Foreclosure Fraud

by: Mike Lux

Fri Oct 15, 2010 at 18:00


I was heartened to see a group of Democratic Senators write this great letter to Ben Bernanke and administration officials on the foreclosure fraud issue. They came out strongly for several important things regarding homeowners' rights, and they framed the issue perfectly: this is not some minor technical problem regarding some mislaid paperwork in a few cases, this is fraud by bankers on a massive scale. Along with this letter, check out this great op-ed by Sen. Whitehouse on the subject. Once again, in keeping with the pattern Digby first reported, this is all Democrats doing the right thing, and not a single Republican lifting a finger to help. Another bit of great news: Elizabeth Warren echoed the Senators message, calling the foreclosure issue "big and serious". This puts the administration clearly on the side of the idea that this problem isn't just a minor paperwork hassle, and that it matters a lot.

This foreclosure fraud issue is yet another domino falling, where once again the big Wall Street banks are wreaking havoc with our economy in order to come away with outlandish profits at the expense of poor and middle-class people. These huge banks are so powerful both politically and economically that they haven't worried about playing by the rules and following the law. Their thinking is that because they are too big to fail, and too influential in Washington, they can just get Washington to change the rules as they go along and bail them out whenever needed. They were shocked that their sneak attack at changing the mortgage rules got exposed by progressives and vetoed by the President, but they almost certainly still assume they can eventually get the rules changed to save them from their own fraud one more time.

This issue is example number one on why progressives need to remain focused on cleaning up Washington and standing up to the special interests who still act like they own the place. And our message has been getting through. Check out this striking new poll from MoveOn.org:

• An overwhelming 84% of voters polled, including 80% of Republicans and 81% of Independents, believe voters have a right to know who is paying for ads for a particular candidate.

• Fifty-six percent of voters overall (including 53% of Independents) are less likely to vote for a candidate if they know the ads supporting that candidate are paid for by anonymous corporations and wealthy donors.

• Forty-seven percent of all voters are more likely to support a candidate who insists that voters have a right to know who is paying for ads, with only 9% of total voters saying they are less likely to support a candidate who holds that position.

• Almost two out of three voters (63%) do not believe that the anonymous groups running ads hold the voters' best interest in mind. This belief is held by 65% of Independent and 70% of Democratic voters.

• A straight majority of total voters (53%) are less likely to trust a candidate to improve economic conditions if that candidate is supported by anonymous groups.

Those are very big, very dramatic numbers. People want to know who is behind these ads, and they want to kick the special interests off their throne of power. This message of changing and cleaning up Washington, challenging big corporate interests, and standing up to the banks on behalf of the middle class has the chance to come through in spite of the swarm of corporate money flowing into attack ads.

Whatever happens in the elections, this foreclosure crisis is ugly, and the economic dominoes that could fall as a result should scare all of us. It may well be that this fragile economy gets pushed into another crisis. The question then will be do we again arrange some kind of backroom sweetheart deal for the big banks that got us into this mess, or do we go the opposite direction, and save the economy by helping middle class homeowners first. If the bankers still "own the place" in Dick Durbin's famous words, we will get screwed again. If voters say no to these secretive special interest ads, and elect some more good down home Democratic populists like the Senators who wrote this letter, we might just win this round.

Mike Lux :: Foreclosure Fraud

Tags: , , , (All Tags)
Print Friendly View Send As Email

Foreclosure Fraud | 19 comments
We'll See (4.00 / 5)
"This puts the administration clearly on the side of the idea that this problem isn't just a minor paperwork hassle"

Well, if the man in charge of this administration takes that position, then this will be true.  I won't hold my breath.

The Truly Amazing Part! (0.00 / 0)
Nobody is mentioning that the fraud is fraud NOT alleged UNDER FEDERAL LAW (with the exception of securities laws violations that implicate investors),  but under STATE foreclosure laws that require lenders to produce proper documentation of ownership of the note and deed of trust Agreement, signed by the debtor before they can foreclose on a defaulted loan.

So, any proposed FEDERAL solution simply wipes out 200 years of STATE SOVEREIGNTY.

If Republican judges actually were concerned about the constitutional principles they bleat about constantly this might very well be considered unconstitutional.

It certainly is unprecedented. This would be a good time for all those "Tenthers" to get outraged. [crickets].

[ Parent ]
Elizabeth....gone to the Dark Side!!!! (4.00 / 1)
Said....

"She additionally stated that major servicers' voluntary foreclosure freezes mean two things. First, this problem "is big, and it is serious," and second, the voluntary moratoria represent evidence that "the issuers themselves are trying to get this problem solved," she said.

Arghhhhhhhh!!!!!

I may be wrong, but I'll defend her at the moment. (0.00 / 0)
Warren is in a terribly weak position right now. She's been demoted to a "consultant," and as such has no power to speak of.

I think what she has to say about this later, after she's set up her agency, will be more important. Then again, she may just get blown out in the storm that's coming.

"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly." -Woody Allen, My Speech to the Graduates

[ Parent ]
i'd lay 2-1 odds against you (4.00 / 3)
and what makes you think she's setting up an agency?  Oh, you mean, the one she's advisor to Geithner on?  You think he would take her advice?  You think he would even solicit her advice?  

You think she'll even be there after the midterms?  Well, if she has integrity.

[ Parent ]
Sadly, you're probably right about that. (4.00 / 2)
But there's only so much sadness I can take. Tomorrow, on the other hand, is another day.

Yes, when she took an "advisory" position, that smelled like day old fish. Under Turbo Timmeh, doubly so. Under this administration, triply so.

I too wonder if she'll be around after mid-terms, especially if the Dems lose majorities in either or both houses.

But dammit, can't we at least start with the Worst Offenders? (Wow, that really is lame, isn't it?! Arrrgghh!)

"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly." -Woody Allen, My Speech to the Graduates

[ Parent ]
Wake me up when this gets past "sternly worded letter" stage, okay? (4.00 / 3)
Your take on this is rather good, Mike. The public, as you adroitly point out, gets this issue. In a big way. Sadly, the folks in DC don't quite get it yet... although the measly six people who did sign this letter apparently do get it. Well, at least the need to send a Sternly Worded Letter(tm).

The question then will be do we again arrange some kind of backroom sweetheart deal for the big banks that got us into this mess, or do we go the opposite direction, and save the economy by helping middle class homeowners first. If the bankers still "own the place" in Dick Durbin's famous words, we will get screwed again.

The answer to this, of course, is YES. We'll be bailing out the banksters and their bondholders by extension. The middle class will get the screws put to them with a vengeance. It was ever thus, Mike. The very same "Too Big To Fail" banks are at the very core of this massive, systemic fraud on the country.

What we're seeing here is the destruction of the biggest asset class on the planet, RMBS, or Residential Mortgage Backed Securities. Since President Obama, with the Senate's glorious consent, decided to reappoint the guy who bought a lot of that garbage and reform nothing in return, this belongs squarely on their shoulders. Timmeh Geithner is as good as done as well. Heckuva job, Barry!

This isn't an issue that will resonate too much this year, though, as a lot of the details and the utter destruction--much less the lawsuits--have yet to fully materialize. People are only now starting to realize just how badly they've all been had. There's no pretending their way out of this one, I'm afraid.

In other words, the idiotic claim currently in use, namely that, "We prevented a depression," will likely be moot by next spring. We'll be in the throws of a real depression by then and the White House will be busily bailing out the banksters yet again.

This will be very bad for Obama and Democrats in general in 2012 though. If they had to guts to do something constructive, they could not only save themselves, they could come out heroes in all this.

But they won't, will they? Instead they'd rather have the GOP in charge, for some insane reason.

The term "Versailles," as a descriptor of our ruling elites, gains more caché every day. Let's party like it's 1789!

"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly." -Woody Allen, My Speech to the Graduates

"Let them eat cell phones!" (0.00 / 0)
If Dems think the recording fraud will mean anything - it won't.  Everyone I know is furious that people who didn't pay their mortgages will get free houses.  forget that some were screwed out of their houses - if anyone gets a free house they are furious!

This will not resonate with the mainstream voters.  Particularly since Obama and Friends have decided that the nice banks will take care of their problems.  

Haven't they always?

[ Parent ]
Yes, they always have and will continue to do so. That's what they're paid for, right? (4.00 / 1)
But don't take too much stock in what people think about "people getting free houses" right now. That perception will get blown out of the proverbial water like the USS Maine in due course.

Consider that all the people that recently "bought" foreclosure properties, some of them for cash, are going to find out they don't actually have title to those properties. That's just for starters.

Recording the fraud is only a small step forward. Actually dealing with it is where the rubber meets the road. If DOJ starts putting these executives in jail for substantial terms, they can save themselves. If congress starts doing its job, they can save themselves.

But they have to make things right and that's a tall order for that crowd.

This fraud, as Barry Ritholtz pointed out so well, is a frontal assault on what we understand to be Property Rights in this country. This will effect everyone in one way or another. It is making victims of tens of millions of innocent people.

Right now, people can go off on their stupid "blame the victim" rap all they want--it seems to be The American Way these days. But a few months from now, the perception will change. It will change because hardly anyone is going to avoid suffering from this fraud. Systemic failures like this one, especially when it's intentional like this one, can have that affect.

This economy is now completely fucked for the time being. Only major changes can avoid catastrophe now and we probably won't get them.

What we're seeing now is just the tip of the proverbial iceberg. It's the Crime Of The Millennium.

The wheels are coming off.  

"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly." -Woody Allen, My Speech to the Graduates

[ Parent ]
Um, not exactly (0.00 / 0)
There is a difference between a title to property and a mortgage.  

Houses that were already foreclosed upon and sold WERE foreclosed upon and sold.  There is no getting them back.  People may be able to civilly sue for fraud, but that is a tough battle after the fact and likely won't pay off.

The key is that people need to go to jail.

As for the economy as a whole, it honestly doesn't have to be a disaster.  Although most likely the cure will be worse than the disease.

[ Parent ]
Yeah, but who really knows, at this point, who holds the title? (0.00 / 0)
This is the problem. The fraud is based on title fraud. The real issue is the securitization of mortgages. When a massive institution like BofA is bundling thousands of mortgages every day into "bonds," they are going to cut corners. They do that through automation. They also violate the law when they do that, as that necessarily entails "robo-signing." It always was a scam.

You're right about two things though: 1) People need to go to jail and, 2), it doesn't have to be a disaster. As to the disease, though, it's actually really bad. Like polio bad.

People who paid cash and thusly had no mortgages, are having their homes seized. People who have mortgages but aren't in default, are having their homes seized, broken into and their property stolen.

Nope, this thing is broken. This will ripple through most of the economy in one way or another.

"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly." -Woody Allen, My Speech to the Graduates

[ Parent ]
This isn't about homeowners (0.00 / 0)
Look, nobody wants to see people lose their homes.  And I feel bad for the many people who have already lost their homes despite fraud and likely will never recover any of the capital that they lost.

But the reality is that, from here on out, the big losers are NOT going to be homeowners.  

Especially in states that mandate judicial foreclosure, such as New York, the banks are FUCKED.  

Right now, the questions is, "who is going to take the biggest bath, the banks, the RMBS investors, the Fed or the taxpayers?"

It's about homeowners, workers, managers, banks, govt... everything. (4.00 / 1)
Our whole financial system is riding on this. So no one gets left out of this tragi-comedy. Almost no one.

Workers are going to get it through higher unemployment rates. Homeowners are going to get it for the simple reason that a lot of them don't actually have proper title on their homes. Communities are going to get it because their tax bases are being destroyed. Small businesses are going to get it because they depend on all of the former to stay in business. Loop right back into higher unemployment, etc, ad nauseum.

The entire foreclosure system is failing, so at some point it will simply be brought to a halt. Then, the "investors" are going to get it. They will sue the banks. This will go on for years. Even the rich are going to get it, if they're not bailed out... as they so rightly expect to happen, eh?

But at the base of all this is the simple notion that everyone will have to do a lot of due diligence, just to determine if they actually have proper title to their properties. As it turns out, a lot of them don't.  Most people who bought foreclosed properties almost certainly don't. Indeed, most people who have mortgages don't have proper title the way things are going. THIS IS A VERY BIG DEAL.

Right now, the entire US financial system is having a collective Disk Failure. RMBS is the biggest single asset class on the planet. Just think of the derivatives trade based on that!

This isn't a "scandal." This is a massive System Failure, of the Windows "Blue Screen Of Death" variety.

"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly." -Woody Allen, My Speech to the Graduates

[ Parent ]
I dunno, Space... (4.00 / 1)
It may well be that the banks are the biggest losers, although the magnitude of the loss for the banks might not be the same as the magnitude of the loss for the homeowner in proportional terms.  I'm not sure how you make them comparable.

The thing I think is worth paying attention to is this business of title insurers and warranties.  Per Yves Smith:

And we further get another lie, that it's the foreclosure freezes imposed by banks, and the prospect of more at the state level, that might affect REO sales. That's another Big Lie; the most pressing impediment, and it's not getting better any time soon, is title insurers withdrawing from foreclosure sales from banks that have admitted to having affidavit problems. Other title insurers are reported to be writing qualified policies on foreclosure sales.

...title insurers may come to require warranties from banks for all properties sold that has securitized mortgages. As Adam Levitin indicated in a Citigroup report, documentation lapses could "cloud title on not just foreclosed mortgages but on performing mortgages." [emphasis mine]

So it's not just those properties that have been foreclosed, performing mortgages could be presumed to be at risk by virtue of who issue the mortgage and when it was issued.

I have to ask, how comfortable would you be purchasing a property with such a warranty if the entire process is assumed to be suspect?  I daresay, most people before this mess would be clueless about any such rider attached to the title.  That may not be the case from this point forward.

[ Parent ]
Precisely. +100 (0.00 / 0)
Confidence in the long-standing way of doing business is now being upended.

This isn't some pebble being thrown into a pond. It's an asteroid.

"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly." -Woody Allen, My Speech to the Graduates

[ Parent ]
Yes, but (0.00 / 0)
My point is that there has been massive fraud occurring for years.  Now that the fraudsters have had their deceptions uncovered, homeowners and potential homeowners are much better off.

I even question whether it is even possible for Congress to save the banks and RMBS owners from their own stupidity.  Real Property law is archaic and complexity is built in.  You simply can't write a law that would accomplish what the banksters want to accomplish -- i.e. Pretend that all the proper procedure was followed -- and even if they could, it arguably could be unconstitutional.

[ Parent ]
Clayton Holdings is the Key (4.00 / 1)
Wall Street is already worried. All it will take is just one of the big pension funds to publicly start the civil process to recover losses due to fraud for the rats to start tearing themselves apart. It was the Big players that assembled the trusts and misrepresented their quality.

Actually I am surprised that some Democratic backbencher hasn't already called for Frannie and Fredie to start such action.

the bottom line (4.00 / 2)
is. laws are being broken and the administration seems to be on the side of corporate self-governance. That is the big ptoblem!

Again, the administration is protecting the banks against the law and the people.

Not seeing victory likely here (0.00 / 0)
If we get some mildly progressive people into the Senate this go-round (because mildly is the very best one can hope for in the Senate at this stage, I think), we might make incremental progress toward victory on this issue.  But, the rules of the Senate, the fact that an elected Senator has to immediately upon election start raising at least $10,000 a day to have any hope of retaining their seat, and the flood opened by Citizens United mean that banks will continue to own that place.

It could be we'd do better to focus all of our resources on holding the House, so that it remains as a bulwark against the Senate.  Then it would be a matter of holding the line, and preserving the status quo so it doesn't get even worse.  Yeeeearrrrrgggghhhhh!

Foreclosure Fraud | 19 comments
USER MENU

Open Left Campaigns

SEARCH

   

Advanced Search

QUICK HITS
STATE BLOGS

Home | RSS/XML Feed | Register | Contact

  © OpenLeft 2007-2010, Powered by SoapBlox

Powered by: SoapBlox