After a quick review of its procedures, Bank of America this week announced that it will resume its foreclosures in 23 lucky states next Monday. While the evidence is overwhelming that the entire foreclosure process is riddled with fraud, President Obama refuses to support a national moratorium. Indeed, his spokesmen on the issue told reporters three key things. As the Los Angeles Times reported:
A government review of botched foreclosure paperwork so far has found that the problems do not pose a "systemic" threat to the financial system, a top Obama administration official said Wednesday.
Yes, that's right. HUD reviewed the "paperwork" problem to see whether it threatened the banks -- not the homeowners who were the victims of foreclosure fraud. But it got worse, for the second point was how the government would respond to the epidemic of foreclosure fraud.
The Justice Department is leading an investigation of possible crimes involving mortgage fraud.
That language was carefully chosen to sound reassuring. But the fact is that despite our pleas the FBI has continued its "partnership" with the Mortgage Bankers Association (MBA). The MBA is the trade association of the "perps." It created a ridiculous on its face definition of "mortgage fraud." Under that definition the lenders -- who led the mortgage frauds -- are the victims. The FBI still parrots this long discredited "definition." That is one of the primary reasons why -- in complete contrast to prior financial crises -- the Justice Department has not convicted a single senior officer of the large nonprime lenders who directed, committed, and profited enormously from the frauds.
Note that the Justice Department is not investigating foreclosure fraud. HUD Secretary Donovan's statement shows why:
"We will not tolerate business as usual in the mortgage market," he said. "Where there have been mistakes made or errors, we will hold those entities, those institutions, accountable to stop those processes, review them and fix them as quickly as possible."
Note the language: "mistakes", "errors", "processes" (following the initial use of "paperwork"). No mention of "fraud", "felony", "criminal investigations", or "prosecutions" for the tens of thousands of felonies that representatives of the entities foreclosing on homes have admitted that they committed. Note that Donovan does not even demand that the felons remedy the harm caused by their past fraudulent foreclosures. Donovan wants them to "fix" "processes" -- not repair the harm their frauds caused to their victims.
The fraudulent CEOs looted with impunity, were left in power, and were granted their fondest wish when Congress, at the behest of the Chamber of Commerce, Chairman Bernanke, and the bankers' trade associations, successfully extorted the professional Financial Accounting Standards Board (FASB) to turn the accounting rules into a farce. The FASB's new rules allowed the banks (and the Fed, which has taken over a trillion dollars in toxic mortgages as wholly inadequate collateral) to refuse to recognize hundreds of billions of dollars of losses. This accounting scam produces enormous fictional "income" and "capital" at the banks. The fictional income produces real bonuses to the CEOs that make them even wealthier. The fictional bank capital allows the regulators to evade their statutory duties under the Prompt Corrective Action (PCA) law to close the insolvent and failing banks.
The inflated asset values allow the Fed and the administration to ignore the Fed's massive loss exposure and allow Treasury to spread propaganda claiming that TARP resolved all the problems -- at virtually no cost. Donovan claims that we have held the elite frauds accountable -- but we have done the opposite. We have made the CEOs of the largest financial firms -- typically already among the 500 wealthiest Americans -- even wealthier. We have rewarded fraud, incompetence, and venality by our most powerful elites.
If the government does not hold the fraudulent CEOs responsible, who is supposed to stop the epidemic of elite financial fraud? The Obama administration's answer is the fraudulent CEOs themselves, at a time of their choosing. You can't make this stuff up.
But ultimately resolving the problems is not the government's responsibility, said Michael Barr, assistant Treasury secretary for financial institutions.
"Fundamentally, this is up to the banks and the servicers to fix," he said. "They can fix it as fast as they feel like."
So who is Michael Barr and why is saying things on behalf of the Obama administration that make it appear to be a wholly-owned subsidiary of the fraudulent lenders and servicers? He's a Robert Rubin protégé and he's the senior Treasury official for banking policy.
We have a different policy view. We believe that only the government can stop fraud from growing to catastrophic levels and that among the government's highest responsibilities is to provide the regulatory "cops on the beat" with the competence, resources, courage, and integrity to take on our most elite frauds. We believe that anything less is a travesty that causes tens of millions of Americans to be defrauded and poses a grave threat to our economy and democracy.
Prompt Corrective Action
First, it is time to stop the foreclosures until the banks and servicers adopt corrective steps, certified as adequate by FDIC, that will prevent all future foreclosure fraud. They must also adopt plans to remedy the injuries their foreclosure frauds have already caused, and assist the FBI, Department of Justice, and legal ethics officials investigations of their officers' and attorneys' frauds and ethical violations.
Second, it is time to place the financial institutions that committed widespread fraud in receivership. We should remove the senior leadership of the banks and replace them with experienced bankers with a reputation for integrity and competence, i.e., the honest officers that quit or were fired because they refused to engage in fraud. We should prioritize the receiverships to deal with the worst known "control frauds" among the "systemically dangerous institutions" (SDIs). The SDIs' frauds and fraudulent leaders endanger the global economy.
We propose Bank of America for the first receivership. In the last few weeks, the SEC has obtained a large (albeit grossly inadequate) settlement of its civil fraud charges against the former senior leaders of Countrywide. (Bank of America acquired Countrywide and is responsible for its frauds.) Fannie and Freddie's investigations -- with their findings reviewed by their regulator, the Federal Housing Finance Agency (FHFA) -- have identified many billions of dollars of fraudulent loans originated by Countrywide that were sold fraudulently to Fannie and Freddie through false representations and warranties. The Fed, BlackRock, and Pimco's investigations have identified many billions of dollars of fraudulent loans provided by Countrywide under false reps and warranties. Ambac's investigation found that 97% of the Countrywide loans reviewed by Ambac were had false reps and warranties. Countrywide also engaged in widespread foreclosure fraud. This is not surprising, for every aspect of Countrywide's nonprime mortgage operations that has been examined by a truly independent body has found widespread fraud -- in loan origination, loan sales, appraisals, and foreclosures. Fraud begets fraud. Lenders that are control frauds create criminogenic environments that produce "echo" epidemics of control fraud in other professions and industries.
We have been amazed that, as one financially sophisticated entity after another found widespread fraud by Countrywide in the entire gamut of its operations, the administration, the industry, and the financial media act as if this is acceptable. Countrywide made hundreds of thousands of fraudulent loans. It fraudulently sold hundreds of thousands of loans through false reps and warranties. It fraudulently foreclosed on large numbers of loans. It victimized hundreds of thousands of people and hundreds of financial institutions, causing hundreds of billions of dollars of losses. It has defrauded more people, at a greater cost, than any entity in history.
Bank of America chose to purchase Countrywide at a point when it -- and its senior leaders -- were infamous. Bank of America made some of these Countrywide leaders its senior leaders. Yet, Bank of America is not treated as a criminal entity. President Obama, Attorney General Eric Holder, Donovan, and Barr cannot even bring themselves to use the "f" word -- fraud. They substitute euphemisms designed to trivialize elite criminality. The administration officials do not call for Bank of America to be the subject of a criminal investigation. They do not demand that Fannie, Freddie, Ambac, the FHFA, and Pimco file criminal referrals about Countrywide's frauds. They do not demand that Fannie, Freddie, and the Fed refuse to purchase or take as collateral any mortgage instrument from Bank of America. No one at the Harvard Club in New York moves to kick Bank of America's officers out of their club! The financial media treats Bank of America as if it were a legitimate bank rather than a "vector" spreading the mortgage fraud epidemic throughout much of the Western world.
For the sake of our (and the global) economy, our democracy, and our souls this willingness to allow elite control frauds to loot with impunity must end immediately. The control frauds must be taken down and their officers removed promptly. Receivership is the way to begin to reclaim our souls, our economy, and our democracy and Bank of America has the track record that makes it a good place to start. It is sufficiently large and powerful that its receivership will send the credible signal that America is restoring the rule of law and that even the most elite frauds will be held accountable.
Next we need to remove the rest of the "too big to fail" institutions -- we call them systemically dangerous institutions, or SDIs -- to reduce the global systemic risks that they pose. We are rolling the dice with disaster every day. The SDIs are inefficient, so shrinking them will reduce risk and increase efficiency. We need to follow three types of policies with respect to SDIs.
Appointing a receiver for an SDI will be a major undertaking for the FDIC, but it is also well within its capabilities. Contrary to the scare mongering about "nationalizing" banks, receivers are used to returning failed banks to private ownership. Receiverships are managed by experienced bankers with records of competence and integrity rather than the dread "bureaucrats." We appointed roughly a thousand receivers during the S&L and banking crises of the 1980s and early 1990s under Presidents Reagan and Bush.
Here is how it works. A receiver is appointed on Friday. The bank opens for business as normal (from the bank's customers' perspective) on Monday. The checks clear, the ATMs work, and the branches all open. The receiver's managers direct the business operations, find the true facts about the bank's operations, senior managers, and financial condition, recognize the real losses, and make the appropriate referrals to the FBI and the SEC so that the frauds can be investigated and prosecuted.
The receiver is also a well-proven device for splitting up banks that are too large and incoherent by selling units of the business to different bidders who most value the operations.
Peter J. Wallison: If It's Incredible, Don't Believe It
by Alan Gray
http://newsblaze.com/story/20101116120222nnnn.nb/topstory.html
. . .a foreclosure that entails savagery, fraud, corruption, greed, intrusion, peril, trauma, desolation, shocking deviation from established law and court rules and procedures, and reprisals for whistleblowing and for not relinquishing one's home to sham foreclosure is a riveting story worth being told.
* * *
. At some point after foreclosure had been filed, the victim discovered that the modification consisted of a contract between the homeowner and a fictitious lender.
* * *
Along various stages of foreclosing on the victim's home, lawyers, sheriffs and judges enabled collection of the debt that was created by Wells Fargo's fraudulent loan modification.
* * *
Specifically detailed in the victim's narrative is the manner in which the victim believes the home was acquired for the foreclosure lawyer through a straw buyer at the collection lawyer's fake auction.
A review of the process found some errors, but none that would alter the foreclosure outcomes.
Fraud is false representation of fact—whether by words or by conduct, false or misleading allegations, or concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury.
Fraud requires five elements: (1) false statement of a material fact,(2) knowledge on the part of the defendant that the statement is untrue, (3) intent on the part of the defendant to deceive the alleged victim, (4) justifiable reliance by the alleged victim on the statement, and (5) injury to the alleged victim as a result.
So far, no evidence, nor even credible allegation includes all the necessary elements of fraud. This is under review by at least one state attorney general (foreclosures are governed by state law, not federal), I've heard of just one person suing as a “victim” of robo-signing. One person? Where are all the personal injury lawyers?
I'll provide you examples of the 5 things you cited above.
(1 + 2 + 3) Citigroup's head underwiter admitted they knew 60% of the loans were below quality at the time they were securitized. They still continued to package the loans and lie about their quality when marketing the securities. This is all documented in FCIC testimony.
(4) Investors relied upon Citi's and other bank underwriting claims to make purchasing decisions. The packaged loans were not of the quality they were supposed to be.
(5) This is one is obvious.
Next you're going to tell me Bernanke saw the housing crash and that he wasn't lying when he said under oath in congress that he would never "monetize the debt".
If a home owner pays his mortgage off to the last penny, being the bank does not have the note.
Will he ever receive full legal title?
But ownership of the mortgage has been clouded by the re-selling of loans in secondary markets, and the use of mortgages as collateral for mortgage-backed securities (a decades old practice, completely legal, even the federal government has been doing that through GNMA for decades).
There is a paperwork problem. There may be instances of securities fraud clouding tiyles to certain homes, but courts of equity will not force any homeowner to pay twice regardless of the cloud created by sloppy paperwork of secondary mortgage markets.
1. Watch Michael Moore's "Capitalism, A Love Story". Pay close attention to the part where the leaked Citibank memo comes into play. Next, pay attention to the "irony" regarding the fact that the FBI was close to nailing some of these "perps" when 9/11 occurred...hmmmm....
2. Understand that when the bailout first came up, Congress voted it down, but in a backroom deal with "Hey-now!" Hank Paulson it went through without a hitch with such teflon language that whatever happens next, the "smartest guys in the room" will be exonorated! Hmmmm...
3. Next we have the presidential election. You think Obama getting elected was a miracle? I think the republicans didn't want the job, knowing what was instore for the next president. How else do you explain Sarah Palin as a running mate when there were so many more talented and qualified Republicans out there. Hmmmmm.....
4. Flash forward to Tuesday's election. Once again the Right have trotted out some of the most unbelievably strange candidates it's only fitting that this election season has resembled a cross between a situation comedy and some Bravo reality show.
End game? The Reich (ummm Right) continue to camouflage their underhandedness under the guise of restoring America when all they are doing is restoring more $$$ back in their pockets! They will continue to blame Obama for policies that were started under Bush. And the rich? Just keep getting richer.
We just can't afford these banksters anymore, their services are too expensive to for America.
To bad their failure is a dream, will never happen, they are too powerful.
Fin Reg passed this year has restored much of Glass-Steagall, but derivatives remain largely unregulated (this needs to change, and I expect it to over time as the massive amounts of derivatives in the market place unwind and run their course). One obstacle is not all derivatives are created equal. Some amplify risk, others don't. Some derivatives are very useful and should remain in use. Some, for example, are fully backed by US Treasury obligations held in trust. Some are fully collateralized, but the collateral itself is subject to valuation risk. And some are backed by nothing (e.g., so-called "naked shorts," and to a large extent "credit default swaps" which really aren't investments but are credit insurance policies issued in excess of the net worth of the company providing the insurance. It will take time to put together meaningful regulation of derivatives.
At the moment the international banker-speculators irrationally demand that derivative trading loses be covered by government bailouts. The US must assert its' sovereignty and disown/refuse any such obligation and demand the return of the previous bailout trillions as they were fraudulently procured. The bailouts are a definite drag on the economy.
There is absolutely no incentive for banks to refinance, rather than foreclose. They’ve hedged their bets on the losses.
These toxic mortgages are nothing more than the pawns being used in the derivatives game.
These sham loans were created for the sole purpose of giving hedge funds high-yield debt to buy.
These fraudulent loans were invented to cheat consumers, into defaulting on their loans. These toxic sub-prime loans, are the fuel that underlay derivative securities and the homeowners are just the collateral damage of this fraud.
It's as if your neighbor went out and bought fire insurance on your home. Then torched it, in order to collect that insurance. Meanwhile, you are left homeless, literally out on the streets.
These banks rigged these loans to play a Wall Street insurance scam. This scam is still going on today and has no end in sight.
Back in April of this year, Senator Byron Dorgan from North Dakota, attempted to pass an amendment to stop these practices within the Finance Reform bill, but Chris Dodd, worked behind closed doors with Republicans to table it.
These fraudulent loans along with this current practice of fraudulent foreclosures, are merely the bait-n-switch to cover up the real money making action in Derivatives and Hedge Funds.
It is why we are still seeing billions being made on Wall Street, while Main Street has been left to die.
Then what? Abolish money?
No incentive for banks to refinance? Then how do you explain over half a million permanent mortgage restructures successfully avoiding foreclosure just from the government HAMP plan? And many more mortgages restructured independently of the HAMP program. I guess the banks were just being nice because they had no incentive to do these restructurings.
ksker, I do sympathize with your emotional response, but you have been more abused by the writers of this blog playing on your fear and anger than you have by the banking system. Contrary to popular opinion, banks do not profit from foreclosures.
These are the institutions that fund the worlds intelligence agencies to cause trouble for all those who dare hold them accountable... I 've always read about these groups but it was always about other nations and I never thought that those tactics would be used on American shores...
They've manipulated our laws to become above them....
http://www.truthdig.com/greatamerican
In 2006 FASB permitted mark to market accounting as a step toward the controversial International Financial Reporting Standards. In two quick years the global financial system collapsed when the MTM speculative oil bubble burst between July 2008 and September 2008. The September 2008 financial crisis was 100% about soured speculative oil derivative contracts, not mortgages.
Today's financial crisis is about the mortgages.
Please take a few minutes to read my public comment to the Securities Exchange Commission regarding my personal experience with alternative energy:
http://sec.gov/comments/df-title-ix/short-sale-disclosure/shortsaledisclosure-11.htm
Be sure to check out the attached files #1 & #2 at the bottom of the comment page. You will be shocked and stunned.
Good that people are finally starting to wake up to that fact.
Tan Man Angelo Mozillo commits security fraud, gets a fine, and continues to live free.
Ain't 'Merica great?
Where’s the Note?
http://action.seiu.org/page/speakout/wheresthenote
I'm a paralegal and I am concerned that the homeowners get a "legal" foreclosure process not a fraudulent one, which is the case with many, especially with the robo signatures. Many of these people that are losing their homes put large down payments and even tried to get a loan modification, all to no avail.