This morning, this was the banner headline just under the masthead, resplendent with a full-page photo running under it, over at HuffPo: "
'Robo-Signer' Foreclosure Scandal May Threaten Fundamental Financial Stability, Government Watchdog Warns."
In it we learn that, for all intents and purposes, while Wall Street is still teetering on the brink of implosion, as it has been for the past couple of years, the federal government--while claiming otherwise, to the point of downright bullshitting the public about it--really isn't too concerned about the ongoing mortgage/foreclosure fraud crisis. The reasons why that's so, however, should piss-off just about everyone who reads further.
'Robo-Signer' Foreclosure Scandal May Threaten Fundamental Financial Stability, Government Watchdog Warns
Huffington Post
Shahien Nasiripour
11-16-10 09:20 AM | Updated: 11-16-10 09:28 AM
The ongoing "turmoil" roiling megabanks and their faulty home foreclosure practices may represent deeper, more systemic problems regarding the origination, transfer and ownership of millions of mortgages, potentially putting Wall Street on the hook for billions of dollars in unexpected losses, threatening to undermine "the very financial stability that the Troubled Asset Relief Program was designed to protect," a government watchdog warns in a new report.
Recent revelations regarding mortgage companies' use of "robo-signers" when processing foreclosure documents "may have concealed much deeper problems in the mortgage market," according to the Tuesday report by the Congressional Oversight Panel, an office formed to keep tabs on the bailout.
Those initial disclosures led big banks like JPMorgan Chase, Wells Fargo and Bank of America to temporarily halt home repossessions. In turn, all 50 state attorneys general, federal prosecutors and a host of federal agencies are probing exactly what went wrong as the industry fights to calm regulators, investors, and members of Congress by arguing the revelations represent isolated cases that are being quickly resolved...
The article continues on to note that the COP, now led by former Delaware Senator Ted Kaufman (who replaced Elizabeth Warren, after she stepped into her new role as a Special Assistant to the President), is citing a best-case vs. worst-case set of scenarios.
In the best-case scenario, "embraced by the financial industry," the panel's concerns "may prove overblown," it notes. In the worst-case scenario, the "robo-signing of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure," the panel said in its report. "In essence, banks may be unable to prove that they own the mortgage loans they claim to own."
Nasiripour's article points out that our government isn't really taking this matter too seriously. (Then again, the truth is, Wall Street doesn't exactly take our government nor our "rule of law" too seriously, either!) HuffPo notes: "While some 11 different federal agencies are investigating the matter, it's unclear just how hard they're looking. The administration has withheld critical details that would shed light on their efforts."
(The truth is, Wall Street never met a loophole it didn't like.)
Further underscoring the federal government's lackadaisical approach to this crisis, the story notes that a report issued on Monday by Government Accounting Office (GAO) states that: "...mortgage servicers' practices...have not [diarist's emphasis] been a major focus' by bank regulators at the Office of the Comptroller of the Currency and the Federal Reserve."
Nasiripour closes out his HuffPo article with commentary from Kaufman's COP urging the Treasury Department to step up its oversight of the matter and to inform the public of its findings: "Treasury so far has expressed relatively little concern that foreclosure irregularities could reflect deeper problems that would pose a threat to financial stability."
The COP also "suggested that the government perform another round of (totally worthless, IMHO) "'stress tests' to gauge whether big banks can withstand tens of billions in potential losses."
So, this all begs the question: "Why aren't the sirens going off in the Treasury Department?"
Perhaps it has something to do with the fact that Ben Bernanke's Federal Reserve can pump hundreds of billions of freshly-printed taxpayer dollars into Wall Street anytime it wishes, by simply opting to purchase more mortgage-backed securities ("MBS") from the too-big-to-fail banks, either openly, or by not-so-stealthfully redirecting quantitative easing money, accordingly. (SEE: HERE, HERE, and HERE).
Alternatively, if one was to take quantitative easing double-speak at face value, Wall Street Primary Dealers could simply buy up our government's debt, under the direction of the Federal Reserve, as planned, and simply pocket the billions of dollars in fees they'll "earn" performing these "services" to the point where they acquire enough additional revenue to pay down their mortgage fraud bill over time.
The possibilities are endless!
The fact is, Wall Street banks have put our entire economy underwater, and that's exactly where their zombie corpses lie, decomposing as we speak, even now. SEE: "How The Banks Put The Economy Underwater," Yves Smith, NY Times (op-ed), (10/31/10)
Except, ya' see, all of those hundreds (if not thousands) of lawyers for all of those Wall Street, mortgage-backed securities investors have to earn a living, too. (See story, three paragraphs, below.) Yes, the money to pay off all of those fatcats for Wall Street's ongoing fraudulent behavior has to come from somewhere! So, "Guess who's going to pay the bill for the foreclosure crisis?"
Wall Street may be imploding again, (then again, maybe not) but, one way or the other, the status quo's "got this."
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(Note: Diarist has received formal authorization from Naked Capitalism Publisher Yves Smith to reprint her blog's posts in their entirety for the benefit of the DKos community.)
More Evidence That Mortgage Loans Were Not Properly Conveyed to Securitization Trusts
Yves Smith
Naked Capitalism
November 15, 2010
We've described in various posts how evidence is growing that the participants in mortgage securitizations sometime early in this century appear to have ignored the requirements of a variety of laws and their own contracts. We believe the most serious and difficult to remedy problem results when the parties involved in the creation of a mortgage securitization failed to take the steps necessary to convey the loans to the legal entity, a trust, which was set up to hold them. As we wrote:
.... there is substantial evidence that in many cases, the notes were not conveyed to the trust as stipulated. As we have discussed, the pooling and servicing agreement, which governs who does what when in a mortgage securitization, requires the note (the borrower IOU) to be endorsed (just like a check, signed by one party over to the next), showing the full chain of title. The minimum conveyance chain in recent vintage transactions is A (originator) => B (sponsor) => C (depositor) => D (trust).
The proper conveyance of the note is crucial, since the mortgage, which is the lien, is a mere accessory to the note and can be enforced only by the proper note holder (the legalese is "real party of interest"). The investors in the mortgage securitization relied upon certifications by the trustee for the trust at and post closing that the trust did indeed have the assets that the investors were told it possessed.
It isn't simply that the notes had to go through a particular chain of parties to get to the trust. All these steps had to be accomplished by a particular date, which was generally no later than ninety days after the trust closed. And all the assets conveyed to the trust had to be "performing", meaning the borrower was current on his payments.
The evidence that the deal creators violated these stipulation is widespread. Borrowers fighting foreclosures often find the trustee can't locate the note, which should be impossible if the certifications the trustee made were accurate. Another proof of the failure to adhere to these requirements is that the note are often conveyed to the trust right before the foreclosure. This fix is impermissible for three reasons: it is far too late (years after the cutoff), it is typically directly from the originator to the trust (in violation of the requirement that it go through all the intermediary parties) and it occurs after they have defaulted (contrary to the stipulation that the loan be performing).
Some investigators have been trying to provide more convincing proof of their belief that these abuses were not merely widespread but pervasive. Lynn Syzmoniak of Fraud Digest in her November 13 entry. She looked up all the foreclosure filings in five Florida counties in the month of October 2010. I've boldfaced her key findings:
Wells Fargo Bank was the bank that filed the most foreclosure actions in five South Florida counties in October, 2010..... The majority of these cases were filed by Wells Fargo as Trustee for mortgage backed trusts. In every case involving a trust, the original mortgage assignment to the trust was missing. Wells Fargo used Assignments prepared years later - most often within a few months of the foreclosure - and often prepared AFTER the foreclosure was filed. In many cases, JP Morgan Chase transferred non-performing loans originated by Washington Mutual Bank into these trusts. Wells Fargo's top choice for law firms was The Law Offices of David Stern. To supply "replacement" assignments showing the trusts had acquired the mortgages, Wells Fargo used its subsidiary, America's Servicing Company in Ft. Mills, SC. The mortgage servicing company most often used by JP Morgan Chase to get its bad loans into trusts was Lender Processing Services in Dakota County, MN.
This practice is more than a little problematic. Transferring non-preformorming loans into a trust or making an out-of-time assignment is a void act under New York trust law (and mortgage securization trusts are organized as New York trusts). Borrower's counsel is typically not in a position to hire a New York trust expert to argue the point, but this is going to become a serious issue as this area heats up.
Syzmoniak was so kind as to send a couple of examples via e-mail. Needless to say, consumer lawyers have been seeing this sort of thing for years:
September 25, 2009 Mortgage Assignment
September 28, 2009 Mortgage Assignment
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Do not pass Congress. Do not subject the status quo's heinous efforts to any taxpayer questions with regard to the oligarchy's ongoing objective to support Wall Street at any cost, no matter how much Main Street continues to suffer from their transgressions, up until now and going forward.
We talk about Wall Street "privatizing profits and socializing losses." But, the truth is, REAL profits are few and far between. (If Wall Street didn't grotesquely disregard the law, again and again, in the name of "profitability," and if they didn't own our legislative branch, and thusly maintain the power to force the Financial Accounting Standards Board [FASB] to virtually rewrite the very definition of profits over the past 24-plus months, there would be NO "profits" at the TBTF banks, in the first place.)
As long as our government not only permits--but directly enables--Wall Street to loot taxpayers while these vampire squids continue to annually skim hundreds of billions of dollars in undeserved bonuses and make-believe "profits" for the status quo, thus allowing incompetent CEO's and our oligarchy to totally disregard the "rule of law" and to continue to run roughshod over the populace, they will.
IT IS TIME FOR DEMOCRATS TO GET MAD AS HELL AND TO TELL THE STATUS QUO: "WE'RE NOT GOING TO TAKE IT ANYMORE!"
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Yves Smith's Naked Capitalism has been ahead of just about everyone else on the planet in terms of her coverage of this story--light years beyond the entire MSM in fact--as Columbia Journalism Review noted over six weeks ago. Here are links to some of my recent posts, chock-full of links to her articles, and those of others, on the topics discussed, above...
Stiglitz: "Corruption, American-style." (Where's Liz Warren?) 11/9/10
"The Mortgage Insurance Scam: Dems Paying For GOP's Sins" 11/1/10
"NYT Lead: 'Battle Lines Forming in Clash Over Foreclosures'" 10/21/10
"Mtge. Fraud Bill Escalates As Stiglitz "Bashes" Bernanke's QE" 10/19/10
"Has The Mortgage/ Foreclosure Fraud Crisis Gone Surreal?" 10/18/10
"Is Wall St. Imploding, Again? Krugman: It's 'very, very bad.'" 10/15/10
"Guess who's going to pay the bill for the foreclosure crisis?" 10/13/10
"40+/- States' AG's May Announce Joint Foreclosure Probe" 10/9/10
"Will Elizabeth Warren Enter The Foreclosure Fraud Fray?" 10/6/10
"Will The Foreclosure Fraud Crisis Undermine Our 'Recovery?'" 10/5/10
"Krugman, Morgenson Nail Wall St. Jobless Lies, Mortgage Fraud" 9/27/10