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L. Randall Wray: Secret Deals, Foreclosure Settlements, Stress Tests and Vampire Squid Whistleblowers

March 16, 2012 Leave a comment

From Huffington Post:

 

No Hollywood scriptwriter could plot a more implausible story. Here is the plotline sequencing:

    1. Bankers make NINJA loans, securitize them, and sell on to government GSEs
    1. Bankers destroy all the loan documents and begin random and fraudulent foreclosures, throwing millions of innocent victims out on the street
    1. GSEs sue bankers and force them to take back bad mortgages
    1. Bankers sell servicing rights for the same bad mortgages back to GSEs, who overpay
    1. GSEs resell servicing rights to companies run by former GSE officials
    1. Bankers slapped on wrist with puny foreclosure settlement in return for government promise it will never sue them for past foreclosure fraud
    1. Government stress test claims banks are healthy
    1. Bankers get sweet deal, counting mortgage mods for best borrowers toward the settlement
    1. HUD report released demonstrating massive foreclosure fraud that reached to highest levels of banks
    1. Vampire Squid Executive Director fires off resignation letter decrying bankster culture
  1. Banksters walk away scott-free as statute of limitations runs out for criminal behavior

 

L. Randall Wray

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Secret Deals, Foreclosure Settlements, Stress Tests and Vampire Squid Whistleblowers

Posted: 03/15/2012 10:53 am

No Hollywood scriptwriter could plot a more implausible story. Here is the plotline sequencing:

    1. Bankers make NINJA loans, securitize them, and sell on to government GSEs
    1. Bankers destroy all the loan documents and begin random and fraudulent foreclosures, throwing millions of innocent victims out on the street
    1. GSEs sue bankers and force them to take back bad mortgages
    1. Bankers sell servicing rights for the same bad mortgages back to GSEs, who overpay
    1. GSEs resell servicing rights to companies run by former GSE officials
    1. Bankers slapped on wrist with puny foreclosure settlement in return for government promise it will never sue them for past foreclosure fraud
    1. Government stress test claims banks are healthy
    1. Bankers get sweet deal, counting mortgage mods for best borrowers toward the settlement
    1. HUD report released demonstrating massive foreclosure fraud that reached to highest levels of banks
    1. Vampire Squid Executive Director fires off resignation letter decrying bankster culture
    1. Banksters walk away scott-free as statute of limitations runs out for criminal behavior

This would have to be a fantasy because no one would ever believe it could have been true.

and

A detailed review of 36 of Chase’s foreclosures found that the bank was unable to find any documents related to how much the borrowers owed in 32 of them; there were documents in 4 cases, but docs for 3 of those were wrong. In other words, Chase actually had correct documents needed for foreclosure in only one case out of 36. And these were foreclosures it had successfully completed. In 35 out of 36 cases Chase had simply stolen the home — it had no documents showing what the homeowners supposedly owed. Maybe they owed nothing. We will never know. That is the state of home mortgages in America — thanks to Wall Street and MERS.

 

L. Randall Wray: Secret Deals, Foreclosure Settlements, Stress Tests and Vampire Squid Whistleblowers.

After Mortgage Settlement, Fannie Mae, Freddie Mac Face Renewed Pressure On Principal Reduction

February 13, 2012 Leave a comment

 

Top law enforcement officials in several states are signaling they will pressure Fannie Mae and Freddie Mac to correct what is widely seen as one of the biggest deficiencies of the $25 billion mortgage settlement announced on Thursday: It simply doesn’t help that many homeowners.

Borrowers whose loans are backed by the government-controlled mortgage giants — nearly half of all outstanding mortgages in the United States — are not eligible for payouts under the deal. State officials who negotiated the deal say they could not convince Fannie Mae and Freddie Mac, or the Federal Housing Finance Agency, which oversees the loan giants, to join onto the settlement because they are steadfastly opposed to principal reductions — loan write-downs for borrowers whose homes are at risk of foreclosure.

“This is a glaring weakness of the overall settlement,” said one state official who spoke on condition of anonymity. “Fannie and Freddie were absolutely opposed to principal reduction. You’d ask why, and they’d say ‘moral hazard to the taxpayer.'”

So far, the mortgage giants and the FHFA have only said that they’re avoiding principal reduction because of the cost to taxpayers.

Principal reductions are hailed by many economists and housing experts as the most effective way to help homeowners who are underwater on their mortgages, owing more than the home is worth. About 1 in 5 homes in the U.S. are currently underwater.

Read the Entire Article Here: After Mortgage Settlement, Fannie Mae, Freddie Mac Face Renewed Pressure On Principal Reduction.

The Foreclosure Deal – Unanswered Questions and Little Relief – NYTimes.com

February 12, 2012 Leave a comment

 

At best, this round of relief will reach about two million former and current homeowners. Under the agreement, banks will grant some $10 billion worth of principal reduction, $3 billion in refinancings and $7 billion in other mortgage relief, like forbearance for unemployed borrowers, covering roughly one million borrowers in total. Another $1.5 billion will be cash payments of about $2,000 to some 750,000 borrowers who were treated unfairly in foreclosures from 2008 through 2011.

And $3.5 billion will go to state and federal governments for what has been described as resources for legal aid and other counseling for borrowers facing foreclosure. Such aid is vitally important, but it appears that the earmarked money also could be used to plug state budget holes, rather than empower homeowners in their fights against the banks. That would be a mistake.

What do banks get in exchange for the relief? The answer, in short, is a sweet deal.

The banks did not get the blanket release they originally sought from legal liability for all manner of mortgage misconduct. But the settlement still shields them from state and federal civil lawsuits for most foreclosure abuses, including the wrongful denial of loan modifications, excessive late fees that enriched the banks but could make it impossible for borrowers to catch up on late payments, and conflicts of interest that led banks to favor foreclosures over modifications. Going forward, the banks will have to adhere to tougher standards for servicing loans and executing foreclosures. But past sins in servicing and foreclosure are largely absolved.

The banks are not off the hook for criminal prosecutions related to the mortgage mess or for private lawsuits. They are also not off the hook for wrongdoing in their aggressive pooling of mortgages into securities and other practices that inflated the bubble. Thanks for the settlement’s narrower legal releases goes to New York’s attorney general, Eric Schneiderman, and a handful of other state attorneys general, who refused to accept a deal that would have blocked further legal action.

Which brings us back to the question of whether a new investigation will indeed get off the ground. We are skeptical. The Obama administration squandered several months resisting Mr. Schneiderman’s insistence on a broader investigation, raising questions about its willingness to now get tough with the banks and bankers. As a practical matter, that delay has allowed some potential violations to draw closer to expiration under statutes of limitation.

 

Read the Entire Article: The Foreclosure Deal – Unanswered Questions and Little Relief – NYTimes.com.

Bruce Judson: Seven Questions Begging to Be Answered Before a Foreclosure Settlement Is Reached

February 3, 2012 Leave a comment