Does the REMIC Trust Exist?

In all jurisdictions, even if the trust has some assets, and therefore legal existence as a legal person, if the asset in question has not been entrusted to the trustee on behalf of beneficiaries, the existence of the trust is completely irrelevant. And all claims arising from the supposed existence of the trust are also irrelevant and lack Foundation.

I agree that the existence of the Trust might be a subject for debate.

However, the fact that a trust exists on paper does not mean that it exists relative to any loan or debt or note or mortgage.

In fact, the fact that it exists on paper does not mean that it exists at all in many states.

In those jurisdictions in which a trust is drafted on paper and recognized as a business entity, the trust is considered inchoate, which means sleeping. The failure to recognize this fact has led to the failure of many family trusts and the payment of high taxes.

In all jurisdictions a trust that does not have any assets, liabilities, income, expenses or business is not treated as a legal entity.

In all jurisdictions, even if the trust has some assets, and therefore legal existence as a legal person, if the asset in question has not been entrusted to the trustee on behalf of beneficiaries, the existence of the trust is completely irrelevant. And all claims arising from the supposed existence of the trust are also irrelevant and lack Foundation.

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An asset cannot be entrusted to the trust or trustee unless title to the asset has been conveyed to the trustee to hold in trust according to the terms of the trust agreement. And there can be no conveyance from someone who doesn’t own the asset. The only way you get to own a debt is payment of consideration to someone who paid consideration for the asset. That is the law and it is not up for debate.
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It is the payment of consideration that determines ownership of an asset or debt or note or mortgage. 
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Note that the PSA  often cited as the trust agreement often is not the trust agreement and that even if it says it is the trust agreement there is another instrument in which the named trustee acknowledges that its purpose is to receive bare legal title to security instruments and notes on behalf of the investment bank who often also serves as Master servicer. I have never seen such a conveyance to the trust or trustee from anyone who owned the debt note or mortgage.
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And without conveying the debt, there can be no conveyance of the mortgage. therefore all assignments (without a concurrent sale and purchase of the debt from someone who owned it) avoid.
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But if you don’t raise this issue you might waive it. and by waiving it you are giving a windfall to the participants in a business venture that has the title of a foreclosure action. That business venture os for profit and has nothing to do with recovering losses from an unpaid loan or debt.

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This is important because when the Foreclosure Mills pursue foreclosure they have only one witness. The witness is a robo witness who is employed as an employee or independent contractor of a self-proclaimed servicer. the witness provides testimony that the records introduced by the servicer are the records for the trust.
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This testimony is either direct testimony or it raises the inference or presumption that the records are the records of the trust, because the servicer is supposedly working for the trust. But if the trust has nothing to do with the “loan,” then the servicer is working for an entity that has no legal relationship with the debt note or mortgage.
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That is the point at which the defense and raised a motion to strike, once it has been established that this fact pattern is the only one before the court. Assuming defense Counsel has raised the appropriate objections along the way, the record submitted by the self-proclaimed servicer should be stricken from the record as not being the records of a creditor. The case collapses because no evidence is legally before the court.
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Even if the servicer was actually collecting payments or actually doing anything, which is clearly debatable since most of these activities are probably actually conducted by Black Knight, the appearance of the servicer would not be the appearance of the Creditor, who is therefore not the named claimant or plaintiff.
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The servicer becomes a witness at best and not a very credible one. If discovery has been conducted properly, the defense can clearly raise the inference that the servicer has an interest in the outcome of the litigation. This means that the attempt to get the servicer’s records into evidence as an exception to the hearsay rule can be defeated. This is especially true if the servicer is not actually processing any business transactions. This dovetails with the evidence that the lockbox system is actually controlled by Black Knight.
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And THAT is important because it undercuts the claim of a “boarding process” which in most cases has never existed. It is only through the fictitious boarding process that the records of prior self–proclaimed servicers are able to come into evidence. The truth is that all of those records are mere projections and estimates and the foreclosure mills depend upon the failure of the homeowner and their counsel to actually compute whether the records are even true.
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One last comment is that one of the big failures in foreclosure defense is the failure to question who is receiving payments from the self-proclaimed servicer. An inquiry into this subject would reveal that the servicer is not receiving any payments and is not making any payments to anyone else. This would undercut the foundation for the inference or presumption that the self-proclaimed servicer is actually performing servicer functions.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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AMGAR

After years of writing about the AMGAR program, people are finally asking about this program. So here is a summary of the program. As usual I caution you against using my articles as the final word on any subject. Before you make any decisions about your loans, whether you are in foreclosure, collection or otherwise you should seek competent legal counsel who is licensed in the jurisdiction in which the collateral is located. Also for those who think they would invest in such a program, you should seek both legal advice and consult with a person qualified and licensed as a financial adviser. And for full disclosure, this plan does include an equity provision and fees to the livinglies team.

The AMGAR program was first developed by me when I was living in Arizona where, after the 2008-2009 crash, the state was facing a $3 Billion deficit. The Chairman of the Arizona House Judiciary Committee invited me to testify about possible solutions to the foreclosure crisis, which at that time was just ramping up. So I developed a program that I called the Arizona Mortgage Guarantee and Resolution plan, which was dubbed “AMGAR.” Now the acronym stands for American Mortgage Guarantee and Resolution program. In Arizona it was mostly a governmental program with some private enterprise components.

For a while it looked as though Arizona would adopt the program and pass the necessary legislation to do it. All departments of the legislative and executive branches of government had examined it carefully and concluded that I was right both as to its premises and its results.

The objective was to tax and fine the various entities that were “trading” in loans improperly, illegally and failing to report it as taxable income, as well as failing to pay the fees associated with filing such transfers in the County records of each county.

The State would essentially call the bluff of the banks, which was already obvious in 2008 — they did not appear to have any ownership interest in the loans upon which they initiated foreclosures.

Thus the State and private investors would offer to pay off the mortgage at the amount demanded if the foreclosing party could prove ownership and the balance (it was already known that the banks had received a lot of money from both public and private sources that reduced the loss and thus should have reduced the balances owed to investors, which in turn reduces the balance owed from borrowers).

The offer to pay off the the money claimed due by the forecloser was on behalf of the homeowner who would enter into an agreement with AMGAR for a new, real, valid mortgage at fair market value with industry standard terms instead of the exotic mortgages that borrowers were lured into signing when they understood practically nothing about the loan. The State would levy a tax or enforce existing taxes against the participants in the alleged securitization plan for the trading they had been doing. The State would foreclose on the tax liens thus opening the door to settlements that would reduce the amount expended on paying off the old loan.

The AMGAR program would receive a mortgage and note equal to what was actually paid out to the foreclosing parties, which was presumed to be discounted sharply because of their inability to prove ownership and balance. Hence the state would receive a valid note and mortgage for every penny they paid and it would receive the taxes and fees that were due and unpaid, and then sell these clean mortgages into the secondary market place. Both the legislative and executive branches of Arizona government — all relevant departments — concluded that the plan would erase the $3 Billion Arizona deficit and put a virtual halt on foreclosures that had already turned new developments into ghost towns.

But the plan went dark when certain influential Republicans in the state apparently received the word from the banks to kill the program.

Not to be deterred from what I considered to be a bold, innovative program aimed at the truth about the hundreds of thousands of wrongful foreclosures, I embarked on a persistent plan of to raise interest and capital to put the program into use. This time the offer to payoff the old loan would come from (1) homeowners who could afford to make the offer and (2) investors who were willing to assume the apparent risk of paying $700,000 as a payoff, only to receive a mortgage and note equal to a much lower fair market value. But the new plan had a kicker for investors to assume that risk.

The plan worked for the few people who were homeowners, in foreclosure and who had the resources to make the offer. Unlike the buyback issue raised by Martha Coakley last week, the plan avoided any possible rule prohibiting the homeowner from getting the house back and in fact employed existing laws permitting the borrower to pay off the loan rather than suffer the loss of the property.

The offer specifies what constitutes proof for purposes of the offer and thus avoids varying interpretations by judges who might think one presumption or another carries the day for the banks. This plan requires actual transactional proof of payments for the origination and acquisition of the loan, and actual disclosure of the loss mitigation payments received by or on behalf of the creditors (investors).

As expected, the banks tried to say that they didn’t have to accept the money. They wanted the foreclosure. But nobody bought that argument. The myth that the bank was “reclaiming” the property was just that — a myth. The bank never owned the property. It was interesting watching the bank back peddle on producing proof that it MUST have had if it brought foreclosure proceedings. But they didn’t have it because it didn’t exist.

Banks claimed to have loaned money to the homeowner and thus were entitled to payment first, or failing that, THEN foreclosure. And what has resulted is an array of confidential settlements in which I cannot reveal the contents without putting the homeowner in danger of losing their home. Suffice it to say they were satisfied.

The reason I am writing about this again is that the latest development is a series of investors have approached me with a request for development of a plan that would put AMGAR into effect. They are looking for profit so that is what I am giving them in the new plan. This has not yet been launched but there are several iterations of the plan that may be offered through one or more entities. You might say this plan is published for comment although we are already processing candidates for which the plan would be used.

If I am right, along with everyone else who says the mortgages, assignments, transactions are all fake with no canceled checks, wire transfer receipts or anything else showing that they funded the origination or acquisition of the loan, then it follows that at the very least the mortgage is an unenforceable document even if it is recorded.

If things go according to plan, then the bank will be forced to either put up or shut up in court — either providing the reasonable proof required by the commitment or offer or suffer a dismissal or judgment for the homeowner. It would not be up to the Judge to state what proof was required. Instead the Judge would only be called upon to determine that the bank had failed to properly respond — giving information they should have had all along. The debt might theoretically exist payable to SOMEONE, but it wouldn’t be secured debt and therefore not subject to foreclosure. The mortgage encumbrance in the public records could then be removed by a court order. Title would be cleared.

Investors would be taking what appears to be a giant risk but obviously perception of the risk is declining.   If the bank comes up with verifiable proof of ownership and balance (according to the terms of the offer or commitment), then the investor pays the bank and gets back a note and mortgage for much less. If the bank loses and the mortgage encumbrance is removed as a result of the assumption of that risk, then the investor gets a fee — 30% of the original loan balance expressed in a new mortgage and note at market rates over 30 years.

So the payoff is quite large to the investors if their assumptions are correct. If they are incorrect they lose all the expenses advanced for the homeowner, all the expenses of selection and potentially the money they put in escrow or the court registry to show proof that the offer is real.

We are currently vetting potential candidates for this program both from the homeowner side and the investor side. This type of investment while potentially lucrative, poses a large risk of loss. People should not invest in such a program unless they do not rely on the money invested for their income or lifestyle. They should be qualified investors as specified by SEC rules even if the SEC rules don’t apply. No money will be accepted and no homeowner will be signed up for the program until we have concluded all registrations necessary for launching the program.

Homeowners who want to be considered as candidates for this program should acquire a title and securitization report, plus a review by our staff, including myself.

You should have a title and securitization report anyway, in my opinion. If you already have one then send it to neilfgarfield@hotmail.com. If you don’t have such a report but would like to obtain one call 954-495-9867 or 520-405-1688 to order the report and review. If you already know someone who does this work, then call them, but a review by a qualified person with a financial background is important as well as a review by a qualified, licensed attorney.

Dozens of Cases Rolling in from Bankruptcy and Civil Courts Reversing Foreclosures, Evictions

The whole thing is unraveling just we predicted 18 months ago. The largest transfer of wealth in world history is starting. The question is who is going to be behind the curve and who is going to be ahead of it?

We are getting daily reports of many cases in which cases that have gone as far as a writ of possession being completely reversed, putting the homeowner not only in possession of the house, but free from the threat of foreclosure. In many cases we are seeing quiet title actions being granted. They won’t be publicized until after the time for appeal has run. It would seem that the foreclosing parties are not likely to appeal because the result, if negative, will apply not only to the case they appealed but to all their cases, past, present and future. The cases differ in procedural and substantive facts, so don’t be thinking that there is a single magic wand to waive over all the cases at one time. The Federal government programs won’t provide any relief for the majority of people injured by the predatory and fraudulent financial, securities and lending practices sponsored by the Wall Street barbarians.

The tide is turning. Dozens of Judges in courts of all jurisdictions are questioning the right of MERS, servicers or other “nominees” to even be present in court much less initiate the foreclosure action. It is basic black letter law that you can’t’ go to court and ask for relief unless you are the person who was injured. No matter how they mince the words, the only parties with any potential to apply for relief in non-judicial or judicial states are the investors. ALL the rest of the would-be foreclosers and parties who actually foreclosed are impostors seeking to get around due process requirements by invoking non-judicial procedure or by outright lying in judicial actions. In a securitized loan situation non-judicial procedure is unavailable and improper. Invoking it doesn’t make it right. It should be challenged from the start. every non-judicial state has a judicial procedure as well. ALL these cases can ONLY be processed by satisfying the requirements of pleading, notice and hearing on the merits at which real witnesses with personal knowledge must account for the securitized transaction from one end to the other.

Many homeowners are now considering filing damage actions for abuse of process and lawyers are getting the point. Several actions have shown the inherent conflict between the apparent authority of the Trustee on the Deed of trust, the trustee of the pooled assets and the trustee for the holders of mortgage backed securities. Similar conflict exists between MERS, the “depositor” (custodian of the alleged mortgages and notes that were securitized), the Trustees, and the certificate holders (investors).

Inflation: TILA-based Foreclosure Defense Key to Staunching the Bloodflow

Despite all efforts to conceal the pernicious effects of inflation and the rising tide of credit warning signals, it is now crystal clear that the underlying inflation rate in the United States is over 15% while the dollar declines in value at about the same rate. This double whammy is showing up in our pocketbooks, the gas pumps, the grocery stores and other retail stores. Americans are no loner the consumer of last resort for the world because they are out of money and out of credit. 

The cause was triggered by the Mortgage Meltdown. But the ripple effects are far more reaching than the housing sector. $500 trillion in derivatives have been planted in the marketplace and many of them are at risk. Even the ones that are not at conventional risk are still at risk because of currency exchange values. The articles written about turning the corner are way too premature.

With a fairly good-looking bill to help the housing sector meandering its way through congress, and the likelihood that the stuff will hit the fan before anything meaningful is done out of Washington, it is up to individuals to find their own ways to game the system, stop the foreclosures, sales and evictions and pivot back on the lenders, mortgage brokers, appraisers, investment bankers et al to get the money that was promised to them through fraudulent closings using hyper-inflated “market” values. 

The existing laws on the books are enough to help you if you use them. Start with the Truth in Lending Act (TILA) and get a TILA audit from people who know what they are doing. TILA is very heavily weighted in favor of consumers and borrowers. It just has not been used much until now. It can be used with mortgage loans, student loans, credit cards and all kinds of other debt, secured and unsecured. One little mistake by the lender either in assessing your ability to pay or in the disclosures made to you entitles you to relief beyond your imagination. It’s already there — USE IT!

And your efforts, combined with millions of other people (like the 9 million who now have negative equity in their homes) will force both government and the financial sector to come to the table, hat in hand, pleading for mercy. But you have to be resolute and willing to go after them. And you have to change your perception of them as the the big guys who cannot be defeated. They can be and in fact they already are defeated. All you have to do is pick up the pieces, which means reducing the mortgage on your home, getting refunds of all the interest you paid, getting refunds on the closing points and closing costs, etc. It means receiving payment for damages caused by the fraud and quite possibly a recovery or partial recovery of the expenses you pay to lawyers and experts to get you there. 

ECONOMIC REPORT
Producer prices rise tame 0.2% in April
Core PPI surprises with 0.4% gain in April and is up 3% in past year
WASHINGTON (MarketWatch) – Wholesale prices rose a smaller-than-expected 0.2% in April after seasonable adjustments, with food prices flat and energy prices falling, the Labor Department reported Tuesday.
The producer price index has risen 6.5% in the past year, the government said.
The core PPI – which excludes food and energy prices – rose 0.4% in April, more than expected. Core prices are up 3% in the past year, the biggest year-over-year rise since late 1991.
The PPI had risen 1.1% in March. Read the full report.
Economists surveyed by MarketWatch expected a 0.4% rise in the headline PPI and a 0.2% gain in the core rate.See Economic Calendar.
The PPI figures are likely to have a muted effect on markets, because they came in after the consumer price index was released last week. And, to be blunt, markets don’t seem to trust the government’s inflation figures that show falling energy prices in a world of record crude oil prices.
The government’s data are seasonally adjusted to hide the impact of normal seasonal variations to focus on fundamental changes in prices that are not driven by the ebbs and flows of the seasons. Because energy prices typically rise more in April than they did this year, the seasonally adjusted figures showed a 0.2% decline. In unadjusted terms, energy prices rose 2.9%.
Wholesale gasoline prices fell 4.6% in seasonally adjusted terms, but rose 3.2% in unadjusted terms.
The opposite case was seen in food prices. In seasonally adjusted terms, food prices were flat. But in unadjusted terms, prices fell 0.3%.
Over the course of a year, the seasonal issues balance out.
In April, core prices at the finished level were pushed higher by a 1.3% increase in wholesale light truck prices and a 0.4% increase in wholesale car prices. Commercial furniture prices rose 1.8%, the most in 27 years. Drug prices rose 0.7%. Alcohol prices rose 1%. Capital goods prices rose 0.4%.
Higher seasonally adjusted prices were seen further back in the production pipeline as well.
Prices of intermediate goods destined for further processing rose 0.9%, led by energy goods, chemicals and steel. Intermediate food prices fell 0.6%, including the biggest drop in flour prices in 33 years.
The core intermediate PPI — a key leading indicator of inflation — rose 1.2% in April and is up 5.8% in the past year, the biggest rise in nearly two years.
Prices of crude materials rose 3.2%, including a 4.1% rise in crude energy goods. Crude petroleum prices rose 4.5% and natural gas prices rose 4.3%. The core crude PPI rose 7.9%, behind a 32% rise in iron and steel scrap prices.
Crude food prices fell 0.9%, including a record 23% drop in wheat prices. End of Story
Rex Nutting is Washington bureau chief of MarketWatch

Democracy Inaction: Bill Moyers Speaks the Truth

EXPLAINING MORTGAGE MELTDOWN, IRAQ AND INEQUALITY OF WEALTH AND OPPORTUNITY

The truth we don’t want to hear is the same truth we shout down as unpatriotic. It is the essence of patriotism and good journalism to speak the truth and to back it up with solid facts that are congruent with the reality we experience in our daily lives. This piece by Moyers is the one of his best, and worth reading and re-reading.

Moyers: ‘Democracy in America Is a Series of Narrow Escapes, and We May Be Running Out of Luck’

By Bill Moyers, Doubleday
Posted on May 17, 2008, Printed on May 18, 2008
http://www.alternet.org/story/85521/

The following is an excerpt from Bill Moyers’ new book, “Moyers on Democracy” (Doubleday, 2008).

Democracy in America is a series of narrow escapes, and we may be running out of luck. The reigning presumption about the American experience, as the historian Lawrence Goodwyn has written, is grounded in the idea of progress, the conviction that the present is “better” than the past and the future will bring even more improvement. For all of its shortcomings, we keep telling ourselves, “The system works.”

Now all bets are off. We have fallen under the spell of money, faction, and fear, and the great American experience in creating a different future together has been subjugated to individual cunning in the pursuit of wealth and power -and to the claims of empire, with its ravenous demands and stuporous distractions. A sense of political impotence pervades the country — a mass resignation defined by Goodwyn as “believing the dogma of ‘democracy’ on a superficial public level but not believing it privately.” We hold elections, knowing they are unlikely to bring the corporate state under popular control. There is considerable vigor at local levels, but it has not been translated into new vistas of social possibility or the political will to address our most intractable challenges. Hope no longer seems the operative dynamic of America, and without hope we lose the talent and drive to cooperate in the shaping of our destiny.

The earth we share as our common gift, to be passed on in good condition to our children’s children, is being despoiled. Private wealth is growing as public needs increase apace. Our Constitution is perilously close to being consigned to the valley of the shadow of death, betrayed by a powerful cabal of secrecy-obsessed authoritarians. Terms like “liberty” and “individual freedom” invoked by generations of Americans who battled to widen the 1787 promise to “promote the general welfare” have been perverted to create a government primarily dedicated to the welfare of the state and the political class that runs it. Yes, Virginia, there is a class war and ordinary people are losing it. It isn’t necessary to be a Jeremiah crying aloud to a sinful Jerusalem that the Lord is about to afflict them for their sins of idolatry, or Cassandra, making a nuisance of herself as she wanders around King Priam’s palace grounds wailing “The Greeks are coming.” Or Socrates, the gadfly, stinging the rump of power with jabs of truth. Or even Paul Revere, if horses were still in fashion. You need only be a reporter with your eyes open to see what’s happening to our democracy. I have been lucky enough to spend my adult life as a journalist, acquiring a priceless education in the ways of the world, actually getting paid to practice one of my craft’s essential imperatives: connect the dots.

The conclusion that we are in trouble is unavoidable. I report the assault on nature evidenced in coal mining that tears the tops off mountains and dumps them into rivers, sacrificing the health and lives of those in the river valleys to short-term profit, and I see a link between that process and the stock-market frenzy which scorns long-term investments — genuine savings — in favor of quick turnovers and speculative bubbles whose inevitable bursting leaves insiders with stuffed pockets and millions of small stockholders, pensioners, and employees out of work, out of luck, and out of hope.

And then I see a connection between those disasters and the repeal of sixty-year-old banking and securities regulations designed during the Great Depression to prevent exactly that kind of human and economic damage. Who pushed for the removal of that firewall? An administration and Congress who are the political marionettes of the speculators, and who are well rewarded for their efforts with indispensable campaign contributions. Even honorable opponents of the practice get trapped in the web of an electoral system that effectively limits competition to those who can afford to spend millions in their run for office. Like it or not, candidates know that the largesse on which their political futures depend will last only as long as their votes are satisfactory to the sleek “bundlers” who turn the spigots of cash on and off.

The property qualifications for federal office that the framers of the Constitution expressly chose to exclude for demonstrating an unseemly “veneration for wealth” are now de facto in force and higher than the Founding Fathers could have imagined. “Money rules Our laws are the output of a system which clothes rascals in robes and honesty in rags. The parties lie to us and the political speakers mislead us.” Those words were spoken by Populist orator Mary Elizabeth Lease during the prairie revolt that swept the Great Plains slightly more than 120 years after the Constitution was signed. They are true today, and that too, spells trouble.

Then I draw a line to the statistics that show real wages lagging behind prices, the compensation of corporate barons soaring to heights unequaled anywhere among industrialized democracies, the relentless cheeseparing of federal funds devoted to public schools, to retraining for workers whose jobs have been exported, and to programs of food assistance and health care for poor children, all of which snatch away the ladder by which Americans with scant means but willing hands and hearts could work and save their way upward to middle-class independence. And I connect those numbers to our triumphant reactionaries’ campaigns against labor unions and higher minimum wages, and to their success in reframing the tax codes so as to strip them of their progressive character, laying the burdens of Atlas on a shrinking middle class awash in credit card debt as wage earners struggle to keep up with rising costs for health care, for college tuitions, for affordable housing — while huge inheritances go untouched, tax shelters abroad are legalized, rates on capital gains are slashed, and the rich get richer and with each increase in their wealth are able to buy themselves more influence over those who make and those who carry out the laws.

Edward R. Murrow told his generation of journalists: “No one can eliminate prejudices — just recognize them.” Here is my bias: extremes of wealth and poverty cannot be reconciled with a genuinely democratic politics. When the state becomes the guardian of power and privilege to the neglect of justice for the people as a whole, it mocks the very concept of government as proclaimed in the preamble to our Constitution; mocks Lincoln’s sacred belief in “government of the people, by the people, and for the people”; mocks the democratic notion of government as “a voluntary union for the common good” embodied in the great wave of reform that produced the Progressive Era and the two Roosevelts. In contrast, the philosophy popularized in the last quarter century that “freedom” simply means freedom to choose among competing brands of consumer goods, that taxes are an unfair theft from the pockets of the successful to reward the incompetent, and that the market will meet all human needs while government itself becomes the enabler of privilege — the philosophy of an earlier social Darwinism and laissez-faire capitalism dressed in new togs — is as subversive as Benedict Arnold’s betrayal of the Revolution he had once served. Again, Mary Lease: “The great evils which are cursing American society and undermining the foundations of the republic flow not from the legitimate operation of the great human government which our fathers gave us, but they come from tramping its plain provisions underfoot.”

Our democracy has prospered most when it was firmly anchored in the idea that “We the People” — not just a favored few — would identify and remedy common distempers and dilemmas and win the gamble our forebears undertook when they espoused the radical idea that people could govern themselves wisely. Whatever and whoever tries to supplant that with notions of a wholly privatized society of competitive consumers undermines a country that, as Gordon S. Wood puts it in his landmark book The Radicalism of the American Revolution, discovered its greatness “by creating a prosperous free society belonging to obscure people with their workaday concerns and their pecuniary pursuits of happiness” — a democracy that changed the lives of “hitherto neglected and despised masses of common laboring people.”

I wish I could say that journalists in general are showing the same interest in uncovering the dangerous linkages thwarting this democracy. It is not for lack of honest and courageous individuals who would risk their careers to speak truth to power — a modest risk compared to those of some journalists in authoritarian countries who have been jailed or murdered for the identical “crime.” But our journalists are not in control of the instruments they play. As conglomerates swallow up newspapers, magazines, publishing houses, and networks, and profit rather than product becomes the focus of corporate effort, news organizations — particularly in television — are folded into entertainment divisions. The “news hole” in the print media shrinks to make room for advertisements, and stories needed by informed citizens working together are pulled in favor of the latest celebrity scandals because the media moguls have decided that uncovering the inner workings of public and private power is boring and will drive viewers and readers away to greener pastures of pabulum. Good reporters and editors confront walls of resistance in trying to place serious and informative reports over which they have long labored. Media owners who should be sounding the trumpets of alarm on the battlements of democracy instead blow popular ditties through tin horns, undercutting the basis for their existence and their First Amendment rights.

Bill Moyers is the author of “Moyers on Democracy” (Doubleday, 2008) and the host of the PBS show, Bill Moyers Journal.

Mortgage Meltdown Revealed in Harvard Study

In this study, the authors provide an exhaustive and invaluable aid, with plenty of charts and explanations of the mortgage meltdown, sub-prime and general credit crisis. This is MUST reading for anyone who is filing securities actions and foreclosure defense. With this paper, you can understand who the players are and what they were doing. This paper is thus far more inclusive than what we have written here which is designed to give you the information in bite-sized pieces.

harvard-paper-diagrams

Foreclosure Defense: Countrywide Ruling Can be Cited as Persuasive Support for Bad Lending Practices

COUNTRYWIDE SUED FOR IMPROPER LENDING PRACTICES BY ITS SHAREHOLDERS: GOOD MATERIAL HERE FOR BORROWERS TO ALLEGE IN THEIR LAWSUITS AND DEFENSIVE ACTIONS

In these posts I am trying to keep pace with the events unfolding on the investor side of the Mortgage Meltdown. That is because these lawsuits are more sophisticated than the usual fair you find with lawyers representing individual borrowers in foreclosure defense, bankruptcy or non-judicial sales.

Our theme is simply this: lender practices went astray because of lack of supervision, failure of regulation, improper oversight by stockholders and congress, and direct collusion with the even more sophisticated Wall Street firms offering “securitization” of risk products that removed the risk element from the loan underwriting process. The result was predictable — lending standards not only fell, they were smashed under a cloud of plausiable deniability. 

countrywide_class_action_defense_stay_ord

Note the article below and in particular, the bold sections which this editor has added.

May 15, 2008

Judge Says Countrywide Officers Must Face Suit by Shareholders

Directors and officers of Countrywide Financial, the beleaguered mortgage lender, must answer shareholder accusations of insider trading and an overall failure to monitor lending practices that led to the company’s collapse, a federal judge in California has ruled.

Rejecting the arguments of Countrywide executives and directors that they were unaware of lax loan operations that led to ballooning defaults, Judge Mariana R. Pfaelzer of Federal District Court in Los Angeles ruled Tuesday that she found confidential witness accounts in the shareholder complaint to be credible and that they suggested “a widespread company culture that encouraged employees to push mortgages through without regard to underwriting standards.”

Plaintiffs also identified “numerous red flags” that would have warned directors of increasingly risky loans made by Countrywide, according to the judge, who rejected a motion to dismiss the suit. “It defies reason, given the entirety of the allegations,” Judge Pfaelzer wrote, “that these committee members could be blind to widespread deviations from the underwriting policies and standards being committed by employees at all levels. At the same time, it does not appear that the committees took corrective action.”

Hundreds of mortgage companies have failed in the last year or so, but few executives or directors have taken responsibility. That makes the ruling significant, said Blair A. Nicholas, one of two lawyers at Bernstein Litowitz Berger & Grossmann representing the plaintiffs.

“It is a critical step enabling Countrywide and its shareholders to hold accountable the officers and directors who looted the company and were responsible for its devastating collapse,” Mr. Nicholas said.

Countrywide shareholders have lost billions of dollars since 2007 when its shares hit a high of $45.03. They closed on Wednesday at $4.85.

“As institutional investors, it is our duty to seek recourse when a company’s directors engage in practices that are not in the best interests of shareholders,” said Christa S. Clark, chief legal counsel of the Arkansas Teacher Retirement System, the lead plaintiff in the case. “We are pleased with the court’s ruling as it enables the shareholders to move forward with our case and remedy this wrong.”

A Countrywide spokesman declined to comment on the ruling.

The plaintiffs in the case said they hoped to recover money for shareholders from Countrywide officials named in the case who sold $850 million in stock from 2004 to 2007. The plaintiffs contend that the directors and officers dumped shares even as the company spent $2.4 billion to repurchase its own stock in late 2006 and early 2007.

The chief executive of Countrywide, Angelo R. Mozilo, has argued that his $474 million in stock sales during the three-year period complied with securities laws under a planned selling program. But he revised the program, known as a 10b5-1 plan, several times, each time increasing the shares to be sold.

As a result, the judge wrote: “Mozilo’s actions appear to defeat the very purpose of 10b5-1 plans,” created to allow corporate insiders to sell stock regularly and without direct involvement.

Gerald H. Silk, who also represents the plaintiffs, said: “Corporate fiduciaries cannot expect to evade liability by blaming a general market downturn when there is specific and systematic misconduct taking place right beneath their noses.”

The suit names 14 current and former directors and officials as defendants; it is known as a derivative action because shareholders of Countrywide are suing its officers and directors on behalf of the company.

Lawyers for the plaintiffs said that they would ask the judge to expedite discovery so that they can get testimony before the proposed purchase of Countrywide by Bank of America takes place. The deal is expected to close in the third quarter.

Senator Charles E. Schumer, Democrat of New York, asked the Federal Trade Commission on Wednesday to investigate whether Countrywide took advantage of borrowers who filed for bankruptcy protection to try to keep their homes.

In the letter to William E. Kovacic, the F.T.C. chairman, Mr. Schumer said, “An investigation by the Federal Trade Commission would help pull the curtain back on a hidden corner of the existing foreclosure crisis, and could help stem the tide of homeowners who are now unnecessarily being forced into bankruptcy and foreclosure.”

Mortgage Meltdown: Credit Crisis Spreads

 

Credit Crisis Over? — Not by a Long Shot

 

As you can imagine I get emails and comments from hundreds of people seeking help and whose houses are going into sale or foreclosure, most of whom are completely unaware that they have rights superior to the lender, if they can find someone to help them like www.repairyourloan.com

 

Lawyers won’t help you until you get the mortgage audit completed. It is then that you will know the extent of your claims and what you do to stop the foreclosure, the eviction or even extinguish the mortgage and release yourself from liability on the mortgage note. 

 

Here is an article which illustrates why you need to beware of both the government and the lenders. They are trying to give the impression that the credit crisis is (a) not as bad as people thought and (b) over. What they are really trying to do is pivot your attention away from the fact that the massive mortgage meltdown has caused a meltdown in all the credit markets. It has caused a massive meltdown in asset values for individuals, corporations and government entities. 

 

This is not the beginning of the end. It is, as Winston Churchill said in World War II “the end of the beginning.” We have years to go before this shakes out just in terms of education of the public. And we have decades to go to recover from this utter failure of government to do its job — to referee between those who know things and those who don’t. 

 

In the process the government, the corporations and the individuals owning houses or doing their jobs have all been smacked in the face, really hard and have snapped out of their wishful confidence in their government and in the “good faith” of a good faith estimate before closing on a loan.

 

Credit Crisis

Congress And The Credit Crisis

Joshua Zumbrun 05.14.08, 6:00 AM ET

 

Washington, D.C. – 

A congressional panel meets Tuesday morning looking to answer two big questions about the economy: Is the credit crisis over? And can anything be done to prevent another crisis in the future? 

 

To both questions, the answer is “No. And proceed with great caution.”

 

For the credit crisis, reasons for optimism are emerging. Monday morning, Federal Reserve Chairman Ben Bernanke outlined positive signs: confidence between banks has risen, the market for repurchase agreements of Treasury securities has improved, secondary markets even for troubled mortgage-backed securities have more liquidity than they did in May.

 

“These are welcome signs, of course, but at this stage conditions in financial markets are still far from normal,” Bernanke cautioned. (See “Recovery: Are We There Yet?”)

 

Still, the battered housing market continues to drag. Data released Monday from the National Association of Realtors showed that home prices are still falling. In the first quarter of this year, the median home price dropped 7.7% from a year ago–the biggest decline in the 29 years NAR has compiled the prices.

 

The number of borrowers who owe more than their house is worth is still growing. Loan defaults and foreclosures are likely to continue, as will losses to the lenders. Foreclosures tend to drag down the prices of their entire neighborhoods. But even here, Lawrence Yun, chief economist of the National Association of Realtors, sees some signs of optimism: “Neighborhoods with little subprime exposure are holding on very well.” And at least banks are not originating new subprime loans.

 

Now for the second question: How to prevent risk in the future. That’s what makes Tuesday morning’s hearing significant. The early advice Congress receives could shape regulation of banks and the financial market for years or even decades. And, as Treasury Secretary Henry Paulson noted in proposing a series of regulatory reforms in March, “few, if any, will defend our current balkanized system as optimal.”

 

The March collapse of Bear Stearns exposed a weakness in the Gramm-Leach-Bliley Act, a 1999 law that removed the barriers between commercial banks, investment banks and insurance companies. The amount of systemic risk was not recognized until too late.

 

After Gramm-Leach-Bliley, banks and insurance companies were allowed to undertake the same activities, but they still answered to their old regulators. Five federal regulators oversee deposits, in addition to regulation from state governments. Futures and securities are regulated by separate agencies. Insurance regulation is spread across more than 50 regulators.

 

The result was a confused alphabet soup–SEC, CFTC, OCC, NCUA, FDIC–with muddled boundaries or, as SEC Chairman Christopher Cox described the result, “a statutory no-man’s land.”

 

But regulation presents pitfalls as well. It must be considered not in terms of more or less regulation but rather in terms of flexibility and efficiency. 

 

“In the wake of a bust, there is always a predictable series of political activities,” says Alex Pollock, former president of the Federal Home Loan Bank of Chicago, who will testify before the committee. “First, the search for the guilty; second, the fall of previously esteemed heroes; and third, legislation and increased regulation to ensure that ‘this will never happen again.’ But, with time, it always does happen again.”

 

The guilty have been identified as the twin bogeymen of the subprime underworld: “speculators” and “unscrupulous lenders,” enabled by banks unable to price risk and an irrational belief that home prices would always rise. The esteemed heroes have fallen: the collapse of Bear Stearns, disappointing results from Wall Street’s banks. Even Alan Greenspan has lost some of his luster.

 

The third act at the boom and bust theater is well under way. This week the Senate is ironing out its companion legislation to the House’s Foreclosure Prevention Act, which passed last week with a 266-154 margin. The president has indicated he would veto the bill’s current incarnation but could support a toned-down version. All that remains is the predictable regulatory overhaul and then a long wait for the inevitable cycle to begin in the future. 

 

 

Bankruptcy: Chapter 13, RISING PRICES and Foreclosure Defense

OBAMANOMICS VS NO ECONOMICS AT ALL

the government is charged with reporting on inflation when it has a vested interest in keep the reported inflation low both for political and financial reasons

The job of the Petitioner in bankruptcy to get a modification of the Chapter 13 plan is therefore double-whacked because of (1) a presumption against him which requires him to show a significant change in circumstances and (2) inaccurate government statistics which call you a liar when you say your basic expenses have shot up 25% just because of inflation.

Homeowners with ARM financing on their homes are triple whacked when the resets kick in. Those people in bankruptcy already should tell their lawyers to file an adversary proceeding based upon violations of TILA and RESPA. There are a number of steps you need to follow (see many posts and links on this blog) before you can file suit.

BKR attorneys are struggling with clients who are complaining that their payment plan is being negatively impacted by the surge in the cost of living. This surge has been understated by, for example, publication of the Consumer Price Index and other indices that are used to set increases in government and pension benefits like social security.

Thus the government is charged with reporting on inflation when it has a vested interest in keep the reported inflation low both for political and financial reasons. If they report it accurately, the government expenses will go up. Up until now, the fact that this was at the expense of the recipients of those benefits (which they paid into and are now being short-changed) has been felt, talked about but largely ignored. That too is coming up front and center. McCain’s statement “I’m not very good on economics” better change to “I just studied up on economics and it is very interesting, Here is what I learned.”

When inflation was comparatively low, even though understated. there wasn’t much conflict. Now, however, the basket of items used for the CPI is literaly out of touch with the real life experience of most Americans — something that Obama has started talking about and which McCain unfortunately doesn’t seem to know or care to know. 

The job of the Petitioner in bankruptcy to get a modification of the Chapter 13 plan is therefore double-whacked because of (1) a presumption against him which requires him to show a significant change in circumstances and (2) inaccurate government statistics which call you a liar when you say your basic expenses have shot up 25% just because of inflation. 

Homeowners with ARM financing on their homes are triple whacked when the resets kick in. Those people in bankruptcy already should tell their lawyers to file an adversary proceeding based upon violations of TILA and RESPA. There are a number of steps you need to follow (see many posts and links on this blog) before you can file suit.

MOST BANKRUPTCY LAWYERS ARE LARGELY UNFAMILIAR WITH TILA, RESPA AND OTHER CONSUMER PROTECTIONS AND THUS MISSING THE LARGEST POTENTIAL BENEFITS TO THEIR CLIENTS. If YOUR lawyer does not know this field then get help elsewhere. For example: http://www.repairyourloan.com, where you can get help on all the steps before filing suit and even get a referral to someone who can assist your attorney in filing the adversary proceeding. 

From another site where the attorneys appear to be knowledgeable but I know nothing about them —-

Rising prices give rise to chapter 13 plan modifications

What do rising gas and food prices have in common? They both eat up a substantial part of your monthly budget. And if you filed chapter 13 within the past few years, you submitted a plan of monthly payments based on a budget before gas and some food prices doubled. It may be time to modify that old plan. How so, follow this.

Your Schedule J lists your projected monthly expenses. Your monthly plan payment is calculated based as a factor of those expenses. It may be possible to file an amended Schedule J to account for today’s increased costs. As your expenses rise, your monthly disposable income decreases and your monthly plan payment may decrease as well. So, instead of paying money to your unsecured creditors, you might be able to free up some cash to use for your personal monthly expenses.

Your bankruptcy attorney can advise you whether you qualify for a lower payment. Dial that number before the cost of a phone call goes up

Foreclosure Procedure: Judicial and Non Judicial Sales

Every state is different to some degree, which is why you can’t take this post to court with you and assume that you have the right legal information. Checking local laws, rules and practices is essential in any foreclosure defense, defense of eviction or making claims against the lenders, mortgage brokers and other parties before or after the sale.

Many people have asked the difference between the kinds of sales and procedures. This will give you a general idea. In my opinion the non-judicial sale is equivalent to a taking of property without due process. I believe it is against basic black letter law of the U.S. Constitution.

Judicial Foreclosures

Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of Lis Pendens. 

  • The complaint will state what the debt is, and why the default should allow the lender to foreclose and take the property given as security.  
  • The homeowner will be served notice of the complaint, either by mailing, direct service, or publication of the notice, and will have the opportunity to be heard before the court.  IT IS RIGHT HERE THAT YOU SHOULD FILE YOUR CLAIMS, DENIALS, AFFIRMATIVE DEFENSES ETC. A Motion to Dismiss claiming the Plaintiff has failed to plead or attach proof that it is the owner of the mortgage and note and still possesses the right to pursue foreclosure. In a fair number of cases they won’t have the documentation and the foreclosure will be dismissed because the Plaintiff “lacks standing.”
  • You should file for discovery — interrogatories, requests for admissions and requests to produce relating to the accounting for your payments, the schedule of payments received and when they were posted, and the names and addresses of people who have original documentation including the note, mortgage, assignment of the mortgage and note, sale of the loan, or other instruments showing that some third party, who is NOT party to the action, is the actual party in interest. Then you can show the court that the wrong person is before the court suing you, or at least that an indispensable party is not present. 
  • If that is the case, summary judgment will probably be denied, judgment could be entered in your favor (unlikely but possible) and/or the action will be dismissed without prejudice (which means they can get their act together and sue you again. The probability is that once dismissed, it will go to the bottom of their pile and they will pursue the “low handing fruit” which are people who don’t know the their rights or how to fight back.
  • If the court finds the debt valid, and in default, it will issue  a judgment for the total amount owed, including the costs of the foreclosure process.  
  • After the judgment has been entered, a writ will be issued by the court authorizing a sheriff’s sale.  
  • The sheriff’s sale is an auction, open to anyone, and is held in a public place, which can range from in front of the courthouse steps, to in front of the property being auctioned.   
  • Sheriff’s sales will generally require either cash to be paid at the time of sale, or a substantial deposit, with the balance paid from later that same day up to 30 days after the sale.  Check your local procedures carefully.  
  • At the end of the auction, the highest bidder will be the owner of the property, subject to the court’s confirmation of the sale.  
  • After the court has confirmed the sale, a sheriff’s deed will be prepared and delivered to the highest bidder, when that deed is recorded, the highest bidder is the owner of the property. Contesting eviction after this point is highly problematic, but you still retain rights to sue the lender for TILA, Fraud and other violations and claims. TILA is NOT generally regarded as a compulsory counterclaim and so the theory is neither is fraud. The safest route is to bring your claims when your first responses are due. 

Non-Judicial Foreclosures

Non-judicial foreclosures are processed without court intervention, which means that the notice of sale and the actual sale can take place without the lender proving to the court that it has a right to do so. The burden is shifted to YOU the borrower to bring a lawsuit agaisnt the the Lender to stop the sale. Obviously this precious piece of legislation was established through aggressive lobbying and campaign contributions to the states which allow this patently wrong procedure, which unfairly puts the burden on the least sophisticated player (you) who has the least resources to start a legal action. Where is the ACLU when you need them?

The sale takes place with the requirements for the foreclosure established by state statutes. 

  • When a loan default occurs, the homeowner will be mailed a default letter, and in many states, a Notice of Default will be recorded at approximately the same time.   The fact that, like many of our readers, you are NOT in default and that the lender has made multiple errors, committed many violations of the Truth in Lending Act (TILA) is not in issue because the state only requires the Lender to post notice. The fact that the real lender, the one who actually put up the money for the mortgage and note and who owns it now does not appear on the Notice, or that the Trustee no longer has the authority to proceed are issues that the Lender sidesteps in states that permit this awful procedure.
  • If the homeowner does not cure the default (the borrower is presumed to be in default upon the filing of the notice, which immediately screws up your credit and makes certain you cannot refinance because you already “in foreclosure”), a Notice of Sale will be mailed to the homeowner, posted in public places, recorded at the county recorder’s office, and published in area legal publications.  
  • After the legally required time period has expired, a public auction will be held, with the highest bidder becoming the owner of the property, subject to their receipt and recordation of the deed. Showing up at this sale and announcing that you are contesting the sale and the foreclosure generally will stop anyone from bidding. 
  • Auctions of non-judicial foreclosures will generally require cash, or cash equivalent either at the sale, or very shortly thereafter.

It is important to note that each non-judicial foreclosure state has different procedures.   Some do not require a Notice of Default, but start with a Notice of Sale.   Others require only the publication of the Notice of Sale to announce the sale, with no direct owner notification required.  You need to know the specific procedure for your state.

American Meltdown: 3AM or 8PM—Emergency vs Urgency

Thomas Friedman, in Michael Moore -like frankness, doesn’t make a case, create a sound bite, or try to get elected. Here he simply tells the facts. 

If all Americans could compare Berlin’s luxurious central train station today with the grimy, decrepit Penn Station in New York City, they would swear we were the ones who lost World War II.

People want to do nation-building. They really do. But they want to do nation-building in America.

Any one of the candidates can answer the Red Phone at 3 a.m. in the White House bedroom. I’m voting for the one who can talk straight to the American people on national TV — at 8 p.m. — from the White House East Room.

millions of Americans are dying to be enlisted — enlisted to fix education, enlisted to research renewable energy, enlisted to repair our infrastructure, enlisted to help others. Look at the kids lining up to join Teach for America. They want our country to matter again. 

MOST OF ALL WE NEED TO STOP VOTING BECAUSE SOMEONE SCARED THE CRAP OUT OF US OR APPEALS TO BASE PREJUDICE. WHEN WE DO THAT WE ARE VOTING AGAINST OURSELVES, OUR CHILDREN AND OUR GRANDCHILDREN.

The emergency is that the fiscal fiasco of the last 7 years is frightening larger than any public figure has stated. Who will tell the people? The reason why you hear scattered comments about this period being comparable to the great depression is that we have dug a real hole for ourselves, so big, so deep, that we can’t see the bottom anymore.

  • Buffett and others are admitting it — economists are slyly predicting it without being accused of starting riots and panic. There is general agreement that the housing market could have another 20% correction from current levels.
  • 20-30 million American homes will have greater mortgage indebtedness than they are worth within 12-14 months.  The same people are mired in credit card debt carrying interest and fees that assures( or at least threatens) the virtual permanent enslavement of a significant portion the American people. Americans spend more money on debt service (interest payments and principal) than many countries do on EVERYTHING. 
  • We have locked ourselves into an energy policy that allows both domestic and foreign enemies of freedom almost unfettered control over our property, our food, our lives and our civil liberties. We have done this while having the technology and knowledge to reduce our oil and gas consumption to a negligible amount, forever abandoning foreign policy based upon foreign fuel supplies. 
  • Inflation is already five times higher than the manipulative government statistics reported and it is increasing. 
  • Joblessness is five time higher as well. 
  • The Iraq war will take at least 7 years — our longest war.
  • Our healthcare system is in the death grip of a few people who have turned our vulnerability into an excuse to rob the public treasury and the private finance of every individual.
  • 1929? — we already there and headed downward, burdened in more debt than any country or its people have acquired in the world history.
  • And in world opinion our stock of confidence has never been lower and is clearly declining every other day, as the dollar goes lower and lower and the world’s central bankers look for alternatives for their currency reserves — anything other than the plummeting dollar. They know we caused, allowed and promoted the worst outbreak of financial fraud in history and that the measurement of the scope of the fraud keeps growing every day by trillions of dollars.

So there is the emergency. The urgency is that there is hope.

The Mortgage Meltdown was the trigger, the wake-up call that the fundamentals of our policy, our society and our economy were all wrong. The people know it, with 4 out of people asserting we are headed in the wrong direction.

We emerged from the Great Depression and we can emerge from this too, perhaps a little battered and wiser but still standing tall. The way we can do that is through ruthless truth, a tolerance for ambiguity, transcending our fears, acceptance of failure, determination to succeed, and persistent pursuit of the core values expressed, although unevenly lived, in our Declaration of Independence and our U.S. Constitution. 

MOST OF ALL WE NEED TO STOP VOTING BECAUSE SOMEONE SCARED THE CRAP OUT OF US OR APPEALS TO BASE PREJUDICE. WHEN WE DO THAT WE ARE VOTING AGAINST OURSELVES, OUR CHILDREN AND OUR GRANDCHILDREN.

May 4, 2008
OP-ED COLUMNIST

Who Will Tell the People?

Traveling the country these past five months while writing a book, I’ve had my own opportunity to take the pulse, far from the campaign crowds. My own totally unscientific polling has left me feeling that if there is one overwhelming hunger in our country today it’s this: People want to do nation-building. They really do. But they want to do nation-building in America.

They are not only tired of nation-building in Iraq and in Afghanistan, with so little to show for it. They sense something deeper — that we’re just not that strong anymore. We’re borrowing money to shore up our banks from city-states called Dubai and Singapore. Our generals regularly tell us that Iran is subverting our efforts in Iraq, but they do nothing about it because we have no leverage — as long as our forces are pinned down in Baghdad and our economy is pinned to Middle East oil.

Our president’s latest energy initiative was to go to Saudi Arabia and beg King Abdullah to give us a little relief on gasoline prices. I guess there was some justice in that. When you, the president, after 9/11, tell the country to go shopping instead of buckling down to break our addiction to oil, it ends with you, the president, shopping the world for discount gasoline.

We are not as powerful as we used to be because over the past three decades, the Asian values of our parents’ generation — work hard, study, save, invest, live within your means — have given way to subprime values: “You can have the American dream — a house — with no money down and no payments for two years.”

That’s why Donald Rumsfeld’s infamous defense of why he did not originally send more troops to Iraq is the mantra of our times: “You go to war with the army you have.” Hey, you march into the future with the country you have — not the one that you need, not the one you want, not the best you could have.

A few weeks ago, my wife and I flew from New York’s Kennedy Airport to Singapore. In J.F.K.’s waiting lounge we could barely find a place to sit. Eighteen hours later, we landed at Singapore’s ultramodern airport, with free Internet portals and children’s play zones throughout. We felt, as we have before, like we had just flown from the Flintstones to the Jetsons. If all Americans could compare Berlin’s luxurious central train station today with the grimy, decrepit Penn Station in New York City, they would swear we were the ones who lost World War II.

How could this be? We are a great power. How could we be borrowing money from Singapore? Maybe it’s because Singapore is investing billions of dollars, from its own savings, into infrastructure and scientific research to attract the world’s best talent — including Americans.

And us? Harvard’s president, Drew Faust, just told a Senate hearing that cutbacks in government research funds were resulting in “downsized labs, layoffs of post docs, slipping morale and more conservative science that shies away from the big research questions.” Today, she added, “China, India, Singapore … have adopted biomedical research and the building of biotechnology clusters as national goals. Suddenly, those who train in America have significant options elsewhere.”

Much nonsense has been written about how Hillary Clinton is “toughening up” Barack Obama so he’ll be tough enough to withstand Republican attacks. Sorry, we don’t need a president who is tough enough to withstand the lies of his opponents. We need a president who is tough enough to tell the truth to the American people. Any one of the candidates can answer the Red Phone at 3 a.m. in the White House bedroom. I’m voting for the one who can talk straight to the American people on national TV — at 8 p.m. — from the White House East Room.

Who will tell the people? We are not who we think we are. We are living on borrowed time and borrowed dimes. We still have all the potential for greatness, but only if we get back to work on our country.

I don’t know if Barack Obama can lead that, but the notion that the idealism he has inspired in so many young people doesn’t matter is dead wrong. “Of course, hope alone is not enough,” says Tim Shriver, chairman of Special Olympics, “but it’s not trivial. It’s not trivial to inspire people to want to get up and do something with someone else.”

It is especially not trivial now, because millions of Americans are dying to be enlisted — enlisted to fix education, enlisted to research renewable energy, enlisted to repair our infrastructure, enlisted to help others. Look at the kids lining up to join Teach for America. They want our country to matter again. They want it to be about building wealth and dignity — big profits and big purposes. When we just do one, we are less than the sum of our parts. When we do both, said Shriver, “no one can touch us.”

Bill Clinton Economics vs Hillary Clinton Economics

For all the talk about how similar they are, the differences have largely been overlooked. The main difference I see is that Obama has a broader understanding of macroeconomics — which means that he understands that if you push here then something else pops up there. He understands nuance and complexity in a highly ambiguous world.

Once you get past sound bites and continuous loop feeds of irrelevant chatter, and then do some research you find two things: Bill Clinton’s policy advisors agree with Obama, not Hillary. And virtually 100% of all economic advisers score Obama’s proposals as having economic merit vs. Hillary’s proposals which contain solely political appeal. 

The inescapable irony is that if you want the “good ole days” of Clinton economics and prosperity, vote for Obama. If you want narrow carefully orchestrated proposals that will fail for lack of support (like healthcare in 1993), then go ahead and vote for Hillary. 

 

May 4, 2008

For Democrats, Instincts Differ on Economics

As they traveled across Indiana and North Carolina over the last few days, trading charges and countercharges about the wisdom of suspending the federal gas tax for the summer, Senators Hillary Rodham Clinton and Barack Obama were really having a larger fight.

They were arguing over who had better economic instincts.

For all the similarities between the two Democrats, there is also a core thematic difference between them. Mrs. Clinton tends to favor narrowly focused programs, like the gas-tax holiday, that speak to specific voter concerns. By suspending the tax and replacing it with a new tax on oil companies, Mrs. Clinton told a rally in Hendersonville, N.C., on Friday, she was standing with “hard-pressed Americans who are trying to pay their gas bills.”

Mr. Obama, on the other hand, leans toward broader programs meant to help nearly all middle- and low-income families. At a steel factory in Northwest Indiana on Friday, Mr. Obama called the tax holiday a “gimmick” and said he instead favored a cut in the payroll tax, which finances Social Security, of up to $1,000 for middle-class households “to offset the costs not only of gas, but also of food.”

The dueling instincts do not explain all the differences between the two Democrats. They also disagree about a health-insurance mandate (Mrs. Clinton favors one) and the capital-gains tax (Mr. Obama has indicated he would raise it more than Mrs. Clinton would). Mr. Obama is open to increasing the amount of income subject to the Social Security payroll tax; Mrs. Clinton has been critical of that idea.

But their contrasting approaches do extend to a range of issues, including the current economic slowdown, the mortgage crisis and retirement savings. The contrast has been present since before the primaries began — when Mr. Obama announced his middle-class tax cut, for example, and when Mrs. Clinton took out a whimsical television advertisement in which she was labeling Christmas gifts as if each were a specific policy proposal.

“Where did I put universal pre-K,” Mrs. Clinton asks herself, looking around. “Ah, there it is!”

The contrast between their approaches also highlights what many economists consider to be the biggest weakness of each candidate’s plan.

As the economy has slowed, Mrs. Clinton has released a series of proposals — to stimulate growth, stem home foreclosures and, most recently, reduce energy costs — that have helped burnish her image as the candidate most in touch with the specific concerns of working families. Yet policy experts say these proposals have generally made for better politics than economics.

“I was appalled by Hillary going with the gas tax,” said Alice M. Rivlin, a budget director under former President Bill Clinton who supports Mrs. Clinton for the nomination. It “looked like pandering,” Mrs. Rivlin said.

An open letter signed recently by more than 100 economists said the proposed tax holiday would do little to reduce gas prices. In part, that is because a fall in prices would lead to more demand, which would cause prices to return to their earlier level. The result would be that overseas oil-producing governments would get money now flowing to the United States government in gas taxes.

Along similar lines, Mrs. Clinton’s proposed stimulus plan was widely considered to be more complex and less effective than Mr. Obama’s suggestion of quick tax cuts, which was the same approach Congress and the White House ultimately took.

But Mr. Obama gets lower marks from budget experts for fiscal discipline. His package of tax cuts and new spending would cost roughly $300 billion a year, while Mrs. Clinton’s would cost less than $250 billion. Economists said they were skeptical he could pay for his program without increasing the deficit.

“Obama has a shorter list of tax breaks,” said Leonard E. Burman, director of the Tax Policy Center in Washington, “but has some really big items on it.”

Policy analysts specifically criticize Mr. Obama’s proposal to eliminate income taxes for senior citizens with up to $50,000 in income. Thanks to Social Security and Medicare, the federal government already spends a large amount of resources on older citizens.

“The tax system already does a pretty good job of protecting poor and near-poor seniors,” said Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities in Washington.

Both campaigns defend their proposals. Mr. Obama’s advisers say he would pay for his plans by, among other things, raising the capital-gains tax more than Mrs. Clinton would and doing more to crack down on corporate-tax evasion. His broad cut in the payroll tax is an aggressive response to middle-class income stagnation, they say, and, because most senior citizens do not pay payroll taxes, they need additional help.

“I’m the only candidate who’s proposed a genuine middle-class tax cut,” Mr. Obama said Saturday in Indianapolis, “that’s paid for in part by closing corporate loopholes and shutting down tax havens.” He also talked about his support for a tax credit to help homeowners who do not itemize their taxes and thus do not benefit from the mortgage deduction.

Clinton advisers say that her remedies to the economic slowdown have been more focused than Mr. Obama’s and that, early on, she correctly identified the housing market as needing specific help. Her economic plans would provide short-term relief to families in the months and years before her longer-term plans — on energy conservation, for instance — would have an effect, the aides say.

Mrs. Clinton often talks about other countries, like Germany, that have created jobs and cut their reliance on imported oil by investing in alternative energy.

“We lost 20,000 jobs last month, and people are saying, ‘Well, that’s better than we thought,’ ” she said at a John Deere sales center in North Carolina on Friday. “I don’t accept that at all.”

The Clinton and Obama approaches still have many more similarities than differences. Whether through focused tax breaks or sweeping ones, both candidates would reduce taxes on middle-class households and raise taxes on those making more than $250,000 a year.

Senator John McCain, the presumptive Republican nominee, by contrast, would make permanent nearly all of the Bush tax cuts, including those on high earners. McCain advisers say allowing taxes on high earners to return to their pre-Bush levels would damage the economy when it is already vulnerable.

Both Democratic candidates have also promised to regulate corporate America more closely than President Bush has and to spend more than $100 billion a year on an overhaul of the health-care system.

The one major difference between their health plans has received more attention than it deserves, economists say. Although opinion is divided, they generally favor the Clinton policy, which would require all Americans to have insurance, potentially making the health-care system more efficient. But health analysts say the Clinton campaign has falsely suggested the Obama plan would exclude people who wanted to sign up for insurance.

Despite the individual criticisms of the two agendas, policy experts praise both candidates for an unusually substantive primary campaign, each having come forward with detailed plans to address climate change, the middle-class squeeze and the decline of company-provided health insurance.

Mrs. Clinton and Mr. Obama have also been more forthcoming than Mr. McCain about how they would pay for their plans. Mr. McCain has proposed almost $300 billion a year in new tax cuts, on top of President Bush’s cuts, but has offered little detail about how he would pay for them.

Douglas Holtz-Eakin, the McCain campaign’s top economic adviser, has said Mr. McCain would later offer more details and that the tax cuts would spur economic growth, reducing their cost.

Perhaps the most important question, policy analysts say, is how Mrs. Clinton’s and Mr. Obama’s different approaches would affect their governing style.

On many budget matters, Mrs. Clinton’s instincts seem similar to her husband’s. Both favor carefully crafted tax credits that can help people who most need it, that come with relatively modest price tags and that seem likely to survive a divided Congress.

Mr. Obama sometimes talks of his vision of an “iPod government,” with simple programs that people can understand. He also talks of persuading voters and members of Congress, including Republicans, to support his plans.

Either way, the debate may not last much longer. No matter which Democrat is nominated, the disagreements with Mr. McCain are likely to be far larger.

Patrick Healy and Jeff Zeleny contributed reporting.

Energy Policy and Return on Investment

 

While we love our contentious politics and passionately favor our pretty candidates, we lose sight of the fact that there is actually some work to do and that the policies that will get that work done are complex, filled with nuance, trapdoors and obstacles.

Politics is well-suited to sound bites, but governance is far more complex than that. We favor Obama’s candidacy not because he knows everything about energy policy or economics — he doesn’t and neither do any of the other candidates. We favor him because he understands that any policy that is actually effective must engage the voters and decision-makers in the private and public sectors and his approach is more likely to achieve that plan of engagement. He is betting that people will accept some ambiguity and mistakes in the pursuit of good governance.

The business case discussed below must present the voter or decision-maker not only with some proposal that is based upon his direct benefits, but all the indirect benefits he/she will receive, the fact that there will be government incentives, and the fact that his/her competitors are getting the benefit of having already subscribed to the new policy. If the decision-maker is not sold on all these factors, he/she won’t do it. His/her job is on the line. Everyone wants to be a hero but nobody wants to risk cutting their employment throat. 

As the following article points out, the largest problem confronting us in changing the energy paradigm is the bean counter. Return on investment (ROI) is a term that is widely used and presumed to mean something. Unfortunately it  doesn’t mean anything except to the speaker. We all mean different things when we talk about whether a project is “worth” doing. That’s where government comes in as the referee.

Good government policy defines the scope of a project, the benefits and the costs in a way that educates people and has them speaking about it in the same way, using terms that are understood by everyone the same way. It is from the higher government point of view that decision-makers in the private sectors can gain a perceptual advantage as they see their place in their industry and their place in the economy as a whole.

Good government policy provides incentives and reliable information for decision-makers to make good decisions not only indiivudally for their own companies, but collectively so that each industry and each company, along with the economy as a wholoe has an opportunity to achieve a stable growth pattern, secure in the knowledge that we remain ahead of teh curve.

Energy policy is part of the larger government role of national security. We can all agree that we want to pursue policies that will increase the likelihood of peace and prosperity, where tax rates are low, tax revenues are high (because of high growth economic activity and productivity) and reducing entangling alliances and policies that might increase the the prospect of an expensive war or distract us from maintaining the value of our currency, while keeping the pressures of inflation checked.

Thus we all know that good national and state economic policy includes effective administration of an energy policy. However in a democratically driven republic with capitalist economic underpinnings nothing works without “consent of the governed.” Cooperation of voters and private sector decision-makers is not merely helpful, it is required. Consent cannot be effectively coerced without most of the rest of the voters or decision-makers subscribing to the policy (peer pressure and reducing the perception of risk because others are doing it). 

Thus the mission of the next administration will be to communicate effectively with the private sector and with voters to change the paradigm of energy production and consumption.

 

  • For example, plug-in hybrids that will provide a range of perhaps 40-50 miles on battery power alone, requires somewhere to plug them in. 
  • If they are plugged in overnight when usage is lowest, then the utility companies get increased revenues and profits, and government should reward the utility companies with credits for participating in the reduction of the carbon footprint of transportation. 
  • But if the cars are plugged in during peak hours, it could be a financial disaster for the utility companies unless they are able to secure cheap energy to absorb the already overloaded hours.
  • This opens the door for wind turbine and solar capture farms in areas that are presently unused, and which would be environmentally unaffected by installation of renewable energy sources. 
  • It opens the door for entrepreneurs to convert existing hybrids to plug in versions and for car manufacturers to offer new vehicles with the hybrid capability to  run on battery alone, run on gasoline, run on diesel and even to run on alternative bio diesel.
  • It opens the door for entrepreneurs to offer home conversion for solar (PV) electricity for powering up those hybrids, golf carts etc. during PEAK times.
  • This in turn opens the door for companies that deliver products and services to businesses and residences to convert to such vehicles, including government society services like police, fire, public transportation etc.
  • The result if properly administrated and orchestrated, is a direct cost savings to all the participants, direct increase in profit for the private sector, direct decrease in major costs for government services, and indirect benefits that are more important at higher levels of government than a particular locale or even state.
  • ALL of this requires an effective leader who gives voice, vision and direction motivated by a desire to produce a benefit to society (everyone) rather than part of a society with merely leads to abuses that are always traced to schemes that are merely masked agendas for transfer of wealth, accumulation of power and the enslavement of the citizenry. 

 

Thus the business case discussed below must present the decision-maker not only with some proposal that is based upon his direct benefits, but all the indirect benefits he will receive, the fact that there will be government incentives, and the fact that his competitors are getting the benefit of having already subscribed to the new policy. If the decision-maker is not sold on all these factors, he/she won’t do it. His/her job is on the line. Everyone wants to be a hero but nobody wants to risk cutting their employment throat. 

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Sales & Marketing: Why ROI Calculators are a Formula for Failure

Financial justification tools face three major challenges: Prospects don’t believe their output; facilities managers are not financially trained; and sales reps are not trusted to explain the numbers.

Rebates, ITCs, projected energy costs, NPV… Finance is not a shallow subject, but most people barely get their toes wet before they drown. Just ask three CFOs to explain “return on investment.” You’ll soon be gasping for air, even if you thought you knew what it meant.

When it comes to sustainability, for-profit corporations still do more talking than buying. Without a business case, few projects end up getting past the “nice idea” stage.

This is as true for chiller plant controls as it is for a utility-class wind farm. Capex approvers need convincing that sustainability goes beyond saving polar bears, and isfiscally the right thing to do for their company.

Take energy efficiency as an example, performance contracts aside. Unless a sales rep can get C-level executives to think about energy as a manageable P&L line item, instead of as a fixed expense, the rep will be going out the way they came in — empty-handed. No business case, no deal.

Point of failure

Who prepares the business cases for your proposals? Unless you can find a way to keep your finance department out of doing it, this is a bottleneck in the sales process. Thus the popularity of ROI calculators.

Does your company use an ROI calculator?
Post a comment and share your experience.

Sales reps who open up an ROI calculator are likely to experience a vague sense of dread. The facilities manager doesn’t really understand or believe the result — accounting isn’t their profession, after all — but they provide the numbers and nod politely.An attempt to explain the results is likely to embarrass the sales rep — accounting isn’t their profession, either — but they try. The prospect does more nodding, and grows more skeptical.

So, companies say they have tools to calculate payback, reps say they use them, and prospects say they understand the results. The marketing department, who spent plenty to have the ROI tool developed, hears neutral feedback or nothing at all. They don’t know the tool is ineffective and has fallen into disuse.

Soon, though, the tool is out of date. The state grant expires, the latest energy bill changed the depreciation rules again, or energy costs have outpaced the projections. Even a spreadsheet that is still valid is not trusted beyond a few months after it was created.

What’s the formula?

In companies where I’ve seen ROI tools succeed, there have been common traits. First, these typically are larger companies with multiple products, so they have more than one ROI tool. One or two people with financial backgrounds are assigned to researching, building, and maintaining the tools. They take pride in their product.Second, each tool is designed to allow the prospect and sales rep to produce a believable business case. That means believable for the customer even if it’s not as favorable to the vendor. When it’s readable and believable, it has a chance of showing up in the C-level decision maker’s e-mail. All assumptions and constants are footnoted with credible sources, and none of them are locked. If the prospect wants to reduce the power factor or increase the number of cloudy days, let them. It’s their ROI.

Finally, train sales reps and give them a support line. Try as you may to make the user interface simple, it’s still Excel and it’s still complex. Webinars are effective at teaching sales reps how to use these tools, especially in a third-party sales channel — and the recording of the webinar stays around for reference. Reps then need to know who to call for help whenever they get stumped in front of a prospect.

To close a business-to-business sale, you need to demonstrate the cause-and-effect relationship between investing in your product and achieving a business goal. In the C-suite, there’s nothing as powerful as a good ROI tool in the hands of someone who is comfortable using it.

 

Mortgage Meltdown: Fixing Broken Mortgages — Getting New terms

CLINTON — MCCAIN FORECLOSURE FREEZE GETS COLD SHOULDER BUT SOUNDS GOOD

Well here is a version (SEE ARTICLE BELOW) of what we have been pushing for months —- changing the terms of the mortgages so that the homeowner can stay in the house and the mortgage can be modified, sold or recast for capital accounting. This is a lot more sophisticated than the “mortgage freeze” proposed by Clinton and McCain and it is working already so we can’t dispute the success.

  • The problem with a “mortgage foreclosure freeze” is that it is a sound bite that doesn’t really mean anything — like the gas tax holiday. It doesn’t address any of the problems but it gives rise to the illusion that the homeonwer is getting some relief.
  • The problem for Obama is that he sounds like he is against providing relief because he understands the nuances of how to get that relief — without pandering for votes. People don’t like nuance and don’t have the time for complex answers. So they vote against themselves based on sound bites, hoping gas prices will go down (they won’t) and that their house will be saved by just doing one thing like a freeze on foreclosures that lasts ninety days (that won’t work either).

There is no Clinton-McCain plan for relief because no order, legislation or rule is pending that will freeze anything and nothing is pending. Hillary and John are just blathering. They haven’t ACTUALLY proposed the plan by introducing a bill on the Senate floor. The plan of these pandering politicians is get elected (the people be damned): the method is to make use of time-honored sound bites that consist of misleading statements and outright lies. The truth is that neither McCain nor Clinton has a clue about gas prices or mortgages.

Although this trading of mortgage obligations is obviously providing some relief, it doesn’t address the root cause of the mortgage meltdown. And much as I don’t care for the people or their methods who perpetrated this fraud on the world, there is no REAL solution unless some value is restored to the balance sheet of financial institutions and investors who purchased the collateralized mortgage obligations. Thus combining attributes of this plan with a more comprehensive plan to restore the capital reserves of financial institutions and investors would be preferable.

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HOUSING

Investors move in to save broken mortgages

Homeowners who owe more than their property is worth are offered new terms.

By E. Scott Reckard
Los Angeles Times Staff Writer

May 1, 2008

Jared Lanning, struggling to pay a home loan on which he owed more than his house was worth, was thinking he might just let the lender take back the property. Then he got a call one evening from an Orange County investor who had bought his mortgage.

“I want out of your loan,” said the investor, Evan Gentry, chief executive of G8 Capital of Ladera Ranch, who offered to lower the balance and the interest rate.

Lanning, a crane operator in Englewood, Colo., was skeptical. A phone pitch, after all, had led to his getting the unaffordable loan in the first place. But Gentry was legit: He helped Lanning get a new Federal Housing Administration-insured mortgage — with a $12,000 lower balance. Gentry also paid $5,000 in closing costs for the new loan. Lanning’s new monthly payment is $200 less than before.

Investors — including big fish like former Countrywide Financial Corp. President Stanford Kurland as well as smaller fry like Gentry — are buying loans on the cheap from lenders who want them off their books. By paying less than face value for the mortgages, the new holders can modify loan terms, including shrinking the amount owed, and still make money.

With some economists projecting 2 million foreclosures this year, legislators and regulators are hoping to encourage wide use of this model. They want lenders and investors in mortgage bonds to mark down what borrowers owe and then provide them with lower-cost loans. It’s a tricky business: No one wants to be seen as bailing out speculative buyers or imprudent lenders, but they also don’t want mass foreclosures to devastate neighborhoods and the economy.

The Federal Deposit Insurance Corp. described the problem Wednesday as “a self-reinforcing cycle of default, foreclosure, home price declines and mortgage credit contraction, the likes of which we have not experienced since the 1930s.” The agency is proposing that the government lend $50 billion to 1 million borrowers to help them replace unaffordable loans.

Sub-prime mortgages with interest rates ratcheting higher have proved less of a problem than once feared, because interest rates overall have dropped. But a “toxic combination” of falling home prices and borrowers who can’t afford even the initial low rates on adjustable loans is now the issue, FDIC Chairwoman Sheila C. Bair said in an interview this week.

“Many more borrowers are under water,” she said. “And many more are just walking away.”

Many people bought homes with nothing-down loans at the peak of the housing boom — 29% of all buyers in 2007 made no down payments, Treasury Secretary Henry S. Paulson Jr. said recently. Others have sucked all their equity out of their properties with refinancings.

According to Moody’s Economy.com, some 8.8 million Americans — more than 10% of all homeowners — owe more than their houses are worth, although a Mortgage Bankers Assn. economist contended the figure was lower, perhaps 8%. In any case, there is wide agreement that many of those troubled borrowers have proved surprisingly ready to abandon their properties, even when lenders offer to modify their loan terms as they were encouraged to do by the Bush administration.

“We are working with borrowers to keep them in their homes, but a lot of them really don’t want to stay,” said Babette Heimbuch, chairwoman of FirstFed Financial Corp. of Los Angeles, a savings and loan operator that specialized in adjustable-rate mortgages, including many that were made without full documentation of borrowers’ incomes.

FirstFed has about $6.3 billion in loans on its books. It said that $667 million of that balance, more than 10%, was delinquent or in foreclosure as of March 31, up from just $46 million a year earlier. FirstFed said Wednesday that it lost $69.8 million, or $5.11 a share, during the first quarter this year compared with a profit of $8.4 million, or 61 cents, a year earlier. It set aside $150.3 million for loan losses during the quarter, up from $3.8 million during the first quarter of 2007.

Because FirstFed kept most of its loans on its books rather than selling them, it should have been easier for the company to work with borrowers to modify the loans. Heimbuch said FirstFed forecloses only after analyzing 10 other options to offer the borrower, including lowering the interest rate; changing to a five-year, fixed-rate loan requiring payment of interest only; and writing down the loan balance.

Still, she said, up to 50% of borrowers who miss payments don’t respond to letters and repeated telephone calls to see if something can be worked out.

Some customers had acquired second mortgages and couldn’t make new arrangements with the other lender, she said. “I think some know they told us the wrong income and are afraid to come clean, though we would still work with them . . . to keep them in their homes if possible.”

For struggling borrowers, it’s a big mistake not to return such calls these days, said Gus A. Altazurra, a veteran mortgage executive who recently raised $10 million from private investors to buy and modify loans for which homeowners are still making payments.

“They’re probably going to help you, given the current situation,” said Altazurra, whose Irvine-based Vertical Fund Group has been negotiating with lenders of all sizes to buy loans. He said “a flood” of mortgages went up for sale in April after lenders closed their books on a horrendous first quarter.

Altazurra, who has paid as little as 31 cents on the dollar for some loans, said the terms of some mortgages made at the peak of the boom were hard to believe. One loan he bought from a Texas bank was to a borrower with a very low credit score — 484 — who refinanced and cashed out 100% of the equity in the property, he said.

Gentry, the other Orange County loan buyer, said he had obtained commitments from investors to provide $100 million in capital for workouts on loans that have stopped paying, current loans that can no longer be sold and foreclosed properties. He has bought nearly $50 million in mortgages and property so far.

Gentry purchased Lanning’s loan in a pool of mortgages from a San Diego lender that was going out of business. He said that on average his private venture was paying 70 cents to 80 cents on the dollar for loans like Lanning’s that were still current, and “less if the loans are nonperforming.”

Lanning had no home equity left — and thus had little incentive to keep sacrificing to make payments — before he got the smaller, cheaper FHA loan. Now his outlook has changed.

“We can’t do anything frivolous now,” he said. “But if we do it right, we have enough. That other loan was just pushing us over the top.”

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