AlterNet / By Stephen Lerner

Time to REBEL! 5 Ways We Can Break the Big Banks' Death Grip on the Economy

Wall Street’s incredible greed and arrogance may have finally handed us the tools and leverage we need.

August 8, 2012  |  

 

Photo Credit: Lily Rothrock via Flickr

 

Let’s be honest. Many people are feeling a little hopeless and cynical about whether anything can change how Wall Street banks run roughshod over the economy and our democracy. We’ve marched, rallied, sat-in and thousands have been arrested--and yet bankers have remained unrepentant, unpunished, unindicted and seemingly untouchable. But the wheels of history are turning and Wall Street’s incredible greed and arrogance may have finally handed us the tools and leverage we need to challenge and break the death grip Wall Street has on struggling people and communities around the country.

Two critical tools--the LIBOR fraud scandal and the potential to start exercising eminent domain to seize bank-owned properties--can supercharge the ongoing campaigns focused on Wall Street. For the first time we can align moral and legal arguments with real leverage to demand that banks renegotiate the debt that is bankrupting communities and drowning homeowners around the country. The single most important step we can take to address local budget deficits is to force banks to renegotiate toxic deals held by local government and to rewrite mortgages for underwater homeowners. Combined, this would pump hundreds of billions into local economies.

First some definitions:

The LIBOR fraud scandal may seem confusing, but it is really pretty simple. Over $800 trillion in loans, derivatives and other financial deals are based on LIBOR (the London Interbank Offered Rate). The banks fixed the rate to increase their profits at our expense and now everyone all over the world is trying to figure out how much it has cost the rest of us.

Whatever the ultimate number is (there are estimates of hundreds of billions in damages), this scandal has permanently torpedoed the notion that there is “moral hazard” in debt relief for regular folks. We can now prove what we’ve always suspected--that the big banks have rigged the game in their favor and that our deals with them are inherently unfair and should be renegotiated. Oakland, California has taken a first step by demanding Goldman Sachs renegotiate a toxic swap the city is trapped in, saying it will boycott Goldman Sachs in the future if the bank won’t renegotiate.

Eminent Domain. Government has long seized property to create room to build shopping malls and stadiums. Those same laws can be used to seize underwater mortgages from banks and then rewrite them at their real value so homeowners can stay in their homes at greatly reduced mortgage costs. If banks are unwilling to reset mortgages at fair market value, then local governments can lawfully seize their property for the common economic good. They would merely have to pay the banks fair market value for the mortgages, which would force the banks to take significant writedowns. San Bernardino County and Berkeley, California have already started down this road.

It is time to REBEL, against Wall Street and the big banks and to start fixing the economy and reclaim our democracy. There are five steps to this:
1. Renegotiate public and housing debt. We need to lift up the demand loud and clear that we want to renegotiate public debt and that it is unfair and illegal to hold local governments and public services hostage to Wall Street’s toxic loans. It is estimated that banks have already sucked more than $50 billion out of local communities through toxic loans, fees and tricky deals that cities are locked into.

2. Exercise eminent domain. There are 16 million underwater homes, worth $2.8 trillion, that are $1.2 trillion underwater. Resetting those mortgages to fair market value would save the average underwater homeowner $543 per month, pumping $104 billion into the national economy every year. This would create 1.5 million jobs nationally.* If just five of the most severely underwater cities used eminent domain they could seize $140 billion worth of underwater homes from banks, forcing banks to take a $30 billion haircut on underwater loans.

3. Boycott big banks and move public money. One of the key profit centers for banks is their government business. And it isn’t just LIBOR they cheated on. There are investigations and growing scandals around price fixing on municipal bonds as well. Furthermore, banks are holding cities hostage on Letters of Credit (LOC’s) by ratcheting up the cost knowing if cities refuse to pay they may be forced to pay huge termination fees. If increasing numbers of cities, pension funds and other holders of public capital chose to boycott certain big banks and moved money out of those banks, it could be a huge financial hit for them.

4. Enact resolutions at local governments and pension funds. There is a simple way to get started that will send chills down Wall Street banks’ spines. Let’s start moving resolutions in cities and counties big and small around the country, demanding that local government and pension funds explore suing banks over LIBOR and prepare to use eminent domain to seize underwater mortgages from banks if they won’t renegotiate debt. This sample resolution is a first step in raising the issue locally and starting to build a campaign to force local governments to hold Wall Street accountable.

5. Litigate and legislate. But it isn’t enough just to pass resolutions--that is only a first step. If the banks refuse to renegotiate the debt than we need to litigate and legislate in our local communities. Our pension funds need to sue to recoup their losses. Local government needs to sue to get out of bad deals and claw back money banks unfairly made off of local taxpayers. And we need to follow the lead of Oakland, Los Angeles and other cities that have passed laws saying they will divest from banks that engage in unfair banking practices.

Since the financial crisis hit in 2008, community groups like National People’s Action, ACCE, New York Communities for Change, the New Bottom Line, the Alliance for a Just Society and Right to the City, to name a few, have joined with unions, Occupy Wall Street, Occupy Our Homes and hundreds of thousands of people who have stood up to Wall Street greed. Wall Street and banking royalty are no longer untouchable. We have the tools and we have the leverage--let's start using them to start winning for our communities and families. It is our responsibility to REBEL. All of our futures depend on it!

*These figures represent updated estimates from last year's report, The Win-Win Solution, from the New Bottom Line, which investigated the effects on the economy of writing down all underwater mortgages to current market value.  

 

Stephen Lerner is a labor and community organizer and the architect of the Justice for Janitors campaign.

Very Bad Things Happen When We Depend on the Same People Who Caused the Foreclosure Crisis to Track Its Destruction

Investigations  

AlterNet / By Sam Jewler, Chris Herwig

Very Bad Things Happen When We Depend on the Same People Who Caused the Foreclosure Crisis to Track Its Destruction

There is not a single federal agency that has tracked foreclosures comprehensively, a massive information gap that prevents the work of journalists, advocates and policymakers alike.

August 6, 2012  |  

 

 

 

 

It’s a simple set of questions: “How many foreclosed properties are there in the country? What zip codes are they in? What factors sent people’s homes underwater?” For policy makers, journalists or anyone trying to size up or address the years-old housing crisis, these questions present the natural place to start. But their answers don’t quite exist.

In Chicago, for example, the city’s official vacant property count, which relies on the banks’ reporting, hovers just under 5,000. The Chicago Tribune estimates 18,000. Housing activists say there are well over 100,000.   

 

Vacant homes in Chicago are so destructive to their neighborhoods and wider communities—dragging down property values, preventing the stabilization of markets and becoming havens for violent crime—that Mayor Emanuel recently announced that the city would spend $4 million finding and demolishing just 200 foreclosed properties.

 

Foreclosures are happening en masse all over the country, and Chicago is not unique in having absolutely no comprehensive list of in-progress or completed foreclosure properties, hampering any attempts to rehabilitate vacant homes or aid people being hit by the crisis.

 

Nationally, there is not a single federal agency that has taken the initiative to track foreclosures comprehensively, a massive information gap that prevents the work of journalists, advocates and policymakers alike. 

 

The government is instead relying on the expensive, potentially biased and seemingly inaccurate information amassed by mortgage bankers, real estate hawks and credit reporting agencies. How this happened is a story of congressional warnings and broken promises, of lack of funding, and ultimately, the increasing dependence on the for-profit sector to quantify and analyze our lives. In this sense, it’s not only a story of the government’s failure, but also of Wall Street’s almost unquestioned power to determine not only value, but reality itself. 

 

The story begins in March 2009, near the peak of the foreclosure crisis, when the government admitted that it was being blindsided.

 

"The failure of federal banking and housing regulatory agencies to gather and analyze quality market intelligence is striking,” the Congressional Oversight Panel reported. “Absent more complete and accurate information, legislators, regulators, and market participants are flying blind."

 

At this point, the government was still scrambling to collect information about how the crisis had happened in the first place and relying on for-profit information providers; companies such as RealtyTrac and industry insiders like Mortgage Bankers Association of America. For the public, that meant it was nearly impossible to access information about the housing crisis without pulling out a credit card, since the majority of these third-party providers charge high fees for their information and withhold their raw data, precluding any public accountability.

 

“Housing data in general is a huge problem,” says Bill McBride, who writes the blog Calculated Risk. 

 

For one thing: none of the available sources match up, making it impossible to aggregate the data into a comprehensive set or to make comparisons across different databases. 

 

A piece McBride posted in March quoted one company’s estimate of 91,000 January foreclosures along with another company’s estimate of 71,000 for the same month, exemplifying the information gap.

 

“Centralized data on foreclosures would help,” McBride says, “but that would just be a start. I was hoping we’d see a new emphasis on housing data following the housing bubble, but it hasn’t happened.”

 

Richard Neiman, a member of the Congressional Oversight Panel, stated the problem explicitly in 2010: “Improved intelligence on the mortgage market is critical to preventing future crises… Currently, Congress, banking regulators, consumer advocates, and other policymakers are left with incomplete or unreliable data purchased from third-party vendors or with limited data provided voluntarily by the industry.”

 

Part of the Dodd-Frank Act, signed almost exactly two years ago, mandated the creation and maintenance of a foreclosure database. But the project seems not to have started in any meaningful way.

 

“Currently, HUD lacks the funding necessary to create the database and lacks the statutory authority to compel reporting to HUD of information necessary to compile the data,” said Lemar Wooley of HUD. “Congress has not appropriated funds for this project.”

 

A spokeswoman for the new Consumer Financial Protection Bureau could not report any updates on the foreclosure database mandated two years ago, which came with no legislated deadline.

 

Meanwhile, the government’s vision of the foreclosure crisis might be on the verge of going even blinder. The House of Representatives recently voted to end the American Community Survey, used by the Census to help the federal government decide how to distribute some $450 billion per year in funding. 

 

Rather than holding predatory mortgage lenders and industry actors accountable, the House legislative response to budget shortfalls -- exacerbated by the economic collapse caused by Wall Street and the government’s inability to regulate it -- was to turn to that same private sector to measure that very sector’s failure.

 

The majority of what foreclosure data is available comes from private vendors, many of which stand to profit from foreclosures and some of which, the facts suggest, may have engaged in practices that contributed to the housing crisis in the first place. These include Realtytrac, which calls itself “the leading online marketplace of foreclosure properties,” Lender Processing Services, CoreLogic, and the Mortgage Bankers Association of America.

 

Several agencies recently took enforcement actions against Lender Processing Services, which provides HUD with mortgage delinquency rates. A standing cease-and-desist order remains in effect by the Federal Reserve, the FDIC and other agencies against LPS since April 13, 2011, for, among other things, "executing assignments of mortgages containing inaccurate information”—probably not a quality one looks for in their data provider. Two months ago, the Federal Housing Administration publicly questioned an LPS report showing 63,000 April foreclosures when FHA’s data showed 19,000. A HUD staffer who spoke on the condition of anonymity said LPS sells the agency information covering about 80 percent of the market for around $300,000 each year.

 

RealtyTrac, used by the likes of National Public Radio, HUD and even people testifying to the House of Representatives on behalf of homeowners, has received a series of complaints for defrauding customers and providing inaccurate data.

 

Another popular source of information is the HOPE Now Alliance, a group of lenders representing about two thirds of outstanding mortgages in the United States. In 2008 the group said they had helped one million homeowners save their homes; the Office of the Comptroller of Currency said that HOPE had vastly overstated their work and helped less than 200,000. Given the lack of an authoritative housing information database, experts simply threw up their hands at the discrepancy.

 

Nationally, homeowners continue to suffer an average of 40,000 foreclosures every month (or so the industry says), and accurate information is necessary for states to allocate the aid from the recent $26 million settlement to underwater homeowners. Meanwhile, urban planners and local governments are struggling to save hard-hit neighborhoods without having comprehensive pictures of the problem.

 

“It’s like this secret they just don’t want you to know about,” said Kathryn Clark, a former urban planner and artist who was so astonished by the lack of foreclosure data that she has begun mapping the foreclosures onto quilts in order to represent the crisis. “It’s crazy what you have to pay to access it. It’s frustrating. It’s shocking. It amazes me.”

 

Citizens used to be able to look to the USPS Administrative Data On Address Vacancies, made available through HUD for vacancy data; however, USPS and HUD decided to renegotiate their data sharing agreement -- right in the middle of the housing crisis -- and as a result, now only allow official governmental entities and non-profit organizations to access the data.  

 

“I think it would be good if the government itself could actually collect loan performance data,” said the HUD staffer. He said he has hope that a Dodd-Frank regulation requiring the use of universal loan identifiers will make it easier to merge databases and create a clearer picture of the crisis. The CFPB is currently writing rules for this tool, but the enforcement mechanism is unclear.

 

More than simply helping us to cope with the crisis, accurate housing information is necessary if we are to avoid another bubble.

 

The HUD staffer explained that predicting housing bubbles relies on the government knowing whether homes are being purchased for immediate residential purposes or for future, speculative profits. By 2005, for example, nearly 30% of all houses were being purchased as unused investments, not homes. Had the government known that, perhaps it could have predicted the spectacular collapse only three years later.

 

At this rate, the government won’t be able to predict the next time, either.

 

“To get a handle on when growth in prices in a housing market is not due to actual demand for housing to be lived in, or supported by growing incomes – that’s the hard thing to detect,” said the HUD staffer. “And that’s kind of the definition of a bubble.”

 

 Sam Jewler and Chris Herwig are two Occupy activists and journalists in based in Washington, DC.

 


August 2, 2012 at 17:41:47

"F" The Bureaucracy! The White House Can Help Homeowners Right Now

By Richard (RJ) Eskow (about the author)





A recent study showed that more homes are underwater than originally believed. Roughly 16 million borrowers owe the banks $1.2 trillion (with a "t") for real estate value value that no longer exists. We did some projections from that date to come up with the full scope of the problem and found that more than 40 million people live in those homes, with total mortgages outstanding of roughly $4.8 trillion.

Major principal reduction would reduce the monthly burden for millions of families. It would free up tens of billions of dollars -- or hundreds of billions -- reducing monthly payments substantially. Struggling households would then spend most of that money for things other than the unjust enrichment of wealthy bankers -- consumer goods and services, mostly.

A broad principal relief plan would be the equivalent of a massive stimulus program, one that could create millions of jobs and help jump-start economic growth. And it would do it without costing the Federal government a cent.

Stop That Bureaucrat!

The Administration's actions for struggling homeowners have generally run the gamut from ineffectual or inept to downright cynical. Now the White House says it wants to do more, but there's a problem: Edward DeMarco. DeMarco's the Acting Director of the FHFA, the agency which took control of government-backed lenders Fannie Mae and Freddie Mac after their bipartisan-backed "privatization" led to an orgy of executive greed and incompetence.

Whether out of ideology or bank coziness, DeMarco has refused every entreaty for principal from detailed economic analyses to heartfelt moral appeals. As Paul Krugman notes today in a post called "Fire Ed DeMarco," DeMarco's latest move is outrageous. He's gone well beyond his agency's mandate to justify his inaction. As Krugman says, "deciding whether debt relief is a good policy for the nation as a whole is not DeMarco's job."

DeMarco's now the Administration's target of choice, with Tim Geithner playing the "good cop" role. "I urge you to reconsider this decision," Geithner wrote to DeMarco in genteel public memo whose mildness brought to mind Groucho Marx's remark to a gangster who was about to kill him:

"I'm not in the habit of making threats, Sir, but there'll be a letter about this in the Times tomorrow morning!"

Bizarro Jimmy Stewart?

Can one bureaucrat's intransigence stymy an entire Administration? If so then DeMarco's the Bizarro World version of Jimmy Stewart in Mr. Smith Goes to Washington, tie askew and sweat pouring down his brow, staging a one-man holding action against decent government.

The so-called "independence" of regulators is a complex topic for another day. What that usually means is that agencies become captive to the industries they regulate, leaving them "independent" only from the public that created them. But some doubt the whole story and say DeMarco's merely a foil.

Yves Smith says "Obama has never been serious about helping homeowners," and nothing in his Administration's performance refutes that. "DeMarco knows he won't be fired," writes David Dayen. "He's become the symbol in the story, and the Administration is much more interested in symbolism when it comes to housing."

Paul Krugman, on the other hand, argues that while "the uncomfortable truth... is that the administration -- and Tim Geithner in particular -- seemed indifferent or even hostile to debt relief for a long time."

"That was a big mistake," adds Krugman. "But it's also in the past, and the administration has now seen the light."

So who's right ? The only one way we'll ever know one way or the other is if the Administration does something meaningful about principal reduction.


Quit "F"-ing Around

It can certainly do a lot more than write scolding letters. First, the President can fire DeMarco. Actually he doesn't even need to fire him, since he's only an Acting Director. He can simply make a recess appointment. The President might even be able to fire DeMarco for cause: DeMarco has willfully neglected a number of his agencies' responsibilities, which are clearly laid out on Fannie Mae's website and include "Reduce the number of foreclosures" and "Help families keep their homes."

Fire him for cause, Mr. President, and let the "CEO Candidate" try to tell the people why you shouldn't. Then turn your attention toward all underwater homeowners, not just those who would be helped by current proposals for FHFA-centered delinquent borrower programs.

That means addressing HAMP, the Administration's cynically-nicknamed "extend and pretend" program, so it provides relief to more homeowners and no longer allows banks to manipulate, mislead, and provide usurious rates to their victims.
The White House can work with the Consumer Financial Protection Bureau or another appropriate agency to implement an aggressive "name and shame" policy toward banks that continue to rip off their customers, either through HAMP or independently.
The Administration must also shift the focus of its debt relief efforts away from delinquent borrowers and begin promoting broader solutions aimed at the wide universe of underwater homeowners. One of DeMarco's few legitimate criticisms of White House policy hinges on the fact that homeowners reap benefits from falling behind on their payments, which could encourage more of them to do the same.

That's true. it also feeds into popularly-held biases against principal reduction, and discriminates against those who have kept up with their payments. Helping delinquent homeowners is arguably another way of helping banks in the guise of helping ordinary people, whereas broader relief might force the banks to step up.

Which leads to another important job for the President, one that doesn't require the approval of any "F"-in' bureaucrat: He can make the moral case for America's homeowners in a clear, strong voice. So far he hasn't done that -- partly because some key members of his team buy into the unfair notion that underwater homeowners, unlike Wall Street bankers, don't deserve to be helped.

The Undeserving

You can skip this section if you like, but it might be worth a quick refresher course on how we got here: A home is "underwater" when the borrower owes more than the house is worth on today's market.

How did that happen to so many people? Banks knowingly pushed home loans on people who couldn't afford the "balloon" payments hidden in the fine print. Other borrowers were suckered by deceptive techniques that ranged from general proclamations ("a home is your best investment") to individual scams (i.e., using crooked adjusters to inflate the home's values, burying unaffordable provisions in massive and unreadable loan documents, encouraging the falsification of loan documents).

The banks then packaged these junk loans into "mortgage-backed securities," often fraudulently misrepresenting them as higher-grade investments. Then they made massive profits from the ensuing bubble in housing value -- a bubble which, given their legions of paid economists and analysts, they should have would collapse. Instead they kept loosening their standards, writing riskier and risker loans, bundling more and more loans into deceptive securities -- and collecting bigger and bigger bonuses.

When the entire edifice came crashing down, the banks took trillions in loan relief in a way that amounted to billions in outright gifts from the taxpayer. They then entered into a massive wave of foreclosure fraud to evict those same borrowers from their homes -- fraud which included mass perjury, forgery, and other crimes. The executives who had supervised this entire process all kept their jobs -- and their bonuses.

But when it came time to offer principal reduction to their victims -- the chance to reduce the amount owed to something closer to market value -- they and their Washington friends cried that this assistance, which would provide great relief from the damage they inflicted on the economy, would be "unfair."

The billionaire bankers and those who rescued them even said -- get this -- that asking them to adjust these debts would "reward the undeserving."

Brought To You by the Letter "F"

So there's something else the President can do without Edward DeMarco's permission, and its importance shouldn't be minimized: He can clearly and forcefully explain the massive injustice that's been done to these homeowners. (See our "Moral Hazard Scorecard" for more details.)

The President can demand justice. He can tell Wall Street he'll do everything in his power to restore justice -- and we mean everything. Many people remember Franklin D. Roosevelt's heated war of words with Wall Street. ("I welcome their hatred!") Far fewer recall how bankers stung by FDR's rhetoric and fearful of public rejection voluntarily pledged to do more -- and did. Rhetoric matters.
With or without Edward DeMarco, the White House can take concrete steps to help homeowners -- and it can use the President's "bully pulpit" to fight back against the bullies. The only way homeowners will know that the
Administration's doing something for them is when it does something -- really does something.

If the President and his team move aggressively on principal reduction, their actions won't just help underwater homeowners: they'll also help the whole economy. That could prevent the President and his party from getting the grade that all politicians dread at election time -- an "F."

So there's something else the President can do without Edward DeMarco's permission, and its importance shouldn't be minimized: He can clearly and forcefully explain the massive injustice that's been done to these homeowners. (See our "Moral Hazard Scorecard" for more details.)

The President can demand justice. He can tell Wall Street he'll do everything in his power to restore justice -- and we mean everything. Many people remember Franklin D. Roosevelt's heated war of words with Wall Street. ("I welcome their hatred!") Far fewer recall how bankers stung by FDR's rhetoric and fearful of public rejection voluntarily pledged to do more -- and did. Rhetoric matters.
With or without Edward DeMarco, the White House can take concrete steps to help homeowners -- and it can use the President's "bully pulpit" to fight back against the bullies. The only way homeowners will know that the Administration's doing something for them is when it does something -- really does something.

If the President and his team move aggressively on principal reduction, their actions won't just help underwater homeowners: they'll also help the whole economy. That could prevent the President and his party from getting the grade that all politicians dread at election time -- an "F."



http://www.huffingtonpost.com/rj-eskow/the-dumbest-bipartisa

Host of 'The Breakdown,' Writer, and Senior Fellow, Campaign for America's Future 

The views expressed in this article are the sole responsibility of the author
and do not necessarily reflect those of this website or its editors.

http://www.huffingtonpost.com/rj-eskow/the-dumbest-bipartisa

Host of 'The Breakdown,' Writer, and Senior Fellow, Campaign for America's Future 

Protesters staged a rally against home foreclosures in California on Tuesday outside the State Capitol in Sacramento. (photo: Max Whittaker/NYT)

States Diverting Foreclosure Relief Money to Pay Down Debt

By Shaila Dewan, The New York Times

17 May 12

undreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps.

In a budget proposed this week, California joined more than a dozen states that want to help close gaping shortfalls using money paid by the nation’s biggest banks and earmarked for foreclosure prevention, investigations of financial fraud and blunting the ill effects of the housing crisis. California was awarded more than $400 million from the banks, and Gov. Jerry Brown has proposed using the bulk of that sum to pay the state’s debts.

The money was part of a national settlement valued at $25 billion and negotiated with five big banks over abuses in their mortgage and foreclosure processes.

The settlement, reached in February after a year of talks and intervention by the Obama administration, was the second-largest in history involving the states, trailing the tobacco industry settlement, and represented the first large-scale commitment by banks to provide direct aid to borrowers.

As part of the settlement, the banks agreed to pay the states $2.5 billion, money intended to help homeowners and mitigate the effects of the foreclosure surge. But critics complained that this was the only cash the banks were required to pay — the rest comes in the form of “credits” for reducing mortgage debt and other activities. Even that relatively small amount has proved too great a temptation for lawmakers.

Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes.

In Texas, $125 million went straight to the general fund. Missouri will use its $40 million to soften cuts to higher education. Indiana is spending more than half its allotment to pay energy bills for low-income families, while Virginia will use most of its $67 million to help revenue-starved local governments.

Like California, some other states with outsize problems from the housing bust are spending the money for something other than homeowner relief. Georgia, where home prices are still falling, will use its $99 million to lure companies to the state.

“The governor has decided to use the discretionary money for economic development,” said a spokesman for Nathan Deal, Georgia’s governor, a Republican. “He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”

Andy Schneggenburger, the executive director of the Atlanta Housing Association of Neighborhood-Based Developers, said the decision showed “a real lack of comprehension of the depths of the foreclosure problem.”

The $2.5 billion was intended to be under the control of the state attorneys general, who negotiated the settlement with the five banks — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally. But there is enough wiggle room in the agreement, as well as in separate terms agreed to by each state, to give legislatures and governors wide latitude. The money can, for example, be counted as a “civil penalty” won by the state, and some leaders have argued that states are entitled to the money because the housing crash decimated tax collections.

Shaun Donovan, the federal housing secretary, has been privately urging state officials to spend the money as intended. “Other uses fail to capitalize on the opportunities presented by the settlement to bring real, concerted relief to homeowners and the communities in which they live,” he said Tuesday.

Some attorneys general have complied quietly with requests to repurpose the money, while others have protested. Lisa Madigan, the Democratic attorney general of Illinois, said she would oppose any effort to divert the funds. Tom Horne, the Republican attorney general of Arizona, said he disagreed with the state’s move to take about half its $97 million, which officials initially said was needed for prisons.

But Mr. Horne said he would not oppose the shift because the governor and the Legislature had authority over budgetary matters. The Arizona Center for Law in the Public Interest has said it will sue to stop Mr. Horne from transferring the money.

In California, Attorney General Kamala D. Harris had played hardball in the settlement negotiations, holding out until the very end for a deal guaranteeing that a large share of the benefits would go to California, and then trumpeting her success in a news conference and a flurry of interviews with national news outlets. So Mr. Brown’s revised budget put her in an awkward position.

“While the state is undeniably facing a difficult budget gap,” she said in a statement, “these funds should be used to help Californians stay in their homes.” Both officials are Democrats.

When asked if Mr. Brown could legally appropriate the money, which is supposed to be held in a special fund “for the benefit of California homeowners affected by the mortgage/foreclosure crisis,” a spokesman for Ms. Harris declined to comment.

Just last week, Ms. Harris announced plans to give about half the money to groups that provide housing counseling and legal assistance to homeowners — groups whose budgets have shrunk while demand for their services grows. The other half would be used primarily for investigation of mortgage-related crime.

States using some or all of their money for housing have designated it for a wide variety of programs, like a small fund for low-interest loans to build housing in low-income neighborhoods, in Virginia, and Ohio’s sweeping plan to demolish abandoned property.

In New York, Attorney General Eric T. Schneiderman stepped in with $15 million in settlement money for housing counseling and legal assistance when state support ran out last month, and plans to spend the bulk of its $130 million on similar programs. North Dakota will use its tiny allotment, $1.9 million, to provide housing to police officers and emergency responders in its booming oil-field counties, where shelter is scarce.

Using the money for other purposes is shortsighted, housing advocates warn. “If you leave homeowners hanging out there to dry, then in the short term maybe you help to meet the budget gap this year,” said Maeve Elise Brown, the executive director of Housing and Economic Rights Advocates, based in Oakland. “But in the long term the more people we have going through foreclosure, the worse it’s going to be for our economy as a whole.”

In some states, redirecting the money could have a racially discriminatory effect, said Alan Jenkins, the executive director of the Opportunity Agenda, which supports homeownership, because in some cities black homeowners disproportionately lost their homes, Mr. Jenkins said.

“If you dump all of these funds into the general coffers, the African-American homeowners are not going to benefit in any real way because they represent such a small percentage of the larger state,” Mr. Jenkins said.

 

AlterNet.org

   

AlterNet / By Sarah Jaffe

7 Foreclosure Horror Stories (And One Possible Win)

Around the country, families are being tossed out of their homes with astonishing regularity, with local law enforcement enlisted to do the bidding of big banks.

May 9, 2012  |  

 

 

 

This week, Christine Frazer and her family were thrown out of the Atlanta home they'd lived in for 18 years, at gunpoint in the dead of night.

They were not set upon by robbers, but by the Dekalb County Sheriff's department, which evicted the family at the request of Investors One Corporation. As Steven Rosenfeld reported for AlterNet, it was the fourth company to buy the family's mortgage in eight months.

The Frazers' eviction is horrifying, but sadly their story is all too common. Senator Sherrod Brown, who's introduced legislation aiming to curtail the worst practices, called it “a longstanding ugly pattern of homeowner abuse.”
"You can basically throw a dart off a building and hit someone with a foreclosure horror story,” said Matt Browner Hamlin of Occupy Our Homes. “This is the whole point -- that the crisis is being driven by fraud and criminality by the banks. Three million people didn't wake up one morning and decide to just stop paying their mortgages."

Around the country, families are being tossed out of their homes with astonishing regularity, with local law enforcement enlisted to do the bidding of big banks that own and resell the mortgages, utterly detached from the people whose lives are turned upside-down in the process. It's easy to just look at statistics and forget the human stories behind the numbers, so here are six stories of families who've had to fight all sorts of shady tactics to try and stay in their homes—and one family that might just beat the bank and get to keep their home, with the help of local activists.

1. Harried into Health Crisis in Hempstead, New York

Charles Pollydore worked on Wall Street, not as a trader, but in IT. He was laid off when the markets collapsed, but kept paying his $4,200 monthly mortgage to Bank of America. “I used my 401k, I used everything I had, emergency funds, everything to keep the mortgage going under the pretext that I was going to get a job soon,” he told AlterNet. “I had to get on welfare, get on food stamps, to get my light and my gas to stay on. I needed Medicaid because I need medical coverage badly.”

But he didn't find a job, and his diabetes worsened—he's legally blind and is facing the amputation of a second toe after losing one--and he wound up on disability. “My doctors said 'We're not going to allow yourself to jeopardize the health you have right now to keep looking for a job,'” he said. His health has dramatically deteriorated since his fight with the bank began.

Pollydore, a member of the group New York Communities for Change, has been repeatedly applying for a mortgage modification to no avail, sending documentation, bank statements, hardship letters, and more, but over and over the bank claims it hasn't received the information. BofA refused to offer him a principal reduction despite being presented with proof of his disability income. “Their strategy is to break the backs of homeowners so that you give up and you walk away,” he said.

He's reached out to his congresswoman, Carolyn McCarthy, and to the attorney general's office, but was told he had to work with Bank of America. “What protection is there for people like myself?” he asked.

“I told one of the [bank] executives, 'You guys are going to have to board the house up with me inside and let me rot and die.'”

2. Fabricated Documents in Rochester, New York

Leonard Spears is 5-feet, 6 inches tall, balding and African American, but Wells Fargo, when serving a summons to foreclose on the Rochester home he'd been fixing up, apparently served a 6-foot man with blond hair. Spears, of course, says he was never served, and Wells Fargo has a history not only of predatory lending (it paid an $85 million fine for pushing borrowers who were qualified for better loans into more risky subprime loans) but of foreclosure fraud as well.

“It took me three years to convert it into the way it looks now, I did a lot of wiring, tore down all the walls, gave up my social life completely because I was dedicated to do this, because this is like the American Dream, to own property, so it was very exciting,” Spears said.

To make matters worse, it turns out that Wells Fargo wasn't even the owner of the note, but merely the servicer. And then, when the foreclosure did go through, the home was sold to the Federal Home Loan Mortgage Corporation (commonly known as Freddie Mac) for all of $500. Yet Spears wasn't able to modify his mortgage to stay in his home. “I was willing to pay way more than $500,” Spears said. “What kind of justice is that?”

Take Back the Land Rochester, Occupy Rochester and others are fighting to get Spears back in his home—there's a petition you can sign.

3. Threatening Phone Calls in Waterford, Michigan

After a car accident Kathryn Nava wound up on disability and had trouble making her mortgage payments. She had a friend who was willing to help her make her back payments, but that friend wanted to see a payment history before giving her the money. Nava called her mortgage lender to request that history—and was told it would cost her $50 per hour, and take 90 days to receive it.

So she tried again, calling the president of the company. She got a voicemail response that shocked her so much she recorded it and saved it.

“Let me enlighten you, Kathy. First of all, there's nothing in your contract with us says we owe you any history, now, next year, five years from now or the next time...I've begun foreclosure today. I bet you're sorry now that you made that phone call. I don't need to put up with your crap, OK?...Bottom line, I'm doing nothing for you now.”

Indeed, she did end up losing her home.

4. Illegal Eviction in Los Angeles

Eduardo Acosta and his family had won their case—a judge ruled that Green Century Investment Group/IndyMac had no right to foreclose on the family, that they'd filed fraudulent paperwork.

A month later, the local sheriff posted an eviction notice to the family anyway.
This came on the heels of an audit of California foreclosures by the San Francisco County Recorder, which found that 99 percent of the foreclosures examined had “irregularities,” and there were clear violations of state law in 84 percent of them.

Acosta had applied for a mortgage modification after his payment shot up to $2,000 a month, his wife fell ill, and his monthly income plummeted. But while the bank reviewed his modification request, it also began foreclosure proceedings—a common enough process that it has a name, “dual tracking.” There's a bill in the Senate that aims to ban the practice and only allow lenders to proceed with foreclosure after working with borrowers. This process all-too-often allows for “accidental” foreclosures, where one side of the company forecloses on a home that another department is ostensibly working to help the family keep.

Occupy LA posted a call for help for the Acosta family after their eviction notice. “I’m sure there are a lot of people going through this,” Acosta said. “Let’s step up and help each other out.”

The Acostas are still in their home as of the latest report, but keeping them there has required a constant fight.

5. Sent to the Psychiatric Ward in Lodi, Wisconsin

An Associated Bank representative helped send Bill Schroeder to a psychiatric ward for 72 hours after a telephone argument over Schroeder's missed mortgage payments.

Schroeder told the Wisconsin State Journal that during their conversation the bank rep called him “worthless” and said the bank didn't care what happened to him as long as it got its money.

"I made an offhand response," Schroeder said. "I said, ‘Maybe I'll just go get my gun and shoot myself and you can have my life insurance.'"
They hung up and Schroeder made a trip to the grocery store. When he got back, a police car was in his driveway to take him to the hospital.

The bank rep was apparently slightly more concerned about Schroeder's health than he let on and had called the police. Yet it didn't seem to occur to the bank that perhaps the way to show real concern for homeowners' mental health would be to not make threats in the first place.

The Schroeder family wound up selling their home in a short sale, which left them still owing the bank $31,256 to make up the difference between their mortgage and the sale price of the home, which was down $66,000 after the bursting of the housing bubble. They estimated to the State Journal that they'll be making payments on a house they don't have anymore for the next seven years.

6. Disappearing Documents in Ohio

Gina Brooks and her husband applied for their first mortgage modification with Wells Fargo's ASC Mortgage servicer when they were only a couple of months behind on their payments. They were denied the first time and chose to go through a Chapter 13 bankruptcy—which would allow them to keep their home and keep paying their mortgage. “I had lived in this house for 14 years,” she said. “I didn't want to lose my home.”

In July 2010, after the bankruptcy, she submitted another modification request and was again denied. The money she and her husband were paying on their mortgage alone was leaving them little to live on, and they finally decided to switch to a Chapter 7 bankruptcy, which would leave them without their home. In a last-ditch effort, she wrote to her mortgage company, and then called in when she didn't hear back.

“I was told at that time they had no record whatsoever of anything I had ever sent in since I started in 2009,” Brooks said. No record of her repeated denials, her requests, her bankruptcies. Nothing. No one was familiar with her case.
Brooks had already started packing her home when a friend suggested she contact her senator. Through an intervention by Sherrod Brown (D-OH)'s office, she was offered a full refinance on her home by Wells Fargo—but after two years of fighting with the lender, her refinance added $31,000 to her mortgage. Brooks said she's grateful to have her home, but frustrated to be paying interest on interest. “Why did it take me two years, two bankruptcies and all of this headache when they could've done it in one month?”

7. Possible Victory in Minneapolis

Monique White's home was the site of one of the first Occupy-related foreclosure defenses last November, when she refused to be bought off by Freddie Mac's “cash for keys” offer. That would've given her a small reimbursement for voluntarily giving up her home after it had been repossessed by U.S. Bank and sold to Freddie Mac—without her knowledge.

Neighborhoods Organizing for Change had already been working with White, but they reached out to Occupy and the group responded, sending occupiers to camp out on White's property to prevent eviction.
Now, thanks to tireless action by a team of lawyers, activists, and White herself—who traveled to U.S. Bank's shareholder meeting to personally ask the bank's CEO, Richard Davis, for help—she's got a tentative deal to modify her mortgage to allow her to stay in her home.
The Huffington Post reported:

It took US Bank a matter of days to come up with a principal reduction that allowed White to pay $686.36 a month to stay in her home. White, who works two part-time jobs and is in training for a full-time union position, said it was a little steep, but she could make it work.

Occupy Homes Minnesota activist Nick Espinosa told the Huffington Post, "It does show that when we shine a light on these cases and bring them to the public eye, that the bank is more than capable of negotiating -- even though they've said all along that that is not their responsibility. It's a huge victory, and it represents exactly the kind of deal that every homeowner in America should be getting from the banks."

Sarah Jaffe is an associate editor at AlterNet, a rabblerouser and frequent Twitterer. You can follow her at @sarahljaffe.

Dozens of Police Evict Georgia Family at Gunpoint at 3am

AlterNet.org

AlterNet / By Steven Rosenfeld

Dozens of Police Evict Georgia Family at Gunpoint at 3am

The eviction might have been another anonymous descent into poverty were it not for Occupy Atlanta activists who tried to help the family stay.

May 5, 2012  |  

 

 

 

Four generations of a Georgia family were evicted at gunpoint by dozens of sheriffs and deputies at 3am last week in an Atlanta suburb. The eyebrow-raising eviction, a foreclosure action, might have been another anonymous descent into poverty were it not for Occupy Atlanta activists who tried to help the family stay in Christine Frazer’s home of 18 years.  

 

The eviction came as Frazer, 63, who lost her husband and then job in 2009, had been challenging the foreclosure in county and federal courts by seeking to restructure the terms of a delinquent mortgage. However, the latest holder of her loan, Investors One Corporation—the fourth company that bought her mortgage in an eight-month period—allowed the eviction to proceed even thought it was "negotiating" new loan terms with her attorney one day before the police raid.

 

DeKalb County Sheriff Thomas Brown told an Atlanta talk radio show a day after the raid that a dozen squad cars and dozens of deputies were needed for the dead-of-night raid because Occupy Atlanta had set up tents on Frazer's property, and his perception of the Occupy activists in other cities led him to believe they could be armed. He also said he timed the eviction to avoid media coverage.

 

“I made the decision that we were going to do this at 3am for a couple of reasons,” he told WAOK’s Derrick Boazman. “Number one, I have seen the various Occupy groups in various cities operate before. It was an ugly scene in Oakland. I have seen them firsthand in Washington. I’ve seen them on Wall Street. I’ve seen them in Atlanta.”

 

“I will not participate in a mass demonstration arrest with television cameras when I am not sure I can trust the people who say they will offer passive resistance,” Brown said. “Our intelligence told us that there were at least 10 Occupy Atlanta folks there on the property; that turned out not to be the case. Our intelligence told us that the family had vacated the house; that turned out not to be the case… We made the decision to have enough resources there to make sure it would not get out of hand.” 

 

But out-of-hand does not even approach how Christine Frazer described the raid, saying in the days since the eviction she and her family, including her 85-year-old mother, daughter and 3-year-old grandson, have been split up and forced to rely on charity. Frazer also described how she had been exploring every legal avenue to refinance her debt, but the lenders had no intention of doing anything but evict her, presumably to sell the home. 

 

“It has been really unsettling,” Frazer said. “When something like this happens, it breaks up the family. Me and my mom are staying one place. My grandson is someplace. My daughter is staying someplace else. It just feels really strange. I have lived in that home for 18 years. That is where I am used to waking up every morning. It’s just… I am grateful that I am not under a bridge, but I miss home.”

 

Frazer said that she did not expect the sudden eviction, because she had been challenging the foreclosure in federal court and her attorney had been negotiating with the lenders.

 

“No, I didn’t, because I currently have a case in federal court for a wrongful foreclosure,” she said. “And also the opposing or foreclosing attorney was in a negotiation process with my attorney. As a matter of fact, that Monday, I talked with them and they had talked about possibly reinstating the loan. But, of course, I was concerned about the principle [amount]. And they previously said they were looking for the eviction. It happened the next morning at 3am.”

 

Frazer’s descent in home loan hell had been going on for months, she said, but nothing in that arduous effort prepared her for being awakened and evicted at gunpoint. 

 

“They came to my home like I was a drug dealer,” she said. “At 3am in the morning, they knocked on my door. The Dekalb Sheriff’s Department knocked on my door. They opened my door. I knew my rights that I didn’t have to open the door. They came with a locksmith, drilled off the locks, came into my house, with a flashlight in one hand and pistol in the other, [shouting] ‘Who’s in the house? Who’s in the house?’”

 

Frazer said the sheriff’s department knew exactly who was there—three generations of women in one family and a toddler grandson. 

 

“Who do you think was in the house?” she asked. “My picture and my story have been in the local DeKalb paper. They knew exactly who. Yes, they knew Occupy was there. But Occupy is a nonviolent movement. Nonviolent. These people came at me like I’m a drug dealer and I am doing something wrong. I am just a homeowner.” 

 

Frazer said she was ordered by sheriffs to dress and then vacate the building.

 

“They told me to pack up as if I just had a fire at my home and take my immediate possessions. And I had to leave immediately. I said, ‘Can I take a shower?’ ‘No, just throw on some clothes.’ It took them seven hours to get that stuff out of my house. They were going to be there anyway. Why couldn’t I take a shower?”

 

Frazer said the sheriff brought men to empty the house of its possessions. 

 

“They hired some off-the-wall great big jerks to come into my home,” she said. “My daughter had a little piggy bank. She was saving those gold dollar coins. They broke it on the floor and took that. I have no idea where some of my jewelry is—stuff I bought when I was 30 years old. I am 63. They just threw everything everywhere, helter-skelter on the front lawn in the dark. I have to tell you, I worked hard all my life. At one point, I had a moving company. I know it is against the law in Georgia to move anyone at night.”

 

The sheriffs closed off the street and had at least a dozen police cars present. There was one Occupy Atlanta member in a tent on the property at the time, said Tim Franzen, an Occupy member active in housing issues. 

 

“Chris does have a place to stay,” Franzen said, when asked where she and her family are now. “We have moved all of her stuff, 18 years worth of stuff, into storage. And Chris still has plenty of fight in her and we are going to fight alongside of her.”   

 

Invisible, Unaccountable Moneymen

 

Frazer’s foreclosure woes are hardly unique. It is typical for single women to earn less money than men. It is very difficult for women over age 60 to find gainful employment. Meanwhile, her mortgage has been sold and resold in a financial industry game of pass the hot potato, where buyers and sellers pay a fraction of its face value but either cash out by finding a new buyer or evicting the borrower and selling the house.  

 

“My loans were securitized, there is no doubt in my mind about that,” Frazer said, explaining that every time she sought to identify who was the actual holder of her mortgage she ran into brick walls and opaque companies where it was all but impossible to even speak to someone with authority to negotiate on the phone.

 

Frazer said one firm she contacted, claiming to be in the business of helping distressed borrowers, came back with an offer—pay $20,000 in cash and then the loan would be reinstated. That option, of course, was impossible, because if she had that kind of cash, she said she would have been making her mortgage payments. Frazer also had hopes that President Obama’s program to help distressed borrowers would offer a way to keep the home. But that also fell through because only borrowers who are caught up with all their payments are eligible for restructuring their loans. 

 

“You are not a distressed homeowner if you are current on your mortgage,” she said. 

 

Frazer said she has tried to negotiate a new loan—starting with her balance, not including nearly $30,000 in penalty and legal fees tacked onto the principle. 

 

“I sat down one day as I was going through this, and looked at what we have paid,” she said. “I have already have paid over $240,000 for the house… The banks have gotten the money. The banks got a [government] bailout. That document that the bank sent me that said my house is now worth $40,000. That is called depreciation. That is a tax write-off for them. Their bread got buttered on both sides. But me and my family; what kind of justice is that?”

 

Dekalb Sheriff Brown told the talk radio listeners there was nothing unusual about Frazer’s foreclosure and eviction—apart from bringing in 10 times the number of law enforcement officers typically involved because of the presence of Occupy Atlanta.

 

“Mrs. Frazer lost her home evidently because she could not make payments,” he said. “As I understand it, she tried to get a loan modification, but she did not qualify for a loan modification because she did not have a source of income.”

 

“Mrs. Frazier and her attorneys exhausted every legal means to save her home,” Brown said. “They took it all the way to the DeKalb Superior Court… The judge sitting on the bench ruled that she could still not keep her home and issued an order to the sheriff to execute the warrant….” 

 

Frazer’s attorney, Joshua Davis, said the sheriff’s descriptions and knowledge of the case was not accurate. Davis said Frazer was scheduled to go before a county court to seek a temporary restraining order preventing the foreclosure while the case was in litigation. However, lawyers for the lender took the case to federal court, because of the loan amounts involved, where the TRO proceeding became voided and the case had to commence again. That was a tactic, Davis said to strip away the legal obstacles and proceed with a foreclosure eviction, which under Georgia law is a 30-day process.

 

“We were about to have a hearing on the temporary restraining order,” Davis said. “Right before we were about to have a hearing but the opposing counsel moved it to federal court. What that does is it basically nullifies the hearing that we hope to take place in [county] Superior Court. And then everything is supposed to be sent to federal court and then the judges from there will move on it. But everything in federal court moves a lot slower.” 

 

There is one legal scenario under which Frazer might regain her home and get a modified mortgage she could afford.

 

Davis said the lender that pursued the eviction, Investors One Corp., was not the holder of her latest mortgage in the DeKalb County assessor’s office. Apparently, an Indiana bank that sold the loan to Investors One is still listed as the last lender of record on the property. That discrepancy in property records might prove to be enough legal grounds to reverse the foreclosure and entitle Frazer to punitive damages—because Investors One executed the eviction without legal standing as the recorded loan holder. If a federal judge accepts that argument or allows a trial to proceed based on it, then a settlement might be possible in which Frazer could obtain a new affordable 30-year mortgage. 

 

When asked if that was what she was seeking, she replied, “Exactly. Work with me.”

 

In the meantime, DeKalb Sheriff Brown is unrepentant about Occupy Atlanta, saying he does not trust their claims of being nonviolent.

 

“What I didn’t want to do was to put a whole lot of people in my jail who wanted to be in my jail, at $53.50 a day, which is a burden to the taxpayers,” he said, “because somebody wants to make a statement that in their minds that corporate America controls 90 percent of the wealth in these United States of America. Whether that is true or not, I don’t know and I don’t care. I have a constitutional responsibility to uphold the peace.”

Steven Rosenfeld covers democracy issues for AlterNet and is the author of "Count My Vote: A Citizen's Guide to Voting" (AlterNet Books, 2008).

Obama Sells Out Homeowners Again: Mortgage Settlement a Sad Joke

Published on Thursday, February 23, 2012 by Common Dreams

Obama Sells Out Homeowners Again: Mortgage Settlement a Sad Joke

by Ted Rall

Joe Nocera, the columnist currently challenging Tom Friedman for the title of Hackiest Militant Centrist Hack--it's a tough job that just about everyone on The New York Times op-ed page has to do--loves the robo-signing settlement announced last week between the Obama Administration, 49 states and the five biggest mortgage banks. "Two cheers!" shouts Nocera.

Too busy to follow the news? Read Nocera. If he likes something, it's probably stupid, evil, or both.(Photo: CNN)

As penance for their sins--securitizing fraudulent mortgages, using forged deeds to foreclose on millions of Americans and oh, yeah, borking the entire world economy--Ally Financial, Bank of America, Citibank, JPMorgan Chase and Wells Fargo have agreed to fork over $5 billion in cash. Under the terms of the new agreement they're supposed to reduce the principal of loans to homeowners who are "underwater" on their mortgages--i.e. they owe more than their house is worth--by $17 billion.

Some homeowners will qualify for $3 billion in interest refinancing, something the banks have resisted since the ongoing depression began in late 2008.

What about those who got kicked out of their homes illegally? They split a pool of $1.5 billion.
Sounds impressive. It's not. Mark Zuckerberg is worth $45 billion.

"That probably nets out to less than $2,000 a person," notes The Times. "There's no doubt that the banks are happy with this deal. You would be, too, if your bill for lying to courts and end-running the law came to less than $2,000 per loan file."

Readers will recall that I paid more than that for a speeding ticket. 68 in a 55.
This is the latest sellout by a corrupt system that would rather line the pockets of felonious bankers than put them where they belong: prison.

Remember TARP, the initial bailout? Democrats and Republicans, George W. Bush and Barack Obama agreed to dole out $700 billion in public--plus $7.7 trillion funneled secretly through the Fed--to the big banks so they could "increase their lending in order to loosen credit markets," in the words of Senator Olympia Snowe, a Maine Republican.

Never happened.

Three years after TARP "tight home loan credit is affecting everything from home sales to household finances," USA Today reported. "Many borrowers are struggling to qualify for loans to buy homes…Those who can get loans need higher credit scores and bigger down payments than they would have in recent years. They face more demands to prove their incomes, verify assets, show steady employment and explain things such as new credit cards and small bank account deposits. Even then, they may not qualify for the lowest interest rates."

Financial experts aren't surprised. TARP was a no-strings-attached deal devoid of any requirement that banks increase lending. You can hardly blame the bankers for taking advantage. They used the cash--money that might have been used to help distressed homeowners--to grow income on their overnight "float" and issue record raises to their CEOs.

Next came Obama's "Home Affordable Modification Program" farce. Another toothless "voluntary" program, HAMP asked banks to do the same things they've just agreed to under the robo-signing settlement: allow homeowners who are struggling to refinance and possibly reduce their principals to reflect the collapse of housing prices in most markets.

Voluntary = worthless.

CNN reported on January 24th: "The HAMP program, which was designed to lower troubled borrowers' mortgage rates to no more than 31% of their monthly income, ran into problems almost immediately. Many lenders lost documents, and many borrowers didn’t qualify. Three years later, it has helped a scant 910,000 homeowners--a far cry from the promised 4 million."

Or the 15 million who needed help.

As usual, state-controlled media is too kind. Banks didn't "lose" documents. They threw them away.

One hopes they recycled.

I wrote about my experience with HAMP: Chase Home Mortgage repeatedly asked for, received, confirmed receiving, then requested the same documents. They elevated the runaround to an art. My favorite part was how Chase wouldn't respond to queries for a month, then request the bank statement for that month. They did this over and over. The final result: losing half my income "did not represent income loss."

It's simple math: in 67 percent of cases, banks make more money through foreclosure than working to keep families in their homes.

This time is different, claims the White House. "No more lost paperwork, no more excuses, no more runaround," HUD secretary Shaun Donovan said February 9th. The new standards will "force the banks to clean up their acts."

Don't bet on it. The Administration promises "a robust enforcement mechanism"--i.e. an independent monitor. Such an agency, which would supervise the handling of million of distressed homeowners, won't be able to handle the workload according to mortgage experts. Anyway, it's not like there isn't already a law. Law Professor Alan White of Valparaiso University notes: "Much of this [agreement] is restating obligations loan servicers already have."

Finally, there's the issue of fairness. "Underwater" is a scary, headline-grabbing word. But it doesn't tell the whole story.

Tens of millions of homeowners have seen the value of their homes plummet since the housing crash. (The average home price fell from $270,000 in 2006 to $165,000 in 2011.) Those who are underwater tended not to have had much equity in their homes in the first place, having put down low downpayments. Why single them out for special assistance? Shouldn't people who owned their homes free and clear and those who had significant equity at the beginning of crisis get as much help as those who lost less in the first place? What about renters? Why should people who were well-off enough to afford to buy a home get a payoff ahead of poor renters?

The biggest fairness issue of all, of course, is one of simple justice. If you steal someone's house, you should go to jail. If your crimes are company policy, that company should be nationalized or forced out of business.

Your victim should get his or her house back, plus interest and penalties.

You shouldn't pay less than a speeding ticket for stealing a house.

© 2012 Ted Rall

Ted Rall is the author of the new books "Silk Road to Ruin: Is Central Asia the New Middle East?," and "The Anti-American Manifesto" . His website is tedrall.com.

Rolling Stone

Why the Foreclosure Deal May Not Be So Hot After All

POSTED: February 9, 12:58 PM ET

New York Attorney General Eric Schneiderman and California Attorney General Kamala Harris, who agreed to join more than 40 other states in a nationwide settlement, announced today.

Mark Wilson/Kevin Winter/Getty Images

So the foreclosure settlement is through.

A few weeks back, I was optimistic about it – I had been worried that it was going to contain broad liability waivers for all sorts of activities, and I was pleasantly surprised when I heard that its scope had essentially been narrowed to robosigning offenses.

However, now that the settlement is finalized, and I've had time to think about it and talk to people who know far more than I do about this, I'm feeling pretty queasy.

It feels an awful lot like what happened here is the nation's criminal justice honchos collectively realized that a thorough investigation of the problem would require resources they simply do not have, or are reluctant to deploy, and decided to accept a superficially face-saving peace offer rather than fight it out.

So they settled the case in a way that reads in headlines like it's a bite out of the banks, but in fact is barely even that. There will be little in the way of real compensation for stuggling homeowners, and there are serious issues in the area of the deal's enforceability. In fact, about the only part of the deal we can be absolutely sure will be honored in full is the liability waiver for the robosigning offenses.

With the rest of it -- collecting on the settlement, enforcement of the decrees, all the stuff put in there to balance the deal in the consumer's direction -- there will be an uphill battle from this point forward to get the banks to comply. The banks meanwhile have no such uphill battle. They will get the full benefit of the deal (a release from costly litigation) from the moment the ink is dry.

Really this looks like America's public prosecutors just wilted before the prospect of a long, drawn-out conflict with an army of highly-paid, determined white-shoe banker lawyers. The message this sends is that if you commit crimes on a large enough scale, and have enough high-priced legal talent sitting at the negotiating table after you get caught, the government will ultimately back down, conceding the inferiority of its resources.

I think the best summation of the settlement is probably Yves Smith's, which can be found here. The piece lists the 12 things that suck the most about the settlement. The most painful is probably #12:

12. We'll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. But the problems will fester and the housing market will continue to suffer. Investors in mortgage-backed securities, who know that services have been screwing them for years, will be hung out to dry and will likely never return to a private MBS market, since the problems won't ever be fixed. This settlement has not only revealed the residential mortgage market to be too big to fail, but puts it on long term, perhaps permanent, government life support.

My mistake in looking at this deal a few weeks ago, when details of it first leaked out, was in focusing on how much worse it could have been, instead of thinking about how bad it still is. The only acceptable foreclosure deal had to bring about a complete end to robosigning and the other similar corrupt practices that grew up around it (like for instance gutter service, the practice of process servers simply signing affidavits saying they delivered summonses, instead of really doing it).

But this deal not only doesn't end robosigning, it officially makes getting caught for it inexpensive. Shame on me for ever thinking that might be a good thing.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/why-the-foreclosure-deal-may-not-be-so-hot-after-all-20120209#ixzz1mUTvUiJ1

Bank Bailout 2: Obama Lets Mortgage Abusers Off the Hook

Published on Thursday, February 9, 2012 by Common Dreams

Bank Bailout 2: Obama Lets Mortgage Abusers Off the Hook

The Obama Administration has followed a predictable pattern: Leave No One Accountable

- Common Dreams staff

The Obama administration announced this morning that the five largest U.S. banks have agreed to a $26 billion 'settlement' to end lawsuits over abusive practices that forced millions of families from their homes and helped bring about the nation’s financial meltdown.

After months of talks with state and federal officials, the banks have reportedly agreed to help some homeowners reduce their mortgage debt or refinance their homes at lower rates. Over 4 million familes lost their homes to foreclosure yet just 750,000 people who lost their homes to foreclosure will receive a one-time check for just $1,800 to $2,000, which for many will barely cover the cost of moving. The deal will only help a fraction of the struggling homeowners affected by the bank’s practices.

New York and California have reportedly signed off on the deal after initially holding it up in protest of lenient treatment of the banks.

The deal gives banks immunity from civil lawsuits for "robosigning," a practice whereby homeowners were rapidly evicted without proper vetting.

In his January 24th State of the Union address, President Obama promised a fresh investigation into mortgage abuses that led to the financial meltdown. Now, before that investigation has even begun, Obama is granting these 5 "too big to fail" banks immunity from "robo-signing" abuses.

* * *

UPDATE: Matt Taibbi writing at Rolling Stone:

...this looks like America's public prosecutors just wilted before the prospect of a long, drawn-out conflict with an army of highly-paid, determined white-shoe banker lawyers. The message this sends is that if you commit crimes on a large enough scale, and have enough high-priced legal talent sitting at the negotiating table after you get caught, the government will ultimately back down, conceding the inferiority of its resources.

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Yves Smith, writing at NakedCapitalism:

The Top Twelve Reasons Why You Should Hate the Mortgage Settlement

[...] As we’ve said before, this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me. It’s bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.

1. We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.

2. "If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating."That $26 billion is actually $5 billion of bank money and the rest is your money. [...]

3. That $5 billion divided among the big banks wouldn’t even represent a significant quarterly hit. [...]

4. That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.

5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. [...]

6. The past history of servicer consent decrees shows the servicers all fail to comply. Why? Servicer records and systems are terrible in the best of times, and their systems and fee structures aren’t set up to handle much in the way of delinquencies. [...]

7. The cave-in Nevada and Arizona on the Countrywide settlement suit is a special gift for Bank of America, who is by far the worst offender in the chain of title disaster. This move proves that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced. [...]

8. If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating. It’s a bad idea to settle obvious, widespread wrongdoing on the cheap. [...]

9. There is plenty of evidence of widespread abuses that appear not to be on the attorney generals’ or media’s radar, such as servicer driven foreclosures and looting of investors’ funds via impermissible and inflated charges. While no serious probe was undertaken, even the limited or peripheral investigations show massive failures (60% of documents had errors in AGs/Fed’s pathetically small sample). [...]

10. A deal on robosigning serves to cover up the much deeper chain of title problem. [...]

11. Don’t bet on a deus ex machina in terms of the new Federal foreclosure task force to improve this picture much. If you think Schneiderman, as a co-chairman who already has a full time day job in New York, is going to outfox a bunch of DC insiders who are part of the problem, I have a bridge I’d like to sell to you.

12. We’ll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. [...]

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And at Firedoglake, Scarecrow writes of the 'settlement':

Obama’s Guiding Principle: Leave No One Accountable

Obama’s people have performed this function for America’s looters over and over again. They did it for Wall Street, the banks, the rich tax evaders, the insurance companies, the oil companies, the gas companies, the coal companies, the CIA, the DoD, and numerous torturers and their legal/policy enablers and associated war criminals in the previous administration.[...] The Obama Administration has followed a predictable pattern we now recognize. It has consistently functioned like criminal defense counsel, whose mission is to get their criminal clients, the major corporations and executives who fund their elections, off with no admission of guilt, no forced resignations, and as little harm to their reputation, or that of the counsel, as possible. To do this, they neutralize anyone with an ounce of public purpose in their veins.

Its role is then to convince the public that whatever you thought or feared was going on in America, and whoever you believed had caused the collapse of America’s economy, caused millions to lose their jobs, their homes and their retirements and continued to loot the country, it’s time to look forward. Because everyone who matters — and that’s not you — now agrees, they say, to function in the public interest, even though it’s a bald face lie, since nothing has changed and the looters and their complicit overseers are still in charge.

Obama’s people have performed this function for America’s looters over and over again. They did it for Wall Street, the banks, the rich tax evaders, the insurance companies, the oil companies, the gas companies, the coal companies, the CIA, the DoD, and numerous torturers and their legal/policy enablers and associated war criminals in the previous administration.

Consistent with this strategy, Obama’s team must silence, neutralize or punish anyone who protests or blows the whistle on the massive criminality and corruption involved. It must also emasculate the left and what’s left of the liberal wing of the Dem Party, using the argument that the Administration is not nearly as awful as the other Party’s people, who openly glorify looting and killing and vilifying the victims.

But of course, when we were ruled by the latter, everyone with any humanity was repulsed by the open looting and killing and indifference and was willing to say so. When the Administration sanctions it, however, we are supposed to bite our tongues, because it could be worse.

Well, it’s worse, and it’s more insidious and corrupting of our souls than where we were four years ago. It is evil.