Mortgage Electronic Registration Systems, Inc.: A Survey of Cases Discussing MERS’ Authority to Act
John R. Hooge Lawrence, KS
Laurie Williams Chapter 13 Trustee Wichita, KS
hat tip as Eric H
No, this isn’t another Fraudclosure case — it is about an action by the Pennsylvania Attorney General’s office against a debt collection company that used bogus “hearings” and fake “courtroom” in an attempt to mislead or fool consumers into believing they were in court:
“Attorney General Tom Corbett today announced that a consumer protection lawsuit has been filed against an Erie debt collection company accused of using deceptive tactics to mislead, confuse or coerce consumers – including the use of bogus “hearings” allegedly held in a company office that was decorated to look like a courtroom.
Corbett said the civil lawsuit was filed by the Attorney General’s Bureau of Consumer Protection against Unicredit America Inc., with corporate and business offices located at 1537 West 39th St., Erie, also identified as the “Unicredit Debt Resolution Center.”
“This is an unconscionable attempt to use fake court proceedings to deceive, mislead or frighten consumers into making payments or surrendering valuables to Unicredit without following lawful procedures for debt collection,” Corbett said. “Consumers also allegedly received dubious ‘hearing notices’ and letters – often hand-delivered by individuals who appear to be Sheriff Deputies – which implied they would be taken into custody by the Sheriff if they failed to appear at the phony court for ‘hearings’ or ‘depositions’.
According to the lawsuit, fictitious court proceedings were used to intimidate consumers into providing access to bank accounts, making immediate payments or surrendering vehicle titles and other assets – sometimes dispatching Unicredit employees to consumers’ homes in order to retrieve documents or have consumers sign payment agreements.
Corbett said Unicredit allegedly used civil subpoenas to summon consumers to an office in Erie, which included an area referred to by Unicredit employees as “the courtroom.”
The fake courtroom allegedly contained furniture and decorations similar to those used in actual court offices, including a raised “bench” area where a judge would be seated; two tables and chairs in front of the “bench” for attorneys and defendants; a simulated witness stand; seating for spectators; and legal books on bookshelves. During some proceedings, an individual dressed in black was seated where observers would expect to see a judge.”
The Attorney General’s Office is asking a judge to freeze the company’s assets and order it to cease operations.
Once again, I find myself pining away for jail time for the people involved . . .
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Source:
Erie debt collection company sued; accused of using bogus “hearings” and fake “courtroom” to collect from consumers
Pennsylvania Office of Attorney General
October 29, 2010
http://www.attorneygeneral.gov/press.aspx?id=5763
Jason Zweig has an interesting piece in the Saturday WSJ about the bad advice investment advisors give:
“Investment professionals are supposed to exercise independent judgment; in Warren Buffett’s words, they should be fearful when others are greedy and be greedy only when others are fearful.
It doesn’t always work that way. Corporate pension funds had 69% of their assets in stocks in 2007 as the market hovered at record highs. They have slashed that exposure to 45%, as my colleague E.S. Browning recently reported.
Advisers, too, have been buying higher and selling lower. Those who use TD Ameritrade had an average of 26% of clients’ assets in bonds and cash on Oct. 9, 2007, the day the Dow Jones Industrial Average hit its all-time high of 14164.53. By March 9, 2009, the day the Dow scraped rock bottom at 6440.08, the advisers had jacked up bonds and cash to 51%.”
The simple explanation is that advisors (or at least the bulk of them) are reacting emotionally to market swings. They are over-confident after markets have had big moves up, so that’s when they buy; they dump equity shares in a panic late in a down turn.
Yes, yes, Human primates are emotional creatures, especially in crowds; we are aware of this fact. Given that is a known variable, the more interesting question becomes why is this the case.
I can make 3 guesses:
1. The fee-based industry maxes out revenue by maintaining a fully invested, long only posture.
2. Advisors receive little in the way of training when it comes to asset allocation and portfolio management.
3. Risk Management and Capital Preservation is often confused with Market Timing, and therefore is frowned upon.
This brings me back to one of the very first things I ever published about investing: Its your money and your responsibility. (TBP mirror) Neither the Fed Chief, nor your advisor nor any guru nor blogger nor Jim Cramer. You are the one who is going to be either going to live in comfortable retirement, or eating cat food tacos.
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Source:
Have You Herd? Your Adviser Is Scared to Set You Straight
Jason Zweig
WSJ, OCTOBER 30, 2010
http://online.wsj.com/article/SB10001424052702304879604575582540743655262.html
Nice wheels:
“The Ohio collector Harry Yeaggy brought home the top prize from Thursday’s RM Auctions Automobiles of London sale, a 1964 Aston Martin DB5 James Bond film car from “Goldfinger” and “Thunderball.”
The car sold for £2,600,000. With the addition of auction fees, the final figure is expected to be over $4,600,00. The car is said to have been one of two used for driving scenes in the movies with the actor Sean Connery behind the wheel as Bond.
Four were built in total and two were used for promotional purposes. The other car used in the films was reported stolen from a Boca Raton airport hangar in 1997. It has not been seen since.”
Peter T Treadway, PhD
Historical Analytics LLC
THE DISMAL OPTIMIST
October 31, 2010
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The International Monetary System is Broken
Deficiencies in the international monetary system are a root cause – if not the root cause – of the volatility and bubbles that have afflicted the post-Bretton Woods global economy. Political decisions often dominate what should be an economic process. Unlike under the classic gold standard, there seems to be no automatic market force that can eliminate the American trade deficit or the phenomenon of East Asian countries piling up American dollars.
In a recent Dismal Optimist, I argued because the dollar was the center of the current international monetary system, that unlike China or Japan the United States could not intervene in the currency markets to lower the value of its currency. Were the United States to do so, it would unleash total chaos on the international monetary system. In fact, in an Oct 4 article in the Financial Times, respected Brookings economist Fred Bergsten advocated that indeed the United States do just that type of intervention. Bergsten gave this hypothetical US action the grandiloquent appellation “countervailing currency intervention.”
I believe Bergsten’s recommendation is reckless and fraught with danger. But on second thought maybe it doesn’t matter. For the United States, there is more than one way to skin a monetary cat. QE2 to be precise will do just fine. QE2 is a grandiloquent abbreviation for the Fed recklessly printing money. There is no finer way for a country to depreciate its currency than by printing an endless supply of it. No need for countervailing currency intervention and completely consistent with the US policy of advocating a stronger dollar while acting to weaken the dollar. Quantitative easing by the US is equally reckless and fraught with danger.
The recent G 20 meeting exposed one of the weaknesses of the current system. Major international monetary decisions are usually political in nature. Governments have many weapons at their disposal. Markets either do not always succeed in forcing rational solutions to imbalances or they take time to do so. Governments set exchange rates maybe not forever but they last for periods that can be long enough. Adjustments by surplus and deficit countries often do not happen automatically and remain uncorrected for long periods of time. Countries will pursue their own self interest and “argue their own book”. Adjustments generally aren’t made voluntarily. The result of the G 20 meetings was a vague unenforceable resolution about excessive trade imbalances and competitive devaluations. A complete waste of time.
The East Asian Miracle /Train Wreck?
The biggest question mark for the global economy is what will happen with the Chinese economy in the next year. Forecasting the US and European economies is child’s play compared with forecasting that of China. For the optimists, China is the world economy’s growth engine since not much can be expected from the US or Europe. According to the pessimists, China and therefore the world economy are headed for trouble.
I frequently travel between Hong Kong and New York. Fifteen hour plane trips have some advantages. On my last trip I had time to read In the Jaws of the Dragon by Eamon Fingleton. Fingleton is not a consensus thinker. He puts forth (disapprovingly) what he terms the East Asian Economic Model, first followed by Japan in its WW II puppet state in Manchuria, then in post-War Japan itself, then Taiwan and Korea and now China. The East Asian model is according to Fingleton responsible for the success of the East Asian economies. The East Asian Model is at its core an ultra-mercantalist , statist strategy that is hollowing out the American manufacturing industry. Americans, seduced in part by low interest rates and cheap imports and imbued with the belief that the market will conquer all, have happily allowed this to happen.
Fingleton exaggerates from time to time and holds some debatable political views. But I believe his East Asian model – which is really a synthesis of ideas put forth by many others — describes economic reality well enough. The Model is an economic strategy that has the following key points:
1. A labyrinthine system of trade barriers.
2. An artificially undervalued currency.
3. An industrial policy that focuses on developing so-called pillar industries and uses export subsidies and other unfair tactics to give them an unfair advantage in world markets.
4. Systematic pressure on foreign companies to transfer their most advanced production technologies.
5. A systematic bias in favor of savings and against consumption.
An interesting conclusion can be derived this model. If China has erected significant tariff and non-tariff barriers, then it will also be true that a revaluation of the renminbi will have a limited effect on Chinese imports. It won’t matter what the price is of US exports to China if they are not allowed in at any price. The giant trade imbalances with the US will persist. The international monetary system will remain in disequilibrium. And Chinese consumers will get a raw deal. This is a world in which market signals are ignored.
Spending time in Hong Kong as I do, I have come to regard the city as a special mirror on what is happening in China. As I have written before, I have been struck by the ever-increasing numbers of Mainlanders who descend on the city to buy all kinds of luxury goods. Hong Kong is rapidly turning into a giant upscale mall. (Similarly Mainlanders head for Macau as gambling is flat out prohibited in China.) Why can’t the Mainlanders load up on Louis Vuittons and Pradas in China? One reason might be the gradual appreciation of the renminbi against the US dollar-pegged Hong Kong dollar. That makes everything in renminbi cheap in Hong Kong (including stocks and condos.) But a second reason might be that unlike in China there are no barriers – - tariff or non-tariff- – on consumer imports into Hong Kong.
Short seller Jim Chanos continues to hold to his view that the Chinese economy is about to suffer a serious slowdown. His argument is that China has poured excess funds into useless capital projects and real estate construction at the expense of its consumers. His presentations are peppered with tales of grandiose white elephants such as the new city of Ordos in Inner Mongolia and the New South China Mall in Guangdong. Both are apparently empty of people. Chanos and company are really predicting that the East Asian Model as far as it is practiced by China will hit the wall. According to this viewpoint, China has deviated too much from what a market directed economy would dictate. Stagnant Japan could be China’s future.
In my opinion, too much pessimism may not be warranted. Historically, China over thousands of years has fluctuated between periods of weakness and disorder and periods of external strength and internal prosperity. China at the moment is in the upswing part of its historical cycle. Western pessimists overlook one thing: the strong work habits and discipline of the East Asian populations and their national obsession to achieve material prosperity. These qualities continue to make East Asia an important long term investment destination. These qualities may overcome a plethora of economic policy sins. Or postpone the day of reckoning long enough to keep the shorts from making much money. We’ll see. As Lord Keynes famously said, “markets can remain irrational longer than you can remain solvent.”
Inasmuch as the East Asian Economic Model describes reality, the countries that have employed it need to ask whether it will work for them in the future. Don’t expect East Asian leaders to nobly act on behalf of the United States. But more consumer spending, more imports, and revalued exchange rates are what their future prosperity requires. They certainly don’t need a protectionist trade war with the United States, a continued pile up of dollar reserves or more domestic inflation. Unlike the paralyzed political class in Japan, the ever pragmatic Chinese leadership may yet make the necessary adjustments. Unfortunately the situation is complicated by the fact that, whereas Japan, South Korea and Taiwan have been allies of the United States, China is a geopolitical rival.
Investing in an Unstable World Economy
“It’s not easy” is the short answer. Markets can turn on a dime. A “buy stocks now” approach because the Fed is embarking on QE2 may be too simplistic and frankly is a little scary. Today’s smart investment can become tomorrow’s disaster when the value of a currency changes dramatically. If the US flips from quasi-deflation to significant inflation investors had better be prepared to do a quick rebalancing of their portfolios. If China exhibits a major slowdown in 2011 and the US and Europe limp along in near or renewed recession, investors face grim choices.
One investment that should be considered is gold. Currencies have lost their ability to be a reliable store of value. Gold is an alternative currency. It is a currency whose supply is not threatened by Bernanke-directed massive sudden increases.
OK gold doesn’t go up in a straight line. So-called experts have been forecasting a correction as gold has risen. And gold is subject to confiscatory actions by governments who do not relish giving up their monopoly to issue and debase their own currency. No doubt the coming US elections will have a major effect on the gold price. Unfortunately I don’t know what that effect will be and neither does anybody else.
I have argued in past Dismal Optimists that while the US may appear to be tottering on the brink of a debt deflation, the surplus countries of the world notably in Asia and the Middle East have inflation problems. All those reserves created in buying dollars are one factor. They aren’t all sterilized. Non US money supplies are rising. Add to this are pressures on natural resources and agricultural products coming from all those new emerging market consumers. This is a second area where investors should put their money while keeping their fingers crossed that any China slowdown will be a gradual one. Bernanke’s Quantitative Easing may not do much near term for US internal demand and real estate prices but they are adding to inflation around the world.
Longer term investors have to assume the gradual abandonment of the East Asian Model, i.e, stronger Asian currencies, more imports, more consumer spending. The big global export oriented US companies—especially those in the technology area– should be well positioned as this happens. So will consumer oriented companies in East Asia. Hopefully significant abandonment will occur in the next two years and not ten years from now.
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Peter T Treadway also serves as Chief Economist, CT RISKS, Hong Kong
www.thedismaloptimist.com
pttreadway -at- hotmail.com
305 761 4718
852 9409 1186
The rules for the classic magazine cover indicator are:
1. Mainstream — not business — publication
2. Well understood concept that is reaching a climax
3. Asset price gains
So this week’s Barron’s only qualifies on one count — 82% market gains — but even still: Covers like this give me pause:
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click for larger cover
From Manal Mehta of Branch Hill Capital, Congressional Oversight Panel:
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MR. SILVERS: Ms. Caldwell, I would like to continue to pursue Mr. McWatters’ train of thought.
I’m concerned about Treasury making representations categorically that you don’t see a systemic risk. And let me walk you through exactly why.
Mr. McWatters referred to a demand letter sent by a number of bond holders, including the Federal Reserve Bank of New York, one of the institutions I believe that is encompassed by your list of regulators and the like that Treasury coordinates with.
You’re familiar with that letter?
MS. CALDWELL: Yes, I am.
MR. SILVERS: All right. That letter asks for $47 billion of mortgage-backed securities to be repurchased at par. Do you know what those mortgages are currently carried — what those bonds — the market value of those bonds today?
MS. CALDWELL: You know, at this point, I’m not prepared to comment on ping litigation but just to, again –
MR. SILVERS: Okay. Fine.
MS. CALDWELL: — earlier that we’re –
MR. SILVERS: Let me tell you what the Fed says they’re worth.
All right? The Fed tells us they’re worth $0.50 on the dollar.
So if the Fed’s request to Bank of America is honored, Bank of America, assuming they are carrying these bonds — assuming, when they buy them back, they mark them to market, Bank of America will take a $23 billion loss.
The Federal Reserve further informs us that there is nothing particularly unique about that particular set of mortgage-backed securities. Meaning, they have not been chosen, okay, because they’re particularly bad. They believe they are of a common quality with the rest of Bank of America’s underwritten mortgage-backed securities.
There are $2 trillion of Bank of America’s underwritten mortgage- backed securities. Five such deals — five such requests — if honored, to Bank of America will amount to more than the current market capitalization of Bank of America, which is $115 billion.
Now, do you wish to retract your statement that there is no systemic risk in this situation? And the word is “risk,” not “certainty” but “risk.” And I would urge you to do so because these things can be embarrassing later.
MS. CALDWELL: I think my statement, as I said earlier, is that it is still early. We’re working very closely with 11 regulatory and federal agencies. We are watching this every day. And at this stage, there appears to be no evidence of a systemic risk but, again, it is early, and it is something we’re monitoring daily.
MR. SILVERS: Let me suggest to you that it is still early is a perfectly acceptable position. The notion that there is no – is it your position that Bank of America, honoring five of these things, would not present a systemic risk? Five of these requests by the — the first of which has been made by the Federal Reserve.
Is Bank of America not systemically significant?
MS. CALDWELL: You know, at this point, I’m not prepared to comment on a particular institution. But I think, as we look at the put-back risk, the litigation involved, the severity and the probability and the time that it would take to go through these, those are all important factors to be considered in looking at the risk.
And again, just to reaffirm, we didn’t say there was no risk.
We said there didn’t appear to be evidence of a major systemic risk.
The nonpartisan Congressional Research Service prepared a report for Congress on the impact of the Bush Tax Cuts on the economy.
The report notes the various options of keeping some all or none of the cuts; the impact of these choices is the balance between fostering economic growth and restoring fiscal sustainability. (You can see the full CRS report here).
First, a definition: What exactly are the tax provisions of Bush Tax Cuts (EGTRRA and JGTRRA):
The Bush Tax Cuts
• The 10% tax rate was introduced;
• The 28% rate was reduced to 25%
• The 31% rate was reduced to 28%
• The 36% rate was reduced to 33%
• The 39.6% rate was reduced to 35%
• Long-term capital gains tax rate was reduced from 20% to 15%;
• Qualified dividends were taxed at 15% rather than as ordinary income;
• The “marriage penalty” was reduced by increasing the standard deduction for couples;
• Child tax credit, the earned income tax credit (EITC), and education incentives were expanded.
• Repeal of the personal exemption phaseout (PEP) and the limitation on
itemized deduction (Pease) (both were gradually phased out)
I cannot quantify the last three, but the others — the tax brackets, cap gains and dividends — are easy to understand.
Here are several visual depictions of the circumstances from and impact of these taxes:
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click for ginormous charts
You should read the full CRS report, as its quite informative . . .
Hat tip Bruce Bartlett
The Bush Tax Cuts and the Economy
Thomas L. Hungerford
Specialist in Public Finance
October 27, 2010
Congressional Research Service
7-5700
www.crs.gov
R41393
CRS Report for Congress
Prepared for Members and Committees of Congress
A series of tax cuts were enacted early in the George W. Bush Administration by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA; P.L. 108-27). These tax cuts, which are collectively known as the Bush tax cuts, are scheduled to expire at the end of 2010. Beginning in 2011, many of the individual income tax parameters (such as tax rates) will revert back to 2000 levels. The major tax provisions in EGTRRA and JGTRRA that are part of the current debate over the Bush tax cuts are the reduced tax rates, the reduction of the marriage penalty (and increase in the marriage bonus), the repeal of the personal exemption phaseout and the limitation on itemized deductions, the reduced tax rates on long-term capital gains and qualified dividends, and expanded tax credits. This report examines the Bush tax cuts within the context of the current and long-term economic environment.
The U.S. economy entered into a recession in December 2007. Between the fourth quarter of 2007 and the second quarter of 2009, the economy shrank with real gross domestic product (GDP) falling by 4.1%. The unemployment rate increased from 4.9% in December 2007 to 10.1% by October 2009, and is currently still over 9%. As a result of reduced economic activity and government efforts to stimulate the economy, the federal budget deficit increased from 1.2% of GDP in FY2007 to 9.9% of GDP in FY2009. Most economic forecasts suggest the economic outlook over the next few months is not bright and will likely be characterized by high unemployment and sluggish economic growth. The long-term fiscal situation is unsustainable.
There are several options that Congress can consider regarding the Bush tax cuts, and each of the options strikes a different balance between fostering economic growth and restoring fiscal sustainability. Allowing the Bush tax cuts to expire as scheduled will somewhat improve the fiscal condition, but could stifle the economic recovery. At the other extreme, permanently extending all of the Bush tax cuts would not undercut the economic recovery, but would worsen the longer-term fiscal outlook and possibly signal a lack of progress in dealing with the long-term fiscal situation. The Obama Administration has proposed allowing the Bush tax cuts to expire for high income taxpayers and permanently extending the tax cuts for middle class taxpayers. Compared to permanently extending all of the Bush tax cuts, this proposal is projected to increase tax revenues by $252 billion over five years and by $678 billion over 10 years, but still leaves federal debt on an unsustainable path. A temporary extension of the Bush tax cuts could provide time for Congress to consider tax reform and also provide a deadline to complete deliberations. Furthermore, allowing the tax cuts targeted to high income taxpayers to expire as scheduled could help reduce budget deficits in the short-term without stifling the economic recovery.
In October 2010, the Division of Corporation Finance sent the following illustrative letter to certain public companies as a reminder of their disclosure obligations to consider in their upcoming Form 10-Qs and subsequent filings, in light of continued concerns about potential risks and costs associated with mortgage and foreclosure-related activities or exposures.
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| October 2010
Name Chief Financial Officer ABC Company Address Dear Chief Financial Officer: The purpose of this letter is to remind you of disclosure obligations that you should consider for your upcoming Form 10-Q and subsequent filings in light of continued concerns about potential risks and costs associated with mortgage and foreclosure-related activities or exposures. Items that should be considered include, without limitation, the impact of various representations and warranties regarding mortgages made to purchasers of the mortgages (or to purchasers of mortgage-backed securities) including to the government-sponsored entities (GSEs), private-label mortgage-backed security (MBS) investors, financial guarantors and other whole loan purchasers. While not an exhaustive list, these representations and warranties may include the following:
In addition, we understand that some issuers are undertaking reviews of their loan documentation and foreclosure practices, and, in some cases, have suspended foreclosures pending completion of such reviews. Item 303 of Regulation S-K requires you to discuss, in your Management’s Discussion and Analysis of your Forms 10-Q or Form 10-K, any known trends or any known demands, commitments, events or uncertainties that you reasonably expect to have a material favorable or unfavorable impact on your results of operations, liquidity, and capital resources. Item 103 of Regulation S-K requires disclosure of legal proceedings, including proceedings known to be contemplated by governmental authorities. Item 1 of Part II of Form 10-Q requires you to address legal proceedings when they first become a reportable event and in subsequent quarters when there have been material developments. In addition, ASC Subtopic 450-20 (SFAS 5) requires you to establish accruals for litigation and other contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. When a loss is not both probable and estimable, an accrual is not recorded, but disclosure of the contingency is required to be made when there is at least a reasonable possibility that a loss or an additional loss has been incurred. The disclosure should indicate the nature of the contingency and give an estimate of the possible loss or range of loss or state that such an estimate cannot be made. Rule 10-01(a)(5) of Regulation S-X requires the disclosure of material contingencies in interim financial statements. As appropriate, you should provide clear and transparent disclosure regarding your obligations relating to the various representations and warranties that you made in connection with your securitization activities and whole loan sales. In addition, you should discuss any implications of any foreclosure review, including potential delays in completing foreclosures, if applicable. These disclosures should address your role as an originator, securitizer, servicer, and investor, as applicable. Depending on your circumstances, please consider the following points as you prepare your Form 10-Q and subsequent filings:
In addition, if you have established a reserve relating to representations and warranties attributable to loans that you have sold, you should consider providing a roll-forward of this reserve presenting separate amounts for increases in the reserve due to changes in estimate and new loan sales and decreases attributable to utilizations/realization of losses. This is not an exhaustive list of the disclosures you should consider. It is your responsibility to determine the disclosures that should be provided in your particular circumstances. Some of these issues are not limited to financial institutions that sold or securitized mortgages or mortgage-backed securities. Issuers that engage in mortgage servicing, title insurance, mortgage insurance, and other activities relating to residential mortgages should also consider the impact of these and similar issues for their disclosures. Please contact me if you have any questions. Sincerely, Senior Assistant Chief Accountant |
Source: SEC, Division of Corporation Finance
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Hat tip Branch Hill Capital
"I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." -Thomas Jefferson (letter to John Taylor in 1816)
After 3 quarters in a row that averaged just 1.2%, Q4 GDP grew 2.8%, a touch below expectations of 3.0% BUT Nominal GDP grew well below forecasts. Because the price deflator was up just .4% vs the estimate of 1.9%, Nominal GDP was up 3.2% vs the estimate of 4.9%. Personal Consumption rose 2.0% vs the forecast of 2.4%. Fixed Investment rose 3.3% helped by a 5.2% increase in equipment and software spending and residential construction rose by 10.9%. Trade was a slight drag on GDP growth and government spending was as well led by a 12.5% decline on national...
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