Articles Posted in Debt Defense

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.”

Mortgage Electronic Registration Systems, MERS, is a mortgage database that was created in the mid-1990s by the nations’ top financial institutions and mortgage lenders.  Back then, a few county level elected officials, who were tapped with the responsibility to guard the integrity of their local land records, voiced deep concerns over MERS.  Those few dissenters were ignored or silenced.  MERS was, and remains, a crucial player behind the financial crisis, the foreclosure crisis, and the plunder of America’s pensions and retirement savings which are invested in mortgage-backed-security bonds.   Go here for information on how to check your own mortgage for MERS infection.
A great primer on MERS was written by Michael Powell and Gretchen Morgenson at NYT.com on March 3, 2011, MERS, It May Have Swallowed Your Loan here.

Never heard of MERS? That’s fine with the mortgage banking industry—as MERS is starting to overheat and sputter. If its many detractors are correct, this private corporation, with a full-time staff of fewer than 50 employees, could turn out to be a very public problem for the mortgage industry.

Following the 1929 Wall Street Crash, the U.S. economy had gone into a depression, and a large number of banks failed. The Pecora Investigation sought to uncover the causes of the financial collapse.  Lasting from 1932 through 1934, and named for the Commission’s fourth and final chief council, Ferdinand Pecora, the Commission experienced a rocky political course but prevailed to uncover massive financial fraud and crimes.  The Commission’s findings were highly educational and formed the basis of many Congressional legislative moves that were enacted to prevent a subsequent crash.  In 1999, a key piece of this legislation was repealed in response to decades of heavily, well funded lobbying efforts on behalf of the financial industry.  Less than ten years later, America experienced a similar Wall Street crash based on much of the same conduct that was investigated and exposed by the Pecora Commission.

Most of our elected officials today don’t have the political will to form a strong, well funded foreclosure fraud (and mortgage-backed securities) investigative commission that would mirror the work of the Pecora Investigation.  We’ve seen a few good Congressional reports on the financial crisis, the most notable being the Levin-Coburn Report.  There have been some excellent reports out of the HUD Office of the Inspector General.  The rest of the governmental investigations and reports have been weak, inaccurate, subject to partisan bickering, or worse, whitewashed to ban words such as “Wall Street” and “shadow banking.”  Those employed at government oversight agencies who do wish to uncover and expose the fraud and it’s impact on the American people are often ostracized, fired, intimidated, or silenced like Neil Barofsky former inspector general of TARP fraud, Lam Pham, fired economist at the Congressional Budget Office, John Kelleher who “resigned” from the Nevada AG’s foreclosure fraud task force, and the two ousted assistant attorneys general in Florida, June Clarkson and Theresa Edwards.

In January 2012, President Obama announced during his State of the Union Address that he was establishing a Residential Mortgage Backed Securities Working Group.  This announcement was met with great fanfare, but eight months have passed and the nation has not heard anything meaningful about this working group’s efforts or accomplishments since Obama’s January 2012 speech.

If at any time since the year 2000, you purchased an American home financed with a mortgage, you most likely will have a MERS(Mortgage Electronic Registration Systems) or MOM(MERS as Mortgagee) Mortgage. If you are in South Florida, you can look up mortgages online on the following County Official Records websites:

Palm Beach County 

Broward County

William Edinger, 44, and his wife, Laura Mannetta, 35, moved their son, Billy, 12, and two daughters, Jessica, 10, and Melissa, 2, to a hotel, when they could no longer afford their $975-a-month home. Jessica often asks if she will go back to her school. “We tell her the truth, that we don’t know when we are moving. She gets upset and angry. We are lucky the other two don’t understand,” Mr. Edinger said.

With limited space to play safely outdoors, the children stay inside with their parents.  Jessica drapes the window curtain over her to create a temporary room for a moment of privacy.

http://www.nytimes.com/slideshow/2012/08/24/sunday-review/2012826HOMELESS.html?smid=tw-share#5

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