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Articles Posted in Debt Defense

The 2008 bailout of the American financial industry was based on a law enacted by Congress, Emergency Economic Stabilization Act of 2008 (TARP).   Under rushed and pressured emergency conditions, Congress passed the legislation with very little understanding of why the economy was crashing.  There was a sense that the housing boom had something to do with the urgent need for a bailout, so provisions were added that required the bailout trickle down to millions of American homeowners who were given suspect mortgages.  The spectacularly failed mortgage modification program now known as HAMP is part of this law.  HAMP was authorized by sections 101 and 109 of the Emergency Economic Stabilization Act of 2008, which was later amended by 7002 of the American Recovery and Reinvestment Act of 2009.

Because no help was actually extended, most do not realize that the bailout law demanded real relief to the American people not just the financial industry.  To this day, the funds earmarked to help hardest hit families have largely gone unspent.  Programs, presented as a last hope and help, like HAMP, are now being exposed as a way for banks to deplete savings, 401k, and other assets from millions of families.  HAMP leaves families worse off more often than not, owing more, trapped in a home with higher mortgage debt and worse loan terms in the long run.  Sheila Bair, before she stepped down as the chairman of the FDIC, was an outspoken critic of chain of title problems caused by mortgage banking fraud and other foreclosure fraud tactics.  She even called for a Superfund to help American families who have saddled with unsustainable, fraudulent, toxic mortgages.

Bair’s new book, “Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself,” explains that HAMP was intended to cheat borrowers, to string them along and drain their savings and eventually foreclose on their homes.  This truth is even more strongly echoed in Neil Barofsky’s recent book, “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.”  In Barofsky’s book, he explains how it dawned on him that the post-bailout goal of the U.S. Treasury was to allow banks to take dwindling wealth of American families while offering false promises of loan modifications all in a continued effort to increase the banks’ health and value.  Barofsky’s realization came to him during a contentious conversation he had with Tim Geithner, the Secretary of the Treasury, when Geithner expressed satisfaction that HAMP was allowing banks to coast gently down after the financial crisis instead of crashing since the American families “foamed the runway” for the banks.  Later, Geithner blocked attempts to use TARP funds to help families cover legal costs to defend against fraudulent foreclosures.

It’s election season.  Every single Florida lawmaker is up for reelection this year because this is a redistricting year.  The Florida House, Florida Senate, and US Congressional district lines were redrawn after the release of the population and demographic data from the 2010 census.   Redistricting happens every ten years after the census is done.  Then each lawmaker has to run for office to represent the newly drawn district.

This presents a unique opportunity for Floridians. For three years in a row now, the Florida legislature has attempted to pass laws that will erode the rights of homeowners and tenants by legalizing a fast, sneaky way for banks to declare homes “vacant” or “abandoned”, change locks, remove possessions, and evict the residents.

Bank friendly elected officials in the Florida House and Florida Senate introduce these bills with names that hide the true intent of the legislation.  In the 2010 legislative session, the bill, introduced by Tom Grady (R-Naples) was called the “Homeowner Relief and Housing Recovery Act.”  Representative Kathleen Passidomo (R-Naples), who replaced Grady as Naples’ Florida House representative, carried on Grady’s legislative legacy by introducing similar non-judicial foreclosure legislation in 2011 and 2012. Those bills also failed, but only after statewide citizen engagement, demonstrations, and protests.  Look out Florida.  Passidomo is running in hopes of being re-elected against a challenger, Peter Richter.  Another Florida House lawmaker who supports legalization of foreclosure fraud is George Moraitis, JR., (R-Ft. Lauderdale).

David Dayen has a fantastic post up on debunking all the much celebrated recent good news in the media on housing issues.

Headlines proclaim home sales are up, prices are up, bidding wars, realtors going door to door begging people to sell, inventory down, home-builder industry exuding “confidence”.

On the ground, we know what’s going on.  And it is not hordes of families lining up to buy homes.  Please.  That is so 2005!   In fact, in 2011, mortgage loan lending was at it’s lowest since 1995.  The banks blame this on poor credit worthiness, which they neglect to connect to the harm done to the American people in the wake of the financial crisis.  The median American family is facing a terrible loss of wealth, a 40% plunge from 2007 to 2010.

The dearth of meaningful solutions to the housing crisis has local officials considering a complex, controversial loan modification proposal that has piqued the interest of several municipal governments across the nation.  The proposal has a component that taps into local government’s constitutional authority and power to take private property for a public purpose upon paying fair compensation.  Mortgage Resolution Partners (MRP), a San Francisco investment firm, is busy networking with local government officials in several cities to inform them of this unique and creative approach to principal reduction modifications for underwater mortgage loans. MRP already met with controversy prior to introducing their profit-making eminent domain idea.  Phil Angelides, the former California state treasurer and former chairman of the Financial Crisis Inquiry Commission, a federal commission set up to look into the causes of the financial crisis, was one of MRP’s founding members.  Starting in late 2011, MRP was seeking six million in start-up capital for their group’s plan to turn a profit by investing in distressed mortgages and had touted its political connections as part of its “secret formula” for negotiating deals to buy distressed mortgages.  By February 2012, Angelides stepped down when his obvious conflicts of interest were questioned by journalists and officials.

One of the most hotly contested issues in the current proposal is its restriction to performing, current but underwater mortgage loans.  The proposal seems silent on delinquent loans, loans in foreclosure, and homes with a second mortgage.  The proposal may specifically exclude mortgage held by the government sponsored entities (GSEs), Freddie Mac and Fannie Mae.

This afternoon a U.S. House panel will convene to discuss the threatening ultimatums issued by financial industry groups to the local officials who are exploring the option of eminent domain to address the housing crisis in their cities.  The panel will not be live-streamed or videoed but U.S. Rep. Maxine Waters’ staffers may tweet from the conference room from twitter handle @MaxineWaters.  The financial industry has a long established pattern of bullying elected officials and judges when they fear regulation or interference.  A notable example is how, a decade ago, banks did an end run around states that tried to enact laws aimed at protecting their residents from predatory lending practices.  The strong anti-bullying programs established in American schools should serve as good models for removing any aggressive and harmful financial industry presence that puts American families at risk.

Amy Johnson, now 93 and facing foreclosure, thought the loan she purchased from Lehman Brothers, the now disgraced and defunct investment bank, was a fixed mortgage loan for $140,000.  She and her late husband hadn’t had a mortgage on the home since they’d paid it off sixty years ago.  After her husband died, she was struggling to make ends meet.  The loan turned out to be an adjustable rate mortgage for $750,000.  And the money appears to have gone missing.  Johnson has no memory of what happened to the three quarters of a million dollars.

Think about this.  A mortgage broker closed a deal with a woman in her mid-to-late eighties.  He/She probably earned a hefty (probably tens of thousands of dollars) commission by duping a financially strapped elderly widow into an adjustable rate mortgage loan $750,000 presumably with a twenty to thirty year term.  This is the pinnacle of predatory lending.   Here in South Florida, many seniors were likewise targeted, falling victim to the same practices.  Many have already lost their homes or are currently facing foreclosure.

Investors like pension funds or municipalities were enticed by slick commission based Wall Street hucksters to invest millions in the fraudulently rated mortgage-backed security bonds that were backed by thousands of such predatory mortgages.  This is where much of America’s retirement savings and public funds went.  The bonds sloshed through four to eight financial institutions on the way to the pension fund investors.  Each financial institution earned fees and commissions, taking their cut then and several continue to take their cut now, servicing mortgage loans and processing fraudulent foreclosures in the most fee-laden method that keeps the last bit of bond money flowing to the financial institutions until the well has completely dried up.

Professor Mary K. Ramirez wrote a white paper in 2011 titled Criminal Affirmance.  She writes, “Recent financial scandals and the relative paucity of criminal prosecutions in response suggest a new reality in the criminal law system: some wrongful actors appear above the law and immune from criminal prosecution.  As such, the criminal prosecutorial system affirms much of the wrongdoing giving rise to the crisis.  This leaves the same elites undisturbed at the apex of the financial sector, and creates perverse incentives for any successors.  Further, this undermines the legitimacy of the rule of law and encourages even more lawlessness among the entire population.”

Americans across the nation are waking up to the fact that police, prosecutors, law enforcers, and regulators refuse to protect the American people from the biggest consumer fraud ever committed.  This fraud covers a wide range of damage from draining billions from pension funds to millions of fraudulent foreclosures.   The highly lucrative nature of these crimes coupled with the lack of deterrents act as an accelerant, flaming the fraud.   Neil Barfosky, the former TARP inspector general fraud watchdog, recently released his book Bailout, a shocking account of the inclusion of a Treasury sanctioned bailout component that allows banks to extract and otherwise deplete wealth from millions of American citizens; homeowners, tenants, retirees, pension and 401k investors, etc.

The policy of criminal affirmance has led to a skyrocketing number of headlines, articles, and reports about unfunded pensionsunprosecuted real estate crimes, fraudulent foreclosures, and lawsuits by those groups who were scammed into purchasing fraudulent mortgage backed investments.   Two of the many variants of foreclosure fraud have been in the national media just this week, Wells Fargo is only one of the bad actors, but currently is the bank du jour on this week’s crime spree menu.

Six Easy Steps to a Government of the Banks, For the Banks, By the Banks

  1. Maintain a spinning revolving door between big finance and legislators, law enforcers, and regulators to ensure friends are in powerful positions.
  2. Fund an army of lobbyists ready to provide rapid-response, detailed, Wall Street-friendly analysis of proposed legislation and regulation (here,herehere,here, etc).

Our elected state officials (49 State Attorneys General) and appointed banking regulators (FDIC, Fed, OCC, Treasury) have already sold out the American people with a farcical, weak, and insulting settlement with Chase, Wells, Citi, BoA, and Ally/GMAC.  Now those same farcical, weak, and insulting terms seem to be under consideration with more financial institutions.
We’ve seen how the first five banks are using the settlement to get billions in credits for doing short sales that don’t actually offer much relief to families struggling to save their homes.  That’s essentially free credit to pay down the $25 billion in penalities for the biggest consumer fraud ever to be perpetrated on the American people.  Since that’s working out so well for those five banks which already signed settlement agreements, bring on the next set of criminals who are reported to be resisting even this slap on the wrist deal.
Read more of the article titled “Four banks including PNC preseed to settle charges over botched foreclosures” by Bloomberg News here.  The newest list of financial institutions who are attempting to moon walk away from the scene of their crimes is U.S. Bankcorp,  PNC Financial Services Group Inc., Suntrust Banks, Inc., and HSBC Holdings.

America’s economic crash was caused by financial industry middlemen.  They sold hundreds of mortgage-backed investment scams to pension funds, 401k managers, municipalities, non-profit endowments, and international investors like small towns in Europe.  The investment scams, bonds based on fraudulent ratings and assurances of soundness, seemed to be a safe, secure a way to earn money.  In reality, these investment scams were, and remain, a complex fraud that gravely harmed the families with deeply underwater mortgages and the bond investors..  The middlemen made, and continue to make, a bundle in fees while shifting costs and accountability on to other parties; homeowners, investors, municipalities which are crushed by the plummet in property tax revenue caused by the crash of property values.

This massive financial fraud lead to many of the nation’s current ills; the bailout,  39% decline in net worth, increase in poverty. and of course the foreclosure fraud crisis.   Governor Romney and President Obama have not addressed the true cause and effect of the financial crisis nor have the Democratic and Republican parties offered any meaningful campaign platforms.  The one candidate to prioritize this issue to a level commiserate with the harm done to the American people is a practically unknown Green Party candidate, Jill Stein.  Ms. Stein was recently arrested protesting Fannie Mae foreclosures.  She chose as her running mate Cheri Honkala who, last year, ran an unsuccessful campaign for Philadelphia Sheriff during which she promised to halt evictions based on fraudulent foreclosures.

Grassroots citizens groups are gathering momentum in hopes of forcing the major party candidates to address this issues.  Signs of this can be seen New Bottom Line campaign called Home Is Where the Vote Is to mobilize underwater homeowners as a political force and, in another development, protesters traveled this week to the Democratic National Convention to voice their deep concerns.  One of the DNC housing crisis protesters summed up his views, which are echoed by millions of his fellow Americans, “I’m actually quite disgusted with both parties. I think they’re captive of the big banks and the financial interests of this country.”

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