It's Not Just About Foreclosure, Not Just About Mortgage Either

Here's from 'NoVa' at Yahoo Board:

"The foreclosure process triggers negative accounting events, like recognizing what they call Day 1 and Day 2 losses on repurchases and REO's.

"Banks relied on their internal controls to recognize these business events, er,, foreclosures that leads to accounting entries that leads to financial statements. They relied on the CONTROLS surrounding the robo-signers which have obviously failed to detect or prevent false transactions.
"Shouldn't we be hearing in the news soon about financial restatements ? Their books are wrong and have been wrong over many years...

"CFO and CEO's signed accuracy statements for their enterprise with every SEC filing ... Talk about the ultimate leverage card to play against any firm or the entire industry - SEC accusations always KILL a firm."

He's saying it is SOX (Sarbanes-Oxley) violations.

Don't hold your breath for the SEC crooks to do anything, but ...

Here's a good article by Gonzalo Lira titled "Second Leg Down of America's Death Spiral", discussing the implications of what the MSM has been trying to paint as "technical" glitches. (He doesn't mention SOX.)

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And New York State Orders Stops on Foreclosures ...

(the link from Karl Denninger's Market Ticker)

Mortgage Servicers Must Suspend Foreclosures In NY, State Says
(Steven Meyerowitz, 10/13/2010 Financial Fraud Law)

"The N.Y. State Banking Department has suspended home foreclosure actions by mortgage loan servicers, requiring that they conduct internal reviews of their foreclosure practices.

"The servicers were also asked to respond to the Banking Department on the following issues: the steps the servicer is taking or has taken to review the foreclosure process in New York; the results of the review, including a description of the process for verifying affidavits; the corrective action, if any, the servicer has taken or intends to take in response to the review; the measures taken to ensure that affidavits filed in New York foreclosure actions are executed in compliance with New York law; and the status of pending foreclosure actions in New York and measures taken to suspend such actions pending review.

"The N.Y. Banking Department joins 47 state attorneys general and 37 banking and mortgage regulators as part of a multi-state group that is investigating the foreclosure practices of mortgages servicers throughout the country."

Obama sending Axelrod on Sunday to discourage the foreclosure moratorium and downplay the so-called Foreclosuregate as merely a minor technical glitch that they hope will swiftly resolved was surely effective (in letting citizens know which side the White House is on, not that it was any surprise).

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Get to Know MERS, Your Robo-Signer and Signature Forgerer

From Zero Hedge Poster 'Bob', citing the info from another user 'careless whisper':

let's take a look at who owns MERS:

http://www.mersinc.org/about/shareholders.aspx

here's a deposition of an officer of MERS admitting zero employees for the past five years!

http://stopforeclosurefraud.com/2010/08/27/exclusive-mers-deposition-of-secretary-and-treasurer-of-merscorp-42010/

hey, all you wanna be fraudsters, for $95 per month you too can have a virtual office at the same address where MERS has their "global headquarters" with zero employees; 1818 library street, reston virginia 20190

https://www.davincivirtual.com/loc/us/virginia/reston-virtual-offices/facility-848

It looks like MERS is a shell corporation founded and operated by the MBS banks. And, for just a little entertaining summary of the big picture:

http://www.youtube.com/watch?v=9kPCYcBm-C8&feature=player_embedded
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MERS is owned by the nation's largest banks and mortgage companies.
MERS may not have any employee, is located at 1818 Library Street, Suite 300, Reston, VA 20190, in the same building as a virtual office run by Davinci Virtual Office Solutions with a live receptionist to take their call.

Fantastic.

The Obama administration, some analysts, they are trying their best to dismiss the whole thing as just a minor technical mistake here and there.

It's FRAUD.

4closureFraud.org has an excellent article uncovering Obama's mortgage documents clearly robo-signed, and signatures don't match... It's not just over foreclosure documents, but ALL mortgage related documents of the past decade, or two (or three?).

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Bank of America Halts Foreclosures in All 50 States

from Zero Hedge:

"As we expected when we reported that the Delaware AG got into the foreclosure fray (Delaware not being a judicial state), it was only a matter of time before foreclosures would be halted in all 50 states. Sure enough, Diana Olick has just reported that BofA has just expanded its foreclosure halt from the 23 judicial states, to all 50 states. And so, the pendulum swings from populist anger to adulation. The only question is when will Tarp 2 be enacted now that banks are facing tens of billions in losses."

Here's a bit more info from WSJ:

"The decision by Bank of America to extend its postponement to all 50 states takes effect Saturday. The bank doesn't intend to lift the moratorium until its assessment of all documentation is complete, a spokesman said."

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'Mortgage Fraud': HR 3808 as Litmus Test for Obama

on whom he really serves. I'm not holding my breath, though.

HR 3808 has already passed House and Senate without any public discussion, and it is ready for Obama to sign into law.

What is it, you ask? The bill requires all federal and state courts to recognize notarizations made in other states. The practical application?

"... the legislation, if enacted, could protect bank and mortgage processors from liability for false or improperly prepared documents. In other words, with one simple signature Obama has the capacity to prevent tens of billions in damages to banks from legal fees, MBS deficiency claims, unwound sales, and to formally make what started this whole mess: Court Fraud perpetrated by banks, a legal act, and to finally trample over the constitution."

Is HR3808 The Equivalent Of TARP 2 And Obama's "Get Out Of Jail" Gift Card For The High Frequency Signing Scandal? (Tyler Durden, 10/06/2010 Zero Hedge)

Now that the High Frequency Signing (HFS, not to be confused with HFT) scandal is mainstream, and virtually every single foreclosure in the US in the past several years is under question, with the impact on mortgage servicers (who just happen to be the TBTF banks) could be just as dire as the fallout from the credit crunch, it appears that the get out of jail card for the banking syndicate has once again materialized, this time in the form of bill HR3808: Interstate Recognition of Notarizations Act of 2009, sponsored by Republican representative Robert Aderholt. The bill, it turns out, has passed both congress and senate, and is now quietly awaiting for Obama's signature to be enacted into law. In summary, the bill requires all federal and state courts to recognize notarizations made in other states. That's the theoretical definition: the practical one - the legislation, if enacted, could protect bank and mortgage processors from liability for false or improperly prepared documents. In other words, with one simple signature Obama has the capacity to prevent tens of billions in damages to banks from legal fees, MBS deficiency claims, unwound sales, and to formally make what started this whole mess: Court Fraud perpetrated by banks, a legal act, and to finally trample over the constitution. Will Obama do it? Potentially - the banking lobby certainly has enough power over him and his superiors, the members of the FOMC. On the other hand, the populist revolt that will surely follow the enactment of such a law will certainly end any dreams of a second term, and potentially of a completed first one. The drama is now on: will Obama openly side on behalf of the bankers (without a "blame the republicans" fall back this time) or of the foreclosure "victims" (granted, the bulk of whom are deadbeat homeowners who should never have owned a home to begin with). We doubt a decision will be reached before the midterms, although quite a bit now hangs in the balance." [The article continues.]

The article cites Reuter's article explaining the conundrum, and a very curious special procedure in the Senate that allowed the bill to be rushed through, even to the surprise of the sponsor of the bill. It passed the Senate one day before the recess, on September 27 without any discussion.

Zero Hedge ends the article with this remark:

"Unfortunately even if the prompt Senatorial passage of the bill was the bankers' plan all along, they may have shot themselves in the foot by leaving it up to the president to determine if America is now a banker corporatocracy (what some may call a fascist regime), or still a place that believes in laws and regulations, as broken as they may be, in broad daylight. Our sense, is that this bill will not pass, although we have on many occasions in the past underestimated the degree of corruption in this country. On the other hand, should tens of millions of Americans have a crystallized image of one person who in their view will be "responsible" for their inability to pay their mortgage bill on time, then we just may be one step closer to the full societal collapse that many predict will accompany the end of Keynesianism.

"The ball is now in the president's court."

Now, will he, or won't he, sign this into law?

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Now We Have HAFA within HAMP to Stem the Housing Crisis

In plainer language, we have the Home Affordable Foreclosure Alternatives Program, a new program announced on November 30, 2009, which is part of the Home Affordable Modification Program courtesy of the U.S. Treasury Department under Obama Administration.

Home Affordable Foreclosure Alternatives Program (HAFA)
(National Association of Realtors)

"On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is part of the Home Affordable Modification Program (HAMP). HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA. A list of servicers participating in HAMP is available at MakingHomeAffordable.gov.

"HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks."

HAFA seems to be in response to the criticism that the administration's loan modification program (HAMP) is not working. The article lists the program features of HAFA in bullet points. They include:

• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

The 2nd bullet point looks like the result of lobbying effort by the realtors. But that aside, my question is: What's in it for investors?

Other than up to $1,000 for giving some scraps for the 2nd lien holders?

I think I know the answer.

Many investors who bought distressed mortgages may be already backstopped by FDIC. If a house is foreclosed or sold on a short-sale, and if the realized amount from foreclosure/short-sale is less than the amount the borrower owes on the house, the investors of the loan will receive 80 to 95% of the difference from FDIC under loss share agreement like the one FDIC has with the investors who purchased IndyMac. (FDIC is, by the way as you know, broke).

The kicker here is that these investors probably paid for a fraction on a dollar for these mortgages. If FDIC's asset liquidation is any indication, they are sold at anything from 3 cents on a dollar (non-performing) to 70 cents (performing) on a dollar.

Let's say here's a house in danger of foreclosure. The mortgage outstanding on the house is $500,000. The market value is determined to be $350,000. Now the investors agree to a short sale at that price. To compensate for the loss, FDIC will give $120,000 (80% of $150,000 loss) to the investors. But wait! These investors purchased this mortgage at $250,000 (50 cents on a dollar). So by agreeing to sell the house at $350,000, they will already have made $100,000. On top of that, FDIC will give another $120,000. Total of $220,000 profit on $250,000 investment. 88% return. The return would be much higher if they used leverage (PPIP anyone?).

With such a perverse incentive in place, investors don't have much interest in loan modification; they would rather foreclose and pocket the quick money than going through a slow process of loan modification. So now the government has stepped in again and is telling the servicers/investors to be a little less greedy; instead of foreclosing, how about short-sale? "You will still get compensated for your "loss", but it may just take a bit longer. It will make you look good in the eyes of distressed homeowners, you know, if you give the appearance of taking some hit ..."

Now, the next question is: Who are these investors?

Or put it another way: Do you know who owns your mortgage?

At this point, it is very safe to assume the bank who gave you the mortgage no longer owns it. It's been sold long time ago. Occasionally, you may get to know who owns your mortgage when there's a change of a loan servicer. Then you may get to know that your loan is actually owned by a bank other than the originating bank, Fannie Mae or Freddie Mac (the wards of the state who have just been given an unlimited ATM card by Uncle Sam), a hedge fund that manages billions of dollars, or that your loan has probably been turned into some kind of securities (MBS, CDO, squared, cubed, who knows) as you may see a combination of alphabets and numbers as the investor.

A hedge fund manager has this to say in a New York Times article ("U.S. Loan Effort Is Seen as Adding to Housing Woes" 1/1/2010) about "clearing the housing market" by allowing foreclosure and short sale:

“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”

Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues.

Yes, that may be all true. But it is probably a good bet that his firm is invested in residential mortgages outright or in a securitized form, which they probably purchased on the cheap. He'd rather see his fat profit sooner than later, wouldn't you think?

So, again and again, the government is there for the big boys, making sure that they profit handsomely.

What will the distressed homeowners get after the short sale under this HAFA? No house, battered credit record, and $1500 for relocation. Oh and the peace of mind that the first lien holder cannot come after you for deficiency. No guarantee though of the 2nd lien holder...

Here's the link to the November 30, 2009 Supplemental Directive announcing HAFA within HAMP (27 pages of the total 43 pages are sample forms and exhibits).

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