Psychological Paralysis Prevents the Majority of Homeowners From Taking Action

Posted on November 16, 2011 by Neil Garfield

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EDITOR’S NOTE: Evil prospers when good people do nothing. The good people here are the victims of this massive securitization bank fraud where tens of millions of taxpayers and pensioners have lost trillions of dollars to the scheme and where homeowners are losing like amounts as the Banks and servicers, with no skin in the game, are pursuing a plan that will make them the largest property owners in the world without a nickle of their own money. Your country needs you now to stand up for your rights and the rights of other Americans.

This story is from the homeowner perspective. Approximately 96% of all homeowners who receive a notice of default simply leave their keys in the kitchen and abandon their home. They do it because they know they “missed” a payment but they don’t know the payment wasn’t due and certainly wouldn’t be due to the company claiming it. They do it because they are depressed, beaten and paralyzed by shame, guilt and fear.

So they don’t educate themselves about their rights and even if they do they can’t get past the thought that if they get to keep the home they are somehow cheating the system. This prevailing thought which is pervasive throughout the judiciary, the legislative branch of government and the executive branch is the single-most important factor in the success of the Banks in taking homes they don’t own, or have any right to own.

It is a shame that the associations of psychiatrists, psychologists, social workers and other psychotherapists have not intervened at least to prevent suicides. But more than that, they and everyone else who comes into contact with financially distressed people should be reminding them that there are resources that can help them stay in their home — for months years or even permanently.

My observation is that when people go into action against the banks they succeed to some measure, but more importantly they feel empowered again and they drop the attributes of depression, anxiety, fear and paralysis. We are all Americans and we all have a stake in seeing to it that this blight on our society is removed and that the human spirit, the American spirit is reinvigorated so that we come out of this better than we were before. It must be that way or we face a permanent decline in our prospects, our lives, our marriages, and our children’s lives.

Overcome mental roadblocks that lead to foreclosure

Mood of the Market

By Tara-Nicholle Nelson, Tuesday, November 15, 2011.

Inman News™

<img title="Andy Dean Photography/Shutterstock" src="http://www.inman.com/files/imagecache/article-photo/files/imagefield/shutterstock_57108076_FORECLOSURES_JUST_AHEAD_SIGN.jpg" alt="Andy Dean Photography/Shutterstock” />Andy Dean Photography/Shutterstock

There are several government reports out now stating that most homeowners who lose their home to foreclosure never contact the bank to determine whether they can work something out with them, despite the ubiquitous government, bank and media education campaigns encouraging them to do just that.

While I’d wager that a small portion of this number are strategic defaulters who plan to walk away from the home in any event because of its deep negative equity, the vast majority are folks who have lost a job, seen their business income decline during the recession and/or had their payment adjust steeply upward sometime over the past couple of years, and have simply fallen behind on the payments.

Simply ignoring the bank’s calls and letters does not just get a distressed homeowner out of a hard conversation or two; the ultimate results of this plan of inaction include losing the property to foreclosure and bank repossession, including eviction and having to find another place to live.

Could those things happen anyway, even if you do reach out to the bank? Absolutely. But there are still millions of homeowners every year who are able to save their homes, under a bank or government loan modification or refinance program, or even amicably agree to a less traumatic surrender of the property than foreclosure, by short-selling the property or negotiating a deed-in-lieu of foreclosure.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: anxiety, bankruptcy, borrower, countrywide, depression, disclosure, financial distress, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, paralysis, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND | 41 Comments »

FORECLOSURE HEALTH CRISIS: DEPRESSION, DIABETES, HIGH BLOOD PRESSURE AND HEART FAILURE

Posted on October 3, 2011 by Neil Garfield

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EDITOR’S COMMENT: The bad news is that foreclosures and the ailing economy drawn down by the housing crisis is literally killing us. The mental health professional community is stepping up to help and we are heavily involved contributing resources and data from the livinglies blog and the American Homeowners Cooperative, which is already into discussions with health care providers and mental health professionals to provide crisis interventions to prevent suicide and assistance to those who are unable to cope with the stress of that next letter in the mail, the next knock on the door, the next phone call.

I always remind people that this situation is not their fault, but they keep thinking it is their fault anyway. They didn’t cook up this scheme and they didn’t screw up the financial system — that was the banks whose greed went unchecked by any regulation or morality. And just because you didn’t make a payment doesn’t mean that you are a deadbeat — your non-payment was built-in to the system that produced this mess. The banks made more money when you defaulted than if you had paid. Read this blog and you’ll understand the MATH.

Foreclosures Are Killing Us

By CRAIG E. POLLACK and JULIA F. LYNCH

AFTER slowing down in the first half of the year, the rate of homes entering foreclosure is rising again. First-time default notices were served on 78,000 homes in August, a 33 percent increase from July. A $1 billion federal program to help jobless and underemployed homeowners ended Friday. Foreclosure notices were filed against a record 2.9 million properties last year, and an additional 1.2 million in the first half of this year.

Foreclosure is not just a metaphorical epidemic, but a bona fide public health crisis. When breadwinners become ill, they miss work, lose their jobs, face daunting medical bills — and have trouble making mortgage payments as a result.

But that is only part of the story. A growing body of research shows that foreclosure itself harms the health of families and communities. In our 2008 survey of 250 people undergoing foreclosure in the Philadelphia area, 32 percent reported missing doctor’s appointments and 48 percent said they let prescriptions go unfilled, significantly higher rates than others in their community. A paper released last month by the National Bureau of Economic Research found that people living in high-foreclosure areas in New Jersey, Arizona, California and Florida were significantly more likely than those in less hard-hit neighborhoods to be hospitalized for conditions like diabetes, high blood pressure and heart failure.

More than one-third of homeowners in our study had symptoms of major depression. The N.B.E.R. study found significantly more suicide attempts in high-foreclosure neighborhoods. For every 100 foreclosures, it found a 12 percent increase in anxiety-related emergency-room visits and hospitalizations by adults under 50. Losing a home disrupts social ties to neighbors, schools, jobs and health care providers — ties that under better circumstances promote good health. Neighborhoods suffer, not just homeowners.

Most programs to stem the tide of foreclosures rely on mortgage counselors at nonprofit groups supported by federal grants, who work closely with homeowners and banks to try to find a financial resolution.

These counselors have become, of necessity, crisis counselors — in a national survey of 395 mortgage counselors we conducted in January, 37 percent said they had worked with at least one homeowner in the past month who was considering suicide — but they need to be trained to quickly and efficiently screen for illnesses like depression. In fact, health care should be part of a comprehensive approach to foreclosure prevention; for example, mental health caseworkers should be embedded in mortgage counseling agencies.

Screening and treatment may actually help some families keep their homes. Studies of unemployed people have shown that treating depression can improve the chances of landing a new job. Such treatment might also help homeowners undertake the daunting documentation and financial planning that foreclosure prevention programs demand.

In a time of fiscal strain and rising need, where will the money come from? For one thing, the settlement negotiations with the financial services industry over mortgage fraud and abuse should include money for health care. Millions of Americans are locked into mortgages they can’t afford. If we can’t help them stay in their homes, the least we can do is help them stay alive.

Craig E. Pollack is an assistant professor of internal medicine at Johns Hopkins. Julia F. Lynch is an associate professor of political science at the University of Pennsylvania.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: bankruptcy, borrower, countrywide, depression, diabetes, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, heart failure, high blood pressure, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, suicide, TILA audit, trustee, WEISBAND | 26 Comments »

Why We Do What We Do

Posted on March 10, 2010 by Neil Garfield

“Without your blog I would not have found the right lawyer in my state.”

– Meghan in RI

“Some of the most rewarding work of my career.”

– Chris Brown Esq.

While we understand the many reasons borrowers pursue their cause on a ProSe or ProPer basis, it has been our position since the beginning that people need competent licensed local counsel. Also, you must understand that no matter what anyone tells you, no letter or correspondence from anyone, no “loan audit,” no promise of modification will stop a foreclosure particularly in non-judicial states, the only thing that will stop a foreclosure is a judge or court order. Our first mission here is education and the desimination of information to the public, judges, lawyers, legislators and homeowners. Unfortunately, the executive and legislative branches of government have dropped the ball and still don’t get it(with some exceptions like Marcy Kaptur D-Ohio).

The bottomline is that the Judicial branch is the only hope, Judges need to open their eyes, ask questions they may have never had to ask because the facts and circumstances are really unlike they have ever been in the past. Lawyers who do “get it” and are actively practicing in this area and succeeding we need to hear from you. People need to know how to find you. There are simply still not enough lawyers that “get it.” We also believe that if someone has the desire and financial wherewithal to hire a lawyer, we want them to give there money to someone that will be effective and is staying up to date on this everchanging area of practice. When we get emails like the ones below or other feedback it makes us feel like we are in some small part helping folks through what is and will be one of the most difficult period for our country in our lifetime. Lawyers who are listed here are doing good work and quite frankly in many cases have practices that are expanding and thriving. If you or your law firm is interested in being listed here email your contact info to: foreclosuredefensegroup@gmail.com Also, if you are a homeowner and have a lawyer who you think knows their stuff and has been doing a stellar job for you, let us know about them.

Hi Mr. Garfield, Mr. Keiser and the Livinglies team

I am writing to say thank you for starting this blog. Without it, I would not have found the right lawyer in my state. I was working with another lawyer, originally, and all he did was buy me some time. Otherwise, he took a lot of money from me for nothing…and continues to pursue me for more. It is also comforting to know that there are other people out there fighting for the same cause, whether they are victims or not. I know there are some naysayers presently posting on your sight but, anyone in my shoes, fighting like all of us are, all of us know when to read between the lines. I have learned so much from your blog and referred your site to others. I would love to see you have another seminar on the East Coast sometime. Thanks for what you’re doing and let me know how I can help at anytime

Meghan in RI

From: Christopher Brown, Esq.
To: Neil, Brad

THANK YOU FOR SENDING THIS!!
While I am at it, let me toss on some more praise for … you I cannot thank you enough for the seminar I attended in August 2008, in Los Angeles, CA. It has completely redefined my practice. While we are still the only firm in Northern Virginia doing this, we are doing it well, and making HUGE strides recently .. it has taken a year to do it, but the foreclosing law firms are FINALLY beginning to concede they have a problem.

Every trial that has come up has been continued, or the case resolved with a “good” loan mod. They have yet to put us to the test at trial, which we are eager to see happen, but our clients continue to accept the good loan mod offers that come before trial. The client is the boss, and I can’t make guarantees, so they more often than not go for the mod, but I feel it coming. We are making incredibly sound constitutional arguments (non-judicial foreclosure is violation of due process, no standing / article 3 injury for purported owner of the note/deed of trust), challenging title like no one else can (former 25 year in-house counsel for title companies on my staff since January), and raising all sorts of problems that were created by the securitization process (former NY securities atty on my staff as well).

This Kansas Sup Ct opinion closes the gap and makes us that much more confident in pursuing our clients interests. I am ecstatic about where my firm is right now and the work we are doing. My staff, which is growing every few months, is ecstatic as well, as myself, my employees, and our families, are doing well in a recession, and we are helping families protect their homes at the same time. I could not be happier – and with this Kansas Sup Ct opinion, things are going to get better even faster.

We have gone through several different strategies, and the one we settled on, ironically, is the one you espoused in the seminar (!!), file a suit claiming they can’t enforce the note, do discovery, and put the burden on them. It is funny the trials and tribulations my office has gone through to get to this point, but it has also been some of the most rewarding work of my career.

Keep up the good work .. and …
Thank you.

Anything I can do for you, all you have to do is ask.

Christopher E. Brown, Esq.
Brown, Brown & Brown, P.C.

Filed under: CORRUPTION, Fannie MAe, foreclosure, MODIFICATION, Mortgage, Servicer | Tagged: audit, bailout, bankruptcy, borrower, Chapter 13, countrywide, credit crisis, creditor, depression, disclosure, discovery, Eviction, Florida, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, housing, lawyers, lender, Lender Liability, mortgage meltdown, rescission, RESPA, securitization, TILA audit, trustee, Wells Fargo | 23 Comments »

The Obama administration’s plan to rescue Americans from foreclosure plays out day after day in rooms like this. On this day, as on most, nothing happened.

Posted on December 30, 2009 by Neil Garfield

“I don’t sleep at night, I don’t sleep at all,” he said, rising slowly. “I tell Maria, ‘If we lose the house, I want to stop my dialysis.’ I want to die, honestly.”

Editor’s Note: The sad simple truth is that there are few options besides fighting this out in the courts. The simple concept that only creditors can sue for claims is being lost in a sea of subterfuge that is still accepted as “truth” in order to conform to fabricated vehicles of deceit. Until the Obama administration fully accepts the real truth — that Wall Street lost no money, that the servicers have no incentive or power to modify mortgages, and that the game continues in plain sight — the oppressive beating of the majority of American citizens will continue.

December 30, 2009

Billions to Fight Foreclosure, but Few New Loans

By MICHAEL POWELL

They milled about the hallways of the cavernous State Supreme Court building in Jamaica, Queens — 42 homeowners whispering, studying old bills, waiting for a court officer to call their names and wave them, one by one, through a door.

There, in a dusty, high-ceilinged room with a steam radiator that never stopped wheezing, they took a seat across a table from a lawyer for a mortgage company. Then their work began: trying to persuade a stranger not to foreclose on their home.

The Obama administration’s plan to rescue Americans from foreclosure plays out day after day in rooms like this. On this day, as on most, nothing happened. One lawyer, visibly bored, put in a brief, token appearance. A few others seemed barely familiar with their cases. Another asked for more records, hinting that maybe next month the lender might talk about a settlement.

Ismail Ali, a silver-haired immigrant from Guyana, hoped to save his home in Ozone Park. “If it takes you another three months to evaluate me, and I keep paying, will I get a new mortgage?” he asked, almost pleading.

The lawyer shrugged, not unsympathetically. “I can’t answer that for you,” he said.

Ten months ago President Obama announced a $75 billion program to keep as many as four million Americans in their homes by persuading banks to renegotiate their mortgages. Lenders have accepted more than one million applications and cut three-month trial deals with 759,000 homeowners. But they have converted just 31,000 of those to the permanent new mortgages that are the plan’s goal.

In New York City, where 20,000 homeowners faced foreclosure this year, a recent study by the Center for NYC Neighborhoods found that lenders have offered new or trial mortgages to just 3 percent of the homeowners who have sought help.

Big mortgage companies — servicers, in the parlance of the industry — stand at the heart of this program. Many of the servicers that have agreed to participate are subsidiaries of the nation’s largest banks — Wells Fargo, Bank of America and JPMorgan Chase.

They say their performance is improving. “We ourselves stated that we fell short of our customer service goals,” said Mary Coffin, executive vice president for loan servicing at Wells Fargo. “Now we are doing three modifications for every foreclosure.”

But a drove of critics, including homeowners, nonprofit loan counselors, legal services lawyers and court officials, say these companies are also at the heart of the problem. Servicers, they say, pile delay upon delay, and too often steer homeowners into new mortgages with onerous terms. Some companies have insisted that homeowners waive their right to sue before getting a new mortgage, even though the Obama plan prohibits such demands.

Administration officials have vowed to shame servicers into action. And New York State lawmakers, like their counterparts in a few other states and cities, have tried to slow the headlong hurtle toward foreclosure by requiring lenders to negotiate with troubled borrowers in court.

Leonard N. Florio, a court-appointed referee, oversees such sessions in that dusty room in Queens. He is a chatty man and punctilious about not taking sides. But as he watched Mr. Ali, the Ozone Park homeowner, load his piles of bills and receipts back into his shopping bags, he could not help noting a pattern.

“I have yet to see an attorney for a servicer cut a deal,” he said. “Update this, update that. I mean, what’s the holdup?”

Loan servicers argue that homeowners are as often to blame: Many cannot show proof of income, and fail to make payments even on modified mortgages. And millions are in bigger trouble than the public realizes, burdened with monthly payments so exorbitant that even a reduced mortgage payment will not save their home.

The servicing companies make money either way. The Obama program pays them $1,000 for each loan modified, and another $1,000 per year for three more years if the borrower avoids foreclosure. On the other hand, the companies make large sums charging late and legal fees on overdue mortgage payments, and sometimes it is cheaper to foreclose than to cut the mortgage payment.

These same companies turned billions of dollars in profits during the fat years of the bubble. Four years ago, lenders strung banners from storefronts in Jamaica and Cypress Hills and Bedford-Stuyvesant, promising “You will not be turned down!” A no-documents-needed mortgage was easily obtained, often accompanied by the flimsiest of appraisals.

Now the lenders toss up daunting hurdles. Homeowners say they send and resend thick piles of documentation, only to be told that their papers have been misplaced, or that their pay stubs are out of date. Housing counselors dial a dozen times just to get a servicer on the phone.

“It’s a constant Catch-22: They never give you their name,” said Gerald Carter, a counselor with the Parodneck Foundation in New York City, which receives city and state money to advise homeowners. “You call back and say, ‘No, I was talking to Bob last time,’ but Bob wouldn’t give his last name — not even an employee ID number. So you start over.”

Last month, the Legal Aid Society of New York sued the federal government and a mortgage servicer, Aurora Loan Services, on behalf of four Queens homeowners. Aurora, which has a $116 billion loan portfolio, was a subsidiary of Lehman Brothers before that firm went bankrupt; it offered loans with interest rates just a bit lower than subprime rates, which are typically a few percentage points higher than rates on conventional mortgages.

The lawsuit charges that Aurora, and by implication many other servicers, systematically denied homeowners access to the federal rescue program. And, the lawsuit asserts, the Obama plan provides far too few safeguards for homeowners.

“The servicers ignore their obligations, and are throwing unaffordable agreements at people and setting them up for another default,” said Oda Friedheim, a staff lawyer with the Legal Aid Society.

Asked to respond, an Aurora spokeswoman e-mailed a statement saying the company tries to prevent foreclosure for its customers.

Tom Vellucci, 54, is one of the four plaintiffs in the lawsuit, and a soldier in this army of the potentially dispossessed. Once a maintenance man for an insurance company, with a modest home in Floral Park, Queens, he lost his health and then his job. When a tenant stopped paying rent, he fell behind on his mortgage. A so-called rescue firm offered to negotiate better terms and wheedled Mr. Vellucci and his wife, Maria, out of $8,000 in fees.

When the inevitable foreclosure notice arrived in March, the Velluccis called Aurora Loan Services and asked for a break. The company, he said, responded by piling on legal fees and giving them a four-month trial agreement that did not reduce their monthly payment.

The Velluccis say they drained their savings making payments. Then the couple asked Aurora if they could revise their mortgage terms under the Obama rescue plan. They say the company refused, saying their mortgage was not eligible because it was owned by investors.

Aurora makes a similar statement about investor-owned mortgages on its Web site. These claims are not true. The Obama program requires companies to make an effort to modify such mortgages.

Sitting on a bench in the Queens courthouse, where he has become a regular, Mr. Vellucci ran his fingers through thick black hair and shook his head. “We kept trying to pay on faith, all faith, so we could prove we were honest people,” he said. “Now all we look like is stupid.”

Phyllis Caldwell, chief of the Treasury Department’s Home Ownership Preservation Office, is not inclined toward tough talk about servicers, perhaps because the Obama plan, which she oversees, lacks enforcement teeth. Asked about Aurora’s refusal to consider modifying investor-owned mortgages, she suggested a reporter call the program’s compliance unit.

“If it is reported in The New York Times and someone chooses to audit it, that’s important,” she said.

She sees a brighter day coming. “We are holding the servicers accountable to report to us,” she said. “They are being much more transparent.”

For now, however, the Velluccis and thousands like them dangle perilously close to calamity.

Born in Italy, Mr. Vellucci and his wife migrated here as teenagers. They raised children, bought a house, lived their dream in Technicolor. Then his kidney gave out and their economic slide began. After court on this day, he would go for dialysis. The couple hope the lawsuit might give them one more shot at the Obama plan.

“I don’t sleep at night, I don’t sleep at all,” he said, rising slowly. “I tell Maria, ‘If we lose the house, I want to stop my dialysis.’ I want to die, honestly.”

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: bailout, borrower, depression, disclosure, foreclosure defense, fraud | 4 Comments »

MYTHS of MODIFICATION EXPOSED

Posted on December 19, 2009 by Neil Garfield

MYTH

any imaginary person or thing spoken of as though existing

any fictitious story, or unscientific account, theory, belief, etc.

Kudos to investigative journalist Kevin Hall with McClatchy Newspapers for inserting himself into the so called “loan modification” process and exposing the farce that is being perpetrated on the American public in the article below. Why is this happening? Pretty simple, two reasons, first the fact is that in almost all cases where you have a mortgage that has been securitized, you the homeowner or you the lawyer representing the homeowner are not dealing with a party that has authority to modify the loan and second they NEED a default. One of the many missions of this site is exposing the truth, hence the name “Livinglies.” The reality is that they, the “pretender lender,” know the debt is unenforceable, the real party in interest is unidentifiable in most cases, and the title to the property has a cloud on it. So what do they REALLY need:

They need new paperwork and they need new signatures on something they can represent as your affirmation of the debt….to THEM… not the party that actually funded your loan who may be damaged by a default or even the party still on the deed or mortgage at the county recorders office.
They need you to waive any rights and claims you could assert because the “real lender” or “real party in interest” and/or various parties in the chain of securitization assumed liablity for those claims you could assert as the notes flowed up the chain.
Here’s the biggie, they have insurance in the event of default, they can’t collect on the insurance, credit default swaps, PMI, etc. in the event of modification.

Insurers have a habit of including exclusions into policies of all types and credit default insurance policies are not different. Here is a little sample of a PMI exclusion:

“Notwithstanding any other provision of this Policy, the coverage extended to any Loan by a Certificate of Insurance may be terminated at the Company’s sole discretion, immediately andwithout notice, if, with respect to such Loan, the Insured shall permit or agree to any of thefollowing without prior written consent of the Company: (1) Any material change or modification of the terms of the Loan including, but not limited to, the borrowed amount, interest rate, term or amortization schedule, excepting such modifications as may be specifically provided for in theLoan documents, and permitted without further approval or consent of the Insured.“*

*Radian Guaranty Master Policy, Condition 4.C, at Master_Policy

So who is the “insured”? Well, the bondholders who put up the money that was actually used to fund your loan, reality is they are the only other party other than you that has been damaged in this whole mortage meltdown. Every other party between you and them was an intermediary, who made a killing, and had no capital at risk. The truth, there is no incentive or reason to modify your loan. In order to collect on the insurance they need a default, not a modification.

Why do you think they want you to use the “fax” to resend them your “modification” paperwork for the umpteenth time? So they can “lose” it again. If they allowed you to scan and email it to them or send it Certified Mail Return Receipt Requested you would have evidence that a) they received it b) who received it and c) when they received it. Then all of a sudden you have a timeline, then all of a sudden someone has to be accountable and explain why they received your information 3 months ago and you haven’t heard “boo” since…

They know that 60% of these “modifications” are back in default within a year so they need to clear the deck to foreclose when that happens. Meantime, with regard to these “trial” modifications, the paperwork I have seen explictly says that the payments will NOT be credited to your loan account but will be placed in a “suspense” account until after the trial modification period is done. Now, if you fail to complete the trial period or when the “trial” period is completed and you did comply, but they tell you they cannot approve your for a modification…who do you spose keeps that money sitting in the suspense account?

Bottomline folks, even if you are “working with your servicer on a loan modification” you need to consult a competent attorney, don’t wait until the wolf is at the door to start looking for one.

If you are a competent attorney, practicing in this area and not on our list of “Lawyers that Get It” we want to hear from you.

Homeowners Often Rejected Under Obama Plan

By Kevin G. Hall G. Hall | McClatchy Newspapers

WASHINGTON — Ten months after the Obama administration began pressing lenders to do more to prevent foreclosures, many struggling homeowners are holding up their end of the bargain but still find themselves rejected, and some are even having their homes sold out from under them without notice.

These borrowers, rich and poor, completed trial modifications of their distressed mortgage, and made all the payments, only to learn, often indirectly, that they won’t get help after all.

How many is hard to tell. Lenders participating in the administration’s Home Affordable Modification Program, or HAMP, still don’t provide the government with information about who’s rejected and why.

To date, more than 759,000 trial loan modifications have been started, but just 31,382 have been converted to permanent new loans. That’s averages out to 4 percent, far below the 75 percent conversion rate President Barack Obama has said he seeks.

In the fine print of the form homeowners fill out to apply for Obama’s program, which lowers monthly payments for three months while the lender decides whether to provide permanent relief, borrowers must waive important notification rights.

This clause allows banks to reject borrowers without any written notification and move straight to auctioning off their homes without any warning.

That’s what happened to Evangelina Flores, the owner of a modest 902 square-foot home in Fontana, Calif. She completed a three-month trial modification, and made the last of the agreed upon monthly payments of $1,134.60 on Nov. 1. Her lawyer said that in late November, Central Mortgage Company told her that it would void her adjustable-rate mortgage, which had risen to a monthly sum above $2,000, and replace it with a fixed-rate mortgage.

“The information they had given us is that she had qualified and that she would be getting her notice of modification in the first week of December,” said George Bosch, the legal administrator for the Law Firm of Edward Lopez and Rick Gaxiola, which is handling Flores’ case for free.

Flores, 58, a self-employed child care worker, wired her December payment to Central Mortgage Company on Nov. 30, thinking that her prayers had been answered. A day later, there was a loud, aggressive knock on her door.

Thinking a relative was playing a prank, she opened her front door to find two strangers handing her an eviction notice.

“They arrived real demanding, saying that they were the owners,” recalled Flores. “I have high blood pressure, and I felt awful.”

Court documents show that her house had been sold that very morning to a recently created company, Shark Investments. The men told Flores she had to be out within three days. The eviction notice had a scribbled signature, and under the signature was the name of attorney John Bouzane.

A representative in his office denied that Bouzane’s law firm was involved in Flores’ eviction, and said the eviction notice was obtained from Bouzane’s Web site, www.fastevictionservice.com.

Why would a lawyer provide for free a document that gives the impression that his law firm is behind an eviction?

“We hope to get the eviction business,” said the woman, who didn’t identify herself.

Flores bought her home in 2006 for $352,000. Records show that it has a current fair-market value of $99,000. The new owner bought it for $78,000 at an auction Flores didn’t even know about.

“I had my dream, but now I feel awful,” said Flores, who remains in the house while her lawyers fight her eviction. “I still can’t believe it.”

How could Flores go so quickly from getting government help to having her home owned by Shark Investment? The answer is in the fine print of standard HAMP documents.

The Aug. 25 cover letter from Central Mortgage Company, the servicer that collects Flores’ mortgage payments, offered Flores a trial modification with this comforting language:

“If you do not qualify for a loan modification, we will work with you to explore other options available to help you keep your home or ease your transition into a new home.”

CMC is owned by Arkansas regional Arvest Bank, itself controlled by Jim Walton, the youngest son of Wal-Mart founder Sam Walton.

A glance past CMC’s hopeful promise finds a different story in the fine print of HAMP document, which contains standardized language drafted by the Obama Treasury Department and is used uniformly by lenders.

The document warns that foreclosure “may be immediately resumed from the point at which it was suspended if this plan terminates, and no new notice of default, notice of intent to accelerate, notice of acceleration, or similar notice will be necessary to continue the foreclosure action, all rights to such notices being hereby waived to the extent permitted by applicable law.”

This means that even when a borrower makes all the trial payments, a lender can put the house up for auction if it decides that the homeowner doesn’t qualify — assuming that foreclosure proceedings had been started before the trial period — without telling the homeowner.

Until now, lenders haven’t even had to notify borrowers in writing that they’d been rejected for permanent modifications.

In January, 11 months after Obama’s plan was announced, homeowners will begin receiving written rejection notices, and the Treasury Department finally will begin receiving data on rejection rates and reasons for rejections.

The controversial clause notwithstanding, the handling of Flores’ loan raises questions.

“Foreclosure actions may not be initiated or restarted until the borrower has failed the trial period and the borrower has been considered and found ineligible for other available foreclosure prevention options,” said Meg Reilly, a Treasury spokeswoman. “Servicers who continue with foreclosure sales are considered non-compliant.”

CMC officials declined to comment and hung up when they learned that a reporter was listening in with permission from Flores’ legal team. Arvest officials also declined comment.

McClatchy did hear from Freddie Mac, the mortgage finance agency seized by the Bush administration in September 2008. Freddie owns Flores’ loan, and spokesman Brad German insisted that Flores was reviewed three times for loan modification.

“In each instance, there was a lack of documentation verifying that she had the income required for a permanent modification,” German said.

That response is ironic, said Michael Calhoun, the president of the Center for Responsible Lending, a nonpartisan group in Durham, N.C., that works on behalf of borrowers.

“These lenders gave loans with no documentation and charged them a penalty interest rate for doing so. And now when the people ask for help, they are using extravagant demands for documentation to give them the back of their hand and continue to foreclosure,” Calhoun said.

German said that Flores was sent a letter on Nov. 24, which would have arrived several days later, given the Thanksgiving holiday, informing her that she’d been rejected for a permanent modification. Flores and her attorney said she never got a letter, and neither Freddie Mac nor CMC provided proof of that letter.

Exactly one week after the letter supposedly was sent, Flores’ home was sold to Shark Investments. That company was formed on Aug. 19, according to records on the California Secretary of State’s Web site. Shark Investments, apparently an unsuspecting beneficiary of Flores’ woes, has no phone listing. The Riverside, Calif., address on the company’s filing as a limited liability company traces to a five-bedroom, four-bath house with a swimming pool.

German didn’t comment on whether Flores received sufficient notice under Freddie Mac rules, or how the home could move to sale so quickly.

Flores’ legal team, which specializes in foreclosure prevention, thinks that lenders and servicers are gaming Obama’s housing effort.

“It seems servicers are giving people false hopes by sending them a plan, and they are using the program as a collection method, getting people to pay them with no intention of modifying the loan,” said Bosch. “I believe they are using this as a tool to suck people dry.”

Dashed hopes aren’t exclusive to the working poor such as Flores.

David Smith owns a beautiful home in San Clemente, Calif., the location of the Richard Nixon Presidential Library. Smith purchased his five bedroom home four years ago for $1.3 million. Today, the real estate Web site Zillow.com estimates the value of Smith’s home at $981,000, slightly below the $1 million he still owes on it.

Smith said he went from “making a lot of money to making hardly any” as the national and California economies plunged into deep recession. He’s a salesman serving the hard-hit residential and commercial construction sector. On top of his hardship, Smith’s mortgage exceeds the limits for the HAMP plan.

In late August, Smith signed and returned paperwork in a prepaid FedEx envelope to Bank of America that said it had received the contract needed to modify the adjustable-rate mortgage he originally took out with the disgraced lender Countrywide Financial, which Bank of America bought last year.

The modification agreement shows that Bank of America agreed to give Smith a 3.375 percent mortgage rate through September 2014, and everything Smith paid between now and through 2019 would count as paying off interest. He’d begin paying principal and interest in October 2019, with the loan maturing in 2037.

The deal favors the lender, but Smith, 55, jumped on it because it kept him in the home.

Armed with what he thought was “a permanent modification,” Smith returned a notarized copy of the agreement and made subsequent payments on time.

In return, he got a surprising notice from Bank of America saying that his house would be auctioned off on Dec. 18.

“It looks like they’re trying to sell this out from underneath me,” Smith said. “My wife cries all the time.”

After a Dec. 16 call from McClatchy asking why Bank of America wasn’t honoring its own modification, the lender backed off.

“The case has been returned to a workout status and a Home Retention Division associate will be contacting Mr. Smith for further discussions,” said Rick Simon, a Bank of America spokesman. “The scheduled foreclosure sale will be postponed for at least 30 days to allow for review of the account in hope of completing a home retention solution for Mr. Smith.”

The Center for Responsible Lending says such problems are common.

“Everyone acknowledges that the system is not working well,” Calhoun said.

Filed under: foreclosure | Tagged: audit, bailout, bankruptcy, borrower, borrowers, Chapter 13, countrywide, credit, credit crisis, depression, disclosure, Eviction, foreclosure defense, foreclosure offense, foreclosures, fraud, housing, Loan Mod, LOAN MODIFICATION, modification, mortgage meltdown, predatory lending, quiet title, rescission, RICO, securitization, TILA audit, trustee | 15 Comments »

Wisdom Succumbs to Wise Guys

Posted on October 21, 2009 by Neil Garfield

It is difficult to imagine anything more obvious than splitting the risk taking core model of Wall Street from the risk averse core model of banking. The dilution of Glass-Steagel over the years and its eventual repeal is exactly how we got into this mess. Coupling that with deregulation and non-transparency created a context in which (moral hazard) theft was legal and inevitable on a scale unimaginable at any other time in history. Former FED Chairman Volker, 82, has the perspective to see all of the history of mistakes and triumphs from the long view. Yet his view is being routinely ignored by the Obama administration whose loyalty to their roots on Wall Street is greater than their commitment to the country. Volker is being treated as window dressing covering over the continuation of drastically stupid policies with horrendous results for ALL U.S. Citizens.

Brave souls like Marcy Kaptur, Elizabeth Warren, Sheila Baer, are getting stepped on so that our government, captured by the financial sector, can go about the business of siphoning off liqulidity from an economy that desperately needs it returned to its rightful place. Thus a government whose prime directive is the common defense and common welfare completely abdicates its role under cover of “rational” policies in what has always been an irrational world.

The rationality and complexity of their arguments leads the populace to a confused state of non-comprehension and docile compliance as we are led down a path to yet another disaster that will in all probability alter the order of society, stability of governments and opportunity for despots. The consent of the governed is being managed by those who know how to at least keep dissent down to a minimum (and then call it consent).

What started here on these pages as merely a research and self-help tool, is now the center of a growing movement by those who are in distress over the status of their country and not merely their homes. Livinglies no longer promotes the interests of only those in financial distress now, but also the interests of all Americans whose lives are being turned into a path toward financial ruin for all of us. The recovery of homes and wealth in the courts is required not only for each individual to gain justice and fairness back from a corrupt system, but to our society as a whole.

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October 21, 2009 NY Times

Volcker Fails to Sell a Bank Strategy

By LOUIS UCHITELLE

Listen to a top economist in the Obama administration describe Paul A. Volcker, the former Federal Reserve chairman who endorsed Mr. Obama early in his election campaign and who stood by his side during the financial crisis.

“The guy’s a giant, he’s a genius, he is a great human being,” said Austan D. Goolsbee, counselor to Mr. Obama since their Chicago days. “Whenever he has advice, the administration is very interested.”

Well, not lately. The aging Mr. Volcker (he is 82) has some advice, deeply felt. He has been offering it in speeches and Congressional testimony, and repeating it to those around the president, most of them young enough to be his children.

He wants the nation’s banks to be prohibited from owning and trading risky securities, the very practice that got the biggest ones into deep trouble in 2008. And the administration is saying no, it will not separate commercial banking from investment operations.

“I am not pounding the desk all the time, but I am making my point,” Mr. Volcker said in one of his infrequent on-the-record interviews. “I have talked to some senators who asked me to talk to them, and if people want to talk to me, I talk to them. But I am not going around knocking on doors.”

Still, he does head the president’s Economic Recovery Advisory Board, which makes him the administration’s most prominent outside economic adviser. As Fed chairman from 1979 to 1987, he helped the country weather more than one crisis. And in the campaign last year, he appeared occasionally with Mr. Obama, including a town hall meeting in Florida last fall. His towering presence (he is 6-foot-8) offered reassurance that the candidate’s economic policies, in the midst of a crisis, were trustworthy.

More subtly, Mr. Obama has in Mr. Volcker an adviser perceived as standing apart from Wall Street, and critical of its ways, some administration officials say, while Timothy F. Geithner, the Treasury secretary, and Lawrence H. Summers, chief of the National Economic Council, are seen, rightly or wrongly, as more sympathetic to the concerns of investment bankers.

For all these reasons, Mr. Volcker’s approach to financial regulation cannot be just brushed off — and Mr. Goolsbee, speaking for the administration, is careful not to do so. “We have discussed these issues with Paul Volcker extensively,” he said.

Mr. Volcker’s proposal would roll back the nation’s commercial banks to an earlier era, when they were restricted to commercial banking and prohibited from engaging in risky Wall Street activities.

The Obama team, in contrast, would let the giants survive, but would regulate them extensively, so they could not get themselves and the nation into trouble again. While the administration’s proposal languishes, giants like Goldman Sachs have re-engaged in old trading practices, once again earning big profits and planning big bonuses.

Mr. Volcker argues that regulation by itself will not work. Sooner or later, the giants, in pursuit of profits, will get into trouble. The administration should accept this and shield commercial banking from Wall Street’s wild ways.

“The banks are there to serve the public,” Mr. Volcker said, “and that is what they should concentrate on. These other activities create conflicts of interest. They create risks, and if you try to control the risks with supervision, that just creates friction and difficulties” and ultimately fails.

The only viable solution, in the Volcker view, is to break up the giants. JPMorgan Chase would have to give up the trading operations acquired from Bear Stearns. Bank of America and Merrill Lynch would go back to being separate companies. Goldman Sachs could no longer be a bank holding company. It’s a tall order, and to achieve it Congress would have to enact a modern-day version of the 1933 Glass-Steagall Act, which mandated separation.

Glass-Steagall was watered down over the years and finally revoked in 1999. In the Volcker resurrection, commercial banks would take deposits, manage the nation’s payments system, make standard loans and even trade securities for their customers — just not for themselves. The government, in return, would rescue banks that fail.

On the other side of the wall, investment houses would be free to buy and sell securities for their own accounts, borrowing to leverage these trades and thus multiplying the profits, and the risks.

Being separated from banks, the investment houses would no longer have access to federally insured deposits to finance this trading. If one failed, the government would supervise an orderly liquidation. None would be too big to fail — a designation that could arise for a handful of institutions under the administration’s proposal.

“People say I’m old-fashioned and banks can no longer be separated from nonbank activity,” Mr. Volcker said, acknowledging criticism that he is nostalgic for an earlier era. “That argument,” he added ruefully, “brought us to where we are today.”

He may not be alone in his proposal, but he is nearly so. Most economists and policy makers argue that a global economy requires that America have big financial institutions to compete against others in Europe and Asia. An administration spokesman says the Obama proposal for reform would result in financial institutions that could fail without damaging the system.

Still, a handful side with Mr. Volcker, among them Joseph E. Stiglitz, a Nobel laureate in economics at Columbia and a former official in the Clinton administration. “We would have a cleaner, safer banking system,” Mr. Stiglitz said, adding that while he endorses Mr. Volcker’s proposal, the former Fed chairman is nevertheless embarked on a quixotic journey.

Alan Greenspan, the only other former Fed chairman still living, favored the repeal of Glass-Steagall a decade ago and, unlike Mr. Volcker, would not bring it back now. He declined to be interviewed for this article, but in response to e-mailed questions he cited two recent public statements in which he suggested that the nation’s largest financial institutions become smaller, so that none would be too big to fail, requiring a federal rescue.

Taking issue implicitly with the Volcker proposal to split commercial and investment banking, he has said: “No form of economic organization can fully contain bouts of destructive speculative euphoria.”

For his part, Mr. Volcker is careful to explain that he supports 80 percent of the administration’s detailed plan for financial regulation, including much higher capital requirements and “guidelines” on pay. Wall Street compensation, he said in a recent television interview, “has gotten grotesquely large.”

Before the credit crisis, the big institutions earned most of their profits from proprietary trading, and those profits led to giant bonuses. Mr. Volcker argues that splitting commercial and investment banking would put a damper on both pay and risky trading practices.

His disagreement with the Obama people on whether to restore some version of Glass-Steagall appears to have contributed to published reports that his influence in the administration is fading and that he is rarely if ever in the small Washington office assigned to him.

He operates from his own offices in New York, communicating with administration officials and other members of the advisory board mainly by telephone. (He does not use e-mail, although his support staff does.) He travels infrequently to Washington, he says, and when he does, the visits are too short to bother with the office. The advisory board has been asked to study, amid other issues, the tax law on corporate profits earned overseas, hardly a headline concern.

So Mr. Volcker scoffs at the reports that he is losing clout. “I did not have influence to start with,” he said.

Filed under: CDO, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage | Tagged: borrower, credit crisis, depression, disclosure, foreclosure defense, fraud, housing, inflation, lender, Lender Liability, mortgage meltdown, Obama, securitization | 18 Comments »

Don’t Get “HAMP”ED Out Of Your Home!

Posted on September 3, 2009 by Neil Garfield

By Walter Hackett, Esq.

The federal government has trumpeted its Home Affordable Modification Program or “HAMP” solution as THE solution to runaway foreclosures – few things could be further from the truth. Under HAMP a homeowner will be offered a “workout” that can result in the homeowner being “worked out” of his or her home. Here’s how it works. A participating lender or servicer will send a distressed homeowner a HAMP workout agreement. The agreement consists of an “offer” pursuant to which the homeowner is permitted to remit partial or half of their regular monthly payments for 3 or more months. The required payments are NOT reduced, instead the partial payments are placed into a suspense account. In many cases once enough is gathered to pay the oldest payment due the funds are removed from the suspense account and applied to the mortgage loan. At the end of the trial period the homeowner will be further behind than when they started the “workout” plan.

In California, the agreements clearly specify the acceptance of partial payments by the lender or servicer does NOT cure any default. Further, the fact a homeowner is in the workout program does NOT require the lender or servicer to suspend or postpone any non-judicial foreclosure activity with the possible exception of an actual trustee’s sale. A homeowner could complete the workout plan and be faced with an imminent trustee’s sale. Worse, if a homeowner performs EXACTLY as required by the workout agreement, they are NOT assured a loan modification. Instead the agreement will include vague statements that the homeowner MAY receive an offer to modify his or her loan however there is NO duty on the part of the servicer or lender to modify a loan regardless of the homeowner’s compliance with the agreement.

A homeowner who fully performs under a HAMP workout is all but guaranteed to have given away thousands of dollars with NO assurance of keeping his or her home or ever seeing anything resembling an offer to modify a mortgage loan.

While it may well be the case the government was making an honest effort to help, the reality is the HAMP program is only guaranteed to help those who need help least – lenders and servicers. If you receive ANY written offer to modify your loan meet with a REAL licensed attorney and ask them to review the agreement to determine what you are REALLY agreeing to, the home you save might be your own.

Filed under: foreclosure | Tagged: audit, bailout, bankruptcy, borrower, brad keiser, credit, credit crisis, depression, Eviction, FDG, Federal Bailout, foreclosure, foreclosure defense, Foreclosure Defense Group, foreclosure offense, foreclosures, fraud, HAMP, lawyers, Lender Liability, Loan Mod, LOAN MODIFICATION, lost note, Mortgage, predatory lending, quiet title, rescission, RESPA, RICO, TILA audit | 24 Comments »

The Elephant in the Room – Well One of Many…

Posted on August 7, 2009 by Neil Garfield

By Brad Keiser

For those of you who have been to our seminars, (coming to Southern California next month) You have heard me ask about Hank Paulson and Ben Bernanke…”Are they stupid or were they lying when they said everything was OK through out all of 2007 and most of 2008?” You have seen and heard why Neil and I declare we are of the belief that there is simply “not enough money in the world to solve this problem.”

Fannie Mae’s (FNM) 8k has an interesting slide of their questionable assets in the supplement. It can be found below along with the complete 2009 Second Quarter filing. The report describes FNM’s exposure to problematic classes of mortgages on their book. That total comes to almost $1 Trillion. (that’s with a “T”) The total book of business is about $2.7 Trillion, at least 30% and more likely as high as 50% of their book is troubled. The report muddles with the actual holdings, as there are overlaps in the descriptions. The actual numbers they provide include:

Negative Amortization Loans: $15B
Interest Only: $196B
Low Fico: $357B
LTV>90%: $265B
Low Fico AND > 90% LTV: $25B
Alt-A: $269B
Sub Prime: $8B

Those numbers add up to $1.13 trillion. They are troubled for multiple reasons. For example, $25 billion are loans that have BOTH high LTV and a FICO score less than 620. While there are varying degrees of toxicity when it comes to “toxic” assets these would be considered highly toxic.

What might all this mean? Some trends are emerging. Based on historical private sector experience with these types of troubled loans, particulary those 30 % of Alt A/No doc and Negative Am loans that are non-owner occupied properties, one could expect that 50% of these borrowers will go into default. On the defaulted loans the losses will be conservatively about 50% of the outstanding loan balances. In other words, losses of 25% on the troubled book are reasonable assumptions. That would imply a loss over time on these loans of $275-$300B. And that does not include losses on Prime loans. And that is JUST Fannie. The Obama Administration has an estimate of $250B over four years for the full cost of cleaning up the ALL the GSE Agencies. These numbers suggest it could be double that, triple that or more.

This is ONLY Fannie…not Freddie or Ginnie or Sallie, not Citi, not BoA, not Wells Fargo, not numerous community banks who owned preferred shares in Fannie or Freddie that had their capital severly eroded when those preferred shares were wiped out last fall. How about the dwindling balance of FDIC reserves? Ladies and Gents we have a veritable herd of these elephants lingering in the room.

Gee no wonder Mr. Lockhart decided now would be a good time to step down from running Fannie, Hank Paulson is getting a tan somewhere now that he has saved Goldman Sachs(for the moment)and something tells me Uncle Ben Bernanke would not be heartbroken if he was replaced by Summers or whomever this fall and could simply go back to pontificating at Princeton.

In the interest of full disclosure I hold no position in Fannie or any of the stocks mentioned….I am long 1200 shares of Smith & Wesson.

Fannie 8k August 2009

Double click chart below to enlarge

Filed under: brad keiser, bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, inflation, interest rates, Investor, Mortgage, politics, securities fraud | Tagged: bailout, borrower, borrowers, brad keiser, Chapter 13, countrywide, credit, credit crisis, depression, disclosure, Federal reserve, foreclosure, foreclosure defense, foreclosure offense, foreclosures, lawyers, lender, Mortgage, mortgage meltdown, Paulson, predatory lending, quiet title, rescission, RESPA, securitization, TILA, TILA audit, TILA rescission, trustee | 8 Comments »

From July CNN: Merrill and Others Knew they were selling junk at Triple AAA ratings

Posted on December 5, 2008 by Neil Garfield

securities consultant says Merrill Lynch knew or should have known the securities they brought to market where overrated (From her website: “She wrote the first letter the SEC posted in February 2007 in response to its proposed rules for the credit rating agencies; she made the case that the NRSRO designation for the rating agencies should be revoked for structured financial products.”):
http://money.cnn.com/video/#/video/news/2008/07/31/news.073108.tavoli.cnnmoney
“I misspoke earlier in the interview. I meant to say recent mortgage lending is the largest Ponzi scheme (not “one of the largest”) in the history of the financial markets. The mortgage lending business model is not viable (see also the simplified illustration on the home page of this site). Money from new investors partially funds the obligations to old investors. High dividends suggested a very healthy business model, but the mortgage loans were unsound creating an unsound business model.

Filed under: bubble, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, inflation, interest rates, Mortgage, politics, securities fraud | Tagged: bailout, depression, disclosure, foreclosure defense, foreclosure offense, lost note, mortgage meltdown, securitization | 1 Comment »

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

Posted on May 5, 2008 by Neil Garfield

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

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

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

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

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

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

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

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

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

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

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

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

May 4, 2008

OP-ED COLUMNIST

Who Will Tell the People?

By THOMAS L. FRIEDMAN

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

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

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

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

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

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

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

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

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

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

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

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

Filed under: alternative medicine, bubble, Bush, CDO, Chelation, community banks, CORRUPTION, credit unions, currency, education, energy, Eviction, foreclosure, foreign relations, GTC | Honor, healthcare, inflation, interest rates, Investor, McCain, Mortgage, Obama, oil, politics, securities fraud | Tagged: DEBT SERVICE, depression, dollar, FRIEDMAN, housing prices, inflation, JOBLESSNESS, MOORE | Leave a comment »

Mortgage Meltdown Still in Progress and Getting Worse

Posted on April 26, 2008 by Neil Garfield

Somehow, the housing trouble has to at least flatten out. As long as that is going on, I think the pressure on the credit system is going to persist. It is kind of the leading indicator. It is where the trouble started. We have to underpin the consumer. That is why this is different. That is why this is like nothing we have had before.

Here is a man who has “seen it all” and who doesn’t like what he sees. Echoing our continuous please for creating an atmosphere of safety or “amnesty”, Bernstein sees a long haul without much lift unless we address the etnire spectrum of risk-taking. Confidence levels are so low that it hard to imagine, each month, that they could go lower. But they they keep sinking. Bernstein’s vision is one of reality, encouraging us to “snap out of it” and hope, if we get our act together without tripping over ideological differences.



	April 26, 2008

One Guy Who Has Seen It All
Doesn’t Like What He Sees Now

By E.S. BROWNING
April 26, 2008; Page B1

Peter Bernstein has witnessed just about every financial crisis of the past century.

As a boy, he watched his father, a money manager, navigate the Depression. As a financial manager, consultant and financial historian, he personally dealt with the recession of 1958, the bear markets of the 1970s, the 1987 crash, the savings-and-loan crisis of the late 1980s and the 2000-2002 bear market that followed the tech-stock bubble.

One of Peter Bernstein’s worries: ‘If China goes into a recession, God knows.’

Today’s trouble, the 89-year-old Mr. Bernstein says, is worse than he has seen since the Depression and threatens to roil markets into 2009 and beyond — longer than many people expect.

Mr. Bernstein, whose books include “Against the Gods: The Remarkable Story of Risk,” sees two culprits. One is the abuse of securitization — the trend for banks to hold fewer loans on their books and instead turn them into securities that were sold to other investors. The other is simply years of overborrowing by financial institutions and consumers alike.

Mr. Bernstein is hopeful that Federal Reserve intervention will prevent deflation and depression, but he says there is no guarantee.

Excerpts of a recent interview:

WSJ: Aside from securitization, what were the main causes of the problem?

Mr. Bernstein: You don’t get into a mess without too much borrowing. It was sparked primarily by the hedge funds, which were both unregulated by government and in many ways unregulated by their owners, who gave their managers a very broad set of marching orders. It was a real delusion. It was like [former New York Gov. Eliot] Spitzer: “I am doing something dangerous, but because of who I am, and how smart I am, it is not going to come back to haunt me.”

When you think about how all of this will work out in the long run, we are going to have an extremely risk-averse economy for a long time. The lesson has painfully been learned. That’s part of the problem going forward. You don’t have a high-growth exit from this, as you’ve had from other kinds of crises. We won’t have a powerful start, where the business cycle looks like a V. Here, the shape of the business cycle is like an L, where it goes down and doesn’t turn up. Or like a U, a flat U. The reason for that is that people aren’t going to get caught in this bind again. They will tell themselves, “I’m too smart to do that again.” And everyone else is going to be saying the same thing. It is, in fact, going to be a wonderful environment in which to take risk, because there aren’t going to be any excesses.

I’m a child of the Depression, and I am thinking about what the early years were like after World War II. It took a very long time to get the memory of the Depression out of business decisions, and certainly banking decisions. I think this is going to be the same. The Fed, too, is going to be less decisive and is going to feel that what it should do is less clear. One of the things that gave people a sense that they could afford to take risks was the sense that the central bankers more or less know what they are doing. But I don’t think we are going to feel that way going forward.

WSJ: You said that it could turn out that the smart thing to do is to take more risk, because everyone will be so risk-averse. What kinds of investments do you see as the big winners coming out of this?

Mr. Bernstein: You could say: the things that have been beaten down the most, which would be real estate. But I think real estate is going to be under a cloud for so long, and you can’t buy real estate with cash, it is too much money. I think you should go with the stock market. If things are better, the stock market will go up, and if things are awful, the stock market is going to be way down. But it is a place where, if you want to take risks, you’ve got a wide range of choices. This is why I own stocks [in addition to other investments], because I don’t know where the bottom is going to come, and I want to be exposed to every kind of possibility I can think of. And, at least, if you pick the stock market and you are wrong, you can change your mind. There is some liquidity there. Stocks never became cheap, but they didn’t become crazy, the way other assets were.

WSJ: How long do you think this whole process will take, before we get back to normal?

Mr. Bernstein: Longer than people think. The people who think we will have turned in 2009 are wrong. There has to be a respite along the way. Nothing goes in one direction forever. But it will take longer than people think. If that weren’t the case, I would be talking entirely differently. I would be saying, “What an opportunity we have got.” And I just can’t believe that the opportunity is here yet. There is too much to unwind.

WSJ: Can you explain the reason you think it will take a long time?

Mr. Bernstein: We have to go back to a moment when people have the courage to borrow and lenders have the courage to lend. Until credit is going up instead of down, you can’t have growth. Housing has got to be a very important part of that; it always has been. You have to reach a point where somebody says, “This house is cheap, I am going to buy it,” or where some businessman says, “This is a great opportunity for us to expand our business. Everything is available to us.”

If China goes into a recession, God knows. The Iraq war and the whole situation with terrorism, we really don’t know where that is going to come out. There are so many things that have got to get buttoned down before you say that the future looks good enough to take a risk.

WSJ: What kind of indications are you looking for as signs that the economy is about to get better and that the stock market and the investment world are about to turn the corner?

Mr. Bernstein: Somehow, the housing trouble has to at least flatten out. As long as that is going on, I think the pressure on the credit system is going to persist. It is kind of the leading indicator. It is where the trouble started. We have to underpin the consumer. That is why this is different. That is why this is like nothing we have had before.

Before, it was investment that made the V at the bottom of the business cycle. I don’t see real investment turning enough without some sign from the consumer side. Maybe the foreign countries will do it for us. That is a substitute for consumption here. Maybe. But I think that they won’t do enough for us, and maybe will be too infected by us to do it. But maybe growth in Asia will help us. The Asian thing is tremendously exciting.

Write to E.S. Browning at jim.browning@wsj.com¹

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Mortgage Meltdown and Credit Crisis: News and Comment 4-2-08

Posted on April 2, 2008 by Neil Garfield

U.S. economy in ‘very difficult period,’ Bernanke says

By Greg Robb

Last update: 9:30 a.m. EDT April 2, 2008

WASHINGTON (MarketWatch) – The outlook for U.S. growth has worsened since January and the possibility of a recession can’t be ruled out, Federal Reserve Chairman Ben Bernanke said Wednesday. “It not appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly,” Bernanke said in testimony prepared for the Joint Economic Committee of Congress. “Clearly, the U.S. economy is going through a very difficult period.” His testimony supports the view that the Fed is not done cutting interest rates. The central bank has lowered its target overnight lending rate to 2.25% from 5.25% last fall, the largest percentage decline on record. Bernanke suggested the central bank is slowing down the pace of its rate cuts. “Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year,” he said. Inflation remains a concern, he noted, and some signs indicate that the public expects prices to continue rising.

EDITOR’S NOTE: State Department Overview of Global economic transactions needed, along with a department of trained, serious, non-political economists who can report the actual effects and trends of global commerce on our foreign relations.

According to the Secretary of State and the National Security Council, counterfeiting undermines currency and constitutes an ACT OF WAR if sanctioned or promoted by one government to the detriment of another.
By promoting the expansion of “money” supply through the latest “funny money schemes” of Wall Street, the United States has been the source of counterfeiting “cash equivalents” which are currently only part of the way through the process of undermining the financial strength, viability, social services and credibility of local and federal governments around the world.
These cash equivalents (derivatives) are the modern day equivalent of counterfeiting.
While it is not likely that a military response is on the horizon, it IS likely that economic and political responses will be coming from countries that include our friends and allies.
The effect on our foreign relations is immeasurable right now.
The effect on our own economy is understated intentionally by government reporting agencies: food prices in Arizona are up 19% (demonstrating that the true rate of inflation of geometrically higher than what the government is reporting).
Food and oil and other necessities are rising sharply in the U.S. because the dollar is sinking to new lows every month. Citizens must be made aware that the economic policies and choices we make, right down to individual purchases at the grocery store or other retail locations has a direct impact on the statement we are making in our foreign relations.
Paulson’s “sweeping” proposals do nothing except sweep the problems under a rug too small to hold the debris.
What must be included in any plan for changes in how the government plays referee in in the marketplace (i.e., regulation), is a new division of the State department that assesses the impact of global economic commerce and recommends policy adjustments to heal and promote our relationships with sovereign nations.

Swiss finance minister reportedly expects tax shortfall due to UBS

Switzerland’s finance minister Hans-Rudolf Merz expects the country to receive 1 billion Swiss francs, or $1 billion, less in taxes for 2007 as a result of the crisis at UBS AG (UBS: UBS Ag he told Swiss daily Tages-Anzeiger in an interview published Wednesday. See full story

By Polya Lesova MarketWatch 4/2/2008 9:06:00 AM Crude-oil futures rise modestly as traders look to data on U.S. petroleum inventories and eye strength in the dollar. See full story

[EDITOR’S NOTE: Somehow people must be educated to understand the relationship between a weak dollar caused by excessive borrowing and flooding the marketplace with “funny money” and the price of gas at the pump. As the value of U.S. currency declines, more of it is required to purchase anything on the world market, including oil. If OPEC follows through on converting from dollars to Euros the effect will be magnified and the price of gas at the pump could easily exceed $10 per gallon same time next year. Wake up, America!]

Wider access to high-risk currency trading lures more investors

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By Gergana Koleva MarketWatch4/1/2008 7:33:00 PM

With over $3 trillion worth of foreign currencies changing hands every day, a growing number of retail investors who seek a boost to their portfolios and a hedge for the falling dollar are viewing the high liquidity of foreign exchange trading as a tonic for troubled times. See full story

National City mulling deal with KeyCorp: report

BOSTON (MarketWatch) — National City Corp. (NCC:

National City Corporation which has seen its stock battered due to its exposure to troubled loans and softening real estate markets, is contemplating a plan to sell itself to KeyCorp (KEY: KeyCorp (New) The Wall Street Journal reported Wednesday.

Fannie Mae revises standards for mortgages: report

Fannie Mae (FNM: Fannie Mae has told lenders it will require a credit score of at least 580 for most individual loans as part of the latest move to make its standards more stringent for mortgages it buys or guarantees, according to a report Wednesday in The Wall Street Journal. See full story

[EDITOR’S NOTE: Talk about locking the barn door after all the horses are gone! What is needed besides changes in future regulation is a solution now, today, to the massive credit crisis which now extends to all new loans including auto loans.

The solution does NOT lie in piecemeal, patchwork of rule changes by different agencies that will conflict with each other, congressional legislation that will conflict with other federal and state legislation, or bailouts of certain players because they are either more important or less “culpable” in the eyes of the beholder.
What is needed is a fast consensus of ALL the players, agencies and leaders from across the spectrum from homeowners and borrowers, through lenders, appraisers, mortgage brokers, investment bankers, retail securities sales, and investors in derivatives to
STOP foreclosures and evictions,
KEEP homeowners in homes unless they can’t even afford to maintain them,
RESTORE the balance sheet of investment bankers and investors, and
HEAL the wounded dollar and staunch the bleeding — by reducing payments on al forms of excessive debt (caused either by artificially — i.e., manipulated — higher housing prices during 2001-2006, or caused by the nearly $1 trillion drain on credit card revolving debt that was promoted in every conceivable way despite interest rates so high that any financial planner or economist could tell you that the average person would NEVER pay it all back].
IMMUNIZE EVERYONE from civil and criminal action to get their cooperation (yes, Amnesty. It is more important to save our economy and standing in the world than to see a few “examples” in jail, or millions of people out on the street. We need no homeless people not a surge in their number. We need stable, rising house prices, not a view with “no end in sight.”).
EDUCATE the American public that this crisis transcends ideology and politics. Whatever your feeling about “entitlements”, personal responsibility and suffering the consequences, we are all bearing the brunt of this crisis every time we go to buy food, gas or other necessities. We are all bearing the brunt of this every time we expect social services like education, fire, police or paramedical help — and they are diminished because the local treasury has been depleted by losses in CDOs/CMOs and by inflation. We are all putting the burden on our children, grandchildren and great-grandchildren for spending money we didn’t need to (like over paying for medical care and drugs compared to all other countries and going to wars to protect an interest in oil which should have been abandoned long ago as a fuel source)

Obama comes closest in his proposals. But even he has failed to grasp all the horns of the bull]

Manhattan apartment sales fall most in 18 years as buyers wait

Manhattan apartment sales plunged the most in 18 years last quarter as buyers faced the prospect of a recession and job cuts at Wall Street securities firms. See full story at Bloomberg.com

Paulson says Treasury `flexible’ on housing measures

Treasury Secretary Henry Paulson indicated the Bush administration is willing to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages. “I think you will continue to see flexibility as we learn and go forward,” Paulson said in an interview with Bloomberg Television in Beijing. See full story at Bloomberg.com

Lehman in market abuse claim

Lehman Brothers (LEH: Lehman Brothers Holdings Inc on Tuesday said it had sent information to the Securities and Exchange Commission about possible abusive short-selling in its shares in recent days. Erin Callan, Lehman chief financial officer, said the SEC was examining whether hedge funds acted in concert to drive down the bank’s share price in the days following the near collapse of Bear Stearns. Such behavior could constitute market manipulation, subject to civil and criminal sanctions. See full story at FT.com

Filed under: bubble, CDO, community banks, CORRUPTION, credit unions, currency, education, Eviction, foreclosure, foreign relations, GTC | Honor, healthcare, inflation, interest rates, Investor, Mortgage, Obama, politics, securities fraud | Tagged: Bernanke recession, consensus, counterfeit, credit cards, depression, money, Obama | Leave a comment »

Mortgage Meltdown: A New Perception of Risk Changes American Economics

Posted on March 27, 2008 by Neil Garfield

Whether Krugman is right in today’s New York Times, predicting a massive bailout between $450 billion and $3 trillion at taxpayer expenses, or the “free marketers” have their way and let everyone collapse, or some people finally get it and move toward a consensus of policy that forgives everyone their transgressions but keeps them in the game as we have suggested repeatedly in these posts, it is clear that perception of risk, trust, confidence and integrity has been changed. This change will be reflected in world and domestic financial markets rights down to a car loan, credit card, home equity loan or business loan.

The recent rise of ankle biting between home equity lenders (many of whom have frozen home equity loan accounts making the credit limit unavailable to borrowers), borrowers and fist mortgage lien holders on short and long sales and refinancing, shows what has happened: Nobody trusts anybody anymore and credit is going to decline not only because of availability of money, not only because of viability of short-term credit instruments and the auction markets that drive them, but because rising borrower distrust of all lenders for all reasons is going to lower demand for credit.
Just as there isn’t enough money in the world to bailout everyone in this mess, there isn’t enough equity, income or assets to cover the credit that exists, much less putting on more. But more is what we are getting in the form of inflation fueled by the Fed churning out money supply like it was candy from a machine.
Borrowers seem to have learned that what lenders tell them can’t be trusted. It is a valuable lesson. They are realizing that lenders have a vested interest in keeping borrowers in debt and to maximize the debt of every man, woman and child in the United States.
The number of homes going upside down either because of overvaluation of the home for purposes of the purchase money mortgage or over valuation for purposes of home equity loans is increasing daily. Sorry to hit a sore point but the chickens are coming home to roost. The motivation of change lifestyle from home owner to renter has never been greater. It seems likely that people will do just that.
This might be a paradigm change that could forever change the landscape of the American economy. retail buying sprees of things that nobody needs, and that nobody wants after they make their purchase, are on the decline. They might be on their way out as a way of life. That accounts for 70% of the U.S. economy.
This new perception of risk and the new distrust, have taken on the same dynamics as the politics of division which was bound to be reflected in the marketplace eventually. Basic assumptions and formulas currently used in economics are now cast under a cloud of doubt, as are the policies based on current assumptions and current measurements of things that might not matter as much in the future as they did in the past.
Doubt and uncertainty create bad environments for doing business, investing and living. We might be in for some hard times, but it is probably high time for the AMerican economy to “get real.”

Filed under: bubble, CDO, community banks, credit unions, currency, education, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, politics | Tagged: borrowers, debt, depression, equity, lenders, recession, risk | 1 Comment »

Mortgage Meltdown: J Pierpont Morgan, Where Are You Now?

Posted on March 17, 2008 by Neil Garfield

Bear Stearns Deal and What it Means

In the absence of someone filing the leadership vacuum now, we must use the rules of civil procedure to slow down the foreclosures, evictions and bankruptcies. We need breathing room if we are to avoid a depression, or if one is coming anyway, to at least keep it as shallow and short as possible.

The sale of Bear Stearns at $2 per share, when it was selling recently at $170 is not merely a number, or the story of one historically important company gone bad. It is the story of an industry gone bad, without any current footing, none in sight, and a complete vacuum of leadership. $2 was a gift and the money coming from the Federal Reserve is also a gift. The fact remains that these bailouts, mergers and emergency capital infusions are still part of the problem and not the solution. For 3 years, everyone has had their heads stuck in the sand pretending that nothing bad was happening.

The issue is trust, confidence, and competence. And those issues have spread from just the public viewing the financial markets to each of the players viewing each other. As JP Morgan, the person, knew, character and trust were the key components of any successful economy and the foundation of well-functioning financial markets. JP Morgan may exist as a company, but there is no JP Morgan who can leverage the power of his person-hood against a rising tide of distrust, ankle-biting and outright fear and panic. The fact that the media is only referring to a run on Bear Stearns generically only stokes the fires of distrust, and at best sweeps deep structural problem under a carpet with no room left to hide the debris.

It was good that SOME agreement was reached with respect to Bear Stearns, but what are we going to do with the rest of the companies that are going to go under? Right now the answer is nobody knows and possibly nothing at all. We are in free fall which is otherwise known as a crash. The only hope is leadership and consensus. That there is no apparent credible leader with the power of J Pierpont Morgan, is an indication that there will be no consensus. Morgan averted a similar crisis 100 years ago — but only because he was respected, he kept his focus on the good of the country, and he exercised enormous influence over government and industry.

The leader must be someone who is known, trusted, and who has the interest of the country at heart. He or she must be competent and knowledgeable in financial instruments, and down to earth enough to understand that the agreement reaches everyone affected, not merely the financial players. Besides Warren Buffett, I don’t know anyone who can come close to that definition. And I don’t know for sure if he is actually up to the task.

Or we can wait for political and legislative and judicial solutions later. If we do that, we are certainly looking at another 18 months of downward spiral. With that kind of timeframe, the dollar will lose at least another 40% of its value, oil will easily surpass $200 per barrel, at least another 25% of existing financial institutions will “go away”, the economy will slip into actual decline, joblessness will increase geometrically and inflation will not be less than 15% per month.

Filed under: bubble, Bush, CDO, community banks, CORRUPTION, credit unions, currency, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, securities fraud | Tagged: BEAR STEARNS, Buffett, confidence, depression, Federal reserve, J Pierpont Morgan, JP Morgan, leadership, respect, trust | Leave a comment »

MORTGAGE MELTDOWN REMEDY: SEND THIS NOW TO YOUR STATE SUPREME COURT AND LOCAL COURT SYSTEM

Posted on March 8, 2008 by Neil Garfield

The problem for homeowners is that however many ideas are put forward they won’t be effective in time to save most people, they won’t be in time to save the economy, and they won’t be in time to save our currency from further wrenching devaluation. It is the fierce urgency of now that cannot even wait to the election or January 20, 2009. There is only one place where immediate relief can be achieved — the Court System. There are constitutional impediments to interference with the mortgage foreclosure process. Yet there is authority in the judicial system to change the rules as long as it does not significantly impede or in this case, it should enhance access to the courts and the ability to mount a credible defense to foreclosures on predatory or fraudulent loans.

These are the rules that could be enacted by each court in the land that would [a] slow down the process and [b] protect borrowers from the steamroller of lender foreclosures and [c] protect lenders, investment bankers and investors from themselves. These rules preserve and enhance due process so that the unsophisticated borrower is not wiped out again by his or her lack of knowledge.

Emergency Provisional Rules

Mortgage Foreclosures

These emergency rules of civil procedure apply to all foreclosures on all property, real or personal, initiated on or before January 1, 2007. No Judgment shall be executed, or if already executed, enforced, and no order of removal or eviction or seizure related to foreclosure shall be executed, or if already executed, enforced unless a Court of competent jurisdiction shall have executed an order finding as a matter of law and fact that the foreclosing party(ies) have complied with each and every provision contained herein.

1. Every Petition for Foreclosure and/or every action undertaken by a foreclosing party prior to seeking recovery or seizure, or occupancy of property, shall require the foreclosing party(ies) to file a verified complaint or affidavit alleging the facts supporting the claim for relief, executed by a person with actual knowledge of all facts alleged. The executing party on said verified Petition or affidavit shall affirmatively allege and actually be available for the taking of testimony by deposition or at an evidentiary hearing in the jurisdiction in which the property is located.

2. Each such Petition or Affidavit shall state the names and addresses of all parties involved in the loan transaction and shall be served under the rules governing service of process upon each of said parties as third party non-party litigants, if such parties were not the lender or borrower.

3. Each such Petition or Affidavit shall account for all funds that were passed through or to each party named in the action, the disposition thereof, and the manner and time in which the passage of said funds were dispersed, together with a citation to the mortgage documentation, including a quote of the relevant passages in the body of the Petition or Affidavit wherein said funds are disclosed and wherein said funds are authorized.

4. Each such Petition or Affidavit shall state with particularity whether any changes occurred after the closing of the subject loan transaction in which parties or persons were changed including the names and addresses of all parties and persons related to the transactions subject to the mortgage.

5. With respect to sale or assignment or any joint or sharing arrangements concerning ownership, distribution of risk, or securitization in which the subject loan was referenced as collateral or otherwise, each such Petition shall state with particularity the details of each such transaction, the distribution or re-distribution of funds, and the documents employed by said parties after said closing.

6. Each and every such Petition or Affidavit shall affirmatively state that the foreclosing party(ies) have standing and authority to bring the action, defend counterclaims and answer affirmative defenses. The signature of the attorney on said pleading shall be mandatory and shall constitute a representation to the COURT that the filing attorney has performed proper due diligence to ascertain the truth of the allegations of legal standing and all other allegations.

7. Each such Petitioner or Affidavit shall be accompanied by attachments of the referenced documents to be included with the first service of such Petition or Affidavit.

8. Each such Petition or Affidavit shall state with particularity and specificity each disclosure made to the borrower and any third parties involved in the transaction under the Truth in Lending Act and the corresponding provision of the mortgage documents executed by the borrower which supports said disclosure.

9. Each such Petition or Affidavit shall state with particularity and specificity each disclosure made to the borrower and any third parties involved in the transaction under the Truth in Lending Act and the corresponding provision of the mortgage documents executed by the borrower which does not support said disclosure. If any allegation other than “none” is made under this paragraph, the foreclosing party(ies) shall state with specificity the law or fact upon which they should be excused from compliance.

10. Each such Petition or Affidavit shall attach a full and complete accounting of all money, value or funds transmitted, paid or or promised between all parties involved in the loan transaction before or after the loan transaction. In the event the borrower has been overcharged, undercharged, or charged correctly, the Petition or Affidavit shall so state affirmatively, providing a full accounting of said funds.

11. No answer or response from the borrower shall be due unless and until the foreclosing party(ies) are in complete and full compliance with the provisions of these rules. Any prior answer or response may be amended by the borrower after a determination is made that the foreclosing party(ies) are in full compliance. No prior Judgement, order or other document or rule shall prevent the borrower from filing a response or answer after the foreclosing party(ies) are found to be in compliance with these rules.

12. In the event that the foreclosing party(ies) fails or refuses to comply with these rules, the foreclosure shall be barred with prejudice and until the terms of the mortgage are determined with certainty by the Court by clear and convincing evidence, no payments to the mortgagee shall be due. This provision that not apply to payment to taxing authorities. In such event of delay caused by the the foreclosing party(ies) the court may fashion such equitable remedies as the Court deems fit in its discretion. for example, the Court could apply delinquent payments to the end of the mortgage, thus extending the terms.

13. In the event of non-compliance with these rules wherein the foreclosing party(ies) demonstrate to the Court the probability that they could amend their filing to conform to the requirements herein, the foreclosing party(ies) shall file an amended Petition or Affidavit on or before thirty (30) days from the date of the order of the Court allowing the amendment. Failure to file within said thirty period shall be grounds for a mandatory immediate dismissal with prejudice.

14. In the event of the filing of a verified amended Petition or Affidavit, Borrower shall have sixty (60) days in which to answer or respond. Failure to answer or respond shall not relieve the burden of proof of the foreclosing party(ies) in compliance with state, local and Federal law, and in compliance with these rules.

15. The Court may grant attorney fees and costs to the prevailing party in each case where a motion or other filing occurs, wherein a determination is made in an adversary proceeding that the filing is in or out of compliance.

16. In the event a foreclosure has already been completed and all subsequent and customary actions have occurred and no bona fide third party has taken control or occupancy of the property, these rules may applied retroactively.

17. Once compliance has been established and the issues are joined, the Court shall enter an order requiring the parties to enter into a process of mediation. The purpose of the mediation shall be to fashion a settlement which provides relief and incentives to all affected parties, including non-party litigants. Mediation shall take place no earlier than thirty (30) days after the entry of the mediation order, and not later than is reasonably possibly given the volume of cases and the availability of competent mediators.

These rules are subject to review by the Court but are effective immediately. Comments and applications to be heard shall be available in keeping with the usual and customary methods of proposed rule changes. Said rules shall be effective unless and until stated otherwise by the Court.

Filed under: bubble, CDO, community banks, credit unions, currency, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, Investor, Mortgage, Obama, politics, securities fraud, Uncategorized | Tagged: Clinton, depression, Eleanor Roosevelt, jobs, judiciary, McCain, Obama, Pelosi, recession, State Courts, Supreme Court | 2 Comments »

Mortgage Meltdown Movement: Start Now, Obama

Posted on March 8, 2008 by Neil Garfield

OBAMA MOVEMENT IS LAST CHANCE FOR ECONOMY AND HOMEOWNERS.

CHANGE THE RULES OF CIVIL PROCEDURE REGARDING FORECLOSURES OF ALL TYPES.

As we have have repeatedly pointed out, there is no time for stimulus packages, legislative bailouts, or executive orders.

The evidence is mounting because [a] the situation is as bad as it looks and it is getting worse and [b] the administration ran out of places to hide the mounting losses to the economy.

The dollar continues its slide which will create devastating inflation within 6 months. Consumer buying power is now the lowest it is had been since 1945. Job losses are at record levels and more people, especially men are starting to simply walk away from their jobs because the pay does nothing for them. People are also getting ready to walk away from their homes and just leave the keys with banks who will try to dump their real estate inventory, perhaps with some new derivative security plan.

The financial industry cannot bail us out, the U.S. Treasury can’t bail us out, China can’t bail us out, the congress cannot bail us out, the President won’t or can’t bail us out, and the candidates for President will inherit the second Great Depression (GDII) unless something is done right now. The plain truth is that if you do the arithmetic, there isn’t enough money in the world to buy our way out of this. Leadership, agreements, cooperation and sharing are the commodities that will settle the financial claims and avert a general collapse.

Start with the obvious — 900,000 foreclosures and mounting. At the center of this meltdown is the mean fact that prices were artificially inflated and, as in every Ponzi scheme, eventually collapsed. The debt was as fake as the prices. But we are still pretending it is real. The monthly payments were in many cases procured by fraud and numerous violations of the Truth in Lending Act.

Change the procedure, not the substance of the law.

The change needed is to enumerate the requirements for initiating foreclosures such that Ponzi operators are deterred from filing foreclosures, the entire foreclosure process is slowed down, and the loans are reinstated, re- negotiated, or modified on some basis that will result in continued occupancy of homes, restoring capital to balance sheets of financial institutions, restoring some degree of quality to CDO’s that were sold, and adding liquidity to the economy without pumping more funny money into it — thus adding value to the dollar, and adding purchasing power to consumers and industry. We encourage immunity from criminal prosecution those players who are still in the chain and assist in the process of recovery. Those actions and investigations by State attorney generals will at best provide an empty victory in an empty marketplace.

CHANGE THE RULES OF CIVIL PROCEDURE REGARDING FORECLOSURES OF ALL TYPES.

The only hope is the judiciary, which handles the foreclosures. Everyone agrees, including the parties initiating the foreclosures and evictions, that the goal is slowing down the process, giving everyone a little hope and incentive, and creating a process where these cases are settled equitably by agreement or by the equitable powers of every court in which an eviction or foreclosure matter is pending. Foreclosure is an equitable remedy which grants wide latitude to the Judge. Procedures should be in place that force the initiators of foreclosure proceedings to slow down, force everyone into mediation and give some breathing room so the marketplace, the financial sector, and government has time to catch up with events that have overtaken them.

In order to accomplish this, the authority is usually vested in the State Supreme Court of each state. The State Supreme Court is usually the authority that creates, amends or changes rules of civil procedure. This plan is not sexy but it is quick and it will work. Change the rules as we have suggested in our recent posting “Send this to Your State Supreme Court”.

As for the PRESIDENTIAL candidates it is a dismal picture. The candidates for all other public offices don’t look any better in any of the State, local or Federal elections.

While we applaud McCain for his honesty in admitting he doesn’t know much about economics, that is hardly the person we want making executive decisions during a deep recession or depression.

While Clinton is good at creating four point plans, ten point plans etc., she has not demonstrated any understanding of the economics at work here. Her husband didn’t have any experience in economics beyond a small state with niche industries. Her “experience” might sell but it isn’t true. She was a tea and cookies first lady in Arkansas and in the White House. This is no Eleanor Roosevelt. We can only hope that, like her Husband, if she is the candidate, she will be lucky enough to have people around like Alan Greenspan, Robert Rubin and others who not only understood the economy but knew how to grow it and that her personal political ambitions for a second term don’t get in the way of good judgment.

While Obama does have a close-up understanding of the economics of poverty, because he gave up Wall Street to work on Main Street, he also lacks experience in the macro-economic events that are in the process of burying our economy. He also is an academic, having taught constitutional law for 10 years, and brilliant analyst and fast learner. He also energizes people to out-perform which is exactly what we are going to need in the White House if we get through this in one piece.

Obama is about leadership while Clinton is about tactical maneuvering. Both are valuable talents. But the truth is that Clinton would probably be one of the best Senate Majority leaders in history and at best a mediocre President for precisely those reasons. With Obama in the White House and Clinton and Pelosi in charge of Congress, it is hard to imagine a scenario where we can’t emerge from all this a little smarter and rebounding from the worst economic times in our lives.

There are no guarantees. Yet it seems like an Obama presidency will be a populist presidency directed by the people and for the people, while a Clinton presidency will be a Hillary presidency. McCain appears best suited to go to war and least suited to deal with any domestic issues. But none of them will like what is delivered to them on “Day One” unless something is done now. Obama too is at least as likely to attract energized geniuses in their respective fields to manage the difficult terrain ahead of us.

What Obama should do is what Obama does best — create a movement that moves the Supreme Courts of every state into action. All candidates for public office should sign on and all present office holders should introduce and pass remedial legislation in support of the movement. Obama is best suited to initiate this movement because his core constituency is the sector hardest hit by predatory lending practices, job losses, and NAFTA failures.

The Obama Presidency should, as much as possible, start now.

It is highly unlikely that Clinton’s last gasp pf political maneuvering and attack ads is going to change the math — Obama ends up with more popular vote, more states won, and more delegates one. Unless the convention turns to a compromise candidate like Gore, who probably won’t take the job, Obama is the only candidate that can be the nominee without tearing the Democratic party apart.

Filed under: bubble, Bush, community banks, CORRUPTION, currency, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, politics, securities fraud | Tagged: Clinton, depression, Eleanor Roosevelt, jobs, judiciary, McCain, Obama, Pelosi, recession, State Courts, Supreme Court | Leave a comment »

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