Gary Dubin: Proposed Mortgage Integrity Act (MIA):

For ten years, Gary Dubin in Hawaii has been practicing law defending homeowners from foreclosure. He has preached his own version of how to combat foreclosure fraud. And he has practiced what he preached. I find his work enlightening and refreshing. So when I read his Proposed Mortgage Integrity Act (MIA) I decided to republish it in its entirety. Some of what he proposes is new but most of it, in my opinion, is a much needed tune-up of the wording of existing law.

His article and proposals are extremely well-written, objectively stated, reasonable and necessary. In my opinion Dubin’s quest  should be supported by homeowners and non homeowners alike as it proposes to correct a deficit in our legal system, our economic system, and our society. The inequality of wealth that was exacerbated by what amounts to outright theft by a handful of banks can be corrected and our economic system can be stabilized if we return to the rule of law.

I have added commentary where I thought it might help readers understand WHY homeowners should win and how the current system is rewarding theft.

Go here listen to replays of previous Gary Dubin shows and find reference documents:

By Gary Dubin

The Proposed Mortgage Integrity Act (MIA): Some Common Sense Urgently Needed Practical Institutional Reforms For A Foreclosure System Completely Out Of Service…

I am entering my tenth year as a radio commentator specializing in developments in the foreclosure field following the Mortgage Crisis of 2008.

Despite isolated legislative and judicial attempts at reform during the last ten years discussed on The Foreclosure Hour, for the vast majority of American homeowners facing foreclosure little unfortunately has really changed.

False documentation and myopic judicial oversight still predominate in foreclosure courts, while hundreds of millions of dollars in hard earned equity is literally stolen in the loan securitization process in one of the largest fraudulent transfers of wealth to a few inside traders in United States history.

[EDITOR’S NOTE: He’s right. The direct meaning of this is that a handful of investment banks received trillions in investments. Then they originated or acquired loans eventually using the fictitious name of a nonexistent trust. But it was the investment bank that was the real player.
Then they sold the debt and the paper multiple times through disguised derivatives. This disbursed claims to debt ownership to dozens of players, who eventually came to rely on the value of the paper (contract or derivative) they acquired as set by the marketplace in private transactions rather than the intrinsic value of the debt, thus freeing the investment bank from ever accounting for the debt.
In short, none of the players are desirous or expecting any payment from parties who were borrowers with a debt that has now been completely satisfied. And claimants in foreclosure neither expect nor receive the remedy (foreclosure) that lawyers claim. The proceeds of foreclosure sale never go to the party named as claimant.
So the bottom line is that the investment bank is behind everything and it has long since received multiples of its investment in the loan. Having raked in an average of $3-$4 million on each $200,000 loan “repayment” of the loan was irrelevant and unwarranted. Neither the original investors nor the borrowers are given any credit for the receipt of proceeds of sale of the debt.
But foreclosure served as a vehicle to galvanize the myth that the debt still existed (and the note and mortgage could be enforced) and was owned by at least someone in the orbit of the investment bank, when it had long since departed. Judicial oversight has both failed and refused to consider the possibility that any alleged owner of the debt has already been paid in full and many times over.
That recognition of these basic facts produces a windfall for the homeowner and a death blow to the shadow banking market is not a consequence of anything the borrowers did, but rather a consequence of running a PONZI scheme. The windfall aspect might be corrected through the use of equitable doctrines; but in all events the promissory note and mortgage cannot be enforced to collect on a debt that has been sold to third parties.
The actual truth is that the actual claims to the debt, note and mortgage are buried deep within the shadow banking market and cannot be traced because they are, according to law, private contracts that need not be registered anywhere and are transferred in trading that is never recorded anywhere. The current remedy allowed by the courts is based entirely on the premise that someone who actually owns the debt is getting paid from the proceeds of liquidation of the “collateral.” This is entirely untrue. It never happens except for instances where the original lender is still the creditor.
The declaration of delinquency or default from a lawyer purporting to represent a nonexistent trust or an existing servicer when the declaration relates to a party who is entirely removed from ownership or any right to the debt, note or mortgage is obviously fatally defective, as many court cases have demonstrated. But the players, for a fee, must pretend that the debt is real and the the note and mortgage need to be enforced. That is the origin of the need for fabrication, backdating, forgery and robosigning.]

Backlogged courts applying mostly outdated traditional mortgage concepts remain ill-equipped to protect American homeowners from mortgage abuse.

Waging a foreclosure defense is still beyond the financial means of most homeowners, and those that can find the money to hire an attorney, find that few if any attorneys are trained in foreclosure defense and those that are, are usually less than adequately competent.

New and reform minded decisions by State Supreme Courts are nevertheless rarely adhered to by many of their state trial courts.

Hundreds of billions of dollars in sanctions levied by state and federal governments against lenders and loan servicers detailing mortgagee abuses have nevertheless failed to stop such identical abuses, and sanction money earmarked to assist borrowers has been largely diverted to other State uses.

Meanwhile, there is literally a war against foreclosure defense attorneys still taking place in our courts and among attorney regulators who think homeowners in foreclosure are just deadbeats and attorneys representing them are just preying on vulnerable defendants.

The present mortgage and trust deed foreclosure systems in the States simply do not work except for lenders and pretender lenders, whereas the federal banking system, specifically the Government Sponsored Enterprises Fannie Mae and Freddie Mac as well as MERS, are the real cause of and not the cure for most of the present serious problems in the foreclosure field.

Nevertheless, the reforms that are needed are not expensive nor complex, just a matter of simple common sense adjustments to a foreclosure system that is centuries old and no longer compatible with the needs of a democratic society under siege by greedy and unscrupulous quick-buck securitization thieves.

On today’s show John and I unveil our view of the general outlines of a proposed overhaul of the foreclosure system in the States, what we call legislation wise “The Mortgage Integrity Act” (MIA for short).

We intend to present this proposal later this year in the format of model legislation for adoption by State Legislatures.

Meanwhile, we hope to get our listeners’ comments and suggestions before drafting the actual Legislation in the form of a Model Act to be sent to the judiciary committees of every State Legislature.

The Model Act will have three main parts. Part One will address the nature of the emergency, Part Two will address the enacted institutional reforms, and Part Three will address transitional issues.

Part One, to be drafted in whereas clauses, will state the following:

1. Keeping record track of and protecting interests in land within each State has historically been an exclusive State function in the United States presumably protected by the Tenth Amendment to the United States Constitution;

2. Such protection has also been a strong State public policy, affecting the economic as well as the social and political well being and health of citizens in each State since respective statehood.

3. That exclusively State function has been recently undermined by the federal government in numerous ways and is responsible for the present mortgage crisis.

4. The result has been the fostering of corruption at virtually all levels of state foreclosure systems.

5. As a result, the State Legislature hereby declares a State Emergency, requiring a restructuring of the State foreclosure system through immediate institutional reforms as well as transitional measures to safeguard the wealth and well being of our citizens from increasing confiscatory forfeitures.

6. Ironically a foreclosure system said to have its goal to stabilize real estate markets in the United States has to the contrary destabilized real estate markets in this State, driving down the value of properties and dislocating tens of thousands of homeowners annually.

Part Two, to be drafted in enactment clauses, will state the following:

1. The existing foreclosure related statutes in this jurisdiction [setting forth the affected statutes by name and number] are hereby amended, abolished and/or replaced, as follows;

2. The exercise of personal jurisdiction by State Courts shall henceforth require service of all complaints by personal service, the proof of which shall henceforth require contemporaneous photographs of those being served. Substitute service is abolished.

3. Service by publication in lieu of personal service shall require attempts to serve defendants first by certified mail, return receipt requested, and next by certification first that an independent investigative agency licensed by the State has made a diligent effort to locate the defendant and within a reasonable time no shorter than two months has failed to do so, using nationwide tracking services.

4. There shall be only one form of combined promissory note and mortgage (or deed of trust) enforced in this jurisdiction, an inseparable ‘Mortgage Note”, which shall only be valid and enforceable if and when duly recorded at a County or Statewide recording office, and which shall not be classified as a negotiable instrument, which may only be transferred by an assignment similarly required to be recorded to be valid and enforceable.

5. Recording offices shall be staffed by attorneys who shall be responsible for researching and approving the standing of all claimed holders of recordable Mortgage Notes prior to their recordation, their compensation to be adequately funded through increases in recording fees taxed upon recorders of securitized trust instruments.

6. Enforcement of Mortgage Notes shall require proof of notices of default consisting of return receipt requests together with personal knowledge affidavits attesting to preparation and mailing by the preparers and mailers.

7. Enforcement of Mortgage Notes shall also require verification of the entire loan general ledger by an independent CPA with no institutional connections, direct or indirect, to the foreclosing plaintiff or its representatives or affiliates.

8. The State Insurance Commissioner is directed to investigate providing mortgage default insurance for the benefit of homeowners.

9. There shall be a specialized foreclosure court in every County in the State, whose Judges shall be prohibited from directly or indirectly having any ownership interest in or any other connection with any financial institution.

10. Mortgage defaults shall by law be considered confidential and not disclosed to anyone other than the affected borrowers, accommodating mortgagors, and guarantors under penalty of fines and imprisonment, to avoid foreclosure blight lowering the market value of affected properties.

11. Foreclosure complaints shall similarly be considered confidential and filed under seal, to avoid foreclosure blight lowering the market value of affected properties.

12. Foreclosure auctions are hereby abolished. Properties subject to foreclosure shall be sold in the ordinary market place by licensed real estate brokers and listed in the Multiple Listing Service as directed by the Foreclosure Court.

13. Deficiency judgments are hereby abolished.

14. In cases in which the Foreclosure Court finds that there is little or no equity remaining after payments required to be made to a foreclosing plaintiff, a foreclosure defendant must vacate the premises within a reasonable time no less than 90 days or must elect to forfeit ownership in exchange for an immediate lease agreement preserving possession for a stated period of time including indefinitely as determined by the Foreclosure Court provided a monthly market leasehold rental payment is agreed to and timely paid.

15. In cases where the Foreclosure Court finds that there is substantial equity remaining after payments required to be made to a foreclosing plaintiff, a foreclosure defendant my elect to retain possession as a tenant as aforesaid and shall have the right to recover title including therefore his equity in the property within a time period of at least one year to be determined by the Foreclosure Court provided at the time of the exercise of that right the foreclosure defendant reimburses the foreclosing plaintiff for whatever amounts may then be due on the mortgage note.

Part Three, covering transitional matters, as follows:

1. The dates of effectiveness of the various enactments will have to be tailored to existing conditions and between new and existing secured loans.

2. The respective powers between the States and the federal government in various respects above will likely require negotiation and litigation. Fortunately, the United States Supreme Court has recently shown deference to the States in related issues involving financial regulation.

Please join John and me today and email us your comments and suggestions. Let us know if you think we missed anything and if there any other way you can think of to change a system so badly out of service?

Gary Victor Dubin
Dubin Law Offices
Honolulu, Hawaii 96813
Office: (808) 537-2300
Licensed in California and Hawaii

Why the Fed Can’t Get it Right


What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Analysis and Comments: Bloomberg reports this morning that “Fed Flummoxed by Mortgage Yield Gap Refusing to Shrink.” (see link below)

In normal times lowering the Fed Funds rate and providing other incentives to banks always produced more lending and more economic activity. Bernanke doesn’t seem to understand the answer: these are not normal times and the cancerous fake securitization scheme that served as the platform for the largest PONZI scheme in human history is still metastasizing.

Why wouldn’t banks take advantage of a larger spread in the Fed funds rate versus the mortgage lending rates. Under the old school times that would automatically go to the bottom line of lending banks as increased profits. If we put aside the conspiracy theories that the banks are attempting to take down the country we are left with one inevitable conclusion: in the “new financial system” (sounds like the “new economy” of the 1990’s) the banks have concluded there would be no increase in profit. In fact one would be left to the probable conclusion that somehow they would face a loss or risk of loss that wasn’t present in the good old days.

Using conventional economic theory Bernanke is arriving at the conclusion that the spread is not large enough for banks to take on the business of lending in a dubious economic environment. But that is the point — conventional economic theory doesn’t work in the current financial environment. With housing prices at very low levels and the probability that they probably won’t decline much more, conventional risk management would provide more than enough profit for lending to be robust.

When Bernanke takes off the blinders, he will see that the markets are so interwoven with the false assumptions that the mortgage loans were securitized, that there is nothing the Fed can do in terms of fiscal policy that would even make a dent in our problems. $700 trillion+ in nominal derivatives are “out there” probably having no value at all if one were the legally trace the transactions. The real money in the U.S. (as opposed to these “cash equivalent” derivatives) is less than 5% of the total nominal value of the shadow banking system which out of sheer apparent size dwarfs the world banks including  the Fed.

As early as October of 2007 I said on these pages that this was outside the control of Fed fiscal policy because the amount of money affected by the Fed is a tiny fraction of the amount of apparent money generated by shadow banking.

Oddly the only place where this is going to be addressed is in the court system where people bear down on Deny and Discover and demand an accounting from the Master Servicer, Trustee and all related parties for all transactions affecting the loan receivable due to the investors (pension funds). The banks know full well that many or most of the assets they are reporting for reserve and capital requirements or completely false.

Just look at any investor lawsuit that says you promised us a mortgage backed bond that was triple A rated and insured. What you have given us are lies. We have no bonds that are worth anything because the bonds are not truly mortgage backed. The insurance and hedges you purchased with our money were made payable to you, Mr. Wall Street banker, instead of us. The market values and loan viability were completely false as reported, and even if you gave us the mortgages they are unenforceable.

The Banks are responding with “we are enforcing them, what are you talking about.” But the lawyers for most of the investors and some of the borrowers are beginning to see through this morass of lies. They know the notes and mortgages are not enforceable except by brute force and intimidation in and out of the courtroom.

If the deals were done straight up, the investor would have received a mortgage backed bond. The bond, issued by a pool of assets usually organized into a “trust” would have been the payee on the notes at origination and the secured party in the mortgages and deeds of trust. If the loan was acquired after origination by a real lender (not a table funded loan) then an assignment would have been immediately recorded with notice to the borrower that the pool owned his loan.

In a real securitization deal, the transaction in which the pool funded the origination or purchase of the loan would be able to to show proof of payment very easily — but in court, we find that when the Judge enters an order requiring the Banks to open up their books the cases settle “confidentially” for pennies on the dollar.

The entire TBTF (Too Big to Fail) doctrine is a false doctrine but nonetheless driving fiscal and economic policy in this country. Those banks are only too big if they are continued to be allowed to falsely report their assets as if they owned the bonds or loans.

Reinstate generally accepted accounting principles and the shadow banking assets deflate like a balloon with the air let out of it. $700 trillion becomes more like $13 trillion — and then the crap hits the fan for the big banks who are inundated with claims. 7,000 community banks, savings banks and credit union with the same access to electronic funds transfer and internet banking as any other bank, large or small, stand ready to pick up the pieces.

Homeowner relief through reduction of household debt would provide a gigantic financial stimulus to the economy bring back tax revenue that would completely alter the landscape of the deficit debate. The financial markets would return to free trading markets freed from the corner on “money” and corner on banking that the mega banks achieved only through lies, smoke and mirrors.

The fallout from the great recession will be with us for years to come no matter what we do. But the recovery will be far more robust if we dealt with the truth about the shadow banking system created out of exotic instruments based upon consumer debt that was falsified, illegally closed, deftly covered up with false assignments and endorsements.

While we wait for the shoe to drop when Bernanke and his associates can no longer ignore the short plain facts of this monster storm, we have no choice but to save homes, one home at a time, still fighting a battle in which the borrower is more often the losing party because of bad pleading, bad lawyering and bad judging. If you admit the debt, the note and the mortgage and then admit the default, no  amount of crafty arguments are going to give you the relief you need and to which you are entitled.

Fed Confused by Lack of Response from Banks on Yield Spread Offered

Fixing the Housing Market So It’s Safe to Buy or Hold

Reality in Iceland: prosecution and letting the chips fall to the table
August 27, 2012. Neil F Garfield. Mainstream media and in particular Krugman and Ritholz have echoes what Simon Johnson and I have been saying for years. It’s not a question of theory or ideology. It’s a question of reality.
Citizens of Iceland were not in the least bit interested whether the “conservatives” or the “liberals” had compelling ideological arguments. They wanted jobs, economic stability, and decent prospects and opportunities. Citizens of Iceland were not interested in the concept of change or even change in government.
They wanted their society fixed, after being used and thrown under the bus by Wall Street using Icelandic banks as a conduit for international exchange of derivatives that turned out to be worthless. The Banks tried throwing Iceland under the bus, but Icelanders defied the power and wealth of the world’s largest banks and executed simple policies that followed the advanced thinking and analysts all over the world, past, present and future.
Bill Clinton was asked by many how he managed to take an ailing economy and turn it into a booming source of innovation with giant government surpluses. His answer was “arithmetic.” When I was a security analyst and investment banker on Wall Street the primary theme was that before investment, underwriting, or performing any act or making any decisions we had to start at the beginning — the fundamentals. Money may be hard to define but it is easy to measure.
At the end of the day if you taken more real money than you have spent, then you have more money at the end of the month. If some thief steals from you, your wealth drops. If someone claims to own your property and doesn’t own it, your wealth remains unchanged — but Wall Street, bucking the obvious proof in Iceland, says otherwise.
Wall Street says they can “borrow” the identity of homeowners and use it to create the equivalent of bank notes that can be accepted as cash equivalents as long as they dress it up with triple A ratings, and insurance companies that cannot pay for the loss and wouldn’t even if they could because the offer to buy the credit default swap, the insurance and other hedge products were based upon blatantly false premises.
Iceland simply did arithmetic and they continue to do arithmetic. They are reducing household debt, letting creditors suffer the risk of loss that was part of their contracts but now they don’t like their contracts. In Iceland too, the Banks demanded bailout money to save the financial system. But Icelanders rejected that on both legal and moral grounds.
They were not going to reward the perpetrators of fraud tooth further detriment of their victims, they would prosecute them and punish them for breaking the key laws and premises of a stable society — accountability to and for the truth.
They were not going to further burden the victims of the crimes with taxes to reward the perpetrators and their counterparts, they were going to provide as much restitution of wealth as possible and necessary to stabilize an economy that was crashing.
The financial system did not crash and burn as Wall Street had sternly predicted to the Bush and Obama administrations in the U.S. With more than 7,000 smaller banks ready and waiting pick up the pieces. They did not debase their currency and their prospects by saddling future generations with the mistakes of remote greedy bankers. They took the money that existed and disregarded the fake money, the ” cash equivalents” created all over the world allowing the shadow banning system to collapse under it’s own worthless weight. Nothing bad happened.
What did happen is that Iceland now enjoys normal economic growth, sharply declining unemployment and underemployment and does not consider trading paper whose value is based upon false transactions to be part of a their GDP. Produce real goods and services while in the U.S. And other “advanced ” superpowers they have turned themselves into paper tigers. While financial services went from 16% of U.S. GDP before this mess, it now counts for half. Arithmetic: if those shadow banking transactions are worthless then our real GDP is 34% less than what we are reporting.
In Europe where they have their heads partially in our sand, they are trying to sit on two chairs with one ass. They too understand that nothing trumps reality but the people who run government here and abroad are simply making far too much money pretending that shadow money is real money. The real value of our stock indexes is around 7500 for DJIA.
The facts are that housing is still in the dumps even if some reports show “signs of life.” to allow Foreclosures to proceed when the creditor had an undocumented c,aim without any real mortgage lien is absurd, bit it is done everyday. It isn’t a matter of defective documents, it is a matter of no documents, while the banks stole the identities of the pensions funds and homeowners for their own personal Profit,  and buried the losses until they were done trading worthless paper. THEN they gave the “ownership” of the worthless paper and the loss to the investment funds that thought they had purchased them years ago under rules that were never followed by Wall Street.
The foreclosures must end because they are illegally based upon a chain of paper without any money transactions (consideration). The “completed” Foreclosures should be disallowed because the transactions on which they were based were void for lack of consideration wherein the signature of the homeowner was procured by fraudulent premises and promises.
The real money transactions should be documented and the real loan status should be disclosed so that homeowners and investors can come to reasonable settlements and modifications without regard to the consequences to Banks whose continuing fraud is causing the U. S. And Europe without applying basic emergency procedures to stop the bleeding.
The loans are not secured by perfected liens and the principal loan origination was outright theft from investor-lenders and homeowners. But they could be secured and people could pay for the real market value of the deal they were tricked into, if we simply go back and do the arithmetic — and play fair.

Iceland Did It Right … And Everyone Else Is Doing It Wrong

No Loan Receivable Account Exists

Everyone seems to be having trouble with winning these cases outright. I think I have discovered the problem.

Most attorneys start in the middle of things because that is how it comes to them. Basic Contracts Law, first day of law school. For an agreement to be enforceable it must have all three of the these components: offer, acceptance and consideration. You can’t have just an offer, you can’t have just an acceptance, there must be some act that the law recognizes as consideration if the offer is accepted. Absent all three there is no way for a party to enforce an agreement for which there was either no acceptance nor any consideration.

If I loan you $100, you owe me $100 whether you sign a piece of paper or not. I offered to make the loan, you agreed to accept it and pay it back. That is true and presumed to be the reasonable interpretation of any exchange of money or property — that it isn’t a gift. And ALL of that is true whether there is documentation or not.

It is equally true that if I induce you to sign the note under the promise that I will loan you the $100, we have offer and acceptance and evidence of both the offer and the acceptance. But if I don’t give you the $100, there is no consideration and the agreement is not enforceable regardless of whether it is in writing or not. In the real world, I might survive a motion to dismiss or even a motion for summary judgment, but I could never win at trial because I don’t have any evidence that the money was delivered to you in cash, check or wire transfer.

But you are still going to lose and have a judgment entered against you for the $100 if you don’t deny that you ever got the money and you probably should add for good measure that you were fraudulently induced to sign a note when I knew I wasn’t going to give you the money.

The deal signed by most borrowers lacked consideration because the money did NOT come from the party representing itself to be the lender. The offer to the borrower was not the deal that the investor-lender or even the nonexistent trust pool was promised so if could not have been offered that way — with all the securitization parties involved and all their compensation contrary to the requirements of TILA for disclosure, whose purpose is to give the borrower an opportunity to exercise choice and seek a better competing deal in the marketplace. The borrower accepted an offer that was not backed by consideration nor the intent to provide it.

Hence there was no meeting of the minds in the first instance.

If you reverse the analysis and say that it was the borrower who made the offer it gets even worse. 99% of the real applications if they contained the true facts would never have been accepted by any investor or even a bank looking for subprime profits.

Hence the basics of contracts law have not been met – — you might have the argument to say there was an offer, but there are not grounds to say there was or even would have been acceptance if the true facts were known, and the documents signed do not reflect either the offer or the acceptance by the actual investor-lender or even the pool, whose documents were routinely ignored.

The real problem of Wall Street lies in the facts not in theory. They took the money in with complete disregard to the wishes and intent and agreement of the investor lenders and then funded loans from their own accounts that were based upon false premises made both to the investor-lenders and the borrowers. It is the fact that the money came from a Wall Street account rather than an investor account that causes the confusion.

That funding was the consideration — but that was separate from the documentary chain used by the securitizers. You can’t point to consideration “over there” and say that was the consideration you gave in exchange for the note and mortgage unless you can show that “over there” was connected to the documents that were presented to the borrower and signed under false pretenses, creating fraud in the inducement and even fraud in the execution of those documents.

They were “borrowing” the consideration from “over there” and borrowing the identity of the investor-lenders and borrowers to create a monumental shrine to Ponzi schemes in which the total nominal value of the scheme exceed world fiat money by 12 times the actual supply of money. The ONLY was to combat this is to dismantle the fraudulent scheme so that the threat posed by “shadow banking” no longer exists, seizure of the assets illegally obtained, and making whatever restitution is possible to investor-lenders and homeowners, past, present and future.

They did the illegal deals and then had their own people “approve”them and even accept them into non-existing pools without bank accounts. They claimed the loans as their own when it was convenient for them to do so — getting the money for plunging values of the mortgage bonds at 100 cents on the dollar.

Then they dumped what was left of the paperwork over the fence and told the investor NOW the loan is yours and you have a loss. But at all times these banks were merely depository institutions and they were accepting deposits from investor-lenders more or less in the same form as a CD. Their balance sheet did not show a loan receivable. It would have shown a liability for the deposit that was due back to the investor-lender but for them inserting fictitious entities that would take the liability and the loss borrower. In other words a shell game supporting the usual Ponzi scheme scenario.

In a word, they merely substituted the mortgage bond owed by a non-existent entity with no assets for a normal loan receivable account. Thus no loan receivable accounts exists.

It’s Not Even a Bubble: Foreclosures on the Rise

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Editor’s Comment: Realtors and Banks want you to think that you need to buy now before the  market takes off and prices spiral upward. I say don’t believe a word of it.

If you are buying to live in a house, you should know that the actual and shadow inventory of foreclosures will keep intense downward pressure on housing prices for many years to come. Some estimates, including mine, are that the housing market might take more than 10 years to recover and that it could be as much as 20 years. This is why so many people are renting rather than buying. Rental values are going up because there is actual demand for renting.

If you are buying for investment, see the above paragraph. You might have a viable investment if you are willing to stay in for the long pull and you are willing to take on the duties and obligations of a landlord.

If you are selling and you are waiting for the market to bottom out, or maybe you see a spike and you think you’ll wait just a little bit longer to get a higher price, forget it. Sellers, as realtors will even tell you, are mostly unrealistic about the sales price of their property. This is because they bought or once saw the price of their property at twice the price as the offers now. The reason is simple — prices went up but values stayed the same or even declined. The difference between prices and values has never been as big a deal as it is now.

Prices can be forced up by actual demand but never as much as we saw from the late 90’s to the peak at 2006. The prices went up because the payments went down or appeared to go down.

Free money was everywhere and nobody was reading the fine print or even questioning why Banks would offer such deals as teaser rates and other nonsensical things to entice people into signing up for mortgages, whose payment would eventually rise above their household income or where the payment was the equivalent of doubling the interest rate because they were going to be sitting with a home that declined to its real value.

The truth is that even if a recovery eventually occurs, it will be 20+ years before we see those prices again. And that will only result from inflation which eventually will pick up steam.

And by all means remember what I have been writing about these last few weeks. The title they are offering you, with a deed signed by a bank, or even a satisfaction of mortgage signed by a bank may not be worth the paper it is written on and the title policy normally excludes that sort of risk from what they  are covering in title insurance. So if you don’t pose the hard questions and negotiate a real title policy that covers all the known risks, you could be the angry owner of a white elephant that cannot be sold later nor refinanced.

From CNBC:

Home prices rose, just barely, in the second quarter of this year annually for the first time since 2007, according to online real estate firm Zillow. That prompted the popular site to call a “bottom” to home prices nationally. The increase was a mere 0.2 percent, but in today’s touch and go housing recovery, that was enough.

Nearly one third of the 167 markets Zillow tracks in this survey saw annual price gains from a year ago.

“After four months with rising home values and increasingly positive forecast data, it seems clear that the country has hit a bottom in home values,” said Zillow Chief Economist Dr. Stan Humphries. “The housing recovery is holding together despite lower-than-expected job growth, indicating that it has some organic strength of its own.”

Zillow’s report, which compares prices of homes sold in the same neighborhood, also showed a stronger 2.1 percent gain quarter to quarter, which is the biggest uptick since 2005. The biggest price gains, however, are in the markets that saw the biggest price drops during the latest housing crash. Phoenix, for example, saw a 12 percent annual price gain on the Zillow index.

That has other analysts claiming that the overall surge in national prices is due to price bubbles in certain markets.

“Strong demand, particularly in areas of California, Arizona and Nevada, are pushing up home prices very quickly in the short-term. And because many of the home purchases in these areas are cash transactions, there appears to be less braking of prices by our current appraisal system than seen in other parts of the country,” noted Thomas Popik, research director for Campbell Surveys and chief analyst for HousingPulse. “The trend raises the distinct possibility of housing price bubbles emerging in some of these hot housing markets.”

The supply of foreclosed properties for sale has been dropping steadily, as lenders try to modify more loans or actively pursue foreclosure alternatives, like short sales (where the home is sold for less than the value of the mortgage). Investors, eager to take advantage of the hot rental market, are having to spread out to more markets in order to find the best deals.

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“We were heavily into Phoenix early in the cycle. Those markets are heating up,” said James Breitenstein, CEO of investment firm Landsmith in an interview on CNBC Monday. “We see a shift more to the east, states like North Carolina, Michigan, Florida.”

While home prices on the Zillow index are improving most in formerly distressed markets, like Miami, Orlando and much of California, they are still dropping in other non-distressed markets, like St. Louis (down 4 percent annually) Chicago (down 5.8 percent annually) and Philadelphia (down 3.5 percent annually).

“Those people looking at current results and calling a bottom are being dangerously short-sighted,” said Michael Feder, CEO of Radar Logic, a real estate data and analytics company. “Not only are the immediate signs inconclusive, but the broad dynamics are still quite scary. We think housing is still a short.”

Radar Logic sees price increases as well, but blames that on mild winter weather that temporarily boosted demand. This means there will be payback, or weakness in prices during the latter half of this year. And even without the weather hypothesis, they see further trouble ahead:

“On the supply side, higher prices will entice financial institutions to sell more of their inventories of foreclosed homes and allow households that were previously unable to sell due to negative equity to put their homes on the market. As a result, the supply of homes for sale will increase, placing downward pressure on prices. On the demand side, rising prices could reduce investment buying,” according to the Radar Logic report.

Investors are driving much of the housing market today, anywhere from one third to one quarter of home sales. That makes these supposedly national price gains more precarious than ever, because they are based on a finite supply of distressed homes and that supply is dependent on the nation’s big banks. First time home buyers, who should be 40 percent of the market, are barely making up one third, and millions of potential move-up buyers are trapped in their homes due to negative and near negative equity.





Homeowner Associations On the Attack, As Predicted Here

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Editor’s Comment:  Thousands of homeowner associations are filing foreclosure actions on banks owning property that are not paying the monthly assessments or special assessments. We’ve written about this before and encouraged the associations to do so.

The irony is very interesting here. The Banks, having never funded a loan and never purchased a loan, managed to foreclose a loan they never had and get title, possession and even eviction if the rightful homeowner failed to leave as ordered by the bogus pretender lender. Now they must pay the taxes, insurance, and maintain the place as it is written in the Declaration of Condominium, or Community restrictions. AND they must pay monthly “Dues” or assessments as well as special assessments.

So that free house the bank got by submitting a credit bid even though they were never the creditor and never had the right to call themselves a creditor, and even though the debt was either unsecured or paid off, now they re suddenly required to pay the piper.

After all, they say they are the homeowner now. So the banks, knowing this would happen have transferred title into “bankruptcy remote vehicles” which are in fact vehicles for avoiding creditors. A transfer in fraud of creditors is intended to be prosecuted by the Association or any other person effected and the association this time is neither intimidated nor unwilling to press their claim. These are the same banks that decimated their neighborhood. The battle is on.

I wonder how this disclosed to Canadian and other investors who think they are getting clear title? This is only one of several reasons why they are getting clouded title — the pendency of assessments.





Pensions to Be Slashed By Fake Losses on Mortgage Bonds


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Editor’s Comment:  

Many of the most conservative, pro-business people who think they escaped the travesty of the mortgage scam and meltdown are in for a big surprise starting this year. Pension funds were the investors. And they lost big. In some cases the fund managers were in bed with the investment bankers who were peddling this crap.

If you read the Wall Street Journal they explain how the already underfunded pension funds (due to accounting tricks that were illegal and then made legal) are now unable to escape the reality admitting the losses being pitched over the fence at them by investment bankers who are rolling in money from bailouts, insurance (that should have paid the pension fund), credit default swaps (that should have paid the pension fund).

Deep in the articles is a description of exactly what is happening in simple math terms. That description applies equally to the intentionally manipulated underwriting standards to assure the loans would fail. If you or I did this, we would be in jail. Instead Jamie Dimon sits on the Board of the New York Fed. what a country. Millions of people are thrown out of their homes, cities and counties go bankrupt, most from mythical losses they don’t understand.

It all comes from what are called yield spreads, premiums and losses from changes in yield. Under normal protocol investors protect themselves by using various hedge products.

But the investment bankers didn’t make the investors the beneficiary of those hedges, they made themselves the beneficiaries instead. Since they were the agents of the investors they should and still can be forced to apply those proceeds, and pay them to the pension funds, which in turn will reduce the amount due under each loan that was funded.

Sources tell me that not only are the pension funds being forced to accept losses on loans they never owned until it was time to foreclose, but that some of the “bets” that went bad are being tacked on as additional fees or losses.

The pension funds are therefore suffering from two huge write-downs — one from the change in accounting rules that allowed them to kick the can down the road (passed 30+ Years ago), and the other from losses that don’t actually exist but were convenient for the banks to assert when they asked for bailouts.

Pension funds become underfunded automatically when the interest and dividends they get paid shrink. In order to bring up income they need to invest more. Neither the companies nor the pensioners are doing that so there is a shortfall. So when interest rates go down, someone must invest more money to earn the interest required to pay to the pensioners. Nobody is making that investment.

Example: If interest rates were 6% when the pension funds made commitments to retiring employees and the amount of money promised those retiring employees just happened to be $60,000, the pension fund would need $1 million invested (over simplifying by taking out amortization of principal). If interest rates fall to 3%, then the $1 million fund is only getting $30,000 per year. In order to raise it back up to $60,000 per year, the fund needs $2 million invested at 3% to stay fully funded. Without additional contribution, there is a $1 million shortfall.

Right now interest rates, manipulated as they are have never been lower which means that pension funds are getting less income than they were getting before, and since nobody is putting in more money to cover the difference the pension fund is underfunded.

When pension funds must declare the losses on mortgage bonds they will be far more underfunded than currently appears and the amount received by each pensioner will be slashed. Say thank you to Wall Street for that.

Curious coincidence: This same analysis applies to the tier 2 yield spread premium grabbed by the investment bank under false pretenses from investors. For purposes of this article you can spell investor as “Pension Fund.”

When the fund manager for the pension fund gave the investment banker $1 million in our example above, he was expecting a 6% return on investment.

But in the most unbridled breach of trust ever recorded in Wall Street history, the investment banker instead invested half the money at twice the rate.

So they only funded $500,000 in “mortgage” loans carrying a nominal interest rate of 12%, even though they had received $1 million and they pocketed the other $500,000 as “trading profits.”Anyone with any investment knowledge understands that this was (1) an immediate loss of $500,000 to the investor (Pension Fund) and (2) a probable loss of the other $500,000 or most of it after the obvious market crash this would cause.

Of course the people accepting those 12% loans were extremely poor credit risks and were literally guaranteed to default.

So Wall Street took the other half of the money they stole from the pension fund, unknown to the pension fund manager, and bet against the mortgages that were underwritten.

Instead of making the pension fund the beneficiary of that protection the investment banker made himself the beneficiary of the insurance, hedge or credit default swap.

And instead of informing the pension fund manager of the loss in a report in which the fund manager could detect what was really happening, the banks announced that the BANKS had suffered trillions of dollars in losses that never happened except in the mythical world of “cash equivalent” derivatives.

So if you are looking for the rest of your pension income you were promised, you can find it on Wall Street.





Public outrage turns spotlight on bank regulators

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Editor’s Comment:  

It has taken six years for the public to absorb the enormity of the bank scandal, the lying, cheating and stealing. Now the spotlight is finally turned on the regulatory agencies whose employees shuttle back and forth between the agencies and the banks. They work for the banks, then they work for the agency that is supposedly regulating the bank. They work for the agency, then they work for one of the banks or bank associations regulated by that agency.

It isn’t the fault of the public, and it is only partly right to blame the press. The enormity was made possible by making the crimes so complex and hidden in the shadow banking system that the information and explanation took six years to come out. If the regulators were truly regulating instead of setting up their next job, the shadow banking system would not exist and there would be nonsuch thing as an off-balance sheet transaction.

If regulators were doing their job the shadow banking system could never have grown to ten times the real money banking system which is now scaring the crap out of everyone. The transparency required by existing law would have been enforced, which would have made it impossible to take the money of investors (depositors) and apply it on the Bank’s whim for the benefit of the bank instead of for the benefit of the investors. They couldn’t have sold the loan products multiple times without everyone knowing about it. They couldn’t have claimed the losses of the investors as their own for insurance bailouts, and then make the investor absorb the losses created by an intentionally corrupt system of loan underwriting.

Using industry standards as they existed for centuries, we would not be staring down the barrels of a shotgun, with one barrel containing the documentation of a transactions that never occurred and the other barrel carrying financial transactions that did occur but were never documented. The gap was a playground for bank criminals, as we are now seeing with increased clarity each week.

So who is to blame? There is plenty to go around. But those who make laws could fix the problem in a moment by prohibiting employment shuttling, in addition to the standard payoff or bribe. The promise of employment is a bribe. And that is why under current laws the banks and the individuals employed by the regulatory agencies who conspired with them can be sanctioned, indicted, tried, convicted and sentenced torsion and required to disgorge I’ll-gotten gains. This would release more than enough money to reduce all household debt including mortgages at the expense of the culprits who fixed the appraisal prices and suckered innocent people into really bad deals.

And just like Iceland, we could be enjoying renewed Economic growth, increased spending, decreased unemployment and restoration of a market that is free and fair. If you take the referees off the playing field and leave it to each player to make and change the rules as they go along, you can ALWAYS expect chaos and criminal conduct. The cry for less government interference or less government regulation can fairly be translated as PLEASE KEEP US OUT OF JAIL.

Bank Scandal Turns Spotlight to Regulators As big banks face the fallout from a global investigation into interest rate manipulation, American and British lawmakers are scrutinizing regulators who failed to take action that might have prevented years of illegal activity. 

Politicians in both London and Washington are questioning whether regulators allowed banks to report false rates in the run-up to the 2008 financial crisis and afterward. On Monday, Congress stepped into the fray, requesting information about the role of the Federal Reserve Bank of New York, according to people close to the matter. 

The focus on regulators and other financial institutions has intensified in the last two weeks after the British bank Barclays agreed to pay $450 million to resolve its case. British and American authorities accused the bank of improperly influencing key interest rates to deflect concerns about its health and bolster profits. 

The Barclays settlement is the first action stemming from a broad investigation into how banks set key benchmarks, including the London interbank offered rate, or Libor. The pricing of $350 trillion of financial products, including credit cards, mortgages and student loans, is pegged to Libor and other such rates.

Barclays Chairman Criticized in Parliament Over Rate Scandal During tense parliamentary testimony, Marcus Agius, Barclays’ chairman, was repeatedly questioned about the leadership and culture at the bank in the wake of the Libor scandal.

Diamond to Forgo Up to $31 Million in Bonuses From Barclays Robert E. Diamond Jr., the former chief executive of Barclays, will forgo deferred bonuses of up to $31 million, as the British lender looks to quell public anger over an interest rate-rigging scandal.





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