Posts tagged with 'foreclosure crisis'
Weekly Audit: Foreclosuregate Hits Home
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by Lindsay Beyerstein, Media Consortium blogger
Earlier this month, Bank of America (BOA), the country’s largest bank, announced a moratorium on foreclosures in all 50 states.
The bank promised not to sell any foreclosed homes or take any more delinquent borrowers to court until it had reviewed its potentially defective foreclosure process. Other major lenders soon announced that they too were suspending foreclosures in dozens of states. Why are the biggest banks in the country voluntarily calling for a time-out? It’s a hint that we’re facing a huge problem: The banks aren’t sure if they have the legal right to foreclose on millions of homes.
Here’s what’s new in foreclosuregate since the Audit took up the story last week. The Bank of America announced that it would resume some foreclosures on Oct. 25, having deemed its own methods sound. The stock market begged to differ. BOA’s stock fell over 5% on Thursday and other bank stocks also took a beating, as did mortgage bonds. This pattern indicates that investors are very worried about the effect of the foreclosure crisis on the health of the banks.
Rep. Alan Grayson (D-FL) is calling for a foreclosure moratorium under the new Financial Stability Oversight Council (FSOC), as Ellen Brown reports for Truthout. The FSOC has the power to preemptively break up any large financial institution that threatens U.S. economic security. Grayson wants a moratorium on all mortgages securitized between 2005 and 2008 until the FSOC can determine which foreclosures are valid and which are bogus.
The missing link
So, what kind of “defects” in the foreclosure process are we talking about? Fraud, basically.
Zach Carter of the Campaign for America’s Future explains to Chris Hayes of the Nation why Bank of America and other major lenders are in so much trouble: They are just administering loans for other lenders. You make your check out to the Bank of America, but the bank is just babysitting after the loan for the bondholders.
The real creditors are the investors who own bonds made up of pieces of many different mortgages, including yours. The bond gives the bondholder a share of the money that you and other borrowers pay each month. If you don’t pay, BOA initiates foreclosure. If you’re late, BOA charges you fees.
However, the bank can’t just hire a foreclosure company to take your home away on a whim. The bank must first show proof that it is entitled to foreclose because you’ve defaulted on your mortgage in the form of a mortgage note. If you hold one of those toxic asset mortgages, there’s a good chance the bank doesn’t have the note.
As Dean Baker explains in Truthout, in many, if not most, cases, “liar loans” (mortgages issued with no proof of income or assets) have given way to “liar liens” (foreclosures with no proof of default).
According to Carter, all the big banks have been hiring foreclosure mills to rubber-stamp their claims without checking. Unscrupulous foreclosure companies are admitting to “robo-signing,” i.e., foreclosing without even checking whether the bank’s claims were legit.
Foreclosuregate
According to Andy Kroll of Mother Jones, the Bank of America stands to lose up to $70 billion over what’s come to be known as “foreclosuregate.” A mortgage starts out with an originator, typically a bank or a mortgage broker. In the heyday of mortgage-backed securities, investment banks were buying up hundreds of thousands of mortgages, making them into mortgage-backed bonds, and selling them to investors.
Unfortunately, if the bank doesn’t have the note, who does? The mortgage originator may have gone bankrupt, many were fly-by-night operators that folded when the housing bubble burst. Many mortgages were bought and resold more than once before they found their way into a mortgage-backed bond.
So, the question is whether the bank really owned the mortgages it made into mortgage backed-securities and sold to individuals, pension funds, and other institutions. If not, the banks stand could be on the hook for selling assets they didn’t actually own to investors.
Moratorium now
The scandal affects so many mortgages that some lawmakers are calling for a nationwide moratorium on foreclosures until investigators can sort out who owns what once and for all. Rep. Edolphus Towns (D-NY) told Amy Goodman of Democracy Now! that Congress needs to stop banks from putting people out on the street until there is some way to differentiate between fraudulent foreclosures and justified ones:
And so, I just think that people who are saying that this is going to hurt—I think that it’s going to help, because once people gain confidence in the fact that they’re being treated fairly and that there’s no discrepancies in the records, then people will feel very comfortable in terms of trying to move forward. But until that happens, you’re always going to have these comments about the fact that that was not done right, it was done unfairly. And, of course, I think there’s enough here for us to stop and to pause and to say, let’s take a look here before we move forward. So a moratorium is definitely in order.
The Obama administration opposes the moratorium on the grounds that it would hurt the housing market and thereby slow the economy. Towns counters that what would really be bad for the economy is letting banks take people’s homes away without any semblance of due process. If the government doesn’t act to protect the innocent, foreclosuregate could shatter the confidence of potential home buyers. Would you want to invest in a house if you were afraid the bank could just take it away from you?
In AlterNet, Mike Lux argues that fraudulent foreclosures are one more assault on poor and middle class Americans. He argues that the banks are so used to being coddled by Washington that they’re counting on legislators to retroactively change the rules to protect them from the consequences of their own devious behavior.
At this point we don’t know what percentage of foreclosed-upon homes have simply been stolen by banks to pay bondholders, but we do know the problem is vast and systemic. The Obama administration is content to let the banks seize private property first and ask questions later. We need a moratorium to take stock and restore the rule of law.
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Weekly Audit: Will Obama Save Homeowners From Wall Street’s Latest Fraud Scheme?
by Zach Carter, Media Consortium blogger
A massive foreclosure fraud scandal is rocking the U.S. mortgage market. Wall Street banks and their lawyers are fabricating documents, forging signatures and lying to judges—all to exploit troubled borrowers with enormous, illegal fees, and in some cases, improperly foreclose on borrowers who haven’t missed any payments.
The fraud is so widespread that it could put some big banks out of business and even spark another financial collapse. Fortunately, things haven’t fallen apart just yet. With strong leadership from President Barack Obama and Congress, the government can help keep troubled borrowers in their homes and prevent another meltdown. (more…)
Weekly Audit: The Hidden Casualties of the Great Recession
by Annie Shields, Media Consortium blogger
The June labor market report announced that the unemployment rate is down from 9.7 to 9.5 percent and 83,000 private-sector jobs were created in June. Unfortunately, the situation isn’t quite so rosy. As Annie Lowrey reports for The Washington Independent, the real cause of the drop in unemployment was not more jobs, but fewer workers. Hundreds of thousands of unemployed Americans have now been reclassified as “discouraged” workers who have not actively searched for work for four weeks. As such, they are no longer part of the system.
Unemployed and disenfranchised
What’s worse, the unemployment crisis is hurting some more than others. Among the discouraged workers that have simply dropped out of the labor market, 65% are women. People of color have also been hit especially hard, as have young people that are just entering the labor market. As Katherine S. Newman and David Pedulla of The Nation write:
“The Great Recession is reminding us of how unequal the distribution of damage can be. While virtually everyone other than the top 1 percent is suffering in some fashion, the depth of the fallout varies a great deal by race, education and gender.” (more…)
Weekly Audit: Brown-Nosing Wall Street Reform
by Zach Carter, Media Consortium blogger
More than two years after the collapse of Bear Stearns, the House and Senate finally ironed out their differences on Wall Street reform in the wee, small hours of Friday morning. The bill now goes back to both the House and Senate for final approval, but it’s fate in the Senate is uncertain following the defection of Tea Party Sen. Scott Brown (R-MA).
The resulting bill has several things going for it, but largely misses the critical structural lessons of the Great Financial Crash of 2008. As Wall Street continues to score epic profits and grotesque bonuses over the coming months, progressives must be committed to continuing the fight for a fair economy. (more…)
Weekly Audit: Wall Street Reform, Financial Fraud, and Foreclosures
by Zach Carter, Media Consortium blogger
Last week, Senate Democrats broke the Republican filibuster on Wall Street reform. This week, Senators are introducing key amendments to strengthen the bill. While the current legislation is not strong enough to seriously curtail Wall Street abuses, all hope is not lost: A mere handful of amendments could make reform a reality. Unwinding the excesses of the Bush-era economy will require tough new rules on the nation’s largest banks. It will also require aggressive prosecution of fraud, and a serious new plan for helping homeowners in distress.
Ending too-big-to-fail
As Sen. Bernie Sanders (I-VT) emphasizes in an interview with GRITtv’s Laura Flanders , the four largest U.S. financial institutions have more than $7 trillion in assets—that’s over half the size of the entire U.S. economy. With that kind of political and economic muscle, banks can influence just about any financial reform that makes it through Congress simply by intimidating the regulators who try to implement them. (more…)
Weekly Audit: How Deregulation Fueled Goldman Sachs’ Scam
by Zach Carter, Media Consortium blogger
Last week, the Securities and Exchange Commission filed fraud charges against Goldman Sachs and underscored what most Americans have believed for some time: Wall Street has rigged the economy in its own favor, and will stop at nothing—not even outright theft—to boost its profits. What’s worse, Goldman’s scam could have been completely prevented by better regulations and law enforcement.
Goldman’s heist
Let’s be clear. “Financial fraud” means “theft.” Goldman Sachs sold investors securities that were stocked with subprime mortgages and had been cherry-picked by a hedge fund manager named John Paulson. Paulson believed these mortgages were about to go bust, so he helped Goldman Sachs concoct the securities so that he could bet against them himself.
Goldman Sachs, like Paulson, also bet against the securities. But when Goldman sold the securities to investors, it didn’t tell them that Paulson had devised the securities, or that he was betting on their failure. By withholding crucial information from investors, Goldman directly profited from the scam at the expense of its own clients. If ordinary citizens did what the SEC’s alleges Goldman did, we’d call it stealing. (more…)
Weekly Audit: More Jobs Please
By Zach Carter, Media Consortium Blogger
One year after President Barack Obama secured passage of his critical economic stimulus package, the U.S. Senate is finally taking anther look at how to create jobs and repair the economy. These issues are more important than ever, but absurd Republican obstructionism and timid Democratic negotiation are once again threatening good public policy.
Not really bipartisan, is it?
As Steve Benen notes for The Washington Monthly, the Senate Finance Committee reached a “bipartisan” agreement to supposedly spur job creation last week. Republicans demanded billions in tax cuts for wealthy people, but kept on caterwauling about the federal budget deficit. In exchange for $80 billion to dedicate to jobs—an extremely modest figure given the state of the labor market—Republicans asked for hundreds of billions in giveaways for the rich. And that’s just to get the bill through the Finance Committee, much less the full Senate. (more…)
Weekly Audit: Crashing the Corporate Christmas Party
By Zach Carter, Media Consortium Blogger
While Wall Street will ring in the new year with huge bonuses and taxpayer-fueled profits, there is little holiday cheer for the workers whose tax dollars funded the bank bailouts. Although bank stock prices have soared for most of the year, the unemployment rate has steadily climbed and the foreclosure crisis has swelled to epic proportions.
Nomi Prins details the disconnect between Wall Street and the rest of us for AlterNet. The government’s massive giveaways to big banks did not stop with the $700 billion Troubled Asset Relief Program. In fact, earlier this month, the Internal Revenue Service granted Citigroup a $38 billion tax break for, well, nothing. Like every other financial boon the Treasury and the Federal Reserve have granted banks since 2008, this special holiday gift will help boost Citigroup’s profits, but does little to boost lending to small businesses, lower credit card interest rates or help struggling borrowers stay in their homes. (more…)
Weekly Audit: Dismantling the Wall Street Casino
By Zach Carter, Media Consortium Blogger
Bailout pay czar Ken Feinberg raised a ruckus last week when he announced plans to slash cash payouts to executives at seven companies that have received massive levels of taxpayer support. While better oversight of the bailout barons is helpful, the best way to change Wall Street pay practices is to adopt a set of tough, comprehensive regulations that cover everything from the executive suite to the loan department. As is, many of the executives Feinberg cracked down on will still make millions this year from stocks and other perks, while the very banks that depend the most on bailout money are spending like mad to lobby against reform. (more…)
Weekly Audit: Protect Consumers, Not Wall Street
By Zach Carter, Media Consortium Blogger
The economy is still getting worse. Foreclosures are surging above last year’s epic highs and the unemployment rate marches upwards every month. As the misery grinds on, Wall Street lobbyists and their allies in Congress are pushing hard to distract the public from the real causes of the current global economic crisis. Corporate America is trying to pin the blame for our empty pocketbooks on President Barack Obama and the phantom socialist menace, and cable news pundits are taking the bait. (more…)
