Monthly Archives: December 2011

AFTER $16 TRILLION BANK PAYMENT, WHAT DO WE OWE?

AFTER $16 TRILLION BANK PAYMENT, WHAT DO WE OWE?.

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AFTER $16 TRILLION BANK PAYMENT, WHAT DO WE OWE?

Posted on December 30, 2011 by Neil Garfield

ARE WE GOING TO GIVE THE BANKS ANOTHER $16 TRILLION?

Between TARP (only $700 Billion) and the FED bailouts ($16 TRILLION) the Banks have already received from all of us enough money to pay off every mortgage, credit card, student loan, auto loan and every other kind of debt allegedly owed to them. And yet, we are told we still owe them the money. If we owe anyone, it is the Federal government and the General Accounting Office should figure out who we pay and how much. It certainly does not seem right that we should pay the $16 TRILLION all over again when the banks have already received the money.

Now add approximately $15 TRILLION that was made in “trading” some of which was booked as principal so it didn’t count as taxable profits, and you may get what I am saying here. If you add all the debt of all Americans to all the banks that received the bailout money, they have already been paid twice over, at a minimum. We are still told that we should pay on those paid debts — payable to the Banks. For those of you counting, that would be the THIRD time the debt is paid. I say they have already been paid. I say the money should go to the Federal government.

What would happen? Well, the government could figure out if any of that money truly should go to the banks and then give them their fair share if there is any fair share. The rest clears up the deficit and provides enough stimulus dollars to shock our recumbent economy into renewed life. Once a full and fair accounting is done, the investors who lost money could be repaid with interest up to the point that the borrowers have borrowed money. The Banks will scream at that because the amount of borrowed money does not equal the total owed to the investors. The amount borrowed is far less than the amount loaned, because the banks siphoned off some 30%of the investors’ money in “fees” and “trading profits.”

The money that was NOT loaned to borrowers is not the borrowers’ problem. The Banks need to take care of that with the money they stuffed into off-shore accounts. The money that has been paid to the investors is also not a problem anymore to the borrowers because the creditor has already been paid — directly or indirectly. That leaves some sort of balance owed by borrowers, which by quick estimates would be around 1/3-1/2 of the amount they borrowed. THAT would reduce the amount due on each debt to a manageable and payable size. Allowing for a fair interest rate of around 3% would clear the decks immediately and boost consumer wealth and confidence sufficient for decades to come.

None of this will happen of course unless there is a paradigm shift from doing what is best for the Banks to doing what is best for the country. It just so happens that it also shifts back to the rule of law. Anyone who has borrowed $100 from Joe, which was paid off by his Aunt Sally knows that if he pays anyone it is going to be Aunt Sally. You are not going to pay Joe AGAIN on the same debt. Or are you?

So there is the question: after all the money we gave to the Banks, why would we pay them again on the same debts that they SAID they lost so much money on? Are we going to give them the whole $16 TRILLION AGAIN? When will people stop beating themselves up about a debt they owe and start questioning why they are paying the same debt multiple times? Why is there a difference between paying the debt as a taxpayer and paying the debt as a borrower? Isn’t it immoral to collect on the same debt multiple times? Isn’t that the true moral question?


What if the SEC investigated Banks the way it is investigating Mutual Funds?

By William K. Black

The Wall Street Journal ran a story today (12/27/11) entitled “SEC Ups Its Game to Identify Rogue Firms.”

“Rogue” is an interesting word with a range of definitions. When it is used as an adjective its meaning is: “a playfully mischievous person; scamp.” The trivialization of the most destructive elite frauds is one of the most common forms of what criminologists call “neutralization” of the moral content of wrong doing. Neutralization increases crime.

The actual story makes it clear that the criminals that the SEC was identifying were not “rogues.” They were the CEOs of seemingly legitimate firms. The SEC is identifying “accounting control frauds” – the frauds that cause greater financial losses than all other forms of property crime combined. The SEC is not identifying a few rotten apples, but roughly 100 hedge funds likely to have engaged in accounting fraud. The WSJ describes the SEC’s identification system:

“The list is the low-tech product of a high-tech effort by the SEC to crack down on fraud at hedge funds and other investment firms. After the agency failed to detect the $17.3 billion Ponzi scheme by Bernard L. Madoff, who wowed investors with steady returns over several decades, SEC officials decided they needed a way to trawl through performance data and look for red flags that might signal a possible fraud.

In 2009, the SEC began developing a computer-powered system that now analyzes monthly returns from thousands of hedge funds. Officials won’t say exactly how it works or how much it cost to build, but the agency has announced four civil-fraud lawsuits filed as a result of what it calls the “aberrational performance initiative.”” The SEC should be applauded for finally understanding that “if it’s too good to be true; it probably isn’t true.” Our agency put a similar system in place in 1984 to identify the S&L accounting control frauds that were driving that crisis. A quarter-century later, the SEC began to follow our well-trodden trail – but only with regard to felons inhabiting the middle of the fraud food chain (hedge funds).

The SEC has, inevitably, discovered that accounting fraud is common among hedge funds. It is unlikely that the SEC system is really “high-tech” in information science terms. Low-tech information systems have been capable of identifying “aberrational performance” for at least thirty years. We did not have to create any pioneering software in 1984 in order to identify aberrational performance. The cost and time to create our “red flags” was trivial (a few hours of programming time by an agency staffer). (We were collecting the data and computing the necessary ratios anyway. One simply decides the level of a few key variables worthy of being flagged. There’s nothing magic about a “flag.” All it means is that suspicious levels are highlighted on the computer screen and on physical copies of the periodic reports so that they capture the reader’s attention.)

The SEC took two years to create its “aberrational performance” system and is embarrassed enough about the cost that it wants to keep it secret. The two year development process allowed the SEC to make a major advance relative to our system – they invented a title consisting of two words and eight syllables. Devising a title that recondite doubtless accounts for six months of the time it took the SEC to develop its flags.

The most interesting aspects of the WSJ story, however, are two unexamined topics that should have been central to the story. First, there is not a word in the article about criminal prosecutions for the frauds the SEC has identified. The frauds, as described in the article, are so blatant that they would make relatively simple to prosecute. There is no indication that the SEC wanted the WSJ to know that they had made well over a hundred criminal referrals against hedge fund CEOs and senior officers. There is no indication that the WSJ reporters were interested in whether the SEC had made criminal referrals against these moderately elite felons. As a result, we have no information on whether the SEC has in fact made hundreds of criminal referrals against the senior officers at the hedge funds that they have identified as having engaged in likely fraud. Indeed, we have no evidence that they have made any criminal referrals. Neither the SEC nor the WSJ reporters indicated that any prosecutions, or even Department of Justice investigations, resulted from the SEC hedge fund investigations.

Second, why isn’t the SEC’s top priority the systemically dangerous institutions (SDIs)? The SDIs are the financial institutions that are so large that the administration fears that their failure will cause a new global crisis. The SDIs pose by far the greatest risk to the economy and investors of any entity. Their frauds reached “epidemic” proportions and drove our ongoing crisis and the Great Recession. The SEC, however, applied its “aberrational performance” system to its smallest entities and is now expanding it to mutual funds. There is no indication that the SEC intends to use the system to spot fraudulent SDIs. There is no indication that the SEC has even contemplated using the system to spot fraudulent SDIs. There is no indication that the WSJ reporters asked why the SEC was failing to use its system where it was most needed.

Applying the SEC system to the SDIs would have led the SEC to develop a more sophisticated analytical approach to identifying fraud. There is no indication that the SEC has any familiarity with the criminology, economics, and regulatory literature about how to identify accounting fraud. Admittedly, the SEC (finally) has taken seriously the warning that generations of parents have impressed upon their children – “if it’s too good to be true; it probably isn’t true.” The Achilles’ heel of the SEC analytics is that it assumes fraud must be aberrational and its flags are (at least as described in the story) all tied to identifying aberrations premised on the implicit assumption that fraud cannot be endemic. The SEC official told the WSJ reporter that they looked for “outliers.” Accounting control fraud, however, can become endemic, particularly in a product line, because it produces a “Gresham’s dynamic” in which bad ethics drives good ethics out of the market. Accounting control frauds report results that are too good to be true, but they all report extraordinary results because accounting fraud is a “sure thing” (George Akerlof and Paul Romer, “Looting: the Economic Underworld of Bankruptcy for Profit, 1993). Accounting control fraud was far more common among the SDIs than the SEC system has identified among hedge funds.

——————————————————————————–

Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; http://www.BayLiving.com; and http://www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax


NV AG Sues LPS – From Reality Check – Pleading Attached‏

  • NV AG Sues LPS – From Reality Check – Pleading Attached‏

12/17/11
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NV AG Masto Strikes Again, Likely Slaying Lender Processing Services

Yesterday, December 16, 2011, 1:55:13 PM | Abigail Caplovitz FieldDescription: Go to full article

Document fraud infects many if not most foreclosures across the country, and Lender Processing Services (LPS) is a major reason why. As a result, many are celebrating Nevada Attorney General Catherine Cortez Masto’s civil fraud suit against the company. Her suit details, based on numerous witnesses’ testimony, documents, and other evidence, how LPS’s business model was deceptive and fraudulent.

LPS organized its workforce to churn out documents that were replete with lies, improperly directed foreclosure and bankruptcy attorneys, misrepresented its fees, and made numerous misleading statements to investors. Frankly, it’s hard to see how LPS survives this suit and the shareholder and other cases that are sure to follow.

The suit’s tremendous clarity and detail raise several questions beyond “when will LPS declare bankruptcy?”

One is, when will a criminal RICO indictment follow? I mean, Nevada has laid a path so clear it’s hard to see how the “Justice” Department misses it. First, Nevada indicted LPS employees for criminal document fraud involving fraudulent notarizations and forgeries. Second, Nevada has sued with today’s complaint, spelling out how LPS’ business model was based on the production of such fraudulent documents. Connect those two dots and you’ve got a criminal enterprise.

The next question is: will a judge or jury finally get the opportunity to declare that LPS is engaged in the illegal practice of law, with the “kickbacks” it demands from lawyers in its network (kickbacks is AG Masto’s word) amounting to illegal fee splitting? Masto’s complaint essentially makes that charge, and two class actions have tried to do the same although neither reached the merits of the allegations.

A third question is: will the SEC take action against LPS, following a shareholder lawsuit filed last year, the shareholder lawsuits that are sure to come now, or simply responding to the materially false statements LPS made that the Nevada AG cites in today’s suit?

And a final question, the one so many of us are hoping is answered soon: will any bankers and banks face similar claims from AGs soon? While Masto’s complaint against LPS is protective of the servicers, and notes LPS’s deliberate efforts to deceive them, it’s also true that banks had in-house robosigners and cannot plead ignorance of LPS-type activities. Wells Fargo, for example, had John Kennerty.

Nevada Attorney General Masto continues to shame the other AGs for her fearless willingness to call fraud fraud and crime crime. For this suit to filed now, when rumors of an AG settlement with the banks that will absolve them of far too much for far too little–a rich gift for bankers that deserve coal, not presents, is deeply gratifying. Even more gratifying would be follow up from other law enforcers. Is that really too much to ask?

I mean, after this suit, how can any AG that wants to get re-elected really sign off on such a deal? Some Democrats have clued in; most of the California delegation (where are you, Rep. Pelosi?) signed a strong letter backing the California AG‘s brave decision to team up with AG Masto, and Washington Senator Maria Cantwell’s equally strong letter that by implication has really highlighted the WA AG’s decision to date not to walk away from the settlement.

And as to the five questions this suit raises about LPS’s future and the banks’, well, the clock has started ticking on the answers, but surely they won’t come before the new year.


 

Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; www.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax


THE FIRST LIE: “WE REPRESENT THE PLAINTIFF BANK”

Posted on December 20, 2011 by Neil Garfield

“My head almost exploded clear off my body last week when I heard a foreclosure mill exclaim to a judge when questioned about how she was going to get a complaint verified: “But we don’t represent the Plaintiff, we represent the servicer!” (Editor’s Note: That is an admission that they filed a lawsuit on behalf of someone they do not represent. They are not the attorney for the Plaintiff but they filed the suit anyway!)

EDITOR’S NOTE: Weidner has it right here and this is a very ripe area of vulnerability for Banks and the lawyers who represent them. The article below gives you a couple if ideas about that.

As I have repeatedly said on these pages, the first words out of the mouth of the lawyer seeking to foreclose is probably a lie: “Good Morning, your honor my name is John Smith and I represent the holder of this loan, Aurora Loan Servicing.” After stating his name, the rest was at best a misstatement from lack of knowledge and probably just a lie.

The foreclosure mills send out lawyers who have no idea whether they represent the bank or any other party who is seeking to foreclose. And when he states that he  represents the holder,, he only knows that he was told to say that, not that it is true or even if the party whom he alleges to represent would agree. This entire game is made up of plausible deniability and “excusable neglect” so that when caught in the lies, each one can say we didn’t realize our information was bad. But they do know their information is bad and that is their vulnerability.

I would counsel attorneys to file a motion for proof of authority to represent as soon as the first pleading is filed — the compliant in judicial states and the motion to dismiss in the non-judicial states. And I would suggest you press the point by testing their proof through discovery. Most of the time they will cave and revamp their strategy. I actually know of a few cases where the filing of that motion alone was enough for the foreclosing parties to simply vanish.

Second, I again repeat that you should raise an immediate objection, based in part on your challenge to their authority to represent. When the statement is made that “we represent the Plaintiff” or “we represent the holder” or “we represent the creditor” that is a statement of fact, which the lawyers want to be tacitly admitted into the narrative of the case. Your objection should be along the lines of no foundation, that counsel is testifying, that if he is testifying you want to conduct a voir dire examination to determine if he has any personal knowledge for making that assertion, and if so, where he got his information.

Even if he say “I represent U.S. Bank” the same objections would apply after he makes his first argument of “fact” rather than law. It is the same as the “default.” How does he know that a default has occurred.  What contact has he had with the creditor? Who is the creditor. How do we know the creditor has not been satisfied and that the note and mortgage are therefore satisfied? We know that the servicers and others are trying to sneak in under the umbrella of the note and mortgage when their claim, for themselves, has nothing to do with the note or mortgage.

BE ALERT! And don’t assume anything. Challenge everything.

Fraudclosure Mill- Just Who Is Your Client Anyway?
Author: Matthew D. Weidner, Esq.

http://mattweidnerlaw.com/blog/2011/12/fraudclosure-mill-just-who-is-your-client-anyway/

A question that must be asked in every foreclosure case is just who hired the Plaintiff mill that is prosecuting the case…and who is paying that mill?

There has been a battle raging for years now between consumer attorney warriors who have been working to crack the secret relationship between their attorneys and the fake plaintiff that is named in the foreclosure lawsuit.

We’re especially cracking this relationship when judges start asking real questions or start putting the plaintiff actually comply with the Supreme Court’s rules.

My head almost exploded clear off my body last week when I heard a foreclosure mill exclaim to a judge when questioned about how she was going to get a complaint verified:

“But we don’t represent the Plaintiff, we represent the servicer!”

This is exactly the case and this is precisely the problem. Well, here’s where things get even more interesting. The referrals don’t come from the servicer, they come from a computer….and that’s a problem….or at least it should be if state bars and judges really started digging into this. It’s one of the backstories that’s running behind the Nevada Attorney General v. LPS Lawsuit, first addressed by my friend, Nick Wooten and a dude named Bubba Grimsley, see this article in HousingWire:

The alleged splitting of attorney fees between foreclosure law firms and third-party mortgage servicing providers is the subject of another lawsuit, bringing the number of cases filed on this issue to five within the past seven months, said Nick Wooten, an Alabama-based plaintiff’s attorney involved in all of the cases.

By mid-May, Wooten said he expects to file 10 to 12 additional cases, making similar allegations about what he claims are illegal, split-attorney fee arrangements between mortgage servicing outsourcers and law firms. The cases are concentrated in the Northern District of Mississippi, the Southern District of Alabama and the Northern District of Florida-Pensacola division.

NICK WOOTEN
http://www.housingwire.com/2011/04/22/lawyer-intensifies-fee-splitting-battle-against-mortgage-servicing-providers

And what did the banksters do when confronted by these allegations? Why they attacked the attorney that dared to challenge them? From another article in HousingWire:

An Alabama circuit court judge denied a motion Wednesday from Lender Processing Services (LPS: 14.30 -17.53%) for sanctions against attorney Nick Wooten and also declined to seal a transcript and default services agreement at the heart of Wooten’s cases.

LPS alleged in April http://www.housingwire.com/2011/04/26/lps-fires-back-with-motion-seeking-sanctions-against-alabama-attorney that Wooten, who is suing LPS in several cases on behalf of homeowners, used confidential information from a bankruptcy case he was handling between Larry David Wood and Karen Wilborn Wood against Option One Mortgage, and filed multiple lawsuits against LPS in other states using that information.

http://www.housingwire.com/2011/05/12/judge-declines-to-sanction-lawyer-involved-in-lps-fee-splitting-cases
KEEP AT THEM NICK!


 

Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; www.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax


Bank of America settles MBS case for $315 million‏

  • 12/19/11 

 
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Bank of America settles MBS case for $315 million

·         Orrick Herrington & Sutcliffe LLP

· ·         December 12 2011

On December 5, 2011, lead plaintiff Public Employees’ Retirement System of Mississippi moved in the Southern District of New York for approval of a $315 million settlement with Merrill Lynch.  In the class action lawsuit, plaintiff asserted claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, alleging that Merrill Lynch misrepresented the quality of the subprime mortgages underlying 84 different RMBS offerings.  The proposed settlement was entered into after discovery had begun and following decisions of Merrill Lynch’s motion to dismiss and Plaintiff’s motion for class certification.


 

Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; www.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax


TILA ACTIONS MAKING A COME-BACK AS LAWYERS AND JUDGES GET MORE RECEPTIVE

Posted on December 20, 2011 by Neil Garfield

EDITOR’S NOTE: FULL CIRCLE. When I started writing this blog I had researched the Truth in Lending law and concluded that it was one of the better pieces of legislation designed to protect consumers and maintain competition in the marketplace. That said, I advised many lawyers to concentrate on TILA violations because the rescission remedy was effective to remove the mortgage and the MONEY (not the house) due back to the “lender” was subject to constraints (who was the creditor and how much is owed, especially after you offset TILA damages, which are significant.

Alas, Judges read things into the law that were not there. Although the “lender” in rescission was obligated to either return all money paid at closing and return the note cancelled and satisfy the mortgage FIRST (or file a Declaratory Action (lawsuit) within 20 days why the rescission does not apply, the theory emerged even at the appellate level (9th Circuit, Federal) that in order to “rescind” one had to tender the money back and that the amount tendered had to be the amount demanded regardless of the actual amount that was due.

But things are changing. They had to change, because the basic problem with every closing in which their was claim of securitization was that the closing was defective, it lacked the disclosure required by law, and it presented loans that were not within industry standard underwriting of loans, nor were things like borrowers income or the value of the property confirmed by an internal review as was done in all mortgage loans prior to the onset of the securitization cancer.

The proposed CFPB rule simply takes existing law and codifies it in a new way — referring to those loans that comply with TILA as “qualified” and those loans that do not comply with TILA as “unqualified.” My prediction is that this new rule will pass. And with it, the challenge to foreclosures for noncompliance with TILA will rise exponentially because TILA fives the lawyer two things that he ordinarily isn’t seeing these days if he is defending foreclosures — (1) attorney fees and (2) damages, a lot of them, on which he can take a contingency fee. Defeat of the foreclosure by invalidating the mortgage lien leaves the homeowner with a lien free house but an obligation outstanding that can be discharged in bankruptcy.

Such an obligation will also be offset by damages for identity theft because the credit record and personal history of each borrower was used to sell bogus mortgage bonds to investors. Many other causes of action like slander of title flow from the that TILA audit. That is why I suggest to everyone who will listen that they get the COMBO, because that is what gives the TILA analyst vital information about what actually happened after closing, but also to get the LIVINGLIES FORENSIC TILA ANALYSIS.

SEE NEW CFPB RULE COULD LEAD TO FLOOD OF FORECLOSURE CHALLENGES

CFPB LIKELY TO ADOPT RULES REGARDING “QUALIFIED” MORTGAGES

If the Consumer Financial Protection Bureau wishes, it could allow borrowers to challenge future foreclosure actions by questioning whether the loan was a “qualified mortgage” in court.

Banks have been lobbying policymakers since May when the Federal Reserve published several options for how lenders must determine a borrower’s ability to repay a mortgage under the Truth in Lending Act. The new rules were proposed under the Dodd-Frank Act to outlaw risky and misleading home loans.

One of the options, known as the QM rule, would allow lenders to originate “qualified mortgages” under a legal safe harbor, provided the loans do not have certain features such as negative amortization, balloon payments, interest-only payments, or terms exceeding 30 years. As long as the bank stays within these guidelines, it will be in compliance.

Another option for QM, though, provides a “rebuttable presumption of compliance” clause, meaning the lender is presumed compliant as long as it follows guidelines in the first option and also verify the borrower’s employment, debt-to-income ratio and credit history.

The industry is very concerned that the CFPB, which assumed the rulemaking duty from the Fed this summer, will choose option two. According to some, the “rebuttable presumption” would mean any future foreclosure would be thrown into court. Foreclosure defense attorneys will able to challenge whether or not the loan being foreclosed upon was QM compliant or not, and if it wasn’t, judges could award TILA damages to the borrower.

“It would be much more expensive if everyone did this,” said Richard Andreano, a partner at the financial law firm Ballard Spahr. “It would get to a point to where it would almost be malpractice for a foreclosure defense attorney not to pursue the claim.”

Roy Oppenheim at Oppenheim Law Firm, a defense attorney in Florida, said there would only be challenges brought when the homeowner and the defense attorney have evidence of noncompliance.

“Not every foreclosure defense attorney will do this,” he said. “If they make good loans there should never be a problem.”


Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; www.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax