- U.S. SECURITIES COMMISSION v CITIGROUP GLOBAL MARKETS INC | $285 Million Citi Settlement With SEC Rejected by Judge Jed Rakoff
- Loreley Financing v. Citigroup Global Markets | Citigroup Sued for Fraud Over $1 Billion of CDOs
- Morgan Keegan to Pay $200 Million to Settle Fraud Charges Related to Subprime Mortgage-Backed Securities
May
22
Guess who got the most private-equity money in 2008?
Warner backpedaling from Bain attacks now.
You get three guesses … and the first two don’t count. An analysis by The Hill of data from Open Secrets shows that Barack Obama got more than $3.5 million from donors who work in private-equity or hedge-fund firms in 2008, almost twice as much as John McCain raised in the same industry: President Obama [...]
Apr
30
An Important Message about 2012 for both President Obama & Mitt Romney
I realize you’re both very busy and were it not important, I would not presume to take up any of your time, or the time of your advisers, but it has long since become clear that neither of your campaigns understands several of the key dynamics that will have a major impact on which one of you wins in November of 2012.
The dynamics I’m referring to have to do with the foreclosure crisis, a topic which, for a variety of reasons, some shared and others divergent, neither of you wants to talk much about, but it is the topic that will continue to destabilize either of your chances to win the upcoming election.
That this is the case, should not be hard to accept… in 2012, the road to the White House runs directly through the states hardest hit by the foreclosure crisis, most notably Ohio and Florida, but also Michigan, Nevada, and North Carolina, et al. For the Obama campaign, I would say that this issue alone would normally be enough to cost you the election, but as luck would have it, you’re the frying pan running against the fire.
In 2008, the Obama campaign won the election by roughly eight million votes. By this coming November, we will have lost roughly that same number of homes to foreclosure. If you assume two voters per household, then there are 16 million that don’t want to vote for you. I didn’t say they wouldn’t vote for you, the alternative being voting for fire, but rest assured, they don’t want to vote for you.
There are another four million plus in foreclosure or seriously delinquent today, so at two per household, that’s another eight million, bringing the total to 24 million. And forecasts by Amherst Securities show 9.5 million foreclosures coming soon to a neighborhood near you, so soon enough there will be about the same number of people directly affected by foreclosure than voted in the presidential election in 2008.
The point is that the number of Americans seriously harmed by the mishandling of the foreclosure crisis are now more than enough to sway a national election.
These people are not merely upset about losing a home to foreclosure, they are enraged over having been misled, deceived and entirely abandoned, as the Obama administration ultimately stood by and did essentially nothing while their servicer tortured them as they lost their homes to foreclosure.
And, I can assure you that my description is not hyperbole to those in this unfortunate group. In fact, many would call it understatement.
It’s interesting to realize that neither of you wants to bring up the situation related to housing and foreclosures in your campaigning. I say that because, although it’s easy to see why the Obama campaign would avoid the topic, but one would think that the Romney campaign would be exploiting such an obvious weakness of the opposition to garner support. And yet, the Romney campaign doesn’t want to talk about housing and foreclosures any more than the Obama campaign does.
In fact, Mr. Romney, this past year while campaigning in Nevada of all places, quite shockingly, you decided to answer a question about foreclosures by saying that what’s needed is a faster foreclosure process… in Nevada… a faster foreclosure process.
Basically, after being asked the only question certain to have tens of thousands of Nevada voters paying close attention, your response gave the Obama Administration credit for programs that successfully delayed or prevented some significant number of foreclosures in a state that’s been devastated by foreclosures more so than any other.
For a moment, all I could think was that you were trying to help Obama win Nevada in 2012, but I’ve since realized that its far more likely that you were caught off guard and didn’t know what else to say at that moment, because since then you’ve adopted the Obama campaign’s approach to the issue: Pretend it doesn’t exist.
I’m quite sure both of your campaigns have people monitoring the Internet, so you must know how ridiculous the absence of any meaningful discussion on foreclosures appears to millions of voters. Therefore, it must be that you’re both so deathly afraid of the Tea Partiers and Rick Santelli that your campaign managers figure mums the word is your only viable option.
Well, since I see no other explanation for your mutual silence on the subject, I thought I’d offer both of you some insight and advice about your respective 2012 campaigns. I may not know enough to be President of the United States, but I know the people of the foreclosure crisis as well as anyone could… to use the hip vernacular of a few years back… they’re my peeps.
First, to President Obama:
Okay, I understand you’ll probably win staying silent on the issue.
For one thing, Mitt Romney isn’t likely to mention the subject of foreclosures either, and if he does, it’s fairly likely that he’ll say something stupid, as he did in Nevada.
Secondly, your campaign strategists probably figure that by next fall, if asked, you’ll be able to tout your administration accomplishments related to housing and foreclosures, which, however inadequate they may be, are still heads and shoulders better than anything the GOP has suggested since 2008. So, as I said, you’ll be running on the premise that people will vote frying pan when the alternative is fire.
Thirdly, I’m sure your people have realized that a significant number of the independents you’ve lost AND many of the Republicans who are disgusted with the economic situation have moved into the Ron Paul camp, which may very well give the Paul campaign a double digit election outcome, and lock in a loss for Romney in a replay of Clinton-Bush-Perot, 1992. (Clinton-43%, Bush-37.5%, Perot-18.9%.)
Lastly, it’s no secret that the Republicans in both the House and Senate, since day one of your presidency, have been practicing a bizarre sort of obstructionist politics, voting in unison against anything you’ve proposed, as our nation-on-fire has continued to burn, economically speaking.
In fact, the only thing you’ve done that Republicans have not opposed was the pumping of untold trillions into TBTF financial institutions. To everything else, they’ve very clearly said “NO,” and bringing up this track record will make it near impossible for anyone concerned about foreclosures to vote for anyone on that side of the aisle.
It all makes sense, and could be right… but you’ll be biting your nails right into the wee hours of election night, because you’ll remember what happened in the 2010 mid-terms when far too many voting Democrats, furious with you for letting them down, closed the curtains in their voting booths and chose Republican candidates out of spite.
If you want to ensure your second term, stop listening to Tim Geithner’s Moral Hazard Band, and anyone who’s ever met Larry Summers, and follow your instincts.
I know you have them because I heard you talking about how you and Michelle only paid off your student loans less than a decade ago. I also heard your speech announcing the settlement between state attorneys general and the five largest mortgage servicers, and you said we need to do more to help Americans losing homes due to no fault of their own… and how we “have each others’ backs” in this country.
Those were smart things to say, but stopping there won’t carry you to November, you need to seal the deal and start telling the American people the truth… that we need to stop pretending that 20 million Americans all became irresponsible at the same time, buying homes they couldn’t afford, blah, blah, blah.
Our financial crisis and economic downturn took out all the investment banks on Wall Street, caused over a thousand smaller banks to become insolvent so far, crippled small and large businesses alike leading to unemployment that will take a decade to improve if we’re lucky, and threw the EU into financial chaos that may still bring an end to the union and its currency. That’s the truth, so stop pandering to the Tea Party types, they’re short on facts, long on crazy… and won’t be voting for you in 2012 anyway.
What the American people want is an economy that doesn’t feel like the United States of Quicksand. Surely by now you’ve started to suspect that you could double down on pumping money into the banks over the next four years and still no recovery would come.
How many quantitative easings do we need to try before we diversify our approach to include America’s middle class… QE-1 didn’t do it… QE-2 didn’t either… and don’t even get me started on the “operation twist” nonsense, which is Bernanke’s only idea to spark consumption by getting credit flowing to consumers. Should we wait until we’ve tried QE-7… QE-12… QE-18… should we try “twisting” the decade away?
Surely you can see that the desired results of these programs haven’t occurred yet, and even if you want to think they will someday, isn’t it time to add a few other strategies to the mix? Interest rates are simply not the problem, Mr. President, they’re low and they’ve been low… so what and who cares?
Remember last June, Mr. President? It was Bernanke’s second post-FOMC press conference. The Fed Chief admitted that he had no idea what was causing the economy’s so-called “soft patch,” he only knew that it would persist. The FOMC statement blamed everything outside the United States… something about Japan along with rising food and oil prices. He was humble, candid, and relieved that QE 1&2 had reduced the threat of deflation for the moment anyway. But as to what wasn’t happening in our economy, he didn’t have a clue.
And yet, you’re doing nothing but bemoaning the fact that Republicans won’t pass your jobs bill even on a stand-alone basis, and following the Fed Chief’s admitted unknowing lead?
Our housing market is either double or triple dipping, whichever you’d prefer, but recovering? Not even close. Truth be told, it’s been in the same downward slide for almost six years, with slight interruptions caused by a fleeting combination of hype, tax incentives and the transformation of the FHA into the new sub-prime, which is now reporting defaults approaching 20 percent on loans made SINCE 2009.
I understand that American consumers are being forced to deleverage, just as the banks will have to do soon. I understand that the credit markets are broken for the foreseeable future and that there’s nothing you can do about that. And I understand that Europe’s economy will ultimately come crashing down into ours, causing all sorts of pain and anguish from coast-to-coast. These things we should hold as being self-evident.
But, if you allow the housing markets to continue to fall, and foreclosures to continue to rise, you will be setting our country up to be hit hard while it’s too far down, and there will be no recovering from such a blow at such a time. Your legacy will be such that you’ll wish Mitt Romney had won in 2012.
You’ve got the opening, or will certainly have it very soon… everything is getting worse, and it won’t be long before the Bureau of Economic Analysis will be reluctantly announcing the “R” word once again. At that point you can reinvent yourself… and do it differently this time… the way you wanted to last time.
Be the man of the people… inspire hope and deliver change. The only real moral hazards you have to worry about are named Geithner and DeMarco.
Take them out, save the economic day, and go down in history a hero. This time do more than anyone says is needed… remind everyone of their obvious propensity for underdoing everything… and if it’s the Republicans that cause you to fail, then let us see you go down fighting.
Now, to presumed GOP candidate, Mitt Romney…
Okay, so I realize that you’re not the right-wing nutcase you pretended to be during the primaries… fair enough. And I also realize that you’ll try to move to the center, without alienating the crazy factor that considers itself the GOP’s base.
But, if you’re banking, pun intended, on Reagan-esque lofty speeches and loudly criticizing the Obama Administration’s first term over things like spending and health care, your creating a situation in which your shot at winning the election in 2012 will depend purely on the vote-against-Obama-turnout… assuming that no one in Florida or Ohio brings up foreclosures, that is.
In other words, you could be anyone running… you’re doing essentially nothing to help yourself win. Election night will be something like watching the results of a poll come in where the choices were “Anonymous Republican v. Obama.”
If you don’t accept that, just consider the two clowns you just beat in the primaries. Santorum, who described condoms as a “grievous moral wrong,” and said that “huge moral failings” were causing our economic problems… and good old Newt Gingrich, who attempted to make a serious case for repealing child labor laws in order to put 9 year olds from poor families to work cleaning schools after school… oh, and who promised a “moon base by 2020.” And those two were the GOP’s saner candidates… the even crazier contenders left the stage earlier.
Oh yeah… and then there’s Mitt… the former Governor of Massachusetts and a Republican centrist with a JD/MBA from Harvard who was the first in the nation to reform health care into something near-universal in his home state… who turned around Bain & Company as its CEO, who led the committee that made the 2002 Winter Olympics a financial success… and whose father who was CEO of American Motors, Governor of Michigan, and U.S. Secretary of Housing and Urban Development.
Mr. Romney, you managed to beat out a perennial alter boy obsessed with anything of a sexual nature, and an ex-Speaker of the House who was forced by his own party to resign after countless ethics violations, including misleading the House Ethics Committee and ultimately earning the distinction of being the first Speaker to be disciplined, (the vote was 395 to 28), for an ethics violation including being fined $300,000.
Okay, so congratulations… I suppose.
So, your advisors are obviously telling you that slamming Obama is the ticket to the Oval Office, and largely because the president has failed to mitigate the damage being caused by the foreclosure crisis, they could be right… but probably aren’t.
Exclusively slamming Obama in order to win in 2012 would be a strategy much more likely succeed if, in addition to ignoring foreclosures as an issue, you didn’t also have to run on a GOP-friendly platform that favors cutting such things as food stamps, child tax credits and Social Service Block Grants, while carrying states like Florida and Ohio that continue to be destroyed by the economic collapse and specifically the foreclosure crisis.
In other words, you’ll be trying to win a national election on a platform that only the one percent… or others in the insensitive class… could love.
Social Services Block Grant (SSBG) funds enable States to provide things like daycare for children or adults, protective services for children or adults, special services to persons with disabilities, health-related services, foster care for children, substance abuse, housing, home-delivered meals… you know… luxuries.
Oh, and what are you worth, by the way… a quarter of a billion and change? And you’re going to cut food stamps? Screw the working poor and long-term unemployed? You’ll redefine “fat cat” and make Herbert Hoover look like FDR in your first 100 days in office if you do what the Republicans expect you to do.
We’ve got 46.4 million people on food stamps in this country. One in four children are eating based on food stamps right now in any given month. The average monthly benefit comes out to be about $8 per household, per day… roughly $2.67 per day for food assuming a three person household. That’s the program that House Budget Committee Chairman, Republican Paul Ryan wants to cut, calling it a “comfortable hammock” instead of a “safety net.”
(By the way, Ryan and his Republican cohorts have helped me as a writer by providing me with a much better understanding of when it’s most appropriate to use the word “asshole,” and for that I suppose I should thank them.)
In Florida alone, there are 3.29 million people on food stamps as of this year, a number that’s doubled since 2008, although the dollar value of the benefits has nearly tripled to $5.15 billion as more families have been forced to seek assistance from the program. Under the Republican budget proposal, estimates show that 234,000 Florida households will lose their food stamps benefit
So, you’re basically planning on winning Florida by ignoring foreclosures, reducing the availability of food, and saying how bad Obama has been? It’s possible, I guess… but I’d stop way short of considering it a sure thing, that’s for sure.
I also have to say that running this way is insane, because even if you somehow pulled it off and won, you’d spend the next four years either doing the GOP’s bidding while watching civil unrest be redefined American style, or you’d resist such asinine policies and soon find yourself abandoned by your own party, shunned by Wall Street, branded a liberal… and all but certain to be back home in four years.
You look pretty darn good for your age now, but under those conditions, you’d start your presidency looking like Michael Douglas and head back home four years later looking like Kirk Douglas.
Mr. Romney, I don’t believe you’re not a smart guy… you have to be a smart guy. So, can you honestly tell me that tax cuts for business and the recently branded “job creators,” combined with reduced government spending is anything but sheer idiocy during times like these?
You must know that American companies have oodles of cash and Treasury securities in their coffers, but no one is going to invest and expand when there is no demand for what they’d produce. American consumers both can’t and won’t spend more than they are today… and consumer spending today is anemic compared to what it was in let’s say 2005.
American consumers have seen their access to credit slashed and their home equity stripped to essentially nothing. And, as if that weren’t enough, inflation and higher oil and food prices are sure to wipe out what little discretionary spending has survived the collapse.
Our first quarter GDP number should say it all, not only because at 2.2 percent it came in below expectations, but also because had it been calculated using the Consumer Price Index, instead of whatever B.S. number was used, the actual GDP was ZERO. Yes, indeed… now that’s what I call a recovery, right Mitt?
Here’s the deal… if you want to win the presidential election this fall, you need to stop pretending foreclosures are helping someone, because clearly they are not, and as long as you have nothing to say on the subject, you might as well stop concerning yourself with figuring out how many ways you can call Obama a socialist, because he may be the frying pan, but you’ll be the fire.
What you really need to do is figure out how to become the transformational leader that leads his party to success, instead of one who allows his party’s offensive ideologies to drag our nation further towards utter ruin.
President Obama has already taken care of those at the top. If you want to ensure a victory for the Romney campaign this November, you need to start at the bottom.
That’s all I have to say about that…
Okay, that’s all I wanted to say. I’m pretty darn sure that you’ll both ignore what I’ve said and proceed with your what-you-ignore-can’t-hurt-you strategy. So, good luck this summer on the campaign trail.
And, Mr. President… we all know that four years ago you were dealt the lousiest of hands, but once your second term begins… know that it’s all on you, sir.
Mandelman out.
Apr
19
Brookings Institution | 2.3 Million Children have Already Lost their Homes to Foreclosure, 6 Million More at Serious Risk
The Ongoing Impact of Foreclosures on Children Five years into the foreclosure crisis, many American families with children continue to lose their homes through foreclosure. An estimated 2.3 million children in single-family homes have already lost their homes to foreclosure, and even more – 3.0 million children – are at serious risk of losing their … Read more
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Apr
06
Obama’s big fundraising night
Razzle dazzle.
March job creation might be down, but Barack Obama’s fundraising numbers are up. The incumbent president hauled in $1.5 million in three hours at a pair of lavish fundraisers last night. At the first of the Obama two fundraisers, twenty donors paid $40,000 a piece for an intimate closed-press meeting with the president. Shortly thereafter, [...]
Apr
05
And So It Begins (A Call To Revolution)
The Market Ticker | And So It Begins (A Greek Call To Revolution) Our government is a pack of fools. They, like the Greeks, had the opportunity to take banksters and arrest them for their crimes, giving them a fair and public trial and then imprisoning them. Instead they fell into league with them, engaging … Read more
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Apr
05
And So It Begins (A Call To Revolution)
The Market Ticker | And So It Begins (A Greek Call To Revolution) Our government is a pack of fools. They, like the Greeks, had the opportunity to take banksters and arrest them for their crimes, giving them a fair and public trial and then imprisoning them. Instead they fell into league with them, engaging … Read more
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Mar
30
ARKANSAS | JOHNATHAN D DIAL ET AL V DEUTSCHE BANK NAT ET AL – Deutsche Bank Wasn’t Cleared To Foreclose, Suit Says
Deutsche Bank Wasn’t Cleared To Foreclose In Ark., Suit Says
Deutsche Bank National Trust Co. was hit Thursday with a proposed class action in Arkansas seeking a declaration that the bank ...
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- Deutsche Bank to Pay $32.5 Million to Settle Mortgage Suit – Massachusetts Bricklayers and Masons Trust Funds v. Deutsche Alt-A Securities
- United States vs Deutsche Bank | Deutsche Bank Faces US Mortgage Fraud Lawsuit
Mar
03
Poor America – P a n o r a m a [B B C] | 1.5 Million American Children Now Homeless (VIDEO)
POOR AMERICA With one and a half million (1.5 million) American children now homeless, reporter Hilary Andersson meets the school pupils who go hungry in the richest country on Earth. From those living in the storm drains under Las Vegas to the tent cities now springing up around the United States, P a n o … Read more
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Feb
20
Romney’s campaign down to $7.7 million cash on hand
Plus: Romney doubles down on Trump.
Proof that he’s sputtering or much ado about nothing given the realities of modern campaign finance? He had $19 million in the bank at the end of December and raised another $6.5 million on top of that in January. (By comparison, back in January 2008, The One raised $36 million. Obvious difference, though: The economy [...]
Jan
24
Should the Government or the Market Set Mortgage Down Payments? A New Study
UNC's Center for Community Capital has posted a new analysis of 19.5 million mortgage loans originated between 2000 and 2008 finding that mandatory down payments of 10% would lock out nearly 40% of all creditworthy borrowers while a 20% down payment would exclude 60%. The study finds a significantly higher exclusion rate for African American and Latino borrowers. The authors (Roberto Quercia of UNC, Lei Ding of Wayne State University, & Carolina Reid from the Center for Responsible Lending) do find valuable default-reduction benefits of other forms of strong underwriting as the Dodd-Frank Act already requires (through the "QM" and "QRM" classifications), but signal caution about the significant access costs of government-mandated down payment levels that government regulators may be currently considering.
Jan
23
Credit Suisse | Mortgage Principal Cuts Don’t Help Homeowners
Mortgage Principal Cuts Don’t Help Homeowners Reducing mortgage balances is a risky idea that hasn’t been shown to keep borrowers who owe more than their property’s worth in their homes, according to Credit Suisse Group AG. (CSGN) Of the 11 million of “underwater” homeowners, about 6.5 million have never missed a payment and 2 million … Read more
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Jan
08
Quotes of the day
Money.
“Thanks to a $5 million donation from a wealthy casino owner, a group supporting New Gingrich plans to place advertisements in South Carolina this week attacking Mitt Romney as a predatory capitalist who destroyed jobs and communities, adding a full-scale Republican dimension to an assault on Mr. Romney’s business background… “The Bain-centered campaign strikes at [...]
Jan
08
Quotes of the day
Money.
“Thanks to a $5 million donation from a wealthy casino owner, a group supporting New Gingrich plans to place advertisements in South Carolina this week attacking Mitt Romney as a predatory capitalist who destroyed jobs and communities, adding a full-scale Republican dimension to an assault on Mr. Romney’s business background… “The Bain-centered campaign strikes at [...]
Dec
23
Democrats, Republicans losing ground on voter affiliation
The rise of independents, or just the disgusted?
You know that Democrats and Republicans have a problem when the question becomes: Which of the two major political parties has turned off more voters since the 2008 elections? As it turns out, it’s the Democrats, but that doesn’t mean the Republicans have gained: More than 2.5 million voters have left the Democratic and Republican [...]
Dec
22
Occupy the New York Times
The one percent.
Income inequality at the Progressive Death Star: Janet Robinson, who will step down as chief executive of the New York Times Co on December 31, will receive an exit package in excess of $15 million, according to people familiar with the situation. In addition to a $4.5 million consulting fee, the Times Co will pay [...]
Dec
08
SEC Charges Wachovia (Wells Fargo) With Fraudulent Bid Rigging in Municipal Bond Proceeds, Settles for $148 Million
SEC Charges Wachovia With Fraudulent Bid Rigging in Municipal Bond Proceeds Wachovia Agrees to $148 Million Settlement With SEC and Other Authorities FOR IMMEDIATE RELEASE 2011-257 Washington, D.C., Dec. 8, 2011 – The Securities and Exchange Commission today charged Wachovia Bank N.A. with fraudulently engaging in secret arrangements with bidding agents to improperly win business … Read more
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- OCC Assesses Civil Money Penalty of $20 Million Against Wells Fargo, Requires Restitution of $14.5 Million to Municipalities Harmed by Bid-Rigging on Financial Products
- FL Attorney General Announces $67 Million National Settlement with Bank of America over Bid-Rigging Scheme
Dec
08
OCC Assesses Civil Money Penalty of $20 Million Against Wells Fargo, Requires Restitution of $14.5 Million to Municipalities Harmed by Bid-Rigging on Financial Products
OCC Assesses Civil Money Penalty Against Wells Fargo, Requires Restitution to Municipalities Harmed by Bid-Rigging on Financial Products WASHINGTON — The Office of the Comptroller of the Currency announced today that it has assessed a civil money penalty of $20 million against Wells Fargo Bank, N.A. (“bank”), and required it to pay more than $14.5 … Read more
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- Wells Fargo Damage Control Attempt – FL Attorney General Reaches Agreement with Wells Fargo Providing More Than $388 Million in Mortgage Relief to Florida Homeowners
- Cease and Desist Order In the Matter of: WELLS FARGO & COMPANY and WELLS FARGO FINANCIAL, INC.
Nov
22
UPDATE | Miriam Mendieta of Foreclosure Review Services (FRS) is NOT Leading the Review of 4.5 Million Fraudclosures
As promised to Jonathan Broder, founder of Foreclosure Review Services (FRS), MyMotionCalendar.com, a coverage and contract attorney company that cover hearings, mediations, depositions, and provide substantive legal work to law firms, Strategic Professional Staffing, a staffing and recruiting firm and StatewideMediations.com which provides mediators and facilities nationwide, I wanted to let everyone know he sent me … Read more
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Nov
21
OUTRAGEOUS | Miriam Mendieta, Esq., Former Managing Partner of David J. Stern’s Fraud Factory to Lead Review of 4.5 Million Foreclosure Cases
You all are not going to believe this one…. Just when you thought they couldn’t be more outrageous, we have this… ~ Foreclosure Review Services (FRS), Industry Veterans to Lead Review of 4.5 Million Foreclosure Cases Foreclosure industry veterans to provide foreclosure review services in response to the Office of the Comptroller of the Currency’s … Read more
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- Mortgage Assignment Fraud – David Sterns Office Commits Fraud on The Court – Case Dismissed WITH Prejudice
Nov
04
Our FAQ on the Foreclosure Reviews
Our FAQ on the Foreclosure Reviews by Paul Kiel ProPublica, Nov. 4, 2011, 10:37 a.m. As we reported today [1], federal banking regulators have launched a foreclosure review process. Certain current or former homeowners who were the victims of abuses or errors by mortgage servicers will be eligible for compensation. Regulators have provided a bare-bones … Read more
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Oct
28
NYT: Yes, Obama’s getting big bucks from lobbyists
$5 million and counting -- so far.
Team Obama has already begun bragging in messages to supporters that they don’t take money from lobbyists in their campaign to re-elect the President, in an attempt to show that Barack Obama has kept his 2008 campaign promise. That promise got broken in the first days of the Obama presidency, however, as the White House [...]
Oct
26
HHS spent nearly $5 million on CLASS implementation before abandoning it
Waste.
Today, at a joint hearing of two subcommittees of the Energy and Commerce Committee, a couple of Health and Human Services officials testified that HHS spent nearly $5 million to implement the long-term care insurance program known as CLASS before it abandoned the program as unworkable. No excuse exists for that waste: Experts within HHS warned [...]
Jun
15
The Definition of Dichotomy
There have been times in my life when certain words gained meaning all of a sudden. Like, I knew the word before and even its definition, but then I reached a point in my life where I really knew what a certain word meant. I’ll give you an example… and I’ve said this before… I never really understood anger, joy, fear or sadness until I had my daughter. I mean, I knew what the words meant before she was born, of course, but I then again I didn’t really.
Well, yesterday I had another one of those types of experiences… no… my wife and I didn’t have another baby… actually I think the experience had been building inside and around me and yesterday it all came colliding together… and all over a sudden I understood the definition of the word, “dichotomy.”
It’s a big word… dichotomy… it means… oh, I don’t know, the word “contrast” comes to mind. It’s sort of the separation of irreconcilable things. A contradiction is perhaps the better way to define it.
I’ll tell you this though… when you run into a true dichotomy you’ll know it, that’s for darn sure. It sort of leaves you sitting there staring at the wall unsure of what to do next. The idea of screaming from the top of the tallest hill in town seems potentially gratifying at such a moment.
I’ll share my experience with you now, and see what you think about the whole… well… the dichotomy, I suppose. Here goes… just as it happened to me.
PART 1
“We are now well into the fourth year of the foreclosure crisis, and there is no end in sight. Since mid-2007 around eight million homes entered foreclosure, and over three million borrowers lost their homes in foreclosure. As of June 30, 2010, the Mortgage Bankers Association reported that 4.57% of 1-4 family residential mortgage loans (roughly 2.5 million loans) were currently in the foreclosure, process a rate more than quadruple historical averages. Additionally, 9.85% of mortgages (roughly 5 million loans) were at least a month delinquent.”
Who the heck said that? He sounds like me, don’t you think? I feel like I might be quoting myself, which is weird.
Actually, I’m flattering myself because those are the words found in Georgetown Law Professor Adam Levitin’s written testimony in provided to House Financial Services Committee, Subcommittee on Housing and Community Opportunity on November 18, 2010. The topics being covered by his testimony:
“Robo-Singing, Chain of Title, Loss Mitigation, and Other Issues in Mortgage Servicing”
“To this sad state of affairs, there now come a variety of additional problems: faulty foreclosures due to irregularities ranging from procedural defects (including, but not limited to robo-signing) to outright counterfeiting of documents; predatory servicing practices that precipitate borrower defaults and then overcharge for foreclosure services that are ultimately paid for by investors; and questions about the validity of transfers in private-label mortgage securitizations.”
The chain of title problems are highly technical, but they pose a potential systemic risk to the US economy. If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever.
The chain of title concerns stem from transactions that make assumptions about the resolution of unsettled law. If those legal issues are resolved differently, then there would be a failure of the transfer of mortgages into securitization trusts, which would cloud title to nearly every property in the United States and would create contract rescission/put-back liabilities in the trillions of dollars, greatly exceeding the capital of the US’s major financial institutions.
These problems are very serious. At best they present problems of fraud on the court, clouded title to properties coming out of foreclosure, and delay in foreclosures that will increase the shadow housing inventory and drive down home prices. At worst, they represent a systemic risk that would bring the US financial system back to the dark days of the fall of 2008.
Okay, so you know what Professor Levitin is talking about there, right? He’s saying that we are in deep Kim chi, that’s what he’s saying. He’s saying that the loans were not properly transferred into the trusts that are now trying to foreclose on homes… and apparently, they can’t seem to come up with anything that says they own the loan… but they want to foreclose anyway.
He’s also saying that when the banksters figured out that they could come up the proper documents to conduct the foreclosure legally, they decided that the path to take… the best way to solve the problem… the optimal answer to this dilemma was… to commit forgery and fraud.
Yes, it’s true. The banksters, unable to establish that they complied with just about ANY of the laws governing the transfer of property, much less the requirements as set for in a Pooling and Servicing Agreement, came up with a plan. Let’s forge them and see if we can’t defraud the court. Yeah, great idea… run with it.
From there it’s almost like they were barely trying, as if “we” are so stupid that you can fool us just as you might a three year-old. Just pick a short name and have everybody sign it. Yeah, Linda Green’s fine, I was thinking, Don Ho, but you’re right, Linda Green is better. Yep, just sign it over and over, they’ll never notice… silly humans.
I’ve said it before and I’ll say it again… nobody chooses “robo-signing” hundreds of thousands of affidavits and various other documents off of a list of other viable alternative solutions to your problem. When you find yourself checking “YES” on robo-signing… when you’re a bank that chooses to open a fraud and forgery department… well, something has left the building, let’s say that.
So, a lot of people have been talking about this for some time now, so what’s new?
Well, both The New York Times and the Huffington Post are reporting on state investigations into the practices surrounding the packaging of mortgage-backed securities and their brethren. And even though the bank’s response has been basically flowers in springtime, the New York and Delaware Attorneys General say they’re quite serious.
He’s saying that this could be a game changer depending on how this is handled. We could explode… or maybe implode. I’m not entirely sure. But it’s bad. The kind of thing you wouldn’t want to have to live through twice.
So, clicking around yesterday, at Huff-Po it was Shahien Nasiripour with the story… still can’t pronounce it and for that I am deeply ashamed, but it is to be expected. He wrote about the New York Attorney General “launching” an “investigation into mortgage securitization.” Heady stuff, I’m sure you’d agree.
“New York Attorney General Eric Schneiderman has targeted Bank of America, the biggest U.S. bank by assets, in a new probe that questions the validity of potentially thousands of mortgage securities and their associated foreclosures, two people familiar with the matter said.
The investigation, which began quietly in recent weeks, is part of a larger inquiry that is scrutinizing whether mortgage companies and Wall Street firms took the necessary steps under New York state law when creating mortgage-backed securities, these people said, who requested anonymity because they weren’t authorized to speak publicly about the probe.
Court testimony and independent studies have raised questions over whether banks and other financial firms passed along the required documents to trusts, the independent entities that oversee securities for investors. In some cases where trusts moved to seize borrowers’ homes, judges have determined the trusts lacked legal standing due to faulty documentation.
The inquiry could prove explosive: Wall Street’s great mortgage securitization machine took millions of home loans and bundled them into securities for sale to investors. If the legal steps that guide securitization — like taking mortgage documents from one party to another, a critical step under New York law — were not undertaken, then the investors who bought the bundled loans could force the companies to buy them back, compelling them to eat enormous losses.
New York state investigators could also find that those securities aren’t valid financial instruments at all and take action under state law.
But an investigation into whether the securities these companies created are even valid represents a new front in his ongoing probe and raises fresh questions into the potential liability sellers of these mortgage instruments face.
“If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever,” says Adam J. Levitin.
Levitin also said that the problem could “cloud title to nearly every property in the United States” and could lead to trillions of dollars in losses.”
Shahien’s “exclusive” soon had company, Gretchen Morgenson of The New York Times also ran a story saying that both the Attorneys General from New York and Delaware were conducting such an investigation into the practices surrounding and involved in mortgage-backed securities. And if you’re wondering what’s the big deal about New York and Delaware, well… I’ll tell you…
“The trusts were governed by the laws of the states in which they were set up. Roughly 80 percent of the trusts are governed by New York law with the rest by Delaware law.”
See… I told you. So, here’s how the Times described the same topic…
The investigation is being led by Eric T. Schneiderman, the attorney general of New York, who has teamed with Joseph R. Biden III, his counterpart from Delaware. Their effort centers on the back end of the mortgage assembly lines — where big banks serve as trustees overseeing the securities for investors — according to two people briefed on the inquiry but who were not authorized to speak publicly about it.
The attorneys general have requested information from Bank of New York Mellon and Deutsche Bank, the two largest firms acting as trustees. Trustee banks have not been a focus of other investigations because they are administrators of the securities and did not originate the loans or service them. But as administrators they were required to ensure that the documentation was proper and complete.
“A complex process that produced hundreds of billions of dollars in securities during the lending boom, the issuance of mortgage securities began with home loans, which were then bundled into investments and sold to pension funds, mutual funds, big banks and other investors. The bundles were created as trusts overseen by institutions such as Bank of New York and Deutsche Bank; they were supposed to make sure the complete mortgage files for each loan were delivered within a specified time and with the proper documentation.”
“The stakes are potentially high. If the trustees did not follow the rules set out in the prospectus, they may be liable for breaching their duties to investors who bought the securities. That could expose the banks to costly civil litigation.”
“Spokesmen from Bank of New York and Deutsche Bank declined to comment about the investigation, as did representatives from the offices of both attorneys general.”
Okay, so Gretchen and Shahien seem to be in a race. It seems to me that they’ve both found a bush and they want to see who can be the first to beat around it. In fairness to them, it may be their editors that hold them back, but the point is, what they’re talking about is the 800 pound gorilla in the room.
Or, another way of putting it… in the contest to see whether mortgage-backed securities either “taste great” or are “less filling,” it’s seems that “less filling” has taken the lead.
We’re talking about mortgage-backed securities without the “mortgage-backed” part. Empty securities. Like a Twinkie without the creamy filling inside. Securities fraud. Bad, very bad. The sort of thing for which one gets sued… or possibly even charged.
Once again, Professor Adam Levitin’s testimony tells it best…
“Many of the issues relating to foreclosure fraud by mortgage servicers, ranging from more minor procedural defects up to outright counterfeiting relate to the need to show standing. Thus problems like false affidavits of indebtedness, false lost note affidavits, and false lost summons affidavits, as well as backdated mortgage assignments, and wholly counterfeited notes, mortgages, and assignments all relate to the evidentiary need to show that the entity bringing the foreclosure action has standing to foreclose.
Concerns about securitization chain of title also go to the standing question; if the mortgages were not properly transferred in the securitization process (including through the use of MERS to record the mortgages), then the party bringing the foreclosure does not in fact own the mortgage and therefore lacks standing to foreclose. If the mortgage was not properly transferred, there are profound implications too for investors, as the mortgage-backed securities they believed they had purchased would, in fact be non-mortgage-backed securities, which would almost assuredly lead investors to demand that their investment contracts be rescinded, thereby exacerbating the scale of mortgage put-back claims.
Many of the problems in the mortgage securitization market (and thus this testimony) are highly technical, but they are extremely serious. At best they present problems of fraud on the court and questionable title to property. At worst, they represent a systemic risk of liabilities in the trillions of dollars, greatly exceeding the capital of the US’s major financial institutions. While understanding the securitization market’s problems involves following a good deal of technical issues, it is critical to understand from the get-go that securitization is all about technicalities.
Securitization is the legal apotheosis of form over substance, and if securitization is to work it must adhere to its proper, prescribed form punctiliously. The rules of the game with securitization, as with real property law and secured credit are, and always have been, that dotting “i’s” and crossing “t’s” matter, in part to ensure the fairness of the system and avoid confusions about conflicting claims to property.
Close enough doesn’t do it in securitization; if you don’t do it right, you cannot ensure that securitized assets are bankruptcy remote and thus you cannot get the ratings and opinion letters necessary for securitization to work.
Thus, it is important not to dismiss securitization problems as merely “technical;” these issues are no more technicalities than the borrower’s signature on a mortgage. Cutting corners may improve securitization’s economic efficiency, but it undermines its legal viability.”
So… any questions about that? It’s a big deal. A really big deal. The banking industry associations say it’s not, but it quite obviously is. You know, there are reasons we have the laws we do governing the transfer of property rights, it’s not like such laws were created on a whim. And the pooling and service agreements, or PSAs, govern how loans are to be transferred into the REMIC trusts are some 500+ pages long, in most cases, and call me crazy, but compliance with such a document doesn’t sound like a trivial matter either.
So, now the Attorneys General from New York and Delaware are investigating in order to find out whether trillions of dollars in loans were seriously mishandled and therefore are not in the trusts, as the banksters said they were. The IRS is investigating too. And at least two large investors have already filed lawsuits alleging that they were sold “empty trusts.”
Here’s an excerpt from a real lawsuit lawsuit filed this past April 21st by the Federal Home Loan Bank of Boston, an investor in mortgage-backed securities, against just about everyone you’ve ever heard of in the financial, services industry, from Aurora to Wells Fargo… you’ll find it on page 28 of the complaint, item ‘f’.
“In order for a mortgage to be enforced, basic steps need to be taken to validly assign the mortgage and mortgage loan to the trust and ensure that the trustee has the proper papers. These basic steps, and the representations made about these steps, were critical to investors because if a mortgage cannot be enforced, then the mortgage loans and the certificates dependent on these loans, are worthless. The Offering Documents failed to disclose that in fact basic steps regarding the transfer of mortgages and mortgage loans were not followed – mortgage loans were not validly assigned, and papers necessary to ensure enforceability of the mortgage were never transferred to the trustee.”
Have I made my case yet? It’s important stuff, right? The New York Times and the Huffington Post write about state Attorneys General investigating trustees about the issue, Professor Adam Levitin testifies in Congress about the issue, and the Federal Home Loan Bank of Boston files a lawsuit that incorporates the issue into its 575-page complaint.
So, you agree, right? It’s a serious issue, how loans are transferred into trusts as part of the securitization process. Right? Right.
Okay, so here’s PHASE TWO of yesterday’s news:
FADE IN: We’re in the United States Bankruptcy Court, Northern District of California, in front of The Honorable Edward D. Jellen, a United States Bankruptcy Judge. We’re watching an Evidentiary Hearing on Debtor’s Objection to Proof of Claim, which is another way of saying that the homeowner is saying there’s something wrong with what the bank is claiming he owes.
The homeowner’s name is Felipe Zulueta, Jr. and he’s representing himself in these proceedings… pro per, or pro se… I can never figure out which is which or why to use one over the other. The point is that he doesn’t have a lawyer… he’s representing himself.
It is 9:35 AM on November 3, 2010 when the Clerk says…
The Clerk: All rise.
This is the United States Bankruptcy Court for the Northern District of California, The Honorable Edward Jellen presiding.
Be seated.
Mr. Chun: Thank you, Your Honor.
Mr. Zulueta: Thank you, Your Honor.
The Court: This is the matter of Zulueta. May I have the appearances, please?
Mr. Zulueta: Felipe Zulueta, Jr. Your Honor, Debtor.
The Court: Okay.
Mr. Chun: Joseph Chun representing the secured creditor.
The Court: All right. Mr. Zulueta, are you going to be presenting any evidence to show that they don’t have standing?
Mr. Zulueta: Actually, Your Honor, I was going to address the exhibits that they’re going to present today.
The Court: Yeah. My question was, do you have an evidence of your own…
Mr. Zulueta: No.
The Court: … that shows…
Mr. Zulueta: No.
The Court: All right. Mr. Chun, according to your trial brief, you have exhibits, is that correct?
Mr. Chun: That’s correct, Your Honor.
Mr. Zulueta: Your Honor?
The Court: Yes.
Mr. Zulueta: I just wanted to clarify, Your Honor, if counsel is representing One West Bank or Deutsche Bank National Trust Company as trustee for the mortgage loan trust.
Mr. Chun: We’re representing One West Bank, the servicing agent – who’s the servicing agent for Deutsche.
Mr. Zulueta: Okay, so I just wanted to find out, Your Honor, if One West Bank has the proper authorization from Deutsche Bank to authorize them, because I don’t see any power of attorney presented.
The Court: All right. Well, you know, the bottom line is you’re not getting a free house.
Mr. Zulueta: I’m not asking for a free house, Your Honor. I just want to make sure that the proper paperwork is in place so I can pay the right creditor.
LATER THAT SAME MORNING…
Mr. Zulueta: Okay, so the first thing I want to point out, Your Honor, is, number one, on the bottom of the page of the recorded document, there’s a handwritten scribble on the bottom after the signature of the notary that says, a notary on the basis within capacity under – which means that this is not a true and correct copy.
The Court: What difference does it make?
Mr. Zulueta: Well, it does make a difference, Your Honor, because I’m trying to establish a pattern here of the fact that this document appears fraudulent.
The Court: Do you have any evidence that it’s fraudulent? I mean, whether it’s recorded or not doesn’t make any difference.
Mr. Zulueta: Well, it does, Your Honor, because all of the exhibits that counsel is presenting today, there is a system of how my loan is supposedly deposited into the trust, and since they’re representing the trust, I want to make sure that they’re the proper creditor for my loan.
The Court: All right. Who do you think is the proper creditor?
Mr. Zulueta: Right now, Your Honor, it’s a mystery. I mean, after my research…
The Court: All right. But you don’t get a free house.
Mr. Zulueta: I understand, Your Honor.
So, how about that? And I’m not making any of that up, by the way… in fact, I didn’t even change a single word from the court transcript. And you don’t even have to take my word for it, because the link to the court transcript can be found at the bottom of this post.
According to April Charney, of Jacksonville Legal Aid, this case goes before the 9th Circuit Court of Appeals next week. Any guesses as to what will happen? I don’t really care whether the documents are all fraudulent. I don’t really care how many laws were broken, or whether the REMIC trust is as empty as my wallet on December 26th… I only want to know one thing…
Will Mr. Zulueta get a “free house?”
Are you getting what I’m trying to say here? Because we have here is a true “dichotomy,” wouldn’t you say? It’s dichotomous, if you’re an adjective person.
That’s only two of the contrasting stories I had to work with that day. At the same time, Fannie Mae announced that it would not participate in Hawaii’s new mediation program. Why? Because they don’t want to have to prove standing… that the servicer is foreclosing on behalf of the trust that actually owns the note… as is required by Hawaii’s new mediation program.
And this afternoon, a lawyer in Hawaii told me that he has learned that title insurance companies are refusing to write title insurance on non-judicial foreclosures in Hawaii. And why in the world would that be, do you suppose?
Meanwhile, in Utah, a judge apparently granted Quiet Title to Scott Harvey, a homeowner, who promptly sells his now free and clear house after no one shows up to contest the matter. Someone want to explain that one to me?
Harvey v Garbett, Quiet Title Case in Draper Utah
Oh, and Bank of America’s being accused of obstructing a federal investigation by HUD investigators in Arizona and now that fact has been added to the lawsuit filed by the State of Arizona against Bank of America less than a year ago, I believe. So, go figure.
My Conclusion…
This is a mess. A real mess. And I see only one way out… follow the laws of our land.
Ours is a country built on laws, and forged by lawyers. It is our laws that have held us together for over 200 years, and only adherence to our laws will get us through this mess.
Did Wall Street’s bankers screw up the securitization of millions of loans? Well, obviously the answer is yes. Does that mean that the REMIC trusts are going to collapse? Yes it probably does at that. Will that be the end of the world? No, I don’t think it will. Answers will be found… equitable answers. And we will go on.
Want to know what won’t work… what will ultimately destroy us? What we’re doing now. The path we’ve been on for the last two years has been disastrous for tens of millions of Americans and we cannot stay on that path much longer. The cost will simply be too great.
Whatever the answer the answer is, I’ll tell you what it is not… it’s not fraud and forgery… it’s not turning our country into a class society where the mega-rich live behind gates and the rest of us… well, eat cake… and it’s not free houses either.
We are only here because the bankers have proven themselves untrustworthy and abusive. That’s right… that’s why we’re here, no other reason. The anger is rising and palpable. The banks continue to lie to homeowners every day. They have already gone too far and will pay a huge price for years to come, but that price is going up every day, and someone has to find a more equitable path.
I think I can help. I leave for Hawaii this coming Monday. I’m meeting with members of the legislature and numerous others. Wish me luck. Pray for us all.
Mandelman out.
ZULUETA Answer Brief Deutsche Bank
May
25
Attorney General Probe Of Florida Foreclosure Companies Expanding….
Not so long ago, it looked like the banks were going to moonwalk away from the crime scene they created with no penalty…not even much of a slap on the wrist. First the banks protested the paltry $20 million dollar settlement and other terms, then they objected to the $5 million settlement terms. But it wasn’t just the banks that were protesting settlement terms, the banks had the support of four of this country’s attorneys general who howled about how the banks could not face any consequence…they warned us of the dire….
MORAL HAZARD
that would occur if they leaned on the organized crime syndicate..no I’m sorry, I mean the banking and foreclosure industries. The basic gist of the warning issued by these four attorney generals was that the country would collapse and the rapture would definitely come if any of their constituents….(I’m talking about the banks of course) were forced to face any consequence.
But now there are serious breaks in the ranks of the attorneys general from all across the country. It appears that some state AG’s want to let the criminals moonwalk away…while others have decided that their job as attorney generals is to investigate and prosecute crimes. It’s terribly ironic that Florida is a focus of these investigations….but not, apparently, by Florida’s Attorney General…..
Read on here for a little disgusting story…..then after your read, please visit Pam Bondi’s Website and Facebook page to let her know what side you think she should be on.
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Sep
08
David J. Stern Enterprises Announces Earnings…..
Profits at this state’s most notorious foreclosure mill were announced yesterday. The thing that I still cannot understand is why our local, elected circuit court judges allow so much shotty practice of law to occur from this mill and others, while the mills are allowed to announce million dollar profits…oh and another question about how what is essentially a law practice can be permitted to be publicly traded. The whole problem with this is the rules and ethical obligations of lawyers are inconsistent with a publicly traded company.
When will all this stop? Make sure to tune into the earnings conference call at 8:30 (Perhaps every judge in the state should tune in for this call.)
Management will conduct a conference call at 8:30 a.m. Eastern Time on Wednesday, September 8, 2010, to discuss the second quarter and year-to-date 2010 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-312-5504. When prompted by the operator, mention conference ID 94593027.
PLANTATION, Fla., Sept. 7, 2010 (GLOBE NEWSWIRE) — DJSP Enterprises, Inc. (Nasdaq:DJSP – News) (Nasdaq:DJSPW – News) (Nasdaq:DJSPU – News), one of the largest providers of processing services for the mortgage and real estate industries in the United States, today announced financial results for the three and six month periods ended June 30, 2010.
Second Quarter Financial Highlights
- Total revenue for the second quarter 2010 decreased 9.1% to $56.1 million from $61.7 million in last year’s comparable period.
- Excluding client costs, total revenue for the second quarter 2010 decreased to $28.9 million from $30.9 million or 6.5% compared to the same period last year.
- Adjusted Net Income including noncontrolling interests was $5.5 million for the second quarter 2010 or $0.28 per diluted share.*
- Adjusted EBITDA for the second quarter 2010 was $6.7 million.
Year to Date Financial Highlights
- Total revenue for the six months ended June 30, 2010 increased 9.3% to $127.7 million from $116.8 million in last year’s comparable period.
- Excluding client costs, total revenue for the six months ended June 30, 2010 decreased to $59.7 million from $61.0 million or 2.1% compared to the same period last year.
- Adjusted Net Income including noncontrolling interests was $14.2 million for the six months ended June 30, 2010 or $0.73 per diluted share.*
- Adjusted EBITDA for the six months ended June 30, 2010 was $21.1 million.
*Calculated using treasury stock method assuming an average ordinary share price of $8.25 for the quarter ended June 30, 2010; assuming 19.5 million average diluted shares outstanding.
Second Quarter Results
Total revenue for second quarter 2010 decreased 9.1% to $56.1 million from $61.7 million in the same period last year. This was primarily due to a decrease in foreclosure referrals, title fees, and client reimbursed costs. Title fees decreased due to the decrease in foreclosure volume and the switch made by some clients to use their own title company. These decreases in revenue were partially offset by increases in REO closings, REO liquidation operations at Default Servicing, and eviction fees. Two new service offerings, Deed-in-lieu and Mediations, also contributed to offsetting these decreases. During the second quarter, client reimbursed costs decreased by 11.7% to $27.2 million from $30.8 million in the same quarter in 2009 as a result of a decrease in foreclosure volume. Our REO closing business became an increasingly significant source of revenue during the quarter, generating $3.5 million in revenue compared to $2.1 million in the same period last year. Our REO liquidation business, which emanates from a single customer, contributed $3.2 million in revenue in the second quarter compared to $2.9 million in the same quarter last year. Going forward, we intend to offer both REO closing and liquidation services to additional customers as a means of increasing revenues and profits. Deed-in-lieu and Mediation services were initiated in the second quarter and contributed a combined $0.7 million to our revenues during the quarter. Revenue from foreclosure services decreased by $1.5 million, or 8.3%, for the quarter to $16.6 million, compared to $18.1 million during the same period last year.
Our adjusted EBITDA decreased to $6.7 million for the three months ended June 30, 2010 from $17.7 million in the same period last year. This decrease was primarily due to three factors: the decrease in foreclosure volume; an increase in compensation expenses; and an increase in expenses related to becoming a public company, including $0.9 million in legal expenses. Our compensation expenses increased $2.6 million, on an adjusted basis, primarily as a result of staffing increases. Increases in staffing were made to address expressed client needs, expanding legacy files due to court delays, and necessary upgrades to the corporate management structure. A much smaller increment of the increase in staffing was due to the mandatory mediation requirement dictated by the Florida Supreme Court for foreclosure files.
During the second quarter 2010, our adjusted net income decreased to $3.5 million from $8.3 million in for the same period in 2009, due to the decrease in revenue and increase in our expenses stated above.
Year-to-Date Results
Total revenue for the six months ended June 30, 2010 increased $10.9 million, or 9.3%, to $127.7 million from $116.8 million in last year’s comparable period. The revenue resulted from an increase in client reimbursed costs, REO closings, REO liquidations, eviction services, and two new services, Deed-in-lieu and Mediation. These increases were offset by decreases in our foreclosure and title services fees. Excluding client reimbursed costs, our total revenues decreased by $1.3 million, or 2.1%, to $59.7 million compared to $61.0 million for the same period last year. Revenues from our REO closing and liquidation business increased by $2.4 million and $1.6 million, respectively, over the same period last year. As mentioned above we initiated two new services, Deed-in-lieu and Mediations, which contributed a combined $0.7 million to total revenue.
Compensation expenses, on an adjusted basis, increased by $5.9 million, or 30.7%, to $25.1 million for the six months in 2010 compared to $19.2 million during the same period in 2009.
General and administrative expenses, on an adjusted basis, increased by $5.1 million, or 60.7%, to $13.5 million from $8.4 million last year. Public company and nonrecurring expenses increased our expenses by approximately $2.5 million during the first six months of 2010. Other operating expenses, including rent, supplies, travel, mailing, and others, increased as a result of the increase in headcount.
During the first six months of 2010, our adjusted net income decreased to $7.8 million from $15.8 million in the same period in 2009.
We generated $17.1 million in cash from operating activities in the six months ended June 30, 2010, compared to $26.4 million in the six months ended June 30, 2009.
Our overall debt of $74.6 million bears an average interest rate of 2.9%. The senior note of $35 million bears no interest for the first six months.
Operating Discussion
As a result of management’s discussions with our largest client, The Law Offices of David J. Stern, P.A. (“DJSPA“) and with the major lenders and servicers for whom DJSPA processes foreclosure files, we believed file volume would increase in the third quarter and we previously decided to maintain current staffing levels. However, file volumes continue to be delayed and existing staffing levels are not sustainable indefinitely.
Rick Powers, President and COO commented, “While a large portion of our business can only be processed with human capital, we are identifying opportunities where technology and process change can be implemented to create efficiency. We are prepared to create efficiencies and make cuts where appropriate over the next three to six months.”
DJSP Enterprises continues to diversify our service offerings beyond default services. As part of our effort to grow our business, we are building business to address the new government initiatives. In this regard, we have expanded our national Deed-in-lieu and modification services. Our Deed-in-lieu business has been our fastest growing service offering in the third quarter. In addition, with the addition of Timios we are moving to expand our title services, which among other things, provides title work for refinancing, into the nation’s largest and hardest hit real estate market of California.
Timios, Inc.
As of August 1st, all Florida title operations have been consolidated under the common management of Timios, Inc. and have already adopted Timios’ best in class paperless operating system for all new orders. In addition we are in the process of licensing Timios in California, the nation’s largest real estate market. This is a major step in becoming a cyclical provider of services to the mortgage industry.
Rick Power added, “That we were able to accomplish this consolidation in such a short period of time speaks to the strong technology at Timios and the quality of both management teams. We are looking forward to entering the California market and expect continued strong performance from Timios.”
Management
David J. Stern Chairman and CEO stated, “We are happy to announce that Kerry Propper will be taking Matthew Kayton’s seat on the board of directors. Mr. Kayton will transition roles with the company and will continue to work with us on a consulting basis in the areas of Title services, acquisitions and other strategic initiatives.”
Mr. Stern continued, “I am very thankful to Matthew for his service and I look forward to his continued contribution as a consultant. Kerry brings a great deal of public company experience to the board and I am pleased that he will be joining us.”
Conference call Information:
Management will conduct a conference call at 8:30 a.m. Eastern Time on Wednesday, September 8, 2010, to discuss the second quarter and year-to-date 2010 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-312-5504. When prompted by the operator, mention conference ID 94593027. Participating in the call for DJSP will be David J. Stern, Chairman and Chief Executive Officer, Rick Powers, President and Chief Operating Officer, and Kumar Gursahaney, Executive Vice President and Chief Financial Officer.
If you are unable to participate in the call at this time, a replay will be available for one week starting on Wednesday, September 8, 2010, at 11:30 Eastern Time. To access the replay, dial 706-645-9291. Please use passcode 94593027. The call will also be carried live by webcast over the Internet and accessible at www.djspenterprises.com.
About DJSP Enterprises, Inc.
DJSP is the largest provider of processing services for the mortgage and real estate industries in Florida and one of the largest in the United States. We provide a wide range of processing services in connection with mortgages, mortgage defaults, title searches and abstracts, REO (bank-owned) properties, loan modifications, title insurance, loss mitigation, bankruptcy, related litigation and other services. Our principal customer is DJSPA, whose clients include all of the top 10 and 17 of the top 20 mortgage servicers in the United States, many of which have been DJSPA clients for more than 10 years. We have approximately 1,200 employees and contractors and are headquartered in Plantation, Florida, with additional operations in Louisville, Kentucky and San Juan, Puerto Rico. Our U.S. operations are supported by a scalable, low-cost back office operation in Manila, the Philippines that provides data entry and document preparation support for our U.S. operations.
Forward Looking Statements
This press release contains forward-looking statements about us within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), including but not limited to management’s expectations about efficiencies and expense reduction efforts. Mr. Kayton’s ongoing consulting role with us, our strategic growth initiatives and our ability to provide closing services in California. Additionally, words such as “anticipate,” “believe,” “estimate,” “expect” and “intend” and other similar expressions are forward-looking statements within the meaning of the Act. Such forward-looking statements are based upon the current beliefs and expectations of our management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions, changing interpretations of generally accepted accounting principles; outcomes of government or other regulatory reviews, particularly those relating to the regulation of the practice of law; the impact of inquiries, investigations, litigation or other legal proceedings involving us or our affiliates, which, because of the nature of our business, have happened in the past to us and the DJSPA; the impact and cost of continued compliance with government or state bar regulations or requirements; legislation or other changes in the regulatory environment, particularly those impacting the mortgage default industry; unexpected changes adversely affecting the businesses in which we are engaged; fluctuations in customer demand; our ability to manage growth and integrate acquisitions; intensity of competition from other providers in the industry; general economic conditions, including improvements in the economic environment that slows or reverses the growth in the number of mortgage defaults, particularly in the State of Florida; the ability to efficiently expand our operations to other states or to provide services we do not currently provide; the impact and cost of complying with applicable U.S. Securities and Exchange Commission (“SEC”) rules and regulations; geopolitical events and changes, as well as other relevant risks detailed in our filings with the SEC, including our Annual Report on Form 20-F for the period ended December 31, 2009, which are available at the SEC’s internet site (http://www.sec.gov). Forward-looking statements in this press release speak only as of the date of the press release, and we assume no obligation to update forward-looking statements or the reasons why actual results could differ.
Non-GAAP Financial Measures
The financial information and data contained in this press release are unaudited and do not conform to the SEC’s Regulation S-X. This press release includes certain estimated financial information and forecasts presented that are not derived in accordance with accounting principles generally accepted in the United States (“GAAP”), and which may be deemed to be non-GAAP financial measures within the meaning of Regulation G promulgated by the SEC. Management believes that the presentation of these non-GAAP financial measures serves to enhance the understanding of the Company’s financial performance. Such measures are not recognized terms under GAAP, and should be considered in addition to, and not as substitutes for, or superior to, operating income, cash flows, revenues, or other measures of financial performance prepared in accordance with GAAP. Such measures are not a completely representative measure of either the historical performance or, necessarily, the future potential of the Company.
The adjusted EBITDA measure presented consists of income (loss) from continuing operations before (a) interest expense; (b) income tax expense; (c) depreciation and amortization; and (d) income and/or expense items that are expected to be at different levels in future periods. We are providing adjusted EBITDA, a non-GAAP financial measure, along with GAAP measures, as a measure of profitability because adjusted EBITDA helps us to evaluate and compare our performance on a consistent basis with the operating cost structure in place as a publicly traded operating company, reflecting the effects of that cost structure and our current fee schedule. In the calculation of adjusted EBITDA for the three and six months ended June 30, 2009, we exclude from expenses the compensation paid to Mr. Stern that exceeded the base compensation that he was entitled to receive after we became a publicly traded operating company (and prior to September 1, 2010), because the Company no longer has any arrangement with Mr. Stern that would require any payments to him at a comparable level. Mr. Stern does not have an incentive plan arrangement providing for pay above base compensation. In addition, we excluded the payroll taxes associated with such compensation, as well as travel expenses incurred on behalf of Mr. Stern in prior periods that are no longer provided since we became a publicly traded operating company. The adjustment to Fee to Processing reflects the additional fees DJS Processing, LLC would have received under the Services Agreement if the fee schedule under the Services Agreement had been determined in a fashion consistent with the current fee schedule. In the calculation of adjusted EBITDA for the three and six months ended June 30, 2010, we included additional fees due to DJS Processing, LLC as a result of a retroactive amendment to the fee schedule for the Services Agreement agreed to by DJS Processing, LLC and DJSPA to increase the fees payable to DJS Processing, LLC effective January 1, 2010.
In the calculation of the adjusted net income measure presented for the three and six months ended June 30, 2010, we deducted the actual GAAP interest, depreciation and amortization for the period from the adjusted EBITDA calculation and then subtracted assumed income tax expense, calculated at the expected going forward tax rate of 38.6% on pre-tax income after minority interest. For periods prior to our becoming a publicly traded operating company, we were not subject to income tax and therefore did not record income tax expense. We are providing adjusted net income, a non-GAAP financial measure, along with GAAP measures, as a measure of profitability because adjusted net income helps us to evaluate and compare our past performance on a consistent basis with the taxable structure in place after our becoming a publicly traded operating company, reflecting the effects of that taxable structure on profitability. In the calculation of adjusted net income measure presented for the three and six months ended June 30, 2010, we deducted the actual GAAP interest, depreciation, amortization and income taxes for the period from the adjusted EBITDA calculation. The following table provides reconciliations of net income (GAAP) to Adjusted EBITDA (Non-GAAP) and adjusted net income (Non-GAAP).
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Dec
12
CONGRESS: It’s Not About Right and Left Anymore… It’s About Right and Wrong.
On Thursday afternoon, when Melissa Bean, a Democrat from Illinois, stood in the way of the Walt Street Reform and Consumer Protection Act, which was introduced on the floor of the House of Representatives just days before, frankly I was shocked. I expected this sort of thing from any one of the Republicans, but from a Democrat? And a woman, no less? Stunning, absolutely stunning.
Come to find out Friday afternoon that she and other “moderate democrats” (Read: “the banking lobby”) actually killed the proposed amendment that would have allowed judges to modify mortgages for homeowners in bankruptcy court.
In the end, 50 Democrats that voted for it the last time it passed the House, this time voted against it. From start to finished in something like 72 hours. And without a peep from homeowners in this country, of which more than 5 million have already lost homes to foreclosure, and with maybe 14 million coming in the next three years, according to Goldman Sachs’ forecasts.
But… I suppose it’s understandable… why would we possibly want judges to have a say? After all, lately we’ve all learned how FABULOUSLY well the banks are doing at modifying loans this year under Obama’s HAMP CRAP. Want the latest results from Treasury? Well, you’re getting them whether you want them or not:
1. Remember SAXON Mortgage Services? You know, the servicer that finished in 1st PLACE back in late July on those “Report Cards” that were going to shame these lying pieces of garbage into complying with the government contracts they signed? That Saxon… THE ONE THAT WAS WAY AHEAD OF WELLS FARGO AND BANK OF AMERICA?
Well, as of DECEMBER 10TH SAXON has issued 42 PERMANENT LOAN MODIFICATIONS out of 35,608 TRIAL MODS, FOR A WHOPPING .1%… THAT’S ONE TENTH OF ONE PERCENT. Woofrigginghoo!
And you want to know the really funny part of that statistic… I don’t even believe that they’re telling the whole truth. Would anyone like to bet against me saying that some of those 42 ended up with higher payments than before the modification, because if so… bring it. I’ll even give you odds, how’s 10:1? Anyone? Anyone? Come on, someone write in and put up a grand… I could use the extra Christmas cash.
Oh, and would you like to know how much money our government has offered the friendly folks over at SAXON in the way of INCENTIVE CASH for taking the trouble to modify a few mortgages they lied people into… $886,400,000.00. Yeah, you read that right… $886.4 MILLION. And I’m not going to say anything even remotely funny about that.
So, there’s our 1st PLACE winner… ready for our next contestant? Come on… this is fun, isn’t it? How about good old IndyMac/One West Bank… that’s got to be worth a few grins and giggles… I don’t know about you, but I’m having a great frigging time doing this, aren’t you?
2. IndyMac/One West Bank – Let’s see… Good old IndyMac has done 19,623 trial mods, but how many permanent mods? I’m going to need a calculator here, hang on… carry the 7… times 3… minus 14… I’ve got it… ZERO PERCENT! NONE. NOT A GODDAMN ONE! ZIPPO. NIL. SANS ANY.
Now, I bet you’re wondering how much incentive cash they’re in line for, aren’t you? Just on the edge of your seat over there? Well, I hope you’re sitting down, because the number is $814,240,000! That’s $814.2 MILLION DOLLARS. You do understand that’s just shy of a BILLION DOLLARS, right?
Would you like to know how much a BILLION really is? Well, try this for an example:
1 million seconds is 12 days.
1 billion seconds… is 32 YEARS!
Or how about this one…
A stack of $1 million is about two feet high.
A stack of $1 billion… is three times higher than the Washington Monument!
In other words… a billion is a whole lot. A whole frigging lot.
Yeah, why would we possibly need judges to help in this situation? I certainly can’t think of a reason. And you want to know something else… a lawyer asked me today why I do what I do. I should have said… “Well shut the front door… I don’t know. Just bored I guess. I didn’t really want to see my daughter grow up, so I figured I’d write about something seven days a week, and since no one else was saying a damn word about this, I figured the competition level was perfect for a remedial writer like myself.”
Look, I’ve got to be brutally honest here. I love having people read my articles and all, but not enough to be quiet about this. What the hell are you people doing out there? I’m thinking of going back to work and watching the country meltdown from a seat in the bleachers. Maybe start writing about something else, because obviously I’m not accomplishing anything here. Rents have dropped a lot in Hawaii, and I could do Hawaii full time. I play a mean ukulele, not sure if I ever mentioned that?
Democrats killed it in the House… dead in three days. The best chance to stabilize the U.S. housing market without costing taxpayers a dime. A chance to stop the tragedy that is the foreclosure crisis, a tragedy that is going to do nothing but grow in size and scope for years to come… a tragedy that’s tearing people’s lives apart… and the banks said no, so it’s no.
And we’re all just hunky-dory with that? I can’t believe it. Oh wait… I forgot… you’re busy. Not too busy to call and email me a couple of hundred times a week, I’ve noticed. People, this is not funny in the least.
And before I go on, let me get one thing out of the way: Melissa “The Banker” Bean, an obvious bought-and-paid-for sycophant, should be tossed out of office directly onto her ample buttocks come the midterm election. Period. We’re still experiencing the worst economic downturn since the Great Depression… a condition unquestionably caused by the unbridled greed and unchecked power of Wall Street’s bankers. And she is clearly some banker’s betch, to use a word my 14 year old daughter and friends taught me.
Think I’m guessing about this? Well, I’m not. I looked up Ms. Bean… it was easy, like falling off a blog. Melissa received at least $515,438 from banks and other financial institutions, including most notably JPMorgan Chase, Morgan Stanley and Bank of America. That’s a half a million dollars plus from the people who don’t want anyone telling them what to do, or what they can’t do.
Of course, checking the Treasury report on servicer performance, I do see that Chase has done quite a bit better in the modification department than either Saxon or IndyMac. Chase has permanently modified a whopping 3% of its trial modifications. Of course, before you get too excited, Chase has only offered trial modifications to 32% of its eligible mortgages, so I guess we better say the jury’s still out. I wouldn’t want to jump to any conclusions and give them a pat on the back for that 3% prematurely.
Anyone feel like betting against some of those 3% ending up with higher payments than before the modification in Chase’s three percent pool of permanent mods? Come on… you guys are not fun. Okay, forget the 10:1… I’ll go 100:1 on Chase’s mods. Step right up… No limits… I’m covering all takers.
Are you frigging kidding me?
Guys… look. I don’t mean to beat up on you… I know how hard this whole thing is… believe me, I do. But this is not the same country I grew up loving if all this sits just fine with everyone. We can’t just sit around wondering who’s likely to win on American Idol, as we wait for the moving truck. Because if we do, that truck is coming… sure as I’m writing this… it’s coming.
And what about all the lawyers I know are reading this? You guys became lawyers for more than one reason, I’m sure. Wasn’t any part of your motivation because you believed in the fairness that’s supposed to be inherent to our system of government… a “representative democracy”? Could you really sit this one out? Are you imagining that you’re immune from losing a house to foreclosure? Because you’re not, you know. No one is.
I’m 48 years old. I’ve owned my own firm for better than twenty years now. I’ve enjoyed a very successful career. I’m fairly enterprising, and I’m wicked smart… and I could lose my house, so don’t kid yourself… you absolutely could lose yours too.
I’m learning a lot this year about politics in this country. I’ve learned that we have more power than we think we do.
Did you see the latest news about Goldman Sachs and the $16.7 billion in bonuses they had been planning to give out this year? Well, they’re still giving the bonuses, but not in cash… stock options instead. Why do you suppose that is? It’s because our representatives have been flooded with letters and calls all year long related to the egregious bonuses at Goldman, AIG and the numerous others. And the political pressure in a midterm election is intense. Congress doesn’t want to go home to campaign and find people standing around holding pitchforks and torches.
We can do the same thing for our cause, you know. We really can. My “A Hundred Thousand Homeowners” project is one such initiative, and there are others I’m working on, as well.
I’ve realized for some time that we live in a politically divided nation, but I was thinking that the divide was between Democrats and Republicans… the “left” and the “right”. Apparently, I was wrong… today we’re actually divided between the Banker Party and the Common Sense Party…. Something like that anyway, it needs work.
Members of the Banker Party think banks are awesome in every way. They never do anything the banks don’t like. Members of the Common Sense Party understand that foreclosures must be stopped, and they think that causing the most severe economic recession since the Great Depression requires some level of new oversight to ensure the same thing doesn’t happen again five years from now. And they’re willing to stand up and fight, before their country disappears before their own tearful eyes.
THIS ISN’T ABOUT RIGHT & LEFT. IT’S ABOUT RIGHT & WRONG.
And in case you’re waiting for “it” to come back… “it’s” not coming back. Or rather… it will be back, just like the technology IPO market will come back too. But, it could easily be a decade before we see any sort of return to prosperity… and it could also be quite a bit longer than that. Here’s one of the most telling statements I’ve seen in a while on this point. It’s from the Congressional Oversight Panel’s December 2009 Report: “Taking Stock… What Has the TARP Achieved?” They wrote:
“It is apparent that after 14 months, that significant underlying weaknesses in the financial system remains.”
We don’t have another 14 months to play around and let the banks destroy our way of life, which they most certainly will do. Here’s another link to my favorite article on the topic. It’s written by Simon Johnson, who in addition to have served as the Chief Economist for the International Monetary Fund (“IMF”), is now a professor at MIT. Here’s his article about what’s happened in this country, which was published in The Atlantic last May.
And here’s one from Rolling Stone from yesterday. You should definitely read this one: President Obama’s Big Sell Out – Rolling Stone.
In Conclusion, don’t worry… I won’t quit if you won’t…
Pastor Martin Niemöller (1892–1984) wrote a very famous poem that, being Jewish, I’ve known since I was a little boy. He wrote it in reference to the inactivity and apathy of German intellectuals following the Nazi rise to power and the purging of their chosen targets, group after group after group.
Niemöller was an anti-Communist and as a result, supported Hitler’s rise to power in the beginning, but he soon after became the leader of a group of German clergymen opposed to Hitler. Hitler hated Niemöller and in 1937 had him arrested and sent to the Sachsenhausen and Dachau concentration camps. His widely known and frequently quoted poem is a popular model for describing the dangers of political apathy.
First they came for the communists, and I did not speak out—because I was not a communist;
Then they came for the trade unionists, and I did not speak out—because I was not a trade unionist;
Then they came for the Jews, and I did not speak out—because I was not a Jew;
Then they came for the Catholics, and I did not speak out—because I was a Protestant;
Then they came for me—and there was no one left to speak out for me.
Speaking out on subjects that matter. That’s what Mandelman Matters is all about. But click that last link and you find my T’was the Night Before Christmas – 2009, Political Year In Review.
