Scot Paltrow | Focus: Mortgage-Lending Meltdown – The watchdogs that didn’t bark
Fraudclosure | Are FDIC loss-share lenders gouging us?
Unmistakably April Charney – A Mandelman Matters Podcast
If there was a Hall of Fame for the foreclosure crisis, and perhaps one day there will be, there is no question that attorney April Charney would be one of the first to be indoctrinated. She’s been fighting for the rights of homeowners for decades, and training other lawyers to do the same since 1994. Of course, the advent of securitization and the meltdown of our financial and credit markets, combined with the effects of our housing bubble, has caused an economic catastrophe not seen since the Great Depression of the 1930s, changed everything, but April has been right there on the front lines of the fight to keep people in their homes. I’d say she knows as much about securitization and what went so terribly wrong as anyone in the country, and she has a way of explaining it, so that judges… and anyone else for that matter can understand it.
April and I have gotten to be friends over the last couple of years, and I have an enormous amount of respect for her, both as a person and as a professional. She is someone that will not keep quiet… she will not back down… and she will never give up when fighting for what she knows to be right. She is one of the few people on the planet that I trust unconditionally. I may not always agree with every single position she takes, but whenever she tells me something, I always give it great consideration, because I know that she does not take positions without having done the same. In my view, April Charney is one of the lawyers in this country that reminds us that some attorneys should be revered by our society. If the foreclosure mill attorney David Stern had a polar opposite or arch nemesis… no question it would be April.
Okay, so there no reason for me to say anything more to introduce April, she really is someone that requires no introduction. She’s been quoted by the media countless times related to the foreclosure crisis, and anyone involved in representing homeowners at risk of foreclosure knows her name and what’s she’s accomplished for homeowners in Florida. And by the way, she’s also a good friend of Max Gardner’s, another hero of this crisis.
So, whether you’re a homeowner fighting to keep your home… or a lawyer who represents homeowners in foreclosure, here’s an opportunity to hear what April has to say about where we’ve been, where we are today, and where she thinks we might be tomorrow… it’s one solid hour of April at her candid best… you really don’t want to miss it.
Just click the play button below and turn up your speakers…
… it’s a Mandelman Matters Podcast
with Jacksonville Legal Aid Senior Attorney, April Charney…
Mandelman out.
Quotes of the day
Meltdown.
“Due to multiple threats made against Assistant Coach Mike McQueary, the University has decided it would be in the best interest of all for Assistant Coach McQueary not to be in attendance at Saturday’s Nebraska game.” *** “Penn State University students were warned by local police not to take to the streets on Saturday at [...]
A Must Read | The Collapse of Our Corrupt, Predatory, Pathological Financial System is Necessary and Positive
A Must Read | The Collapse of Our Corrupt, Predatory, Pathological Financial System is Necessary and Positive
A Must Read | The Collapse of Our Corrupt, Predatory, Pathological Financial System is Necessary and Positive
A Must Read | The Collapse of Our Corrupt, Predatory, Pathological Financial System is Necessary and Positive
A Must Read | The Collapse of Our Corrupt, Predatory, Pathological Financial System is Necessary and Positive
Our Protest Picture from A View From the Bench on Front Page of Daily Business Review
Video: Borderline insane — or totally facetious — meltdown from OWS protester
Crazy.
Really not sure what to make of this. I have a hard time believing this kid is serious — and his periodic smirk makes me wonder if his rant might not be a — to borrow a word from Rachel Maddow — “genius,” ironic, satiric, mocking, obnoxious, somewhat schizophrenic and absolutely over-the-top parody of the [...]
A memo to Europe on idled resources and the opportunity in meltdown
Europa, Europa.
Mark Steyn wrote over the weekend about the meltdown of the Eurozone and the impending “end of the world as we know it.” Although it’s football season, and there’s plenty of fun stuff to do, it’s worth taking the time to point out some things about this global collapse deal, one more time. First, the collapse of [...]
Meltdown: For first time, most Americans believe their own rep doesn’t deserve reelection
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 [...]
If You Think the Meltdown Was the Fault of Homeowners, Think Again…
If you’re thinking that our economic crisis was in some way the fault of homeowners who couldn’t afford their mortgages, please consider the following:
At the end of 2007, there were roughly $1.4 trillion in sub-prime mortgages in this country.
If “irresponsible sub-prime borrowers,” caused the meltdown, then $1.4 trillion would have solved the problem in its entirety, right? Because that’s all the sub-prime loans there were.
But, between the Federal Reserve, the FDIC and the Treasury over $13 trillion has been pumped into financial institutions to fix the “housing correction,” which is what Hank Paulson was still calling our economic collapse as of November of 2008.
At the end of 2008, there were $11.9 trillion worth of mortgages in this country. So, with $13 trillion, the government could have paid off every single one… and still had a little over a trillion dollars left over.
But there’s a lot more to the economic problem than that, explains Nomi Prins, my new favorite financial uber-genius and author of “It takes a Pillage.” Wall Street had been playing the leverage game… somewhat like they did in the 1920s, I suppose… but on mega-steroids. Leverage means borrowing on assets, and Wall Street banks were leveraged by 30:1, commercial banks by 10:1, not including their “off-the-balance-sheet” holdings, which could make their leverage ratio significantly higher in many cases.
So… in “Pillage,” Nomi Prins explains in terms anyone can understand that factoring in the leverage at 11:1, we’re looking at a $140 TRILLION economic problem… yes, you read that correctly… that’s trillion, with a ‘T’. Our Wall Street bankers, through the abuse of the securitization process and excessive amounts of leverage, created a potential tab of $140 TRILLION for the people of this country to pick up.
Securitization is the process of packaging loans into securities that are then be sold to investors, called Asset Backed Securities (or ABS). Inside a given ABS, you might find 10% real loans and 90% bonds backed by those real loans. Or there could be only 5% real loans. The mortgage payments we all make are used to make payments that flow through the securities and to the investors who then invest by buying pieces of the ABSs.
“It takes a Pillage” is a book that’s absolutely jam packed with “Aha!” and “OMG!” moments, but one shines above the rest… What caused the financial crisis were the securities, or the “bonds”… not the loans.
We’re talking about a system that took on $140 trillion in debt on the backs of just $1.4 trillion in real loans. And it may be much more than $140 trillion, we don’t really know because we’ve allowed the market to remain unregulated. The $1.4 trillion is based on leverage at 11:1. It could very well be some multiple of that amount.
Issuers of ABSs, who were Wall Street’s investment banks earned about $300 billion for packaging and selling these “assets,” packaging the CDOs we’ve all heard about paid the best. Who bought ABSs? European and the global banks, insurance companies, and pension plans bought a whole lot of them. And they bought them with borrowed money.
They bought them because Wall Street told them they were safe… triple A rated… and even better they could be insured with Credit Default Swaps, too! What was not to love?
Hundreds of trillions in “structured assets”, ABSs, MBSs, CDOs, CDOs Squared, and of course synthetic CDOs, which are entirely, made up of credit default swaps, all deriving their value based on $1.4 trillion in mortgages. All of those structured investments, once demand for them abruptly dried up, are what we came to know as “TOXIC ASSETS.”
Prins makes it very clear that toxic assets are not the same as defaulted sub-prime loans. The fact is, Nomi says, that every single sub-prime loan in the country could have defaulted and all of the homes attached to those loans devalued to zero… neither of which happened… and the banks in this country would not have become insolvent… not even close.
The toxic assets lost their value starting in the summer of 2007, not because sub-prime loans defaulted, but because no one wanted to buy them anymore. After Standard & Poors and Moody’s lowered their ratings on just 1% of the MBSs outstanding on July 10, 2007, investors no longer trusted the triple A ratings. If some bonds were improperly rated, the thinking went, what about all the others?
I’ve read just about every book on the meltdown that’s been published in the last two years. From “Too Big to Fail,” to more recently, “Crash of the Titans,” which is about Bank of America’s acquisition of Merrill Lynch, and “It takes a Pillage” filled in so many blanks for me I couldn’t possibly count them all. Nomi is a very down to earth person too, and it makes reading her easy like Sunday morning. She’s snarky at certain moments, but she delivers it straight most of the time so you won’t get distracted.
I read her book and was on the phone the following morning with my friend in New York, Danny Schechter, who produced the movie, “Plunder – The Crime of Our Time,” which is all about the housing meltdown and foreclosure crisis and if you haven’t see it yet, you really should order a copy on Amazon right away. Nomi appeared in Danny’s film a, so I knew he could put me in touch with her, and she responded to my email right away. (She’s even agreed to an interview, so look for a podcast coming soon, I hope.)
Nomi is smart… I mean scary smart. Like, I’ve always been considered smart too… near the top of my various classes, 1380 SAT scores about a hundred years ago, if that means anything, but Nomi is so far off the charts that I can’t even believe it. I don’t remember anyone like her in college or graduate school. Talking to her is like talking to a walking encyclopedia of the financial history of the United States… but one that speaks English like the rest of us.
By the summer of 2006, the housing bubble had popped. Greenspan had raised interest rates 17 times in a row by then. But, starting on that July day during the summer of 2007, before most people had any idea what was happening, the bond/credit markets froze solid as money stopped moving… banks started hoarding cash and soon no one would be able to get a mortgage or refinance one… and housing prices started to fall fast.
After that, anyone that had bought a home during the preceding years found himself or herself increasingly underwater. One couple I know, with an 850 credit score by the way, lost a home to foreclosure and filed for bankruptcy. He was a very successful dentist and she a hospital administrator. Their crime? They got caught buying a home… and selling one at the worst moment in US history.
So, our government pumped $13 trillion into banks, financial institutions and others in this country since the fall of 2008. We allowed just about any business that wanted to become a “Bank Holding Company,” so they could qualify for the federal bailout programs. (As an example, did you know that American Express Travel Services became a BHC in order to receive $4 billion in taxpayer dollars? Why? What do they do? Arrange vacations for rich people? Were “they too big to fail,” too? Nomi covers it in “Pillage.”)
And today, the only mortgage lending in this country comes from the federal government… Fannie Mae, Freddie Mac and the FHA. So, we’ve already nationalized mortgage lending in this country. We had no choice but to do that because if we didn’t, there would be no mortgage lending in this country. Citibank and Bank of America have been nationalized too… I know we don’t call them “nationalized,” but they ARE both nationalized.
(Citibank, for example, has been given over $400 billion in government loans and loan guarantees. BofA has been received over $200 billion. We still guarantee Goldman Sachs bonds… meaning we are co-signing for their debt. Want to see the numbers in detail, visit the “Reports” tab on NomiPrins.com… you won’t believe it.)
General Motors had to come to congress for a loan at the end of 2008… why? Well, for one thing, in 2008, they missed their forecasts by 2.4 million cars… we couldn’t finance one so we couldn’t buy one. And the bond market was broken, so they couldn’t issue bonds as they normal would. We lost tens of thousands of jobs when they filed bankruptcy.
Unemployment started rising as we stopped spending. And we entered a deflationary spiral… the same one we’re in today. There’s no double dip, it’s the same “dip. The reason they can say that the recession ended was because of the trillions we were pumping into the system. Among other programs, the fed bought $1.5 trillion in mortgage-backed securities between 2009 and 2010, but that’s over now, and the downturn is back in the game.
We’re just about at the end of QE2 now, and we don’t have any more stimulus money to artificially stimulate our economic situation… so things are already returning to their downward slide. Home values nationally have fallen 57 months in a row… and they’ve fallen faster and further than during the Great Depression.
The sooner we face the reality of the situation, the sooner we can start to rebuild our economy. All we’ve done so far is pump money into insolvent financial institutions, while we’ve let the American middle class sink into an abyss from which we will not recover in my lifetime… and I’m turning 50 on Friday of this week.
You see… all that government spending, as we like to call it… is really US… we ARE the government… it’s OUR money the government is spending. All those trillions are coming out of OUR pockets, and the pockets of our children and their children. And a few hundred billion has gone into the pockets of our bankers in the form of bonuses… and no one even seems to care.
And still, all that many people want to talk about is how some homeowner must have been living beyond their means and deserves to lose their home. Don’t bail out irresponsible sub-prime homeowners, right?
Ridiculous. We’ve been lied to. This isn’t a question of wanting the government to take care of everything… they are ready taking care of everything, except the people, America’s middle class. And we didn’t even ask for much… just a modified loan in order to remain in our homes. Because millions losing homes benefits no one.
You’re already paying for bonuses at Citibank, Goldman Sachs, and American Express Travel Related Services… and if you can stomach doing that, you can find it in your heart to be in favor of your neighbor getting his loan modified, if for no other reason, so that you don’t lose your own ass in the next few years. Because don’t kid yourself… none of us is getting out of this one unscathed.
The water is going down in the harbor, are we’re all going down with it. And as long as we have housing prices falling and no middle class spending going on in this country, we’ll have no recovery… except maybe the recovery that they talk about on T.V. but no one can feel. And how long do you think people are going to buy into that fairy tale being told by our politicians?
Arizona’s state senate passed a bill 28-2 that would have slowed the foreclosure and given people a chance to remain in their homes by forcing banks to follow the existing laws. Then the banking lobby made it disappear over weekend. Another similar amendment was to be proposed, but the banking lobby got that one too. And last week lobbyist at a meeting of the Arizona Mortgage Lending Association bragged about his success killing the bills I refer to. Bragged.
“It Takes a Pillage” makes it clear that we need to stop blaming our neighbors because he or she is struggling to keep the family home. Borrowers didn’t cause this crisis, bankers caused it… but the borrowers are losing their homes while bankers get bigger and bigger bonuses?
Since when is an outcome like that what this country is all about?
There are a lot of great books I wish everyone in this country would read. But, if you’ve already read other books about the meltdown, or even if you haven’t… whether it’s a starting place or one in a series, I can’t recommend reading “It Takes a Pillage” strongly enough.
What Nomi Prins has to tells us, needs to be heard.
I’ll go ahead and admit something. I’ve read it once all the way through, and dozens of times in sections… then I bought it on iTunes and I listen to it most nights as I fall asleep… I know… I’m weird… but it’s that good.
(There’s a link below to NOMI’S SITE and then you can get to Amazon from there… and it’s now available in paperback, so it’s only $11.53! For $11.53 you’ll be so much smarter about the meltdown, you’ll thank me.)
Mandelman out.
~~~
CLICK HERE TO VISIT: NomiPrins.com
AND THEN CLICK ON THE BOOK COVER TO GO TO AMAZON
AND ORDER YOUR COPY OF “IT TAKES A PILLAGE.”
~~~
IT TAKES A PILLAGE: AN EPIC TALE OF POWER, DECEIT AND UNTOLD TRILLIONS.
“No one takes Wall Street to task like Nomi Prins. But this book is far more than a pointed attack on how greed and bad regulation created a global economic meltdown-it also offers concrete prescriptions for how to prevent the next crisis. Let’s hope Washington is listening.”
James Ledbetter, Editor, The Big Money
“Nomi Prins has applied her unmatched expertise in Wall Street’s arcane methods of turning your money into their bonuses to mapping the recent crisis. In compelling, scathing prose, she shows how the key players escaped being brought to account, and kept their pet officials in power.”
John Dizard, The Financial Times
~~~
Some of Nomi’s Bio…
Before becoming a journalist, Nomi worked on Wall Street as a managing director at Goldman Sachs, and running the international analytics group at Bear Stearns in London.
Her writing has appeared in The New York Times, Fortune, Newsday, Mother Jones, The Daily Beast, Newsweek, Slate.com, The Guardian UK, The Nation, The American Prospect, Alternet, LaVanguardia, and other publications.
Nomi has appeared on numerous TV programs; internationally on BBC World, BBC and Russian TV, and nationally on CNN, CNBC, MSNBC, ABC, CSPAN, Democracy Now, Fox and PBS. She has been featured on hundreds of radio shows globally including for CNNRadio, Marketplace, Air America, NPR, regional Pacifica stations, New Zealand, BBC, and Canadian Programming.
Ice, Ice Baby – Iceland’s people give cold shoulder to paying for acts of reckless bankers.
Note to the reader… Just in case you’re not all that interested in Iceland, I would encourage you to remember that it’s me writing this, and therefore it might not be entirely about Iceland. Just a thought…
When Iceland’s online bank, Icesave, failed, the British government stepped in and covered $3.8 billion in deposits that its citizens were owed by the bank. The Dutch government did the same to the tune of another $1.8 billion. Iceland’s three largest banks collapsed as a result of the meltdown in the global financial markets and the result was that the country’s deposit-insurance, like our FDIC, was overwhelmed.
Now, the British and Dutch governments want their money back, but Iceland’s people are saying, well… no, not to put too fine a point on it. You might even say that the Icelanders are saying: “Hell no!”
The BBC is reporting that the British and Dutch governments say they’re disappointed that after over a year and a half trying to reach an agreement, their best offers continue to be rejected.
Most recently, Iceland’s President Olaf Ragnar Grimsson vetoed the latest repayment plan proposed by London, saying that the people along with the Althingi, the name of Iceland’s thousand-year-old Parliament, will decide this matter. The latest deal offered allows for repayment by 2046 at about a 3% APR, which many in Iceland say are egregious terms.
The country’s parliament voted for a referendum on the Icesave bill that is scheduled for March 6th, but the BBC’s story says that Iceland’s government hopes that a deal can be reached before that date, presumably because the people are expected to vote no… again.
Last time out, back in 2009, 93.2% of Iceland’s voters rejected the bill, and ‘yes’ votes came in third at only 2,599, because 6,744 voters turned in blank ballots. The Icelanders are not happy. Many blame the EU for failing to regulate the bank, and workers interviewed responded by saying things like, and I’m paraphrasing here… “Why should we have to pay for the reckless acts of a handful of greedy bankers?”
Mish Shedlock of Global Economic Analysis thinks it’s a darn fine question. He supports the people of Iceland and hopes they get the chance to tell the Brits and the Dutch to go pound sand. Mish’s position is simple to understand:
“Here’s the deal. When you make stupid investments, don’t expect to be bailed out. There is no reason the people of Iceland should have to pay for the stupidity of others.
If the UK and Dutch governments were dumb enough to guarantee those deposits, then the UK and Dutch governments should pay the price, not Icelandic citizens.”
Mish sees the “best offer” rhetoric coming out of London as being unbridled arrogance. He says that it’s Iceland that should be making the offer, not the Brits and the Dutch.
“It is up to Iceland to make its best offer not for the UK and Dutch governments to make demands of 100% repayment. Why should Iceland crucify its taxpayers with a “loan” when the correct procedure is a massive haircut?
Iceland should immediately counter with its “best offer” of one cent on the dollar. That will set the tone for reasonable expectations.”
It’s pretty clear that most Icelanders agree with Mish, taking the position they should not be penalized because their government has failed to rein in its spending… much less for the excesses of several of the country’s banks.
Across the EU, the majority of people just don’t want to have to pay for the acts of a relative few. And with Iceland’s unemployment still rising, there aren’t many who feel like they should have to pick up the tab for Icebank’s failure.
Icelanders aren’t too pleased with London for using anti-terrorist legislation to freeze the assets of Icelandic banks when the meltdown happened, and I must admit… that was not the most diplomatic of responses, all things considered.
The amounts owed represent about half a year’s economic output for the entire country, and Iceland’s economics minister, Gylfi Magnusson, has been quoted as saying:
“The magnitude of those payments are such that we would have little left for anything else”
And that’s unquestionably true. Can you even imagine the U.S. being offered a plan to repay a debt caused by the acts of our bankers and a failure of our regulators, that required us to repay an amount equal to one half of our country’s economic output for an entire year? Can you even imagine what that would be like here in this country? I shudder to think…
Hang on… maybe you don’t have to try to imagine such a scenario. Maybe you could just read Bloomberg from last June.
“U.S. Debt Poised To Exceed Annual Economic Output, Jun 4, 2010
President Barack Obama is poised to increase the U.S. debt to a level that exceeds the value of the nation’s annual economic output, a step toward what Bill Gross called a “debt super cycle.”
(The) U.S. gross domestic product and the government’s total debt, rose past $13 trillion for the first time this month. The amount owed will surpass GDP in 2012, based on forecasts by the International Monetary Fund.”
For anyone not already familiar, Bill Gross is the founder of PIMCO, the firm generally referred to as “the world’s largest bond holder,” so it’s fair to assume that he knows a fair amount about debt and where things are headed in that regard. Bonds, after all are debt, as opposed to stocks, which are equity.
At the end of last year, PIMCO called for the break-up of the EU. As reported by examiner.com:
“PIMCO the largest bondholder in the world called for a split in the Eurozone between the more productive North including Germany and the Netherlands, and the south incuding Portugal and Spain. Many analyst believe that Spain and Portugal are next in line to be targeted by bondholders and credit rating agencies.”
“The crisis in the Eurozone was fueled by property speculation and cheap credit, which came mainly from Germany.”
Well, all I can say is that it’s a good thing we’re not talking about the source of our problems here in the U.S.A. Because if we were having the same sorts of problems, well… I’d be pretty worried… hey, wait a minute… didn’t we have the same sorts of shenanigans going on here? I could have sworn…
The examiner.com story on PIMCO continues:
The bankers have cost the Irish government, which back their private losses, hundreds of billions of Euros that are equivalent to 100% of Irish GDP.
Unlike Ireland, Iceland did not guarantee private bank losses, and deflated its currency. Iceland has now emerged from recession, and forced bondholders to take losses on their bad bets.”
Okay, let’s get back to Iceland… before I start to itch uncontrollably…
The issue of whether Iceland will cover all of the debts of the failed Icesave Bank remaining unresolved is causing some related problems. For one thing, Iceland has applied to join the EU, and that application is on hold pending a resolution of the debt. And Iceland has also applied for loans from the International Monetary Fund (“IMF”) and that application is said to have stalled, even though the IMF says that the two things are unrelated and one should not be dependent on the other.
According to the BBC:
“An application for about $4.6bn in loans from the International Monetary Fund appears to have stalled. The IMF has said that the Icesave dispute should have no impact on the loans. But Britain and the Netherlands, along with Nordic countries, are thought to have made the loans conditional on Iceland repaying international debts.”
Well, that certainly makes things anything but clear for me, but this next part I had no trouble understanding:
“Rating agency Moody’s said recently that the deadlock may force it to downgrade Iceland’s debt to junk, making it even harder for the country to borrow much-needed funds on the international market.”
Now, that certainly doesn’t seem like it will help Iceland’s situation. I mean, if Moody’s downgrades Iceland’s credit rating, that will only increase the interest rate that the country is forced to pay if it wants to sell its bonds to investors.
But, at least Moody’s isn’t just slapping triple ‘A’ ratings on bonds anymore, they’ve corrected all those problems, right? They must have. I’m sure the ratings agencies, including Moody’s, are running much tighter ships than in the past.
What kind of bothers me is that just a few days ago, I was reading about a securitization of just under $300 million in mortgage-backed securities about to be offered to the public and Moody’s refused to rate it. Why? Earthquake risk. No, I’m not kidding… here’s the story on CNN/Money/Fortune:
Moody’s read the prospectus and calculated that at least 18% of the 303 mortgages in the pool are located in the San Francisco Metropolitan Statistical Area, a definition used to identify the Bay Area’s earthquake prone region. “If a major earthquake were to strike the San Francisco MSA,” writes Moody’s in a report embedded below, “the decline in the values of damaged properties, and the likelihood that borrowers could abandon properties whose value has plummeted, will likely result in either losses to senior certificate holders or deterioration of the credit quality of the certificates to junk status.”
So, maybe Moody’s isn’t just trying to pressure Iceland to agree to repay the British and Dutch governments for the failure on the Icesave Bank… maybe Moody’s is thinking of downgrading Iceland’s credit rating because they just found out that the country could have an earthquake sometime in the next thirty years.
I’ll tell you… it sure is reassuring to be able to count on the bond ratings agencies as being quality organizations that would never knee-jerk react to a crisis thus allowing the proverbial pendulum to swing too far in any one direction. Earthquakes, huh? Well, alrighty then…
So, as it said further on in the Bloomberg story, about the United States remember, published last June and referenced above:
“Over the long term, interest rates on (U.S.) government debt will likely have to rise to attract investors,” said Hiroki Shimazu, a market economist in Tokyo at Nikko Cordial Securities Inc. “That will be a big burden on the government and the people.”
Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co. in Newport Beach, California, said in his June Outlook report that “the debt super cycle trend” suggests U.S. economic growth won’t be enough to support the borrowings “if real interest rates were ever to go up instead of down.”
Conclusion…
I sure hope I didn’t jump around too much telling this story of Iceland… this was a story about Iceland, wasn’t it?
I certainly didn’t mean to imply that what’s happening in Iceland or in the EU has anything to do with our problems with debt here in the U.S. We’re on a much stronger course… we’re planning on borrowing our way out of our debt and then pumping the trillions raised directly into our banks.
Besides, I would never compare Iceland to this country… I mean, there are several key differences between there and here. For one thing, I’m almost positive that we don’t have nearly as much ice as Iceland does. I could be wrong about that, I live in Southern California, so what I know about ice you could put in a thimble.
Another key difference is that we don’t have a president who would turn down a repayment deal such that was offered to Iceland by the British and Dutch governments, saying that the people of the United States are going to decide the issue. No, over here, our government would be much more likely to agree to the deal without telling anyone, and hide the amounts owed somewhere on the un-auditable balance sheet of the Federal Reserve, or within the 3,000 page text of a future bill called something like the Americans for Economic Recovery Act of 2012.
There’s probably other differences too… like their names… we don’t have anyone named: Olaf Ragnar Grimsson, unless maybe its someone who is starring in “The Grinch Who Stole Christmas.”
Will the bond holders of Greece, Spain, Portugal, Ireland, and of course, Iceland… have to take a haircut and accept a lesser amount than what’s owed? I have no idea. I’m just relieved that what’s going on in those places has absolutely nothing to do with what the problems our country is likely to be facing in the future. Big relief, wouldn’t you say? Huge.
We don’t have to worry about that sort of thing because our banks are healthy, and we’re allowed to just borrow as much as we want to without consequence… forever and ever… Amen.
Isn’t that right, Mr. Geithner, Mr. Bernanke and Mr. Obama?
Mandelman out.
BREAKTHROUGH: Why Americans Are Allowing the Foreclosure Crisis to Continue
It’s coming up on two years since I started writing my blog, Mandelman Matters, and since those oh-so-humble beginnings back in late December of 2008, I’ve written and posted 375 in-depth articles focused on the political, economic, social and legal aspects of the financial and resulting foreclosure crises. And as I’ve said countless times before, although in hundreds of ways to avoid obvious repetition, both crises continue to drag our economy into a deep and prolonged recession as their combined impact destroys the accumulated wealth of all but America’s wealthiest citizens.
Those that have been reading my column since the early days, in many cases know me quite well by now. They know that I write in an effort to help homeowners better understand the global financial and credit crisis… so that they will know that what has happened to them was not their fault. It’s not the borrowers that caused this crisis… it’s the banks.
Our country’s economic crisis wasn’t the result of people buying homes they knew they couldn’t afford. In fact, considering everything that’s come to light over the last two years related to what our bankers did leading up to the meltdown, that sort of thinking at this point is just plain old idiotic.
I write because I want homeowners to know that, even though there’s quite a campaign being waged that’s intended to make them the irresponsible villains, they should not feel ashamed of their situations, afraid to speak out for fear of being judged harshly by others around them. Easier said than done, perhaps…
My readers also know that I vehemently detest what the banks have done, and continue to do to homeowners, treating them as if they were deserving of nothing but disdain and their homes to foreclosure. And they know that I hold my government directly responsible for this deteriorating state of affairs for our government has failed to do anything to improve the situation at every turn in the road. It’s our government that has unabashedly shoveled $12.2 trillion into the very banks that caused both the crisis and their own insolvency… while allocating just 1/1000th of that amount to helping homeowners and communities through foreclosure prevention efforts.
Most of my readers also know that I’ve spent a great deal of time, not only looking for and sharing meaningful answers when I find them, but also trying to motivate others to take up the cause and speak out to their elected representatives, urging them to do more to stop the foreclosure crisis. Because as long as it continues, and housing prices continue to fall, there can be no real recovery, and more and more homeowners will fall into the economic abyss.
The biggest challenge I’ve faced, has been the complexity of the situation that makes it impossible to influence anyone’s view through sound bites, and at the same time, those with only a cursory knowledge of the subject matter, the people I’d most like to influence, aren’t likely to read long, in-depth articles.
Still, I try to find entertaining ways to present complex subject matter, and I feel like I’ve been pretty successful getting people to read longer articles than they’re used to reading, and on topics they didn’t expect to be reading. I know, from the thousands of emails I receive regularly, that there are more than a few whose lives I’ve touched in meaningful ways. And even though I haven’t succeeded in many other ways as yet, that does in fact make it all worth it.
I remember the day the real crisis began… July 10, 2007… the day the music died, as it were. Moody’s and S&P had announced that they were downgrading the ratings on 1,032 bond offerings, and not just slightly, but by several grades. Two weeks later banks had stopped lending to each other. The Fed was forced to reverse its position announced just weeks before and it started pumping cash into emergency programs to keep liquidity from drying up. The availability of credit essentially dried up over night, starting on that summer day in 2007.
You see, up until that July 10th, all that was happening was that our housing bubble had started to deflate, largely due to the efforts of the Greenspan’s and then Bernanke’s Federal Reserve. By the summer of 2006, the Fed had raised interest rates 17 times in a row. As rates climbed, the market softened, homes stayed on the market longer than in the recent past, and prices began to slowly fall. Those that had been closest to the edge of the precipice when they bought their homes, many the victims of predatory lending practices, although certainly some their own worst enemies, fell in, their homes lost to foreclosure when they couldn’t make the rising payments on adjustable rate loans, and couldn’t refinance or sell as a result of falling prices, and tightening credit standards for mortgage loans.
All of that is what’s supposed to happen as a bubble deflates, but on July 10, 2007, the impact of the bubble’s deflation was rendered moot and everything fell off a cliff. Within a month following that July 10th announcement by Moody’s and S&P, no one could get a mortgage, no one could refinance one… homes stayed on the market until many were taken off the market… and prices started to fall fast.
By the end of 2007, we would all start hearing the surreal amounts of write-downs being taken by Merrill Lynch and Citibank… and the rest would soon join in. Before the following year would come to its end, Bear Stearns would be handed off to Jamie Dimon, CEO of JPMorgan Chase, essentially in the middle of the night… initially for just $2 a share, although the price was soon raised to $10 a share in deference to Bear’s shareholders. It seems that even Jamie Dimon thought $2 a share was too much raping and pillaging.
A lot of people don’t know this, but it was right after Bear Stearns went down in flames in the Spring of 2008, that Treasury Secretary Hank Paulson, horrified by having seen s glimpse of what was to come, used back channels to contact the Speaker of the House of Representatives, Nancy Pelosi, to talk to her about the situation and the potential need for help from the legislature. This contact by Secretary Paulson, although I never saw it reported by the media, was well documented by Phillip Swagel, Treasury’s Chief Economist during the last two years of the Bush Administration, in his white paper written for the Brookings Institute and published on March 9, 2009.
Swagel explains in his paper that Paulson was told not to come to Congress for help unless he could assure Congress that “a crisis was at the door”. It was the last year of an unpopular Republican president, and since 2006, the Democrats had taken control of the House. Congress simply wasn’t going to do anything to make the Bush Administration look good. Whatever problems Paulson wanted to talk about would have to wait for the next president… because whether a he or a she, would likely be a Democrat.
It was the first of many times, when politics would prevent us from dealing with the tsunami that was now unquestionably growing in its destructive power as hosing prices continued their precipitous fall. The foreclosure crisis, which had started a year earlier when higher rates started to have their intended effect, but shifted into a higher gear when the ratings agencies announced that they had been wrong about the ratings on 1,032 bonds, then quickly became a credit crisis as banks stopped lending even to each other.
And then it happened… I’m not sure of the date except to remember that it took me by complete surprise… what had been talked about in terms of bond ratings and a crisis in the credit markets all of a sudden was branded the “sub-prime crisis”. It was all going to be the fault of the borrowers… those “irresponsible sub-prime borrowers,” not to put too fine a point on it.
Irresponsible sub-prime borrowers? Yucky, who are they? Get them away from me. They sound like they have cooties, right?
Two things occurred to me right away:
- It’s wasn’t borrowers not making mortgage payments that was taking down the titans of Wall Street. Not a chance. There weren’t nearly enough of them, for one thing, the numbers just were not adding up. The banks had abused the system in so many ways that it would be impossible to count them all, and to lay the blame for such acts at the feet of borrowers was nothing more than disingenuous crap.
- Telling everyone that their neighbors were the source of the growing problem would divide the country to an even greater degree than it was already, and we were already acting pretty much like Jets and Sharks. When they figured out that it wasn’t irresponsible borrowers that had destroyed the global financial system, it would be too late. No one would support helping what they had been told we’re be “irresponsible sub-prime borrowers,” even if that was precisely what would be needed to stop the downward slide.
What they were saying about borrowers was just factually wrong. Not that there weren’t some number of speculators, and some number of people that had bought homes beyond they’re ability to pay for them, but with home prices falling and credit frozen solid you didn’t have to be “irresponsible” in order to soon have trouble paying for the home you bought during a giant housing bubble. No one had planned for what was about to come.
And, in point of fact, according to one of the country’s top real estate economist’s, Stan Liebowitz, professor of economics and director of the Center for the Analysis of Property Rights and Innovation in the management school at the University of Texas, Dallas, who conducted an exhaustive study of a database of some 34 million mortgages, sub-prime and prime loans had started defaulting at the same time.
There were more sub-prime defaults than prime, but that was only by definition. From reading Professor Liebowitz’s study, it became quite clear to me then that if you made any real estate decisions based on believing that the next 10 years would look at least something like the last 70… well, you were likely going to find yourself being called an irresponsible homeowner in the near future.
And the longer the free fall in housing prices was allowed to continue, the more company you’d have, because increasing numbers of foreclosures meant lower home values, which meant reduced consumer spending, which led to corporations laying offer workers, which would in turn fuel more foreclosures.
This fire that began when investors realized that they could no longer trust the ratings of the mortgage-backed securities that Wall Street bankers had been pedaling all over the world for the last several years, was now burning out of control.
We’d borrowed our way out of the last recessions, but that wasn’t going to be possible this time because without investors to supply the capital through their purchases of asset- and mortgage-backed securities, credit simply wasn’t going to be available this time around. And with the baby boomers marching faster and faster towards retirement age every year, we would soon no longer have 78 million boomers willing to spend their three trillion dollars in annual discretionary income, borrowing anytime and without a second thought.
There was never any doubt in my mind…. this one was going to hurt like the dickens, and for a long time. Most of my lifetime anyway, and at only 49 years old, that meant much of my then 13 year-old daughter’s as well. I felt that I had to try to do something to shorten the duration of what was to come… and I identified three areas on which I would concentrate my efforts: Education on what had happened in simple, entertaining terms. 2. Information and resources to get through the storm. 3. Actionable tools for moving beyond the crisis towards a secure future.
So, a full two years and 375 articles later, here we are. The foreclosure crisis continues to grow in intensity and spread geographically. The latest Zillow Report totaled the cost to American homeowners at over $9 trillion to-date. And there is nothing in place, or even known to be on the drawing board with even the smallest potential to solve the problems, and the president has been clear… no more help is coming.
But, as the flood of foreclosures continue unchecked, and the bill being sent to all American homeowners continues to rise by trillions each year, it seems that only a relative few even notice, let alone care. There are still people out there blaming the borrowers for buying homes they couldn’t afford, while the most devastating financial crisis the world has seen in at least 70 years, and perhaps ever, barely even makes the evening news most nights.
I mean specifically… how is it that anyone in this country is still on the side of the bankers? Haven’t we learned enough despicable things about these Wall Street types over the last couple of years? What more could we learn that would make them appear any worse? Perhaps were they also molesting children en masse.
We gave them trillions and they gave out hundreds of billions in bonuses… they went broke and we bailed them out and the very same year and they used the money to pay record bonuses. They made no apologies about it. We provided them with hundreds of billions in TARP funds and when we asked what they did with the money they said “none of your business,” and we said… “okay, sorry we bothered you.”
We wanted to pass some financial reforms so that they would have a harder time destroying the world next time, and they fought every proposed every single regulatory change tooth and nail. Regulate derivatives? No, we couldn’t possibly… it will ruin the economy. But didn’t derivatives like credit default swaps being unregulated play a major role in ruining things this last time? No, this last time was simply people buying homes they couldn’t afford. Really?
Right now, as I write this, in Providence, Rhode Island, there’s a bankruptcy court that has a new rule that mandates that there be a meaningful dialog between servicer and borrower to try to work things out before a foreclosure can go through. The bankruptcy judge has no right to force the servicer to modify, or to insist on the terms of a modification… just that the two parties talk about other possibilities before foreclosure and trustee sale of the property. And the banking lobby is strongly opposing the rule, as if to say… “Nooooo, you can’t make us talk to them… nooooo.”
A few months back, in New York, there was a bill that proposed to allow a homeowner to recoup legal fees in a foreclosure suit if the homeowner won the case… just like the banks were already allowed to do. The banks were already allowed to get their legal fees if they won, but the homeowners were not entitled to legal fees if they won, so this bill proposed to make that lopsided situation… I don’t know… fair? And the banking lobby spent tens of millions to block its passage, and then when it passed anyway, they kept on fighting to stop it from being signed by the governor. I mean… who does that? Are these guys opposed to handicapped bathrooms too?
We passed a bill about credit card reform in 2009… we wanted to limit the annual fees that could be charged by credit card companies. It passed, and there were fee limits imposed, but the banking lobby also removed any caps on interest rates. So, now we have a credit card with a 79.9% interest rate. Want to know how the bank chose the 79.9% figure? Well, they obviously decided that 89.9% would have been offensive.
Elizabeth Warren, a Harvard Law School professor and consumer advocate, who has studied issues affecting the middle class in this country for the last 30 years, had an idea that we should have a federal agency whose job it is to protect consumers. The president agreed and it was included in the financial reform bill. The banking lobby… led by the Republicans, by the way, vehemently opposed her appointment to the post, and demanded that the new agency report to the Federal Reserve Chairman.
As if even having one single person in government… one out of so many I couldn’t even count them… whose job is to protect consumers and it’s: Nooooooo. Because, I suppose, protecting consumers is dangerous to the economy?
And when they don’t have the paperwork required to foreclose what do they do… why forge it, of course. Isn’t that what we all do when we lose some important piece of paper? Of course it is. Why just this morning, I was home forging my daughter’s birth certificate, and after that I’m going to recreate my social security card. Luckily, although I’m not a notary, I stole one of those stamps they use from a notary’s office, so I’m all set there.
So, I’ve spent the last… I don’t know how long… asking myself the same question:
WHY? Why does it seem to be perfectly okay with the majority of Americans that foreclosures proceed as the banks see fit, even though it’s costing those same Americans trillions each year… and with all of the news of banking fraud now widely known… and after bailing out those same banks to the tune of $12.2 trillion… why is it perfectly okay with most folks that the foreclosure crisis continues and remains largely ignored if at all possible?
It makes no sense whatsoever. Unless… hang on… I may have something here. Actually, I’ve figured it out, and the answer was right in front of my face the whole time, but yet so hard to see.
It all started while I was watching CNN last week reporting Florida foreclosures. They had footage of people approaching a table to ask questions about applying for loan modifications and the like… and something struck me… I thought… wow, those people look like they’re really poor. I’m not talking about down on their luck, I’m talking about destitute. Even the kids looked like they had come straight out of a modern day Oliver Twist… as in “please Sir, can I have some more?”
Right away, my mind started thinking… those people look like they should never have bought homes in the first place… hey, wait a minute here. I went to my computer and started searching for imagery representing the foreclosure crisis and sure enough… a whole lot of very poor people… mostly minorities… African Americans and Hispanics… and a few “white guys” with ponytails and beards in ripped sweats with several dirty faced children clinging to his legs.
Now, please understand that I’m not saying anything bad about low-income people… I’ve been one before, and gotten to know quite a few over the years… and it’s no fun. Also, I’m not someone who cares at all what someone looks like or wears out to the store. I’m 49, so one more year and I figure I can wear socks with sandals pretty much anywhere I feel like it.
These were people who owned homes in Florida, however, and I’ve been to Florida on several occasions… and although there are certainly many economically disadvantaged neighborhoods throughout the state… not everyone is dirt poor there. But that’s sure what it looked like in the photos and video footage of the foreclosure crisis.
See, the thing is that I have readers from all over the United States, plenty in Florida… and since I write, some would say, lengthy articles, my readers tend to be smarter than average… often times way smarter than average. They may be struggling through this crisis, but everyone’s doing that, or lying about it. And I give out my email address and phone number and I encourage readers to call or write and they do all the time.
In fact, I had just gotten off the phone with a homeowner from Florida who wanted to talk to me about what was going on in loan modification land, and he was a dentist… last name “Anderson,” and it doesn’t get much whiter than a dentist named Anderson. Why wasn’t he shown as the face of the foreclosure crisis?
Oh my God, I said out loud but to myself… they’re reinforcing the image that the people losing homes shouldn’t have bought them in the first place. Empty homes with trash piled everywhere, graffiti on walls, tiny little box homes… this is supposed to be representative of who’s losing homes today? Like hell it is.
Then again… it occurred to me that the Anderson Family so rarely stops to pose for a photo-op in front of their Volvo before driving away from their foreclosed home for the last time.
From there I started thinking about the article I had posted just a few days earlier. It was about how much the meltdown in the housing market had cost American homeowners, and titled: Zillow: U.S. Homeowners to Lose $1.7 Trillion in 2006, Already $9 Trillion Lost Since 2006. And I realized that I hadn’t received a single email about the article… not even one. That’s weird, I thought. That article should have pissed someone off… at least a little bit anyway. But not a peep from readers about it.
I mean, if losing $9 trillion since 2006 doesn’t make every single homeowners in this country scream out: “STOP THE FORECLOSURES, DAMN IT!” then I just can’t imagine what ever would. I don’t care if you’re making your mortgage payments without any trouble at all, or whether you own your home free and clear… or if you’re a paycheck or two away from foreclosure… no matter how you slice it, you’re losing your ass and the end of those losses is nowhere in sight. How can you possibly want the foreclosures to continue… unless, of course…
I started asking people I ran into the following question, and I encourage you to do the same: Why is (insert bank name here) continuing to foreclose on so many homes?
Assuming the person you asked isn’t someone intimately involved in the foreclosure crisis, here’s the sentiment you’ll hear from the average person:
“Well, the banks are foreclosing because it’s in their financial best interests to do so. The people bought homes they couldn’t afford, and now the banks have the right to take them back and sell them to others. That’s just how it works. It’s unpleasant, and I’d rather not watch, so wake me when it’s over, okay?”
Well, well, well… do you see what’s happening there? These people that are acting as if there is no foreclosure crisis are actually making total sense… they should be ignoring the foreclosure crisis… if they believe that statement above, and when you ask around, you’ll find that they do.
If someone believes that the people losing homes should never been able to buy them in the first place, that there’s no way they can afford to keep them… and that the banks are foreclosing because it’s in their best financial interests to do so… then ignoring the foreclosure crisis is perfectly logical. It’s like the wounded gazelle that separates from the heard… the lion is going to eat it… it’s the natural order of things… but it’s unpleasant and I’d prefer not to watch… so wake me when its over.
And why wouldn’t people believe that banks are foreclosing because its in their own best financial interests? I mean, that’s what banks do, right? They act in their own financial best interests, right? That’s what they’ve always done in the past, right? Show-me-the-money-type-banks, right? Why would they possibly not be doing what’s in their own best financial interests?
Average American: Are you saying that banks are foreclosing when it’s NOT in their own best interests?
Mandelman: YES.
Average American: We are talking about banks, right?
Mandelman: WELL, NOT REALLY… NO.
Average American: Okay, now I’m confused.
Mandelman: TOTALLY UNDERSTANDABLE… AND YOU ARE NOT ALONE.
Here a bank, there a bank, everywhere a bank, bank…
So, you’re starting to see this pretty clearly, right? People are right to assume that the banks are foreclosing only when it’s in their financial best interests to do so… they’re also right to believe that otherwise the banks wouldn’t be doing what they’re doing.
But, those of us that live in the foreclosure crisis every day, me by writing about it pretty much seven days a week, and others by dealing with it as they work through the hell of getting a loan modified, or walking away from their home of many years, we all know that the banks we’re talking about are not really banks… at least not in the traditional sense of the word.
The banks that are rapid fire foreclosing today, and thus causing every homeowner in the nation to lose tens or even hundreds of thousands of dollars in equity are better thought of as “MORTGAGE SERVICERS”. And mortgage servicers are not the investors that own loans, they are the companies that print and mail out monthly statements, maybe answer payment questions, send out late notices, post fees and charges, and when necessary, they foreclose.
Foreclosures are always more profitable for servicers because the servicers get 25 basis points to service a prime loan (a quarter of one percent), 50 basis points to service a sub-prime loan (half a percent), but then 125 basis points to service a delinquent loan, say… over 60 days late.
Then, should the borrower continue not making his or her payments, the servicer starts the foreclosure process and in doing so gets to add on lots of miscellaneous fees and charges that must be paid, if not by the borrower who loses the home and walks away, then by the investor when the home is foreclosed and is either sold or held in inventory as an REO… there’s just no way the servicer doesn’t get paid for the fees and charges associated with foreclosure.
(A few months back, I had the opportunity to interview an ex-employee from Chase Home Servicing, and I wrote an article that a huge number of people have read, but if you haven’t you’re missing out on something special and it’s titled: Inside Chase and the Perfect Foreclosure.)
So, servicers always make more money by foreclosing, even though the investor who owns the loan, in many instances, would likely come out ahead financially by modifying the loan.
Make Room for Daddy…
Lewis Ranieri is often referred to as the “father” of the securitized mortgage market. During the 1980s, while he was vice chairman of Salomon Brothers Inc. he was responsible for capital markets becoming a source of funds for financing residential and commercial real estate purchases.
Most recently, Ranieri founded Hyperion Private Equity Funds, but he also serves as Chairman, CEO and President of Ranieri & Co. Inc., Chairman of American Financial Realty Trust, Capital Lease Funding Inc., Computer Associates International Inc., Franklin Bank Corp. and Root Markets Inc. He was inducted into the National Housing Hall of Fame and a recipient of a lifetime achievement award given by the Fixed Income Analysts Society Inc. Oh, and he’s Chairman of the Board of the American Ballet Theatre.
There is probably no one on the planet that knows more about securitizing pools of mortgages for single-family residences than Ranieri does, because he is the guy who brought it all together in a private sector, for profit environment, making the dream of homeownership one that could be realized on a scale never before possible. And perhaps more so than anyone else, Ranieri knows what he’s talking about when he discusses how to handle securitized mortgages during a housing crisis. Read his words carefully…
“You are almost always better off restructuring a loan in a crisis with a borrower than going to a foreclosure.
In the past that was never at issue because the loan was always in the hands of someone acting as a fiduciary. The bank, or someone like a bank owned them, and they always exercised their best judgment and their interest. The problem now with the size of securitization and so many loans are not in the hands of a portfolio lender but in a security where structurally nobody is acting as the fiduciary.
And part of our dilemma here is “who is going to make the decision on how to restructure around a credible borrower and is anybody paying that person to make that decision?” And what we need here is financial innovation in the first instance because you can’t do this loan by loan, you are going to have to scale this up to a bigger level and we are going to … have to cut the Gordian knot of the securitization of these loans…
… because otherwise if we keep letting these things go into foreclosure it’s a feedback loop where it will ultimately crush the consumer economy.”
Will it really? Do you think so, Mr. Ranieri? My gosh, I had no idea something like that might happen. A feedback loop that will “ultimately crush the consumer economy?” That sounds really scary.
I am so glad we checked with you on this issue… and that you said what you just said… at the Miliken Institute Global Conference… that was held BACK ON APRIL 24, 2006!
Because…
… otherwise when Wall Street’s bankers one day cause the credit markets to freeze solid as a result of their fraudulent packaging of mortgage-backed securities and collateralized debt obligations which they sold as triple A rated bonds to pension plans and sovereign wealth funds all over the world…
… all because they were betting against them using entirely unregulated credit default swaps issued by insurance companies not required to hold reserves for paying claims…
… otherwise we might have STUPIDLY STARTED BLAMING BORROWERS and then allowed the housing markets to go into a free fall that would WIPE OUT THE AMERICAN MIDDLE CLASS, while we tried to prop up insolvent banks by pumping trillions of tax-payer dollars into them hoping against hope for our real estate markets to stabilize so that the toxic assets would magically turn non-toxic once again.
Whew… well we sure dodged a major bullet by talking to you back in 2006, and gaining an understanding of what servicers were all about. Thank God we headed off that disaster…
OH WAIT A MINUTE… YOU MEAN I WASN’T DREAMING ALL OF THIS… YOU MEAN WE ACTUALLY DID KEEP LETTING THINGS GO INTO FORECLOSURE THUS CREATING A FEEDBACK LOOP THAT DID ULTIMATELY CRUSH AMERICA’S CONSUMER ECONOMY?
Noooooooooooo… We couldn’t be that stupid, could we? We ran about blaming borrowers for doing things they could never have even gotten near, let alone understood… we allowed our society to focus on punishing people we called “irresponsible” when in reality they were swept under by forces way beyond their control… instead of going after the bankers that were in fact the proximate cause of our economic collapse?
So, you see what’s happening here, right?
More than half of our country doesn’t care about the foreclosure crisis because to them, it’s just bankers acting in their own best interests by foreclosing on homes that borrowers irresponsibly bought knowing they couldn’t afford them. It’s therefore the natural order of things, so to them, even though it’s already cost American homeowners $9 trillion and will soon wipe them out along with everyone else… it can’t be stopped, so they might as well not pay attention to the unpleasantness. And please… wake me when it’s over.
But these individuals are wrong about their most basic assumption: what they think are banks aren’t actually banks… their mortgage companies that service loans, today widely just called “servicers”. I wonder if Mr. Ranieri had anything to say back in 2006 about mortgage servicers specifically?
Oh, and wouldn’t you know it? He did…
“Many mortgage (servicers) are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.
Even when borrowers stop paying, mortgage companies that SERVICE the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage SERVICING companies to extract revenue — fees for insurance, appraisals, title searches and legal services.”
Wow… I wonder how the average American homeowner would think and feel about the foreclosure crisis continuing if he and she understood what Mr. Ranieri just said about mortgage servicer incentives. Would they still feel the same way about foreclosures being allowed to go on unchecked… with no program anywhere in sight that might even partially stem the tide?
What if they knew that it wasn’t a case of banks foreclosing to protect their own best interests, but rather it’s servicers foreclosing merely in an effort to pump fees out of a transaction that is costing them their home’s equity? Would they still be okay with what’s happening today, still ignore the crisis threatening their financial futures?
Break on through to the other side…
So, after two years and 375 in-depth articles on the political, economic, social and legal aspects of the financial and foreclosure crises, after countless hours spent carefully analyzing the factors preventing homeowners from having a voice that could be heard over the vociferous din of Washington D.C. lobbyists, I have finally had a breakthrough moment. I now know what needs be done and I’m going to lead the charge to get it done. If you’re a reader of Mandelman Matters for some time now… you’ve read along as I’ve figured this out.
Do you see what I now see? And will you help me do what’s necessary to change the national dialog that’s facilitating the total destruction of our consumer economy? Because I hope you see that there is no time to lose. Very soon we will have reached the point beyond which there will be no coming back… at least not in my lifetime. We’re not there yet, but you feel the path we’re on accelerating downward, can’t you? It’s a race to the bottom where many of us will stay indefinitely.
Our government is simply wrong in how they are handling the crisis. The most straightforward and incontrovertible evidence of this can be seen in the numbers… we put $12.2 trillion into banks and other corporations to-date… and yet only 1/1000th of that amount into stopping the housing meltdown and foreclosure crisis. There is no plausible justification for that sort of imbalance in allocating resources toward our economic recovery… none whatsoever.
We need to do two things:
OBJECTIVE #1: Destroy the factually incorrect widespread belief that banks are foreclosing because they are doing so in their own best financial interest, and therefore cannot and should not be stopped from doing so.
WHY? Because it couldn’t be further from the truth. Because it’s not an accurate understanding of what’s happening today. Because it’s tearing apart the fabric of our country, and cutting scars that may never heal. And because it’s costing every American homeowner so much that unless it’s contained, few among us will be able to expect a secure financial future.
KEY MESSAGING: What we’re witnessing today is nothing more than a petty grab for fees and charges by mortgage servicers, without consideration for the actual investors, and at a cost, already well over $9 trillion dollars, that is being paid by our country’s working middle class. Do what’s in the best interests of the investors, not the servicers… modify loans instead of foreclosing. Do what’s better for the investor… better for the borrower… better for our economy… better for our society… better for our communities… and even better for our banks.
HOW?
Create an action plan that maps out the steps involved in changing America’s view of the foreclosure crisis by shattering the misconception that servicers make decisions in the best interests of investors.
Start recruiting others much smarter than me to help pull together the data needed to create a presentation of incontrovertible facts about servicers and foreclosures. Distribute the facts in presentation formats so others can help to spread the facts.
Bring together the bloggers, journalists, and like-minded politicians around the mission of delivering signed petitions to Congress and the key messages to all Americans.
OBJECTIVE #2: Change the face of the foreclosure crisis from that of the very low-income and largely minority homeowner to a balanced depiction of Americans at risk of losing homes, or those that have already endured the tragedy of losing a home to foreclosure, so that the idea that foreclosures are only happening to those that never should have bought homes to begin with can finally be buried under the truth.
I will begin immediately looking for homeowners to interview on camera for inclusion into a thirty-minute DVD titled: Faces of the Foreclosure Crisis. I have already discussed several powerful distribution channels with others, in addition to the Internet. I you want to be interviewed or talk with me about it, first email me @ mandelman@mac.comn
WHY? Because there aren’t many people in this country at risk of foreclosure today, that went out and bought a home they knew they couldn’t afford. And because foreclosures don’t discriminate and their not the exclusive purview of the working poor.
CONCLUSION…
Over the last two years, I’ve tried to attack the misperceptions about the foreclosure crisis by writing about hundreds of topics in order to educate and motivate America’s homeowners to stand together and speak out. Now it’s time to focus on the two key areas that have combined to paint such a distorted picture that millions of Americans, like the frog that’s set into a pot of cool water and then slowly boiled, today don’t even oppose that which is causing them such significant harm every day.
Drill baby drill…
We’ll create the message and pull together the facts… then we’ll reinforce those facts until the old ideas sound as absurd as they are.
We can do this together… we can change the inaccurate view to a more correct one, and as we build momentum, we’ll see people change… because we’re right, and right always prevails. No one should be comfortable turning his or her back on this country’s foreclosure crisis, because it is like turning one’s back to the ocean… you never know when that next set wave will crash into you from behind.
Two years ago there were days that I felt like the Maytag Repairman, often lonely in my view of the crisis and where we were headed. Of course, there were a few others that came before me, but there are many more today than there were only yesterday. My call to other bloggers is as simple as it is urgent: Let’s arm American homeowners with the facts that they can use to overcome the feelings of shame and force others to confront the truth of the crisis.
Because with so much being lost, someone should be winning. But as we sit here today, that’s not the case… there are no winners. And there won’t be until all homeowners in this country start demanding that the rape of America’s middle class cease and desist, which can start as soon as we break the paradigms that are wrong, and start looking for win-wins… instead of lose-loses.
So, I guess it’s Mandelman’s March… In the best interests of America’s Homeowners…
(BTW… Blogger, Rortybomb, has a lot more of what Ranieri said at the conference, and his is a great blog besides. You might also want to check out his take on strategic defaults, not as colorful as mine, perhaps, but the guys is obviously wicked smart.)
Howie Hubler’s Loan Value Group… Proof That Wall Street Has No Idea What’s Happening on Main Street
Okay homeowners… want to hear about one of the dumbest ideas I’ve ever heard as related to the housing meltdown? I mean stupid-on-steroids? An idea that’s supposed to stop people from walking away from underwater mortgages, brought to Wall Street by the guy who as a bond trader during the bubble cost Morgan Stanley $9 billion… this one you’re not going to believe.
It’s also proof positive that the guys on Wall Street have lost it… or never had it… but it makes clear that the sum total of what they know about living in America today you could put in a thimble and still have room for your finger tip.
Some guy named, and I am not making this up, “Howie” Hubler, who the Wall Street Journal says is a “former mortgage trader who was blamed for a big Wall Street loss three years ago,” has a new venture that the WSJ says is “placing a new bet on housing”.
Hold on a sec… I need a beer… this is too good to rush through. I just realized who Howie Hubler is, and how the whole meltdown thing really happened… it was the clown-like-men with names like “Howie”. One sec… I’ll be right back…
Okay… ahhhh… pear hard cider… that’s good and cold… my favorite lately… okay, are you ready? Here goes…
Want to know who Howie Hubler is? Did you read Michael Lewis’ book, “The Big Short,” because if you did, you might remember Lewis mentioning a bond trader at Morgan Stanley that lost the investment bank $9 BILLION… more than any single trader in the history of The Street. Lewis didn’t mention Howie’s name in his book, but thank goodness “60 Minutes” found him and put him on the show… his name… Howie Hubler.
Here’s how Lewis described Howie in his best-selling book:
“A former Montclair State College football player, he’s loud, headstrong and bullying, the type to react to any intellectual criticism of his trades by telling the critic to get the hell out of his face.”
(Sounds charming… If there’s an argument for forced sterilization, I’m thinking I may have just found it. Actually, I better be careful, Howie may want to kick my ass after school tomorrow… nah… I’m never that lucky.)
Well, Howie has apparently bounced back from his $9 billion trading loss at Morgan, and he’s had another idea. He’s started a company called Loan Value Group, whose purpose is to offer a way for banks to guard against the risk that more homeowners will decide to walk away from underwater mortgages… or in today’s parlance, “strategically default”.
Howie calls his company’s breakthrough new product the “Responsible Homeowner Reward,” and according to the WSJ, “it essentially pays borrowers a small amount of money in exchange for staying current on their loan.” The company is even filing for a patent on their innovative, yet entirely mindless process. According to the Loan Value Group’s Website:
“LVG has created a patent-pending, turnkey solution to incentivize mortgage borrowers to make consistent and timely payments.”
Excuse me? Come again? I could not possibly have heard that right. There must be something wrong with my hearing aid. No wait… I don’t wear a hearing aid, and besides, I’m reading this, so why would it matter if I did… which I don’t. Never mind, let’s keep going.
Now, there’s no reason for me to paraphrase, I want to be word-for-word accurate here, so here’s what the WSJ had to say when describing Howie’s company and its new offering:
“Here’s how the program works: when an investor signs up, they decide how to structure and size a “reward” for the borrower. As long as borrowers make their loan payments, their reward will grow up to a certain amount. Usually, the reward, which could average 10% of the loan balance, can only be claimed when the loan is paid off.”
“While the size of the reward probably won’t give borrowers positive equity, it’s designed to change their attitude towards paying an underwater loan: it gives them something to lose (besides the underwater house).”
“Loan Value Group is trying to take aim at one of the biggest unresolved problems in housing: Nearly 23% of all homeowners with a mortgage, or around 11 million borrowers, are underwater. The company is betting that more homeowners in hard-hit markets will begin to reconsider whether it makes sense to pay the mortgage—and that banks are going to take action to guard against that risk.”
Apparently, that worry is spreading, and the bankers and investors are more than nervous about the whole thing. It’s funny too, because whenever the Wall Street crowd talks about future foreclosures, and I’m talking about numbers like 10 million or more future foreclosures, it’s the more the merrier… let’s get at ‘em without delay. But, bring up the issue of strategic default, which after all is just another foreclosure to throw on top of the 10 million more that are essentially imminent, these guys start to itch like someone who forgot to bring mosquito repellent to Minnesota in the summer.
Just a few months ago, the spectacular failure that is Fannie Mae started warning homeowners that they would be imposing stiff penalties on borrowers who decide to walk away from their underwater mortgages. And the federal government has rolled out yet another program designed to help refinance underwater homeowners that are current on their loans, have very high credit scores, but have not yet refinanced their mortgages, even though rates have consistently been lower than they have been in like 50 years for as long as I can remember.
(In related breaking news… Mandelman Matters has learned that all of the 37 people in this country that fit this description are said to be eying the program closely, although two have reportedly lost jobs, one missed a VISA payment due date by 11 days, thus rendering himself ineligible for the program, and a fourth decided to strategically default now just because they thought it would be fun.)
Dear Lord, I do hope at least 30 of the people that have a shot at qualifying for this program get the help they so desperately need and richly deserve. I can’t stand the thought of having to write about another failed attempt by the Obama administration having to do with the housing market. As it is, it’s starting to feel like beating up on the kid at summer camp who wore a cape, never washed his hair, and somehow managed to contract poison ivy every time he was outdoors for more than a minute or two.
I’ll tell you what… whenever there’s a non-issue, the Obama administration or Wall Street steps up to address whatever isn’t a problem introducing programs that have about the same potential to succeed, as my stationary exercise bike has of winning the Tour de France.
So far, according to the WSJ, three hedge funds have signed up to offer the “Responsible Homeowner Reward” program, and two of those firms have expanded their use of the program since their initial foray into pointlessness. Loan Value’s Website says it has offered $107,393,922 in rewards on loans on behalf of the three participating investors.
As quoted in the WSJ story…
“The cost of doing it is significantly less than the cost of a few defaults,” said one distressed loan investor that began using the product on performing loans earlier this year.
Look I’m sorry to have to come off this way, but are these people completely stupid, or am I not understanding something here?
So, let’s see… my $600,000 mortgage is $300,000 underwater, but I’m making my payments no problem, and I have a bitchin’ credit score to show for it. If I’ll continue making my payments until I pay off the loan, these guys want to offer me a reward amounting to 10% of my mortgage balance, in this case $60,000. I’ll be paying $300,000 (plus interest) more than I have to were I to buy the house today, but once I pay off my 30-year mortgage I’ll get $60k? Whew, well that’s certainly a relief… only 26 more years to go and I’m all lined up to receive that $60k reward.
The man, the myth… Howie Hubler!
And, the best part is that the Loan Value Group won’t even charge me for participating in the program, it’s free! All I have to do in this example is pay off $300,000 worth of air. Is that about right? Such a deal. And some people say that Wall Streeters are incapable of selfless generosity.
Okay, so that’s supposed to accomplish what, exactly? I’m being serious here… someone write in and tell me that the geniuses that came up with this idea were not taking really loopy drugs at the time… because I just don’t see it. Will it stop strategic defaults? Don’t be silly, no. Not even one of them. Can you dig what I’m saying here?
Here’s what Loan Value Group’s Website says about why people default on their mortgages:
- Once home equity becomes hopelessly negative, it is no longer in the borrower’s interest to continue paying, even if he or she can afford the payments. Some of these borrowers then default.
- Today, 29% of all US mortgages, 15 million homes, have negative equity.
- Analysis suggests that over 10 million mortgages are at significant risk of strategic default.
Boy, I’d love to take a look at that “analysis” that “suggests that over 10 million mortgages are at significant risk of strategic default,” mostly because that analysis would also have to simultaneously suggest that far fewer people are at risk of foreclosure because they can’t afford their mortgages, which is what President Obama has said is stopping him from offering more help to stabilizing the housing market.
Now, as many of my readers I’m sure know, I’ve spent the last 18 months talking with literally thousands of homeowners from just about all 50 states, and I’m talking seven days a week, with days so long they’ve too often seen me going to bed as the sun comes up. Suffice it to say, I’ve heard and read just about every take on the foreclosure crisis that could be taken. There’s only one thing I have never heard a homeowner say about their primary residence:
Yes, we can afford the payment no problem, but we decided to bail out anyway just because of our negative equity position. Yep, that was it… we just couldn’t sleep at night knowing that we’re underwater.
In fact, to the contrary… I’ve heard from countless homeowners willing to stay in their homes indefinitely if they could just get some sort of modification that will allow them to do so… regardless of how far underwater they are today.
Yet, in stark contrast to my real life experiences talking with homeowners, there is a fast growing story that tells a tale of homeowners simply walking out of their homes and refusing to pay their mortgages… even though they can afford the payments… ostensibly because they’ve pulled out their trusty HP financial calculators and determined, I suppose using some sort of time value of money-net present value calculation as compared with close substitutes and detailed alternative cost analyses, that their financial interests would be better served strategically defaulting. So ultimately, as the story goes, they are moving out, leaving their otherwise affordable mortgage debt behind them, either because they reside in a state that doesn’t allow for deficiency judgements, or via filing for bankruptcy.
NONSENSE. Not a chance. It’s simply not happening… yet, anyway. It may happen en masse at some point in the future, and perhaps it should be happening in larger number today, but to-date… sorry, no… it’s not true.
Here’s how the situation breaks down today:
1. Most homeowners are still clinging to the idea that the economy and housing markets will recover at some point in the reasonably near future. Two years ago, the preponderance of homeowners would have said 2-3 years was a reasonable possibility, today that same group would say maybe 5 years, they think… maybe seven or eight… and they’d be perfectly content to stay where they are and wait it out until then.
Sure, as time passes more and more are starting to suspect that what’s happened may lead to housing prices that never “recover,” but rather once a bottom is reached, appreciate only slowly and over many years, as in decades. But, essentially all of the homeowners I speak with today still find this idea almost impossible to accept, no matter how much they try to accept it.
I’m certain that there will come a time when the ability to accept the severity and permanent nature of the changes to our economy will be met with much less internal resistance. Perhaps then strategic defaults will be popping like popcorn, but we’re not there yet, and until we are we won’t see people walking away simply because of negative equity, because for that to be the driver, you have to have abandoned the prospect of any sort of rebound anytime soon.
I’ve seen and studied the same sort of behavioral pattern following the dot-com crash that began in April of 2000, and last year authored an article In June, Newsweek was still talking about a stock market bounce by year’s end. A year later, many or even most people were still holding onto their technology growth funds, even though they were decimated and certain to remain so for the indefinite future. Two years later, I still had an otherwise “smart” friend holding onto shares in Cisco Systems at $84, when the stock had barely been able to hold onto double digits for two years.
It wasn’t until 2-3 years had passed that we, as a society, finally moved beyond the idea that our technology investments weren’t going to lead us to an early retirement, and it might very well have taken even longer, had we all not decided that it was real estate that would deliver the riches we sought. After all, the logic dictated that houses could never drop to a value of zero, as so many of our dot-com stocks did in the end.
This same sort of delay in accepting the nature of the changes to our economic condition occurred during the early years of the 1930’s. In 1930, the markets were said to be on their way to recovery by year’s end. In 1931, it was a “great time to buy” and would prove to be how great fortunes would be made.
It wasn’t until 1932, when the Pecora Investigation, as it would come to be known, exposed the bankers as the cause of the 1929 crash, which had thrown the economy into a depression from which it was refusing to recover. When the attorney in charge of the Senate investigation, Ferdinand Pecora, put Wall Street’s bankers on the witness stand, including most notably the CEOs of Goldman Sachs, and National City Bank, the predecessor to today’s Citibank, the bank president’s were in many cases forced to resign.
Pecora’s investigation shined a light on the wide range of abusive practices in which banks and bank affiliates had been involved, including rampant instances involving conflicts of interest, such as underwriting unsound securities in order to pay off bad bank loans, and “pool operations” to support the prices of bank stocks.
When J.P. Morgan admitted during Pecora’s cross-examination that several of his partners had paid no income tax in 1930 and 1931, the public had heard enough. The Glass-Steagall Act, which separated investment and commercial banking was passed into law the following year.
2. Moving is a pain in the neck, especially with very limited funds, little or no access to credit, and a 500 FICO score… to say nothing of the two dogs and a cat that likes to scratch floor boards.
Oh sure, having money in the bank or a Visa card with $10k available credit does make the equation significantly better, but don’t kid yourself… the idea that you’re going to move out of your house and rent the one across the street for less than you were paying on your mortgage is a happily-ever-after type tale. The reality is quite different and it’s never one that’s fun or easy.
3. People that are “strategically defaulting” today all have money problems that are driving their decisions to walk away, it’s not their negative equity. And no one in this group owns an HP financial calculator, or let’s at least say that no one is using one for the purpose of making the decision to walk away from their mortgage.
These are the same people who bought homes using questionable loans at least as far as risk management goes. They took chances and with irrational exuberance bet their farms to buy or refinance their homes. Does it make any sense that these same individuals are now conducting sophisticated financial analyses in order to determine their optimal course of action? Obviously, I would argue that it does not.
People said to be strategically defaulting today are doing so because they can’t truly afford their mortgages… period. They’re not capable of making their payments comfortably but so terribly annoyed by being underwater that they are motivated to destroy their credit and uproot their families. Maybe it will someday, but it isn’t what’s happening today, no matter how much our bankers want us to believe that it’s the case.
The WSJ story quoted a guy by the name of Daniel Alpert, the managing director at Westwood Capital, a company that buys distressed loans and then presumably attempts to shake down the borrower using just about any means necessary, safe in the knowledge that the courts probably won’t do anything to punish them because, after all, the borrower didn’t pay his or her agreed to payment. It seems that, as a practical matter, too many judges view whatever happens to borrowers after they’ve defaulted on loans as bordering on irrelevant.
Daniel wasn’t all that thrilled with Loan Value Group’s responsibility reward, basically saying that it had a long road to hoe at best. In his own words:
“In our experience, giving people cash incentives to do the right thing doesn’t really play out as powerfully as the incentive of a principal adjustment, if they agree to a new payment and make it.”
I wonder if Daniel has some data that proves out his theory about principal reductions, or whether he’s just talking out of his hindquarters? Actually, no I don’t.
Now, here’s what the WSJ story says about the rationale behind the new product:
“… Loan Value Group sees an opportunity because many investors are reluctant to take that drastic step and write down loan balances, especially for borrowers that are current on their loans. Principal reduction is expensive and can be tricky to implement.”
OKAY, REF… I’D LIKE TO CALL FOR A TIME OUT…
Go back and re-read that pair of sentences just above. Investors are “reluctant” to reduce balances on loans that are current and being paid as agreed, because if they weren’t “reluctant,” they’d just write down the principal balance on every loan they hold and that would be way past stupid. And, as to principal reduction being “expensive” and “tricky” to implement, well… oh, what can I say that won’t sound bitter and angry? Hmmm… I guess nothing.
Principal reductions aren’t “granted by the bank,” they’re the result of market forces and in this case, by “market forces” I mean massive fraud on the part of the banks.
What I mean to say is that if the bank holds your $500,000 mortgage, but the property is now worth $250,000, half the amount of your mortgage, then someone is getting a principal reduction if you walk away, and the bank will be writing down the value of the loan, assuming of course, that banks one day will have to return to following at least some of the generally accepted accounting principals. So, it might be the bank or perhaps a new owner of the property, but the value of that loan’s security just got cut in half.
ONE INTERESTING THING…
Although I can’t imagine why, the WSJ story compares Howie’s new reward program to a loan modification, but, the program proclaims proudly, without the ubiquitous resistance from servicers, which is due to the company’s refusal to work with servicers! That’s at least interesting, don’t you think? It’s like an acknowledgement from a Wall Street insider that servicers ARE in fact the problem when it comes to loan modifications. The company says it deals directly with the borrower on behalf of the investor, servicers be damned.
I guess you could look at Loan Value Group’s responsibility reward like a loan modification for people who don’t have cash flow problems. Like… it would be prefect for a publicly traded homeowner. You’ll get your modification reward but in 26 years, assuming everything goes well on your end.
And this is why I say that Wall Streeters are hopelessly and incomprehensibly out of touch with the real America… the America I live in.
The truth is, I don’t know anyone that wouldn’t laugh at this deal. Most of the folks I know that are trying to get their loans modified aren’t really interested in waiting 28 weeks, let alone 28 years. Just the fact that Howie thought of this program and then others bought into the idea is indicative of what’s wrong in this country today, and why we are unable to understand, let alone solve the foreclosure crisis.
I wonder how the call from Loan Value Group to a homeowner would go. Let’s listen in… it’s a crisp Sunday afternoon in November when the phone rings at the McHenry residence…
Howie: “Hello, is this Mr. McHenry?”
Homeowner: “It sure is. Who’s calling?”
Howie: “Oh good… well my name is Howie Hubler and I’m representing the investor that holds your mortgage. I see that you’ve been making your mortgage payments on time and as agreed and I’m calling to thank you for being such a wonderful customer.”
Homeowner: “Well, aren’t you nice for saying so. Listen, I’ve been meaning to give you guys a call, but right now I’m watching the game and…”
Howie: “Well, perfect timing then… I saved you from having to spend hours finding out that we don’t have in-bound telephone lines. The reason I’m calling is that I noticed that your home is now worth quite a bit less than you owe on your mortgage, and I wanted to let you know that if you’ll keep paying your mortgage as agreed, we’ll be giving you a reward equal to 10% of your outstanding balance.”
Homeowner: “Um, well… okay.”
Howie: “The best part is that there’s no charge to participate in the program, all you have to do is continue paying your mortgage as you always have. Once you’ve paid off your loan you’ll receive your Responsible Homeowner Reward, which in your case appears to be roughly $60,000! Doesn’t that sound terrific?”
Homeowner: “Wait, what? After I pay off the loan… you mean 26 years from now? But I’m 62. Are you saying that I’ll get my check for $60k when I’m 88 years old? And you’re calling me now to tell me about it? Why bother calling me now?”
Howie: “Well sir, we’re calling to tell you about it now because we wanted to tell you about it while you’re still young enough to enjoy hearing the news.”
Homeowner: “That’s nice. Why don’t you send me my check while I’m still young enough to enjoy spending it? Hey, while I’ve got you on the phone, how much less is my house worth than I owe on my mortgage?”
Howie: “(laughs…) Sir… that’s not really important now, you just keep paying as agreed and we’ll be sending you your 10% reward in only 26 short years, isn’t that wonderful?”
Homeowner: “Well, I’m not sure I’d describe it as being wonderful. Wonderful would be if you were sending me the check sometime in the next decade… but, seriously, how much more do you fellas figure I owe than the house is worth?”
Howie: “Sir, let’s not focus on that right now. The important thing is that you’ll keep paying us the amount you promised to pay. That way, you’ll get your reward before you know it. Sir, 26 years may seem like a long time, but it’s really right around the corner.”
Homeowner: “Right, if you live on a block that’s 9,000 miles long and you’re walking around it, I suppose that’s true. Now how much more do I owe than the home is worth? Are you going to tell me or what?”
Howie: “Well, sir… right now, we show your home to be worth right around $300,000, and you owe about $600,000 on your mortgage. Of course, that picture is going to change dramatically as soon as we on Wall Street get the next bubble inflating and real estate prices blow through their 2006 highs, and if you saw the financial reform bill that Congress passed a month or so ago, you probably realized that it won’t be long before that happens. Heck, could be by next year at this time.”
Homeowner: “Wait… what? Another bubble? And you’re saying that’s a good thing?”
Howie: “Of course that’s a good thing, sir… a very good thing. Why I personally plan on picking up my family’s generational wealth during the very first year of the next bubble… yep, promised the wife that I’d buy her a title, not “Queen” perhaps, but I’d look at something in a “Lady” or even a “Duchess”.
She deserves it, sir. She’s worked so hard these last two years, not only taking calls from the designers who decorate our homes around the world, but she also directly supervises our Nanny Supervisor, and still manages to fit in cosmetic surgery… it’s not easy, sir, as I’m sure you’d readily agree. Why next month she’s having her calves lifted. Don’t know how she fits it all in, sir, I really don’t.”
Homeowner: “I didn’t realize that… did you say calves…”
Howie: “Oh sure, sir… you can have anything lifted these days. A couple of months ago she had her index fingers reshaped… and sir, I don’t mind saying that to see her pointing her finger today… well, it gives me chills just thinking about it.”
“So you see, sir… things are going to be looking up real soon for responsible homeowners like you and me. And next time, we won’t let those irresponsible sub-prime borrowers muck it up like they did this last time. No, we learned our lesson this last time out, no doubt about that. Next time, we’re going to make sure we only screw over borrowers who have jobs paying at least $3 over minimum wage who have credit scores over 400. Word on the street is, next bubble… if you can’t make at least nine months worth of teaser payments, you won’t be able to get the loan.”
Homeowner: “Actually, I kind of thought the meltdown was caused by irresponsible bankers who committed securities fraud, borrowed more than they could ever afford to repay, intentionally lent money to people who couldn’t repay loans and with terms they didn’t fully understand, and then profited enormously from a combination of tax-payer funded bailouts and bets against the bonds they were selling to investors all over the world.”
Howie: (laughs…) Oh come on, sir. Where do you get your news, the Rachel Maddow show? Look, I don’t know anything about all of that… it’s way too complicated for me. I just know that my neighbor is an irresponsible deadbeat for sure because he has a jet ski in his garage, a flat screen television in his den, and he remodeled his kitchen. What more do I have to say, sir? The guy’s got sub-primer written all over him.”
Homeowner: “Okay, so your seriously calling to tell me that if I go ahead and pay you $600,000 plus interest over the next 26 years, you’ll give me a $300,000 house and a $60k bonus at that time, and the good news is I don’t have to pay anything to participate in the program? I will have paid something north of a million dollars for a home that’s worth $300,000, but I don’t have to pay to participate? You’re seeing an entire team of doctors, aren’t you son?”
Howie: “Well, that’s one way to phrase it sir… if you’re a doom and gloomer I suppose you could say that.”
Homeowner: “Well, okie dokie then… thank you for calling. I’ll give it some thought… maybe run it by my accountant to see what he thinks. I hadn’t really considered it before, but now that you’ve brought the whole thing to my attention, I’m starting to think that maybe I’d be better off walking away from my mortgage, and waiting a few years to buy again at a much lower price.”
Howie: “But, sir… you signed the note… you promised… you’re morally obligated to repay what you promised. You realize that, right sir?”
Homeowner: “Hmmm, I’m going to have to think about that. I wasn’t aware that I signed anything that had anything to do with a moral obligation. I thought the deal was that I would either make the payments or you’d get the home back. Besides, what about my moral obligation to my family to not piss away a million bucks on nothing?”
Howie: “Well, now that’s just crazy talk, sir. You know as well as I do that if you don’t honor your commitments in life you’re certain to burn in hell for all eternity.”
Homeowner: “Pardon me?”
Howie: “Never mind that, the point is that the investor that owns your loan is counting on you to do the morally right thing and repay your loan as you promised when you signed on the dotted line. That’s the only way that they can keep their promises to their families, and I happen to know that one of the executives has promised his 9 year-old son his own full-size railroad for Presidents’ Day this year. You wouldn’t want to be the reason that he can’t fulfill that promise to his son, now would you sir?”
Homeowner: “Um… I guess I’m not sure how to respond to that.”
Howie: “No need to, sir. No need at all. I can tell that you’d feel awful if you were to cause something like that to happen. After all, the children are our future, right sir?”
Homeowner: “Um, our future… yes, well… I suppose they are, assuming we have one.”
Howie: “I knew you’d feel that way. So, don’t forget to watch your mail so you receive your certificate entitling you to your Responsible Homeowner Reward, okay sir?”
Homeowner: “Watch our mail, okay we’ll be watching for it.”
Howie: “Very good, sir. I’m so glad to have been able to help. If you have any questions, feel free to write to us at the P.O. Box address that’s printed in 4 point type on the back of your certificate at the bottom, right under the FDIC logo. Sometimes you may have to hold the certificate up to a really bright light to make it out. We respond to all letters within 1400 days of the next leap year. Goodbye sir. And have a great rest of your day!”
CLICK!
Homeowner: “Um… okay, yes, um, goodbye? He hung up on me?”
Mrs. McHenry: “Honey, who was that on the phone?”
Homeowner: “Someone wanting us to keep paying our mortgage.”
Mrs. McHenry: “But, we already pay our mortgage, don’t we?”
Homeowner: “Of course, dear. He wanted to tell us that they’ll send us a check for $60,000 once we’ve paid it off.”
Mrs. McHenry: “Why in the world would someone call us to tell us to pay our mortgage that we’re already paying, and offer us a check for $60k 26 years from now? Come on… what do you take me for? My God, can’t you come up with anything better than that? What’s her name, Henry? It’s that tramp “greeter” down at the Wal-Mart, isn’t it? I see the way she looks at you.”
Homeowner: “I’m really not sure, Honey, and no… there’s no one but you Sugar-kisses. Besides, that greeter at Wal-Mart is 81 years-old with a hip replacement. Honey, could you hand me the remote? And do me a favor, make an appointment with Carl, our CPA for next week… maybe it’s time we moved down to Florida… rent a place for a couple years and see where we want to settle down… ”
And… SCENE.
Hey, I was just thinking… how about this for the company’s slogan:
Loan Value Group. Confusing Homeowners from Coast-to-Coast for No Particular Reason
It’s not bad, right? I’ll keep working on it…
Loan Value Group’s executives, if you can believe this company has executives… say that they can implement their product offering quickly—within 48 hours—rather than the months involved in finalizing a normal loan modification, which should come as no surprise whatsoever. How long could it possibly take to tell homeowners who are current on their payments that they’ll get a “reward” after they’ve paid off their loans?
Of course, the investors that own the loans pay for the program, so they need to buy in to the loopy strategy and I’m thinking that might take some time, but what do I know? Maybe none of the Wall Streeters know anything about living in this country today.
According to the journal, the company’s pitch to investors is that they can apply the reward “while skirting accounting rules that would normally require a modified mortgage to be written down,” and that rewards can also be applied on top of loans that have been modified. And… that makes absolutely no sense at all, if you ask me, so I can’t even comment.
Finally, the WSJ story closes by positing the following:
“The government hasn’t had a great track record modifying loans—do private sector solutions like these hold more promise?”
Um, well… golly. I guess I’m not sure how to respond to that either. Alright already… I give, I give… UNCLE… they win, I can’t fight them… they’re obtuse-ness is just too strong… must – get – air – fast – throat – closing – room – spinning – getting dark – it’s – really – hot – in – here…
CRASH! BANG! CRACK! BOOM!
Ouch, that really hurt… damn it.
Well, that’s the last time I buy a glass desk…
BUT AT LEAST I STOPPED THINKING ABOUT HOWIE FOR A FEW MINUTES.
I suppose I should head off to the Emergency Room to have the shards of glass removed from my torso… and perhaps if I explain what I’ve been through, the doctor will prescribe morphine as a prophylactic. I can’t remember, do they serve alcohol in hospital cafeterias these days? Never mind, I’d better bring my own just to be safe.
Here’s a link to the story in the WSJ: Plan Offers Hedge on ‘Strategic’ Default. If it starts making sense to you, kill yourself quickly. You don’t want your family to see you like that.
And here’s a link to the company, Loan Value Group, in case you feel like killing some time staring at something that makes absolutely no sense whatsoever, and you’ve already watched this week’s episode of “Keeping Up With the Kardashians.”
Epilogue…
“What happened to Howie Hubler?” Steve Kroft asked on 60 Minutes.
“He was allowed to resign from Morgan Stanley and take with him millions of dollars in back pay,” Mr. Lewis answered. “Tens of millions of dollars in back pay.”
~~~~~~~~~~
Howie costs Morgan Stanley $9 billion trading bonds, and takes home tens of millions in cash. Me? I’m cashing in my change jar trying to figure out how to buy a new laptop so I can continue to scream on behalf of homeowners and fight like all get-out to bring back the country I love so that my daughter can one day travel to Europe and not feel that she has to tell those she meets that she’s Canadian to avoid embarrassment.
I don’t know about you, but that’s enough for me for today… Howie’s already kicked my ass, and he didn’t even have to leave his office to do it.
Waiter… check please? Hey, do you guys take Chevron cards? No, it’s okay… just wondering. I’ve got it… you don’t accept two-party out-of-state checks either, I suppose? No, no… it’s fine… it’s only coffee… I’ve know I’ve got some change in my car…
Mandelman out.
Why is David J. Stern Not In Handcuffs? Stunning Examples of Fraud…
Serious, pervasive, systemic fraud lies at the heart of the current foreclosure meltdown. This fraud was not committed in shady backrooms, although it might have started there. This fraud was carried out thousands of times a day in hundreds of courtrooms and courthouses all across the State of Florida.
This fraud wasn’t a “Flash Crash” scheme that popped and no-one could catch it. This fraud moved slowly, deliberately, purposefully in front of clerks of courts, attorneys, judges, the financial markets, regulators, legislators and the press. There is no way to keep this Pandora’s box shut anymore. There is no way to put this genie back in the bottle.
In the past week, I’ve done interviews with Canadian reporters, Australian reporters, British reporters. They’re all struggling to understand what went wrong and just how big the problem is. The attachments below are just like stars…..just a few little examples of a universe of fraudulent documents that are recorded in courthouses all across this state….each one representing a black hole that will suck our mortgage and financial markets further into a mess. I challenge anyone who is struggling to grasp the magnitude of this problem to print out the three attachments, lay them out and study them. These flawed and fraudulent assignments of mortgage pollute and make toxic the title to every piece of real estate they touch…..and this was all done in the most public of all forums…our open and accessible public records system…..
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CNBC News Video on The Foreclosure Robo Signer Meltdown
This is an excellent debate from CNBC on Foreclosure Robo Signer Meltdown.
According to the report: 1)Emergency laws should be enacted immediately; 2) Emergency laws to limit title claims should be passed immediately.
A real eye opening debate, Wall Street is on fire about this scandal now…..an excellent discussion, including mindless, unsophisticated blather from a big box attorney who clearly doesn’t get that many foreclosure judgments will be VOID due to fraudulent and otherwise improper service of process!
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INSIDE CHASE and the Perfect Foreclosure
“JPMorgan CHASE is in the foreclosure business, not the modification business’.” That, according to Jerad Bausch, who until quite recently was an employee of CHASE’s mortgage servicing division working in the foreclosure department in Rancho Bernardo, California.
I was recently introduced to Jerad and he agreed to an interview. (Christmas came early this year.) His answers to my questions provided me with a window into how servicers think and operate. And some of the things he said confirmed my fears about mortgage servicers… their interests and ours are anything but aligned.
Today, Jerad Bausch is 25 years old, but with a wife and two young children, he communicates like someone ten years older. He had been selling cars for about three and a half years and was just 22 years old when he applied for a job at JPMorgan CHASE. He ended up working in the mega-bank’s mortgage servicing area… the foreclosure department, to be precise. He had absolutely no prior experience with mortgages or in real estate, but then… why would that be important?
“The car business is great in terms of bring home a good size paycheck, but to make the money you have to work all the time, 60-70 hours a week. When our second child arrived, that schedule just wasn’t going to work. I thought CHASE would be kind of a cushy office job that would offer some stability,” Jerad explained.
That didn’t exactly turn out to be the case. Eighteen months after CHASE hired Jared, with numerous investors having filed for bankruptcy protection as a result of the housing meltdown, he was laid off. The “investors” in this case are the entities that own the loans that Chase services. When an investor files bankruptcy the loan files go to CHASE’S bankruptcy department, presumably to be liquidated by the trustee in order to satisfy the claims of creditors.
The interview process included a “panel” of CHASE executives asking Jared a variety of questions primarily in two areas. They asked if he was the type of person that could handle working with people that were emotional and in foreclosure, and if his computer skills were up to snuff. They asked him nothing about real estate or mortgages, or car sales for that matter.
The training program at CHASE turned out to be almost exclusively about the critical importance of documenting the files that he would be pushing through the foreclosure process and ultimately to the REO department, where they would be put back on the market and hopefully sold. Documenting the files with everything that transpired was the single most important aspect of Jared’s job at CHASE, in fact, it was what his bonus was based on, along with the pace at which the foreclosures he processed were completed.
“A perfect foreclosure was supposed to take 120 days,” Jared explains, “and the closer you came to that benchmark, the better your numbers looked and higher your bonus would be.”
CHASE started Jared at an annual salary of $30,000, but he very quickly became a “Tier One” employee, so he earned a monthly bonus of $1,000 because he documented everything accurately and because he always processed foreclosures at as close to a “perfect” pace as possible.
“Bonuses were based on accurate and complete documentation, and on how quickly you were able to foreclosure on someone,” Jerad says. “They rate you as Tier One, Two or Three… and if you’re Tier One, which is the top tier, then you’d get a thousand dollars a month bonus. So, from $30,000 you went to $42,000. Of course, if your documentation was off, or you took too long to foreclose, you wouldn’t get the bonus.”
Day-to-day, Jerad’s job was primarily to contact paralegals at the law firms used by CHASE to file foreclosures, publish sale dates, and myriad other tasks required to effectuate a foreclosure in a given state.
“It was our responsibility to stay on top of and when necessary push the lawyers to make sure things done in a timely fashion, so that foreclosures would move along in compliance with Fannie’s guidelines,” Jerad explained. “And we documented what went on with each file so that if the investor came in to audit the files, everything would be accurate in terms of what had transpired and in what time frame. It was all about being able to show that foreclosures were being processed as efficiently as possible.”
When a homeowner applies for a loan modification, Jerad would receive an email from the modification team telling him to put a file on hold awaiting decision on modification. This wouldn’t count against his bonus, because Fannie Mae guidelines allow for modifications to be considered, but investors would see what was done as related to the modification, so everything had to be thoroughly documented.
“Seemed like more than 95% of the time, the instruction came back ‘proceed with foreclosure,’ according to Jerad. “Files would be on hold pending modification, but still accruing fees and interest. Any time a servicer does anything to a file, they’re charging people for it,” Jerad says.
I was fascinated to learn that investors do actually visit servicers and audit files to make sure things are being handled properly and homes are being foreclosed on efficiently, or modified, should that be in their best interest. As Jerad explained, “Investors know that Polling & Servicing Agreements (“PSAs”) don’t protect them, they protect servicers, so they want to come in and audit files themselves.”
“Foreclosures are a no lose proposition for a servicer,” Jerad told me during the interview. “The servicer gets paid more to service a delinquent loan, but they also get to tack on a whole bunch of extra fees and charges. If the borrower reinstates the loan, which is rare, then the borrower pays those extra fees. If the borrower loses the house, then the investor pays them. Either way, the servicer gets their money.”
Jerad went on to say: “Our attitude at CHASE was to process everything as quickly as possible, so we can foreclose and take the house to sale. That’s how we made our money.”
“Servicers want to show investors that they did their due diligence on a loan modification, but that in the end they just couldn’t find a way to modify. They’re whole focus is to foreclose, not to modify. They put the borrower through every hoop and obstacle they can, so that when something fails to get done on time, or whatever, they can deny it and proceed with the foreclosure. Like, ‘Hey we tried, but the borrower didn’t get this one document in on time.’ That sure is what it seemed like to me, anyway.”
According to Jerad, JPMorgan CHASE in Rancho Bernardo, services foreclosures in all 50 states. During the 18 months that he worked there, his foreclosure department of 15 people would receive 30-40 borrower files a day just from California, so each person would get two to three foreclosure a day to process just from California alone. He also said that in Rancho Bernardo, there were no more than 5-7 people in the loan modification department, but in loss mitigation there were 30 people who processed forbearances, short sales, and other alternatives to foreclosure. The REO department was made up of fewer than five people.
Jerad often took a smoke break with some of the guys handing loan modifications. “They were always complaining that their supervisors weren’t approving modifications,” Jerad said. “There was always something else they wanted that prevented the modification from being approved. They got their bonus based on modifying loans, along with accurate documentation just like us, but it seemed like the supervisors got penalized for modifying loans, because they were all about finding a way to turn them down.”
“There’s no question about it,” Jerad said in closing, “CHASE is in the foreclosure business, not the modification business.”
Well, now… that certainly was satisfying for me. Was it good for you too? I mean, since, as a taxpayer who bailed out CHASE and so many others, to know that they couldn’t care less about what it says in the HAMP guidelines, or what the President of the United States has said, or about our nation’s economy, or our communities… … or… well, about anything but “the perfect foreclosure,” I feel like I’ve been royally screwed, so it seemed like the appropriate question to ask.
Now I understand why servicers want foreclosures. It’s the extra fees they can charge either the borrower or the investor related to foreclosure… it’s sort of license to steal, isn’t it? I mean, no one questions those fees and charges, so I’m sure they’re not designed to be low margin fees and charges. They’re certainly not subject to the forces of competition. I wonder if they’re even regulated in any way… in fact, I’d bet they’re not.
And I also now understand why so many times it seems like they’re trying to come up with a reason to NOT modify, as opposed to modify and therefore stop a foreclosure. In fact, many of the modifications I’ve heard from homeowners about have requirements that sound like they’re straight off of “The Amazing Race” reality television show.
“You have exactly 11 hours to sign this form, have it notarized, and then deliver three copies of the document by hand to this address in one of three major U.S. cities. The catch is you can’t drive or take a cab to get there… you must arrive by elephant. When you arrive a small Asian man wearing one red shoe will give you your next clue. You have exactly $265 to complete this leg of THE AMAZING CHASE!”
And, now we know why. They’re not trying to figure out how to modify, they’re looking for a reason to foreclose and sell the house.
But, although I’m just learning how all this works, Treasury Secretary Geithner had to have known in advance what would go on inside a mortgage servicer. And so must FDIC Chair Sheila Bair have known. And so must a whole lot of others in Washington D.C. too, right? After all, Jerad is a bright young man, to be sure, but if he came to understand how things worked inside a servicver in just 18 months, then I have to believe that many thousands of others know these things as well.
So, why do so many of our elected representatives continue to stand around looking surprised and even dumbfounded at HAMP not working as it was supposed to… as the president said it would?
Oh, wait a minute… that’s right… they don’t actually do that, do they? In fact, our elected representatives don’t look surprised at all, come to think of it. They’re not surprised because they knew about the problems. It’s not often “in the news,” because it’s not “news” to them.
I think I’ve uncovered something, but really they already know, and they’re just having a little laugh at our collective expense… is that about right? Is this funny to someone in Washington, or anyone anywhere for that matter?
Well, at least we found out before the elections in November. There’s still time to send more than a few incumbents home for at least the next couple of years.
I’m not kidding about that. Someone needs to be punished for this. We need to send a message.
Mandelman out.
Elizabeth Warren on the Foreclosure Crisis
Elizabeth Warren is the only person I’ve seen in Washington D.C. that is both aware of what consumers are facing today, and I believe truly cares about homeowners in this country. She gets it in ways that no one else in government does, and she appeared just a few days ago on PBS to talk about the new agency and the foreclosure crisis. And I found it breathtaking to watch, and hear what she she had to say.
She says…
“It’s about respect. I believe that the American people ought to be part of the conversation about what’s happening in our economy, and what’s happening in Washington D.C. and what’s happening on Wall Street. I truly believe that if the insiders get together and rewrite all the rules, those will be rules that will benefit the insiders and the rest of America will just be left out of it.”
She was asked whether she believes that Tim Geithner is right about the way he’s handling the commercial real estate meltdown that’s around the corner. She responded by saying:
“We have not seen a strong response from Treasury. I hope he’s right, but I would feel better if I saw more action, if we saw some plans in place. It is our job in oversight not to say ‘Oh good, let’s relax!’ Our job in oversight is push and say these are problems, and show us what you’re doing here, and we do this on behalf of the American people.”
She described it as a downward spiral. (Sound familiar?) She knows what’s ahead and she knows it doesn’t look good. People… she is our one true real hope. We need her now, and if we can’t make her the President of the United States, we must make sure she is allowed to establish and lead the consumer protection agency of which she conceived. It is only because of her that the agency will exist, and to pretend that there is anyone else to lead it, would be a travesty and a tragedy on an historic scale.
I pray… literally pray… that all of you reading me take the time to write to the White House and to your elected representative telling both that her appointment is the single most important thing to you… and to all of us.
At the end of her interview, and I hope you’ll watch every single second of it as it appears below… she admits that she doesn’t know whether it’s possible to push back against Wall Street’s power, and she admits that many have told her that it is not. But, I’ve never felt more in-sync with anyone as when she utters her last words, saying: “I don’t know. I just refuse to give up.”
I was told by someone inside the beltway, as they say, that Treasury Secretary Tim Geithner is still working hard to oppose her appointment to lead the new consumer protection agency. I’ve also been told that Larry Summers will also oppose her appointment.
These are the two guys who have bailed out the banks at every turn, and don’t want to see anyone question those banks, or limit what they’re allowed to do to us, in order to become solvent again.
The banks, however, are no more solvent today than they were a year ago. The toxic assets… remember the “toxic assets”… are right where they were in October of 2008. Geithner has not dealt with that problem. It is abundantly clear that his plan is to allow the banks to continue crippling our economy until they can make enough money to return to solvency.
But, and please listen when I say this, and go check it out for yourself if you don’t believe what I’m about to say… Japan took that approach and it took their banks over a DECADE. It could take our banks even longer.
My daughter is 14. How old are those that you love? We are literally staring down the barrel of a DECADE LONG GUN RIGHT NOW. Geithner cannot be allowed to continue doing what he’s doing to this country.
Last year, we spent more than $4 trillion propping up the banks, and we are no better off today than we were then. In fact, as everyone will know in a matter of months, if they don’t know it already, we are much worse off than we were a year ago.
It’s not just about the TARP for $700 billion, by the way. The TARP was just the beginning. The rest is not covered by the media, but you can look it up for yourself. Try Googling the following, because these are all programs Geithner and Summers and the Obama Administration have established and approved… quietly.
TLGP (Temporary Liquidity Guarantee Program) This was set up by Geithner and Bair. It guarantees certain types of debt issued by financial institutions, and deposits in certain accounts. Thousands of banks are participating in this program. ALLOCATED: $1.5 TRILLION
GSEP (Government Sponsored Entity Purchases) This was set up by Tim Geithner and Ben Bernanke. It allows the Federal Reserve to being purchasing the toxic debt issued by Fannie and Freddie. ALLOCATED: $1.4 TRILLION
CPFF (Commercial Paper Funding Facility) This program was established by Geithner to fund the commercial paper market after Lehman’s demise. Commercial paper can be thought of as short term loans that many large companies use to cover payrolls. It was funded by the Federal Reserve Bank of New York… Geithner was the President of the Federal reserve Bank of New York before becoming Treasury Secretary, by the way. They say this program is closed, but how do we really know? ALLOCATED: $1.4 TRILLION
TALF (Term Asset Backed Securities Loan Facility) Geithner and Bernanke set this up last year to loan money to banks that offer bundled loans to small businesses and consumers. The hope was that it would make it easier for people to get car loans, student loans, and other forms of credit. Did it work? Maybe a little, but it sure didn’t fix anything. ALLOCATED: $200 BILLION
TAF (Term Auction Facility) A program whereby the Federal Reserve auctioned funds to depository institutions. Bids are submitted by phone through local Federal Reserve banks, and all advances must be collateralized, but how do we know what’s passing for collateral these days. ALLOCATED: $600 BILLION
AMLF (Asset Backed Commercial Paper Mutual Fund Liquidity Facility) This program provides loans to banks so they can buy certain types of commercial paper from money market mutual funds. The goal of this program was to make it easier for the funds to pay the investors that wanted to cash out. ALLOCATED: $1.6 TRILLION
FEDS (Foreign Exchange Dollar Swaps) This is a program whereby the Federal Reserve goes around the world offering dollars to the European Central Bank, the Swiss National Bank, the Bank of England and other central banks. These banks can print Euros, Francs, Pounds, etc. but not dollars. The european banks give the Fed their own currencies to hold, and then lend the dollars to other banks in an attempt to ease the strain in those banks. ALLOCATED: UNREPORTED AMOUNT SPENT AS OF A YEAR AGO: $420.26 BILLION
PDCF (Primary Dealer Credit Facility) This is an overnight loan facility that provides funding to primary dealers in exchange for any tri-party-eligible collateral. The purpose is to keep the markets functioning. Loans are taken out for one day, but new loans can be taken out each day. ALLOCATED: UNREPORTED SPENT: UNREPORTED
Still think it’s all about the TARP funds?
People have called me and said… “But the banks paid back the TARP funds, doesn’t that mean they’re doing better?” And I’ve replied: No, I’m afraid not. It just means they wanted to have the restrictions on executive pay lifted, and only the TARP funds place such restrictions on the banks. The rest of the programs above don’t place any restrictions on anyone.
Tim Geithner and Larry Summers are directly responsible for the situation we are in today. It’s worsening and worsening faster than ever. Don’t wait until you actually feel the pain to take action, because by then it will be too late, if it isn’t already.
Oh, and stop listening to the double dip nonsense. It’s not true. We won’t have a double dip, because we never had a recovery. We’re in the same downward spiral we went into in 2007. Elizabeth Warren knows this, but she also knows that government cannot continue to abandon the American people as it pumps trillions into the banks who caused and are continuing to cause such monumental and intense pain. We need her now… we need balance, as much as we can get.
And just like I’ve said many times over the last two years… she won’t give up. Write to the White House, and to your elected representative today. Demand that Elizabeth Warren head up the new consumer protection agency… please.
Here’s she is being interviewed just three days ago on PBS. Please watch the whole thing. Thank you… Mandelman
Watch the full episode. See more Need To Know.
FBI to target fraudulent lending, hundreds to be arrested
FBI to target mortgage fraud
By Suzanne Kapner in New York
Published: June 11 2010 02:25 | Last updated: June 11 2010 02:25
The Federal Bureau of Investigation is preparing a nationwide crackdown on mortgage fraud, the latest in a series of efforts to curb lending practices that contributed to the housing meltdown, according to people familiar with the matter.
The FBI is preparing to arrest hundreds of people across the US as early as next week for offences including encouraging borrowers to falsify income on mortgage applications, misleading home owners about foreclosure rescue programmes, and inflating home appraisals, said two people with knowledge of the operation. An FBI spokesman declined to comment.
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