CHOKING OFF FUNDING FOR REGULATION: BANKS SEEK TO WIN AT ANY COST

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EDITOR’S NOTE: It’s simple — if you don’t like the regulations, then kill the regulators. Simply deny them the funding required for them to do their job. Once again the power of the banks, lobbying congress, and legislatures around the country, is being felt as the banks attempt to tighten their strangle hold around the American system of government. Europe on the hand is not so susceptible to these efforts and the fact remains that large swaths of these over-sized brutes have their operations in an increasingly hostile environment in Europe, which is the leading the way in investigations and regulation. The battle continues.

U.S. Regulators Face Budget Pinch as Mandates Widen

By BEN PROTESS
Robert Khuzami, left, and Gary Gensler.Jacquelyn Martin/Associated Press, Andrew Harrer/Bloomberg News Robert Khuzami, left, and Gary Gensler.

Government regulators on the Wall Street beat have long been outnumbered and outspent by the companies they are supposed to police. But even after receiving budget increases from Congress last month, regulators are still falling behind.

The Securities and Exchange Commission and the Commodity Futures Trading Commission are struggling to fill crucial jobs, enforce new rules, upgrade market surveillance technology and pay for travel.

On a recent trip to New York to tour a trading floor, a group of employees from the commodities watchdog rode Mega Bus both ways, arriving late to their meeting despite a 5:30 a.m. departure. The bus, which cost $30 a person round trip, saved the agency roughly $1,000 over Amtrak.

“We spent hundreds of billions of dollars on a hideous bailout, and now we’re not going to fund reforms to prevent another one,” said Bart Chilton, a commissioner with the agency.

The money squeeze comes as Wall Street regulators take on added responsibilities in the wake of the financial crisis, including monitoring hedge funds, overseeing the $600 trillion derivatives market and other tasks mandated by the Dodd-Frank law.

Their budgets may soon be even tighter, with Republicans looking to cut the regulators’ spending beginning Oct. 1, the start of the government’s fiscal year. Gary Gensler, the chairman of the commodities agency, and Mary L. Schapiro, the head of the S.E.C., will discuss their budgets for the 2012 fiscal year before a Senate committee on Wednesday.

Current and former regulators warn that budgets cuts would prevent the agencies from enforcing hundreds of new rules enacted under Dodd-Frank, or worse, catching the next Bernard L. Madoff.

But critics contend that the agencies don’t deserve extra money, given that they missed warning signs and failed to catch serious wrongdoing in the years leading up to the crisis. The S.E.C., too, has been accused of mismanaging its finances. The Government Accountability Office has faulted the agency’s accounting almost every year since it began producing financial statements in 2004.

Some Republicans argue that the regulators’ cries of poverty are overblown. The S.E.C.’s budget this year is $1.18 billion, up 6 percent over 2010 — and nearly triple what it was a decade ago.

“A dramatic spending increase to fund the S.E.C. and C.F.T.C., as envisioned by the authors of the Dodd-Frank legislation, would further the mind-set that our nation’s problems can be solved with more spending, not more efficiency,” Representative Scott Garrett, the New Jersey Republican who leads the House Financial Services Committee’s Capital Markets panel, said in a statement earlier this year.

While hiring bans and travel restrictions have been eased since the new budget, regulators say they are largely in a holding pattern as lawmakers debate the 2012 budget. Any further cuts, they say, could undermine their efforts to police Wall Street.

The commodities agency says the uncertainty has forced it to delay some investigations and forgo other potential cases altogether.

“We don’t have the sufficient number of bodies to pursue all relevant investigations and leads,” said Mr. Gensler, adding that his agency was short nearly 70 people in its enforcement division.

Robert S. Khuzami, the S.E.C.’s enforcement chief, has similar worries, noting that some Wall Street investigations have faced mounting delays. Recent departures of lawyers will only magnify the problem, he added.

Mr. Khuzami also said he faced a “significant backlog” of tips and referrals, including in the area of market manipulations and accounting irregularities. The tips, which come from whistle-blowers, law enforcement agencies and investors, often prompt S.E.C. investigations.

“The biggest concern is we’re not going to get to fraud and wrongdoing as early as we should,” he said. And if the agency’s budget is not increased in 2012, the S.E.C.’s enforcement division “won’t cast as wide a net,” he added.

Already, the S.E.C.’s enforcement division has adopted cutbacks. The division, for instance, has curbed its use of expert witnesses in some securities fraud trials, Mr. Khuzami said.

The division also started sending only one lawyer — sometimes a junior staff member — to conduct depositions and interview witnesses, according to defense lawyers and people close to the agency. Senior S.E.C. lawyers monitor the depositions via videoconference.

To avoid hotel costs, some S.E.C. investigators have shuttled between New York and Washington on Amtrak trains that leave around dawn and return the same day. The agency only recently started to again examine investment firms and public companies in some Southern states, after postponing reviews to avoid paying for plane fares.

Despite the recent budget increase, the S.E.C. “still must closely monitor expenses such as travel to make sure that each expense is truly mission-critical,” according to an internal agency memo dated April 14 that was provided to The New York Times. “It is not at all clear what fiscal year 2012 funding level will be approved by Congress,” said the memo, which was signed by Jeff Heslop, the S.E.C.’s chief operating officer.

While the S.E.C. offsets its budget with fees from Wall Street banks and other financial firms — and in recent years has even turned a profit for taxpayers — Congress sets the agency’s spending levels each year. Lawmakers in April raised the S.E.C.’s budget for the next few months by $74 million, to $1.18 billion. President Obama had requested $1.25 billion for the agency, and Dodd-Frank called for $1.3 billion.

The Commodity Futures Trading Commission received $202 million. Although that was a 20 percent increase over the previous year, the budget fell short of the $261 million the agency said it needed to enforce Dodd-Frank. The law requires the commission’s staff for the first time to oversee swaps, a type of derivative. The industry is seven times the size of the futures business now under its jurisdiction, Mr. Gensler said.

“With $202 million, we can grow moderately,” he said. But “we need more resources to protect the public and oversee the swaps market.”

After the budget increases, regulators ended a yearlong hiring freeze. But both agencies say they are reluctant to significantly increase staffing for fear of having their budgets cut in October.

“Please keep in mind that this round of hiring will focus on the agency’s very highest priorities, and many divisions/offices may receive approval for very few, if any, of their priorities at this time,” the internal S.E.C. memo said. The memo further instructed officials to compile a list of the “top 10 priorities for hiring,” which will then be reviewed on a “case-by-case basis.”

The agency said it had not been able to fill nearly 200 positions this year owing to budget constraints. The S.E.C. had five open spots for experts in complex trading and received about 1,000 applicants for the roles; it could afford to hire just one person.

The agency also lacks money to adequately train the enforcement lawyers already on staff, Mr. Khuzami said. Some lawyers who wanted to attain their brokerage licenses to better understand the industry had to put off prep classes.

“I don’t think people realize how serious the problem is and how serious the consequences are,” said Harvey Pitt, who was chairman of the S.E.C. from 2001 to 2003.

The regulators, for instance, have had to slow down the adoption of Dodd-Frank rules. The S.E.C. has put off creating several offices mandated by the law, including a bureau that will oversee the credit rating agencies and a special office of “women and minority inclusion.”

The commodities agency, which planned to complete its 50 new rules by July, is now hoping to finish by early fall. Once the rules are complete, the agency will not have the funds to enforce them, Mr. Gensler said. Some 200 firms registering with the commission as swaps dealers may have to wait months for the agency to process their applications — unless it can hire several new employees in the department.

Regulators fear that Congress will soon slash their budgets, which could send the agencies scrambling to cut costs again — much as they did in recent months amid the threat of a government shutdown.

Until recently, employees from the commission were instructed not to order certain office supplies — items like three-hole punches and heavy-duty staplers. The ban was lifted after the new budget was instituted.

Some regulators were also paying for their own travel. When Mr. Gensler, a former Goldman Sachs executive, headed to Brussels to help the European Parliament create new derivatives rules, he paid out of his own pocket.

Another commissioner from the commodities agency who attended a conference in Boca Raton, Fla., paid for a night at the Sheraton using his family’s promotional points. Mr. Gensler attended via a videoconference.

30 Responses

  1. Dear Joyce: Thank You. Mary.

  2. Mary: Your comments are a little confusing to me so here is what I can offer.

    1) Title insurance has nothing to do with MI insurance as I commented earlier.

    2) If a loan is refinanced then in that event most title policies being issued for the refinance will normally get the benefit of a discount. For example if you purchased a home in 2004 and you got a title policy – and paid $2500, then when the home is refinanced, the policy is updated by commitment and then you pay a lesser amount at closing because only an update since the original loan was made is incorporated into the new title policy. It should have cost you less unless there have been changes I am not aware of. Look back to see what they originally charged you on the first loan and compare it to the cost on the title policy issued for the refinance – it should be less, but it has nothing to do with MI (mortgage insurance)

    The title company does not order MI as far as I know as that is an underwriting requirement and is done by the originating lender. The originating lender issues closing instructions which tells the closing agent or closing title company to show generally in the prepaid section of the settlement sheet. that you must sign as the buyer or owner.

    You need to call the underwriter of the title policy which in this case you said was Stewart I believe and ask them what happens if a refinance or foreclosure takes place. Then to double check them, look at the title policy.

    At one time I thought the title companies were happy about the foreclosure as one of them told me they have no liability if it goes to sale. That needs to be confirmed by you when you call the underwriter or examiner at the title company.

    I hope I have answered your questions because loans have different closing methods from State to State so it is important that you deal directly with the underwriter that issued the title policy to the closing agent.

    The closer has a responsibility to close the real estate transaction in accordance with the Earnest Money Contract or whatever agreement and that is just the way it is. You really needed someone to be there to assist you with the actual closing in case the agent did not close to your satisfaction.

    So many realtors sat while millions of home owners signed these closing documents and said nothing. They were indeed a contributor to the demise of this economy and the housing crisis. Now they are going to help people, right. They get to sell all of the foreclosures –

    Hope some of this has helped – look at your state laws for title company closing and get an attorney particularly if the closing agent was an attorney.

  3. Dear Joyce:

    Thank you.

    Just read the 1st post second.

    The $1900 taken out of original value of refinance, Title & Settlement Agency paid themselves for Title Policy’

    The Title & Settlement Agency refused to give a copy of the title policy to us June 2009 when we requested to pay for an update.

    The mini-ledger from the Attorney for Wells Fargo Bank NA in NJ states Title Policy.

    MI is insurance that pays off in the event you default on the loan and it goes to foreclosure – The claim is filed by the loan servicer who provides a 30 60 90 day report or until foreclosure takes place.

    The MI insurance instructions were directly from WFHM employee in NJ ordering the Title & Settlement Agency to update title to include ‘Wells Fargo Bank NA LENDER’ and ‘Star Mortgage Services’ and has nothing to do with MI

    Or, do you mean when we refinance we don’t have Title Policy anymore? If really was MI?

    I called the Wells Fargo Bank NA Attorney who is the partner who owns the Title & Settlement Company and was the Settlement Agent and who issued the Title policy they would not give us a copy.

    I also called the TItle Company STEWART who issued the title policy when we purchased our home and the title policy agent said that policy expired when we refinanced?

    I guess I want to understand the harm we all share and have in common as a class of consumer:

    We have a title policy. The Clouded Title how will that be protected by the Title Policy?

    The Settlement Agent has duty to insure all of the transactions are legally filed including the Assignment.

    The Originator would be the party who instructed the Settlement Agent to not record name of the LENDER, for example.

    How does that affect the Title Policy when the Settlement Agent, is the Title & Settlement Company and Attorney and recorded the ‘Title Policy’ … how does that protect consumers in the CLOUDEDTITLEGATE?

    Settlement Agent
    A person responsible for ensuring that all laws and regulations are followed in transferring real estate from one owner to the next. For example, when one sells his/her house, the settlement agent performs the title search and conducts other activities necessary for the real estate to close smoothly. Generally speaking, a settlement agent does not represent either party in a real estate transaction. Some U.S. states require a settlement agent to work on real estate transactions.

    Settlement agent. In some states, a settlement agent, or closing agent, handles the real estate transaction when you buy or sell a home.

    He or she oversees title searches, legal documents, fee payments, and other details of transferring property, acting on your behalf to ensure that the conditions of the contract have been met and appropriate real estate taxes have been paid.

    A settlement agent also represents you at the closing, so you don’t need to be present.

    The Settlement Agent has a fiduciary and legal duty.

    Based on what we are learning and they are the ‘mule’ who made FORECLOSUE GATE possible… CLOUDEDTITLEGate!

    Now what?

  4. Dear Joyce Cauthen,

    Thank you.

    The ‘Homeowners Insurance Policy’ I was referring to is separate from the Title Insurance Policy.

    The annual homeowners policy, when I refinanced, WFHM Perth Amboy sent fax to Weichert to add ‘Star Mortgage Services as ‘Assignee and/or Successor’. When SouthStar Funding LLC issued C&D in Georgia, mail no longer deliverable to SERVICER in Agreement SouthStar Funding LLC the Originator.

    Until I realized Wells Fargo was not operating in good faith, and not an American Bank, and had misrepresented themselves and harmed the nation, I paid the homeowners insurance bill annually $995 a year.

    Based upon legal advice June 2010, we did not renew the homeowners casualty policy and took out instead renters insurance to protect our belongings and personal protection if someone were to get hurt on the proeprty.

    Was interesting to watch the Master Servicer, Norwest Asset Securities Corp sell to themselves their own Hazard Insurance Policy Charging $7,000 annually, $3,500 per 6 months.

    Is that the insurance that pays the REO BROKER? ‘Hazard Insurance’ does not protect anything that falls if you turn the house upside down in the event of a fire or such. Also the Hazard Insurance does not protect you in the event someone falls or hurt on your property. In the event consumers have been given a forced hazard insurance policy they may want to consider renters insurance.

    Interesting note: Weichert Underwriters refused to write renters policy – and the UNDERWRITERS STATED THEY DID NOT WANT TO GET INVOLVED.

    Geico car insurance had no problem submitting quote for renters policy costs about $35 per month.

    In reading some other agreements and discussions there is interest to find out ‘imporvements to property’ claims are processed.

    Do you know how the Title Policy consumers purchased protects us while the deed is in the name of the consumer?

    We all purchased at the time of the ‘refinance’ or ‘purchase’ title policy. The titles are CLOUDED with defects. To clear up those defects, wondering how the Title Insurance works and protects who? The Settlement Agent, was the Attorney who was the patner owner of the Title & Settlement Agency. The would do nothing to sell us a policy when we wanted an updated to dispute falsified information against the title.

    What happens 9/2011 when the trust fund ends?
    The ‘TRUST FUND’ of 88 Loan Trusts (some which escaped out of the TRUST FUND moved to Abacus 2007-AC1 in January/February 2007.

    I hope I get the time to look at each class and make a list of each loan trust and find out what they did with it? Just disappears? Where was it recorded and who are the loans in ‘M9’? Will the notes remain in the name of Cede&Co? or broker for the 30 years?

    I’m concerned about what happens during the 5-Year reverse accounting to occur 9/2001. Do you know what happens when TRUST FUND ages to 5-years? and how that affects consumers?

  5. save america one – Please refer to the next to last paragraph – let me make that clearer to you.

    Assuming the foreclosure trustee deeds the property back to the entity calling for foreclosure, then the servicer servicing REO properties will select the hazard insurance to be acquired. The previous homeowner insurance would of course be cancelled since he no longer owns the home. The MI company would pay the claim to the servicer to be passed on to the investor (or trustee of cert holders) and the title insurance as I understand automatically becomes void – I’m not sure about that but that is what one of the bigger title companies told me.

    Don’t know why the foreclosure would be an issue if the homeowner had a valid claim , that he discovered after the foreclosure. But we will see. someone here on the site maybe able to confirm.

  6. Saveamericaone:

    I am a little confused – help me out with your request.

    Hazard insurance is paid for by the buyer generally at the time of closing and the settlement agent collects it and pays directly to the Insurance agent for your Home Insurance.

    Mortgage Insurance – is insurance that pays off in the event you default on the loan and it goes to foreclosure – The claim is filed by the loan servicer iwho provides a 30 60 90 day report or until foreclosure takes place – Since the amount of all expenses are known, f/c , escrow deficit, defaulted interest (mortgage), etc., the servicer will normally file his claim (even though he knows what to expect from the MI in advance of the f/c) and then that money should be passed on to the private portfolio investor OR TO THE TRUSTEE ‘S CERTIFICATE HOLDER. Regarding MI insurance – generally if required by the loan, and the borrower is required to have it as part of his loan, then the settlement agent will collect two months reserve (not the full annual premium)

    If a subprime loan, then the borrower is not generally requred to be covered by MI insurance, but the originating lender on behalf of the investor will order mortgage insurance which the lender pays for and I presume that the investor paid for it as a result of factoring it into the cost of the interest rate .

    This kind of insurance is still considered MI , which it is, except that they do not disclose its cost to the borrower as far as I know on the settlement sheet.

    Title insurance is paid for at the closing in full and it covers and guarantees no encumbrances, liens or judgments against the property and the buyer as the funding bank will not fund the loan if title is not clear.

    You have three different types of insurance – so who is that Financial Brokers REO insurance you are talking about. After foreclosure assuming the trustee transfers the hazard insurance back to the creditor – they have deals that they cut to keep hazard insurance in place.

    This is close to what goes on – but as you know, they have gotten so arrogant – no telling what they are doing to people.

  7. Please focus on the insurance policy purchased by the consumer RETAIL who did not know they were purchasing insurance policy for Financial Holding Companys’ REO BROKER Division and not new title insurance! Could that be the reason does not kick in until foreclosure and why we have

    CLOUDEDTITLEGate?

    The only party the consumer worked with was agent of Settlement Agent! The money was taken directly out of the proceeds of the loan or refinance.

    I have a wonderful woman in MD who is a first-time home buyer and her loan is in a Home Equity Loan Trust?

    We need a good law firm in 50 states to represent consumers as Plaintiff for the harms and injury and remedy offered under law!

  8. DTC, as “Settlement Agent

    Cede & Co., nominee of DTC

    Cede& co is a part of the Federal Reserve and does not answer to the SEC

    Why are all transactions put in name of Cede & Co?

    Oooppppppsssssiiiieee!
    The UNITED STATES GOVERNMENT is the beneficiary rather than the owner.

    If the United States Treasury fails who benefits?

    The BENEFICIARY? of the transactions Cede c/o DTCC a private company owned by the private families who coveted the real estate of the US.

    The service MANDATORY and affects all MBSD clearing members.

    DTC Settlement Agent, as FICC’s Settlement Agent for MBSD process:

    -certain responsiblities with respect to an indemnity claim made by a Federal Reserve Bank
    (as a result of the NSS process).

    Entirety of such liability to the MBSD clearing members…the remain loss shall be allocated among all clearing particiapnts in proprotion to their relative usage of the facilities during period in which kloss incurred.

    Is this the Federal Reserve’s way of guarding their assets from the failure of the Mortgage-Backed Securities Division Participants

    New MBSD clearing members will be required to appoint a Cash Settling Bank ‘requisite agreements’ with FICC.

    Requisite Agreement with Federal Reserve:
    Banks or trust companies as defined by DTC’s rules and procedures.

    OPPS ! We did it Again. We , the United States of America Consumer are not a member nor do we have a federal administrative agency inside reporting back to CONGRESS.

    OPPS We did it again.

    Consumers, we have to get together and submit our application so we can get a copy of the rules and regulations. When we do should we give a copy to Congress both houses?

    http://livinglies.wordpress.com/2011/05/09/cochrane-details-on-the-depository-trust-company/

  9. Dear Joyce Cauthen,
    excellent ‘got ya’

    When you purchase insurance protection for damages – furniture, appliances, if you move there is a disclosue terminates policy, or as a ‘credit enhancement’ to sell the insurance to consumer there is disclsoure ‘even if you move’

    Who is on the light-side with copies of such agreements and what is the legal wording?

  10. Researching relationship of Filing Agent LaSalle Bank NA & National City to Structured Asset – and Bear Stearns and Lehman connected to MAF Bank, and 1992/1993 Merger acquistion of Great Northern into Bancorporation.

    S/3 Merger Provides great historical insight into regulations and US Government – US Treasury Control

    And insight as to why – perhaps – the business entities’ executives are not being brought up on charges?

    I’ve been looking for proof of ‘intent’ of US Government (in writing) that we won’t prosecute you was born.

    How angry are you that CONGRESS created class of consumer targetted by foreign corporations outside of the United States and inside the United States. We are the Weakest Link through which direct access to deed to take property could be targetted and was not under any regulation nor protection of the US Government? OVERSIGHT, Intentional failsafe for who?

    HOW MAD ARE YOU THAT CONGRESS misrepresents every day they breath they are protecting the welfare of the nation and thought they meant you?

    Who will protect consumers? NO ONE EXCEPT OURSELVES. WE DO NEED A CONSUMER UNION IN EVERY STATE!

    NEIL AND THEWHOLETRUTH – HOW DO WE PROCEED? HOW DO WE ‘CUT/OFF’ THE HEAD OF THE SNAKE?

    “Page 64.

    ENFORCEMENT

    Under FDICIA,

    OTS has primary enforcement responsibility over savings associations and savings and loan holding companies,

    OCC has primary
    enforcement responsibility over national banks, the Federal Reserve has primary
    enforcement responsibility over state member banks and bank holding companies,
    and the FDIC has primary enforcement responsibility over state nonmember banks.
    The FDIC has the authority to recommend that enforcement action be taken with
    respect to institutions over which it does not have primary enforcement
    authority. If action is not taken, the FDIC has authority to take such action
    under certain circumstances. These agencies have the authority to bring
    enforcement actions against those institutions and certain “institution-related
    parties,” including stockholders, and any attorneys, appraisers and accountants
    who knowingly or recklessly participate in wrongful action likely to have an
    adverse effect on an insured institution. Such enforcement actions can take
    the form of capital directives, cease-and-desist orders, removal and
    prohibition orders and civil penalties, which can range from $25,000 per day to
    as high as $1 million per day, if a finding of reckless disregard is made.
    Federal criminal penalties for most financial institution crimes, which are enforced by the
    Department of Justice, include fines of up to $1 million and imprisonment for
    up to 30 years. In addition to the prompt corrective action system, any
    financial institution that fails to satisfy any of its capital requirements is
    subject to possible enforcement actions by its appropriate federal banking
    agency. In this regard, the appropriate federal banking agency could require
    one or more of the following corrective actions: (i) increasing the amount of
    the institution’s regulatory capital to a specified level or levels; (ii)
    convening a meeting or meetings with the agency’s supervision staff; (iii)
    reducing the rate of earnings that may be paid on accounts; (iv) limiting the
    receipt of deposits to those made to existing accounts; (v) ceasing or limiting
    the issuance of new accounts of any or all classes or categories; except in
    exchange for existing accounts; (vi) ceasing or limiting lending or the making
    of a particular type or category of loan; (vii) ceasing or limiting the
    purchase of loans or the making of specified other investments; (viii) limiting
    operational expenditures to specified levels; (ix) increasing liquid assets and
    maintaining such increased liquidity at specified levels; or (x) taking such
    other action or actions as the agency may deem necessary or appropriate for the
    safety and soundness of the institution, or depositors or investors in the
    institution. The agency also could impose harsher measures such as the
    appointment of a receiver or conservator or a forced merger into another
    institution.

    FDICIA amends the grounds for the appointment of a conservator or receiver
    for an insured depository institution to include the following events: (i)
    consent by the board of directors of the institution; (ii) cessation of the
    institution’s status as an insured depository institution; (iii) the
    institution is undercapitalized and has no reasonable prospect of becoming
    adequately capitalized when required to do so, fails to submit an acceptable
    capital plan or materially fails to implement an acceptable capital plan; or
    (iv) the institution is critically undercapitalized or otherwise has
    substantially insufficient capital. FDICIA provides that an institution’s
    directors shall not be liable to its shareholders or creditors for acquiescing
    in or consenting to the appointment of the FDIC or RTC as receiver or
    conservator or to a supervisory acquisition of the institution.

    The imposition of any of these measures on Bancorporation, Great Northern or
    any of their financial institution subsidiaries could have a substantial
    adverse effect on operations and profitability. The appropriate federal
    banking agency may also require the institution to raise additional capital
    through the issuance of stock or other capital instruments. ”

    Please log into: http://www.secinfo.com then paste URL:

    http://www.secinfo.com/dsVS7.bp.htm#1stPage

    ‘Search’ box type in ENFORCEMENT for example for highlights

  11. I’d like to correct an en entry I made on May 5. I said the trust agreement says the trustee owns the notes. What it actually says is that the trustee of the trust is to be shown as the owner of the notes on MERS.

  12. stopGOVTwaste,

    Paid out insurance — the crux of violations – possibly criminal. .

  13. Joyce Cauthen

    Distressed debt business – yes — and price paid — Yes — and HAMP – as to modifications — YES — All been denied access to valid negotiation. with current creditor — all in violation of HAMP, FDCPA, and TILA Amendment.

    And, of course, in violation of valid BK filings.

  14. Lets not forget about creditors rights insurance (which underwriters smartly stopped issuing). These policies could have paid out too, in addition to MI!

    http://www.scribd.com/doc/52302516/April-2010-Title-News-Solving-the-Creditors-Rights-Quagmire

  15. Used Karguy – That 30, 60, & 90 day looks like the MI loan status reports that update the MI company so they can forecast their potential claims if the default is not clear up. Also, gives them an opportunity to help the servicer with a dual assistance program for handling collection of the account and to come up with a workout to bring the guy current in some fashion. At any rate, it is not the claim itself – it is only a notice and if those notices are not sent timely by the se rvicer, then the MI company may try to challenge any claim when the loan does foreclose.

    I worked on a loan in Wisconsin that Wells FArgo had purchased MI which the lender says they paid for, not the borrower. I simply do not accept that. At any rate, the MI company would not assist the homeowner who eventually worked through their problem but the servicer will not modify nor will the MI company assist her. They told me flat out NO WAY. And the government wants to know why there are so many foreclosures.

    The lenders do not want the money from the MI any more as they go along – they want it calculated on the total due at the time of foreclosure. See it is the agenda – foreclose, foreclose and foreclose.

    We have to remember the tremendous liability that these MI cmpanies were incurring in this latest demise which they have been unable to control. We had a few MI’s go out of business in the 80’s and 90’s, but the strong ones survived. That is why it was better to assist with partial payments from the MI so the housing crisis could be contained – but it just didn’t happen.

  16. Distressed business is not something I know very much about so it is great having Anonymous’ comment.

    It brings to my mind though when the laws of the state are applied – shouldn’t we know what the real debt figure is before the debt is sold – Not knowing how they come up with the final calculation is of concern.

    How does this work in the scheme of things

  17. Sorry I made so many typing errors, but I was in a hurry. What I was trying to say is that MI is endorsed just like hazard insurance to show who the real mortgagee of record is – Title policies, mi policies, hazard pollicies – all are endorsed and shipped over to the new mortgagee along with the assignment of the note and lien, and if it is a trust, fine – if not, then the claims are paid to the creditor of record (current mortgagee) before any assignment.

  18. Debate is over with – thought I would add another note or two.

    Makes no difference about transfer or not transferred. If the loan was transferred then, like hazard insurance, the mortgage changes. When the loans were transferred by assignment (which no one ever really followed through on until f/c immenet), the Mi policies and hazard policies would be endorsed to the assigns which could be the trustee on behalf of the trust.

    That is why the mortgagee clauses reads to thus and so and/or its assigns – isn’t that right?

    If the loan did not get transferred then they never would have taken a chance of assigning the MI policy because the MI company has to pay the creditor of record if assigned and if not, then they would have the originating creditor on record.

    Every servicer must order endorsements to assign the MI policies and the hazard policies when the creditor (mortgagee ) changes legally.

    If you find that MI was not assigned – it may serve as proof that the banks are trying to pull a fast one when they say it is in the trust – if so, why didn’t they assign it as such.

    If there is fraud on th epart of the originating lender to underwrite the loan, etc or poor loan servicing technique, the MI company may refuse payment due to fraud, etc.

    The MI companies I do believe however have caved when they thought they might lose future business if they did not go along and pay claims even though they feel like they had a legal way out.

    That is why I said – deficiencies must incorporate the detail of funds to be claimed or claimed in the name of the homeowner. When we verify debt in the 30 day dispute – does anyone say, well here is what you say I owe – I paid for the MI coverage, now where is the credit or has the policy changed regarding foreclosure calculation and deficiency calculations against the homeowner.

  19. re: distressed debt business: but I have to reiterate that a debt owner may NOT both write off the debt and sell it. It must make an ‘election of remedies’.

    What it can do is write off the real net loss
    after the discounted sale of the debt.

    Like this: 100k owing
    – 60k debt sold at 40% discount
    _________________
    40k loss can be written off

    There are some strict rules about the amt the debt-buyer may come after the debtor for in this scenario, but I forget what they are. It seems to me that if ABC has expensed the 40k, XYZ debt buyer may not pursue that same 40k. This may or may not be impacted by the UCC, as applicable, but like I said, I forget. Anyone?

  20. Joyce, Wells Fargo did admit that they purchased insurance after I cornered them (Office of the President employee) in a heated discussion. In the mortgage loan schedule where I found my loan, the MI is listed as

    .35

    Servicing notes obtained in discovery show that the
    mortgage insurer was notified at the 30 day, 60 day, 90 day, and each month there after. I believe the svcg. notes reflected actual claims being submitted.

    don’t have the notes with me. will post from home.
    Thanks for your input. Very much appreciated.

  21. Joyce, I think you just confirmed what I said – the individual m.i. ins does not kick in until f/c. I see that the borrower’s m.i. and the bulk m.i. are different policies. I have not figured out how the bulk policies work.

    This m.i. business has serious consequences as to foreclosures and modifications alike.

  22. @anonymous- I’m finding conflicting info re m.i.

    From a non-GSE Trust Agreement:

    “(g) Upon execution of this Agreement, the Depositor hereby delivers to the Trustee and the Trustee acknowledges a receipt of the Mortgage Loan Sale Agreement, each Servicing Agreement and the BULK PMI POLICIES. The Depositor hereby directs the Trustee, solely in its capacity as Trustee hereunder, to execute and deliver, concurrently with the execution and delivery of this Agreement, the Bulk PMI Policies and each Servicing Agreement to which the Trustee is a party.”

    The agreement also says the Trustee (not the Trust) owns the notes……..I’m getting my 119th headache.

    from a trust agreement:

  23. About that MI insurance – I would like to make a comment or two about what I know and perhaps it can help shed a little light before the debate comes on tonight.

    But first no one commented on my ridiculous comments saying the OCC, etc., should return the salaries paid to them – well, that is the point – it was ridiculous just like it was ridiculous that we allow them to not answer up for not doing their job. Of course they are not giving it back – oh well.

    When ordering MI insurance mainly on prime loans, the cost was generally added to the monthly payment as a separate %. For example, they would add in .025 to cover the premium, much like FHA insurance. Countrywide however – American’s wholesale lender – made it a part of the Principal and interest amount amortized over 30 years, whatever. So even if you had less than an 80% loan to value, you could not lower the principal and interest unless you went through a modification process.

    On all other lenders, they simply dropped that % from the escrow account once you proved you had a lower than 80% LTV. With today’s demise of course, we were never going to see that happen.

    This type of MI was not tied to the PSA as far as I know and simply followed the MI contract for coverage and what we did was:

    1. Notify the MI company by report on the 60th day.
    2. This report gave the loan number, name, due date and reason for delinquency
    3. The MI company would follow the loan until it became current just like the loan servicer and some MI companies even made inspections and contacted the homeowner direct as a supplement to the servicer’s effort.
    4. In the 1980’s, when we went through that demise, as servicers, there were times when we could get the MI company to subsidize the monthly payment or pay the full monthly payment on behalf of the defaulted borrower so he would have a chance of clearing his default if he was able to overcome his hardship – kinda like the FHA and VA were doing in order to hopefully not have the borrower foreclosed on or remain in default for any length period of time. The MI companies as did the VA and FHA worked with us and we resolved these issues and kept foreclosures down.

    That has changed of course as we now see, that the banks did not necessarily want the homeowners to get their hardship resolved because I believe now that foreclosure was the new agenda for those loans originated from 1998 on thru today and the MI companies have now refused to subsidize or assist the homeowner with his temporary hardship. As we all know, all of the participants were working in tandem with each other and the servicers did not want nor did the MI company want to advance payments to assist the borrower.

    It is not clear what kind of deal has been worked out but only when the property is foreclosed (UNLESS THE SERVICER ALLOWS ADVANCES BY THE MI ON THE BORROWER’S BEHALF) DOES THE SERVICER CALCULATE THE % TO BE PAID BY THE mi COMPANY AND AS i recall, it is calculated on every charge to date, mainly all past due principal, interest, and foreclosure fees, so you can see the longer the loan runs, the more money the servicer would get.

    I am checking on this right now as we speak as it is affecting some other work I am doing and I want to be clear.

    With regard to the Wells Fargo Home Servicing, for those loans in a pool, there is another kind of insurance, not the pool insurance, but regular MI that is paid by the company, not the borrower (even though we know it was factored into the interest rate that was given to the borrower at origination but it was not disclosed as I recall. It is something that needs to be verified. W

    We do not believe that deficiencies should be filed unless the recap sheet showing all monies received as a result of haz proceeds, MI, the whole ball of wax must be disclosed before the borrower is required to pay any deficiency. I am working on this as well. Any body got any ideas.

    Normally there was no insurance on sub prime loans but that may go to the other MI insurance that is purchased by the lender – You will notice it is not broken out on the monthly statement or in some of the disclosures – Checking on this.

  24. Greg

    Distressed debt business is the biggest business across the globe.

  25. john gault

    “Transferred” — no — nothing was transferred — validly. But, assume — that they were intended to be transferred. All this means is that they were “earmarked” to be transferred. No one knows when MI kicked in. No one knows what means were utilized to allow MI to kick in. No one knows if MI kicked in — before they even actually defaulted. No one knows how EPDs were actually calculated (early payment defaults), no one knows what documents were actually submitted, no one knows whether a refinance was – in effect — only a modification of prior loan, no one knows — anything.

    Subprime loans were false default loans to begin with — easy to manufacture MI to kick in. And, then, where did the money actually go?? That is, any payments made — any refinance payoffs. Where did the money go — when MI (falsely) kicked in– before actual default????

  26. I know this is off topic, but I wanted to weigh in again on mortgage insurance. I posted a comment a couple weeks ago, wondering where in the heck those funds are going. As I research MERS and now HAMP, I stumble on related issues.

    It appears, from info at FNMA’s website, that loans must be “transferred” for m.i. to kick in. My reading on this is that ‘transfer'” in this context means foreclosure. If there’s no foreclosure, there’s no m.i. payment. M.I. companies may have mandated this to protect themselves from bad claims, or it may be that the named insured is not the Trust and for some reason, as assignee, the m.i. will not inure to the trust’s benefit. I would hazard a guess this has something to do with FNMA’s guaranty on the loans, among other things.

    This is causing havoc with HAMP and other programs, which I dont fully understand just yet since the government is stepping in with HAMP funds to provide essentially for lender losses. (yeah, I know)

    What would happen to the m.i. in place on a loan when that loan is modified? Can the m.i. be ‘modified’, also, given there is no assurance a borrower will perform under the modification agreement? If the m.i. does not continue, the lender may be unreasonably at uncovered risk, but that of course depends on whether or not the modified loan warrants insurance/ risk coverage. Now there’s a mess, I think. To the best of my knowledge, no one is absolving any principal. Under modification, a forty year loan might be made on a property with a balloon due many years down the road. How is this insured? Is it insured? Would an m.i. company want to terminate its coverage on a modified loan, given that the borrower has generally defaulted, whereas when the m.i.was originally placed, the file (credit and collateral) was underwritten (theortically) to certain standards. I guess, from the hip, as long as the borrower is not being charged for the m.i. on a modified loan, and m.i. is available as a lender charge, there is no reason the lender shouldn’t keep some version of m.i. in place. That can be a substantial amt, however, and surely is coming into play here.

    As to the topic here, this should be further incentive for the IRS to go after taxation due on trusts which did not meet the criteria for the tax-free status. As I posted, per Bloomberg I think it was, the IRS is on the fence in this matter. They need to get off the fence. The scammed investors can sue the banksters, get back their capital as well as the taxes due. With taxes paid – large amounts – these funds can be used to prosecute the bad guys.

    The article here says there was basically an exodus of attorneys. Anyone know why?

    Apparently the government has not chosen to print
    money for THIS endeavor. Hmmmm……Perhaps people like Mr. Paulson, who ‘earned’ 4 billion dollars betting against loans, would like to set up an account to further these efforts. I mean really, Mr. Paulson, set it up yourself as a charity and get the write-off. But do hurry! While you’re at it, buy 1000 notes, rip them up, and free 1000 families from horrible losses and circumstances beyond their control.

    We are running out of options. The high speed gravy train can’t be sustained when there is no middle class capable of supporting it. As an American, I am sickened by what is becoming of this land which began with such promise and such potential.

  27. Since the gov can’t find employees, I nominate MS!
    Get over there and put all that greek to good use!

  28. In my opinion, it is not very bright in the first place to create a system that contains financial incentives to produce junk loans and sell them off at no risk (just read the Deutsche/MortgageIt complaint).

    Can people seriously think that a monumental financial incentive to produce trillions in loans at no risk can be counter-acted by regulations?
    Americans have deluded themselves with the legal system and microscopic rules so much that they have lost touch with reality. Just look at the tax code as an example.

    The government should have no business taking the risk out of the market. Then it will not need to produce volumes and tomes of regulations that create huge transaction costs and a bunch of non-productive government jobs draining the private sector.

  29. correction to post –

    Since they were paid to do a job “not well done” and use the money to take the culprits to jail if indeed that is where they should be.

    I want to see the banks recover and go back to ethical and honest banking financial servicers and they can do just that , even after they have pulled so many stunts that have harmed so many people.

    We have to move ahead, but we cannot leave the wrongful actions behind us without some resolution to satisfy those that have been harmed.

  30. My suggestion is that the SEC and the OCC and other regulatory return all of the money they earned in 2005-6-7-8 and then use that money to pay them a salary in 2011-2012 to do the job properly. That goes for the Congress as well since these agencies in effect report to the Congress.

    Since we are paid to do a job “not well done” and it brings down the whole economy, nationally and globally – I don’t want to hear that they don’t have enough money to talk the culprits to jail if indeed that is where they should be.

    Random auditors across the state, supported by a fund from private investors will randomly check loan files before and after they are closed and held in check through the initial loan servicing period of approximately 24 months.

    The lenders will not know which files have been sent for audit to the transparent company who will make its findings known. Now since all of these players know what the rules are, let’s get started closing loans again to get the economy moving while we take a look at all those wrongful foreclosures and come up with a settlement – Where are the reserves of the banks – any money left or was that used for something else –

    Since when does a bank or Wall STreet not know the cause and effect of putting a loan on the books and its far reaching devastating effects that it can and has caused us.

    Joyce

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