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Today, the Comptroller of the City of New York along with the presidents of several large unions sent a letter to some of the biggest baddest banks in the foreclosure mess and told those banks to get their acts together and start making mortgage modifications.
In a press conference in lower Manhattan, Comptroller John Liu, Michael Mulgrew, President, UFT, George Gresham, President, 1199 SEIU, John Samuelsen, President, TWU Local 100, and New York Communities for Change announced a letter sent to Citigroup, JPMorgan Chase, Bank of America and Wells Fargo demanding that the banks do “everything possible” to avert foreclosures.
The heft and power of these entities as depositors and investors is such that they expect the banks to sit up and take notice. The banks have a deadline of September 1st or 45 days to respond with a plan.
While the City and the pension funds have not outright threatened to take their business elsewhere if the banks don’t start doing modifications, the implication is clear.
Further, this public action could inspire other municipalities and large pension funds to follow suit.
One of the things that frustrates me is that neither the servicers nor the trustees of RMBS will tell you who the investor is. They will often say that the investor won’t let them modify. This makes no sense.
As I previously pointed out, the investor almost always does better by modification than foreclosure. The servicer does better in foreclosure. Yet the trustees, who owe a fiduciary duty to get the best return for the investor, seem to prefer the foreclosure route which results in a near total loss for the investor.
The investors have the ability to force modifications by suing the trustees to make them do those modifications.
So, municipalities, state pension funds and unions have two tools at their disposal: 1) threatening to move their deposits and, 2) if they hold RMBS in their portfolios, forcing the trustees to write down principal and adjust interest rates to return non performing mortgages to a diminished but still performing status.
By today’s actions, we see that they are beginning to use tool #1. Hopefully they will begin using tool #2 before all the value is gone from their RMBS investments.
[Earlier posts in this series and related links at FDL's Foreclosure Fraud Resources]
13 Comments
The question becomes why didn’t these institutions already do a ‘move your money’ action? think of what might have happened if they had.
Probably, because 1) everybody thought the Federal Government was going to do something, 2) because once you have already moved the money, you’lost your leverage?
Great news – thanks for this post!
“2) because once you have already moved the money, you’ve ’lost your leverage?”; disagree, deposit losses really cramp these guys styles and if the ‘big boys’ and not just the small guys had done the ‘move your money’, it would have made a large difference,IMO.
what I find depressing/disconcerting is so many continue to do biz with the big 4. I don’t know about anywhere but SOCal for sure but Chase and BofA have been advertising big time with lots of ‘goodies’ being proffered folks.
Threateing to move the money –> assuming that it is a REAL threat and you are willing to follow through, is more likely to get cooperation, than moving the money and later asking for change.
Read a couple of days ago that CALPERS is pressuring BP to fire/change the board of Directors. Since CALPERS was/is a Goliath in pension funds, it’d be good for them to force changes on the Banksters as discussed in your article. I can hope, after all, that’s all the power we seem to have.
Cynthia, did you read this excellent abstract?
I thought it was excellent!
Thanks for keeping us posted on this mess. Good for NYC and the Unions.
thanks cynthia. my calpers pension is considered ‘safe’ but i still worry. glad to see the flexing of muscle to force the forking banks to do their forking job the way it is supposed to be forking done.
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This is good news. Thanks for this NEWS we’ll never see on t.v.
FDL probably needs to get someone who actually understands securities and the financial markets to report on stories like this. Our side suffers from far too many stupid people who don’t know what they don’t know and that undermines our case. This action is total political theater to pander to the base.
What Cynthia claims to be tools that could be used to cause these firms to make mortgage adjustments just aren’t. Taking them in the same order:
In case you haven’t noticed, interest rates on deposits are at a historic low. While banks aren’t turning away deposits, it’s not like that threats to withdraw deposits are going raise much but guffaws. Where are the municipalities, state pension funds, and unions going to put their money instead that is: 1) as secure, 2) pays any better returns, and 3) isn’t just another institution doing exactly the same thing? Nowhere.
And RMBSs are not packages of mortgages, they are legally distinct securities, actually bonds, which are loans against the cash flows from mortgages. Bondholders have no legal power to force renegotiation of the terms of the backing mortgages. And they have virtually no economic power to do so because the bond issuer has an obligation to do what is best for their owners/shareholders. In this case, that frequently will be to default on the bonds. These blustering institutions are the ones who need to be exposed as fools for not paying attention to what was actually happening in the mortgage market and either not buying RBMSes, or not hedging the downside risk.
Time to grow up and join the fact-based culture instead of just trying to score political points
guess you haven’t seen this
Your right. It IS excellent
Bond holders are just as capable of bringing suit against the trustees holding the mortgages as shareholders are of bring shareholder derivative suits.
And, sir, they are actively seeking strategic legal advice in anticipation of doing just that.
Whether it ever comes to fruition, I don’t know. But I do know that the option is actively being explored.