You are browsing the archive for mortgage crisis.

The 99% Choir goes Christmas Caroling

11:24 am in Economy, Financial Crisis, Mortgage crisis, Uncategorized by Cynthia Kouril

OK, this is so charming, so pithy, so spot and so non-violent that even BMAZ can’t hate on this direct action {watch he’ll find something to nitpick and make a liar out of me ;-)}.

The Backbone Campaign, longtime source of witty direct action protests, partnered up with the Other 98%, the Seattle Labor Chorus and the Washington Community Action Network to produce a Christmas caroling event at Bank of America and at Wells Fargo. Donned in their Santa hats and other gay apparel, including a Ghost of Christmas Present, the 99% Choir serenaded the staff and customers at branches in Seattle area.

Enjoy those holiday classics such as “We’ll Foreclose, We’ll Foreclose, We’ll Foreclose” and “Deck the Jails with Wall Street Bankers”. If you want to get involved in something similar where you live, check out their Credit Union Community Organizer kit or their Occupy Our Homes podcast.

More of this, please.

Also, anyone who knows about some similar direct action that took place over the holidays, or who is planning one and wants to get the words out, please let everyone know in the comments thread.

Congressional Oversight Committee Report Confirms what we have been saying about the Mortgage Crisis

8:16 am in Economy, Financial Crisis, Government, Legislature, Uncategorized by Cynthia Kouril

The Congressional Oversight Committee has released a report today on the mortgage crisis and the systemic risk posed by foreclosure fraud.

And it’s a doozy.

it is possible that “robo-signing” may have concealed deeper problems in the mortgage market that could potentially threaten financial stability and undermine foreclosure prevention efforts.


The risk stems from the possibility that the rapid growth of mortgage securitization in recent years may have outpaced the ability of the legal and financial system to track mortgage loan ownership. In essence, banks may be unable to prove that they own the mortgage loans they claim to own.

In an introduction to that report
by Sen.Ted Kaufman , who replaced Liz Warren as Chairman of the Committee, he outlines what we here at the Lake have been talking about for over a year,, that the failure of the banks to properly document mortgage transactions has created a situation where it is hard, if not impossible to tell who owns what.

I ask you, if the banks created this problem by their own failure to to timely record and maintain proper records, who should bear the loss from that failure? The homeowners?, the local communities? or the MOTU who made this mess? . . . Read the rest of this entry →

Foreclosure Fraud Hits the New York Times Front Page

4:15 am in Business, Economy, Financial Crisis by Cynthia Kouril

Those of you who hang out on the FDL foreclosure fraud front page have known for months that banksters were doing foreclosures using forged and perjurious documents. We here at the Lake have been trying to get that story out, so that judges would realize what was happening and would scrutinize foreclosure pleadings carefully and hold plaintiff banks/servicers/MERS to their burden of proof.

Well, thanks to the sudden decisions of Ally Financial (formerly GMAC Mortgage) and JPMorgan Chase to suspend some of their activities in judicial foreclosure states, the story has finally hit the front page of the NYTimes.

This morning, judges woke up to coffee and information that I hope will profoundly change their attitude toward the legitimacy of the legal pleadings being promulgated. All I ask is that when presented with foreclosure pleadings, they READ FOR CONTENT and allow defendants to present proof of fraud, instead of dismissing the very notion as absurd and some sort of stall tactic.

Let’s hope this story will hit the evening news broadcasts and the front pages of local papers everywhere. This is a good start.

[More investigative reporting on mortgage issues and foreclosures on the Firedoglake Foreclosure Fraud Page]

Mortgage and Foreclosure Wrongdoing: AGs’ Road Map – How Mortgage Servicing Companies are Ripping off Pension Funds

4:17 pm in Business, Economy, Financial Crisis by Cynthia Kouril

Dear States Attorneys General –

In Part 1 of the Mortgage and Foreclosure Wrongdoing Road Map, I explained all the choke points for fraud, forgery and illegal activity that exist in the electronic mortgage registration system and in the Residential Mortgage Backed Securities schemes.

You’ll note that many of these securities were bought by municipalities to fund their operations and by pension funds to fund, well, pensions.

If you found widespread fraud in the administration of the many of the underlying mortgages which were under foreclosure and discovered as well that the document trail for many of these loans has been so severely compromised that the loans may have no value at all, you may be very concerned that the pension funds and municipalities’ investments may be harmed.

This may not be a primary concern as the harm has already happened and you can’t make it much worse. The entire RMBS system — from origination through securitization, ending in individual foreclosures — was all about generating money for the banks and servicers through fees, not about generating money for the investors through repayment of principal and interest.

If you want to help the investors, get the banks to enter into consent decrees involving cramdown, i.e. mandatory write down of principle and interest to produce a monthly payment that is no more than 25-30% of the homeowner’s income. This will put a firm floor under the downward spiraling housing market and restore liquidity to that market; home owners and potential home buyers will feel more at ease knowing that the housing market will be more stable and prices less likely to crash.

It will also allow the investors a much larger return than foreclosure, where most of the auction price is eaten up with fees and expenses leaving the investors with pennies today and nothing in the future.

Forcing foreclosure without any good faith attempt at mortgage modification — not that bait-and-switch con known as HAMP — benefits the servicers at the expense of the pension funds and other innocent investors. Under such conflict of interest, and on such a grand scale, it might even be that the bad faith decision to seek foreclosure itself is chargable as fraud.

Oh, and I hope you are aware this is not confined to GMAC, right?

Cause and Effect? GMAC to Suspend Evictions

1:26 pm in Uncategorized by Cynthia Kouril

Ok, I’m not suggesting that there is a cause and effect here, but yesterday I pointed out that Banks which foreclosed with crappy paperwork may find themselves saddled with a large inventory of unmarketable houses. Today, GMAC mortgage announced that it is suspending evictions, short sales and resales of foreclosed homes in 23 states.

Here’s the list of states:

New Jersey
New Mexico
New York
North Carolina
North Dakota
South Carolina
South Dakota

I can’t vouch for all of these states, but every court case on which I have reported where a judge found the bank’s paperwork suspect occurred in a state on this list. Why other states are on this list I’m not yet sure, but I suspect they are all judicial foreclosure states. I’ll do a follow up post when I have bird-dogged that factoid.

If my guess is right, that means folks in non-judicial foreclosure states need to be even more alert to the need to contest non-judicial foreclosures in court. Make a motion for stay, ask for an injunction, don’t let someone take your house unless you are absolutely certain they have a right to do so.

Rocket Docket: FL Judges May Favor Banks in Error to Move Foreclosure Case Backlog

4:01 am in Judiciary by Cynthia Kouril

Florida is one of the states with the biggest foreclosure backlog. In an effort to get those cases out of the regular stream of court business where they are slowing down all other kinds of cases, the Florida Legislature created a $9 million fund to set up special foreclosure courts and to hire retired judges to hear only foreclosure cases.

In and of itself, this is not a bad thing. Judges in specialty courts develop expertise in that subject matter. Many states have specialty courts like family courts and special matrimonial sections that deal with those kinds of sensitive cases. Even within the federal judiciary, there are specialized courts for bankruptcy and for claim against the government.

However, the New York Times has a troubling article reporting that

lawyers representing troubled borrowers contend that many of the retired judges called in from the sidelines to oversee these matters are so focused on cutting the caseload that they are unfairly favoring financial institutions at the expense of homeowners.

Lawyers say judges are simply ignoring problematic or contradictory evidence and awarding the right to foreclose to institutions that have yet to prove they own the properties in question.

“Now you show up and you get whatever judge is on the schedule and they have not looked at the file — they don’t even look at the motions,” says April Charney, a lawyer who represents imperiled borrowers at Jacksonville Area Legal Aid. “You get a five-minute hearing. It’s a factory.”

This is a serious problem, people.  . . . Read the rest of this entry →

Underwater Mortgages to Get Principal Write Down?

10:58 am in Uncategorized by Cynthia Kouril

Reuters is reporting the most astounding, wonderful, amazing, sounds too good to be true bit of gossip.

Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.[emphasis added]

If this is true, it is an act of sound economic policy, and act of humane pragmatism, and a piece of pure political genius all at the same time.

Go read the Reuters piece. I’m just stunned. In a good way.

[Earlier posts in this series and related links at FDL's Foreclosure Fraud Resources]

Fannie and Freddie or Bonnie and Clyde?

8:49 am in Business, Financial Crisis by Cynthia Kouril

Mother Jones has a must read article. In it they not only detail what I have been telling you about foreclosure mills using phony documents to swindle courts and homeowners into allowing foreclosures, but they also blow the lid off of the origins of these practices.  MY brain exploded when I read the following (we are still scraping bits of my medulla off the ceiling):

FORECLOSURE MILLS OWE their existence to Fannie Mae and Freddie Mac, the federally guaranteed entities that essentially created, beginning in 1968, the vast marketplace where loans are traded. Their mandate was to promote property ownership by making a large pool of credit available at affordable rates. They accomplished this by buying mortgage debt from banks and packaging it into bonds, which allowed investors to get in on the action. The banks responded to the demand by lending more money to their customers, and Fannie and Freddie’s combined mortgage portfolio exploded from $61 billion in 1980 to $1.2 trillion two decades later, according to the Government Accountability Office. Their dominance gave them the clout to rewrite rules for the mortgage industry—standardizing underwriting guidelines, loan documents, and the like.

Fannie and Freddie also reshaped the foreclosure industry. Their huge holdings meant they had to deal with thousands of foreclosures annually—even during periods when only a small percentage of loans were going bad. In the 1990s, the market expanded into subprime territory to feed the securitization beast, and borrowers began defaulting at increasingly higher rates. Hiring lawyers on a case-by-case basis was burdensome, so Fannie and Freddie put together a stable of law firms, prime contractors prepared to litigate large bundles of foreclosures quickly and cheaply. They urged these handpicked firms to bring in-house all of the related services—inspections, eviction notices, sales of repossessed properties, and so forth—or at least to retain a suitable subcontractor to handle the tasks. Thus emerged the foreclosure supermarket.

[emphasis in original]

Get this, the government entities, which are currently wringing their hands and saying they can’t persuade banks to write down principal amounts in mortgage modification , had absolutely zero qualms about setting up mortgage securitizations and creating foreclosure mills. If I were an congressional oversight or banking committee, I sure as hell would be hauling in the people who ran Freddie and Fannie in the period before the housing collapse and demanding some details. I would also be hauling in the people currently running Fannie and Freddie and demanding some new explanations in the face of this information which appears to impeach prior testimony on the Hill.

Really, go read the Mother Jones article, then email it to your congresscritter.

You know who funds Fannie and Freddie and has the US taxpayer on the hook for unlimited liability for their screw ups? Geithner.  Yep, he can bail out bank CEO’s bonuses, but somehow can’t manage to convince those banks to permit write downs of principal in underwater mortgages. He can bailout Bonnie and Clyde  Fannie and Freddie to an unlimited amount of taxpayer dollars, but can’t seem to stop them from organizing criminal frauds on the courts. He’s so powerless, you see.

In the meantime, "According to industry projections, millions of homes spiraling toward foreclosure are putting homeownership in jeopardy of its lowest level in 50 years, reports USA Today.”

Yes, Firepups, the brilliant Bush era policies, such as eliminating down payments, which he claimed would increase the number of families who owned their own homes, made millions in bonuses for bank executives, but had the net effect of DECREASING homeownership not only among the poor and disadvantaged, but also among regular middle class Americans. Those who work for a living have been swindled, and then have been unfairly maligned and blamed for the crisis by those same banks. And who was there for pretty much every minute of it? Geithner.

So, where do all these foreclosed houses go? You’d think a middle income family with a decent amount of down payment money saved up could get themselves a real estate bargain in this situation, right? Wrong.

There are well financed speculators buying up foreclosed properties, FOR CASH. They are able to outmaneuver individual buyers because they don’t have to arrange financing.

"Cash-happy investors have been scooping up these bargain basement deals at a fast clip, often before middle-income buyers can get financing," according to the Herald. The nest egg can’t compare to the deep pockets of developers, speculators and investors who can self-finance, especially in the wary world of mortgage lending.


The real mystery is what the investors will do with the homes. Buyers tend to be more patient, willing to wait decades to see their home values appreciate, whereas investors prefer to see a quick return on investment.

I’ve got a few questions about that. Where is the money coming from to buy foreclosed homes in bulk? Even at the ridiculously low prices at a foreclosure auction, buying houses in batches take a lot of moolah.

Who are these speculators?

What do they plan to do with all these vacant houses?

Nobody commits that kind of money just for fun, somebody has a plan to score a big profit off the misery of evicted former homeowners.  Any informed speculations you care to leave in the comments would be helpful in forming a hypothesis.

[Earlier posts in this series and related links at FDL's Foreclosure Fraud Resources]

Mortgage Crisis: The Stomach Churning Failure that Is HAMP

4:48 pm in Uncategorized by Cynthia Kouril

Calculated Risk has been crunching numbers again. These are really dismal. People who were SUCCESSFUL in getting HAMP modifications have an median income to debt ratio of 79.9.

That means that AFTER getting mortgage modification 67% of that family’s gross income went to debt service. That’s before you paid the utilities, before you bought the groceries ,before you have paid for transportation to work, before you spent the legally mandated 9.4% of your income on health insurance.

So let’s do some math:

Family of 4, gross income of $50K


-     33,500   (67% for debt service)



-      4,700   (9.4% for health insurance)



-       6,500   (FICA 13%)



-    7,000     (food using USFDA #)


Whoops = -1700!

That’s a negative integer! and we still have not paid any income tax or spent any money of travelling to work to earn that $50K or paid any utilities. Sorry, no lights or heat for you.

Can any sentient being continue to make the argument that HAMP is a worthwhile program? Really now. We need a meaningful and SUSTAINABLE mortgage modification program that writes down principle amounts to reflect current market prices. This will put a floor under the housing price collapse and stabilize neighborhoods as well.

This is not rocket science, it’s simple math.

[Earlier posts in this series and related links at FDL's Foreclosure Fraud Resources]

FBI Made “A Few” Arrests

12:40 pm in Uncategorized by Cynthia Kouril

JCN releases himself from handcuffs by @superamit.

A few days ago, I passed on a story that the FBI was going to start making arrests for foreclosure fraud. Well, the arrests have been happening. According to an FBI press release there has been some bit of activity:

Summary of Results to Date

Criminal Cases:

Total Number of Defendants: 1215
Total Number of Arrests: 485
Total Number of Info/Indictments: 673
Total Number of Complaints: 135
Total Number of Convictions: 336
Total Number of Sentencings: 206
Total Estimated Loss Amount: $2.3 billion
Total Seized Dollar Amount: $10.7 million

Civil Cases:

Total Number of Defendants: approximately 395 1
Total Number Civil Enforcement Actions:

(Including Cease and Desist Actions)

Total Recovered: $196.7 million 2

1 Defendants include both individuals and corporations. This number is approximate because many of the defendants are d/b/a or “doe” defendants.

2 This amount includes some judgments which have been suspended based on the defendants’ inability to pay, as well as two judgments that the Federal Trade Commission has filed and are pending court approval. Amount also includes funds precluded from Chapter 7 discharge under Bankruptcy Code due to U.S. Trustee Program civil enforcement actions.

The FBI has released some anecdotal evidence about the kinds of cases represented in that chart.

Like the case of a builder in California who used fictitious straw man buyers to take out subprime loans to buy houses he had built and could not sell. $21 million in loans were fraudulently obtained that way.

Then there is the case of two people in Florida who used identity theft to take out loans and purchase properties in the names of people who did not know their personal information was being exploited this way.

There was scheme in Detroit to place multiple “ghost” loans on a single property. This scheme was made possible, no doubt, because of the banks own stupidity in not using the government land office loan recording facility and instead relying on idiotic ideas like MERS. This scheme involved $100 million in loans and multiple properties.

While most of these cases seem to involve the banks getting ripped off, there were some consumer protection cases involving people who had their homes sold out from under them when they thought they were getting a refinancing and others involving stealing homes from the elderly in a phony reverse mortgage scheme.

So far, no wholesale indictments of foreclosure document mills, or of loan backed securities trustees for breaching their fiduciary duties and not acting in the best interests of the investors; but I continue to live in hope. We’ll just keep leaving a trail of breadcrumbs and hopefully they will keep making cases.

[Earlier posts in this series and related links at FDL's Foreclosure Fraud Resources]