Category: Corruption

This is Getting Ugly Fast…

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Bank of America just suspended all foreclosures nationwide:

Bank of America Corp. imposed a nationwide moratorium on foreclosures and the sale of foreclosed homes after it came under intense pressure from a government-run housing-finance giant worried about documentation problems, people familiar with the situation said.

The bank called the halt as concern mounted from legislators and state prosecutors about procedures used by lenders to foreclose on homes. Many banks use so-called robo signers, employees who sign hundreds of documents a day, without carefully reviewing their contents, when foreclosing on homes. Critics say that could result in improper foreclosures.

Freddie Mac, the government-run mortgage-finance company that along with Fannie Mae owns many of the mortgages serviced by banks, pressed Bank of America to expand its search for problems with the foreclosure documentation process, said the people familiar with the situation.

A year ago, I wrote about potential issues with MERS, and I figured that there might be a fair number of cases out there, but the developments of the past few weeks, which, credit where credit is due, were spotted and covered with far more detail and intellect by Yves Smith than by me, have been remarkable.

This is all falling apart at a far greater speed than did the collapses of Bear Stearns and Lehman Brothers in 2008.

We had low key mainstream coverage on the brokerage houses’ issues in 2007, but the first mainstream coverage of the mortgage debacle is from just a month ago.

I would further note, that what is going on now has NOTHING to do with MERS, which remains the elephant in the room.

This feels like the first few pebbles hitting us from an avalanche.

Politics Trumping Science In the Obama Administration

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Yet another Bush policy that Obama has doubled down on.

In this case, we now have a report showing that the Obama administration actively suppressed science based reports from the NOAA during the BP oil spill:

The White House blocked government scientists from warning the American public of the potential environmental disaster caused by BP’s broken well in the Gulf of Mexico, a report released by the national commission investigating the oil spill said yesterday.

The report, produced by a panel appointed by Barack Obama to investigate the spill, said that about two weeks after the BP rig exploded scientists from the National Oceanic and Atmospheric Administration (NOAA) asked the White House for permission to release their models showing their worst case scenarios for the spill.

The White House office of management and budget, which is a traditional clearing house for decisions, turned down the request, the report said, quoting interviews with administration officials.

The report, one of four released today by the commission, provides the most compelling evidence to date of direct attempts by the White House to spin the BP oil spill disaster.

I’ve been a cynic about Barack Obama since he started embracing gay bashers in late 2007, but his full court press to embrace and protect BP is something that has managed to disappoint me, and my expectations for him are remarkably low.

Your Bank Foreclosure Fraud Update

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Alan Grayson connects the dots

The lede here has to be that the Ohio Attorney General has sued GMAC mortgage:

This is big news. I just got off a conference call with Richard Cordray, the Attorney General for the state of Ohio. He has filed a lawsuit in Lucas County (Toledo) Common Pleas Court against GMAC Mortgage and their parent company Ally Financial, in a suit which names Jeffrey Stephan, the infamous “robo-signer” who signed off on up to 10,000 foreclosures a month across the country with affidavits, without verifying the information in the foreclosure documents. The lawsuit alleges fraud on the part of GMAC, along with violations of the Ohio Consumer Sales Practices Act, in filing false affidavits to mislead the courts in what they describe as “hundreds” of Ohio foreclosure cases. And, the Attorney General is treating every single false affidavit filed in an Ohio court as a separate violation, with a fine of up to $25,000, plus additional restitution for the homeowner of an unspecified amount.

This is a major lawsuit, and as Cordray told reporters, “We’re at the beginning of this, not the middle or end, and we’ll see where it leads us.” For context, approximately 450,000 foreclosures have been filed in Ohio since 2005, and potentially all of them used this robo-signing process. At the outer edge of this, if every one of those foreclosure processes is seen as a single case of fraud, the fines for the entire lending industry would add up to $11.25 BILLION dollars, just in the state of Ohio, not including the extra restitution for homeowners.

Cordray is also requesting information from the other major lenders, and has moved for an injunction against GMC, so it looks like this snowball once he gets to discovery.

Additionally, we have more calls for investigations and a moratorium, with both Nancy Pelosi,the Republican Texas Attorney General Greg Abbott, and North Carolina Attorney General Roy Cooper raising concerns. (talk about the odd couple)

Congress has weighed in, sort of, with an unexpected vote in the Senate a week ago approving an electronic notary law which, at least according to Jennifer Brunner, the Ohio Secretary of State, increases the possibility of fraud by creating a credit card style race to the bottom in terms of legal standards.

This growing furor may explain one of the peculiarities of the property meltdown, why banks seem to favor foreclosures over short sales even when the former generate more money.

I was unaware of the fact, but the standards for titles are much lower in the event of a foreclosure sale:

If you know anyone in real estate, you have bumped into countless frustrated agents who were attempting to complete shortsales for their selller clients only to have the whole thing fall apart at the last moment and then they later see the same property go into foreclosure for LESS than what the pre-approved shortsale buyer had offered just weeks earlier. Why, why, why, they moan. Why would a bank or mortgage servicer take less than what they could have had?

Well, now I wonder if one potential answer doesn’t have something to do with the types of deeds that get conveyed in a foreclosure and the tie to title insurance. In foreclosures in many states the buyer obtains a specialized deed – a special warranty deed, or a bargain and sale deed which make fewer guarantees for the buyer than the general warranty deed which is transferred in a normal sale(which I believe a short sale still falls under)

………

Is it possible that the foreclosers realized it was in their best interest to abort short sales in favor of foreclosures in order to pass the more limited deeds conveyed in a foreclosure? Did that decision come back to haunt them once the entire foreclosure process itself became highly suspect and publicized? (There is already a large title insurer who is denying title insurance on some foreclosures.)

Of course, the real elephant in the room is that anyone who has gotten a mortgage in the past decade* is just as likely to have problems with their title.

Foreclosures do not create title problems, foreclosures merely reveal those problems.

This is going to be uglier than David Boehner in a thong.

*Full disclosure, like me.

Supreme Court’s Citizen’s United Case Allows Foreigners to Contribute to US Campaigns

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What a surprise. The US Chamber of Commerce is raising millions of dollars in foreign contributions, and spending them on political activities, though they are claiming that they are claiming that it’s on the up and up:

The US Chamber of Commerce has responded to this post in a statement to the Politico’s Ben Smith. The Chamber’s Tita Freeman did not dispute that the Chamber’s 501(c)(6) organization running attack ads receives foreign funds, and simply claimed, “We have a system in place” to prevent foreign funding for the Chamber’s “political activities.”

It’s called money laundering, and it’s illegal.

We also a complaint filed against Karl Rove’s Crossroads GPS group with the IRS for misuse of their 501(c)4 tax status.

If Barack Obama really wanted to change the atmosphere in Washington, going after crap like this, where people are not just bending the rules, but are

I am not suggesting that Obama specifically get the FBI on the Chamber of Commerce and Rove, that’s Nixonian, but making it clear to the senior staff of the DoJ that there will be a zero tolerance policy on crap like this is both ethically sound and justified by the facts.

Don’t hold your breath though.

Not gonna happen……

Wouldn’t be prudent.

Not Enough Bullets

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So, once again, Congress refuses to act, so billionaire hedge fund managers can continue to pay less in taxes than the janitors who clean their offices:

Once again a key piece of news has passed virtually without comment.

While the entire nation argues over nonsense like the WTC Mosque, Rick Sanchez, and, yes, blue-red culture war stuff like the Tea Party, congress yesterday quietly took a knee on the “carried interest” tax question. In doing so they decided not to take a vote on changes already approved by both houses that would scale back perhaps the most preposterous tax break in the entire federal code, one that leaves hedge-fund gazillionaires like Stevie Cohen and John Paulson paying less than half the top tax rate paid by most middle and upper-middle class Americans.

In case you don’t recognize the writing style, it’s Matt Taibbi, and I suggest that you read the whole article, because he communicates the disgust that I feel far more cogently that I ever could.

Foreclosure Fraud Hits Prime Time

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Yesterday, we’ve had a New York Times editorial, and today, Getchem Morgenson hits their front page with a survey of “flawed paperwork” issues:

As some of the nation’s largest lenders have conceded that their foreclosure procedures might have been improperly handled, lawsuits have revealed myriad missteps in crucial documents.

It’s good that this story has hit the big time, but Ms. Morgenson is wrong. There were no flawed documents, this was deliberate fraud, and the dead tree media is behind the curve on this.

We are seeing Fitch making noises about downgrading mortgage servicers over this issue, and on the regulatory front the Connecticut Attorney General has placed a 60 day moratorium on foreclosures, so that paperwork can be reviewed, and the Comptroller of the Currency has ordered 7 of the larges banks to review their paperwork.

On the private side of the business, we are seeing title insurance companies refusing to write policies on foreclosures for some of these banks.

In terms of the irregularities that we are seeing:

If you think that the housing crash is bad, just wait until millions of foreclosed homes hit the market, and no one is willing to buy them, because the title is not clear, than the sh%$ really hits the fan.

My earlier post on the subject is here.

How Not to Bury an Effective Ad

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Robin Carnahan, who is running against, Roy “I f%$#ed a lobbyist and took money from Abramhoff” Blunt released a pretty damn effective ad with Fox News’ Chris Wallace cutting Roy Blunt a new one on his conflicts of interest.

Well, Fox sued, claiming “copyright infringement and that the ad “compromises “Fox’s integrity. (I have to clean my screen now)

Of course, now everyone wants to see the video. Smooth move, Fox.

In any case, here is the video:

Jail, please

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Gee, the SEC has determined that Citicorp CEO Chuck Prince and Chairman of the Board, and Clinton era Secretary of the Treasury, Robert Rubin both knew that the numbers that they were feeding investors about their top tranches of mortgage backed securities were crap:

Charles O. “Chuck” Prince and Robert Rubin were among Citigroup Inc. officials who knew 2007 losses were mounting on mortgage assets that U.S. regulators have faulted the bank for not disclosing, a court filing shows.

Prince, the bank’s chief executive officer at the time, and Rubin, who was then chairman, knew the highest-rated segments of subprime mortgage-backed securities were the source of about $200 million in new losses in October 2007, the Securities and Exchange Commission said yesterday in a filing at federal court in Washington. In July, the agency accused the bank and two other executives of failing to disclose $40 billion in subprime assets before losses surged. It didn’t target Prince and Rubin.

Bob Rubin has been Gordon Gecko for a very long time, and if the Obama administration wants to show some real commitment to financial reform, ramping up criminal investigations of his behavior would be a very good idea.

If you put a former Secretary of the Treasury in jail, it goes a long way toward cleaning up the system.

I Still Think That The Appointment of Elizabeth Warren is an Exercise in PR, Not Real Change, But …

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Both Felix Salmon and Barney Frank seem to think that this is the real deal, with Felix noting that, “she has the authority to get the Consumer Financial Protection Bureau up and running as quickly as she can,” and Representative Frank is saying that, “There’s no possibility she would take something like this unless she was fully empowered to do the job.”

Me, I’m with On the other side Yves Smith’s analysis, which says that this is all theater to create the illusion of Obama as a financial reformer:

  • While the bureau is organized under the Treasury, and before it is placed under the Federal Reserve, it has no rule making authority.
  • The organization is operating for an organization, the Federal Reserve that is not only, “subservient to the regulator that is in charge of looking out for the industry,” but is in large part owned by the industry. (look at the structure of the regional Fed banks, they are owned by the big banks)
  • This is an admission that she will not be appointed to the position, so she is already a bit of a lame duck, and will be completely one as soon as someone is nominated for the post.
  • She has admitted that she has no intention of serving as head of the CPFB, which means that she is even more of a lame duck.
  • Many of the organizational and personnel decisions will be deferred to whoever is the appointee.
  • Once a nominee is named, she becomes completely irrelevant.
  • Geithner and Summers still run the show, and are who Obama listens to.*

I’m with Ms. Smith’s last ‘graph:

Needless to say, it would be better if I were proven wrong, but it looks like Warren has made a Faustian bargain. I can only hope if that is the case that she moves quickly to cut her losses.

Simply put, how many times has the Obama administration taken the side of Main Street over Wall Street?

I’ll give you hint, it’s a non-positive integer.

She will be out in 6 months, and my guess is that she will discover that she cannot get her phone calls answered on November 3.

*But remember, the Cossacks work for the Czar.

A Depiction of the Levels of Hell?

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Your tax dollars at work

Or maybe just a description of development, procurement, and life cycle support costs of a weapons system for the Pentagon ……… but I repeat myself.

The problem here is that each one of these steps represents a place where some private contractor can sit astride the process and extract a toll.

This why it takes 25 years and billions of dollars to develop the next fighter aircraft, when the P-80 was delivered just 180 days after the go ahead was given.

If this is what the past 50 years of developments in systems engineering have given us, perhaps, just maybe, there are some deep flaws in the underlying assumptions of that profession.

The source for the link is the Defense Acquisition University, and yes Virginia, there is a Defense Acquisition University, and they have a handy, dandy interactive flash version available on site.

A Court Case to Watch on HAMP

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A federal court in California has ruled that a borrower is an intended 3rd party beneficiary of the HAMP program, and so has standing to sue the bank for acting in bad faith:

This is getting interesting. A judge in U.S. District Court, Southern District of California, has issued an order that may just answer a few prayers of many homeowners. Here’s what happened…

A San Diego homeowner, by the name of Ademar Marques, was applying for a loan modification, and, although it might be hard for many readers to believe, his servicer, Wells Fargo, dba, America’s Servicing Company, wasn’t being very nice about it, or even cooperating at all. It seems that Wells Fargo wanted to just skip all of those messy and time-consuming formalities required when considering someone for a loan modification, and just jump straight into foreclosure.

Mr. Marques filed a lawsuit against Wells Fargo’s America’s Servicing Company because he read about the Home Affordable Modification Program (“HAMP”) and the program’s guidelines said that his servicer was “REQUIRED” to screen him for a hardship, and consider him for a loan modification. He also alleged that he qualified for the loan modification program based on all of the published guidelines, and that his servicer, a participating servicer in HAMP never said that his loan could not be modified, they just refused to modify it, and instituted foreclosure proceedings.

Well, I never! The gall of some servicers. Have you ever heard of such a thing? Actually, I have. But not more than 30-40 times a day for the last two years.

The court ruled that as a participant in HAMP, the bank was obligated to review Ademar Marques case, and in not doing so, they breached their HAMP contract, and so do not have the right to foreclose.

Here is the money quote:

Are you digging this? Best I can make out, if you’re the intended third party beneficiary to a federal contract you can sue for breach of contract. So, if it says in the contract that the servicer “MUST” do something, and that servicer doesn’t do it… you the borrower may be able to sue the servicer for breaching that contract.

If Wells appeals, and if I were them, I wouldn’t, because settling in this one case loses them a mortgage, and if the court of appeals rules against them, it becomes case law for a large swath of California, but bankers are not know for cutting their losses.

If there is an appeal, and Mr. Marques prevails, then it is certain that Wells Fargo will appeal to the Supreme Court, and I would bet 5 to 1 odds that if it gets that high, then the Obama administration will argue for the malefactor banks, because that’s how they roll.

He’s Expecting to be Indicted

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Mayor Richard M. “Richie” Daley has decided not to run for reelection as Mayor of Chicago.

Basically, given his history, my guess is that he knows that a corruption indictment is coming, and he wants to clear the deck in preparation.

There are whispers that Rahm Emanuel might take a shot at running for mayor, but I don’t think so.

Rahm has failed upward his entire political career, NAFTA, trying to kill the 50 state strategy, running pro-war candidates who lost, etc.

You can make money in Washington, and on Wall Street (Rahm worked at Wasserstein Perella and Federal Home Loan Mortgage Corporation (Freddie Mac)) based on connections, but if you are the Mayor of Chicago, you have to make things work.

Just ask former Chicago Mayor Michael Bilandic.

Rahm might have the chops for the party politics, it is what he excels at, but at making worthwhile things happen, he is simply incompetent, and if he were to be mayor, he would be a one term mayor, and he would be unelectable thereafter, at least in Illinois.

But I’ve gotten off topic. My thesis is that Daley is resigning because US Attorney Patrick Fitzgerald is getting to close for comfort.

Sergey Aleynikov Gets One Count Dismissed

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He is accused of stealing Goldman Sachs’ proprietary high frequency trading software, but one of the three counts against him, for unauthorized computer access, has been dismissed.

I’ve always maintained that HFT is actually illegal front-running, or at least it was illegal before Treasury Secretary Robert “Why am I not in jail?” Rubin got his hands on the regulatory regime, and as such, I have always wondered if there was a cover-up of some kind, seeing as how the prosecutors have admitted that this code could be used to manipulate the markets.

A twist in the case that I was unaware of was that Sergey is not the only one the Feds are going after on this, as, “Two months after Aleynikov’s indictment, prosecutors charged former Societe Generale trader Samarth Agrawal with stealing computer code used in high-frequency proprietary trading in the French bank’s New York office.”

I am beginning to think that there is an official policy of allowing “systemically important” banks to skim profits from the markets in order to bolster balance sheets that are far shakier than has been revealed, but they want to keep this technology out of the hands of the small fry, because it would make the flash crash look like a weenie roast if too many people got their hands on this technology.

Background here

Why the Hell is the US Government Supporting the Karzai Government?

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The largest bank in Afghanistan, Da Kabul Bank, is in the process of imploding due in a miasma of corruption and self dealing, as ordinary depositors rush to pull out their money from the institution following a number of stories revealing their corruption:

The Karzai government is corrupt and rotten to the core. Not a single US soldier should die to prop it up. The lie that we are fighting “al–Qaeda” in Afghanistan needs to be exposed. The US and NATO are fighting four or five groups of Pashtun insurgents, some of them until fairly recently US allies. The goal of the fighting is to keep the Karzai government from falling to the guerrillas and to train up an army and police force that could go on defending Kabul. The Afghanistan National Army from all accounts has poor morale. No wonder. What Afghan soldier or policeman would die for a ponzi scheme?

But Juan Cole’s outrage at this was premature, because it is actually worse than he first reported, because after the government seized control of the bank, as the Washington Post hed states, “Officials freeze assets of Kabul Bank shareholders, excepting Karzai’s brother.”

Why we supported his continued corruption, and his election theft, I’ll never know, but enough is enough.

Get out now, because the alternative, replacing him (see Diệm, Jean Baptiste Ngô Đình) just won’t work.

Lifelong Peonage and Are the Main Feature

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Click for Ginormous Graphic

Barry Ritholtz has a useful infographic showing just how education loans have become the latest way that the banks keep us in debt slavery.

Note that the value of outstanding student loans is now larger than that of credit card debt, and its holders cannot discharge it through bankruptcy, ever.

This goes hand in hand with changes in the job market, where jobs that do not require a college to degree require a college degree to get, along with the explosion of for-profit schools that make false promises of a career in order to get you to overpay for trade school.

It really is remarkable just how predatory our society has become.