News, Research & Insights for American Homeowners, Patriots & Constitutional Conservatives
What's $1.2 billion between friends?
It sounds as if investigators looking for over a billion dollars in customer money in the wake of the collapse of MF Global have begun to despair of finding any. Today, the Wall Street Journal reports that the probe thus far strongly suggests that the money got “vaporized” in a labyrinth of shady trading and [...]
Er ...
I don’t know. Maybe he should have stuck with the Fifth Amendment: Jon S. Corzine, the former U.S. senator and governor who presided over the collapse of the commodities brokerage MF Global, told lawmakers Thursday that he never intended to authorize a transfer of customer funds to the firm’s accounts and that if he did [...]
Taking the Fifth?
Jon Corzine goes to Capitol Hill today to answer questions about the disappearance of as much as $1.2 billion in the collapse of MF Global under his leadership. The former Democratic governor of New Jersey and current fundraising bundler for Barack Obama might not have too much to say to the House Agriculture Committee. In [...]
So far ... no one.
Now that Newt Gingrich has soared to the top of the polls, at least in some of the latest surveys, conventional wisdom would be to predict a pile-on at the next debate. That happened to Rick Perry, and the pressure produced surprisingly bad performances from the Texas governor and caused a collapse in his own [...]
Only three?
Energy Secretary Stephen Chu testified before Congress yesterday on the $535 million debacle of the Solyndra collapse, and needless to say, didn’t impress too many people. He took responsibility for the decision to approve the loan guarantees, but claimed he had no idea how shaky Solyndra was, nor the solar industry in general — two [...]
The United States has no housing policy. And there's none on the horizon either. That's a scary thing, given the centrality of housing to domestic economic woes.
Once upon a time, the US had a housing policy. It was focused on increasing homeownership. It might have been a misguided policy or at least a policy taken too far, but it was a policy and everyone understood that. It meant that programs were designed to work toward that goal.
Today, 4 years into a housing crisis, we still have no housing policy. There's no plan to clean up the legacy of the housing bubble and no plan to build the future of housing finance. This sad state reflects a singular failure of political leadership. It also reflects a deeply fragmented housing finance world in which no one is in a position to call the shots.
Legacy IssuesLet's start with the legacy problems, namely the foreclosure crisis and the collapse of home prices. The Administration has never really figured out where it stands on these issues. It makes nods to the need to fix the housing market as part of economic recovery, yet it has assiduously avoided confronting the foreclosure crisis and housing price collapse as a macroeconomic issue. Instead, it has come up with a stream of poorly integrated, small-bore programs that it has greatly overhyped, even as the programs under-deliver. This is HAMP, HARP, FHAShortRefi, etc.
HARP 2.0 and the proposed multi-state foreclosure settlement don't even qualify as manque housing policy. They are just continuations of the small-bore approach. The reason it feels like there is no plan is because there is no plan. The problem here isn't just that people are losing their houses. It's that we've lost control of the ship. We've lost a policy vision.
Why this non-commital approach? Because there is simply no way of dealing with the legacy problem without dealing with negative equity, and that means forcing loss recognition somewhere in the system, either on banks or on taxpayers. That's a painful move politically, and the Administration has kept trying to avoid manning up to the problem. As a result, it looks a lot like Greece, where there's lots of energy spent denying the inevitable. From a good government perspective, however, it's horrendeously irresponsible.
So who is calling the shots? I was just on a panel about this at the fabulous AmeriCatalyst housing conference, and it is painfully obvious that no one is calling the shots. The ship is rudderless on housing. Part of this is because of the fragmented administrative authority. HUD would seem to be the go-to office, but HUD's authority is over FHA and VA and Ginnie Mae, all a limited part of the market. FHFA has authority over the GSEs, but it is as a receiver, and the FHFA Director is an acting director and a career civil servant. The prudential bank regulators each have their own sphere and they aren't interested in housing policy. They are interested in the safety-and-soundness of their regulatory charges. Treasury and the Fed would both seem to have a macro-view of the world, but neither is really expert in housing. Prior to 2008, Treasury had never done anything with housing, while the Fed has only ever approached housing in terms of interest rate manipulation and as a bank regulator. The Council of Economic Advisors and the Domestic Policy Council in the White House would seem to be places where one would find a larger cross-market view and a policy focus, but they aren't staffed with "housies". There's no one in a position to see the whole market and with the expertise and authority to craft a policy. One of these entities could step forward to try and take some leadership, but the personalities just don't seem to be there for that to happen. Instead, housing policy on legacy issues is being made one case at a time in the courts with foreclosure suits. Is that how a national market should work?
One suggestion has been for a national "foreclosure czar". The right person in such a job could help corral the various disparate interests at play, but I would not be overly optimistic. A foreclosure czar would have a convening power proportionate to his or her personal prestige, but no ability to impose a policy vision. The leadership here needs to come from the White House, I think, but it hasn't been forthcoming.
Future of Housing Finance
We also have no plan for the future of housing finance. There are several well-developed future of housing finance plans circulating (including one from the Center for American Progress's Mortgage Finance Working Group, of which I am a member), but that proposal is just a proposal. It isn't policy. We've gotten a non-committal set of options from Treasury and HUD, but haven't seen things move beyond that.
In fairness to the Administration, the lack of forward-looking housing finance reform isn't solely its fault. Housing finance is a political 3d rail. There's deep, deep ideological divide on the solution, and the hybrid public-private nature of the past system has given everyone ammo for their position.
The ideological right blames everything on the role of government in the system and wants to privatize, damn the torpedos. Never mind that there isn't the private-risk capital in the world to support our $6T in securitized residential housing assets.
There's a left position that wants to see something more like nationalization or at least a very prominent government affordable housing role. And then there's the non-engaged left, that just doesn't give a damn about the future of housing finance. In their view, the ability of homeowners to buy a house in 10 years doesn't matter much when people are losing their houses today.
There's a fair amount of consensus on the big picture between the craven right and the moderate left that there needs to be a continuation of the public-private system in some form, but no consensus on the details. The extremes on both ends of this debate have prevented the moderate consensus from solidifying or advancing, at least until after the 2012 election.
Is There a GOP Alternative?
So if the Administration doesn't have a housing policy, do any of the GOP contenders? No, sadly. Watching the GOP debate this evening, it was clear why none of the candidates has emerged as a front-runner: none of them are ready for prime time. Romney seemed a notch or two more polished than the rest (he also looked like he just got off the red-eye), but it was hard to ignore the pointed question posed to him about why his 59 point economic plan has nothing on housing. The response that it's a "jobs plan" not a housing plan just underscored that he doesn't have any ideas on how to address the elephant in the room for the economy. If he had a housing plan, that was the time to present it.
Transparency!
When Barack Obama got asked about the loss of $535 million in taxpayer-guaranteed loans in the Solyndra collapse, he told ABC that he thought it had been a “good bet.” Now that the House wants the executive branch to produce documents relating to how Obama came to that conclusion, it looks like the taxpayers who [...]
Uh oh.
It’s been a while since we looked in on Greece, which has become the single most destabilizing force in the industrialized financial world. The EU finally reached agreement with the Greeks last week on budget reforms and debt repayments for a second bailout to forestall a collapse of the euro and then of the global [...]
The smoking gun?
By this time, everyone should be aware of the federal policies that precipitated the housing bubble and its collapse — the push by Congress and two administrations to push higher-risk lending in order to expand home ownership, as well as the effort by Congress to get Fannie Mae and Freddie Mac to spread that risk [...]
"Happy days are not here again."
Economic indicators are falling. The Fed issued a gloomy report on the future of the economy, saying that the so-called recovery may be “faltering.” Greece has only enough cash to make payroll for a few weeks before it defaults and flattens the European banking system. The only thing missing from a collapse is a good, [...]
Plus, a Solyndra quid pro quo discovered?
With their entire economic approach under fire after the collapse of Solyndra — and no small amount of speculation as to the motives behind the Obama administration’s approval of over a half-billion dollars in subsidies for the solar-tech flop — the White House has launched their own investigation into Solyndra’s failure. Are they looking at [...]
Investments.
The collapse of Solyndra looks inevitable in retrospect — and for auditors who reviewed their loan application that the Obama White House expedited and to the employees who worked there, it looked inevitable before it happened, too. This has many wondering just what business model Solyndra used to keep the company going as long as [...]
Investments.
The collapse of Solyndra looks inevitable in retrospect — and for auditors who reviewed their loan application that the Obama White House expedited and to the employees who worked there, it looked inevitable before it happened, too. This has many wondering just what business model Solyndra used to keep the company going as long as [...]
Whoa.
With the White House already reeling over the Solyndra collapse, a new scandal may have erupted today that could make the disappearance of $535 million in taxpayer funds look like a paperwork glitch. Eli Lake starts off his new gig at The Daily Beast with a huge bombshell — an accusation made to members of [...]
Ugly.
As it turns out, the $700 billion TARP bailout in late 2008 was just an appetizer for Wall Street. Behind the scenes, the Federal Reserve gave out $1.2 trillion in loans to banks around the world, desperately attempting to maintain liquidity in a system that looked headed for collapse, according to Bloomberg News: Citigroup Inc. [...]
Europe to Qaddafi: Surrender.
After a day of almost uninterrupted good news for Libyan rebels in Tripoli, CNN now reports that some have begun to pull back. Moammar Qaddafi’s troops have apparently started a counteroffensive, but Qaddafi himself is nowhere to be found: The 42-year rule of Moammar Gadhafi appeared on the verge of collapse Monday, with rebel supporters making [...]
Any day now
The opening paragraph pretty much says it all. The reign of the Tea Party may be coming to an end in Washington, according to academic political experts who say polls show a backlash against the conservative movement. So what data are we drawing our conclusions from this time? The CNN poll showed the Tea Party’s [...]
Crisis of confidence.
Note well: It’s a poll of adults, not a poll of voters, so it’s no predictor of how next year’s vote will shake out. But I want you to see it anyway because it corroborates other recent polls showing a historic collapse of Congress’s standing among the public. Never in modern times, through the financial [...]
Collapse.
“The consensus has been that for all his problems, Obama is so skilled a politician — and the eventual GOP nominee so flawed or hapless — that he’d most likely be reelected. “Don’t buy into it. “This breezy certitude fails to reckon with how weak his fundamentals are a year out from the general election. [...]
I field countless emails and phone calls from consumers all across the country who suffer abuses at the hands of the banks. I have given up any hope that our government or regulatory agencies will do anything to stop the abuses…or even slow them down for that matter…they have just grown too powerful, and our government…at every level…is just too corrupt.
We live in a totalitarian, corrupt police-state. We will just muddle along here in this country in a sort of suspended-animation until some event throws us into chaos. We flit now from chaos to calamity, constantly moving between brinkmanship and collapse. Something has to give and it will eventually. We cannot just moonwalk away from $14 trillion in debt. We cannot just ignore the fact that our states and local governments are bankrupt.
The Corporations exist with one purpose in mind….to consolidate their power. There are no limits to check their abuses. The most dramatic example of this comes later this week when the feds announce their settlement with the major banks. They’re all going to get totally off the hook with not so much as slap on the wrist. There will continue to be outrageous outrages. Every single day. Things will get worse. Much worse. There is no stopping them.
Read on for today’s Outrage of the Day!
I thought you would enjoy this, as part of the continuing saga of me vs. the Banks.
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It should be a requirement that every American watch The Inside Job. The award-winning movie is chilling and offers detailed analysis of the epic and continuing collapse of the United States economy.
What I find most chilling are the profiles and interviews with the architects of the collapse, the bankers, the politicians and the academics. Pure evil.
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Next week is Florida’s Sunshine Week, a week where media and the Florida First Amendment Foundation focus on helping people understand the vital need for people to support their press and the requirements that our government keep information open and accessible to the public.
Please follow this link and learn more about the Florida First Amendment Foundation, and all the things that will happen next week.
But more importantly, please sit down and take the time to watch this very, scary video
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The domestic, internal battles in these foreclosure wars are not many, many years old. There still exists much confusion by legislators, judges, policy makers and the American people about the details leading up to the slow speed crash of the United States Economy that continues on even today. People need to wake up and look at the much bigger and much scarier picture about what’s happening in this country.
THIS IS WAR PEOPLE. WHAT DOES THIS MEAN FOR FRAUDCLOSUREGATE? WHAT ARE THE LARGER AND FAR MORE PROFOUND IMPLICATIONS FOR OUR ENTIRE COUNTRY?
Evidence outlined in a Pentagon contractor report suggests that financial subversion carried out by unknown parties, such as terrorists or hostile nations, contributed to the 2008 economic crash by covertly using vulnerabilities in the U.S. financial system.
“There is sufficient justification to question whether outside forces triggered, capitalized upon or magnified the economic difficulties of 2008,” the report says, explaining that those domestic economic factors would have caused a “normal downturn” but not the “near collapse” of the global economic system that took place.
Suspects include financial enemies in Middle Eastern states, Islamic terrorists, hostile members of the Chinese military, or government and organized crime groups in Russia, Venezuela or Iran. Chinese military officials publicly have suggested using economic warfare against the U.S.
Read Washington Times Article Here
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Fannie Mae has just released it’s Quarterly National Housing Survey and the results are… well, in some cases predictable… and in others just bizarre. I’m not entirely sure, but I’m think some of the problem comes from the methodology, and it’s not at all hard for me to believe that at least some of the questions are phrased poorly. But, overall… it is a real survey and the results are something I track each quarter or two.
Here’s what Fannie Mae has to say about the survey and its purpose:
“Our purpose was to gauge the public’s current attitudes toward housing, especially in light of the current housing crisis. This comprehensive research project asked more than 3,000 consumers about their confidence in homeownership as an investment, the current state of their household finances, their views on the U.S. housing finance system and their overall confidence in the economy.”
One of the things that I’ve been watching for two years is American attitudes about foreclosures. And there’s no question that those attitudes have been shifting, slowly perhaps, but in the right direction… as the foreclosure crisis has continued to worsen. I’ve always understood one thing about the crisis that I think many other observers have missed… as the pain increases, and as more and more people are directly affected by the foreclosure crisis… more will start to question what caused this terrible tragedy. And as that happens, as more and more people start to realize that it wasn’t the borrowers over-borrowing… it was the bankers over-borrowing that caused the collapse of our financial and credit markets and left our housing markets in a literal free fall.
When that is understood by the majority of Americans, I believe we will finally be ready to throw away the meaningless distinctions, “responsible homeowners and irresponsible homeowners,” and we’ll return to just being American homeowners. Because only then will we be ready to reclaim our democracy from then corrupt oligarchy that has taken control of the legislative and executive branches of our government. Only then will we start to heal the shame that has needlessly bound millions of our fellow citizens, who were not at fault… but were blamed for too long.
The truth about my blog, Mandelman Matters, is that I started it back in 2008 because I wanted to do whatever I could to accelerate that learning and then the healing process, and I know my efforts, while not entirely satisfying as I always wish to do more, have not gone unnoticed. And, along with the others who’ve dedicated their efforts to exposing and educating our society… I’m quite proud to say we are gaining on it. In fact, based on where we began our journey into the worst economic meltdown in 70 years, I’d say we’ve got no more than 2-3 years to go… tops.
Here are some of the most telling outcomes of Fannie’s Q4 Homeowner Survey… along with some that provide proof that there’s still much work to be done… the order of what’s presented is mine alone…
1. Americans are split on whether banks should foreclose if the owners are unable to pay their mortgage:
48 percent of respondents say YES… 43 percent say NO.
2. Slightly more than half (53 percent) believe homeowners bear the responsibility for a home loan they can’t afford.
This number must change and isn’t changing fast enough, for my tastes. The foreclosure crisis, however has not yet directly impacted 20% of American homeowners as yet, but when it does… this number will change dramatically.
3. When asked if financial distress makes stopping payments on an underwater mortgage acceptable:
15 percent of respondents said YES.
4. Respondents ranked negative impact on credit score (35 percent) and moral qualms (33 percent) as more likely factors for motivating them to pay their mortgage.
5. Underwater borrowers were more than twice as likely to be behind on their mortgage payments and were more than twice as likely to believe stopping payments was acceptable as compared with borrowers not underwater.
6. A surprising 44 percent of respondents expect their personal financial situation to improve in the next year.
7. Understandably, 62 percent of respondents believe U.S. economy is on wrong track. But, 65 percent of respondents also think that now is a good time to buy a house.
Or, another way you might phrase that: 65% of respondents in the Fannie Mae National Housing Survey think that a good time to buy a house is when the economy is on the wrong track.
8. Amazingly, 78 percent of respondents think home prices will stay the same or go up over the next year.
However, broken down into distinct groups, only 26 percent of Americans believe home prices will go up over the next 12 months, 56 percent believe they will remain the same.
9. In January of 2010, it’s worth noting, 37 percent of respondents said they believed home prices would go up over the next 12 months.
So, that means 78% of respondents think that when the economy is on wrong track, home prices rise.
10. Respondents said that they expect home prices to increase by 0.4 percent, but I would really love to see how this question was asked, because obviously the respondents didn’t actually say 0.04 percent.
11. The percentage of respondents who believe that buying a home is a safe investment has fallen from 70 percent to 64 percent. And this is down from 83 percent in 2003.
12. Among delinquent borrowers, the perception that buying a home is a safe investment has fallen significantly from 65 percent in January 2010, to 53 percent of respondents to this survey.
Fannie Mae’s presentation of this latest survey data is found below in its entirety… It’s clear that while we are gaining on it, we have much work yet to be done…
National Housing Survey 040610
METHODOLOGY
From December 12, 2009 – January 12, 2010, Penn Schoen Berland, in partnership with Oliver Wyman, conducted 3,451 telephone interviews with Americans age 18 and older.
This included a random sample of 3,051 members of the general population, including 887 homeowners, 1,110 mortgage borrowers, 908 renters, and 338 underwater borrowers (those who report owing at least 5% more on their mortgage than their home is worth). The overall margin of error for the general population sample is +/- 1.77% and larger for subgroups.
An additional oversample of 400 random national delinquent borrowers was also polled. The margin of error for the delinquent oversample is +/- 4.9% and larger for subgroups. Delinquency was defined as not having made a mortgage payment in the past 60 or more days.
Last week, the Justice Department decided to end the criminal investigation of former Countrywide Financial CEO Angelo Mozilo. People close to the case say that the overall collapse in the mortgage market has made it too difficult to prosecute the actions of any one particular executive.
So, in other words, Mozilo got off for his role in creating the housing market bubble and sub-prime implosion that fed into the global financial meltdown of 2008, precisely because the meltdown was so large? Well, that’s certainly nice to hear, don’t you think?
I’m not going to attempt to write some scathing or potentially insightful commentary about Mr. Mozilo, I’m sure that’s been done many times before, and frankly… he bores me to no end. But, at the same time I felt like I had to say something about a financial criminal of his stature picking up a get out of jail free card… it simply could not go by without at least a mention.
So, here’s sort of a highlights reel in print… I give you Angelo Mozillo, the man behind Countrywide, IndyMac, two of the most spectacular banking and mortgage industry failures in U.S. history. And not only that, but he also managed to eviscerate Bank of America as he made his way to the exit, retiring in 2008.
Here we go… join me, it’ll be quick, and then you’ll want to throw-up, so stay close to a bathroom is my best advice.
When the mortgage crisis started in October 2006, Mozilo filed a stock trading plan to sell 350,000 shares a month. He revised the plan twice, first in December so he could sell 465,000 shares per month, and then on February 2, 2007, the day Countrywide stock it a record high of $45 a share, he revised it again to sell 580,000 shares per month. En total, Mozillo sold 5.8 million shares for roughly $150 million between November 26, 2006 and the end of 2007.
Mozillo claimed he was only selling shares of his company’s stock according to a prearranged retirement schedule, but during that same time period, Countrywide’s shareholders lost all of the $2.5 billion the company had just spent on repurchasing shares.
The man has impeccable timing, no question about that. Countrywide’s exceptionally high 18% mortgage payment failure rate first appeared in 2006.
In the fall of 2007, Democratic Senator Chuck Schumer wrote a letter to the Federal Housing Finance Board warning its chairman, Ronald A. Rosenfeld about the Federal Home Loan Bank’s $51 billion in cash advances to Countrywide that were collateralized by $64 billion in bad mortgages.
In that letter Sen. Schumer wrote:
“I find these numbers alarming as reports continue to emerge about how Countrywide’s reckless and predatory lending practices were a leading contributor to today’s foreclosure crisis.”
Last October, Mozilo agreed to pay $67.5 million to settle the U.S. Securities and Exchange Commission’s accusations that he misled investors about Countrywide’s health and risk-taking, and generating roughly $140 million of improper gains from insider stock sales. Mozilo neither admitted nor denied any wrongdoing… (Want the actual SEC complaint, CLICK HERE.)
Mozilo’s internal emails, obtained by the SEC, show him referring to a sub-prime product as “toxic” and saying “the company was flying blind.” (Want to read the rest of the emails obtained by the SEC, CLICK HERE.)
California recently settled a predatory lending case against Mozilo (and another ex-Countrywide executive) for $6.5 million.
When the deal to sell Countrywide to Bank of America was struck in mid-January of 2008, Countrywide was valued at $4 billion and Bank of America’s share price was $38.50. Two weeks later, Countrywide posted a loss of $422 million for the fourth quarter of 2007. By the time the acquisition was completed on July 1, 2008, the deal’s value had fallen to $2.5 billion.
After eight months, $46 billion of TARP funds, $118 billion in government-backed asset guarantees, and an incredibly stupid merger with Merrill Lynch, Bank of America was $3.14 per share in March of 2009.
By then, Countrywide was being sued by everyone imaginable… homeowners, shareholders, municipal employee pension funds, and they were alleging everything from insider trading to inflated fees being charged to homeowners, to unlawful actions, collusion and mortgage fraud, and let’s not forget deceptive advertising having to do with a variety of predatory lending claims brought by Attorneys General from 11 states and led by Illinois and California on October 6, 2008.
Countrywide ultimately settled by agreeing to modify $8.4 billion in principal and interest rates on over 400,000 loans it had initiated, but the company neither admitted nor denied any wrong doing and no fines were levied. Following that, the company settled other predatory lending claims for about an additional $3 billion. But, these settlements led to a class action lawsuit brought by investors who argued that Bank of America didn’t have the right to modify Countrywide’s agreements.
Between July of 2003 and June 30, 2008, Mozilo had taken home more than $470 million in compensation and stock sales, which represents the third highest pay package of any financial or homebuilding executive during that time. If you’d like to see Mozilo’s employment agreement, as taken from the company’s 8K filing with the SEC in 2004, CLICK HERE.
“Mozilo’s fingerprints are all over the economic catastrophe we are living. He was the Typhoid Mary of the mortgage business, spreading the exotic-loan disease far and wide,” said Dan Pedrotty, director of the AFLCIO’s Office of Investments. “He was also grossly overpaid, especially considering the fact that he drove his company off a cliff.”
Time Magazine called Mozilo the #1 Culprit of the Financial Crisis.
Mozilo’s lawyers argued that “Countrywide’s problems were caused by the general collapse of the mortgage market nationally and not by any misdeeds by company executives,” according to the Wall Street Journal.
Best of all, I was dumbfounded to learn that Bank of America is writing the checks for all of these settlements… including one for $22.5 million, another for $45 million, a $60-some million settlement, and even $600 million to settle a class action suit brought by shareholders… even the recent $6.5 million to the State of California… all because BofA agreed to purchase Countrywide, indemnifying Mozilo and his ace lieutenants against legal costs.
So, very well done there.
Okay, that’s all I can take… I just learned something that I had always hoped wasn’t true… Crime Pays!
Mandelman out.
Foreclosure News