Szymoniak: Honesty Pays $46.5 Million in Whistleblower Suit

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Editor’s Comment and Analysis:  

It was and remains a big lie — the securitization the loans, the origination of the loans, the assignments, alleges and endorsements. $46.5 million sounds like a lot and these whistleblowers will get a “windfall” as a result of it. But it is a drop in the bucket and we need to fill the bucket. And our bucket list should include taking down the big banks, removing money from politics, and getting back to government by the people and for the people.

Schiller, the scholar who has been leading the way in economic analysis of the housing market, has offered an audacious plan that is the last possible way for government intervention to save the economy, which is heavily dependent upon consumer spending, particularly in the housing market. Eminent domain has long been sustain as the right of government to take private property and convert it to public use. Whether it is a highway, downtown redevelopment or other reasons, eminent domain has been played by the banks and developers as a way to get land they need, at a price that could not be achieved using the power of the government behind them. 

While seemingly unusual and audacious, Schiller’s proposition has many precedents in history and should be considered as the last great hope after the 50 attorney generals agreed in the 50 state settlement that now prevents them from further investigation and prosecution against the banks. Schiller’s, the originator of the case-Schiller index showing that median income and income disparity is harmful to the economy and deadly to the housing market, proposes that we use the power of eminent domain to seize the remaining mortgages, and perhaps the property that has already been foreclosed, and remake the deals so that they make sense. Translating that means that the homeowners will get the deal that they should have received when they bought o refinanced their house. And it capitalizes on the inconvenient truth that it was the banks who created risks that neither the investors nor the homeowners signed up for.

By paying the value of the remaining mortgages — more than 30% are reported still under water and when carefully analyzed the figure is closer to 60%, the banks get no more and no less than they should, the investors still get their money — 100 cents on the dollar if they insist on payback from the banks in addition to the money from the new mortgages on the old property, and the homeowner is back in charge of his own home paying principal, interest, costs, fees and insurance and taxes that are fair market value indicators. It is better than the proceeds of foreclosures, so the banks now must argue that they have a right to take less money in order to get the foreclosure.

The banks want the foreclosure because they lied. And with the foreclosure it adds to the illusion that they funded or paid for loans in which they do not have a nickel invested. The fact that the balance sheets of the mega banks are going to take a giant hit is only an admission that the assets they are reporting are either not worth anything or are worth far less than the value shown on their public financial statements. They are still lying about that to investors, the SEC and other regulatory agencies.

So whistleblowers must pave the way and show the lies, show the inequality, show the inflated appraisals that could not stand the test of time and force government to act as it should. The chief law enforcement of the country and the chief law enforcement of each state owes his/her citizens at least that much and more. They must find ways to clear up the corruption of title records that are irretrievably lost. 

And the lawyers who keep turning down these cases because they are too complex or too weak should take a close look at these whistleblower  cases. The settlement, as always, comes before the trial because the fact remains that the banks are o the hook for  their bets on the mortgages and not the mortgages themselves. Lawyers need to show a little guts and seek some glory and wealth from these cases, while at the same time doing their country a service.

We are turning the corner and the banks are starting to lose. Keep up the fight and your effort will probably go well-rewarded.

Whistleblowers win $46.5 million in foreclosure settlement

By James O’Toole

NEW YORK (CNNMoney) — Getting served with foreclosure papers made Lynn Szymoniak rich.

While she couldn’t have known it at the time, that day in 2008 led to her uncovering widespread fraud on the part of some of the country’s biggest banks, and ultimately taking home $18 million as a result of her lawsuits against them. Szymoniak is one of six Americans who won big in the national foreclosure settlement, finalized earlier this year, as a result of whistleblower suits. In total, they collected $46.5 million, according to the Justice Department.

In the settlement, the nation’s five largest mortgage lenders –Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial — agreed to pay $5 billion in fines and committed to roughly $20 billion more in refinancing and mortgage modifications for borrowers.

A judge signed off on the agreement in April, and in May — Szymoniak received her cut.

“I recognize that mine’s a very, very happy ending,” she said. “I know there are plenty of people who have tried as hard as I have and won’t see these kinds of results.”

Related: 30% of borrowers underwater

Whistleblower suits stem from the False Claims Act, which allows private citizens to file lawsuits on behalf of the U.S. when they have knowledge that the government is being defrauded. These citizens are then entitled to collect a portion of any penalties assessed in their case.

The act was originally passed in 1863, during a time when government officials were concerned that suppliers to the Union Army during the Civil War could be defrauding them.

In 1986, Congress modified the law to make it easier for whistleblowers to bring cases and giving them a larger share of any penalties collected. Whistleblowers can now take home between 15% and 30% of the sums collected in their cases. In the cases addressed in the foreclosure settlement, the whistleblowers revealed that banks were gaming federal housing programs by failing to comply with their terms or submitting fraudulent documents.

In Szymoniak’s case alone, the government collected $95 million based on her allegations that the banks had been using false documents to prove ownership of defaulted mortgages for which they were submitting insurance claims to the Federal Housing Administration.

The FHA is a self-funded government agency that offers insurance on qualifying mortgages to encourage home ownership. In the event of a default on an FHA-insured mortgage, the FHA pays out a claim to the lender.

Szymoniak’s case was only partially resolved by the foreclosure settlement, and she could be in line for an even larger payout when all is said and done.

As an attorney specializing in white-collar crime, the 63-year-old Floridian was well-placed to spot an apparent forgery on one of the documents in her foreclosure case, one she saw repeated in dozens of others she examined later.

“At this point, the banks are incredibly powerful in this country, but you just have to get up every morning and do what you can,” she said.

The other five whistleblowers in the settlement came from the industry side, putting their careers at risk by flagging the banks’ questionable practices.

Kyle Lagow, who won $14.6 million in the settlement, worked as a home appraiser in Texas for LandSafe, a subsidiary of Countrywide Financial. He accused the company in a lawsuit of deliberately inflating home appraisals in order to collect higher claims from the FHA, and said he was fired after making complaints internally.

Gregory Mackler, who won $1 million, worked for a company subcontracted by Bank of America to assist homeowners pursuing modifications through the government’s Home Affordable Modification Program, or HAMP. Under HAMP, the government offers banks incentive payments to support modifications.

Mackler said Bank of America violated its agreement with the government by deliberately preventing qualified borrowers from securing HAMP modifications, steering them toward foreclosure or more costly modifications from which it could make more money. He, too, claims to have been fired after complaining internally.

There’s also Victor Bibby and Brian Donnelly, executives from a Georgia mortgage services firm who accused the banks of overcharging veterans whose mortgages were guaranteed by the Department of Veterans Affairs, thereby increasing their default risk. Bibby and Donnelly won $11.7 million in the settlement; their attorneys did not respond to requests for comment.

Shayne Stevenson, an attorney who represented both Lagow and Mackler, said the two weren’t aware of possible rewards when they first brought their evidence to his firm.

“The reality of it is that most of the time, whistleblowers don’t even know about the False Claims Act — they don’t know they can make money,” Stevenson said. Both his clients, Stevenson added, “just wanted the government to know about this fraud, so they deserve every penny that they got.”

A Bank of America spokesman declined to comment on individual cases, but said the national settlement was “part of our ongoing strategy to put these issues, particularly these legacy issues with Countrywide, behind us.” BofA acquired mortgage lender Countrywide in 2008, thereby incurring the firm’s legal liabilities.

The other banks involved either declined to comment or did not respond to requests for comment.

Related: Foreclosures spike 9%

While the whistleblowers in the settlement scored big paydays in the end, the road wasn’t easy. Stevenson said his clients “were pushed to the brink” after raising their concerns, struggling to find work and beset by financial problems.

“They were facing evictions, foreclosure, running away from bills, trying to deal with creditors that were coming after them,” Stevenson said. “This went on and on and on, and this is part and parcel of what happens to whistleblowers.”

For Robert Harris, a former assistant vice president in JPMorgan’s Chase Prime division, the experience was similar.

Harris accused the bank of failing to assist borrowers seeking HAMP modifications and knowingly submitting false claims for government insurance based on wrongful foreclosures. He was stymied when he tried to complain internally, and says he was fired for speaking out.

While Harris ended up with a $1.2 million payout in the settlement, the father of five says he’s been blacklisted within the industry and exhausted by the ordeal.

“It completely turned my life upside down,” he said. “I’m trying to raise my kids, recover from a divorce, recover from the loss of my career — it just comes to down to surviving and putting this to an end.”

“I guarantee the other whistleblowers, too, have sacrificed a lot,” he added. “But to be able to sit back and sleep at night is worth it.”


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EDITOR’S NOTE:  Somehow this particular article escaped me when it was published by Huffington Post. Like all the other allegations against the participants in the mortgage securitization hoax, the underlying theme is that the major banks simply lied about the ownership, value and nature of the mortgage assets. In this case the government paid them based upon their naked representation that the mortgage liens had been perfected and properly transferred.

 So far the banks have been successful, for the most part, in convincing the public and the courts that the mortgage liens have been perfected and properly transferred in all cases where claims of “ownership” were based upon securitization of debt. But in every case where professionals have been employed and have taken the time to carefully examine both the money trail and the document trail they have reached the conclusion that the documents and the handling of the money has been at best fatally defective and at worst fraudulent, forged,  and fabricated.

 The victims of this hoax include every taxpayer, consumer, homeowner and business in the entire country. As the lawsuits multiply and as the attorney general of each state comes to realize the political risk of siding with the banks, it will become obvious that we are all affected regardless of whether we are directly involved in the foreclosure process or merely suffering the results of collateral damage.

 The debates regarding the debt ceiling, spending and the tax code are mere distractions from the enforcement of existing tax liability of the participants in the massive securitization hoax. As taxpayers we have given the banks considerable resources to kick the can down the road. But the ultimate result cannot be disputed. Trillions of dollars are owed to the federal government, state governments and local governments on transactions that were either not reported at all or were reported with the intent to deceive those governments and deprive them of revenue.

The missing revenue together with the fraudulent receipt of payments from taxpayers for nonexistent or fraudulently represented mortgages and mortgage assets constitute all of the “deficit” that has been reported for all the governmental  entities that supposedly are in distress, bankrupt were subject to downgrade in their credit ratings.

 Simply stated, the deficit money is sitting on Wall Street or offshore under the control of those who control the Wall Street entities that perpetrated the grand securitization hoax. The same is true for individual consumers and homeowners. The scope of the securitization hoax included but was not limited to home loans, credit cards, student loans, auto loans and virtually every other kind of debt imaginable. Lately we have been receiving reports that the securitization hoax is expanding its scope to include life insurance. By inducing those who would otherwise not purchased life insurance (perhaps because they could not afford it) or who would purchase a contract from a life insurance carrier that was not involved in securitization, Wall Street is creating a vehicle which for the first time institutionalizes the motivation to deprive people of their lives.

 There are many permutations of the securitization hoax. The bottom line is that the vendor of the financial products sold to the consumer is not taking any risk, but is being paid, like an actor. In this way Wall Street is essentially the primary actor in the sale of financial products, like all mortgages or insurance, without being regulated or licensed by the appropriate federal or state agency.

The actors (pretender lenders) are either lending their licenses contrary to law or pretending to be licensed and getting away with it because of the apparent complexity of securitization. There is no need for complex analysis. Either they are a lender or they are not. Either they are a mortgage broker or they are not. Either they are an insurance broker or they are not. And if they acted as a lender when in fact their function was as a mortgage broker they have violated the law. And if they acted as a mortgage originator when in fact their function was a mortgage broker, they have violated the law. The administrative agencies regulating the various professions involved in real estate transactions have lots of work to do, lots of discipline to mete out, lots of fines to collect and lots of restitution to order.

 There are hundreds of millions of transactions in which worthless paper was involved which contained claims to obligations, notes and mortgages (which are interest in real property). The fact that these were fraudulent transactions does not take away from the fact that a profit was made, that documents should have been recorded, and that taxes and fees were due. The only question left is whether there are enough people left in government who are willing to use the tools available to them to correct the mess created by the securitization hoax.

Al Capone, the famed mobster, got away with almost everything including murder — until  he was taken down for tax fraud. It doesn’t matter how his reign of terror was ended. What matters is that it did end. And if government had followed through there would not have been anything to replace him. That is the challenge facing today’s government. And more importantly, it is the challenge to our Republic, where inch by inch, personal liberties have been taken away that are still guaranteed by our most basic law — the American Constitution.

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The audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents.”

Those violations are likely only a small fraction of the number committed by home loan companies, experts say, citing the small sample examined by regulators.”

Shahien Nasiripour

Shahien Nasiripour shahien@huffingtonpost.com

Confidential Federal Audits Accuse Five Biggest Mortgage Firms Of Defrauding Taxpayers [EXCLUSIVE]

Foreclosure Fraud

WASHINGTON — A set of confidential federal audits accuse the nation’s five largest mortgage companies of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans, four officials briefed on the findings told The Huffington Post.

The five separate investigations were conducted by the Department of Housing and Urban Development’s inspector general and examined Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, the sources said.

The audits accuse the five major lenders of violating the False Claims Act, a Civil War-era law crafted as a weapon against firms that swindle the government. The audits were completed between February and March, the sources said. The internal watchdog office at HUD referred its findings to the Department of Justice, which must now decide whether to file charges.

The federal audits mark the latest fallout from the national foreclosure crisis that followed the end of a long-running housing bubble. Amid reports last year that many large lenders improperly accelerated foreclosure proceedings by failing to amass required paperwork, the federal agencies launched their own probes.

The resulting reports read like veritable indictments of major lenders, the sources said. State officials are now wielding the documents as leverage in their ongoing talks with mortgage companies aimed at forcing the firms to agree to pay fines to resolve allegations of routine violations in their handling of foreclosures.

The audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents.

Two of the firms, including Bank of America, refused to cooperate with the investigations, according to the sources. The audit on Bank of America finds that the company — the nation’s largest handler of home loans — failed to correct faulty foreclosure practices even after imposing a moratorium that lifted last October. Back then, the bank said it was resuming foreclosures, having satisfied itself that prior problems had been solved.

According to the sources, the Wells Fargo investigation concludes that senior managers at the firm, the fourth-largest American bank by assets, broke civil laws. HUD’s inspector general interviewed a pair of South Carolina public notaries who improperly signed off on foreclosure filings for Wells, the sources said.

The investigations dovetail with separate probes by state and federal agencies, who also have examined foreclosure filings and flawed mortgage practices amid widespread reports that major mortgage firms improperly initiated foreclosure proceedings on an unknown number of American homeowners.

The FHA, whose defaulted loans the inspector general probed, last May began scrutinizing whether mortgage firms properly treated troubled borrowers who fell behind on payments or whose homes were seized on loans insured by the agency.

A unit of the Justice Department is examining faulty court filings in bankruptcy proceedings. Several states, including Illinois, are combing through foreclosure filings to gauge the extent of so-called “robo-signing” and other defective practices, including illegal home repossessions.

Representatives of HUD and its inspector general declined to comment.

The internal audits have armed state officials with a powerful new weapon as they seek to extract what they describe as punitive fines from lawbreaking mortgage companies.

A coalition of attorneys general from all 50 states and state bank supervisors have joined HUD, the Treasury Department, the Justice Department and the Federal Trade Commission in talks with the five largest mortgage servicers to settle allegations of illegal foreclosures and other shoddy practices.

Such processes “have potentially infected millions of foreclosures,” Federal Deposit Insurance Corporation Chairman Sheila Bair told a Senate panel on Thursday.

The five giant mortgage servicers, which collectively handle about three of every five home loans, offered during a contentious round of negotiations last Tuesday to pay $5 billion to set up a fund to help distressed borrowers and settle the allegations.

That offer — also floated by the Office of the Comptroller of the Currency in February — was deemed much too low by state and federal officials. Associate U.S. Attorney General Tom Perrelli, who has been leading the talks, last week threatened to show the banks the confidential audits so the firms knew the government side was not “playing around,” one official involved in the negotiations said. He ultimately did not follow through, persuaded that the reports ought to remain confidential, sources said. Through a spokeswoman, Perrelli declined to comment.

Most of the targeted banks have not seen the audits, a federal official said, though they are generally aware of the findings.

Some agencies involved in the talks are calling for the five banks to shell out as much as $30 billion, with even more costs to be incurred for improving their internal operations and modifying troubled borrowers’ home loans.

But even that number would fall short of legitimate compensation for the bank’s harmful practices, reckons the nascent federal Bureau of Consumer Financial Protection. By taking shortcuts in processing troubled borrowers’ home loans, the nation’s five largest mortgage firms have directly saved themselves more than $20 billion since the housing crisis began in 2007, according to a confidential presentation prepared for state attorneys general by the agency and obtained by The Huffington Post in March. Those pushing for a larger package of fines argue that the foreclosure crisis has spawned broader — and more costly — social ills, from the dislocation of American families to the continued plunge in home prices, effectively wiping out household savings.

The Justice Department is now contemplating whether to use the HUD audits as a basis for civil and criminal enforcement actions, the sources said. The False Claims Act allows the government to recover damages worth three times the actual harm plus additional penalties.

Justice officials will soon meet with the largest servicers and walk them through the allegations and potential liability each of them face, the sources said.

Earlier this month, Justice cited findings from HUD investigations in a lawsuit it filed against Deutsche Bank AG, one of the world’s 10 biggest banks by assets, for at least $1 billion for defrauding taxpayers by “repeatedly” lying to FHA in securing taxpayer-backed insurance for thousands of shoddy mortgages.

In March, HUD’s inspector general found that more than 49 percent of loans underwritten by FHA-approved lenders in a sample did not conform to the agency’s requirements.

Last October, HUD Secretary Shaun Donovan said his investigators found that numerous mortgage firms broke the agency’s rules when dealing with delinquent borrowers. He declined to be specific.

The agency’s review later expanded to flawed foreclosure practices. FHA, a unit of HUD, could still take administrative action against those firms for breaking FHA rules based on its own probe.

The confidential findings appear to bolster state and federal officials in their talks with the targeted banks. The knowledge that they may face False Claims Act suits, in addition to state actions based on a multitude of claims like fraud on local courts and consumer violations, will likely compel the banks to offer the government more money to resolve everything.

But even that may not be enough.

Attorneys general in numerous states, armed with what they portray as incontrovertible evidence of mass robo-signings from preliminary investigations, are probing mortgage practices more closely.

The state of Illinois has begun examining potentially-fraudulent court filings, looking at the role played by a unit of Lender Processing Services. Nevada and Arizona already launched lawsuits against Bank of America. California is keen on launching its own suits, people familiar with the matter say. Delaware sent Mortgage Electronic Registration Systems Inc., which runs an electronic registry of mortgages, a subpoena demanding answers to 75 questions. And New York’s top law enforcer, Eric Schneiderman, wants to conduct a complete investigation into all facets of mortgage banking, from fraudulent lending to defective securitization practices to faulty foreclosure documents and illegal home seizures.

A review of about 2,800 loans that experienced foreclosure last year serviced by the nation’s 14 largest mortgage firms found that at least two of them illegally foreclosed on the homes of “almost 50” active-duty military service members, a violation of federal law, according to a report this month from the Government Accountability Office.

Those violations are likely only a small fraction of the number committed by home loan companies, experts say, citing the small sample examined by regulators.

In an April report on flawed mortgage servicing practices, federal bank supervisors said they “could not provide a reliable estimate of the number of foreclosures that should not have proceeded.”

The review of just 2,800 home loans in foreclosure compares with nearly 2.9 million homes that received a foreclosure filing last year, according to RealtyTrac, a California-based data provider.

“The extent of the loss cannot be determined until there is a comprehensive review of the loan files and documentation of the process dealing with problem loans,” Bair said last week, warning of damages that could take “years to materialize.”

Home prices have fallen over the past year, reversing gains made early in the economic recovery, according to data providers Zillow.com and CoreLogic. Sales of new homes remain depressed, according to the Commerce Department. More than a quarter of homeowners with a mortgage owe more on that debt than their home is worth, according to Zillow.com. And more than 2 million homes are in foreclosure, according to Lender Processing Services.

Rather than punishing banks for misdeeds, the administration is now focused on helping troubled borrowers in the hope that it will stanch the flood of foreclosures and increase consumer confidence, officials involved in the negotiations said.

Levying penalties can’t accomplish that goal, an official involved in the foreclosure probe talks argued last week.

For their part, however, state officials want to levy fines, according to a confidential term sheet reviewed last week by HuffPost. Each state would then use the money as it desires, be it for facilitating short sales, reducing mortgage principal, or using the funds to help defaulted borrowers move from their homes into rentals.

In a report last week, analysts at Moody’s Investors Service predicted that while the losses incurred by the banks will be “sizable,” the credit rating agency does “not expect them to meaningfully impact capital.”

*************************Shahien Nasiripour is a senior business reporter for The Huffington Post. You can send him an e-mail; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get e-mail alerts when he reports the latest news. He can be reached at 917-267-2335.

Mortgage Meltdown and Foreclosure Defense: Private Lending Might be a Resource for You

Besides all of the strategies we are collecting for you here, there are some monetary resources you could consider. Things like reverse mortgages are not likely to yield you anything if you are in trouble because you needs lots of equity to get into those. But there are private lenders and peer to peer lending groups that are getting more active. 

Here are some resources you can go to to learn about and perhaps secure a private loan. These resources are equally applicable for those investors who wish to pursue higher returns by lending, peer to peer or in investment pools. Mostly these loans are NOT securitized. 

Description of Zopa and Prosper et al: http://www.mortgagenewsdaily.com/822006_Peer_To_Peer_Lending.asp

USA Today Article: http://www.usatoday.com/money/perfi/credit/2007-12-25-peerlending-min_N.htm

Peer to Peer Leader Featured on TV: http://www.lendingclub.com/home.action

Peer to Peer Featured on CBS TV: http://www.prosper.com/prm/borrower3.htm?site=&adcopy=b885409550&gclid=CObxkrn8wZMCFSRaiAodOkAocg&adgroup=bank&s=ggl&campaign=USState&ovmtc=broad&ovkey=peer%20to%20peer%20lending&prm=1002

ZOPA: https://us.zopa.com/ad/ad1.html?gclid=CO2Knvj6wZMCFSgtagodA3cbCA

Business Opportunity: http://www.privatelendingmadeeasy.com/

Mostly small business lending: http://entrepreneurs.about.com/od/financing/a/privatelending.htm

Luxury Mortgages: http://www.privatelendinggroup.com/

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May 24, 2008

OFF THE CHARTS

Mortgages Without U.S. Backing Start to Rise

THE private mortgage market in the United States — almost moribund in the wake of the subprime crisis that bankrupted some lenders last year — is showing small signs of revival.

In the first quarter of this year, there were $116 billion in private mortgage loans, loans not issued or insured by the federal government or a government-sponsored entity. That was up from $84 billion in the final quarter of 2007, according to a survey of lenders by Inside Mortgage Finance, a newsletter.

In the wake of the collapse of the private mortgage securitization market in the second half of last year, few banks were willing to make loans that they could not sell, primarily to the government-sponsored enterprises Fannie Mae and Freddie Mac. Those agencies are private companies, but they have a limited right to borrow from the Treasury, and investors generally assume that the federal government will bail them out if they get into serious trouble.

The agencies’ share of the mortgage market rose to a record 75.6 percent in the final quarter of 2007. Add in the 1.3 percent share for Department of Veterans Affairs loans, and the 4.5 percent share for the Federal Housing Administration, and the share of truly private mortgage loans fell to a record low of 18.6 percent.

In the first quarter, the private share recovered to 24.2 percent, meaning that in a country that considers itself the bastion of private enterprise, three of four new home loans had some sort of government-related guarantee.

“There are more banks and other lenders increasing their portfolio lending,” said Guy D. Cecala, the publisher of Inside Mortgage Finance. “At year-end, banks were reluctant to do any portfolio lending.” Portfolio lending refers to an institution’s making a loan and holding on to it, rather than selling it either as a mortgage or as part of a securitization package.

Much of that private lending appears to be in jumbo mortgages, which are too large to be bought by the agencies. The limit had been $417,000, but Congress has raised it temporarily, with differing limits in various areas.

There is still a great reluctance to grant mortgages to subprime borrowers. Mr. Cecala estimated that $10 billion in subprime loans were made in the first quarter, a little less than in the final three months of 2007. In 2005 and 2006, about one in five dollars lent went to subprime borrowers, with a peak volume of $625 billion in 2005.

While there is a little more private lending activity, the private mortgage securitization market continues to shrink. Investors have not yet been reassured that new securitizations will be safer than the disastrous ones from 2006 and early 2007.

A look at the total volume of mortgage loans helps to explain how the mess was created. In 2003, with interest rates at very low levels, a record $3.9 trillion in mortgage loans were made, most of them for refinancing. When interest rates edged up the next year, it seemed reasonable to expect a big falloff, but the decline was only 26 percent.

Mr. Cecala said that the mortgage industry, having greatly expanded to deal with the wave of refinancings, looked for ways to keep lending. The availability of alternative products, allowing larger loans relative to value, or giving borrowers the option to make very low payments for a limited time, grew. That easy credit helped to push home prices up, until they peaked in 2006.

Now, with mortgage defaults rising, Congress is expected to enact housing legislation to permit the F.H.A. to guarantee refinancing loans to homeowners in danger of losing their homes. A Senate committee approved a bill this week to allow such guarantees, but only if the loan amount was reduced to a figure lower than the current value of the home. Such a reduction would cause a loss for the original lender, but that loss might be smaller than it would be with the alternative: the house goes into foreclosure.

Read Floyd Norris’s blog at norris.blogs.nytimes.com.

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