Posts filed under “Foreclosures”
MERS: The Center of the Mortgage Scam
A prominent economist said about the 2008 financial crisis:
“At the root of the crisis we find the largest financial swindle in world history”, where “counterfeit” mortgages were “laundered” by the banks.
The Mortgage Electronic Registration Systems – MERS – was one of the main ways the swindle was done, and the main way in which counterfeit mortgages were laundered by the banks.
MERS is a shell company with no employees, owned by the giant banks.
MERS threw out centuries of well-established law about how real estate is transferred – and cheated governments out of many tens or hundreds of billions of dollars in recording fees.
Matt Taibbi pointed out:
MERS … is essentially an effort at systematically evading taxes … and hiding information from homeowners in ways that enabled the Countrywides of the world to defraud investors and avoid legal consequences for same.
MERS was at least in part dreamed up by Angelo Mozilo of Countrywide.
For those of you wondering why so many localities are broke, here’s one small factor in the revenue drain. Counties typically charge a small fee for mortgage registration, roughly $30. But with MERS, … you don’t need to pay the fee every time there’s an ownership transfer. Multiply that by 67 million mortgages and you’re talking about billions in lost fees for local governments (some estimates place the total at about $200 billion).
Outrageously, MERS actually marketed itself to its customers as a way to save money by avoiding the payment of legally-mandated registration fees. Check out this MERS brochure from 2007. It brags on the face page about its fee-avoiding qualities (“MINIMIZE RISK. SAVE MONEY. REDUCE PAPERWORK”) and inside the brochure, in addition to boasting about helping clients “Foreclose More Quickly,” it talks about how clients save money because MERS “eliminates the need to record assignments in the name of the Trustee.”
All of this adds up to a system that enabled the mortgage industry to avoid keeping any kind of proper paperwork on its frantic, coke-fueled selling and re-selling of mortgage-backed securities during the bubble, and to help the both the Countrywide-style subprime merchants and the big banks like Goldman and Chase pull off the mass sales of crappy loans as AAA-rated securities.
Foreclosures Loom Large in the Region
Jaison R. Abel and Richard Deitz
FRBNY April 10, 2013
Households in the New York-northern New Jersey region were spared the worst of the housing bust and have generally experienced less financial stressthan average over the past several years. However, as the housing market has begun to recover both regionally and nationally, the region is faring far worse than the nation in one important respect—a growing backlog of foreclosures is resulting in a foreclosure rate that is now well above the national average. In this blog post, we describe this outsized increase in the region’s foreclosure rate and explain why it has occurred. We then discuss why the large build-up in foreclosures could cause a headwind for home-price gains in the region.
While the foreclosure rate has been edging down in the nation recently, the opposite is true in New York and northern New Jersey. The chart below shows the foreclosure rate as measured by the share of all active mortgages in foreclosure in a given month. After rising sharply during the housing bust, the U.S. foreclosure rate plateaued at about 4 percent in 2011, and has since fallen. Unlike the national rate, the foreclosure rate in our region has steadily climbed over the past several years. The rate in northern New Jersey and downstate New York now hovers at around 8 percent, double the national average. Even in upstate New York, where housing conditions have remained relatively stable, the foreclosure rate has recently edged above the national rate. Indeed, according to a recent report, New Jersey and New York now have the second- and third-highest foreclosure rates in the United States, behind only Florida.
Ireland’s Homeowners: Global Champions in not Repaying Mortgages Source: Quartz via Deutsche Bank, Moody’s Cyprus? Pshaw. Greece, Italy, Spain Portugal? Puh-leeze. Ireland sets the bar for what mortgage arrears looks like ina country bankrupted by their financial sector and hoodwinked by a bank bailout. The chart above, showing mortgage arrears on the emerald…Read More
Fannie & Freddie have finally begun to investigate the self-dealing and often fraudulent practice of Force-Placed Insurance. Both the New York State Insurance Regulator and the Consumer Financial Protection Bureau have been way ahead of the GSEs on this.
For those of you who may be unfamiliar with Force-Placed Insurance, it is an optional bank insurance product that sometimes gets forcibly jammed down the throats of home owners and mortgage investors at grossly inflated prices. As Jeff Horowitz detailed in 2010 (Losses from Force-Placed Insurance Are Beginning to Rankle Investors), most of the fees, commissions and revenues from this “product” went straight back to the banks holding the related mortgage, typically to wholly owned subsidiaries.
It was an abusive practice, and in quite a few instances, the additional costs actually tipped homeowners into foreclosure.
Here’s the WSJ:
“The Federal Housing Finance Agency, which regulates mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC) plans to file a notice Tuesday to ban lucrative fees and commissions paid by insurers to banks on so-called force-placed insurance . . .
Forced policies have boomed in the wake of the housing bust, as many homeowners struggled to keep up with mortgage payments. Some borrowers may try to save money by dropping the original standard coverage, only to be hit by policies with premiums that are typically at least twice as expensive as voluntary insurance, and sometimes cost as much as 10 times more. Nearly six million such policies have been written since 2009, insurance industry data indicate. Consumers are free at any point to replace a force-placed policy with one of their own choosing.”
The Consumer Financial Protection Bureau has issued new rules on this, but the real action seems to be the variety of civil suits from investors; additionally, New York State just reached a settlement with forced-placed insurer Assurant, including a $14 million penalty, and a long list of practice changes (after the jump). If it were up to me, I would have insisted on profit disgorgement and jail time for the CEO (But I am “unreasonable”).
Hopefully, this is the first of many . . .
Latest Mortgage Scandal: Force-Placed Insurance (November 10th, 2010)
Rule of Law: Banker Criminality Demands Prosecution (May 20th, 2011)
A modern Pecora Commission could right Wall Street wrongs (February 5th, 2012)
U.S. Cracks Down on ‘Forced’ Insurance
ALAN ZIBEL And LESLIE SCISM
WSJ, March 25, 2013
Losses from Force-Placed Insurance Are Beginning to Rankle Investors
Amaerican Banker, NOV 9, 2010
NY Post: “While foreclosures nationally fell 3 percent last year, New York City filings climbed 19 percent, or 13,116 properties, according to a new report. The outer boroughs were the hardest hit, with Queens seeing a 164 percent rise year-over-year and Staten Island rising 19 percent over the same time frame, according to RealtyTrac, which…Read More
The banks are thrilled at the latest settlement, confirming yet again their ability to break the law with impunity. Consider the following, from the litigation between Syncora Guarantee (formerly XL Capital Assurance) vs EMC Mortgage Corp, and Ambac Assurance vs vs EMC Mortgage Corp:
Compare Comments made by Consultants Hired to do Foreclosure Reviews:
“Oversight by the regulators was nearly nonexistent, the reviewers said. Some employees hired by one of the consultants, Promontory Financial, to pore over hundreds of thousands of Bank of America foreclosures said that without a watchdog some consultants worked to minimize the number of homeowners found to be harmed. One reviewer described how her supervisors routinely kicked back loans where she had identified harm. The reviewers would speak only if they were not named because they were searching for work…”
With comments made by Whistelblowers about due diligence on mortgages before they were securitized – full transcript attached:
19 Q. So as I understand it, through the team leads you received directions that the clients wanted the underwriters to ignore certain defects in loans?
24 A. That is correct.
Q. Turn to paragraph 17 of your affidavit, which is on page 5.It says here in the first line: “Clayton supervisors would often inform the due diligence underwriters that the purchasers wanted the underwriters to approve loans that often did not satisfy the underwriting guidelines.”
11 A. That is correct.
12 Q. Is the same statement true for Watterson Prime?
14 A. Yes.
15 Q. Was this a practice which was pervasive at Watterson and Clayton?
17 A. Yes.
18 Q. Across all clients?
19 A. Yes.
I see if I can find the PDF of the full deposition; most of the transcript is after the jump