Finance

Maryland Foreclosure Defense Seminar For Attorneys

Posted on October 21, 2010. Filed under: Banking, Finance, Foreclosure Defense, Mortgage Audit, Mortgage Fraud, Mortgage Law, Predatory Lending, Securitization, Truth in Lending Act |

If you are a Maryland lawyer looking to get into the foreclosure defense field, or a practicing lawyer already handling cases in

this area, this seminar should be of significant value to you.

Learn the latest tips, tricks and strategies; and obtain copies of foreclosure materials used against lenders and servicers by

experts in the field. The goal of this seminar is to help you better understand the legal issues facing your clients, and help you more

effectively advocate on their behalf.

The seminar will cover the following topics:

  • How to Scrutinize Loan Documents for RESPA and TILA Compliance Violations
  • Loan Rescission under the Truth in Lending Act
  • How to Detect a Predatory Loan
  • Understanding the Mortgage Securitization Process
  • Securitization Parties and the Requisite Chain of Title
  • Credit Default Swaps
  • Everything You Need to Know about Mortgage Electronic Registration Systems (MERS)
  • Detecting Fraudulent Assignments of Mortgage/Deed of Trust
  • Detecting False Affidavits of Note Ownership or Lost Note
  • How to Spot a False and/or Defective Allonge
  • Produce the Note Theory

Cost: $1,495.00 ($1,349.00 if reserved before November 1, 2010)

Location: Rockville

Date: Friday November 12, 2010

Time: 9:00 AM to 5:00 PM

For reservations contact: dean@lenderaudits.com


Foreclosure-Defense-Seminar

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Mortgage Assignment & Affidavit Fraud

Posted on October 27, 2009. Filed under: Banking, Finance, Foreclosure Defense, Mortgage Audit, Mortgage Fraud, Mortgage Law, Predatory Lending | Tags: , , , , , , , , , , , , , |

In bankruptcy and government takeovers of financial institutions, missing collateral is a major obstacle for trustees and regulators to overcome. The missing assignment problem is an extension of not carelessness or sloppiness as many have claimed, but of overt acts of fraud.

Skilled attorneys and forensic accounting experts could expose this fraud and as such, the effects and implications are more far reaching than a borrower, simply having their debt extinguished. Debt extinguishment or dismissal of foreclosure actions could be obtained if it can be shown that the entity filing the foreclosure:

• Does not own the note;
• Made false representations to the court in pleadings;
• Does not have proper authority to foreclose;
• Does not have possession of the note; and/or
• All indispensable parties (the actual owners) are not before the
court or represented in the pending foreclosure action.

To circumvent these issues, mortgage servicers and the secondary market have created and maintained a number of practices and procedures. MERS was briefly discussed and will be the sole subject of a major fraud report in the future.

Another common trade practice is to create pre-dated, backdated, and fraudulent assignments of mortgages and endorsements before or after the fact to support the allegations being made by the foreclosing party. Foreclosing parties are most often the servicer or MERS acting on the servicer’s behalf, not the owners of the actual promissory note. Often, they assist in concealing known frauds and abuses by originators, prior servicers, and mortgage brokers from both the borrowers and investors by the utilization of concealing the true chain of ownership of a borrower’s loan.
Ocwen-Anderson-Report-Sue-First-Ask-Questions-Later

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Entire Finance Industry Filled With Massive, Pernicious Fraud

Posted on October 18, 2009. Filed under: Banking, Finance, Fraud, Housing | Tags: , , , |

The entire finance and real-estate “industry” is filled with massive, pernicious fraud, and we now have only one question remaining – will The Government do its lawful and mandated job, that of prosecuting the bad actors, or has it joined with the fraudsters, become one with them, and thus, declare itself as a gang of mobsters rather than a legitimate government? The latter, of course will beg only the question of what should be an ordinary American’s response.

Let’s start with what may be one of the most outrageous yet least-actionable examples: Alan Greenspan.

Alan Greenspan, the former Federal Reserve chairman, said Thursday that banking regulators should consider breaking up large financial institutions considered “too big to fail.”

Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always back them up. That squeezes out competition and creates a danger to the financial system, Mr. Greenspan told the Council on Foreign Relations in New York, according to Bloomberg News.

This is the “former Fed President” who winked and nodded at what he knew was an unlawful merger of Citibank and Travelers, then personally advocated and lobbied for the passage of Gramm-Leach-Bliley – the law that not only tore down Glass-Steagall but retroactively made that merger legal.

More….

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MERS v. Southwest Homes of Arkansas

Posted on October 5, 2009. Filed under: Case Law, Finance, Foreclosure Defense, Mortgage Audit, Mortgage Law | Tags: , , , , , , , , , , , |

MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., APPELLANT, VS. SOUTHWEST HOMES OF ARKANSAS, APPELLEE

No. 08-1299

SUPREME COURT OF ARKANSAS

2009 Ark. LEXIS 121

March 19, 2009, Opinion Delivered

NOTICE:

THE LEXIS PAGINATION OF THIS DOCUMENT IS SUBJECT TO CHANGE PENDING RELEASE OF THE FINAL PUBLISHED VERSION.

SUBSEQUENT HISTORY: Rehearing denied by Mortgage Elec. Registration Sys. v. Southwest Homes of Ark., Inc., 2009 Ark. LEXIS 458 (Ark., Apr. 23, 2009)

PRIOR HISTORY: [*1]

APPEAL FROM THE BENTON COUNTY CIRCUIT COURT, NO. CIV07-223-2, HON. DAVID S. CLINGER, JUDGE.

DISPOSITION: AFFIRMED.

COUNSEL: George Nicholas Arnold – Counsel for the Appellant.

Howard Keith Morrison – Counsel for the Appellant.

Thomas D. Stockland – Counsel for the Appellee.

JUDGES: JIM HANNAH, Chief Justice. IMBER, DANIELSON and WILLS, JJ., concur.

OPINION BY: JIM HANNAH

OPINION

JIM HANNAH, Chief Justice

Mortgage Electronic Registration System, Inc. (”MERS”) appeals a decision of the Benton County Circuit Court denying its motion to set aside a decree of foreclosure and to dismiss the foreclosure action. 1 MERS alleges that the circuit court erred in ordering foreclosure because as the holder of legal title it was a necessary party that was never served. We affirm the circuit court and hold that under the recorded deed of trust in this case, James C. East, as trustee under the deed of trust, held legal title. Because MERS was at most the mere agent of the lender Pulaski Mortgage Company, Inc., it held no property interest and was not a necessary party. As this case presents an issue of first impression, our jurisdiction is pursuant to Arkansas Supreme Court Rule 1-2(b)(1).

1 Mortgage Electronic Registration System, Inc.’s (”MERS”) motion was [*2] entitled Motion to Set Aside Default Judgment; however, the circuit court found, and the parties agree, that MERS was never served. Because MERS was never served, it could not have failed to respond to that service and suffer a default judgment. The relief sought was that the decree of foreclosure be set aside and the foreclosure action be dismissed.

This case arises from foreclosure on a 2006 mortgage granted in a one-acre lot. A prior deed of trust also encumbered the property. In 2003, Jason Paul Lindsey and Julie Ann Lindsey entered into a deed of trust on a one-acre lot in Benton County to secure a promissory note. The lender on that deed of trust was Pulaski Mortgage, the trustee was James C. East, and the borrowers were the Lindseys. MERS was listed on the deed of trust as the “Beneficiary” acting “solely as nominee for Lender,” and “Lender’s successors and assigns.” The second page of the deed of trust states that “the Borrower understands and agrees that MERS holds only legal title to the interests granted by the Borrower and further that MERS as nominee of the Lender has the right to exercise all rights of the Lender including foreclosure.” The deed of trust was recorded.

In [*3] 2006, the Lindseys granted the subject mortgage on the same property to Southwest Homes of Arkansas, Inc. to secure a second promissory note. This mortgage was recorded. On February 9, 2007, Southwest Homes filed a Petition for Foreclosure in Rem against the Lindseys under the 2006 mortgage. The Lindseys, the Benton County Tax Collector, and “Mortgage Electronic Registration System, Inc. (Pulaski Mortgage Company)” were listed as respondents. Pulaski Mortgage was served; however, MERS was never served. Pulaski Mortgage did not file an answer. 2 A Decree of Foreclosure in Rem was entered on April 4, 2007, and the property was auctioned to Southwest. An Order Approving and Confirming Commissioner’s Sale was entered on May 8, 2007. In February 2008, MERS learned of the foreclosure and moved for relief, arguing it was a necessary party to the foreclosure action. The circuit court denied the motion, and this appeal followed.

2 Pulaski Mortgage was the lender of record. No assignment of the deed of trust was recorded nor had Pulaski Mortgage’s security interest been satisfied of record.

MERS asserts that it held legal title to the property and, therefore, it was a necessary party to any action [*4] regarding title to the property. The deed of trust indicates that MERS holds legal title and is the beneficiary, as well as the nominee of the lender. It further purports by contractual agreement with the borrower to grant MERS the power to “exercise any and all rights” of the lender, including the right of foreclosure. However the deed of trust provides that all payments are to be made to the lender, that the lender makes decisions on late payments, and that all rights to foreclosure are held by the lender.

No payments on the underlying debt were ever made to MERS. MERS did not service the loan in any way. It did not oversee payments, delinquency of payments, or administration of the loan in any way. Instead, MERS asserts to be a corporation providing electronic tracking of ownership interests in residential real property security instruments. See In re MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 861 N.E.2d 81, 828 N.Y.S.2d 266 (2006). According to MERS, it was developed by the “real estate finance industry” and was designed to facilitate the sale and resale of instruments in “the secondary mortgage market, which include one of the government sponsored entities.”

MERS contracts with lenders to track security [*5] instruments in return for an annual fee. MERSCORP, supra. Those who contract with MERS are referred to by MERS as “MERS members.” According to MERS, MERS members contractually agree to appoint MERS as their common agent for all security instruments registered with MERS. 3 MERS asserts that it holds the authority to exercise the rights of the lender, and for that purpose, it holds bare legal title. Thus, it is alleged that a principal-agent relationship existed between MERS and Pulaski Mortgage under the contract terms of the deed of trust. 4

3 The Kansas Court of Appeals, in Lankmark National Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177 (2008), likewise found that Mortgage Electronic Registration System, Inc. acts as an agent. We note the analysis in this case is consistent with our own but also note that the Kansas Supreme Court granted review of the Landmark case.

4 MERS is listed as a nominee on the deed of trust. A nominee is “a person designated to act on behalf of another, usu. in a very limited way.” Black’s Law Dictionary 1076 (8th ed. 2004). A nominee is also a “person who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit [*6] of others.” Id. As discussed above, MERS was not designated to act on behalf of another under the facts of this case. Further, it held no title in this case where title vested in the trustee, and finally, it received and distributed no funds for the benefit of others.

“An agent is a person who, by agreement with another called the principal, acts for the principal and is subject to his control.” Taylor v. Gill, 326 Ark. 1040, 1044, 934 S.W.2d 919, 922 (1996) (quoting AMI 3d 701 (1989)). Thus, MERS, by the terms of the deed of trust, and its own stated purposes, was the lender’s agent, including not only Pulaski Mortgage but also any successors and assigns.

MERS asserts authority to act, arguing that once it becomes the agent on a security instrument, it remains so for every MERS member lender who acquires ownership. This authority is alleged to arise from the contractual relationship between MERS and MERS members. Thus, MERS argues it may act to preserve the rights of the lender regardless of who the lender may be under the MERS electronic registration. We specifically reject the notion that MERS may act on its own, independent of the direction of the specific lender who holds the repayment [*7] interest in the security instrument at the time MERS purports to act. “[A]n agent is authorized to do, and to do only, what it is reasonable for him to infer that the principal desires him to do in the light of the principal’s manifestation and the facts as he knows or should know them at the time he acts.” Hot Stuff, Inc. v. Kinko’s Graphic Corp., 50 Ark. App. 56, 59, 901 S.W.2d 854, 856 (1995) (citing Restatement (Second) of Agency
§ 33 (1958)). Nothing in the record shows that MERS had authority to act. Here, Pulaski Mortgage was the lender and MERS’s principal. Pulaski Mortgage was a named party in the foreclosure action. Thus, MERS was not acting as the lender’s agent at the time it moved to set aside the decree of foreclosure.

However, MERS also argues that it holds a property interest through holding legal title. Specifically, it purports to hold legal title with respect to the rights conveyed by the borrower to the lender. We disagree.

“A deed of trust is ‘a deed conveying title to real property to a trustee as security until the grantor repays a loan.’” First United Bank v. Phase II, Edgewater Addition, 347 Ark. 879, 894, 69 S.W.3d 33, 44 (2001)(quoting Black’s Law Dictionary [*8] 773 (7th ed. 1999)); see also House v. Long, 244 Ark. 718, 426 S.W.2d 814 (1968). The encumbrance created by the deed of trust may be described as a lien. See, e.g., First Amer. Nat’l Bank of Nashville v. Booth, 270 Ark. 702, 606 S.W. 2d 70 (1980).

Under a deed of trust, the borrower conveys legal title in the property by a deed of trust to the trustee. Phase II, supra. “In this state, the naked legal title to real property included in a mortgage passes to the mortgagee, or to the trustee in a deed of trust, to make the security available for the payment of the debt.” Harris v. Collins, 202 Ark. 445, 447, 150 S.W.2d 749, 750 (1941). The trustee is limited in use of the title to passing title back to the grantor/borrower in the case of payment, or to the lender in the event of foreclosure. See Forman v. Holloway, 122 Ark. 341,183 S.W. 763 (1916). The lender holds the indebtedness and is the beneficiary of the deed of trust. House, supra. A trustee under a deed of trust is not a true trustee. Heritage Oaks Partners v. First Amer. Title, Ins. Co., 155 Cal. App. 4th 339, 66 Cal. Rptr.3d 510 (Cal. Ct. App. 2007). Under a deed of trust, the trustee’s duties are limited to (1) upon default undertaking foreclosure [*9] and (2)
upon satisfaction of the debt to reconvey the deed of trust. Id.

In the present case, all the required parties to a deed of trust under Arkansas law are present, the borrower in the Lindseys, the Lender in Pulaski Mortgage, and the trustee in James C. East. Under a deed of trust in Arkansas, title is conveyed to the trustee. Harris, supra. MERS is not the trustee. Here, the deed of trust renamed James C. East as the trustee. The deed of trust did not convey title to MERS. Further, MERS is not the beneficiary, even though it is so designated in the deed of trust. Pulaski Mortgage, as the lender on the deed of trust, was the beneficiary. It receives the payments on the debt.

The cases cited by MERS only confirm that MERS could not obtain legal title under the deed of trust. MERS relies on Hannah v. Carrington, 18 Ark. 85 (1856); however, that case stands for the proposition that a deed of trust vests legal tide in the trustee. We are also cited to Shinn v. Kitchens, 208 Ark. 321, 326, 186 S.W.2d 168, 171 (1945), where this court stated that “[t]he trustee named in the deeds of trust was a necessary party at the institution of the foreclosure suit, as also, of course, was Kitchens, [*10] the holder of the indebtedness.” East, as trustee, was a necessary party. MERS was not. Finally, we are cited to Beloate v. New England Securities Co., 165 Ark. 571, 575,265 S.W. 83 (1924), where this court stated that the real owner of the debt, as well as the trustee in the mortgage, are necessary parties in the action to recover the debt and foreclose the mortgage. Again, this case supports the conclusion that East was a necessary party and MERS was not.

Further, under Arkansas foreclosure law, a deed of trust is defined as “a deed conveying real property in trust to secure the performance of an obligation of the grantor or any other person named in the deed to a beneficiary and conferring upon the trustee a power of sale for breach of an obligation of the grantor contained in the deed of trust.” Ark. Code Ann. § 18-50-101(2) (Repl. 2003). Thus, under the statutes, and under the common law noted above, a deed of trust grants to the trustee the powers MERS purports to hold. Those powers were held by East as trustee. Those powers were not conveyed to MERS.

MERS holds no authority to act as an agent and holds no property interest in the mortgaged land. It is not a necessary party. In [*11] this dispute over foreclosure on the subject real property under the mortgage and the deed of trust, complete relief may be granted whether or not MERS is a party. MERS has no interest to protect. It simply was not a necessary party. See Ark. R. Civ. P. 19(a). MERS’s role in this transaction casts no light on the contractual issues on appeal in this case. See, e.g., Wilmans v. Sears, Roebuck & Co., 355 Ark. 668, 144 S.W.3d 245 (2004).

Finally, we note that Arkansas is a recording state. Notice of transactions in real property is provided by recording. See Ark. Code Ann. § 14-15-404 (Supp. 2007). Southwest is entitled to rely upon what is filed of record. In the present case, MERS was at best the agent of the lender. The only recorded document provides notice that Pulaski Mortgage is the lender and, therefore, MERS’s principal. MERS asserts Pulaski Mortgage is not its principal. Yet no other lender recorded its interest as an assignee of Pulaski Mortgage. Permitting an agent such as MERS purports to be to step in and act without a recorded lender directing its action would wreak havoc on notice in this state.

Affirmed.

IMBER, DANIELSON and WILLS, JJ., concur.

CONCUR BY: PAUL E. DANIELSON

CONCUR

CONCURRING [*12] OPINION.

PAUL E. DANIELSON, Associate Justice

I concur that the circuit court’s order should be affirmed, but write solely because I view the decisive issue to be whether MERS was, pursuant to Arkansas Rule of Civil Procedure 19(a) (2008), a necessary party to the foreclosure action. It can generally be said that “[n]ecessary parties to a foreclosure action are parties whose interest are inseparable such that a court would be unable to determine the rights of one party without affecting the rights of another.” 59A C.J.S. Mortgages § 708 (2008). See also 55 Am. Jur. 2d Mortgages § 647 (2008) (”[A]ll persons who are beneficially interested, either in the estate mortgaged or the demand secured, are proper or necessary parties to a suit to foreclose.”). Moreover, “[p]ersons having no interest are neither necessary nor proper parties, and the mere fact that they were parties to transactions out of which the mortgage arose does not give them such an interest as to make them necessary parties to an action to foreclose
the mortgage.” Id. Indeed, our rules of civil procedure contemplate the same.

Rule 19(a) of the Arkansas Rules of Civil Procedure speaks to necessary parties:

(a) Persons to Be [*13] Joined if Feasible. A person who is subject to service of process shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or, (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter, impair or impede his ability to protect that interest, or, (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations by reason of his claimed interest. If he has not been joined, the court shall order that he be made a party. If he should join as a plaintiff, but refuses to do so, he may be made a defendant; or, in a proper case, an involuntary plaintiff.

Ark. R. Civ. P. 19(a) (2008).

Here, a review of the deed of trust for the subject property reveals four parties to the deed: (1) Jason Paul Lindsey and Julie Ann Lindsey, “Borrower”; (2) James C. East, “Trustee”; (3) MERS, “(solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns)”; and (4) Pulaski Mortgage Company, “Lender.” The question, then, is whether MERS, [*14] as nominee, was a necessary party that had an interest “so situated that the disposition of the action in [its] absence may” have impaired its ability to protect its interest or left a subsequent purchaser or other subject to a substantial risk by reason of its interest. The answer is no; MERS, as nominee, was not a necessary party to the foreclosure action, because it held no such interest.

Initially, I must note that my review of the deed’s notice provision reveals that the deed clearly contemplated the Lender as the party with interest, in that it provided:

13. Notices. . . . Any notice to Lender shall be given by first class mail to Lender’s address stated herein or any address Lender designates by notice to Borrower. Any notice provided for in this Security’ Instrument shall be deemed to have been given to Borrower or Lender when given as in this paragraph.

Here, as stated in the circuit court’s order of foreclosure. Pulaski Mortgage, as Lender, was served with notice of the foreclosure action, in accord with paragraph thirteen.

But, in addition, MERS claims that because it holds legal title, it has an interest so as to render it a necessary party pursuant to Rule 19(a). Indeed, pursuant [*15] to the deed of trust, MERS held “only legal title to the interests granted” by the Lindseys,

but, if necessary to comply with law or custom, MERS, (as nominee for Lender and Lender’s successors and assigns) has the right to exercise any and all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.

“Legal title” is defined as “[a] title that evidences apparent ownership but does not necessarily signify full and complete title or a beneficial interest.” Black’s Law Dictionary 1523 (8th ed. 2004) (emphasis added). Thus, as evidenced by the definition, holding legal title alone in no way demonstrates the interest required by Rule 19(a).

MERS further claims that its status as nominee is evidence of its interest in the property, making it a necessary party. However, merely serving as nominee was recently held by one court to be insufficient to demonstrate an interest rising to the level to be a necessary party. In Landmark National Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177 (2008), review granted, (Feb. 11, 2009). MERS also [*16] asserted that it was a necessary party to the foreclosure suit at issue. There, the district court found that MERS was not a necessary party, and the appellate court affirmed. Just as here, MERS was a party to the mortgage “solely as nominee for Lender.” 40 Kan. App. 2d at 327, 192 P.3d at 179. Based on that status, the Kansas court found that MERS was in essence, an agent for the lender, as its right to act to enforce the mortgage was strictly limited. See id.

Agreeing with MERS that a foreclosure judgment could be set aside for failure to join a “contingently necessary party,” the Kansas court observed that a party was “contingently necessary” under K.S.A. 60-219 if “the party claims an interest in the property at issue and the party is so situated that resolution of the lawsuit without that party may ‘as a practical matter substantially impair or impede [its] ability to protect that interest.’” Id. at 328, 192 P.3d at 180 (quoting K.S.A. 60-219). Notably, the language of K.S.A. 60-219 quoted by the Kansas court is practically identical to the language of Ark. R. Civ. P. 19(a).

The Kansas appellate court noted that MERS received no funds and that the mortgage required the borrower [*17] to pay his monthly payments to the lender. See id. It also observed, just as in the case at hand, that the notice provisions of the mortgage “did not list MERS as an entity to contact upon default or foreclosure.” Id. at 330, 192 P.3d at 181. After declaring that MERS did not have a “sort of substantial rights and interests” that had been found in a prior decision and noting that “a party with no beneficial interest is outside the realm of necessary parties,” the Kansas court concluded that “the failure to name and serve MERS as a defendant in a foreclosure action in which the lender of record has been served” was not such a fatal defect that the foreclosure judgment should be set aside. Id. at 331, 192 P.3d at 181-82.

It is my opinion that the same holds true in the instant case. Here, Pulaski Mortgage, the lender for whom MERS served as nominee, was served in the foreclosure action. But, further, neither MERS’s holding of legal title, nor its status as nominee, demonstrates any interest that would have rendered it a necessary party pursuant to Ark. R. Civ. P. 19(a). For these reasons, I concur that the circuit court’s order should be affirmed.

IMBER and WILLS, JJ., join.

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Expanding the Making Home Affordable program

Posted on June 21, 2009. Filed under: Finance, Housing, Refinance | Tags: , , , , , |

The Making Home Affordable program may be further expanded to help more underwater homeowners refinance their mortgages.

Though mortgage rates have crept up in recent weeks, current interest rates are more favorable than they have been in the past few years.

However, many homeowners have been unable to take advantage of the low rates thanks to loan-to-value (LTV) constraints, among other things.

The Home Affordable Refinance program currently has a LTV ceiling of 105 percent, meaning even those with no equity or private mortgage insurance can take advantage of the program.

But many borrowers have lost so much equity over the past few years that the FHFA is considering raising that ceiling to as much as 125 percent LTV, according to a Bloombergreport.

http://www.thetruthaboutmortgage.com/making-home-affordable-program-may-help-more-underwater-homeowners/

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A Case for Economic Democracy

Posted on May 16, 2009. Filed under: Finance, Housing, Politics, Predatory Lending | Tags: , , , , , |

This lecture was delivered on March 25, 2009, at Union Theological Seminary in a public forum, “Christianity and the U.S. Crisis,” associated with a class co-taught by Cornel West, Serene Jones, and Gary Dorrien. It is an abridged version of a chapter in Dorrien’s forthcoming book, Social Justice in Question: Economy, Difference, Empire, and Progressive Christianity (Columbia University Press, 2010).

Today we are caught in a global economic crash and depression, a calamity affecting every nation connected to the global economy, especially poor nations lacking economic reserves. But this crisis also puts into play new possibilities for a democratic surge, perhaps toward economic democracy.

From the perspective of Economics 101, every bubble mania is basically alike, but from the beginning, this one has been harder to swallow, because it started with people who were just trying to buy a house of their own, who usually had no concept of predatory lending, and who had no say in the securitization boondoggle that spliced up various components of risk to trade them separately. It seemed a blessing to get a low-rate mortgage. It was a mystery how the banks did it, but this was their business; we trusted they knew what they were doing. Our banks resold the mortgages to aggregators who bunched them up with thousands of other subprime mortgages, chopped the package into pieces and sold them as corporate bonds to parties looking for extra yield. Our mortgage payments paid for the interest on the bonds.

For twenty years securitizations and derivatives were great at concocting extra yield and allowing the banks to hide their debt. Broadly speaking, a derivative is any contract that derives its value from another underlying asset. More narrowly and pertinently, it’s an instrument that allows investors to speculate on the future price of something without having to buy it. The words that are used for this business-securitization, insurance, diversifying risk-sound reassuring, but they mask that the business is pure high-leveraged speculation and gambling. Credit-default swaps are private contracts in a completely unregulated market that allow investors to bet on whether a borrower will default. Ten years ago that market was $150 billion; today it’s $62 trillion, and it’s at the heart of the meltdown. Credit default sellers are not required to set aside reserves to pay off claims, and in 2000 Congress exempted them from state gaming laws. AIG’s derivatives unit was a huge casino, selling phantom insurance with hardly any backing, for which we now have to pay. The tally for the past six months: four bailouts, $160 billion, some very hard-to-take bonus payments, and no bottom in sight for a sinkhole of toxic debt exceeding $1 trillion.

via OpEdNews » A Case for Economic Democracy.

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Homeowner Assistance Increasing In February Foreclosure Prevention Report

Posted on May 14, 2009. Filed under: Finance, Foreclosure Defense, Housing, Loan Modification, Mortgage Law | Tags: , , , , , , |

Washington, DC – May 12, 2009 – (RealEstateRama) — Federal Housing Finance Agency (FHFA) Director James B. Lockhart today released FHFA’s latest Foreclosure Prevention Report detailing actions taken to prevent unnecessary foreclosures. The report, based on data from the Enterprises’ 30.2 million residential mortgages as of February 28, shows significant foreclosure prevention activity.

Foreclosure Prevention Actions:

* Completed foreclosure prevention actions increased by 9 percent in February with completed loan modifications growing by 26 percent. Repayment plans grew 38 percent.

* As the Enterprises intensified their loan modification efforts, loan modifications accounted for 43 percent of all completed foreclosure prevention actions in February, up from 38 percent in January. Approximately 70 percent of loan modifications completed in February involved both interest rate reductions and term extensions.

* Completed alternatives to foreclosure – short sales and deeds in lieu – accounted for approximately 9 percent of all completed foreclosure prevention actions.

via FHFA Reports Homeowner Assistance Increasing In February Foreclosure Prevention Report | RealEstateRama.

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Fraud fears cloud FHA’s success in stabilizing housing market – National Business – MiamiHerald.com

Posted on April 6, 2009. Filed under: Banking, FHA, Finance | Tags: , , , |

WASHINGTON — As the Federal Housing Administration has stepped in to help stabilize the housing market by underwriting more mortgages, the Depression-era agency is seeing growing default rates that could undermine its health, the Department of Housing and Urban Development inspector general testified Thursday.

Kenneth Donohue also told the Senate Appropriations housing subcommittee that unscrupulous lenders who helped precipitate the housing crisis with subprime loans are moving into the FHA loan system, and the number of fraud cases is a growing concern.

Sen. Patty Murray, D-Wash., who chairs the subcommittee, said that if the FHA can’t pay its debts, Congress may have to cover the shortfall.

“And we don’t have the dollars to do it,” Murray said.

While some see the FHA as the “savior of the market,” Murray said, she’s concerned the agency suffers from outdated technology, personnel shortages and inadequate underwriting.

“Just because FHA has become a major player in saving the housing market doesn’t mean these challenges have disappeared,” she said.

In addition to the resurgence of FHA-guaranteed mortgage loans and the stimulus bill, lower interest rates and an $8,000 first-time homebuyer tax credit are helping to stabilize the market, J. Lennox Scott, the chief executive of John L. Scott Real Estate in Washington state, told the committee.

Two years ago, FHA-backed loans made up only a small percentage of the housing market. The agency didn’t underwrite subprime or adjustable rate loans. As prices rose, the FHA was barred from writing loans on mortgages above $362,500.

The maximum was raised in the stimulus bill to nearly $730,000. As subprime loans and adjustable rate loans disappeared, the FHA now guarantees nearly 30 percent of mortgages. At the same time, the number of lenders doing business with the FHA has grown more than 500 percent.

“As is the case with other mortgage market participants, currently FHA is experiencing elevated default rates and foreclosures and with it, losses that exceed prior estimates,” HUD Secretary Shaun Donovan said.

Donovan said the primary reasons for the defaults were growing unemployment and other economic factors. Donovan said FHA-guaranteed loans didn’t include “unsafe features” and poor underwriting that made subprime and other loans risky.

via Fraud fears cloud FHA’s success in stabilizing housing market – National Business – MiamiHerald.com.

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Gerald Celente: Sub-Prime was Peanuts Compared to the Coming Commercial Real Estate Collapse

Posted on April 6, 2009. Filed under: Bailout, Banking, bankruptcy, Finance, Housing | Tags: , , , , , |

Gerald Celente appears on Fox Business News to talk more about the collapse of ‘09, where he predicts more civil unrest, collapse of commercial real estate and the retail sector, and the new credit crisis. (video follows excerpts and comments)

Who’s going to rent all this vacant retail space? This country’s been way overbuilt for a long time. This is where the real credit crisis is. It’s going to make the sub-prime look like peanuts because no one is going to rent this empty vacant space. You’re going to see ghost malls start springing up all over America.

We may be seeing a rally on Wall Street, especially in the financial sector, but this simply cannot last. Even with the new mark-to-market accounting rules which allow banks to keep toxic assets off their balance sheets, there will be hell to pay once mall operators and other commercial real estate borrowers start defaulting on loans.

People are going to start refusing to pay [credit card payments]. They can’t pay. They have nothing left to lose by fighting it. We’re going to see revolution in this country. The riots that you’re seeing there [G20 Meeting in London] are going to happen here.

Will the American troops fire on their people if they protest?

Mr. Celente has been forecasting Civil unrest since August of 2008, and more recently, in February of this year. Do you still doubt he is on to something?

I don’t trust a thing that the government will do.

Does anyone really still that spending Trillions of dollars to fix a system broken by overspending is going to fix the problem? If so, put everything you have in the stock market today. If not, start taking steps to protect your wealth and your family. The worst is yet to come.

via Gerald Celente: Sub-Prime was Peanuts Compared to the Coming Commercial Real Estate Collapse.

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Wells, BofA and JPM Chase Were More Disparate By Race

Posted on April 6, 2009. Filed under: Banking, Finance, Foreclosure Defense, Fraud, Housing, Mortgage Fraud, Mortgage Law, Predatory Lending | Tags: , |

NEW YORK, April 2 — In the first study of the just-released 2008 mortgage lending data, Fair Finance Watch has found that the seeming survivors of the banking meltdown, Wells Fargo, Bank of America and JPMorgan Chase, had worse disparities by race and ethnicity in denials and higher-cost lending than the banks they acquired, Wachovia and Countrywide. Mortgage lending in the U.S. will become more and not less disparate because of the emergency mergers and bailouts engineered by the regulators, the FFW study predicts.

Fair Finance Watch notes that JPMorgan Chase’s massive closing of branches of Washington Mutual will also make credit harder to come by, especially in poor neighborhoods. 2008 is the fifth year in which the data distinguishes which loans are higher cost, over the federally-defined rate spread of 3 percent over the yield on Treasury securities of comparable duration on first lien loans, 5 percent on subordinate liens.

Wells Fargo Bank in 2008 confined African Americans to higher-cost loans above this rate spread 2.18 times more frequently than whites, according to Fair Finance Watch. Wachovia Mortgage FSB, the largest lender of Wachovia which Wells Fargo acquired, had a lower disparity, at 1.46.

http://www.innercitypress.com/ffw2data040209.html

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