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Christmas Miracle in New Jersey: Order to Show Cause Issued to Mortgage Banksters

9:37 am in Financial Crisis by Cynthia Kouril

photo: davidshankbone via Flikcr

New Jersey’s Chief Justice appointed Judge Mary C. Jacobson in Trenton to oversee foreclosure matters in the state.  Judge Jacobson did something amazing on Monday; she issued an Order to Show Cause, sui sponte, against six of the biggest mortgage fraudster banks.

An Order to Show Cause is a fast-tracked motion where the non movants have to show cause why the court should not order the relief spelled out in the OSC. Sui sponte is when the court itself is the moving party, rather than let’s say, a homeowner.

The relief spelled out in the OSC is eye popping:

A. Direct the Office of Foreclosure to suspend processing Orders and Judgments of Foreclosure in all uncontested cases involving the banksters named in the OSC.

B. To not issue writs of execution (evictions and seizure of the home by the Sheriff) on any judgments held by the named Banksters

C. Issue a Stay stopping all Sheriff’s sales of homes already seized pursuant to any judgments obtained by the named banksters

D. Appoint a Special Master to investigate the business practices of the named banksters, the law firms and the document forgers and robo signers and make a report back to the court about whether any of the documents offered by the named banks can be considered trustworthy, and to propose remedial action that  might make the it possible to resume foreclosure (assume there is a remedy, and I’m not sure what that might be), and to monitor the future compliance of the named banksters with the remedial plan—oh yeah, and to propose sanctions on the banksters, the law firms and document mills.

E. To make the named banksters pay the costs of the work of the Special Master.

F. To make the named banksters reimburse the Office of Foreclosure for the costs of doing the foreclosures over (assuming there is some remedial plan that makes that possible)

G. Forcing the named banksters to give the Office of Foreclosure a complete up to date list of all the foreclosures in process.

I’m not so sure the Special Master will be able to devise a remedy for shredded, never created, twice sold and therefore missing paperwork, so it’s somewhat doubtful that there can be a “do over” foreclosure. Moreover, can you imagine how long it will take for the Master to complete this investigation and report? And that whole time no uncontested foreclosures go forward? Yowzers!

This will light a fire under the state’s attorney general, who will now be in a footrace with the Master to be the one who cracks the foreclosure case. I guess the judicial branch is getting fed up waiting for the do-nothing legislative branches (remember cramdown?) and the make matters worse executive branches (who can’t seem to find a fraud case to bring) and are taking matters into their own capable hands.

The NJ courts press release is here. The hearing on the OSC is currently scheduled for January 19th in Trenton. It could be a interesting New Year for NJ homeowners. This is a nice Christmas gift for them.

[You can find FDL's coverage of the mortgage crisis and foreclosure fraud at this link.]

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]

Countrywide Gets Slap on Wrist for Ripping Off Homeowners

8:24 pm in Uncategorized by Cynthia Kouril

Countrywide Bank (now owned by Bank of America) has settled a case with the Federal Trade Commission over unfair and exorbitant fees it charged to homeowners who got behind on their mortgage payments.

Countrywide hit borrowers who were behind on their mortgages with fees of several thousand dollars at times, the FTC said. The fees were for such services as property inspections and landscaping that far exceeded market rates. Countrywide created subsidiaries to hire vendors, which marked up the price for such services, the agency said.

"Countrywide profited from making risky loans to homeowners during the boom years, and then they profited again when the loans failed," Leibowitz said

Countrywide, as well as other banks, have little incentive to deal fairly with homeowners seeking mortgage modifications because they make so much money soaking desperate people who are at the end of their financial rope. When the banks act rapaciously with no regard for morality or even legality is it any wonder that homeowners become numb to the idea of “moral hazard” and are willing to walk away from their underwater homes, or go into strategic default to try to force the renegotiation of their loans?

The settlement will cost parent company Bank of America $108 million. Considering that B of A is the largest collector of mortgage payments in the country, or so says MSNBC, $108 mil sounds a bit like a slap on the wrist.  After all, B of A’s enterprise value as of June 10, 2010 is over $458 billion.  This fine represents .02% of that, or 2¢ per $100.

The FTC is charged with enforcing federal laws designed to prevent abuses by companies that collect consumers’ debts. That’s because mortgage-collection activities are typically handled outside the oversight of federal banking regulators.

Critics say the agency lacks the expertise or resources to enforce those laws.

Understand the source of this problem? The hollowing out of government oversight. We have had 8 years of the hollowing out of our government. The talent and expertise have fled to the private sector and academia. We, as a nation, need to lure those people and the new crop of talent into government service; that comes from the top. You want hope, you want change? Then the president has to be the Recruiter-in-Chief.

He also has to get his government in gear, too many second and third tier administration positions remain unfilled a full 1-1/2 into the presidency. That is really bad chief of staffing work. We need to rebuild our oversight infrastructure. Or else, we will see the housing crisis continue to slide into  a “W” shaped crisis instead of a “U” or “V” shaped depression. We will continue to see environmental disasters. We will continue to see rampant fraud by military vendors. We will continue to careen from one emergency or disaster to another. The president needs to get his team on the field with their heads in the game. Start rebuilding our governmental oversight infrastructure NOW.

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