Allocation of National Mortgage Settlement

Have you wondered about what really happened to the money negotiated through the National Mortgage Settlement Agreement? I wonder. I still wonder. Nobody seems to know exactly where the money went. A recent article on The Bryan Ellis Investing Letter breaks it down, sort of. Nobody seems to know where all the money went. I looked at on the site for the National Conference of State Legislators and found a break down for allocations state by state which was published around the time of the settlement date. The allocation of funds for Florida follows. But how the money was actually spent, remains a mystery. It seems abundantly clear that the monies did not go to beleaguered former homeowners who had already lost their homes in foreclosure.

FLORIDA ALLOCATION OF NATIONAL MORTGAGE SETTLEMENT MONIES:

$334,073,974.00 - Florida's Share

$35 million for down payment assistance;
$10 million for housing counseling;
$5 million for the state court system to help with foreclosure-related issues;
$5 million to the Office of the Attorney General to fund legal aid programs;
$9,117,895 to the Florida Prepaid Tuition Scholarship Program;
$5,262,579 to the state courts system to provide technology solutions that expedite foreclosure cases through the judicial process;
$16 million to the state courts system to provide supplemental resources to reduce the backlog of pending foreclosure cases;
$9.7 million to the clerks of the court to enhance service levels to assist and support the courts in expediting processing backlogged foreclosure cases;
$10 million to the Office of the Attorney General to provide legal aid to low- and moderate-income homeowners facing foreclosure;
$10 million to the Department of Children and Families for capital improvements to certified domestic violence centers;
$20 million to Habitat for Humanity of Florida;
$50 million to reduce rents on new or existing rental units through the State Apartment Incentive Program;
$10 million to fund the construction or rehabilitation of units through the State Apartment Incentive Loan Program;
$40 million to fund the State Housing Initiative Program;
$10 million to the Department of Economic Opportunity to fund a competitive grant program to provide housing for homeless persons;
$10 million to the Department of Economic Opportunity to fund a competitive grant program to provide housing for persons with developmental disabilities;
$5 million to the Office of the Attorney General to reimburse the office for costs and fees;
The remaining funds are directed to the state General Fund as civil penalties.

And stated on the Florida Attorney General, Pam Bondi's site:

"Attorney General Bondi formally entered a landmark $25 billion joint federal-state agreement with the nation's five largest mortgage servicers over foreclosure abuses and unacceptable nationwide mortgage servicing practices. The proposed agreement provides an estimated $8.4 billion in relief to Florida homeowners and addresses future mortgage loan servicing practices. The settlement generally releases civil claims related to robo-signing, other foreclosure-related abuses, and loan origination misconduct, but it provides no release of criminal claims or of claims related to mortgage securitization.

'This settlement will provide substantial relief to struggling Florida homeowners, and ensures that our state gets its fair share of the relief being provided nationally,' stated Attorney General Pam Bondi. "This agreement holds banks accountable and puts in place new protections for homeowners in the form of strict mortgage servicing standards.'"

AND

"Florida’s share of the total monetary benefits under the settlement is approximately $8.4 billion.

• Florida borrowers will receive an estimated $7.6 billion in benefits from loan modifications, including principal reduction, and other direct relief.
• Approximately $170 million will be available for cash payments to Florida borrowers who lost their home to foreclosure from January 1, 2008 through December 31, 2011 and suffered servicing abuse.
• The value of refinanced loans to Florida’s underwater borrowers would be an estimated $309 million.
• The state will receive a direct payment of $334 million.

In addition to the terms of the national settlement agreement, Attorney General Bondi separately negotiated an agreement with the nation’s three largest mortgage servicers to ensure that a guaranteed portion of the overall settlement funds goes to Florida borrowers.

For more information about eligibility and filing a claim:
Website: NationalMortgageSettlement.com
Email: administrator@nationalmortgagesettlement.com
Call toll-free: 1-866-430-8358 (Hearing Impaired: 1-866-494-8281).
*The line is staffed Monday through Friday from (7 a.m. to 7 p.m. Central)."

In fact, some former homeowners received checks for $300.; and a few others I know of received around $1400. The state of Florida has gleefully participated in the fleecing of Florida citizens perpetrated by the banks and that fleecing continues to this day. The mortgage crisis and great recession is the result of the biggest Ponzi scheme ever that makes Bernie Madoff look like a kindergartner.

If I had never purchased a home, a potential first time home buyer, there is no way that I would buy a home now. Not in this economy. Not after witnessing these recent events. I would stay home with Mom as long as she could stand it, and then after that I would rent. The media can blame the slow down in purchases on the weather, or alternately claim that the mortgage crisis ended. But, you don't need a weatherman to tell which way the wind blows.  

Confused about Florida's real real estate recovery?

I used the search string - Florida real estate recovery 2014 - 


and received the following collection of conflicting results:


2014 looks like another good year for Florida real estate, but ...
www.heraldtribune.com/.../20140210/.../30210...‎



Housing recovery will slow in 2014: Florida Realtors
tbo.com/.../housing-recovery-will-slow-in-2014-flori...‎





Debt Repayment in Florida Hurt by Sluggish Real Estate ...
www.bloomberg.com/.../2014.../debt-repayment-in-flori...‎

STORY: Foreign Buyers Drive Florida's Housing Recovery
www.businessweek.com/.../foreign-buyers-driv...‎

..
Florida housing market heating up again - Chicago Tribune
articles.chicagotribune.com › ... › Fort Myers‎



...
Housing recovery radar: Where are the next hot spots?
www.cnbc.com/id/100961977‎





There's economic optimism for 2014 …but not a lot - Miami ...
www.miamiherald.com › Business‎

Top 10 real estate trends for 2014 - CBS News
www.cbsnews.com/news/top-10-real-estate-trends-for-2014/‎

..
Florida Home Prices and Home Values - Zillow
www.zillow.com/fl/home-values/‎







After a Slow Start, Florida's Housing Market Recovery Picks ...
pascoflrealestate.typepad.com/...realtor/2014/.../after-a-slow-start-floridas...‎



Mar 26, 2014 - ORLANDO, Fla. – March 26, 2014 – Florida was one of the first states to feel the effect of a national recession with job losses starting in April ...

Contract for Deed - Not the Way to Buy Florida Real Estate

Back in real estate school we learned that buying real property with a contract for deed, which is also called a land contract, or installment contract -- is a bad idea. However, leave it to the enterprising lenders of our times, and you see this bad idea popping up all over again. A contract for deed is not a mortgage. The buyer does not receive a deed to the property until the debt is paid in full. The transaction is more like buying a car than buying a house. When you make installment payments on a car, a lien remains on your car until you pay it off. Contract for deed is the same. With a mortgage the buyer receives a deed the day of closing.

From a buyer's point of view, one of the main problems with a contract for deed is that the seller might die before the final payment and obtaining the deed may be difficult.

Right of Cancellation

• Under Florida's Title XXXIII Regulations of Trade, Commerce, Investments and Solicitations, Section 498.028, the buyer of a land contract has the right to go back on the agreement for whatever reason within a seven-business-day period from the execution date of the contract. If a buyer exercises this right, the seller must reimburse the buyer all funds and fees within 20 days of receiving the cancellation notice. Notice land contract sellers cannot charge buyers with any penalty or obligation if they decide to exercise their right of cancellation.
  

Notice of Assignment of Contract for Deed

• In Florida the seller of a contract for deed can sell the rights to a property to a third party while the buyer is making payments. However, Florida land contract law requires the seller to provide the buyer with a signed and notarized notice stating the contract for deed has been assigned to another party. The buyer should, from then on, continue making payments to the new owner of the land contract.
  

Another pitfall with a contract for deed is that the underlying loan can be called due by the lender under the “due on sale” provision of the mortgage.  If the underlying mortgage is being paid timely, this scenario is unlikely, but still possible. Sellers who enter into contract for deed may be unaware that according to Florida law, a purchaser of real estate who defaults on a contract for deed, must be foreclosed upon just as if it were a mortgage.

In my opinion the pitfalls far outweigh the benefits for either party.

Remember these times? Before the bubble burst ...

Even before the real estate market devolved into what it is today, there were conflicting opinions about how long the boom would last. All agreed that it wouldn't last forever, just when the market would fall apart no one could know. The following are snippets of articles found online dating from 2004 and 2005.

2004

Want to Invest? Join the Club.

By VIVIAN MARINO

Published: October 31, 2004

"As a mortgage broker, Richard Banach helped many investors finance real estate deals over the years, but when it came to his own money, he stayed mostly with stocks, a strategy he has grown to regret. "I've seen people with marginal credit and modest means making big money in real estate," he said, while he has watched his technology-heavy portfolio swell, then shrivel.

Now "totally out of stocks," Mr. Banach, 46, who lives in Glen Head, N.Y., said he will focus on real estate. While he has the advantage of knowing something about buying property, he realizes that finding good deals won't be easy in a still-rising market crammed with other stock market refugees. So last year he joined the Long Island Investors Group, a club that serves both as an informal repository of information about properties for sale and as a support group."

---

Lost in the Super Market

"The housing situation is tight. How tight? Let’s put it this way: If you’re able to go see a house at midnight, do it. It may be gone in the morning."

By Carl Swanson

"You should've bought last summer. Or better yet, last spring—the last time property stayed on the market and prices were negotiable.

When the family that owned the nine-room co-op, smack in the middle of the investment-banker promised land that is Park Avenue in the Seventies, decided to pull up stakes last summer, they put their price at $3.6 million. That was in August, and the number was a bit exuberant, given that it had been a slow year so far and the family had lived there for 40 years; the place was more Sister Parrish than Peter Marino.
The bids came in at $3.2 million. “There was resistance” among buyers to paying more, admits Stribling Private Brokerage president Kirk Henckels—especially after the family increased the price 10 percent in September. “But we broke through it.”

Did they ever. After the board rejected one bidder, the apartment went back on the block for $4.25 million in January, where it garnered multiple $4.1 million bids. “That 28 percent increase in five months,” Henckels says, is “as freestanding an increase as you can find.” And thus the bear market—such as it was—is ended."

---

Foldvary: The Real Estate Bubble 

Editorial

The Real Estate Bubble

by Fred E. Foldvary, Senior Editor

"The last bottom of the real estate cycle in the US was in 1990, when there was a recession. Real estate prices have been rising since then, and were not at all deterred by the downturn of 2001. Real estate speculation has carried real estate prices in some parts of the US, such as California, to heights that cannot be sustained when interest rates rise as the Federal Reserve reverses its low-interest policy. Another crash is coming.

Henry George, the American economist and social reformer of the latter 1800s, originated one of the first theories of business cycles. The basic cause, he said, was land speculation. During an economic boom, at first, a growing demand for real estate is met by reducing vacancies. But then new real estate is constructed, and rent and land values rise. Speculators notice this and buy land expecting to sell at higher prices later. This speculative demand, added to the demand for use, carries land prices so high that investments in enterprise become unprofitable. Land becomes priced for expected future uses, rather than present-day uses."

---

2005

Boom in Jobs, Not Just Houses, as Real Estate Drives Economy

By David Leonhardt 

July 9, 2005

"For all its benefits, the new found power of real estate has also left the country vulnerable to a housing slowdown, which many economists expect over the next few years. Residential housing now makes up 16 percent, or $1.9 trillion, of the gross domestic product and is the economy's largest single sector, slightly bigger than the industries and services that supply health care, according to Economy.com."

---

Bernanke: There's No Housing Bubble to Go Bust

By Nell Henderson

Washington Post Staff Writer
Thursday, October 27, 2005

"Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve. 

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households".

---

Real estate investors cast watchful eye on Las Vegas' high stakes housing game

Kelly Zito, Chronicle Staff Writer

Monday, March 7, 2005

"Las Vegas' lucky number last year was 52 -- as in 52 percent. That's how much real estate prices jumped in the nation's fastest-growing city in one year, as a housing shortage set off a wave of speculation by investors from California and other states. 

But as any gambler knows, Lady Luck eventually turns a cold shoulder. Las Vegans wanted to cash in, too, and so many put their houses up for sale that they flooded the market. By the end of the year, some home builders were slashing prices".

---

Be Ever Vigilant in 2014

Mainstream media's steady drum beat -- the economy has recovered – the Great Recession is over.. Unemployment is down. Home sales are up. GDP is expanding. In 1995, the Atlantic Monthly online published an article titled - “If the GDP is Up, Why is America Down?”Good question then, an even better question now.

GDP – Gross Domestic Product – is the primary indicator of economic well being. GDP measures all economic activity of a given economy, the United States, for example. It is a clumsy method of measurement. Since GDP includes all economic activity, productive and destructive economic activity are added together and dumped in the same pot. Increased medical costs; ever larger law enforcement budgets; building more prisons; cigarette sales; alcohol sales; gambling; strip clubs; promotion of fast food and unhealthy foods; spending for deferred maintenance of infrastructure. Citizens are consumers. We are no longer producers. Everything is monetized. The things that families and communities do for each other, are never measured at all. The intangible, the free assistance, the neighbor to neighbor help is never included, never measured, never mentioned.

Unemployment – According to mainstream media Florida unemployment is at 6.4% - not bad. However, my sources tell me that the quality of the jobs is sub par. There are many part time workers, not out of choice, but because part time work is all they could find. Others are underemployed, college graduates working at low level jobs, because that's all there was available. If you don't have a connection, a relative who owns a business or can influence hiring it's tough. Hardest hit are the twenty somethings who are now competing with older more experienced workers for the same low paying job. And don't forget all those who have given up hope of ever finding work, and rely on their family, government, or the underground economy to support themselves.

Housing Market – According to mainstream media, the Florida housing market has recovered; or at the very least is well on its way to recovery. There is a shortage of inventory (that's houses). Interest rates are low. Around two thirds of home buyers pay cash. However, there is a second side to each and every one of these statements. The inventory shortage is caused by the lack of new construction due to the lack of demand; and foreclosed and bank owned homes that were allowed to deteriorate after the homeowners left. Cash is king in home buying, and much of the cash is foreign cash. Even Florida residents with good credit who easily qualify for a new mortgage are edged out by a cash buyer. And interest rates are still low, Except for government backed loan programs like FHA and VA, home buyers need a credit score of at least 620. For some people, a 620 credit score may be easy to achieve, however, many people took a credit score beating due to job loss, causing a domino effect to their personal finances. And although, as the Miami Herald reported in August 2013, that new foreclosure filings were down in Miami-Dade and Broward Counties, but auction notices and bank repossessions were up. More people out of their homes.

My post on this blog – Civil Indigent Status – Florida - – has had more traffic by far, than any of my other posts. Likewise, of the top ten keywords used to reach www.faldp.org – six of them included indigent or indigent status as part of the key word. Our world financial crisis is far from over, although there are pockets of improvement. I have high hopes for this year – and suggest that we all be vigilant. Look past the headlines, ask the questions, show compassion for others, and be ever vigilant in protecting you and yours from financial disaster.

Top 3 Posts of 2013

 1.

New Florida Alimony Law Goes Into Effect July 2013 -- Oops! Not so fast ...

This bill was vetoed - update:
Governor Scott vetoed the alimony reform bill on 5/1/2013. Back to the drawing board. No Happy Dance yet. 

Posted March 20, 2013 

I thought this bill represented some positive changes for alimony reform. Mainly, it would have ended permanent alimony ... and the old boys in the nursing home paying alimony out of their pension will be a thing of the past. But no dice.

 2.

Baby Mama Drama? You can make it stop.

Posted April 11, 2013

Single fathers are particularly vulnerable to the whims of their child's mother regarding child visitation -- if they have never been to court to establish status as the "legal father". 

 3.

 

Foreclosure Reform - Is the Fox Watching the Henhouse Again?

Posted May 21, 2013

The Foreclosure Reform Bill awaiting Governor Scott's signature is designed to work through Florida's backlog of foreclosure cases. It could be one of those double edged swords. Below is a summary of the pending Foreclosure Reform Bill and staff analysis. Is it yet another example of the fox watching the henhouse? You decide.

CS/CS/HB 87: Mortgage Foreclosures

This post was published shortly before HB87 was signed into law by Governor Rick Scott. Since then you can bet the fox has been having a field day in the henhouse.

Elizabeth Warren: Give Restitution to the Victims of Foreclosure - Repost from Change.org

Dear Elizabeth Warren, 

            There are laws against false advertising, making false promises, and predatory lending. The Banks intentionally broke these laws, causing the Great Recession.

            We, the homeowners of America claim the tortious actions of the Banks have created Unjust Enrichment, evident in the fact that their wealth and size has increased 40% since the Great Recession they caused. The basic purpose of restitution is to achieve fairness and prevent the unjust enrichment of a party.

            In tort law, restitution applies to the measure of damages required to restore the plaintiff to the position he or she held prior to the commission of the tort.

            We, the homeowners wronged by the actions of the Banks, now demand the restitution we deserve.

             We demand that you set up a National Website for us to list the amount of money, and property, each American lost from the intentional criminal acts of the Banks.

            We demand that you make the Banks accountable and return us to the status we were, before being victimized. This is the law. This is fair.

A few descriptions of the fraud:

·           Predatory lending refers to the practice of unscrupulous lenders, to enter into "unsafe" or "unsound" secured loans for inappropriate purposes. A classic bait-and-switch method was used by Countrywide, advertising low interest rates for home refinancing. Such loans were written into mind-numbingly detailed contracts and then swapped for more expensive loan products on the day of closing. Whereas the advertisement stated that 1% or 1.5% interest would be charged, the consumer would be put into an adjustable rate mortgage (ARM) in which the interest charged would be greater than the amount of interest paid. This created negative amortization, which the credit consumer did not notice until long after the loan transaction had been consummated.
·       Countrywide, sued by California Attorney General Jerry Brown for "Unfair Business Practices" and "False Advertising" was making high cost mortgages "to homeowners with weak credit, adjustable rate mortgages (ARMs) that allowed homeowners to make interest-only payments." When housing prices decreased, homeowners in ARMs then had little incentive to pay their monthly payments, since their home equity had disappeared.
·       Former employees from Ameriquest, which was United States’ leading wholesale lender, described a system in which they were pushed to falsify mortgage documents and then sell the mortgages to Wall Street banks eager to make fast profits.]There is growing evidence that such mortgage fraud was a large cause of the crisis

      We can now prove, that the mortgage inflation and subsequent collapse was planned.  Millions of Americans were sold predatory loans, solicited into predatory lines of credit, because the Banks persuaded them that it was a sound investment.       

      The Banks coerced Americans into believing their homes were more valuable than they were, and they knew this to be false.

      Essentially, the Banks only cared about getting the loan, securitizing it, and selling it to another Bank. It was a dangerous game of musical chairs, which crashed the world economy yet you have held no one accountable. What is worse, is there has been NO REAL RESTITUTION to the victims, - the homeowners!

            The Mortgage Settlement Act has proven to be a joke.  How can a check for $400 be considered restitution to someone that lost his, or her home, of twenty years? 

           The actions of the Banks; over inflating home values, selling predatory loans, forging documents, and acting with gross disregard to the consumer, are criminal acts, which amounted to the biggest fraud ever perpetrated on civilians in the history of the world.

                              Enough is enough. We demand restitution now!

Petition by

Citizens for Restitution

***

Please go to Change.org and sign this petition. Damage to American homeowners and people worldwide continues.

Again - 13 Billion is NOT Enough

The 13 Billion Dollar settlement negotiated between Eric Holder and Jamie Dimon is not enough to pay for JP Morgan's crimes. Although it sounds like a whole lot of dollars, watch the video reposted from You Tube - Alexis Breaks it Down sent to me by The Other 98%. According to Rana Foroohar as reported in Time Magazine, this fine is the worst possible outcome.

Why?

Because nothing changes. Their hands are slapped, and life goes on. Too big to fail = Too big to jail. In the Statement of Facts filed with the settlement, JP Morgan was aware that many of the loans bundled and securitized were of low quality. 

And most of the 13 Billion is tax deductible. The taxpayers take it again. According to NPR:


"More than half of the record settlement amount will be tax-deductible, the banking giant said Tuesday.
'It's our understanding that the $2 billion penalty will not be tax-deductible, Lake said, 'but that the remaining $7 billion of compensatory payments will be deductible for tax purposes."

And:

"The Justice Department has issued this breakdown of the $9 billion in the settlement that's not tied to consumer aid:

• $2 billion - civil penalty to settle the Justice Department claims under the Financial Institutions Reform, Recovery, and Enforcement Act
• $1.4 billion - to settle federal and state securities claims by the National Credit Union Administration
• $515.4 million - to settle federal and state securities claims by the Federal Deposit Insurance Corporation
• $4 billion - to settle federal and state claims by the Federal Housing Finance Agency
• $298.9 million - to settle claims by the State of California
• $19.7 million - to settle claims by the State of Delaware
• $100 million - to settle claims by the State of Illinois
• $34.4 million - to settle claims by the Commonwealth of Massachusetts
• $613.8 million - to settle claims by the State of New York"

And:

"The settlement represents only a fraction of JPMorgan's $23 billion litigation reserve fund, which it has called a hedge against future legal fees and judgments. That reserve was described in the bank's third-quarter corporate filings, as Lake said in a conference call held Tuesday afternoon."



Business as usual, the cost of doing business, tax deductible, nobody goes to jail.

$864 Million Bank of America Fine a Fraction of Damage Done

Today, November 9, 2013, reported on Reuters, the U.S. government urged that Bank of America pay $863.6 million in damages after a federal jury found Bank of America liable for fraud over defective mortgages sold by its Countrywide unit. The case centered on a mortgage lending process at Countrywide, which Bank of America bought in July 2008, known as the "High Speed Swim Lane," or alternatively "HSSL" or "Hustle." Government prosecutors said Countrywide's program emphasized and rewarded employees for the quantity rather than the quality of loans produced, and eliminated checkpoints designed to ensure that loans were sound. The Hustle case, like some other financial crisis cases recently pursued by the government, was brought under the Financial Institutions Reform, Recovery, and Enforcement Act, a law passed after the 1980s savings-and-loan scandals.

The lawsuit is the first government case to go to trial over the faulty mortgage practices that led to the 2008 financial crisis.

A new wave of claims against financial institutions and rating agencies could breathe new life into an old law. Federal prosecutors have turned to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). FIRREA is a civil anti-fraud law passed in the wake of the savings and loan crisis.

FIRREA was passed, in part, to “enhance the regulatory and enforcement powers of Federal financial institutions’ regulatory agencies.” The obvious precedent event was the Savings & Loan Crisis that caused billions of dollars in losses to investors and federally insured deposit funds. Read more about FIRREA

Net income is what remains of a company's revenue after subtracting all costs. It is also referred to as net profit, earnings, or the bottom line. Net Income that is not paid out in dividends is added to retained earnings. On October 16, 2013 Bank of America Corporation reported net income rose to $2.5 billion in the third quarter of 2013 from $340 million in the year-ago quarter.

I admit that $864 million sounds like a lot of money, a whopping fine. But when you do the math, its not much. The proposed fine resulting from the FIRREA based law suit I mentioned, represents only .345% of Bank of America's most recent quarterly net. One quarter, Q3 only. Less than 1% of one quarter's net. How bad is that slap on the hand going to hurt?

According to RealtyTrac.com - November 2013.

Although many media types continually speak of the foreclosure crisis, and the world financial crisis in the past tense. We are not past it. The nightmare continues. There are currently 1,254,701 properties in U.S. that are in some stage of foreclosure. In September, the number of properties that received a foreclosure filing in U.S. was 2% higher than the previous month.

According to an article published in Huffington Post in May 2013, Americans lost $192.6 billion in wealth, or an average of $1,700 per household, in 2012 due to foreclosures. The article also stated that the U.S. could lose $221 billion more within the next year if officials don't come to the aid of millions of borrowers who owe more on their homes than they're actually worth.

And in the Fall 2012 issue of "Democracy, A Journal of Ideas", declared that wealth stripping has increased during the economic crisis. Since the onset of the Great Recession, Americans have lost $7 trillion in equity in their homes. The Federal Reserve estimates the median American family has lost nearly two decades of wealth, or almost 40 percent of their assets. In a separate report, the Pew Research Center estimates that Latinos, Asians, and African Americans have experienced wealth losses of 66 percent, 54 percent, and 53 percent respectively, compared to 13 percent for whites. These losses are largely due to home foreclosures and lost equity.

So, no, less than 1% of one quarter earnings as a fine for Bank of America is not nearly enough to put a dent in the damage done.

American Dream to American Nightmare

Homeowners facing foreclosure face a gamut of challenges and emotions. Many cannot afford an attorney or they would not be in foreclosure in the first place. And, oh so many, were told when they first bought or refinanced back during the boom years -- don't worry you can re-fi in two years and get out from under that adjustable rate mortgage (ARM) - get out from under that ARM that is tied to the mysterious LIBOR which was manipulated anyway and which caps the adjustable rate at some outrageous rate as much as 15%. People bought the lie and bought the line. After all, property values were going up and up, why couldn't they re-fi in a couple of years, cash out the old equity and get a fixed rate. Oops there go the goal posts. Now way way over there. This strategy worked for a while, as all good Ponzi schemes do. The homeowners who jumped on fast, and then jumped off the merry go round, made some money. It's the people who didn't jump off fast enough that got run over, and it's still happening. Lots of homeowner roadkill.

Homeowners in foreclosure feel shame. Shame that they are unable to pay their mortgage, and shame that they fell for it. Most scams are under reported because the victims are ashamed. They berate themselves that they should have known better.

The Ponzi Scheme

If current events have proven anything, it’s that there is no more potentially profitable con game than the Ponzi scheme. The trick dates back hundreds of years, but it was popularized by Charles Ponzi, an Italian immigrant to the U.S. who swindled investors out of millions in the early 1900s before being arrested. The modern Ponzi scheme is a form of investment fraud in which a fake or corrupt stockbroker uses the money of his new investors to pay the imaginary returns of his old ones. Initial investments with the fake broker might yield enormous returns for the people being conned, but in reality their money has not been invested in anything–the con man has simply been putting it all into a bank account. Any time someone wants to withdraw money, or if he has to pay the returns of his old investors, the con man simply uses the money he’s gotten from new investors to do it. Nothing is actually being invested, won, or lost in the market. The con man is simply giving that impression so that people keep handing over more and more cash. Because it can only grow so far, any Ponzi scheme is destined to eventually collapse under its own weight, so the con man usually pulls a disappearing act after collecting enough money, leaving the investors with nothing but the fake returns they received to keep them involved in the swindle. Undoubtedly the most famous recent example involved Bernard Madoff, a New York financier who engineered a Ponzi scheme estimated to be in the neighborhood of $65 billion. Madoff was eventually caught and sentenced to 150 years in prison, but not before pulling of what is essentially the biggest con game of all time.

Sound Familiar?

Maybe not yet, stay with me. The picture becomes more clear the more you learn about this huge scam being perpetrated by the too big to fail banks. You go to buy a house. Like most Americans, you expect to put money down and get a mortgage on the house. That's how it has always been done. When you go to the closing table you sign the mountain of documents that are briefly explained, but there is no time to read the documents. And no time to absorb or question the brief explanation. So you sign. Somewhere in that mountain of paperwork, sign sign signing, is the agreement and acknowledgment that this lender may sell and transfer the debt to another entity, shall I say lender? Problem is, it isn't really a lender, it is a trust, a pooling service agreement. At the time, you don't really care, because all you're trying to do is close on this house and take possession. Even if some of the paperwork doesn't seem quite right or you don't understand it, you let it go. We all did. You think, if you question it at all, is that you have protections. There are laws that protect home buyers from fraud. The mortgage industry must have rules and standards to protect buyers. This is America.

You live your life. A month or more after buying you get a letter stating that the original lender transferred the debt or the servicing to another company. The letter includes assurances that the terms of your debt remain the same. You continue to pay the same monthly amount, the only difference is that you send your payments to a new address. Life goes on.

And life has a way of bringing on life events. Maybe you get sick. Maybe your spouse gets sick. Maybe your spouse dies. Maybe you lose your job. Maybe this country experiences the worst economic down turn since the Great Depression. And then, your ARM resets.

What you didn't know, behind the scenes, is that when your original "lender" transferred their interest in your property to another entity, your debt morphed into an Asset Backed Security, a bond, a security theoretically to be sold on Wall Street.

The lenders and the servicers were busy selling these securitized debt instruments all over the world. They gleefully sold the paper -- over and over. And that debt, in many cases, was never actually placed in any trust or pooling service agreement. They sold these as more like a potential asset, a position, and investors bought. The higher the risk the more the return. As long as new "mortgages" were created money was flowing. The investors were paid. Paid over and over handsomely. But when the financial crisis hit the world, sometime around 2008, and homeowners began defaulting on their mortgages, and it became clear that the asset backed securities were based on loans that had been misrepresented and the asset backed securities that had supposedly been put into trusts were never transferred correctly and homeowners ARMs reset - the s**t hit the fan.

The bottom tier of the Ponzi scheme failed. The house of cards tumbled.

And this just in:

Hey friend,

INCREDIBLE: The Justice Department has evidence JP Morgan Chase committed major banking fraud - but instead of filing criminal charges, they're *negotiating* with them to settle for a small fraction of the damage they did.

Tell the Department of Justice that negotiating with criminals on their own punishment is unacceptable. America is tired of Chase paying fines. We need Chase doing Time:

http://other98.com/dont-negotiate-with-chase-prosecute-them

Thank you for doing the right thing.

Diligent Defense?

Homeowners in foreclosure seeking the help of a foreclosure defense attorney, do not always receive the diligent defense they so desperately need.  This is a letter from an attorney to his client. All names have been removed to protect the innocent and the guilty.

When a friend sent me the letter, my only response was an immediate OMG! Following is the text of the letter retyped verbatim:

"The purpose of this letter is to bring you up-to-date on the status of mortgage foreclosure cases in Escambia, Santa Rosa, Okaloosa, and Walton Counties under a program in which retired Circuit Court Judges are handling these cases on an expedited basis. This means that it is no longer possible to allow years to go by before a foreclosure will occur as the Judges are insisting that their dockets be handled efficiently and promptly. This means that in the cases of modifying mortgages, mediation must be held promptly and the financial documents produced ASAP for the bank's review to see if you qualify for modifying the mortgage based on income formulas. In general you have to have monthly income a gross income basis of at least three times the amount of the new monthly mortgage payments and the best rates that we have seen recently are 4%  for 40 years with the default tacked on to the end of the mortgage as a balloon. You can calculate your monthly mortgage payments less taxes and insurance by looking at amortization schedules on your computer and in an amortization book maintained by most realtors. If modification is not going to work, the other preferable solution is a short sale of the property with a release of liability on the note and mortgage. This means that the properties have to be promptly listed for sale with an expert broker that we recommend and hustled through the system to avoid the foreclosure. The result is far better for your credit score and also a good solution if the property is worth less than its mortgage balance.

The summary judgments of foreclosure resulting in a forced sale of the properties can be heard at anytime the Court feels the paperwork is sufficient in the  file to allow the bank to proceed. This means that even at routine hearings such as hearings on discovery dispute or Motions to Dismiss that we have filed, the Court can grant summary judgment for the Plaintiff. This is not the result that we want and we certainly want to avoid if at all possible.

If you have any doubts about what you wan to do with this property, find a qualified broker, who will tell you exactly what the property will sell for in the market based upon its condition and the comparables, and call me so we can make a joint decision on the best way to proceed."

What's wrong with this picture?

My analysis is below:

The letter states:
"The purpose of this letter is to bring you up-to-date on the status of mortgage foreclosure cases in Escambia, Santa Rosa, Okaloosa, and Walton Counties under a program in which retired Circuit Court Judges are handling these cases on an expedited basis. This means that it is no longer possible to allow years to go by before a foreclosure will occur as the Judges are insisting that their dockets be handled efficiently and promptly."

My take:

This expedited program to foreclose on homeowners is commonly known as the rocket docket. Retired judges/ senior judges have been assigned to hear these expedited cases. The problem with senior judges presiding over foreclosure cases is that senior judges do not have accountability. They have already retired, and do not need to care if their rulings are overturned on appeal. They have already retired, and are not subject to being voted out of office, as they are already out of office. Another issue regarding senior judges could be one of a conflict of interest. If the senior judges pensions are handled by the bank who is the Plaintiff in a foreclosure suit, this raises questions about the integrity of the proceedings. 

The letter states:

This means that in the cases of modifying mortgages, mediation must be held promptly and the financial documents produced ASAP for the bank's review to see if you qualify for modifying the mortgage based on income formulas. In general you have to have monthly income a gross income basis of at least three times the amount of the new monthly mortgage payments and the best rates that we have seen recently are 4%  for 40 years with the default tacked on to the end of the mortgage as a balloon. You can calculate your monthly mortgage payments less taxes and insurance by looking at amortization schedules on your computer and in an amortization book maintained by most realtors.

My take:

Really??? One of the biggest complaints about the mortgage modification process is the lenders dragging their feet, and not reacting to the documents which are repeatedly produced by the homeowner for the modification assessment. This situation persists despite Florida Attorney General, Pam Bondi's stern letter to Bank of America earlier this year. Calculating a mortgage amount is easy. Amortization calculators are all over the internet. However, actually obtaining a 4% mortgage is another matter entirely. Particularly when the homeowner is in foreclosure and has already taken a hit on the credit score.

The letter states:

If modification is not going to work, the other preferable solution is a short sale of the property with a release of liability on the note and mortgage. This means that the properties have to be promptly listed for sale with an expert broker that we recommend and hustled through the system to avoid the foreclosure. The result is far better for your credit score and also a good solution if the property is worth less than its mortgage balance.

My take:

Again, really??? When was the last time you tried to arm wrestle a realtor into including a a release of liability on a short sale. Realtors will tell short sale sellers, no problem they won't come after you. But to actually get that promise in the documents -- good luck! And even better, "an expert broker that we recommend". I smell kick back.

The letter states:
The summary judgments of foreclosure resulting in a forced sale of the properties can be heard at anytime the Court feels the paperwork is sufficient in the  file to allow the bank to proceed. This means that even at routine hearings such as hearings on a discovery dispute or Motions to Dismiss that we have filed, the Court can grant summary judgment for the Plaintiff.

My take:

Hold on, hold up! A summary judgment is not proper if there are material issues in dispute. The last time I checked, Florida is still a judicial foreclosure state. That means that there are specific rules that the Court and the Plaintiff must follow to bring a foreclosure to auction. It is not when the Court "feels" the paperwork is sufficient to proceed. The Court is not supposed to feel. The Court is supposed to be an unbiased trier of fact. The letter was written by a foreclosure defense attorney, and somehow I don't think he is doing his job if "even at routine hearings such as hearings on a discovery dispute or Motion to Dismiss the Court can grant summary judgment. For starters the Plaintiff would have had to file a Motion for Summary Judgment. And there are defenses to that, such as an Affidavit in Opposition to Motion for Summary Judgment; and Affidavit of Denial of Debt.