Re-Default: Up To 46% Of Bailed Out Homeowners Can’t Pay Their Mortgage (Again)

Mac Slavo

The Treasury Department and managers of the Home Affordable Modification Program (HAMP) are scrambling to figure out why homeowners who used the government’s bailout mechanism to save their homes are re-defaulting on their payments.

The program, originally designed to assist homeowners who were facing foreclosure following the 2007 sub-prime crisis, has reportedly saved 1.2 million people from losing their homes, but a report from the Special Inspector General who oversees the government’s Troubled Asset Relief Program (TARP) says that the loan modifications that were supposed to get American families back on their feet aren’t working as well as expected.

“We launched this program in response to the worst housing crisis since the great depression,” Treasury Assistant Secretary for Financial Stability Tim Massad said in a press call. 

“There will always be an inherent risk of homeowner default in programs like this,” Massad added. 

Senate report to reveal mortgage crisis details: WSJ

The Journal said the Senate investigation's findings
would likely expose bad blood between
Goldman and Morgan Stanley
© AFP/Getty Images/File Chris Hondros

AFP

WASHINGTON (AFP) - The Senate will soon issue findings of a probe of the US mortgage meltdown that fueled the global financial crisis, with Goldman Sachs likely to face fresh embarrassment over its role, the Wall Street Journal reported Sunday.

The Senate Permanent Subcommittee on Investigations, whose high-profile inquiry commission subpoenaed Goldman's and other executives last year, is due to release its report on the subprime implosion of 2007 and 2008.

The paper, citing people familiar with the matter, said the report was expected to release emails from securities firms that developed or sold subprime mortgages and financial vehicles including collaterized debt obligations (CDO).

CDOs were used to help Wall Street firms bet against the housing market. When the housing bubble burst, several of the top CDOs were downgraded to "junk" status, and their values plunged.

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Wall Street Quietly Creates a New Way to Profit From Homeowner Distress

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The Fed Bought Fraud

Dees Illustration

Greg Hunter
USA Watchdog

In the wake of the financial meltdown of 2008, the Federal Reserve announced it would buy mortgage-backed securities, or MBS.  The January announcement by the Fed said it would buy MBS from failed mortgage giants Fannie Mae and Freddie Mac in the amount of $1.25 trillion.  At the time, the Fed said in a press release, “The goal of the program was to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally.”  (Click here for the full Fed statement.)  It did provide “support” to the mortgage market, but did it also buy fraud and cover the banks that sold it?  The evidence shows, at the very least, it bought massive amounts of fraud.

We now know the Fed definitely bought valueless MBS because it has joined other ripped-off investors to demand Bank of America buy back billions in sour home debt.  A Bloomberg story from just last week, featuring Philadelphia Fed President Charles Plosser,  reports, “The New York Fed, which acquired mortgage debt in the 2008 rescues of Bear Stearns Cos. and American International Group Inc., has joined a bondholder group that aims to force Bank of America Corp. to buy back some bad home loans packaged into $47 billion of securities.  On the one hand, the Fed has “a duty to the taxpayer to try to collect on behalf of the taxpayer on these mortgages,” Plosser said today at an event in Philadelphia.”

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Homeowners Get The Boot For Bad Paperwork While Banks Get Millions For Same

Dees Illustration

Shahien Nasiripour
Huffington Post

Mortgage companies enrolled in the Obama administration's signature foreclosure-prevention initiative may be receiving taxpayer funds despite not having a legal right to the home or to the mortgage, a top Treasury Department official revealed Wednesday.

But despite faulty or missing paperwork, the Obama administration allows mortgage companies to boot homeowners from the program, sticking the borrowers with massive bills that often leave them worse off.

During an oversight hearing, Phyllis Caldwell, Treasury's housing rescue chief, acknowledged during questioning that Treasury doesn't know whether mortgage companies and the owners of mortgages are receiving public money under "false pretenses." Treasury is investigating, she said.

The contradiction highlights what many critics of the past two administrations' policies have claimed for some time: they exert overwhelming force when it comes to saving financial institutions, but merely modest assistance when it comes to distressed homeowners.

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Foreclosuregate Explained: Big Banks on the Brink

Peter White
Truth-Out

Scandal is spreading across Wall St. like a very bad case of poison ivy. A rash of fraudulent home foreclosures has exposed some of the nation's biggest banks to an even worse condition ... bankruptcy.

Until late 2007, the money boys on Wall St. made a bundle in the housing market. After the bubble burst, they were just itching to cash in on the down side, calling in all those bad loans they made and selling off millions of repossessed homes. According to RealtyTrac, Inc., which compiles such data, lenders foreclosed on 3.2 million properties in the last three years, 288,000 in the last quarter, the highest number on record.


But evidence came to light, first in New York, then Florida, Maine, Ohio, and other states that lenders were taking shortcuts to speed up foreclosures. Law firms hired so-called "robo-signers," some of whom have admitted in depositions that they routinely signed off on thousands of foreclosure papers they had never read and sometimes forged signatures of notary publics who were not present.

"Why don't we have Mickey Mouse sign the thing, instead of having a human being sign it? I mean it becomes meaningless," New York Supreme Court Judge Arthur Schack told PBS "Newshour."

Legally meaningless maybe, but not without consequence for hundreds of thousands of Americans who have been evicted from their homes, many of whom have no jobs, and who were snookered into sub-prime mortgages in the first place.

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Mortgage Crisis: The Six Trillion Dollar Problem

Greg Hunter
USA Watchdog

When I was an investigative reporter at the networks, the first question we would ask when trying to decide if we wanted to do a story was: How many?  How many people have been hurt by a defective product?  How many defective products of a certain kind were in use? How many dollars will it take to fix the problem?  In the case of the recent mortgage crisis – “Foreclosuregate,” the question of how many has been answered.It has been widely reported that there are a little more than 60 million home mortgages in the Mortgage Electronic Registry System (MERS).  If every one of the 60 million mortgages are worth $100,000, that would mean a total of at least $6 trillion in home mortgages that are electronically filed.  In MERS, there is no physical written record of a “Promissory Note.”  In almost all states, you need that original “Note” to prove ownership of a home.  That means in almost every single state, the banks cannot legally foreclose on your home without this document.  Some say the loan documents were lost on purpose because the bankers did not want their massive fraud to see the light of day.  Whether or not the “Notes” were lost on purpose or accident, the fact is the original “Notes” are nowhere to be found.  That is what the “Robo Signing” part of the story is all about.  It has been widely reported that “foreclosure mills” were creating massive amounts of counterfeit Promissory Notes so banks could legally foreclose on homeowners.

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Foreclosure Fraud: The Perfect No-Prosecution Crime

Dees Illustration

Greg Hunter
USAWatchdog

Did you know that in the aftermath of the Savings and Loan (Thrifts) scandal there were more than a thousand felony convictions of financial elites?  The cost of the wrongdoing associated with the rip-off and closure of nearly 800 Thrifts cost taxpayers more than $160 billion.  The current sub-prime/mortgage-backed security scandal is 40 times bigger according to Economics professor William Black.  That means the size of the crime is $6.4 trillion by my calculation.  Can you guess how many indictments there have been on financial elites who created this enormousmortgage crisis mess?  Zero, none, nada, zip.  Yes, not one single prosecution or conviction has been started of achieved.

That is simply outrageous considering the width and breadth of the many crimes committed.  There was “rampant” mortgage fraud in the loan application process according to the FBI as far back as 2004.  (Click here to see one of many stories of the FBI warning of mortgage fraud) There was real estate document fraud when the original Promissory Notes and loan documents were “lost.”  The Promissory Notes were required to create tens of thousands of mortgage-backed securities (MBS).  No “note,” no security.  That is security fraud.  No security means the special IRS tax treatments for the MBS’s were fraudulently obtained.  That is IRS tax fraud.  Because there were no documents, the rating agencies fraudulently made up triple “A” ratings for the securities.  When the whole mess blew up, big banks hired foreclosure mill law firms to create forged documents.  That phony paperwork was and is being used to wrongfully remove homeowners from their property.  That is foreclosure fraud.

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Welcome to the Machine: MERS and The Shadow Banking System

4closurefraud.org

Chink in the Armor

A story is breaking upon the nation as I write this.  It is a story I have been forced to live for the last year and a half.  In that year and a half I have come to learn a lot of confusing truths about the way the money in this world really works.   The mainstream media is talking more and more about the foreclosure scandal and at the heart of it all is MERS.  Mortgage Electronic Registry Service.  It’s the biggest littlest company you have never heard of before and in the thirteen years of its existence, it has utterly destroyed the real property ownership records system in every county in the United States.

The purpose of The Working Joe’s Guide to MERS & Mortgage Banking is to provide the every day average Joe & Joie the information they need to understand this tremendous scandal unfolding ahead.   More importantly,  use this information to arm yourself with truth so you can cry BULL---- when the talking heads try to spin the story for you.  And they will. 


Be warned.  The story has so many facets that to sit down and take it from one end to the other leaves one a bit befuddled.  Smoke comes out of your ears, if you know what I mean.  Thinking and operating in the world of MERS is a testament to the infinite adaptability of the human condition.  I recall when I first came to the realization of the Meaning of MERS and the smoke started to pour from my ears.  It was late at night and I had been researching what had happened to me about a week earlier. 

I had just invoked the “Produce the Note” defense in court and had won a stay on the sale in the foreclosure of my house.  After the euphoria wore off,  I really started to wonder what had just happened.  I was geeking out trying to understand.  It was late at night.   I had been finding and reading court cases for about a week,  the lights were out except for the screen,  the kids were all asleep,  and I sat bolt upright in my chair when the realization struck.  “My God,  they can’t deliver clear title!”  I blinked into the darkness for about five minutes as the full impact of that washed over me.  That was almost a year ago and I have managed to withstand the MERS monster’s siege upon my castle since then (not to worry,  still plenty of food & water). 

Living and thinking in a MERS world is common for me now.   Newcomers look at their surroundings as if it were their first foray into Toon Town, the refuge of Roger Rabbit when he was running from the law.   I’ve been here for a while and I’m used to it.   "Oh,  yeah,"  I tell them,  "that happens all the time."

In order to really get into what is going on,  you have to pile through a lot of boring mundane stuff.  PJ O’Rourke calls it "Dictatorship by Tedium."   Any time regular people try to figure out what’s going on they feel like they are back in High School Algebra class and not having a clue as to what is going on.  That’s how “they” get away with it.  It’s not that you can’t understand.  You can.  It’s that they make it so boring, you don’t want to.  In today’s specialized world, to a certain extent,  you have to trust that “they” who are “the experts” are as well studied in their subject matter as you are in yours.  Leave all that to people who are interested.

This is a complicated story.  It is actually six stories interwoven into a larger narrative.  Part of the problem is it is so easy to get caught up with one or two pieces of the story and miss the real story.  It goes deeply into the arcane runes of the financial world.  To tell it in detail would leave you glassy eyed and wondering what you were doing for lunch.  So I leave a lot of details out and as a result,  it may seem overly simple.   That’s because it is.  But it’s not.

This is a quick tour so you can understand the big picture.  You will,  no doubt,  find various aspects of it curious and you will want to go back to explore more.  All the subjects in here are available for further study through the internet.  That’s what I did.  This whole story is pulled together from late night google searches. 

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Poverty In Suburbs Increasing Rapidly During Economic Downturn

Suburban Slums - GETTY image

Hope Yen
Associated Press

WASHINGTON — The American suburb is no longer a refuge from poverty in cities.

A pair of analyses by the nonprofit Brookings Institution paints a bleak economic picture for the 100 largest metropolitan areas over the past decade and in coming years, and finds that suburbs now are home to one-third of the nation's poor, and rising.

The study of census data finds that since 2000, the number of poor people in the suburbs jumped by 37.4 percent to 13.7 million. The growth rate of suburban poverty is more than double that of cities and higher than the national rate of 26.5 percent.


At the same time, social service providers are spread thin in many suburban areas, according to a detailed Brookings survey of groups in representative metropolitan areas of Chicago, Los Angeles and the District of Columbia. That has forced providers to turn away many poor people due to scarce aid that typically goes to cities first.

"Millions of Americans at all income levels moved to the suburbs looking for better schools, better jobs, affordable housing, and a sense of security, but in recent years, as incomes have fallen, people had a harder and harder time making ends meet," said Scott Allard, a University of Chicago professor who co-wrote one of the reports.

"As a result, Americans who never imagined becoming poor are now asking for assistance, and many are not getting the help they need."

After the recession began in 2007, the suburbs continued to post larger increases in the number of poor – adding 1.8 million, compared with 1.4 million in the cities.

The findings come weeks before the Nov. 2 congressional elections in which voters anxious over the economy will decide whether to keep Democrats in power. Made up of both cities and surrounding suburbs, the large metro areas represent two-thirds of the U.S. population and are home to battlegrounds that helped lift Democrat Barack Obama to victory in 2008.

Cities still have higher poverty rates – about 19.5 percent, compared with 10.4 percent in the suburbs. But the gap has been steadily narrowing. In a reversal from 2000, the number of poor people living in the suburbs now exceeds those in cities by roughly 1.6 million.

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How Countrywide Covered the Tracks

Angelo R. Mozilo CEO - Countrywide Financial

Gretchen Morgenson
NY Times

ON June 27, 2006, Countrywide Financial, the nation’s largest mortgage lender, was about to close its books on a record-breaking six-month run. The housing market was on fire and Countrywide’s earnings were soaring. Despite all the euphoria inside the company, some executives noticed that Angelo R. Mozilo, the company’s brash and imperious chief executive, seemed subdued.

At a town hall meeting that day with 110 of the company’s highest-ranking executives in Calabasas, Calif., Mr. Mozilo sat alone on a stage, fielding questions and offering rosy predictions about his company’s prospects. But then he struck a sober note in response to a question from one of his colleagues.

The questioner wanted to know what, if anything, worried Mr. Mozilo, according to a participant.

“I wake up every day frightened that something is going to happen to Countrywide,” Mr. Mozilo said.

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STOP FORECLOSURE in TX, CA, and FLA

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The Mortgage Morass: Obama Opposes Any Action That May Upset the Banks

Paul Krugman
NY Times

American officials used to lecture other countries about their economic failings and tell them that they needed to emulate the U.S. model. The Asian financial crisis of the late 1990s, in particular, led to a lot of self-satisfied moralizing. Thus, in 2000, Lawrence Summers, then the Treasury secretary, declared that the keys to avoiding financial crisis were “well-capitalized and supervised banks, effective corporate governance and bankruptcy codes, and credible means of contract enforcement.” By implication, these were things the Asians lacked but we had.

We didn’t.

The accounting scandals at Enron and WorldCom dispelled the myth of effective corporate governance. These days, the idea that our banks were well capitalized and supervised sounds like a sick joke. And now the mortgage mess is making nonsense of claims that we have effective contract enforcement — in fact, the question is whether our economy is governed by any kind of rule of law.

The story so far: An epic housing bust and sustained high unemployment have led to an epidemic of default, with millions of homeowners falling behind on mortgage payments. So servicers — the companies that collect payments on behalf of mortgage owners — have been foreclosing on many mortgages, seizing many homes.

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STOP FORECLOSURES in TX, CA, and FLA.

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Fighting Fraudclosure: Fed-Up Families Are Fighting Back

MSNBC—Oct. 14, 2010—From the Dylan Ratigan Show. People are starting to fight back against mistreatment by mortgage lenders. And the extent of the housing mortgage mess is beginning to come to light.

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Meet Danielle And Jim Plus 9: The Squatters Who “Reclaimed” Their Foreclosed Home Over The Weekend

Tyler Durden
Zero Hedge
Thursday, October 14, 2010

Unfortunately, surreal stories like this will very soon become daily news. As was pointed out yesterday, Simi Valley has just seen the first case of a forced reclamation of a foreclosed home, after Jim and Danielle Earl took their nine (9!) children, ages 9-23, and a locksmith and broke into the six-bedroom house that had been foreclosed upon for lack of payment, and on which the couple owed $880,000! And where would such brilliant advice originate from? Why, the couple’s lawyer of course, who will one day be seen as the prophetic visionary who stole the bankers wealth from underneath them and handed it out to America’s millions of starving lawyers, one billing sheet at a time: “The move was recommended by their lawyer” as the WSJ suggests. Already in process: millions of cases identical to this one, billions in legal fees, and hundreds of billions in lost market value of associated equity and credit instrument, not to mention very unpleasant days for LPs in “Recovery” funds.

More on the family:

The Earls paid $500,000 for the house in 2001 and then refinanced to pull out cash. They fell behind on their mortgage and at the time of their eviction they owed about $880,000 on a no-interest mortgage.

Investors at Conejo Capital bought the house for $697,000 at a lender’s trustee sale and put $40,000 of work into a remodel, replacing carpeting and appliances, as well as upgrading the kitchen. They flipped it to new buyers for $800,000. Those buyers were supposed to move in this week; those plans are on hold.

The Earls claim that they were working with GRP Financial Services to catch up on payments, but discovered a $25,000 difference between what they believed they owed and what the bank said they owed. They then stopped making payments.

“This is only the beginning of this,” the Earls’ attorney, Michael Pines tells KABC News. “I chose this family because we needed to get back in before the investor and the real-estate broker defrauded a new family by having them move in, which would have created a bigger mess. (The Earls) have done absolutely nothing wrong.”

So there you have it: people who owe $880,000 on their mortgage believe it is their right to reclaim homes. We will avoid any ethical commentary on this, suffice to say that it is the bankers who in the greed and stupidity have managed to dig themselves into what could be a hole so deep not even TARP 2-XXX can dig them out of.

For a clip of this surreal harbinger of things to come, click below.

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