- Mortgage Unit Troubles Ally (GMAC) Financial
- Letter | Attorney General Martha Coakley urges Congress to investigate Ally Financial’s GMAC over foreclosure practices
- Ally (GMAC), Home of Robo-signer Extraordinaire Jeffrey Stephan, Sets Aside $270 Million for Expected Penalties from Foreclosure Fraud Settlement
May
14
Ally (GMAC) Puts Mortgage Unit Into Bankruptcy
Ally Financial says its Residential Capital mortgage unit seeks Ch.11 bankruptcy protection DETROIT — The U.S. government is hoping that Monday’s bankruptcy filing by Ally Financial Inc.’s troubled mortgage business will help the company repay its government bailout faster. Residential Capital LLC, or ResCap, filed for Chapter 11 bankruptcy protection in New York, unable to … Read more
Related posts:
May
03
Lack of Jobs, NOT BANKS, to Blame for Blighted Foreclosed Homes, Florida Governor Rick Scott Says
Lack of jobs, not banks, to blame for blighted homes, governor says Gov. Rick Scott said Tuesday he was caught aback by the Sun Sentinel’s investigation of how banks have established foreclosure practices that have left thousands of South Florida homes to decay, devastating neighborhoods. “Maybe I don’t ask enough questions about it, and I … Read more
Related posts:
Apr
17
The People’s Bailout | NYers Blockade Home Foreclosure Auctions with Sing-In Actions (VIDEO)
Every week, foreclosed homes are sold at auctions throughout the five boroughs of New York City. Many of the families who live in these homes were victims of predatory loans and deceptive banking practices, but now face imminent evictions from some of the biggest culprits of financial fraud in the banking and mortgage industry. Others … Read more
Related posts:
Apr
14
SIGTARP REPORT | Factors Affecting Implementation of the Hardest Hit Fund Program
TARP Bailout Money Fails To Reach Neediest Homeowners After Two Years: Report A federal housing program funded with taxpayer money left over from the government’s bailout of the banks and auto companies is failing to deliver on its promised relief to struggling homeowners. The Hardest Hit Fund, a $7.6 billion initiative established by the federal … Read more
Related posts:
- SIGTARP Report | The Special Master’s Determinations for Executive Compensation of Companies Receiving Exceptional Assistance Under TARP
- SIGTARP Report | Extraordinary Financial Assistance Provided to Citigroup, Inc.
- Congressional Oversight Panel Releases Final Report on the Troubled Asset Relief Program
Apr
04
NY Appeals Court Dismisses Fraud Suit Brought by Investors – Says Investors can take care of themselves.
The investor in a synthetic CDO who claimed that fraud on the part of Swiss banking giant, UBS, is what led to its incurring losses of over $500 million, has found a wholly unsympathetic ear in the appellate division of the New York State Supreme Court, who dismissed the suit on March 27, 2012, saying that investors are capable of protecting themselves.
# # #
In a judgment handed down by the appellate division of the New York State Supreme Court on March 27, justices said German bank, HSH Nordbank could not characterize itself as a simple commercial bank that did not understand the product.
HSH Nordbank is a commercial bank headquartered in Hamburg, Germany. Its core business, historically, included ship financing, private banking and corporate clients, and its operations spanned the globe including operations in Luxembourg, New York, London and Singapore.
By 2009, after losing close to 2.8 billion euros in 2008, HSH was in trouble. With no one willing to partner with, much less acquire the bank, the government bailout of 13 billion euros, came with the understanding that more could be required.
It’s the classic tale of a bank gone bad. How do these things happen? You raise them… teach them right from wrong… and then one day they come home wearing a navy pinned-stripe suit and wingtips, talking about net present values and obsessing over ROI.
Usually, when a bank like this one goes bad, there were warning signs. First, it’s hidden fees on checking accounts, then a 29 percent bump on credit card interest, and before you know it, that nice, clean cut bank you once knew is hip deep in a mortgage-backed security, shooting credit default swaps, and talking up a synthetic CDO-squared like housing prices will never go down.
As is often the case, it could be that HSH started going downhill after it started hanging out with a certain unsavory element… bankers from the short side of the trade… or in other words, when Goldman Sachs alum, J.C. Flowers, bought a 24 percent stake in HSH… followed by UBS arriving on the scene hawking its wares.
Next thing anyone knew, HSH was agreeing to act as the “protection seller for the trade,” and “assume exposure to the first $500 million of losses on a $3 billion portfolio of US real-estate-linked securities,” in return for premiums paid by UBS… who was actively managing the underlying pool of assets.
And baby, that’s a long way from financing a ship or helping rich people with their banking needs. (It reminds me of Warren Buffett talking about how he never invests in companies whose products he doesn’t understand, and why it’s probably a good rule of thumb.)
Referred to as the “North Street” transaction, for the first six years no credit events occurred in the reference pool, and HSH collected the full interest due on its notes. But in 2008… as stated in the German bank’s complaint… as the financial crisis intensified, credit events spiked to the extent that HSH lost almost all of its $500 million investment.
Ouch. That’s gotta’ sting.
All it took was a drop of 19 percent in the value of the underlying portfolio to wipe out the investment HSH Nordbank’s made in the North Street notes… but the HSH lawsuit alleged that while it was busy losing everything, UBS came out smelling like J.C. Flowers used to when he was still at Goldman Sachs… with a gain of over $275 million.
Like most of the CDO-related lawsuits, HSH’s claim was that the portfolio was managed in such a way that the risks to the protection seller increased significantly. HSH accused UBS of substituting riskier assets into the deal when no one was looking, and selecting assets with spreads to wide for their respective credit ratings.
In dismissing the suit, the court didn’t so much weigh in on UBS’ behavior, but rather made its view clear that HSH was quite capable of taking care of its own interests. From the court’s decision…
“At bottom, HSH is complaining that UBS – which HSH agreed was not acting as its adviser or fiduciary in this matter – induced it to enter into a deal that would enable UBS to exploit, at HSH’s expense, a feature of the relevant securities market that was common knowledge among participants in that market. This does not constitute a legally sufficient cause of action for fraud, certainly not when pleaded by a sophisticated business entity that disclaimed reliance on the party it now accuses of fraud.”
Oooh, snap!
HSH-Nordbank tried to make the case that it was just a simple commercial bank hardly capable of understanding the big-city-type investment product UBS was offering… which must have been hysterical to watch especially with Goldmanite and zillionaire, Flowers on everyone’s mind at least once or twice during the case.
Again, from the courts decision…
“HSH – a sophisticated commercial entity – cannot satisfy the element of justifiable reliance, inasmuch as the undisputed documentary evidence establishes that HSH agreed it was not relying on any advice from UBS; assented to the inherent conflicts of interest that would result from UBS’s multiple roles with regard to the reference pool; and was explicitly warned of the risks it was undertaking in this highly leveraged and complex transaction.”
Some are saying the case may set a precedent for the packagers of CDOs, making their only responsibility to disclose risks and conflicts of interest involved. A lawyer said to be “deeply involved” in the case, was quoted as saying…
“This is one of the most, if not the most, comprehensive decisions the appellate division in New York has ever issued in a case involving sophisticated parties to a structured credit transaction.”
“The court unanimously held that a sophisticated commercial bank cannot justifiably rely on alleged misstatements or omissions regarding an investment when it had the means to uncover the alleged fraud through the exercise of reasonable diligence. The decision could have far-reaching implications for other cases involving sophisticated plaintiffs claiming they were fraudulently induced to enter into complex financial transactions.”
A spokesperson for the German bank said: “HSH Nordbank has based its lawsuit primarily on three charges: fraud, misrepresentation and breach of contract. The charges of fraud and misrepresentation have now been rejected by a New York court in an appeal hearing. The charge of breach of contract still applies. We shall carefully examine the ruling of the New York court to decide what legal consequences it will have for us.”
But the court didn’t exactly give UBS a free pass either.
The judges told the Swiss bank that their alleged conduct “leaves much to be desired as a matter of business ethics,” and made very clear that UBS should not interpret the judgment to mean that “if UBS did in fact engage in the sharp dealing alleged by HSH, it is to be commended; such practices are indeed troubling”.
My commentary on this decision…
There are no doubt going to be those that will find this decision a blow to the “punish-Wall-Street-for-fraud” movement. They will say that this decision inhibits the ability of investors to sue the bankers that defrauded pension plans, insurance companies and sovereign wealth funds all over the world, leading to the global financial crisis. “They” have been waiting with bated breath for these investor lawsuits to come and save the day, in what might be considered the modern day version of “The Clash of the Titans.”
It’s as if to say that what consumers couldn’t accomplish, the investors will… and now, as a result of this decision… maybe they won’t after all… and the thought of the bankers getting off scott free is simply intolerable.
I disagree.
I think this ruling shows that the justices that make up NY’s appeals court are smart. Twenty-five percent of HSH-Nordbank is owned by J.C. Flowers, as I mentioned in the article above, do you know who and what he is?
First of all, J.C. Flowers graduated from Harvard with degree in applied mathematics, which in many ways makes him the worst kind of Wall Streeter, or at least the most dangerous. His mathematical models tell him what to do, which is not all that different from someone who is directed by mysterious voices.
After Harvard he worked at Goldman Sachs for 20 YEARS, becoming a partner in 1988. Not only that, but he founded Goldman’s immensely profitable, financial institutions merger practice. Think about that for am moment… Flowers is considered to be one of the world’s leading experts on the value of financial institutions.
After leaving Goldman in 1998, he was the main partner in a venture that acquired Long-term Credit Bank of Japan and turned it into Shinsei Bank, where Flowers is still a Director. When Shinsei went public a few years later, Flowers made about a billion.
In 2001, he started J.C. Flowers & Co., which is a private equity firm that owns large stakes in Shinsei, HSH-Nordbank, NIBC Bank, Hypo Real Estate… have you ever heard of any of those banks or whatever they are? No one has, and you can bet that Flowers knows stuff regular folk don’t.
During the collapse, Flowers was called upon by Bank of America to advise it on the potential acquisition of Lehman Bros. and a couple days after that he was brought in by AIG to advise it on how it might avoid falling apart at the seams. He was one of the first to warn, then Treasury Secretary Hank Paulson, of the coming collapse of AIG and Lehman, and was depicted by the actor, Michael O’Keefe in the movie “Too Big to Fail,” on HBO.
Back in 2008, he even bought the First National Bank of Cainesville in Missouri and renamed it… “Flowers Bank.”
And he owned 24 percent of HSH-Nordbank.
And he was unhappy, I suppose, because UBS pulled a Goldman on one if his banks, who came into court acting as if they were the savings and loan from “It’s a Wonderful Life.” And the court didn’t buy it for a second… so, good for them. Bravo! What’s good for the goose is good for the gander, as my mother used to like to say.
Not every mortgage-backed security deal ever done was a fraud. There were certainly some that were, and Goldman Sachs did more than their share, I’m sure. In fact, a good part of Wall Street’s culture is based on being able to find, “dumber money.” So, if you get involved in a deal so complicated that you get the short end of the stick, you don’t get to cry foul and use the courts system to go after one of your peers for doing what you wish you would have done.
Sorry, Mr. Flowers… this time you didn’t come out smelling like a rose. But, don’t worry too much… I’m sure you’ll get to stick it to someone else in similar fashion soon enough.
If a pension plan comes to court and can establish that “reps and warranties” were actually “lies and more lies,” then I’m sure the courts will respond appropriately. But everyone lost during this last raping of the planet… EVERYONE… except maybe a few dozen guys now in the Hamptons watching their statute of limitations clocks and hoping the U.S. Attorney’s office doesn’t show up at their door before their time runs out.
So, just because you lost, doesn’t mean you get to cry fraud. Let’s get the bad guys, no question. But let’s be smart about it… because that’s what will act as a deterrent for future fraudsters. No one is afraid of being caught by the dumb and dumber.
I’m just saying…
Mandelman out.
The case related to a 2002 synthetic CDO transaction that HSH Nordbank entered into with UBS termed ‘North Street Reference Linked Notes 2002–04’.
A link to the complete story can be found at RISK.net.
Mar
28
MM PODCAST: From Fannie Mae to FHA – Edward Pinto Wants Government Out of Housing Finance
Edward J. Pinto
Former Chief Credit Officer, Fannie Mae
Resident Fellow, American Enterprise Institute
An executive vice president and chief credit officer for Fannie Mae until the late 1980s, Edward Pinto has done groundbreaking research on the role of government housing policies in the lead-up to the financial crisis. His data have revealed striking facts about the contributions of housing policy to the mortgage crisis.
Two of his major research papers have been submitted to the Financial Crisis Inquiry Commission: “Government Housing Policies in the Lead-up to the Financial Crisis: A Forensic Study,” and “Triggers of the Financial Crisis.”
Today, Ed is continuing his work on how housing policies impacted the financial crisis and researching policy considerations and options for rebuilding our housing-finance sector. He earned his B.A. at the University of Illinois, and his J.D. at Indiana University.
Ed and I first came in contact with each other a couple of years ago, and although we haven’t always agreed on everything, I have followed his work closely and have come to have a great deal of respect for his work and for him as a person.
On this Mandelman Matters Podcast, I ask Ed about the results of his extensive research into the FHA, which he refers to as the “new sub-prime,” and “the next bailout.” His extensive study of the FHA’s data in terms of leverage and default rates will flat out shock you. And when you hear him explain how the government is perpetuating the foreclosure crisis… well, to say it’s infuriating would be an understatement.
Okay, so make sure your speakers are turned up and I’d make sure you’re sitting down to avoid falling over when you hear some of the things Ed Pinto has to say.
~~~
This Mandelman Matters Podcast is presented in two parts. Part 1 is just under 60 minutes and focuses on the FHA and the big picture facts about our government’s role in housing finance, and Part 2 is about 40 minutes, and goes further into the causes of the crisis, and where Ed sees us going from here.
Like I said, you may not always agree with his conclusions or cures, but his research is always fascinating, his facts are bulletproof, his experience as an “insider”at Fannie Mae is invaluable… and I don’t think there’s any question that his motives are pure.
Just click on PART ONE below to start listening to…
From Fannie Mae to FHA –
Why Ed Pinto Wants Government Out of Housing Finance
A Mandelman Matters Podcast
And Coming Soon…
Two of Ed’s latest articles:
Truth in Government Lending is Long Overdue
Empty promise: The holes in the administration’s housing finance reform plan
~~~
And you can SUBSCRIBE to Ed Pinto’s blog and FHA WATCH bulletins.
He can be contacted via Email at: edward.pinto@aei.org
Mandelman out.
Mar
26
Calling DeMarco’s Bluff? Use the GSEs’ Market Power to Force 2d Lien Write Downs
There's been mounting pressure on the acting head of the FHFA, Ed DeMarco to order Fannie Mae and Freddie Mac to undertake principal reductions. DeMarco's pushed back, arguing that it's not fair for the GSEs to write-down principal when there are second liens on some of the loans that are on banks' books and the banks aren't doing write-downs (see here and here and Felix's critique here). DeMarco is arguing for strict observance of absolute priority. He notes that reducing the GSEs' first lien balances at taxpayer expense effects a bailout of the banks as it bouys the likelihood that their second liens will be repaid.
DeMarco's correct about a write-down of the firsts alone being a bailout of the banks. But his argument for doing nothing doesn't hold up for two reasons. First, there are plenty of GSE loans without seconds. There's no reason not to do write-downs on those loans. And second, the GSEs have the market power to force the banks to write down seconds as a term of doing business with the GSEs. If DeMarco's serious about dealing with negative equity, he'll start running the GSEs' like the 800 lb. gorilla they are in the housing market.
Not all GSE loans have second liens. It's not hard to determine if there's a second lien on a property--a title search and/or a credit report will show that. Those aren't free, but I hate to think that would be what's keeping DeMarco from ordering the GSEs to write-down principal on loans that don't have seconds. The possibility that some might have seconds shouldn't get in the way of writing down principal on those that don't have seconds.More importantly, DeMarco's hardly a helpless babe in this situation. DeMarco has the leverage to force the banks' hand on second liens. The GSEs have no obligation to do business with anyone they don't want to deal with, and the GSEs get to set the terms on which they do business. There is nothing, absolutely nothing, that prevents DeMarco from instructing the GSEs to adopt a policy that they will not purchase mortgage loans from any financial institution that does not agree to abide by a second lien write-down policy. That could be a policy that says 2ds get written off completely if there is a principal reduction on the 1st, or one that makes for a pro rata reduction, etc. The precise terms aren't key.
What is key is that the GSEs have the power to force these terms on the banks. The GSEs ARE the mortgage market today. They have monopsony power. (The GSEs' could also probably condition continuation of servicing rights on second lien treatment...) If DeMarco wants to use the banks' seconds as an excuse not to do principal reductions, he needs to explain why he isn't willing to exercise the GSEs' market power. And it can't just be vague statements that it "isn't appropriate" or "legal restrictions." He needs to be citing chapter and verse, but I don't think there's anything to cite and certainly not something that forecloses (no pun intended) the possibility--at most there's an issue to be litigated, which gives FHFA all the leverage it needs. And fwiw, FHA could do the same darn thing. (Ahem, Shaun Donovan.)
Sadly, rather than thinking creatively about this issue, FHFA (and its GC in particular) seem to be spending an inordinate amount of time on devising ways to supp up the foreclosure process and get rid of those pesky laws protecting homeowners (such as through a uniform state law making to strip away consumer protections under the banner of uniformity--lowest common denominator prevails!) or requiring that servicers care for properties that have been abandoned.
I'd love to see DeMarco order the GSEs not to do business with anyone who won't enter into a second-lien reduction agreement with them. It would focus a very sharp spotlight on the second liens on the banks' books. Clearly they can afford some principal reductions without going belly up, or else we wouldn't (or perhaps shouldn't) be seeing dividend payments. But this is the shibboleth: if DeMarco's serious about principal reductions, he's got the tool to do it. And if he isn't, it's time for him to go.
Mar
21
Bringing Up the REAR – Charles Gasparino, Fox Business Network
“It’s hard to imagine a less-deserving group of victims: people who gambled during the housing bubble by purchasing homes with borrowed money that they knew or should have known they couldn’t afford, but who are now able to stay in the homes they should have never bought because of what amounts to paperwork errors on the part of the nation’s big banks.”
That’s how Fox Business reporter, Charles Gasparino opened his column that appeared in the New York Post back on February 10, 2012. Titled, “A Deadbeat Bailout,” he was writing in response to the settlement agreement between 49 state attorneys general and the five largest banks that had just been announced.
“But that’s essentially what went down, thanks to the Obama administration’s latest re-election gimmick — the nationwide mortgage-foreclosure settlement.”
Now, I’ll bet you think I’m going to tear this guy apart for being such an insensitive idiot, right? Well, you’re wrong. In fact, I’ve decided that “the Gasp” is absolutely right on target with his analysis of the situation.
It’s clear what happened here…
Millions of middle and working class people, and some richer folks too, all decided at the same time that their lives were not exciting enough. They longed for the days when they were losing their retirement savings through investments in profitless dot-coms attempting to monetize eyeballs, and whose stocks were regularly pumped up by analysts paid for their favorable opinions. Yes, those were some good times.
So, they all got together and decided they would take up gambling in a much bigger way than ever before… they’d literally bet their farms. They started gambling with their entire net worth AND the homes in which they lived, and perhaps because they were relatively new to the whole gambling thing… or maybe because they were once again following the lead of Wall Street’s investment bankers… they lost their shirts and their farm houses.
Today, as a result, there are literally millions of these irresponsible failed gamblers aimlessly wandering around the country looking for justice… very much like Kwai Chang Caine in the 1970s television show, Kung Fu…
Young Caine: Is it good to seek the past, Master? Does it not rob the present?
Master: Only banks may rob the present. You must try to rob the banks.
Caine: But we are merely deadbeats, what about a bailout?
Master: For that you must seek out the one they call “Obama.”
Caine: But was it not Obama who bailed out the banks?
Master: Yes, he did my son… along with the second Bush. But, have you not heard of “the election?”
Caine: No, Master, I have not.
Master: Well, when you can snatch the election from Obama’s hand, then you will receive the bailout.
Okay, Charlie… work with me here… you’re fluttering all over the place like Woodstock, that little yellow bird that hangs out with Snoopy in a Charlie Brown cartoon. And it’s not very becoming for a journalist of your stature.
Let’s start with your initial premise… it’s the “Obama administration’s latest re-election gimmick.” No question about it… you nailed that one. And the whole thing about how the administration “would like us to believe that the nation’s largest banks are finally paying for their bad behavior during the housing bubble and its aftermath, etc. etc.” Bingo… you nailed that part too.
After that, however, you started getting your facts all mixed up. For one thing, the banks still haven’t signed any final settlement agreement, and you have to know that. For another, the banks aren’t paying out $26 billion to anyone, under any set of circumstances. I think cash out the door is about $5 billion, and if it reaches that amount net, I’ll pick up a cake and celebrate.
Here’s how it appears to break down… of the $5 billion, there’s $4.25 billion that goes to the states with the $750 million balance going to the federal government for whatever and who cares. Now, from the $4.25 billion you have to subtract the $1.5 billion that’s going to the deadbeats who lost homes in faulty and fraudulent foreclosures between 2009-2011.
And I’m with you on this “robo-signing” nonsense… I mean, the only reason they call it “forgery” is because someone forged someone’s signature… what’s the big deal about that? I mean, if I had a nickel for every time I forged an affidavit… I mean, grow up. And don’t even get me started on the whole ‘standing’ thing. Just because I can’t prove I own a house means I can’t evict the deadbeat living there? That’s just stupid.
Anyway, the deal is supposed to pay out $1,500 – $2,000 per deadbeat, and I realize that you and Dick Bove are concerned because you know these people are deadbeats, but apparently the Obama administration and the AGs do too, so calm down.
First of all, you have to realize that five or six million have lost homes to foreclosure during the last four years. But, the settlement only applies to about a million or a million and a half of the “victims.” To cover everyone equally they’ll only be getting $1,500-$2,000 each, which really isn’t bad for fraudulently foreclosing on a home. If you think about that way, it’s kind of a deal. I don’t know about you, but I’d be willing to throw in two grand of my own money to watch Diana Olick get tossed out in the street… just to have some fun on a Sunday.
And even if we assume that you’re right and the “fraud” being talked about only amounted to insignificant dalliances with meaningless paperwork, I think that message is sure to be heard loud and clear when, as compensation for losing a home, someone picks up a check that’s two grand shy of the downpayment required to lease a new Hyundai. Just think about it… when it comes to “victim compensation,” few things say “insignificance” better than half the downstroke on a leased Hyundai. I guess you could spit in the person’s face at the same time, but that would require hand delivering the checks and who wants to go to that sort of trouble.
I’m not sure how to handle the five percent issue though. You said that, “95 percent of the victims weren’t victims at all,” but that means that five percent were? Well, that’s kind of a bummer, right? They got tossed out of homes, but really shouldn’t have? That sort of sucks, wouldn’t you say? I mean, okay… I guess on Wall Street it’s also sort of hysterical… like, I hate it when that happens. I guess it’s not that big a deal though, I mean in 10 or 15 years they’ll be right back where they were, mortgaged to the hilt in some spring-loaded, snapping turtle of a loan. And hey… stuff happens, right?
I have no idea how they’ll divide the remaining $2.75 billion among the 49 states, if divided evenly it’s about $56 million each. Not that they’ll do it that way, but it’s worth noting that in California, that amount would cover one year of incarceration costs for a little over one-half of one percent of the state’s prison population.
My prediction is that states will end up taking whatever they get and putting it towards the currently incalculable and certainly undisclosed budget deficits coming in 2013 and 2014. One or two states have already said they’d be doing that, and you’ll no doubt be happy to hear that Ohio is going to use much of their share to demolish foreclosed homes.
I know you’re concerned about what we teach this generation of homeowners, because as you said, “If there are no consequences to risk, why not just roll the dice again and again?” Well, I can’t think of anything that’s more effective at teaching ex-homeowners a valuable lesson… I mean, if you get thrown out of your home… just so the bank can tear it down… well, if you didn’t know it already, you know you’re a deadbeat for sure after that.
But, either way… whether the money goes to state budget deficits, or pays to tear down homes… or even if they end up sliding a grand or two into the pockets of some number of ex-homeowners, I really don’t think it’s anything to get all worked up over. I mean, yes… technically it’s still a bailout, but as bailouts go, it’s fairly meager. Besides, I don’t think we have to worry that the recipients of the two thousand dollar checks are going to stash their windfalls in Cayman National or anything, so it’ll just bolster the demand deposits at the major U.S. banks where it can be eaten away by fees and 29 percent interest payments. Worst case, they’ll spend it on an iPad, use it for the down payment on a new car, or maybe repay a student loan, so Wall Street types really should relax.
Most importantly, the people that are being refinanced that are underwater aren’t the “victimized” deadbeats; you got this whole part wrong. The people that are being refinanced are current on their payments… they’re underwater, yes… but they’re current. Refinancing them is the right thing to do… if you’re the bank or maybe the government. For those homeowners, however, it’s pretty much the equivalent of handcuffing them to the bedframe and setting the house ablaze on your way out.
And, although I know that they’re talking about refinancing, but lets just wait and see what happens when a homeowner is presented with a refi in the amount of … $400,000… and the place across the street just sold for $178,000. You’d have to get me drunk before I’d sign that loan, and my guess is others won’t rush to sign theirs either. And that assumes that the banks are actually going to be offering 200% LTV refis, because there’s certainly no indication of that happening to-date.
The rest of the money, something like $17 billion or slightly more, is supposed to go to foreclosure prevention, and that includes principal reductions. And, I’m happy to be able to say that within a week or two of the settlement having been announced, I received and confirmed reports that Bank of America has already started offering its borrowers loan modifications that include some very significant principal reductions. In fact, one lawyer I know that helps homeowners through the loan modification process just told me that of the last 5-6 modifications that he saw come from BofA, ALL included principal reductions to current market value.
(And, by the way… Ocwen, although not a part of the AG settlement, has been granting principal reductions under its “Shared Appreciation Modification,” or SAM program for some time now. It’s not part of a bailout for deadbeats, however, it’s because they have people who can do math.)
But once again, Bank of America as large as they may be, is not America’s $10 trillion residential mortgage market, and since neither Freddie, Fannie or FHA are participating in the principal reduction part of the plan, I’d say we’re in very little danger of doing anything terribly beneficial for deadbeats on a widespread basis. Besides, even if the government and the bankers, for the first time ever, actually fell into something productive in this regard, $17 billion in principal reductions, or $40 billion for that matter, which is the other number being tossed around for whatever reason, would be like removing sand from the beach with a teaspoon, when viewed in the context of $1 trillion in underwater loans.
So when Big Dick Bove says: “What this settlement did was to help 1 million people who were deadbeats,” it’s not really the case. Okay, sure… maybe a few deadbeats are technically getting a tiny bit of help, but I’m confident that we’ll be pulling the rug out from under them before anything would rise to the level of actual help. Let Dick know… I’m sure he’ll be relieved to hear it.
Also, I’m wondering something… when you say that, “foreclosures are a necessary ingredient to the housing market’s recovery,” how many do you figure we’re going to need in order to really “recover?”
I only ask because we’ve had something like 6-8 million so far, Amherst Securities says about 11 million are coming. Do you think 20 million foreclosures, roughly one out of four mortgages in this country, will that be enough to get my equity back and put us on easy street once again? If not, maybe we should start lobbying the Obama administration to extend that HAMP loan modification thing, because that sure was effective at generating foreclosures. Although, maybe FHA will be able to pick-up any slack. They’re numbers certainly look promising, if the last couple of years are any sort of gauge.
Let me know… I’m anxious to hear your thoughts.
Mandelman out.
Mar
19
Matt Taibbi | Another Hidden Bailout: Helping Wall Street Collect Your Rent
Matt Taibbi | Another Hidden Bailout: Helping Wall Street Collect Your Rent Here’s yet another form of hidden bailout the federal government doles out to our big banks, without the public having much of a clue. This is from the WSJ this morning: Some of the biggest names on Wall Street are lining up to … Read more
No related posts.
Mar
19
Matt Taibbi | Another Hidden Bailout: Helping Wall Street Collect Your Rent
Matt Taibbi | Another Hidden Bailout: Helping Wall Street Collect Your Rent Here’s yet another form of hidden bailout the federal government doles out to our big banks, without the public having much of a clue. This is from the WSJ this morning: Some of the biggest names on Wall Street are lining up to … Read more
No related posts.
Mar
09
Great news: Le Bailoutte de Peugeot avec Le US Taxpayer Francs
When your own losses aren't enough.
Americans sunk tens of billions of dollars into General Motors in 2008 and 2009, money which they won’t see any time soon, if at all. The Obama administration strongarmed senior creditors in an unprecedented politically-engineered bankruptcy to get taxpayers to eat the costs of old pension obligations and boost the UAW. All of this was [...]
Mar
08
New Obama housing strategy: Flip This Bailout?
The Dukes of Moral Hazard.
It seems that the White House has tried everything they can to keep housing values from dropping to a historically-rational level. They have blocked foreclosures, offered gimmicky tax breaks that did nothing but steal demand from future quarters, and spent tens of billions on HAMP. All of these came from the Obama administration’s emphasis on [...]
Mar
05
Investor Bailout | Boom-Era Property Speculators to Get Foreclosure Aid
Boom-Era Property Speculators to Get Foreclosure Aid The Obama administration will extend mortgage assistance for the first time to investors who bought multiple homes before the market imploded, helping some speculators who drove up prices and inflated the housing bubble. Landlords can qualify for up to four federally-subsidized loan workouts starting around May, as long … Read more
No related posts.
Feb
28
Romney blasts Santorum for robocalling Democrats in open MI primary
"Kidnap[ping] our primary process"? Take the poll!
Is courting Democrats in an open primary “outrageous,” or simply good politics? Rick Santorum’s campaign funded robocalls to get Michigan Democrats to come to the state’s open primary today, attacking Romney as “Massachusetts Mitt” and slamming Romney for opposing the auto bailout — which, as Chris Cillizza points out, Santorum also opposed: Rick Santorum’s presidential [...]
Feb
28
Abigail Field | Dear State Attorneys General: You Failed America. Yes, You.
Dear State Attorneys General: You Failed America. Yes, You. By Abigail Caplovitz Field Update: My original headline said “Sold Out” where it now says failed. I think it’s more accurate. Dear State Attorneys General: Rumor has it that this week we will learn precisely how you failed us all regarding the criminal enterprise that is … Read more
Related posts:
Feb
24
Rep. Deutch Urges Attorney General Pam Bondi to Use Mortgage Settlement Money on Helping Struggling Homeowners
Rep. Deutch Urges Attorney General Pam Bondi to Use Mortgage Settlement Money on Helping Struggling Homeowners Washington, Feb 22 - Today, U.S. Reps. Ted Deutch (FL-19), Corrine Brown (FL-3), Alcee L. Hastings (FL-13), Richard Nugent (FL-5), Debbie Wasserman Schultz (FL-20), and Frederica Wilson (FL-17) sent a letter to Florida Attorney General Pam Bondi urging her … Read more
Related posts:
- You’ve Got a Friend in Pennsylvania – Attorney General Corbett URGES PA homeowners to file complaints concerning questionable mortgage foreclosures to assist ongoing investigation
- Democracy Now | 50-State, $25B Mortgage Settlement: Relief for Struggling Homeowners or Bailout for Banks? (VIDEO)
- Attorney General Kamala D. Harris Secures $18 Billion California Commitment for Struggling Homeowners
Feb
21
EU, Greece reach deal to stave off default
Again. For now.
If this seems like deja vu, it only means you’ve been paying attention: After months in which Greece teetered on the verge of bankruptcy, European officials agreed Tuesday to give the country a second massive bailout in exchange for harsh austerity measures, as grim new estimates about the country’s economy pushed off a resolution until [...]
Feb
20
Yes, Mr. Kessler, there really is a crony capitalist in the White House
Santa Claus for bundlers and donors.
Glenn Kessler at the Washington Post normally does a pretty good job of fact-checking claims in politics, within the limitations of the fact-checking “science,” which are considerable. Today he takes on claims from Mitt Romney that Barack Obama engages in crony capitalism, focusing on the auto bailout/bankruptcy and the Solyndra scandal. Kessler takes a detailed [...]
Feb
17
It’s Not Just the Economy Stupid!
“Greeks are protesting new austerity measures” is a common headline these days. It definitely captures some of what protesting Greeks are doing, but certainly leaves a whole lot out of the picture. Many Greeks are protesting not only the deterioration of their standard of living, but equally importantly, what they experience as a political disenfranchisement that has been orchestrated by the government, with the collaboration of the European heads of state. The situation in Greece is going to get much worse not only because of the economy, but also because of the repressive politics that are threatening to ignite Greek society.
To understand the Greek political cauldron you need to put yourself in the shoes of the average salaried Greek and what she has experienced these past two years. Picture this:
You are the average Greek. You make about 800euro a month in a city where the cost of living compares to Paris. You pay your taxes, which are as high as in some of the northern European welfare states, yet you get none of the services they do. Your family is your safety net. You are guilty of the everyday acts of corruption that you need to survive in the system, such as bribing public hospital doctors to do their job. And you are barely making ends meet. All around you you see evidence of the affluence of a political class in cahoots with the business circles that monopolize Greek markets and keep consumer prices high. In 2009, the prime minister you voted for on a platform of “tax the rich” and fight corruption, tells you that because of your high wages and the public sector inefficiency the country needs a bailout. The corrupt politicians who have borrowed money to turn it into lucrative public procurement projects for themselves and for the companies that bribed them are still in place. Not one of them is persecuted because they have voted into law an amnesty for themselves, while the foreign press-which you can read online- is buzzing with multibillion dollar scandals involving the government and foreign companies, or the government and land swaps with monasteries, or the government and the corrupt procuring of military equipment from France and Germany. To add insult to the injury, your government largely contributes to the European press depiction of you as southern welfare drone, overpaid, underworked, definitely not of the Protestant ethic. The vice-President of the government informs you that you and he have eaten the money together. Your government explains and the troika agrees that you need to be reformed, while the political class remains in place. You get poorer. You get angrier.
You respond by joining other peaceful protesters in Syntagma square. In 2011, right before another loan is voted by the Parliament you join another three hundred thousand Greeks to protest against it. Without having yourself been violent and without even having been close to people who are violent you find yourself tear gassed and clobbered by the police, who are caught on camera behaving like thugs(viewer discretion advised). The press largely ignores all of this and instead only reports on the usual suspects throwing Molotov bombs at the police. You get angrier, you get poorer. You demand elections, because you think the government has no mandate to be taking the decisions it is taking. You are told by the very same people who have brought the country to the brink, and who are still in place, that elections are dangerous, elections are bad, elections are what will doom the country. The troika agrees.
Then the government institutes a regressive property tax that essentially means you need to lose the house if you are to pay the tax, given that you have also lost your job. The political architects of this system are still all in place, explaining to you why YOU are to blame for all this. You are so angry that on October 28th, a national holiday celebrating Greece’s resistance to Mussolini’s threats, you hit the streets of your town and along with thousands of citizens all around Greece, you boo, jeer, and even chase the representatives of the government (including the President of the Republic) from the celebration. The media brand you a minority and the government prosecutes you for “insult to the public authorities”. Right after this episode, your Prime Minister almost causes a global financial crisis by announcing that he will ask your opinion about whether you want to sign onto a new bailout or not. Sarkozy is caught on camera calling Papandreou a madman. Papandreou asks for a vote of confidence, retires the referendum idea, retires himself, and passes the premiership to an unelected banker called Papademos, as if it were a baton, in a procedure that is foreseen nowhere in the constitution. It is said that Papademos is an uncorrupted technocrat who is well trusted by the Europeans. You have been threatened with an exit from the EU so you are temporarily relieved. Then you remember that Papademos was the Greek central banker when the capital sin of fudging the numbers was committed by Greece. You are confused. Quickly you go back to being angry.
By February 2012, you are near explosion. You join about a hundred to two hundred thousand Greeks who are protesting in front of the Parliament and watch as the police attack even peaceful protesters with tear gas with the apparent goal of dispersing them. The only foreign reporter on site (BBC) describes the scene as "collective punishment of a peaceful majority." The usual suspects slash and burn, but you don’t care anymore. While Athens is burning the Parliament adopts the most draconian bailout yet under conditions of political breakdown. The minister of education repeats that elections now will be a disaster and the government announces that it will promote restrictive changes to the conditions for protesting in the center of Athens. You are once again depicted as an irrational, unruly, spoiled child, who will not take his well-deserved spanking and will instead only throw expensive tantrums. Or as a crony syndicalist despite the fact that you have been working in the private sector and have not dared to ever participate in a strike.
This time you can’t get much poorer. But you are probably not done getting angry. Next time around, you are ready to pick up a stone and throw it at the police yourself.
Feb
14
National Foreclosure Settlement | Confidential Federal-State Draft of General Framework for Consumer Relief Provisions
A 12-page document outlines how banks have to satisfy the $20 billion portion of the deal that requires them to help homeowners. At least half of that portion must go towards writing down loan balances for homeowners that are at risk of foreclosure. Another $3 billion must be used to help homeowners who owe more … Read more
Related posts:
- Democracy Now | 50-State, $25B Mortgage Settlement: Relief for Struggling Homeowners or Bailout for Banks? (VIDEO)
- Pam Bondi Press Release | Florida Enters $25 Billion Joint State-Federal Mortgage Servicing Settlement
- OCC Settles Civil Money Penalties Against Large National Bank Mortgage Servicers for $394 Million; Penalty Assessment Coordinated with Servicers’ Actions and Payments Under Federal-State Settlement
Feb
13
Austerity Hits Greece
The latest EU bailout installment for Greece requires tough austerity measures. Among the most devastating is the prohibition on the use of Corinthian and Ionic columns. Henceforth, only Doric columns may be utilized. This measure was a compromise among creditor consitiuencies, as Germany had previously demanded that the Greeks be limited to Bauhaus design. 
Feb
13
Video: Greece passes austerity measures as Athens burns
Greece fires.
Greece finally managed to pass the necessary austerity measures demanded by the EU as a requirement for the latest bailout of their sovereign debt — and their capital of Athens burned into the night as protesters violently reacted to the news. For a country that already has 20% unemployment, the deeply unpopular measures will likely [...]
Feb
13
Florida Homeowners Find Little to Cheer about RE Fraudclosure Settlement w/ “Gangsters”
Florida Homeowners Find Little to Cheer Florida (STOFL1), the U.S. state with the highest percentage of troubled mortgages, may collect almost one-quarter of the national $25 billion foreclosure settlement. For Cheryl Alexander, who had a court halt the forced sale of her home, that’s not enough. “We’re not sheep that can be led to the … Read more
Related posts:
Feb
13
Greece Will Leave EU… They Should Do It Now.
Athens is burning through the night.
EU is forcing 22 percent reduction in minimum wage.
20 percent of government jobs to be cut over three years.
Large reductions in retirement pensions.
And German Finance Minister Wolfgang Schaeuble’s assurances of more to come…
International lenders… that’s who is causing Greece to burn… they demand the people endure pain and more pain before they will release funds so that Greece can make bond payments to… International lenders. These new austerity measures come on top of two years of harshly imposed income losses and tax hikes. Headline unemployment is now over 20 percent. And the deep recession in Greece is only deepening. That’s all it can do.
The only thing I can think of that could make things measurably worse in a hurry would be to accept the EU’s sadistic conditions and reduce minimum wage by 22 percent and cut 15,000 government jobs. That should just about guarantee that the situation deteriorates into something straight out of Dante’s Inferno. Do what German Finance Minister Wolfgang Schaeuble is demanding and the economy in Greece will be in absolutely no danger of recovering… ever.
At least 100,000 of Greece’s citizens descended on the capitol in an attempt to stop the country’s lawmakers from bending over for the bankers once again.. Reports coming out of Athens say that the riots raged on for hours as police fired tear gas and stun grenades into the huge crowds. In response, black-masked protesters using gasoline bombs created a wall of fire, and more than 45 buildings in the city of Athens were burned overnight. As the lawmakers voted once again to accept the EU demands that harsh punishment be imposed upon the people, in exchange for more bailout funds, which can then be used to repay some of the same the bankers that are demanding the country be punished.
For God’s sake stop the madness. Tell Germany to go f#@k themselves. Leave the EU now. Default on the ridiculous debt and return to the Dracma. The world will survive, and it will become clear that they want Greece to remain in their death grip… not only do they want their precious bond payments, but should Greece default then we’d all get to see just who exactly is holding which Credit Default Swaps on what. And wouldn’t that be interesting at the very least?
The violence isn’t isolated to Athens anymore either. Six other Greek cities are reporting riots overnight, the worst in Volos where Reuters is reporting that the town hall and tax office have been badly damaged by fire.
And if this were the end of the austerity measures, that would beb one thing, but they are not… not even close. Greece has been surviving, if you can call it that, since May 2010, because of a €110 billion ($145 billion) bailout from EU’s central bank and the International Monetary Fund. Everyone knew the last bailout was a short-term band aid and here we are again with a new rescue-Greece-loan-package, this time worth €130 billion ($171 billion). How do you say “only slightly bigger band aid,” in Greek anyway?
In an interview published Sunday in Welt am Sonntag newspaper Schaeuble, quite obnoxiously said: “The promises from Greece aren’t enough for us anymore.” Yeah, I can see how Germany gets away with making comments like that. After all, they’ve hardly caused the world any problems over the last century or so. And I’m not interested in hearing about how long ago that was… it could have been yesterday to some of the survivors of the Holocaust with whom I’ve had the privilege of speaking.
Oh, hell… doesn’t everyone see what’s happened to our world over the last thirty some years? We’ve lost all compassion for our fellow man, and have become a world run by global finance ministers to whom being unable to pay a bond payment is a crime tantamount to treason. In the U.S. we’ve allowed financial services to become 40 percent of our GDP… and we wonder why Main Street doesn’t think the recession has ended? Forty percent of the United States of America shouldn’t be derived from any single source, how about that for a starting place kind of idea.
Dear Greece… The Dracma will be fine and so will the people, but not if you wait too long, or if you continue with a prime minister who is an ex-central banker. Toss him out, re-shuffle the deck and find someone who understands more than money. You have a breathtakingly beautiful country and we will all vacation there as soon as things calm down.
Mandelman out.
P.S. Watch the videos below… and pray for the people of Greece. I wonder what Fannie Mae and Freddie Mac will force the American people to undergo before we default on our debt to them. You see the parallel, don’t you? Fannie and Freddie refusing to do principal reductions even in light of half the country being underwater and much of it severely so, and yet… their answer is NO. We’ll remain in debt as they want it and we’ll get nothing more… NO SOUP FOR YOU. And for those of you that are thinking that Greece, an 11-hour plane ride away, has nothing to do with here… Hahahahahahaha… wrong.
Visit msnbc.com for breaking news, world news, and news about the economy
Jan
25
Naked Capitalism | Is Schneiderman Selling Out? Joins Federal Committee That Looks Designed to Undermine AGs Against Mortgage Settlement Deal
Is Schneiderman Selling Out? Joins Federal Committee That Looks Designed to Undermine AGs Against Mortgage Settlement Deal It’s clear what the Administration is getting from getting Schneiderman aligned with them. It is much less clear why Schneiderman is signing up. He can investigate and prosecute NOW. He has subpoena powers, staff, and the Martin Act. … Read more
Related posts:
- Naked Capitalism | Banks Win Again: Weak Mortgage Settlement Proposal Undermined by Phony Consent Decrees
- David Dayen | The Schneiderman Gambit: Financial Fraud Unit Appears Designed to Fail, and Grease Skids for Foreclosure Fraud Settlement
- Naked Capitalism | Mortgage Settlement Term Sheet: Bailout as Reward for Institutionalized Fraud
Jan
23
Naked Capitalism | Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage “Settlement”
Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage “Settlement” The story did not outline terms, but previous leaks have indicated that the bulk of the supposed settlement would come not in actual monies paid by the banks (the cash portion has been rumored at under $5 billion) but in credits … Read more
Related posts:
- Naked Capitalism | Banks Win Again: Weak Mortgage Settlement Proposal Undermined by Phony Consent Decrees
- Naked Capitalism | Mortgage Settlement Term Sheet: Bailout as Reward for Institutionalized Fraud
- Naked Capitalism | Obama Pressing for a “Shock and Awe” Mortgage Mod Program, 3 Million in 6 Months
Jan
20
Abigail Field | Hey Californians, Make Sure Your AG Keeps Standing Up for You
Hey Californians, Make Sure Your AG Keeps Standing Up for You By Abigail Caplovitz Field | Dear Californians (and everyone else too): Shortly after the State of the Union speech next week, Team Obama wants to announce a deal with the big banks, and he wants you to think it’s a good deal. The banks … Read more
Related posts:
Jan
20
Fraudclosure | Woman Nearly Loses Her Home Over Error Made by Citimortgage
“They should have said, ‘We were totally wrong, we have to do what we need to do to stop this foreclosure and do what we need to do to correct this’” ~ East Pennsboro Township woman nearly loses her home over error made by Citimortgage Citimortgage received a $20 billion government bailout on grounds it’s … Read more
Related posts:
Jan
17
Will the IMF tap American taxpayers for a $100 billion EU bailout?
Ghost of Congress Past.
This is not a new question. The fund that the Daily Caller rightly reports as a potential American taxpayer bailout got created in 2009 as part of the legislation that also launched Cash for Clunkers, the notoriously failed effort that wasted $3 billion more by subsidizing car sales that would have taken place anyway while [...]
Jan
12
Revealed: Bain & Company advised Obama on auto bailout, recommended cutting dealerships; Update: CNBC retracts story, misidentified Bain
Uh oh.
Does it matter that Romney hasn’t worked for Bain & Company in nearly 20 years or are the optics of this one bad enough to make it newsworthy regardless? The car dealership episode was one of the most controversial of the auto bailout — as many dealers across the country complained they were being put [...]
