News, Research & Insights for American Homeowners, Patriots & Constitutional Conservatives
Okaaay.
This morning, at the National Prayer Breakfast, Barack Obama cited Scripture as justification for his policy agenda — from reforming health care to ensuring that financial institutions play by fair rules to taxing the rich. BuzzFeed’s Zeke Miller reports: The president said he often falls to his knees in prayer, and emphasized the role of [...]
Steve's title was subtle, so in case anyone missed it, here are the materials on Public Citizen's website. The petition calls on the Federal Reserve and the Financial Stability Oversight Commission to use their authority under Dodd-Frank to break up Bank of America. (But still check out Steve's analysis on Dealbook!).
UNC's Center for Community Capital has posted a new analysis of 19.5 million mortgage loans originated between 2000 and 2008 finding that mandatory down payments of 10% would lock out nearly 40% of all creditworthy borrowers while a 20% down payment would exclude 60%. The study finds a significantly higher exclusion rate for African American and Latino borrowers. The authors (Roberto Quercia of UNC, Lei Ding of Wayne State University, & Carolina Reid from the Center for Responsible Lending) do find valuable default-reduction benefits of other forms of strong underwriting as the Dodd-Frank Act already requires (through the "QM" and "QRM" classifications), but signal caution about the significant access costs of government-mandated down payment levels that government regulators may be currently considering.
The WSJ reports on the latest development in the implementation of the OCC's mortgage servicing fraud consent orders. It seems that the banks will have OCC approved "independent" foreclosure review consultants (chosen and paid by the banks) review foreclosure files from 2009-2010 and pay homeowners damages if there are any problems found.
This proposal really worries me. It's hard to imagine that the banks will part with any money unless they receive releases--broad releases--from the homeowners. The homeowners, however, will not typically have legal representation and will lack the ability adequately value their claims against the banks. $100 for a complete release? Why not?
There's a real danger that the "independent" consultants will come in with low-ball damage figures when they do in fact find problems (which itself is likely to be rare). Indeed, I would suggest that this sort of practice would be precisely the sort of thing that might fit under the new Dodd-Frank UDAAP rubric, as the banks would be using their superior knowledge to take advantage of consumers who lack the legal expertise to evaluate their options. (And note that this is not the same as a consumer approaching a bank for a loan--this is the bank approaching the consumer with an offer). The solution here is to have someone negotiating on behalf of the homeowners. The homeowners should get to choose counsel, and the banks should be paying for that representation on a reasonable hourly fee schedule.So, from what I can get from the WSJ story, I think we have three intertwined problems. First, there's the problem of sophisticated banks dealing with homeowners who are not represented by legal counsel. Procedurally that's an unlevel field. Second, there's the substance of what that means. It means that the banks might snooker consumers into signing releases of any sort for too little money. It also means that the releases might be too broad. At most the releases should cover the robosigning (writ narrowly), force-placed insurance, and any issues that the banks' foreclosure reviewers actually look for. If the foreclosure reviewers aren't looking for chain of title problems (and they certainly won't), then that shouldn't be covered by the release. Similarly, origination-related claims shouldn't be included.
The third problem is the foreclosure review consultants themselves. Who are they? I'm not aware of any firms in the country with real expertise in determining whether a foreclosure has been done properly or not. It would be a stunning conflict of interest to ask any law firm that has done a foreclosure to undertake such a review--their malpractice policies are on the line. And I can't fathom what McKinsey or the like would know about a legal matter like this. So, I'm guessing that the banks will hire some fancy big name white shoe law firms do to this work. But honestly, what do fancy law firms know about foreclosures? They don't do that kind of work. But I'm just speculating here because we don't really know anything. I think it's important as a transparency matter that we know who the foreclosure review consultants are. I hope the OCC understands that this sort of transparency is critical if their consent orders are to be taken as a serious engagement with the problem of foreclosure fraud. I don't have a lot of faith that they will.
I'm testifying before the Senate Banking Committee on Tuesday about the role of the government guarantee in housing finance (a/k/a wtf do we do with Fannie and Freddie). My testimony is here. I expect it will manage to piss off people left, right, and center, but that's the nature of this GSE reform debate.
I'm not thrilled with the prospect of a government guarantee, but I just don't think that there's sufficient the market demand for credit risk on U.S. mortgages for a non-guaranteed system to function. Do we really think that $6 trillion dollars of interest risk investors are suddenly going to decide they want credit risk as well?
Realistically, if it gets hairy enough, the government will bail out the system, Dodd-Frank, Tea Party, and all that jazz aside. We'll keep chanting no more bailouts until we do the next bailout. (Remember the War to End All Wars?) That means that it's better to have an explicit guarantee and price for it.
Put differently, the choice we face is not guarantee or no guarantee. That's just a false dichotomy. The choice instead is between an explicit and an implicit guarantee. The implicit guarantee is a guarantee of moral hazard. The government will bail, but won't price for it. The explicit one certainly has its own problems, but at least it means we are being candid about the risks the government is assuming and trying to price for them and structure the guarantee to mitigate the risk that it will be used.
I have a new paper on credit card securitization and what it teaches us about the likely effectiveness of the Dodd-Frank Act's skin-in-the-game risk retention requirements. Credit card securitization has long required 4%-7% credit risk retention (cf. 5% under Dodd-Frank).
I argue that when combined with other features of credit card securitization it was actually counterproductive at aligning issuer/securitizer and investor incentives and likely contributed to rate-jacking. Instead, credit card securitization didn't go off the rails like mortgage securitization because of the existence of implied recourse, effectively 100% skin-in-the-game. This suggests that skin-in-the-game cannot be relied upon as a one-size-fits-all cure. Its effectiveness will instead depend on the other securitization features with which it is combined.
If you're interested in going into the sausauge factory of credit card securitization, there's plenty of gore and detail here for you. If you're interested in the connections between credit card securitization and rate-jacking, there's something here for you. And if you're interested in whether Dodd-Frank's risk retention requirements will be effective, there's something here for you too.
The (overly long) abstract is below the break:
The Dodd-Frank Act’s “skin-in-the-game” credit risk retention requirement is the major reform of the securitization market following the housing bubble. Skin-in-the-game mandates that securitizers retain a 5% interest in their securitizations. The premise behind skin-in-the-game is that it will lessen the moral hazard problem endemic to securitization, in which loan originators and securitizers do not bear the risk on the ultimate performance of the loans.By Lane Houk
July 25, 2011
The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law on July 21, 2010. The Act modifies the timelines for qualified written requests (QWRs), outlaws various servicing practices, greatly increases the liability for specific RESPA violations, and makes several TILA adjustments.
Shorter QWR Timelines are NOW IN EFFECT
Servicers now have less time to acknowledge receipt of a QWR along with less time to properly respond to QWRs. The Act changes the receipt acknowledgment deadline from 15 days to only 5 days for a proper QWR (Qualified Written Request). The Act also modifies the substantive response deadline from 60 days to just 30 days while permitting a one-time 15-day extension, if the borrower is notified with the extension and also the reasons for the delay; but even using the extension, the time frames are nonetheless short so servicers are going to be challenged to act quickly. Procedures for promptly responding to QWRS are now even more imperative however don’t be surprised if servicers pay sloppy attention to these issues.
Important thing to WATCH OUT FOR: The Designated Address Tactic
Many servicers may already have designated an address for QWRs, but don’t or won’t publicize this address (others put it in the fine print of your mortgage statement). A servicer may well set up a particular and exclusive address for QWRs by sending notice towards the borrower in a notice of transfer, or a separate mailing. 24 C.F.R. § 3500.21(e)(1). Such an address should assist servicers process these requests in a timely fashion but don’t be surprised if many try to use the address as a potential safeguard to protect them from liability, if the borrower sends the QWR towards the wrong address they might make the claim that they weren’t properly notified.
So here’s a borrower practice tip: Call your Servicer before you send a QWR and specifically ask for the address to send a Qualified Written Request to. Verify who you spoke with, what date and time and make them repeat the address twice to make sure you have it right.
Common Prohibitions & Requirements
Servicers ought to also be aware of the new general RESPA prohibitions regarding force-placed insurance, as well as charging fees for responses to QWRs and common responses. The Act imposes new requirements for escrow accounts. For example, after receiving a full payoff, any escrow balance must be returned within 20 days. The Act also implements a 10-business day deadline to respond to a request for the identity and address with the owner, or assignee, with the loan.
Damages
The Act raises the available damages for failing to respond to RESPA requests as required. The available damages for each violation under 12 U.S.C. § 2605 changed as follows:
(1) Individuals: actual damages plus $1,000 increased to actual damages plus $2,000; and
(2) Class Actions: the cap for class action lawsuits increased from the lesser of $500,000 or 1 percent with the servicer’s net worth to the lesser of $1,000,000 or 1 percent.
TILA
In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act adjustments several sections with the Truth in Lending Act. Escrow accounts are now mandatory for many first mortgages, including all loans guaranteed by a state or federal government. The Act requires servicers to credit payments as with the date of receipt, unless a delay will not result in a charge or negative credit report. Also, payoff statements should be sent within a reasonable time, but no extra than seven days after a written request.
Conclusion
The most crucial points are that servicers ought to speed up internal actions to meet these new deadlines, and that the damages available for RESPA violations have doubled. Servicers must take note that they can limit liability for potential QWR violations by requiring that particular requests be sent to a particular and exclusive address. If the borrower sends a QWR towards the wrong address, the servicer may well be able to avoid liability altogether. So watch out for these tricky, deceptive servicing tactics. It’s shameful that any of these companies does this.
It’s really quite simple. Be honest with your customers. Don’t tack on usurious fees and don’t try to get one over on them. What surprises me the most is that the average consumer doesn’t realize that the major servicers are all subsidiaries of the major banks. Chase, Wells Fargo, Bank of America, Citigroup, etc.
Servicing is where so much of the damage is being done to our housing market yet NO ONE boycotts the big banks. I for one will never have a checking account or get a loan from any of the big banks. They can forget it… you should send a clear voice as well.
New York Times-
TRULY startling revelations were few in the voluminous report, published last Thursday by the Financial Crisis Inquiry Commission on the origins of the financial panic. This is hardly a shock, given the flood-the-zone coverage and analysis of the crisis since it erupted four years ago.
Yet the report still makes for compelling reading because so little has changed as a result of the debacle, in both banking and in its regulation. Providing chapter and verse, for example, on the bumbling and siloed management at the nation’s largest banks is enlightening, in that many of these institutions are even bigger than they were before. With too-big-to-fail institutions now larger than ever, we are almost certain to go through another episode like 2008 in the not-too-distant future.
For those who might find the report’s 633 pages a bit daunting for a weekend read, we offer a Cliffs Notes version.
Let’s begin with the Federal Reserve, the most powerful of financial regulators. The report’s most important public service comes in its recitation of how top Fed officials, both in Washington and in New York, fiddled while the financial system smoldered and then burned. It is disturbing indeed that this institution, defiantly inert and uninterested in reining in the mortgage mania, received even greater regulatory powers under the Dodd-Frank law that was supposed to reform our system.
The report shows how the Fed refused to exert its authority on predatory lending. On Page 94, we learn that from 2000 to 2006, it referred a grand total of three institutions to prosecutors for possible fair-lending violations in mortgages.
The Fed “succumbed to the climate of the times,” its general counsel, Scott G. Alvarez, told commission investigators. It is hard for a supervisor to challenge banks when they are highly profitable, other officials said. Richard Spillenkothen, head of supervision at the Fed until 2006, attributed its reluctance to “a desire not to inject an element of contentiousness into what was felt to be a constructive or equable relationship with management.”
Is it any shock, then, that neither the Federal Reserve Bank of New York nor the Office of the Comptroller of the Currency, a partner in regulatory inadequacy, saw that the S.S. Citigroup was headed for the shoals? This depressing case is chronicled in depth in the report.
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The Wall Street Journal has come out with a story that may signal the end of the road for Elizabeth Warren, and frankly, I find it a disgusting turn of events that the banking lobbyists will likely win this battle and get rid of the only pro-consumer person in the administration. The article, which was in the December 30th edition of the WSJ, titled: U.S. Seeks Chief For Financial Consumer Agency, says:
White House adviser Elizabeth Warren and a top lieutenant are quietly asking business and consumer groups for names of people who might run the new Consumer Financial Protection Bureau, people familiar with the matter said.
The hunt suggests that Ms. Warren, a lightning rod for some bankers, might not be selected to lead the bureau, a centerpiece of the Dodd-Frank financial overhaul bill that passed this summer. Still, many liberal groups will push to get her in the post.
First of all, let me just register my displeasure at how they are branding Ms. Warren “liberal” as opposed to conservative. I have to tell you that if this is how the conservatives want it, then fine. If it’s going to be “liberal” to want someone to look out for the middle class consumer as opposed to the banking lobby in this country, then so be it.
I didn’t realize it was liberal to want to see someone put a stop to the kind of abusive lending behavior that has stripped the middle class of just about everything they had. I guess conservatives are now the people in favor of predatory credit cards with 39.9%, 49.9%, or even 79.9% interest rates, not to mention the hidden fees and outrageous charges and abusive mortgage payments that double without notice, and are generally marketed to the elderly and less educated segments of the population.
That’s conservative, huh? Well, okay… I guess I’m hating “conservatives” then, because those sort of things are destroying the middle class in this country and that’s like destroying America… and I’m against destroying America.
The WSJ story went on to say:
President Barack Obama’s choice could signal how he intends to deal with resurgent Republicans in Congress. The feelers to business groups serve as a reminder that any nominee would likely need support from at least seven Republicans in the Senate to win confirmation.
Among the names being discussed are Iowa’s attorney general, Tom Miller; New York state bank regulator Richard Neiman; and former Office of Thrift Supervision director Ellen Seidman.
Yeah, that’s about perfect. Go ahead and put a banking regulator in the post that’s supposed to protect consumers. After all, Lord knows our banking regulators, and I use that term loosely, have done a bang up job so far at protecting us. Why not? Hey, maybe Kenny Lewis, the ex-CEO of Bank of America, would take the job. I understand he’s not working at the moment.
The WSJ then explained:
The Obama administration weighed nominating Ms. Warren earlier this year but held off amid concern that Republicans who consider her anti-business would block her appointment. Instead, she was named a special adviser to set up the agency, and a decision on a permanent head was put off until 2011.
Several federal agencies are scheduled to transfer their powers to the new agency in July, and the administration wants to have a confirmed chief in place by then. Without a Senate-confirmed director, the agency’s powers would be limited. For example, the agency wouldn’t be able to issue certain new rules on lending.
And with any of the banking regulators in the job, there won’t be any new rules on lending, at least none that will bother the bakers in the least… so, what’s the difference?
You know… the Democrats really are wimps. I mean… really. Elizabeth Warren was literally the creator of the Consumer Financial Protection Bureau… it was her idea, and its been her that has campaigned for it tirelessly. But the Dems get afraid that some of the senate Republicans don’t like her and they don’t even consider fighting to appoint the best person for the job… they run for the hills and start looking for someone that the other side of this issue will like… even though that essentially ensures that the bureau won’t accomplish what it’s intended to accomplish.
I do understand that the essence of politics is compromise, and that you won’t get very far in Washington playing bull to our system’s china shop, but this sort of flagrant political expediency is what has harmed, and quite likely has fatally harmed, the Obama presidency.
So, as the Journal’s story continued, I got sicker to my stomach:
So far, Ms. Warren and her senior adviser, Raj Date, have solicited input from a range of groups, including the Independent Community Bankers of America, the Financial Services Roundtable and the Center for Responsible Lending, according to people familiar with the matter.
The first two groups are two of Washington’s most influential associations for lenders, representing thousands of big and small banks. The Center for Responsible Lending is a North Carolina-based consumer group that pushed for the creation of the new agency and is influential with congressional Democrats.
Soliciting input from the Independent Community Bankers of America and the Financial Services Roundtable as to who should lead the new consumer protection bureau, is something like asking the Illegal Drug Dealers Association and Pablo Escobar to provide input as to who should run the DEA.
What’s the point? In fact, anyone either of these groups would choose for the role should be the basis for not including them on the list of candidates.
Then the Journal’s story said the following:
The process is at an early stage but could escalate quickly, the people said. A concrete list of candidates hasn’t yet been established, and the White House could dismiss any recommendations made by banking or liberal groups. The decision on a nominee will ultimately be made by Mr. Obama, and could come by March, the people said.
Did you notice how they framed the two sides to the argument? “Banking or liberal groups.” Earlier it was “conservatives vs. liberals,” and now it’s “banking vs. liberals.” So, which is it, or is it one and the same. Is it now considered “conservative to be pro-banking,” and liberal to be pro-consumer? It would seem so, especially as from reading the next paragraph in the WSJ story:
Many credit Ms. Warren, a longtime critic of banks and a Harvard law professor, with envisioning the consumer-protection agency in 2007. Liberals pushed to include it in the Dodd-Frank law, saying Washington needed a regulator whose sole focus was protecting consumers from unscrupulous lending practices. Republicans and business groups, particularly the U.S. Chamber of Commerce, tried to kill it and succeeded in scaling it back.
“Liberals pushed to include” the new consumer protection bureau in the Dodd-Frank law, but “Republicans and business groups, particularly the U.S. Chamber of Commerce tried to kill it, and succeeded in scaling it back.”
I don’t know about you, but that’s just a stunning place to have a dividing line, if you ask me. Republicans, business groups and the U.S. Chamber of Commerce are opposed to a consumer protection bureau whose job it will be to look out for consumers, protecting them from unscrupulous lending practices? Really? After what we’ve just been through, I can’t even believe there’s anyone in this country that would be opposed to consumers being protected from unscrupulous lending practices, let alone the Chamber of Commerce and, in general, Republicans.
I owned my own business for close to two decades, and I’ve been a member of my local Chamber of Commerce, and I always thought that my membership was a way of showing that I supported honest and ethical standards in business. Certainly not that I was opposed to consumers being protected from unscrupulous lending practices.
Many of those unscrupulous lending practices,” one might recall, are illegal acts… crimes. Are Republicans all of a sudden the “Pro-Crime Party?” Would someone please direct me to the rabbit hole because I’m looking to climb back up.
The WSJ further explains:
Ms. Warren has said the bureau’s priorities will include simplifying credit card and mortgage disclosures. She also wants to make the prices of financial products more transparent. Critics say the bureau’s actions could limit choices for consumers and burden financial firms with costly new regulations.
Okay, so simplifying disclosures on credit cards and mortgages, and make the prices of financial products more transparent… don’t those things fall under the category of “positive change” for everyone? Why would one side not want people to know what they’re getting into… to be more knowledgeable and aware of the prices of things?
You see, I’m confused because one phrase I’ve heard coming from the Republicans when talking about the foreclosure crisis is that people need to take some “personal responsibility” for their decisions. So, under the banner of being better able to understand what one is committing to when one signs a mortgage or applies for a credit card, wouldn’t simplified disclosures or clearer pricing be something the “personal responsibility” crowd would support?
After all, the personal responsibility crowd is saying that the borrowers weren’t victims, they’re people who should have known better, so why wouldn’t changes that help to make sure that in the future people would be better able to “know better” be a good thing for the future of personal responsibility?
Also, how exactly could clearer pricing of financial service products or simplified disclosures possibly limit the choices available to consumers, except that maybe the consumers wouldn’t have the scams and abusive products from which to choose anymore?
And as to “costly new regulations,” all I can say is take it out of the bankers’ bonus checks.
The WSJ story continues:
Much will depend on who leads the agency. Ms. Warren is revered by many liberal groups, but it would be even more difficult for her to win confirmation in the new Senate, which will have 47 Republicans.
In the new political dynamic, the White House needs broader support from business groups to move nominees and legislation through Congress. If the administration can win early support for a nominee from business, it could smooth the passage for Senate confirmation.
Since when is “business” opposed to consumers being better informed when they borrow money… and for that matter, since when are banks against that?
The thing is… I’m a pro-business guy… all the way. I voted for Reagan, I voted for Bush I. I even voted for Dubya, although I have to say that didn’t exactly work out as I’d hoped. And when I voted for Obama, the only reason I was hesitant was that I thought he’d be too unfriendly towards Wall Street, which as it turns out should go on record as me being the most wrong I’ve ever been in my whole life. Like voting for “Icy Cold” and finding out it was “Boiling Hot”.
But now I find myself on the other side of business? I’m against consumers getting ripped off and stripped of their wealth by bankers and politicians and that in itself makes me an “anti-business liberal?” Holy mackerel, next thing I know is someone going to be inviting me to save the caribou and drive a wind-powered car? ‘Cause I’m going to resist giving up my 4-wheel drive Suburban, I’ll tell you that right now. Global warming? I was always a little chilly anyway.
And another thing… I happen to like the Ten Commandments, so leave ‘em up wherever they are now, and my family happens to enjoy saying a prayer before we eat and at bedtime, so if you don’t like that, tough cookies. I like tax incentives for business because they encourage business to grow, which means more jobs and better jobs. I sure as heck don’t want government telling me what to do every time I turn around, I think I pay plenty of taxes as it stands, and as far as I’m concerned, we should pave Afghanistan and make it overflow parking for our new ChinaLand Shopping & Amusement Complex, how’s that?
Although I’ve said it before, if you want to put a nativity scene on top of the Supreme Court for Christmas, go right ahead. You want Santa in his sleigh over the White House… why not? And go ahead and plug in a big Jewish star over the Treasury building and a neon “Feliz Navidad” atop of the Department of Agriculture too, if that will help balance things out in your mind, I really don’t care.
But it should be abundantly clear to EVERYONE that this country needs a tad more regulation and oversight of our banking and finance industry in order to prevent those involved from raping the middle class while they pay themselves untold billions in bonuses, and use their immense wealth to purchase our republic and hijack our democracy. Because that’s precisely what they’ve done and what they continue to try to do every single day in real life today… and it must be stopped or before we know it, Mexico’s going to be building a fence to stop our illegal emigrants from crossing their border in the dead of night to look for work.
And Elizabeth Warren is absolutely the right person to lead the bureau of which she conceived, and this moment in time she is likely the ONLY right person for the job. Even she will have a monumental challenge in front of her, but anyone else that I can see, will be dead right out of the gate… and then the abuses we have today… we’ll still have tomorrow.
Oh yeah, and Geithner opposes her big time…
Isn’t that alone enough reason to give her your support?
So, this is it. I want everyone click on the blue type and sign the petition, Let Elizabeth Warren Police Wall Street, which says:
PETITION TO PRESIDENT OBAMA: Elizabeth Warren has proven that she is willing to stand up to Wall Street on behalf of consumers and is the logical choice to lead the Consumer Financial Protection Bureau. Tim Geithner is a longtime Wall Street insider, and if he’s recommending against Elizabeth Warren that’s all the more reason to appoint her.
I know, it seems like we’ll probably lose this fight at this point, Geithner and the rest just have too much power and they never give up pushing for their corrupt practices to continue unchecked, but we’ll definitely lose if you don’t sign, so let’s not just throw in the proverbial towel just yet, okay?
Come on… take a moment to click it and sign it ! Let Elizabeth Warren Police Wall Street
Mandelman out.
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(And hat tip to The Daily Bail for bringing the petition and much more to my attention… a really great site, by the way.
And if still unsure, click this and read their article, “The Real Reason Tim Geithner is Afraid of Elizabeth Warren.”)
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And here’s Shahien Nasiripour of the Huffington Post on the Warren appointment:
Financial Reform Coalition Endorses Elizabeth Warren To Head New Consumer Agency
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Here’s Simon Johnson, Baseline Scenario and ex-Chief Economist of the IMF, on Tim Geithner:
Tim Geithner’s Ninth Political Life
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And here’s the Washington Post on Geithner running the Consumer Financial Protection Bureau!
Timothy Geithner’s realm grows with passage of financial regulatory reform
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And her are just a few past articles on Elizabeth Warren from Mandelman Matters:
Elizabeth Warren on the Foreclosure Crisis
TARP Chief Elizabeth Warren: “It’s the Bank Lobbyists vs. American Families”
The Most Damaging Propaganda Campaign in History. And its Aimed at You and Me
Elizabeth Warren’s Appointment In Jeopardy-We Have to Act Now
Bringing Up the Rear: Senator Christopher J. Dodd
Bringing Up the Rear: Treasury Secretary Tim “Transparency” Geithner & his Band of Banking Sadists
Well, Would You Look at That: Elizabeth Warren Might Be Replaced by a Bank Lobbyist
And here’s an oldie, but a goodie… if you don’t remember it, perhaps it’s time to read it again…
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Hey… why not take a minute and SUBSCRIBE to Mandelman Matters so you’ll get it delivered to your email daily? Don’t worry, you don’t have to read it, if you don’t want to. But you’ll feel better when you do!
Apparently, something like 22 out of 120 protesters were arrested on Thursday for trespassing when they refused police orders to vacate the premises as they demonstrated in front of the Chase bank branch at the corner of Hope and 4th in downtown Los Angeles.
The homeowners say they are members of the Alliance of Californians for Community Empowerment (ACCE), which bills itself as “a statewide community organization,” and the Home Defenders League, which was started by some of the group’s members as a rallying point for those at risk of foreclosure… and it goes without saying, getting jerked around by any one of our nation’s banks.
According to a story appearing on the news website, People’s World:
“Millicent ‘Mama’ Hill, writing in an ACCE email blast, explained that the organization’s members started the Home Defenders League so that ‘anyone who has been a victim of the foreclosure crisis has a chance to fight back.’”
The group gathered in front of the Chase branch and set up house… they put down a rug, an end table, a mattress, chairs… and trhen they proceeded to, one by one, come up to the megaphone to tell their stories to what onlookers say was a very sympathetic crowd.
As you’ll see when viewing the video news footage taken by a Los Angeles news crew from KTLA Loa Angeles, they came prepared to chant and sing and share some key facts with anyone who would listen, including the fact that the big banks are getting ready to hand out $143 BILLION in bonuses this year.
For anyone who’s paying attention to the recent disclosures by the Federal Reserve, required by the Dodd-Frank financial reform bill, and as publicized by Congressional Representative Bernie Sanders (I-VT), which showed that $3.3 TRILLION was provided to the failed banksters and other major corporations over the last two years through various programs in an effort to keep them from having to shut their doors and/or be taken over by the FDIC, I suppose. As I understand it, Citibank has borrowed roughly $100 billion at essentially zero percent interest from the Fed’s emergency lending program. Now the questions being asked by Sanders and others, involve things like whether the repayment of the TARP funds was simply a sham, made with other federal program dollars in order to escape restrictions on CEO pay.
I’m sorry, but duh… of course the repayment of TARP was a sham to escape CEO pay restrictions… who didn’t know that? That was barely even hidden. It was like one day the banks were minutes away from insolvency, and a few scant months later, with nothing having appreciably changed in the economy, the too-big-to-fail banks were complaining about the CEO pay restrictions and just fater that, the TARP funds started flooding back into the Treasury like a tidal wave had hit the beach and water was filling the bottom floor of a beach hotel’s lobby. What else could have happened? The banks used Peter to repay Paul, because Paul’s money came with restrictions on CEO pay, but Peter worked for the government too. Anyone care to bet against that statement?
So, the protestors let the crowd know about the banks getting ready to hold their annual bonus orgy, during which we’re treated to sound bites of how the mega-rich get mega-richer… meanwhile American consumers get lied to, jerked around and in my opinion psychologically abused and even tortured as they try to deal with their banks in an attempt to modify their loans. Oh, I know that loans get modified, I just saw a woman get hers modified yesterday… after more than a year of being treated like a sub-par human, as opposed to a sub-prime borrower.
Interestingly, ACCE and the Home Defender League have already had some early success. According to the story on the People’s World site:
“The group convinced the city of Los Angeles to adopt the LA Foreclosure Registry Ordinance requiring banks to register properties in foreclosure with the city or face penalties of up to $1,000 per day per property, Hill said.”
And, also in California, ACCE is calling for legislation that would require banks to negotiate with homeowners before beginning foreclosure proceedings, in order to see if a modification can work to keep the borrower in their home.
And, by applying public pressure, ACCE and other groups across the country have successfully pushed servicers to grant permanent loan modifications in a number of individual cases where homeowners were facing foreclosure, and the bank had turned a blind eye and a deaf ear.
ACCE says that now they plan to up the ante by ” bringing together the collective power of the homeowners themselves in alliance with their supporters among labor unions, the religious community and community organizations.” And in fact, among those that were arrested during Thursday’s protest was the Executive Director of SEIU Local 721, John Tanner.
Well, all I can think of to say is…
And… people… groups like this, I’m told are forming all over the country… this is NOT a dress rehearsal… this is the real thing. So, what are you waiting for… let’s roll!
It’s not just the opinion of foreclosure defense attorneys and advocates….and still some ask, “Is the defense of foreclosure ethical?”
WASHINGTON – An Obama administration official says a preliminary investigation into the foreclosure process has found inexcusable breakdowns in the basic controls mortgage lenders should have been using.
Assistant Treasury Secretary Michael Barr said Tuesday that a foreclosure task force composed of 11 federal agencies had found serious problems in the way home foreclosures were being handled.
Barr told a new financial stability council headed by Treasury Secretary Timothy Geithner that the task force hoped to have a set of recommended improvements ready by late January.
Barr said the goal of the task force was to hold banks accountable for fixing the problems that have been found and making sure that individuals who have been harmed are given a way to seek redress.
Bar said the investigation had found “widespread and, in our judgment, inexcusable breakdowns in basic controls. The problems must be fixed.”
Barr was delivered his comments before the Financial Stability Oversight Council. The group of top federal officials including Geithner and Federal Reserve Chairman Ben Bernanke was holding its second meeting.
The panel was created by the Dodd-Frank legislation passed by Congress last summer in an effort to fix flaws in current government regulation that were exposed by the financial crisis that struck with force two years ago.
Barr said that the 11 federal agencies were coordinating their investigation with state regulators across the country. He said the federal task force hoped to report back to the stability council at its January meeting.
“Major financial institutions are being reviewed for problems across a wide range of issues in foreclosure processing,” Barr said.
Members of the stability council heard Barr’s presentation but made no comments during the portion of the group’s meeting that was open to the public.
The foreclosure crisis followed a housing boom that had been fueled by borrowers being allowed to take out risky loans with variable interest rates that they could not afford.
Several major lenders temporarily suspended their foreclosures to review thousands of cases for improper handling. Attorney generals in all 50 states have also launched a joint investigation into the issue.
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Without question, Elizabeth Warren was the right person to be appointed to head up the new Consumer Financial Protection Bureau, which has been created as a result of the recently passed financial reform bill.
Her appointment was easily the single most important appointment to a government post in my lifetime. If you think I’m being dramatic, I assure you I am not. If anything, I’m understating the importance of Ms. Warren being named to the position.
If the battle had been lost, and I assure you that it was a battle in every sense of the word, that loss would not only have been costly for today’s consumers in monetary terms, but it would also likely have cost our children a few sheckles in the decades to come.
The banking lobby was THE ONLY group behind the opposition to Elizabeth Warren and that should tell you enough right there. Warren wants to protect consumers, and it should be painfully obvious to everyone that bankers do not. Treasury Secretary Tim “Transparency” Geithner and White House economic advisor, Larry Summers have been the two most visible individuals opposing Warren and they are also the two people who have engineered the banking bailouts, and left American homeowners to figure things out for themselves.
Here’s what Yves Smith said on her blog, Naked Capitalism, had to say about Warren’s appointment:
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“Warren is the obvious choice to head the otherwise-guaranteed-to-be-a-joke consumer financial services agency due to set up its shingle at the Fed. She has been a tireless consumer advocate, is trusted and well liked by the public at large, an effective communicator and a respected legal scholar, and is willing to stare down political opponents. All those qualities make her hugely threatening. Banksters and their lobbyist allies have been saying loudly and clearly that they are firmly opposed to having Warren head the new consumer agency.”
And here’s what Shahien Nasiripour wrote recently in The Huffington Post:
“Treasury Secretary Timothy Geithner has expressed opposition to the possible nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau, according to a source with knowledge of Geithner’s views. Warren’s persistent oversight is part of the reason for Geithner’s opposition, according to the source.”
“Geithner’s objections to Warren taking over that role also involve her views on Wall Street, sources say. The longtime professor believes the nation’s megabanks are Too Big To Fail and have been among the biggest abusive lenders in the country. Her toughness on giant banks is said to be a longtime source of tension with Geithner.”
Okay… and here’s Simon Johnson of Baseline Scenario, on Geithner’s opposition to Warren:
“With his track record of survival, Geithner and his team apparently feel they can push hard against Elizabeth Warren and give the new consumer protection job to someone closer to their philosophy – which is much more sympathetic to the banking industry.”
And Yves Smith again, in response to Johnson’s comment…
“The Administration is not about to change its stripes and suddenly take an action that might actually lead to some effective measures against the financial services industry. It’s clear they will oppose a Warren appointment; the only question is how openly they will do so.”
Okay, that’s enough… I can’t take any more of that.
The Consumer Financial Protection Bureau was Elizabeth Warren’s idea. She’s the one who brought it to President Obama. She’s the country’s leading expert on economics-and-the-middle-class and she’s the only person in Washington who is there totally for the American consumer, and not beholden to the banks. She’s a Harvard professor… she doesn’t need the money… she’s serving the American people. We needed to let her do that.
Elizabeth Warren says she views the new bureau as “a way for the rest of us to… get some balance, some leveling of the playing field, so that people can really see the products they’re buying.”
Here, here! Don’t we need some of that. We haven’t had any of that in more than 30 years. In 1980, a credit card disclosure was a single page. Today, it’s dozens of pages of mouse type that basically says that the issuer can do pretty much whatever they want, whenever they want to do it. First Premier Bank actually has a card that charges a 79.9% interest rate! (Don’t worry though… I’m sure it only applies to poor people, so screw ‘em, right?)
And that’s to say nothing of the snapping turtle, spring loaded mortgages that need to be refinanced every two or three years or they blow up your life. Just in case there’s someone reading this who’s saying to themselves… “Gee, those people should have read their mortgages more carefully,” I only have one thing to say: Shut up, shut up, shut up. (Well, that could be viewed as three things, I suppose.)
If you read the paperwork that comes along with an Option ARM mortgage, it talks about the payment potentially increasing by twofold by discussing the loan’s potential to RECAST… and RECAST is not even a word in the English language, according to the American Heritage Dictionary, 4th Edition, but if it were a word, it would be one that you might use when fishing. After you’ve cast your line, should you not like where it went, you might RECAST it. But as far as reading about your mortgage payment increasing… the word RECAST isn’t likely to be of much help for the average American, I would think.
If you want to warn someone about their mortgage payment doubling, it’s really quite easy, really, you simply put a round red sticker on the documents right by the signature line… it says: WARNING! PAYMENT MAY DOUBLE WITHOUT NOTICE. See how easy that was?
(By the way, I’ve suggested that solution for disclosure before and people tend to laugh when I say it. So, if that just made you chuckle, please write to me and tell me why it’s funny. It’s mandelman@mac.com)
So, what about Senator Dodd? He’s the REAR this month, remember? (I’d almost forgotten too.)
As a vocal consumer advocate, Warren faced opposition by Republicans and the finance industry. And that was to be expected. The lion’s share of Republicans and every single one of the banksters have questioned whether Warren has the experience to run a large agency. They’ve also suggested that her support for consumers will make it difficult for her to negotiate fairly. And all of that drivel was to be expected as well.
Chris Dodd, however, helped write the legislation that created the Bureau of Consumer Financial Protection at the Federal Reserve, and the goal was to create an agency that would police banks for credit card and mortgage lending abuses. And Dodd’s the Chair of the Senate Banking Committee, a staunch defender of Fannie and Freddie in the years leading up to their spectacular failures. (Both of the mortgage giants are now trading OTC right next to Blockbuster.)
And then, prior to her appointment this past Friday, when asked about the appointment of Elizabeth Warren to head the new agency, he replied by issuing a warning that her appointment may lead to a protracted confirmation fight in the Senate. In an interview with Bloomberg’s Judy Woodruff, Dodd said the following:
“What you don’t need to have is an eight-month battle for who the director or the head or chairperson of this new consumer financial protection bureau will be. Warren’s a good candidate, but some Senators have suggested they won’t vote for her.”
Is that right, Senator Dodd? Do you recognize what a sniveling coward that makes you sound like. You’ve been in the Senate since… I don’t know… since well before we had cable television in this country. You were at the helm of the Senate Banking Committee leading up to the worst financial meltdown of the banking system since The Great Depression. You, Christopher, you. You were the guy completely asleep at the wheel when the bomb went off.
Your inaction and now oh-so-obvious incompetence has caused so much pain it could never be adequately described in words. That’s right you, Christopher. Maybe not alone, but you were certainly one of the guys at the top of the heap.
And now, when the financial reform bill, as watered down as it is, has finally passed… and you have the chance, before you retire into the sunset, to support the appointment of the only person in Washington that’s not pro-bankster, Elizabeth Warren… the only person who might just provide some degree of balance in a government that has so obviously become driven by the financial lobby… you run from the fight, suggesting publicly that she shouldn’t be appointed because some Senators have suggested that they wouldn’t vote for her? I guess that’s what they teach in the Peace Corps?
Well, fine. But, just so you and everyone in Washington D.C. knows… this has been the litmus test of your character. This has been the test that will show the rest of us, which among you are even remotely of the people, by the people and for the people.
Now that Elizabeth Warren has been appointed to the post, albeit temporarily, support her with whatever support you can offer, Senator Dodd. Let the ones that oppose Elizabeth Warren stand naked in the light.
And the American consumer…. no, rather the American voter will take care of them come November.
Mandelman out.
President Obama is expected to sign the new financial reform bill, known as the Dodd-Frank Act, by the end of this week. Although I have not read the actual text of the bill, I did read the Press Release sent out by the Committee on Financial Services… and there are some very interesting developments. If you have any interest in what Congress has and hasn’t done, its worth reading, and I certainly plan to take it apart and write more about it in the days to come.
Perhaps most notably, but least mentioned, the bill requires the credit rating agencies, Moody’s, Fitch, and Standard & Poors, to not only be more transparent, but also potentially liable for issuing “bad ratings” on bonds. The role of the bond market and the credit rating agencies in the financial meltdown is not widely understood, I’m aware, but it’s nice to know that Congress is aware, and this is evidence that that’s the case. Here’s what the Committee’s press release has to say on the matter as far as the ratings agencies are concerned:
New Requirements and Oversight of Credit Rating Agencies
New Office, New Focus at SEC: Creates an Office of Credit Ratings at the SEC with expertise and its own compliance staff and the authority to fine agencies. The SEC is required to examine Nationally Recognized Statistical Ratings Organizations at least once a year and make key findings public.
Disclosure: Requires Nationally Recognized Statistical Ratings Organizations to disclose their methodologies, their use of third parties for due diligence efforts, and their ratings track record.
Independent Information: Requires agencies to consider information in their ratings that comes to their attention from a source other than the organizations being rated if they find it credible.
Conflicts of Interest: Prohibits compliance officers from working on ratings, methodologies, or sales; installs a new requirement for NRSROs to conduct a one-year look-back review when an NRSRO employee goes to work for an obligor or underwriter of a security or money market instrument subject to a rating by that NRSRO; and mandates that a report to the SEC when certain employees of the NRSRO go to work for an entity that the NRSRO has rated in the previous twelve months.
Liability: Investors can bring private rights of action against ratings agencies for a knowing or reckless failure to conduct a reasonable investigation of the facts or to obtain analysis from an independent source. NRSROs will now be subject to “expert liability” with the nullification of Rule 436(g) which provides an exemption for credit ratings provided by NRSROs from being considered a part of the registration statement.
Right to Deregister: Gives the SEC the authority to deregister an agency for providing bad ratings over time.
Education: Requires ratings analysts to pass qualifying exams and have continuing education. Eliminates Many Statutory and Regulatory Requirements to Use NRSRO Ratings: Reduces over-reliance on ratings and encourages investors to conduct their own analysis.
Independent Boards: Requires at least half the members of NRSRO boards to be independent, with no financial stake in credit ratings.
Ends Shopping for Ratings: The SEC shall create a new mechanism to prevent issuers of asset backed-securities from picking the agency they think will give the highest rating, after conducting a study and after submission of the report to Congress.
It should come as no surprise that the ratings agencies do not like this aspect of the bill one bit. Fitch has gone so far as to notify its clients that they should not use its ratings “in prospectuses and registration statements at this time.” Here’s what Fitch sent out to its clients, as reported by Tara Perkins on Globe Investor:
“Immediately after the Dodd-Frank Bill is signed into law an issuer will need to obtain Fitch’s written consent to include a Fitch credit rating in a Securities Act registration statement and any related prospectuses.”
“Fitch will be potentially exposed to ‘expert’ liability under section 11 of the Securities Act, liability to which Fitch is not currently exposed. Fitch is not willing to take on such liability without a complete understanding of the ramifications of that liability to Fitch’s business and the means by which Fitch may be able to effectively mitigate the risks associated therewith. While Fitch will continue to publish credit ratings and research, given the potential consequences, Fitch cannot consent to including Fitch credit ratings in prospectuses and registration statements at this time.”
Fitch is not a fan of the new rules and, ironically, argues that it should not be considered an “expert” under the Securities Act “since ratings are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts.”
There’s more. The Dodd-Frank Act says that the SEC should remove the exemption for credit rating agencies from the Fair Disclosure Rule within 90 days of the enactment of the new law. That threatens to dramatically cut back the amount of information that rating agencies receive.
“The exemption for credit rating agencies from Regulation FD permits issuers to provide the credit rating agencies with material non-public information without requiring public disclosure of such information,” Fitch notes. “To the greatest extent possible, Fitch will work with the issuer community to put in place appropriate mechanisms so that Fitch can continue to receive confidential information as part of the rating process.”
Well, one thing I can say about this: In terms of news regulations, it’s not nothing.
My personal view as to the role of the ratings agencies has always leaned towards acknowledging that to great degree, they were manipulated by the bankers, Goldman Sachs and the rest. I understand that they were paid for their involvement, and that they didn’t do nearly enough to prevent the problems from occurring, but I think one also has to recognize that, compared with the bankers, the amounts the ratings agencies received represented nickels and dimes.
In addition, Wall Street’s bankers plainly took advantage of the ratings models, submitting securities in such a way as to exploit the holes they knew existed. So, all in all, while I think the ratings agencies were complicit in certain ways, I don’t think they should share equally in the blame, by any means.
Nonetheless, I’m encouraged by the inclusion of this new area of regulation, it’s obviously had its intended impact already, and regardless of who did what in the past, it seems that this is certainly a big step in the right direction at least as far as preventing future fraud as a result of improperly rated debt securities goes.
So, alrighty then… score one for our side.
Mandelman out.
And thanks to the blog, Naked Capitalism for bringing this to my attention. Naked Capitalism is a super smart and all-around terrific blog, by the way. It has many contributors, but is the home of Yves Smith, who is like one of the smartest people on the planet. She currently heads up Aurora Advisors, a New York-based management consulting firm that specializes in corporate finance. Her past gigs include Goldman Sachs and McKinsey & Co. and you don’t get a more impressive resume than that, and she’s a graduate of Harvard College and Harvard Business School… big surprise there.
(Actually, Yves… Harvard Business School? Really? What happened… back-up school? Why not Wharton? Harvard Business School is across the river from Harvard, and I mean that both literally and figuratively. You know what I mean, right Yves?)
The Senate Ethics Committee on Friday dismissed complaints against Democratic Sens. Chris Dodd (Conn.) and Kent Conrad (N.D.) over their participation in Countrywide Financial Corp.’s VIP lending program.
But the panel cautioned the senators that they should have “exercised more vigilance” in their dealings with the mortgage giant to avoid an appearance of preferential treatment.
Yeah right, like anyone in the Senate, especially the Senate “ethics” committee (isn’t that an oxymoron or something?) was going to find any wrongdoing by Mr. Chris “I’m a VIP” Dodd. The entire cesspool called the United States Senate should be cleared by voters this next go-round and we need to start fresh. I’d vote for your neighbor, really. They’d have a better understanding of the hard-working majority of this country than these buffoons we call politicians. Rat bastards.
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