Jan

Flori-duh: Bank Foreclosing on O.J. Simpson’s House But Can’t Find Him! Memo to JP Morgan Chase Bank: O.J. Simpson‘s safely tucked away in a Nevada prison. So, if you need to serve him about foreclosing on his South Florida house, send your process server to 1200 Prison Road, Lovelock, Nevada! Showing once again the ridicule … Read more Related posts:

Nov

Home sales contracts are falling apart 2X as fast as last year

By Mandelman | HAMP, Housing & Economic Research, Loan Modification, News for the Patriot

52167Leave a Comment2011-11-23+23%3A32%3A39Mandelman

In a rare moment of semi-lucid disclosure, the National Association of Realtors (“NAR”) reported that home sales contracts are falling apart TWICE as often as they did last year, according to the numbers released at its annual convention in Anaheim, California.

In an article published in National Mortgage News, titled: NAR: Sales Falling Through Twice as Often, the NAR said that recently 18% of its members are reporting “contract failures,” which is double the number that were being turned down one year ago.

Why? Well, according to the Realtors, it’s credit scores and appraisals coming in too low. Well shave my head and call me Baldy… what do you know about that? I certainly do declare, how can such a thing possibly be so? What could possibly be the cause? Who would have ever expected something like this to happen?

This really is precious, don’t you think? Absolutely adorable. Hey, I know how we can fix things… let’s have a bake sale… Lord, I do love a good bake sale.

Apparently, the Realtors are quite surprised that these days even good credit isn’t good enough, so the NAR conducted decided to conduct an “analysis.” These guys needed to study this problem, because apparently, when the topic of conversation moves beyond the houses themselves, the NAR has no clue what’s going on.

They found that the average credit score needed to get a loan in 2007 was 717, but lo and behold, will wonders never cease, in 2010 is was 760! So, I guess it’s going up. Go figure.

“Weighted average FICO scores for conventional loans purchased by Fannie Mae and Freddie Mac eased a bit in this year’s second quarter, declining to 755, but remain well above historic norms, the realty group said.”

Well, thank the good Lord for the NAR’s powerful analysis. Please do go on… I am totally glued…

Almost three out of every four loans were offered to buyers with scores of 740 or higher, while less than 1% were offered to those whose scores were 620 or lower, NAR said. Twenty-five percent of Americans have credit scores below 599 — almost double the level of two years ago.

Shut the front door! Twice as many Americans have credit scores below 599 than did just two years ago? Now why do you suppose that would be? Want to know what that looks like on a piece of graph paper? Ever heard of a trend line? Well, this trend line follows Thelma and Louise’s car at the end of the movie.

The stiffer mortgage requirements have come at a time when banks are seeing strong profits and runs counter to the government’s efforts to use rock-bottom interest rates to get the economy and the housing market moving again, said NAR’s chief economic, Lawrence Yun.

It “Yuns counter to the government’s efforts,” run? (Wait, flip those.) I meant, it “runs counter to the government’s efforts,” Yun? How weird is that? I mean interest rates have been at all time lows for the past… hmmm… oh, I don’t know… shall we say four straight years, and it’s been working great so far, wouldn’t you say? I mean, we’ve got a housing market that might even rival that of Paraguay.

Listen… Yun… you’re an idiot. Where did you get your economics degree? I mean specifically. Because you should ask for a refund. Seriously… if you paid for your economics education you got ripped off, dude.

“We need to get back to reasonable lending standards,” said Ron Phipps, the outgoing president of the 1.1 million member trade group.

Reasonable lending standards? Oh, for heaven’s sake. I’ll bet Ron thinks that… after all, he’s got to find a way to keep those 1.1 million NAR members paying their dues, does he not? But, I’m afraid Ron’s fighting a losing battle. There’s no way he’s going to be holding his ship together much longer. It’s going to be over soon.

It is, however, nice to see the NAR is offering some continuing education classes.

The convention featured two separate educational sessions on the importance of credit scores and how to improve them…

Improve them up to 760? That’s a lot of improving. How much does it cost to improve that much?

LOL… allow me to offer some slightly contradictory advice that is certain to save you a whole lot more than a couple hundred a month.

Unless there are specific reasons for you to do so, like you’re downsizing, or you simply have to move… don’t buy a house right now. I can absolutely assure you that you will lose money in year one, two and three… and very likely beyond that. So, RENT! And revel in it… especially if you’re renting now, there’s no reason to buy something today, because now is definitely NOT a good time to buy. And if anyone tells you otherwise, ask them if they’d care to debate me on a podcast… that ought to do it.

You want to know what you should be doing now? SAVING MONEY. Less buying and more saving is the new black.

Want to glance into my crystal ball for a few moments? Okay, here goes…

The banks are not enjoying “record profits,” as we often hear in the news. They have the same “toxic” assets on their balance sheets that they had in 2008. The biggest difference today is that the banks are not adhering to several key accounting rules, and because of that no one really knows exactly how they’re doing. I do know one thing about the banks, however. Banks make money by lending, and they’re not doing much, if any, of that.

Over the last two years, for example, many of the TBTF banks have lowered their reserves in order to make their financials look better than they actually were, and last quarter a few of these banksters actually made their numbers by writing down their own debt based on their creditor’s perception that they may default. Like, if I owed you $10,000, but you figured I might go bankrupt and not pay, so you were willing to sell my debt for $5,000… and so I wrote down the amount I owe you to $5,000 on my financials. Nonsense.

As of October of 2011, as a result of the “bailouts,” Goldman Sachs still owes U.S. taxpayers $12.9 billion, JPMorgan Chase owes us $32 billion, Morgan Stanley owes us $25.5 billion, and Bank of America owes us $19.7 billion. So, if they’re in such great shape, why can’t they pay back what they owe?

“Unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” said Fitch Ratings yesterday. “Further contagion poses a serious risk,” Fitch said. Have you noticed how the news on Europe is getting progressively worse? Like at first, it was over there, but now it might be coming here? Well, of course it’s coming here… just think of the financial crisis as occupying the planet.

Any event that triggers default on the trillions of dollars worth of synthetic CDOs that were sold before 2007 could be a disaster that tips the world from recession into deep depression. Nobody really knows what will happen for sure, but it won’t be a small event. A synthetic CDO, by the way, is a collateralized debt obligation or CDO that is comprised of credit default swaps instead of debt securities, which are based on mortgages and leverage (read: borrowed money). Many people describe credit default swaps as being insurance against a bond’s default, but there’s more to it than that. For example, various credit events can require an insurer to post additional collateral, which is what got AIG in so much trouble in the fall of 2008. Right now, truth be told, we are living on a razor blade, and hoping no one slips.

Don’t be fooled by stimulus you can’t see. Just because you can’t see it, doesn’t mean it’s not there. So, when Bernanke is flooding the system with money, even though you can’t see it or even feel it… it’s there and it’s affecting things… not forever… but for some period of time. Now that stimulus is pretty much over, you can expect things to fall faster.

Unemployment is rising… when it will be reported as such, I don’t know because the numbers being released are not to be trusted. For example, the September jobs report showed that the U.S. economy created 103,000 jobs in that month, but as it turns out… 45,000 of those jobs were Verizon workers returning to work from an August strike. Job creation… well, not so much.

According to economist Dean Baker: “The economy has created 99,000 jobs a month over the last three months, about 9,000 more than it needs to keep pace with the growth of labor force. At this pace, it will be around 80 years until the economy gets back to normal levels of unemployment.” Regardless, news accounts say that the jobs numbers were better than expected.

Remember President Obama’s first piece of legislation… the one that approved roughly $700 billion in stimulus spending? Well, something like $500 billion of that money went to the states, and that’s why the states have been able to operate as if everything is hunky dory. But, that money is gone now, or soon will be and the states can deficit spend or print money like the federal government can. So, get ready because state jobs are being cut to the tune of 22,000 a month… my guess would be that pension cuts are coming soon.

Foreclosures are steadily rising. Home prices are steadily falling. Period. What else could possibly happen, given the circumstances? But, you can’t tell that from the headlines. For example, get ready for the reports showing that sales were up this year as compared with last year’s anemic total, but look below the surface and you’ll find that last year’s total was the lowest in 13 years, and this year’s median price of a home was down 4.7 percent from last year. And frankly, even those numbers are ridiculous because there’s no real, real estate market… it’s just a mish-mosh of distressed sales and short sales, with only the federal government providing the financing, and a shadow inventory so large that no one can even guess at its size anymore.

But nothing goes down in a straight line so don’t be fooled by interim reports offering meaningless comparisons and purporting to indicate that happy days are here again. Nothing can change for the better until we do something to stop the free fall in housing prices, which means stopping the flood of foreclosures… and that won’t happen until we shatter the stereotype that “people bought homes they can’t afford.” The problem with believing the happy crap is that it stops us from demanding action from our government.

Meanwhile… back at the National Association of Realtors, the following headline appeared right below the one that motivated me to write this article…

NAR: Housing Market Poised to Turn

The ever-optimistic National Association of Realtors believes the worst housing downturn since the Great Depression is almost over.

So… umm… well, okay… Yay!

Let me guess… according to the NAR, now is a good time to buy, right?

As Yves Smith would say: Quelle surprise.

Mandelman out.

Aug

HELOC LOANS WORTHLESS

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

117382 CommentsHELOC+LOANS+WORTHLESS2010-08-12+16%3A41%3A37LH

12debt.html?_r=1&ref=business

EDITOR’S NOTE: It is ironic how reality eventually catches up with illusion. While we have been pounding on the issue of principal reduction as the only realistic way out of the recession, and while the financial industry has been busy convincing people that principal reduction is somehow immoral, the contraction of home prices back to reality is having its own consequences.

In the article below the art and necessity of strategic default is revealed as mainstream in the current housing market. In the case of home equity loans or home equity lines of credit the bloating of appraisals at the time of the transactions has blown up in the face of the financial industry. Many of those home equity loans were in reality part of the initial transaction without which the buyer would have been unable to purchase the home. The transaction would have been valid if the appraisal had been valid. It wasn’t.

A simple analysis of basic fundamental figures published monthly over the last 120 years easily demonstrates that the appraised values that were unverified by the alleged “lender” as part of a nonexistent “underwriting process” could not sustain the test of time or circumstance.

In point of fact most new homeowners quickly found out within weeks or months of the initial transaction that their property was worth far less than the representations made to them at the time of closing. The true value was so far below the so-called appraised value that it didn’t cover the home equity part of the transaction even at the time that the transaction was closed.

The reaction of homeowners to the disappearance of the illusion of wealth has been entirely predictable. For the present the number of home equity loans which are going unpaid is soaring both in numbers and percentages, regardless of the borrower’s ability to pay. Any party that wishes to assert itself as the “owner” of the loan is stuck in the position of holding a predatory loan subject to numerous defenses that is completely unsecured by any equity in the home. According to this article there is at least one debt collector that won’t pay more than $500 per loan regardless of the principal amount due.

The rising number of strategic defaults on primary loans is also rising, also predictable and also inevitable. This is the obvious reaction of a marketplace seeking equilibrium and dependable valuations. Until policy makers accept the reality that the wealth of our economy is largely buried under the illusion of debt that is neither secure nor perfected arising from transactions that were illegal, predatory and fraudulent, there is no way out.

Restoring consumers to the position they were in before they were defrauded is the only way to restore confidence in our society that has permitted the privatization of the issuance of money. Financial reform without providing an easy path to restoration of wealth in the middle-class is meaningless.

August 11, 2010

Debts Rise, and Go Unpaid, as Bust Erodes Home Equity

By DAVID STREITFELD

PHOENIX — During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back.

The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.

Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.

The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.

“When houses were doubling in value, mom and pop making $80,000 a year were taking out $300,000 home equity loans for new cars and boats,” said Christopher A. Combs, a real estate lawyer here, where the problem is especially pronounced. “Their chances are pretty good of walking away and not having the bank collect.”

Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter.

Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar. “People got 90 cents for free,” Mr. Combs said. “It rewards immorality, to some extent.”

Utah Loan Servicing is a debt collector that buys home equity loans from lenders. Clark Terry, the chief executive, says he does not pay more than $500 for a loan, regardless of how big it is.

“Anything over $15,000 to $20,000 is not collectible,” Mr. Terry said. “Americans seem to believe that anything they can get away with is O.K.”

But the borrowers argue that they are simply rebuilding their ravaged lives. Many also say that the banks were predatory, or at least indiscriminate, in making loans, and nevertheless were bailed out by the federal government. Finally, they point to their trump card: they say will declare bankruptcy if a settlement is not on favorable terms.

“I am not going to be a slave to the bank,” said Shawn Schlegel, a real estate agent who is in default on a $94,873 home equity loan. His lender obtained a court order garnishing his wages, but that was 18 months ago. Mr. Schlegel, 38, has not heard from the lender since. “The case is sitting stagnant,” he said. “Maybe it will just go away.”

Mr. Schlegel’s tale is similar to many others who got caught up in the boom: He came to Arizona in 2003 and quickly accumulated three houses and some land. Each deal financed the next. “I was taught in real estate that you use your leverage to grow. I never dreamed the properties would go from $265,000 to $65,000.”

Apparently neither did one of his lenders, the Desert Schools Federal Credit Union, which gave him a home equity loan secured by, the contract states, the “security interest in your dwelling or other real property.”

Desert Schools, the largest credit union in Arizona, increased its allowance for loan losses of all types by 926 percent in the last two years. It declined to comment.

The amount of bad home equity loan business during the boom is incalculable and in retrospect inexplicable, housing experts say. Most of the debt is still on the books of the lenders, which include Bank of America, Citigroup and JPMorgan Chase.

“No one had ever seen a national real estate bubble,” said Keith Leggett, a senior economist with the American Bankers Association. “We would love to change history so more conservative underwriting practices were put in place.”

The delinquency rate on home equity loans was 4.12 percent in the first quarter, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping. Borrowers who default can expect damage to their creditworthiness and in some cases tax consequences.

Nevertheless, Mr. Leggett said, “more than a sliver” of the debt will never be repaid.

Eric Hairston plans to be among this group. During the boom, he bought as an investment a three-apartment property in Hoboken, N.J. At the peak, when the building was worth as much as $1.5 million, he took out a $190,000 home equity loan.

Mr. Hairston, who worked in the technology department of the investment bank Lehman Brothers, invested in a Northern California pizza catering company. When real estate cratered, Mr. Hairston went into default.

The building was sold this spring for $750,000. Only a small slice went to the home equity lender, which reserved the right to come after Mr. Hairston for the rest of what it was owed.

Mr. Hairston, who now works for the pizza company, has not heard again from his lender.

Since the lender made a bad loan, Mr. Hairston argues, a 10 percent settlement would be reasonable. “It’s not the homeowner’s fault that the value of the collateral drops,” he said.

Marc McCain, a Phoenix lawyer, has been retained by about 300 new clients in the last year, many of whom were planning to walk away from properties they could afford but wanted to be rid of — strategic defaulters. On top of their unpaid mortgage obligations, they had home equity loans of $50,000 to $150,000.

Fewer than 5 percent of these clients said they would continue paying their home equity loan no matter what. Ten percent intend to negotiate a short sale on their house, where the holders of the primary mortgage and the home equity loan agree to accept less than what they are owed. In such deals primary mortgage holders get paid first.

The other 85 percent said they would default and worry about the debt only if and when they were forced to, Mr. McCain said.

“People want to have some green pastures in front of them,” said Mr. McCain, who recently negotiated a couple’s $75,000 home equity debt into a $3,500 settlement. “It’s come to the point where morality is no longer an issue.”

Darin Bolton, a software engineer, defaulted on the loans for his house in a Chicago suburb last year because “we felt we were just tossing our money into a hole.” This spring, he moved into a rental a few blocks away.

“I’m kind of banking on there being too many of us for the lenders to pursue,” he said. “There is strength in numbers.”

John Collins Rudolf contributed reporting.

Filed under: bubble, CDO, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, GTC | Honor, HERS, investment banking, Investor, Mortgage, Motions, Pleading, securities fraud, trustee Tagged: appraisals, David Streitfeld, fraud, home equity, Mortgage, predatory

Jul

Demonstrations in the Street

By LH | Foreclosure Blog News, Homeowner Resources

10982Leave a CommentDemonstrations+in+the+Street2010-07-27+15%3A40%3A34LH

I’ve always been puzzled by the lack of action and reaction of the public to the mortgage crisis. As I write this, it gets worse, more people lose their homes, more homes are beset by adversary relations between family members, more alcohol abuse, more spousal abuse, more child abuse, more anxiety, depression, divorce and grief. This was all done TO the people not BY the people. Tens of millions of people did not wake up one morning in 2001 with a plan to obtain fraudulent mortgages, with fraudulent appraisals, based upon non-existent income.

In the article below, you see how people can get things rolling by forgetting the ideology and getting with the program: this could not have happened without Wall Street running wild, without incentives to create bad mortgages, and without the tacit or express complicity of the federal Reserve and other U.S. agencies. How about letting them know you don’t like it? The Constitution allows for freedom of assembly and freedom of speech. Don’t let the oppressive tactics of the opposition stop you from using your constitutional rights.

By the way, this one led to immediate results. Read the article and then go to the follow-up at Resignations, Investigations and Salary Cuts of 90%

—————————————————————————–

L.A. NOW

Southern California — this just in

« Previous Post | L.A. NOW Home | Next Post »

Protesters incensed by Bell officials’ high salaries visit mayor’s business, home [Updated]

July 25, 2010 | 12:31 pm

Residents irate over the high salaries hauled in by their public officials marched Sunday to the businesses and homes of the mayor and City Council members.

A boisterous crowd of more than 200 gathered at the corner of Gage and Corona avenues. Several were wearing T-shirts featuring a city seal and the words “My city is more corrupt than your city.”

Their first stop: Oscar’s Korner Market and Carniceria, owned by the mayor, Oscar Hernandez. They then moved on to the mayor’s house, near Florence Avenue, then to a home on Otis Avenue owned by City Councilman George Mirabal.

At the stops, protesters maintained a moment of silence and then shouted “Fuera!” — “Out!” Dozens of cars honked as they passed and offered thumbs-up, though one man stopped, defended the city officials and challenged a protester physically.

“I don’t think they are taking it seriously. And we’re serious,” said Nestor Valencia, 45, an organizer of the demonstration, a Bell resident since 1975 and a founder of the Bell Resident Club. “They need to resign.”

Bell is a working-class city of 40,000 residents. The Times revealed earlier this month that City Manager Robert Rizzo received a $787,637 annual salary, Assistant City Manager Angela Spaccia received $457,000, and Police Chief Randy Adams received $376,288. Rizzo earned more than President Obama, Spaccia earned more than the top administrator for Los Angeles County, and Adams earned 50% more than Los Angeles Police Chief Charlie Beck.

All three resigned on Friday.

Four City Council members are paid close to $100,000 annually for their part-time positions — sums that are far higher than in other cities of comparable size and which have baffled and upset the League of California Cities and other local government organizations.

“This is a test for our community,” Valencia said. “There’s been a fiasco here.”

Hernandez, in particular, Valencia argued, represented “a culture that is not our culture.”

“It is a culture of rule-breaking,” Valencia said. “It is a culture of nepotism. … He thinks he can do anything because he is the mayor.”

Hernandez could not be reached for comment.

[Updated at 12:48 p.m.: Bell police have estimated the crowd at between 200 and 300.

Demonstrators have visited the residences or businesses of the mayor, the vice mayor and two City Council members -- all of whom they want to resign.

The crowd also stopped at a Chevrolet dealership, long a fixture on Atlantic Avenue, that shut its doors weeks ago, citing burdensome property taxes. Demonstrators are now approaching City Hall, their final stop.

"This city has woken up," said Jesus Casas, 35, a Bell resident for 15 years. "We want a new city government that will represent by the people and for the people."]

Filed under: foreclosure

Jul

Investors Sue Citi for Fraud Citing Appraisals and Other Issues

By LH | Foreclosure Blog News, Homeowner Resources

10395Leave a Comment2010-07-16+11%3A51%3A49LH

I7.13.10N RE CITIGROUP INC

Filed under: foreclosure

Jul

WORLD HUNGER PROVIDES PROOF OF FINANCIAL DERIVATIVES INFLATING PRICES

By LH | Foreclosure Blog News, Homeowner Resources

10019Leave a Comment2010-07-07+11%3A50%3A09LH

One of the hardest things for people to get their minds around is how borrowers were defrauded. The nagging question keeps coming to mind “But you DID sign the loan and take the money, didn’t you?” Yes you did, but you did it because of a representation and virtual guarantee from several parties at the closing table who knew the appraisal was a lie, that you were believing it, that you relied on it, and that you never would have done a deal where the real appraised fair market value was far less than the amount of the loan.

So then the question becomes “How can you be sure the appraisal was inflated? Were all appraisals inflated? How do you know that?” Answers: Read on, YES, Read On, in that order.

I start with the proposition that the only legitimate factors that cause changes in housing prices (up or down) are changes in supply and demand, rising costs or labor and materials and related services. Anything else is a manipulation UNLESS it is thoroughly disclosed in language that a normal reasonable person would understand. Even if such disclosure is made and the deal goes through BOTH parties would be defrauding someone by definition, to wit: they are agreeing that the stated price or value of the property is inflated but they are doing the deal anyway.

How could anyone inflate the price of a house without everyone knowing it? ANSWER: By inflating the entire market in that geographical area. Note that during the securitization era, ONLY the places that were targeted had sharply rising prices, sometimes from one month to the next. Other places, like Seneca Falls, NY (highlighted in NY Times article) were not not affected by either the boom or bust except indirectly where they are dealing with decreased services from the state and county resulting from budget deficits resulting from an expectation of rising revenues based upon the apparent rise in tax appraised value.

How does one inflate values of any commodity or property in the entire relevant marketplace? ANSWER: By creating false liquidity (i.e, availability of money) and by speculation pushing up the “value” of the derivatives and other hedge products which in turn raises the value of the actual commodity, or in our case, the actual house. Since the cost of the money decreases, despite government attempts to raise interest rates, and speculation is allowed without supervision, the speculators control the market on the way up and on the way down. They win on both sides because they are controlling the events. That is not a free market. That is a privately controlled market.

So the reason I am sure that false appraisals were the rule, not just the norm are as follows:

There was no abnormal trends or changes in demand, supply, or costs — except that supply actually outpaced demand by a factor of at least 200%. Thus prices should have probably dropped as developers increased competition for buyers. There is no observable reason for prices to rise, much less at the pace seen in the period 2002-2007. By all public accounts it will be at least 2030 before the current inventory of houses are sold. This level of overbuilding is unprecedented and cannot be tied to an expectation of increased demand but rather an expectation that the seller controlled the transaction and collectively with loan brokers, originators, aggregators, and investment bankers would do anything to close the deal even if it meant having the borrower sign for a loan that called for NO PAYMENTS.

8,000 certified licensed appraisers signed a petition to Congress in 2005 complaining they were being coerced into justifying the deal rather than actually estimating fair market value. They feared they would be blacklisted from all the deals because an honest appraisal would have slowed down sales of homes and sales of financial products to borrowers.

This was a complete reversal of practices existing before the securitization era. The value of the collateral was the Lender’s only guarantee of repayment. hence the tendency was to minimize the estimate of fair market value. Once the risk of repayment was eliminated “lenders” (i.e., mortgage brokers and originators) were under pressure to close loan transactions dollar volumes. The easiest way of doing that was to increase the value of the properties. The more this practice took hold of meeting the contract terms which were always disclosed to the appraiser (contrary to prior practice) the easier it became, since the “comparables” used by the appraisers were produced by the same practice, incentives and pressures. As the mortgage bonds were sold in increasing dollar volumes, the pressure to place investment dollars increased exponentially. Incentives for mortgage brokers and originators to close deals at any level of risk or terms increased proportionately. Marketing and selling of loan products became big business, with large fees and apparently no risk as the managers of such companies perceived it. The upward pressure to increase the size of loans directly resulted in an upward pressure on sale prices and the perception of “value” in the marketplace. A snowball effect was thus created producing a spike in housing prices that is completely unprecedented in the history of housing since the 1870′s when such measurements began to be recorded. No other boom or bust cycle in any part of the country had ever experienced spikes of this magnitude.

Starting 3-4 loan products in the 1970′s, the number of possible loan products has skyrocketed to over 400 different kinds of loans — a bewildering array that increases asymmetry of information — causing the buyer to depend and rely upon the more sophisticated side (“lender”) for information about the loan product they were steered into.

The number of loan originating companies masquerading as actual lenders went from 1 (Household Finance, now HSBC) to hundreds during the entire securitization period (circa 1990-2008) and then back down again as most of them went out of business, liquidated, or went bankrupt. New business start-ups would not have flooded the market but for the virtual certainty of high fees without regard to whether the product worked or not (i.e., whether the loan was repaid or not).

The amount of money attributable to derivatives that increased availability of loans increased from zero in 1983 to more than $30 trillion in 2007 — twice the Gross National Product of this country.

I see no reason for price increases other than the flood of money into certain marketplaces, which in turn gave some color of verification of an appraisal that was plainly wrong, inflated, and where fees for such appraisals increased geometrically.

Yes they were virtually all inflated. That was the requirement. Just as the rating agencies falsely inflated the value and risk of the mortgage bonds that were used to attract the $30 trillion in capital used to flood the marketplace, the appraisers likewise inflated the appraisals of the value and thus the risk to the borrowers AND investors. The proof is simply in the present situation where prices have fallen by as much as 80%. This is further corroborated by the price levels before the flood of money into the marketplace. The final verification is that median income was flat during this period. Most economists and housing experts agree that ultimately median income is the main determinant in housing prices.

How do I know this is true? It is the only workable explanation that is being offered, even including comments, reports and statements issued by the financial services industry.

For an example of how this has worked against the poorest, starving people of the world, see the following, which demonstrates that the Wall Street process, if unregulated, leads to bizarre social and financial consequences.

Johann Hari: How Goldman gambled on starvation

Speculators set up a casino where the chips were the stomachs of millions. What does it say about our system that we can so casually inflict so much pain?

Friday, 2 July 2010

Is Your Bank In Trouble?
Free list Of Banks Doomed To Fail.The Banks and Brokers X List.

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By now, you probably think your opinion of Goldman Sachs and its swarm of Wall Street allies has rock-bottomed at raw loathing. You’re wrong. There’s more. It turns out that the most destructive of all their recent acts has barely been discussed at all. Here’s the rest. This is the story of how some of the richest people in the world – Goldman, Deutsche Bank, the traders at Merrill Lynch, and more – have caused the starvation of some of the poorest people in the world.

It starts with an apparent mystery. At the end of 2006, food prices across the world started to rise, suddenly and stratospherically. Within a year, the price of wheat had shot up by 80 per cent, maize by 90 per cent, rice by 320 per cent. In a global jolt of hunger, 200 million people – mostly children – couldn’t afford to get food any more, and sank into malnutrition or starvation. There were riots in more than 30 countries, and at least one government was violently overthrown. Then, in spring 2008, prices just as mysteriously fell back to their previous level. Jean Ziegler, the UN Special Rapporteur on the Right to Food, calls it “a silent mass murder”, entirely due to “man-made actions.”

Earlier this year I was in Ethiopia, one of the worst-hit countries, and people there remember the food crisis as if they had been struck by a tsunami. “My children stopped growing,” a woman my age called Abiba Getaneh, told me. “I felt like battery acid had been poured into my stomach as I starved. I took my two daughters out of school and got into debt. If it had gone on much longer, I think my baby would have died.”

Most of the explanations we were given at the time have turned out to be false. It didn’t happen because supply fell: the International Grain Council says global production of wheat actually increased during that period, for example. It isn’t because demand grew either: as Professor Jayati Ghosh of the Centre for Economic Studies in New Delhi has shown, demand actually fell by 3 per cent. Other factors – like the rise of biofuels, and the spike in the oil price – made a contribution, but they aren’t enough on their own to explain such a violent shift.

To understand the biggest cause, you have to plough through some concepts that will make your head ache – but not half as much as they made the poor world’s stomachs ache.

For over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer, he’ll lose some cash, but if there’s a lousy summer or the global price collapses, he’ll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked.

Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into “derivatives” that could be bought and sold among traders who had nothing to do with agriculture. A market in “food speculation” was born.

So Farmer Giles still agrees to sell his crop in advance to a trader for £10,000. But now, that contract can be sold on to speculators, who treat the contract itself as an object of potential wealth. Goldman Sachs can buy it and sell it on for £20,000 to Deutsche Bank, who sell it on for £30,000 to Merrill Lynch – and on and on until it seems to bear almost no relationship to Farmer Giles’s crop at all.

If this seems mystifying, it is. John Lanchester, in his superb guide to the world of finance, Whoops! Why Everybody Owes Everyone and No One Can Pay, explains: “Finance, like other forms of human behaviour, underwent a change in the 20th century, a shift equivalent to the emergence of modernism in the arts – a break with common sense, a turn towards self-referentiality and abstraction and notions that couldn’t be explained in workaday English.” Poetry found its break with realism when T S Eliot wrote “The Wasteland”. Finance found its Wasteland moment in the 1970s, when it began to be dominated by complex financial instruments that even the people selling them didn’t fully understand.

So what has this got to do with the bread on Abiba’s plate? Until deregulation, the price for food was set by the forces of supply and demand for food itself. (This was already deeply imperfect: it left a billion people hungry.) But after deregulation, it was no longer just a market in food. It became, at the same time, a market in food contracts based on theoretical future crops – and the speculators drove the price through the roof.

Here’s how it happened. In 2006, financial speculators like Goldmans pulled out of the collapsing US real estate market. They reckoned food prices would stay steady or rise while the rest of the economy tanked, so they switched their funds there. Suddenly, the world’s frightened investors stampeded on to this ground.

So while the supply and demand of food stayed pretty much the same, the supply and demand for derivatives based on food massively rose – which meant the all-rolled-into-one price shot up, and the starvation began. The bubble only burst in March 2008 when the situation got so bad in the US that the speculators had to slash their spending to cover their losses back home.

When I asked Merrill Lynch’s spokesman to comment on the charge of causing mass hunger, he said: “Huh. I didn’t know about that.” He later emailed to say: “I am going to decline comment.” Deutsche Bank also refused to comment. Goldman Sachs were more detailed, saying they sold their index in early 2007 and pointing out that “serious analyses … have concluded index funds did not cause a bubble in commodity futures prices”, offering as evidence a statement by the OECD.

How do we know this is wrong? As Professor Ghosh points out, some vital crops are not traded on the futures markets, including millet, cassava, and potatoes. Their price rose a little during this period – but only a fraction as much as the ones affected by speculation. Her research shows that speculation was “the main cause” of the rise.

So it has come to this. The world’s wealthiest speculators set up a casino where the chips were the stomachs of hundreds of millions of innocent people. They gambled on increasing starvation, and won. Their Wasteland moment created a real wasteland. What does it say about our political and economic system that we can so casually inflict so much pain?

If we don’t re-regulate, it is only a matter of time before this all happens again. How many people would it kill next time? The moves to restore the pre-1990s rules on commodities trading have been stunningly sluggish. In the US, the House has passed some regulation, but there are fears that the Senate – drenched in speculator-donations – may dilute it into meaninglessness. The EU is lagging far behind even this, while in Britain, where most of this “trade” takes place, advocacy groups are worried that David Cameron’s government will block reform entirely to please his own friends and donors in the City.

Only one force can stop another speculation-starvation-bubble. The decent people in developed countries need to shout louder than the lobbyists from Goldman Sachs. The World Development Movement is launching a week of pressure this summer as crucial decisions on this are taken: text WDM to 82055 to find out what you can do.

The last time I spoke to her, Abiba said: “We can’t go through that another time. Please – make sure they never, never do that to us again.”

Filed under: bubble, CDO, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, foreign relations, GTC | Honor, investment banking, Investor, Mortgage, Pleading, securities fraud, STATUTES, taxes Tagged: appraisals, derivatives, loans, mortgage bonds, ratings

Jun

Housing Market Slows as Buyers Get Picky

By LH | Foreclosure Blog News, Homeowner Resources

91531 Comment2010-06-17+14%3A37%3A58LH

Editor’s Note: Housing prices will continue to decline until median income starts to flatten out. All signs indicate that we are in for another 10%-20% drop as conventionally measured. Remember that housing prices do NOT take into consideration selling expenses and concessions at closing. All things considered, housing prices should be at least 8% under what is reported.

With that 8% reduction, more homes are underwater than what has been reported. In fact, more homes are underwater than what their owners think they are.

Given another 10%+ reduction, the number of homes underwater will increase substantially as many are considered “near” break-even but are actually substantially underwater. This in turn will increase resistance to selling as well as current resistance to buying, knowing that the market will get worse.

If you are selling a home this means that for every $100,000 you think you are going to get, your net proceeds at closing are likely to be reduced by $10,000-$20,000. The buyers are basically merciless, since many of them are short-sale buyers. They know they have the seller over a barrel and they are taking advantage of every piece of leverage available.

CONCLUSION: The current housing market is untenable. The vast majority of homeowners are underwater in terms of what they will get at the closing table. Typical price concessions are ranging from 5%-6%, before the contract is signed. Thus without a massive program for principal reduction, neither the housing market nor the economy has any chance of a real recovery anytime in the near future. That principal reduction is really not a reduction. It is a correction from the false appraisals that supported a fraudulent scheme for selling crap securities to unwary investors.

A principal reduction is no gift. It is making things right, i.e., justice. And practically speaking it is the ONLY way we can ever make this situation right.

June 16, 2010

Housing Market Slows as Buyers Get Picky

By DAVID STREITFELD

Before the recession, people simply looked for a house to buy. Later they got squeamish just thinking about buying. Now they are on a quest for perfection at the perfect price.

Exacting buyers are upending the battered real estate market, agents and other experts say, leading to last-minute demands for multiple concessions, bruised feelings on all sides and many more collapsed deals than usual.

It is a reversal of roles from the boom, when competing buyers were sometimes reduced to writing heartfelt letters saying how much they loved the house and how they promised to eternally worship the memory of the previous owners. These days, it is the buyers who are coldly seeking the absolute best deal while the sellers are left in emotional turmoil.

“We see buyers who must have learned their moves from the World Wrestling Federation,” said Glenn Kelman, chief executive of the online broker Redfin. “They think the final smack-down occurs at the inspection, where the seller will be reluctant to refuse any demand because the alternative is putting the house back on the market as damaged goods.”

Everyone expected the housing market to suffer at least a temporary hangover after the government’s $8,000 tax credit expired, but not necessarily this much. Preliminary data from around the country indicates that the housing market began swooning last month immediately after the credit was no longer available. In some places, sales dropped more than 20 percent from May 2009, when the worst of the financial crisis had subsided.

Builders have been affected too. Construction of new homes in May dropped 17.2 percent from April, the Commerce Department said Wednesday, significantly lower than forecast. Permits for future construction dropped 10 percent, suggesting a cruel summer.

Even the lowest home mortgage rates in decades are not doing much to invite deals. The Mortgage Bankers Association said Wednesday that applications for loans to buy houses were down by a third compared with last year. Applications are back to the level of the mid-1990s, when the country’s housing market was smaller.

Against such a backdrop of misery, buyers are empowered — and are taking full advantage.

John Porter Simons, a Seattle software engineer, thought he had a couple willing to pay $340,000 for his house. But they asked for $24,000 worth of work, most of which involved waterproofing the basement. “It was totally irrational,” said Mr. Simons. “My basement has never flooded. I live on a hill.”

He made a counteroffer to their offer, and the buyers walked. The house is now under contract to a new set of buyers, who got a cut in price and $2,500 in electrical work thrown in.

Buyers, of course, say they are merely being smart.

Chris Dunn, an economic consultant in Chicago, saw a house he liked last month for $539,000. He offered $500,000, but then his inspector told him that he would eventually have to replace the windows. The sellers were persuaded to kick in $10,000 more to pay for the work.

“We didn’t feel we were being that aggressive,” said Mr. Dunn. “We had the position, ‘If the seller is willing to come down enough, we will buy this home.’ If they weren’t willing, we would have just moved on. In this market, you have a lot of options.”

In some cases, agents say, sellers literally cannot afford to make concessions. Another $10,000 will push them underwater, which means they will have to arrange the sale through the bank.

“People cashed in on their houses to get money to go on vacation, for a new roof, to send the kids to college,” said Roberta Baldwin, an agent in Montclair, N.J. “They thought it was always going to be worth more.”

Even when a sale can be worked out, it is not uncommon for everyone to walk away feeling more aggrieved than celebratory.

“Buyers feel they’re not appreciated for simply making an offer,” Ms. Baldwin said. “And sellers feel humiliated and even angry. They expected to do better.”

Information about scuttled deals tends to be anecdotal, but Mike Lyon of Lyon Real Estate in Sacramento estimates that 15 to 17 percent of sales in his area are falling apart at the last minute as sellers prove unable or unwilling to give buyers what they want. In a normal market, he said, the figure is about 5 percent.

“This is the fallout from all the foreclosures: Buyers think that anyone who is selling must be desperate,” said Mr. Lyon, who employs about a thousand agents. “They walk in with the bravado of, ‘The world’s coming to an end, and I want a perfect place.’ ”

The tax credit, for all its flaws, may have helped avert financial Armageddon, but the final effect is still being tallied. In Indianapolis, the number of contracts signed in May was down 32 percent compared with May 2009. They dropped nearly 25 percent in Minneapolis/St. Paul, 20 percent in Seattle, 10 percent in Sacramento and 42 percent in Hartford. (A few areas, including Miami, showed improvements instead of declines.)

Pending contracts, if they are not canceled at the last minute, become official in six to eight weeks. Many deals done in April, when the credit was in effect, are still being completed and will be counted in May or June sales reports. So the severity and extent of the current slump will not become clear until fall.

The optimists, and real estate remains full of them, say the trough is temporary. The stimulus might have stolen sales from May but by July, they argue, people will need to buy again.

Indeed, the Mortgage Bankers Association’s purchase application index ticked up slightly this week after five weeks of decline, although the association declined to say the index had bottomed out.

John P. Johnson of Des Moines will continue to hope, as he has for more than two years now, for a market that is healthy enough to supply him with a buyer. His house, built in 1981, is too recent to be charming and too old to be new.

“When we upgraded the kitchen, we put in Corian countertops, which were fashionable at the time, but now they all want granite,” he said.

He had one offer in the fall, which fell apart when the buyer made too many demands (a shaved sales price plus paying the closing costs and all their other fees). Despite another price cut to $204,000, only one couple showed up at the last open house. His agent tells him the market is dead. The number of contracts signed in Des Moines in May was down 47 percent from last year.

“Keeping this house ready to sell is a full-time job,” said Mr. Johnson. “I never thought I’d be spending my retirement doing this.”

Filed under: bubble, CDO, CORRUPTION, Eviction, expert witness, Fannie MAe, foreclosure, foreclosure mill, GTC | Honor, investment banking, Investor, MODIFICATION, Mortgage, securities fraud, Servicer, trustee Tagged: housing prices, median income, principal reduction, underwater

Jun

ORDER YOUR PROPERTY CHAIN OF TITLE, APPRAISAL AND SECURITIZATION COMMENT FROM NEIL GARFIELD AND HIS EXPERTS

By LH | Foreclosure Blog News, Homeowner Resources

7648Leave a Comment2010-06-14+14%3A47%3A01LH

Fill out GTC|HONORS Registration Form

Go to Title, Copies, Appraisals, and SQR

Neil is doing most of them now and he reviews anything before it goes out. You Get a chain of everything in your title record going back two owners including yourself. You Get copies of the documents that were filed and you get an auto-generated appraisal that you can use in your fight against the Pretender Lenders. All this and a comment on some obvious aspects of your loan, possible fabrications and forgeries, and (SQR) Securitization Quick Review for only $249.

Act NOW! and save money. The Price goes up to $349 on June 15, 2010.

Filed under: foreclosure

Jun

More Investors Are Suing Chase: Cheer them on!

By LH | Foreclosure Blog News, Homeowner Resources

8823Leave a Comment2010-06-12+08%3A13%3A56LH

Submitted by Beth Findsen, Esq. in Scottsdale, Az

Investors-suing-Chase-includes-list-of-mortgage-backed-securities-various-originators-like-New-Century-WAMU-Wells-Fargo-ResMae-Greenpoint-Coun

One of the many things I find interesting in this lawsuit is that FINALLY the pretender lenders are at least being referred to as originators and not banks, lenders or any of the other things that had most people believing.

Here too investors sue the rating agencies, Moody’s, S&P, Fitch paving the way for borrowers to make virtually the same allegations against the appraisers and the pretender lender who hired the appraiser.

The only thing left for the investors is to realize that the only way they are actually going to mitigate losses is by creating an entity that negotiates modifications directly with borrowers. Otherwise these intermediaries in the securitization chain are going to continue cleaning their clocks.

Here are some morsels you too might find interesting

7. The true facts that were misstated in or omitted from the Offering Documents
include:
(1) The Originators systematically disregarded their stated underwriting
standards when issuing loans to borrowers;
(2) The underlying mortgages were based on appraisals that overstated the
value of the underlying properties and understated the loan-to-value ratios
of the Mortgage Loans;
(3) The Certificates’ credit enhancement features were insufficient to protect
Certificate holders from losses because the underwriting deficiencies
rendered the Mortgage Loans far less valuable than disclosed and the
credit enhancement features were primarily the product of the Rating
Agencies’ outdated models. As such, the level of credit enhancement
necessary for the Certificates’ risk to correspond to the pre-determined
credit ratings was far less than necessary; and
(4) The Rating Agencies employed outdated assumptions, relaxed ratings
criteria, and relied on inaccurate loan information when rating the
Certificates. S&P’s models had not been materially updated since 1999
and Moody’s models had not been materially updated since 2002. These
outdated models failed to account for the drastic changes in the type of
loans backing the Certificates and the Originators’ systemic disregard for their underwriting standards. Furthermore, the Rating Agencies had conflicts of interest when rating the Certificates.
8. As a result, Lead Plaintiff and the Class purchased Certificates that were backed by collateral (i.e., the Mortgage Loans) that was much less valuable and which posed greater risk of default than represented, were not of the “best quality” and were not equivalent to other investments with the same credit ratings. Contrary to representations in the Offering Documents, the Certificates exposed purchasers to increased risk with respect to delinquencies, foreclosures and other forms of default on the Mortgage Loans.

Filed under: bubble, CASES, CORRUPTION, Eviction, expert witness, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, trustee, workshop Tagged: Accredited Home Lenders, American Home Mortgage Corp., Chase, Chase Home Finance LLC, countrywide, Depositor, Greenpoint, HERS, Inc., J.P. Morgan Acceptance Corporation I, J.P. Morgan Chase Bank, J.P. Morgan Mortgage Acquisition Corporation, JPMorgan Chase & Co, McGraw-Hill Companies, Moody’s Investor Services, mortgage backed securities, N.A, new century, originators, Ownit Mortgage Solutions, Public Employees’ Retirement System of Mississippi, Registration Statement, ResMae, Sponsor, Standard & Poor’s Financial Services, WAMU, Wells Fargo

Jun

NY Appeals: AG may pursue Banks for Fraudulent Appraisal

By LH | Foreclosure Blog News, Homeowner Resources

8731Leave a Comment2010-06-10+13%3A08%3A19LH

Editor’s note: I think the standards used here apply to ALL private actions for appraisal fraud. With appraisal fraud proven, virtually all lending statutes are proven to have been violated. Appraisal fraud lies at the root of the mortgage mess with its sister, ratings fraud. Both are appraisals and both are ratings. Both were designed to track people into doing what they otherwise would never have done if they had the right information. If the either the investor to advanced the money or the borrower who took it knew that the appraisal was bogus and that there was going to be a hit virtually as fast as you drive a new car off the lot, they would not, as reasonable people, have completed the transaction or they would demanded more information.

From Jake Naumer: This goes to the root and branch of the problems we have today.The good news is that there is actually a TRUE and CORRECT VALUE for any property.It just seems that no one seems to know what it actually is.

Historically and emperically, true value has always been a fairly fixed relationship between total aggregate income and total aggregate property, with some deference for location and ammenities.All of the players with varying vested interests seek to distort the perception of value, through the use of manipulation and misinformation, in order to extract the profit that is created by the gap between true value and perceived value. Unfortunately, once the distortion machine was exposed by exacting market forces, robbery of the honorable rule abiding tax paying citizens was required to maintain the status quo.

It will not last.

Submitted by Jeff

2010/06/08 at 1:06 pm

People v First Am. Corp.
2010 NY Slip Op 04868
Decided on June 8, 2010
Appellate Division, First Department
Gonzalez, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on June 8, 2010

SUPREME COURT, APPELLATE DIVISION
First Judicial Department
Luis A. Gonzalez, P.J.
David B. Saxe
James M. Catterson
Rolando T. Acosta, JJ.
406796/07

1308

[*1]The People of the State of New York by Andrew Cuomo, Attorney General of the State of New York, Plaintiff-Respondent,

First American Corporation, et al., Defendants-Appellants.

Defendants appeal from the order of the Supreme Court, New York County (Charles Edward Ramos, J.), entered April 8, 2009, which, insofar as appealed from as limited by the briefs, denied their motion to dismiss the complaint on the ground of federal preemption.

DLA Piper LLP (US), New York (Richard F. Hans,
Patrick J. Smith, Kerry Ford
Cunningham and Jeffrey D.
Rotenberg of counsel), for
appellants.
Andrew M. Cuomo, Attorney General, New York
(Richard Dearing, Benjamin
N. Gutman and Nicole
Gueron of counsel), for respondent. [*2]

GONZALEZ, P.J.

This appeal calls upon us to determine whether the regulations and guidelines implemented by the Office of Thrift Supervision (OTS) pursuant to the Home Owner’s Lending Act of 1933 (HOLA) (12 USC § 1461 et seq.) and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) (Pub L 101-73, 103 STAT 183 [codified in scattered sections of 12 USC]), preempt state regulations in the field of real estate appraisal.

The Attorney General claims that defendants engaged in fraudulent, deceptive and illegal business practices by allegedly permitting eAppraiseIT residential real estate appraisers to be influenced by nonparty Washington Mutual, Inc. (WaMu) to increase real estate property values on appraisal reports in order to inflate home prices. We conclude that neither federal statutes, nor the regulations and guidelines implemented by the OTS, preclude the Attorney General of the State of New York from pursuing litigation against defendants First American Corporation and First American eAppraiseIT, LLC. We further conclude that the Attorney General has standing to pursue his claims pursuant to General Business Law § 349.

In a complaint dated November 1, 2007, plaintiff, the People of the State of New York, commenced this action against defendants asserting claims under Executive Law § 63(12) and General Business Law § 349, and for unjust enrichment. The complaint alleges that in Spring 2006, WaMu hired two appraisal management companies, defendant eAppraiseIT and nonparty Lender’s Service, Inc., to oversee the appraisal process and provide a structural buffer against potential conflicts of interest between WaMu and the individual appraisers. The gravamen of the Attorney General’s complaint asserts that defendants misled their customers and the public by stating that eAppraiseIT’s appraisals were independent evaluations of a property’s market value and that these appraisals were conducted in compliance with the Uniform Standards and Professional Appraisal Practice (USPAP), when in fact defendants had implemented a system allowing WaMu’s loan origination staff to select appraisers who would improperly inflate a property’s market value to WaMu’s desired target loan amount.[FN1]

Defendants moved for dismissal of the complaint pursuant to CPLR 3211, asserting that the Attorney General is prohibited from litigating his claims because HOLA and FIERRA impliedly place the responsibility for oversight of appraisal management companies on the OTS, and asserting a failure to state a cause of action. Supreme Court denied defendants’ motion, finding that HOLA and FIRREA do not occupy the entire field with respect to real estate appraisal regulation and that the enforcement of USPAP standards under General Business Law § [*3]349 neither conflicts with federal law, nor does it impair a bank’s ability to lend and extend credit. We affirm.

The Supremacy Clause of the United States Constitution provides that Federal laws “shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding” (US Const, art VI, cl [2]), and it “vests in Congress the power to supersede not only State statutory or regulatory law but common law as well” (Guice v Charles Schwab & Co., 89 NY2d 31, 39 [1996], cert denied 520 US 1118 [1997]). Indeed, “[u]nder the U.S. Constitution’s Supremacy Clause (US Const, art VI, cl 2), the purpose of our preemption analysis is . . . to ascertain the intent of Congress” (Matter of People v Applied Card Sys., Inc., 11 NY3d 105, 113 [2008], cert denied
_ US _, 129 S Ct 999 [2009]).

Congressional intent to preempt state law may be established “by express provision, by implication, or by a conflict between federal and state law” (Balbuena v IDR Realty LLC, 6 NY3d 338, 356 [2006], quoting New York State Conference of Blue Cross & Blue Shield Plans v Travelers Ins. Co., 514 US 645, 654 [1995]). Express preemption occurs when Congress indicates its “pre-emptive intent through a statute’s express language or through its structure and purpose” (Altria Group, Inc. v Good, 555 US __, __, 129 S Ct 538, 543 [2008]). Absent explicit preemptive language, implied preemption occurs when “[t]he scheme of federal regulation [is] so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it . . . [o]r the Act of Congress may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject” (Rice v Santa Fe El. Corp., 331 US 218, 230 [1947]). Further, when “[a] conflict occurs either because compliance with both federal and state regulations is a physical impossibility, or because the State law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” the State law is preempted (City of New York v Job-Lot Pushcart, 213 AD2d 210, 210 [1995], affd 88 NY2d 163 [1996], cert denied 519 US 871 [1996] [internal quotation marks and citations omitted]).

Here, defendants do not argue, nor have they directed this Court’s attention to any language within HOLA or FIRREA that establishes, that Congress expressly created these statutes to supersede state law governing the causes of actions asserted in the Attorney General’s complaint. Defendants also have not argued that there exists a conflict between federal and State laws or regulations. Rather, defendants assert that because Congress has legislated so comprehensively, and that federal law so completely occupies the home lending field, the Attorney General is precluded from bringing claims against them under the theory of field preemption. Thus, the necessary starting point is to determine whether HOLA and FIRREA so occupy the field that these two statutes preempt any and all state laws speaking to the manner in which appraisal management companies provide real estate appraisal services.

In 1933, Congress enacted HOLA “to provide emergency relief with respect to home mortgage indebtedness at a time when as many as half of all home loans in the country were in default” (Fidelity Fed. Sav. & Loan Assn. v De la Cuesta, 458 US 141, 159 [1982] [internal [*4]quotation marks and citations omitted]). HOLA
created a general framework to regulate federally chartered savings associations that left the regulatory details to the Federal Home Loan Bank Board (FHLBB). The FHLBB’s authority to regulate federal savings and loans is virtually unlimited and “[p]ursuant to this authorization, the [FHLBB] has promulgated regulations governing the powers and operations of every Federal savings and loan association from its cradle to its corporate grave” (id. at 145 [internal citations and quotation marks omitted]).

When Congress passed FIRREA in 1989, it restructured the regulation of the savings association industry by abolishing the FHLBB and vested many of its functions into the newly-created OTS (see FIRREA § 301 [12 USCA § 1461 et seq.] [establishing OTS], § 401 [12 USCA § 1437] [abolishing the FHLBB]). According to FIRREA’s legislative history

“[t]he primary purposes of the [FIRREA] are to provide affordable housing mortgage finance and housing opportunities for low- and moderate-income individuals through enhanced management of federal housing credit programs and resources; establish organizations and procedures to obtain and administer the necessary funding to resolve failed thrift cases and to dispose of the assets of these institutions . . . and, enhance the regulatory enforcement powers of the depository institution regulatory
agencies to protect against fraud, waste and insider abuse” (HR Rep 101-54 [I], at 307-308, reprinted in 1989 US Code Cong to Admin News, at 103-104).

FIRREA was also designed
“to thwart real estate appraisal abuses, [by] establish[ing] a system of uniform national real estate appraisal standards. It also requires the use of state certified or licensed appraisers for real estate related transactions with the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Fannie Mac), the RTC, or certain real estate transaction [sic] regulated by the federal financial institution regulatory agencies” (HR Rep 101-54 (I), at 311, reprinted in 1989 US Code Cong to Admin News, at 107).

Further, 12 USCS § 3331, which was enacted as part of FIRREA, states that the general purpose of this statute, is
“to provide that Federal financial and public policy interests in real estate related transactions will be protected by requiring that real estate appraisals utilized in connection with federally related [*5]transactions are performed in writing, in accordance with uniform standards, by individuals whose competency has been demonstrated and whose professional conduct will be subject to effective supervision.”

The uniform standards described in 12 USCS § 3331, are defined in 12 USCS § 3339 which requires that the OTS, as a
“Federal financial institution[] regulatory agency . . . shall prescribe appropriate standards for the performance of real estate appraisals in connection with federally related transactions [FN2] under the jurisdiction of each such agency or instrumentality. These rules shall require, at a minimum — (1) that real estate appraisals be performed in accordance with generally accepted appraisal standards as evidenced by the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation; and (2) that such appraisals shall be written appraisals.”
The Appraisal Standards Board (ASB) of the Appraisal Foundation promulgates the appraisal standards mandated by 12 USC § 3339 and are called USPAP. The Appraisal Foundation is a private “not-for-profit organization dedicated to the advancement of professional valuation [and] was established by the appraisal profession in the United States in 1987″ (Welcome to The Appraisal Foundation [The Appraisal Foundation], https://netforum.avectra.com/eWeb/StartPage.aspx?Site=TAF [accessed May 27, 2010]). The ASB is responsible for “develop[ing], interpret[ing] and amend[ing]” USPAP (Welcome to The Appraisal Foundation, https://netforum.avectra.com/eWeb/
DynamicPage.aspx?Site=TAF & WebCode=ASB [accessed May 27, 2010]). However, “[e]ach U.S. State or Territory has a State appraiser regulatory agency, which is responsible for certifying and licensing real estate appraisers and supervising their appraisal-related activities, as required by Federal law” (State Regulatory Information [The Appraisal Foundation], https://netforum.avectra.com/eWeb/DynamicPage.aspx?Site=taf & WebCode=RegulatoryInfo [accessed May 27, 2010]; see also State Appraiser Regulatory Programs > State Contact Information [Appraisal Subcommittee], https://www.asc.gov/State-Appraiser- Regulatory-Programs/StateContactInformation.aspx [accessed May 27, 2010] [listing each State appraiser regulatory agency's website]). Further, the OTS itself has determined that

“[i]t does not appear that OTS is required by title XI of FIRREA to [*6]implement an appraisal regulation that reaches all the activities of savings and loan holding companies, at least to the extent that those activities are unrelated to the safety and soundness of savings associations or their subsidiaries. Neither the language of Title XI nor its legislative history indicate that Congress intended title XI to apply to the wide range of activities engaged in by savings and loan holding companies and their non-saving association subsidiaries” (55 Fed Reg 34532, 34534-34535 [1990], codified at 12 CFR 506, 545, 563, 564 and 571).

Indeed, the OTS encourages financial institutions
“to make referrals directly to state appraiser regulatory authorities when a State licensed or certified appraiser violates USPAP, applicable state law, or engages in other unethical or unprofessional conduct. Examiners finding evidence of unethical or unprofessional conduct by appraisers will forward their findings and recommendations to their supervisory office for appropriate disposition and referral to the state, as necessary” (OTS, Thrift Bulletin, Interagency Appraisal and Evaluation Guidelines at 10 [November 4, 1994], http://files.ots.treas. gov/84042.pdf [accessed May 27, 2010]).
In looking at the legislative history it becomes clear that Congress intended to establish

“a system of uniform real estate appraisal standards and requires the use of State certified and licensed appraisers for federally regulated transactions by July 1, 1991. . . The key . . . lies in the creation of State regulatory agencies and a Federal watchdog to monitor the standards and to oversee State enforcement. . . It is this combination of Federal and State action . . . that . . . assur[es] . . . good standards are properly enforced (135 Cong Rec S3993-01, at S4004 [April 17, 1989], 1989 WL 191505 [remarks of Senator Christopher J. Dodd]).

Thus, we conclude that neither HOLA or FIRREA preempts or precludes the Attorney General from pursuing his claims.
Having rejected defendants’ general arguments for preemption under HOLA and FIRREA, “[t]he Court’s task, then, is to decide which claims fall on the regulatory side of the ledger and which, for want of a better term, fall on the common law side” (Cedeno v IndyMac Bancorp, Inc., 2008 WL 3992304, *7, 2008 US Dist LEXIS 65337, *22 [SD NY 2008] [internal quotation marks and citation omitted]). Defendants assert that the Attorney General is preempted from pursuing his claims because subsequent to FIRREA’s passage, the OTS issued extensive [*7]regulations specifically addressing the composition and construction of appraisal programs undertaken by federal savings and loans.

It is well settled that “[a]gencies delegated rulemaking authority under a statute . . . are afforded generous leeway by the courts in interpreting the statute they are entrusted to administer” (Rapanos v United States, 547 US 715, 758 [2006]). Indeed, the OTS regulations “have no less pre-emptive effect than federal statutes” (Fidelity Fed. Sav. & Loan Assn., 458 US at 153). 12 CFR 545.2, states that regulations promulgated by the OTS are “preemptive of any state law purporting to address the subject of the operations of a Federal saving association.” However, 12 CFR 560.2(a) limits the language of 12 CFR 545.2 by setting parameters to the OTS’ authority to promulgate regulations that

“preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of federal savings associations, to enable federal savings associations . . . to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA” (12 CFR 560.2[a]).
12 CFR 560.2(b) provides a non-exhaustive list of illustrative examples of the types of state laws preempted by 12 CFR 560.2(a). Further, 12 CFR 560.2(c) states that the following types of State law are not preempted

“to the extent that they only incidentally affect the lending operations of Federal savings associations . . . (1) Contract and commercial law; (2) Real property law; (3) Homestead laws specified in 12 U.S.C. 1462a(f); (4) Tort law; (5) Criminal law; and (6) Any other law that OTS, upon review, finds: (i) Furthers a vital state interest; and (ii) Either has only an incidental effect on lending operations or is not otherwise contrary to the purposes expressed in paragraph (a) of this section.”
The OTS advises that when a court is

“analyzing the status of state laws under § 560.2, the first step will be to determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption” (61 Fed Reg 50951-01, 50966-50967 [1996]).
[*8]
Defendants argue that the Attorney General’s challenges to defendants’ business practices are preempted because the conduct falls within 12 CFR 560.2(b)(5), which provides examples of loan-related fees “including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees.” Defendants also assert that their alleged conduct is within 12 CFR 560.2(b)(9), which provides

“[d]isclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents and laws requiring creditors to supply copies of credit reports to borrowers or applicants” (id.).

Lastly, defendants assert that their alleged conduct falls within 12 CFR 560.2(b)(10) which states that “[p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages” is preempted.
The Attorney General’s complaint asserts that defendants engaged in conduct proscribed by Executive Law § 63(12)[FN3] and General Business Law § 349 [FN4]. It further alleges that defendants unjustly enriched themselves by repeated use of fraudulent or illegal business practices, in that they allowed WaMu to pressure eAppraiseIT appraisers to compromise their USPAP-required independence and collude with WaMu to inflate residential appraisal values so that the appraisals would match the qualifying loan values WaMu desired.

Under the first prong of the preemption analysis, we find that this action brought pursuant to Executive Law § 63(12), General Business Law § 349(b) and on the theory of unjust [*9]enrichment is not preempted by 12 CFR 560.2(b)(5) because it involves no attempt to regulate bank-related fees. We also find, under the first prong of the preemption analysis, that there is no preemption pursuant to 12 CFR 560.2(b)(9) because these claims do not involve a state law seeking to impose or require any specific statements, information or other content to be disclosed. Although at least one case has held that claims similar to those asserted here were preempted (see Spears v Washington Mut., Inc., 2009 WL 605835 [ND Cal 2009]), we find
under the first prong of the preemption analysis that 12 CFR 660.2(b)(10) does not preclude the Attorney General’s complaint because prosecution of the alleged conduct will not affect the operations of federal savings associations (FSA) in how they process, originate, service, sell or purchase, or invest or participate in, mortgages.

The question then becomes whether the Attorney General is nevertheless precluded from litigating his claims under the second prong of the preemption analysis. Because enjoining a real estate appraisal management company from abdicating its publicly advertised role of providing unbiased valuations is not within the confines of 12 CFR 560.2(c), we answer it in the negative.

Defendants argue the OTS’s authority under HOLA and FIRREA is not limited to oversight of a FSA and that its authority under these two statues extends over the activity regulated and includes the activities of third party agents of a FSA. Defendants assert that providing real estate appraisal services is a critical component of the processing and origination of mortgages and represents a core component of the controlling federal regime. Defendants cite 12 USC § 1464(d)(7)(D) and State Farm Bank, FSB v Reardon (539 F3d 336 [6th Cir 2008]) for
support. 12 USC § 1464(d)(7) states, in pertinent part, that

“if a savings association . . . causes to be performed for itself, by contract or otherwise, any service authorized under [HOLA] such performance shall be subject to regulation and examination by the [OTS] Director to the same extent as if such services were being performed by the savings association on its own premises . . .”
Here, it is alleged eAppraiseIT and Lender’s Service, Inc., were hired by WaMu to provide appraisal services. However, defendants are incorrect in asserting that providing real estate appraisal services is an authorized banking activity under HOLA. In an opinion letter dated October 25, 2004, OTS concluded that it had the authority to regulate agents of an FSA under HOLA because

“[i]nherent in the authority of federal savings associations to exercise their deposit and lending powers and to conduct deposit, lending, and other banking activities is the authority to advertise, market, and solicit customers, and to make the public aware of the banking products and services associations offer. The authority to conduct deposit and lending activities, and to offer banking products and services, is accompanied by the power to advertise, market, and solicit customers for such products and services . . . A state may not put operational restraints on a federal savings [*10]association’s ability to
offer an authorized product or service by restricting the association’s ability to market its products and services and reach potential customers . . . Thus, OTS has authority under the HOLA to regulate the Agents the Association uses to perform
marketing, solicitation, and customer service activities” (2004 OTS Op No. P-2004-7, at 7, http://files.ots.treas.gov/560404.pdf, 2004 OTS LEXIS 6, at *15 [accessed May 27, 2010]).
State Farm Bank, FSB v Reardon (539 F3d 336 [6th Cir 2008]) follows this principle. In Reardon, the plaintiff, a FSA chartered by the OTS under HOLA, decided to offer, through its independent contractor agents, first and second mortgages and home equity loans in the State of Ohio. The Sixth Circuit concluded that although the statute at issue

“directly regulates [the plaintiff FSA's] exclusive agents rather than [the FSA] itself . . . the activity being regulated is the solicitation and origination of mortgages, a power granted to [the FSA] by HOLA and the OTS. This is also a power over which the OTS has indicated that any state attempts to regulate will be met with preemption . . . [T]he practical effect of the [statute] is that [the FSA] must either change its structure or forgo mortgage lending in Ohio. Thus, enforcement of the [statute] against [the FSA's] exclusive agents would frustrate the purpose of the HOLA and the OTS regulations because it indirectly prohibits [the FSA] from exercising the powers granted to it under the HOLA and the OTS regulations” (Reardon, 539 F3d at 349 [internal quotation marks and citation omitted]).
Since appraisal services are not authorized banking products or services of a FSA, defendants have failed to show that the Attorney General is preempted from pursuing his claims under 12 USC § 1464(d)(7)(D). Consequently, under the second prong of the preemption analysis, the result of the Attorney General litigating his claims against a company that independently administers a FSA’s appraisal program would “only incidentally affect the lending operations of [the FSA]” (12 CFR 560.2[c]). Thus, defendants have failed to show that OTS’s regulations and guidelines preempt or preclude the Attorney General from pursuing his claims.

Defendants assert that Cedeno v IndyMac Bancorp, Inc. (2008 WL 3992304, 2008 US Dist LEXIS 65337 [SD NY 2008]) provides this Court with persuasive authority that the federal government and its regulators alone regulate the mortgage loan origination practices of FSAs including all aspects of the appraisal programs they utilize. In Cedeno, the Southern District found preemption precluded a private individual from maintaining a cause of action against a bank. It was alleged that the bank failed to disclose to the plaintiff that it selected appraisers, appraisal companies and/or appraisal management firms who would inflate the value of [*11]residential properties in order to allow the bank to complete more real estate transactions and obtain greater profits. This practice resulted in the plaintiff being misled as to the true
equity in her home. The Southern District found that the conduct of the bank was

“directly regulated by the OTS: the processing and origination of mortgages, a loan-related fee, and the accompanying disclosure. The appraisals are a prerequisite to the lending process, and are inextricably bound to it. Because the plaintiff’s claim is not a simple breach of contract claim, but asks the Court to set substantive standards for the Associations’ lending operations and practices, it is preempted” (Cedeno, 2008 WL 3992304, *9, 2008 US Dist LEXIS 65337, at *28 [internal quotation marks and citations omitted]).

Contrary to defendants’ assertions, we find that Cedeno is not applicable here because Cedeno does not reach the question as to whether HOLA, FIRREA or OTS’s regulations and guidelines are intended to regulate the conduct of real estate appraisal companies.
Annexed to the OTS’s October 25, 2004 opinion letter is a document entitled Appendix A – Conditions. In this document, OTS requires FSAs that wish to use agents to perform marketing, solicitation, customer service, or other activities related to the FSA’s authorized banking products or services to enter into written agreements that “(4) expressly set[] forth OTS’s statutory authority to regulate and examine and take an enforcement action against the agent with respect to the activities it performs for the association, and the agent’s acknowledgment of OTS’s authority” (2004 OTS Op No. P-2004-7, at 16, http://files.ots. treas.gov/560404.pdf, 2004 OTS LEXIS 6, at *37 [accessed May 27, 2010]). We note that defendants have neither asserted that such written agreements exist nor produced such documents. Thus, we conclude that the Attorney General may proceed with his claims against defendants because his challenge to defendants’ allegedly fraudulent and deceptive business practices in providing appraisal services is not preempted by federal law and regulations that govern the operations of savings and loan associations and institution-affiliated parties.

Defendants assert that the Attorney General cannot rely upon a substantive violation of a federal law to support a claim under General Business Law § 349 because this is an improper attempt to convert alleged violations of federal law into a violation of New York law. Defendants claim that where a plaintiff seeks to rely upon a substantive violation of a federal law to support a claim under General Business Law § 349, the federal law relied upon must contain a private right of action.

However, the Attorney General is statutorily charged with the duty to “[p]rosecute and defend all actions and proceedings in which the state is interested, and have charge and control of all the legal business of the departments and bureaus of the state, or of any office thereof which requires the services of attorney or counsel, in order to protect the interest of the state” (Executive Law § 63[1]). Indeed, when the Attorney General becomes aware of allegations of persistent fraud or illegality of a business, he [*12]

“is authorized by statute to bring an enforcement action seeking an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, [and] directing restitution and damages’ (Executive Law § 63 [12]). He is also authorized, when informed of deceptive acts or practices affecting consumers in New York, to bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices and to obtain restitution of any moneys or property obtained’ thereby (General Business Law § 349 [b])” (People v Coventry First LLC, 13 NY3d 108, 114 [2009]).
It is well settled that “[o]n a motion to dismiss pursuant to CPLR 3211, the court must accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory’” (Wiesen v New York Univ., 304 AD2d 459, 460 [2003], quoting Leon v Martinez, 84 NY2d 83, 87-88 [1994]). The Attorney General’s complaint alleges that defendants publicly claimed on their eAppraiseIT website that eAppraiseIT provides a firewall between lenders and appraisers so that customers can be assured that USPAP and FIRREA guidelines are followed and that each appraisal is being audited for compliance. The Attorney General charges that defendants deceived borrowers and investors who relied on their proclaimed independence by allowing WaMu’s loan production staff to select the appraiser based upon whether they would provide high values.

We find defendants’ assertions that the Attorney General lacks standing under General Business Law § 349 and that his complaint fails to state a cause of action are without merit. Indeed, the Attorney General’s complaint references misrepresentations and other deceptive conduct allegedly perpetrated on the consuming public within the State of New York, and “[a]s shown by its language and background, section 349 is directed at wrongs against the consuming public” (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 24 [1995]). Therefore, we find that the Attorney General’s complaint articulates a viable cause of action under General Business Law § 349, and that this statute provides him with standing.

Consequently, we conclude that defendants have failed to demonstrate that HOLA, FIRREA or the OTS’s regulations and guidelines preempt or preclude the Attorney General from pursuing the causes of action articulated in his complaint. We additionally find that the Attorney General has standing under General Business Law § 349. We have reviewed defendants’ remaining contentions and we find them without merit.

Accordingly, the order of the Supreme Court, New York County (Charles Edward Ramos, J.), entered April 8, 2009, which, insofar as appealed from as limited by the briefs, [*13]denied defendants’ motion to dismiss the complaint on the ground of federal preemption, should be affirmed, without costs.

All concur.
Order, Supreme Court, New York County (Charles Edward Ramos, J.), entered April 8, 2009, affirmed, without costs.

Opinion by Gonzalez, P.J. All concur.
Gonzalez, P.J., Saxe, Catterson, Acosta, JJ.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: JUNE 8, 2010

CLERK

Footnotes

Footnote 1: USPAP is incorporated into New York law and it prohibits a State-certified or State licensed appraiser from accepting a fee for an appraisal assignment “that is contingent upon the appraiser reporting a predetermined estimate, analysis, or opinion or is contingent upon the opinion, conclusion or valuation reached, or upon the consequences resulting from the appraisal assignment” (NY Exec Law § 160-y; 19 NYCRR 1106.1).

Footnote 2: 12 USC § 3350(4) states that “[t]he term federally related transaction’ means any real estate-related financial transaction which—(A) a federal financial institutions regulatory agency or the Resolution Trust Corporation engages in, contracts for, or regulates; and (B) requires the services of an appraiser.”

Footnote 3: Executive Law § 63(12) states, in pertinent part, that “[w]henever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply, in the name of the people of the state of New York . . . for an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, directing restitution and damages. . .”

Footnote 4: General Business Law § 349(b) states, in pertinent part, that “[w]henever the attorney general shall believe from evidence satisfactory to him that any person, firm, corporation or association or agent or employee thereof has engaged in or is about to engage in any of the acts or practices stated to be unlawful he may bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices and to obtain restitution of any moneys or property obtained directly or indirectly by any such unlawful acts or practices.”

Filed under: CASES, CDO, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, Mortgage, Motion Practice and Discovery, Pleading, securities fraud, Securitization Survey, STATUTES, workshop Tagged: 2010 NY Slip Op 04868, Appraisal, appraisal standards, Appraisal Standards Board of the Appraisal Foundation, Cuomo, deceptive and illegal business, eAppraiseIT, FIERRA, Financial Institutions Reform, First American Corporation, First American eAppraiseIT, fraudulent, GONZALEZ, HERS, HOLA, Home Owner’s Lending Act of 1933, Inc., inflate a property’s market value, Lender’s Service, New York, Office of Thrift Supervision, OTS, P.J., People v First Am. Corp, preemption, Recovery and Enforcement Act of 1989, Supremacy Clause, target loan amount, Title XI, USPAP, WAMU, Washington Mutual

May

Homebuilders Profit While Homeowners Eat Dirt

By LH | Foreclosure Blog News, Homeowner Resources

71222 Comments2010-05-07+11%3A26%3A39LH

Editor’s Comment: Home builders made out like bandits as they were complicit in the rampant appraisal fraud that served as the keystone of the mortgage meltdown. Both the homes that were sold and the securities that were sold to fund the mortgages were inflated in the same way. But on the homeowner side there was the developer who would raise prices every 6 weeks giving existing home buyers the elation of getting rich and prospective home buyers the urgency of getting on the gravy train.

Without “comparable” asking prices and sales prices generated by developers who set up mortgage shops on the premises, the appraisals could not have been inflated so much. Without the inflated appraisals, Wall Street could not have moved (created) as much money as they did. Without new homes going up the illusion of a prospering economy could not have been sustained. So now we have the prospect of perhaps 30 million vacant homes over the next 20+ YEARS.

Everyone asks where the money went. It went into the pockets of those who were in on the game. And one of the sectors largely ignored up until now has been the home builders. Inflating the prices of homes by 50% or more meant incredible profit margins for home builders. So here we have it — huge salaries and bonuses going to the head of home building companies — and even continuing building in some areas where there is already a glut of housing for sale.

Maybe some smart lawyer can figure out a way to plead in the developer in this mess. Those developers that created mortgage brokering offices on premises must have had some interesting deals with the mortgage aggregators serving Wall Street.The “rebates” and “premiums” must have been sweet — and undisclosed contrary to TILA.

Maybe some homeowners who still own their homes and bought from the developer have a cause of action for economic fraud. And maybe the allegations are not much different than what is already in the complaints filed against mortgage brokers, appraisers, and other participants in the securitized mortgage scam that brought our country to the edge (we hope) of ruin.

——————————–

Bailed-out homebuilders collect fat paychecks

While workers faced massive layoffs, housing execs raked in the dough

By Helen Chernikoff

updated 8:35 a.m. MT, Thurs., May 6, 2010

NEW YORK – No one rode the U.S. housing bubble higher than the company that calls itself “America’s Builder,” D.R. Horton Inc.

During the boom years, Horton and its peers sprawled across the map, opening new divisions and buying up smaller fry in an industry-wide frenzy of expansion and acquisition.

In 2006, the year home prices peaked, D.R. Horton’s sales did as well, with 53,099 home sales closed. Its founder predicted the company would break the 100,000-unit barrier by 2010.

Horton sold just 16,703 homes in 2009. Since the depths of the downturn in 2007, the company has lost more than $3.9 billion and laid off 53 percent of its workers.

But Horton has seen robust growth in one area: executive pay. The company’s founder and chairman, D.R. Horton, made $17.6 million from 2007 to 2009, as his annual compensation jumped from $2 million to $7.6 million, according to Equilar, a research firm that specializes in pay.

His chief executive, Donald Tomnitz, received a similar pay hike. Both will receive raises in base salary this year.

The two were not the only ones who profited handsomely during the most perilous stretch in their industry’s history, when homebuilders fired nearly half their workforce and lost more than half their market cap.

While Wall Street bankers have received far more scrutiny — and grief — for their fat paychecks, homebuilder executives have been doing quite well for themselves. In 2007 and 2008, the CEOs of the 10 biggest U.S. homebuilders earned an average of about $6 million a year each in total compensation.

And although banks and automakers got bigger bailouts from the government, homebuilders certainly got their share. This came in the form of tax benefits for buyers, tax refunds for builders and policies that kept mortgage rates low and foreclosures off the market.

“Without the government’s support, in all likelihood we would have seen more failures among the builders,” said Mark Zandi, chief economist at Moody’s Economy.com. “It’s almost hard to list all the things that have been done to support homebuilding either directly or indirectly.”

The federal homebuyer tax credit, which has provided up to $8,000 for homebuyers, cost taxpayers about $25 billion, Zandi said, while the tax refund amounted to a $5 billion cash cushion for big builders’ balance sheets. Individual states, such as California, helped out, too, offering their own baskets of tax benefits and breaks for homebuyers.

Of course, homebuilding executive pay — including that of Horton and Tomnitz — isn’t what it was at the top of the market, when predatory lenders pushed few-questions-asked loans on people who could not afford them. In 2005 alone, for example, Horton and Tomnitz each took home cash bonuses of almost $13 million.

Then again, some investors say homebuilders were overpaid during the boom, when Bob Toll of Toll Brothers Inc., R. Chad Dreier of Ryland Group and Larry Mizel of MDC Holdings Inc. took home compensation and stock sales in the hundreds of millions.

“Homebuilding is highly cyclical. You can’t blame that on corporate management nor should you give them credit when there is an upturn,” said Eric Marshall, director of research for Hodges Capital Management, which owns shares of No. 1 builder PulteGroup Inc. “CEO compensation needs to be better balanced, especially in cyclical industries.”

D.R. Horton declined to comment for this article.

Location, location, location
Homebuilding falls in a sector known as consumer durables. That’s the technical term for the big-ticket items that cost consumers not just money but often sleep — such as houses and some of the stuff inside them. Besides homebuilders, the sector includes companies like appliance maker Whirlpool Corp. and furniture retailer Ethan Allen Interiors Inc.

But CEOs whose companies build homes make more money — four to five times more — than their counterparts who manufacture couches and washing machines, said Robin Ferracone, executive chair at compensation consultant Farient Advisors. She and others attribute homebuilders’ outsized pay to a quirk of the industry: the involvement of founders and their sons in companies such as Horton, Toll Brothers, MDC Holdings, Lennar Corp. and Hovnanian Enterprises.

“When a homebuilding company goes public, it often doesn’t make that psychological transition to being a public company,” Ferracone said. “They pay themselves as if they were private.”

Filed under: bubble, CORRUPTION, foreclosure, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, trustee, workshop Tagged: appraisal fraud, Beazer, comparable, HERS, home builders, HOrton, Hovnanian Enterprises, Lennar, MDC Holdings, profit margins, TILA, Toll Brothers

Apr

Discovery and Motion Practice: Watch Those Committee Hearings on Rating Agencies

By LH | Foreclosure Blog News, Homeowner Resources

6681Leave a Comment2010-04-23+16%3A18%3A32LH

REGISTER NOW FOR DISCOVERY AND MOTION PRACTICE WORKSHOP MAY 23-24

Editor’s Note: As these hearings progress, you will see more and more admissible evidence and more clues to what you should be asking for in discovery. You are getting enhanced credibility from these government inquiries and the results are already coming out as you can see below.The article below is a shortened version of the New York Times Paper version. I strongly recommend that you get the paper today and read the entire article. Some of the emails quoted are extremely revealing, clear and to the point. They knew they were creating the CDO market and that it was going to explode. One of them even said he hoped they were rich and retired when the mortgage mess blew up.

Remember that a rating is just word used on Wall Street for an appraisal So Rating=Appraisal.

The practices used to corrupt the rating system for mortgage backed securities were identical in style to the practices used to corrupt the appraisals of the homes.

The appraisals on the homes were the foundation for the viability of the loan product sold to the borrower.

In the case of securities the buyers were investors.

In the case of appraisals the buyers were homeowners or borrowers.

In BOTH cases the “buyer” reasonably relied on an “outside” or “objective” third party who whose opinion was corrupted by money from the seller of the financial product (a mortgage backed security or some sort of loan, respectively).

In the case of the loan product the ultimate responsibility for verification of the viability of the loan, including verification of the appraisal is laid squarely on the LENDER.

Whoever originated the loan was either passing itself off as the lender using other people’s money in a table funded loan or they were the agent for the lender who either disclosed or not disclosed (nearly always non-disclosed).

A pattern of table funded loans is presumptively predatory.

The appraisal fraud is a key element of the foundation of your case. If the appraisal had not been inflated, the contract price would have been reduced or there would have been no deal because the buyer didn’t have the money.

The inflation of the appraisals over a period of time over a widening geographical area made the reliance on the appraiser and the “lender” even more reasonable.

Don’t let them use that as proof that it was market forces at work. Use their argument of market forces against them to establish the pattern of illegal conduct.

April 22, 2010

Documents Show Internal Qualms at Rating Agencies

By SEWELL CHAN

WASHINGTON — In 2004, well before the risks embedded in Wall Street’s bets on subprime mortgages became widely known, employees at Standard & Poor’s, the credit rating agency, were feeling pressure to expand the business.

One employee warned in internal e-mail that the company would lose business if it failed to give high enough ratings to collateralized debt obligations, the investments that later emerged at the heart of the financial crisis.

“We are meeting with your group this week to discuss adjusting criteria for rating C.D.O.s of real estate assets this week because of the ongoing threat of losing deals,” the e-mail said. “Lose the C.D.O. and lose the base business — a self reinforcing loop.”

In June 2005, an S.& P. employee warned that tampering “with criteria to ‘get the deal’ is putting the entire S.& P. franchise at risk — it’s a bad idea.” A Senate panel will release 550 pages of exhibits on Friday — including these and other internal messages — at a hearing scrutinizing the role S.& P. and the ratings agency Moody’s Investors Service played in the 2008 financial crisis. The panel, the Permanent Subcommittee on Investigations, released excerpts of the messages Thursday.

“I don’t think either of these companies have served their shareholders or the nation well,” said Senator Carl Levin, Democrat of Michigan, the subcommittee’s chairman.

In response to the Senate findings, Moody’s said it had “rigorous and transparent methodologies, policies and processes,” and S.& P. said it had “learned some important lessons from the recent crisis” and taken steps “to increase the transparency, governance, and quality of our ratings.”

The investigation, which began in November 2008, found that S.& P. and Moody’s used inaccurate rating models in 2004-7 that failed to predict how high-risk residential mortgages would perform; allowed competitive pressures to affect their ratings; and failed to reassess past ratings after improving their models in 2006.

The companies failed to assign adequate staff to examine new and exotic investments, and neglected to take mortgage fraud, lax underwriting and “unsustainable home price appreciation” into account in their models, the inquiry found.

By 2007, when the companies, under pressure, admitted their failures and downgraded the ratings to reflect the true risks, it was too late.

Large-scale downgrades over the summer and fall of that year “shocked the financial markets, helped cause the collapse of the subprime secondary market, triggered sales of assets that had lost investment-grade status and damaged holdings of financial firms worldwide,” according to a memo summarizing the panel’s findings.

While many of the rating agencies’ failures have been documented, the Senate investigation provides perhaps the most thorough and vivid accounting of the failures to date.

A sweeping financial overhaul being debated in the Senate would subject the credit rating agencies to comprehensive regulation and examination by the Securities and Exchange Commission for the first time. The legislation also contains provisions that would open the agencies to private lawsuits charging securities fraud, giving investors a chance to hold the companies accountable.

Mr. Levin said he supported those measures, but said the Senate bill, and a companion measure the House adopted in December, did not go far enough.

“What they don’t do, and I think they should do, is find a way where we can avoid this inherent conflict of interest where the rating companies are paid by the people they are rating,” he said. “We’ve got to either find a way — or direct the regulatory bodies to find a way — to end that inherent conflict of interest.”

Although the agencies were supposed to offer objective and independent analysis of the securities they rated, the documents by Mr. Levin’s panel showed the pressures the companies faced from their clients, the same banks that were assembling and selling the investments.

“I am getting serious pushback from Goldman on a deal that they want to go to market with today,” a Moody’s employee wrote in an internal e-mail message in April 2006.

In an August 2006 message, an S.& P. employee likened the unit rating residential mortgage-backed securities to hostages who have internalized the ideology of their kidnappers.

“They’ve become so beholden to their top issuers for revenue they have all developed a kind of Stockholm syndrome which they mistakenly tag as Customer Value creation,” the employee wrote.

Lawrence J. White, an economist at the Stern School of Business at New York University, said he feared that the government’s own reliance on the rating agencies had “endowed them with some special aura.”

The House bill calls for removing references to the rating agencies in federal law, and both bills would require a study of how existing laws and regulations refer to the companies.

The addition of new regulations might inadvertently serve to empower the agencies, Mr. White said. “Making the incumbent guys even more important can’t be good, and yet that’s the track that we’re on right now,” he said.

David A. Skeel, a law professor at the University of Pennsylvania, said the Senate bill “basically just tinkers with the internal governance of the credit rating agencies themselves.”

Ending the inherent conflicts of interest is “more ambitious, but if you’re ever going to talk about it, then this is the time,” Mr. Skeel said.

Binyamin Appelbaum contributed reporting.

Filed under: bubble, CDO, CORRUPTION, Eviction, expert witness, Fannie MAe, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, trustee, workshop Tagged: admissible evidence, appraisals, Carl Levin, collateralized debt obligations, corrupt, credibility, David A. Skeel, discovery, enhanced credibility, HERS, inflation of the appraisals, loan product, market forces, Moody’s Investors Service, Motion Practice, pattern of illegal conduct, rating agencies, rating system, Rating=Appraisal, reasonably relied, Securities and Exchange Commission, SEWELL CHAN, Standard & Poor’s, Stockholm syndrome, University of Pennsylvania

Apr

The Narrative Has Shifted: Take Advantage of it

By LH | Foreclosure Blog News, Homeowner Resources

6535Leave a Comment2010-04-19+16%3A15%3A16LH

Your allegations of intentional misdeeds, fabricated documents and forgeries have new life now that the SEC is hot on the trail of the wrongdoers in a very public way. As the news sinks in more and more Judges, lawyers and experts and forensic analysts will see their role more as a commitment to justice than just helping out a homeowner in distress.

It just didn’t make sense that anyone would loan money in a deal where they knew there would be no payback. My allegations rang hollow to many people, who felt that despite the many distractions and defects contained in the paperwork behind the foreclosure glut, it was the borrowers who made the financial crisis happen. Now we see more and more people taking another look.

For those of us who serve the judicial branch of government, it is no longer a dance to delay the inevitable. It is, as it has always been, a confrontation with giant corporations whose reach into the corridors of powers enabled them to suck the life out of an ailing economy.

No society has ever persisted without a vibrant growing middle class. It will be a very long time before we succeed in reversing the damage wreaked by Goldman Sachs and other investment banking houses who acted without any sense of conscience, morality or even compliance with laws that society passed to enable their existence. But now, we have a chance. Let’s not waste this opportunity. Don’t let the pretender lenders get control of the narrative again.

The reality is that many, perhaps most loans were created according to specifications set by Wall Street, not by industry underwriting standards. The reality is that people were hired to lie and cheat and deceive homeowners into investing their homes into this salacious scheme. The reality is that the appraisals were false, and were given greater credibility by the reasonable borrower assumption that no lender would lend money on a bad deal where the property value was intentionally overstated, and that lenders would and did strive to comply with the requirements of the Truth in Lending Law, where the responsibility for appraisal verification, income verification, quality, viability, and affordability are BY LAW the responsibility of the Lender. Little did these hapless homeowners know, TILA was a joke to these players.

So now reality sets in. securities that were rated investment grade were junk and are worth far less than their sale price. Homes that were rated as high value were really still the same value as the market had shown before the flood of money and bird dogs looking for signatures on documents, even if the signatures were forged and even if the borrower was dead.

The finance system depends upon confidence. Confidence is based upon belief in the market values and practices in the marketplace. There is only one correction that is viable now. It is the simple recognition that neither the securities nor the properties they were based upon, had any new “value added.” It is the simple recognition that we had to accept when the NASDAQ that flew near 5,000 is really worth only 2,000, long after the boom and bust of that era. Any attempt to saddle the homeowners, the taxpayers or the investors with anything other than the reality of fair market value will undermine our financial system, and ultimately our future and the future of generations to come.

Filed under: bubble, CDO, CORRUPTION, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: affordability, appraisal verification, belief, confidence, fabricated documents, fair market value, forgeries, Goldman Sachs, income verification, industry underwriting standards, intentional misdeeds, NASDAQ, pretender lenders, TILA, Truth in Lending Law, underwriting standards

Aug

New mortgage rules stifle housing market

By LH | Housing & Economic Research

1303Leave a Comment2009-08-07+07%3A03%3A36LHiehi-feed-20105

For many, selling a home nowadays is tough enough.

But recent changes in mortgage laws are sparking uproar.

Realtors complain new rules passed after the housing bust are actually hurting the recovery and keeping homes from getting sold.

For the Drawert family, the hardest part about selling their Plano home, came after they found a buyer.

“It cost us a lot of stress, we almost lost the deal,” Paul Drawert said.

It’s a common complaint across North Texas.

Many are finding home sales are stalling, due to paperwork.

“It was a problem we didn’t need to have. It is absolutely driving down the prices,” said Patti Tejes, a realtor.

The effects of new Fannie Mae and Freddie Mac rules, passed in May, after the foreclosure crisis, are unfolding now.

It’s called the Home Valuation Code of Conduct: new rules to fight mortgage fraud and prevent inflated home values by cracking down on home appraisers.

Critics complain the changes are too severe, causing lowball appraisals, that are driving down prices and killing sales.

“You’ve got a buyer willing to buy a property, a seller willing to sell a property, and you’ve got everybody’s hands tied by the HVCC rules currently in place,” said Tejes.

Take the Drawert home – the buyer and seller agreed to a price of $635,000.

Heidi Bruty was anxious to move in.

“Everything seemed to be closing in, coming in on time, and when the appraisal came, it was a real blow,” Bruty said.

That was because the appraisal came in at $514,000, more than a $100,000 lower that the agreed price, so the bank denied the loan.

“This is incorrect, there’s no house in that neighborhood that has ever even sold close to that price,” said Bruty.

They believe the appraiser compared the custom home to much smaller track ones in different neighborhoods.

“It’s about people getting shafted over this rule,” said broker, Kirk Tatom.

He now sees appraisers coming from miles away, comparing homes from different zip codes, even cities.

“They’re unfamiliar with the area. This house is on a golf course, overlooks a green, and they used all the comps that backed up to major roads – those aren’t comparable homes,” he said.

Banks used to pick their own appraisers but to eliminate corruption, now many hire third-party companies.

For a few weeks, appraiser Micah Beck worked under the new system but stopped, saying the rules are encouraging a culture of quick, shoddy appraisals.

“You give them what they want, which is in the last three months, you grab three sales and throw them on there, bing, bang, boom, you’re out the door. These guys popping out appraisals so fast for 100 bucks a pop, they’ll use the most recent three sales and shoot the value low, so they can keep doing them quickly, without a lot of grief,” he said.

WFAA-TV

New rules have been introduced to fight mortgage fraud.

Congress is now considering ordering a moratorium on the rules.

But supporters say changes were needed to keep home values in check and that critics are only using the appraisal rules as a scapegoat for the sinking housing market.

“I think HVCC is good. For a long time, we’ve needed changes to separate the appraisers from the lenders and mortgage brokers,” Allen Gardiner from the Appraisal Institute said.

For the Drawerts, the changes nearly sabotaged the deal.

After weeks, the buyers found another bank, and got a higher appraisal though it was still thousands less than the contract.

By then, the Drawerts were desperate to sell.

“You had a willing buyer, willing seller, a willing lender and you had an appraiser from outside the area, from Little Elm, Texas, who came in and undervalued the home and screwed up the deal,” said Erin Drawert.

A new reality: even with a buyer a house can still be far from sold.

E-mail jbetz@wfaa.com.

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So then the question becomes “How can you be sure the appraisal was inflated? Were all appraisals inflated? How do you know that?” Answers: Read on, YES, Read On, in that order.

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