A few weeks ago, Fannie Mae issued an outright threat to homeowners in this country, creating a new rule that would punish anyone who stops paying their mortgage and walks away from their home, referred to as a “strategic default,” by not allowing those who choose that path to get a Fannie Mae loan for seven years.

They call it their “Seven-Year Lockout Policy for Strategic Defaulters,” and if you haven’t realized it already… look what’s been accomplished here: Homeowners have scared the heck out of industry giant, Fannie Mae.  I mean… these guys are shaking like leaves, absolutely running scared.  I know homeowners have been feeling like they have no power against the bankers, but this should prove otherwise.  It’s like we pushed the bully, and the bully ran home and got his Mom to come lay down a new rule in response.

On Fannie’s Website, Terence Edwards, Executive Vice President for Credit Portfolio Management has the following to say about the new rule:

“Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting.”

Bad for borrowers, Terrence?  Really, how so?  Are you trying to say that people who walk away from their underwater mortgages are doing it because it’s bad for them?  Because I don’t think they think that, Terence.  I’m pretty sure that those that choose to walk away from their mortgages do so because they’ve figured out that it’s better for them… in their own best interests, as they say.

Hey Terrence, you disingenuous prick, I understand that my walking away from my mortgage is bad for you, but that’s only because my house is now worth half of what I owe.  You wouldn’t mind if I walked away from my mortgage if I had equity, right?  So, in other words, you want me to lose the couple hundred grand instead of you, does that about sum up your position here?  Yeah, well… I’m sure you do.  But I, on the other hand, would prefer that you lose the money instead of me.  Sorry about that.

Terrence, last I checked you’re just a giant failed mortgage lender who is as much a part of why we’re in this mess as any, and you’re going to need $1.5 trillion in taxpayer dollars to bail you out.

I’m a taxpayer, Terrence… isn’t that enough of a loss for me to take on your behalf?  You want me to contribute my tax dollars and probably my child’s future tax dollars to your $1.5 trillion bailout.  And on top of that, you also want me to eat the loss of a couple hundred grand on my house?

Geeze… when are you guys planning to kick in on this?  Your CEO gets a $6 million a year salary, I looked it up, and best I can tell he gets paid to say “yes” to just about everything.  I don’t know, Terrence, but I’m pretty sure that I could have bankrupted Fannie Mae for a lot less than $1.5 trillion.

Walking away from a $500,000 mortgage on a house that’s now worth $250,000 isn’t bad for the borrower, it’s good for the borrower… it makes all the financial sense in the world, for the borrower.  I mean, would you recommend that someone hold onto a stock that’s lost half its value.

Then you say it’s bad for communities, Terrence, why do you think that’s the case?  I mean… bad is a relative term, wouldn’t you agree.  And, in terms of doing bad things to communities, aren’t you guys at Fannie Mae pretty much the poster children?  Like if the Olympic Games had a “Damaging Communities” event, wouldn’t you guys at Fannie be like the Michael Phelps of gold medalists, at the very least?

Yes, I’m afraid you would at that, Terry my boy.  You guys are responsible for wiping out more communities than say… I don’t know… Joseph Stalin comes to mind.  So does the bubonic plague.  So, now you’re all of a sudden so concerned about my community, are you?

Terry, my home appraised at the peak of the insanity at $925,000.  Last week, we heard there was a short sale about eight homes down from us.  Any guesses, Terry?  Well, I doubt you’d come close to $360,000 Mr. Fannie Mae spokesperson and executive VP.  I bought this house in 1990 for $340,000 you insensitive jackass.  Your incompetence has cost me a fortune.

You and your peers owe me money… or at the very least an apology… or something else, but how dare you attempt to “punish me” should I decide to become a productive member of society sooner by choosing not to take $300,000 and set it on fire.  And what would you like me to do, Terrance, if I spend the next twenty or thirty years paying for this house only to find out that I’m still under water by some amount at that time?  Any thoughts on that, you housing genius?  Maybe, try to do better in my next lifetime, Terrence?

How exactly will my strategic default harm my community?  How exactly, Mr. Edwards?  Because I’m thinking two things here:

One… If I let the home go into foreclosure, it’ll be an REO and the bank will resell it at the market price, or maybe a little below.  But, no one is going to give it away for free, right Terry?  The market price is the market price, right you mumbling mathlete?

If I’m allowed to short sale it, maybe it will sell for a little bit more, but then again, it might not sell at all, in which case I’ll still end up in foreclosure, but I won’t be able to stay in the house, saving money as a result of not making payments, while I pay a lawyer to prolong my free stay for as long as possible.  By the time I walk away, I’ll have maybe $100,000 saved up, which will make moving and renting an absolute breeze… to say nothing of my mental state, much improved as a result of controlling my destiny and screwing you.

Two… a strategic default only creates a foreclosure, and if you were so concerned about the impact of foreclosures on communities, we wouldn’t be in the situation we’re in today.  I hope you’ll forgive me if I laugh at you feigning concern about how foreclosures affect our communities.  I’ve been watching quite a few loan modifications up close and personal, and I haven’t seen Fannie Mae lift a finger to help a single homeowner.  Banks are abusing homeowners left and right, every single day of the year, with the exception of a few who take Christmas off, and where has Fannie Mae been?

Now that I finally decide to take matters into my own hands, in the best interests of me and my family, now you’re going to try to punish me, you worthless piece of trash, how dare you?  Go to hell, Terrence Edwards.  You’re an insolent punk for saying what you said, for trying to scare homeowners who are trying to survive this inconceivable catastrophe that you and yours created.  You’re an empty suit hiding behind some overpaid government job, nothing more.

You, of all people, claiming that strategic defaults are harming communities is absolutely hysterical.  Like cautioning people to take an umbrella when going for a walk into the eye of Hurricane Katrina.  Don’t forget your umbrella… you wouldn’t want to get wet.  Yeah, thanks for that advice.

Your approach is to “deter the disturbing trend” towards strategic defaulting?  Is that what you said?  Well, that’s the best damn news I’ve had in at least three years.  You and the rest of the self-important louts at Fannie Mae are actually disturbed by something.  Well, thank the good Lord, I am glad to know that.  Because you certainly haven’t seemed very disturbed at the carnage that’s been destroying the housing markets to-date, Mr. Terrence Edwards.

If strategic defaulting is disturbing you and Fannie Mae in general, well then that’s just about the best reason I could possibly think of for doing it.  You talked me into it, Terrence, and God willing quite a few others in this country whose lives have been ruined because of Fannie’s ruinous policies and incompetent management.

And then, as if Mr. Terrence Edwards hadn’t said more than enough, he went on to say:

“On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.”

On the flip side?  The flip side?  I swear, someone needs to give you such a slap.  On the flip side, you actually have no idea what you’re talking about, do you?  You think people are walking away because they didn’t talk to their servicers?  You think, in that distorted little brain of yours, that it’s homeowners who need to act in “good faith” more often?

Well, that’s it for me.  I don’t know what to say in response to that, except to say that I can’t believe Terrence Edwards has a management job anywhere, let alone at the world’s largest source of lending.  After a statement like that, this guy should be asking women if they’d like to see something in a pump or a loafer.

Homeowners aren’t the ones failing to act in good faith, Mr. Ed.  Homeowners would all try to work with their servicers to resolve something in good faith.  Homeowners, and I’ve personally talked at length with thousands of them, have “good faith” written all over them.  They exude it from their pores.  That’s why they didn’t storm the castle when you and the other banksters needed to be bailed out after you guys decimated the global financial system.  But… on the flip side… their servicers consistently, and by that I do mean all the damn time and every damn day… continually lie, intimidate, bully, flagrantly break promises, and exhibit a lack of caring that would make Mary Poppins look like Dr. Mengele.

Are you unaware of this, Mr. Ed, you horse’s ass?  Has this somehow escaped your attention?  Missed it?  Busy watching the World Cup or something?  Come on, no way… you know exactly what’s going on between servicers and homeowners out there, and if you really don’t, well then you most certainly should.

In the spirit of leaving nothing to chance, allow me to explain how this whole mess happened.  We, the taxpayers, sat by and watched our elected representatives bail out Fannie Mae, and every other bankster in the country, we sucked it up and then watched Goldman et al, pay out $120 billion in bonuses last December.

Our President said he had a plan, and that banks would modify loans… there was hope.  But there wasn’t, was there, because the banks and servicers proceeded to treat homeowners like something stuck to the bottom of their custom made shoes.  They lied all the time, like constantly.  They bullied and made people feel badly, and in general they proved beyond any doubt that they could not be trusted.

No one is walking away from their home because they weren’t willing to make a good faith effort to find an alternative resolution by working with their servicer.  Never happens, or happened.  And if it has started to happen, which I still don’t believe, it’s only in response to the treatment of homeowners by their servicers. And true to form, the Wall Street Journal writes a story about homeowners happy about their decision to strategically default, some other news program interviews someone going to Hawaii as a result of not having to pay a mortgage payment, and you… you don’t bother to find out what’s really going on… you start with the threats.

Here’s what you said on Fannie’s Website:

Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.

Troubled borrowers who work with their servicers, and provide information to help the servicer assess their situation, can be considered for foreclosure alternatives, such as a loan modification, a short sale, or a deed-in-lieu of foreclosure. A borrower with extenuating circumstances who works out one of these options with their servicer could be eligible for a new mortgage loan in three years and in as little as two years depending on the circumstances.

Oh, so let me get this straight… a Deed in Lieu, a short sale… those are just fine in your mind, but a strategic default is bad for borrowers and bad for communities.  Do you hear yourself?  How would a Deed in Lieu be better for the community, Mr. Edwards?  Never mind… you don’t know.

However, in your top paragraph above, you are saying that you’re going to go after deficiency judgments in states that allow deficiency judgments?  Well, goodie for you.  But, does that mean that you won’t go after deficiency judgments in states that allow them if the borrower simply attempts, in good faith, to work it out with his or her servicer, but fails?  I doubt it, don’t you Terrence?

And you’re going to ask the servicers to “put forth recommendations” as to who should be pursued for a deficiency judgment?  The servicers?  The group of companies and individuals that have, perhaps more than any group in history, proven that they cannot be trusted to follow rules, keep promises, or tell the truth.  I suppose they will also be the final arbiters of whether the homeowners attempted to work it out in “good faith,” as well.  Yeah, that’s about right actually.  Par for the friggin’ course.

Well, I’ll tell you what, Mr. Terrence Edwards.  You think you can threaten millions of American homeowners?  Why you would presume to have such authority is beyond me, but I’ll promise you this… you’ve certainly motivated me in a big way.  How many homeowners do you suppose I can reach through my 300,000 readers if I try really hard?  Because that’s precisely what I now am more committed than ever to doing.  Just because of you and your threats.

What was the threat anyway?  Oh yeah, those that you or the servicers deem strategic defaulters won’t be allowed to get a Fannie loan for 7 years, but the “good faith” people… which I would guess are those who agree to whatever their servicer demands, might get one in two or three years.

First of all, who cares about getting another loan in 2-3 years?  No one I know.  But even more to the point, what in the world makes you guys at Fannie Mae think you’ll be around in seven?

Mandelman out.

‘

It all started when I saw that this past February, Wells Fargo had donated $22,000 to establish a suicide prevention hotline in Idaho, apparently the state with the fourth highest suicide rate in the nation.  I find that statistic a little odd, but what do I know.  I’ve never even been to Idaho.

The United Way for Treasure Valley phrased it as follows on their website:

Wells Fargo stepped up Tuesday with a $22,000 gift to help establish an Idaho Suicide Prevention hotline.

“Wells Fargo is pleased to invest in this important community initiative to address a critical need in our state,” said Dana Reddington, Idaho Region president for the banking firm.

Wells Fargo “stepped up” with a $22,000 “gift.”  Is that how that should ideally be phrased?  I suppose it’s fine.  But, having spent the last few days writing and talking about Norm Rousseau, who took his own life this past Sunday after a protracted battle with… no, not cancer… much worse.  You know, we can in many cases cure certain kinds of cancer.

Norm’s protracted battle was with Wells Fargo, and no one has even come close to finding a cure for them.  So, on Sunday morning, just a few days ago, he lost the will to continue the fight after staying up all night trying in vain to fix the engine in a motorhome he was hoping to house his family in after being evicted on yesterday morning.

Look, I only spoke with Norm once for about an hour, so I shouldn’t really speak for him, but I just wanted to say that I’m pretty sure that he would have gladly traded his battle with Wells for… maybe not pancreatic, but let’s say prostate cancer… for sure.  I think so, anyway.

In fact, I’d probably make the same trade at this point were I given the choice.  I’m thinking that the cure rate for prostate cancer for a male in his 50s is much higher than the cure rate for a battle with Wells Fargo these days.  I don’t know… maybe I’m nuts… it’s not my core point here, so just forget it.

Anyway, I understand Wells Fargo wanting to give a gift that establishes a suicide hotline… it’s a gift the bank can use too.  And I do understand giving that sort of gift.

I’ve been married for 22 years, and although I hate to admit what I’m about to say, I’m hoping some of you guys have done it as well.  Maybe not the women, I really don’t know.

So, I was thinking about my birthday, it being only a few weeks away, and what I wanted to ask for in the way of a gift.

When my wife and I first got married, I always bought her birthday presents that were clearly hers alone… jewelry, clothes, I don’t know… a new tennis racquet, a mountain bike, golf clubs… those sorts of things.  Nothing that I had anything to do with as far as usage went.

But the longer we’ve been married, I’ve noticed that I’ve started drifting towards gifts that aren’t really just hers, but sort of ours… kind of.  I’m not entirely certain, but it’s possible that one year for her birthday I may have bought her our new breakfast nook table and chairs set.  That wasn’t cool, I thought to myself.

I shouldn’t be doing that sort of thing, right?  That’s not the way you stay happily married, or even breathing and walking upright, depending on your spouse’s comfort level with firearms.

It occurred to me that I might just be turning into my father, perish the thought… and that could not be considered anything short of terrifying.    Turn on the sirens people… crash positions… we’re going in hot and hard.

Truth be told, I couldn’t even remember what I had bought her last year for her birthday, and that was not giving me a very reassuring feeling.  Maybe since we need a new air conditioning unit for the house, maybe that’s what I should want for my birthday this year.

When I was really a young boy, maybe six or seven years old, I remember my father asking me if I wanted to go with him to Sears one evening after dinner.

I jumped at the opportunity of course, after all, a trip to Sears meant two things: A chance to sit on and pretend to drive several different riding lawnmowers… and a bag of hot cashews from the stand that sat in the middle of the store on the bottom level.  Good times.

So, we get to Sears, my father and me, and I head straight for the riding lawnmowers.  Remember that part of Forrest Gump when even though he’s already a zillionaire, he goes back home and the City Fathers give him “a fine job,” and he’s riding a lawnmower around this field cutting the grass?  Yeah, well I understood that part of the movie.  I completely agreed… Forrest looked like he did have a fine job there.

So, anyway… after a few minutes when my father had run out of patience with the lawnmower engine sounds I was making with my mouth, he said let’s go and we headed on into the store.  The smell of hot cashews used to hit you right as you walked in the door of the Sears where I grew up in Pittsburgh, Pennsylvania, and both my father and I were huge fans of the toasty warm aromatic nuts.

So, we got us a small bag before heading off for the guaranteed-to-be-boring part of the excursion, at least as far as I was concerned.  The part when we’d have to actually shop for whatever it was he wanted to find… the reason we were there, you might say.

He explained that we had come to buy my Mom a birthday present, which was the next day.

“Let’s get her a board game, Dad,” was the first thing that came to my young mind.  Well, why not… it was something I understood and knew I could get some utility from… and heck, she’d probably have liked it quite a bit too, especially if there was spelling involved.  Mom loved to spell anything anytime, and she was darn good at it too.

But, Dad said no. He had something else in mind, as we headed on over to the dreaded, “Housewares” department.

Housewares was the section that had the most things I didn’t understand, and I braced myself and took a deep breath, just as I might have done were I about to be placed into solitary confinement while doing time on Alcatraz.

We got there and I did a 360 to take in my surroundings.  Sure enough, I was absolutely surrounded by “Housewares,” and an old man who could have played Santa Claus at Christmas if you spotted him a fake beard and some hair, waddled over to offer his assistance to my father while doing a quick comb through of his thinning hair, completely ignoring me, of course.

This was the 1960s, and I was still to be seen, but not heard in many circles.  Unlike today, when we let our 8 year olds pick out the family car.

I heard my father say something about a chair of some kind… but after that it was pretty much just a blur.  For a boy my age during The Wonder Years of the 1960s it was genetically impossible to stay attentive during conversations of such banality.

Soon they had focused in on a particular chair.  It was metal with yellow vinyl, sort of a highchair with steps that slid out from underneath, a feature my father was saying would be highly valued by Mom, who was only 5’3” and apparently couldn’t reach certain things without a step ladder.  I hadn’t known about her shortcomings before that day, as she was plenty tall to reach everything I needed her to reach.

So, it was probably only a few minutes later, although it seemed a good hour or two, and we were paying with Dad’s Sears charge card, and then heading back to our station wagon, a 1963 Plymouth, dressed in a sickly hospital green color that my father said he liked, although I didn’t see how that could be possible.

We pulled around and there was that aging rotund and balding salesman, waddling towards us and carrying a decent size box, inside which, I assumed, would be the chair even though the box didn’t seem large enough to hold the chair.  As he was loading the box into the wagon, the man told my father that there would be, “some assembly required,” to which my father replied, “Sure.”  Dad actually seemed happy to hear of it.

My Dad owned a small grey metal Craftsman toolbox that he kept in the front hall closet that was strictly off limits as far as I was concerned.  He’d pull it out any time those words were spoken, “some assembly required,” or whenever there was some sort of disaster in our hundred year-old home.

Dad faced each job with an air of confidence that said clearly that he was unquestionably capable of handling any job that was thrown his way and he would do so with whatever was in his small grey metal toolbox.  It was a toolbox akin to Mary Poppins’ carpetbag, if you remember the movie with Julie Andrews and Dick Van Dyke.  It was as if he was expecting to be able to reach in and pull out a belt sander and a table saw.

The problem invariably was that whatever he needed he didn’t have and whatever he thought he could do, he really couldn’t, at least not in the time he had thought that he could.  And if hung around too long or stood too close, he’d end up blaming me for whatever wasn’t in his toolbox, growing more frustrated by the minute until he got the job done, which sometimes required a two or three day affair.

After the first couple of hours, there was no talking to him, and when the project had finally been completed he’d sit in front of the fireplace or television and sip what I later learned was Jack Daniels, but what he used to call Dry Sherry.

My father was, after all, a Harvard man.  And you can tell a Harvard man… but you can’t tell him much.

So, being a child of above average intelligence, as soon as we walked in our front door, I shot upstairs to my room, claiming homework or a bath was calling, the sort of tasks that I knew would trump helping Dad assemble the chair, or anything else he had in mind… so he went to work in the basement assembling Mom’s birthday surprise.

Yes, my brilliant, PhD, Harvard, college professor father had just thrown down maybe $19 on a metal stepstool/chair in yellow vinyl from Sears.  And he was so proud the next evening when, finally assembled after maybe six or seven hours of hard work, he presented it to her after we had finished dinner.

Mom had made cupcakes, as she was prone to do, and she started to light a match in order to light the little candles, one in each cupcake, except for the one that was for my little sister, Karen, who wasn’t even 2 years old at the time, and to my way of thinking, clearly didn’t qualify as any sort of human member of our family.  Certainly not one who needed a cupcake.

Mom struck the match but it failed to light and that was all the chances Mom got on things like lighting matches.  Dad reached out and took them into his much more capable hands.  He struck the match… nothing.  Mom smiled and looked away, you could tell she couldn’t have been more pleased at that moment.

Next match was the pressure match and lucky for Dad it was a winner and the candles were soon aglow as we sang…

Happy birthday to you… Happy birthday to you… Happy birthday dear Barbara/Mommy… Happy birthday to you!

I grunted as Mom gave Karen her own cupcake, sans candle.  “She can’t eat that, she doesn’t even know what it is,” I said with the sort of superiority only a six year-old older brother can muster.

“She can lick it,” Mom said smiling at the useless drooling infant that had Zwieback toast crumbs all over her face and in her hair.

I looked at the thing they called my sister thinking, “Later, when no one is looking, I’ll drag you down the stairs head first, you little parasite,” or at least the six year-old version of that sentence.

Karen grabbed the cupcake, squished it a little, mashed it icing side down onto her highchair… and promptly threw it straight onto the floor.  Yeah, she was small and didn’t say much, but I knew she had done that just to torture me.

“Maaaaaam,” I yelled out as I jumped for the cupcake, hoping against hope that my mother would at that moment take leave of her senses and allow me to eat it off the floor.  No such luck.

“Hand it to me,” she said in that voice.  And I did… resistance I knew, was futile.

So, with the festivities now over, we went into the kitchen to examine the gift and there it was… that glorious yellow vinyl and metal, half highchair, half stepstool… sitting poised for action… right in front of the sink.

You see, as I was about to learn, Mom was always standing over that sink washing dishes, and so my father thought the ideal birthday gift would be a chair high enough so that she could sit while washing the dishes, the stepstool functionality being an unanticipated bonus.

Of course, my Mom, being a mom of the mid 1960s, was beyond gracious at all times.  It was as if she liked everything.  Like, someone could have served her a bowl of dirt, and she’d have said thank you.

“Oh, look at that,” she said.

Now, even at six years old I was sensing something in her voice that felt like danger had just entered the room.  I swear, the temperature fell by 12 degrees… all of a sudden you could see your breath in our kitchen.

Dad was oblivious, explaining every single one of the chair’s highly valued features and functions.  “And, I bought it at Sears,” he explained as part of his wrap-up.  “So, if anything goes wrong, we can return it and they’ll give us a new one.”

Dad absolutely adored that about Sears.  He even bought his sport jackets at Sears when they would go on sale, of course, and I grew up assuming it was for the same reason… Sears’ famous return anything anytime policy.

“Isn’t that something,” Mom was saying.  She had decided that moment was a good one to start sharpening a giant kitchen knife, but then apparently thought better of it and set it down gingerly.

“Well, thank you Julian,” she said in a voice that I would one day learn to call condescending.  “That was very considerate of you.”

And that was it… Mom’s birthday was over for another year.  I knew not to ask her how old she was.  I ‘d learned the hard way the year before that a young man doesn’t ask a lady that question.  So, I just gave her a kiss on her cheek, said Happy Birthday Mom, and ran up to my room to see if I could sneak in a few minutes of black & white T.V. before they yelled up… “Turn off the T.V. please,” after which I’d drift off to sleep dreaming of riding lawnmowers and the like.

Less than a week passed until one day after school, I heard the doorbell, and ran to see who rang it.  A large truck was parked right in front of our house, on the side it read, “Sears Appliances,” or something very close.

“Maaaaam,” I called out.  It’s a man in a truck from Sears.”

My Mother came out in her apron, admonishing me for yelling for her to come in front of an adult, and then in her adult voice sweet as pie said, “Oh, hello, yes please, come in,” to the man in the Sears uniform.

And two hours later our kitchen had a brand new dishwasher installed… a Kenmore.

I didn’t connect the dots at the time, but inexplicably Mom made cupcakes again that night, highly unusual as it wasn’t anyone’s birthday, and this time she let me have the bowl of icing to lick and scrape on top of it all.  She was unusually happy and I was in sugar-induced nirvana.

After desert, we all walked into the kitchen and Mom started explaining all of the features and functionality of the new Kenmore dishwasher.

Dad listened, barely smiling occasionally, and then as I was sensing his patience was running thin he said right in the middle of Mom’s Kenmore demonstration that I was more than happy to watch, “Okay, are you finished?  I’ve got some work to do,” and with that he turned and walked towards the stairs.

Mom just kept going on about the Kenmore in a sort of sing-song voice, and as Dad started up the stairs, she was full on singing her words now and kind of dancing after him…

“And it’s from Sears… so if anything goes wrong… we can always return it,” Mom sang as if she were Judy Garland playing the role of a housewife in a movie.

I thought that I recognized the melody… “Home on the Range,” sort of.

Seconds later we could hear the door to Dad’s study close, I thought, perhaps a little harder than usual.  Mom walked back towards the kitchen humming, and without any advance notice, as she passed by me on her way to get started loading the new dishwasher, she set a second cupcake topped with icing right in front of me without saying a word.

And somehow I knew as I stared at the icing on my cupcake, there would be no percentage in asking questions.

It would be many years before I had any real appreciation for what had gone on that year… the year my Mom had two birthdays.  And the year my father had stared death in the face… and lived.

Yes, he was the Harvard man, the brilliant college professor… the breadwinner of our family… the owner of the tools… who never shirked his duty when “some assembly was required”… the one who always drove… and lit our matches when required… the patriarch.

But, make no mistake… that night Mom had let him live… let him off with a song about a Kenmore dishwasher from Sears… a song that sounded a lot like “Home on the Range.”  Now that I’m all grown up and married myself, I fully realize that a blow to the back of the head with a shovel would have been much less painful.

And I can’t quite remember when I noticed it again, but that yellow vinyl and metal chair/stepstool from Sears remained in our basement for the next twenty years… for all I know is still down there today.

Mom was never one to throw important things like that away.

I’m like that too.  So, I’m going to remember Wells Fargo’s $22,000 gift to establish a suicide hotline forever, and I hope that not only will you remember it too, but that you’ll also keep forwarding the story of Norm Rousseau to others for years to come, so they can remember what happened too.

Because although I only spoke to Norm for an hour or so… I know for sure that wherever you believe he is right now, he’ll smile through eternity if his battle and his death produced that kind of result.

Over the last two days, more people read Norm Rousseau’s story than anything I’ve ever written on Mandelman Matters.  And I wasn’t sure how I felt about that until I realized that maybe if his story spread and wasn’t forgotten, then maybe one day there wouldn’t be other stories like his for me to write.

And I can tell you that it sure would make his wife happy, give her some peace, even.  Nothing can change what happened.  But, yesterday she said that all she wants is for what happened to Norm never to happen to anyone else.

Here’s the link to NORM’S STORY.  Do more.  Do everything possible to stop this from ever happening again.  Stopping even one… matters a lot.

Do more.  Give a gift that keeps on giving.

Mandelman out.

BRIAN!  Dude… My good friend… Mi amigo de la Hipoteca clase… My favorite lender defender from whom laughs do engender… please don’t take me an offender… but as the message’s sender… a response to you I’ll tender… and my views I’ll therefore render…

Okay, I give in… that TBWS Daily was hysterical.  I mean, people say I’m funny, but I can’t hold a candle.

Overall, I loved the show, but, if I may… there were just a couple things…  

Just to make sure I understand what you said there… the problem is that there aren’t enough homes for people to buy?  We’re having a shortage of houses for sale, are we?  Wow… you know, I was sleeping and woke up to today’s video and for a minute there, I thought I must have dozed off for a decade or more.

But seriously… I had no idea that was the problem.  Well, alrighty then… I guess I’m going back to work… Mandelman doesn’t matter anymore… our economic problems have been solved.  And, thank heavens for that, because I was getting darn tired of writing about… um… well… I guess you could refer to it as… oh, I don’t know… how about… “the truth?”

Get more houses on the market?  Seriously?  More houses is what we need?  Am I on Candid Camera, or is there a rabbit hole around here somewhere that I can’t see?

So, I guess what you’re telling me is that at this point, the banks are actually hoarding them… holding them back for their own heads?  Foreclosing on more and more of them every day because they have a plan to corner the deteriorating home market?  Or are they just trying to pay us back for bailing them out by offering to pay most of the property taxes in this country going forward?  Or, maybe they just have a handyman fetish, so the more vacant homes the better?  Nothing turns them on like monitoring property preservation companies?

Why would they be hoarding empty houses?  Correct me if I’m wrong, but I was always under the impression that empty homes COST money as a result of their tendency to… what do they call it?  Oh yeah… decompose.

Aren’t banks the ones that are always trying to MAKE money?  Or have that backwards and banks are the ones that want to have the highest possible costs?  I can never keep that one straight… like eating eggs for breakfast… are they good for me or bad for me?  I can never remember… so I eat granola.

But, I digress…

Why do you suppose it might be that banks aren’t putting more homes on the market… or in the parlance of the economist… why are they limiting supply… making sure that it remains lower than demand?

Anyone?  Anyone?  Bueller?  Bueller?

Well, it can’t be because they don’t like money, right?  Right.  Okay, good.  I was pretty sure we’d have no argument there.

Could it be that they’re just so busy foreclosing and proprietarily trading credit derivatives for fun and losses, that they just haven’t realized that there are throngs of Californians and Arizonans clamoring to buy the homes they’re holding onto?  Again, I’d have to guess that… no, that can’t be it either.

Okay, let’s try this… What happens when the demand for a good exceeds its supply?  Oh, now lets not always see the same hands…

Brian?  Is that you I see in the back of the room doodling?  What’s that a picture of?  That’s you sitting at a table refinancing a four-plex for a dentist?  Yes, that’s very nice, but we’re trying to hold a class here, so if you wouldn’t mind…

So, what happens when the demand for a good exceeds its supply? Right, Brian!  Prices go up… or actually, in this particular case, they don’t go down as quickly.

And just what do you suppose would happen if the banks decided to make a bunch of homes available for sale, as you suggested is the thing to do in today’s TBWS Daily?  Do you think prices would tend to go up or down?  I’ll give you a hint… the answer is the opposite of “up.”

And, if home prices were to go down even faster than they are as a result of all of the other factors that haven’t changed a lick, except to worsen… you know… like, unemployment, long-term unemployment, foreclosures, average incomes… GDP… the state’s $16 billion budget deficit that’s about to constrict the state’s economy even further as we cut services and raise taxes on the wealthy… those kind of things?

Well, if home prices fell further and faster I’d have to venture a guess that more people would find themselves underwater and/or further underwater… and that would mean what do you suppose?  If you guessed further reductions in consumer spending, higher unemployment and more foreclosures… well, you’d be right once again!

And then what about all the people who, having been duped into believing that housing had bottomed, bought homes recently?  Would they be gaining equity or losing it?  Losing it, right!  And assuming an FHA/new-sub-prime loan was involved many would be underwater by Christmas… and you know what that would mean, right?

Even more foreclosures!  Maybe that’s why FHA is reporting almost 20 percent defaults on loans made SINCE 2009.  It’s kind of funny if you think about it… we’re actually creating foreclosures over at FHA even faster than we can foreclose down the street at Fannie and Freddie.  It’s very “Dr. Strangelove – Or, how I learned to stop worrying and love the bomb,” don’t you think?

And I did hear you say that the shortage was “at the low end of the market,” right?  I’m sure that’s correct, because that’s the end of the market that’s not only less expensive, but also less experienced.  Those are the folks easiest to convince to buy a home because it’s never going to be this cheap or the rates this low again… so, better hurry and get your offer in today… isn’t that about right, Brian?

Of course, I wouldn’t want to leave out my favorite flavor of scumbag, the vulture investors who envision this as a once in a lifetime opportunity to become full fledged slum lords, gouging the unfortunate and credit impaired with top tier rents for at least a decade while they put the absolute minimums into maintenance and scheme to hold onto security deposits in all cases.

No, I wouldn’t want to forget them.

See, it’s not that there aren’t enough homes on the market really, right Brian?  It’s that there aren’t enough homes that can be purchased below market value that’s the problem.  Realtors don’t really want more inventory… they want more inventory that can be purchased at distressed prices.  I’ll be happy to put my home on the market tomorrow, just not at a price at which it would sell any time soon.

Don’t get me wrong… I do understand that the banks dumping homes on the market at distressed prices would make summer fun for Realtors and mortgage brokers… and Lord knows I do like seeing you guys having a good time… after all, you’re always a fun lot to have at a party.

But, since the banks doing what you suggest under today’s circumstances would only push us further into a recession, with housing prices falling even faster than they will otherwise, thus creating even more foreclosures… thus further destroying the housing and credit markets once the fun ends… well, I’d like to humbly suggest that IT’S A TERRIBLE IDEA.

So, if you put it all together… the worsening employment and overall economic conditions (except in the media where it’s an election year), combined with the tightening of the already tight credit markets… and with the unabated flood of foreclosures on the horizon (forecasted to exceed the number of homes lost to-date, by the way)… and the permanently broken private securitization market… CA’s $16 billion and growing state budget deficit… and the need for Washington D.C. to reduce spending going forward…

… to say nothing of the EU’s high wire act, sans net, that’s destined to see one or two countries fall to their deaths sooner than we think, thus causing us to nationalize or bailout several or more of our TBTF banks once again… and then factor in the possibility of Mitt Romney and the GOP actually winning in November… OMG, OMG, OMG… consider all that…

… And you’ll want to eat a gun.

But… STOP!  Don’t do that.  That is NOT the answer, Brian.

Just like it’s NOT the answer to… “put more homes on the market.”

From your good friend who loves you… and as always I remain…

Most sincerely yours…

Martin

xoxoxoxoxo…

Martin Andelman

Mandelman Matters

P.S. If I’m in town, I think I’m going to come to Anaheim to see you guys… I figure you’re just dying to buy me a beer.  And tell Frank to be careful on that bike.

Mandelman out.

Hey, to subscribe to TBWS… CLICK HERE!

Just like the last VICTIM OF WELLS FARGO I wrote about, Wells Fargo claimed that Norman and Oriane Rousseau had missed a mortgage payment.  But the payment HAD been made in person at a Wells Fargo branch by Cashier’s Check, and Mrs. Rousseau has the receipt for the transaction.

The Rousseaus file a dispute with Wells Fargo over the supposed missing payment.  Wells Fargo “investigates” and comes back saying that the Rousseaus had stopped payment on the check.  They stopped payment on a Cashier’s Check?  Seriously?

I don’t want to spend too much time on this ridiculous point, so here’s how Rousseau’s lawyer explains this technical yet wholly insipid issue, and then we’ll move on…

The teller’s receipt establishes that the cashier’s check was in the custody and control of Wachovia on April 1, 2009, and the research by the Cashiering Department should have concluded that Wachovia screwed up by not applying the cash-equivalent funds to the Rousseau’s account. After delivery and acceptance to the branch office, it was Wachovia’s responsibility to safeguard the instrument; Wachovia itself effectively stopped payment on the cashier’s check.

Okay, so let’s get back to the meat of the story…

Concerned that they could not resolve the payment dispute but told they should apply for a loan modification, the Rousseaus hired a law firm and submitted a loan modification application.  After that it was standard operating procedure at Wells Fargo… we lost this, and we lost that, resend this, and resend that… for almost a year.

Good Lord, Wells Fargo, could you please do something differently just once?  This article is almost becoming a form letter.

Wells Fargo then of course told the Rousseau family not to make their payments, that they were being considered for a loan modification and that making their payments would immediately disqualify them.

So, they saved their payments just in case Wells decided to deny them a modification.  Saved every single one just in case the bank decided to act like… well, Wells Fargo Bank.

Then Wells sent them a Notice of Default, but when they called to say they wanted to reinstate their loan, Wells said what they always say… IGNORE IT… don’t worry about it, everything’s fine, it’s just an automated sort of thing… why, you’re being considered for a loan modification.

Then Wells filed a Notice of Sale on October 28, 2010.  Their home would be sold on November 22, 2010.  And still Wells said… IGNORE IT… it’s just another automated sort of thing… your loan modification is still pending… and please re-submit some documents.

It was November 10, 2010… just 12 days before their home was to be sold… when the Wells Fargo representative told the Rousseau’s that their loan modification had been denied.  The reason: Insufficient income.

Yeah, but you know the funny thing about that is that their income hadn’t changed a nickel since they applied for the loan modification.  So, what’s the deal?  Did it take Wells Fargo a year to figure out the Rousseau’s income was insufficient?  Is that the story I’m supposed to be buying into?

You’re a liar, Wells Fargo.  Either you knew you weren’t going to approve their loan modification, or you’re the most incompetent financial institution in the history of the world.  And you don’t just do this sometimes, you do this all the time… and especially to people in their 60s or older.  Why is that do you suppose? 

In case you’re wondering what I’ve been up to, I’m actually collecting Wells Fargo stories at this point.  I figure it’ll be a hoot to put them all together into a book.  What do you think?  Should I autograph a copy for you when it’s done?

That same day the Rousseaus found a lawyer and discovered they had a RIGHT TO REINSTATE their loan.  (Nice of Wells not to tell them that, by the way.)  They contacted Wells and requested a reinstatement quote… TWO DAYS LATER Wells finally gave them the phone number for RCS, the trustee.

But, RSC said that reinstatement would take two weeks and trustee sale was going off as planned in 8 days.  Wells got them their reinstatement quote too… it was dated November 15, but received via email on November 17, 2010.

And it expired in two days and had to be received in Texas by November 19, 2010.

The Rousseaus had more than enough in savings to reinstate their loan, they told Wells Fargo that… but now they couldn’t get the money from their IRA in time for the 2-day deadline and Wells refused to postpone the sale.

So, the Rousseau’s home sold at the trustee sale on November 22, 2010.

Next the Rousseaus go through a series of lawyers.  Finally, they get a good one and in July of 2011, the court grants an injunction contingent on them making a monthly payment of $1800.

But, by December of 2011, Wells finally wore the Rousseaus down and they just couldn’t make December’s payment.  They used up all their money fighting Wells Fargo, and Norm had been unemployed since the foreclosure.  He was taking odd jobs as a handy man to make ends meet.

Wells Fargo immediately goes to court… gets the injunction dissolved… then proceeds with the Unlawful Detainer… the lockout is set for May 15th, 2012… at 6:00 AM.

THAT’S TOMORROW MORNING… AT 6:00 AM.

Over this past weekend, Norm Rousseau talked with their attorney who is working pro bono by the way.  Basically, his lawyer tells him…

“Look… let’s face the facts here.  We’ll proceed with the lawsuit.  We’ll fight like hell to get you back in the home, but you have to be ready with some sort of plan so you’re not left homeless and on the streets.”

Norm found someone who has a 27-foot motorhome he can use, but after he gets it home on Saturday… it stops running… it won’t start.  But, Norm Rousseau is a man in his 50s with mad skills.  He goes to work around the clock taking apart the engine, doing everything he can to get it running so that on Tuesday morning he will have somewhere to house his family.  He’s up all night Saturday night, but still can’t get it running.  It’s too big to tow with a car.

 

His mind must have been wandering late on Saturday night.  What must a man, a father, a provider be thinking when he knows that everything in life has somehow gone terribly wrong and there’s nothing left to do?  He must have been imagining the sheriff pulling up to evict his family on Tuesday morning… just two days away, as the motorhome’s engine lay in pieces in his driveway.

 

I can only imagine what must have been going through his mind as he worked tirelessly, without sleep, on that engine and electrical system… as the clock ticked away the hours, I’m sure going faster and faster as time was running out.  Damn, it’s already 11:00 PM… then it’s 3:00 AM… and then 5:00 AM… and then before he knew it… a most unwelcome sun was shining… 9:00 AM…

 

I can almost hear him thinking: “Damn it, what am I going to do?  How could this have happened?”  I can hear him swearing under his breath as he fights with the old parts trying to get them to work together again… I can see him staring at the engine as the will to go on was leaving his soul…

Norman and Oriane Rousseau had bought their home in Ventura, California in 2000, putting nearly 30 percent down, which was their life savings.  In 2006, every time they went into the World Savings branch they’d get pitched on refinancing into one of World’s infamous Option ARM loans… that are now illegal, I believe.  After a couple of years of being pitched, they finally bought into World Saving’s lies.

They had told World Saving’s loan officer, ERIC COOPER, that they were only interested in obtaining a conventional 30-year, fixed-rate loan.  They wanted consistent payments over the life of the loan.

But COOPER assured them that they could significantly reduce their monthly payments… by more than $600 per month, with a lower interest refinanced loan. COOPER said that the new Pick-A-Payment loan product was better suited to their situation.

He described the Payment Option ARM as the new industry standard.  He pointed out that the lower interest rate and payment flexibility were valuable advantages that were not available with other loan products.  And he said that even more importantly, unlike the previous WORLD loans, the interest rate was tied to an index with historically low rates that were continuing to decrease.

According to COOPER, industry experts projected the interest rates to continue to fall, and so their monthly payments would be EVEN LOWER than their initial payments.

Even under the worst case scenario, COOPER assured them, the historical data for the index indicated that changes in the interest rate would only be slight, and if an increase should occur it would have a negligible effect on their monthly payments… no more than a few dollars.

And besides, COOPER explained, the loan would only be around for a couple years, as they should expect to refinance within the next two years to take advantage of even more favorable interest rates and as the steadily rising housing values would surely increase the amount of their equity in the property.

Then COOPER went for the close…

On the condition that the Rousseaus apply for the new loan that very day, he would agree to waive their pre-payment penalty, stating that there would be virtually no costs to refinance beyond a $35.00 application fee.

Yeah, COOPER, you’re a real peach.

COOPER also convinced the Rousseaus that it was in their best financial interests to consolidate approximately $25,000 in unsecured debt in the refinance transaction, citing the benefits of the lower interest rate and the convenience of having only one payment.

The Rousseaus provided COOPER with accurate and truthful information regarding their income and assets, and COOPER was such a nice guy that he offered to complete the Quick Qualifying Loan Application on their behalf.

Gee, thanks COOPER.

It was right around November 1, 2007, that WACHOVIA arranged for a notary to complete the closing at the Rousseau’s home.  The notary discouraged their review of the documents and directed them straight to the signature lines, but the Rousseaus noticed that a pre-payment penalty in excess of $4000.00 was included in the closing costs… the fee that COOPER had promised to waive if they applied that same day.  They called COOPER and he apologized for the oversight, but tried to get them to sign anyway, because it would only add a couple of bucks to their payment.

They said… no… they’d reschedule the appointment and wait for the four grand to be taken off their bill, thank you very much.

Two weeks later, the notary returned and they signed the paperwork for their new $368,000 state of the art loan.

Now, the Rousseaus didn’t know it at the time, but COOPER was a lying sack of garbage that had misrepresented just about everything having to do with their new loan.

The 7.2% interest rate of the new loan was actually higher than their old loan and higher than the 6.8% quoted by COOPER.  The “significant reduction in monthly payments” was an illusion accomplished by comparing the fully amortized payment of the 2006 loan with the negative amortizing minimum payment due under the new loan.

The new loan, at annual change dates, added deferred interest to principal and the loan amortized, with payment increases capped at 7.5% for ten years.  Then, the new loan recast when negative amortization reached 125%.

The Rousseaus were never told about the new loan’s fully amortizing payment of $2,497.94 per month, in fact their payment amount was intentionally misrepresented by COOPER.  And the new monthly payment could never decrease because it represented the minimum payment possible… the negatively amortizing option that meant payments would increase at each change date.

But that wasn’t enough for our boy COOPER.  The Rousseaus were charged $2,640.00 in origination fees for the “low cost” refinance, which made a tidy profit for World/Wachovia/Wells/Whatever bank.

And best of all, an undisclosed Yield Spread Premium (“YSP”) of $4,195 was charged for placing them in a loan with an interest rate .50% higher than they qualified for, and that YSP increased their monthly payments by $123.32, or $44,395.20 over the life of the loan.

The truth is that the Rousseaus were a heck of a long way from being considered well qualified for their new loan. Their fully amortized payment represented a total debt-to-income ratio of 27.91%, but that percentage was based on income figures that were grossly overstated by guess who? That’s right… COOPER.

The Rousseaus told COOPER their total gross annual income was, $76,000, but somehow it got listed as $136,800 on the application.  You know… the application that good old COOPER was nice enough to fill out for the Rousseaus.

So, it was Sunday… yesterday… around 10:00 AM… and Norm couldn’t get the motorhome running.  He must have realized that he couldn’t handle the shame of seeing his wife and stepson evicted with nowhere to go… living on the street.  I don’t know how anyone could face that reality.  I don’t think I could. 

 

How could it be that just 12 years before they had put their life savings down on their first and likely last home?  They had done everything right, but nothing was right anymore, and I’m sure to Norm Rousseau, nothing would ever be right again. 

 

Their church had offered to help them, maybe find them somewhere to stay temporarily, and that would be fine for his wife and her son… but not for him.  I’m sure he wept as he looked at the engine parts laying there, realizing that it was over.

 

Norm Rousseau called me a couple of months ago.  He wasn’t asking me to help him, in fact, he never even told me about what he was going through with Wells Fargo.  No, Norm was concerned about someone else who was losing a home.  A really good person who’s done so much for so many others, was how he described her.  It wasn’t right what the banks were doing he said.  He was hoping that I could do something to help someone he knew, because she was someone who had helped others… but he didn’t say a word about himself.

 

Norman Rousseau gave up over that engine that sits in pieces in his driveway today, the sun shining down making the metal parts hot to the touch.  Maybe it was the frustration of having nowhere to turn for justice, maybe it was the shame he felt that somehow he had let his family down… even though that was not the case at all.

 

Sometime mid-morning on Sunday Norm Rousseau ended his own life.  He went into his garage and shot himself.  At one point he could have reinstated his loan, that’s what he had planned to do, but Wells Fargo had made that impossible… they stripped him of everything he had.

And now, his wife and stepson are to be evicted at 6:00 AM tomorrow morning.  They have nowhere to go, they have no money, they are still in shock over the loss of Norm.

And I don’t know what to do really.  I’m going to call the sheriff’s office in Ventura… see if I can persuade them to drag their feet for a week before locking them out.  Their lawyer is trying to file something with the courts, but maybe you can think of something too.

Maybe you can forward this article to people in the media.  Tell them what’s going on… maybe someone will care enough to do something.  It’s 11:21 AM and I’ve been up all night again, I can’t really keep this up much longer… but somehow I felt like telling Norm’s story was the very least I could do.

Since Wells Fargo had already done the very least they could do.

Rest in peace, Norm Rousseau.

Mandelman out.

John Stumpf, CEO

john.g.stumpf@wellsfargo.com

Or, by phone: (415) 396-7018 or (866) 878-5865

Or, if you want to have some fun, since I know this physical address is correct, why not grab an envelope, buy a stamp and reach out to him via regular mail.  For extra smiles, consider throwing old keys in with your letter, or I’ve always enjoyed tossing a small handful of sunflower seeds in before sealing…

John G. Stumpf

Chief Executive Officer

Wells Fargo Bank

420 Montgomery St.

San Francisco, CA 94163

For a copy of the complaint in the Rousseau’s

lawsuit against Wells Fargo…

CLICK HERE.

Memory.

Yesterday, Barack Obama told an audience at a campaign rally that “sometimes I forget” the magnitude of the recession … and today, the RNC wants to make sure everyone remembers this quote.  Their rapid-response team already has a video spot up less than 24 hours later, complete with somber, funereal music and the obvious data [...]

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Uh oh.

Via BuzzFeed, pity our poor media that it was The One who said this and not Romney. The difference is a full day’s worth of breathless coverage of a callous elitist who’s out of touch with America’s economic hardship. Maybe two, unless they get interrupted with a hot story about a teen Mitt beating someone [...]

Read this post »

NACA stands for the Neighborhood Assistance Corporation of America; a nonprofit that provides “Home Save Counselors” to assist homeowners trying to get their mortgages modified.  They put on really big shows at convention centers and have lines of homeowners waiting overnight… that sort of thing.

I’m not sure why, but meeting with a “Home Save Counselor” doesn’t make me feel like I’ll be talking with a commissioned salesperson who will be potentially making up to $1,000 on my loan modification case?  A “Home Save Counselor” is on commission?  What’s next?  Does the nurse in the Emergency Room get a bonus if I get an MRI?

Well, according to a reader of mine who wrote to tell me that he or she had been working at NACA and, among other things he or she found objectionable, was the compensation structure… or, the commission plan would be a better way to phrase that.

Here’s what my reader, who shall remain anonymous, had to say after working as a NACA “Home Save Counselor” for almost a year…

The pay structure at NACA is unbelievable.  They start you off at $12.00 and hour until you finish your training.  You’re told that within four months you should have built your pipeline.  Most of that pipeline consists of files transferred from those who have left the company’s employ.  

 

After training ends, your hourly pay drops to $8.00 an hour and becomes a draw against future commissions, the thinking being that by this time you should be closing loans – YEAH RIGHT.  The commissions could be anywhere from $750 to $1,000 – depending on the target (credit).

 

If you are licensed you get the 100% commission – if you’re not licensed you get only 80%, with the other 20% going to the mortgage consultant that pulls the bank application.  I could never figure out what happens to the percentage that I would think would be given to the mortgage consultant that qualified the member initially.  

 

The turnover rate is very high.  And they don’t appear to care who leaves or stays – they profit either way.  You can’t imagine how many mortgage consultants leave the company and never get that 80%.    

 

And you have to re-pay what they call, “The Draw.”  There are countless employees that owe NACA thousands of dollars, and are constantly fighting to receive their commissions.

Now, to begin with, I checked the NACA website and found they recruit for open positions right there.  Here’s what it lists as desired experience, just in case you’re interested in becoming a NACA “Home Save Counselor.”

B. EXPERIENCE: 

a.      Counseling

b.      Call Center

c.      Loss Mitigation

d.      Strong computer skills.

e.      Community Involvement

f.       Financial Services

g.      Mortgage brokerage, origination, processing and/or counseling is preferred.

Well, I was glad to see that they, at least, did include “counseling” on the list.  But, I can’t help but wonder how many people out there have a resume that looks like this:

“Mortgage brokers” who have worked for “financial services” companies…

Who have “loan origination” experience, having worked in a “call center”…

With strong desktop underwriting… no, that’s not right… I meant, “strong computer skills,” and know what the term “loss mitigation” means…

 

Who are also “counselors involved in their communities?”

I only ask because I’ve known quite a few people in my 50 years on this planet, and I’ve personally never even heard of a… “Computer literate involved community counseling mortgage broker with telemarketing and loan originating experience in the financial services industry,” have you?

Do they even make those?

“Hello, Central Casting?  Yes, I’m looking for someone to play the part of a “Computer literate involved, community counseling mortgage broker with… CLICK.  Hello?  Hello?”  Huh, we must have gotten cut off… don’t you just hate AT&T?

Come on… I was born at night, but not last night.  Once you put “mortgage broker” on that list, you’re looking for a mortgage broker, right?  You know any mortgage brokers with diverse skill sets that you’d consider “many and varied?”

Why don’t they just say they’re looking for a mortgage broker to work on commission and sell people on applying for loan modifications?  They should let me write their ad on Craig’s List, I’d have the phone ringing off the hook.

Here’s what else it says on NACA’s website about working there…

“NACA staff have a passion for and commitment to community advocacy and the delivery of excellent services to working people.

 

The Home Save Counselor works directly with at-risk homeowners across the United States by providing comprehensive phone counseling. The Home Save process requires homeowners to complete information and submit documents through NACA’s website.  The homeowner can obtain comprehensive counseling either face-to-face in a NACA office or by phone through the counseling center. 

 

The Home Save Counselor should have experience with counseling, calculating income, budget preparation and traditional loss mitigation workouts. While NACA’s Home Save solutions are not the same as traditional workouts offered by lenders/servicers, we need those individuals skilled in traditional workouts so we may teach the Home Save process.

Home Save Counselors work from the Counseling Center and will be counseling homeowners over the phone. The Counseling Center is operating from 8:00 a.m. to 11:00 p.m.  Employees work on two shifts.  NACA, at its discretion, may change the shift hours.  All Counselors may be required to work longer hours or additional days to accomplish the work.  Some staff are provided the opportunity to participate in NACA’s Save-the-Dream events which occur throughout the country.”

 

Well, the long hours are no problem… they’re working on commission right?  Commissioned sales people never mind working late as long as they’ve got “Ups” or “Leads” to “close on a loan mod deal,” after all they’ve got to cover their “nut” and “pay back their draw”.… is that about right for how I should be phrasing that?

It’s funny too because a few months ago my wife and I bought my daughter a new car for her birthday, and we both have such fond memories of the “Vehicle Attainment Counselor” we worked with at the VW dealership.  Actually, by the time we left in our new car, he had also helped save our marriage and made me understand my inner feminine child… oh, shut up, shut up, shut up!

He was a car salesman, which was fine by us as we were looking to purchase a car.  And I couldn’t pick him out of a line up today if there were prize money involved.  I can, however, describe the car we bought… it’s a Jetta TDI, black and tan leather… sunroof… gorgeous.

“Counselors,” is that what we’re calling them now?  How stupid do they think we are?  I don’t have a stockbroker, I’ve got a “Monetary Separation Counselor,” is that the deal?

Look… I have wanted to like NACA ever since I started reading about how Bruce Marks was delivering old furniture to the front lawns of bank CEOs… he seemed like a guy after my own heart for a while.  But all I ever hear from homeowners is that they went to a NACA Revival Show, and either nothing happened, or something bad did.  It’s never a positive experience… never.

And now maybe I’ve discovered why… commissioned mortgage brokers masquerading as “counselors from the community,” making up to a grand for selling loan mods.  You know, I’ve been wondering where all the mortgage brokers who used to sell loan mods went ever since the FTC’s and AG’s task forces started shutting them down a few years back, and the MARS rule pretty much put anyone out of business all over the country, if they weren’t already.

So, now I know… they’re at NACA… of course… why didn’t I think if that.  I should have realized that they’d all end up as “counselors” at a nonprofit housing counseling agency largely funded by HUD or other tax dollars of mine.  That is a truly lovely thought… now if you’ll excuse me I’m feeling some projectile vomiting coming on.

By the way, it’s not as if I’m the only one who feels this way about NACA… check this out…

Cleveland, Ohio — Homeowners should beware of an out-of-town housing assistance group that claims to help people get better mortgage terms, local foreclosure prevention groups say.

 

The groups — Empowering and Strengthening Ohio’s People, Neighborhood Housing Services of Greater Cleveland, Community Housing Solutions and the Cleveland Housing Network – issued a statement Wednesday against an event planned in late June, saying the sponsor jilted homeowners last time it came to town.

 

The Neighborhood Assistance Corporation of America, in Boston, has scheduled an event June 28-July 2 at Cleveland’s Public Auditorium. The organization held a similar event in June 2009 at Cleveland State University’s Wolstein Center.

 

“NACA claims to have the best homeownership and foreclosure prevention program in the nation,” the local group’s statement said. “But that is no consolation to the hundreds of homeowners who were jilted by the organization the last time they came to Cleveland.”

Bruce Marks, NACA’s founder and chief executive officer, said the local groups were threatened because his organization has serviced 650,000 clients nationwide.

“It is just petty organizational jealousy,” he said. “It should be about the homeowners.”

Yes, Bruce it should be about the homeowners, but you’re not exactly the one to be on that particular soap box, are you?

Can’t you just see an ex-mortgage broker telling some homeowner that they’ll get a principal reduction and all sorts of other garbage because he needs the commish to make his Benz payment on Friday?  Close that loan mod, close that loan mod… good Lord.

Lou Tisler, executive director of Neighborhood Housing Services, said NACA staff assured many Northeast Ohio homeowners in 2009 that they would get mortgage modifications to keep them in their homes. Often, the “guarantee” didn’t materialize, and the homeowners ended up at the local agencies, he said. By then, months often had passed, making it more difficult to prevent homeowners from going into foreclosure, Tisler said.

 

“I have nothing against Bruce Marks,” Tisler said. “I have something against an organization coming in and building up expectations for people and then leaving town not making people whole.”

Yeah, I understand that sentiment… actually, no I don’t.  See NACA is Bruce Marks.  He set this thing up… made it too big to be competent, and now it’s causing homeowner harm and setting them up to be closed like they’re attending a time share presentation.

Oh, and there have been 19 complaints filed since 2007, as far as the Ohio Attorney General’s Office knows, and that includes the complaints relating to telephone solicitations and foreclosure counseling. Gee… so what does that tell us?  Maybe it’s that fewer people complain when they aren’t paying anything for the service they didn’t receive?  You think that could be it?

“Nineteen is a very, very small percentage given the number of people we’ve helped,” is how Bruce Marks responded, and he should try that argument out here with the State Bar or BBB.  I know firms with fewer than 19 complaints over the last four years, and thousands of satisfied clients… and they have a D- with the BBB.

No matter anyway… the complaints did not result in any action against the group, and why would they?  NACA’s a nonprofit with Home Save Counselors.  Now, if they were just a traveling circus of a high-pressure sale show hawking loans and loan mods, well, that would be another matter, right?

Oh, shut the front door.

People, I don’t know what to tell you about whether you should go to NACA or not… but if it were me and I was going to check it out… I’d keep my wallet in my front pocket so it doesn’t get picked, and I’d be every bit as suspicious as when talking to any other kind of commissioned salesperson.

For the record, I tried sending a couple guys to one of the events once, but the NACA goons spotted them looking like they might be cognizant of their surroundings and they threw them out.  It would seem that Mr. Marks doesn’t think his show is ready for prime time.

Too bad.  I wouldn’t mind slamming a few seniors into some crummy mods in order to pick up a quick Ten Gs for this weekend.  Come on, Bruce… I’d make one heck of a “counselor.”  (Wink, wink.)

Mandelman out.

Well, just when I thought I’d seen everything…

A Riverside, California homeowner, Denise Saluto, who was in foreclosure filed for quiet title against Deutsche Bank National Trust, as trustee for Long Beach Mortgage, and its successors and/or assigns, and Washington Mutual Bank, successor in interest to Long Beach Mortgage Company… and won by default.  (And Washington Mutual, turned into JPMorgan Chase.)

That’s right… neither Deutsche Bank nor JPMorgan Chase responded to the lawsuit.

When this happens, the Plaintiff still has to present his or her case, but it’s unopposed so it’s not exactly the highest of hurdles.  After considering the evidence presented by the Plaintiff, the court entered judgment in favor of Plaintiff and against the Defendants, thereby voiding her Trustee Sale and the Deed of Trust.  So, presto-change-o… no more mortgage… as in… it’s a free and clear house!  Ms. Saluto may still owe the debt, but the mortgage company is now like Visa or Mastercard, insecure because they’re unsecured.  And no one wants to be unsecured, especially in bankruptcy court.

Now, some will say that Deutsche Bank/JPMorgan Chase didn’t respond because they just forgot or whatever, but I don’t know whether that’s the case or not.  In fact, when their lawyer tried using this excuse, the judge was quick to point out that the file had been with the lawyer for NINE MONTHS before any efforts were made to get the default judgment set aside.

When a party loses by default like that, assuming it was an oversight of some kind, they usually appeal the decision as soon as they’re notified of the judgment by coming back into court to ask the judge to set aside the default judgment, claiming they weren’t properly served or something like that.  And depending on the reason they defaulted, and almost certainly in the case of a bank and a foreclosure, the judge will set aside the default judgment and let the case start over. 

As a matter of fact, if it’s within six months of the default, and the lawyer takes the blame, the court MUST vacate the default judgment.  It’s actually the only time you ever get to see a lawyer willingly accept blame for anything.

So, in this case, as one would think, Deutsche Bank did appeal the decision, but the thing is, they waited almost a year to do so, in legalese… the bank, “failed to establish diligence in bringing their motion for relief.”

“On February 5, 2009, Saluto filed a complaint against JPMorgan Chase Bank and Deutsche Bank to set aside a trustee sale for violations of title 15 of the United States Code section 1601 et seq. and 12 Code of Federal Regulations part 226.1 et seq., to cancel the trustee deed upon sale, and for quiet title.

Defendants failed to respond to the complaint, and on March 16, 2009, Saluto served a request for entry of default on defendants.  The next day, Saluto filed the proofs of service and the request for default with the trial court. The trial court entered default on each defendant on March 17, 2009.” An entry of default just means that the defendant cannot file a response.  The Plaintiff still must file a “default judgment package,” which contains evidence supporting their claims.

In July 2009, Saluto filed a request for entry of default judgment, and on December 15, 2009, default judgments were entered.

Then… a year went by before…

“On June 15, 2010, defendants filed a motion to set aside the defaults and default judgments under section 473, subdivision (b), which allows relief from an action taken against a party through mistake, inadvertence, surprise, or excusable neglect when the motion for relief is made “within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken.”

To support the motion, defendants filed the declarations of their attorney, Jenny L. Merris; a vice-president of Deutsche Bank, Ronaldo Reyes; and a research analyst of JPMorgan Chase Bank, Harold Galo. The declarations stated that defendants had no record of receiving service and were not aware of the lawsuit until March 2010.”

So, on October 28, 2010, Judge Mark E. Johnson heard the banks’ motion.

At the hearing, Judge Johnson stated:

“I’m going to deny the motion. I do believe that I am outside of the six-month limit. . . . I also don’t see the due diligence. So if you want to re-bring it under [section] 473.5, I will look at that, but at least as to this ground I have before me, [section] 473 subdivision (b), I’m denying the motion.

On December 3, 2010, defendants filed a motion to set aside the defaults under section 473.5. Defendants submitted new declarations of Reyes, Galo, and Merris in support of the motion.”

Deutsche Bank claimed the bank had “no actual knowledge of this action until in or around early April 2010 when JPMorgan Chase Bank’s counsel informed it that Plaintiff had recorded the Default Court Judgment against this property.”  Deutsche Bank’s declaration claimed, “This was the first time that Deutsche Bank became aware of the existence of this action.”

JPMorgan Chase claimed that it “had no actual knowledge of this action until on or around March 2010 when JPMorgan was informed that Plaintiff was seeking to refinance the property . . . and that Plaintiff had recorded the Default Court Judgment against this property.”

This time, Commissioner Barkley granted the motion brought by the banks thereby vacating the default judgment the Plaintiff had obtained about a year earlier. Saluto then appealed the decision to California’s Court of Appeals, Fourth District, Division Two, contending that the defendants’ motion under section 473.5 was, in essence, a motion for reconsideration, and defendants failed to comply with the procedural requirements of section 1008. (Don’t worry about section 1008 for a moment.)  Saluto also argued that Commissioner Barkley simply got it wrong, and that the default judgment should have been upheld.

Now, this gets kind of technical, but Section 473.5 says that when service of a summons fails to result in actual notice to a defendant in time to defend the action… and therefore a default or default judgment is entered… the defendant may serve and file a notice of motion to set aside the default or default judgment and for leave to defend the action.

Section 473.5 says that the notice of motion has to be served and filed within a reasonable time, but not exceeding the earlier of two years after entry if a default judgment, or 180 days after service of a written notice that the default or default judgment has been entered.

Basically, because JPMorgan Chase Bank said it discovered the default in March 2010 and Deutsche Bank said it discovered the default in early April 2010, but they didn’t file their motion under section 473.5 until December 2010, the appeals court found no evidence that the two banks acted “diligently” in bringing their motion for relief under section 473.5, and therefore the trial court should not have granted the motion that set aside the default judgment.

As far as complying with the procedural requirements of section 1008, mentioned above, the court said the following…

“Because we have found reversible error based on defendants‟ failure to establish diligence in bringing their motion for relief, Saluto’s additional contentions are moot.”

So, that’s that for Denise Saluto… she won, quieted her title and now she has no mortgage on her home.  She may still owe the money to some entity, but the debt is unsecured… like credit card debt… whatever she owes it’s no longer tied to her home.

Pretty amazing, right?  If you would have asked me last week, I would have said there’s absolutely no chance that filing for quiet title will result in your loan being unsecured.  And I would have been entirely wrong because Denise Saluto just did it.

And again… did it happen because Deutsche Bank and JPMorgan Chase somehow let this slip through the cracks?  Maybe.  Or, was it that the banks weren’t prepared to defend the quiet title action… as in, they couldn’t find the note, or the assignment was a forged and fraudulent mess.

Honestly, I have no idea what happened here, and I don’t think anyone else can know for sure either.  All we can know is what happened.

So, what could happen next?

I started thinking about what could happen from here for Denise Saluto.  Would she simply walk away with her free and clear home and that would be it?  Or, would the banks have another move on the chessboard that would reverse the decision and cost Denise her home?

I called around to various lawyers and other experts, asking if the banks could somehow get the decision reversed?  The answer: No.  The decision by the Court of Appeal is essentially final.  Sure, the California Supreme Court could overturn a decision by this court, but I’m told that the chances of that happening are so remote that it’s not worth considering.

So, there are no legal maneuvers that will change what’s happened, but I can’t believe that the bankers are just going to give up and go home on this either.  Maybe they will, but maybe they won’t, right?  So, what else could happen next to threaten the title to Denise’s home?

Ooops, we forgot… we sold it to someone else?

I’m not saying this is going to happen, but it occurred to me that a “new owner” of Denise’s note could show up on the scene with paperwork showing they bought it from the prior owner, either Deutsche Bank or JPMorgan Chase, before all this transpired.

You know, like a surprise owner that just happens to have appropriately dated paperwork showing that they are the owners of Denise’s loan and therefore the quiet title doesn’t apply… she’s behind on her payments, and therefore they are moving to foreclose.

Would this be fraud?  I would certainly think so.  Would that stop the bankers from doing it?  I would certainly think not.  And would it work and cause Denise to lose her home?

The lawyers, however, all tell me the answer is no.  None of that would happen… it simply wouldn’t work.

So, Denise Saluto does now own her home free and clear.  However, it seems very likely that she still owes the amount of her mortgage as an unsecured debt.  Lawyers have told me that she could potentially have the debt discharged in a Chapter 7 bankruptcy, but it would depend on a few things lining up just right, including the value of her home being less than the homestead exemption.

In general, a judgment creditor cannot force the sale of your home unless your home can be sold for an amount that would satisfy all superior liens PLUS the amount of your homestead exemption.  It looks to me like equity of up to $75,000 is exempt if you’re under 65 years of age, and $150,000 if over 65, and if you’re married it’s higher still.

But, as with everything having to do with the law, there are plenty of caveats, limitations and nuances.  I found many of them in the California Code of Civil Procedure Section 704.730, but as always, check with an attorney before assuming anything because my experience has been that just because it says one thing doesn’t mean that it doesn’t mean another.

Okay, so what does this mean to me?

Well, in my opinion… that’s an interesting question.

For one thing, filing quiet title did work out well for Denise Saluto, and since I would never have predicted it happening in her case, I’m certainly not going to tell you it won’t happen again in yours, because as I said earlier… I don’t know why it happened.  It might have slipped through cracks, or might have been caused by other factors.

Ever since yesterday when I started reading the decision by the California Court of Appeal, I’ve been trying to come up with a reason not to file one myself.

The lawyers I spoke with all told me that you have to have legitimate doubt about who holds title to your home, or else you’d be filing fraudulently, but I don’t see that as being a problem for me or anyone else in this country whose been paying attention to the news these last few years.

I mean, since I do know that Mickey Mouse has been signing the Assignment of the Deed of Trust in most cases, and Donald Duck has been notarizing it, and since the President of the United States recently told the country that there have been thousands of fraudulent foreclosures, and with countless lawsuits alleging that Mortgage-backed securities are in fact, less filling, as opposed to tasting great… let’s just say that I would not want to be asked under oath who owns my note.

As far as my having legitimate doubts as to the holder of title to my home, I could assure any court under oath that when it comes to my hizzle, my doubt is rizzle… it’s legit.  Word.

(That was me trying to be “hip,” but let’s not tell my daughter because she will be so embarrassed.)

This decision got me thinking about all sorts of possibilities, truth be told.  Like, what if many thousands of people all filed for quiet title around the same time… like maybe a million homeowners… LOL.  I would definitely have to go pay-per-view to see that shiznit go down.

If JPMorgan Chase and Deutsche were caught bo janglin in Denise’s case, I’d have to wager that many thousands of quiet title filings would leave them in a tizzle.  (Oops, I did it again.)

So, realizing that I wouldn’t be the only one thinking this way, I went online to see how many sites there were offering to teach homeowners how to file quiet title, or represent homeowners who want to file for quiet title… and not surprisingly, there were plenty of them… some want thousands of dollars for their services, and some want anywhere from many hundreds to a couple thousand dollars for a kit that claims to help you do it yourself.

And because, even though I think it’s a long shot, I don’t think it’s more of a long shot than winning the lottery or having a slot machine pay off, so I got together with some lawyers and other experts and am putting together a comprehensive guide to filing quiet title, which won’t cost more than $100, and will offer everything the more expensive versions have to offer, and probably even more.

Will it work?  I have no idea, and I’d have to guess that the answer will be no a lot more often than it’ll be yes.  But, if you’ve decided to try it, at least this way you won’t have to spend a lot of money doing so.  For a hundred bucks, you can spin the wheel and if it doesn’t work… oh well.  And if it does… well, then… Woohoo!

(Look for the new site in the next few days at www.filequiettitle.com and www.quiettitlecalifornia.com)

If you want more information on the Mandelman Guide to Filing Quiet Title, email me at mandelman@mac.com and I’ll send you an email response with more details.  The guide will be packed with easy to understand insight and instructions, tricks and tips, rules and limitations, and even sample templates to make it easy to file your own complaint with the court.

It will help you do it right… do it cheap… and do it safely.  And I’ll be consulting with lawyers in each state, so I’ll have the specifics for your state included, if applicable.

I’m not saying you should do it… and after Denise Saluto’s outcome, I’m sure as heck not saying you shouldn’t.  All I am saying is that I’m going to make sure that you don’t need to spend a bunch of money trying it.  And it shouldn’t become the primary strategy to keep your home, because no one knows why it worked in the Saluto case… or whether it will work for you.

But, it does prove one thing fo’ shizzle… when it comes to the foreclosure crisis, no one knows what will happen tomorrow, because the only thing that’s consistent about this mess is its glaring and scandalous inconsistencies.

Mandelman out.

The International Monetary Fund (“IMF”), in its latest World Economic Outlook, stated quite clearly that mortgage write-downs, among other forms of debt forgiveness, can deliver significant economic benefits by substantially mitigating the negative impact of deleveraging on a nation’s economic activity.

The report points out that our recession is being driven by households forced to reduce their debt leading to reduced consumer spending, which in turn drives us deeper into recession.

Daniel Leigh, the report’s author, made the concept simple for anyone, except perhaps Ed DeMarco of the FHFA, to understand…

“Because debt is acting as a brake on economic growth, it is important to unstick the brake.” 

I love this guy… he’s like the Forrest Gump of the economics set.  Now get this…

“The IMF has studied the response of a number of countries to situations where large parts of the population are burdened with high mortgage debt in a recession, and finds that such programs can help prevent self-reinforcing cycles of falling house prices and lower aggregate demand.”

That sounds suspiciously familiar… which country would fall into that category?  Oh yeah… ours.  The report’s conclusions go on to give me goose bumps…

“Such policies are particularly relevant for economies with limited scope for expansionary macroeconomic policies and in which the financial sector has already received government support.”

The report focused in on the household debt reduction program implemented in the U.S. during the 1930′s… and in Iceland in our current crisis, which it said can…

“… significantly reduce the number of household defaults and foreclosures and substantially reduce debt repayment burdens.”

The report also contrasted those successes with examples of failures to effectively deal with the fallout of an economic crisis… “such as the current response to the crisis in the U.S.”

Oh, dear Lord people… what do we need a ton of bricks to fall on our heads?  Because if we keep doing what we’ve been doing to-date, that’s at least metaphorically exactly what is going to happen.

The report also said that programs must be designed with incentives for BOTH banks and borrowers to participate, “notably by offering a viable alternative to default and foreclosure.”

The IMF also pointed out that…

“The friction caused by such redistribution may be one reason why such policies have rarely been used in the past, except when the magnitude of the problem was substantial and the ensuing social and political pressures considerable.”

I’m starting to feel a little nauseous over here… is any of this ringing any bells for anyone?  Who is it that keeps talking about the need for…considerable social and political pressures?  Me, right?

The report also cited a study which found that, “political systems tend to become more polarized in the wake of financial crises,” and as a result led to problems generating collective actions… like DOERS, comes to mind.  Specifically, the report said that, “distressed mortgage borrowers may be less politically organized than banks – and this can hamper efforts to implement household debt restructuring.”

I think I’m going to need to lie down soon… but first I think I’ll go out to my driveway and slam my hand in my car door… in an effort to make the pain go away.

Join me in the Way Back Machine…

It’s the U.S. during The Great Depression of the 1930′s and FDR has just introduced the Home Owners Loan Corporation or HOLC.

HOLC will be using government bonds that offer federal guarantees on principal and interest to buy up distressed mortgages from banks.  The purchases will represent 8.4 percent of our country’s GDP in 1933.

HOLC will then be restructuring these mortgages to make them more affordable to homeowners.  The result will be that 80 percent of these restructured loans, roughly 800,000, will be protected from foreclosure.

Primarily, HOLC will extend the term of the mortgages, in some cases doubling the term, and converting the loans from variable to fixed rate loans, but HOLC also wrote off principal in many instances so that no loans exceeded 80 percent of the current appraised value.

Over the next twenty years or so these mortgages will be sold and the government will even make a profit by the time the program ends in 1951.

Referring to the HOLC program, the IMF’s report said…

“A key feature of the HOLC was the effective transfer of funds to credit constrained households with distressed balance sheets and a high marginal propensity to consume, which mitigated the negative effects on aggregate demand, which was caused by the recession and need for household deleveraging.”

In other words, it worked.  Well, I’ll be Bernanke’s Uncle.  Isn’t Ben supposed to be an expert on The Great Depression?  I could have sworn…

But wait… there’s more…

Apparently, this year Iceland has been forgiving mortgage debt for its citizens in an effort to stimulate economic growth and guess what?

It’s working there too!

The Icelandic government and the reconstructed Icelandic banks worked together to develop, “a template to be used in case by case restructuring discussions between borrowers and lenders.”

“The templates facilitated substantial debt write-downs designed to align secured debt with the supporting collateral,” or in other words, reduce the loan in line with the current value of the home, and make sure that the terms are such that the homeowner has the ability to repay the loan.

Brilliant!  What are they putting in their Cheerios over there?  We need some, whatever it is.

“The IMF found that such case by case negotiations safeguard property rights and reduced moral hazard.”

No kidding.  Do tell.

Then only problem was that the process was time consuming because as of January of this year, only 35 percent of the restructuring applications were processed.  Here in the U.S. we’ve been knocking our politically divided heads against the wall for four years now, and we’re nowhere close to having processed 35 percent of anything.

But, Iceland is obviously a country with advanced critical thinking skills, likely the result of not having CNBC or Fox News channels, so it has introduced a debt forgiveness plan which writes down seriously underwater mortgages to 110 percent of the current value of the given property.

Iceland’s officials did say that before debt write-downs really took off, it took the announcement of “… a comprehensive framework and clear expiration date for relief measure.”

See, that leaves the U.S. out, right there.  Name one thing we’ve done since 2006 that you’d describe as being either comprehensive or clear?  Go ahead… I’m waiting.  Okay, I’ll make it even easier… what have we done that’s been somewhat comprehensive and reasonably clear?

Right… that’s what I thought you’d say.  The only way we’ll be able to make this Iceland strategy work over here is if we can succeed by developing something that’s “narrow and muddy.”  Comprehensive and clear seem entirely out of reach for us.

So… how’s it going, Ice, Ice Baby?

“As of January 2012, 15 to 20 percent of all Icelandic mortgages have been or are in the process of being written down.”

Of course, as an intuitive economist once said, and I’m paraphrasing here…

“If you want to create the much-admired Danish model, you’re going to need some Danes.”

Iceland’s mortgage write-down program happened as a result of thousands of its citizens taking to the streets demanding that something be done about the debts the people had incurred buying homes during the bubble at what turned out to be wildly inflated prices.  At one point, they surrounded the country’s parliament building and started throwing rocks.

(And people laughed at me last year when I suggested that we form a group called, “People in Favor of Hitting Politicians with Sticks,” or PIFOHPWS… for short.)

Of course, in our country, there’s no way that would ever happen because we’re all way too ashamed to be seen on CNN in what would be called, “The March of the Deadbeats.”  Which is why I suggested the DOERS idea… stay home, send emails and other clever things through the mail.  Occupy without leaving your house, if you will.

Even though, you would think that by now more people would be figuring out that if home values fall by 60 percent or more… and unemployment soars past the 20 percent mark… there are going to be an awful lot of people that may look, “irresponsible,” but are purely innocent victims of a global credit crisis.

Are you listening, Rick Santelli, you odious, insufferable, unenlightened and ill-bred jackass?  I doubt it.  I think it’s abundantly clear that you haven’t been able to listen to anything but the droning that goes on incessantly between your pinned back ears.

So, how come the whole debt forgiveness thing is working so well over in Iceland, but if the issue even comes up for discussion over here, we can’t stop a parade of badly behaved adult children from whining about how they’re paying their mortgage payments and therefore would rather see the country mired in a 40-year economic funk than lift a finger that could potentially benefit someone who took out a second to remodel a bathroom?

Who are these people, and more to the point, who are their parents?  Because when the revolution comes, I’m taking them out first.  Our new society simply cannot be allowed to start with their sort of genetic defect.  Or, like the man said… you can’t fix stupid or petty.

Brendan Keenan, writing in the Independent.ie, had the following to say on the topic of the Iceland debt forgiveness strategy…

“It will probably be necessary in the end to do something of the kind in this country, but any government trying should tread very, very warily. We may not be Greeks, but nor are we Icelanders.”

That’s true… but what are we in the eyes of the rest of the world these days?

A spoiled, drunk 15 year-old waving a gun in their face?

Mandelman out.

Misguided budget-cutting?

I’m pretty sure this isn’t helpful for the Obama re-election campaign message.  His ads talk about the Great Recession, and how his audacious leadership has led us out of it into … oh, I guess we can call it the Great Stagnation.  Paul Krugman’s declaration of a depression interferes with that message just a tad, [...]

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What you’re about to read about should never be allowed to happen in this country, and what is particularly troubling is that Wells Fargo Bank could have very easily prevented it by simply communicating with its customer honestly or competently.

And the law firm employed by Wells Fargo to wrongfully foreclose on this 73 year-old widow’s home of 43 years, Anglin, Flewelling, Rasmussen, Campbell & Trytten, LLP of Pasadena, California, could have stopped this travesty of justice as well, but these lawyers can’t even be bothered to actually appear in the courtroom, choosing instead to phone in their odious nuggets of legal claptrap, entirely devoid of common sense, because that’s how they roll.

As it stands, and as a result of Wells Fargo’s handling of the matter, a 73 year-old woman is at risk of losing a home that she has owned for 43 years… and all because she fell behind on her mortgage by $104.27. 

That’s right… we’re talking about a hundred bucks and change here.  You want some offensive stupidity?  Wells you’ve certainly come to the right fargo.

A Personal Note to Laurie Maggiano at Treasury… I just wanted you to know that I was sincere when I told you that I’m trying to suppress my aggressive tendencies and stop being so snarky all the time, but are you following this case at all?  Because as long as the Obama Administration continues to ignore this sort of thing, you could be the Michelangelo of Home Preservation and it won’t matter because your ceiling’s being covered in a Navajo White semi-gloss with a stipple effect.  I’m just saying…

Remember Patricia Martin’s foreclosure situation with Wells Fargo? 

I wrote about it on February 20^th of this year, and if you didn’t see it, I’d suggest that you continue reading what follows and then if you think it necessary, you can click DOER ALERT to read the original article.

Patricia Martin’s DOER ALERT, by the way, was the only one that did not succeed. Although Wells Fargo had responded to a DOER ALERT in the past, this time they completely ignored our pleas for the bank to do the right thing and stop her eviction.

She was not evicted, however, as her attorney, Mark Zanides (who happens to be a good friend of mine), drove a few hundred miles to appear in court on her behalf and successfully stopped the eviction.

And this past week, Mark won in court again, with the court granting the preliminary injunction… so at this point… Patricia Martin will be remaining in her home as the case proceeds to trial… a jury trial, by the way.  (You can read Patricia’s declaration HERE.)

You can call me naïve, but I just can’t believe that even Wells Fargo, the bank that appears committed to being the worst the servicing industry has to offer, wants to do this.

Zanides estimates that the bank has spent a significant amount already on legal fees and now is certain to spend a whole lot more.  Patricia Martin’s home is worth no more than $275,000.  How can it be worth it to spend $50,000 or more to take her home, when she wasn’t even late… didn’t want a loan modification… and could have simply continued making her payments… as she has for the last 43 years?

How can anyone want this to happen?

Memo to Wells Fargo: If you’ll just have someone contact me to explain the reasoning behind this situation, I promise to explain it from your perspective and stop calling your bank disparaging names.

But, until then, and absent any information to the contrary, what am I or anyone else to think other than that you are the epitome of the worst sort of corporate citizen… the sort of bank that is not to be trusted… a bank that we should all warn our children about… a bank that should reasonably be despised for its behavior.

Here’s an in-a-nutshell type recap with quotes from the declarations of those involved:

Patricia Martin’s daughter, Nicole Ortega (who lives in the home with her husband and her mother) went into a Wells Fargo branch on September 27, 2010 and asked how much was owed to satisfy the August and September payments.   She then paid the amount that Wells Fargo said she owed, $3238.30, which she thought represented a monthly payment of $1619.15.

She didn’t know it for several months, but the amount she was paying was $104.27 short of the required amount.  In her own words, from her declaration…

“I had previously been told by Wells Fargo Bank’s agents that the bank does not take partial payments.  The fact that the bank took these payments confirmed to me that I had made a full payment.  Had I known that the full payment for September 15 was supposed to be $1723.41, I was ready willing and able to pay it.  In no way would I ever jeopardize our family’s home to save $104.27, that is, the difference between the amount paid and what was apparently the amount owed.”

Yes, and we certainly believe you.  In fact, I think it’s safe to say that every single human being with a fully developed adult brain on the planet believes you… okay, except maybe Larry Summers and Ed DeMarco… and the fact that you had to write a declaration stating this fact so that it could be used in court is absolutely emblematic of the insanity American homeowners continue to face today.

Roughly five years into the financial and resulting foreclosure crises, and this story, instead of shocking every ear who hears it, is starting to sound like meatloaf and mashed potatoes.

Wells Fargo’s employee, Michael Dolan, states in his declaration that he is an Operations Analyst in Wells Fargo’s Mortgage Lending Operations, located at 4101 Wiseman Blvd. in San Antonio, Texas.

Prior to his current position, he states he was a Vice President in the Portfolio Retention Department at Wachovia Mortgage, FSB, and prior to that he says he was Vice President of Loan Services at World Savings Bank, FSB.  He also mentions that he started at World Savings in 1984, so he was at World and Wachovia for a combined 23 years.  So, I’m going to go ahead and assume that he knows how to read a calendar and mail a letter.

Here’s what Patricia Martin’s daughter’s declaration says about a statement made in Mr. Dolan’s declaration…

“The Dolan declaration states that ‘on or about September 29, 2010, the Bank sent the borrower a letter informing her that the loan was due for September 15, 2010 loan payment, and that $1619.15 had not been applied to the loan because it was not enough to cover the balance due.’  (The letter is marked Exhibit Q.)  I am aware that my mother did receive this letter dated September 29, 2010.  However, we did not receive this letter until early June 2011, when it arrived in an envelope postmarked May 30, 2011.  I have attached this letter and the envelope in which it came.  I remember this letter specifically because it arrived so far after the letter itself was dated.  I thought that was significant, so I saved the envelope in which it arrived.”

Now, you see Mr. Michael Dolan… that makes you a lying piece of itinerant trash, because not only did you lie in your declaration, but you also figured you could cover the lie and your worthless ass by sticking a backdated letter in the mail more than eight months later.

And why not?

I mean, what are the chances that anyone would have kept a certain blue dress around all that time without sending it to the cleaners, right Mikey?

If this were the first time that Wells Fargo was ever accused of such behavior, I’d have the tendency to say… maybe it was an error.  If it were the second time… okay, what the heck.  But since no one can even count how many similar things Wells has not only been accused of doing, but in fact has been proven to have done… well, there’s no benefit of the doubt due here.  The mere suggestion is utterly laughable.

Patricia’s daughter continues in her declaration to state what anyone would have to agree is the obvious.  (You can read the Plaintiff’s Evidentiary Objections to Dolan’s Declaration HERE.)

“I did not know the September payment whose amount had been given to me by the bank employee and which had been paid on September 27 had not been credited.  Had I received Exhibit Q in early October, it would have explained what happened and I would have asked how I could pay the remaining balance of $104 or so and made arrangements to pay the late fees.”

Yes, that’s right because that’s what ANYONE would have done under the same circumstances.  She continues…

“Had I received Exhibit Q, I would not have had to make all of the calls to the bank seeking clarification that I made later on in December when I learned the September payment had not been credited.  Nor would I have needed to write the letter in December seeking explanation of why the September payment had not been credited.”  (Her letter is marked “First Ortega Dec. Exhibit A.”)

And again… she is making complete sense.  The question is why is any of this being questioned and who is the imbecile questioning it?  She continues…

In early October, I received a letter dated October 5, 2010, stating that the September payment had not been made.  (Marked “Dolan Exhibit R.”)  The letter states that ‘if this payment has already been made, then please disregard this notice.’  Since I knew that I had made the September payment, I disregarded the notice, as the bank’s letter invited the borrower to do.”

Yep, that’s what I would have done as well.

Okay, look… this tale goes on and on and as it does, it gets worse and worse.

The homeowner received another letter late in October saying that the last two payments had not been received, and that the loan was now in default.  Another letter arrived a few days later saying basically the same thing.  Again, the homeowner assumed that the letters were wrong, as in their mind the September payment had definitely been made, so they did the next logical thing… they called Wells Fargo at the number provided on the letters.

The homeowner’s daughter told the bank that they were aware that they owed the October and November payments, explaining that her mother, Patricia Martin, had been hospitalized and there were other hardships involved… but that the September payment had been made.

They asked the bank if it would be okay to make the October and November payments on December 3, 2010… and Wells Fargo representative stated that by doing so, “you will be fine,” with the exception that the December payment would be due later that month.

The Wells agent then said that she would notate the account to that effect.

During that same call, the Wells Fargo representative uttered the words that would make a bad situation far worse, she suggested that the borrower should apply for a Map2 modification, and then transferred the call to a Ms. Leffert.

Patricia Martin’s daughter spoke with Ms. Leffert and gave her some of the information she requested.  She didn’t have all of the information, however, and told Ms. Leffert that she would have to speak with her mother before going further.  Subsequently, she called Ms. Leffert to provide the missing information, and in late November Ms. Leffert stated that “you qualify” and that “you’ll be ahead of the game since the late payments will be added to the modified loan.”

And then things got even worse.  A letter dated November 18, 2010, but not received until the end of that month, now said that the note was delinquent and would need to be reinstated by paying $4829.96 by November 30^th.  Patricia’s daughter immediately contacted Wells Fargo to find out what was wrong with their system and records, as she had already made arrangements to pay October and November payments on December 3^rd.

She spoke with a representative named Jason who told her that there were some unapplied funds in the amount of $1619.15 that it looked like something was happening with, also saying that it may be applied to October’s payment.

Jason was told that September’s payment had been made, and he said he couldn’t tell her why September was not credited, but he suggested that she wait and let the bank finish whatever they were doing and it would clear things up.

Patricia’s daughter then states in her declaration…

“Had I been told by the bank’s representative that we were required to make a payment of $4829.96 by November 30 or lose our home, we could and would have done so.”

And again, all I can say is… OF COURSE YOU WOULD HAVE.  Your mother has lived in the home for 43 years… good Lord, when did our world lose its common sense and critical thinking skills?

So, of course, when she goes into branch on December 3^rd to make her two delinquent payments as she had arranged that she would do… the bank won’t accept the payments, as they were due by November 30^th.

Does everyone realize how many billions in delinquent and defaulted loans Wells Fargo has on its books… to say nothing of the untold billions in worthless garbage that exists off the bank’s balance sheet?  You do, right?

And does everyone realize that the President of the United States, the U.S. Attorney General and the Secretary of Housing and Urban Development have all made it abundantly clear that unnecessary foreclosures are to be avoided as they are not in our national interests?

So, what possible difference does it make whether a homeowner is paying on November 30^th or December 3^rd?  Wells Fargo… are you stupid, irrational and incompetent… or are you just plain evil and sadistic?

And don’t start blaming anything on “the investor,” Fannie Mae, or the mystery trust that thinks it holds this loan because this beauty of a loan is one of those fabulous pick-a-pay jobs made popular by World Savings, so it’s on you, Wells Fargo, all the way.  And should I even ask who might be responsible for such a loan being sold to a 68 year-old widow?

I’ve never been a great speller, so maybe someone at the bank could help me out here… how many “Wells” are there in “predatory shithead?”

By January Wells Fargo says they won’t fix it, won’t accept payments, and months later when loan modification is denied, house goes to foreclosure sale and is taken back by the bank.

The modification, by the way, is denied months later because Wells Fargo says they won’t consider Patricia’s son-in-law’s income.  He lives in the house with his wife… her daughter… ever since Patricia, whose husband passed on a few years ago, started having some serious medical problems.  Oh, and he’s a police officer… a sergeant on the local police force… someone who protects and serves his community.

Writing this article, I had to wonder… on how many other occasions has Wells Fargo improperly credited amounts paid by borrowers?  Luckily, I didn’t have to wonder for very long, as I remembered the article I wrote a little over a week ago about a case in Louisiana involving Wells Fargo and in front of Federal Bankruptcy Court Judge Elizabeth Magner.  If you haven’t read it, I highly recommend that you do.

In Judge Magner’s own words, after describing Wells Fargo’s behavior as being, “highly reprehensible,” she went on to say…

“Wells Fargo has taken advantage of borrowers who rely on it to accurately apply payments and calculate the amounts owed, but perhaps more disturbing is Wells Fargo’s refusal to voluntarily correct its errors.  It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods.”

So, is what has happened to Patricia Martin yet another example of Wells Fargo’s systemic misapplication of funds in order to repossess homes?

I would imagine that Wells Fargo would answer “No,” to that question.

So, fine… then you’d have me believe what?  That it’s a fluke?  An aberration?  Some sort of inexplicable, unfortunate deviation from the norm perhaps?

HORSE PUCKY.

For all of you legal eagle types… You can read Wells Fargo’s Opposition to the Preliminary Injunction HERE, Wells Fargo’s Appendix to Opposition to Preliminary Injunction HERE, and the Plaintiff’s Reply to Wells Fargo’s Objection to Preliminary Injunction HERE.

Mandelman out.

HEY DOERS… Looking for Something to DO?

Wells Fargo’s CEO, John Stumpf “earned” $19.8 million last year, according to the Wall Street Journal and documents filed with the SEC in March of this year.

If you’d like to congratulate him, you can try reaching him by email:

john.g.stumpf@wellsfargo.com

Or, by phone: (415) 396-7018 or (866) 878-5865

Or, if you want to have some fun, since I know this physical address is correct, why not grab an envelope, buy a stamp and reach out to him via regular mail.  For extra smiles, consider throwing old keys in with your letter, or I’ve always enjoyed tossing a small handful of sunflower seeds in before sealing…

John G. Stumpf

Chief Executive Officer

Wells Fargo Bank

420 Montgomery St.

San Francisco, CA 94163

### 

 

You’ll also be happy to hear that Wells has just launched its new business unit, Abbot Downing, which is dedicated to caring for the wealth of the super rich… its clients have more than $50 million in investable assets.  Only recently launched, Abbot has already recruited about $33 billion in investable assets under management.  So, very well done there.  (And I heard that one of their clients holds the patent on the color “blue.”)

I realize you’re both very busy and were it not important, I would not presume to take up any of your time, or the time of your advisers, but it has long since become clear that neither of your campaigns understands several of the key dynamics that will have a major impact on which one of you wins in November of 2012.

The dynamics I’m referring to have to do with the foreclosure crisis, a topic which, for a variety of reasons, some shared and others divergent, neither of you wants to talk much about, but it is the topic that will continue to destabilize either of your chances to win the upcoming election.

That this is the case, should not be hard to accept… in 2012, the road to the White House runs directly through the states hardest hit by the foreclosure crisis, most notably Ohio and Florida, but also Michigan, Nevada, and North Carolina, et al.  For the Obama campaign, I would say that this issue alone would normally be enough to cost you the election, but as luck would have it, you’re the frying pan running against the fire.

In 2008, the Obama campaign won the election by roughly eight million votes.  By this coming November, we will have lost roughly that same number of homes to foreclosure.  If you assume two voters per household, then there are 16 million that don’t want to vote for you.  I didn’t say they wouldn’t vote for you, the alternative being voting for fire, but rest assured, they don’t want to vote for you.

There are another four million plus in foreclosure or seriously delinquent today, so at two per household, that’s another eight million, bringing the total to 24 million.  And forecasts by Amherst Securities show 9.5 million foreclosures coming soon to a neighborhood near you, so soon enough there will be about the same number of people directly affected by foreclosure than voted in the presidential election in 2008.

The point is that the number of Americans seriously harmed by the mishandling of the foreclosure crisis are now more than enough to sway a national election.

These people are not merely upset about losing a home to foreclosure, they are enraged over having been misled, deceived and entirely abandoned, as the Obama administration ultimately stood by and did essentially nothing while their servicer tortured them as they lost their homes to foreclosure.

And, I can assure you that my description is not hyperbole to those in this unfortunate group.  In fact, many would call it understatement.

It’s interesting to realize that neither of you wants to bring up the situation related to housing and foreclosures in your campaigning.  I say that because, although it’s easy to see why the Obama campaign would avoid the topic, but one would think that the Romney campaign would be exploiting such an obvious weakness of the opposition to garner support.  And yet, the Romney campaign doesn’t want to talk about housing and foreclosures any more than the Obama campaign does.

In fact, Mr. Romney, this past year while campaigning in Nevada of all places, quite shockingly, you decided to answer a question about foreclosures by saying that what’s needed is a faster foreclosure process… in Nevada… a faster foreclosure process.

Basically, after being asked the only question certain to have tens of thousands of Nevada voters paying close attention, your response gave the Obama Administration credit for programs that successfully delayed or prevented some significant number of foreclosures in a state that’s been devastated by foreclosures more so than any other.

For a moment, all I could think was that you were trying to help Obama win Nevada in 2012, but I’ve since realized that its far more likely that you were caught off guard and didn’t know what else to say at that moment, because since then you’ve adopted the Obama campaign’s approach to the issue: Pretend it doesn’t exist.

I’m quite sure both of your campaigns have people monitoring the Internet, so you must know how ridiculous the absence of any meaningful discussion on foreclosures appears to millions of voters.  Therefore, it must be that you’re both so deathly afraid of the Tea Partiers and Rick Santelli that your campaign managers figure mums the word is your only viable option.

Well, since I see no other explanation for your mutual silence on the subject, I thought I’d offer both of you some insight and advice about your respective 2012 campaigns.  I may not know enough to be President of the United States, but I know the people of the foreclosure crisis as well as anyone could… to use the hip vernacular of a few years back… they’re my peeps.

First, to President Obama:

Okay, I understand you’ll probably win staying silent on the issue.

For one thing, Mitt Romney isn’t likely to mention the subject of foreclosures either, and if he does, it’s fairly likely that he’ll say something stupid, as he did in Nevada.

Secondly, your campaign strategists probably figure that by next fall, if asked, you’ll be able to tout your administration accomplishments related to housing and foreclosures, which, however inadequate they may be, are still heads and shoulders better than anything the GOP has suggested since 2008.  So, as I said, you’ll be running on the premise that people will vote frying pan when the alternative is fire.

Thirdly, I’m sure your people have realized that a significant number of the independents you’ve lost AND many of the Republicans who are disgusted with the economic situation have moved into the Ron Paul camp, which may very well give the Paul campaign a double digit election outcome, and lock in a loss for Romney in a replay of Clinton-Bush-Perot, 1992.  (Clinton-43%, Bush-37.5%, Perot-18.9%.)

Lastly, it’s no secret that the Republicans in both the House and Senate, since day one of your presidency, have been practicing a bizarre sort of obstructionist politics, voting in unison against anything you’ve proposed, as our nation-on-fire has continued to burn, economically speaking.

In fact, the only thing you’ve done that Republicans have not opposed was the pumping of untold trillions into TBTF financial institutions.  To everything else, they’ve very clearly said “NO,” and bringing up this track record will make it near impossible for anyone concerned about foreclosures to vote for anyone on that side of the aisle.

It all makes sense, and could be right… but you’ll be biting your nails right into the wee hours of election night, because you’ll remember what happened in the 2010 mid-terms when far too many voting Democrats, furious with you for letting them down, closed the curtains in their voting booths and chose Republican candidates out of spite.

If you want to ensure your second term, stop listening to Tim Geithner’s Moral Hazard Band, and anyone who’s ever met Larry Summers, and follow your instincts.

I know you have them because I heard you talking about how you and Michelle only paid off your student loans less than a decade ago.  I also heard your speech announcing the settlement between state attorneys general and the five largest mortgage servicers, and you said we need to do more to help Americans losing homes due to no fault of their own… and how we “have each others’ backs” in this country.

Those were smart things to say, but stopping there won’t carry you to November, you need to seal the deal and start telling the American people the truth… that we need to stop pretending that 20 million Americans all became irresponsible at the same time, buying homes they couldn’t afford, blah, blah, blah.

Our financial crisis and economic downturn took out all the investment banks on Wall Street, caused over a thousand smaller banks to become insolvent so far, crippled small and large businesses alike leading to unemployment that will take a decade to improve if we’re lucky, and threw the EU into financial chaos that may still bring an end to the union and its currency.  That’s the truth, so stop pandering to the Tea Party types, they’re short on facts, long on crazy… and won’t be voting for you in 2012 anyway.

What the American people want is an economy that doesn’t feel like the United States of Quicksand.  Surely by now you’ve started to suspect that you could double down on pumping money into the banks over the next four years and still no recovery would come.

How many quantitative easings do we need to try before we diversify our approach to include America’s middle class… QE-1 didn’t do it… QE-2 didn’t either… and don’t even get me started on the “operation twist” nonsense, which is Bernanke’s only idea to spark consumption by getting credit flowing to consumers.  Should we wait until we’ve tried QE-7… QE-12… QE-18… should we try “twisting” the decade away?

Surely you can see that the desired results of these programs haven’t occurred yet, and even if you want to think they will someday, isn’t it time to add a few other strategies to the mix?  Interest rates are simply not the problem, Mr. President, they’re low and they’ve been low… so what and who cares?

Remember last June, Mr. President?  It was Bernanke’s second post-FOMC press conference.  The Fed Chief admitted that he had no idea what was causing the economy’s so-called “soft patch,” he only knew that it would persist.  The FOMC statement blamed everything outside the United States… something about Japan along with rising food and oil prices.  He was humble, candid, and relieved that QE 1&2 had reduced the threat of deflation for the moment anyway.  But as to what wasn’t happening in our economy, he didn’t have a clue.

And yet, you’re doing nothing but bemoaning the fact that Republicans won’t pass your jobs bill even on a stand-alone basis, and following the Fed Chief’s admitted unknowing lead?

Our housing market is either double or triple dipping, whichever you’d prefer, but recovering?  Not even close.  Truth be told, it’s been in the same downward slide for almost six years, with slight interruptions caused by a fleeting combination of hype, tax incentives and the transformation of the FHA into the new sub-prime, which is now reporting defaults approaching 20 percent on loans made SINCE 2009.

I understand that American consumers are being forced to deleverage, just as the banks will have to do soon.  I understand that the credit markets are broken for the foreseeable future and that there’s nothing you can do about that.  And I understand that Europe’s economy will ultimately come crashing down into ours, causing all sorts of pain and anguish from coast-to-coast.  These things we should hold as being self-evident.

But, if you allow the housing markets to continue to fall, and foreclosures to continue to rise, you will be setting our country up to be hit hard while it’s too far down, and there will be no recovering from such a blow at such a time.  Your legacy will be such that you’ll wish Mitt Romney had won in 2012.

You’ve got the opening, or will certainly have it very soon… everything is getting worse, and it won’t be long before the Bureau of Economic Analysis will be reluctantly announcing the “R” word once again.  At that point you can reinvent yourself… and do it differently this time… the way you wanted to last time.

Be the man of the people… inspire hope and deliver change.  The only real moral hazards you have to worry about are named Geithner and DeMarco.

Take them out, save the economic day, and go down in history a hero.  This time do more than anyone says is needed… remind everyone of their obvious propensity for underdoing everything… and if it’s the Republicans that cause you to fail, then let us see you go down fighting.

Now, to presumed GOP candidate, Mitt Romney…

Okay, so I realize that you’re not the right-wing nutcase you pretended to be during the primaries… fair enough.  And I also realize that you’ll try to move to the center, without alienating the crazy factor that considers itself the GOP’s base.

But, if you’re banking, pun intended, on Reagan-esque lofty speeches and loudly criticizing the Obama Administration’s first term over things like spending and health care, your creating a situation in which your shot at winning the election in 2012 will depend purely on the vote-against-Obama-turnout… assuming that no one in Florida or Ohio brings up foreclosures, that is.

In other words, you could be anyone running… you’re doing essentially nothing to help yourself win.  Election night will be something like watching the results of a poll come in where the choices were “Anonymous Republican v. Obama.” 

If you don’t accept that, just consider the two clowns you just beat in the primaries.  Santorum, who described condoms as a “grievous moral wrong,” and said that “huge moral failings” were causing our economic problems… and good old Newt Gingrich, who attempted to make a serious case for repealing child labor laws in order to put 9 year olds from poor families to work cleaning schools after school… oh, and who promised a “moon base by 2020.”  And those two were the GOP’s saner candidates… the even crazier contenders left the stage earlier.

Oh yeah… and then there’s Mitt… the former Governor of Massachusetts and a Republican centrist with a JD/MBA from Harvard who was the first in the nation to reform health care into something near-universal in his home state… who turned around Bain & Company as its CEO, who led the committee that made the 2002 Winter Olympics a financial success… and whose father who was CEO of American Motors, Governor of Michigan, and U.S. Secretary of Housing and Urban Development.

Mr. Romney, you managed to beat out a perennial alter boy obsessed with anything of a sexual nature, and an ex-Speaker of the House who was forced by his own party to resign after countless ethics violations, including misleading the House Ethics Committee and ultimately earning the distinction of being the first Speaker to be disciplined, (the vote was 395 to 28), for an ethics violation including being fined $300,000.

Okay, so congratulations… I suppose.

So, your advisors are obviously telling you that slamming Obama is the ticket to the Oval Office, and largely because the president has failed to mitigate the damage being caused by the foreclosure crisis, they could be right… but probably aren’t.

Exclusively slamming Obama in order to win in 2012 would be a strategy much more likely succeed if, in addition to ignoring foreclosures as an issue, you didn’t also have to run on a GOP-friendly platform that favors cutting such things as food stamps, child tax credits and Social Service Block Grants, while carrying states like Florida and Ohio that continue to be destroyed by the economic collapse and specifically the foreclosure crisis.

In other words, you’ll be trying to win a national election on a platform that only the one percent… or others in the insensitive class… could love.

Social Services Block Grant (SSBG) funds enable States to provide things like daycare for children or adults, protective services for children or adults, special services to persons with disabilities, health-related services, foster care for children, substance abuse, housing, home-delivered meals… you know… luxuries.

Oh, and what are you worth, by the way… a quarter of a billion and change?  And you’re going to cut food stamps?  Screw the working poor and long-term unemployed?  You’ll redefine “fat cat” and make Herbert Hoover look like FDR in your first 100 days in office if you do what the Republicans expect you to do.

We’ve got 46.4 million people on food stamps in this country.  One in four children are eating based on food stamps right now in any given month.  The average monthly benefit comes out to be about $8 per household, per day… roughly $2.67 per day for food assuming a three person household.  That’s the program that House Budget Committee Chairman, Republican Paul Ryan wants to cut, calling it a “comfortable hammock” instead of a “safety net.”

(By the way, Ryan and his Republican cohorts have helped me as a writer by providing me with a much better understanding of when it’s most appropriate to use the word “asshole,” and for that I suppose I should thank them.)

In Florida alone, there are 3.29 million people on food stamps as of this year, a number that’s doubled since 2008, although the dollar value of the benefits has nearly tripled to $5.15 billion as more families have been forced to seek assistance from the program.  Under the Republican budget proposal, estimates show that 234,000 Florida households will lose their food stamps benefit

So, you’re basically planning on winning Florida by ignoring foreclosures, reducing the availability of food, and saying how bad Obama has been?  It’s possible, I guess… but I’d stop way short of considering it a sure thing, that’s for sure.

I also have to say that running this way is insane, because even if you somehow pulled it off and won, you’d spend the next four years either doing the GOP’s bidding while watching civil unrest be redefined American style, or you’d resist such asinine policies and soon find yourself abandoned by your own party, shunned by Wall Street, branded a liberal… and all but certain to be back home in four years.

You look pretty darn good for your age now, but under those conditions, you’d start your presidency looking like Michael Douglas and head back home four years later looking like Kirk Douglas.

Mr. Romney, I don’t believe you’re not a smart guy… you have to be a smart guy.  So, can you honestly tell me that tax cuts for business and the recently branded “job creators,” combined with reduced government spending is anything but sheer idiocy during times like these?

You must know that American companies have oodles of cash and Treasury securities in their coffers, but no one is going to invest and expand when there is no demand for what they’d produce.  American consumers both can’t and won’t spend more than they are today… and consumer spending today is anemic compared to what it was in let’s say 2005.

American consumers have seen their access to credit slashed and their home equity stripped to essentially nothing.  And, as if that weren’t enough, inflation and higher oil and food prices are sure to wipe out what little discretionary spending has survived the collapse.

Our first quarter GDP number should say it all, not only because at 2.2 percent it came in below expectations, but also because had it been calculated using the Consumer Price Index, instead of whatever B.S. number was used, the actual GDP was ZERO.  Yes, indeed… now that’s what I call a recovery, right Mitt?

Here’s the deal… if you want to win the presidential election this fall, you need to stop pretending foreclosures are helping someone, because clearly they are not, and as long as you have nothing to say on the subject, you might as well stop concerning yourself with figuring out how many ways you can call Obama a socialist, because he may be the frying pan, but you’ll be the fire.

What you really need to do is figure out how to become the transformational leader that leads his party to success, instead of one who allows his party’s offensive ideologies to drag our nation further towards utter ruin.

President Obama has already taken care of those at the top.  If you want to ensure a victory for the Romney campaign this November, you need to start at the bottom.

That’s all I have to say about that…

Okay, that’s all I wanted to say.  I’m pretty darn sure that you’ll both ignore what I’ve said and proceed with your what-you-ignore-can’t-hurt-you strategy.  So, good luck this summer on the campaign trail.

And, Mr. President… we all know that four years ago you were dealt the lousiest of hands, but once your second term begins… know that it’s all on you, sir.

Mandelman out.

MINUTES OF TALKING

(I understand that last week’s edition of 30 MINUTES OF TALKING had a few audio problems.  I apologize for that, and they should be all fixed for this week’s show.  I hope you’ll give it another try… it’s getting better all the time.)

Has the Housing Market Hit Bottom?  

Or, was that our GDP that just sunk to nothing?

This week on 30 MINUTES OF TALKING I’m looking at the contradictions that are being thrown at us almost every day now… this past week it was the housing market that hit bottom, according to quite a few.  But did it?  The Case Schiller Index certainly doesn’t think so.

I’ll also be looking at the indications that tell us that we’re headed for another official recession, just like Spain, and the rest of Europe.  GDP came in a little light, if you use their nonsense numbers… but in real life… our GDP was ZERO.

And I call homeowners all over the country to ask them to help our Fed Chief Ben Bernanke with his puzzling questions about unemployment and what to do about it.  As it turns out, Ben is just not speaking our language.

And that’s not all… so, click play below and get ready to hear the truth, the whole truth and nothing but the truth on 30 MINUTES OF TALKING FOR APRIL 28, 2012.

Mandelman out.

In Hollywood movies, we’ve been introduced to villains that have real game.  In the Harry Potter films, for example, there’s “Voldermort… The Dark Lord… He Who Shoud Not Be Named.”  In the movie, “Star Wars,” we were introduced to the infamous and intergalactic, “Darth Vader.”  And few will ever forget “Dr. Hannibal Lecture,” telling Clarice that he was “having an old friend over for dinner,” in “The Silence of the Lambs.”

Most everyone, I would think, has at one time or another, seen a “James Bond” movie, maybe it was “Goldfinger,” a story with a villain whose elaborate plan to use nerve gas to rob Fort Knox and ultimately steal the world’s gold, was first released in 1964.  Or perhaps it was, “Live and Let Die,” in which a villain attempts to hatch an ingenious scheme to addict the world’s population to heroin, after seizing control of the drug’s world-wide production and distribution.

In real life, we’ve never had to worry about such evil actually destroying our world, because throughout our collective history, we’ve never seen a villain show up with that kind of game.

Adolf Hitler was looking somewhat promising for a few years during the 1930s, but after the Battle of Stalingrad ended in a disaster for the German troops in the early part of 1943, he was little more than a screaming lunatic with bad hair and genocidal tendencies.  We’ve had our share of “empires” that for a time, appeared capable of dominating our planet, but regardless of whether we’re talking Roman, Ottoman or British… they all ultimately fell like flan.

And, although I realize that at the moment, we’re very concerned about our TBTF financial institutions having the power to destroy our nation forever, it occurs to me that it’s probably not the case, even if it does seem like it at certain moments.  As far as our corporate dynasties go, if history is any sort of guide, they’ve proven to have shorter lifespans that some MLB player careers.

Don’t get me wrong, I’m not at all happy about how our government seems set on providing us with tangible evidence of its ineffectiveness on at least a monthly basis.  But, it does remind me that it’s at least reasonably likely that the TBTF problem will be overwhelmed by the general incompetence of man, long before it destroys our world or way of life.

Like, it’s not at all inconceivable that five years from now we could be laughing at how we were so worried about Goldman Sachs… before the investment-bank-turned-bank-holding-company in 2008, quietly filed for bankruptcy in 2015.  Remember Lloyd Blankfein, someone would say? And someone else would reply, “Was he the bald one?”

I can remember when the Vietnam War was never going to end… and then it did.  I can recall a time when drugs were sure to be on the verge of destroying our country’s youth, and then they didn’t.  Without an Equal Rights Amendment we would never survive as a great nation, or maybe we would.  Our hostages would all die in Iran, unless they wouldn’t.  And the crash of ’87, which soon morphed into the S&L crisis, was reported so severely at the time, that I never even questioned but that it would be my grandchildren that would be worrying about paying its astronomical bill… until that wasn’t the case anymore.

After that, the Internet was going to change absolutely everything… even replacing our old economy with a “new one,” or not.   AOL bought Time Warner… for a year.  And Enron was the corporate Titanic, that along with Tyco, HealthSouth, Adelphia, WorldCom, Arthur Andersen and a myriad of others, had led us to Sarbanes Oxley, a bill that was sure to signal the end of American business… until it didn’t.

Years ago, the Sears Catalog was a permanent institution in this country, and so was the airline, TWA… and bicycle maker, Schwinn… or camera-maker, Polaroid… and we bought albums, 8-tracks and CDs, but always at Tower Records.  And yet they’re all gone today.

Remember when we might not survive Y2K, and when the president said he didn’t have sexual relations with that woman, and when Larry Craig said he had a wide stance, and when we knew there were weapons of mass destruction… even though we didn’t know for sure, but it didn’t matter because that’s not why we went into Iraq anyway, and besides al-Qaeda had cells around the world that would end our lives soon enough anyway?

Remember when Wall Street had investment banks on it, and Fannie Mae and Freddie Mac stood for fairness?  When membership had its privileges, when the Catholic Church and Penn State were both safe places for boys to be, when you could press five to increase your credit limit and there were things called usury laws that made charging more than a certain amount of interest illegal?

I still remember when there was an impenetrable Iron curtain across Europe, and on its other side lived the people who wanted to kill us with their collective thinking.  They’re gone now, replaced by a smaller, nuttier guy in a Members Only jacket that makes him much harder to fear.

I can remember when none of those things were thought of as fleeting… like the blips on an ever-changing landscape that time would flip, shake and erase like an Etch-a-Sketch whenever we turned our backs to enjoy a moment.

The Worst Economic Crisis Since the Great Depression…

We are now six years since the end of a real estate boom that was only around for some four years anyway, and we’re going on four years since Hank Paulson said that he needed $700 billion in unmarked small bills by morning or our gig would be up.

Since then, we’ve all watched as Secretary Geithner… his trusted ward, Lawrence of Summers, and the Professor sans MaryAnn, all ran about shoveling trillions around Wall Street, while engaging in crazy tea party inspired chatter about how, as far as U.S. homeowners were concerned, there was too much “moral hazard” involved to consider offering them any real help.

Obviously, their thinking was that by bailing out the deadbeats who borrowed the money for houses that they had now lost trillions on, collectively speaking, they would rush out and do the same thing again thinking they’d be bailed out again.  And don’t laugh… that’s pretty much what they thought… and still think for that matter.
So, the announcement went out across the land in so many words.  For America’s homeowners… the beatings would continue.   And so they have.

The Rich Getting Richer…

About a week ago, a study showed that 93 percent of the gains since President Obama took office went to the top one percent.

By anyone’s standards, that statistic is alarming… no one can be in favor of that continuing, not even the top one percent.  It’s not like it’s debatable to say that enormous income disparity between rich and poor is a problem in any society.

The question, I suppose, is whether all that’s occurred since 2007 has been part of some nefarious plot perpetrated by evil villains that might have starred in a James Bond movie, or whether the guys in charge have simply been wrong… you know, handled things badly.

Well, I think the picture is becoming ever clearer that what we have are over-confident leaders who think certain things based on what they’ve been taught and learned in the past… but they’re wrong.  What they view as precedent isn’t applicable to the economic situation we’re facing today.

It’s not like the administration wouldn’t have preferred to have created more jobs and stopped more foreclosures, right?

To those in charge it’s a duck because it looks like a duck, walks like a duck and talks like a duck… but it isn’t a duck…  it’s a goose, and a flightless one at that.  In the parlance of business books, it’s a “black swan.”

The Geithner/Summers/Bernanke clan believed (and continue to delude themselves into believing) that by pumping trillions into the financial system and into the TBTF banks, two things would result:

1. The banking system would stabilize.
2. The economy would start to grow again, as measured by GDP.

The funny thing is… and by funny I mean inconceivably sad… that you could argue that neither outcome materialized, or you could say that the first objective was achieved, in an accounting-rules-don’t-matter sort of way.  But, no one could argue that the second goal was reached in the least.

Basically, Geithner and Bernanke thought that lowering rates pumping liquidity into the financial system would stimulate growth because it has in the past.  They sacrificed homeowners thinking that once the financial system was stable again, the rest of the economy would be pulled out by the health of the financial system.

So, here we are… the growth they counted on failed to materialize, as I’m sure they would phrase it, but of course what truly failed to materialize were their critical thinking skills because there was no chance that their plan was going to work in terms of creating real growth.

It’s simple really.

There are fewer of us working, so we’re producing less and therefore we’re earning less… and so we’re spending less.  And that means we’re paying less in taxes to both state and federal coffers, which means the states are spending less, and lower state spending means reduced GDP… do you see the dynamic at work here?

Take a quick peek at what’s happening in Spain today and you’ll see clearly the fallacious nature of banker-think.

Unemployment in Spain is now 25 percent… among the country’s youth, it’s 50 percent, but the European banks to which Spain owes money are demanding that Spain reduce its deficit spending by 5.5 percent over the next two years.  Now guess why.

They want Spain to do that so that the country will have enough money to make its payments to the bankers of course.

But, you might ask… if Spain reduces its GDP by 5.5 percent over the next two years, which is the same as reducing its spending by 5.5 percent, won’t that cause unemployment to rise even higher?

Well, of course it will… and very well done there indeed.

And if the country’s unemployment goes even higher, won’t that reduce the country’s GDP, as fewer people will be working, and won’t that also reduce the revenues that go into the country’s coffers?

Yes, that’s right again!

But, won’t fewer people working result in property values falling even further causing  more people to go underwater and into foreclosure driven by fewer able or ready to buy homes?

Very good, right yet again.  This is so exciting…

And if property values fall, and more people default, won’t that cause further harm to the Spanish banks that made the loans that are increasingly defaulting?

Yes, yes, yes… keep going…

Well, the more the Spanish banks lose as a result of property values falling, and while unemployment rises, the less credit the banks will provide, and won’t that also reduce GDP even further?

I think you’ve got it… now bring it all home for me…

… and won’t all of that combined actually reduce the amounts that Spain will have to make payments to the central and EU bankers who are the ones demanding the 5.5 percent reduction in government spending in the first place?

Thank you, Lord!  Why yes, I would have to say that would be the case. 

Do you see ANY OTHER OUTCOME  that was POSSIBLE?

Please… take your time… the answer is NO, NO, NO.

So, why are the EU bankers doing this?  Isn’t it stupid?

Yep.  It’s stupid.

So, why are they doing it?  Are they evil?  Do they have a nefarious plan?

No, it’s just stupid.  But the EU bankers are just like Geithner, Summers and Bernanke, they are forecasting Spain to have GDP growth this coming year because they are being bailed out.

But the bailout funds are only to repay the EU bankers that are lending them in the first place.

That’s correct.

So, how can Spain grow its GDP as bankers are forecasting they will?

We already covered this point… THEY CAN’T… and wont.

And we’re doing the same thing here at home, the only difference being we can print money… or rather the Federal Reserve can… and then it can lend it to us and charge us interest, albeit a small amount of interest… it’s still interest.

That printing and lending to the U.S. government machine is what gets called “quantitative easing,” or a “twist,” or whatever new not-in-the-Scrabble-dictionary type word they come up with next.  It has a tendency to prop up the stock market, which is why the rich are getting richer as the rest of us die on the proverbial vine.

And just like the EU bankers, Geithner and Bernanke are forecasting GDP growth once again for the U.S. but once again none of us will feel it because we’re not rich and making trillions as the stock market remains artificially propped up by the Fed’s money creation and lending scheme.

The best part is that, all the while, foreclosures will accelerate and continue unabated… actually much faster than before, now that the banks have their settlement and to large degree can’t be prosecuted for their foreclosure related improprieties… not that such prosecutions were going on anyway.

The European bankers are no different than is the FHFA, which is led by Ed DeMarco, the guy stopping Fannie and Freddie from reducing principal balances of mortgages.  He says he won’t do it because his job is to return Fannie and Freddie to profitability, and all that means is that in his forecasts… even if principal is not reduced… we’ll all still pay off the debts, or at least enough of us will that it’s not worth writing down the amounts owed.

Translation: He’s forecasting growth in future years, just as the European bankers are for Spain and elsewhere.  He’s wrong, and so are they.  He won’t share his assumptions used in his forecasts, but if he was forecasting that more and more will default if principals aren’t reduced, then he’d be concluding that they should be.

So, you might ask… what should we do? 

Well, for one thing, I’d suggest yelling out: “Look out below!  We’re coming down… and coming down fast,” in order to avoid hurting those below us on the economic ladder… you know, the poorer people.

It’s not that they can actually do anything to get out of the way, so they’ll still get crushed by our fall, but I still think it’s rude not to yell. “Look out below!”

But, that wasn’t my point…

What I wanted to say is that we shouldn’t despair.  We should keep up and even intensify the fight because if you understood what’s going on, then one thing should be clear…

They’re not evil… they’re wrong.  And we can know they’re not evil, because they’re simply not smart enough to be evil.

Mandelman out.

I’d like your opinion on the following purely hypothetical scenario…

If a small group of individuals working within a nation’s government made a series of decisions that destroyed the economic security of tens of millions of the country’s citizens… decisions that literally cost thousands of lives, and in all likelihood shortened the life expectancies of hundreds of thousands more… failed to such a degree that it would be more than a decade before any recovery would be possible… then claimed economic recovery knowing that 93 percent of gains had gone to the top one percent… and they did all of this while failing to address the core issues that led to the crisis in the first place…

… should such individuals be prosecuted… impeached… or imprisoned?  

And I can’t help but wonder… again, purely hypothetically, of course… what sort of harm would such “leaders” have to cause before they should they be executed?  Because, it would seem obvious to say that they damn sure should not be reelected… or at least not allowed to continue on their chosen path.

Please don’t get agitated… I’m not suggesting President Obama be prosecuted, impeached, imprisoned… and, good Lord… certainly not executed.  Nor am I suggesting such fates as being appropriate for Messrs. Geithner or Summers.  It was a purely hypothetical scenario that I posed… not one I am suggesting exists in reality in the United States of America today.

But, you do know what I’m saying, right?  

And that you just answered that query in the affirmative… should alone be enough to give one pause.

Now, I’m not going to get involved in the mincing of words, nor am I going to suggest that the policy decisions made by the Obama Administration were in any way nefarious.  In fact, to the contrary… I’m willing to accept that the administration’s decisions to-date were made in the face of such unprecedented complexity and political impenetrability that some amount of reasonably momentous error was all but preordained.

I am also not writing this as some sort of political diatribe designed to potentially influence for whom one should or shouldn’t vote in 2012.  Our presidential elections are a choice between two, or perhaps more, candidates, and Americans are all quite familiar with a thought process that results in a vote against one… as often as for another.

And, while you should read these words as an indictment of the decisions made by the Obama Administration during its first term in office, you may also rest assured that the fact that the Republican party as a whole has done nothing to help the administration contend with the catastrophic economic situation our nation continues to face, has in no way been lost on me.

In point of fact, the Republicans have engaged in obstructionist politics during a time of national crisis and should be ashamed.  I don’t think there’s any question that were our crises made from war, their acts would have been seen as nothing short of treasonous and therefore would have been unthinkable.

20:20 Vision…

All told, as related to our nation’s economy, every American citizen today should view the on-going inaction on both sides of the aisle, as utterly intolerable.

The fact is that I could very easily make a list of government programs, each with budgets in the billions, all promoted as somehow mitigating the damage being caused by the foreclosure crisis, and all whose outcomes would have been identical to those reported… had the programs been administered by farm animals.

And that would be funny, were it not so literal and entirely accurate.

This past week, Kristin Roberts and Stacy Kaper, writing for the National Journal, documented the appalling story of the incomprehensible failure of the Obama Administration to arrest the damage being caused by the foreclosure crisis that’s still tearing through American families and households with the destructive force of a category five storm.

Roberts and Kaper began their article recounting a recent meeting at the Treasury Department, at which they said, civil-rights and housing advocates were “presenting a brutal reality check to President Obama’s Treasury secretary. The administration’s housing programs, they said, were ill-conceived, had failed woefully, and would be indefensible in an election year.”

Apparently, a woman by the name of Janet Murguia, president of the nation’s largest Latino-rights organization, gave Mr. Geithner an ultimatum:

“Make dramatic changes to your housing program, or the National Council of La Raza will be unable to carry Obama’s message to Hispanic voters in 2012.”

(I don’t know what if anything Secretary Geithner said after that meeting ended, maybe he said nothing… out loud.  But, I just have to believe that in his head the words sounded something like, “Si no le gusta Obama, estoy seguro de que vas a amar a Romney.” Assuming Tim speaks Spanish, of course.  Roughly translated it means… “Yeah, well if you don’t like Obama, I’m sure you’re going to love Mitt Romney.”)

Make no mistake about it, whether as a society or as an economy, we are unlikely to fully “recover” in my lifetime.  And truth be told, all I have left are tears, for never before in history has so much been so needlessly extinguished sans the millions of body bags that come home from a world at war.

It is incomprehensible that our plight is not even close to being over, but it should be sincerely humbling that, as I write these words, we don’t even have a plan on a drawing board that one could credibly claim has even the remotest chance of abating a crisis that can only continue to break the economic back of our middle class, ultimately destroying our citizenry’s faith in what has been referred to as “The American Dream” for more than 200 years.

For ours is not so much a financial crisis… nor a liquidity crisis… nor a credit crisis… nor a crisis caused by over-leverage and excessive debt.  What we are experiencing is a crisis that is being perpetuated by the near complete loss of trust on the part of investors and consumers.

And… “Once you lose trust you just don’t get it back… you just don’t.”

Investors lost trust…

During the summer of 2007, investors around the world lost trust in the mortgage-backed securities and their complex derivatives.  We haven’t had a meaningful private securitization of such debt since that time, and we aren’t going to see such private securitizations of mortgage debt anytime soon.

In fact, the only securitizations of mortgage debt we have today are government guaranteed via Fannie, Freddie, FHA, VA, et al.  Absent the government guarantee, there would essentially be no mortgages available… period.

Over the handful of years between 2003 and 2007, investors bought into securities rated AAA… but soon found out they should never have been rated AAA.  Almost overnight, demand for these securities dried up, and the banks that were holding Collateralized Debt Obligations (CDOs) on their books found that they couldn’t be sold… and if they couldn’t be sold, then what were they worth?  And the answer was that no one knew.

These are the “toxic assets” that then Treasury Secretary Hank Paulson was planning to buy with the TARP funds… until he realized that banks wouldn’t sell them at a discount, and that it would be political suicide for him to buy them at face value.

The result of all this was that housing prices that had started dropping during the summer of 2006 after Alan Greenspan raised interest rates 17 times in a row, now went into a credit crisis inspired free fall.  The further they fell the more people went underwater… and the more that went underwater… the more fell into foreclosure.

Without credit being available and with home equity evaporating, spending by consumers fell off a cliff… companies started laying off workers and unemployment had nowhere to go but up… which in turn increased the number of foreclosures, which in turn lowered housing prices… forcing more underwater, thus leading to more foreclosures still.

So… with the number of defaulting loans continuing to rise each year since 2006, investors have incurred losses that now total well into the trillions.  Some of these losses were the result of some variation of securities fraud, to be sure.  But as the crisis has been allowed to grow in size and scope, it’s become more and more difficult to tell which securities were fraudulently packaged and which were destroyed by the damage our government failed to mitigate at every single opportunity.

Not that I imagine investors care why, at this point.  They got burned big time, and their burning isn’t nearly over yet.  So, as far as selling them more mortgage-backed securities rated “investment grade” by Moody’s or S&P… I don’t think you need an MBA from Harvard to come to the conclusion that the prospects of that happening anytime soon are… shall we say… “BLEAK.”

Chris Whalen knows banking…

Just a few weeks ago, Institutional Risk Analytics (“IRA”) Vice Chairman, Christopher Whalen, speaking to the audience at American Enterprise Institute, described quite succinctly why talk of housing recovery is premature.  Not to put too fine a point on it but the phrase used was “dead cat bounce.”  As the IRA blog stated:

“… you won’t here that from any politicians from either of the institutional political parties in this election year.  Politicians and their enablers in the economics professional all want to believe that the US housing sector is on its way back.”

Yes, well… I want to believe that maybe I’ll win the Masters one day as a senior citizen, but although I wouldn’t want to rule out the possibility, I likewise wouldn’t want to find out that policymakers in Washington D.C. are basing anything on such fanciful ideas.

As Mr. Whalen said at the conference…

“There is no private label market nor is it likely that the private label market for RMBS is going to recover anytime soon. Memo to Peter Wallison, Rep. Scott Garret (R-NJ) and our other friends in Washington working to eliminate Fannie and Freddie: Stop talking about a private sector alternative to the GSEs in the near term. There is no private sector alternative to the government housing agencies.”

 

“The lack of credit availability is the chief reason that housing will not recover in the near term.”

Whalen also points out that beyond the issue of investors losing trust, until the Fed raises interest rates the private label market for non-conforming loans and RMBS won’t be back no matter what.  It’s not hard to understand… with rates at zero there is simply no incentive for private investors to take on the risk of non-conforming residential mortgages.  Or, in other words, if the spread isn’t there, you might as well just buy Treasuries.

Things are getting tighter…

According to Jonathan Corr, Chief Operating Officer of Ellie Mae, a company that tracks the characteristics of loans, credit standards are tightening.

Corr told Nick Timiraos of the Wall Street Journal that conforming loans, which are those made by Fannie Mae and Freddie Mac, that were approved for purchases in February of this year had an average credit score of 764 and an average down payment of 22%.  Applications that were DENIED had an average credit score of 732 and an average down payment of 19%.

And as far as refinancing goes, Ellie Mae’s report shows Fannie and Freddie February borrowers had an average credit score of 770.

With the FHA looking like the next mega-billion dollar bailout, even FHA loans are getting harder to qualify for… in February, the average credit score for someone trying to refinance through an FHA loan stood at 722, which is up from 706 last August.  Purchase loans approved by the FHA had an average credit score of 701 with an average down payment of 5%.

In addition to all of this, according to Laurie Goodman at Amherst Securities, the total population of homebuyers in the US has declined by roughly 20% since 2005.  She points out that Americans are not deleveraging in terms of reducing debt.  More accurately, “the remaining 80% of homeowners/buyers continue to labor under excessive levels of debt.  If these families are ever able to sell their homes, it is a pretty good bet that they will either downsize to smaller dwellings or rent.”

Chris Whalen said it more bluntly to the audience at AEI few weeks ago…

“… forget the economist twaddle about consumer deleveraging. We have merely charged-off the worst defaults in the population, leaving the survivors to service mortgages that are at or below water in terms of LTVs.”

None of this should be difficult to understand…

Historically, at least two-thirds of homebuyers are also home-sellers, that is to say they are selling a home in order to buy another.

But, if half of today’s homeowners are underwater or effectively underwater, meaning they owe more than their homes are worth, or they would if sales commissions and other moving expenses were factored in… then they can’t sell… so they can’t buy.  Many won’t be able to sell for a long, long time, and with housing prices continuing to fall (more on that in a moment), more and more are being cemented into this group all the time.

As Goodman explained in a recent presentation, at best all we’re doing is charging off the debt of defaulted borrowers, thus leaving behind a smaller pool of homeowners who have too much debt to function in the housing market.

Just do the math… if historically two-thirds of homebuyers were also home-sellers, but half of those home-sellers now can’t sell… then the future demand for homes is going to be significantly lower than it has in the past.

Yes, there are first-time buyers, although not nearly as many as in the past.  Many aren’t rushing to buy after seeing their parent’s equity evaporate over the last few years, and student loan debt is causing a delay in family formation and hence reducing first time home purchases.  And yes, there are investors, but it should be easy to see that the number of investors is nowhere near large enough to make up for half of the two-thirds of buyers we’re used to seeing in our housing markets.

All told, demand for homes in the future will be significantly lower than in the past… period.  And if demand is going down, prices cannot be going up… simple as that.

The Elephant in the Room…

And, all of that ignores the elephant in the room that is the increasing numbers of foreclosures and their associated backlog, referred to as the “shadow inventory,” neither of which are capable coexisting with a recovery in housing prices.

You see, in 2011 the number of foreclosures slowed down, in some states quite significantly, but not because of borrowers becoming more able to pay their mortgages.  Foreclosures fell because of banks holding back as they awaited final determinations on things like the Attorneys General national mortgage settlement, and some states, specific court decisions.

I haven’t seen any conclusive numbers yet, but I’d bet money that 2011 will look flat when compared with 2010 instead of increasing as it otherwise should have, and this will make for some deceptive statistics showing the crisis being somehow nearer its end… when it’s not.  In fact, all reports already indicate that the number of foreclosures is increasing as we speak.

Here’s how Reuters reported such news on April 4, 2012…

Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.

“We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010,” said Mark Seifert, executive director of Empowering & Strengthening Ohio’s People (ESOP), a counseling group with 10 offices in Ohio.

“Last year was an anomaly, and not in a good way,” he said.

In 2011, the “robo-signing” scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.

Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur.

Mortgage servicing provider Lender Processing Services reported in early March that U.S. foreclosure starts jumped 28 percent in January (of this year).

More conclusive national data is not yet available.

However, RealtyTrac has published estimates showing that the number of foreclosures in February of this year as compared with January’s numbers increased in 21 states and, “…jumped sharply in cities like Tampa (64 percent), Chicago (43 percent) and Miami (53 percent).”

According to RealtyTrac’s CEO, Brandon Moore, the “numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”

Other evidence of foreclosures not happening in 2011, but set to happen this year are seen in a January 2012 report by the Neighborhood Economic Development Advocacy Project (“NEDAP”) in New York.  According to Reuters, that group’s study found that…

 “… in the first half of 2011 the number of 90-day pre-foreclosure notices in New York City outnumbered court foreclosure actions by a ratio of 14 to one, indicating that while proceedings were initiated against many homeowners, they were left incomplete.”

“Now the banks have a settlement, foreclosure numbers for 2012 are going to be high,” said NEDAP co-director Josh Zinner.

Reuters went on to report that…

“One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products — with high interest rates where banks asked for no money down or no proof of income — is that today it’s mostly Americans with ordinary mortgages whose ability to meet payments have been hit by the hard economic times.”

This statement, however, is really just twaddle, to borrow Chris Whalen’s word.

Other than some fringe number of truly unfortunate borrowers who bought at the worst time under the worst terms… or those that were speculating on the edge who lost homes as soon as the home loan market froze… foreclosures have always been caused by negative equity colliding with a “life event.”  If you’re underwater and something bad happens… with divorce, illness/injury, or job loss being the BIG 3… you’re a foreclosure waiting to happen.

It can and does literally happen to anyone and everyone.  I speak with homeowners at risk of foreclosure every day and have been doing so for over three years.  I’ve seen people whose incomes were $50,000 a month for twenty years lose homes to foreclosure… and people whose incomes temporarily dropped from $3,000 a month to $2200, do the same.

Of course, it’s true that the foreclosure crisis has hit minorities harder than middle class whites, but that’s just a function of two things: predatory lending practices that preyed on lower income minorities… and people with further to fall taking longer to do so.  (That’s why when people ask me if I’m losing my home I always answer by saying, “not today.”)

Life events are called “life events” for a reason… they happen as a result of life happening.  And they happen to everyone… eventually.

A friend of mine who is a banker explained to me that lending is really just a game of hoping a loan is refinanced before a life event hits.  If I loan you money for one year, I can charge you a very low interest rate because it’s unlikely that you’ll get hit by lightning… or divorced, laid off, injured or seriously ill… within a year.  But, if I loan you money for 30 years… well, now all kinds of crap can happen that can impair your ability to repay the loan as agreed.  Pretty simple stuff, right?

When Countrywide originated a mortgage, it may have said 30 years on it, but no one at Countrywide thought that the loan would be around for 30 years… in fact, they figured it would be around for maybe seven years… tops.  By then it would either be refinanced or paid off when the house was sold.

But… what’s happening today?  Millions of people cannot refinance or sell their homes… so, that means millions of loans are going to be around a lot longer than anyone expected.  And the longer a loan is around, the greater the likelihood that a life event will show up and slap you off your track at least for some period of time.  And when that happens while you’re underwater you can’t sell… so, BINGO!  You’re a statistic in the foreclosure crisis… an “irresponsible borrower,” a deadbeat debtor… shhhh… whatever you do don’t tell anyone.

Tell your own mother and she may very well launch into a diatribe about how you have always spent too much on “those kids.”  Tell Dad and he’s likely to lecture you about how you shouldn’t have bought the car you’re driving.  Your next-door neighbor finds out and he or she will be looking in your garage for a jet ski or your living room for a flat screen television.

I’ve explained this before… in behavioral economics it’s called the “just world hypothesis.”  We need to believe that when something bad happens to someone, it’s somehow that person’s behavior that caused the bad thing to happen.  That’s how we make ourselves feel safe… by believing that we live in a just world.  Random bad things that could happen to anyone are terrifying… like shark attacks, lightning striking… 9-11.

Our foreclosure crisis is a tragic and awful thing that has literally caused thousands to take their own lives out of shame and despair. And it’s a quiet crisis because no one tells anyone when they’re at risk of foreclosure, or when they lose their home… or when they save it through some sort of loan modification.  You can’t see or feel the foreclosure crisis until it touches your life, and then you say… “I can’t believe this is happening to me… or to (insert someone you know).

Until then, you look the other way… assume that the person losing a home was irresponsible… shouldn’t have bought a home in the first place… is nothing like you.

Consumers lost trust…

The National Journal’s reporters, Roberts and Kaper, whose story titled, “Out of their depth,” I referenced near the beginning of this article, tells of an Obama Administration that, in their words, failed to help homeowners because it just “didn’t have the stomach for it.”

Their article starts out talking about the administration’s more recent posture as being determined to do something right about the foreclosure crisis… as follows…

“The turnabout followed three years of tepid, halfhearted, and conflicted policies driven by a desire among Obama’s most senior advisers to avoid political risks and insulate the financial sector from further losses. It was a disastrous approach that did little for a market in free fall or for the millions of Americans still underwater and facing foreclosure.

 

National Journal spoke with more than two-dozen sources involved in creating and implementing the Obama administration’s many housing initiatives, from Election Day 2008 to the present. The result is a story of missed opportunities, competing priorities, out-of-whack expectations, and a few subtle, yet noteworthy, successes—all impelled at least as often by political, rather than economic, calculations.

 

The approach remains haunted by a primal decision made almost immediately after Obama’s economic team took office. Although the federal government would spend reams of cash to stanch, to some degree, the losses suffered by the financial sector, the auto industry, and state and local governments, suffering homeowners would see no such relief, at least not on a widespread basis. Their bailout never arrived. It appears that the administration simply didn’t have the stomach for it.”

Now, first of all… no, never mind… keep going…

“Housing clearly was an area where Obama’s team thought it needed to take quick action simply to stop the bleeding. “Housing was 30 months in the hole when Obama was elected,” said Peter Swire, a member of the transition team who, after the inauguration, became one of the economic officials leading the effort. “The first goal was to stabilize.”

 

To its credit, Obama’s policy group recognized just how unprecedented the crisis was, and that realization helped to elevate the discussion about solutions to the highest levels, placing decision-making authority in the hands of Lawrence Summers, who would be director of the National Economic Council, and Geithner. Others, such as Housing and Urban Development Secretary Shaun Donovan and bank regulators, were called to the table inconsistently. Treasury was the department running the nation’s housing policy.

 

But the task was enormous—and enormously complicated. The economic team was committed to some form of government intervention, but it could find little consensus on the scope and scale necessary for that effort to succeed. Compounding the problem, the deterioration of housing markets throughout the country, and of the U.S. economy overall, accelerated between the election and Inauguration Day.”

Okay, so look… HORSEPUCKY!

The “task” as Roberts and Kaper phrase it, was not so terribly complicated that it was beyond these genius IQs’ abilities to do something right… something at least marginally effective in the eyes of America’s homeowners.  They didn’t because they didn’t care to… and every single American homeowner who has paid the least bit of attention should recognize that as being the truth.  My Lord… what do they need to do, come to your door and spit in your face?  They didn’t because they didn’t care… and my problem isn’t even that… I could forgive them for that, somehow… not easily, but somehow.

My problem is that they still don’t care… and yes, I’m talking today… right now… headed into the election and clearly they still have learned essentially nothing about a crisis that’s plain as day, completely out of control.

And that’s just unacceptable in so many ways that I can’t talk about it without wanting to smack someone across the face… Larry Summers would do just fine… Geithner… sure, why the hell not?  Obama… no.  Him I want to grab by the shoulders and shake.

Amherst Securities forecasts another 9.5 MILLION homeowners at risk of foreclosure… almost ten million more coming soon to a theater near you.  That’s in the neighborhood of being twice as many as we’ve had to-date… not quite, but in the neighborhood.

And why on Earth anyone with any critical thinking skills would possibly think that after another 9.5 million foreclosures they’d be over… well, it’s sheer lunacy, that’s what it is.  Another 9.5 million foreclosures and the only homeowners with equity will be those who own their homes free and clear.  And the closest I’d let my wife or daughter get to a bank would be the ATM at a 7-11.

Here’s what the article by Roberts and Kaper says about the two principles that drove the administration’s housing policy…

From the start, two principles would drive the housing-policy team’s debate about the form that government intervention would take. First, Geithner and Summers sought to preserve the sanctity of contracts, and that commitment determined the structure of the president’s core housing programs.  The government would not force banks to modify loans, and any changes made to mortgage terms would have to work for investors as well as homeowners.  Those requirements led to hours of discussion and proposal drafting around the idea of “net present value,” or NPV—a formula used to determine whether modifying or foreclosing on a mortgage would result in higher profitability for investors.

(First was “the sanctity of contracts?”  How about the sanctity of accounting principles, you pompous pair of pathetic Pecksniffians.)

Now I’m not saying that there was anything wrong with the idea of a Net Present Value test, in principle… it’s in the execution that fell apart.  That’s what caused Americans to lose trust in government.  Summers and Geithner were simply the wrong people to execute this sort of program, and Obama should have known that by… oh, I don’t know… how about by 2010 or 2011?

And here’s their second guiding principle…

Moral hazard was the other debate driver. Having witnessed Main Street’s reaction to the Wall Street bailout under the Troubled Asset Relief Program, Obama’s team went to great lengths, time and again, to promise Americans that taxpayer money would not be used to help people who had simply purchased too much house. This was assistance built for “responsible” and “deserving” homeowners, the story went. So your neighbor got in over his head? Or a friend bought a house to flip and then couldn’t sell it? Their fault, the White House was saying. “That narrative is one we had to be careful with,” a senior administration official said.

Taken together, contract sanctity and moral hazard set the parameters for the president’s housing policy. And within four weeks of Obama’s swearing-in, his team proclaimed itself ready to unveil the sharply tailored strategy.

Okay, so there you have it.  The two individuals in charge were more concerned with the possibility of helping a homeowner who “got in over their head,” which by the way they didn’t give a rat’s petute about when discussing laws to prevent predatory lending or any other restriction on mortgage lending that might stop someone from getting in over their head, but never mind that nauseating hypocrisy.

The article says something else worthy of note…

“… housing had so quickly turned from tremendous boom to disastrous bust that the mortgage industry was unable to cope. Lenders and loan servicers had never operated in that kind of environment and had no mechanism to respond to the dramatic surge in delinquencies and foreclosures. One senior administration official called the servicing system “dysfunctional” in 2008 and 2009, and an industry representative agreed. “The system was not designed to deal with massive foreclosures,” he said. “It simply was not clear what was the response to take.”

Okay, so that being the case, and I have no trouble believing that absolutely was the case… let’s not worry about what you do… instead, let’s look at what you don’t do:

You don’t announce your “sharply tailored strategy” within four weeks of being sworn in. 

“A handful of core officials—at least one each from the White House, Treasury, and HUD—bought coffee and doughnuts and then wheeled chairs into an empty conference room. They listened to the loan servicers’ concerns and questions, discussed the complexity of their operations, and hammered home what servicers needed to do.

 

One of the main questions centered on up-front documentation: Did Treasury want the process to happen so rapidly that servicers should put mortgagees into trial loan modifications based on verbal statements alone? Yes, the officials said. Don’t worry about the documents. Just put loans into the “trial mods” and then get the documents in order before the time comes to make the changes to the loan permanent, they said. “Just do it,” was the message.”

And you absolutely don’t instruct mortgage servicers that they should just put everyone into trial modifications with no systems, no training, no infrastructure and no real solid idea of what will happen next.

You don’t do any of that.  These are people’s homes you’re talking about.  And sure, there were some small percentage of folks that went out and bought their homes without a contingency plan for the Great Depression Part 2 coming around the corner… and yes there were some that should not have borrowed as much as they did for any number of reasons.  The proliferation of television ads and even television programs instructing people to do just that, come to mind.

Marlboro wants to run a beautiful 30-second commercial showing me a handsome man riding a horse in the snow while smoking a cigarette and the federal government loses its mind taking them off the air.  But a 60-minute infomercial that provides detailed instructions and fake testimonials on how to get rich safely by borrowing 125 percent of your home’s value in order to buy condos in the middle of the desert… no problem at all, right?

And better yet, why not do so using a spring-loaded, snapping turtle-styled mortgage that requires neither down payment nor job and increases in balance owed and monthly payment whenever Greenspan feels itchy… but hey… who are we to stand in the way of the American Dream, is that about right?

And, finally this…

“They (servicers) insisted to us they could not do this program, they were not ready to do this program, and we told them they had to,” said Treasury’s Tim Massad, then chief counsel in the department’s financial stability office.

And therein lies the rub… I’m going to say something many are not going to like… I’m tired of blaming the banks alone for this mess because in large part it’s simply not their fault… this failure belongs to the Obama Administration… from start to flummoxed… plain and simple and in no uncertain terms.

And what a spectacular failure it continues to be… absolutely stunning in its completeness… in its flagrant ineptitude… in its degree of insensitivity… in its ongoing utter folly.  It’s down right peerless, that’s what it is… it stands without equal.

The core problem: Estimates for both programs were based on faulty, incomplete data. “There was always a huge degree of uncertainty around those forecasts, which reflected the limitations of the data available at that time,” said John Worth, who helped design the two initiatives as director of Treasury’s Office of Microeconomic Analysis. “We were sort of building the airplane as it was trucking down the runway, because there was a real sense of urgency to deliver help to homeowners.”

Yeah, it reminds me of the real sense of urgency that must have surrounded the readying of the Space Shuttle Challenger back in 1986.  I’m sure those NASA managers were in a hurry to help school teachers get into space, so they disregarded warnings about the O-rings, launching in low temperatures, and whatever else, so that the damn thing exploded 73 seconds into its flight as tens of millions of young children watched on national television.

So… bang up job there, Mr. Geithner, Mr. Summers… and President Obama… absolutely crackerjack work all around.

Is it the banks that are to blame?

Admittedly, I’ve done more than my share of bank bashing over the last few years, and I haven’t been alone by any means.  But, I’ve gotten to know more about the crisis from some of the banks’ perspectives, and I think we should consider what’s really gone on here.

Don’t start throwing tomatoes at me in your mind… just yet.  I’m serious about this… so, hear me out.

Tens of millions of Americans saw themselves lied to and abandoned by their obviously unfeeling government, who then walked them right into the totally unprepared arms of financial institutions bound by no rules, responsible only to shareholders, as they were reeling from a crisis that had bankrupted all of the investment banks on Wall Street in one fell swoop.

Oh, don’t get me wrong… I’m not ready to give the entire banking industry a pass by any means.  Fannie Mae and Freddie Mac… are certainly among the worst offenders of all.  And Wells Fargo is inexplicably immoral and entirely malevolent at every single opportunity.

But, Bank of America was doing principal reductions before the ink was even close to dry on the AG settlement… I personally have seen several dozen of them.

BOA is the first to admit that it’s a long way from perfect, but I’ve seen them resolve things quickly and fairly every single time they’ve been at fault.  And they have modified more than 200,000 mortgages over the last couple of years.  Not enough, you say?  Perhaps, but they appear to me to be an organization trying hard to make things better and get things right as they continue to deal with the now infamous acquisitions of Countrywide and Merrill Lynch.

And Ocwen has been doing principal reductions as part of their shared equity program for almost a year, as far as I know… maybe even before that.  They were founded on the principal that loans should be modified before foreclosed if at all possible.  I’ve even seen the executives at One West Bank jump through hoops to stop sales and get loans modified that had fallen through the cracks.  Oh, and Impac Mortgage… well, they’ve always been leading the pack on the loan modification front.

I don’t think there’s any question about it… getting your loan modified is much easier than it was two years ago, or even last year… unless you’re with Wells Fargo, of course.

Conversely, what have I seen from the Obama Administration?  Nothing but intermittent lip service and an ongoing stream of ill conceived, half-hearted programs, each entirely predictable as to its ultimate failure.

On January 15, 2009, Larry Summers made a written commitment to spend $50 to $100 billion on, “a sweeping effort to address the foreclosure crisis.”

And yet… as of the end of 2011, the administration had spent less than $3 billion on a situation their chief economic advisor acknowledged to be a “CRISIS” almost three years earlier… without so much as an apology to those whose lives their inaction had ruined.

Dodd-Frank made $1 billion available for an emergency program that was purported to help those unemployed people in their homes.  But, the money had to be out the door by a specific date and HUD delayed issuing application requirements, which left potential beneficiaries with only weeks to assess qualifications, apply, and submit the necessary paperwork.

And that was a $1 billion “emergency program” to help the unemployed save their homes.  If HUD handled medical emergencies, everyone would die.

The Fraud in the Foreclosure Process…

It’s hard to imagine, but even with a presidential election coming up, an election in which the winner must carry such foreclosure-riddled swing states as Ohio and Florida, there’s just more and more and more and even more… and none of it good as far as the Obama Administration is concerned… and yet the administration appears wholly unconcerned.

The Attorney General settlement with the five largest servicers is another example of a cowboy that’s all hat and no cattle.  To listen to the Obama Administration, it’s an important settlement, meaningful to the homeowners in America, many of whom… according to the administration, were foreclosed on either illegally, fraudulently, or improperly… it’s kind of hard to tell which.

Regardless, if the homeowner lost a home to foreclosure between 2009 and 2011, they are said to be receiving between $1,500 and $2,000 as compensation for some unspecified degree of improper or fraudulent foreclosure having taken place.

The absurdity of this component of the overall settlement was not lost on anyone, even for a moment, and in Obama’s typical fashion, he held a single press conference, said some great sounding things about justice for homeowners and making banks pay, and we haven’t heard from him on the subject since.

Meanwhile, if you really did lose a home to a wrongful foreclosure, you now know no one cares, as two grand is hardly compensation for losing a home that shouldn’t have been lost.  And if you didn’t lose your home improperly, then you just got two grand for absolutely nothing.  As settlements go, this one managed to do something not often seen… it managed to please no one, and since it hasn’t even begun to disperse checks, no one is even sure how the whole thing will or won’t work.

The only thing that’s certain about the settlement is the level of skepticism present among homeowners, and that’s either being expressed through jeers or barbs.

Mickey Mouse signed it, and Donald Duck notarized it… but who cares?

The problem with the whole “fraudulent or improper foreclosure” aspect of the crisis is that it’s not helping homeowners, in fact in many instances its caused more harm then good.

For one thing, it’s driving false hope.  For another, it’s driving bad decisions.

Even when used successfully as a defense in a foreclosure proceeding, the improper signing of affidavits or assignments has proven itself, at least in the vast majority of instances, to at best result in a delay.  The servicer attempting to foreclose may be forced to re-file with proper documents, but they almost always do… and the foreclosure proceeds in almost every single case.

More importantly, however, the use of improperly signed documents as a defense in a foreclosure is more often than not, simply ineffective from the homeowner’s perspective.  No delay is granted and the foreclosure proceeds as if the documentation was flawless.  Judges simply care more about a borrower not having made a payment in two years than who signed the assignment of the deed of trust.

Foreclosure defense lawyers all tell me that they raise issues pertaining to document signing as they might visit any port in a storm… hoping to gain some leverage that leads to their client’s loan getting modified.  None seem to believe that borrowers are truly damaged by such improper signing, and most judges evidently agree.

The moral of the story about foreclosure defense is that, in almost all cases, if you haven’t made your mortgage payment for a couple of years, the safest path to saving your home is through a loan modification.  And don’t shoot the messenger, but if you’re trying to save your home… you should also be saving money.

You may need the money to save your home, and even if it turns out that you don’t, once your situation gets resolved, you’ll definitely need a vacation so having extra money saved is a no lose proposition.

The other problem with our current fascination with who signed what is that it’s driving homeowners to buy forensic loan audits, securitization audits and countless other reports of questionable value to those trying to save homes from foreclosure.  They find out that something was done improperly and think that it means that they can use it to save their home from foreclosure.  In almost every single instance, they find out they were wrong… and by then, it’s too late to get their loan modified.

My point is that these are the facts… the unpopular and perhaps unfair facts that are the result of the Obama Administration’s handling of the foreclosure crisis.  You can continue to blame the banks and mortgage servicers if you want to, but their role has never been to ensure societal fairness… they are, after all, bill collectors and as such they are responsible to their shareholders and investors… not to you or me as delinquent borrowers.

When you want companies to all do something that’s not in their financial best interests, that’s when government has to step in.  For example, if you want cars to have safety belts or catalytic converters, you don’t just leave it to GM, Chrysler and Ford to figure it out… you pass legislation that mandates the adoption of such things because its been decided that they are for the good of our society.

That’s precisely what the Obama Administration has failed to do during this crisis… mandate what is best for our society, and instead its just been left to the for profit corporations to figure it out for themselves.  And we’re surprised that didn’t work?  Really?  Why?  Who thought it would, besides Larry Summers and Tim Geithner?  Because for sure I could have told them it wouldn’t… saved everyone a lot of aggravation, to say nothing of several trillion dollars.

We tried the same thing during the Great Depression of the 1930s… a voluntary loan modification program, I mean.  It’s true.  Didn’t work then either, and the St. Louis Federal Reserve has a paper all about it.  Do you think Geithner and Summers missed reading it?

In Conclusion…

It’s year six of the most severe balance sheet recession that this country has experienced in 70 years and once again we’re right in the middle of our annual faux recovery.

The global credit crisis that ended our housing bubble in 2007 left us with housing prices in a free fall and a growing foreclosure crisis about which essentially nothing has been done, or at least nothing has been done right.  The result of the collapse in credit card availability and home equity have left American consumers with only two options: default or attempt to repay massive debt burdens.

We’ve seen something like $10 trillion in accumulated wealth evaporate, mostly in the form of lost home equity, and so it should come as no surprise, except to economists unable to see things beyond their charts and models, that consumer spending as measured by consumption has gone down enormously since 2006.

Simply put… we are earning less today because we are consuming less today.

And yet, we continue to ignore or mishandle the foreclosure crisis that is clearly THE ISSUE that prevents any sort of economic recovery from talking hold.

That’s not the fault of banks and mortgage servicers… and it’s not the fault of courts failing to prevent foreclosures based on improperly signed documents used in the foreclosure process.  Clearly, this monumental failure belongs to our elected officials in federal and state governments… and to the policy decisions made by the Obama Administration.

Again, I’m not saying you should vote for Mitt Romney… or that you should vote for Barack Obama, for that matter.  What I am saying is that we should not be tolerating any more of what we’ve been fed since the crisis began, because for six years we’ve been told things about our housing markets and the impact of foreclosures that have been proven repeatedly to be wrong and by a long-shot.

As 2008 began, the Congressional Budget Office (“CBO”) forecasted that the budget deficit in 2009 would be just 1.4 per cent of GDP.  As it turned out, 2009’s budget deficit skyrocketed to 10 percent of GDP.  (And to the CBO I would just like to say… “Thank you for playing.”)

The cause of the dramatically increasing deficit in 2009 is found in the fallout from the housing bubble… not irrationally exuberant spending programs and not excessive tax cuts.  The CBO’s 2008 forecasts were obviously made before our government understood the impact that the housing bubble’s collapse would have on the economy.  The question is, do they understand it even now?

According to a disturbing recent study, while during the Clinton Administration the top one percent got 45 percent of our economic growth and during the Bush Administration that affluent group got 65 percent of our growth… in 2010, the top one percent picked up an unconscionable 93 percent of the gains in that year… and 37 percent of the gains went to the 15,600 uber-rich households that make up the top one-tenth of one percent.

So, very well done there.

Perhaps even more alarming, there were no gains at all for those in the bottom 90 percent, and in fact, this sizable group has seen their average annual adjusted gross incomes fall by $4,843 since 2000 to $29, 840 (adjusted for inflation, by the way).

Don’t be confused by any of this, once again, the culprit is housing.  If you’re in the top 10 percent club, you’re doing well in large part because of your investments in the stock market, which saw an increase in value of $1.46 trillion in the fourth quarter of 2011 alone.

But, if you’re in the bottom 90 percent, chances are you don’t own a whole heck of a lot of stocks… for you it’s your home’s value that makes up the lion’s share of your wealth, and home prices once again fell in 2011.  The median home was worth 6.2 percent less in February of this year as compared with the prior year.  And yes… if you haven’t figured it out yet, home prices are still falling with no end yet in sight.

According to a recent article on Bloomberg/Businessweek, “Home prices seen dropping 10% in U.S. on Foreclosures”…

“A lot of people look at bumps in the monthly data and say we’re reaching a bottom,” said Joshua Shapiro, chief U.S. economist at MFR Inc. in New York. “We won’t be there until this supply of foreclosures clears.”

It’s also worth noting that the sinking housing market has hit minority households much harder than whites.  According to the Pew Research Center, Hispanic households have lost 66 percent of their net worth during the recession while whites have endured only a 16 percent loss.

Fed Chief Ben Bernanke says our economy needs to grow faster in order to reduce unemployment, and thank you Professor Bernanke for that brilliant insight.  But, as former labor secretary Robert Reich pointed out recently…

“We can’t possibly grow faster if the vast majority of Americans, who are still losing ground, don’t have the money to buy more of the things American workers produce. There’s no way spending by the richest 10 percent – the only ones gaining ground – will be enough to get the economy out of first gear.”

All of this should paint a clear picture… even under the most optimistic set of assumptions we’re not looking at any sort of real recovery… the kind you can feel as well as read about… being a possibility this year… and not next year either… or even during the year after that.  Our accumulated wealth has been stripped, and Bernanke can lower interest rates until he literally can’t and we’re still going to save for quite a while before we spend again.

Economists point out that savings rates are only hovering around 5 percent, but you have to consider that represents savings at roughly zero interest.

Of course, at some point rates will have to rise, and while some point out the benefits that come along with higher rates, I’m pretty confident that the Fed Chief is in touch with the concept of what will happen to the millions of underwater adjustable rate mortgages when rising rates make for higher monthly mortgage payments that cannot be refinanced.  Get ready, ‘cause when rates do rise, there’ll be a whole new group of the “irresponsible,” arriving on the scene.

Where the crisis will meet the people… all the people. 

On “AUSTERITY STREET.”

Allow me to offer you a glimpse into the future… the near future… as in a year or two from now when the foreclosure crisis will collide with the realities of state budget deficits, which are the kind of budget deficits that can’t be addressed by printing money.

Remember President Obama’s very first bill… the economic stimulus bill that finally passed with a $700 billion price tag, but ended up stimulating almost nothing, economically speaking?  Well, it may not have accomplished what the administration wanted it to, but it did accomplish something.  It provided roughly $500 billion for the states, which is why we haven’t had any state budget crises making headlines over the last couple of years.

Well, guess what?  The money’s gone… there was something like $6 billion left going into this year.  But, the states fiscal problems are still very much around.

According to the Center on Budget and Policy Priorities…

The Great Recession that started in 2007 caused the largest collapse in state revenues on record.  As of the third quarter of 2011, state revenues remained 7 percent below pre-recession levels, and are not growing fast enough to recover fully soon.

 

State budget estimates for the upcoming fiscal year show that states still face a long and uncertain recovery. For fiscal year 2013, thirty states have projected shortfalls totaling $49 billion.

 

Meanwhile, states’ education and health care obligations continue to grow. Some 5.6 million more people are projected to be eligible for health insurance through Medicaid in 2012 than were enrolled in 2008, as employers have cancelled their coverage and people have lost jobs and wages.

 

Extremely large shortfalls addressed in recent years have led to deep cuts in critical public services like education, health care, and human services; the new shortfalls likely will prompt legislators to make further cuts in those areas on top of those already enacted.

 

So state budgets are poised to continue to be a drag on the national economy, threatening hundreds of thousands of private- and public-sector jobs, reducing the job creation that otherwise would be expected to occur.

 

These shortfalls are all the more daunting because states’ options for addressing them are fewer and more difficult than in recent years. Temporary aid to states enacted in early 2009 as part of the federal Recovery Act allowed states to avert some of the most harmful potential budget cuts in the 2009, 2010 and 2011 fiscal years. But that aid expired at the end of fiscal year 2011, leading to some of the deepest cuts to state services since the start of the recession. The federal government is now moving ahead with spending cuts that will very likely make states’ fiscal situation even worse.

 

Unfortunately, the hole is so deep that even if revenues continue to grow at last year’s rate — which is highly unlikely, it would take seven years to get them back on a normal track.

 

Continued slow job growth will restrain the rise in state tax receipts. This is especially true for the sales tax. High unemployment and economic uncertainty, combined with households’ diminished wealth due to fallen property values, will continue to depress consumption, keeping sales tax receipts at low levels.

 

Spending cuts are problematic during an economic downturn because they reduce overall demand and can make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. This directly removes demand from the economy.

 

Tax increases also remove demand from the economy by reducing the amount of money people have to spend.  At the state level, a balanced approach to closing deficits — raising taxes along with enacting budget cuts — is needed in order to maintain important services while minimizing harmful effects on the economy.  Ultimately, however, the actions needed to address state budget shortfalls place a considerable number of jobs at risk.

Want to know what all of that refers to in a nutshell: AUSTERITY.

As the states cut services and programs, people feel them from the bottom up, and the deeper the cuts get, the bigger their impact on our society.  For example in California and Florida over the last two years, state college tuitions have risen by roughly a third… that’s a 33% increase in the cost of going to college, and it means that many students won’t be attending as planned.

This is life-altering stuff, and the impact to states can last for decades.

The foreclosure crisis is only making the picture bleaker each year, as spending drops, so do sales tax receipts, and as property values fall, so do property tax receipts.

So, we cut services available to those near the bottom of the economic ladder, and raise taxes on those at the top.  Together, although budget deficits are closed, the impact causes more harm to the economy, thus making recovery that much further away.

The situation is dire for many, if not most states.  It isn’t a hypothetical scenario, or a potential one… it’s our very certain reality in the years just ahead.  This is where everyone starts to feel the pain, and in the most extreme situations… it’s Greece.

One last thing…

The National Journal story I’ve quoted throughout this article, wrapped up with the following statement from former FDIC Chief Sheila Bair… (Warning: You may want to bite down on a pencil before reading what Sheila has to say.  The first time I read it, I bit my tongue and couldn’t eat salsa for almost a week.)

“I think the president really wanted to do something aggressive and meaningful here, and I just think Larry and Tim were not as committed to it,” the FDIC’s Bair said. “It was not a priority for them. They were focused on the big financial institutions. I think they just wanted to get a program and a press release out to make the president happy.”

If that doesn’t say it to you… I’m not sure what else would.

We need to let our elected officials know that we will no longer tolerate pointless inaction caused by inane debates over such things as “moral hazard,” and the selective preservation of the sanctity of contracts.

If the federal government can handle the unbelievable amounts of moral hazard they’ve created with TBTF, they can certainly handle someone getting help under less than ideal circumstances SIX YEARS into the bungling of the crisis.

And as far as the sanctity of contracts goes, if they can deal with pretending the maturity dates on commercial mortgages haven’t arrived when they have, surely they can recover from making some new rules under such extreme circumstances.  After all, they figured out how to have Japanese-Americans hauled off to internment camps in Utah during WWII.

We need to let them know that we hold them responsible for what’s transpired, because we do listen to what the President of the United States says to the American people… in fact, we were under the impression that once elected it’s to be considered more than a campaign speech.

Decisions made by Larry Summers have been disastrous for this nation… that much is abundantly clear.  Tim Geithner’s been no peach either.  Together their folly has cost our country incalculable amounts of money, but further, they have caused people to take their own lives.  Geithner must resign.  Summers should be banned from the economics profession for life.  Both should be sentenced to three years selling shoes at JCPenny.  Repeat after me: “Would you like to see that in a pump or a loafer.”

I don’t want to get funny about this… I mean every word of what I’ve said here.  While we are begging for crumbs off of Linda Green’s table, stomping our feet because Wells Fargo won’t change, it is our government that has created this mess… our government who said they’d done something to solve it… and our government who has obviously failed.

So, fix it… damn it.  We won’t tolerate anything less.  We want accountability, and if we are not listened to, we will have your seat in public office.

And maybe we can’t get all of them… but we can get some of them.  And I’m thinking maybe that’s enough.

Mandelman out.

~~~

JAMES ROBERT DEAL ATTORNEY PLLC

PO Box 2276, Lynnwood, Washington  98036-2276

Telephone (425) 771-1110, fax (425) 776-8081

James@JamesRobertDeal.com

March 29, 2012

President Barak Obama

The White House

1600 Pennsylvania Avenue

Washington DC 20500

Dear Mr. President,

I write to identify a policy change that would add trillions of dollars of liquidity to the housing market overnight. It would stimulate home sales, stabilize home prices, and reduce the number of home foreclosures.

My suggestion is to make existing home mortgages assumable. Buyers then would not have to go get new loans. Existing loans could be “recycled.”

To do this Congress might amend the Garn-St. Germain Act to suspend enforcement of due-on-sale clauses in residential mortgages until liquidity is restored to the system.

However, the Garn Act, Title 12, Chapter 13, USC 1701 ff., included a non-binding provision that encouraged lenders to allow assumptions at compromise rates, but this provision, because it was not mandatory, has never been enforced. It says:

(3) In the exercise of its option under a due-on-sale clause, a lender is encouraged to permit an assumption of a real property loan at the existing contract rate or at a rate which is at or below the average between the contract and market rates, and nothing in this section shall be interpreted to prohibit any such assumption.

Relying on this paragraph, perhaps the appropriate agency could make the change without Congress having to amend the Garn Act.

As it is currently written, the standard FNMA/FHLMC Paragraph 18 due-on-sale clause does not actually require a seller to pay off a loan at the time of sale. It only gives the lender the option of calling the loan due should the seller sell without lender consent. Should a seller sell without lender consent, and should the lender call the loan due, the buyer and seller have 30 days to pay off the lender. If the loan is not paid, the lender can foreclose, which typically takes another six months.

If enforcement of due-on-sale clauses were to be suspended, then sellers would be able to pass their mortgages on to their buyers. Buyers would not have to go through the now very difficult process of qualifying for new loans. More homes would become saleable. Home values would tend to stabilize. Fewer homes would be “under water.” Instead of sellers simply abandoning their homes, more would be able to sell them. The number of foreclosures would drop. More renters could become home owners.

Although this simple change would not add new money to the system, it would keep existing money in the system, and make that money available to buyers, thus adding effective liquidity to the system as a whole.

I would assume that many banks have already decided as a matter of internal policy that due-on-sale clauses will not be enforced as long as mortgage payments are paid. Banks do not need more REO properties. However, buyers, sellers, and real estate agents do not know this. And they should know this. Sellers and buyers should be encouraged to do assumption transactions and wrap-around deed of trust transactions. The real estate agents I talk with all assume that due-on-sale clauses are still enforceable. They are very cautious about suggesting that sellers and buyers “go around” due-on-sale clauses. They do not want to be liable if the bank forecloses. Their errors and omissions insurance might not cover them if they advise buyers and sellers to “go around” a due-on-sale clauses.

Before the Garn Act was passed states had their own laws regarding due-on-sale clauses, generally judge-made laws. Some state courts took the position that a due-on-sale clause was in effect a de facto restraint on alienation against selling and buying and declared due-on-sale clauses void, at least for residential transactions.

The Garn Act relied on the Commerce Clause to preempt state laws regarding due-on-sale clauses and federalize the issue. This preemption was a good thing at the time because lenders were operating more and more across state lines. The laws needed to be uniform. Further, the cost of money had risen, and banks needed to recycle their loans to earn more money.

However, at this time in our history, the inability of sellers to allow buyers to assume their existing loans means that buyers must get new financing, and that can be difficult. Strict enforcement of due-on-sale clauses, now more than ever before, really does act as a de facto restraint on alienation.

I would suggest that enforcement of due-on-sale clauses be relaxed for an initial one year trial period so that buyers could assume existing mortgages or do wrap-around deed of trust transactions. I would suggest that buyers be required to meet reasonable requirements for assumptions if there is to be a release of liability for sellers, minimal approval requirements for assumptions without release of liability for sellers, and perhaps no approval requirements at all for wrap-around deed of trust transactions, in which sellers would not be released from liability, as was the general situation before passage of the Garn Act.

Wrap-around deed of trust transactions with no release of liability to the seller should be allowed with no bank review as an available option for two reasons: First, banks are already overwhelmed with dealing with loans in default and short sale transactions, and second, such wrap-around transactions can be closed in a matter of weeks instead of months. If a seller will remain secondarily liable on a loan, he can be counted on to do his own review of his buyer’s credit worthiness.

I would suggest that relaxation of enforcement of due-on-sale clauses apply not only where buyers are buying homes they will occupy, but also where investors are buying homes which will be rentals or which will be improved and resold. Yes, non-owner-occupied investors will go around snapping up homes, but that would not be a bad thing. Sellers would be able to sell their homes and perhaps buy other homes. Foreclosures may be avoided. Banks will not lose as much money. Investors are more likely to have the cash necessary to buy out the equity of owner-occupied sellers and repair homes and get them onto the market as sales or rentals.

Regarding homes that are “under water,” loans on those homes could be modified down to a reasonable interest rate and a principal balance equal to fair market value. After modification, the loan would become assumable.

My second suggestion has to do with co-signers. More buyers could qualify to buy homes if they could assemble a group of non-occupant co-signers. It is my understanding that FHA will allow an occupant-borrower to strengthen his loan application by bringing in non-occupant co-buyers but that Fannie Mae and Freddie Mac will not.

I would suggest that an owner-occupied home buyer be allowed to solicit his relatives and friends to be co-signers and that each be allowed to obligate himself for $1,000 or $20,000 or some other fixed maximum amount of money. I would suggest that this guarantee be non-dischargeable in bankruptcy to strengthen it.

In Washington there is a 1.78% excise tax on title transfers, so for friends to serve as co-signers they should not be required to go on title as co-buyers, as is currently required. Co-signers would voluntarily assume responsibility to supervise their buyer, make sure he is employed, maybe even hire him, and make sure he is paying his mortgage.

With more parties obligated, lenders would have more confidence that a borrower would pay his mortgage. It would be an American version of a Grameen Bank loan where an entire village co-signs for a borrower and guarantees payment.

I would suggest that if an occupant-buyer secures sufficient co-signer guarantees, he should be allowed to purchase a home on a zero-down basis.

Third, I would suggest that the almighty credit scoring system be relaxed, particularly when a borrower can assemble a credible group of cosigners.

Finally, I would suggest that the entire system of qualifying borrowers be reviewed so that those capable of repayment can get loans.  There are many arbitrary loan qualification requirements which prevent people who are capable of making their mortgage payments from getting loans.

The best thing about all these suggestions is that they do not involve the outlay of any federal money.

Sincerely,

James Robert Deal

“May a party be a lawful ‘beneficiary’ under Washington’s Deed of Trust Act if it never held the promissory note secured by the Deed of Trust?”

That’s the key question the Washington State’s Supreme Court heard arguments in the potentially pivotal case, Bain v. Mortgage Electronic Registration Systems, et al and Selkowitz v. Little “Litton” Loan Servicing, LP, et al.  It’s also a form of the same question that’s been asked by countless homeowners and their lawyers as they’ve fought to prevent their homes from being lost to foreclosure over the last 3-4 years.

Go back in time fewer than five years and you’d be hard pressed to find anyone who had ever heard of Mortgage Electronic Registration Systems, but today the acronym “MERS,” is a household dirty word in American homes from coast-to-coast.

Although the mortgage banking industry would say that they created Mortgage Electronic Registration Systems for the benefit of mankind, there’s no question that its creation also provided the industry with a way to avoid having to pay the costs involved in recording mortgage transfers.  Lenders permanently list MERS as the “mortgagee of record,” and by doing so the avoid the expense of recording any subsequent transfers.

MERS makes the claim that it is both an “agent” of the lender and the “mortgagee,” but the practice has fueled a firestorm of debate over a wide range of legal issues, and although many courts seem to have accepted the MERS way… it’s often not clear whether such decisions were actually made in favor of MERS, or just against homeowners not making their mortgage payments.

What MERS does is operate a computer database that’s supposed to track mortgage servicing and the ownership rights of mortgage loans throughout the U.S.  And when I first heard that explanation, I thought… well, that sounds incredibly boring.

Frankly, as a layperson… the whole thing is kind of insane, especially when you stop to consider that although MERS would readily admit that it doesn’t own any mortgage loans… it is also the recorded owner of over half of the nation’s residential real estate.  At least I think that’s right… every time I try to understand it better, the whole thing confuses me and then I have to take a nap.

The best way to understand the issue I’ve seen…

The video below puts you in the courtroom to watch as both sides of the debate present oral arguments related to MERS’ involvement in the foreclosure process in front of the nine justices of the Washington State Supreme Court.

I found it fascinating to watch… almost as good as an episode of “Boston Legal,” in fact, the MERS lawyer kind of reminded me of Bill Shatner’s character on that show, Denny Crane.

You’ll watch the plaintiff’s attorneys who are representing homeowners at risk of foreclosure argue that MERS violates the state’s Deed of Trust Act, among other things… followed by the attorney flown in from Minnesota to appear “pro hac vice,” on behalf of defendant MERS, who basically argues that MERS isn’t the problem no matter what because no one ever needs to know who owns their loan.

I’m paraphrasing, of course, but you’ll see what I’m saying when you watch it.  It’s not quite 45 minutes long, but it feels shorter… and afterwards, I’ll pick up the discussion below and share my thoughts on the matter.

~~~

A simplified view of how we got here…

The foreclosure crisis put MERS in the national spotlight as it started filing foreclosure lawsuits on behalf of financiers and servicers against millions of American families.

These people losing homes to something using the name MERS had been told by President Obama that because of his new government program, Making Home Affordable, they would be able to get their loans modified and hence save their homes from foreclosure simply by calling their bank… assuming, of course, they weren’t “irresponsible borrowers.”

So, believing that he was both smart and “a man of the people,” they did what he said they should do… but he wasn’t, and it didn’t work.

But, more than just “didn’t work,” the experience was nothing short of torturous, and in fact, I’m quite certain that many who lived through it, would have jumped at waterboarding as an alternative.

Lawyers representing homeowners who had clearly been wronged tried turning to the courts to enforce the HAMP guidelines, but to no avail.  So, they went after anything and everything… TILA/RESPA… MERS and the failings of securitization… and most recently robo-signing related allegations are all the rage…

“I’ll take one securitization audit, and one forensic… oh… and give me one of those fraud reports too… to-go, please… how much?  Oh my.  Do you take Texaco cards?”

The thinking was obvious… judges and everyone else could see them coming a mile away… cause enough trouble for the servicers and they’d offer to modify loans and hence save homes.  And soon… when even that wasn’t working… well, then even just delaying the loss of a home was something of a win, right?

Right… wrong… it didn’t matter… homeowners not making their mortgage payments was the issue at hand, as far as the vast majority of judges went, and today, although the battle rages on fueled by words like “forgery and fraud,” the outcomes are fundamentally the same as far as homeowners at risk of foreclosure are concerned.

Oh sure, some states became better than others, and bankruptcy courts seemed to fare better than others, but homeowners became more and more confused as courts of appeals, in some cases, tooketh away, what lower courts had given.

The OCC turned out to be an acronym for the Office of Ceremonial Complacency.

Many states today have bills on their legislative calendars that could help in some ways, but banking lobbyists don’t give up a single yard without a fight.

And finally it was OCCUPY… the blunt force edition of the foreclosure defense game, but again, to most… sort of a delay with a side of pepper spray.

So… now what?  What’s next?  The UCC 9 v. UCC 3 argument?  Okay, fair enough.  Not as exciting as securitization fail and REMICs exploding all over the place, but I’m in… why not?

I don’t like it any more than anyone else, but the fact is that in 2011… a year during which in some states like New Jersey and Nevada, foreclosures were said to be down year over year by something like 80 percent, even with the servicers waiting for the settlement to be reached so they could pick up their “Get Out of Fail Free” card… even with all of the things that caused delays… foreclosures were essentially flat when compared with 2010.  Absent anything new that I’m not seeing… can you imagine how bad this year and next are going to be?

Well, of course, there is the $2,000 if you were foreclosed on in 2009-2011… do I have that right?  I think so, but every time I type that out my mind says… no, that can’t be right… and then it is.

So, in the Bain case you watched on the video… what happens if the court sides with the plaintiffs?  Says that MERS does violate the state’s Deed of Trust Act… does that save homes in a way that I’m not seeing.  Or, will the servicers just start foreclosing judicially, as they’ve done in response in Hawaii, for example.

So… I called a couple of lawyers licensed to practice in the State of Washington to ask if their views of the Bain case confirmed mine… and they did.

Please understand what I’m trying to say, because I’m not saying everyone shouldn’t fight this year and next and next and next… and harder than ever, for that matter.  I know I will…

BUT, WAIT A MINUTE… some changes have come to pass.

Like what?  Like, the new servicer standards, for one.

Remember… the servicers and their propensity to ignore the toothless HAMP guidelines is one of the main reasons we’re all here, right?  Well, now we have new servicer guidelines that are part of the settlement agreement between the 49 AGs and the five largest servicers that doesn’t quite exist as yet, but I’m willing to believe if you are.

Ever since the day that the Obama administration prematurely asseverated that the AG settlement had arrived, I’ve had only one thought on my mind… what happens if servicers don’t adhere to the new standards?

Is there a private right of action?  I don’t think so… they’re not even laws, right?  So what good are ANOTHER set of servicing guidelines related to loan modifications that no one can enforce when they’re ignored?  We’ve already got a perfectly good set of servicing guidelines related to loan modifications that no one can enforce when ignored… they’re called HAMP guidelines and they’re like new, hardly used at all.  If they were a car they might be a 2009, but they’d have no miles on them and still come with the full factory warranty and that new car smell.

Why are we troubling the servicers with having to come up with another set of guidelines they don’t have to follow?  Don’t they have enough on their plates already?  I mean… they’ve got all those foreclosures still to get handled… and without several of their biggest mills, like Stern and Baum.

Then there’s designing the next phase of document creation, that’s not going to be done in a day or two.  And I hear that some servicers may actually have to get things notarized… no, I mean for real… actually notarized.

I think we should just call the five servicers involved and tell them not to bother with the new guidelines… we don’t need them.

Either that, or we should put some pressure on our AGs and our state legislatures to give the new standards or guidelines the force of law… you know… including a private right of action for homeowners, and a provision for attorneys fees.

What are the banking lobbyists going to say in response to that?  There will never be lending again in this state?  No chance.  Plus, even if the new standards were made into state law, it would be very easy for the banks to not get sued and lose… just don’t break the new law and follow the standards you agreed to follow in the settlement, which you said you’d follow… so, what’s the problem?

To the AGs and state legislators, I would put forth that we don’t need new rules that lack teeth… that no one who agreed to them has to follow.  We’ve got plenty of those kinds of rules related to loan modifications already.  Why would the AGs oppose taking the terms and making them law?

I realize the states are gong to have “independent monitors,” but I’m not worried about the monitors getting screwed over and losing their homes… monitors aren’t being damaged by rules being broken, it’s the homeowners, silly.  They’re the ones that need to be able to assert their rights under the agreement.

And to the homeowners not at risk of foreclosures just yet…  forget about the deadbeat cracks, shouldn’t any rules of any federal program or settlement with our government be followed?  Period?  Of course they should.  So, since we KNOW the last set were ignored, let’s make these new standards into a law with a private right of action and a provision for attorneys fees and let’s see what happens from there.

Maybe with such a law and attorneys fees clause, the trial bar will get interested, and they’ve got a lobby in DC that’s pretty effective, I hear.

I know… there are allowable margins for error in the settlement agreement, and extended timeframes for compliance… but, so what?  Whatever we’ve got, make it a law… something that must be adhered to, or consequences might result.

Embrace incremental improvements…

If you’re waiting for a BIG BANG, you’re going to be waiting for a long time.  It’s become obvious that, as I’ve been saying for so long I’m tired of saying it… it’s a game of inches.

And it’s a simple game.  You hit the ball… you catch the ball.  Sometimes you win, sometimes you lose and sometimes it rains.

Well, some things are actually better.  Over 80 percent of trial modifications become permanent modifications today… that didn’t used to be true.  And I’ve checked with lawyers all over the country and they’re seeing what I’m seeing… better modifications… and principal reductions more and more.

Bank of America has started granting principal reductions as part of their loan mods.  I’ve seen eight in the last two weeks, and a dozen lawyers from around the country, including Bruce Levitt in New Jersey, have reported the same thing.  And how about BofA’s new rent-for-three-years-if-you-can’t-afford-it-any-more program?  I call it a soft landing.

And Ocwen is offering shared appreciation modifications (“SAM”) and they’re offering quite a few of them by the way.  But they are still awaiting approval from several states… it’s a requirement, I’m told.

And look… I’m not just saying this stuff to protect homeowners from bankers… I’m saying it to protect the bankers and our society too.  I just don’t believe many people can take another failed program that happened because no one followed the rules.  Last time, well… that’s one thing… it wasn’t pretty, but we made it through.

Not to put too fine a point on it but there are more than a few programs I could reference… like, dozens… that have failed so spectacularly that… and I do mean this literally… their reported outcomes would have been identical had they been administered by farm animals or house pets.  And that would be funny, were it not so entirely accurate.

Allow the same exact things to happen back-to-back and I’m not at all sure… all bets could be off.

Or… tell me I’m wrong.  I’m always willing to be wrong.  I actually like being wrong because I always learn something… and it happens so infrequently these days… lol.

Mandelman out.

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Look… I hate being a porcupine in a balloon factory, so I’m not trying to take anything away from the numbers that are even slightly better than they’ve been in the recent past.  In fact, I’m an optimist by nature, so I hate being the one that comes off like Calamity Jim.

And, nothing I say should ever stop someone from buying a house in which they plan to live.

But, the structural problems we face have NOT changed, so I see no possibility that we aren’t going to see some continued weakening in the housing market in the years ahead, and I don’t care whether we’re talking Phoenix, or wherever else.

Nothing goes down in a straight line.  

The Dow nearly doubled between March of 1935 to March of 1937 and smack dab in the middle of the Great Depression the economy appeared to be back on track.  But, it gave up those gains the following year in a crack-that-whip sort of slide slide and a new recession saw unemployment back at 20%.  After that, the DOW barely puttered along for the rest of the 1930s, never coming close to recapturing its March 1937 high.

Well, since our economy went off a cliff in 2007 we’ve had several periods during which “experts” have proclaimed that “the worst is behind us.”  None has been anywhere close to correct… and many have had a vested interest in what they’re reporting.  I understand that optimism is both fun, and a hard thing of which to let go, but the result of blind optimism during a crisis is that we won’t deal with the structural problems that are sure to continue kicking of our collective ass for years to come, and by years I do mean decades.

Lending in this country is… in a phrase, a complete train wreck.

To begin with, the federal government has essentially taken over consumer lending, at least as far as the $10 trillion home mortgage market is concerned.  The government’s share of new loans now approaches 100%.  Today, the three fastest growing government insurance programs are the FHA, the USDA’s single-family guarantee program, and … yawn… Ginnie Mae.

FHA is flat out bankrupt and after the election will be making headlines as the next bailout.  Over the last few years it’s become the new sub-sub-prime.  It’s leveraged at a little under an eye-popping 1,000 to one, which dwarfs Fannie’s previous record of 174 to one… and we know how well that never worked out.  I want to say defaults are in the 20% range, but that number could be one or two points off in either direction.

The US Department of Agriculture’s (USDA) single-family guarantee program is the poster child for underpricing risk.  Ed Pinto, a former chief credit officer at Fannie Mae, and an expert on government lending programs, recently explained that a borrower with a FICO score of 620 is able to get a zero down payment loan of say $150,000. According to Pinto, the all-in cost of the USDA loan is at least $12,000 below what Freddie Mac would require for the same borrower paying five percent down.  What’s going to happen down this path shouldn’t be much of a mystery.

Going, going… it’s gone.

We haven’t had a private securitization of mortgage debt since 2007, and we won’t have one for a long time… certainly not until we correct the inadequacies of the system that created our current economic catastrophe, or until institutional investors take stupid pills en masse.  That means a market dependent on the government for essentially all lending, and with Europe living on a razor’s edge, that’s just not good.  The credit markets remain broken and we won’t see a real rebound until they have been substantively repaired.  The way we’re facing facts lately, that could take a generation.

Demand for residential real estate is simply going to be much lower than in the past… half of homeowners are underwater and therefore unable to move.  Saddled with debt and unable to find good paying jobs, first time buyers are delaying family formation and therefore their purchases of homes.  The unemployment picture is little more than pre-election propaganda… the most recent numbers being largely the result of a warmer than usual winter.  And foreclosures in 2011 were simply suppressed last year by litigation, and as banks awaited the settlement with the state AGs… they’re headed higher as we speak.

That makes some comparisons between 2010 and 2011 appear favorable, but it is a meaningless illusion… similar to the illusion of a housing rebound in 2009-10 until we saw the impact of tax incentives and the Fed buying trillions in mortgage-backed securities coming to an end.

What’s next?  How about: “CASH FOR CRAP?” 

Bring in an old toaster and the federal government will give you $500.  Betcha’ that’s going to make for some very encouraging third quarter numbers.

Add to those factors the demographics of our aging baby-boomers, 78 million of us who will de facto be moving less and downsizing as we age.  And don’t forget the certainty of a European default at some point in the next couple of years, and it’s just not anywhere near as pretty a picture as we’re going to have painted for us during the election year that’s ahead.

And all of that lackluster performance is occurring in an environment of record low interest rates.  What do you suppose will happen to the housing market as those rates rise?  Defaults will unquestionably spike once again, and credit will tighten even further.  Prices simply have to fall farther before demand will increase enough to stabilize prices, let alone support any real broad based appreciation, because demand isn’t coming to the rescue, we’ve drowned it in a sea of judgmental punishment.

But again… nothing goes down in a straight line, so there will be moments where things will feel like the worst is behind us… followed by times where it will feel like it’s not.

What a house cost in the past, is entirely irrelevant.  Real estate prices are not set based on their past, no more than stock prices are priced that way, which is why no one should still be holding Cisco at $84.

A few days ago, to make my point, all the news was “happy-in-homeland.”  Today… well… not nearly as much…

From Bloomberg today…

The S&P Supercomposite Homebuilding Index fell 2 percent today. New-home sales fell 1.6 percent to a 313,000 annual pace, the slowest since October, from a 318,000 rate in January that was weaker than previously reported, figures from the Commerce Department showed today in Washington.  The median estimate of 78 economists surveyed by Bloomberg News called for 325,000.

KB Home (KBH), the Los Angeles-based homebuilder that targets first-time buyers, sank 8.9 percent to $10.24. Revenue in the first-quarter was $254.6 million, falling short of the average analyst estimate of $328.6 million.

And here’s Dave Rosenberg from CNBC today…

The current recovery is the weakest one ever and being driven by warm weather, not by fundamental improvements taking place in the economy, says Gluskin Sheff economist David Rosenberg.

Deficit spending and loose monetary policies have further propped up the economy, which is much weaker than otherwise improving economic indicators would suggest.

“Is it growing? How could it not be growing,” Rosenberg said on CNBC.

“We’ve got four years of trillion-dollar-plus deficits, we have a Fed balance sheet that’s tripled in size, zero policy rates for three years. Of course you’re going to get some growth.”

It’s that kind of artificial growth that should worry the country.

“If you want to take a big-picture perspective, this goes down as the weakest economic recovery ever, despite all the ramp up in government stimulus, and that really tells you something.”

While unemployment rates continue to fall, warm weather deserves more credit than policy.

Up to 40 percent of those jobs are weather-related, such as construction jobs coming on line earlier than scheduled.

Warm weather also gave more Americans money to spend due to lower heating bills, which further distorts economic reality.  “Employment data were affected by the seasonal adjustments,” Rosenberg says.

“It felt like March in February, and if you apply the March seasonal factors to February, employment would have actually declined.”

Mandelman out.

Good for the Banks, Good for the Borrowers

By Lauren E. Willis, Professor of Law, Loyola Law School Los Angeles

February 17, 2012

Beginning in 2007, the federal government took drastic action to save the nation’s banks. The banks were underwater, with liabilities that exceeded assets by any honest accounting. In response, we committed to them not only $700 billion in much-ballyhooed TARP funds, but also, hidden from public view, trillions of dollars in loans at rates as low as .01 percent, far below what any private investor or bank would have given them.

Although the banks have made much of having paid back much (but not all) of the face value of TARP funds extended, they have not paid a market rate of interest on the money they borrowed. They have even kept what Bloomberg calculates to have been a neat $13 billion in profit from lending the money they borrowed back to American consumers and businesses at higher rates. The American people not only threw the banks a life raft, but pulled most of them ashore.

Yet over four years later, millions of American homeowners are still sinking. About twelve million homeowners are underwater, summing to the ironic number of about $700 billion. To avoid foreclosure, these homeowners will have to make, month after month, year after year, payments totaling far more than their homes are worth.

Many will not be successful. Best estimates are that if we stay on our present course, we are only half way through the foreclosures precipitated by dropping home values, and that the economy will remain in its feeble state for years. The social costs of foreclosure will roll on, increasing the tax burdens and decreasing the quality of life for all households, renter, former homeowner and current homeowner alike.

There is as yet no Troubled Asset Relief Program for homeowners, despite the Obama Administration’s many incarnations of its “Home Affordable” programs. Many Americans’ most troubled asset is their over-mortgaged home, and the government has neither committed $700 billion to help them, nor extended them .01 percent interest rate loans. The $17 billion in principal reductions just agreed to by the banks to settle charges that they lied to the courts in foreclosure documents and charged homeowners bogus fees is less than three percent of the total housing debt overhang.

But what was good for the banks would be good for homeowners, and for renters too.

How would a TARP for homeowners work? Through the power of eminent domain. Eminent domain allows the government to take private property for a public purpose, so long as the owner is paid just compensation. Eminent domain can be used to correct deficiencies in the market, particularly when they threaten public tranquility and welfare.

Homeowners trapped underwater threaten the welfare of our society. After sending inflated monthly payments off to banks, they have little left to spend each month in their communities. They cannot sell because they cannot afford to pay the mortgage balance that exceeds any price their houses could command. Stuck in place, they cannot move to cheaper housing, better jobs,
or training opportunities.

With so many Americans removed from the pool of potential buyers, those who own their homes with smaller mortgages or outright cannot sell their homes for decent prices, trapping them too in place and forcing some to delay retirement. The low house prices do not even benefit renters, who cannot easily buy – in communities that are not decimated by foreclosures, sellers cannot afford to sell, and in communities that are decimated by foreclosures, banks refuse to lend.

With everyone frozen where they were when the housing bubble burst, the workforce is not nimble enough to follow businesses that have quickly changing needs, and so American businesses outsource the work to companies in other countries – both to assemble products and to assemble the engineering teams to develop those products.

Eventually, underwater homeowners will have too little income to make their payments or will give up trying. Further foreclosures will not only drag housing prices down further, but lead to property hazards, fires, crime, and other social costs, threatening the nation’s tranquility.

The logistics of providing homeowners relief from their troubled assets are not particularly complex, and similar programs have been done before. Any jurisdiction with eminent domain authority – the federal government, state governments, or in some states, local government bodies – could do it.

Two general methods could be used, either triggered by a petition of the homeowner. One, which I first proposed in 2008, would allow the government to take primary residences at risk of foreclosure and then sell the homes back to the homeowners at current market prices, with new fixed rate mortgages that do not exceed the value of the home. Because just compensation in eminent domain is measured by the market value of the property, today’s fire-sale home prices would be a boon to this plan. Lenders and investors would receive the lesser of the mortgage balance or the amount paid by the government as just compensation.

A more elegant method, similar to one proposed by Professor Howell Jackson at Harvard Law School, would allow the government to take mortgages at risk of foreclosure, reduce the principal balances and renegotiate the terms with homeowners, without title to the home changing hands. The government would pay the lenders the market value of the mortgages, meaning what an investor today would pay for them; no investor would buy these mortgages for more than the value of the collateral securing them.

The government could sell the new or renegotiated mortgages to private investors directly or could sell bonds backed by the mortgages. So long as the government underwrites the mortgages well, with documentation of borrower income and assets, fair appraisals and monthly payments the borrowers can afford, banks and investors will buy the mortgages or bonds.
This plan is not entirely unprecedented; eminent domain has been used to boost homeownership in the U.S. before.

At one time in Hawaii, concentrated land ownership was injuring the public tranquility and welfare by preventing ordinary families from owning the property on which they lived. To fix this market failure, the state took land from large landowners and compensated them at fair market value. The state then sold the property to the families who had been living there and paying rent, offering them mortgages through the Hawaii Housing Authority. The Supreme Court had no trouble finding this to be constitutional.

Naysayers will predict that banks will never lend to homeowners again in any jurisdiction that implements this plan. But banks are not giving out many new mortgages now. A state or locality with homeowners that are no longer weighted down by excessive debt would be the best place in America to lend.

Others will say that forcing banks to realize the true deflated values of the mortgages on their books will send them back under. But history says otherwise. During the Great Depression, and against the strenuous objections and predictions of doom by creditors, the federal government nullified all clauses in contracts that pegged debt to the price of gold. By taking these contracts off the gold standard, debts were reduced by roughly 40 percent.

Economist and former Federal Reserve Board Governor Randall Kroszner examined the effects of this sweeping debt reduction and found that both stocks and bonds responded favorably. Despite their prior opposition, creditors decided that the elimination of debt overhang and the avoidance of threatened corporate bankruptcies more than offset the cost to creditors of receiving 60 cents on the dollar.

Like the abrogation of the gold standard clauses, eminent domain is a blunt instrument, one that inevitably will be more generous to some than others. Politicians may proclaim that irresponsible homeowners should not be given a helping hand. But in four years, underwater homeowners have already learned all they are going to learn, and to continue punishing them unfairly punishes the rest of us.

Now that we know the Wall Street bailout will not flow out to buoy up the rest of the country’s families and businesses, it is time to help ourselves.

# # #

Lauren E. Willis is a Professor of Law at Loyola Law School Los Angeles, and an expert on the regulation of consumer financial products, including home mortgages.

Professor Willis earned her BA with high honors in general scholarship from Wesleyan University, and her JD, with distinction and Order of the Coif, from Stanford Law School where she was on the senior staff of the Stanford Law Review, a co-founder of the Stanford Public Interest Law Students Association, and a Foreign Language and Area Studies (Russian) Fellow.  Lauren received the Block Civil Liberties Award, the Stanford Women Lawyers Scholarship, and the University Goldstein Award for Scholarship on Children at Risk. 

After law school, Lauren clerked for the Office of the Solicitor General of the United States and for Judge Francis D. Murnaghan, Jr. of the United States Court of Appeals for the Fourth Circuit.  Before coming to academia, Willis was a litigator in the Housing Section of the Civil Rights Division of the U.S. Department of Justice and worked with the U.S. Federal Trade Commission on predatory mortgage lending litigation.   She currently serves on the Research Advisory Council of the Center for Responsible Lending in Washington, D.C.

Lauren taught at Stanford Law School as a Fellow, joined the Loyola faculty in 2004, and spent the 2008 Spring semester as a Visiting Associate Professor at the University of Pennsylvania Law School.  She was honored by Loyola’s graduating day class with the 2008 Excellence in Teaching award.

In her lecture, panelist, and media appearances in the U.S., the E.U., Korea, and South Africa, Willis has discussed regulation of the U.S. home mortgage market, predatory lending, financial literacy education, behavioral decisionmaking, and a variety of consumer law topics.  She is a member of the State Bars of Maryland and Massachusetts.  Currently she teaches: Civil Procedure, Consumer Law, Contracts, and Problems and Reforms in the Home Mortgage Market.

Other papers written by Professor Willis I think you’ll find of interest…

“It’s hard to imagine a less-deserving group of victims: people who gambled during the housing bubble by purchasing homes with borrowed money that they knew or should have known they couldn’t afford, but who are now able to stay in the homes they should have never bought because of what amounts to paperwork errors on the part of the nation’s big banks.”

 

That’s how Fox Business reporter, Charles Gasparino opened his column that appeared in the New York Post back on February 10, 2012.  Titled, “A Deadbeat Bailout,” he was writing in response to the settlement agreement between 49 state attorneys general and the five largest banks that had just been announced.

“But that’s essentially what went down, thanks to the Obama administration’s latest re-election gimmick — the nationwide mortgage-foreclosure settlement.”

Now, I’ll bet you think I’m going to tear this guy apart for being such an insensitive idiot, right?  Well, you’re wrong.  In fact, I’ve decided that “the Gasp” is absolutely right on target with his analysis of the situation.

It’s clear what happened here…

Millions of middle and working class people, and some richer folks too, all decided at the same time that their lives were not exciting enough.  They longed for the days when they were losing their retirement savings through investments in profitless dot-coms attempting to monetize eyeballs, and whose stocks were regularly pumped up by analysts paid for their favorable opinions.  Yes, those were some good times.

So, they all got together and decided they would take up gambling in a much bigger way than ever before… they’d literally bet their farms.  They started gambling with their entire net worth AND the homes in which they lived, and perhaps because they were relatively new to the whole gambling thing… or maybe because they were once again following the lead of Wall Street’s investment bankers… they lost their shirts and their farm houses.

Today, as a result, there are literally millions of these irresponsible failed gamblers aimlessly wandering around the country looking for justice… very much like Kwai Chang Caine in the 1970s television show, Kung Fu…

Young Caine: Is it good to seek the past, Master?  Does it not rob the present?

Master: Only banks may rob the present.  You must try to rob the banks.

Caine: But we are merely deadbeats, what about a bailout?

Master: For that you must seek out the one they call “Obama.”

Caine: But was it not Obama who bailed out the banks?

Master: Yes, he did my son… along with the second Bush.  But, have you not heard of “the election?”

Caine: No, Master, I have not. 

Master: Well, when you can snatch the election from Obama’s hand, then you will receive the bailout.

 

Okay, Charlie… work with me here… you’re fluttering all over the place like Woodstock, that little yellow bird that hangs out with Snoopy in a Charlie Brown cartoon.  And it’s not very becoming for a journalist of your stature.

Let’s start with your initial premise… it’s the “Obama administration’s latest re-election gimmick.”  No question about it… you nailed that one.   And the whole thing about how the administration “would like us to believe that the nation’s largest banks are finally paying for their bad behavior during the housing bubble and its aftermath, etc. etc.”  Bingo… you nailed that part too.

After that, however, you started getting your facts all mixed up.  For one thing, the banks still haven’t signed any final settlement agreement, and you have to know that.  For another, the banks aren’t paying out $26 billion to anyone, under any set of circumstances.  I think cash out the door is about $5 billion, and if it reaches that amount net, I’ll pick up a cake and celebrate.

Here’s how it appears to break down… of the $5 billion, there’s $4.25 billion that goes to the states with the $750 million balance going to the federal government for whatever and who cares.  Now, from the $4.25 billion you have to subtract the $1.5 billion that’s going to the deadbeats who lost homes in faulty and fraudulent foreclosures between 2009-2011.

And I’m with you on this “robo-signing” nonsense… I mean, the only reason they call it “forgery” is because someone forged someone’s signature… what’s the big deal about that?  I mean, if I had a nickel for every time I forged an affidavit… I mean, grow up.  And don’t even get me started on the whole ‘standing’ thing.  Just because I can’t prove I own a house means I can’t evict the deadbeat living there?  That’s just stupid.

Anyway, the deal is supposed to pay out $1,500 – $2,000 per deadbeat, and I realize that you and Dick Bove are concerned because you know these people are deadbeats, but apparently the Obama administration and the AGs do too, so calm down.

First of all, you have to realize that five or six million have lost homes to foreclosure during the last four years.  But, the settlement only applies to about a million or a million and a half of the “victims.”  To cover everyone equally they’ll only be getting $1,500-$2,000 each, which really isn’t bad for fraudulently foreclosing on a home.  If you think about that way, it’s kind of a deal.  I don’t know about you, but I’d be willing to throw in two grand of my own money to watch Diana Olick get tossed out in the street… just to have some fun on a Sunday.

And even if we assume that you’re right and the “fraud” being talked about only amounted to insignificant dalliances with meaningless paperwork, I think that message is sure to be heard loud and clear when, as compensation for losing a home, someone picks up a check that’s two grand shy of the downpayment required to lease a new Hyundai.  Just think about it… when it comes to “victim compensation,” few things say “insignificance” better than half the downstroke on a leased Hyundai.  I guess you could spit in the person’s face at the same time, but that would require hand delivering the checks and who wants to go to that sort of trouble.

I’m not sure how to handle the five percent issue though.  You said that, “95 percent of the victims weren’t victims at all,” but that means that five percent were?  Well, that’s kind of a bummer, right?  They got tossed out of homes, but really shouldn’t have?  That sort of sucks, wouldn’t you say?  I mean, okay… I guess on Wall Street it’s also sort of hysterical… like, I hate it when that happens. I guess it’s not that big a deal though, I mean in 10 or 15 years they’ll be right back where they were, mortgaged to the hilt in some spring-loaded, snapping turtle of a loan.  And hey… stuff happens, right?

I have no idea how they’ll divide the remaining $2.75 billion among the 49 states, if divided evenly it’s about $56 million each.  Not that they’ll do it that way, but it’s worth noting that in California, that amount would cover one year of incarceration costs for a little over one-half of one percent of the state’s prison population.

My prediction is that states will end up taking whatever they get and putting it towards the currently incalculable and certainly undisclosed budget deficits coming in 2013 and 2014.  One or two states have already said they’d be doing that, and you’ll no doubt be happy to hear that Ohio is going to use much of their share to demolish foreclosed homes.

I know you’re concerned about what we teach this generation of homeowners, because as you said, “If there are no consequences to risk, why not just roll the dice again and again?”  Well, I can’t think of anything that’s more effective at teaching ex-homeowners a valuable lesson… I mean, if you get thrown out of your home… just so the bank can tear it down… well, if you didn’t know it already, you know you’re a deadbeat for sure after that.

But, either way… whether the money goes to state budget deficits, or pays to tear down homes… or even if they end up sliding a grand or two into the pockets of some number of ex-homeowners, I really don’t think it’s anything to get all worked up over.  I mean, yes… technically it’s still a bailout, but as bailouts go, it’s fairly meager.  Besides, I don’t think we have to worry that the recipients of the two thousand dollar checks are going to stash their windfalls in Cayman National or anything, so it’ll just bolster the demand deposits at the major U.S. banks where it can be eaten away by fees and 29 percent interest payments.  Worst case, they’ll spend it on an iPad, use it for the down payment on a new car, or maybe repay a student loan, so Wall Street types really should relax.

Most importantly, the people that are being refinanced that are underwater aren’t the “victimized” deadbeats; you got this whole part wrong.  The people that are being refinanced are current on their payments… they’re underwater, yes… but they’re current.  Refinancing them is the right thing to do… if you’re the bank or maybe the government.  For those homeowners, however, it’s pretty much the equivalent of handcuffing them to the bedframe and setting the house ablaze on your way out.

And, although I know that they’re talking about refinancing, but lets just wait and see what happens when a homeowner is presented with a refi in the amount of … $400,000… and the place across the street just sold for $178,000.  You’d have to get me drunk before I’d sign that loan, and my guess is others won’t rush to sign theirs either.  And that assumes that the banks are actually going to be offering 200% LTV refis, because there’s certainly no indication of that happening to-date.

The rest of the money, something like $17 billion or slightly more, is supposed to go to foreclosure prevention, and that includes principal reductions.  And, I’m happy to be able to say that within a week or two of the settlement having been announced, I received and confirmed reports that Bank of America has already started offering its borrowers loan modifications that include some very significant principal reductions.  In fact, one lawyer I know that helps homeowners through the loan modification process just told me that of the last 5-6 modifications that he saw come from BofA, ALL included principal reductions to current market value.

(And, by the way… Ocwen, although not a part of the AG settlement, has been granting principal reductions under its “Shared Appreciation Modification,” or SAM program for some time now.  It’s not part of a bailout for deadbeats, however, it’s because they have people who can do math.)

But once again, Bank of America as large as they may be, is not America’s $10 trillion residential mortgage market, and since neither Freddie, Fannie or FHA are participating in the principal reduction part of the plan, I’d say we’re in very little danger of doing anything terribly beneficial for deadbeats on a widespread basis.  Besides, even if the government and the bankers, for the first time ever, actually fell into something productive in this regard, $17 billion in principal reductions, or $40 billion for that matter, which is the other number being tossed around for whatever reason, would be like removing sand from the beach with a teaspoon, when viewed in the context of $1 trillion in underwater loans.

So when Big Dick Bove says: “What this settlement did was to help 1 million people who were deadbeats,” it’s not really the case.  Okay, sure… maybe a few deadbeats are technically getting a tiny bit of help, but I’m confident that we’ll be pulling the rug out from under them before anything would rise to the level of actual help.  Let Dick know… I’m sure he’ll be relieved to hear it.

Also, I’m wondering something… when you say that, “foreclosures are a necessary ingredient to the housing market’s recovery,” how many do you figure we’re going to need in order to really “recover?” 

I only ask because we’ve had something like 6-8 million so far, Amherst Securities says about 11 million are coming.  Do you think 20 million foreclosures, roughly one out of four mortgages in this country, will that be enough to get my equity back and put us on easy street once again?  If not, maybe we should start lobbying the Obama administration to extend that HAMP loan modification thing, because that sure was effective at generating foreclosures.  Although, maybe FHA will be able to pick-up any slack.  They’re numbers certainly look promising, if the last couple of years are any sort of gauge.

Let me know… I’m anxious to hear your thoughts.

Mandelman out.

The foreclosure wars have always had two easily identifiable sides.  It’s homeowners in one corner… and banks and mortgage servicers in the other.  In the beginning the battle was largely over TILA and RESPA claims.  After that, we fell into loan modifications, and then into the HAMP guidelines that were never really followed by the servicers, or if they were on occasion, no one could tell.

Lawyers who went to court over HAMP “rules” quickly discovered that they were more like pointers, intimations, tips, or perhaps clues… but whatever they were, HAMP had no teeth, and if there was anything that could be construed as a rule or law, then there was no private right of action.  And as far as the HAMP contract between Fannie Mae/Treasury and the participating servicers, well… forget about it because borrowers were not considered third party beneficiaries to that contract.

I never liked any of these decisions one bit… and I still don’t.  But I’m no lawyer, so I went along with whatever the foreclosure defense attorneys thought best.  Obviously, on these points at least, the fix was in, so I climbed on the bus and went on down the road.

We arrived at the battleground called “securitization fail,” and soon everybody on the homeowner side was learning to sing a new version of their ABCs that went like this… A to B, B to C, C to D, which represented the steps required to properly negotiate a note into a REMIC trust, steps that were almost never followed… or maybe never followed.

The argument, however, was a technical one and judges weren’t exhibiting much patience for the technical learning that was required to understand the argument.  It seemed that the judges were having trouble seeing past the 300 cases on their dockets and the homeowner who hadn’t paid their mortgage payments in over two years.  The argument may very well have been rock solid, but many lawyers came back from court reporting that their judges had heads that were solid as rocks.

Next up was the media darling “robo-signing,” a practice that created documents to be filed in the records that were forged or signed without knowledge of anything, or illegally notarized, or whatever else you could think of… the paperwork was all wrong.

This debate is still raging, but it hasn’t done a lot of good for many homeowners, truth be told.  It certainly has delayed things, in certain instances, and it even slowed the number of foreclosures filed during the year… but it’s certainly not keeping people in their homes in any number.

The bank and servicer side of this argument says that it’s just sloppy paperwork, technicalities causing no harm to borrowers… to which the foreclosure defense side replies, “YOU’RE BREAKING THE LAW… and then in response we hear, “IT DOESN’T MATTER.”  “YOU’RE BREAKING THE LAW.”  “IT DOESN’T MATTER.”  It’s annoying… I’ll certainly give it that.

Good Morning, New Jersey…

Well, yesterday the New Jersey Supreme Court ruled in the Guillaume case, a much-anticipated decision, so I’d been told… and the ruling says that in addition to the servicer’s name and address, the lender’s name and address must appear on the document that states that a bank intends to foreclose on a mortgage.  (You’ll find a copy of the case at bottom.)

Earth shattering news?  Yes, I thought so too.  File this one right next to “Brown v. The Board of Education,” or “Plessy v. Ferguson.”  I’m sure law schools all over the nation are rushing to change their curriculums to add a class on the “Much Anticipated but Meaningless.”

 140 Elmwood Ave, East Orange, NJ

The case involves an East Orange, New Jersey home owned by Maryse and Emilio Guillaume.  The couple received a notice of intention to foreclose in May of 2008, and that notice included the name and address of the mortgage servicer, America’s Servicing Co., but it failed to include the name and address of the lender.  And somehow, this issue made it all the way to the state’s Supreme Court.

The state’s high court ruled that because the foreclosure notice that the servicer sent to the Guillaumes did not include the name and address of the lender in addition to that of the servicer, it did fail to comply with New Jersey’s Fair Foreclosure Act.

The court said that, failure to include such information creates the potential for “significant prejudice” to homeowners.  According to the high court…

“A misunderstanding about a lender’s identity could prompt a homeowner to make a critical error at a time when he or she is struggling to avert foreclosure.”

From the sounds of that, you’d think that the decision represents some sort of a win for homeowners, right?  Not so much.

While the court ruled that the lower court judge was wrong about the need to include the lender’s name and address on the notice of intent to foreclose in addition to the servicer’s, the ruling also said that the lower court was correct to order a default judgment against the couple. Specifically, the court ruled that the couple did not make a case for “excusable neglect” or a “meritorious defense” related to their foreclosure, so the Guillaumes still lose their home.

Additionally, the high court also reversed a separate appellate decision, known as “Laks.”

The Laks decision said that a foreclosure should be dismissed if the notice of intent to foreclose did not comply with New Jersey’s Fair Foreclosure Act, and by reversing that decision, now trial court judges that find a notice that’s fails to comply, will be able to either dismiss the action, or simply order a corrected notice, or even select another solution they deem appropriate.

So, now… after all this… while it’s true that the lenders name and address has to be included on the notice of intent to foreclose along with the name and address of the servicer’s, in the event that the lender’s name is missing, that will no longer necessarily mean that the foreclosure will be dismissed and the servicer will have to start over.  Now, the judge will have the discretion to simply order a corrected notice and allow the foreclosure will proceed.

Throughout last year, uncertainty over how the court would ultimately rule in this case led servicers to postpone foreclosures in New Jersey, and as a result foreclosures were down by 80 percent.

Now, I’m not saying that’s necessarily a bad thing, and if it were the goal, then I would call it a success. But, time is the natural enemy of a loan modification, because the longer the delay, assuming no mortgage payments are being made, the greater the amount of arrearages that have to be dealt with in order to modify the loan.

Now consider that reports all indicate that there are at least 100,000 New Jersey foreclosures that were stalled throughout last year, and that will now move forward.  That’s 100,000 or more homes that have less chance of being modifiable today than they would have a year ago.  So was the delay truly beneficial to homeowners?

I suppose for those that have no chance to  save their home by getting their loan modified, they got an extra year living in the house, but  even these people might have been better off dealing with it  a year ago and today being one year closer to rebuilding their credit and buying their next home, assuming that’s they’re goal.  The point is that a delay can be a dual edged sword, because it almost never leads to saving homes from foreclosure.

Lawyers that represent servicers all appeared quite happy with this decision because now a process that’s been clogged by uncertainty has been clarified by the court, and foreclosures will be free to move forward.

But it occurs to me… homeowners would not have been happy regardless of how this decision had gone.

I suppose I could be missing something, but I just don’t see a potential win in this case for homeowners no matter what.  It was from its outset, a lose – lose scenario.

Bloomberg, covering news of the decision, quoted Rebecca Schore of Legal Services of New Jersey, an attorney for the Guillaumes, saying that…

“While she was pleased with the ruling on the need to name the actual lender in a notice of intention to foreclose, she was disappointed that the court didn’t require dismissal of the complaint.”

Okay, I hate to say this but… does any of this really matter to homeowners?  Aren’t both positions merely a delay, and not much of a delay at that? 

I mean, one way the notice of intent to foreclose includes the name and address of the lender in addition to the servicer, and the other way the notice doesn’t.

It seems to me that we’re pretty much exclusively fighting for delays, these days… in the hope of gaining leverage… all to achieve one thing… an affordable and therefore sustainable loan modification, because that is the only way homeowners are remaining in their homes in any number.  Everything else seems to carry the odds of a Hail Mary at best.

Why are we giving our government a pass?

In February of 2009, our president introduced a plan that was to provide a path to precisely that, a sustainable loan modification, but when the participating servicers weren’t following that program’s rules, no one was willing to enforce them.  And because of that entirely unacceptable and unforgivable unwillingness to enforce the programs rules, our entire nation has endured unspeakable suffering and financial pain.

But we didn’t turn to our legislature to demand that something be done to correct the unjust situation, we followed other paths instead, perhaps for good reason.  But the fact remains that we have largely ignored the fact that the failure of HAMP is our government’s failure. As such, it is our government that should be held accountable.  And as this is an election year, it seems the timing for such efforts is fortuitous.

I’m certainly not saying that people and their attorneys shouldn’t be doing whatever they can to protect their homes, and I’m sure there are times when a delay is advantageous.  All I’m saying is that when the rules set forth by a federal program are being ignored it’s up to our elected representatives to do something to make damn sure those rules are followed because they were written in best interests of the program’s participants.

EPILOGUE…

The rules set forth under HAMP should be followed.  Now, with whatever the AG settlement says, we’re about to have a new round of rules… and since it’s possible that Congress will again refuse to enforce those rules, I believe that we should be working to structure and demand a private right of action and attorneys fees to allow homeowners and trial attorneys to turn to the courts for relief. 

To be blunt, it seems to me to be insane that our president should be allowed to announce and implement a $75 billion program designed to save homes from foreclosure, in order to rescue our economy and protect our middle class population, and then when program applicants are abused because program rules are not followed, that our legislature sit on their hands pretending that nothing can be done… as we go off to try other approaches.

It also seems ridiculous that a $75 billion program, three years after its launch, has only spent five percent of its budget, and no one says a word.  If we had a $75 billion program for rats and mice, and three years later only five percent of the budgeted amount had been spent, there would be people screaming about how we’ve underserved the rats and mice.  In fact, I don’t think I’ve ever heard of a government program under-spending to this degree.  Has it ever happened before?

Why is there no effort to hold the administration and member of Congress accountable for what has clearly been their failure related to the federal government’s loan modification initiative?  Why are we accepting such utter failure and holding them accountable for nothing, when in point of fact, their failure has cost the country trillions, and destroyed the lives of millions?

Instead it seems that we’re being corralled into a position where almost all of our efforts, even if successful, only have the potential to lead to a delay… a delay that in most cases reduces the potential to save the home.

We still have a democracy of sorts, do we not?  Isn’t it the responsibility of our elected representatives to protect us from abuses caused by inadequacies in federal programs?  Aren’t we supposed to be holding them accountable and demanding they so something. That’s how democracy is supposed to function, is it not?  Why are we not trying to force our democracy to function, as it was intended to function… as it has functioned for hundreds of years?

Or, what about at the state level?  Our AGs settled and let us down.  That much seems water under the bridge, so fine.  Well, I for one want the “new” servicer standards or guidelines to be more than mere suggestions… can they be codified at the state level.

I’d certainly feel a lot less let down by the AG’s settlement if the servicer standards were made into law that had a private right of action and a provision for attorneys fees because that would save homes and stop foreclosures, and it would do so more effectively than any amount of money.

Let’s UNITE homeowners around fairness, instead of DIVIDING them over delays…

I’m not talking about bailouts for borrowers, I just want the rules associated with a federal program to be followed and enforced, and I think every homeowner in the country should and would want that too, regardless of whether at risk of foreclosure or not at this moment.

Every homeowner in America should have an interest in federal programs operating as they were intended to operate.  It’s not about who is at risk of foreclosure and who isn’t.  It’s simply about being in favor of basic fairness in our federal or state programs.  And basic fairness, competence and accountability from our elected officials.  No one should, and few would, oppose any of those ideals, and those that suffered as a result of being deprived such fairness would engender sympathy from others.

Technically deficient paperwork, on the other hand, as was the crux of the Guillaumes decision by the New Jersey Supreme Court, is an entirely different matter.  Guillaumes will appear to many to be a distinction without a difference.  Who cares if the lender is mentioned on the notice or not… the answer is most assuredly not many people.

It will also appear to be a transparent a stall tactic, since even if the judge were to dismiss a foreclosure that failed to comply with the state’s Fair Foreclosure Act, the remedy would simply be to begin again.  I realize that this would buy a homeowner some time, but it would not buy much, and the time it would buy would make it that much harder to get the loan modified, as time is the enemy of modifications.

The truth is, Guillaumes is what it appears to be… stalling… hoping for leverage, and losing a house to foreclosure.  And that does not engender sympathy from homeowners not facing foreclosure.  What it does is further divides those in foreclosure from those who are not.

Delays for technical reason are never going to make homeowners in foreclosure look good to those not in foreclosure.  Don’t shoot the messenger, but it’s one thing if you’re being treated unfairly… screwed around by a government program where participating servicers who are receiving money from the program are not following the rules.  That’s wrong in anyone’s book.

It’s quite another when it appears that all that’s happening is a delay of the inevitable based on what’s perceived as relatively trivial or technical, and that’s what comes to pass.  This decision helps no one but servicers, and does significant further harm to the image of homeowners at risk of foreclosures as “deadbeats” postponing the inevitable.

I believe it is to large degree indicative of a need to re-think our strategy on behalf of homeowners and the foreclosure crisis.  The track we’re on far too often has no win available, and can cause significant harm to the cause and the individual homeowners we’re trying to help.

I would appreciate responses to the ideas presented in this post, at least the  Epilogue… Thank you.

Mandelman out.

US Bank National Association v. Guillaume

Did you hear about this?  California’s Attorney General, Kamala Harris has asked the Federal Housing Finance Agency, or FHFA, which is the government agency that is acting as conservator for failed mortgage behemoths Fannie Mae and Freddie Mac, to stop foreclosing in California until it has conducted a “thorough, transparent analysis of whether principal reduction is in the best interests of struggling homeowners as well as taxpayers.”

Well, damn woman… that’s the spirit.  I didn’t know you had it in you.  Bravo!

Can I just tell you something about this?  If this works… I am going to be so pissed off that I may have to be medicated.  We’ve already lost a bazillion homes to foreclosure in California, half the damn state is underwater and you know it’s higher than that if you add in real estate commissions and other miscellaneous costs associated with selling a home.  And there are about 2 million homes in foreclosure or very seriously delinquent right this moment in this state.

As a result of the foreclosure crisis, we’ve got headline unemployment around 12 percent, with the real number being over 16 percent, and some economists saying under-employment in the state is 22 percent, which isn’t at all hard to believe.

And all of this has created a huge budget deficit of $9.2 billion through June 2013.  That’s after making significant cuts, raising taxes on the wealthy, adding a half-cent sales tax bump and assuming the Facebook IPO goes well.  And even with that, the nonpartisan Legislative Analyst’s Office has just released its study of Governor Brown’s numbers, saying…

“We can identify no strong rationale for the administration’s assumption that capital gains will grow very rapidly in 2012 and later years.”

I’m not even going to mention how much yours truly has watched evaporate since 2007.  It may not be as much as it cost for the Obamas to take their family ski vacation in Aspen recently, but it’s quite a bit more than it would cost to send SEVEN kids to Harvard for FOUR years.

So, if she ASKS for the foreclosures to stop and they do… well,  I’m… I mean… no, I think… but when you… um… oh my God… it’s just that… would you… arghhhhh.

A Mind of His Own…

The U.S. Congress, President Obama, and Secretary Geithner have all been leaning on acting director Edward DeMarco to allow Fannie and Freddie to do more to stop foreclosures, and specifically to start reducing principal for quite some time now, as in over a year, and DeMarco has said, “No.”  And when this man says “no” he means no, damn it.

Rep. Elijah Cummings (D-MD), who has also urged DeMarco to change his position, was quoted in the Huffington Post as having said in a recent interview…

“All the administration can do is keep pushing.   DeMarco has the power.”

I’ll say this… it’s fascinating to watch, that’s for sure.  I must have missed it, and I do apologize for that, but what’s this form of government we’re now using called?  I tried looking it up… is it an “Adhocracy?” Here are a few of the characteristics of an adhocracy according to Wikipedia:

• Little formalization of behavior.
• Job specialization based on formal training.
• A tendency to deploy specialists in small, market-based project teams to do their work.
• Low standardization of procedures.
• Roles not clearly defined.
• Work organization rests on specialized teams.
• Power-shifts to specialized teams.
• High cost of communication.
• Culture based on non-bureaucratic work.

That sounds close, doesn’t it?  It’s either that or “Chiefdom,” seems to fit as well.

Ed DeMarco is so lucky that Obama’s a wussy… wait, oh my God, did I just say that out loud?  I am so sorry; I can’t believe I did that.  But my point is the same.

I’d like to see DeMarco trying this sort of thing with Lyndon Johnson in the Oval Office.  Oh, ho, ho… Ed would kick some sand in Lyndon’s face and find himself being called “Stumpy” for the rest of his natural life, you dig what I’m saying here?

Actually, truth be told, I can’t even think of a President in my lifetime that would tolerate this nonsense from some econocrat hired to be a fancy-pants version of a bankruptcy trustee for a failed mortgage company.  Were it President Kennedy we were talking about, DeMarco might have climbed into the back of his limo to head home after a long day, only to find Sam Giancana had replaced his driver.

“Yeah, well Jerry wasn’t feeling so good, so I gave him the night off, Mr. DeMarco,” Mooney would have said… as the doors all locked at once.  “You just sit back and relax, we’ll be across the river and in Virginia in no time.”  And then he’d turn on the radio and start singing “That’s Amore,” along with Dino.

Buon’anima.

At least that’s how it would go in a Martin Scorsese picture about President Kennedy, which is how I like to think of JFK.  Either that, or DeMarco would have found himself on his way to Playa Girón in the Gulf of Cazones on the southern coast of Cuba.

So, Kamala says, “Boy, if you don’t… don’t make me come out there…”

I was about to jump into a Chris Rock routine there for a moment.  Actually, I don’t even know if she can pull off that angry black woman thing, but that’s exactly what we need at a time like this.  You think Weezy Jefferson would be putting up with some nerdy pasty white guy causing people to be thrown out of their homes?  I’d say not.  Isabel Sanford would have kicked DeMarco’s butt out into the street last summer before Labor Day.

But, so help me Lord… if Kamala’s “request” accomplishes anything close to what she’s asking for, I’ll probably pass out, hot the floor, and have to be hospitalized for weeks as I sit in the bed mumbling all sorts of strange things to myself.

I mean, people have been abused, tortured, taken years off their lives no doubt, and some even taken their own lives, and all we had to do was get Kamala to request that he cut it out?  And she’s only just thinking of this now?  She couldn’t have come up with the “maybe I could ask him” idea last year?  Just what was it that caused her to have this epiphany right now anyway, and does she THINK that it might work?

Or, is she treating me like I’m a toddler with a learning disability who’s going to give her credit for trying.  “It’s okay, at least you tried.  Let’s give her a hand everybody, at least Kamala tried.  She’s looking out for us all… she’s trying… can’t argue with that… thank you Kamala.”

And what do you suppose is next… I mean if her request happens to fall on Ed’s characteristically deaf ears?  Is she going to try again, but with “pretty please and sugar on top?”  And what if that doesn’t do the trick either… “Simon says?”

Oh hell… you know what?  The bar’s so damn low nowadays, I’m starting to think… well, at least she did ask, and that’s a damn sight more than Governor Brown has done… or at least most of the House of Representatives and the entire United States Senate.

And our state legislature… do we still even have a state legislature?  Someone should run over to our state capital and see if everyone’s okay in there.  You don’t know… maybe they’ve all been gassed or someone poisoned the water supply and bodies are strewn across the floors in there, dead for weeks or even months… you don’t know, how would you know?  It’s been so quiet, I’d forgotten they even exist… maybe they’re all gone?

Alright, so never mind, Kamala… good job, thanks for thinking of us, we do appreciate it… and you’ll let us know if DeMarco says yes, won’t you?  We’ll just be waiting over here someplace… you have my number, right?  I’ll email my contact information just so you have it.

Sorry everybody… false alarm… Kamala’s asked, and that’s really all anyone can do… so, we’ll let you go back to bed now.  Lo siento.  Que’ se mejore pronto!

It means… “I’m sorry.  And I hope you get better soon.”

Mandelman out.

Okay, late one night this past week I got a call from Heidi Cuda, a producer from Fox 11 News in Los Angeles.  She explained that she’d been producing a week long series about the foreclosure crisis in California, titled, “Saving the California Dream,” and several people including an attorney friend of mine, Walter Hackett, said that she should be talking to me.

“Why?” I asked.  ”I’m not in foreclosure, did Walter say I was a deadbeat borrower?”  I think I threw her off with that line.

“No,” she said.  ”Everyone says you’re the guy that knows everything about the foreclosure crisis.”

“I’m going to kill him,” I replied.

“Noooo,” she said.  ”Everyone said you were wonderful.  I want to interview you for the final segment.”

“Where the hell have you and the rest of the mainstream media been for the past three years?”  I asked.

She took the bait.  ”Well, I’ve been going all over the state talking to homeowners and I’ve learned all about… blah, blah, blah.”

I wasn’t really listening.

“So, what makes you think you’re qualified to interview me?” I asked in earnest.

“I’m not, but that’s why I need  you, you’ll make the series and I need to learn from you,” she said sounding sincere.

Ooooh, she was good.  Very slick.  Soooo L.A.  Like she just got off the set of “Entourage,” on HBO.

“What time,” I asked.

“Noon on Friday.”  She replied.

“Okay, I’ll try.”  I said.

“I can’t wait to meet you,” she fired back still sounding sincere.

Yep, she was a “producer” all right.  ”Alright, see you then.”

Ciao.

Click.

“Love ya’ babe…” I said under my breath, after she’d already hung up.

So, I drove up to LA, we taped the interview and I drove home.  Then I went back to my desk, started writing and promptly forgot all about it, so I missed it at 6:00 PM, or whenever it was on, and missed it again at 10:00 PM, when it aired for the second time.

The next day people kept asking me if I’d seen it, so I watched it on-line.  Didn’t think much of it.  Hated it, actually.  What a waste of time.  Never doing that again.

Then she called me today.  ”Hi,” I said.  I was wimping out.  She tells me Part 2 is on tonight and it’s going to be great.  I didn’t know anything about a second part.  So, this time my wife called me when it was starting… so, I watched it.  And it was much better than Part 1, I thought.  You, however, can decide for yourself, if you’re so inclined.

I’d skip Part 1, if I were you… but that’s just me.

Mandelman out.

PART ONE…

Saving The California Dream: Foreclosure Toolbox Part 5: MyFoxLA.com

PART TWO…

Saving The California Dream: Foreclosure Crisis Part 2: MyFoxLA.com

Worst report in three years.

The first hint of this came in the 2011Q4 GDP report.  While the topline number of 2.8% looked mediocre but not horrid, the figure for growth in real final sales of domestic product — which measures end sales and not inventory adjustments — registered only at 0.8%, barely above recession level.  I noted that this [...]

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A couple of quick clarifications related to stories now in the news:

A. NO, housing has NOT hit bottom.  If anyone tells you they think it has, just reply by saying: “Shut up, shut up, shut up, shut up.”  Until they go away.

The way things stand today, housing won’t “bottom” this year, it won’t bottom next year, and it won’t bottom the year after that, and should you come across someone who has money and disagrees vehemently, please give them my email so I can make some extra cash on the side.

How do I know this?  Well, I’ve been right since 2007 and that would be pretty remarkable if there was anything else that could possibly have happened… but there couldn’t have been, so the more interesting question is how can all these people running our show be so consistently wrong?  That’s the question, and I’ve asked it before… are they stupid or lying?

Housing can’t bottom because there’s essentially no demand for housing, okay… very little demand for housing… and you don’t need a calculator to figure this one out.  Follow me here…

1. At least half the homeowners in this country are under water or effectively underwater, so they can’t move.  And they used to be about 66 percent of home sales, those who would sell a home in order to buy another one.
2. Getting a loan today requires 20 percent down at least and a fairly high credit score, and we’re short a few million people with either of those things going for them, right?  (Average FICO at Fannie Mae still over 760.)\
3. The only people selling now are those who have to, because this isn’t exactly the best time to cash in your equity position.  And the only people buying are trying to steal something.
4. The burden of student loan debt continues to cause people to delay family formation, and that means fewer first time buyers than in the past.  (Allan Carlson PhD, president of The Howard Center for Family, Religion & Society has an excellent research paper here.)
5. There’s a shadow inventory, made up of homes that have gone back to the bank but are not being put on the market.  Why?  Because there’s no one to buy them, silly.  In Maricopa County, which is Phoenix et al, has about 16,000 properties listed in the MLS and roughly 112,000 REOs.  Beverly Hills has a dozen homes on the market at the moment, and 186 REOs.  Just for future reference, that’s not what a “bottom” looks like, millions of distressed and deteriorating homes being kept off the market.
6. Foreclosures haven’t slowed down.  No they haven’t.  No… they haven’t.  Banks slowed down on foreclosing this past year because they were waiting for the AG settlement to provide them with immunity from the whole fraudulent paperwork thing.  They’re about to kick foreclosures back into high gear again, so NO THEY HAVEN’T.  And there’s no reason for them to.
7. Is that enough, or do you want to hear about aging baby boomers, changing attitudes about homeownership, or consumer debt ratios?  ‘Nuf said, right?  If you want more, it looks like Michael Olenick has a great piece on this subject this morning on Naked Capitalism here.  (I haven’t read it all yet though, so let me know if I missed something important.  I’m pretty sure that he and I agree on most everything related to this subject.)

Just try to remember what I’ve said countless times… NOTHING goes down in a straight line.

Warren Buffett admitted yesterday that he was “dead wrong” about housing when he predicted it would recover by now.  That’s cute, isn’t it?  The billionaire made a boo-boo.  Ooopsie!  But, he’s still a billionaire and the people that listened to him in 2009 and 2010 are the current wave of foreclosures at FHA, which by the way, is the new sub-prime and the next bailout for sure.

Buffett has no idea what he’s talking about.  He’s been living in the same house in Omaha, Nebraska since 1958.  Have you been to Omaha, Nebraska?  Well, I have.  And the fact that some multi-billionaire is still living in the same house he bought in 1958 in Omaha is not quaint… it’s not “old school.”  It’s f#@king nuts.  Insane.  Weird.  Like, as in… needs some sort of clinician to diagnose it, sort of weird.

I don’t know what his deal is… but I’ll bet it’s difficult to pronounce.

B. NO, unemployment is NOT “down.”  The only thing that changed to any significant degree is the participation rate, which dropped to its LOWEST point in 29 years. 

That means that more people stopped looking for work, not that more people found it.

The participation rate sunk to 63.7 percent last month, which is the lowest since May of 1983!  Do you remember 1983?  I do, and it was God awful.  It means that roughly 88 million people in this country over 16 years old not only didn’t have a job, but weren’t even trying to find one.  Not even trying.

I’ll bet they’re a cheery, upbeat bunch.  Probably all out looking for houses to buy now that we’re hitting the bottom and all.  Maybe Buffett will put them to work so they can all buy homes in Omaha…. and then kill themselves.

The employment-to-population ratio, which is the percentage of Americans that have jobs… HAS NOT CHANGED AT ALL.  It’s 58.5… the SAME as it was in January 2010.  Oooh baby… what our dust, we’re recovering now.

Oh, wait.  That’s right… I totally forgot… everything’s fine… it’s a “jobless recovery,” remember?  So, why is Bernanke so worried about the whole unemployment thing anyway?  It’s “jobless” so we’re right on track, we’re in line with the forecasts… hitting the numbers perfectly.

The “headline” unemployment rate in which we like to bathe in this country only counts people who answer the phone and tell the survey taker that they’re actively looking for work.  And if more people were looking, then the unemployment rate would be a lot higher.  So, what Obama really needs is for more people to STOP LOOKING.  And if that doesn’t make you want to chew on glass all by itself, then I don’t really know what to say to you.

Seems like most folks are cooperating though, because at the beginning of this month, based on the latest census data, the Labor Department increased the number of working age people by 1.5 million, and of those 1.25 million were not even looking for work, so you gotta’ figure they’re all Obama supporters, right?  Just doing their part.

Bloomberg’s got the data here, in case you feel a need to check my numbers.

C. NO, the stock market at 13,000 doesn’t mean anything good.  Think of it as Bernanke pushing string. 

The Fed chief continues to do the only thing he can do, I suppose… come right out and promise low interest rates until at least 2014 and pump money into the system like a mad man.  The problem is that money isn’t exactly going places.

Since the recession in 2008, M1 money supply has increased by an absolutely jaw-dropping 60 percent, coming in over $2.2 trillion in January of this year, and with no end in sight… it’s going higher for sure.  And tons of cash makes the stock market happy, but today’s cash flood isn’t doing much for the economy.

Money supply is one part of the equation, but the other component to the deal is called “velocity,” and the velocity of money in this country has fallen off a cliff, going from 10.37 in late 2007 to 7.09 as of late 2011.  Ouch.

Velocity of money is about how fast money is changing hands, buying goods and services… you know, making for economic activity.  And the scads of money Bernanke continues to pump into the system with reckless abandon isn’t moving… it’s not changing hands… he’s just pushing string, get it?

As a result of all this, what they call the M1 “multiplier” has stayed below the 1.0 level for the last three years.  The multiplier effect is an economics term that refers to the amount of commercial bank money that’s created by central bank money.  So, it’s like the Fed increases it’s loans to banks and its purchases of government securities (called bonds) and by doing so pushes money into the commercial banks who are in turn supposedly “encouraged” to loan it out and earn interest, and thereby turn the Fed’s one dollar into more than one dollar.

Except it’s not happening, right?  In fact, between August 2008 and November 2009, bank reserves grew by 500 fold, from $2 billion to one trillion.  The banks didn’t lend it out.  They didn’t find the excess money very encouraging.  Do you know why?  Because they knew that we were getting screwed, that’s why.

They knew we were in debt big time, because they’re the ones that put us there, and they knew that we’d be getting no help from the government, so there weren’t a whole lot of people to lend it to without taking on too much risk.  So, they just kept it.  And that’s why I keep saying, it’s not a liquidity crisis, it’s a credit crisis.

So, you know you have a credit crisis if the money multiplier is 1, right?  Because if banks were lending the money out, the multiplier would have to be greater than one, right?

And when you have a credit crisis, then many people can’t buy houses, and that means that the prices of houses will go DOWN.  And that means that we won’t spend like we used to when our houses were worth a lot more and there was credit available, and that means companies will make less money and lay people off.  And that leads to more foreclosures, which puts additional downward pressure on house prices, which leads to more foreclosures still.

So… super low interest rates for an extended period of time… literally trillions in cash sitting in bank reserves with more being pumped into the system every day, but with the velocity of that money falling and a multiplier that stays at 1… add it all up and what do you get?

Well, on one hand you get a stock market that’s artificially pumped up by the Fed’s assurance of continued low rates, and a free flowing money supply.  But on the other hand you have anemic velocity, a multiplier stuck on 1, and unemployment that’s only getting worse, which means company’s won’t be growing they’ll be shrinking… so you has is an economy that’s deflating.

Bernanke would rather deal with just about anything than deflation, so he just keep a-printing and a-pumping hoping against hope that one day the banks will be so bloated with cash that they loan it to anyone that asks.  It’s really quite sad, if you think about it.  Poor little man… only knows one trick and when it isn’t working all he knows to do is just try it over and over again.  Makes me get all teary eyed, poor guy.  Someone should really teach him a new trick.

Last thing… take the artificially pumped up stock market and hold it up next to the dog-doo economy and what do you see?  You see some seriously over valued stocks, which is another way of saying that you see stocks priced to deliver some exceptionally poor returns to investors.

Because one day, the Fed won’t be able to pump, because the pump she will run dry, as all pumps do.  And then what will be holding up the market at these levels… uh oh… no clothes… run away!

Then you’ll hear, “Come Mr. Tally man, tally me banana,” and daylight will come and you’ll want to go home.

So… housing is not, not, not at bottom, – check.  Unemployment not improving – check. And does the stock market at 13,000 mean something to the economy?  Nothing good – check.

Oh yeah… and then there’s always Greece, et al.  Can’t forget them.  Opah!

You might want to bookmark this page, so as the election gets closer and thing get even better than they are today, you’ll be able to contain yourself.

Mandelman out.

During the mortgage madness of 2003 – 2006, banks wore many hats related to the complex derivatives and mortgage-backed securities being packaged and sold to investors all over the world.  Then, the meltdown forced many mortgage originators into bankruptcy and saw numerous financial institutions become insolvent.  When the surviving banks acquired the various assets of the fallen… it became difficult or in some cases near impossible to ascertain from where certain risks might come.

Of course, the banking lobby has successfully resisted efforts aimed at breaking them up into more manageable entities, less capable of causing systemic damage to the global financial system.  The industry’s position seems to be that every thing is just fine.  Goldstein Such’s CEO, Lord Blankcheck, speaking at the dedication ceremony of the American Securitization Memorial, had the following to say…

“The size of our financial institutions is not the problem.  Just because in some instances I have not been aware that we created a market in which we took a significant position and then on another floor were aggressively shorting that position, should not be a cause for concern.  Remember, when that happened last year, we were able to unload our position as soon as we discovered it, and it was the Germans who ultimately took the hit.  That’s what we mean when we say our systems are both agile and resilient.”

Critics, however, point to a recent case involving HPMagnum Chaste who, after acquiring the assets of Snare Burns and Punxsutawney Federal, buying some of the default servicing rights of Hemann Bros., the trustee division of Bakeley’s, a pool of loans once owned by World Slavings that had been originated by Dog Beach Mortgage before being sold to Dowdy Savings & Moan, which was later acquired by USA Bunko, and then buying Credit Default Swap counterparty positions once owned by Goldstein Suchs, but used as collateral for repo agreements involved in the hedging of assets tied to the commercial paper markets, until in 2008, the global  financial behemoth began to arbitrage by becoming the bond holder and master servicer of a sub-set of loans that had been originated by Countrywide before BofA sold put options and preference shares to Morgan Stanley under an agreement whose terms may not be disclosed.

Apparently, Citibank was serving as trustee for the mezzanine tranches of some of the loans, and was the investor in the AA- 2-year CDO squared, but says the bank hired Wells Fargo to short AIG in order to protect itself from volatility in the asset-backed commercial paper market and the possibility of margin calls resulting from exposure to default by Greece, if it occurred in the third quarter of 2011, but through leveraging inverse interest rate swaps against bonds offered by Wachovia, through Merrill Lynch as trustee, IndyMac ended up as custodian, and servicer, with Deutsche as depositor.

In a bizarre twist of fate, when a homeowner is Shitsburgh, Tennessee lost his job at the local crayon manufacturing plant, and failed to make three months of mortgage payments, the entire structure unwound like a spring load bear trap, causing Moody’s to downgrade the country of Luxembourg from AA- to BB+, which forced MBIA to file for bankruptcy protection, and one of  Jamie Dimon’s vacation homes to be sold at a trustee sale.

Goldman Sachs, however, says that it will record an $11 billion profit from the compound transaction although a spokesperson from the investment bank says the firms is not yet exactly sure why.  “We know it’s a gain,” said Mimi Guffaw, a partner in charge of Goldman’s Double-barreled Default Anticipation Yield desk, known as D-DAY.  “It’s always a gain. We just can’t put our finger on precisely where it’s coming from.”

The Tennessee homeowner says that the whole thing started when his bank called him to tell him that he qualified and should apply for a loan modification.  He tried to explain that he had just bought the home a couple months back and had paid cash, but the Citibank representative said that it didn’t matter he would be receiving a Notice of Default later that month if he didn’t apply, or agree to pay 14 years of back taxes on the adjoining lot owned by a Danish concern.

In a related story, Bloomberg News is reporting that senior partners from cordovan loafer law firm, Mammoth, Pervasive & Bland LMNOP will testify in front of Senators Shelby and Bachus, along with several other members of the powerful Senate Banking Committee.  The two partners, Godim Pervasive and Arenti Bland told the senators that the new regulations imposed under Doss Frank requiring banks to keep track of their capital positions and disclose derivatives that leverage defaulting sinking funds with option-adjusted durations, are far too onerous and if not repealed, will make our nation as a whole unable to compete globally and deprive hundreds of thousands of retired rail workers of their dental plans.

Heinreich Svenerrrson Bjork-Hadern, Assistant Monday Morning economist for the International Literary Fund said they are studying the problem carefully, but at this point all they could say with certainly is that either Spain is on much more solid financial footing than previously assumed, or Canada has unexpectedly just gone into default, causing firefighters in Muncie, Indiana to ask AIG for $4 billion in collateral and leaving U.S. taxpayers to pick up the tab.

President Oblabla held a press conference to try and calm global currency markets by introducing the head of his new Global Asset and Confounded Equity Derivatives Exposure Security Task Force, known as GAACEDESTF.  No one noticed, however, and the president went to play golf with Herman Cain.

The Treasury Department is trying to unravel the global conflagration taking place in the over-the-weekend debt markets, which nobody had ever heard of, but apparently are crucial to keeping the power grid functioning in the mid-Atlantic states.  Former SIGTARP Neil Barofsky has promised to try to figure things out, but again suggested that in the future Ben Bernanke refrain from accepting baseball card collections as collateral for loans made by the Federal Reserve, that the too-big-to-fail banks not be allowed to do more than three or four things at a time, and that leverage of 200,000 to 6 is taking things a bit far.

Bernanke says he doesn’t see the problem, noting that the Fed didn’t actually take possession of the baseball cards in question; rather it created a new form of security that is being called a “Promise to Insure Structure and Securitize.”  Bernanke claims that by accepting PISS as collateral, the Fed is protected from fluctuations in the commodities markets that might otherwise lead to hyperinflation once oil prices have collapsed and the ongoing deflationary spiral has stalled.

“If something goes wrong, we won’t have the exposure that we might have had were we to be holding the actual cards, Bernanke explained.  Under this structure, no matter what happens, all we’ll have as collateral for the loans is the PISS.”

Bernanke closed by saying that he thinks the U.S economy remains strong, even though the reverse opportunity swaps now secured by the Social Security Trust Account will like cause the Singapore Sovereign Wealth Fund to foreclose on The second and third floors of The White House sometime this summer.

Clearly, the obfuscation of information conveyance from financial institutes to the end consumer is a paradigm best explained by specialist terminology synergizing with superfluously convoluted modes of communication.

 # # #

So, why did I write this?  Because it makes just as much sense as everything else that’s going on in this country, and at least it made me smile.

Mandelman out.

Who are you going to vote for in 2012?  Here’s how it breaks down…

If you’re an Obama supporter, which means you’re going to vote for Obama even though you don’t really want to.  But, you’ll explain that we have to vote for Obama again because the GOP candidates are unbelievably bad.  I mean, Santorum might be interesting, if we were living in the year 1642.  And Mitt Romney would be… or maybe he wouldn’t… but then again I think he is… except that he’s probably not… but then again…  And in terms of Romney’s position on the issues, you’ll have no trouble pointing out that Republicans are in the pocket of Wall Street… and completely insane.

So, okay… fair enough, I agree… they’re insane.

And if you’re a GOP supporter, which means you’re going to vote for Mitt Romney even though you don’t really want to.  But, you’re going to list the numerous and obvious reasons that Obama has been an abject failure in his first term.  You’ll remind me of how he spent a year debating health care while the economy slid off a cliff, only to pass a bill that no one really wanted, and that his economic policies have failed in every way and at every turn.  And you’ll ask, how can I possibly vote for him again, when he’s clearly not capable of leading this country at a time like this.  And all I’ll be able to say in response is “Yeah, it’s true, but the other guys are insane.”

So, once again… I agree, he’s been dreadful.

SO, FIRST LET’S LOOK AT MITT…

Mitt Romney is the epitome of a Wall Street “fat cat.”  He’s running on the traditional GOP platform of cutting taxes, spending, regulation (repeal Dodd Frank and Obamacare) and government programs.  He wants to increase trade (meaning jobs going overseas is a plus), energy production (drill baby drill), human capital and labor flexibility (whatever those last two mean).

Mitt’s already got enough money to start his own space program, but to run for President he’ll need zillions, so let’s look at a list of his top 20 contributors, according to the Center for Responsible Politics.

• Goldman Sachs
• JPMorgan Chase & Co.
• Morgan Stanley
• Credit Suisse Group
• Citigroup
• Bank of America
• Kirkland & Ellis
• Barclays
• HIG Capital (Private Equity firm.)
• PriceWaterhouseCoopers
• Blackstone Group (Private equity firm)
• Bain Capital
• Wells Fargo
• UBS AG
• EMC Corp.
• Citadel Investment Group
• Elliott Management (A hedge fund.)
• Bain & Co.
• Sullivan & Cromwell (Law firm)
• The Villages (“Florida’s friendliest retirement hometown?”)

The money donated came from the organizations’ PACs, their individual members or employees or owners, and those individuals’ immediate families… but after reading that list, do you have any questions about Mitt?  Right… you don’t.

Also, as far as the new “Super PACs” go, well… the top six ALL support GOP candidates.  Restore Our Future ($25 million and change for Mitt Romney), Winning Our Future, Red (just under $12.5 million for Newt Gingrich), White & Blue, Make Us Great Again (Just under $5 million for Rick Santorum), Endorse Liberty (just under $3.5 million for Ron Paul), and Our Destiny PAC (roughly $2.5 million for Huntsman).

“Bundlers” are another important source of campaign funds, and the Center for Responsible Politics defines “Bundlers” as being, “people with friends in high places who, after bumping against personal contribution limits, turn to those friends, associates, and, well, anyone who’s willing to give, and deliver the checks to the candidate in one big bundle.”

Romney’s list of bundlers, offers no real surprises, except that it’s worth noting that #4 on his list is… Lender Processing Services, better known as LPS, who I believe handle about 80% of the foreclosure market for the banks.

NOW, HERE’S PRESIDENT BARACK OBAMA…

Now let’s look at Obama’s platform and where his money is coming from.  In the aggregate, he’s raised about twice as much as Romney, roughly $136 million to $62 million, but when Romney gets the nod and becomes the GOP’s candidate, I’m sure he’ll catch up quick.

There’s only one Super PAC listed as supporting Obama… “Priorities USA Action” for $611,766.  Their Website’s main message seems to be that Mitt Romney wanted GM to go bankrupt (as did the Obama administration, and GM did go bankrupt, by the way), that he has made money from companies that have gone bankrupt, and is therefore, if elected president, going to make American businesses go bankrupt, bankrupt, bankrupt, bankrupt… it echoes.  So, don’t vote for Romney the zillionaire because he’s going to drive us into bankruptcy, I suppose is the message?

However, in the bundler department, Obama is the king by far with just under $75 million coming in from his “elite” friends… #1 is Jeffrey Katzenberg of DreamWorks SKG, by the way.  The president has 444 VIPs on his list, as compared with the 16 registered lobbyists that have bundled just $2.3 million for the Romney campaign.

Below is the list of the Obama campaign’s top contributors, and again, the “money donated came from the organizations’ PACs, their individual members or employees or owners, and those individuals’ immediate families.  Just as I did above, I’ve provided links to the names that I figured you hadn’t heard of and except for one that owns/operates movie theaters they’re all law firms, by the way.

• Microsoft Corp.
• DLA Piper
• Google Inc.
• Harvard University
• University of California
• Morgan & Morgan
• Comcast Corp.
• Skadden, Arps et al
• Sidley Auston LLP
• Time Warner
• US Department of State
• Debevoise & Plimpton
• National Amusements Inc.
• Stanford University
• US Government
• Wilmerhale Llp
• University of Chicago
• Columbia University
• Mayer Brown LLP
• Arnold & Porter

In terms of the issues, Obama’s campaign Website says he’s “taking aggressive steps to put Americans back to work,” but that, “there’s more work to do.”  He also says that when he “took office he both addressed the immediate economic crisis and laid the foundation for a U.S. economy that can out-innovate and out-build the world.”

Obama’s campaign site also claims to have “made the environment a priority,” and that he is “moving us towards energy independence.”  He’s also in favor of equal rights (repealed “Don’t ask, Don’t tell”), thinks his health care bill will stop insurance company abuses, is pro national security (brought troops home), and wants tax cuts for the middle class (yeah, whatever).

But, how about this…

NEITHER CANDIDATE SO MUCH AS MENTIONS HOUSING OR THE FORECLOSURE CRISIS ANYWHERE ON THEIR CAMPAIGN WEBSITES.  IT’S JUST NOT AN ISSUE FOR EITHER OF THEM.

So, as I was saying… and if you go around asking people, even strangers on the street you’ll see this for yourself… if you’re pro-Obama, it’s because… “How can anyone vote for the GOP candidate, they’re insane.”  And it’s true… they are.  And if you’re pro-Mitt… it’s because… “How can you possibly vote for Obama when his first term track record sucks, and he’s not exactly inspiring confidence in next time.”  And, it does and he’s not.

You want to know what I decided… they’re BOTH right.

As a result, I had pretty much decided to do something I never do – stay home on election day, go to the movies on election night, and just try to avoid knowing who won for as long as possible.

It’s not as dumb an idea as you might think.  I mean, living in California it’s not like my state’s not going to go red under any circumstances anyway, so at least I’d help keep the popular vote numbers down, which could send a message if enough people in California did the same thing.  It’s not like I’m thinking of not voting as a resident of Florida or Ohio, the states that put the swing into swing state, right?

BUT…  EVERYTHING HAS CHANGED…

AND NOW I WANT…

BUDDY for PRESIDENT in 2012!

“Who’s Buddy?”  That’s how everyone I talk to about this responds, except for two friends of mine who somehow already knew about Buddy Roemer’s candidacy, Marc Dann, Ohio’s former attorney general, and Michael Hudson, author of a great book, The Monster, which is about predatory sub-prime lending.

Abigail Field already knew about Buddy too, in fact she’s the one who introduced me to him.  She wasn’t sure about Buddy at the time, and in fact I was pretty sure she was kidding around when she said, “What about Buddy for President?”  I was, however, desperately seeking a port in a storm of lousy options, so I jumped at the chance to find out about Buddy.  Frankly, at that moment, I was willing to glom on even if Buddy turned out to be a dog.

So, you can imagine how pleasantly surprised when my Google search turned up a Website promoting “Buddy for President,” and Buddy was actually a very serious and eminently qualified candidate for president in 2012… Charles “Buddy” Elson Roemer III.  (Apparently, “the third” makes anyone “Buddy” in the South.)

WHY HAS BUDDY BEEN IGNORED BY THE GOP? 

I think the answer to this question is clear… because he’s very smart, he knows what the real issues are and he’s willing to talk about them candidly… and when he does he doesn’t play to any base, he says what’s right for America.  He flat out makes sense, but in order to do that he doesn’t always agree with one party or the other… you know… like the rest of us.

He was a Democrat for 20+ years, and a Republican for 20+ years.  He tried to run as a Republican in 2012, but the GOP wouldn’t let him.  Buddy Roemer DOESN’T TAKE ANY MONEY FROM PACs, NEVER HAS, and the Republicans certainly didn’t want anyone like that on stage during the debates… so they refused to invite him.

He asked to be invited, however, but first the GOP said no because he didn’t have enough money… so, he raised $500,000, but then they GOP said no because he wasn’t high enough in the polls. So, he worked hard and got up higher in the polls… higher than either Rick Santorum or John Huntsman at the time… but still the GOP refused to allow him to join the other 23 candidates on the stage.

To those that are part of our established political machine, which we all know is BROKEN BEYOND REPAIR… Buddy must be SCARY.  SO, BUDDY DECIDED TO RUN FOR PRESIDENT AS AN INDEPENDENT.

We’ve all thought it… we’ve all said it…  we’ve all wanted it.  Well, here’s our INDEPENDENT, THRID PARTY CANDIDATE that understands that both parties are joined at the billfold.  And if there was ever a time where it’s possible to elect such a candidate, this is that time.  If the people whose lives have been torn apart by the foreclosure crisis all get behind Buddy Roemer, he will win.

FOR AMERICA’S SAKE, PLEASE TAKE THE TIME TO GET TO KNOW BUDDY ROEMER.

The truth is that I can’t even remember being so impressed with a politician, and not because he gives good speeches, but because of the facts on his resume and because of what he believes can be accomplished.  Like all of us he expected Barack Obama to bring change, and he’s deeply disappointed.  So am I.

Check out these 5 FACTS I’ve learned about Charles “Buddy” Roemer III.

FACT #1: “Buddy” Roemer served 4 terms as a U.S. Congressman (1981-1988).  At the time, he was considered a “Conservative Democrat,” which meant that he voted for what he believed to be right for his constituency, even if that meant breaking ranks with his party.  As a U.S. Congressman, he also must have stood out like a sore thumb because he NEVER accepted special interest money, remaining free from the “special favors” expected of Congressmen by their corporate campaign contributors.

FACT#2: Buddy has the education and dedication we need in our president now.  Buddy was born and raised in Louisiana.  He graduated top in his class from high school at age 16 and went straight to Harvard College where graduated with a BS in ECONOMICS and then earned his MBA in FINANCE at Harvard Business School.  After Harvard, he began his political career with state-level campaigns and became a delegate to his state’s  constitutional convention where he helped to author the Louisiana Constitution.

FACT #3: Buddy was Governor of Louisiana, he has the ethics we can trust & the record we need. Buddy’s zeal for reforming government led him to leave Congress to challenge the corrupt incumbent Louisiana Governor Edwin Edwards, whose ties to industry had turned Louisiana into one of the most polluted states in the country, with high unemployment and a huge deficit.  Without the help of any PAC money, “The Roemer Revolution” succeeded and Buddy Roemer moved into the Louisiana Governor’s mansion in 1988.

During Governor Roemer’s tenure, strict environmental protections were enacted, unemployment was reduced by nearly half, the state’s budget was balanced, education standards were enacted, and sweeping campaign finance reform legislation was passed into law.

FACT #4: Buddy KNOWS banks, banking reform and how to avoid foreclosures.  After leaving public office in 1992, Buddy pursued a variety of business ventures, but his most recent was as the founder, CEO, and President of Business First Bank, a community bank approaching $1 billion in assets that focused on small business lending.  Business First Bank took NO BAILOUT MONEY from the Federal Government, and RESTRUCTURED LOANS after the financial crisis of 2008 INSTEAD OF FORECLOSING ON HOMEOWNERS.

FACT #5: Buddy Roemer is the ONLY candidate that DOESN’T TAKE PAC OR SUPER PAC MONEY, special interest money or Wall Street money.  The MAX that anyone can contribute to Buddy’s campaign is $100, and he needs one million people to do that…. or TWO MILLION would be even better. And, in terms of experience, he’s the ONLY candidate that’s won four elections to spend 8 years in the U.S. Congress, and to beat an incumbent to become a successful state governor.

I think the FACTS about BUDDY are CLEAR…

BUDDY UNDERSTANDS THAT WE NEED:

• Bank reform
• Budget reform
• Tax reform
• Healthcare reform
• Trade reform
• Immigration reform

He agrees we need all of those things but says they can’t happen until we have campaign reform.

If one million people give $70 each, that’s more than any of the GOP candidates has raised.  He needs to get 15% in a national poll to get on the stage during the presidential debates so he can challenge what has become an institutionally corrupt system.  And if he does that, he could win.

“If we continue business as usual, and let Goldman Sachs and GE be the major contributors… and let the fat cats buy their candidates… if we just sit back in our armchairs and do not get involved, what do you think will happen?  We’ll be in a lot of trouble, I’ll tell you that.”   Charles “Buddy” Roemer III

Please take the time to watch Charles “Buddy” Roemer…

Governor Roemer… on C-Span.

 Mandelman out.

 URGENT!  I NEED DOERS RIGHT NOW!

This is the story of Patricia Martin, 65 years old, disabled by a crippling back injury, after suffering a stroke and a heart attack, now with a heart function approximately 35 percent of normal.  This is a woman who owned her home since purchasing it with her late husband in 1968.

Not a home of great value to anyone but her.  The home in which she and her husband raised their children.  And the home in which today, she resides along with her daughter, son-in-law and grandson.  The home that has been the centerpiece of her life for 44 years.

Yes, Patricia Martin, despite the challenges of her health, was blessed with a close family who love her and she them.  And as I think of her, all I can imagine is that her memories of all the years in that house must mean everything to her.

And yet tomorrow morning, Wells Fargo Bank wants her EVICTED. 

You see, after a year and a half of deceiving and abusing her, Wells finally won when last November they foreclosed on the Option ARM mortgage some predatory jackass sold her on back in 2005, and bought her house at the trustee sale she didn’t know would take place.  Wells wore her down and finally beat her, it wasn’t easy… it took half dozen bank employees well over a year to do it, but they finally did.

People like Wells Fargo’s own… Alfonzo Martinez, who Patricia Martin describes as always being abusive, unprofessional and condescending.  And as I’m typing those words, I can’t help but wonder what you have to do to get a 65 year-old grandmother to think that about you.

I guess the reality is that maybe I’ll never understand this sort of thing… how it ends up coming to my desk at this point… how it is that there wouldn’t be a dozen or more people at Wells Fargo Bank chasing this 65 year-old woman around, trying to apologize, offering to make things right… asking for forgiveness.  How can that not be the case?

Is it part of the corporate culture at Wells to be callous and unfeeling… to shun responsibility, to be able to act with impunity even when doing things that others would consider unconscionable.  Who raised these people?

I have to say that this sort of thing reflects very badly on you, CEO John Stumpf… and your senior management team, of course.  But you more than the others, for it is you with whom the buck stops, does it not?  And I say that because I was the CEO of my own firm for some 20 years, and were someone to have told me a story such that I’m about to tell, about my own company… well, I simply cannot even imagine it.

First of all, let me introduce you to the stars of our tragic tale:  besides Alfonzo Martinez we have Amy Leffert, Shelly Melaine, Samuel Biasa who looked over the entire account, Ray Serrano in the Office of the Presidency at Wells Fargo Bank, and NDEX West, as our Foreclosure Trustee, who told Patricia Martin…

“Wells isn’t offering you a repayment option, they don’t want your money, they want your property and that’s all there is to it.”

Wells Fargo turned down Patricia Martin’s application for a loan modification because they said she had failed the NPV test… but they had run the test using a property value of $370,000.  Trish Salem, who was helping Patricia, was insistent that her home was worth $301,000, and Wells agreed to re-run the test again using the lower property value.  They ran it again, but with the same $370,000 property value.  Why?  Well, that’s easy… because they are a collection of unfeeling and incompetent idiots, that’s why.

It all started on September 26, 2010 when Patricia became quite ill and so her daughter went into the branch to make two mortgage payments, one for August and one for September, and was told she didn’t have to pay the late fees at that time, they could be paid later… the late fee was $83.41 for each of the two months.  She paid the two payments by check in the amount of $3238.30.

It would be those late fees that would ultimately be what would lead to her undoing.  And that’s why I say Wells Fargo can’t be trusted, because that should be impossible.  Late fees, whether you pay them or not, should never be capable of causing you to go down a path to losing your house.

In October Patricia and her family had to make some expensive repairs to the home’s heating system, so it wasn’t until mid November that Patricia’s daughter called Wells to explain why the October payment wasn’t made and to say that both October and November would be made shortly.

That was the fateful day when the Wells Fargo suggested that Patricia Martin apply for a “Map 2” loan modification.

It was Amy Laffert that took down Patricia’s information, telling her, “you qualify” and stating that Particia would be “ahead of the game,” because her late payments would be folded into the modified loan.

The file was assigned to Shellie Melaine, and that was when she was told that something was amiss.  Shellie said that half of the payment that had been made in September had not been applied.  Patricia’s daughter later called and asked to have the missing payment rectified.

Little did she know that she would soon be getting a letter saying the loan was in default and that she would have to come up with $4829.96 by November 30th, to bring it current.

The amount could not be right, there were only two payments due. 

It’s like a Hitchcock movie, isn’t it?  I get chills as I’m writing it.  Do you see where the twist is coming from… it’s the September payment, the late fees… they took them anyway after saying she didn’t have to pay them… I want to scream… NO, PATRICIA, STOP… but she had no idea what was going on, and Wells certainly didn’t explain anything about it to her.

But it still could have worked out okay, had Wells just accepted her two payments and brought the loan current,   and this information was confirmed by Ray Serrano in the Office of the President at wells Fargo.  Patricia could have made the two payments, and she only owed the two payments, but wells saw three payments as being due… they were wrong, but they’re never wrong to them.

She sent in a copy of the check for the two payments.  They received it and said the matter would be corrected.  But it wasn’t corrected.  She called again, they said it would be corrected and they would reverse all changes and fees… blah, blah, blah… they did nothing.

Again, and again… same thing, same thing. At this point Wells is torturing this woman.

So, this goes on and on… do I have to tell it all?  Good Lord, Wells Fargo and specifically to you CEO John Stumpf… why do you put people through this process?  Get off your private jet and go spend the day in the loan modification department.

So, yeah… the Map 2 modification was denied because of insufficient documents.  But we all know there were no insufficient documents, because next Wells Fargo, in a letter dated January 31, 2011, the bank invited Ms. Martin to apply for a HAMP modification and why would they do that?  Does HAMP require LESS SUFFICIENT DOCUMENTS?  You guys at Wells don’t even make sense about half the time.

And if I have trouble keeping tract of your nonsense, imagine how Patricia was handling it, especially when in the middle of all this, December 10, 2010, she had to have major back surgery.

All the documents were promptly submitted to Alfonzo Martinez, the designated agent of Wells Fargo Bank… and this is the second time I’ve bumped into Mr. Martinez and heard how awful he is.  How can he not be fired by now?

Memo to Alfonso… Dude, you’re really starting to bother me.  Chose another career, do the right thing… you don’t want me annoyed with you.  I’ve had a tough three years, I’m cranky and I love to stick up for grandmothers.  Trust me, it’s not worth it.  Have you considered the Armed Forces?

According to Patricia’s lawyer…

“Mr. Martinez was unprofessional in his job.  He repeatedly requested documents which had already been submitted, threatened to close the modification request if he did not get documents he had not previously requested, repeatedly asked for new RMAs although a number already had been submitted, and demanded that Ms. Martin submit RMAs with sections in blank which he would fill in.

It appears that for a period of several months from February 1, 2011 to May of 2011, Alfonso  he never did complete the package and send it to underwriting, rather, he required at least three different new loan mod submissions.”

At one point in the clusterf#@k of a process, Samuel Biasa stepped in to look over the entire account and, having seen that all documents were in fact there, admitted that he didn‘t know why Alfonzo had not submitted them to underwriting.  So, Mr. Biasa submitted the paperwork himself to Wells underwriting and for a short time, things were looking up.

When Alfonso came back and saw that Samuel Biasa had submitted Patricia’s file, Patricia says that he became “very abusive, unprofessional and condescending” towards both Patricia and her daughter.

Then the HAMP modification came through… DENIED.  Can you guess why… insufficient documents again?  Sure why not?  The bank would still not accept her payments… she was told the system was being whatever and who cares.

Then she was denied for HAMP again.  This time for the NPV… with the $370,000 valuation, that they just couldn’t seem to ever change… but it’s funny because HOW MUCH DO YOU SUPPOSE WELLS PAID FOR PATRICIA’S HOME AT THE AUCTION… $298,000.

By the time the system got put right, there was too much IN LATE FEES AND OTHER CHARGES FOR HER TO PAY IT IN ONE LUMP SUM.

As her sale date approached she tried filing a lawsuit, but botched it completely.  She finally called Mark Zanides, an attorney who I happen to know quite well.  And although Mark knew it would be a difficult case, he couldn’t leave her alone facing eviction.

He told me about Patricia’s story and I couldn’t leave her alone either.

And I have the feeling that my DOERS WON’T let her get evicted either…

IS THAT RIGHT, DOERS?

Wells Fargo… let me be clear about this because time is short.  Patricia Martin is scheduled for UD Court tomorrow.  So, you have some law firm, some unsuspecting foreclosure mill, no doubt… and you should call and cancel them.  It looks like NDEX WEST.  You should see what’s happened here and if it can be fixed… you should do the right thing and fix it.

This is a predatory piece of garbage World Savings/Wachovia loan sold to a senior.

I had this sort of situation with Bank of America a few weeks ago and they got the house back from a third party.  You bought this one yourself.  So, you can give it back no problem.  She can make her payments, good Lord, she was trying to make her payments to you all damn year when you wouldn’t take them because of some stupid $80 late fee.

Don’t make me go any further here, I take no pleasure in this.  Bank of America has been wonderful to work with and you should follow their lead.  I’m hearing all sorts of terrible things about Wells lately.  You don’t want to take Bank of America’s place in the shooting gallery, do you?

Come on, let’s save Patricia’s home for her… and for her daughter and son-in-law… and for her grandson.  It’ll feel good to do the right thing.

Mandelman out.

Please send an email to John Stumpf and others at Wells Fargo and tell them how you feel and that they need to stop the eviction by canceling tomorrow’s UD proceedings and give this woman her home back.

 # # #

Chairman of the Board, President, CEO: John.G.Stumpf@wellsfargo.com

~~~~

John Stumpf (415) 396-7018
john.g.stumpf@wellsfargo.com
CEO: John G. Stumpf
420 Montgomery St.
San Francisco, CA 94163
1-866-878-5865

~~~

Howard.I.Atkins@wellsfargo.com

James.M.Strother@wellsfargo.com

Richard.D.Levy@wellsfargo.com

David.A.Hoyt@wellsfargo.com

David.M.Carroll@wellsfargo.com

patricia.r.callahan@wellsfargo.com

kevin.a.rhein@wellsfargo.com

Carrie.L.Tolstedt@wellsfargo.com

AVID.MODJTABAI@wellsfargo.com

BoardCommunications@wellsfargo.com
sharon.cecil@wellsfargo.com
Todd.M.Boothroyd@wellsfargo.com

john.g.stumpf@wellsfargo.com
cara.heiden@wellsfargo.com
denise.erickson@wellsfargo.com
cara.k.heiden@wellsfargo.com
mary.coffin@wellsfargo.com

BoardCommunications@wellsfargo.com

 ombudsman@fdic.gov

Wells Fargo please contact Patricia’s Attorney ASAP!

Mark Zanides, Attorney at Law

415-624-4475

HOMEOWNER:

Patricia Martin

Loan #: 0040638090

And if you can’t reach Mark Zanides, you can reach me, Martin Andelman at 714-904-2288.