Message on the Forensic TILA Analysis — It’s a Lot More Than it Appears

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No doubt some of you know that we have had some challenges regarding the Forensic TILA analysis. It’s my fault. I decided that the plain TILA analysis was insufficient for courtroom use based upon the feedback that I was getting from lawyers across the country. Yet I believed then as I believe now that the only law that will actually give real help to the homeowners — past, present and future — is TILA, REG Z and RESPA. Once it dawns on more people that there were two closings, one that was hidden from the borrower which included the real money funding his loan and the other being a fake closing purporting to loan money to the homeowner in a transaction that never happened, the gates will start to open. But I am ahead of the curve on that.

For those patiently waiting for the revisions, I appreciate your words of kindness. And your words of wisdom regarding the content of the report which I have been wrestling with. I especially appreciate your willingness to continue doing business with us despite the lack of organizational skills and foresight that might have prevented this situation. I guess the problem boils down to the fact that when I started the blog in 2007 I never intended it to be a business. But as it evolved and demands grew we were unable to handle it without help from the outside. If I had known I was starting a business at the beginning I would have done things much differently.

At the moment I am wrestling with exactly how I want to portray the impact of the appraisal fraud on the APR and the impact on “reset” payments have on the life of the loan, which in turn obviously effects the APR. I underestimated the computations required to do both the standard TILA Audit and the extended version which I think is the only thing of value. The standard TILA audit simply doesn’t tell the story although there is some meat in there by which a borrower could recover some money. There is also the standard issue of steering the borrower into a more expensive loan than that which he qualified for.

The other thing I am wrestling with is the computational structure of the HAMP presentation so that we can show that we are using reasonable figures and producing a reasonable offer. This needs to be credible so that when the rejection comes, the borrower is able to say that the offer was NOT considered by the banks and servicers because of the obvious asymmetry of results — the “investor” getting a lot less money from the proceeds of foreclosure.

And THAT in turn results in the ability of the homeowner to demand proof (a) that they considered it (b) that it was communicated to the investor (with copies) and (c) that there was a reasonable basis for rejection — meaning that the servicer must SHOW the analysis that was used to determine whether to accept or reject the HAMP proposal. Limited anecdotal evidence shows that like that point in discovery when the other side has “lost” in procedural attempts to block the borrower, the settlement is achieved within hours of the entry of the order.

So I have approached the analysis from the standpoint of another way to force disclosure and discovery as to exactly what money the investor actually lost, whether the investor still exists and whether there were payments received by agents of the creditor (participants in the securitization chain) that were perhaps never credited to the account of the bond holder and therefore which never reduced the amount due to the creditor from the homeowner. My goal here is to get to the point where we can say, based upon admissions of the banks and servicers that there is either nobody who qualifies as a creditor to submit a “credit bid” at auction or that such a party might exist but is different than the party who was permitted to initiate the foreclosure proceedings.

The complexity of all this was vastly underestimated and I overestimated the ability of outside analysts to absorb what I was talking about, take the ball and run with it. Frankly I am wondering if the analysis should be worked up by the people who do our securitization work, whose ability to pierce through the numerous veils has established a proven track record. In the meantime, I will plug along until I am satisfied that I have it right, since I am actually signing off on the analysis, and thus be able to confidently defend the positions taken on the analytical report (Excel Spreadsheet) etc.

34 Responses

  1. @iwantmynpv

    It’s true—it all comes down to motive(s). What is the motivation for any particular action? If the only motivation (on a personal level and/or a society) is more money and/or more power—you have eventual complete downfall and failure…which is happening right now, right in front of our eyes.

  2. @Pie,

    Are you saying that NO ONE will go to jail? That no investigation will be conducted? That everything has been orchestrated to “suicide” TBTF in such a fashion that there won’t be any guilty party and it will all be an investment gone bad? If no one goes to jail (and I’m not speaking of law hanging fruit…), the will be the end of America. no one can live and survive in a country with a minimum of transparency and trust.

  3. Less than 8 weeks ago I told everyone to short Morgan Stanley stock, or buy puts, and that they would be going away by the end of the year. Morgan Stanley couldn’t even hedge their euro-swap book and their inability to run the FB deal was another factor.

    They will lose every class filed against them on purpose. The feds do not want to spook the markets and the best way to socialize all the MS fraud is to have another fine bunch of cronies absorb them.

    They will blame the FB deal and the imminent lawsuits as the reason MS was under prsessure and forced out of business. There will be no disclosure of years of derivative losses that have been masked behind 2009 FASB mark rule change.

    There is no disclosure unles there is a motive. There’s your motive guys. P.S. Jamie ( I compete with Dick Cheney for the most evil guy on the planet status) Dimon has another 38 billion in losses. I heard the next show they put out will resemble the “London Whale” trader. It is called the “Louisiana Land Shark” The trader had taken a large position on shrimp futures and Bubba Gump corners the market after Forrest goes long after a ping-pong tournament. Of course, BP is in the movie taking credit for how fast the fishing industry has recovered.

  4. @ Enraged & Carie

    “enraged, on May 23, 2012 at 2:51 pm said:
    And keep in mind that the best ever strategy is to… follow the money!
    ….Stay away from securitization, pretend lender and the likes….”
    “stay away from exotic defenses, stick to the tried and proven….”

    Humbly, respectfully – but STRENUOUSLY – disagree Enraged.

    To “follow the money” – you MUST go up and back down the “securitization” “ponzi scheme” chain.

    You tell tnharry not to discourage her, but you may doing that yourself.

    “tried and proven” by who?? This thing is so messed-up that a Judge in one court and jurisdiction says one thing, and tomorrow a different Judge in the court and jurisdiction right next door holds completely the opposite.

    I would say to Carie that if you can find even the SLIGHTEST support (small as a mustard seed) IN LAW to support your position and argument – no matter how “exotic” or “far-fetched” it may seem NOW – baby-girl you do your thang. Raise the issue. As Neil says above, “take the ball and run with it”.

    pass the blunt

  5. @Carie,

    And keep in mind that the best ever strategy is to… follow the money!
    There are a few One West/Deutsche cases that recently got a lot of attention. Got back to them and see what they have in common with yours. Always get the attorney’s name on each win and contact him. Eventually, persistence will pay off.

    Stay away from securitization, pretend lender and the likes. KISS it: where did my money go? Might still be too late though.

  6. @tnharry,

    Don’t discourage her. If you recall, every single case WAS an uphill battle a few years ago, until whatever homeowners were alleging became common knowledge and, in effect, got permanently recorded in the complaint that served a thee basis for the infamous settlement.


    i hope you have a crack at it but if you don’t, I’m concerned that the longer you keep hung up on it and the more difficult you are making it on yourself to really move on. Unfortunately, there are a lot of people who may never get vindicated and you need to keep in the back of your mind that you may very well be one of them. But, if anything, let your test become your testimony; let your experience serve someone else: don’t deal with lenders on your own, stay away from exotic defenses, stick to the tried and proven and be the first one to get to the courthouse.

  7. @carie – that starts to sound like fraud, and it can be tricky to prove. i get that you dispute that they were the proper party to initiate a foreclosure, but can you really show that they weren’t the servicer for whomever the holder may have been? you’re not going on the “not a loan” theory, right?

  8. @tnharry

    I “voluntarily” sent them my money based on their lies…I guess I have to prove they were/are lying about where my money went after I sent it to them…?

  9. @carie – that sounds like an uphill battle, but good luck. unless they garnsihed wages or executed on your accounts, you sent them the money voluntarily. furthermore, you were living in the property while you were paying, so arguably you were receiving something of value for the payments. as for showing that they were the incorrect party, how do you propose to do that? if you have the goods to prove they aren’t/weren’t entitled to payments, then you had the goods to quiet title preforeclosure and either could have or potentially should have mitigated your damages. not trying to pick on you, but these questions will be asked if you go down that road. hopefully by your counsel early on so you can both work on good answers, but certainly by opposing counsel and the judge

  10. Facebook: Zuckerman’s estimates of how much money was to be made by advertizing on facebook was grossly inflated (hence his grossly inflated declared $70 IPO value). GE (who was advertizing) realized on Friday that they weren’t making nearly as much as Zuckerman predicted and they pulled all their advertizing out of Facebook.

    Morgan Stanley and Chase (I believe) got wind of it and lowered the IPO down to 45$ and everyone who had stock sold and those who wanted to buy tried to but the computer system had a glitch and none of it was recorded for several hours. So, all the people who had tried to sell at $45.00 were stuck with $31.00 shares (lost $14.00 per. Can mean a lot. Since then, it’s down to 28.00).

    Everybody is pissed at Zuckerman and Stanley Morgan. Never got a chance to hedge the damn thing. it blew in their face before inception. Can you believe that?

  11. @Carie,

    Given the very little I know about CA and how tough they’ve made it for attorney’s to represent homeowners, I would (as much as possible) stay away from state courts. That being said, I don’t know either how federal courts have been dealing with homeowners in CA. You’ll need to do some research.

    I would start with George Wass, the attorney who represented Denise Saluto (google the case in Riverside, CA. District Court. It is the southern district so that should work).

    If that deson’t work, I’d simply ask Jeff Barnes
    He’s been filing appeals on behalf of homeowners all over the states. Since he isn’t licensed in all those states, that means that he works alongside a CA attorney. There’s no way he won’t know someone. And the good thing is: if you’re going for reimbusement of everything you paid, this is the kind of case for which you can actually negotiate a contingency-basis fee.

    Good luck.

  12. So—which hedge fund bet that Facebook would fall…? Hmm…what’s that you say—it was rigged? Just like everything else? Oh…of course.


    How do you think I should go about suing my servicer re. all the money I gave them that they had no right to collect? Do you know what kind of lawyer I would talk to for that?

  13. Ok guys. Why am I posting this? Very simple: 2 years ago, we wouldn’t have known anything until months later. We might have heard of a little something about Facebook and the banks but without any specifics. And 2 or 3 years down the road, we would have vaguely learned of lawsuits.

    Today, secrecy has become impossible. And since everybody (and i mean everybody) knows how much government is in bed with banks and big corps, if something happens on Monday, on Friday there are fifteen lawsuits filed against everyone involved.

    If this is not progress, I don’t know what it…

    Facebook (FB: 31.80, +0.80, +2.58%) and lead underwriter Morgan Stanley (MS: 12.98, -0.34, -2.52%) were reportedly hit with another shareholder lawsuit on Wednesday over the social network’s controversial initial public offering.

    The latest lawsuit comes even as Facebook’s shares looked to end their two-day plunge amid a pair of conflicting analyst notes on the company’s valuation.

    Facebook shares were recently up 3.50% to $32.21.

    According to Reuters, Facebook shareholders filed suit against the social network and banks including Morgan Stanley on Wednesday in U.S. District Court in Manhattan, alleging the defendants concealed a weakened growth forecast prior to the high-profile IPO.

    Research analysts at several underwriters slashed their revenue forecasts for Facebook during the IPO marketing process, but “selectively disclosed” the new guidance to just “certain preferred investors” instead of the public generally, the suit said, Reuters reported.

    “We believe the lawsuit is without merit and will defend ourselves vigorously,” a Facebook spokesperson told FOX Business.

    The lawsuit comes a day after a separate civil lawsuit was filed against Facebook, co-founder and CEO Mark Zuckerberg and underwriters alleging violations of securities laws. Nasdaq OMX Group (NDAQ: 21.68, -0.64, -2.87%) was also sued on Tuesday over trading glitches that impacted the Facebook IPO, which raised $16 billion on Friday.

    According to a Reuters report on Tuesday, Morgan Stanley told major clients its consumer Internet analyst was reducing his second quarter and 2012 revenue forecast on Facebook during the IPO roadshow.

    Fellow underwriters JPMorgan Chase (JPM: 33.61, -0.40, -1.18%) and Goldman Sachs (GS: 96.30, -1.23, -1.26%) also cut their forecasts on Facebook even as the syndicate raised the IPO size and price.

    The slew of lawsuits comes as Facebook’s shares have tumbled more than 18% below their IPO price amid worries the offering overvalued the world’s largest social network.

    Read more:

  14. To stay on Topic – it has been 1 day since Neil has not responded to my offer of a free NPV tool.

    “Neil, i will give you a FREE NPV calculator to help homeowners. The platform is built using the agile method and several small hedge funds are already using the platform to run loan tapes to calculate MTM Pool Value and the NPV forward using thier own variables.
    You can customize the tool for whatever purpose you would like. That is on your nickel, but you can certainly offset the cost by charing homeowners and counsel a small licensing fee.
    Because the Treasury Dept.won’t stand by its own pass/fail model for fannie and freddie pools, I have a hard time believing it can be useful at the homeowner level, let alone a court of law.
    Please send me an e-mail and you can get started almost immediately”.

  15. “These derivative bets went horribly wrong, resulting in billions of dollars in lost capital for the company and billions more in lost market capitalization for JPMorgan shareholders.”

    Just noticed this little thing. When you google “Amount of Chase loss”, all you get from official sites is 2 billions. 3 billions if you’re persistent.

    Go to the fringe and it becomes a whooping… 30 billions!!! Yeah. I’d be pissed too. The truth is probably in-between somewhere.

  16. Darn it! I forgot to sue AIG and Hank Greenberg in 2008 and now, the statute has ran!!! Sheeesh!

    Who else could I sue? Let me see…

    Anyway, here is the entire article linked by Dee. (Thanks Dee. As long as someone is going after Jamie Boy, I have a great day!)

    Advisor Network|5/22/2012 @ 2:30PM

    JPMorgan Employees Sue Jamie Dimon, Ina Drew Over Losses
    Gastone Ciucci Neri

    Add it to the growing list of people going after JPMorgan Chase. Employees are suing the bank over the $2 billion trading loss that they say hurt their retirement plans.

    A lawsuit filed on behalf of JPMorgan employees says their retirement accounts fell in value after news broke about the trading loss, Reuters reports. That’s because the plan holds JPMorgan shares which have dropped 18% since the loss was announced on May 10.

    The complaint, filed in U.S. District Court, Southern District of New York, names the bank, its CEO and chairman Jamie Dimon as well as former CIO Ina Drew, who resigned soon after the loss was revealed, as defendants. According to the suit, the defendants violated the federal Employee Retirement Income Security Act which gives plan participants the right to sue for breaches of fiduciary duty.

    The plaintiffs say their plan suffered hundreds of millions of dollars in losses. “If defendants had discharged their fiduciary duties to prudently manage and invest the plans’ assets, the losses suffered by the plans would have been minimized or avoided,” the suit says.

    This isn’t the first suit for JPM related to its now infamous trading loss which has yet to be unwound. JPMorgan investors filed lawsuits last week against the bank’s executives saying they made “materially false and misleading statements and omissions” during the bank’s April 13 earnings call. From that suit:

    “Defendants misrepresented the losses and risk of loss to the company arising from massive bets on derivative contracts related to credit indexes reflecting interest rates on corporate bonds,” the complaint says. “These derivative bets went horribly wrong, resulting in billions of dollars in lost capital for the company and billions more in lost market capitalization for JPMorgan shareholders.

  17. @Carie,

    Yeah but it’s been talked about here ad nauseam. And Bill Black has been harping over and over about “banks’ perverse incentives” forever. And Neil has been… well, shall we say… quite vocal about government backed everything and how banks profited much, much more from foreclosing than from modifying. So it really isn’t news for anyone of us and I was somewhat taken aback by Mark Stopa’s sudden enlightening.

    Maybe no one told him about livinglies. What do you think?

  18. @enraged

    Re. your post from Mark Stopa—it makes total sense…add to that the fact that the servicers PURPOSELY DELAY the foreclosures so they can get MORE FEES paid to them from the government—so they not only get the mortgage amount— they also get the massive fees they nonchalantly tack on…right?

  19. @Nabdulla,

    And I’m glad you appreciate my sense of humor. The judge yesterday didn’t. Found me in contempt and fined me $300. To show you… Oh well! It’s only money that I don’t have. No need to panic, right?

  20. @Nabdulla,

    Awww! Well, I’m glad you’re happy! I did something positive today. That’s what it’s all about.

    I thought Mark Stopa was enlighted. What, with his crusade in favor of homeowners and everything, I really thought he had already chewed enough on the situation to have… I don’t know… insights, maybe? Apparently not. What we’ve known, spelled out and rehashed fur what seems to be ever just hit him. like a ton of bricks. Like that. Just found religion.

    He was already doing a bang up job before. Can’t wait to see the sparkles!

    Blame the Banks? Or the Government? Or Both?
    Posted on May 22nd, 2012 by Mark Stopa

    It is thoroughly appalling to me how nobody – and I mean NOBODY – has blamed the U.S. government for the housing crisis, if not the entire Great Recession. (Mark, where have you been? Read Bill Black lately? What about Pino? Abigail Field? Mandelman? Galbraith? Yves Smith? You need to get out some more… Law is turning you into a raisin…) Sure, the banks are dirtbags, but we all know that. Why is nobody placing appropriate blame on our government?

    If you don’t know what I mean, take a look at this Final Judgment, where a homeowner prevailed over BB&T at trial. Yes, the bank was sleazier than the skuz on the bottom of my shoes, declaring this homeowner in default when there was no default. But take a close look at WHY the bank did so. As the Final Judgment reflects, the bank was financially motivated to declare a default because it knew the government was going to pay the mortgage in the event of default.

    As if that’s not disgusting enough, what makes it even worse was that BB&T did not even loan the money – a prior bank did. Yet as a result of a deal with the FDIC, BB&T was in the position of pocketing millions of dollars from our government merely by declaring this homeowner in default. This should piss off everybody in America – a bank that didn’t loan money wrongly declares a default so it can collect millions from our government. Where is the outrage?

    These perverse financial incentives permeate foreclosure-world to a degree that is impossible for the typical person to fathom. Personally, I’m convinced the government’s involvement (coupled, of course, with the lack of ethics on Wall Street) is the reason for the housing crisis.

    If that doesn’t make sense, think about it like this. Suppose you were a bank. Suppose you could make a loan and either get paid monthly, with interest (if the homeowner paid) or get the entire mortgage paid in full by the government (if the homeowner stopped paying). What would you do? You’d loan as much money as possible, right? You’d loan to every Tom, Dick, and Harry, regardless of his/her creditworthiness. You’d loan more and more money on each loan because there’d be no downside – either the homeowner paid according to the terms of the loan, with interest, or, if the homeowner didn’t pay, the government would pay in full.

    This is the dynamic that has existed over the past several years throughout our country. Many, many mortgages are fully guaranteed by the U.S. government. This is why home prices were inflated during the boom. Banks jacked up appraised values because there was no downside – they wanted to loan more, knowing the loans were guaranteed by the U.S. government. And this is why banks won’t settle cases now – why settle with homeowners when they can get a judgment and get paid in full by the government?

    Don’t believe me? Don’t take my word for it – read the findings of Judge Levens in this Final Judgment.

    Mark Stopa

  21. @ Enraged….

    “enraged, on May 22, 2012 at 2:26 pm said:
    ….That way, Obama will be able to say: “See what i did? Just under my presidency, I creasted millions of jobs and I restarted the economy by making sure all the jobs couldn’t be exported and would benefit everybody. See what i did? By my-self!!! Good boy, good Barack! Am I a good boy or what?”

    You know Lady, you are truely off the hook. A lot of times I can’t even finish my reading and research rolling out the chair holding my ribs because of the pain from laughing at some of the things you say. 🙂 You really make my day….(sometimes). Anyway, however humorous, I don’t miss the importance underlying your comments.

    You remind me a lot of George Carlin: “I would never want to be a member of a group whose symbol was a guy nailed to two pieces of wood.”

    Have a good day and don’t let ANYTHING take your spirit away.

  22. This is not really related to this article but I want to know more about where I can read up on April Charney’s research and legal work with this dilemma – she is an outstanding attorney whose knowledge abounds and I’d personally like to do more reading of work she’s done – please let us know where we can find – thanks Neil.

  23. Kissinger’s Infamous 1992
    Bilderberg Quote In Evian, France

    Henry Kissinger in an address to the super secret Bilderberg Organization meeting at Evian, France, May 21, 1992 said the following as transcribed from a tape recording made by one of the Swiss delegates:

    “Today American’s would be outraged if U.N. troops entered Los Angeles to restore order; tomorrow they will be grateful. This is especially true if they were told there was an outside threat from beyond, whether real or promulgated, that threatened our very existence. It is then that all peoples of the world will plead with world leaders to deliver them from this evil. The one thing every man fears is the unknown. When presented with this scenario, individual rights will be willingly relinquished for the guarantee of their well being granted to them by their world government.”

  24. Pardon the Interruption:
    Drouin Case — Wells Fargo, Sand Canyon and Option One Lose Motion to Dismiss in NH Federal Court.

    TUESDAY, MAY 22, 2012

    KingCast and Mortgage Movies Video: Drouin Case — Wells Fargo, Sand Canyon and Option One Lose Motion to Dismiss in NH Federal Court.

    This case supports everything I’ve been arguing to the U.S. DOJ about my status as a journalist exempt from payment of FOIA fees as noted in yesterday’s journal entry:

    NH District Court Judge LaPlant recognized in Drouin v. AHMSI, Wells Fargo and Option One (NH Dist 11-CV-596) that Sand Canyon did not exist and could not have Assigned ANYTHING, as I noted more than a year ago in the Jeanne Ingress NH cases where Judge Diane Nicolosi played dumb and allowed Wells Fargo lawyer Shawn Masterson to provide hearsay testimony about having the original documents “in his desk.” Selected clips are provided in this dual-purpose documentary short film that will be posited with the DOJ later this week as a Motion for Reconsideration to DOJ Counsel Janice Galli McLeod. Query, will Judge Paul Barbadoro ignore this precedent from his Brethren when Ms. Ingress mounts this argument later this week? Will there be a split between judges in the same single District? The mind boggles.

    KingCast/Mortgage Movies: We know exactly what the hell we are talking about.

  25. Now they need a place to go…she wanted to die in her home , her husband is buried in the yard….

  26. Also, the property was sold for only $33K which shocked the widower! The loan owed by the thief was over $200K!!! Would have sold for $1.00 but apparently there was another interested party who took it up to the $33K which the bank paid a couple dollars ore and won the deal…the elderly and grandchildren wanted to negotiate a sale or lease with BOA before…imagine that!

  27. It seems as if ‘Trustees” are also the owners? Some game being played out here that we are yet to see exposed. And at the sale of the property…here’s and e.g. Country wide foreclosed on an elderly in WPB who had her home stolen and equity stolen repeatedly until the thief went into foreclosure…then BOA said they dont own the loan but sale proceeded anyway under Country wide..after the elderly widower was told to stay in home at a hearing after the first sale..was her and deceased first and only home and original owners…then after a year or more another attorney requesting exparte and approved by judge Hoy to set a new sales date…May 4th…when grandchildren went in to negotiate with BOA, bank claim they did not own home…then couple days after the sale and house supposedly sold back to country wide a realtor appeared to the elderly representing Saxon mortgage…now when and where did they appear in the foreclosure process over the years? Who are they? Realtor said Saxon foreclosed which was not the recorded truth…and Clerks record still showing Countrywide foreclosed…seems as if there are other fraud being committed while fraudclosures fraud continue…thief stealing from thief? Worth investigating I say…

  28. In fact, anyone who wants to run a FREE NPV can just post on here or send me an e-mail.

  29. Neil, i will give you a FREE NPV calculator to help homeowners. The platform is built using the agile method and several small hedge funds are already using the platform to run loan tapes to calculate MTM Pool Value and the NPV forward using thier own variables.

    You can customize the tool for whatever purpose you would like. That is on your nickel, but you can certainly offset the cost by charing homeowners and counsel a small licensing fee.

    Because the Treasury Dept.won’t stand by its own pass/fail model for fannie and freddie pools, I have a hard time believing it can be useful at the homeowner level, let alone a court of law.

    Please send me an e-mail and you can get started almost immediately.

  30. Sorry guys, off topic. Still very, very important.

    Think about this that way: Obama is absolutely adamant that straightening the economy requires creating jobs. Nothing to do with foreclopsures that drag everything else down, no sireee! Jobs, just jobs.

    So, what better way to create jobs than by boosting constructions in all the states, first by demolishing the empty houses stolen from poor schemiels like and you me. Then, REBUILD!!! Construction has always been the economic barometer here. That way, Obama will be able to say: “See what i did? Just under my presidency, I creasted millions of jobs and I restarted the economy by making sure all the jobs couldn’t be exported and would benefit everybody. See what i did? By my-self!!! Good boy, good Barack! Am I a good boy or what?

    But since Americans don’t do anything about it, they must like that way… I can think of a few countries where bloody riots would have started last year with the CBS investigation and would not have abated until heads had rolled. Not in the US of A. here, people accept all the abuse.

    Guess we have the president we deserve…

    Billion Dollar Bait & Switch: States Divert Foreclosure Deal Funds

    A foreclosed home stands boarded up on February 9, 2012 in Islip, New York. (Getty Images)

    by Paul Kiel and Cora Currier
    ProPublica, May 22, 2012, 12:26 p.m.
    2 CommentsRepublishEmail
    Your email Your name Friends’ email(s) max 10, separated by commas Personal message Print6
    inShare. Email States have diverted $974 million from this year’s landmark mortgage settlement to pay down budget deficits or fund programs unrelated to the foreclosure crisis, according to a ProPublica analysis. That’s nearly forty percent of the $2.5 billion in penalties paid to the states under the agreement.

    The settlement, between five of the country’s biggest banks and an alliance of almost all states and the federal government, resolved allegations that the banks deceived homeowners and broke laws when pursuing foreclosure. One part of the settlement is the cash coming to states; the deal urged states to use that money on programs related to the crisis, but it didn’t require them to.

    Interactive Map
    Where Are the Foreclosure Deal Millions Going in Your State?

    The State of the Government’s Loan Modification Program

    See the performance of all the mortgage servicers.

    ProPublica’s Foreclosure Facebook Page

    Ask questions, share your experiences, and connect with fellow homeowners on ProPublica’s new foreclosure Facebook page.

    Our FAQ on the Foreclosure Reviews

    Answers to homeowners’ questions about the Independent Foreclosure Review.

    Making Home

    The administration’s website for the foreclosure prevention program. Provides an FAQ, homeowner examples, and other tools to see whether you might qualify for the program.

    Foreclosure Avoidance Counselors

    A list of HUD-approved housing counseling agencies nationwide.

    FTC Tips for Mortgage Servicing Consumers

    Tips for homeowners from the Federal Trade Commission.

    Program Guidelines for Mortgage Servicers

    These rules lay out how mortgage servicers are supposed to conduct the program.

    Calculated Risk

    A finance and economics blog that provides news and metrics on the state of the housing market.
    ProPublica contacted every state that participated in the agreement (and the District of Columbia) to obtain the most comprehensive breakdown yet of how they’ll be spending the funds. You can see the detailed state-by-state results here, along with an interactive map. [1] Many states told us they’ll be finalizing their plans in the coming weeks. We’ll be updating our breakdown as the results come in.

    What stands out is that even states slammed by the foreclosure crisis are diverting much or all of their money to the general fund. In California, among the hardest hit states, the governor has proposed using all the money to plug his state’s huge budget gap. And Arizona, also among the worst hit, has diverted about half of its funds to general use. Four other states where a high rate of homeowners faced foreclosure during the crisis are spending little if any of their settlement funds on homeowner services: Georgia, South Carolina, Wisconsin, and Maine.

    Overall, only about $527 million has been earmarked for new homeowner-focused programs, but that number will go up. A number of large states — in particular New York, Nevada, Illinois, and Florida — have indicated they’ll be dedicating substantial amounts of the funds to consumer programs, but haven’t yet produced a final breakdown.

    Iowa Attorney General Tom Miller, who led the coalition of attorneys general who negotiated the deal, argued that only a very small portion of the settlement was being diverted and it will “overwhelmingly” benefit homeowners. The centerpiece of the settlement is a requirement that the banks earn $20 billion in “credits” by helping homeowners in various ways [2] — from reducing principal on underwater homes to bulldozing empty ones. Because the system awards only partial credit for certain actions, Miller said the settlement would bring more than $20 billion in benefits to consumers — he estimated $35 billion. Critics contend those sorts of numbers far overstate the benefits to consumers, because the banks can claim credit for some activities that were already routine [3].

    The banks will only pay $5 billion in actual cash penalties under the agreement. The largest chunk, $2.5 billion, goes to the states’ attorneys general, while about $1 billion goes to the federal government. $1.5 billion will be sent to borrowers who lost their homes to foreclosure during the crisis in the form of $2,000 payments.

    Compared with the billions going to consumers, Miller contended, $1 billion going to states’ general funds was minimal. It was always expected that the states would divert some of the money to their general expenditures, he said.

    But when announcing the deal, state and federal officials said the states’ $2.5 billion would mainly fund housing counselors and legal aid organizations. Studies have shown homeowners stand a better chance of avoiding foreclosure if they get the help of a counselor, and homeowners lack legal representation in the overwhelming majority of foreclosure cases [4]. The money was divvied up among the states according to a formula that took into account how large the states were and how hard they were hit by the crisis.

    As you can see from our breakdown [1], 15 states have so far allocated over half their amounts to consumer-focused efforts. But the uses range widely. In Ohio, $75 million has been set aside to destroy some 100,000 abandoned homes. In Minnesota, the state is setting up a fund to compensate victims of the banks’ foreclosure abuses.

    In two of the states most affected by the foreclosure crisis, California and Arizona, the attorneys general had intended to use most of their funds on homeowner-related efforts before the governors intervened.

    After California Attorney General Kamala Harris prepared a proposal to spend the money on counselors, lawyers, and other consumer-related efforts, Gov. Jerry Brown released a proposed revised budget last week that used the state’s $411 million for existing housing programs [5]. In other words, the money would just be used to help fill the state’s $16 billion budget deficit [6]. Harris opposes the move, which still must make its way through the state legislature for it to become law.

    The $25 billion settlement: Breaking it down
    $20 billion in credits:
    $10 billion for cutting debt for struggling, underwater homeowners
    $7 billion for various other forms of homeowner relief
    $3 billion for refinancings for underwater homeowners
    $5 billion in cash payments:
    $2.5 billion to the states’ attorneys general
    $1.5 billion to borrowers who lost homes to foreclosure
    $912 million to the federal government
    $90 million to various state organizations
    In Arizona, the attorney general had similar plans. Then state lawmakers and the governor took $50 million of the $98 million coming the state’s way. Although the budget legislation stated that the money should be used to fund departments related to housing and law enforcement, there will be no new spending. Housing advocates are readying a lawsuit to stop the transfer and expect to file in the coming month, said Valerie Iverson, Executive Director of Arizona Housing Alliance.

    Several other large states have diverted most or all of the money:

    • Georgia directed all of its $99 million to programs designed to attract new businesses. A spokesman for the governor said, “He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”

    • In Missouri, the state legislature used almost all of its $39 million to fund higher education, which had been slated for cuts. The attorney general’s office kept $1 million for hotlines and outreach related to the settlement.

    • Virginia put the entirety of its $66.5 million into the state’s general fund without restrictions. In March, Democrats proposed a budget amendment that would funnel that money to foreclosure prevention and homeownership programs, but it was voted down [7].

    • Wisconsin Governor Scott Walker announced soon after the settlement [8] was finalized that the bulk of it—roughly $26 million—would go into the state general fund. Two million went to an economic development fund, including funds for demolition in blighted neighborhoods. Many state Democrats and housing advocates opposed the plan [9], but failed to block it.

    • Texas directed its $135 million to the state’s general fund, of which $10 million has been allocated for basic services to low-income Texans. The legislature won’t formally decide what to do with the rest until next January because it meets only once every two years. John Henneberger, co-director of Texas Housers, an affordable housing group, said that in speaking to legislators, advocates had “received no assurances that this money will be used according to the purposes of the settlement.”

    ProPublica will continue to track how the funds are being used in the coming months. Check out our breakdown and interactive map [1] for updates.

  31. Neil, i will give you a free NPV calculator to help homeowners. The platform is built using the agile method and several small hedge funds are already using the platform to run loan tapes to calculate MTM Pool Value and the NPV forward using thier own variables.

    You can customize the tool for whatever purpose you would like. That is on your nickel, but you can certainly offset the cost by charing homeowners and counsel a small licensing fee.

    Because the Treasury Dept.won’t stand by its own pass/fail model for fannie and freddie pools, I have a hard time believing it can be useful at the homeowner level, let alone a court of law.

    Please send me an e-mail and you cna get started almost immediately.

  32. Neil, this is chess and you are a chessmaster for sure! Just the fact that you openly publish insights such as this shows that you are wanting more people to get the truth. If any of your new products are anything like what you did for us THREE YEARS AGO, then I know whatever that is, people will be pleased. I continue to be amazed at how you wrote that QWR to Chase Home Loan as well as your response to their response, and so on. I was impressed then and I continue to be impressed by following the blog, religiously, daily. When the devil shows his head again, I will be the first one ordering that day, whatever it is that I need for the battle ahead. Keep it up and get some rest!

  33. […] Visit link: Message on the Forensic TILA Analysis — It’s a Lot More Than it Appears […]

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