August 19, 2009

The Engineered Housing Bubble and Mortgage Scam: Americans Lost Over $2 Trillion in Retirement Assets and $2 Trillion in Home Value

By a huge margin, the largest owners of residential mortgages in the world are Fannie Mae and Freddie Mac. Whether we like to admit it or not, the entire market for housing in the United States has been corrupted by government involvement. By subsidizing the availability of credit and by granting huge tax incentives to home speculators, the government helped finance the biggest bubble of all — the biggest bubble in history. - Historic Financial Collapse Underway?, Seeking Alpha, July 20, 2008

The GSEs, Fannie and Freddie had to be kept afloat to create the real estate bubble and to collapse the economy. They were used to stem lack of market liquidity and create the perception that plenty of money and credit were always available. This led to housing inflation... Our government, Wall Street and banking are perpetually engaged in fraud. We ask what do you call nationalization such as Fannie Mae and Freddie Mac five years after they were insolvent? Then the continual fraud of issuing mortgages to those who are unqualified to have them insured by Fannie, Freddie and the FHA. Our CFTC, SEC and other government agencies are all looking the other way as massive fraud is committed by JP Morgan Chase, Goldman Sachs, Citigroup and others... The next fraud could be US property being given to foreign governments in exchange for worthless bonds from the US Treasury, Fannie, Freddie and the FHA... Crime will continue on Wall Street, in banking, government, insurance and among other elitist corporations until the dead system collapses. - Crime, Corruption and Collapse on Wall Street, The International Forecaster, March 11 2009

Americans have recently lost over $2 trillion in their retirement portfolios and $2 trillion in the value of their homes. It is no coincidence that loose lending standards started around 2001 and a new bankruptcy law went into effect in 2005. The easy money via loose lending was necessary to create the housing bubble from 2002-2007, and the new bankruptcy law makes it much harder for households to get out from under their consumer debt and is contributing to the rise in foreclosures across the country. The financial oligarchs have engineered a global economic collapse to usher in a global currency and global government under their control.

Banks Bungle Foreclosures, But We’ll Suffer

October 12, 2010

There’s a joke I like to make to rookies before we go live on our News Hub shows. After the new participant counts to 10 for an audio check, I usually say, “You have passed the exam to become a mortgage banker.” Watch the News Hub. It turns out that’s closer to the truth than most of us ever realized.

Judging by the failure of big banks to get their foreclosures in order, someone who can count to 10 might be overqualified.

What other conclusion can one come to after the wave of moratoriums placed by major banks on their foreclosure proceedings? GMAC, J.P. Morgan Chase & Co. and PNC Financial Group Inc. have halted proceedings in 23 states. Bank of America Corp., living up to its desire to be a national bank, has stopped proceedings in all 50 states.

It’s a humiliating, time-consuming and costly mistake by the banks, and a kind of karmic justice. But their bungling is going to cost us and our economy, as the housing market and people desperate to start anew try to recover.

At issue is “robo-signing,” where bankers signed off on mortgage documents saying they’ve read and understand them — as many as 18,000 a month. Read story on the “robo-signer” controversy in the banking industry.

Sorry, but as judges have pointed out, no one can read a single mortgage document in a day, much less hundreds of them. Now, the banks have to go back and read those tomes of legal gobbledygook and try to make sense of it.

“We haven’t found any errors,” said Brian Moynihan, Bank of America’s president and chief executive. “It’s technical issues and we’re doing our homework.” See story on B. of A.’s decision to halt foreclosures.

‘Unrealistic gains’

Some say the foreclosure halt will be good for housing. Cheap homes won’t be flooding the market. Also, borrowers will be able to save money by staying in their homes as the process drags out, and other borrowers may be able to get current with added time.

But that’s a short-term view. For most borrowers, foreclosure is going to come eventually. Chances are, if a homeowner was unable to rework a loan, they’re not going to be able to do that now. Those homes are going to hit the market eventually, putting more pressure on home prices.

The reality is most Americans who bought during the last decade have an unhealthy amount of personal wealth tied up in their homes. A study by the Congressional Budget Office in 2007 found that rising home prices gave consumers confidence to spend even though household income was flat or falling.

The CBO’s report ominously warned:

A worse outcome for consumer spending is possible if housing prices fall significantly or if some current spending is based on unrealistically optimistic expectations of future gains in home prices.”
At the time, Americans were tapping into their homes like personal piggy banks and using home-equity lines like savings accounts. Borrowing from home values represented 10% of disposable income in 2005, compared with just 2% in 1995, the CBO said. Read the Congressional Budget Office’s report.

Three years after the report came out, it’s safe to say that the CBO understated the effect. Having lost wealth via their housing, Americans are spending less and saving more. The savings rate was 5.8% in August, up from just 1% five years ago, according to the Bureau of Economic Analysis.

In other words, there couldn’t be a worse time for bank blundering to gum up the housing market. Read WSJ story on foreclosure woes on economy.

Mortgage mess

But it shouldn’t surprise us. During the last 15 years, mortgages were put on steroids. Subprime, pay-go, ARMs and other easy-money loans washed over the country. Many borrowers never understood what they were getting into, even when mortgages were relatively simple.

“Consumers are often not able to use the available information to their advantage,” a Harvard study found in 1999. “In many cases, they do not understand financial transactions, or lack confidence about financial issues. Consumers are also likely to underestimate the risks associated with mortgage loans, despite the information they receive from the lender.” Read the Harvard University study on predatory lending.
The main culprit? The confusing, legal mumbo jumbo that home buyers are presented with when they buy a home. It may not be “predatory lending,” but it ain’t easy either.

Given that foreclosure is a costly process — and it could be very costly for banks should they be fined $25,000 for every mortgage using fraudulent paperwork, as many state attorneys general are recommending — banks need to consider alternatives.

One possibility suggested by Wharton Business School’s Alex Edmans would be to offer a bonus to borrowers who repay their loans. Another, proposed by Columbia University’s business school dean R. Glenn Hubbard and vice dean Chris Mayer, would be to offer a massive government-backed streamlined refinancing program. Read the Hubbard-Mayer proposal.

Homeowners should learn their lesson too. They should quit using their homes as credit cards to buy flat-screen TVs and trips to Disney World.

Ultimately, the new Consumer Financial Protection Bureau should simplify the mortgage process. Everyone should know what they’re getting into.

Easy as 1-2-3 would be nice, but for a start, let’s see if we can get everyone to count to 10.

Homeowners Tell How Banks Failed to Modify Mortgages

By Kevin G. Hall, McClatchy Newspapers
August 16, 2009

Nearly three years into the deepest U.S. housing slump in generations, lenders are modifying only a small number of problem mortgages, and rising foreclosures are restraining the economy's recovery.

The Obama administration has stepped up pressure on lenders and their mortgage servicers, who act as bill collectors on behalf of investors who own mortgage bonds. The administration on Aug. 4 unveiled the first of what will be monthly "name and shame" exercises, publishing data on the loan-modification efforts of about three dozen companies.

The administration thinks that about 2.7 million U.S. homeowners are at least two months behind on their mortgage payments, roughly equal to the population of Kansas. Yet only 9 percent of eligible borrowers had been offered trial loan modifications through June.

McClatchy's Washington Bureau received calls and e-mails from borrowers across the nation in response to a recent story about the "name and shame" effort. In subsequent interviews with them, a common theme emerged: Virtually all say they were encouraged, directly or indirectly, by their lenders to fall behind on their mortgage payments in order to qualify for loan modifications. Then the modifications never came, however.

These borrowers burned through retirement savings, destroyed their credit ratings and suffered mental and financial hardship. Here are some of their stories:


A work-from-home psychotherapist and Realtor, Helen Rudinsky, who's now 53, bought property in the nation's capital in June 2004. At the height of the housing boom, she took out an interest-only loan, offered for pricier homes and marketed as virtually risk-free because of climbing home values.

A few years later, she gave birth to a boy who was diagnosed with autism. She's temporarily moved to Bend, Ore., seeking easier access to expensive testing and therapy for her child.

Rudinsky contacted Wells Fargo last October about mortgage options because her payment of $2,500 a month was set to leap by $1,000 this August. She said that a Wells Fargo employee advised her that only loans that fell behind on payments were reviewed for modification.

Rudinsky had never missed a payment, had a credit score of 770 — anything higher than 600 is considered good — and put down $130,000 when she bought her home, clear evidence that she was a reliable customer. She took the employee's response as a suggestion to miss payments, and as a solution to her problem.

"I got behind, and then it spiraled out of control," she said.
Assigned a loan negotiator, Rudinsky called many times a week but got nowhere. She followed a checklist to ensure that all necessary documents were with the lender, but it was never enough, she said.

"Every time I call them, they either say they need more documents or that I am fine and I should hear from them," Rudinsky said. "I've talked to over 50 Wells Fargo people around the country, and I am starting to wonder if I will ever get anywhere."
In May, she was told that she was approved for a program with interest payments potentially as low as 2 percent, she said. More documents, more back and forth, and Rudinsky said she was assured that things were on track and that the foreclosure process was on hold. To her shock, nearly 10 months after her initial call to Wells Fargo for help, her home suddenly headed for auction. Her frantic calls and e-mails were ignored.

The sale was scheduled for 10:15 a.m. Aug. 4. Rudinsky raided her retirement funds to pay $30,795 in a last-ditch move that saved her home minutes before the auction. Days later, Wells Fargo called again, demanding that she make good on her loan or lose her home, she said.

"I don't know what to do anymore. I feel like Alice in Wonderland, because whatever you do, it isn't enough," Rudinsky said. "It's so absurd. It feels like a Third World country. I can't believe this is happening here in the United States."
Wells Fargo had modified just 6 percent of its eligible loans through June. Kevin Waetke, a spokesman for Wells Fargo, declined to comment on the specifics of Rudinsky's case but denied that the company encouraged mortgage delinquency.

"I can assure you that Wells Fargo has comprehensive training in place, we have this guidance readily available and we advise customer service representatives to tell them to make their payments," Waetke said.

In 2001, sales representative Cynthia Steigner, who's now 51, bought a three-bedroom 1927 home in Riverside, Calif., using a conventional 30-year fixed-rate mortgage. When the economy soured late last year, she lost her job and couldn't pay her bills. She contacted her lender, IndyMac, and was told that she'd get no help until she fell four months behind on payments, she said.

"I needed the help then, not four months later," Steigner said. Nevertheless, she followed instructions, fell behind and still got no help, she said. Instead, she filed for personal bankruptcy. Once the courts completed her case early this year, her lender sought her out to discuss a modification again.

The Federal Deposit Insurance Corp. had seized IndyMac in July 2008. Its mortgage assets were transferred to OneWest Bank last March. The new lender sent Steigner a loan-modification agreement May 6. It offered a new mortgage payment of $1,093 a month, a reduction of almost $500.

Steigner sent two months of payments in a bank-drafted certified check dated May 22. On June 8, it was returned with a letter that said the bank draft had to say "cashier's check."

Steigner had the check reissued as an official cashier's check and sent it back. It was returned to her again on June 25 with a letter that said that the loan modification campaign had expired.

Soon after, a note was posted on Steigner's front door that said that her home would go to auction Aug. 13. She hired an attorney late last month and threatened to sue OneWest Bank for breach of contract. After that and queries to the bank from McClatchy, her home was pulled off the block on Wednesday, though it's still at risk of being sold.

"They gave me the loan modification, and then they reneged on it, and now my house is going to auction. And it puts me through the ringer," Steigner said. "It's the daily chase: What do I have to do to get them to hear me?"
OneWest Bank doesn't have its own spokesman; it hired the San Francisco-based public relations firm Sard Verbinnen for that.

"She was denied because she did not return a signed modification agreement," said Diane Henry, the hired spokeswoman.
"That's not true," said George Bosch, legal administrator for Edward Lopez Law Offices in Los Angeles. Bosch provided a copy of the signed letter and the FedEx receipt for when it was shipped.

Henry also said that Steigner's case was complex and was being "re-reviewed."

Meanwhile, if she loses her home, Steigner fears, it'll be the last one she owns.

"Am I ever going to buy another house? Am I going to be able to? I can't start over," she said. "There are no jobs, no nothing."

Phil Stubblefield, 61, arrived in loan-modification hell quite by accident. His ex-wife died of heart failure April 20, and her Sacramento, Calif., home and Countrywide mortgage passed to their daughters, one of whom was in college and the other starting medical school. As students, each had limited income.

Stubblefield reached out in May to Bank of America, which had bought the disgraced Countrywide in January 2008, as it faced bankruptcy because of problems with its loan portfolio. Stubblefield sought to modify the loan on the property in order to stay current amid unusual circumstances.

"Virtue was met with no help at all. The only recommendation was, 'We can help you when the loan goes into default,' " said Stubblefield, an Amtrak train conductor in California's capital. "That's when I said, 'That's easy; then they'll talk to us.' "
After the mortgage payment became two months late in June, the girls started receiving what Stubblefield dubs "nasty-grams." Getting authorization to speak for his daughters, he tried to negotiate a lower interest rate to reduce payments enough for him to help, or to have some portion of the loan forgiven.

"I was waiting for them to turn around and say, 'What can you do for us?' There was no coming together, no negotiation," he said. "It was 'Sell the house,' and that's when I came back and said, 'Don't you read the newspapers? There are 40,000 foreclosures in Sacramento and a 19-month turnaround on (real estate) listings.' "
What especially irks Stubblefield, who worked for eight years as a mortgage broker, are the comments from lenders that they're doing everything possible to keep people in their homes and out of foreclosure.

"It comes off to me that it's just window dressing and speech that doesn't translate to anything," he said. "No action."
Stubblefield's ex-wife had a mortgage payment of about $1,850 a month, more than half of her take-home income from a state government job. Until lending standards became unhinged from 2004 to 2007, conventional wisdom was that lenders wouldn't underwrite loans with payments that exceeded 35 percent of borrowers' take-home pay.

"They put her in a loan to begin with that was guaranteed to fail," Stubblefield said.
A Bank of America spokesman took Stubblefield's loan information from McClatchy but didn't comment.


Frank X owns the "worst house in a nice neighborhood" in a New York suburb. He and his wife are Wall Street veterans, and they shared their plight only on the condition that their surname be withheld in order to protect their privacy. His wife didn't want her first name used, either.

The 40-something couple bought a three-bedroom ranch house in February 2004 on a "pick your pay" loan that allowed them to choose each month whether to pay just interest or principle also. The original payments were around $1,800 a month, but have ballooned to $2,908.

Three years ago they had a son, and his wife went on maternity leave. She later returned to work part time just as the bottom started falling out of the financial sector. Her hours were slashed. Frank, a financial consultant who works from home, also saw his income drop with the slump, and he feared that his wife might get laid off.

Late last year, they contacted Wachovia, a national bank based in Charlotte, N.C., that Wells Fargo purchased around that time, to see what could be done in case of a layoff.

A bank representative, Frank said, suggested that they miss a couple of payments in order to qualify for loan modification with an interest rate as low as 2 percent. With a credit score in the 700s, they found the suggestion unattractive.

However, they'd lost more than half their income, lacked enough equity in the home to refinance and their daughter was about to head to a state college, downsizing dreams of private school. The couple took a leap of faith and stopped paying; they haven't stopped falling yet.

"Every month that I called back, we're told something is going to happen," Frank said with a New York edge in his voice.
In June, they were told that programs were being set up for people "exactly like you with good payment histories."

What was offered, however, was a lower payment for only three months, followed by a big balloon payment and a drop in their credit score. They said no thanks.

In late July, Frank was promised that a new program would be out in days. Then it was to be August; now, maybe September. His wife asked the mortgage servicer to stop calling her office because she lacks privacy to discuss the matter, yet threatening calls keep coming to her there several times a week.

"I've been promised and promised and promised. I've robbed Peter to pay Paul, and we're still in this situation," Frank said. "If what their own representative told me (last year) was true, they would have already done something for me."
47 percent of South Florida homeowners underwater on mortgages
BofA, Wells Fargo get low marks on mortgage modifications
41 people indicted in Florida in scheme to inflate mortgages
Fed plans consumer-friendly changes to mortgage rules
Mortgage program helping few borrowers
Illegal Immigrants Used Fake IDs to Take Out Mortgages Now in Default
Wall Street Titans Use Aliases to Foreclose on Families While Partnering With a Federal Agency
Soldier in Iraq Loses Home Over $800 Debt
Frank Data: How Federal Policy Triggered the Mortgage Meltdown
Central Bank Hid Housing Market Crash Forecast
DOJ: Nearly 500 arrests in mortgage fraud probe

Updated 6/17/10 (Newest Additions at End of List)

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