Modifications: Interest reduction, Principal reduction, Payment reduction, and Term increase

In the financial world we don’t measure just the amount of principal. For example if I increased your mortgage principal by $100,000 and gave you 100 years to pay without interest it would be nearly equivalent to zero principal too (especially factoring in inflation). A reduction in the interest rate has an effect on the overall amount of money due from the borrower if (and this is an important if) the borrower is given 40 years to pay AND they intend to live in the house for that period of time. To the borrower the reduction in interest rate and the extension of the period in which it is due lowers the monthly payment which is all that he or she normally cares about.

Nonetheless you are generally correct. And THAT is because the average time anyone lives in a house is 5-7 years, during which an interest reduction would not equate to much of a principal reduction even with inflation factored in. Unsophisticated borrowers get caught in exactly that trap when they do a modification where the monthly payments decline. But when they want to refinance or sell the home they find themselves in a new bind — having to come to the table with cash to sell their home because the mortgage is upside down.

So the question that must be answered is what are the intentions of the homeowner. The only heuristic guide (rule of thumb) that seems to hold true is that if the house has been in the family for generations, it is indeed likely that they will continue to own the property. In that event calculations of interest and inflation, present value etc. make a big difference. But for most people, the only thing that cures their position of being upside down (ignoring the fact that they probably don’t owe the full amount demanded anyway) is by a direct principal reduction.

THAT is the reason why I push so hard on getting credit for receipt of insurance and other loss sharing arrangements, including FDIC, servicer advances etc. Get credit for those and you have a principal CORRECTION (i.e., you get to the truth) instead of a principal REDUCTION, which presumes the old balance was actually due. It isn’t due and it is probable that there is nothing due on the debt, in addition to the fact that it is not secured by the property because the mortgage and note do NOT describe any actual transaction that took place between the parties to the note and the mortgage.



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Is there anybody in there?
Just nod if you can hear me.
Is there anyone at home?
Come on, now,
I hear you’re feeling down.
Well I can ease your pain
And get you on your feet again.
I need some information first.
Just the basic facts
Can you show me where it hurts?

Pink Floyd – Comfortably Numb

As I observe the zombie like reactions of Americans to our catastrophic economic highway to collapse, the continued plundering and pillaging of the national treasury by criminal Wall Street bankers, non-enforcement of existing laws against those who committed the largest crime in history, and reaction to young people across the country getting beaten, bludgeoned, shot with tear gas and pepper sprayed by police, I can’t help but wonder whether there is anyone home. Why are most Americans so passively accepting of these calamitous conditions? How did we become so comfortably numb? I’ve concluded Americans have chosen willful ignorance over thoughtful critical thinking due to their own intellectual laziness and overpowering mind manipulation by the elite through their propaganda emitting media machines. Some people are awaking from their trance, but the vast majority is still slumbering or fuming at erroneous perpetrators.

Both the Tea Party movement and the Occupy Wall Street movement are a reflection of the mood change in the country, which is a result of government overreach, political corruption, dysfunctional economic policies, and a financial system designed to enrich the few while defrauding the many. The common theme is anger, frustration and disillusionment with a system so badly broken it appears unfixable through the existing supposedly democratic methods. The system has been captured by an oligarchy of moneyed interests from the financial industry, mega-corporations, and military industrial complex, protected by their captured puppets in Washington DC and sustained by the propaganda peddling corporate media. The differences in political parties are meaningless as they each advocate big government solutions to all social, economic, foreign relations, and monetary issues.

There is confusion and misunderstanding regarding the culprits in this drama. It was plain to me last week when I read about a small group of concerned citizens in the next town over who decided to support the Occupy movement by holding a nightly peaceful march to protest the criminal syndicate that is Wall Street and a political system designed to protect them. My local paper asked for people’s reaction to this Constitutional exercising of freedom of speech and freedom of assembly. Here is a sampling of the comments:

“What are those Occupy people thinking?! The whole concept is foreign to me. There are always going to be the haves and the have nots. Get over it. Blame yourself for not paying more attention in school or not working hard enough. Just wish people would take responsibility.”

“If they worked half as hard actually working as they do being a pain in everyone else’s ass, they’d be rich! Being born does not guarantee success or wealth. Only hard work does. Maybe we should let them all occupy a jail cell or two.”

“If the goal is to irritate hardworking suburban commuters on their way home, that sounds like the perfect time and location.”

“Let’s hope they don’t pitch tents and trash Lansdale. They need to look for a job, not occupy the streets.”

“I work, and even if I wasn’t working I wouldn’t (march); I would be out looking for a JOB!”

I was dumbfounded at the rage directed towards mostly young people who haven’t even begun their working careers and have played no part in the destruction of our economic system underway for the last 30 years. The people making these statements are middle aged, middle class suburbanites. They seem to be just as livid as the OWS protestors, but their ire is being directed towards the only people who have taken a stand against Wall Street greed and Washington D.C. malfeasance. I’m left scratching my head trying to understand their animosity towards people drawing attention to the enormous debt based ponzi scheme that is our country, versus their silent acquiescence to the transfer of trillions in taxpayer dollars to the criminal bankers that have destroyed the worldwide financial system. I can only come to the conclusion the average American has become so apathetic, willfully ignorant of facts and reality, distracted by the techno-gadgets that run their lives, uninterested in anything beyond next week’s episode of Dancing with the Stars or Jersey Shore, and willing to let the corporate media moguls form their opinions for them through relentless propaganda, the only thing that will get their attention is an absolute collapse of our economic scheme. Uninformed, unconcerned, intellectually vacant Americans will get exactly that in the not too distant future.

Greater Depression Hidden from View

“Look at the orators in our republics; as long as they are poor, both state and people can only praise their uprightness; but once they are fattened on the public funds, they conceive a hatred for justice, plan intrigues against the people and attack the democracy.”Aristophanes, Plutus


The anger and vitriol directed at OWS protestors by middle class Americans is a misdirected reaction to a quandary they can’t quite comprehend. They know their lives are getting more difficult but aren’t sure why. They are paying more for energy, food, tuition, and real estate taxes, while the price of their houses decline and their wages stagnate. More than a quarter of all homeowners are underwater on their mortgage and many are drowning in credit card and student loan debt. At the same time, government drones tell them the economy is in its second year of recovery and corporate profits are at all-time highs. Government statistics, false storylines, and entitlement programs are designed to confuse the public and obscure the fact we are in the midst of another Depression. Everyone has seen the pictures of the Great Depression breadlines, farmers forced off their land during the dustbowl, and downtrodden Americans in soup kitchens. The economic conditions today are as bad as or worse than the Great Depression. This Depression is hidden from plain view because there are no unemployment lines, bread lines, or soup lines. We are experiencing an electronic Great Depression, as food stamps, unemployment compensation, Social security payments and welfare benefits are electronically delivered to millions of recipients.

There have been over 12 million foreclosure actions since 2007, with millions of Americans losing their homes. Another 16 million homeowners are underwater on their mortgages as home prices continue to fall and the economy sinks further by the day. The value of household real estate has fallen from $22.7 trillion in 2006 to $16.2 trillion today, a loss of $6.5 trillion concentrated among the middle class. In contrast, mortgage debt has only decreased by $600 billion mostly due to write-offs by the banks that created fraudulent mortgage products to lure Americans into debt.

The unemployment rate in the United States reached 25% during the Great Depression. The government manipulated fictional unemployment rate reported to the public by drones at the BLS is currently 9.0%. They conveniently ignore the millions of people who have given up looking for work and those who have taken jobs as part-time pickle ploppers at McDonalds, when they previously assembled automobiles at GM. The true number of unemployed/underemployed is 23%.

Since 2007, unemployment has officially gone up by 7 million. In reality, the same percentage of the working age population should be employed today as in 2007 (63%). Since only 58.4% of the working age population is employed today (lowest since 1983), another 4 million needs to be added to the official unemployment tally. The fact is there are 240 million working age Americans and only 140 million are employed. This means there are 100 million working age Americans not working, but our government only classifies 14 million of them as unemployed. There is certainly millions of stay at home moms, students, and legitimately disabled among the 86 million people classified as not in the labor force, but you can’t tell me that another 20 to 30 million of these people couldn’t or wouldn’t work if given the opportunity.

The deception in government reported figures is borne out by the most successful government program of the Obama administration, which has been adding participants at an astounding rate. The Food Stamp program has been a smashing success as we’ve added 13.8 million Americans to this fine program since Obama’s inauguration, a mere 43% increase in less than three years. There are now 45.8 million Americans dependent upon food stamps for survival, 14.7% of the U.S. population. This program began in 1969 and enrollment always surges during recessions and declines during recoveries. But a funny thing happened during our current “recovery”. The government reported our recession over in December 2009. It was certainly over for the Wall Street psychopaths as they rewarded themselves with $43 billion of bonuses in 2009/2010. The number of Americans on food stamps has risen by 6.8 million during this government sponsored “recovery”. You’ll be happy to know that Obama’s good buddy – Jamie Dimon – and his well run machine at JP Morgan earns hundreds of millions administering the SNAP program.

Since 2007, Federal government transfer payments have increased from $1.7 trillion annually to $2.3 trillion, a 35% increase in four years. This is surely a sign of a recovering economy. Bernanke’s zero interest rate policy has stolen $400 billion per year from senior citizens and savers and handed it to the very bankers who caused the pain and suffering of millions. Personal interest income has declined from $1.4 trillion to $1.0 trillion, while Wall Street faux profits have soared. The game plan of the oligarchy has been to transfer hundreds of billions from taxpayers to bankers, report profits through accounting entries reducing loan loss reserves, pump up their stock prices and convince clueless lemming investors to buy newly issued shares at inflated valuations. The plan has failed. The zero interest rate policy’s unintended consequences have caused revolutions throughout the Middle East and massive food inflation across the developing world.

The single biggest reason the middle class feel frustrated, angry and like they are falling behind is due to the Federal Reserve and the relentless never ending inflation they produce in order to support their masters on Wall Street and provide cover for the trillions in debt spending by politicians in Washington DC. It is no surprise that beginning in 1980 when government spending began to accelerate much more rapidly than government revenues, the government decided to “tweak” how it measured inflation. The government reports inflation at 3.5% today. The truth is inflation is running in excess of 10% if measured exactly as it was in 1980. That’s right, we have a recession and we have inflation in double digits. No wonder the masses are restless.


The reason middle class Americans are being methodically exterminated and driven into poverty is the monetary policies of the Federal Reserve. Since 1971, when Nixon extinguished the last vestiges of the gold standard and unleashed politicians to spend borrowed money without immediate consequence, the U.S. dollar has lost 82% of its purchasing power using the government manipulated CPI. In reality, it has lost over 90% of its purchasing power. The average American, after decades of being dumbed down by government sanctioned education, is incapable of understanding the impact of inflation on their lives. As their wages rise 2% to 3% per year and inflation rises 5% to 10% per year, they get poorer day by day. The Wall Street banks, who own the Federal Reserve, step in and convince the average American to substitute debt for real wealth in order to keep living the modern techno-lifestyle sold to them by mainstream corporate media.

The oligarchy of moneyed interests have done a spectacular job convincing the working middle class they should be angry at 20 year old OWS protestors, illegal immigrants and the inner city welfare class, rather than the true culprits – the Federal Reserve, Wall Street banks and mega-corporations. This is a testament to the power of propaganda and the intellectual slothfulness of the average American. U.S. based mega-corporations fired 864,000 higher wage American workers between 2000 and 2010, while hiring almost 3 million workers in low wage foreign countries, using their billions in cash to buy back their own stocks, and paying corporate executives shamefully excessive compensation. The corporate mainstream media treats corporate CEO’s like rock stars as if they deserve to be compensated at a level 243 times the average worker. The S&P 500 consists of the 500 biggest companies in America and while the executives of these companies have reaped millions in compensation, the stock index for these companies is at the exact level it was on July 9, 1998. Over the last thirteen years workers were fired by the thousands, shareholders earned 0% (negative 39% on an inflation adjusted basis), and executives got fabulously rich.

Man made inflation has stealthily devastated millions of lives over the last four decades. When the weekly wages of the average worker are adjusted for inflation, they are making 12% less than they did in 1971. Using a real non-manipulated measure of inflation, the average worker is making 30% less than they did in 1971. Sadly, our math challenged populace only comprehend their wages have doubled in the last forty years, without understanding the true impact of inflation. Thankfully, the Wall Street debt dealers with a helping hand from Madison Avenue propaganda peddlers stepped up to the plate and imprisoned the middle class with the shackles of $2.5 trillion in consumer debt. So, while real wages have fallen 30% since 1971, consumer debt has increased by 1,700%.


Americans have been snookered into renouncing their citizenship and converting to being mindless consumers. Citizenship requires a person to be actively engaged in the community with obligations to fellow citizens and future generations. Consumerism requires people to love things, embrace debt, worry about what others have, and become driven by the accumulation of possessions and the appearance of wealth. The disgusting exhibition that Madison Avenue maggots have coined Black Friday is the ultimate display of consumerism. In a nauseating display of senseless spending driven by retail conglomerates, Americans act like Pavlov’s salivating dogs by lining up for hours to stampede over and pepper spray other consumers to get the ultimate deal on that Chinese made toaster oven, Vietnamese made laptop, Korean made HDTV, or Mexican made tortilla maker. They don’t seem to grasp the irony of going deeper into debt buying cheap crap made in foreign countries by the workers who took their jobs. The mainstream media proclaims a hugely successful Black Friday as millions bought crap they didn’t need with money they don’t have, while millions more ate their Thanksgiving meals in food shelters – unreported by the media.This repulsive manifestation of consumerism is applauded and encouraged by our government, as described by George Monbiot:

“Governments are deemed to succeed or fail by how well they make money go round, regardless of whether it serves any useful purpose. They regard it as a sacred duty to encourage the country’s most revolting spectacle: the annual feeding frenzy in which shoppers queue all night, then stampede into the shops, elbow, trample and sometimes fight to be the first to carry off some designer junk which will go into landfill before the sales next year. The madder the orgy, the greater the triumph of economic management.”

The masses have been brainwashed by those in power into thinking consumer spending utilizing debt is essential for a strong economy, when the exact opposite is the truth. Saving and investment are the essential ingredients to a strong economy. Debt based spending only benefits bankers, mega-corporations, and politicians.

Mass Manipulation through Propaganda

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.” – Edward Bernays, Propaganda, 1928 

Edward Bernays, the father of propaganda to control the masses, would be so proud of his disciples running our country today. He clearly believed only an elite few were intellectually capable of running the show. Essentially, he hit upon the concept of the 1% telling the 99% what they should think and believe over eighty years ago. The mechanisms for controlling the thoughts, beliefs, and actions of the population are so much more efficient today. The conditioning begins when we are children, as every child will be bombarded with at least 30,000 hours of propaganda broadcast by media corporations by the time they reach adulthood. Their minds are molded and they are instructed what to believe and what to value. Those in control of society want to keep the masses entertained at an infantile level, with instant gratification and satisfying desires as their only considerations. The elite have achieved their Alpha status through intellectual superiority, control of the money system, and control of the political process. Their power emanates from eliminating choices, while giving the illusion of choice to the masses. People think they are free, when in reality they are slaves to a two party political system, a few Wall Street banks, and whatever our TVs tell us to buy.

Our entire system is designed to control the thoughts and actions of the masses. In many ways it is done subtly, while recently it has become more bold and blatant. It is essential for the ruling elite to keep control of our minds through media messages and the educational system. It is not a surprise that our public education system has methodically deteriorated over the last four decades. The government gained control over education and purposely teaches our children selected historical myths, social engineering gibberish and only the bare essentials of math and science. The government creates the standardized tests and approves the textbooks. We are left with millions of functionally illiterate children that grow into non-critical thinking adults. This is the exact result desired by the 1%. If too many of the 99% were able to ignore the media propaganda and think for themselves, revolution would result. This is why the moneyed interests have circled the wagons, invoked police state thug tactics, and used all the powers of their media machine to squash the OWS movement. It threatens their power and control.

“Experience has shown that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.” – Thomas Jefferson

A highly educated engaged citizenry would be a danger to the existing social order. The 1%, educated at our finest universities, does not want average Americans to obtain a great education for a reasonable price. They want them to get a worthless diploma at an excessively high price tag and become debt slaves to the Wall Street 1%. They want uneducated, indebted consumers, not educated productive citizens. Our republic has been slowly perverted since the time of its inception. The insidious process had been slow and methodical until 1913. The establishment of the Federal Reserve by an elite group of bankers and their politician friends and the establishment of a personal income tax created the conditions that have allowed a small cabal of powerful men to dictate the course of our economic, political, social, and military policies for the last 98 years. Anyone that chooses to open their eyes and awake from the propaganda induced stupor can see the result of allowing a small group of corrupt authoritarian men using their power to pervert our government into tyranny. The majority remains oppressed, buried under trillions of debt, while the shysters reap obscene profits, poison the worldwide economic system, and walk away unscathed in the aftermath of their crimes.

The ruling oligarchy has become so brazen in the last few years that it has attracted the attention of the critical thinking minority. The advent of the internet has allowed these critical thinking few to analyze the un-sanitized facts, discuss the issues, and provide truth amidst a blizzard of lies. The proliferation of truth telling websites (Zero Hedge, Mish, Financial Sense, Naked Capitalism) has allowed truth seekers to bypass the government sanctioned corporate media. The pillaging of society by the politically powerful, corrupt 1% is plain to see in the graphs below.


The divergence in household income was not the result of hard work, superior intellectual firepower, or the media touted entrepreneurial spirit of the rich. It was the result of the 1% capturing the economic and political system of the United States and using it to ransack the wealth of the formerly working middle class. The fatal flaw which will ultimately result in a fitting end for the powerful elitists is their egos. They are psychopaths, unable to feel empathy for their fellow man. Enough is never enough. They always want more. Life is a game to them. They truly believe they can pull the right strings and continue to accumulate more riches. But they are wrong. They are blinded by their hubris. There are limits to growth based solely on debt and we’ve reached that limit. The world is crumbling under the weight of crippling debt created by these Wall Street psychopaths, while the corrupted bought off politicians try to shift the losses from the bankers who incurred them to the citizens who have already been fleeced. Nomi Prins captures the essence of our current situation:

“Today, the stock prices of the largest US banks are about as low as they were in the early part of 2009, not because of euro-contagion or Super-committee super-incompetence (a useless distraction anyway) but because of the ongoing transparency void surrounding the biggest banks amidst their central-bank-covered risks, and the political hot potato of how many emergency loans are required to keep them afloat at any given moment.  Because investors don’t know their true exposures, any more than in early 2009. Because US banks catalyzed the global crisis that is currently manifesting itself in Europe. Because there never was a separate US housing crisis and European debt crisis. Instead, there is a worldwide, systemic, unregulated, uncontained, rapacious need for the most powerful banks and financial institutions to leverage whatever could be leveraged in whatever forms it could be leveraged in. So, now we’re just barely in the second quarter of the game of thrones, where the big banks are the kings, the ECB, IMF and the Fed are the money supply, and the populations are the powerless serfs. Yeah, let’s play the ECB inflation game, while the world crumbles.”

Those in power are beginning to lose control. You can sense their desperation. Their propaganda is losing its impact as the pain for millions of Americans has become acute. The outrage and anger flaring across the country on a daily basis, reflected in the OWS movement, is just the beginning of a revolutionary period descending upon this nation. The existing social order will be swept away, but they will not go without a fight. They will use their control of the police, military and media to try and crush the coming rebellion.

 The Dream is Gone

“The more corrupt the state, the more numerous the laws.” – Tacitus, The Annals of Imperial Rome

In addition to controlling the monetary system and brainwashing the inhabitants with relentless propaganda, the ruling class has used their control of the political process to impose thousands of laws, statutes, rules, and regulations upon the citizens. Again, an apathetic, distracted, trusting populace has been easily convinced that more laws will make them safe and secure. They have willingly sacrificed liberty, freedom and self reliance for the façade of safety, security and protection. The overwhelming number of government rules and regulations are designed to control you and insure your compliance and obedience to those in power. In a non-corrupt society inhabited by citizens willing to honor their obligations, government’s function is to insure property rights and defend the country from foreign invaders. Citizens don’t need to be herded like sheep with threats of imprisonment to do what is right. We don’t need 90,000 pages of regulations telling us the difference between right and wrong.


There were 400 pages of Federal Tax rules when the 1% personal income tax was implemented in 1913. Did the 18,000% increase in tax rules since 1913 benefit the average American or did they benefit the 1% who hires the lobbyists to write the rules which are passed into law by the politicians who receive their campaign contributions from the 1%? Do you ever wonder why you pay more taxes than a billionaire Wall Street hedge fund manager? Do you think our tax system is designed to benefit billionaires and mega-corporations when corporations with billions of income pay little or no taxes? Complexity and confusion benefits those who can create and take advantage of the complexity and confusion. Corporations and special interests have used their wealth to bribe politicians to design loopholes, credits, and exemptions that benefit their interests. The corruption of the system is terminal.


“The mistake you make, don’t you see, is in thinking one can live in a corrupt society without being corrupt oneself. After all, what do you achieve by refusing to make money? You’re trying to behave as though one could stand right outside our economic system. But one can’t. One’s got to change the system, or one changes nothing. One can’t put things right in a hole-and-corner way, if you take my meaning.”George Orwell

The American people are paying the price for allowing a few evil men to gain control of our government. The American people cowered in fear as the 342 page Patriot Act was somehow written in a few weeks after 9/11, introduced in Congress on October 23, passed the House on October 24 with no debate, passed the Senate on October 25 with no debate, and signed into law on October 26 by George Bush. A law passed by the ruling elite that stripped Americans of their freedoms and liberties was passed using fear mongering false patriotism propaganda to squelch dissent and the American people had no say in the matter. The government has used fear to keep the American people under control. We now unquestioningly accept being molested in airports. We shrug as our intelligence agencies eavesdrop on our telephone conversations and emails without the need for a court order. It is now taken for granted that we imprison people without charging them with a crime and assassinate suspected terrorists in foreign countries with predator drones. Invading countries and going to war no longer requires a declaration of war by Congress as required by the Constitution. The State grows ever more powerful.

Therefore, it is no surprise that Americans sit idly by, watching their 52 inch HDTVs,  as young people across the country are beaten, pepper sprayed, shot with rubber bullets and tear gas, and scorned and ridiculed by corporate media pundits for exercising their free speech rights to peacefully protest our corrupt system. The American tradition of civil disobedience is considered domestic terrorism by those in authority. Our beloved protectors in the Orwellian named Department of Homeland Security write reports classifying Ron Paul supporters and returning Iraq veterans as potential terrorists. If the powers that be get their way, the internet will be locked down and controlled, as it poses a huge threat to their thought control endeavors. Freedom to think, learn, question and organize resistance is unacceptable in the eyes of the elite. The country has reached a tipping point. Will enough right thinking Americans stand up and fight to bring down this corrupt system, or will we be herded silently to slaughter. The truth is there is something terribly wrong in this country. We are facing a myriad of problems that will require courage and common sense to overcome. We need only look in the mirror to find the guilty party. It is time to stop letting fear dictate our actions. Conflict is coming to this country due to the evil sanctioned by our corrupt leaders and the upright men and women who will bear the burden of destroying that evil.

Our civilization has adopted the worst aspects of the two most famous dystopian novels in history – Orwell’s 1984 and Huxley’s Brave New World. The question is whether the population of this country is too far gone to recover. The answer to that question will determine whether the country chooses authoritarian dictatorship or a renewal of our founding principles. Aldous Huxley understood the three pillars of Western civilization fifty years ago and that their destruction would result in a collapse of our economic system:

“Armaments, universal debt, and planned obsolescence – those are the three pillars of Western prosperity. If war, waste, and moneylenders were abolished, you’d collapse. And while you people are over-consuming the rest of the world sinks more and more deeply into chronic disaster.”

The three pillars sustaining the American empire edifice of never ending war, ever accumulating debt and excessive consumerism are crumbling. The growing corruption and weight of un-payable debt have weakened the very foundation of our grand experiment. The existing structure will surely collapse. My entire adult life has tracked the decline of the American empire. I had become comfortably numb. I came to my senses and began to question all the Federal government/Wall Street/Corporate Media sponsored truths about eight years ago. Many others have also awoken and begun to challenge the false storylines dictated by those in power.

The young people leading the protests across this land are showing tremendous courage and a tenacity of spirit that has been dormant for decades among the lethargic, distracted, over-medicated public. Despite being subjected to government education conditioning, these young people have zeroed in on the enemy. They may not have all the solutions, but they have correctly identified the corrupt banking system as the central nervous system of this vampire squid sucking the life out of our nation. I will support any effort to shine a light on our crooked system. My three young sons deserve a chance at a better life than they will get under the thumb of this oligarchic criminal enterprise. As a child I caught a fleeting glimpse of the American Dream. I turned to look, but it was gone. I choose not to become comfortably numb. I choose to do whatever it will take to renew the opportunity for my sons to achieve the American Dream.

When I was a child
I caught a fleeting glimpse
Out of the corner of my eye
I turned to look but it was gone
I cannot put my finger on it now
The child is grown,
The dream is gone.
I have become comfortably numb.

Pink Floyd – Comfortably Numb



Credit Suisse Appraisal Fraud Cited by Investors

In the complaint, the plaintiffs’ lawyers contend that Credit Suisse and Cushman & Wakefield conspired by setting up a Cayman Islands branch to circumvent federal law on real estate appraisals.

Credit Suisse knew the resorts would most likely default under the weight of inflated values, which would allow the bank to take ownership as agent on behalf of the creditors, the suit contends.

Editor’s Note: Don’t overlook this piece. It points directly at the heart of the mortgage meltdown crisis. They knew how to inflate values for the purposes of inducing people to buy into financial instruments. That is what happened to homeowners and the investors who purchased mortgage-backed securities.
Read on. It also outlines the scheme by which the banks played “heads I win, tails you lose.” They structured the investments such that there could be no winner other than the bank. Again, exactly what happened to homeowners and investors. Create an investment you know is bad on both sides, and while the foreclosures come piling into courtrooms, quietly walk away with trillions of dollars leaving the investors and the homeowners with nothing.
January 5, 2010

Credit Suisse Is Accused of Defrauding Investors in 4 Resorts

HELENA, Mont. — Investors at four high-end resorts have filed a class-action lawsuit against Credit Suisse and the real estate services company Cushman & Wakefield, contending that they conspired to inflate the value of the properties so they could take them over.

The suit, outlined in an 84-page complaint filed Sunday in federal court in Boise, Idaho, details what it calls a sweeping loan-to-own scheme. Credit Suisse, according to the complaint, raked in huge fees on loans against the properties, which it syndicated and sold to hedge fund managers. If the resorts could not pay back the hundreds of millions of dollars in loans, based on the inflated values, Credit Suisse could either assume ownership as the agent for the creditors or sell the resorts.

The properties include the Yellowstone Club at Big Sky, Mont., which has multimillion-dollar “ski-in-ski-out” homes and private slopes. Its members include Bill Gates, the Microsoft chairman; the golfer Annika Sorenstam; former Vice President Dan Quayle; and Peter Chernin, former president and chief operating officer of the News Corporation.

In addition, developers and property owners at Lake Las Vegas in southern Nevada, the Tamarack Resort in central Idaho and Ginn sur Mer in the Bahamas are also party to the lawsuit.

The suit was brought on behalf of at least 3,000 investors by L. J. Gibson, who owns property at three of the resorts, and Beau Blixseth, the son and business partner of Timothy L. Blixseth, the developer who bought land near Yellowstone Park and developed the famous club. The involvement of 4,000 to 5,000 more litigants at 10 other resorts, including the Promontory Club in Utah, is pending.

A Credit Suisse spokesman, Duncan King, said, “We believe the suit to be without merit, and we will defend ourselves vigorously.”

Dwayne Doherty, a spokesman for Cushman & Wakefield, which provided appraisals of the property, echoed that statement. “The allegations are completely without merit, and we will defend ourselves vigorously,” he said.

The lead lawyer in the suit, Michael J. Flynn, of Rancho Santa Fe, Calif., said he could not comment until the judge allowed the class action to proceed.

The suit accuses the defendants of engaging in a sweeping conspiracy that focused on the developers of the resorts. Specifically, the complaint accuses Credit Suisse and Cushman & Wakefield of racketeering, breach of fiduciary duty, mail and wire fraud, money laundering and negligence. The suit describes Credit Suisse as an “international banking predator.”

In the complaint, the plaintiffs’ lawyers contend that Credit Suisse and Cushman & Wakefield conspired by setting up a Cayman Islands branch to circumvent federal law on real estate appraisals. The complaint also alleges that they inflated the value of the resorts and made millions of dollars in fees on loans against the properties. Credit Suisse knew the resorts would most likely default under the weight of inflated values, which would allow the bank to take ownership as agent on behalf of the creditors, the suit contends.

The Yellowstone Club borrowed $375 million from Credit Suisse in 2005. After the economy began to falter, Edra Blixseth, who won control of the property in a divorce from her husband, Timothy, was forced to declare bankruptcy in 2008. The property was sold to CrossHarbor Capital Partners in 2009 for $115 million, about a quarter of the estimated value of the club at the peak of the market, though Credit Suisse retained the right to collect the loan after it was sold.

In May, in the Blixseth bankruptcy case, Judge Ralph B. Kirscher of Federal Bankruptcy Court in Butte, Mont., wrote: “The naked greed in this case, combined with Credit Suisse’s complete disregard” for the developer and others, “shocks the conscience of this court.”

“While Credit Suisse’s new loan product resulted in enormous fees to Credit Suisse in 2005, it resulted in financial ruin for several residential resort communities,” he wrote. “Credit Suisse lined its pockets on the backs of the unsecured creditors.” The statement was written in a judge’s order that has since been vacated as part of a settlement agreement.

The complaint also contends that the money to finance loans came from a separate case in which Credit Suisse helped Iranian banks avoid United States sanctions by hiding profits. Credit Suisse paid the government $536 million in December to settle that case.

The suit seeks $8 billion in damages, which it says should be tripled as allowed under federal racketeering statutes.

The decline at many posh Western resorts has been stunning. Values have dropped precipitously, projects are unfinished and investor interest has waned. At the Tamarack Resort, 90 miles north of Boise, the tennis star Andre Agassi has abandoned plans to build a five-star hotel, unfinished buildings have been mothballed and Bank of America is asking a court to allow it to repossess the resort’s ski lifts. Homeowners who bought property and built homes are fuming.

In November, the new owners of the Yellowstone Club liquidated 13 tractor-trailer loads of antique furniture bought by the Blixseths, including a two-seat black walnut throne from a castle in Bavaria that Timothy Blixseth once planned to place in his 53,000-square-foot home. That home was never built.

States Commence the Inevitable “Tobacco” Litigation Against Banks — Arizona Leading

Sometime back in the early Spring and Summer of this year, I had a series of meetings with Arizona officials from the legislative and executive branch right up to the top, an Alabama Class Action firm of some repute, and telephone conversations with the U.S. Attorney, and several other class action attorneys researching “relater” and class actions.

I presented a plan to Arizona and others whereby if they would take certain actions, a vast sum of uncollected taxes, filing fees, late fees, and penalties could be assessed against the 100 or so of the main perpetrators of the largest criminal enterprise and financial coup d’etat in history.

In Arizona this would have meant recoupment of revenues that would have satisfied the current budget deficit in full and left a surplus in the State’s treasury. The same is true for many other states. The same is true for the Federal government. Foreclosing on the tax liens would have been easy — taking the mortgages claimed to be owned by the pretender lenders, restructuring them to fit with reality, re-funding many of the mortgages with money from local community banks and credit unions who were not playing the derivative securitization game, satisfying the tax liens, creating commerce with the local banks and putting wealth and real money back in the pockets of the homeowners whose pockets had been picked by Wall Street — money that would be spent in a real economy in each state enhancing the financial condition of ALL players, high and low, in the state and federal economy.

The people I met with are now using my plan, unfortunately without attribution, and preparing to commence lawsuits that will look very much like the tobacco litigation and settlements that took place years back. While this is definitely a step in the right direction, my opinion is that you opt out of any such class action, and that you pursue your own cause of action. Many of these people are and were in bed with the banks that caused this mess. It is my opinion that they will avoid the criminal part of the enterprise, avoid the tax revenues that are due to each state and end up with a friendly suit” that settles the “score” with pennies on the dollar leaving homeowners, cities, counties and states in the same awful position they presently find themselves.

The plan had as its premise that both the investors and the homeowners were sold financial products that qualified as securities. A security is ANYTHING (even a cow) that is sold to an investor under the pretext or promise that the investor will receive a passive return without participating in the business (like picking up cow-poop). For the pension funds, hedge funds and sovereign wealth funds the fact that a security was sold to them is easily understood. They bought a bond, whose indenture made it a hybrid security offering return of capital, and interest return, and ownership in the “underlying” (read that “non-existent”) pool of mortgages and notes. This by everyone’s account is a security.

For the homeowners the fact that they also bought a security seems to have been missed and some of the easiest remedies are being overlooked. The myth is that homeowners wanted a loan, applied for it and were approved based upon normal underwriting standards, perhaps with a few twists and turns. The reality is that they were targeted, sought out and sold by a vast chain of “bankruptcy remote” corporate shells fronting for the major players on Wall Street. This started with the sale to the investors of the mortgage backed bonds that also conveyed 100% of the ownership of the alleged asset in the alleged pool long before anyone applied for a loan. It ended with the sale of a financial product that was sold on the premise and promise of a passive return — increase the value of the property, refinance of the note periodically  so that they would continue to withdraw large sums of cash and avoid the crush of the payments that could become due when the loan reset to payments of unimaginable heights, many times far in excess of the income of the homeowner.

Both the investor and the homeowner were deceived in exactly the same way. They both bought securities that were misrepresented, intentionally to be of higher quality and higher value than was the case. We know it was intentional because of the presence of two undisclosed yield-spread premiums. The only way the investment banks and all the other intermediaries could stay out of trouble is if the loans failed and the credit default swaps paid off. This and only this was the source of repayment of principal to the Lenders (Investors): the loans HAD to fail because insurance doesn’t pay off on a performing or modified loan. They had to make absolutely sure the loans failed, and the dire consequences to the nation, the states, counties, cities and citizens be damned.

Now they want to screw you over AGAIN. Stick to your guns and your rights, the more litigation hits the judicial marketplace the more real your claims will appear. Once the Judge accepts your claims as possibly with merit, you will then be able to pursue evidentiary hearings, discovery, orders to compel and TRO’s based upon the contempt of court, violation of statute and other causes of action against the pretender lenders.

Soon the class actions and individual actions of the investors against the investment banks, servicers and other intermediary conduits will meet the class actions, individual actions and state actions for the homeowners/consumers and arrive at the obvious conclusion that if they cooperate rather than fear an internecine squabble, they end this problem once and for all — returning homeowners, cities, counties, states and the nation to true normalcy.


November 3, 2009

States Are Pondering Fraud Suits Against Banks


PHOENIX — Newly empowered by the Supreme Court, the attorneys general of several states hit hard by the housing collapse are exploring consumer fraud suits against major mortgage lenders.

Frustrated by the banks’ inability or unwillingness to stop an avalanche of foreclosures, the states are considering lawsuits over the creation and marketing of millions of bad loans as well as the dismal pace of mortgage modifications.

Such cases would have been impossible until recently, because federal regulators had exclusive oversight of national banks. But a 5-to-4 Supreme Court decision in June allowed the states to exercise their own supervision, giving them significant leverage.

“We tried to use the tool to be persuasive with the banks,” Arizona’s attorney general, Terry Goddard, said in an interview. “But their waterfall of excuses, the abysmal numbers of modifications, tells us persuasion is not working.”

As a result, he said, “we’re moving much closer to litigation.”

While statutes vary, those of every state prohibit fraud in consumer lending. The attorneys general are considering the theory that the banks essentially perpetrated a vast fraud on consumers by marketing exotic loans that would prove impossible to pay back.

During the boom, the banks earned short-term fee income from generating the loans, then quickly resold most of them to investors or to Fannie Mae and Freddie Mac, two government-sponsored housing agencies that eventually required costly taxpayer bailouts.

The Mortgage Bankers Association, a trade group, declined to comment on the possibility of state fraud lawsuits. A spokesman, John Mechem, warned that consumers would end up paying for any campaign of stepped-up legal activity.

“Lawsuits add to the patchwork of regulations that increases compliance costs for lenders, which in turn increases the cost of credit for borrowers,” Mr. Mechem said.

The states’ new power to sue banks arose from an effort in 2005 by Eliot Spitzer, then the New York attorney general, to discover whether several banks had violated the state’s fair-lending laws.

The banks balked at surrendering any information. The Clearing House Association, a consortium of national banks, and the federal Office of the Comptroller of the Currency filed suit, asserting the states had no authority over national lenders.

Mr. Spitzer’s successor, Andrew M. Cuomo, took up the battle. Lower courts agreed with the banks, but the Supreme Court, narrowly, did not.

Already, the states’ victory in Cuomo v. Clearing House is beginning to affect the legal landscape. “The handcuffs are off,” said Ann Graham, a professor of banking law at Texas Tech University. “The states can pursue justice now.”

In July, the Illinois attorney general, Lisa Madigan, filed a civil rights case accusing Wells Fargo of predatory lending. While the case was in the works for 18 months, Ms. Madigan said “it would have been much more difficult to bring” without the favorable Clearing House ruling.

The impact goes beyond housing issues. In West Virginia, a case brought by the state against Capital One, charging deceptive marketing of credit cards, was blocked by a judge in June 2008. The judge said the state did not have authority to pursue the case. After the Clearing House decision, West Virginia filed a request to reinstate the case.

Other states say they are just beginning to explore their new powers.

“We’re back on the field,” said Iowa’s attorney general, Tom Miller. “That’s really important. Certainly there will be some litigation.”

In Arizona, the number of state lawyers working on mortgage issues went from one to eight after Clearing House. “Before the court’s decision, we wouldn’t waste our time looking at national banks,” said Robert Zumoff, senior litigation counsel for Mr. Goddard.

The Clearing House ruling rolled back an expansion of federal authority that began more than five years ago. In January 2004, the Comptroller of the Currency, the agency responsible for regulating national banks, issued two rule changes that had a far-reaching effect on the ability of state banking regulators and law enforcement to pursue violations of state law by large banks and their subsidiaries.

The rule changes broadened the protections afforded to national banks against prosecution for violations of state civil rights and predatory lending laws and other banking statutes. In a statement announcing the regulations, then-comptroller John D. Hawke Jr. said that his agency would take the lead on preventing lending abuses by the banks.

“Predatory lending is a very significant problem in many American communities, but there is scant evidence that regulated banks are engaged in abusive or predatory practices,” Mr. Hawke said then. “Our regulation will ensure that predatory lending does not gain a foothold in the national banking system.”

In the years that followed, as the housing market roared to a peak and then began to plunge, national banks repeatedly and successfully cited the new regulations to turn back lawsuits alleging violations of predatory lending statutes and other laws by state attorneys general and banking regulators.

At other times, they merely switched their charters. When Illinois first started investigating the branches of Wells Fargo Financial Illinois for predatory lending in the spring of 2008, the branches operated under a state charter.

Initially, Wells responded to the state’s subpoena. But on July 26, 2008, the branches were put under the control of Wells Fargo Bank, which is nationally chartered. Wells promptly informed the state of this new situation and ceased cooperation.

With such maneuvers, Ms. Madigan said, “it was much easier for people in the banking industry or any other industry to hide their misconduct.”

While the attorneys general do not say they could have prevented all the shady deals that characterized the housing market at its worst, they believe they might have been able to stop enough of them to limit the scale of the crash.

“For the better part of eight years, the federal regulators were not being aggressive, and at the same time we were disabled,” said the Ohio attorney general, Richard Cordray. “There was nothing holding back irrational and irresponsible practices.”

The Clearing House decision was not a full-fledged victory for the states. The decision limits their subpoena power. While it is now easier to bring cases in court, it might be harder to develop them in the first place.

If the banking industry has its way, the victory will not be a permanent one.

In Washington, the banks are lobbying hard to try to block the states from becoming more aggressive. Lobbyists have urged lawmakers to pre-empt state rules that are more restrictive than federal laws. The Obama administration has opposed those changes.

Two weeks ago, the House Financial Services Committee voted to give the federal government the power to block states from regulating large national banks in some circumstances. Under the compromise, the Comptroller of the Currency would be able to override the states, but only after finding that the state law significantly interfered with federal regulatory policies.

In an interview in his offices here, Mr. Goddard and his top aides spoke repeatedly of their frustrations in dealing with the banks.

After the Clearing House decision, he said, there was “a virtual parade of national officers of national banks” coming through, ostensibly eager to find a common ground to help stanch foreclosures that are running as high as 7,000 a month in Arizona.

But Mr. Goddard, a former mayor of Phoenix, said the lenders were often unable or unwilling to provide him with elementary information, including how many and what kind of loans they have in the state.

The banks have been imploring Mr. Goddard to tell homeowners in default to get in touch with them, opening a dialogue. So he has. But the homeowners say they call and get no response.

“People call and get a runaround,” Mr. Goddard said. “The paperwork gets lost. It’s time to stop this absurd dance.”

He would rather have a solution to the foreclosure problem today than a court victory in three years. But since he is not getting a prompt solution, that leaves only the hope of legal action, in his view. Any case will most likely be a major effort involving multiple states.

“Maybe the banks think we don’t have the gumption to pull the trigger,” Mr. Goddard said.

Stephen Labaton contributed reporting.

Investors and Borrowers Unite!

if you peal away the apparent differences you find that there is an inherent joinder of interest investors and borrowers: both were deceived and both lost nearly everything they had by purchasing a financial product that was misrepresented — artificially inflated as to quality and value. And both were subject to the same MO — using third parties to create the appearance of propriety and conformity with the applicable laws, while the real purpose was simply to take the money and run.

Thanks to Dan Edstrom: This is a comment bringing to our attention the lawsuit of the real lenders (the investors) against the intermediaries, pretender lenders and conduits in the securitization process. It of course looks very familiar. They are saying that they were misinformed, led astray and lost money. What is not stated is that they were “qualified investors” who because of their size and sophistication are deemed to have greater access to information and a greater ability to assess risk on their own. And even they got duped. So our point is that the homeowner is the LEAST sophisticated player as a party in interest. Thus the homeowner should be the one to suffer the least amount of damage. As is usually the case with American politics, the current situation is standing on its head. The homeowner generally doesn’t have a clue as to what is really going on with his “loan product,” and even if he had some idea, wouldn’t know what to do with the information. And Yet the brunt of this crisis is falling on the people who were MOST vulnerable.

My solution is for attorneys, particularly class action attorneys, to put their differences aside. One might argue that the investors, as real lenders have an interest that conflicts with the interest of borrowers of their money. Conversely one might argue that borrowers might have claims against the real lenders whose money set this whole process in motion, and counterclaims and affirmative defenses in foreclosure or mortgage litigation (whether the loan is in distress, non-performing, or otherwise). But if you peal away the apparent differences you find that there is an inherent joinder of interest investors and borrowers: both were deceived and both lost nearly everything they had by purchasing a financial product that was misrepresented — artificially inflated as to quality and value. And both were subject to the same MO — using third parties to create the appearance of propriety and conformity with the applicable laws, while the real purpose was simply to take the money and run.

Only the real lenders can actually re-structure these loans. It is true, when all is said and done, that the restructuring alone will only provide them with cover on 10%-35% of their investment. But that is geometrically more than the write-downs currently being imposed by Wall Street and they lay off the risk onto the investors and the taxpayer. But the solution doesn’t end there. A joint claim for damages against the intermediaries who obviously knew they were creating loans to fail so that they could collect on credit default swaps and higher service, fees, would net both the investor and the borrower a hefty judgment. The judgment would either be paid or it would levied against assets of the the losing party(ies). Those assets would include mortgages claimed to be owned by the pretender lenders, unopposed by other borrowers. Hence the early bird here would be able to recover as much as 100% or more of the investment in mortgage backed securities and play a societal role in re-structuring loan products that were brainless and predatory in their conception and execution.

So take a look at the entry below and go looking for other lawsuits from investors against the underwriters who sold mortgage backed securities. They probably have done a lot of your discovery for you. And you might end up with a deal in which the borrowers and the investors come into the same courtroom crying foul against the players in the middle. Then, and only then will they have no place to hide.

From Dan Edstrom: Things are changing indeed! Check out this investor lawsuit that is the other side of the coin to the borrowers lawsuits against the “pretender lenders”. This is huge and goes to the heart of everything Neil Garfield has been saying. Notice they are not going after the borrowers, but the REAL cause of the failed mortgages.

The complaint alleges that the Registration Statements omitted and/or misrepresented the fact that the sellers of the underlying mortgages to JP Morgan Acceptance were issuing many of the mortgage loans to borrowers who: (i) did not meet the prudent or maximum debt-to-income ratio purportedly required by the lender; (ii) did not provide adequate documentation to support the income and assets required for the lenders to approve and fund the mortgage loans pursuant to the lenders’ own guidelines; (iii) were steered to stated income/asset and low documentation mortgage loans by lenders, lenders’ correspondents or lenders’ agents, such as mortgage brokers, because the borrowers could not qualify for mortgage loans that required full documentation; and (iv) did not have the income required by the lenders’ own guidelines to afford the required mortgage payments which resulted in a mismatch between the amount loaned to the borrower and the capacity of the borrower.

According to the complaint, by the summer of 2007, the amount of uncollectible mortgage loans securing the Certificates began to be revealed to the public. To avoid scrutiny for their own involvement in the sale of the Certificates, the Rating Agencies began to put negative watch labels on many Certificate classes, ultimately downgrading many. The delinquency and foreclosure rates of the mortgage loans securing the Certificates has grown both faster and in greater quantity than what would be expected for mortgage loans of the types described in the Prospectus Supplements. As an additional result, the Certificates are no longer marketable at prices anywhere near the price paid by plaintiffs and the Class and the holders of the Certificates are exposed to much more risk with respect to both the timing and absolute cash flow to be received than the Registration Statements/Prospectus Supplements represented. [Editor’s Note: Same as the houses]

New Shockwaves From Courts and Accounting Board

Wall Street was not responding to legitimate consumer demand, it was creating an artificial demand simply to create mortgage product to feed its securitization machine and generate big fees for itself.

Comment from Reader:
“MERS and the Pretender Lenders are seeking the courts to credit them with a touchdown despite the obvious fact that they do not and never did have possession of the football. Challenge flag anyone?”

The Next Financial Crisis Hits Wall Street, as Judges Start Nixing Foreclosures


The financial tsunami unleashed by Wall Street’s esurient alchemy of spinning toxic home mortgages into triple-A bonds, a process known as securitization, has set off its second round of financial tremors.

After leaving mortgage investors, bank shareholders, and pension fiduciaries awash in losses and a large chunk of Wall Street feeding at the public trough, the full threat of this vast securitization machine and its unseen masters who push the levers behind a tightly drawn curtain is playing out in courtrooms across America.

Three plain talking judges, in state courts in Massachusetts and Kansas, and a Federal Court in Ohio, have drilled down to the “straw man” aspect of securitization. The judges’ decisions have raised serious questions as to the legality of hundreds of thousands of foreclosures that have transpired as well as the legal standing of the subsequent purchasers of those homes, who are more and more frequently the Wall Street banks themselves.

Adding to the chaos, the Financial Accounting Standards Board (FASB) has made rule changes that will force hundreds of billions of dollars of these securitizations back onto the Wall Street banks balance sheets, necessitating the need to raise capital just as the unseemly courtroom dramas are playing out.

The problems grew out of the steps required to structure a mortgage securitization. In order to meet the test of an arm’s length transaction, pass muster with regulators, conform to accounting rules and to qualify as an actual sale of the securities in order to be removed from the bank’s balance sheet, the mortgages get transferred a number of times before being sold to investors. Typically, the original lender [Editor’s Note: Read that as “originating lender” or “pretender lender”] (or a sponsor who has purchased the mortgages in the secondary market) will transfer the mortgages to a limited purpose entity called a depositor. The depositor will then transfer the mortgages to a trust which sells certificates to investors based on the various risk-rated tranches of the mortgage pool. (Theoretically, the lower rated tranches were to absorb the losses of defaults first with the top triple-A tiers being safe. In reality, many of the triple-A tiers have received ratings downgrades along with all the other tranches.)

Because of the expense, time and paperwork it would take to record each of the assignments of the thousands of mortgages in each securitization, Wall Street firms decided to just issue blank mortgage assignments all along the channel of transfers, skipping the actual physical recording of the mortgage at the county registry of deeds.

Astonishingly, representatives for the trusts have been foreclosing on homes across the country, evicting the families, then auctioning the homes, without a proper paper trail on the mortgage assignments or proof that they had legal standing. In some cases, the courts have allowed the representatives to foreclose and evict despite their admission that the original mortgage note is lost. (This raises the question as to whether these mortgage notes are really lost or might have been fraudulently used in multiple securitizations, a concern raised by some Wall Street veterans.)

But, at last, some astute judges have done more than take a cursory look and render a shrug. In a decision handed down on October 14, 2009, Judge Keith Long of the Massachusetts Land Court wrote:

The blank mortgage assignments they possessed transferred Massachusetts, a mortgage is a conveyance of land. Nothing is conveyed unless and until it is validly conveyed. The various agreements between the securitization entities stating that each had a right to an assignment of the mortgage are not themselves an assignment and they are certainly not in recordable form…The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s. Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature. To accept the plaintiffs’ arguments is to allow them to take someone’s home without any demonstrable right to do so, based upon the assumption that they ultimately will be able to show that they have that right and the further assumption that potential bidders will be undeterred by the lack of a demonstrable legal foundation for the sale and will nonetheless bid full value in the expectation that that foundation will ultimately be produced, even if it takes a year or more. The law recognizes the troubling nature of these assumptions, the harm caused if those assumptions prove erroneous, and commands otherwise.” [Italic emphasis in original.] (U.S. Bank National Association v. Ibanez/Wells Fargo v. Larace)

A month and a half before, on August 28, 2009, Judge Eric S. Rosen of the Kansas Supreme Court took an intensive look at a “straw man” some Wall Street firms had set up to handle the dirty work of foreclosure and serve as the “nominee” as the mortgages flipped between the various entities. Called MERS (Mortgage Electronic Registration Systems, Inc.) it’s a bankruptcy-remote subsidiary of MERSCORP, which in turn is owned by units of Citigroup, JPMorgan Chase, Bank of America, the Mortgage Bankers Association and assorted mortgage and title companies. According to the MERSCORP web site, these “shareholders played a critical role in the development of MERS. Through their capital support, MERS was able to fund expenses related to development and initial start-up.”

In recent years, MERS has become less of an electronic registration system and more of a serial defendant in courts across the land. In a May 2009 document titled “The Building Blocks of MERS,” the company concedes that “Recently there has been a wave of lawsuits filed by homeowners facing foreclosure which challenge MERS standing…” and then proceeds over the next 30 pages to describe the lawsuits state by state, putting a decidedly optimistic spin on the situation.

MERS doesn’t have a big roster of employees or lawyers running around the country foreclosing and defending itself in lawsuits. It simply deputizes employees of the banks and mortgage companies that use it as a nominee. It calls these deputies a “certifying officer.” Here’s how they explain this on their web site: “A certifying officer is an officer of the Member [mortgage company or bank] who is appointed a MERS officer by the Corporate Secretary of MERS by the issuance of a MERS Corporate Resolution. The Resolution authorizes the certifying officer to execute documents as a MERS officer.”

Kansas Supreme Court Judge Rosen wasn’t buying MERS’ story. In fact, Wall Street was probably not too happy to land before Judge Rosen. In January 2002, Judge Rosen had received the Martin Luther King “Living the Dream” Humanitarian Award; he previously served as Associate General Counsel for the Kansas Securities Commissioner, and as Assistant District Attorney in Shawnee County, Kansas. Judge Rosen wrote:

“The relationship that MERS has to Sovereign [Bank] is more akin to that of a straw man than to a party possessing all the rights given a buyer… What meaning is this court to attach to MERS’s designation as nominee for Millennia [Mortgage Corp.]? The parties appear to have defined the word in much the same way that the blind men of Indian legend described an elephant — their description depended on which part they were touching at any given time. Counsel for Sovereign stated to the trial court that MERS holds the mortgage ‘in street name, if you will, and our client the bank and other banks transfer these mortgages and rely on MERS to provide them with notice of foreclosures and what not.’ ” (Landmark National Bank v. Boyd A. Kesler)

Lawyers for homeowners see a darker agenda to MERS. Timothy McCandless, a California lawyer, wrote on his blog as follows:

“…all across the country, MERS now brings foreclosure proceedings in its own name — even though it is not the financial party in interest. This is problematic because MERS is not prepared for or equipped to provide responses to consumers’ discovery requests with respect to predatory lending claims and defenses. In effect, the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer’s home. While up against the wall of foreclosure, consumers that try to assert predatory lending defenses are often forced to join the party — usually an investment trust — that actually will benefit from the foreclosure. As a simple matter of logistics this can be difficult, since the investment trust is even more faceless and seemingly innocent than MERS itself. The investment trust has no customer service personnel and has probably not even retained counsel. Inquiries to the trustee — if it can be identified — are typically referred to the servicer, who will then direct counsel back to MERS. This pattern of non-response gives the securitization conduit significant leverage in forcing consumers out of their homes. The prospect of waging a protracted discovery battle with all of these well funded parties in hopes of uncovering evidence of predatory lending can be too daunting even for those victims who know such evidence exists. So imposing is this opaque corporate wall, that in a ‘vast’ number of foreclosures, MERS actually succeeds in foreclosing without producing the original note — the legal sine qua non of foreclosure — much less documentation that could support predatory lending defenses.”

One of the first judges to hand Wall Street a serious slap down was Christopher A. Boyko of U.S. District Court in the Northern District of Ohio. In an opinion dated October 31, 2007, Judge Boyko dismissed 14 foreclosures that had been brought on behalf of investors in securitizations. Judge Boyko delivered the following harsh rebuke in a footnote:

“Plaintiff’s ‘Judge, you just don’t understand how things work,’ argument reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process…There is no doubt every decision made by a financial institution in the foreclosure is driven by money. And the legal work which flows from winning the financial institution’s favor is highly lucrative. There is nothing improper or wrong with financial institutions or law firms making a profit – to the contrary, they should be rewarded for sound business and legal practices. However, unchallenged by underfinanced opponents, the institutions worry less about jurisdictional requirements and more about maximizing returns. Unlike the focus of financial institutions, the federal courts must act as gatekeepers…” (In Re Foreclosure Cases)

While the illegal foreclosure filings, investor lawsuits over securitization improprieties, and predatory lending challenges play out in courts across the country, a few sentences buried deep in Citigroup’s 10Q filing for the quarter ended June 30, 2009 signals that we’ve seen merely a few warts on the head of the securitization monster thus far and the massive torso remains well hidden in murky water.

Citigroup tells us that the Financial Accounting Standards Board (FASB) has issued a new rule, SFAS No. 166, and this is going to have a significant impact on Citigroup’s Consolidated Financial Statements “as the Company will lose sales treatment for certain assets previously sold to QSPEs [Qualifying Special Purpose Entities], as well as for certain future sales, and for certain transfers of portions of assets that do not meet the definition of participating interests. Just when might we expect this new land mine to go off? “SFAS 166 is effective for fiscal years that begin after November 15, 2009.” There’s more bad news. The FASB has also issued SFAS 167 and, long story short, more of those off balance sheet assets are going to move back onto Citi’s books.

Bottom line says Citi:

“… the cumulative effect of adopting these new accounting standards as of January 1, 2010, based on financial information as of June 30, 2009, would result in an estimated aggregate after-tax charge to Retained earnings of approximately $8.3 billion, reflecting the net effect of an overall pretax charge to Retained earnings (primarily relating to the establishment of loan loss reserves and the reversal of residual interests held) of approximately $13.3 billion and the recognition of related deferred tax assets amounting to approximately $5.0 billion….” [Emphasis in original.]

I’m trying to imagine how the American taxpayer is going to be asked to put more money into Citigroup as it continues to bleed into infinity.

Citigroup is far from alone in financial hits that will be coming from the Qualifying Special Purpose Entities. Regulators are receiving letters from Citigroup and other Wall Street firms pressing hard to rethink when this change will take effect.

Putting aside for the moment the massive predatory lending frauds bundled into mortgage securitizations, inadequate debate has occurred on whether securitization of home mortgages (other than those of government sponsored enterprises) should be resuscitated or allowed to die a welcome death. If we understand the true function of Wall Street, to efficiently allocate capital, the answer must be a resounding no to this racket.

Trillions of dollars of bundled home mortgage loans and derivative side bets tied to those loans were being manufactured by Wall Street without any one asking the basic question: why is all this capital being invested in a dormant structure? Houses don’t think and innovate. Houses don’t spawn new technologies, patents, new industries. Houses don’t create the jobs of tomorrow.

Also, by acting as wholesale lenders to the unscrupulous mortgage firms (some in house at Wall Street firms), Wall Street was not responding to legitimate consumer demand, it was creating an artificial demand simply to create mortgage product to feed its securitization machine and generate big fees for itself. Now we see the aftermath of that inefficient allocation of capital: a massive glut of condos and homes pulling down asset prices in neighborhoods as well as in those ill-conceived securitizations whose triple-A ratings have been downgraded to junk.

There’s no doubt that one of the contributing factors to the depression of the 30s and the intractable unemployment today stem from a massive misallocation of capital to both bad ideas and fraud. Today’s Wall Street, it turns out, is just another straw man for a rigged wealth transfer system.

Pam Martens worked on Wall Street for 21 years; she has no security position, long or short, in any company mentioned in this article other than that which the U.S. Treasury has thrust upon her and fellow Americans involuntarily through TARP. She writes on public interest issues from New Hampshire. She can be reached at

Wisdom Succumbs to Wise Guys

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.
October 21, 2009 NY Times

Volcker Fails to Sell a Bank Strategy

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.

Wells Fargo, Rels Conspired to Inflate Home Appraisals

From Jose Semidey: [Editor’s Note: This is a major item that affects the core of both claims and defenses against the lenders. Any party seeking to foreclose is “admitting” that they are the holder in due course on the note or that they are the authorized agent for the HDC. Inflated appraisals greatly affect the APR and support causes of action for TILA violations and usury. They also increase the likelihood that the loan will go into default and inflate the loan amount and thus the payments. The increase in payments, particularly when they reset, greatly increases the probability (certainty in many cases) that the EXPECTED LIFE OF THE LOAN is not 30 years but rather whenever the reset is scheduled. So if the reset is set in one year and the amount of the payment is exceeds the income of the borrower you KNOW the life of the loan is only one year. Amortize ALL expenses of the loan over ONE YEAR instead of thirty and see what you get. With the amount of the inflated appraisal added to the cost of the loan, the actual APR will sometimes exceed 100% — unconscionable and illegal even in states that permit payday loans.]

Press Release : Wells Fargo Appraisers

Class Action Says Wells Fargo, Rels Illegally Strong-arm Appraisers

April 14, 2009

SEATTLE – Today two real-estate appraisers filed a proposed class-action lawsuit against Wells Fargo (NYSE: WFC) and Rels Valuation, an appraisal management service, claiming the two organizations pressured and intimidated appraisers to deliver artificially inflated home appraisal values to help close loans and increase profits.

The suit, filed in U.S. District Court in San Francisco under the Racketeering Influenced and Corrupt Practices Act (RICO), claims that beginning in 2004 Wells Fargo and Rels colluded to punish appraisers who refused to inflate appraisals by denying them future appraisal work.

Rels is one of the largest appraisal management companies in the country, acting as an intermediary between banks and appraisers. Appraisers, by law, are intended to be independent and autonomous from the influences of others, but according to the complaint are compelled to do the bidding of Rels, and through them Wells Fargo.

“We plan to show Rels effectively tells the appraisers what they want to see in the valuation, and if they don’t deliver, they are locked out of future work,” said Steve Berman, the attorney representing the plaintiffs and managing partner of Hagens Berman Sobol Shapiro.

According to Berman, Rels provides the appraiser with a predetermined figure called the ‘Borrower Estimated Value’ and expects the appraisers to deliver reports with values exceeding the Rels-supplied figures.

“We heard from appraisers who say that after providing bona-fide appraisals that come in below what Rels wants, the company contacts them and strongly suggests they reevaluate the property,” Berman noted. “If an appraiser refuses, we contend Rels simply refuses to use them again.”

Don Pearsall and Timothy Savage both claim Wells Fargo tried to strong-arm each of them into inflating appraisal values, violating the laws and regulations of the Uniform Standards of Professional Appraisal Practice (USPAP). The USPAP rules clearly state an appraiser must not accept an assignment that includes the reporting of predetermined opinions and conclusions – something the lawsuit claims Rels does on a regular basis.

According to the compliant, Rels and Wells Fargo have given appraisers predetermined comparable properties to base appraisals, further compromising the appraisers’ independence.

Plaintiff Pearsall, a long-time appraiser, completed an appraisal for Wells Fargo and Rels in 2007. After submitting his report, Rels asked that he alter the report to reflect the company’s desired views on the property.

After refusing, the suit claims Rels blacklisted Pearsall, stripping him of a large portion of his income.

Timothy Savage, an appraiser in Vail, Colorado, also submitted two appraisals to Rels in 2009, which the company rejected, asking him to increase the appraisal values. After refusing, Savage received a letter from Rels informing him that he is no longer included on the approved panel of appraisers, the suit claims.

“We’ve heard from appraisers across the country sharing similar stories – bullied into inflating prices and blacklisted when refusing,” Berman added. “Apparently the treatment that both Tim and Don experienced is the same for hundreds, if not thousands of appraisers.”

The lawsuit seeks to represent all state-licensed or state-approved appraisers nationwide who’ve been removed as an approved appraiser by Wells Fargo or Rels Valuation. The suit asks for treble damages and is the first lawsuit filed on behalf of appraisers against Wells Fargo and Rels.

You can learn more about this case by visiting If you’ve performed appraisals for Wells Fargo or Rels Valuation and been blacklisted, you can also contact attorneys at

About Hagens Berman Sobol Shapiro
Hagens Berman Sobol Shapiro is based in Seattle with offices in Chicago, Boston, Los Angeles, Phoenix, San Francisco and New York. Since the firm’s founding in 1993, it has developed a nationally recognized practice in class action and complex litigation. Among recent successes, HBSS has negotiated a pending $300 million settlement as lead counsel in the DRAM memory antitrust litigation; a $340 million recovery on behalf of Enron employees which is awaiting distribution; a $150 million settlement involving charges of illegally inflated charges for the drug Lupron, and served as co-counsel on the Visa/Mastercard litigation which resulted in a $3 billion settlement, the largest anti-trust settlement to date. HBSS also served as counsel in a $850 million settlement in the Washington Public Power Supply litigation and represented Washington and 12 other states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. For a complete listing of HBSS cases, visit

Jose L. Semidey
Senior Mortgage Analyst
Mortgage Analysis and Consulting
Rescuing the truth in lending

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Suite 230
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703-442-8828 Office
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Those $18 billion in bonuses were earned from hidden profits: The Joke is on Us

Obama is of course correct in his outrage. Taking hundreds of billions of dollars from the taxpayers to cover the appearances of catastrophic losses and then paying bonuses for good management is over the top by any standards. But neither he nor the media is correct in assuming that that the bonuses were not in fact earned by the people who defrauded us in the first place with the mortgage meltdown. Those bonuses were paid BECAUSE PROFIT WAS GENERATED even if it wasn’t completely reported. Nobody seems to get it — the key acronym is OPM (other people’s money). Wall Street did not lose any money, they made record profits, kept it, took taxpayer money too and now they are in the process of also taking the properties of unsuspecting homeowners who still don’t understand what hit them and how it was done.

At no time did the investment bankers have their own capital at risk during the selling of the mortgage backed securities. They were ALWAYS using the money of other people (investors). Every time money moves, financial insitutions make money. In this case both their existence and their profits and fees were and remain largely undisclosed. Starting with the “forward sale” (i.e., selling what you don’t have “yet”) of certificates of mortgage backed securities at a nominal rate of interest that could never be paid and filling in the void with either non-existent mortgage obligations or deals in which the actual expected life of the “loan” was as little as a month and at most five years, investment bankers made astonishing profits PLUS fees. Selling a note with a nominal interest rate of 18% to an investor looking for a 6% return enabled investment bankers to receive $900,000 on a “loan” that was funded for $300,000. You don’t really think they went wild selling these things because they were making money on volume with basis points as fees do you?

And at the “pretender lender” level where a financial institution pretended to be the underwriter of a home loan and where the committees to verify viability, value and income were disbanded, they put on a good face because they were being paid for the renting of their charter to people and companies who were operating as bankers without even being seen, much less regulated. So the “pretender lender” would charge all the “normal” fees for a sub-sub prime loan into which the borrower was steered when they qualified for a conventional loan, PLUS an undisclosed 2.5% fee for renting their charter out to an undisclosed third party. Now Countrywide and others are telling borrowers that they won’t reveal the true name of the lender because the information is confidential. Why? Because when the borrower and investor get together they will have proof positive of  identical fraud on both ends of this game. You didn’t think that these lenders were advertising for borrowers because they were making a few hundred dollars on each loan plus interest, did you? NO, they were never at risk because they were using OPM and they got paid $30,000 on that $300,000 loan funding.

Did you think home prices went up because of increased demand for housing? Take a look around you. We have enough inventory to satisfy demand for the next three or four years without another stick being nailed. Home prices went up because Wall Street needed to move money — lots of it — $13 trillion to be exact. And they had a problem. They had run out of borrowers, buyers, and homeowners seeking refinancing. So they invented them and inflated the “price” or “value” of the house to satisfy the demand from Wall Street for $100 billion per month in paper.

It isn’t that the bonuses were unearned or that actual losses were incurred. The story here is that they didn’t lose money and did earn the bonuses. It was everyone else who lost money. And yet we continue to throw money at the “infrastructure” (translation: big institutions) for the same stupid WMD reasons that got us into Iraq. There are 6,000 depository bank institutions in this country alone, most of whom are NOT in trouble. Most community bankers and loan managers at credit unions didn’t play the mortgage meltdown game. Without a penny of “bailout” they could have filled the void created by these giant thieves and credit would be flowing. There is nothing new in that model. Every time a financial institution buckles, the FDIC, OCC, FED or OTS steps in, breaks them up and distributes the assets with value to healthy institutions. The only reason that didn’t happen  this time is that government was in bed with the regulators.

Credit will flow when the world has confidence in the United States economy and financial system. A fraud has occurred under our watch (all of us). The system can’t correct until the fraud is corrected, the damages are measured and a plan is in place that will actually (not cosmetically) put people back in the position they were in before the fraud occurred. That means the mortgages must fall, the notes must be reduced (or eliminated) and the investors must have a GOOD bank representing them that will participate in equity appreciation in the homes, not a BAD bank that will apply lipstick to a pig. Right now it is the mortgage servicers and other middlemen who never put up a dime who are getting and keeping the houses and proceeds of foreclosure sales. They are laughing all the way to their own bank.

Putting homeowners back in the black will provide a greater stimulus than any plans being offered today, although the current stimulus packages are badly needed for us to compete globally. Putting investors in a position where they can recover some or all of their investment will inject confidence into limping marketplace. And putting the thieves in jail will tell the world, we recognize and correct our mistakes — giving us a chance to regain or re-earn some moral high ground.

The home you save could be your own: MSNBC Story by Mike Stuckey Quoting Living Lies Editor Neil Garfield

The home you save could be your own
In foreclosure crisis, more Americans representing themselves in court
By Mike Stuckey
Senior news editor
updated 4:25 a.m. MT, Wed., Jan. 28, 2009
Luis Molina is not a lawyer and he has never played one on TV.

But that didn’t stop him from putting on his best suit, marching into a Miami courtroom this month and going up against an attorney with 30 years of experience to stop a foreclosure proceeding against his family’s home. Molina did such a good job of representing himself that the judge in the case thought he was a lawyer and punctuated his ruling in Molina’s favor by tearing up the other side’s motion for summary judgment and throwing it over his shoulder.

“I felt like a million dollars,” Molina told, describing his day in Judge David C. Miller’s courtroom in Florida’s 11th Judicial Circuit Court. “I felt like if there was anything in my life that I had done correctly, it had to be that. Every single lawyer after the fight came over and shook my hand.”

Molina, a former car salesman and deli owner whose formal education ended with a diploma from Teaneck High School in New Jersey, is among a growing number of American homeowners representing themselves as what are called “pro se” — a Latin phrase meaning “for oneself” — litigants in foreclosure proceedings.

There’s no way to know how many pro se foreclosure cases are currently moving through U.S. courts, but anecdotal accounts from lawyers and others indicate the number is growing along with the nation’s mortgage crisis, which has reached unprecedented proportions.

A myriad of issues
Along with trained and licensed attorneys, pro se litigants are forcing courts to look at myriad foreclosure issues that go far beyond whether or not a loan is being properly repaid, including allegations of predatory lending practices and the fundamental question of who actually has the right to foreclose.

“There’s a surge in the number of pro se litigants,” said Arizona attorney Neil F. Garfield, who runs a Web site called “Living Lies” that offers information to homeowners facing foreclosure and lawyers defending foreclosure lawsuits. He said traffic to his Web site had increased from 1,000 hits a month at this time last year to more than 67,000 last month.

Eric Halperin, director of the Center for Responsible Lending in Washington, D.C., said, “I haven’t done any statistical study to know whether there’s an increase, but it makes sense given that there’s a lot more foreclosures.”

More than 2.3 million U.S. properties were involved in foreclosure proceedings last year, almost double the number in 2007 and more than triple the 2006 volume, according to RealtyTrac, an online foreclosure information service. Even more foreclosures are expected this year. While many occur in the states that normally handle the process outside court, including California and Arizona, many occur in the 20 states where foreclosure is only accomplished via a lawsuit, as in New York and Florida.

Driven by finances
The reasons that foreclosure defendants end up representing themselves are usually financial. “A lot of lawyers out there have been extremely reluctant to take homeowners’ cases,” said Garfield. “They figure if the person can’t pay their mortgage, they can’t pay their lawyer.”

Even when homeowners in foreclosure can show errors by their lenders and mortgage servicers, many lawyers still aren’t interested in representing them, according to Halperin.

“A lot of the time, what you’re getting is loan forgiveness,” he said. “There’s no cash for you to take a piece of. It’s challenging. … I don’t think there’s an adequate number of attorneys who both are trained and will take foreclosure cases.”

Molina and other pro se litigants told that when they found attorneys willing to take their cases, the lawyers didn’t know a lot of basic information about foreclosure defense that is available on Web sites like Garfield’s “Living Lies” and “Mortgage Servicing Fraud.”

Mario Kenny, another Miami resident who is fighting foreclosure pro se and writing about his experience online, said the cost of professional help is too high. “A lawyer wants too much money — … $5,000, $10,000, $15,000,” he said.

Besides, Kenny said, the legal profession is doing more to aid foreclosures than avert them.

“They are stopping us and getting in our way,” he charged, referring to what he described as a warning by someone with the Florida Bar Association that advice on his Web site bordered on practicing law without a license. “I don’t practice law, I don’t have any clients, I don’t charge anybody,” said Kenny, a 52-year-old fashion designer.

The bar association, which regulates the state’s 85,000 lawyers, had no record of Kenny being contacted or investigated, but said it could not rule that out. Lori Holcomb, the bar’s counsel for unlicensed practice of law, said the bar is much more likely to investigate “companies that have gone into business to do this, not individuals who say, ‘Hey, I’ve done my foreclosure, let me help you with yours.’”

Experts advise: Get a lawyer
The bar and other experts contacted for this story strongly advised any property owner facing foreclosure to consult an attorney.

“It’s better to be pro se than not to do anything at all,” said Garfield, the Arizona attorney. “But it’s better to have a lawyer than be pro se. A lot of this stuff requires knowledge of motion practice, civil procedure, evidence, proof that the average person never had a reason to learn.”

“Representing yourself should really be a last resort,” agreed Halperin of the Center for Responsible Lending, a nonprofit organization with a mission of protecting U.S. homeowners  from unscrupulous lenders. While legal help for embattled homeowners is scarce, “There are resources out there,” he said. Many bar associations, for instance, match up clients with volunteer lawyers, and his group has formed the Institute for Foreclosure Assistance, which recently received a $15 million grant to provide legal aid to homeowners.

Thanks but no thanks, said Luis Molina. He said he stopped making payments on a $416,000 home loan after discovering numerous predatory and illegal practices by the original lender and sought to have the loan rescinded, as is his right under federal law.

Doing it himself
After he was served with foreclosure papers over the summer, Molina said he had “so many meetings with so many attorneys and not one of them knew what they were doing.” So the 41-year-old husband and father of an 8-year-old daughter who had been forced out of a publishing business by the souring South Florida economy, started reading everything he could find online and elsewhere about foreclosure. He used Garfield’s Web site, self-help legal books and pleadings by foreclosure attorneys to fashion his own case.

He said he kept asking the other side for documents to which he was entitled under the legal process of discovery. The most important document he sought was the original loan note. To have standing in a foreclosure proceeding, a financial institution must show that it possesses the note, and can document the chain of sales and assignments by which it was obtained. In today’s financial world, home loans are sold and resold many times to various investors, often as part of highly complex securities transactions, and true ownership is often unclear.

Instead of providing the documents, Molina said, the plaintiff’s lawyers filed a motion for summary judgment in which they asked Judge Miller to simply declare them the winners of the case and grant the foreclosure. Molina showed up for the Jan. 6 hearing on that motion and told the judge that the plaintiffs had not complied with his requests for discovery.

Molina said he was very nervous as he presented his case. “This is a big fight for my life,” he said. “I’m going up against some lawyer who has been doing this for 30 years. Either I walk out of there with my house or I walk out of there homeless.”

He doesn’t recall now exactly what he said during the very brief proceeding.

Judge’s compliments
Neither does Judge Miller, who handled dozens of cases that day. But he remembers this: “It was a good argument. Whatever it was convinced me to vacate the judgment and stop the foreclosure.”

Even then, the judge said, Molina didn’t seem to understand that he’d prevailed. “He kept talking and I didn’t know why he was talking. I said, ‘Would it make you happy if I just ripped it up? Here, I’m tearing it up!’

“I don’t make a practice of that,” Miller said. “I don’t want people to think I’m some crazy judge tearing stuff up down in Miami, but that time I did. … It was a funny hearing.”

Molina made such a good case that Miller thought he was an attorney until informed otherwise during an interview with “You’re kidding!” the judge said. “He was very good. He sounded like a lawyer, he looked like a lawyer. If he was representing himself, he was doing a good job.”

Molina, who emphasizes repeatedly in interviews that he is only representing himself and gives legal advice to no one, burst out laughing when told about the judge’s impression.

But he said many of the 30 to 40 observers in the courtroom who applauded his victory also mistook him for a lawyer, patting him on the back and asking for his business card.

“The guy from legal aid asked me where did I get my pleading from,” meaning his legal argument, Molina said. “I said I got it at Office Depot. I thought he meant, where did I get my folder?”

Deposition looms
Molina said the principal attorneys for the plaintiff, who did not respond to’s requests for an interview, appear to be pursuing the case despite the initial setback, requesting that he be deposed next month. But he said they have yet to produce the original loan note and that he believes they’re merely stalling.

“I still don’t see how they’re going to trial with this thing,” he said.

In the meantime, he’s pursuing the separate case to have the loan rescinded. He believes he’ll eventually wind up having the lien cleared from the title of his property without having to pay off the balance. And, for now, he’ll keep representing himself.

“It’s a straight-up job,” he said.



The answer to your question is YES we have lawyers and the list grows every week. You can start with the “Lawyers Who Get it” at If you still have trouble then contact us again. In the meanwhile, allow me to point out that the process of defending your property is intimidating to many people. That is because the lenders’ lobbyists made it that way. The blog site and my seminars and workbooks untangle the apparent chaos and give the homeowner or the homeowner’s attorney the steps to prepare their case before going to a lawyer, if they don’t have some emergency because they waited too long to defend themselves. There are still steps they can take if they waited too long but they come in a different order.

Here are the basic steps that must be taken in order to effectively present a credible threat to your lender AND A CREDIBLE ORGANIZED PACKAGE TO A PROSPECTIVE LAWYER THAT MIGHT TAKE YOUR CASE. The goal is a substantial modification of the loan in which the principal and payments are reduced or eliminated. I have distilled the methods of everyone from the people who the very narrow “audit” comparing the Good Faith Estimate to the Settlement Statement, all the way through those who perform full forensic analysis. Since the cost can vary as much as between $200 to $20,000 and each company or person offering “audit,” “loan modification”, “loss mitigation”, performs a different set of services, I have created Garfield’s Continuum (1-2 day workshops for Lawyers and 1/2 day workshops for homeowners, and workbooks for each). The Continuum deals with legal strategies, theories and fact finding. Based upon what works and what doesn’t I have come up with the minimum menu of services that MUST be included if you are aiming to get a substantial modification and not one that merely extends your loan to 40 years and adds on your back payments to the principal due on the note.


  1. Documents to be examined:
    1. Promotional literature, correspondence and borrowers notes from initial contact with mortgage broker of “lender.”
    2. Any document purporting to give the terms of a proposed loan including but not limited to Good Faith Estimate
    3. The Good Faith Estimate and documents supporting affordability and benefits
    4. The settlement statement
    5. The name and contact information and appraisal report including the actual person and license number of the appraiser, the amount of the previous sale, any prior appraisals available to borrower, and the borrower’s estimate of current value decreased by 12% for broker’s fees (6%) and current average discount from asking price (6%).
    6. The name and address of the mortgage broker, and the specific person the borrower dealt with, whether the mortgage broker is still in business.
    7. Identification of the loan originator
    8. Determination if FNMA or Freddie MAC were actually involved or if the standard forms were used from those or any other (HUD) GSE.  (Government Sponsored Entity)
    9. Identification of title agent with name and address
    10. Identification of title insurance company with name and address
    11. Identification of the escrow agent with name and address
    12. Identification of the closing agent with name and address
    13. Identification of the Trustee with name and address
    14. The set of closing documents given to the borrower: the ones provided before closing, the ones provided after closing and any documents that were transmitted appointing servicer or substitution of Trustee or assignment etc.
    15. SEC reports and annual reports of any of these entities or affiliates
    16. If available, Sampling investigation to determine if Pooling and Services Agreement, Assignment and Assumption Agreement, Insurance, Credit Default Swaps, Cross Collateralizing, Over-collateralizing, reserves, and bailouts from Federal Reserve or U.S. Treasury can be produced for examination.
    17. Documents, if available, showing authority of any party alleging rights to enforce, collect or perform modifications, issue notices of delinquency, default, sale or file foreclosure actions, unlawful detainer (eviction) actions etc.
  2. Basic Required Services — For expediency and cost purposes, the initial “analysis is presumed to be using a “sampling technique” that identifies probably information that is applicable but does not guarantee accuracy or completeness)

    1. Retainer Agreement in Writing for analysis, collection etc., that allows for attorney tot ake over relationship on certain conditions.
    2. Written authroization form Borrower executed in triplicate and notarized (each copy)
    3. Analysis of disclosures and promotional literature to determine the nature of the deal the borrower thought he/she/they were getting and comparison with the actual result.
    4. Analysis of GFE etc. and comparison with actual deal, disclosures of third party funding, table funding, surprise fees, undisclosed fees, undisclosed parties, etc.
    5. Analysis of settlement statement to determine the representation of the parties at closing to the borrower and comparison with actual deal.
    6. Appraisal Sampling analysis to determine negnligence or fraud based upon comparables of time, geography and whether developer asking prices were used to inflate the appraisal. Calculation of potential claim for inflated appraisal. Determination of the expected life of the loan based upon adjustments, expected market conditions etc. Calculation of probable effect on APR over the expected life of the loan.
    7. Analysis of whether the closing conformed to GSE guidelines as industry standards
    8. Analysis of conduct of the mortgage broker to determine potential claim for negligence or fraud
    9. Analysis of conduct of the title agent to determine potential claim for cloud on title, negligence or fraud
    10. Analysis of conduct of the title insurance company to determine potential claim for cloud on title, negligence or fraud
    11. Analysis of conduct of the escrow agent to determine potential claim for negligence or fraud
    12. Analysis of conduct of the closing agent to determine potential claim for negligence or fraud
    13. Analysis of results of investigation for compliance with TILA, RESPA, HOEPA, RICO, Deceptive Business, Deceptive Lending, usury etc.
    14. Analysis of conduct of the Trustee or successor Trustee on Deed of Trust, if applicable to determine potential claim for negligence or fraud
    15. Sampling analysis to identify potential successor trustees (Pool, SIV, SPV etc.)
    16. Sampling analysis to determine where the borrowers payments have been sent and how they have been applied, if available.
    17. Sampling analysis to determine if the the named entity as Payee on the Promissory note has been paid in full by a third party — and preliminary abalysis as to whether the note became non-negotiable, whether the borrower owes anyone any amount, and if so who that might be and how much it might be, if it is possible to make such determinations in the preliminary investigations.
    18. Issuance of Preliminary Findings Report to be sent to servicer or whoever the borrower is sending payments to or otherwise in communication with.
    19. Challenge letter to each party seeking to enforce, whether lawyer or party, raising defensive positions concerning their authority to act.
    20. Extensive Qualified Written Request with suggestions for resolutions, coupled with Notice and contract for appointment of Borrower or Borrower’s designee as attorney in fact for reconveyance as per RESPA.
    21. Demand letter and notice if Lender fails to comply.
    22. Challenge letter if Lender denies claims or requires additional written authorization
    23. If available, counsel’s recommendation of next steps
  3. Extended Services:
    1. Appointment of agent for reconveyance
    2. Recording reconveyance
    3. Recording other instruments in property records
    4. Expert Affidavit
    5. Expert testimony
    6. Exhibits prepared for court
    7. Form complaints, motions and affidavits
    8. Legal ghost Writing
    9. Consultation with Borrower’s attorney
    10. Appearances in Court
    11. Forensic Review
      1. Basic, non sampling
      2. Full audit including examination of servicer’s ledgers etc.

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

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

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

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

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

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

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

Mortgage Meltdown: INFLATION

Which is true? The answer is neither. The measurements of inflation are ALL skewed to give impressions to the reader that benefit the administration. 

U.S. food prices rise 0.9% — their largest monthly increase in 18 years
5/14/2008 8:33:39 AM


Consumer-level inflation tame in April, U.S. says
Headline growth’s up a moderate 0.2%; core rate rises a slim 0.1%

Fed Confused on Policy

Virtually ALL of the the decisions concerning money supply and “regulation” are being made in the private sector which is devoted to one thing by mission and by intent: transfer of wealth to the big dogs in the private sector. This clearly government function, as specifically expressed in the U.S. Constitution has been abandoned by government and usurped by the private sector.

By allowing tainted money into the political system, actions that had been plainly illegal, immoral and unethical have become a way of life, legalized by laws passed to satisfy legislator’s obligations to lobbyists. Obama’s call for reigning back the forces of money from the private sector is a call to arms and a call for alarms — to regulate and disclose the billions of dollars spent by credit/financial industries, oil and gas, coal, drugs, healthcare and crime (yes, crime because close examination shows that some private sectors will ONLY make money if the jails are full).

The purpose of government — to be the referree between capital and labor in a market allowing forces of supply, demand and innovation to determine outcome — has been abandoned and must be re-asserted. If not, we become a third world country where the rich live in electrified bunkers with their own security staff and the rest of the population remains hopeless poor and in debt. The risk of violent revolution, food riots and knee-jerk policies generated from fear or anger will be the rule rather than the exception. This is hardly the result intended by the framers of our constitution.

As the comments indicate, the Fed policy-making apparatus is in tatters.

  • It lowers the Fed overnight rate and interest rates go up — something that was thought impossible by many people. 
  • It confronts hyper-inflation with a mixture of mentioning how serious the issue is and then lowers rates again, which we all know means increasing the money supply and increasing inflation. But then lenders still refuse to give loans to small business, homeowners and other key parts of the credit cycle that spur the economy. 
  • The plain fact is that the Fed is not having much effect at all on anything. 
  • It missed the opportunity to regulate and increase its influence to thwart the bubble in housing because politically it was expedient to do so in a Repiublican administration. 

We all pay the price as the economy and our society commences the wrenching process of remaking itself with a solid foundation of productivity, more even distribution of purchasing power, less impulse purchasing, more saving, and the prospects of slower growth and recession here and abroad.

The FED is diminished, probably permanently. Up until now nobody has addressed the issue head-on that neither the Fed nor the U.. Treasury, nor the Bureau of Engraving and Printing are having much impact on money supply, interest rates, prices or economic growth.

Virtually ALL of the the decisions concerning money supply and “regulation” are being made in the private sector which is devoted to one thing by mission and by intent: transfer of wealth to the big dogs in the private sector. 

Pianalto: Fed’s strategy compatible with low inflation rate
LONDON (MarketWatch) — Cleveland Federal Reserve Bank President Sandra Pianalto said Tuesday that inflation remains a top risk to the economic outlook, but that the Federal Reserve’s rate-cutting strategy likely wouldn’t stoke inflationary pressures. In a speech prepared for delivery in Paris, Pianalto said she finds herself in a “challenging environment” as a policymaker. “While even the core price measures in the United States are rising somewhat faster than I would prefer, and inflation presents a key risk to my outlook, I believe that the Federal Reserve’s policy strategy remains compatible with a low and stable inflation rate,” she said. Pianalto said it was important to distinguish between inflation and relative-price pressures. End of Story

Bankruptcy: Chapter 13, RISING PRICES and Foreclosure Defense


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

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

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

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

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

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

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

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

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

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

Rising prices give rise to chapter 13 plan modifications

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

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

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

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

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

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

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

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

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


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. 


May 4, 2008

Who Will Tell the People?

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

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

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

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

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

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

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

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

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

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

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

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

Fed Lies and Sound Bites

The latest change in Fed policy sounds good. You get that warm fuzzy feeling that credit will loosen up and that things are getting better. But the fact remains, that this is ANOTHER transfer of the power to create money to the PRIVATE sector, it is another green light for PRIVATE TAXATION, and worst of all, it comes at a time when inflation is already running high and threatening to become worse than at any time in recent history.

Flooding the market with more dollars is simple: it reduces the value of those dollars. as the value goes down some businesses will appear to prosper, but when those business owners go to buy something, they will realize they lost profit even though their accountants report they made more. In nutshell, if it costs $25 to buy a loaf of bread or $15 to buy a gallon of gas, the fact that your sales went up won’t do you any good.

Beware the earnings figures from public reporting companies. There is no FASB directive that requires real disclosure of real earnings in constant currency. This will become painfully obvious as the next 12 months unfold.

Fed expands auction, accepts wider collateral
NEW YORK (MarketWatch) — The Federal Reserve, along with other central banks, said Friday that it was increasing the funding it is providing to banks and announced that, for the first time, it was willing to accept bonds backed by auto loans and credit cards.
“In view of the persistent liquidity pressures in some term funding markets, the European Central Bank, the Federal Reserve and the Swiss National Bank are announcing an expansion of their liquidity measures,” the Fed said in a statement.
The Fed took the move in an attempt to flood the market with supply and lower short-term lending rates, such as the London interbank offered rate, or Libor.
The U.S. central bank announced an increase, to $75 billion from $50 billion, in the amounts auctioned to eligible depository institutions under its biweekly Term Auction Facility, beginning with the auction on May 5.
This increase will bring the amounts outstanding under the TAF to $150 billion.
The move to expand the TAF was widely anticipated because of strong demand for loans through the program.See full story.
“The program is now reaching a magnitude where it can play a significant role in plugging the gap between the remaining demand for unsecured term funding in the bank market and the latest decline in supply following the run on Bear Stearns,” wrote Lou Crandall, chief economist for Wrightson ICAP.
The expansion was “probably marginally disappointing because there was a widespread expectation … that the Fed would extend the term of at least some TAF auctions to three months,” wrote Stephen Stanley, chief economist for RBS Greenwich Capital.
The TAF, announced on Dec. 12, was followed in March by the creation of several other Fed lending programs targeted at different sectors of the credit markets.
All told, the Fed has now offered to lend up to $462 billion in cash and Treasurys to the markets, in addition to the nearly unlimited funds available through the discount window and the primary credit dealer facility.
The three-month Libor rate — a benchmark for lending between banks — was 2.78% on Thursday, well above the 2% federal funds rate. Crandall said extra supply from the Fed in the next three weeks should tighten the spread between the Libor and fed funds rates.
Deeper cooperation
The Federal Open Market Committee also has authorized further increases in its existing temporary currency-swap arrangements with the European Central Bank and the Swiss National Bank.
These arrangements will now provide dollars in amounts of up to $50 billion and $12 billion to the European Central Bank and the Swiss National Bank, respectively, representing increases of $20 billion and $6 billion.
The FOMC also authorized an expansion of the collateral that can be pledged by bond dealers in the Fed’s Schedule 2 Term Securities Lending Facility auctions of Treasurys.
Primary dealers may now pledge AAA/Aaa-rated asset-backed securities, in addition to already eligible residential- and commercial-mortgage-backed securities and agency collateralized mortgage obligations.
Accepting asset-backed paper could help provide money to the student-loan market, Crandall noted. End of Story
Steve Goldstein is MarketWatch’s London bureau chief. Washington Bureau Chief Rex Nutting contributed to this report.


The latest reports show that devaluation of the dollar combined with other economic factors has launched what will be the worst round of inflation we have seen in our lifetimes. And it will most probably feed itself into a frenzy despite all efforts to soften the blow. The 1.1% increase in production costs is only the tip of the iceberg.

  • All businesses are feeling the pinch of rising “costs” (more dollars) against consumer reluctance to pay higher “prices.” 
  • Price baskets that reflect reality (actual impact on the life of an ordinary American family) show something in the range of 15%-25% average. 
  • Job growth has been non-existent for years despite data to the contrary: the reports count ANY job to replace a job that paid 4-10 times as much as “job creation.”
  • Purchasing power has been declining since before this latest round of hyper-inflation.
  • Debt is at an all-time high for the country and for individuals.
  • Taxes and other “private taxation” deductions from U.S. individual income  have steadily increased when compared to other nations
  • The Fed is stuck between an economy diving into recession and an economy that is virtually ruined by its own currency. If it raises rates to try to curb inflation, it won’t succeed because most of the money supply is created from Wall Street. Raising rates also has the added factor of decreasing confidence in the U.S. economy, which will only deepen the recession. If it lowers rates to counter the recession it won’t succeed for the same reason. Lowering rates has the added factor of creating a new bubble to cover-up the old one. 

When will we finally get the message and bubble and bust is not a very good way to do business?

  • Fundamentally, the first line of attack should be on staunching the bleeding and stopping the foreclosures and evictions. Just taking control of that and putting it under management, will have an enormous impact on our currency, our World position, and our financial markets. 
  • restoring confidence in the financial markets is the first priority. The ONLY way this can be done is by stopping foreclosures and evictions, restoring value to balance sheets, and providing a path to full recovery, even if it is not totally assured. 
  • The perception that the U.S. financial markets cannot be trusted can ONLY be overcome by establishing international oversight, at least for transparency and reporting purposes. In order to retain national sovereignty, obviously, regulation in the United States can only be by U.S. agencies.
  • But in the global economy, other countries and economic unions have the same rights we do when it comes to regulating money supply and whether to permit certain actions in their part of the pond. We have now painted ourselves into the corner of submitting our own regulatory authority to the decisions of other nations. It’s fact that we are just going to have to live with.

Our passion for dominance should be replaced with a passion for fairness and stability.

Mortgage Meltdown: Inflation, Devaluation and the Price of Your Home

The reality of inflation is that it is robbing nearly everyone blind and is going to get much worse before it gets better.


  • This is the period I was talking about where merchants and consumers alike get caught in the middle. Some merchants can take advantage of inflation but most are stuck with being the “bad guy” — it is always the messenger that gets shot. This is like a triple barraled cannon. 
  • So consumers are paying more and more but they don’t even know that the merchants are doing everything they can to soften the pinch on consumers. In fact, they think the opposite is true and they blame merchants for using inflation as an excuse of increasing their margins when in fact the merchants are making far less money. 
  • This can ONLY mean that future price increase, at least double what we have seen are in order and as you can see from the front page of the Wall Street Journal, the effects of inflation are causing social unrest and violence. So to your question about home values: the bottom lines is that VALUES (measured in today’s dollar will probably continue down for a while). PRICES will continue up. 
  • When it costs $20 to buy a loaf of bread it is inconceivable that the price of a house won’t eventually reflect these changes even if the correspondence is uneven and fluctuating. 
  • Using models that appear to be valid now this can be figured as follows in an example I made up: 
  • Note the difference between value and price. 
  • VALUE is first based upon the price you could get today. It is therefore the same as price. 
  • VALUE changes with market conditions. Increased demand and diminished housing inventories causes demand to rise in proportion to supply and VALUE goes up. 
  • PRICE represents the measurement of VALUE. 
  • PRICE changes occur as a result of two things: (1) changes in VALUE and (2) changes in the value of the currency being used to purchase the asset. So if inflation and devaluation of the dollar were not a factor, then VALUE and PRICE would always be the same. 
  • And usually the difference, while present, does not figure prominently in the negotiated price for a house. 
  • That is all changing now because the dollar is slipping every other day and prices of everything are going up at rates reaching nearly 100% in some cases and the rate is expected to increase exponentially. 
  • So NOW the inflation and devaluation of the dollar must be taken into account when projecting the future price of an asset (in this case a home). In a flat market with inflation, the home would be no more desirable than it was before. But because of the fall of the purchasing power of the dollar through inflation and devaluation, the PRICE would still go up. Example. $200,000 house is still worth the same after 3 years. BUT the price still goes up by the amount of inflation. 
  • Stated inflation through reporting of the CPI is now like EPA mileage — completely out of touch with reality. And reality is what people deal with, not government statistics. 
  • EXAMPLE: Today’s home VALUE: $200,000 
  • Today’s home Price $200,000. 
  • 1 year from Now: 
  • home VALUE: $160,000 – $180,000 in today’s dollars as of April 14, 2008 (assumes 20% decline in home VALUES, which might be excessive) home 
  • PRICE: $184,000-$207,000 as of April 14, 2009 purchasing power of your dollars, assuming 15% inflation 
  • 2 years from now: 
  • home VALUE: $180,000 – $200,000 in today’s dollars as of April 14, 2008 (assumes 10% increase in home VALUES, which might be excessive) 
  • home PRICE: $234,000-$260,000 as of April 14, 2010 purchasing power of your dollars, assuming 15% inflation 
  • 3 years from now
  • home VALUE: $190,000 – $210,000 in today’s dollars as of April 14, 2008 (assumes 5% increase in home VALUES, which might be excessive) 
  • home PRICE: $275,000-$304,000 as of April 14, 2011 purchasing power of your dollars, assuming 15% inflation 

Of course this might look good on paper, but the only way it will have any meaning to you is if you sell the real estate for the “inflated” price, pay off your mortgage, and downsize to something much smaller. The reason is that the price of everything has gone up along with your house. 

Mortgage Meltdown and Credit Crisis Measurements and Collateral Damage: $41.5 trillion

That’s Trillion with a “T”

  • Most people agree that we can’t correct the problems that are still unfolding unless we admit the severity of the problem. The current estimates of a maximum of $450 billion damage are absolute lies designed to give reassurance to people who could and probably should cut and run. As long as we deny what is really happening, the real solutions will not emerge. The current group of proposals can be be all logged in under one word : patchwork. 
  • The real solution is comprehensive political action together with regulatory reform that goes in an entirely different direction than allowing money to be controlled more by political force of individuals in power with their own private agendas.
  • Here is a one page summary of the measurements of the actual damages caused by the sub-prime mortgage crisis, coupled with the effect of the sub-prime mortgage crisis on all mortgages and housing, coupled with the effect on inflation and private losses rippling out from the collapse of liquidity, credit, jobs, and social services. Some fo this information was taken from the BBC News Website.
  • Mortgage Meltdown: The real measurements and statistics 

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