NY Times Editorial: Time to Get Ahead of Problems

The Obama administration needs to ensure that the taxpayers’ interests come first. Until now, the White House has focused far more energy on shoring up the banks — a stance that may have made sense in the thick of the financial crisis but is increasingly suspect now.

October 26, 2010

The Mortgage Morass

The mortgage mess just keeps getting messier. Last week, Bank of America announced that it had performed a “thorough review” of its processes, found nothing amiss and would soon restart 102,000 pending foreclosures. On Sunday, the bank acknowledged that it had in fact found errors in its filings, and would resume foreclosures only in a deliberate manner as new and corrected paperwork was submitted to the courts.

The repeated recalibration cast further doubt on Bank of America’s procedures and the ability of the entire industry to clean up this mess.

The immediate issue is robo-signing, in which employees at Bank of America, JPMorgan Chase and other banks falsely attested to having verified the facts in what may turn out to be hundreds of thousands, or more, court foreclosure filings. That has brought to light other problems, including crucial documents that have been lost or improperly transferred — raising questions about the banks’ legal standing to foreclose as well as the value of securities backed by these mortgages.

The state courts will have to resolve the question of whether banks can foreclose with defective or substitute documents. Courts will also have to rule on any disputes between banks and investors over mortgage securities, a complex and contentious process if it comes to that. The Obama administration needs to do a lot more to get hold of this crisis, before it gets any worse.

Last week, Bank of America also acknowledged receiving a letter from mortgage investors — including Freddie Mac and the Federal Reserve Bank of New York — demanding that it repurchase tens of billions of dollars in problem loans that were bundled into securities.

Investors can demand that banks repurchase loans that did not meet underwriting guidelines or were inadequately vetted or processed. The repurchases are important to taxpayers, because — through Fannie, Freddie and the Fed — the government now owns or backs a large number of problem loans and related securities. If the banks do not take the hit, the taxpayers will.

Fannie and Freddie have increased their repurchase demands on lenders over the past year, but banks are sure to resist large repurchases, setting up more clashes and disruption.

Bank of America has said it does not believe it is at fault for the loans’ poor performance. Freddie Mac and the Fed should push their claims hard.

The Obama administration needs to ensure that the taxpayers’ interests come first. Until now, the White House has focused far more energy on shoring up the banks — a stance that may have made sense in the thick of the financial crisis but is increasingly suspect now.

The administration has called on banks to correct the problems in their foreclosure paperwork. More is needed, including a plan to impose coherence on the increasingly chaotic mortgage system.

The White House needs to work with Congress to ensure that no foreclosures proceed — not just those with questionable paperwork — without homeowners’ first being offered fair and timely loan modifications. The Housing and Urban Development secretary, Shaun Donovan, has promised tougher action, but has been short on details and even refrained from naming the banks that have been laggards in loan workouts.

The administration and federal regulators should also acknowledge the potential hit to banks’ finances from the coming wave of litigation and repurchases. They should be taking precautions right now, say, by initiating more robust monitoring or new stress tests to gauge whether banks need to raise more capital to absorb the costs of any court fights and buying back bad loans.

The markets are relatively calm for now. That is the time to get ahead of problems that are not going away.

8 Responses

  1. Dave Krieger

    Do not think so. Judges are accepting – anything they want. Believe me – seen a lot. Your QT is excellent – but, unfortunately, subject to the judge in control – who may do whatever they want. Some judges are, thankfully, attuned – others…..well – it is a battle. Luck of the draw.

    Need support from US Government for QT. Hearing from contacts that – wand will be waved to “cure” all title defects -by the government. But, that will not stop the foreclosures. It will only be a guaranty to purchasers of foreclosed homes.

    The battle lines are drawn – the government WANTS the foreclosures – and we cannot trust the process.

    IT remains – politics – as usual.

  2. “Tax payer interests come first??” Hold on – all for taxpayers – we are taxpayers too – but – we are also victims – and will not sacrifice our lives for cover-up by those in control.

    Investigations by those in authority must be complete and thorough – and must go back to origination. No one can investigate the foreclosure fraud in “ONE MONTH” – this is impossible.

    We will not give up the fight to keep our homes without a COMPLETE investigation of the fraud.

    Tired of hearing from the Fed, SIMFA, Pres. Obama – that FORECLOSURES MUST GO THROUGH. Tired of the cover-up.

    We are not a “herd of cattle” to be moved through by foreclosure – in order to support security/bank industry agenda and fraud.

    The Fed/SIMFA and hired distressed debt buyers – are NOT immune from litigation.

    If the Fed/FDIC comes down with concrete evidence that supports our contentions of fraud – GREAT. If they do not, there must greater actions against these non-immune agencies – who have collaborated from the onset – to push foreclosures through by all means and method.

    We will have no other choice. Prepare ahead.

  3. There is a reason for laws. Crime does not pay no matter how rich you are. It might be good for the short term like Drugs. But in the long run like drugs it is gonna hurt.

    But this nation is a nation of drug addicts prescribed and non prescribed

  4. What happens if the government tries to bail the banking institutions out again? Are we, the sheep, going to take this? If the people of the USA think that if Congress goes to the right that it will help their plight, they are badly mistaken. We are going to have to do something draconian to get Congress’ attention. Literally, a march on Washington.
    http://www.challengingforeclosure.com Burmese8@yahoo.com

  5. When I run a red light even though everyone does it, and I get caught I pay a fine. When I fail to pay taxes, I get penalized. When I fail to follow the letter of the law, someone is going to come after me. Why is it then that the banks, who can’t come up with the note, have fraudulent notarials and signatures, who cloud my title refuse to settle with me??? I’ve proved the above and in 30 years of practice, when you prove your point, you at least get a settlemen offer. Not now. The answer is basically well that’s the way its done now. When the rule of law is looked at as something to be ignored, our country is going to fall apart. I’m disgusted and tired but I will not let the defendants in my lawsuit win–might does not make right.

  6. No more Government bank bailouts, Government needs to replace the money to the people, The ones that have been taken by the banks, and then let the people decide how to spend the money- such as buying down their debts if they wish, Let the people make that choice and the banks will get a lot of $ back, win-win? but, well who am I?

  7. Sustainable solutions must include the group called homeowners.

    Someone once said: [prisoners] cannot negotiate.

    Intermediaries, such as banks, may have a 1st Amendment right to talk, but having been paid and having no capacity to sue, no one has a duty to listen to their duplicity any more. That’s all there is to it.

    Solution: The looted need ONE action and ONE cause of action: RICO.

  8. Folks ….

    Once these robosigned documents have been recorded in the courthouse … game over!

    The modus operandi in a QT action is to impeach it by deposing the robosignor. Once you get them to admit to things like … “for value received” (what value?) … and “what personal knowledge did you have of this account” (no first-hand knowledge) and … “was the notary present when you signed this?” … and “how many of these documents do you sign a month?” … it will become pretty clear as to how impeaching this document can break the agency relationship in the chain of title; thus, the reason for your relief. (THIS IS NOT LEGAL ADVICE!)

    Just (to quote someone we all know and despise) …


    http://www.cloudedtitles.com for more info!

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