How many times do we have to read this same story? Telling someone that they have to stop paying to access a federal program, encouraging them to believe that they are going to get a loan modification, when your bank has already decided that no one is going to get this kind of deal, and then foreclosing on them when they fall for the bait – is this they way banks are supposed to make money?
James Pilant
The same sad story over and over again. The bank says no problem, sets up a trial period and then forecloses. It’s a trap.
The post says the family “claims” they were duped.
“Claims,” yeah right, we’ve seen this technique over and over again. The bank literally takes the property legally by manipulating the families into a “trial” period, which they will then (to no one’s surprise) find the deal inadequate and then foreclose.
For cruelty and cold blooded maliciousness, it would be hard to find worse.
James Pilant
via CBS Chicago
From the New York Times article by Gretchen Morgenson.
Federal prosecutors in Los Angeles have dropped their criminal investigation into Angelo R. Mozilo, the former chief executive of Countrywide Financial, once the nation’s largest mortgage lender, according to a person with direct knowledge of the investigation.
From 4closureFraud.
Right!
This is how I feel as well. It’s a good read. Be warned, he’s really upset. But so am I when I’m dealing with this issue.
Here is my writing on the same subject. You can see that I get passionate about foreclosures too.
Robo-Signing Foreclosure Freeze Update (via Foreclosureblues)
Lots of Links on the Foreclosure Fraud Crisis (via Rortybomb)
Sheldon Whitehouse Weighs In On The Foreclosure Crisis
Third Way Comments on Foreclosure Fraud Policy in the Post-Ibanez Landscape (via Rortybomb)
Foreclosure Speed Made Loan Modifications Impossible
The Vast Majority Of Foreclosures Were Done Correctly?
In total, I have 46 posts about the mortgage crisis.
James Pilant
I’m surprised this hasn’t already happened. When you buy securities you expect that they be “secure.” These are not supposed to be the equivalent of penny stocks. Countrywide packaged securities that it knew were risky and packaged securities that it knew had serious ownership issues.
This is hard legal question. What is the first warranty guarantee that a seller gives automatically (implied)? Answer, that they own the product they are selling. That is the first thing you are supposed to do. And Countrywide sold a product that it knew it didn’t have a clear title to.
Is this going to be hard lawsuit to win? If it can be proved that Countrywide knew that its title to these properties was not secure, Bank of America which now owns Countrywide is going to be pay out more. I have heard estimates of up to 40 billion dollars in possible paybacks over these bad securities.
From CBS Money Watch –
A lawsuit alleges Countrywide Financial Corp. and two of its former executives misled institutional investors who were stuck with huge losses from mortgage-related investments that they say were portrayed as low-risk.
The lawsuit was filed Monday in New York State Supreme Court by investors who bought hundreds of millions of dollars in Countrywide’s mortgage-backed securities from 2005 to 2007, before the housing market went bust. The list of a dozen plaintiffs includes New York Life Insurance Co., TIAA-CREF Life Insurance Co. and Dexia Holdings Inc.
The complaint names Countrywide, various subsidiaries that issued the securities, two former company executives including ex-CEO Anthony Mozilo, and Bank of America, which bought Countrywide in 2008.
The big guns are out on this one. Read a little more –
The plaintiffs allege they wanted conservative investments that Countrywide portrayed as being backed by low-risk mortgages written according to strict underwriting criteria.
Materials that Countrywide subsidiaries circulated to potential investors indicated all the mortgage-backed securities had been assigned investment-grade ratings, and most had top-rung “AAA” ratings, according to the lawsuit.
But as of last month, more than 31 percent of the mortgage loans underlying those securities were over 30 days delinquent, in foreclosure, bankruptcy or repossession, the lawsuit says. The securities “are no longer marketable at or near the prices the plaintiffs paid for them,” leaving them with “significant losses,” the complaint says.
The lawsuit seeks unspecified damages for alleged securities fraud.
These investments were marketed as conservative (solidly secure), given a triple AAA rating (higher than any paper you ever wrote could get) and are now sinking in value daily.
The American mortgage crisis just keeps rockin’ on.
James Pilant
When foreclosing on mortgages the banks have been skipping the rule of law. They have not followed the rules for the transfer of property preferring to pretend that their electronic records are a viable substitute. I never believed the courts would go along with that and the Massachusetts court did not. Here’s the story from that excellent blog, Rortybomb.
From Rortybomb – Big Week in Foreclosure News –
The biggest news is the decision in Massachusetts’ “Ibanez case”, where the Massachusetts Supreme Court voided the seizures of two homes by Wells Fargo and US Bank based on their inability to show that they owned the mortgages at the time of foreclosure. Tracy Alloway walks you through the case, David Dayen has more including the PDF of the decision, and analysis from Yves Smith and Felix Salmon.
From the opinion: “Where, as here, mortgage loans are pooled together in a trust and converted into mortgage-backed securities, the underlying promissory notes serve as financial instruments generating a potential income stream for investors, but the mortgages securing these notes are still legal title to someone’s home or farm and must be treated as such.”
They ruled through Massachusetts law instead of New York law, so no answers on looming New York trust law. Bank stocks are down. This is likely to have major implications down the road. We’ll have more on this opinion later.
I do not believe the ruling will stand. Congress will ride to the rescue of the banks legalizing their reckless disregard for state law and afflicting the suffering homeowners with even more pain. Congress will enact it. Obama will sign it. He will then explain it as a major legislative victory. Everything he does merits a press release and a couple of morning show appearances demonstrating his successful legislative record.
I wish there was someone somewhere who was as concerned with the rights and privileges of the American middle class and less concerned with the welfare of the banks.
James Pilant
The headline to my quoted article says that the bank is digging for dirt on itself. This is just PR. They know exactly what they don’t want people to know. Bank of America wants to give the impression that it’s such a hugh and confusing organization that nobody really had a handle on everything going on. Nonsense.
Frankly, I’m excited. This bank has been a key player in the mortgage foreclosure crisis and has just settled some buyback lawsuits. Let’s see exactly what they thought of the quality of their ownership chain. Let’s see what their internal memos said about the speed of the foreclosures, their refusals to renegotiate mortgages and their thoughts on the President’s plan to help homeowners.
I promise you a careful look at these documents as soon as I can get to them.
From The Lookout from Yahoo News –
WikiLeaks founder Julian Assange recently confirmed that Bank of America will be his next target — so it’s not surprising that the nation’s largest bank is now in damage-control mode. Still, the megabank’s methods are a bit unorthodox. Instead of trying to frantically pin culpability elsewhere in the great chain of financial dealing, BofA executives are actually digging for dirt on the bank’s own operations, the New York Times reports. That way, the reasoning goes, the bank’s messaging team will be better positioned to spin any damaging revelations that surface from WikiLeaks.
Do people believe this stuff? Doesn’t this sound more like the plot for an episode of a television comedy?
James Pilant
First, let’s be clear. This two billion dollars is a buyback of loans that were sold to other firms as good investments when in fact they were missing paperwork or had more serious problems. This case settles a small portion of the “handful,” the “tiny proportion” of loans in which there were mistakes that everybody was assuring us was the case six months ago. Well, there are hundreds of thousands of these loans. They border on or are loans based on deception and fraud.
This payout doesn’t make much sense. Bank of American shares actually went up after the agreement was announced. So, we have to figure they were expecting it to be much worse or suffered anxiety over the uncertainty.
What really surprises me was that Wikileaks is supposed to dump a ton of Bank of America files on the web and the opposition negotiators didn’t wait for it. I would have thought that the release of the documents would have put Bank of America in a poorer negotiating position while quite possibly providing new insights into the loans themselves.
I hate it when public financial events don’t make any sense. I hate it because it doesn’t make sense only because I don’t know some of the players or the deals. In a year or two, I’ll probably have some insight into what happened but by then it will make no difference in what has become “ancient” history.
James Pilant
From CBS Money Watch –
Bank of America Corp. will take an approximately $2 billion charge in its fourth quarter as it settles buyback claims on home loans sold to Fannie Mae and Freddie Mac.
The bank said Monday that it also expects to take a provision of about $3 billion in the quarter related to repurchase obligations on the home loans.
Bank of America shares jumped 4.4 percent in premarket trading on the news.
On Friday Bank of America, which is based in Charlotte, N.C., paid Fannie Mae $1.34 billion and Freddie Mac $1.28 billion as part of the settlements.
The deals with Fannie Mae and Freddie Mac are tied to Countrywide Financial Corp. residential mortgage loans. Bank of America bought Countrywide in July 2008.
From MSNBC Business – Real Estate –
On Wednesday, Phyllis Caldwell, chief of the Treasury Department’s homeownership preservation office, told a financial bailout watchdog panel that there was no evidence of risk to the financial system from the documents scandal — or from efforts by mortgage investors to force banks to buy back problem loans.
Okay, let’s take a deep breath.
Now, where do we start? The amount of self delusion necessary if she actually believed this is staggering. If she doesn’t believe it, she must believe that we are grotesquely stupid and amenable to the most childish stupidity.
Put me in her position and ask my opinion. It will run like this –
“Oh, my God, oh, my God, in six months we are going to have to pay out several hundred billion dollars to shore up the banking industry, the housing crisis will be extended by three to four years and there’s going to be a legal battle over bank buybacks of improper securities that should last roughly a decade.”
Oh, and I will probably add, “Thank the Lord, I’m admitting how serious the situation is, because I’d sure look like a fool if I told everyone there was no problem! After that, I wouldn’t have any credibility at all.”
It’s hard to add to this. I could throw numbers running down the page for quite a distance about the huge amounts of money and the incredible number of mortgages affected by the crisis. But you can read, if you’ve paying any attention, you already know the numbers are huge.
So, I’ll let what I say stand without throwing the numbers at you. After all, I’ve probably got 15 to 20 posts where I talk about the numbers in detail.
I tell you guys. I just don’t get it. I graduated from Oklahoma’s Northeastern State University, got my law degree at the University of Tulsa College of Law. This woman has a BA, sociology and urban planning, and MBA, University of Maryland. Why is her thinking so different from mine?
Well, she’s got something I haven’t got, twenty years in the banking industry, most of it at Bank of America.
That would be the same bank that resumed foreclosures after deciding it didn’t have a problem? It would.
I guess I might not see a problem there either, if I only just had her “experience.”
James Pilant
Further evidence is coming in that the banks’ and the Obama Administration’s assurances of no systematic abuse in the foreclosure process are just nonsense.
Here’s some more evidence.
By the way, the web site Rortybomb seems to really have their stuff together. If I were you I’d give it a regular look.
James Pilant
via Rortybomb
Pilant's Business Ethics Blog 
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