BOA SAYS NO TO CORRECTION OF PRINCIPAL: “UNFAIR AND UNEXPLAINABLE”

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SEE modification-plan-sought-follow-the-money-not-the-paperwork

EDITOR’S NOTE: Moynihan is pulling out the old argument, trying to stir up people who have been paying their mortgage so he and the other mega banks won’t be required to cough up trillions of dollars they stole through fraudulent appraisals of property inducing people to get into “loan” transactions that were guaranteed to fail, which the mega banks were betting on, so they would win going both ways. They did the same thing to investors with fraudulent appraisals (ratings) inducing people to get into MBS transactions, which were guaranteed to fail, and which the mega banks were betting on, so they could win going both ways.

What he is saying is that it is too hard to explain to people who have been paying their mortgage payments why others, who were not paying their mortgage payments, are getting a break. What he means is that if they DID explain it as a clawback from a fraudulent series of transactions, millions more people, whether they were paying or not, would demand their money back too. They will realize that just because they CAN afford to take the loss on a fraudulent transaction, doesn’t mean they SHOULD take the loss any more than anyone else.

And THAT in turn would be the end of the mega banks and the grip on this country’s power structure. because it would deplete every bit of equity they have and remove them from the table of active players in banking, leaving the REST of the banking industry, consisting of over 7,000 banks and credit unions to pick up the pieces which will be remarkably easy to do, and will produce no catastrophe other than for the those who continue to benefit from a PONZI scheme that is remaining alive, morphing into the next great catastrophe.

See Simon Johnson’s extremely clear, well written analysis, with citations and back-up for everything he says and I say www.baselinescenario.com.

AND Moynihan is issuing a tacit threat: everyone who relies on dividend income and is expecting dividend income from BOA will be on the short end of the stick — kind of like the lowest people in every PONZI scheme. I’m not saying they should be punished for believing this drivel from Moynihan. In a nation of laws, however, it is no argument at all to leave “well enough alone” if it means that victims remain uncompensated because other people, possibly without knowledge of the tainted aspect of the money, will lose.  Such shareholders in the mega banks may also be victims, at least some of them, and they may have their remedies too. In the end, there won’t be enough money to go around to satisfy everyone, but one thing is for sure — in a nation of laws — the perps should do the walk, not the victims.

LLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL

NY Times

Bank Chief Rejects Idea of Reducing Home Loans

By NELSON D. SCHWARTZ

Showing resistance for the first time against government pressure to write off tens of billions worth of mortgage debt, Bank of America executives said on Tuesday that the idea was unworkable and warned that it would be unfair to borrowers who had managed to stay current on their loans.

“There’s a core problem that if you start to help certain people and don’t help other people, it’s going to be very hard to explain the difference,” said Brian T. Moynihan, the chief executive of Bank of America. “Our duty is to have a fair modification process.”

All 50 state attorneys general, as well as a host of federal agencies, are pushing for a settlement over investigations into foreclosure abuses by major mortgage servicers that could cost the industry $20 billion or more. Much of that money would be earmarked to reduce principal owed by homeowners facing foreclosure.

But picking just who to help is among the thorniest questions facing government regulators, as well as the banks themselves. Even the most outspoken attorney general on the issue, Tom Miller of Iowa, acknowledged on Monday that too generous a program might encourage homeowners to walk away from properties where the value of the loan exceeded how much the underlying property was worth.

Indeed, industry experts estimate that nearly a trillion dollars worth of mortgage debt is “underwater,” a result of house prices having fallen since the original loans were made. Federal officials hope a settlement with the servicers will help individual borrowers and provide a cushion for the weak housing market.

Officials of Bank of America, the nation’s biggest mortgage servicer, argue that any effort to help troubled borrowers should not penalize borrowers who are underwater but have managed to make their monthly payments.

“There may be as much as $1 trillion worth of mortgages that are underwater,” said Terry Laughlin, the Bank of America executive whose unit, Legacy Asset Servicing, handles mortgages that are delinquent or in default. “What do you do for those borrowers that have a job but have negative equity and have paid on time and honored their obligations?”

“This is an unsolvable question,” he said. “It’s a very slippery slope.”

The comments by Mr. Moynihan and Mr. Laughlin came at a daylong meeting with investors and analysts in New York, the first of its kind for Bank of America since 2007.

Despite fierce criticism by regulators and political leaders that its efforts to help troubled borrowers have fallen short, Bank of America executives insist that the number of successful modifications the bank has completed is on the rise. The bank says more than 800,000 mortgages have been modified in the last three years.

Writing down billions of principal now could actually retard the recovery by encouraging borrowers to default, they argue. “It’s not that we don’t want to help troubled borrowers,” Mr. Laughlin said. “It’s a moral hazard issue.”

Late last week, the attorneys general presented the five biggest mortgage servicers, including Bank of America, with a 27-page proposal that would drastically reshape how they deal with homeowners facing foreclosure. It did not include a specific dollar figure, but government officials say they want to combine any overhaul of the foreclosure process with a monetary settlement that could finance more modifications for troubled borrowers.

The existing modification program created by the Obama administration, known as HAMP, has helped far fewer borrowers than originally promised. It also faces fierce opposition from Republicans in the House of Representatives, who voted last week to kill the program.

Mr. Moynihan believes investors who hold trillions in mortgage securities have to be involved in any settlement. It is not exactly clear what role they would play as part of the settlement with the federal government.

Officials at Bank of America, as well as other large servicers, declined to comment on the specifics of the 27-page proposal, and the industry has been cautious about fighting back too aggressively, mindful of the tales of robo-signing and other abuses that prompted the investigation by the attorneys general and federal regulators last fall.

What’s more, consumers and politicians are keenly aware that Bank of America and other financial giants have staged a remarkable turnaround since the government bailed out the industry after the collapse of Lehman Brothers in 2008.

“I think reasonable minds will prevail on this,” Mr. Moynihan said. “We do push back and we get to reasonableness.”

Still, the comments at Tuesday’s investor meeting are a preview of the arguments the industry is poised to make more forcefully in the weeks ahead as it negotiates with the attorneys general and other regulators behind closed doors. On Monday, Mr. Miller said he hoped a settlement could be reached within two months.

As the huge volume of loan losses recedes and the economy improves, Mr. Moynihan said his company had the power to earn $35 billion to $40 billion a year. Bank of America lost $2.2 billion in 2010, weighed down by special charges and the lingering effects of the housing bust and the recession on consumers.

He also reiterated his position that the long wave of acquisitions undertaken by his predecessors was over. “I can’t stress enough to you how much of a peace dividend we’ll get without mergers,” Mr. Moynihan said. “That peace dividend is effectively a permanent dividend.” The bank intends to resume payouts to shareholders in the second half of 2011.

LET’S NOT BLAME THE BORROWER

Editor’s Comment: Kwak takes on the entire “immoral borrower” myth quickly and easily here. The worst you can say about the borrower is the best you can say about the banker who got us into this mess.

www.baselinescenario.com

Want more? Read 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown.

Written by James Kwak

June 7, 2010 at 9:11 am

Interview in The Straddler

By James Kwak

The Straddler, an online interdisciplinary publication, has an extended interview with me, of all people, so you can see what I talk like.

This is one section I’m proud of:

“Middle class wages have been declining for ten years and stagnant for thirty years, and if you have a financial system that allows people making $15,000 a year to take out $400,000 mortgages, I don’t think that’s the fault of the guy making $15,000.  I think it’s the fault of the financial system.

“But, let’s say I’m a guy who makes $15,000 a year.  I realize, wow, I can get a $400,000 mortgage and I can live in this house for a few years, and if housing prices go up, I can flip it and I can actually make a couple hundred thousand dollars.  And let’s say I’m really clever, and I say, if housing prices go down, I’ll just walk away and I will have gotten to live in a really nice house for three years at no cost to myself.  I mean, that’s the worst, most cynical spin you can put on it, right?  But this is exactly what people on Wall Street do.  The person who is criticizing the janitor for doing this is the same person who thinks that businesses should exploit every legal opportunity to make profits.  So even if you attribute the worst possible state of mind to the guy making $15,000, he’s still just doing what any businessman should do under the circumstances.  But our national ideology somehow doesn’t allow us to think about it in those terms.”

Enjoy.

Wrongful Foreclosure Hits Cash Short-Sale Buyers Too: What? Ask Bank of America!

SERVICES YOU NEED

“Here is a simpler explanation: the financial services industry is throwing more paper at the system than it can handle. So they are getting away with “representations” rather than solid evidence and proof. If Judges would require at least a copy of the title report, this case would not have occurred — at least not in its current form. Of course THAT requirement would mean that they were looking at the facts, the chain of title and other things that borrowers and their attorneys have been screaming about for years. And the self-serving false affidavits would be tested by actual requirements of proof rather than the current presumptions that Judges are using to clear their calendars.”

EDITOR’S COMMENT: It’s really very simple. This case is not a “mistake”, it is a fatal flaw in the country’s judicial system and a fatal flaw in the country’s property title system. We can kick the can down the road or deal with it.

If this case does not prove to Fort Lauderdale lawyers that there is gold in these wrongful foreclosures (which is virtually every single foreclosure that has ever been started or concluded in the last 9 years) then shame on them for depriving their families of the  riches and luxuries that the owners of the foreclosure mills currently under criminal investigation have enjoyed from their yachts, jets and other perks. Let me put it this way, lawyers, would you rather make $10,000 from a PI case or $100,000 from each wrongful foreclosure case? Do I need to draw you a picture?

This man paid cash and bought the house on a short-sale. The satisfaction of mortgage was recorded and ignored because it is less expensive to use a credit report than to pull down the traditional title report before foreclosure. The satisfaction was a nullity anyway since the party who signed it had no authority to do so and the company for whom the satisfaction of mortgage was signed was not the mortgagee. But the deed was valid transferring title to the new owner. THIS IS WHY YOU NEED the COMBO TITLE AND SECURITIZATION ANALYSIS 6 MONTH SUBSCRIPTION INCLUDES MEMBERSHIP.

So BOA through its brand new BAC (after acquiring Countrywide) forecloses on the house as though the OLD OWNER still owned it and as if the mortgage was a valid encumbrance, and as if the note was evidence of an obligation that was outstanding. They even submitted the same tired false affidavits that caused GMAC to suspend foreclosures.

It is obvious but needs to be stated that ANYONE in the law firm and any person who signed papers in connection with the mortgage that was foreclosed had no personal knowledge of anything because if they did they would have known that the house was sold for cash and that there was no mortgage, even on paper. It is even more obvious that nobody is actually doing their job — not the servicers, not the foreclosure mills, not even the Judges. If they did, there wouldn’t be any foreclosures. But then the billions being made on the new “industry” of foreclosures would stop and that would make some very wealthy people unhappy — especially if they now have to give that back as damages for wrongful foreclosure.

Here is the rub. The old owner does not own it anymore because the old owner signed a deed. But the original mortgage of record is clouded because it is still there and nobody with authority has signed anything to remove it. So now the new owner, who paid cash, must file a quiet title action and maybe a slander of title action, wrongful foreclosure action etc for damages, all because in the magic world of “securitization” the paper doesn’t move, the loan is not securitized, the pool doesn’t own it, the loan was table funded, and there was no valid encumbrance, even though the mortgage was recorded.

Here is a simpler explanation: the financial services industry is throwing more paper at the system than it can handle. So they are getting away with “representations” rather than solid evidence and proof. If Judges would require at least a copy of the title report, this case would not have occurred — at least not in its current form. Of course THAT requirement would mean that they were looking at the facts, the chain of title and other things that borrowers and their attorneys have been screaming about for years. And the self-serving false affidavits would be tested by actual requirements of proof rather than the current presumptions that Judges are using to clear their calendars.

see Man Pays Cash, BOA forecloses and Sells the Property

Foreclosure Wave Hits Cash Buyers, Too

with 29 comments

By James Kwak

Since most of you probably read Calculated Risk, you’ve probably seen the Sun Sentinel story of the man in Florida who paid cash for a house–and still lost it in a foreclosure. Not only that, but he bought the house in a short sale in December 2009, the foreclosure sale happened in July 2010, and only then did he learn about the foreclosure proceeding.

Even after that,

“Grodensky said he spent months trying to figure out what happened, but said his questions to Bank of America and to the law firm Florida Default Law Group that handled the foreclosure have not been answered. Florida Default Law Group could not be reached for comment, despite several attempts by phone and e-mail. . . .

“It wasn’t until last week, when Grodensky brought his problem to the attention of the Sun Sentinel, that it began to be resolved.”

Bank of America now says it will correct the error “at its own expense.” How gracious of them.

If the legal system simply allows Bank of America to correct errors, at cost and with ordinary damages, after they happen, this type of abuse will only get worse. There’s obviously no incentive for banks not to make mistakes, and as a result they will behave as aggressively as possible at every opportunity possible. Yes, this was probably incompetence, not malice, on the part of the bank. But if you don’t force companies to pay for the consequences of their incompetence, they will remain willfully incompetent, and the end result will be the same.

South Florida Sun-Sentinel.com

Lauderdale man’s home sold out from under him in foreclosure mistake

By Harriet Johnson Brackey, Sun Sentinel

2:15 PM EDT, September 23, 2010

When Jason Grodensky bought his modest Fort Lauderdale home in December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.

Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a government-backed lender. “I feel like I’m hanging in the wind and I’m scared to death,” said Grodensky. “How did some attorney put through a foreclosure illegally?”

Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens.

Grodensky’s story and other tales of foreclosure mistakes started popping up recently across South Florida. This week, GMAC Mortgage, one of the nation’s largest mortgage servicers and a major mortgage lender, told real estate agents to stop evicting residents and suspend sales of properties that had been taken from homeowners in foreclosure. The company said it might have to “correct” some of its foreclosures, but was not halting those in process.

In Florida courts, which have been swamped with foreclosure cases for several years, mistakes “happen all the time,” said foreclosure defense attorney Matt Weidner in St. Petersburg. “It’s just not getting reported.”

And the legal efforts required to resolve a foreclosure mistake are complicated. “Unwrapping it is like unwrapping Fort Knox,” said Carol Asbury, a Fort Lauderdale foreclosure attorney. “It’s very difficult.”

The process is under increasing scrutiny, as Florida’s court system struggles with the mountain of cases that have resulted from the housing crisis.

Grodensky said he spent months trying to figure out what happened but said his questions to Bank of America and to the law firm Florida Default Law Group that handled the foreclosure have not been answered. Florida Default Law Group could not be reached for comment, despite several attempts by phone and e-mail. Grodensky said he has filed a claim with his title insurance company, but that, too, has not resulted in any action.

It wasn’t until last week, when Grodensky brought his problem to the attention of the Sun Sentinel, that it began to be resolved.

“It looks like it was a mistake in communication between us and the attorneys handling the foreclosure,” said Bauwens.

Court records show Countrywide Home Loans filed a foreclosure case in Broward County civil court against the former owner of the home on Southwest 14th Street in 2008. Bank of America took over Countrywide at the end of that year.

The following year, Grodensky and his father Steven bought the house for cash as an investment property. Jason Grodensky’s brother Kenny Sloan lives in the house now. They negotiated a short sale, which means the lender agreed to accept less than the mortgage amount. Documents show the sale proceeds were wired to Bank of America. The sale was recorded in December 2009 at the Broward County Property Appraiser’s Office.

But in court, the foreclosure case continued, the records show. There was a motion to dismiss the case in July, followed the next day by a motion to re-open it. A court-ordered foreclosure sale took place July 15. The property appraiser’s office recorded the transfer of the title to Fannie Mae the same day.

Bauwens said the lender would go back to court to rescind the foreclosure sale.

Broward Chief Judge Victor Tobin, who set up the county court’s foreclosure system, said this is the first he’s heard of this type of mistake. “From the court’s point of view we have no way of knowing that someone sells a house unless they tell us,” said Tobin. “The bank would first have to tell the lawyers and the lawyers would presumably ask the court for an order dismissing the case.”

Tobin said the court system is under pressure to clear up its foreclosure backlog. This year, the state court system pumped $6 million into the effort, hiring more temporary judges and staffers.

Some say there’s too much effort aimed at simply disposing of the cases.

“The evidence doesn’t matter, the proof doesn’t matter, due process doesn’t matter,” said Asbury, the attorney. “The only thing that matters is that they get rid of these cases.”

Mindy Watson-Cintron of Century 21 Tenace Realty said she was unable to stop a foreclosure even though she had a willing buyer for a Coral Springs home last summer. Watson-Cintron had a letter from GMAC Mortgage, agreeing to sell the house in a short sale. The letter indicates the deal would be accepted through Aug. 20.

Watson-Cintron said she called, pleaded and even spent three hours one day in the lobby of the law offices of David Stern in Plantation trying to get someone to agree to put the foreclosure on hold. Stern’s office is one of the nation’s largest foreclosure firms and, Watson-Citron said, represented GMAC in the foreclosure case.

But the foreclosure continued. The lender took back the home and now has it listed for sale — at a lower price than Watson-Cintron’s buyer offered. “The bank’s not talking to the attorneys and the attorneys are not talking to the courts,” she said.

Stern could not be reached for comment despite several attempts by phone and e-mail to his office. A spokesman for GMAC Mortgage promised to look into the case.

Florida Attorney General Bill McCollum is investigating Stern’s firm, Florida Legal Default Group, based in Tampa, the Law Offices of Marshall C. Watson in Fort Lauderdale and Shapiro & Fishman, which has offices in Boca Raton. Officials have said the investigation centers on whether foreclosure documents submitted by these firms were false, misleading or inaccurate.

In announcing its decision this week to halt evictions and suspend sales in foreclosure cases, GMAC cited a deposition by Jeffrey Stephan in a Palm Beach foreclosure case in which Stephan said he did not verify all the documents and did not sign them all in the presence of a notary. Stephan said he signed as many as 10,000 documents a month.

Some foreclosure defense attorneys have questioned whether similar practices involve other lenders as they push huge numbers of foreclosures through the courts. In one South Florida foreclosure case, Chase Home Finance executive Beth Cottrell said in a deposition in May that her team of eight supervisors signs 18,000 documents a month. Chase’s spokesperson did not comment.

Harriet Johnson Brackey can be reached at hjbrackey@SunSentinel.com or 954-356-4614.

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