Editor’s Note: Deep down in this article lies the heart of the matter of disclosure and fraud in the U.S. Marketplace. It is that there is a floor below which a financial company need not go in making disclosures. And it is under those floorboards where all the vermin and toxic waste is hidden. In a word, that’s why Investors bought mortgage backed bonds to fund residential mortgages. In a word, that’s why borrowers bought financial products based not upon faulty premises but false ones. Both the investors and the borrowers were tricked using the same means. But you don’t have to rely upon the disclosure rules to sue for fraud. Common Law, TILA, RESPA, UDCPA and other state and Federal laws will do just fine.
Caveat Emptor, Continued
By FLOYD NORRIS
A few years ago, the securities markets financed hundreds of billions of dollars in mortgages without any government guarantee. Now, those markets are virtually closed to such financing.
Whether or not they will ever come back is open to question, but Wall Street made clear this week just how intransigent it would be in resisting the kind of changes that might convince investors the waters were safe.
The investment banks that put together mortgage securities told regulators that they should not be required to evaluate the credit quality of the mortgages they package and sell. And then they argued that they had no ability to do that.
The Securities and Exchange Commission has proposed a new set of rules for such mortgage-backed securities. For some of them — the ones that are sold publicly and in an expedited way that does not require the commission to carefully review the offering — the proposal included a requirement that the chief executive of the firm that put the deal together provide a certification of the deal’s quality.
That certification would include a statement that the C.E.O. had reviewed the deal and believed the mortgage assets had “characteristics that provide a reasonable basis to believe” the securities would pay off. The commission said it believed the attention the executive would have to give each deal “should lead to enhanced quality of the securitization.”
The public comment period on the S.E.C. proposal closed this week, and on the final day the principal Wall Street trade group, the Securities Industry and Financial Markets Association, known as Sifma, weighed in with a split opinion.
Its members who invest in such securities thought the certification idea was a fine one.
But Sifma’s members who would be required to issue the certifications did not like the idea at all.
“In the view of our dealer and sponsor members, it is not the role of the depositors and its officers to undertake any sort of credit analysis,” Sifma told the commission, adding, “They are not trained to do so.”
In industry jargon, those who create mortgage securities are called “depositors” because they deposit the individual mortgages into the securitization trust. They may have made the loans themselves, or they may have purchased them from the original lenders.
There is much more to the S.E.C.’s proposed rules. There would be detailed “asset level disclosure,” so investors could have a better chance of assessing the quality of the mortgages, and there would be required updates to that information. There would also be what some people call a “road bump,” barring the sale of new securitizations until investors had five days to review details of the offering. In the old days, investors learned what they had bought after they had bought it.
Or, to be more accurate, they learned what the sponsor told them about the mortgages. There was usually a promise by the sponsor to buy back mortgages that did not meet the requirements. In practice, sponsors have often denied the mortgage was not proper, leaving investors with the choice of accepting that conclusion or mounting an expensive lawsuit. The S.E.C. proposes to bring in a third party to assess disputed mortgages, but to give that party no real power to force repurchase. Some investor groups want more power for such an inspector.
The S.E.C. traditionally has focused on disclosure rather than the merits of investments, and Mary L. Schapiro, the commission’s chairwoman, has said that current securities laws are not ideal for regulating asset-backed securities. She suggested last fall that Congress might consider passing a separate law for such securities, much as it did for mutual funds in 1940.
Without such a law, the commission is trying to set rules to ensure quality in deals that are allowed “shelf” registrations, which can move much faster than other deals. It is those deals that would need C.E.O. certifications. Other offerings could proceed on a different basis, but the commission still wants to assure that disclosures are the same, even if the securities are sold in nonpublic offerings.
Under the old rules, shelf registrations are available if the securities have a high rating from a bond rating firm, like Moody’s, Fitch or Standard & Poor’s. The value of such ratings proved to be very low, and the new rules seek to find other ways to differentiate high-quality deals from lower-quality ones.
The issue of C.E.O. certifications stems from 2002, when the Sarbanes-Oxley Act required chief executives and chief financial officers to certify that their filings were accurate, to the best of their knowledge. Some observers thought that added nothing to the law, and they were right in some ways. False filings were already illegal, and executives were subject to legal penalties if it could be proved they knew the filings were false.
But it appears that the act of signing made many executives pay more attention to what it was the company was saying, and to force more checking. The S.E.C. hopes that will happen with securitizations as well.
The Sifma filing argues the certifications being contemplated now would go much further, because company chief executives are not required to forecast whether the company will be able to meet its obligations, and there is no way they can forecast whether a large number of mortgages will default in some future recession.
If the S.E.C. insists on a certification, Sifma offered its own version. It is one that closely tracks existing fraud law, and so probably would add no new legal risk. But it also would be unlikely to reassure many investors.
“Based on my knowledge,” states the Sifma-proposed certification, “the prospectus does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading.”
It is worth asking why all this is necessary. Prospectuses for the old deals did not provide the detailed disclosures the S.E.C. now seeks, but the details that were there, like the credit standing of subprime borrowers, made it clear there was real risk. But institutional investors were in a search for higher-yielding securities, and took the AAA ratings as a reason not to study the securities carefully.
If there is to be a revived private mortgage securitization market, it will need investors who are willing to do their own work analyzing the investments. And it will require that those in a position to control the underwriting standards when the loans are made have incentives to make loans that will be repaid.
In a filing with the Treasury Department and the Department of Housing and Urban Development, which sought suggestions for improving the mortgage market, Jay Diamond of Annaly Capital Management, a firm that invests in mortgages, recalled a comment attributed to the head of a subprime mortgage lender who had been asked why his firm kept lowering its standards as risks grew.
“The market is paying me more to do a no-income-verification loan than it is paying me to do the full documentation loans,” said William Dallas of Ownit Mortgage Solutions. “What would you do?”
The Dodd-Frank Law just enacted and the S.E.C. proposal seek to change incentives by requiring sponsors of securitizations to hold on to pieces of them, and to not hedge away that risk. Monitoring the hedging activities of a big firm like Goldman Sachs will not be easy for the regulators.
With the private mortgage securitization market moribund — there was one recent issue, but it contained only superhigh-quality mortgages — the United States home mortgage market has split in two.
A vast majority of mortgages come, in effect, from the government. They are guaranteed either by a government agency or by the government-sponsored enterprises Fannie Mae and Freddie Mac. The rest, usually mortgages too large to be insured by Fannie and Freddie, are written by banks and stay on their balance sheets. Those loans charge higher interest rates than are available on the loans sold with government guarantees.
Fannie and Freddie are in business only because the government bailed them out, and some in Washington say they would like to get rid of them. But there seem to be remarkably few well-thought-out ideas about how to replace them. Some ideas kicking around call for having the government issue what would amount to catastrophe insurance for private securitizations, charging fees for that. In some variations, the government would be expected to closely monitor underwriting standards, charging higher fees or not offering insurance at all on securities backed by lower-quality loans.
The Obama administration has called a conference for Aug. 17 to hear ideas on the subject, and promises a comprehensive proposal on Fannie, Freddie and a new mortgage regime early next year. It is hard to see how it can reduce the government’s role in a major way without causing new problems for the already weak housing market.
But such an outcome will be even harder if Wall Street insists that the firms responsible for putting private financings together have no responsibility, as Sifma put it, “to undertake any sort of credit analysis.”
Floyd Norris comments on finance and economics in his blog at nytimes.com/norris.
Filed under: foreclosure |
edgetraderplus
all to true & thank you!!!!!
1913 the monster of banking created to deceive & control .
most people have noooo idea & have fallen under the influence of the biggest propaganda campaign in world history [which btw history as “we know it” cant not be relied on either , more of the same lies ]
Hitlers go to monster “Nazi Propaganda Ministry Joseph Goebbels”
Goebbels had rules that he followed… precepts that had to be adhered to in order to create an effective propaganda campaign. Some of those rules included:
• Propaganda must be carefully timed, reaching its audience ahead of competing propaganda.
• Propaganda must have a theme that must be repeated over and over.
• Propaganda must label events and people with distinctive phrases or slogans.
• Propaganda must evoke the interest of the audience.
• Propaganda must diminish anxiety.
• Propaganda must be transmitted through an attention-getting communications medium.
this is why sooooooo many “choose” to ” not believe ” Americans were sold out in 1913 “officially” . Our history is fraught with treason . ” pearl harbor” &WWII, “civil war” , war of 1812 bla bla all uncover lies & the inner workings of those opposed to an independent nation “united ” could not be defeated .
The banking cartel has been behind the power of “corruption” for centuries .
This cancerous infection has spread to “every major component of “our nation”
JFK -April 1961- “The very word ‘secrecy’ is repugnant in a free and open society;
edgetraderplus,
Not going to discuss minor differences – my prior post was intended as a compliment. But, do disagree with you as to avenues to address our rights. The courts have become controlled by influential and powerful law firms. This has made it increasingly difficult for the little people to fairly litigate their claims – and this is despite “knowledge of one’s rights and how to preserve them.”
Saturday 7 August 2010
Agree or disagree matters not. Moving forward with purpose is what counts. Not to seem to be a quibbler, but details do matter and make a huge difference, at times.
> “We have lost our rights.”
I am not a part of any “we,” for I know what my rights are, and I know how to fight for them. To begin with, I am not one who starts out by waiving rights at the outset, nor am I a 14th Amendment citizen. This is why I can say I was born in this country, but I am not a citizen of the United States. Most find that statement enigmatic.
> “we no longer even [have] an avenue to properly address our rights.”
That is not true. The avenues still remain, but one has to be familiar with the judicial terrain and know which direction to take. Believe or not, for as corrupt as the judicial system is, judges know a proper challenge when one is presented, but even that is a back-up strategy.
The initial strategy is to simply know one’s rights and how to preserve them. The strongest defense is a keenly aware offense. Staying out of the system has such rewarding benefits.
I keep the burden of proof where it belongs, and it ain’t on me.
> “Piece by piece – our rights have been take away.”
Correction. Rights have willingly been given away, even verified by one’s signature on some goverment form. Many have traded rights to have the “privilege” of feeding on the government teat…Social Security, medicare, unemployment, etc, etc. All required a signature, and most stood in line to sign their rights away for the benefit of “privileges,” so no rights were “taken” away.
> “The Constitution? long gone.”
Comatose, but still available for those relatively few who know how to use it.
> “If there is nothing in it for them – people will not stand up”
This country was born out of a revolution to perserve one’s rights because the new “Americans” REFUSED to give up inalienable rights and were willing to die for them.
Today, after being “schooled” in a governemt educational system designed to keep people “dumbed up,” people will not stand up for anything, except the government dole. Stand up for rights? It would take away from television time.
Why is it that I can literally go face to face with the IRS and tell them to stay out of my business unless and until they can prove that I am a “taxpayer?” The IRS never has in the last 15 years.
I knew how to stand for my rights against one of the most feared, but corrupt, organizations, which is NOT a part of the US government. It pays to know jurisdiction.
Seemingly minor points of “dispute” over your response, but it makes the differencer between freedom or servitude. I fight for the former, even in a simple discussion.
Cheers, to you!
I think this article makes a great EXPLAINATION of “why?” – but it MUST include a “short and plain” statement conclution that “says it all” IE a sound bite — so that the readers know what its referring to – IE a CONCLUTION that even the busiest (arent they all?) reader can understand immediately, such as:
“The method of “assuring” the security was based on LAYERS of semi-truths that BY THEMSELVES created the APPEARANNCE to “prove” a fraudulent conclution – that each “level of truth” seemed reasonable – but were structured to create a false conclution…”
Hopefully the above can be edited even more… and ideally, should cause the reader to say “but how?
The real goal (and the key to the effectiveness this explaination on THE READER – is to make the reader “know’ what they are “looking for” and MUST compel the reader to “WANT” the answer to THAT question… *But it must start with an outrageous and offensive “conclution” that GETS THEIR ATTENTION (IE: that they immediately react with the feeling that “IF” the conclution “is true” – THAT would be an OUTRAGE (to them) – and they DEMAND an explaination…
edgetraderplus,
Cheers. Have slightly disagreed with you in the past. And, I want to tell you now – what you have just written is an important post. Perhaps, we may not agree how on we got there – but agree – we are there – we have lost our rights – and we never knew what was happening.
Those rights are continually being denied – we no longer even an avenue to properly address our rights. Justice – where? Piece by piece – our rights have been take away. The Constitution? long gone. You are right – the government (or shall I say – the parties that control the government) QUOTE ” have taken over the Constitutionally created united states of America and replaced the individal states with STATES”
What do we have left – nothing. American people – Lazy? – maybe. To busy – to stand up for rights – as a whole. If there is nothing in it for them – people will not stand up. Once had a professor tell me – one generation really stood up for what they believed in – he attributed this to those that grew up in the sixties. After that came the “ME Generation.”
Thanks edgetraderplus,
Saturday 7 August 2010
Strike “Common law” from any Federal Courts, in fact, ANY court in this country. Please take the time to understand that the Common Law emanates from the organic Constitution.
The Federal Government is a corporation. Common Law applies to a sovereign man or woman, and the corporate federal government does NOT recognize Common Law in a statutorily created Disctrict Court of the United States which can only hear federal law cases.
Few people understand how the federal government has taken over the Constitutionally created united states of America and replaced the individal states with STATES, in all capitalized letters to denote corporate status.
These may seem like unimportant “details,” but the continuing refusal of the American populace to pay attention to the not so trivial “details” is what keeps most people in a blissful state of ignorance, and all the courts and judges,as well as the goverment, rely on that lazy state of ignorance.
TW states:
“So tell me, why is it that “We the People” have to borrow what should be “OUR” money and pay it back to these “demolition experts” with interest?”
First of all, who is the “We” in the referenced “We the people?” At the time it was written as the Preamble to the Constitution, the “We” referenced all the sovereign people in the country.
Since the enactment of the statute known as the 14th Amendment, a new class of citizens, never before known in this country, was created: a citizen of the United States. Translation: a citizen of the Federal corporate United States.
For those of you who are too lazy to care about your rights and liberty, [when you have none, any more],
rights are inablienable, God-given and preceding any form of law. You readers have “privileges,” not rights.
Voting, marrying, driving are forms of privilegs extended to you by Congress under the 14th Amendment “citizen of the United States” status, and
privilges conferred can be taken away at any time Congress so chooses. And you have all stood in some line, waiting to sign some form, agreeing to be granted privileges, waiving all your rights, in the process.
Most everyone who you know is a citizen of the federal corporation. How can you tell? Ask yourself:
Are you a registered voter?
[Sovereigns were “electors” who elected others. Today, registered voters “vote” for corporate officials]
Do you have a marriage license”
[Many have heard the term Common Law marriage but do not understand what it means. It means, married under the common law, without having to get a “license” to undergo a natural act.]
Are you a taxpayer?
etc, etc, etc.
This may bore most of you to no end, but ignorance of a few of these examples explains why most here are under the chains of the federal government, a form of
“government,” under the organic Constitution which is one with limitations.
Does anyone here see the Federal government being limited in any manner?
I know I am wasting my time and words here, but when one knows the truth, it is very difficult to let the lies you all believe in go uncorrected.
FWIW, I am not a registered voter, so I did NOT provide my “signature” to be a part of the Fedral system.
I need no license to be married.
I maintain no bank accounts or use credit cards, also to stay out of the Federal system.
I am not a taxpayer. Paying taxes is purely voluntary, unless one chooses to “sign on” under penalty of perjury to Title 26, which is unconstitutiional deception, throughout.
And TW also asks, “…what about OUR money…?
I am guessing [s]he means Fedral Reserve Notes, [FRNs], which are NOT money but is commercial-issued debt.
I could launch into paragraphs, supported by law, about what is and what is NOT money. There is NO
LAWFUL MONEY IN CIRCULATION in this country.
All lawful money has been replaced by fiat debt that
99.9% of people in this country “believe” to be money.
The law says otherwise, but the corporate federal government, the federal disctrict courts, and certainly the IRS will do nothing to dissuade anyone of their chosen beliefs, no matter how mis-guided.
No one need take my word for it. I have done my due deligence and have read Supreme Court law. I know of what I speak. Most speak of what they “believe” to be true and argue on the merits of mistaken beliefs.
Once the Federal Reserve Act was passed in 1913, and the statutory 16th Amendment was passed, this country lost all vestiges of a Republican form of representative government, one where the rights of one was protected against the will of many, and replaced by a “democracy, where the will of many tramples on the “selfisness” of one.
“Can’t you just go along with the program?!”
Not this independent one!
Cheers…
I carefully read the 71 page Sifma brief: I found many things I disagreed with. But on page 38, I did find one point that was well made:
We believe that the issuer should be required to disclose whether the sponsor or other obligated party is required to repurchase or replace any pool asset if the asset becomes delinquent in payment in the first 90 days (or other period) after origination.
Smon
Good point. Seems every trick in the book is used to avoid real decisions. Study these cases – most avoid responsibly addressing the real issues. The question is – Why??
What did we buy?
$23 Trillion… not $700 Billion
[youtube=http://www.youtube.com/watch?v=lDJc0PZV-Bk&hl=en_US&fs=1?color1=0x5d1719&color2=0xcd311b]
These “financial terrorists” have been at it for hundreds of years… infiltrating our government, media, courts, society, etc. Since they couldn’t beat us on the field of battle they did the next best thing to cripple our country… and that was to supplant their financial system upon us.
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.”
-Lord Acton
“I care not what puppet is placed on the throne of England to rule the Empire, …The man that controls Britain’s money supply controls the British Empire. And I control the money supply.”
-Nathan Mayer Rothschild
“The real menace of our Republic is the invisible government which like a giant octopus sprawls its slimy legs over our cities states and nation. At the head is a small group of banking houses generally referred to as ‘international bankers.’ This little coterie… run our government for their own selfish ends. It operates under cover of a self-created screen…[and] seizes…our executive officers… legislative bodies… schools… courts… newspapers and every agency created for the public protection.”
-John F. Hylan
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance.”
-James Madison
“The few who could understand the system will either be so interested in its profits, or so dependent on its favours, that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”
-John Sherman
So tell me, why is it that “We the People” have to borrow what should be “OUR” money and pay it back to these “demolition experts” with interest?
Source:
http://quotes.liberty-tree.ca/quotes_about/rothschild
There is nothing FREE about the work, stress, interest, and degrading we’ve experienced trying to deal with GMAC and bring them to justice. Everyday is a new day and we will not stop until we at least file a suit against them. We cannot let them continue to treat people like they have treated us.
Keep up the fight!!
“The Government Sponsored Enterprise Business Model”
Called by Treasury Sec Hank Paulson, George Soros “Fatally flawed” , “hoplessly conflicted”, “simply does not work”.
If Obama called in the board of Wal Mart and asked them them what to do with such a business model………….what do you think that they would suggest?
FLOOD THE CITY COUNSEL ROOMS WITH PEOPLE AND BRING IT TO THE ATTENTION OF THE CITY COUNSEL. THE LOCAL D.A. FILE CRIMINAL COMPLAINTS.
CHECK OUT THE CITY OF BELL IN THE LATIMES ARCHIVES + NEIL GARFIELDS ANALYSIS.
BUT DO IT AT THE LOCAL LEVEL
“Common Law, TILA, RESPA, UDCPA will do just fine.”
The problem with this statement is that every lawyer I have spoken with says federal courts have NOT yet ruled responsibly and by law on these issues. The laws are there, in other words, but the judges aren’t buying it. Probably still ruling against giving a “free house”.
How then are we to rely on Common Law, TILA, RESPA, UDCPA?