Mortgage Meltdown: Barney Frank Proposal

Posted on April 6, 2008 by Neil Garfield

Memo to all Senators, Congressmen and state legislators:

The solution proposed by Barney Frank for the Mortgage Meltdown is dead-on right. Suck it up.

 

The disaster that awaits will fall on your record unless EVERYONE gets something they can go home with. Any lender that opposes this is arguing for their own disaster. This program will save their balance sheet, increase their reserves for lending, and save their income statement as well. They could even recover prior write-downs if Frank’s plan is expanded to the full 4 million homes affected. See my blog as livinglies.wordpress.com for more details.

 

The bottom line is that we MUST keep everyone in those homes, maintaining them and paying utilities, and paying something toward the mortgage. Allowing the lenders to participate on the upside allows them to recover their losses, but also, if the disclosure rules are relaxed, they will be able to delay writing off mortgages and investments that otherwise will come cascading this year and next.

If we can, where the home is empty and still inhabitable, we should reverse the foreclosures and reinstate the loans, reinstate the CDO/CMO investment etc. Of course those homes that have stripped of appliances, wiring and plumbing are another story. Pelosi’s support of this is critically important to passage. 

 

Filed under: bubble, CDO, community banks, credit unions, currency, education, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, politics, securities fraud | Tagged: , , , | 3 Comments »

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

Posted on March 8, 2008 by Neil Garfield

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

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

 

Emergency Provisional Rules

Mortgage Foreclosures

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Filed under: bubble, CDO, community banks, credit unions, currency, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, Investor, Mortgage, Obama, politics, securities fraud, Uncategorized | Tagged: , , , , , , , , , , | 2 Comments »

Mortgage Meltdown Movement: Start Now, Obama

Posted on March 8, 2008 by Neil Garfield

OBAMA MOVEMENT IS LAST CHANCE FOR ECONOMY AND HOMEOWNERS.

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

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

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

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

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

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

Change the procedure, not the substance of the law. 

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

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

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

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

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

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

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

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

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

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

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

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

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

Filed under: bubble, Bush, community banks, CORRUPTION, currency, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, politics, securities fraud | Tagged: , , , , , , , , , , | Leave a comment »

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