The Emperor’s New Clothes Revisited


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Editor’s Comment:

Back when I first started writing the blog I was looking for an easy parable that would simplify the exotic theft performed by Wall Street. It did not occur to me that I would need to write a second blog alerting the readers to government complicity in compounding both policy and fiscal errors committed by the Federal Government. In 2007 and 2008 the situation was dense and complex with varying layers of plausible deniability to cover up what turned out to be the largest economic crime in human history-a milepost that will standout even hundreds of years from now. Now the government is engaging in the same transactions lending an aura of legitimacy to transactions that were not only fraudulent but which also corrupted our property title system. The degree of corruption that has been revealed so far is barely the tip of a toxic iceberg. The premise here is simply that the investment banking entities sold worthless mortgage bonds to investors based on the promise that the bonds would have value because millions of mortgage loans were being assigned in exchange for the money held in REMIC pools as a result of the sale of the worthless mortgage bonds to investors.

It has never been true that the investment banking industry owned or undertook any risk associated with the underwriting of those mortgage loans. It has also never been true that the investment banking entities that sold the mortgage bonds to hapless pension funds and other institutional investors ever owned any of those mortgage bonds for their own account. Why would they? They knew very well that the loans and the pools had been created with poison pills to assure virtual destruction of the entire apparatus that was later described as securitized loan.

For reasons that are easily explained by reference to the political realm but which are completely unjustified by reference to any generally accepted principals of finance and accounting, the investment banks have falsely been allowed to claim the losses of their first victims-the pension funds and other investors who bought mortgage bonds. In so doing and without any questions the government set the stage for a bail out of the financial industry, the total size of which can be expressed in multiples of our Gross Domestic Product. As we have slowly and painfully learned government agencies and government sponsored entities were willing conspirators

So the first lie is that the banks never owned the loans, the second lie is that the banks never owned the mortgage bonds, and the third lie is that the government bought and sold the mortgage bonds from the investment bankers. With each announcement of the purchase or sale of mortgage bonds by the Federal Reserve or other U.S. agencies we slip a little deeper into the abyss from which we may never emerge. The transactions referred to in the article below are non-existent and consist of false declarations from both sides of the transaction-the government and the investment bankers. First the investment bankers pretended to sell mortgage bonds which they never owned to the government; and then the government pretended to sell the same mortgage bonds back to the investment bankers. Since neither one had an ownership interest in the mortgage bonds we are forced back to the parable of the Emperors New Clothes. We are to accept the information of this “transaction” as though it had any basis in reality or truth. In fact, it has none. And to add insult to injury, the mortgage bonds themselves are intended to “derive” their value (hence the word “derivative”) from underlying mortgage loans that were properly sold and underwritten by appropriate industry players. This is and remains a lie in that both the terms of the transactions with the homeowners and the documents containing declarations of fact relating to the transactions were patently false and fraudulent in that they were intended to deceive everyone outside of the financial services industry.

The government should have demanded its money back on the original sale by the investment banks. In that sale, the government acquired nothing. The return of the money to the government is being disguised as a sale, further corrupting title to both the mortgage bonds and the real property. If any actual sales had occurred, state and federal law would have required complete disclosure of those sales as a condition precedent to initiating or concluding any process in foreclosure. The current government policy of kicking the can down the road is at the expense of our prospects as a nation and at the expense of the citizens of the nation who subscribe to the belief that no person should be deprived of life, liberty or property without due process of law. Each of these foreclosures would fail if properly scrutinized. They would fail because the initial documentation was faked, and all documentation leading up to foreclosure compounded the fakery. Today we have our own government further compounding the fakery and lending credence to false transactions.

U.S. Completes Sale of Mortgage-BackedSecurities, Earning $25 Billion


WASHINGTON — The Treasury Department announced on Monday that it had finished selling the $225 billion in mortgage-backed securities it bought to help stabilize the markets during the worst of the financial crisis.

The government ended up making a $25 billion profit on the securities, which are guaranteed by Fannie Mae and Freddie Mac, the government-owned mortgage finance companies. The profit came from interest payments, principal and rising prices for the securities, the department said.

“The successful sale of these securities marks another important milestone in the wind-down of the government’s emergency financial crisis response efforts,” Mary Miller, assistant secretary for financial markets, said in a statement. “This program helped support the housing market during a critical moment for our nation’s economy and delivered a substantial profit for taxpayers.”

Treasury bought $225 billion in mortgage-backed securities in 2008 and 2009 as part of a wide-ranging effort to stabilize the housing and financial markets, an effort started by the Bush administration and continued and amplified under President Obama.

In March 2011, the Treasury Department announced that it would start to sell off what remained of its portfolio. To avoid disturbing the still-fragile housing finance market, it limited sales to $10 billion a month, and said it would discontinue the sell-off if any market disturbances occurred.

Thus far, Treasury’s sale of its mortgage-backed securities portfolio has provided a lucrative return to the taxpayer. But it is only one piece of a broad and expensive effort to prevent the collapse of the financial system and housing market.

The government also put Fannie Mae and Freddie Mac under federal conservatorship in 2008, and the taxpayer has spent about $150 billion bailing out the two government-sponsored enterprises.

Estimates vary, but the Federal Housing Finance Agency projects the ultimate cost to the taxpayer for Fannie Mae and Freddie Mac could be $121 billion to $193 billion, depending on the strength of the housing market and other variables.

Treasury also spent about $414 billion to buy bad assets and restore confidence in American financial institutions via the Troubled Asset Relief Program, also known as TARP. That program, though much hated by the public, has received significant revenue from its sale of stakes in participating institutions and from interest payments. The nonpartisan Congressional Budget Office expects it to ultimately cost taxpayers about $34 billion.

The Federal Reserve also initiated significant purchases to prop up the financial markets in the wake of the crisis. According to its most recent release, the Federal Reserve still has about $850 billion in mortgage debt on its books, along with about $1.7 trillion in Treasury debt. The Federal Reserve delivered $78.4 billion of earnings on its portfolio to the Treasury in 2010, and $76.9 billion in 2011.

In recent months, investors have tentatively returned to buying mortgage-backed debt. The housing market seems to be strengthening as well. In a monthly report released on Monday, Fannie Mae economists cited a stronger labor market and other improving indicators as hopeful signs that 2012 might be the start of a housing turnaround.

But, it noted, “while mortgage rates have hovered near their record lows, purchase mortgage applications have remained at depressed levels,” indicating that there remained significant weakness.

Strategic Default with a Venegeance! tonight 7pm


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Editor’s Comment: 

Tonight’s Meeting: Tuesday, March 20, 2012 Phoenix Arizona

Due to many requests, I’ll be doing the “Strategic Default with a Vengeance” presentation again tonight.  Please get the word out.

This class can be an absolute paradigm for anybody struggling under the weight of a lost or reduced income, foreclosure, an “underwater” home, a bad credit report, personal debt or credit card debt.

My goal in offering this class is to help homeowners (and non-homeowners) put themselves in a better position in a year or two than the banks and administration are going to have them in 5, 8, 10 or even 15 years.

The rules are in place to protect you, so step up and use the rules to your advantage and improve you family’s economic outlook as well as your piece of mind!

We meet every week!

Every Tuesday: 7:00pm to 9:00pm. Come early for dinner and socialization. (Food service is also available during meeting.)
Macayo’s Restaurant, 602-264-6141, 4001 N Central Ave, Phoenix, AZ 85012. (east side of Central Ave just south of Indian School Rd.)
COST: $10… and whatever you want to spend on yourself for dinner, helpings are generous so bring an appetite.
Please Bring a Guest!
(NOTE: There is a $2.49 charge for the Happy Hour Buffet unless you at least order a soft drink.)


I have set up a MeetUp page. The page can be viewed at Please get the word out and send your friends and other homeowners the link.

May your opportunities be bountiful and your possibilities unlimited.

“Emissary of Observation”

Darrell Blomberg



The USA: Blessing The Abuse And The Bullies


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Editor’s Comment: 

Cautiously optimistic in CA

The L.A. Times reports that CA AG Harris has tapped UC Irvine Professor Katie Porter to monitor the mortgage settlement in CA. Normally this would be cause for joy as it is hard to image a better candidate than Professor Porter. She’s smart, she’s knowledgeable, she has been looking at this morass for a long time and she and her close colleagues (such as Professor Adam Levitin) know where the buddies are buried. In addition, the former Elizabeth Warren’s student is a master at working with very large amounts of information, which will be the case here. For a sample of her statistically‑based work see her recently published book “Broke: How Debt Bankrupts the Middle Class”.

But these are not normal times, and hence some are wondering why Professor Porter would accept such a position. So far we can only guess that she may be planning in becoming an eleventh hour mother of all whistleblowers; she may eventually denounce the settlement as unworkable and as the farce that it so far is. We just hope that it won’t be too late by then.

Certainly it is hard to see how, under the current status quo of the settlement, she would be able to ensure that the banks deliver “meaningful relief to California borrowers” (AG Harris’ words), as there is nothing meaningful in the settlement to start with.

Abigail Field, amongst many others, continues to bring us details about the settlement and, well, personally I think that we would have been better off without one. While there are many worrying provisions in that settlement a few really jump out, such as the incredible “error tolerance(s)” therein proposed. Abigail writes:

“Note: You may want to print out table E-1 while reading this, or at least keep it open in another browser window; these metrics are shocking enough you won’t want to take my word for it, you’ll want to verify I’m citing the text correctly.

Now, the table doesn’t come right out and say, we, the federal and state governments of the United States of America do hereby bless the institutionalization of servicer abuse, but it should. To understand why, you need to keep your eye on how the table’s columns are defined. For most issues, the critical columns are C “Loan Level Tolerance for Error” and D “Threshold Error Rate.” Later I’ll talk about the problems in Column F, the “Test Questions.”

When Error Isn’t Error

Loan Level Tolerance for Error, Column C, is defined as:

“Loan Level Tolerance for Error: This represents a threshold beyond which the variance between the actual outcome and the expected outcome on a single test case is deemed reportable” (bold mine; see footnote 1 page E-1-14)

Get that? Any error up to the threshold doesn’t count; it’s not reportable error. Now see footnote 2, which defines “Threshold Error Rate” (Column D):

“Threshold Error Rate: For each metric or outcome tested if the total number of reportable errors as a percentage of the total number of cases tested exceeds this limit then the Servicer will be determined to have failed that metric for the reported period.”

Only “reportable” errors count, and only if enough of those are reported can get a servicer in trouble under the settlement.”

Ms. Field’s post is here (caution: reading it may cause uncontrollable rage): The Mortgage Settlement Lets Banks Systematically Overcharge You And Wrongly Take Your Home

So back to Professor Porter. At this juncture she is probably the only one who really knows why she is getting involved. Certainly as currently proposed (remember, it is not yet final) this “settlement” settles nothing, it adds insult to the injury and certainly will not bring “meaningful relief”.

The L.A. Times article is here:,0,5768422.story


What Are You Doing About Injustice?


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Where is the outrage?

From 1936 through 1946 a war was waged against the citizens of Athens and Etowah, Tennessee.  Led by Paul Cantrell who was elected Sheriff during rigged elections, the citizens of McMinn County were subjected to unparalleled abuse.  False arrest was common.  People simply passing through the County on buses were arrested on trumped up charges and held until they posted bail or paid fines.  These fines were taken by Cantrell and his deputies as personal income.

The rigged elections of 1940, 1942 and 1944 were reported to the U.S. Department of Justice, which in a striking parallel to election violations in more modern times, did nothing.  In the early 40’s the Department of Justice simply looked the other way as the crimes being committed by public officials.

What Sheriff Cantrell (later Senator Cantrell) did not expect was the return of thousands of World War II veterans who had just liberated Europe from the Nazis.  These courageous veterans took up arms in 1946 against the Cantrell cartel, removed him from office by force, and restored liberty to the citizens of McMinn County, Tennessee.  Not a single veteran was prosecuted.

Today, citizens are facing yet another Sheriff Cantrell cartel but this time it is the large financial institutions with the backing of the United States Government and the support of legions of corrupt lawyers.  Where is the outrage?

Commentator Charles Davis reports in Al Jazerra on March 17, 2012, “…If you want to make a lot of money in a less than honest way, the way to do so lies not in stealing purses or cars. No, the secret to getting rich and staying that way is by controlling the commons: control the land and natural resources, with a few armed guards or the world’s only superpower backing your claim, and one can charge a hefty fee for the necessities of life…”  Where is the outrage?

Homes are stolen by banks wielding documents made from vapor.  Lawyers enter hundreds of courtrooms daily waving fraudulent documents before the court, attesting to the validity and truthfulness of documents they themselves authored during a spiritual eventide.  Notaries Public misuse their public trust by improperly attesting to documents (as was seen in the recent case of Ms. Paula Gruntmeir, a Tiffany & Bosco employee – suspended for a second time by the Arizona Secretary of State).  Judges by and large accept the lies of the lawyers – resulting in a massive transfer of property from American homeowners and the new landed gentry – the banks and their invading Knights Templar: corrupt lawyers.  Where is the outrage?

In 1831 a twenty-six year old French nobleman, Alexis de Tocqueville, travelled to the United States.  His purpose was to study the American system of laws and that he did.

de Tocqueville wrote about his views of American Society and its laws in his 1835 book Democracy in America.  de Tocqueville noted that in America the aristocracy “…entertain[ed] a hearty distaste to the democratic institutions of their country.  The populace is at once the object of their scorn and their fears.  If the maladministration of the democracy ever brings about a revolutionary crises, and if monarchial institutions ever become practicable in the United States, the truth of what I advance will become obvious…

And, what was it that de Tocqueville ‘advanced’?  “The two chief weapons which parties use to ensure success, are the public press, and the formation of associations.”

Our public press has become impotent.  The investigative reporters who in the past would challenge unfounded statements of our political and public leaders have all but vanished.

How is the public to vent their outrage?  It is our constitutional right to form associations.  Sometimes we call associations towns, cities, counties, political parties or just clubs.  From an early age Americans have been taught to rely upon their own abilities in order to resist evil and the difficulties of life.  Lawyers and bankers lying in public and court are creating the death knell for honesty in our judicial systems.  It is up to individual citizens to associate and recover the loss of truth in our society.

The time has come to take dishonest lawyers to task.  To recover from the outrages taken against homeowners the task at hand is to complain to your State Bar Association each and every time a lawyer steps in court and propounds or argues an untruthful document.  The Bar Associations will be inundated with thousands if not hundreds of thousands of complaints.  Much like the WWII veterans who faced down Sheriff Cantrell at the steps of his jail in 1946, sooner or later the will of the people will be heard through their association at the front doors of the state legal licensing authorities.

Where is the outrage?  It is in your hands, your pen and your paper.  This is your call to action.

The Battle of Athens: Restoring the Rule of Law



Foreclosure Alternatives Explored


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Editor’s Comment: 

By William C. Veal, Esq.

As we see the progress, or lack thereof, of the investigation into the massive scan called Foreclosure in our country, we read many articles by various people regarding the current status of investigations and attempted solutions.  See the two articles below.

            One article, by Jessica Bye reports on two “whistle blowers” who state that BoA defrauded the Federal Housing Administration by inflating appraisals used for government-insured home loans.  In one of the lawsuits, it states, “In other words, BoA has had it both ways.  BoA has continued to maximize the value of its mortgage portfolio with anti-HAMP (Home Affordable Modification Program) modification practices and then make money by committing fraud on the homeowner”.  Obviously, lawsuits are brought by those who believe they have a strong position to bring to task the wrongdoer.  Those who have been foreclosed on improperly have the same sense of being wronged and have a right, if not an obligation, to present their cases to the courts.  While the mortgage companies have substantial assets with which to pursue their claimed remedies against the individual homeowners, those same homeowners are often befuddled by the flood of paper work and the myriad of legal documents with which they are confronted.  They rarely have the assets with which to determine whether or not “robo-signing” was used or whether or not the proper documents exist which would allow a legitimate foreclosure by a financial institution.  Accordingly, many homeowners are set out of their homes without knowing the full extent of their rights against the mortgage company.

            While extensive litigation and negotiation is underway, and has been for an extended period of time, various resolutions which, it appears to me, still benefit the mortgage lenders, are on the horizon.  One of the most interesting descriptions was written by Andrew Dunn.  See the second article below.  He addressed the issue of converting mortgages to leases.  While the details of this program are not confirmed and therefore unavailable, it would appear by the mere wording of converting mortgages to lease hold interests, the homeowner, it appears to me, is once again on the losing end of that arrangement.  While there are positives such as the homeowner being allowed to remain in their residence, the loss would be considerable to the homeowner forfeiting all ownership interest.  This would be particularly true if the mortgage documents could be called into question.  It would appear that the homeowner loses any rights that he may have had should the documentation be faulty.  Homeowners would be unable to negotiate their interests, much less protect them.  Obviously, if the economy begins to show substantial growth, then the investors would be the ones who reap the profit.  Unfortunately, I have been unable to determine whether or not such mortgages converted to leases would be long term or short term contracts and what modifications, if any, would be available to the leaseholder.  Obviously, “evicting a renter” is legally less difficult than a foreclosure process.

            It still seems to me that the tap dancing is only becoming more and more refined and shows little promise of real resolution to the problems facing homeowners today.

Whistleblower says BofA defrauded HAMP

By Jessica Dye

NEW YORK, March 7 (Reuters) – Bank of America NA prevented homeowners from receiving mortgage-loan modifications under a federal program in order to avoid millions of dollars in losses while benefitting from financial incentives for participating in the program, according to a complaint unsealed in federal court Wednesday.

The suit is the second whistleblower complaint unsealed so far with apparent ties to the $1 billion False Claims Act settlement announced by Bank of America and the U.S. Attorney’s Office for the Eastern District of New York on February 9.

The Bank of America settlement is also part of the sweeping $25 billion agreement reached between state and federal authorities.

Final settlement documents have yet to be filed in the BoA settlement, which the U.S. Attorney’s Office said was the largest ever False Claims Act payout related to mortgage fraud.

The settlement resolved claims that Bank of America’s Countywide Financial subsidiaries defrauded the Federal Housing Administration by inflating appraisals used for government-insured home loans, as well as claims involving the Home Affordable Modification Program, a federal program to help American homeowners facing foreclosure.

The complaint unsealed Wednesday was filed by whistleblower
Gregory Mackler, a Colorado resident who said he worked
alongside Bank of America executives while an employee at Urban
Lending Solutions, a company to which Bank of America contracted
some of its HAMP work.

While working at Urban Lending, Mackler said he saw BofA and its loan servicing subsidiary, BAC Homes Loans Servicing LP, implement “business practices designed to intentionally prevent scores of eligible homeowners from becoming eligible or staying
eligible for permanent HAMP modification.”

The bank and its agents routinely pretended to have lost homeowners’ documents, failed to credit payments during trial modifications and intentionally misled homeowners about their eligibility for the program, the complaint alleged.

BoA let through just enough HAMP modifications to avert suspicion and allay congressional critics, while not enough to incur any substantial losses to its own bottom line, according to the complaint.

“In other words, BoA has had it both ways. BoA has continued to maximize the value of its mortgage portfolio with anti-HAMP modification practices and managed to make money by committing fraud on homeowner,” the lawsuit said.

A lawyer for Mackler could neither confirm nor deny that the complaint was tied to the settlement. A spokesman for the U.S. attorney’s office and a representative for Bank of America declined to comment.

In February, a whistleblower complaint was unsealed from Kyle Lagow, a former employee in a Countrywide appraisal unit which detailed allegations of Countrywide’s “corrupt underwriting and appraisal process.” Bank of America purchased Countywide in June 2008

Under the False Claims Act, successful whistleblower complaints can earn that whistleblower up to 25 percent of the
settlement amount.

According to the docket, the U.S. Department of Justice has until March 16 to decide whether to intervene in both the Mackler and Lagow case.  The case is United States of America v. Bank of America NA et al., in the U.S. District Court for the Eastern District of New York, no. 11-3270.

Bank of America eyes turning troubled homeowners into renters


Bank of America is exploring a program that would allow homeowners on the brink of foreclosure to remain in their homes by becoming renters.

Such an ambitious program likely would draw interest from thousands of families still struggling with their mortgages. But it faces many hurdles and is unlikely to get off the ground nationwide.

The Charlotte-based bank has applied for a trademark for the phrase “Mortgage to Lease,” presumably what would become the name of the program.

The name of the program seemingly coincides with comments made by the head of the unit dealing with Bank of America’s troubled mortgages, Ron Sturzenegger, late last year. In an interview with housing finance news service HousingWire, he said the bank is exploring programs that would involve a short sale to an investor who would then lease it back.

While confirming that the bank is in the very early stages of exploring such a program, Bank of America spokesman Dan Frahm said nothing has been announced or is imminent.

He said the bank frequently applies for trademarks for program names that never come to pass.

Bank of America has been struggling under the weight of thousands of delinquent mortgages, the majority acquired through the bank’s 2008 acquisition of Countrywide Financial Corp. The division lost $18 billion in 2011, according to the bank’s annual report filed this week.

While the bank has been working through bad loans, it still had more than $150 billion in its portfolio at year’s end.

The bank already offers a number of standard refinancing and other foreclosure prevention programs.

A mortgage to lease program would be much more ambitious. While similar programs have been tested in smaller areas, none have been offered nationwide, said Guy Cecala, publisher of Inside Mortgage Finance.

There is no shortage of investors willing to buy properties. The trick would be to make the math work for all parties involved.

Such a program generally ends up as a good deal to the homeowner. The family gets to stay in their home, and the debt is settled for less than what they owe while avoiding a more damaging impact on their credit score.

The bank or investor, though, becomes a landlord, complete with responsibilities for upkeep, maintenance, insurance and taxes.

But a bank would see some benefits from a program. It would avoid the labor-intensive, costly foreclosure process, and evicting a renter is generally easier than foreclosing on a homeowner.

Cecala said he doesn’t expect Bank of America’s program – which would take years to develop – to come to pass.

“People like it in theory,” he said. “But when you start thinking about the logistics involved, it gets very complicated and perhaps not workable.”


Hormonal Imbalance Suffocates Homeowners


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Editor’s Comment: 

Matt Stoller nails it in his article below.  In order to arrive at Buffet’s conclusion, you must start with the premise that the banks did nothing wrong.  50 AGs filing actions against the banks and Buffet arrives at the conclusion that the solution will be hormones?!  Time and time again we see these subtle statements implying that the fault is the homeowners.  That they are the deadbeats.  But if you took that premise out and judged fairly, all these guys would be in jail.  Buffet has a financial stake in seeing the banks as prosperous and doing no wrong.

Matt Stoller:  Warren Buffet says, “Hormones” Will Fix the Housing Crisis

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. 

Last week, Warren Buffett made some news with his folksy, charming as always shareholder letter.  Most people focused on his admission that he was wrong about the housing crisis.   Buffett pointed to his year ago statement that “a housing recovery will probably begin within a year or so.”  And he said, graciously, that this prediction “was dead wrong.”  This is rhetorically notable, because it’s so rare that our masters of the universe ever admit error.  But it is just more PR dressing up bad policies.

Buffett is a very important man, not just because of his immense wealth, but because he has the ear of policy-makers and the President.  I once went through a pile of phone records of Treasury Secretaries Hank Paulson and Tim Geithner, and Buffett seemed to be on speed dial (he was contacted more than George Bush, for instance).  Buffett’s advice to the President over the past few years has been that America built too many homes, and that the country is working through this excess supply naturally.  Eventually, that will lead the economy to turn around (a thesis Joe Weisenthal has tracked for months now in the data).  It’s actually not so different from Alan Greenspan’s somewhat-kidding-but-not-really advice to burn excess housing stock.  So when Buffett talks, it makes sense to listen.

Here’s what he has to say about the housing sector today.

This hugely important sector of the economy, which includes not only construction but everything that feeds off of it, remains in a depression of its own. I believe this is the major reason a recovery in employment has so severely lagged the steady and substantial comeback we have seen in almost all other sectors of our economy.

Buffett himself italicized depression.  He wanted this picked up by all of us.  But what I found most interesting is his cure for the housing market.

That devastating supply/demand equation is now reversed: Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over. And while “doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.

Essentially, he argues that household formation is artificially low, and that this will naturally be cured by hormones, as it has in the past.  Only, the lack of family household formation is actually a new phenomenon.

Family households have been forming at an average rate of 651,000 per year since at least 1947 (when the first annual household data became available). During that whole period the only years showing “negative formation” are 2008, 2010, and 2011.

And what is behind this lack of household formation?  There are possibly many reasons, but one sure driver is student debt.  The average college graduate now carries $25k in student debt after graduation.  It’s no surprise that young people aren’t buying homes, but are increasingly renting and doubling up with others.

According to a recent Federal Reserve study, only 9 percent of 29- to 34-year-olds got a first-time mortgage from 2009 to 2011, compared with 17 percent 10 years earlier.

Student debt is just one facet of the punitive infrastructure we have set up towards debtors.  Another facet of this infrastructure is that housing market itself is broken because creditor middlemen known as mortgage servicers are skimming from both homeowners and investors.  These problems have created an atmosphere of deep uncertainty, and there is simply no private investment in the sector (the existing market of private MBS is likely overvalued, as deeply in the red as it is today).  The housing market is at this point nearly entirely backed by government guarantees through the FHA and the GSEs, aside from the hundred plus billion in direct government infusions.  One shock (like a war with Iran or something else on the radar) could tip it over once again.

You can be sure that Warren Buffett’s explanation, that all will be well soon, is the official line in Washington, DC.  Republicans don’t want to talk about housing, period.  And the administration has successfully purged all official dissent out of the Democratic Party infrastructure with its settlement.  This won’t hold, because reality, like a fart in church, will eventually and successfully intrude on the party in DC.

How long they can keep this afloat isn’t clear.  But there is a reason that hope, or in this case hormones, is the plan for housing.  Here’s more of Buffett’s letter, justifying some of his large investments.

The banking industry is back on its feet, and Wells Fargo is prospering. Its earnings are strong, its assets solid and its capital at record levels. At Bank of America, some huge mistakes were made by prior management. Brian Moynihan has made excellent progress in cleaning these up, though the completion of that process will take a number of years. Concurrently, he is nurturing a huge and attractive underlying business that will endure long after today’s problems are forgotten. Our warrants to buy 700 million Bank of America shares will likely be of great value before they expire.

Buffett helped cause the housing crisis through his massive ownership stake in Moody’s (he is the single largest shareholder), and he profited immensely from the government bailouts.  His assertions that the financial crisis was an “economic Pearl Harbor” was a similarly self-serving explanation that diverted attention from a crisis resulting from events he helped shape  to some sort of external causation.  He is now profiting from legal and regulatory forbearance against entities he owns.  If Wells or BofA were held accountable for their systemic abuse of the property rights system through foreclosure fraud, or if they were forced to reserve against second liens more accurately, it’s unlikely they would be good investments.  On the other hand, if that were to happen, we could begin to fix our housing market.

There is no honesty among our political elites, and by that statement, I don’t mean that they are liars.  There are liars everywhere, and truthtellers as well.  Most of us are concurrently both.  What I mean is that the culture of the political elite is one in which a genuine conversation about the actual problems we are facing as a society simply cannot be held with any integrity.  Instead, we have to chalk up problems in a very busted housing market, and a generation saddled with indentured servitude disguised as a debt, as one of “hormones”.

It sounds cute that way, I guess.  Eventually, we will see integrity in our discourse.  It’s unavoidable.  You can’t operate a society solely on intellectual dishonesty because eventually all your bridges fall down, even the ones the rich use.  For a moment, from 2008-2009, there was real discourse about what to do.  We’ll see a moment like that again.  Only, the environment won’t be nearly as conducive to having a prosperous democratic society as it was in 2008.  There will be a lot more poverty, starvation, violence, and authoritarianism when the next chance comes around.  Catastrophic climate change, devastating supply chain disruptions, political upheaval, geopolitical tensions and/or war – one more more of these will be the handmaidens of honest dialogue.

The tragedy is not that our circumstances will worsen dramatically, but that it just didn’t have to be this way.

Fighting Foreclosure: Where to Start


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Darrell Blomberg is a pro se litigant who hasn’t made a monthly payment in over 4 years.  He’s not in foreclosure, but it has not come easily.  As he says, he has, “studied his eyeballs out”.  Additionally he works very closely with many homeowners, attorneys and other skilled professionals.  We are fortunate to have him here in Phoenix Arizona and have often wished we could clone him so every city could have at least one of him.  He hosts weekly strategy meetings that we recommend highly to everyone.  (For details see the end of his article below).  

In the article below, Darrell succinctly, directly, and with humor outlines where to start should you decide to fight your foreclosure.  

So you want to fight your foreclosure?  Where should you start?

Start with what you already have available to you.  What’s that?

Personally Archived Documents:

…..Real Property Purchase Contracts

…..Loan Application

Contracts Archived by Title Companies:

……….(Contact them and request the documents)

…..Real Property Purchase Contracts


…..Mortgage or Deed of Trust

…..Complete Escrow / Closing package

Recorded Documents: (Recorded, Mailed, Posted, Advertised)


…..Default Notices


…..Substitutions of Trustee

…..Court Complaint or Notices of Trustee’s Sale

…..Sheriff’s Deed or Trustee’s Deeds upon sale

Prior Servicer Communication:

……….(You saved that didn’t you?)

…..Monthly statements

…..Missed-payment related documents

…..Responses from any attempted communications

…..Loan modification documents

If you choose to work with an attorney this should be the information you bring to her when you ask her to start a case for you.  If you were just getting behind in your payments and you had this much information for an attorney on your first visit… you’d probably have earned yourself a kiss!  (But don’t forget your checkbook just in case.)

The unfortunate reality is that most people show up at an attorney’s office empty-handed a few days before the foreclosure sale is scheduled to take place.  DON’T be that person.  The attorney is justified in saying she isn’t in a position to help you at that late stage of the sale process.

If you’re going to wait that far into the foreclosure process, at least show up with ALL of the above listed documents and improve your chances of showing the attorney you are worthy of her time.

Don’t want to use the services of an attorney to fight your foreclosure?  If you don’t want to hire an attorney you better have every one of the above documents!  Further, you’ll need to start cracking the books because you’re not going to be playing T-Ball in this ballpark.  You’ve made a choice to join the big league of study.  Here’s the continuing list of what you’ll not only need to learn but what you’ll need to know how to use.  And I freely add that you’ll need to use what you learned under extreme pressure!


…..State & Federal Statutes

…..Civil & Criminal

Case Law:

…..State & Federal

…..Search the highest applicable court first!


…..Rules of Evidence

…..Rules of Civil or Criminal Procedure

……….(Local, State, Appellate & Supreme Court, Eviction Actions)……….

…..Rules of Court

…..Oh yes, there’s State & Federal for these too!



…..Many Dictionaries & Thesauri (An Antonym resource is helpful too)

……….Old and New

……………(Definitions change and you’ll want to use the right definition)

…..Law Dictionaries

……….Black’s (9 editions, get a couple different ones)


…..Law Library

……….Many are publicly available

……….Call the state & local courts

……….Check the local Universities


……….Law Schools websites

……….Google Scholar

……….State & Local governmental bodies

……………Administrative Agencies



……….Specialty Blogs

……….Specialty websites

…..Other helpful resources

……….American Jurisprudence

……….American Law Reports

……….Corpus Juris Secundum

……….Scholarly Articles

Now that we’ve got that figured out, where do you start?  The best place to start is with an in depth forensic review of your documents?  You’re up to that aren’t you?  What are you looking for?  The big three are: Errors! Contractual Violations! Statutory Violations!

Documents need to be checked thoroughly for authenticity, chronology, timeliness, correct contents, information consistency, method of delivery, chain of parties, authorization and proper notarization.  (Robo-signing hasn’t been established as a game-changer yet.)

The nice thing about reviewing your own documents is that you have all of the evidence.  It’s either in your possession or it is publicly available!  You can even get the recorded docs in “self-authenticating” form on line for just a few dollars.


So you’re taking on an adversary with essentially unlimited assets, unlimited time and NO ACCOUNTABILITY.  That’s a monstrous task.  You need allies.  You’re not going to do this alone.  You’ve got to work with other like-minded individuals who are as committed as you.  I suggest you either find such a group or you start one.  I’ve started one and I’ll follow up with a post about that in the near future.

A strong group should amicably pool their talents and efforts.  In 10 months of running weekly meetings I’ve learned a lot.

The number one thing I have learned is that all defenders MUST start sharing ALL of their positive and negative experiences.  This includes; documents, pleadings, court results and bank, servicer and trustee communications.  Why?  Because everybody could have learned something from your share and perhaps helped you too.  But, if you didn’t share, we all missed out on the observation or discovery someone else might have made about your efforts if you had shared your experience.

If we keep up the diligent effort, the Banks, Servicers and Trustees will not prevail!  Attorneys and homeowners who educate themselves and rally together will prevail!

May your opportunities be bountiful and your possibilities be unlimited.

“Emissary of Observation”

Darrell Blomberg

The meetings I host are every Tuesday.

Here’s the details:


7:00pm to 9:00pm. Come early for dinner and socialization. (Food service is also available during meeting.)

Macayo’s Restaurant, 602-264-6141, 4001 N Central Ave, Phoenix, AZ 85012. (east side of Central Ave just south of Indian School Rd.)

COST: $10 per couple… and whatever you want to spend on yourself for dinner, helpings are generous so bring an appetite.

Please Bring a Guest!

(NOTE: There is a $2.49 charge for the Happy Hour Buffet unless you at least order a soft drink.)

Lying to God


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Editor’s Comment: 

PICO National Network diverts $34 million in deposits away from pretender lenders. 

Whether you are a person of faith or not, we are taught that lying is not a good thing.  Conceding something that isn’t true is the same thing as a lie.  
There are two articles below.  In the first article below the author is asking us to accept one concession after another, one lie after another.   He states that the “distressed property seizures were triggered by the 2008 financial crash”.   But this is a lie.  This financial crisis was triggered by those on Wall Street along with their co-conspirators the banks.  They are the ones that distressed the property.  
The author quotes some nameless analysts as his source.  So who are these nameless “analysts” who are continuing to mislead us with lies?   
Then he continues talking about “lender-triggered foreclosures”.  There is no such thing as a lender-triggered foreclosure.   Nearly all foreclosures today are triggered by pretender lenders.
While it’s true that the banks need to clean up their balance sheets, the truth of the matter is that the residential loans are never going to have any value anyway on the banks’ balance sheets.  Only on the investors’ balance sheets will they have any value because the investors are the ones that made the loan.  Another lie exposed.
It really makes you wonder how Scott Rolfs, the managing director of Religious and Education finance at the investment bank Ziegler could be so out of touch.  Is he an expert, as he sets us up to believe, or not?  If he is, he needs to be held accountable.  If not, then what’s he doing in that position?  He talks about the appraised value of the properties being significantly lower today than when properties were appraised a few years ago and the loans granted.  Why is Rolfs not mentioning the 8,000 appraisers who went to Congress in 2005 to complain about the pressure that the banks, just like his, were giving to the appraisers, to over-inflate prices?  Why is Rolfs ignoring the pastors and congregations who have not defaulted, who can pay the loan and are just asking to refinance the balloon payment?  Whose side is he on anyway?  He says, “… banks have not wanted to look heavy handed with the churches“?  So why have they gone from foreclosing on only a handful of churches in the last decade to a record number of 138 in 2011?  Why is he not telling the truth?  Why is he insisting on lying to homeowners, and the congregations across this country?
But listen up Scott Rolfs, and all other self-proclaimed “experts” from banks just like yours.  We The People have more than a message for you.  With every concession, with every lie, with every misleading statement you make in an effort to cloud our vision, we are gaining strength.  And we are taking action.  
Read on to the second article below.  The churches are realizing they have power,  just like homeowners do.   What started as a humble awakening of just two congregations banding together has now grown into a national movement called PICO.  And they are unlocking the Power of the People.  The Churches are transferring their money away from you, big banks who are lying and misleading, who are not helping, who are drunk with power and whose despicable, appalling behavior is summed up by Father Rien as “ruthless”.    Have you got the message yet that, “ can’t do this to people.”  

Those who engineered this “financial crisis” from Wall Street along with their co-conspirators the banks, have lied to us all, every step of the way, and have destroyed numerous economies and countless lives in the process.  If you are a person of faith, any faith, you may wonder as I do, what their own repercussions might be when they pass from this world to wherever it is you may believe they go.  We’ve heard from some homeowners of faith, that this thought alone is all that keeps them going.  
If you are a person of faith, you already know, it’s just not a good idea to lie to God.

Banks foreclosing on churches in record numbers


(Reuters) – Banks are foreclosing on America’s churches in record numbers as lenders increasingly lose patience with religious facilities that have defaulted on their mortgages, according to new data.

The surge in church foreclosures represents a new wave of distressed property seizures triggered by the 2008 financial crash, analysts say, with many banks no longer willing to grant struggling religious organizations forbearance.

Since 2010, 270 churches have been sold after defaulting on their loans, with 90 percent of those sales coming after a lender-triggered foreclosure, according to the real estate information company CoStar Group.

In 2011, 138 churches were sold by banks, an annual record, with no sign that these religious foreclosures are abating, according to CoStar. That compares to just 24 sales in 2008 and only a handful in the decade before.

The church foreclosures have hit all denominations across America, black and white, but with small to medium size houses of worship the worst. Most of these institutions have ended up being purchased by other churches.

The highest percentage have occurred in some of the states hardest hit by the home foreclosure crisis: California, Georgia, Florida and Michigan.

“Churches are among the final institutions to get foreclosed upon because banks have not wanted to look like they are being heavy handed with the churches,” said Scott Rolfs, managing director of Religious and Education finance at the investment bank Ziegler.

Church defaults differ from residential foreclosures. Most of the loans in question are not 30-year mortgages but rather commercial loans that typically mature after just five years when the full balance becomes due immediately.

Its common practice for banks to refinance such loans when they come due. But banks have become increasingly reluctant to do that because of pressure from regulators to clean up their balance sheets, said Rolfs.

“A lot of these loans were given when the properties were evaluated at a certain level in 2005 or 2006,” Rolfs said. “Banks have had to reappraise the value of these properties, whether it’s a church or a commercial office building. Values have gone down, so the loans cannot continue in the same form.”

The factors leading to the boom in church foreclosures will sound familiar to many private homeowners evicted from their properties in recent years.

During the property boom, many churches took out additional loans to refurbish or enlarge, often with major lenders or with the Evangelical Christian Credit Union, which was particularly aggressive in lending to religious institutions.

Then after the financial crash, many churchgoers lost their jobs, donations plunged, and often, so did the value of the church building.


Solid Rock Christian Church near Memphis, Tennessee, took out a $2.9 million loan with the Evangelical Christian Credit Union at the beginning of 2008, to construct a new, 2,000 seat, 34,000 square-foot building to house its growing congregation.

In the middle of construction, the economy crashed. The church raided its savings to finish the project, but ended up defaulting on the loan.

The ECCU foreclosed and put the church up for auction.

“We are still fighting this,” a church spokesman told Reuters. “We have filed for bankruptcy to stop this foreclosure and to restructure our debt.”

At the iconic Charles Street African American Episcopal Church in Boston, Massachusetts, churchgoers and clergy accuse the bank of being unwilling to negotiate.

The church is being threatened with foreclosure and a March 22 auction by its lender OneUnited bank, America’s largest black-owned bank.

The bank says the church, which was founded in 1818 and played a major role in the anti-slavery movement, has defaulted on a $1.1 million balloon loan that came due in December 2011.

A balloon loan is a long-term loan, often a mortgage, that has a large, or balloon, payment due upon maturity. They often have very low interest payments and require little capital outlay during the life of the loan due to the large end payment.

The church is also involved in separate litigation with OneUnited involving a 2006 loan of $3.6 million that financed the refurbishment of two buildings into a community center.

“We want to refinance and we want to pay. It’s doable, we have the means to do it but we can only do it if they actually sit down and talk to us,” said the Rev. Gregory G. Groover Snr, the church’s pastor.

Groover said the church did not default by missing monthly payments, but is in trouble because the loan ballooned.

“We don’t have a million dollars to pay off the loan. I don’t know what church does. The idea of auctioning off a church is senseless,” he said.

In a statement provided to Reuters, OneUntied said it was not its practice to discuss the details of “any discreet customer relationship”.

“It is not the practice of the Bank to exercise collection remedies including foreclosure in the absence of good cause. We trust the community will not rush to judgment without full knowledge of all the facts,” it said.

Axel Adams, an Atlanta, Georgia official with the Rainbow PUSH coalition, the civil rights and economic justice organization led by the Rev. Jesse Jackson, said he had seen a “tremendous increase” in churches facing foreclosure.

“And some pastors have not notified their congregants,” Adams said. “They are fearful that if they do, they will lose congregants prematurely.”

Flat Rock Church in Lithonia, Georgia, which dates back to 1860, took out an $850,000 balloon loan with Sun Trust Bank in 2005 to fund a new 300-seat church.

In May 2010 the loan became due. The bank foreclosed and the church is due to be auctioned off next month.

“The bank has refused to negotiate and to this day I just don’t know why,” said Binita Miles, the church pastor.

A spokesman for Sun Trust said: “We view foreclosure as an action of last resort. We have been working for several years to address the issue with the client in hopes of avoiding foreclosure.”

There are more than 300,000 churches in the United States.

“The church foreclosure market isn’t anything extraordinary,” said Rolfs. “It’s simply another byproduct of the credit bubble.”

Mortgage Crisis Inspires Churches to Send Lenten Season Message to Banks

By Samuel G Freedman

During the recent weeks of Lent, the Rev. Ryan Bell has led his Southern California congregation into the penitential spirit of the season. He has preached about the prophet Isaiah’s admonition “to loose the bonds of injustice.” He has replaced his church’s ebullient praise songs with somber, reflective music. He has sent his members a list of ordinary comforts to give up until Easter, with suggestions from caffeine to Facebook.

And Mr. Bell has committed his congregation to one other religious obligation. He is withdrawing the church’s money, several hundred thousand dollars, from its account with the Bank of America. By the April weekend when Christians mourn Jesus’ crucifixion and celebrate his resurrection, Mr. Bell said, he will have moved the assets to a local bank as a protest against Bank of America’s role in mass foreclosures and to issue a call for its repentance.

“To right the wrongs of the world is as much a part of the Lenten experience as to repent ourselves,” Mr. Bell, 40, the pastor of Hollywood Adventist Church near Los Angeles said in a phone interview this week. “During this season, when we individually are examining our lives, we think it’s appropriate for the institutions that affect us to examine theirs.”

Across the country, dozens of other clergy members and congregations have taken similar action over the past three years. Beginning with two ministers in a bedroom suburb outside Oakland, the movement has grown to encompass about 25 congregations, according to the PICO National Network, a coalition of congregations involved in social justice that has taken up the campaign. By PICO’s estimate, congregations have withdrawn $16 million, and their individual members and organizational partners an additional $15 million, from banks deeply implicated in the foreclosure crisis — primarily Bank of America, Wells Fargo and JPMorgan Chase.

The effort has become so closely conflated with Lent this year that a group of San Francisco clergy members spilled symbolic ashes outside a Wells Fargo A.T.M. in an Ash Wednesday protest. The ministers called for a “foreclosure sabbatical” — invoking the biblical term for the ancient Judaic concept of forgiving debts every seventh year.

The Rev. Richard Smith of St. John the Evangelist, an Episcopal church in San Francisco, likened the divestment campaign and public protests to early Christianity’s ritual of “reconciliation of the penitents.” Far from taking place in the private sanctity of the confessional, that rite occurred in public, with the penitent overseen by a priest and required to present himself before a bishop.

“It seemed like a parallel to us,” said Mr. Smith, 62. “Our banks have done a great deal of damage in a very public way. So it seems appropriate as we enter into a season of penitence that we invite those who separated themselves from the community to repent with us. It’s basically Ethics 101.”

Last month, federal and state officials reached a provisional accord with five banks — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial — for a $26 billion settlement that includes reducing mortgage principal for homeowners in danger of default because of the steep decline in property values.

T. J. Crawford, a spokesman for Bank of America, said that even before that accord was reached the bank had modified the mortgage loans of one million customers and had met with PICO and other religion-based groups. “We value all of our relations,” he said, “and would prefer dialogue to divestiture.”

For the clergy members and churches active on the foreclosure issue, however, the animosity began building years ago. The current campaign may have had its genesis on the Sunday in 2008 when a 10-year-old girl named Jeannette walked up to her pastor after church to say goodbye because her family was moving.

As soon as the child spoke to him, the Rev. Mario Howell of Antioch Church Family in the East Bay area of Northern California recently recalled, he realized that Jeanette’s parents had not been at worship that morning. What, he asked her, was going on? The girl explained that her mother and father — a teacher and probation officer, respectively — had lost their home to foreclosure.

Soon enough, Mr. Howell said, he heard similar stories from other members, all of them employed, most of them first-time homeowners who had striven to move out of Oakland. During 2010, the church’s monthly intake from tithes and offerings fell by half to $14,000, far below its own mortgage payment of $23,000. Last March, Mr. Howell had to sell the building to a religious order, the Wesleyans, which is allowing the congregation to remain there. The church recently pulled out $175,000 in savings from the local Bank of America branch.

During the same few years, the Rev. Robert Rien of St. Ignatius of Antioch, a Roman Catholic church across town from Mr. Howell’s, was learning that 24 families from the 1,000 in his congregation were threatened with foreclosure. He accompanied many of them to meetings with their mortgage banks to try to renegotiate terms.

“You would’ve thought the collar would have some influence,” said Father Rien, 65. “It didn’t. These people were engineers, accountants, working in medical offices, in the building trades. No matter how they pleaded with the banks, they didn’t find any understanding. It was ruthless behavior. I had the scales pulled off my eyes.”

Father Rien met Mr. Howell through a local interfaith coalition that is part of the PICO network. He wrote about the banks’ behavior in the church bulletin and preached about it from the pulpit. In late 2009, with the endorsement of the congregation’s trustees and pastoral council, he pulled out $135,000 from Bank of America.

“It’s a grain of sand to Bank of America,” Father Rien said, “but we needed to send a message that you can’t do this to people.”

With coverage in the religion media and organizational contacts through the PICO network, that message spread from the East Bay in late 2008 and early 2009, expanding into the national movement of this Lent.

“I can say that it’s caught on, but not enough,” said Mr. Howell, 61. “There’s still not enough churches that understand the plight of their people — that if one family loses their home, it’s like all of us go down.”

The Murder of our Economy and Society by the Banks


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When is Foreclosure Theft? When the Mortgage is Recorded at MERS

Author: L. Randall Wray

As I’ve said many times, whenever you criticize the banks you get pushback from their employees and lawyers handling their home thefts (whoops I meant “foreclosures”). About ten days ago I posted a brief update on the state of play, and received the usual comments. (Here:

Indeed, they went beyond “usual” as one bank lawyer tried to defend home theft as a “victimless crime”: “As a lawyer who did foreclosure work for many years for both borrowers and lenders, I assure you that robosigning is a victimless technicality. In only a handful of exceptions is there a wrongful foreclosure in which the outcome would have changed had the technicality been corrected. I am astonished to see foreclosure characterized as “theft” on an otherwise reputable site.”

Well, I guess it is nice that the lawyer thinks this site is “otherwise reputable”. But, in fact, robosigning is a go-to-jail crime. And illegally taking a home is certainly not victimless. Let us count the victims:

*The homeowner. Often the banks seize the wrong properties—because MERS (more below) recorded the wrong address. Often they steal homes that never had a mortgage. Or they lose the payments the homeowner tried to make, then claim default, then steal the home. Or they advise the homeowner to stop making payments in order to qualify for a “loan mod” (better terms on a new mortgage, often under one of the government programs)—then steal the home. But banks and their lawyers consider these “victimless crimes”.

*The neighborhood. All homeowners in the area suffer lost property values and higher crime rates. Local government lose revenues, so cut services. Workers are forced to turn down better job offers because they cannot afford to move—stuck with underwater mortgages and homes they cannot sell. Banksters see “no harm, no foul”.

*The national economy. Ten million jobs lost. Over ten trillion dollars of lost wealth. We know the banksters’ view of this: new opportunities for the top 1%! (As I’ve argued—back in 2005!—it is all part of Bush’s “ownership society” agenda: pump up home prices and when the bubble bursts, all property will get concentrated into the hands of the wealthiest, the true owners of our society.)

*The justice system. Looking the other way when lawyers and their banks openly lie to judges, falsify documents, and engage in property theft turns our justice system into just another branch of the kleptocracy that Wall Street is creating—what Wall Street calls the “new plutocracy”—government of, by, and for the top tenth of one percent.

*Property rights. Over the past half a millennium western property law was developed precisely to prevent some feudal lord or modern bankster from showing up and claiming title in order to steal property. This is why in the US every property sale had to be recorded—in pen and ink—at the county recorder’s office. The mortgage note and deed had to be retained by the creditor and presented to foreclose on a delinquent homeowner. It had to match the county records of ownership. That has now been destroyed in the US. Anyone with a good enough lawyer and a compliant judge can now claim your property. Who suffers? Everyone. Except the top 1% that can afford to buy lawyers and judges.

A lawyer wrote to me in response to this bankster lawyer’s comment to me:

Must have been a Lender/Servicer/Plaintiff attorney! “Victimless???” Let me tell you this short war story:

During an argument (small chamber hearing — wish it had been in a large courtroom with others present), the Judge asked both the Plaintiff Attorney and me (as defense attorney) if we paid our mortgages? Both of us answered,”Yes.”

The Judge then offered, of course, that he, too, paid his mortgage and then added: “So, you see we all must pay our mortgages.”

This was my response to the Judge: “Yes, Your Honor, I am able to pay my mortgage because I am paid by the homeowners to defend their cases. The Plaintiff-Bank attorney is able to pay his mortgage because the banks pay him to prosecute their cases. And you, Your Honor, are able to pay your mortgage because you are paid by the taxpayers to adjudicate these cases.

Essentially, all of us are ‘standing on the backs’ of the homeowners who (through no fault of their own) are out of jobs or underpaid, and who are ‘underwater with barely a straw to breath through’ — all as a direct result of this economic recession — An economic recession which was, quite literally, caused by THIS Plaintiff and others like it in the financial industry.

In fact, Your Honor, you, as a public servant, have already witnessed cuts in the court clerk’s office and other judicial resources. Even you, yourself, may have concerns of reduced income or ‘cutting-down of the courts’ as a result of this economic recession .”

The Judge reacted by visibly pulling back in his winged, cushioned chair, and with eyes-wide-open and responded: “My God, we’re here arguing ‘a car accident’ and you’re arguing ‘A MURDER! ‘ ”

Without, blinking an eye, I leaned forward and responded, ” ‘Exactly,’ Your Honor, this Plaintiff and others like it have, indeed, MURDERED our national economy, our state economies, as well as small businesses, communities, and our families (which include the elderly and children).

Yes, Your Honor, I am arguing a MURDER.” The Point (as to “Victimless”): There are so many VICTIMS that it is impossible to take a “body count!” PLUS, our Due Process Rights, Official Land Recording System, Judicial System (as a whole), and CENTURIES of property law have all been, at the least, CRITICALLY INJURED (if not worse).

When is a foreclosure a theft? When the mortgage was recorded at MERS. MERS has no standing to foreclose. The typical mortgage was bought and sold about ten times before it finally got securitized. And those sales and purchases were not recorded at the county recorder’s office. Several important court cases have ruled that servicers using MERS have no standing to foreclose because the chain of title was thereby broken. That is about two-thirds of all mortgages made since the megabanks created the MERS monster. Now, those who go up against banks trying to foreclose using the “MERS destroyed the chain of title” defense do not always win. Judges are having a hard time getting their minds around the fact that banks have destroyed property law in the US. Or, they make a calculation that recognizing this fact will throw the whole real estate sector into disarray, hence overlook the home thefts as the lesser of evils.

I am going to do a more detailed update on the more recent rulings. Meanwhile here is a link to a good site with a lot of information: It is instructive just to read down the list of the variety of frauds the banks are using to illegally take homes, things like:

o Falsely claiming to be the owner/holder of the mortgage;

o Falsely claiming standing by use of names such as Trustee, Assignee, Nominee, Beneficiary, etc.;

o Fraudulently invoking the jurisdiction of the court; o Preying on the ignorance of the court and homeowner;

o Falsely claiming Pooling & Servicing Agreements, industry standards, rules, guidelines or other industry-authored writings supersede the law;

o Failing to follow PSA guidelines;

o Robo-Signing legal documents without the legal authority to do so.

o Entering on-time payments as late, to exact illegal and unauthorized fees;

o Manipulating account records;

o Backdating legal documents;

o Filing forged documents in courts and public records;

o Charging force-placed insurance when the homeowner already has full coverage;

o Falsely reporting a default to the credit bureaus when it is the pretender lender who is manufacturing the default;

o Paying property taxes late, then charging the late penalties to the borrower;

o Paying taxes and insurance on the wrong property;

o Refusing payments to guarantee default;

o Adding thousands of dollars in unearned legal fees to create a default;

o Ignoring customer complaints and “qualified written requests”;

o Arrogantly violating numerous laws and regulations;

o Coercing the homeowner into signing a forbearance agreement to strip away their legal rights;

o Falsifying records and documents;

o Committing fraud upon the courts by stating they are the Holder and Owner of the Note – when in fact – they do not own or hold the “original” Note;

o Intentionally causing delays to run up your legal expenses;

o Creating fictitious documents (Lost Note Affidavits, Power of Attorney, etc.);

o Triggering the terms of the null and void Deed of Trust/Mortgage

o Apply to the trust for reimbursement after deducting the fees from the borrowers p&i payments, (Known as double-dipping)

o Rounding up ARM rates when on a downward trend; o Not adhering to the terms of the loan documents;

o Creating additional false deficiencies through a variety of questionable practices;

o Adding misc. fees to purposely create a deficiency with the borrower’s next payment;

o Not applying payments to principal and interest;

o Committing perjury through misrepresentations;

o Withholding or redacting discovery evidence;

o Tampering with court transcripts and removing evidence from the record;

o Conjuring up events that never happened while refusing to provide documentation to support their fallacies;

o Refusing to cooperate with attempts to refinance and stop the illegal foreclosure;

o Using abuse of litigation, appeals and malicious prosecution to litigate forever;

o Payoffs to the consumer’s attorney, law enforcement officials, judges, court personnel and government officials;

o Threats & intimidation; o Electronic surveillance;

o Wire Fraud / Mail Fraud;

o Conspiracy;

o Fraud in the inducement;

o Unjust Enrichment;

o Embezzlement;

o Racketeering – RICO;

o Extortion;

o Abuse of Process;

o Violation of ethics;

o Grand Theft;

o Extortion;

o Tax Fraud (REMIC);

o Public Corruption;

o Notary Fraud;

o Evidence Tampering;

o Theft of Government Services;

o Perjury;

o Felonious Influence of Public Officials;

o Money Laundering;

o Insurance Fraud;

o Securities Fraud;

o Constitutional and Civil Right violations.

Ah, yes, the banks are truly innovative. Keep this in mind the next time some bank lawyer tries to convince you that all this is “victimless crime”. Now many will say: “but the homeowner was delinquent, so the home theft by the banksters was justified!” Why was the homeowner delinquent? Because the banksters have tacked on fees, lost payments, doctored documents and so on. Nay, they need only be delinquent BECAUSE the bank that wants their home says they are!

And for those willing to wade through a ruling, there was an excellent recent decision in El Paso, Texas in the 171st district court. It found MERS to be “grossly negligent”, that it had “fraudulently misrepresented” standing as beneficial owner of notes and mortgages, that it had failed to properly record the property, and that it had engaged in a “conspiracy”. There have been several such cases that rule against the legal basis of MERS’s business model—which then invalidates the whole “theory” that electronic recording can replace pen and ink recording in the county recorder’s office. And that, dear Virginia, means there is no legal basis for foreclosure of property registered at MERS and all such foreclosures are property theft.

Negative Equity Rising and Still Understated


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Negative Equity Rising and Still Understated

Editor’s Comment: 

In our pretend world which is being narrated by the Banks, the housing crisis is easing, people are starting to buy foreclosed homes for investment and domicile, and the defects in documentation were just paperwork problems that will get fixed. The foreclosures are real, we are told, the banks hold the assets on their balance sheets, the auctions were valid, the credit bids were properly accepted by the auctioneer as a no-cash offer from a bona fide creditor. Planted articles and stories across the media spectrum would have us believe that the worst is behind us.

In the real world, even those who wish to portray the housing market to be in some stage of recovery admit that the number of homes with negative equity is increasing as prices continue to fall far below the alleged balances due on those dubious loans and mortgages. And they admit that the amount of negative equity in each house is deepening to the point where, as in the movie Larry Crowne, the owner simply turns in the keys or waits out the foreclosure.  Strategic defaults are increasing rapidly as people realise that they can recover some of their losses simply by not making a rent or mortgage payment for as long as they can hold off the bank. 

The amount of negative equity is computed without regard for selling expenses and other factors usually totalling around 10%. So the “average” $175,000 house is actually at around $157,000. If the principal demanded on the loan is, on average, $325,000, it is easy to see why even the spinners must admit that the owner of such a home is likely to walk away from a bad investment. In order for there to exist a valid reason to stay, the homeowner must hold out for a price increase of more than twice the current value of the house — something that everyone concedes is not going to happen, even with inflation, for a minimum of 20-30 years. The stigma once attached to such a move is largely dissipating and even those who extend credit are beginning to soften up on using a foreclosure to deny credit — opting instead to charge more from a customer who otherwise had a stellar credit history. 

So in the real world, the housing market is still going down and it must — because the inventory of empty, abandoned homes is increasing. The re-sales, short-sales and even modifications are barely making a dent in the growing number of defaults and foreclosures on the horizon. And then on top of all that, despite the bank narrative, a new narrative is coming from the courts and law enforcement. The real world has millions of foreclosures that never should have happened. The real world has millions of homeowners who have every right to reclaim the title and possession of their homes. And that is the other reason why housing prices continue to fall below 2001 levels — even the buyers are aware that there is considerable risk associated with “buying” a home from a company whose claim to ownership is at best unproven and at worst an outright lie.

by THE KCM CREW on MARCH 6, 2012

Last Week, CoreLogic released their Negative Equity Report for the fourth quarter of 2011. The report delivered some important news. Let’s go over the key findings in the report.

What Is Negative Equity?

When a home’s current value is less than the existing mortgage on that home, the house is said to be in a ‘negative equity’ situation (other terms used to describe this situation are ‘underwater’ and ‘upside down’).

How Many Homes Are in a Negative Equity Situation?

The CoreLogic report stated:

“11.1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011. This is up from 10.7 million properties, 22.1 percent, in the third quarter of 2011.”

This is important because studies show that people in a negative equity situation are more likely to default on their mortgage payments than people who have equity in their homes.

How Many Homes Are Approaching Negative Equity?

According to the report:

“An additional 2.5 million borrowers had less than five percent equity, referred to as near-negative equity, in the fourth quarter.”

Many experts believe that housing prices will soften in the first half of 2012. That will cause a percentage of these homes to fall ‘underwater’.

Bottom Line

History has shown that a percentage of those 2 million+ homes will enter the distressed property category as some families decide it no longer makes sense to pay their mortgage. Any increase in short sales or foreclosures will impact prices in an area.

Faulty Foreclosures Present Systematic Breakdown and Big Risks for Buyers


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Faulty Foreclosures Present

Systematic Breakdown and Big Risks

for Buyers

Editor’s Comment: 

The reality of the system of wrongful foreclosures is being revealed piece by piece as officials examine the filings from pretender lenders. It is plainly obvious that even the “technical” so-called errors are revealing systemic fraud. The result has been people laughing all the way to the bank, with property title in hand that carries presumptions of authenticity simply because it resulted from a foreclosure auction — even if the auction was faked, rigged and a credit bid from a non-creditor was accepted.
Nobody is saying yet that 80% of the foreclosures were so wrong that the property title should revert to the foreclosed homeowner and that those who thought they had title arising out of the foreclosure or from a bank or REO company (another layer controlled by the banks) are in for a rude awakening. Sorting out these title problems will be a virtual industry in coming years as homeowners, illegally foreclosed and evicted from their homes start making claims in larger numbers for return of title and possession. There are many who have already done so and been awarded both title and possession. 
The writing is on the wall and those who don’t read it do so at their own peril. Many people who rode out the recession with money in the bank are buying up properties and renting them out. If the property legally still belongs to the original homeowner, then the title, the possession and possibly the rent collected may be the source of considerable liability for people who think that wrongful foreclosures are not their problem. They would be right if they obtained title as a bona a fide third party purchaser for value — without notice — but the information about fraudulent foreclosures has been in the public domain and the tracing of title is fairly easy if you stick to the simple requirements of law. 
The culprit in these resales of “foreclosed” property are the title insurers, some of whom were active players in MERS. They are smart enough to avoid liability arising from claimed securitization of loans that were never actually securitized and were never properly documented. The relevance is that strangers to the transaction were the source of foreclosures and alleged modification procedures on loans they neither owned, funded, nor did they possess any agency authority to do anything on behalf of undisclosed principals.
There are those who have successfully negotiated the proper terms of exclusions and exemptions in title policies, but they are few and far between. The fact is the title company will deny that their contract for insurance ever covered the securitization risk because they specifically excluded it from the policy. The only real possibility of holding the title companies liable is through their agents who produced a title report. That may well be a novel issue in litigation. 
So the message for people in the business of buying foreclosure properties is to use an attorney who understands the process of securitization, who knows how to protect your rights when the old homeowner comes back with claims and who is willing to negotiate with the title underwriter for a policy that is worth the paper it is written on. Remember, if it looks too good to be true, it probably is too good to be true. 
The banks and government are trying to paper over the problem with a whole layer of third party purchasers so they can claim later that the homeowner can only claim monetary damages. But the law is clear in most states. You can’t deprive someone of title to their own property by fiat. If it were otherwise then the moral hazard we have already seen played out in the housing market will get worse as more and more players enter the market knowing that the worst that can happen is they might need to settle with the old owner for money. Our economy depends upon certainty of title and there are rules about how we establish that certainty. Those rules were broken by the banks and now they must be subjected to the consequences of those actions. 
The bottom line is why should a perfect stranger be allowed to take your property and then be allowed to claim that they were somehow allowed to use fabricated documents containing false and fraudulent declarations of fact, forgeries, and misrepresentation of authority. Homeowners were thus led down a rabbit hole where they thought they were seeking modifications from authorised parties, they thought they were paying the right parties, they thought they owed money when the money had already been paid. The answer from the banks, servicers and others who participated in these false transactions is forget about it. 

High error rate in S.F. foreclosure study means

trouble for state

Originally published Saturday, March 3, 2012

The review found that signatures of some original owners of loans were missing and that affidavits were not filed showing lenders had contacted borrowers to discuss their options 30 days before a mortgage default notice.

The Associated Press

SAN FRANCISCO — More than 80 percent of residential mortgage loans that have gone into foreclosure in San Francisco have missing documents or signatures or otherwise violate the law, according to a review ordered by the city assessor.

The results hint at potentially broader problems with how foreclosures have been handled since the collapse of the housing market.

While many of the errors were technical and related to paperwork, the problem shows the state needs to change its antiquated real-estate regulations, Assessor-Recorder Phil Ting said.

“The whole process … is absolutely, 100 percent broken and not working for any of us at this time,” Ting said. “These rules were made for people who walked or rode their horse to the bank.”

The review found that signatures of some original owners of loans were missing and that affidavits were not filed showing lenders had contacted borrowers to discuss their options 30 days before a mortgage default notice.

The review was conducted by Newport Beach-based Aequitas Compliance Solutions. The company looked at 382 of the city’s 2,405 foreclosure sales between January 2009 and October 2011.

The report said it was possible that homeowners were accused of defaulting on loans that they had never agreed to in the first place, and were being foreclosed by lenders that didn’t own the loans.

“How can we expect homeowners to have a fighting chance of saving their homes when they can’t even find who currently owns their debt?” Ting said in a statement.

The report was not aimed at individual lenders, but the system in general. It suggests similar problems could be found elsewhere in the state, Ting said.

He said it would be up to the District Attorney’s Office and state Attorney General’s Office to determine whether the violations were prosecutable.

Richard Green, director of the University of Southern California’s Lusk Center for Real Estate, said he would like to see similar audits done in other California cities to confirm San Francisco is not an isolated case.

But considering the high rate of errors with foreclosures in the city, which suffered a comparatively mild downturn when the housing bubble burst, Green said he would not be surprised if the audit’s findings foretold a broader problem.

“Mistakes happen. But it’s the robustness of this happening. It’s that it’s happening over and over again,” he said.

If Insurers Are Rejecting Defective Loans Why Don’t the Courts?


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If Insurers Are Rejecting Defective Loans Why Don’t The Courts?

Editor’s Comment: 

Insurers of all stripes are rejecting claims for failed mortgages at a rate that is becoming troublesome to the Megabanks. Moynihan at BOA thinks that (a) the insurers should pay or (b) the taxpayers should pay for it. He thinks BOA should be absolved of all liability for defective loans. I’m sure that taxpayers would disagree. As for the insurers, they have investigated, considered, analysed the origination of loans and found them wanting in all major respects. In other words the risk they agreed to insure did not produce the loss which is the basis for the BOA claim.
What produced the loss for the BOA claim is that the loans were never subjected to any underwriting process that even remotely resembled loan underwriting before the banks began creating the appearance of selling parts of loans to many buyers and pools of loans to many buyers. And the biggest problem is that BOA doesn’t have a loss. The investors have the loss but their asset rights have been hijacked onto megabank balance sheets.
In particular, the insurers have found exactly what we have been writing about on this blog for five years. 
1. The value of the property was inflated by the “lender”.
2. The lender was really a paid originator — a pretender lender.
3. The borrower’s income was patently false, inflated by the “lender” originator.
4. The satisfaction of the prior loan was obtained from a party who demonstrated no ownership or agency.
5. The terms of the loan frequently guaranteed that the borrower would stop paying — as when the payments reset to a level that exceeds the borrower’s annual income including everyone in his household.
6. The false value used for the property fraudulently inflated the principal due on the loan and fraudulently inflated the payments due on the inflated principal.
7. The true value of the collateral at the time of origination of the loan was less than the stated principal due on the loan— a fact that was withheld from all the players in violation of TILA but more importantly creates two classes of debt on the same loan — one secured and the other unsecured. The unsecured portion is the difference between the true fair Market value and the inflated value that was used at closing (or the deficiency of collateral at the time of closing).
8. The promissory note contains two principal defects in most instances — (1) it contains false declarations as to the identity of the lender and the amount due and (2) it creates an instantaneous liability to the borrower who did not get the benefit of the bargain he or she was promised.
So my question is this — if insurers can refuse to pay based upon these defects why is it that the assumption prevails that borrowers must pay based upon these defects? Doesn’t it make more sense to reform the notes and mortgages to name the proper creditor, name the proper secured party, state the proper amount due and then have the insurer pick up the tab if there is a tab? Of course that analysis might mean that we simply accept the conclusions that insurers have arrived at — the loans are defective. And THAT would mean that most of the foreclosures could be overturned.

BofA Clash With Fannie

Intensifies as Insurers Reject


By Hugh Son – Mar 2, 2012

Bank of America Corp. said it’s facing more demands by Fannie Mae for refunds on flawed home loans because mortgage insurers who cover defaults rejected 25 percent more claims last year.

Unresolved insurance rejections rose to 90,000 at the end of 2011 from 72,000 the year earlier, Bank of America said last week in its annual filing with regulators. Last year’s denials equal $1.2 billion in unpaid loan balances, according to a note yesterday by Compass Point Research and Trading LLC.

A Bank of America Corp. loan negotiator at the Neighborhood Assistance Corporation of America (NACA) Save the Dream event in Los Angeles on Feb. 16, 2012.

The rejections heighten tension between Brian T. Moynihan, the bank’s chief executive officer, and U.S.-owned Fannie Mae in their disputes over who must pay for billions of dollars in failed loans made during the housing boom. When mortgage insurers deny claims, the two firms are left to squabble over whether losses will be borne by bank shareholders or the taxpayers who bailed out Fannie Mae.

“It seems like a bit of posturing on the part of Bank of America to push back against all repurchase activities,” said Chris Gamaitoni, a mortgage and banking analyst at Washington- based Compass Point. “I don’t think Bank of America is being treated differently than anyone else, and yet they are pretty alone in saying Fannie is being more aggressive.”

The rift widened last year when Fannie Mae told the Charlotte, North Carolina-based company it must repurchase mortgages if an insurer drops coverage, even if the decision is contested. Bank of America refused to comply, pushing Fannie Mae in January to drop the lender as a partner for the funding of new home loans.

Shorter Deadline

Pressure on Bank of America, the second-biggest U.S. lender by assets, may rise in July when Fannie Mae shrinks the amount of time it gives a bank to appeal an insurer’s denial to 30 days from 90 days before pressing for a refund. Repurchase costs probably would rise if the firm is forced to adhere to Fannie Mae’s policy, Bank of America has said.

The lender ultimately may seek a settlement to resolve the mounting requests, said Gamaitoni, a former senior financial analyst at Fannie Mae. Jerry Dubrowski, a spokesman for Bank of America, said Compass Point has regularly overstated the lender’s housing-related liabilities, and declined to comment further.

Insurance Required

Fannie Mae and Freddie Mac buy mortgages from lenders and package them into securities for sale to investors. Both firms were seized by the U.S. in 2008 to stave off collapse, and have collectively drawn more than $180 billion in taxpayer funds. The bill is likely to rise — Fannie Mae this week requested $4.6 billion more from the U.S. Treasury Department — and the firms’ regulator is pressing banks for refunds on bad loans to limit the bailout’s cost to the public.

Fannie Mae typically requires a borrower to buy mortgage insurance if the loan exceeds 80 percent of the home’s value. The coverage guards against losses when borrowers default and foreclosure fails to recoup costs.

Mortgage guarantors, including MGIC Investment Corp., Radian Group Inc. and American International Group Inc.’s United Guaranty, have voided policies for errors including inflated appraisals or borrower incomes. Those flaws also would entitle Fannie Mae to demand that banks buy back the loans.

Insurance Disputes

Bank of America is involved in legal disputes with mortgage insurers, including MGIC, saying the firms are denying valid claims. In the second half of last year, Bank of America has “materially increased” the percentage of denials it argues are improper, Milwaukee-based MGIC said this week in a filing. AIG’s mortgage guarantor said last week that lenders were devoting more resources to reversing rejections.

Bank of America has committed about $42 billion to deal with flawed mortgages, foreclosures and writedowns since the start of 2007. The lender accounts for half of Fannie Mae’s pending repurchase demands after insurance denials, the Washington-based firm said this week in an annual filing.

Outstanding repurchase claims against Bank of America from all sources jumped 22 percent to a record $14.3 billion as of Dec. 31, the lender said in January. That increase was fueled in part by other demands from Fannie Mae. The mortgage financing firm has started asking for refunds on loans that have performed for 2 years or more before defaulting, requests Bank of America has deemed invalid.

More Public Money

“We enforce our contract with Bank of America in the same manner as we do with other lenders,” said Kelli Parsons, a spokeswoman for Fannie Mae. The firm is working with the bank to resolve their disagreements and “treats lenders consistently with respect to issuance of repurchases and our expectations of collection.”

Fannie Mae faces its own squeeze and asked for more public funds this week after posting a$2.4 billion loss in the fourth quarter. The company said that while Bank of America has failed to “honor repurchase obligations in a timely manner,” it still expects to get reimbursed.

“If we collect less than the amount we expect from Bank of America, we may be required to seek additional funds from Treasury,” the company said in the Feb. 29 filing.

Fannie Mae said this week that Bank of America accounted for about 60 percent of all repurchase requests that haven’t been resolved in more than four months at year-end. The lender made up $5.5 billion of the U.S.-owned firm’s outstanding repurchase requests. Most of those demands stem from loans created by Countrywide Financial Corp., the biggest U.S. mortgage lender before its 2008 takeover by Bank of America.

JPMorgan Chase & Co. (JPM), the biggest U.S. bank by assets, had $1.1 billion in requests.Citigroup Inc. (C), No. 3 by assets, had $917 million and No. 4 Wells Fargo & Co. (WFC) had $830 million.

Bank of America’s 46 percent rise in New York trading this year has led lenders higher amid signs the U.S. economy is improving. Moynihan, 52, has said that expenses tied to soured mortgages will subside by about $1 billion a quarter, which combined with other cost-cutting plans should help the firm’s pretax revenue rebound.

Dual Tracking: Luring Homeowners into Foreclosure


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Editor’s Comment: 

I call it fraud.  They prefer to call it “dual-tracking”.  The fact is, that homeowners ignorant of the real intent of the banks and servicers went through the charade of seeking modifications and settlements.  Yet they were set up every step of the way, in every way possible.  From bogus lenders to robo-signed documents and now to have made official what we’ve known all along, that the pretender-lender banks had procedures in place to operate a dual-track system.  In other words at the same time that homeowners were negotiating for modifications, the same banks had them on a track for foreclosure.  No wonder a homeowner could never reach the same person twice, no wonder every new voice on the phone needed to have the information sent in again, no wonder the banks told homeowners that they could not help them until they were behind in their payments.  Just like common oxymorons, the paradoxes such as deafening silence, living dead, or denying us our civil rights and calling it the patriot act, loan modifications and help for homeowners is really just an oxymoron.  Makes sense now, doesn’t it. 

California attorney general seeks more mortgage protections

Atty. Gen. Kamala D. Harris says the proposed California Homeowner Bill of Rights would help homeowners facing foreclosure and fix serious flaws in the system.

By Marc Lifsher, Los Angeles TimesFebruary 29, 2012
Reporting from Sacramento—

California’s top law enforcer is calling on legislators to pass half a dozen new bills that would give more protection to homeowners facing foreclosure.

Atty. Gen. Kamala D. Harris said Wednesday that the proposed legislation, dubbed the California Homeowner Bill of Rights, is aimed at fixing some of the most serious flaws in the system.

If approved by lawmakers and the governor, the bills would stop banks from simultaneously pursuing foreclosures against troubled borrowers who are in talks with them about loan modifications. Borrowers also would have to be given a single point of contact instead of being passed from one department to another.

“California communities and families are being devastated by the mortgage and foreclosure crisis. We must ensure the deceptive practices that caused it never happen again,” Harris said. “The California Homeowner Bill of Rights will provide basic fairness and transparency for homeowners, and improve the mortgage process for everyone.”

The proposed legislation comes almost three weeks after California joined a nationwide foreclosure settlement with some major banks that’s projected to provide up to $18 billion in financial assistance to California homeowners.

Speaking at a news conference at the state Capitol, Harris noted that California, along with neighboring Nevada, suffered the most from the housing meltdown. She was joined by 11 Democratic lawmakers, including Assembly Speaker John A. Pérez (D-Los Angeles) and Sen. President Pro Tem Darrell Steinberg (D-Sacramento).

The multi-state settlement “helps thousands of Californians, but thousands more need the same help,” Steinberg said.

The new legislation before the state Senate and Assembly would:

End so-called dual-track foreclosures that allow mortgage holders to simultaneously negotiate loan modifications to lower homeowners’ interest payments while taking legal steps to foreclose on the same properties;

Provide a single point of contact for homeowners with their loan servicers and impose a $10,000 civil penalty for “robo-signed” mortgage documents containing unverified information;

Give local governments tools to force banks and property owners to maintain blighted, foreclosed homes and to give new owners incentives to improve their properties;

Allow renters more time to stay in foreclosed residences;

Collect fees from banks to pay for enhanced law enforcement actions to defend homeowners;

Create a statewide grand jury to investigate alleged financial and real estate foreclosure crimes.

Steinberg conceded that he and his allies are in for a tough legislative fight. Similar foreclosure prevention bills have been defeated or watered down in recent years after lobbyists from the deep-pocketed financial services industry rallied opposition from conservative Republican and moderate Democratic lawmakers.

“We’re going to have to push, fight and negotiate,” Steinberg said. “There’s some history on these issues, and we know what some of the opposition arguments have been.”

If approved, the legislation “could lead to the slowing or halting of a still-crashing wave of foreclosures,” said a statement of support by the ReFund California Coalition, an alliance of community and consumer groups.

A bankers’ trade group said it hadn’t had enough time to offer any detailed comments on Harris’ proposal.

“California’s lending community remains committed to both helping homeowners and protecting affordable access to mortgage credit,” said Dustin Hobbs, a spokesman for the California Mortgage Bankers Assn. “It is critical that any new legislation take into account our state’s fragile economic condition. Any introduction of new legislation and regulation must include a realization that markets and consumers need stability in order for lasting economic recovery to take hold.”

Beware of Mediation With Pretenders in Nevada


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Editor’s Comment: 

It should come as no surprise that the would-be foreclosers are not creditors, not authorised servicers and are not acting officially in any capacity. They just want another house acquired through a “credit bid” that enables them to get a deed without putting up a dime.
If there is any surprise, it is that the report is absurdly low as an estimate of those going to mediation in Nevada without any right to do so and pretending they are lenders which is a crime . And there is precious little understanding that all the other mediations took place under the same cloud. 
So a homeowner reaches an agreement with, for example, Bank of America, when in fact BOA doesn’t own the loan, never funded the loan, and is claiming rights to represent investors who don’t know the deal is in the process of negotiation. And of course BOA is claiming the loan is part of a pool serviced by BOA pursuant to what? We already know the loan never made it into the pool so even if BOA was the servicer it still has no right to be at mediation, much less foreclose.
Just to be clear, even if they show up with the paperwork doesn’t mean the documents were not fabricated. Quite the contrary. The banks would not be looking for amnesty if the documents were real. The Missouri indictments never would have issued if the documents were real. 
All evidence points to a much higher percentage of false claims in support of fraudulent foreclosures. If we took apart each document the way one Arizona sheriff says his department analysed Obama’s birth certificate, we would find that none of the foreclosures of mortgages that were subject to claims of securitization were anything but pure fraud.

A third of the time, lenders don’t have paperwork in foreclosure mediation sessions


Friday, March 2, 2012

When homeowners headed for foreclosure sit down with their bank to see if they can work out an agreement, state law requires the lender come equipped with documents proving who owns the home, among other things. In one-third of those mediation meetings, however, banks failed to produce the required documents, according to an analysis of the last six months of 2011.

The figures appear to provide statistical evidence to support what many homeowners have claimed — that banks aren’t negotiating in good faith to help them stay in their houses.

JP Morgan Chase had the highest rate of noncompliance with the state law. It failed to produce required documents in 52 percent of mediations, which homeowners may request before a bank forecloses. The figures were released Thursday by the state’s Foreclosure Mediation Program.

Bank of America, by far the biggest private lender in Nevada, did not produce the necessary documents 41 percent of the time.

Overall, out of the 3,183 mediations from July 1 to Dec. 31, lenders were missing documents on 1,148 occasions, or 36 percent of the time.

“The noncompliance rate since the beginning of the program has been shockingly high,” said Barbara Buckley, head of the Legal Aid Center of Southern Nevada and the former Assembly speaker who authored the foreclosure mediation bill. “I had hoped by now that the lenders would begin complying.”

Bill Uffelman, president of the Nevada Bankers Association, said “the numbers speak for themselves.”

“The fact that they’re missing required documents, produced somewhere along the life of the loan, indicates insufficient record keeping,” he said.

Representatives of the banks could not be reached after the figures were released.

The state’s Foreclosure Mediation Program started in September 2009 was intended to allow homeowners to sit down with their lender before going through foreclosure. It does not force banks to make any concessions but it does require they do the following:

• Show up at mediation sessions.

• Bring documents, such as a certified copy proving ownership and a chain of title.

• Have the authority to negotiate on behalf of the lender.

• Participate “in good faith,” as determined by the mediator, who is appointed by the Nevada court system.

When the program started, it struggled to get bank representatives to show up at all, said Verise Campbell, administrator of the program. In the last six months of 2011, banks had representatives present in all but 2 percent of mediation sessions.

Despite the large percentage of sessions where banks have not shown up with documents, it is an improvement compared with the early years of the program. Lenders failed to bring documents in 50 percent of the cases during the first two years of the program, Campbell said.

The numbers released Thursday show “improvement, but banks still need to focus on their document compliance,” Campbell said. “It’s clearly the weak link in their compliance.”

The numbers provided the first look at participation by lending institution. In addition to Bank of America and JP Morgan Chase, the report gave the rate of not bringing required paperwork for the following lenders: Wells Fargo, 31 percent; Ally/GMAC, 50 percent; US Bank, 32 percent; Citigroup, 12 percent.

Transparency about which lenders are complying and which ones aren’t could compel those noncompliant banks to produce documents, Buckley said.

The courts could use these statistics to issue fines against banks that fail to comply with the state program, Buckley said.

Lenders who don’t comply with the program “don’t deserve to proceed with foreclosures,” she said.

Shell Game: Nominees and Principals All Change Depending upon Circumstances


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In reality there are nothing but nominees for undisclosed principals on both the note and mortgage. The money for funding the mortgage came from investors who pooled their money together. At the moment the borrower accepted the benefit of the loan funding, an obligation arose by operation of law between the borrower and the lender. But the lender is different than the party named on the note and mortgage (DOT).

This does not mean the obligation does not exist. But it does mean that the documentation contains declarations of fact that are not true. Hence it must be concluded that either the note is NOT evidence of the debt or that at best it is partial evidence of the debt — the balance of the information being contained in the closing documents with the investor lender and parole evidence in which the actual money trail differed from both the closing documents recitals for the borrower and the closing documents recitals with the investor lender.

Under ordinary rules of construction, the note is not the obligation. The note is considered the evidence of the obligation — if it indeed contains declarations of fact that are true. The mortgage or DOT is neither the obligation nor the note. The mortgage is considered to be incident to the note. Thus if the note is defective, the mortgage does not contain terms that are enforceable. Hence the issue is not whether the debt exists, but whether it is secured by collateral and if so, under what terms contained in which gaggle of documents that the parties used to “securitize” the loan.

This is not confusion created by the borrower who thought justifiably that he could rely upon the representations of the persons attending the loan closing that the parties were properly disclosed and that their remuneration was properly disclosed in accordance with TILA. This confusion arises strictly because the intermediaries wished to create a gray area in which they could claim ownership of the loan for purposes of trading and gambling “off balance sheet” and without accounting to either the investor-lender or the homeowner-borrower.

In order to sustain the position of the opposing parties, the court would be required to accept the parties shown at closing on the note and mortgage as the real parties in interest for one purpose, the parties who traded in insurance, credit enhancements and credit default swaps as owning the loan for other purposes, and the investors from whom all the money was obtained for funding the loans as the real parties in interest for still other purposes.

The chaos from these practices are precisely the subject of indictments and civil suits across the country in which the title registries were either ignored or corrupted or both. The burden of clarification and proof of ownership should be on the party or parties seeking relief and it should result in a single lien that is owned by one or more parties and not multiple liens without any accounting for which party can submit a credit bid and for how much the credit bid can be submitted.

If the note and mortgage (DOT) are incomplete at best and wrong in certain respects in describing the transaction then the lien purportedly recorded against the debtor’s property was never perfected. The actual security instrument contains MERS, an admitted nominee for an undisclosed principal and a “lender” which in fact was a nominee for an undisclosed lender or other party.

The point here is that the obligation that a rose by operation of law when the borrower accepted the funding is either undocumented or incompletely documented, making it unsecured. If the property is unsecured then it is part of the bankruptcy estate which can then be utilized, unencumbered for the beenfit of creditors and the debtor alike.

The proof of this line of thinking lies in the alleged auction which was improperly conducted. Assuming the auctioneer was properly and duly authorized however, and that the substitution of trustee was properly and duly authorized, the party submitting the bid at auction did so without tendering any promissory note much less the complete package of documentation that would prove its status as holder and owner of the loan (i.e. the party to whom the money is actually owed arising from the borrower’s obligation when the loan was funded).

At the alleged auction, the auctioneer announced the receipt of a credit bid from a party that had not established itself as the actual creditor, nor did the auctioneer collect the note that would constitute the bid. Since there was not cash paid at the auction, there cannot be said to have been a transaction because neither the cash nor the note was tendered as a bid. Hence the “sale” was a fictitious sale and the deed issued upon sale would have been improper, leaving the debtor with title tot he property unencumbered by the alleged mortgage or DOT.

It is one thing to apply the law for purposes of  jurisdiction and establishing a colorable right to initiate a foreclosure proceeding. It is quite another to bid the property into one’s own name to the detriment of the actual creditor, leaving the debtor with a continued liability.


Members’ Teleconference at 4pm Arizona time, 6PM EST Agenda


COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary CLICK HERE TO GET COMBO TITLE AND SECURITIZATION REPORT

CUSTOMER SERVICE 520-405-1688 (Do NOT use this number to access teleconference)

Darrell Blomberg will guest host tonight’s program for Members Only. If you are a subscribing member, you have received the information necessary to participate. I will be on for a while as well.

Darrell will be presenting his analysis of the San Francisco study and how he is using it. Download these two documents to follow along:

Foreclosure In California, A Crisis Of Compliance – San Francisco

2012-02-28, Trustee’s Sale Worksheet – WATERMARKED2

AND I intend to bring up for discussion why politicians are not talking about foreclosures, housing and the direct effect the banks have had on our economy.

Why the Original Note (and Ownership) Continues to Be Critically Important


COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary CLICK HERE TO GET COMBO TITLE AND SECURITIZATION REPORT


Editor’s Comment: Yves Smith is right to point out that when the borrower’s note is not produced and not returned after the “sale” of the property, something is rotten in Denmark. Just so we are all clear, we are talking about the foreclosure sale where according to state law the highest bidder get the property. But the bidder must bid SOMETHING in order to take title away from the homeowner. The homeowner must either get the note returned in its original form along with the endorsements, OR the bidder must pay cash.

Nobody in any state is allowed to go to an “auction” of real property held pursuant to a right of sale or foreclosure and bid nothing. In fact, in many states, the bidder must put up a sum of money just to get into the bidding or even witness the auction.

So it is indeed strange that amongst the millions of foreclosures that have alleged resulted in putative “sales” no homeowner has received anything like a cancelled note or even an affidavit explaining why he did not get the cancelled note. That being the case, why should the homeowner be forced to legally recognize the alleged sale. It is obviously not complete if the homeowner has not received the note.

There are two ways the homeowner can get the note. Either someone has paid the auctioneer the bid price in cash or the actual party to whom the debt was owed bids the amount of the debt owed by that specific homeowner in which that homeowner offered that specific property as collateral to guarantee repayment. Another creditor to whom the debtor owes money simply won’t do (and this is where the banks’ position collapses).

I have spoken to certain people on the dark side and they take the position that if the bid was less than the principal due, then the note is not due until it is paid in full. But this flies in the face of those states where the alleged creditor is limited to the value of the property and may not pursue a deficiency judgment. It also fails to explain why the note is not returned when the bid was i fact the principal claimed by the creditor (even though we know that the principal claimed is not actually the principal due).

Which brings me to my point. Attorneys for borrowers are snatching defeat from the jaws of victory by their ignorance of the auction process. When you are arguing standing, instead of spending all your time on erudite sounding arguments, simply point out to the Judge that unless the would-be forecloser produces the original note along with proof of ownership, they have no right to bid at the auction unless they want to pay cash. Just point to the provision of the statutes that says so.

I would go even further and say that if the Judge, in his discretion, allows the foreclosure to proceed, that the order specific that this order does not constitute a finding that the the party initiating the foreclosure is necessarily the right party to submit a credit bid.

It is important to add that the person who is conducting the auction should be put on notice that there is a high likelihood that a party is claiming to be a creditor for the sole purpose of being able to bid on the house without ever paying for it. If the auctioneer (trustee, clerk or whatever) accepts such a bid without performing any due diligence, they could be subject to liability.

The argument that the homeowner is subject to double liability is valid and true but the Judges are not giving it any traction. They are not seeing that happen often enough to make it a real issue in their minds.

Yet Another Mortgage Scam: Homeowners Not Getting Cancelled Notes After Foreclosures, Hit by Later Claims

As we’ve discussed the “where’s the note?” problem of mortgage securitizations, some readers who are old enough to have sold a home more than once have said that while they’d gotten a cancelled mortgage note back on their first sale, on a more recent one, they hadn’t. They were concerned, and as this post will show, they are right to be.

By way of background, the popular press has done the public a disservice by talking about “mortgages”. A “mortgage” consists of two instruments: a promissory note, which is a IOU, and a lien against the property, which is referred to as a mortgage (in non-judicial foreclosure states, they are typically called a deed of trust and confer somewhat different rights, but we’ll put that aside for purposes of this discussion).

What appears to be happening on all too often in Florida is that when borrowers signed warranty deeds in lieu of foreclosure when they can no longer keep these homes, they often get only a satisfaction of mortgage, not a cancelled note. This is not what is supposed to happen. When a borrower deeds his property to the bank, the objective of the exercise is to cancel the debt. If the note has not been extinguished, it is referred to as a “zombie note”. As the Fort Myers News-Press reported last year:

Carol Kaplan, a spokeswoman for the Washington-based American Bankers Association, said leaving the note off the satisfaction of mortgage is “not a practice we’ve ever heard of.”

Turns out that’s a bit disingenuous. The article quoted Jack Williams, resident scholar at the American Bankruptcy Institute and a bankruptcy professor at Georgia State University:

“We saw something very similar to this in the debacle in the ’80s, people buying notes from the government and suing,” Williams said. “I won’t rule out that could happen again. They sold the note to collection agencies and law firms and places like that.”

In the real estate meltdown of the ’80s, he said, it was the Resolution Trust Corp., set up by the federal government to liquidate mortgage loans and other real estate assets held by failed savings and loan associations.

“Let me tell you, people made millions of dollars suing homeowners back in the day,” Williams said.

Some of the debt was in the form of deficiency notes: court judgments saying a certain amount was owed even after the property was sold at public auction.

But in other cases, Williams said, it was the note, straight up.

Even though the lawyers who’ve taken note of this practice are in Florida, the ground zero fo the foreclosure crisis, it is important to stress that anything that is happening in one state on a meaningful basis in securitized mortgages is very likely to be happening elsewhere. The securitizations were set up to be widely dispersed geographically and the servicers have set up their procedures to be as standardized as possible even with the differences in real estate law across states. If borrowers aren’t getting notes back in Florida, it’s quite probable that that is occurring in other states.

Xiomara Cruz, a Coral Springs attorney who has taken an interest in this topic, sent a warning to fellow lawyers:

I have seen in dozens if not hundreds of foreclosure suits allegedly “settled” for properties in Florida, MOST only include language satisfying the mortgage BUT DO NOT INCLUDE SPECIFIC CANCELLATION/SATISFACTION of the promissory Note. So that in essence your client just got a Release of Mortgage and nothing else.

I hate these tactics being used against consumers, the recording system and the judiciary. It is wrong. Regular people are being conned. Judges are being conned. Even many lawyers are being conned. The words “mortgage loan” and “mortgage” are being used by Fannie, Freddie, all Servicers, Banks as if they were interchangeable with ‘debt’ and ‘NOTE’ when the foreclosure mills walk into court or settle for their ‘clients’. Yet, when you ask the mills or the banks, servicers, Fannie, Freddie to put their money where their mouth is, all of a sudden its “we only made an agreement to settle the foreclosure suit, we dismissed with prejudice, we filed a satisfaction of mortgage, we can’t back to sue you” That is serious BOLOGNA and I don’t mean the capital city of Emilia-Romagna!

The very inherent INTENT of every borrower entering into a settlement is to cancel the debt, otherwise what good is to settle to give back the collateral willingly? Filing the satisfaction of mortgage only helps the banks, servicers, and Fannie/Freddie obtain clear title so they can sell it and make more money after already getting fat with interest for years, servicing fees, selling ‘beneficial rights’ to receive monthly payments, but not selling the actual underlying note. This situation gets horribly worse because if the note is left outstanding, it can be used upon by anyone else who obtains that note in the flow of commerce. A suit on the note is left open.

And she reports in a later message to me that servicers and even judges don’t take well to being pushed on this issue:

When this happened to my client, he immediately raised the flag requesting specific performance in the underlying foreclosure suit. However, the bank voluntarily dismissed the foreclosure action with prejudice while the motion for specific performance was pending hearing (which had already been set) and the judge ceded to the bank’s voluntary dismissal. He then hired me specifically after a year of calling everyone from members of congress to the OCC to the AG to obtain the cancelled note back because no one would give it him back to him marked cancelled. The bank and Fannie stated through their attorneys, over and over in every instance before our suit, that they never promised him anything else but a dismissal of the foreclosure suit and a satisfaction of mortgage, and he got a dismissal with prejudice. Long story short, its still there, the circuit judge dismissed all counts of the unfair consumer practices, unfair debt collection practices, with prejudice and although he really wanted to couldn’t dismiss with prejudice the breach of contract, specific performance counts but dismissed them without prejudice and with leave to amend “because he didn’t like some of the WHEREFORE clauses”.

This story borders of Kafkaesque. Yet Cruz is not being unreasonable. 25 years ago, an attorney who did not demand the cancelled note in satisfaction of a mortgage would have been considered grossly negligent. And the risk is not theoretical. Professor Williams described how people were defrauded in the wake of the S&L crisis when notes that should have been cancelled got into the wrong hands. April Charney had just seen a case on a 2008 foreclosure where the ex parte order returned the original note to the plaintiff/servicer. The hapless borrower is now being sued by the private mortgage insurer. PMI was typically used to insure the LTV over 80% on high LTV loans. In in the subprime market, lenders bought mortgage insurance on loans and paid the premiums themselves (via the trust) rather than have the premiums paid by the borrower, as is the more traditional structure.

Bloomberg: Housing Prices Continue to Plunge


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EDITOR’S COMMENT: Somebody once said that after Americans have exhausted all other options they will finally  do the right thing. I hope that is true. Because until we start treating homeowners as victims instead of deadbeats, the situation cannot change. And until we consider the interest of investors to be far more important than the appearance of financial stability in banks that are holding fictitious assets, confidence in our financial markets and the willingness  to invest in American markets will be diminished.

I don’t know about you, but if I knew that the economy would return to health by giving somebody money or property or any other sort of benefit I would be hard-pressed to say no and allow more people to lose their homes, their dignity and their hopes. We tried giving everything we had to the banks. It’s time to look in other directions.

Home Prices in 20 U.S. Cities Decline 4%

By Shobhana Chandra

Home prices in 20 U.S. cities dropped more than forecast in December to the lowest level since the housing crisis began in mid-2006, indicating foreclosures are hampering the industry’s recovery.

The S&P/Case-Shiller index of property values in 20 cities fell 4 percent from a year earlier, after decreasing 3.9 percent in November, a report from the group showed today in New York. The median forecast of 31 economists surveyed by Bloomberg News called for a 3.7 percent decline.

Abandoned houses at the Desert Mesa subdivision in North Las Vegas. Photographer: Jewel Samad /AFP/Getty Images

Feb. 28 (Bloomberg) — Robert Shiller and Karl Case, co-creators of the S&P/Case-Shiller index of property values in 20 U.S. cities, talks about the housing market and home prices. The S&P/Case-Shiller index fell 4 percent in December, more than forecast, to the lowest level since the housing crisis began in mid-2006. Shiller and Case speak with Tom Keene on Bloomberg Radio’s “Surveillance.” (Source: Bloomberg)

Feb. 22 (Bloomberg) — Douglas Yearley, chief executive officer of Toll Brothers Inc., talks about the outlook for the U.S. housing market. Yearly also discusses Toll Brothers’ first-quarter earnings and the Obama administration’s efforts to stimulate the housing market. He speaks with Trish Regan on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

Feb. 28 (Bloomberg) — Home prices in 20 U.S. cities dropped more than forecast in December to the lowest level since the housing crisis began in mid-2006, indicating foreclosures are hampering the industry’s recovery. The S&P/Case-Shiller index of property values in 20 cities fell 4 percent from a year earlier, after decreasing 3.9 percent in November, a report from the group showed today in New York. Betty Liu reports on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

Signage for the Toll Brothers Inc. Diablo Estates is displayed at the entrance of a development in Clayton, California. Photographer: David Paul Morris/Bloomberg

Distressed properties returning to the market mean prices will stay depressed, prompting buyers to wait for cheaper bargains and impeding construction. While sales have begun to stabilize, a rebound in home values may take time, underscoring Federal Reserve policy makers’ concern that weakness in housing is blunting their efforts to spur the economic expansion.

“We’re still dealing with a lot of distressed properties and very low absolute levels of demand,” said Sean Incremona, a senior economist at 4Cast Inc. in New York, who accurately projected the 4 percent drop. “We’re not seeing any of the stabilization in housing activity filter through to prices.”

A separate report today from the Commerce Department showed orders for U.S. durable goods fell in January by the most in three years, led by a slowdown in demand for commercial aircraft and business equipment.

Three Years

Bookings for goods meant to last at least three years slumped 4 percent, more than forecast, after a revised 3.2 percent gain the prior month. Economists projected a 1 percent decline, according to the median forecast in a Bloomberg News survey.

The Standard & Poor’s 500 Index was little changed at 1,367.54 at 9:34 a.m. in New York. The 10-year Treasury yield fell two basis points from late yesterday to 1.90 percent.

Economists’ estimates for the year-over-year change in the home price index for December ranged from declines of 4.1 percent to 3.2 percent, according to the survey. The Case- Shiller index is based on a three-month average, which means the December data was influenced by transactions in October and November.

The November reading was previously reported as a year- over-year drop of 3.7 percent.

Home prices adjusted for seasonal variations fell 0.5 percent in December from the prior month, following a decrease of 0.7 percent in November. Unadjusted prices fell 1.1 percent from the prior month.

Shows Trends

The year-over-year gauge, begun in 2001, provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Nineteen of the 20 cities in the index showed a year-over- year decline, led by a 12.8 percent drop in Atlanta. Detroit showed the only increase, with prices rising 0.5 percent in December.

Nationally, prices decreased 4 percent in the fourth quarter from the same time in 2010 to the lowest level since mid-2006. They fell 3.8 percent from the previous three months before seasonal adjustment, and fell 1.7 percent after taking those changes into account.

“The pickup in the economy has simply not been strong enough to keep home prices stabilized,” David Blitzer, chairman of the S&P index committee, said in a statement. “If anything, it looks like we might have re-entered a period of decline as we begin 2012.”

Demand Steadies

Recent reports indicate demand is steadying. Existing-home (ETSLTOTL) sales rose to a 4.57 million annual rate in January, the National Association of Realtors reported last week. While it was the best showing since May 2010, distressed properties made up the largest portion of all purchases since April.

Toll Brothers Inc. (TOL) and D.R. Horton Inc. are among builders benefiting from job growth as well as cheaper properties and record-low mortgage rates.

“We’re optimistic,” Doug Yearley, chief executive officer at Horsham, Pennsylvania-based Toll Brothers, said in a Feb. 22 interview with Bloomberg Television. “We have orders that are up significantly. We’re seeing deposits up, we’re seeing traffic up.”

Excess supply of distressed properties is dragging down values for all houses. About 5 million houses have been lost to foreclosure in the U.S. since 2006, according to RealtyTrac Inc. Banks may seize more than 1 million U.S. homes this year after legal scrutiny of their foreclosure practices slowed actions against delinquent homeowners in 2011, it said last month.

“Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery,” Fed Chairman Ben S. Bernanke said in the cover letter of a Fed study on the housing market that he sent to Congress last month.

To contact the reporter on this story: Shobhana Chandra in Washington at

To contact the editor responsible for this story: Christopher Wellisz at


Dividing Into “Them and Us” Keeps Housing Market Falling and Bankers Fat


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Editor’s Comment:

Living lies is a way of life in American politics. You take the truth, turn it on it’s head, and put out myth loud and often and it is often eventually taken as true — even those who are hurt by the lie will come to believe it if they hear it often enough. That is how most borrowers feel guilty about the mortgage mess and why they are willing to pay more for their homes and loans than the property or loan product is worth.

The Ayn Rand controversy is over before it begins. Rand’s writing is largely misinterpreted in my opinion but it did serve as the basis for maintaining “them and us” mentality — largely to our detriment as recent facts clearly disclose.

The myth grows as these red voters convince each other that the people in the blue states are ruining the country and siphoning off all the hard earned money of people who think government should stay out of their affairs. It is in the red states that people insist on keeping the government out of their Medicare without realizing that their media and educational system have been dumbed down to the point where they don’t realize that Medicare is a single payer government run healthcare system funded with taxpayer dollars. Taking government out of Medicare is the same as taking turkey out of thanksgiving.

The fact is that blue states have consistently produced more federal tax revenue than the red states — and specifically more than the blue states get in Federal expenditures. Conversely, the red states produce less revenue and take more Federal expenditures than they pay. These states have been subsidized for decades by the blue states who even allow taxpayer dollars to be spent on such controversial items as creationism in textbooks. In plain terms the blue states pay the expenses of the red states and without the blue states the red states would collapse into financial chaos. People in blue states have no objection to this arrangement because we are all one country. People in red states object to this arrangement because they are exposed to misinformation.

In similar fashion, mortgage fraud is being defined in terms of those who cheated the banks out of money by a variety of deceptions. We can all agree that those who practice fraud should be punished and their ill-gotten gains should be distributed back to the victims in some fair way. But the big mortgage fraud came FROM the banks and never happened TO the banks because they first defrauded investors and THEN committed fraud on the American consumer, taxpayers and the budgets, pension funds, state and local governments.

We can all agree that when a borrower actually deceives a bank into thinking he has more income and more assets than is the truth, that borrower should suffer many consequences. But the facts, like the blue state subsidy of red state self-reliant citizens, show another living lie at work here.
The facts show that the banks working through mortgage originators misrepresented the income of borrowers usually without the borrower even knowing the application had been changed. And the facts show that the consumer and investor lender relied upon appraisals that we’re dictated by the banks instead of being dictated by reality. So the shoe is factually on the other foot again. The lying and cheating was done by the banks.

Somehow the banks have spun the myth that the borrowers should be punished for wrongdoing even if the banks and not the borrowers were the wrong doers.

The convoluted logic for this injustice comes from the idea that it is just fine for the red state to be supported by blue states whom the red states say are draining America of its future. The bulk the mortgage fraud by the banks happened in high density population centers which means primarily blue states or Blue parts of red states.

By playing the red state living lie for all it’s worth, the banks have convinced many people that by punishing the banks and returning the Ill-gotten gains to the pension funds and homeowners, these blue state Free loaders will be getting another windfall at the expense of the red state. In reality, the reverse is true. Money that would otherwise go to revitalize the economy of all states — red and blue — is going to the banks because we don’t want to let those blue free loaders from getting anything.

And that is our story. The facts go one way while the lies go the other way. Right now the lies have it. Motion passed – we will continue to punish the borrowers for the bank misdeeds no matter how much it hurts the country — or how much it diminishes the ability of the blue states to continue subsidizing the red states.

Ayn Rand Worshippers Should Face Facts: Blue States Are the Providers, Red State Are the Parasites

OCC REVIEW: Sham, Shame or Opportunity for Social Justice?


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EDITOR’S COMMENT: Let’s start by saying Field is right, as far as it goes. The OCC review process is under the thumb of the Banks, and the cities and states are being extorted into “settlement” agreements that provide no help to homeowners and only a little help to the state budget shortfalls.

But nothing can change the fact that title is corrupted by foreclosure deeds that refer to sales that never happened by non-creditors submitting credit bids, and nothing will remove the fact that the default that was declared was at best declared on the wrong figures and at worst (and the most usual) on a loan that was either already paid off completely or was not in default at all.

But I wouldn’t give up on the OCC Review process at all. It sets in motion  an administrative process that is hard to stop. You just need to understand that the rules in an administrative procedure are different than the rules of court — even if you end up in court getting an order that ratifies or vacates the decision of the agency.

With the OCC consent decrees and the various promises contained in the decrees, consent orders, and settlements, together with the investigations that have been performed by both public law enforcement and private litigants, there is ample ground to challenge the banks and servicers for violations that might be otherwise overlooked by the OCC — but for the fact that you brought it up.

In my opinion that OCC Review process should be pursued vigorously and it might lead to remedies that are still remote in civil courts. It’s true that the pattern of the banks is to promise them anything and then do nothing — but that only works if the people do nothing. That is where readers like you, members of the Occupy movement and other nascent movements across the country come into play.

The bottom line is that the worst WILL happen — but only if you let it. Get yourself an attorney, get the analytical reports like our COMBO that will arm you with data that contradicts the assertions made in court by the banks and their attorneys, and file every administrative complaint that applies for forged notaries, for violation of OCC orders, for violation of statute and even common law.

This isn’t like 4 years ago when all that we were saying here was considered theory at best and the ravings of a conspiracy theorist at worst. Now everything we said — from mortgage defects, lack of perfection of the lien, slander of title, pretender lenders submitting credit bid at rigged auctions, and evictions by non-creditors are all well known along with a long list of other violations.

Pick the violations that apply to your case, and then go after the so called banks and servicers who claim to have rights over your loan. In the end, all you need is an order for a Judge or an administrative hearing officer that commands them to prove their proffers — to put up or shut up — for them to fold their tents and leave you in your home or allowing you to recover your home.

Abigail Field: Insider Says Promontory’s OCC Foreclosure Reviews for Wells are Frauds. Brought to You by HUD Sec. Donovan

By Abigail Caplovitz Field, a freelance writer and attorney who blogs at Reality Check

U.S. Housing Secretary Shaun Donovan has embarrassed himself yet again. This time, though, he’s gone in for total humiliation. See, he praised the bank-run Office of the Comptroller of the Currency’s (OCC) foreclosure reviews as an important part of the social justice delivered by the mortgage “settlement“. But thanks to an insider working on an OCC review, we know that process is a sham. Worse, the insider’s story shows that enforcement of the settlement is likely to be similar, which is to say, meaningless. Doesn’t matter how pretty the new servicing standards are if the bankers don’t have to follow them.

Let’s start with Donovan’s sales pitch for the OCC reviews:

For families who suffered much deeper harmwho may have been improperly foreclosed on and lost their homes and could therefore be owed hundreds of thousands of dollars in damages — the settlement preserves their ability to get justice in two key ways.

First, it recognizes that the federal banking regulators have established a process through which these families can receive help by requesting a review of their file. [ACF: That’s the OCC process] If a borrower can document that they were improperly foreclosed on, they can receive every cent of the compensation they are entitled to through that process.

Second, the agreement preserves the right of homeowners to take their servicer to court. Indeed, if banks or other financial institutions broke the law or treated the families they served unfairly, they should pay the price — and with this settlement they will. [bold throughout mine]

Now, the justice of the settlement has been debunked many times over. And David Dayen debunks Donovan’s OCC pitch here. What’s important is that Bank Housing Secretary Donovan wants you to believe the Wells Fargo OCC process is a meaningful contribution to holding bankers accountable and compensating victims.

Wells Fargo’s Fraudulent OCC ‘Independent’ Foreclosure Reviews

Right around the time our Bank Housing Secretary was pitching the OCC reviews as social justice, a person temping for Promontory Compliance Solutions LLC (an affiliate of Promontory Financial Group) on the Wells Fargo OCC “independent” review project was telling Mandelman what a complete charade it was. The insider’s description exposes the reviews as the fraud on the public that they are.

The full revelations of the temp hired, trained and supervised by Promontory Compliance Solutions, working on the Wells Fargo’s OCC independent foreclosure reviews project, are available as a Mandelman blog post and a Mandelman Podcast. But here’s a few highlights to show how rigged the process is:

“I have found errors that should be moved up through the ranks, but am told “quit digging so deep”…”put your shovel away”…Focus on the questions “in scope”… The review forms are set up so no harm could ever be found. It’s equivalent of an attorney presenting his case to a judge with just 20% of the evidence.”


“The foreclosed victims don’t realize if they do not provide specific dates on the intake forms… their complaints are considered “general comments” out of scope.

The kicker? The forms don’t tell people their information will be ignored if the complaints are not dated.

Mandelman reports that the insider

“also says that the questions on Promontory’s form are worded in such a way that it makes it very difficult to ever find fault. For example, by using compound questions, he is often told to answer “no,” when the first part of the question would be a “yes.””

A last, flashing neon sign announcing the reviews will protect banks and do no justice is who has been hired to do the reviews. See, here’s the insider that’s willing to talk, and it’s probably why he’s willing to talk:

I have 15 years industry experience in all facets of the mortgage & title industry, and just needed a job at the moment.

But this is who he’s working with and for:

some of the people brought in with me do not know the difference between a truth in lending statement, and a note. It’s a shame, these are your reviewers!!! The supervisors don’t want any trouble…they are mostly temps too, just trying to get a promotion to full time.

Sounds like no bailed-out bank will be held accountable and no homeowner compensated. Nice product you’re selling there “U.S.” Housing Secretary Donovan.

Indeed, Wells Fargo’s Promontory process apparently found no wrong doing in 9,996 cases out of 10,000 examined. The other four were sent to Wells Fargo for further review but came back as no problem. At least, 0 problems out of 10,000 files is what the insider’s supervisors announced to everybody. I don’t know if the supervisors were telling the truth or just trying to message everyone to not find any problems in any files. Either way it tells you the same thing: the reviewers won’t find anything wrong with the files.

Hey Secretary Donovan, want to try that ‘”settlement” with OCC reviews as justice’ pitch again?

Can’t Just Be Stumpf’s Wells Fargo

I don’t think Wells is alone in concocting an elaborate sham to check the ‘atonement’ box on the consent decree/settlement checklist.

First, all the banks subject to the decrees have all cooperated in manufacturing profits in ways that have deeply distorted our social fabric and our nation’s public policies. Second, since the OCC’s willing to let John Stumpf’s Wells Fargo do a thoroughly fraudulent process, surely it’s willing to let the rest of them do it too. I say “Bank-run OCC” quite deliberately. Third, Promontory is engaged to do three reviews; Wells, Bank of America, and PNC. Now, the insider only worked on the Wells Fargo Promontory project, so I can’t be sure the other two set ups are equally rigged. But what are the odds?

As to banker-driven distortion of our national government’s priorities, you can see it clearly if you know where to look. Generally it’s in the serial banker-centric responses to the financial meltdown and the ensuing housing crisis. But a concrete example is how our federal government has handled unsustainable liabilities.

Just More Proof Our Government Represents Bankers, Not Us

The bankers got and still have troubled asset “relief.” Without that help they’d all be bankrupt today. But homeowners are still denied mortgage principal relief on their their homes, even in bankruptcy. Don’t tell me that the moral hazard of troubled asset relief is smaller or less systemically important than the moral hazard of mortgage principal relief, in bankruptcy or out. There’s absolutely no way to justify that disparate treatment on the merits.

Underwater, toxic mortgages aren’t the only Wall Street created, unsustainable liability affecting our nation. Nationwide local governments are locked into extremely expensive Wall Street products called interest rate swaps. These deals turn our tax dollars into windfall profits for the bailed-out bankers. Taxpayers are trapped in the deals by high early termination fees. Worst of all, the reason these deals are so bad for municipalities is the Fed’s free money response to the banker-caused financial meltdown. That is, our government trying to help the bankers is facilitating the profiteering from municipalities. And yet I’ve heard no one in the Obama administration suggest helping municipalities cope with the bankers’ greed. At least Team Obama talks a good game about helping on mortgages.

(Btw, are you anti-union? Well, consider who did the dynamite research documenting the swaps problem: SEIU.)

What the Fraudulent OCC Review Means for “Settlement” Enforcement

But our federal government’s willingness to help banks and not people isn’t confined to disparate treatment of unsustainable liabilities. In the face of a worsening mortgage servicing, foreclosure fraud, and rule of law crisis we get a toothless settlement between the bankers and all meaningful law enforcers. A toothless settlement is no settlement. The bankers’ recidivism on SEC injunctions makes that clear.

Why do I say the settlement is toothless? Yes, as of writing, two weeks after the deal was announced, there’s no settlement text to look at. However, the “Executive Summary” of the deal says this about compliance: “The banks will report on their compliance in the form of agreed-upon metrics and outcome measures.” (Bold mine)

How do you think the banks will do that reporting? Surely they’ll hire firms like Promontory Compliance Solutions LLC; after all, by doing Wells’s OCC reviews, Promontory’s got pole position on doing its settlement compliance too, right? And if Promontory’s rigging the review to ensure Wells Fargo doesn’t pay homeowners a dime in restitution, it’ll be even more thoroughly protective of the bank when theoretically big fines ($1-5 million/each) are at stake.

Who IS Promontory Financial Group?

If Promontory Financial is going to be allowed to conduct officially-condoned compliance theater, let’s take a look at the actors in the production. From the firm’s website’s “Our Firm” page:

“Led by our Founder and CEO, Eugene A. Ludwig, former U.S. Comptroller of the Currency, our professionals have deep and varied expertise gained through decades of experience as senior leaders of regulatory bodies, financial institutions and Fortune 100 corporations.”

Ok, that makes sense: Ludwig’s a former head of the bank-run OCC, so of course his firm was lined up to do OCC reviews. And from his long form bio on the company’s site, we learn: “Before becoming Comptroller, Gene was a partner in the law firm of Covington & Burling, specializing in banking law.”

Do you remember Covington & Burling, and its connection to federal law enforcement, MERS, and implicitly the Justice Deparment’s failure to prosecute the bankers that are Covington & Burling’s clients? Not really? Well check out Covington’s “Financial Institutions” practice, and its White Collar Criminal Defense page. Note Covington’s partnership includes John Dugan, who returned to the firm after his recent years as Comptroller of the Currency, Edward Yingling, recent head of the American Bankers Association, James Garland, recent Deputy Chief of Staff to AG Eric Holder and Steve Fagell, also a recent Deputy Chief of Staff to AG Eric Holder. Though their current bios don’t show it as clearly as they once did, Garland and Fagell were instrumental in structuring the Justice Department’s response to financial meltdown crimes before returning to Covington’s white collar criminal defense practice. Finally, remember that AG Holder is himself a former Covington partner, as is Lanny Breuer, his head of the Criminal Division. Presumably both will return to Covington when they’re done at Justice.

Doing a complete list of the connections between Covington, our government and the bankers the Feds regulate and “prosecutes” takes too much time, and besides, I really want to talk about Promontory. Covington’s in this post purely because Promontory has deep roots at the firm, beyond Founder and CEO Eugene Ludwig’s time as a partner there.

From Promontory’s “Firm Leadership” page, we get:

Alfred H. Moses is Promontory’s Co-Founder, Senior Partner and Chief Strategy Officer.

Alfred was a Partner at the Washington, D.C., law firm of Covington & Burling for much of his career.

Here are other Covington alumni at Promontory: Managing Director Barak Sanford, Managing Director Michael Dawson (who also worked in the Treasury Department), Managing Director Joyce Payne Yette, and Principal and Deputy General Counsel Pat Gage. Paul Tagliabue, currently Of Cousnel at Covington, serves on Promontory’s Advisory Board.

Promontory’s also wired into Capitol Hill and the OCC beyond Ludwig. For example, Managing Director Amy Friend worked for Senator Chris Dodd and the Senate Banking Committee for years, as well as for the OCC. Konrad Alt, who is point person for Promontory on at least one of these reviews, once was counsel to the Senate Banking Committee

To sum up: the law firm most hardwired into the Justice Department under AG Holder, with deep ties to the OCC, is also thoroughly hardwired into Promontory Financial, which is helping Wells Fargo, a Covington client, “comply” with the OCC’s consent decree. And Promontory also employs veterans of our government’s bank regulating and law writing institutions who somehow managed never to work for Covington.

I’m beginning to think that “revolving door” doesn’t describe Covington & Burling’s relationship to the power, at least anything bank or law enforcement related. It’s more like Covington & Burling is the nerve center through which bailed-out bankers shape banker law enforcement and regulatory policy.

What a Real Compliance Firm Looks Like

For an article on internal investigations I wrote for Corporate Secretary Magazine, I had the pleasure of interviewing Toby Thacher. Here’s how his firm presents itself on its webpage:

Thacher Associates, LLC is one of the premier corporate intelligence, investigative and integrity risk-management firms in the United States. …

Although Thacher Associates is not a law firm, most of our senior managers are attorneys with considerable experience as prosecutors. …

Each year corporations, government and regulatory agencies, school districts, and charitable and religious institutions lose billions of dollars due to breaches of fiduciary duties, self-dealing by untrustworthy employees, and unethical actions by unscrupulous or unqualified vendors and contractors. Thacher Associates helps clients protect and enhance their reputation—and their bottom line.

For that article, Thacher told me that his firm is prepared to resign rather than look the other way:

“We were involved in one investigation where we believed there was criminal activity on the part of one of the corporate officers, which needed to be reported to the SEC and prosecutors,’ he recalls. ‘We asked for permission to tell the audit committee, but the client refused. Our only alternative was to resign from the investigation.’”

Here’s the bios of the three Thacher principals. All three prosecuted organized crime; none have practiced white-collar criminal defense. And this page shows they do the kind of work needed for both the OCC reviews and compliance assessment for the mortgage settlement. Can you imagine a Thatcher Associates-type firm implementing a Promontory-type charade? I can’t.

Now, I know about Thacher Associates only because the article I wrote. Surely there are other Thacher-type firms. You can spot them because they won’t be choc-a-bloc full of serial Covington alumni or similar folks from other big DC lobby/law firms. I include Thacher just to show what could be, what would be, if the Attorneys General signing the “settlement” or the OCC were remotely serious about ensuring the bailed-out bankers obey the law or honor their agreements.

So that’s the big tell: as so long as firms like Promontory (or Allonhill, see Michael Olenick) are allowed to do the ‘compliance’ work, the mortgage settlement and the OCC review process are meaningless. And don’t let the fervent marketing efforts of Housing Secretary Donovan convince you otherwise.


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