By Jessica Yellin CNN National Political Correspondent
(CNN) -- The Obama administration's Making Home Affordable program was designed to help homeowners like Mark Kollar and Angela Baca-Kollar keep their homes.
Mark Kollar and Angela Baca-Kollar took part in the Making Home Affordable program.
When the recession hit, the Arizona couple's income plummeted. They tried everything they could think of to hold on to their house: They drained their savings account, sold their 401(k), changed jobs.
It wasn't enough, and foreclosure is set to begin in a week.
The Kollars thought they had one last hope: the Making Home Affordable program, which should have reduced their monthly mortgage to affordable payments. In theory, it'd be a win-win: The Kollars and their two children keep their home, and the nation avoids one more foreclosure.
The problem? The bank hasn't been playing along, and the Kollars have no place to turn.
"I don't want a handout. I want to do the right thing," Mark Kollar said. "I thought this was supposed to give us a chance."
A CNN investigation revealed that the Kollars are far from alone. Housing counselors, homeowners and consumer advocates tell endless stories of banks giving homeowners the runaround: declining apparently eligible applicants; pressuring them into loans they can't afford; placing homes in foreclosure while the owners are being considered for a modified loan; lenders telling homeowners to waive their legal rights, even though the program prohibits it; or banks telling homeowners that they have to be in default to qualify, which isn't true. Watch more about how the program has worked so far »
Call for help
Have a complaint about your bank and Making Home Affordable?
1-888-995-HOPE
When will an agent pass on the complaint to higher-ups?
If you have been told to skip payments to qualify
If you have been told to pay a fee to qualify
If your lender is "improperly applying the program's guidelines"
If a member of Congress or their office makes a complaint on your behalf
Source: U.S. Department of Treasury
According to the Treasury Department's most recent report, only 230,000 of the up to 4 million eligible homeowners have new mortgages under the program.
Treasury Secretary Timothy Geithner has told bankers that he's not happy with the pace. Banks say that it took 90 days to get the program's rules and procedures and that they're still training staff members to handle it.
The most common complaint from those applying for help: banks losing paperwork or dropping calls while the foreclosure clock is ticking. Watch more on home mortgage problems »
Mark Kollar can testify to that.
Since receiving his Making Home Affordable offer, he's spent hours trying to reach someone at his bank who can help. A number of representatives told him that this is his only offer; accept it or lose his house.
After insisting on speaking to a supervisor, he was eventually told to resubmit the documentation he'd been submitting for months.
In return for billions of dollars from the government to help banks recover from bad loans, the banks are supposed to help homeowners make their mortgage payments more affordable. As President Obama said unveiling the program in March, helping "responsible folks who have been making their payments" because it will "leave money in their pockets and leave them more secure in their homes."
Under the Making Home Affordable formula, the Kollars' payment should have been reduced to 31 percent of their $3,000-a-month income.
The bank's offer? A payment of $2,892 a month, or 96 percent of their income.
Diane Thompson of the National Consumer Law Center says this isn't uncommon. "We've seen gross errors of banks putting in wrong income to get ... payments," she said.
Don't Miss
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New program yet to help buyers land homes
Bank of America, which holds the Kollars' loan, says the offer it made was based on incorrect information from a government-approved housing counselor.
Bank of America spokesman Rick Simon said it's difficult to determine what the Kollars should pay because Mark Kollar recently started a commission-based job, and his monthly income fluctuates.
The bank plans to watch his earnings for a few more months before it moves ahead "with consideration of a trial modification offer." Simon said the bank is offering the Kollars a temporary new mortgage payment while it watches their earnings.
"Bank of America is committed to the success of the Making Home Affordable program and helping homeowners avoid foreclosure whenever a borrower has the ability to make a reasonable mortgage payment," Simon said.
By one measure, the Kollars are more fortunate than others in the same predicament; the bank hasn't sold their house out from under them. Beth Goodell, a lawyer with the nonprofit Community Legal Services of Philadelphia, says she's seen that happen.
"Its outrageous," said Goodell, who represents low-income families in foreclosure. "It has to be clearer that foreclosure should stop altogether while people are being considered."
She says the only outlet for these homeowners is the courts.
An official with the Treasury Department said that "in all identified instances where loans have been denied to eligible borrowers, the administration has worked with servicers to correct the problem and provide modifications."
And Michael Barr, the Treasury Department's assistant secretary for financial institutions, says the program is "off to a strong start." He admits that "servicer performance has been uneven" but believes that the lenders are on track to make improvements. And he vows that the administration "will hold these institutions accountable for their progress."
But Goodell has seen plenty go wrong, and she said, "There's not adequate recourse."
Frustrated with the bank, Angela Baca-Kollar called the Obama administration's helpline, 1-888-995-HOPE, but the representative told her that the hot line "can't strong-arm the bank" and urged her to call a government-approved housing counselor.
The Kollars had been working with such a counselor for months.
"There is nowhere to go," Angela Baca-Kollar said.
Wednesday, December 9, 2009
GOP in Pact w/Banksters: Agree to Defeat Regulatory Reform
In a little-noticed but potentially explosive remark last Friday, Senator DickDurbin (D-Ill.) accused Republican leadership of signing a political pact withthe banking industry: in exchange for help defeating a measure that would makeit easier for homeowners to restructure failing mortgages, GOP leadership in theSenate would help banks defeat any additional efforts at regulatory reform.The allegation of a quid pro quo was based on an email that Durbin received lastspring after his amendment to allow judges to modify mortgages for homeownerswho enter bankruptcy was defeated on the Senate floor. During a discussion topromote publicly-financed elections on Friday, the Illinois Democrat relayedthat, shortly after the defeat of his "cram-down" amendment, a "banker friend"forwarded him the note from Tanya Wheeless, president & CEO of Arizona BankersAssociation."I have contacted the market presidents for each of the three banks (Chase,Wells and Bank of America) and explained that in my humble opinion it's a bigmistake to cut a deal with Durbin and alienate our (in Arizona) Senator,"Wheeless's email reads. "I also told them that I thought this would drive awedge in our industry. [Senator Jon] Kyl has pointedly told them not to make adeal with Durbin and then come looking to Republicans when they need help onsomething like regulatory restructuring or systemic risk regulation.""I know the (sic) every state association will have to do what's best for itsmembers, but I have told my largest three members that if they cut this deal,AzBA will fight them on it. They may be willing to alienate Republicanleadership, but I'm not quite there yet."The email, pasted below, was passed to the Huffington Post by Durbin's office.The implication seems fairly clear: banks were being warned that if they negotiated with Durbin on cram-down, they were risking GOP support on regulatory reform. That the banking industry would take such a stance isn't entirely surprising, when one considers the narrow financial interests that influence theindustry. But the willingness of the GOP leadership to, apparently, useregulatory reform as a cudgel to pressure banks is illuminating of the horse-trading process that occurs behind the legislative curtains.At the very least, it shows just how stacked the deck is against passing consumer-oriented reforms. In the end, cram-down was defeated not once but twice on the Senate floor.Durbin said on Friday that, back then "I talked about the fact that when it comes to the banking lobby, they own the place. It might have been an overstatement. But not by much. One of the people I ran into afterwards said[the statement] was like a bolt of lightening in a swimming pool. It just woke everybody up that something is going on, on Capitol Hill."The email, he added, "is a total smoking gun as far as I'm concerned. It tells the whole story and it is in writing as to what is happening behind the scenes... So when people say I don't know if we should have public financing because that is my tax dollars, I can tell them that their resources, whether tax dollars or personal wealth, are being impacted every day by decisions being made by the special interest groups."
Click on title above for original article and for READABLE copy of Durbin email;
http://www.huffingtonpost.com/2009/12/08/durbin-banks-and-gop-made_n_383872.html
Click on title above for original article and for READABLE copy of Durbin email;
http://www.huffingtonpost.com/2009/12/08/durbin-banks-and-gop-made_n_383872.html
Sunday, December 6, 2009
UpDate: $hiti-Loan Modification Process
Well today we got a package in the mail from $hiti (Fed Overnight Express) informing us that we have successfully completed the 3 month "probationary" period re: our "application" for a loan modification so we can keep our home which is in danger of foreclosure.....
Well isnt that some very good news. However, we were led to believe that once we completed the 3 mo probationary period, that we would "automatically" be approved for a loan modification and that the next step would be for them ($hiti) to work out an affordable mortgage payment plan for us. NOW, in this packet received today, we are told we must go through a "Mortgage Counseling Service" as a "next step" in the loan modification process.....WTF!!? More loops to jump through and scads more paperwork for us to fill out. I am about ready to tell the CEOs at $hiti that if THEY go to "Money Management Counseling" also, we will go to ours. Why are the consumers being treated like errant children when it is the banksters to blame for this mess?
I think I am going to tell them to SHOVE the "counseling" BS and GET ON with the business of forclosure but will also warn them that they better be able to prove "standing to sue" (ownership)as they havent a copy of the original NOTE as was lost in the ILLEGAL BUNDLING process.
-----------------------
I called $hiti today as instructed (at 1-866-413-4560) but got put on hold for over 20 minutes and was ultimately disconnected before I could speak to anyone.
I tried $hiti again today (Dec. 9) ......at 11:05 am (ET) and keep getting a recording that "all operatiors are busy helping other customers," and asking me to "please hold the line." I am wondering how long they want me to stay on hold.....tic tock tick tick I am waiting on hold now.....tick toc tick toc...good thing my "forclosure clock" aint ticking. They havent even begun forclosure on us yet. Opps. Here is that message again,..."Please continue to hold and thank you for your patience." And yes I am still holding but will wait no longer than the usual 20 minutes. I have other things to do rather than stay on the line waitiing for $hiti all day...tic tock......tic tock,..easy listnin musack in the background...tick toc . Why dont they play "the asshole song" for us as that is what they must think we are for attempting to jump through all their impossible and/or improbable "mortgage assiatance" hoops....like some trained trick dog or pony show act. At the end of this 20 minute wait, I think I shall write them a letter and CC a copy to MICHAEL BARR, Assistant Secretary of Financial Institutions for the US Treasury Dept..... and ask HIm WTF the problem is with getting our loan modified.
Homeownership is almost impossible today for the average working joe, as the taxes are constantly being raised, so what is the sense of fighting to keep your home if you are going to get taxed to death right into the poor-house anyways? The American Dream of Home Ownership has turned into a Nightmare. Thank you very much for nothing Big Banksters, Goldman Sucks and the Federal Reserve.
Well isnt that some very good news. However, we were led to believe that once we completed the 3 mo probationary period, that we would "automatically" be approved for a loan modification and that the next step would be for them ($hiti) to work out an affordable mortgage payment plan for us. NOW, in this packet received today, we are told we must go through a "Mortgage Counseling Service" as a "next step" in the loan modification process.....WTF!!? More loops to jump through and scads more paperwork for us to fill out. I am about ready to tell the CEOs at $hiti that if THEY go to "Money Management Counseling" also, we will go to ours. Why are the consumers being treated like errant children when it is the banksters to blame for this mess?
I think I am going to tell them to SHOVE the "counseling" BS and GET ON with the business of forclosure but will also warn them that they better be able to prove "standing to sue" (ownership)as they havent a copy of the original NOTE as was lost in the ILLEGAL BUNDLING process.
-----------------------
I called $hiti today as instructed (at 1-866-413-4560) but got put on hold for over 20 minutes and was ultimately disconnected before I could speak to anyone.
I tried $hiti again today (Dec. 9) ......at 11:05 am (ET) and keep getting a recording that "all operatiors are busy helping other customers," and asking me to "please hold the line." I am wondering how long they want me to stay on hold.....tic tock tick tick I am waiting on hold now.....tick toc tick toc...good thing my "forclosure clock" aint ticking. They havent even begun forclosure on us yet. Opps. Here is that message again,..."Please continue to hold and thank you for your patience." And yes I am still holding but will wait no longer than the usual 20 minutes. I have other things to do rather than stay on the line waitiing for $hiti all day...tic tock......tic tock,..easy listnin musack in the background...tick toc . Why dont they play "the asshole song" for us as that is what they must think we are for attempting to jump through all their impossible and/or improbable "mortgage assiatance" hoops....like some trained trick dog or pony show act. At the end of this 20 minute wait, I think I shall write them a letter and CC a copy to MICHAEL BARR, Assistant Secretary of Financial Institutions for the US Treasury Dept..... and ask HIm WTF the problem is with getting our loan modified.
Homeownership is almost impossible today for the average working joe, as the taxes are constantly being raised, so what is the sense of fighting to keep your home if you are going to get taxed to death right into the poor-house anyways? The American Dream of Home Ownership has turned into a Nightmare. Thank you very much for nothing Big Banksters, Goldman Sucks and the Federal Reserve.
Monday, November 2, 2009
CIT files for Chapter 11 bankruptcy protection : U.S. to Lose 2.3 Billion Investment
CIT Group seeks prepackaged reorganization in New York bankruptcy court,
By Stephen Manning, AP Business Writer
On 9:28 pm EST, Sunday November 1, 2009
WASHINGTON (AP) -- After struggling for months to avert bankruptcy, lender CIT Group has filed for Chapter 11 protection in an attempt to restructure its debt while trying to keep badly needed loans flowing to thousands of mid-sized and small businesses.
CIT made the filing in New York bankruptcy court Sunday, after a debt-exchange offer to bondholders failed. CIT said in a statement that its bondholders overwhelmingly opted for a prepackaged reorganization plan which will reduce total debt by $10 billion while allowing the company to continue to do business.
The Chapter 11 filing is one of the biggest in U.S. corporate history, following Lehman Brothers, Washington Mutual, WorldCom and General Motors. CIT's bankruptcy filing shows $71 billion in finance and leasing assets against total debt of $64.9 billion.
A prepackaged bankruptcy, which has the support of major bondholders, speeds up the process of restructuring CIT's debt and could allow it to exit court protection by the end of the year. In addition to reducing its debt, CIT said the plan cuts cash needs over the next three years, which should help it return to profitability more quickly.
"The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy," said Jeffrey M. Peek, chairman and CEO. Peek has said he plans to step down at the end of the year.
CIT's move will wipe out current holders of its common and preferred stock. That means the U.S. government will likely lose the $2.3 billion it sunk into CIT last year in return for preferred shares to prop up the ailing company. The government could have lost billions more, however, had it not declined to hand over more aid to the company earlier this year.
Treasury Department spokesman Andrew Williams said the government will be closely monitoring the bankruptcy proceedings, but acknowledged that "recovery to preferred and common equityholders will be minimal."
Common stockholders set to lose their investment include FMR LLC of Boston with a 9.9 percent stake in CIT and San Diego-based Brandes Investment Partners LP with a 9.7 percent equity position, according to CIT's filing.
CIT has been trying to fend off disaster for several months and narrowly avoided collapse in July. It has struggled to find funding as sources it previously relied on, such as short-term debt, evaporated during the credit crisis.
The company received $4.5 billion in credit from its own lenders and bondholders last week, reportedly made a deal with Goldman Sachs to lower debt payments, and negotiated a $1 billion line of credit from billionaire investor and bondholder Carl Icahn. But the company failed to convince bondholders to support a debt-exchange offer, a step that would have trimmed at least $5.7 billion from its debt burden and given CIT more time to pay off what it owes.
Analysts warned that the bankruptcy could add to the uncertainty around loans for the nation's small businesses, especially retailers, which make up a significant portion of CIT's clients and are already struggling with tight credit markets.
CIT is the financier for about 2,000 vendors that supply merchandise to more than 300,000 stores, many of which are gearing up for the critical holiday shopping season. They rely on the lender to cover costs ranging from paying for orders to making payroll. Any disruption caused by bankruptcy could wreak havoc on their operations, Joe Alouf, a partner with Eaglepoint Advisors, a crisis management company that is partly owned by Kurt Salmon Associates.
"CIT is the 600-pound gorilla in the industry," Alouf said.
But CIT has already pulled back sharply on its lending to businesses as it tried to preserve cash. According to its most recent quarterly earnings report, the company originated just $4.4 billion worth of new business during the first six months of 2009 compared to $11.3 billion in the first half of 2008.
CIT said Sunday the bankruptcy filing is only for the holding company, and won't affect its operating subsidiaries, such as Utah-based CIT Bank. CIT has filed a number of first-day motions to allow it to continue operations, including requests to keep paying wages and other employee benefits and to pay its vendors and certain other creditors in full.
The company has retained Evercore Partners and FTI Consulting as its financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP as legal counsel in connection with the restructuring plan and Chapter 11 cases.
Houlihan Lokey Howard & Zukin Capital Inc. serves as financial adviser, and Paul, Weiss, Rifkind, Wharton & Garrison LLP serves as legal counsel to the bondholders' committee.
AP Retail Writer Anne D'Innocenzio in New York contributed to this report.
http://finance.yahoo.com/news/CIT-files-for-Chapter-11-apf-1202955938.html?x=0&sec=topStories&pos=main&asset=&ccode=
Thursday, October 29, 2009
$hiti takes to the heartland
October 28, 2009 — 8:36am ET | By Jim Kim
Sheila Bair
It's no secret that Citigroup (C) CEO Vikram Pandit has a media problem. The news has been relentlessly bad, and reporters are all too willing to ask tough questions.
The bank's PR team, to its credit, has tried getting around the mainstream, New York-based business press in some ways. It has tried going to international outlets, for example, with dubious results. Now, it's trying local outlets--and it seems to be working. The Las Vegas Review Journal offered a nice write-up that was quite upbeat, noting Pandit's words: "You should know that we are very strong around the world as a bank."
The news hook was Pandit's meeting with 1,700 workers at a credit card processing center in town. It got into his views on the federal deficit and shadow banking. If anyone asked him about Sheila Bair or about his nearly $11 million in pay in 2008 or whether he should step down, it wasn't evident. Similarly, the Argus Leader noted Pandit's commitment to the South Dakota. They even got a nice shot of the CEO with the mayor of Sioux Falls.
Related Articles:
Favorable report card for Vikram Pandit?
Shareholder meetings only a bit ugly
Vikram Pandit comes out swinging
Read more: http://www.fiercefinance.com/story/citi-takes-heartland/2009-10-28?utm_medium=nl&utm_source=internal#ixzz0VKwNlA8b
http://www.fiercefinance.com/story/citi-takes-heartland/2009-10-28?utm_medium=nl&utm_source=internal
Sheila Bair
It's no secret that Citigroup (C) CEO Vikram Pandit has a media problem. The news has been relentlessly bad, and reporters are all too willing to ask tough questions.
The bank's PR team, to its credit, has tried getting around the mainstream, New York-based business press in some ways. It has tried going to international outlets, for example, with dubious results. Now, it's trying local outlets--and it seems to be working. The Las Vegas Review Journal offered a nice write-up that was quite upbeat, noting Pandit's words: "You should know that we are very strong around the world as a bank."
The news hook was Pandit's meeting with 1,700 workers at a credit card processing center in town. It got into his views on the federal deficit and shadow banking. If anyone asked him about Sheila Bair or about his nearly $11 million in pay in 2008 or whether he should step down, it wasn't evident. Similarly, the Argus Leader noted Pandit's commitment to the South Dakota. They even got a nice shot of the CEO with the mayor of Sioux Falls.
Related Articles:
Favorable report card for Vikram Pandit?
Shareholder meetings only a bit ugly
Vikram Pandit comes out swinging
Read more: http://www.fiercefinance.com/story/citi-takes-heartland/2009-10-28?utm_medium=nl&utm_source=internal#ixzz0VKwNlA8b
http://www.fiercefinance.com/story/citi-takes-heartland/2009-10-28?utm_medium=nl&utm_source=internal
Monday, October 26, 2009
"Standing" to Forclose / Who Really Owns Your Home?
by Jeff Neilson
A thanks to Edward Harrison who publishes the blog “Creditwritedowns.com” for his superb explanation of foreclosure and title issues dealing with “foreclosed” properties;
Click on title above to see Harrisons article; http://seekingalpha.com/instablog/407380-jeff-nielson/32957-who-owns-foreclosed-u-s-properties-part-i-scam-in-the-making
– in his commentary “What are the legal rights of lenders and homeowners in foreclosure?” http://www.creditwritedowns.com/2009/10/what-are-the-legal-rights-of-lenders-and-homeowners-in-foreclosure.html#ixzz0V58C0GR0
It was that article which inspired me to write about some of the legal ramifications, based upon his research and analysis.
There is a lot of material in Mr. Harrison's commentary, so for those interested in this issue, I recommend going to the source to read it in full. I intend to focus on two of the extremely important issues in that piece: the question of who holds title to a securitized mortgage, and (just as important) who has “standing” to initiate and prosecute a foreclosure.
For people with no familiarity with legal jargon, who has “standing” in a legal proceeding is a question of “proximity” to the case before the court. The test for this issue generally being some direct proprietary interest.
The problem for the Wall Street oligarchs, as they began to hatch their schemes to create the U.S. housing bubble (and their own, concurrent Ponzi-scheme) centered on the importance of their new “invention”: mortgage “securitization”. It is this “securitization” which was the key to creating the U.S. housing-bubble from the supply side – rather than most asset-bubbles which are (at least initially) fueled by demand.
Through this process, banks initiate a mortgage – and then immediately sell it to a 3rd-party. If Wall Street didn't initiate the mortgage themselves, then they became the first buyer in the chain. Once holding this mortgage, these “financial wizards” sliced-and-diced these mortgages, mixed them together, and packaged and sold them in such a convoluted manner that even with the resources of the U.S. legal system at their disposal, courts have been unable to determine who holds clear, legal title to these mortgages.
However, the Wizards of Wall Street anticipated this legal dilemma. In 1995, they created a shadowy entity called Mortgage Electronic Registration Systems (MERS). Wikipedia defines MERS in this manner:
Mortgage Electronic Registration Systems is claimed to be a privately held company that controls a confidential [emphasis mine] electronic registry designed to track mortgages and the changes of servicing rights and ownership of mortgage loans in the United States.
Before I explain the role being played by MERS, and the importance of that role, let me get back to securitization. The reasons why it was absolutely essential in creating a housing-bubble, and Wall Street's subsequent scams are relatively straightforward, when laid out step-by-step.
Wall Street pretended they were “reducing risk” by securitizing these mortgages and more or less moving them off of their own balance sheets. At first, this was probably true: by taking a fixed amount of debt, and dividing it amongst more people, the risk to the system as a whole (and the individuals) is reduced.
As a simple, numerical example, if I take $100 dollars of debt and initially divide that amongst 10 people, there is a given level of risk for each of these individuals and for the system as a whole (if too many parties should default). If I then split that same $100 dollars of debt and divide it evenly among 100 people, then that reduces both the individual risk and the systemic risk – since the smaller the individual debt, the lower the probability of default. The problem was that Wall Street (and the other players in this market) never intended for the amount of debt to remain fixed.
If you then take the same numerical example, but repeat that process nine more times you now have $1000 worth of debt (ten times the original amount) – but split amongst a group which is ten times larger. Thus, not only do the risks of each party revert to the original ratios (and risks of default) but the systemic risk is ten times greater because ten times more money and ten times more players are now identically leveraged.
It was through these debt “daisy-chains” that the Wall Street oligarchs were allowed to move from the reckless-but-standard 10:1 average leverage for this sector to an insane average of 30:1.
The problem was that both ratings agencies and regulators still pretended that there had been neither an increase in individual risk nor in systemic risk. To persuade these accomplices to “look the other way” with respect to risk required adding one, more ingredient: “credit default swaps” (CDS).
These were bogus “insurance policies” created by Wall Street to “insure” its entire Ponzi-scheme. This provided the pretext for credit-rating agencies to continue rubber-stamping “AAA” on these toxic securities, and allowed regulators Ben Bernanke and Tim Geithner (head of the New York Fed, at the time) to pretend that “systemic risk” was being “controlled”.
As I say, this was clearly and obviously fake “insurance”. Because everyone was pretending that systemic risk was only a tiny fraction of what it actually was, the same regulators allowed Wall Street to only list a tiny fraction of the necessary collateral/assets to write such “insurance policies”. It was through the willful participation of the ratings agencies and the Federal Reserve that Wall Street oligarchs supposedly “insured” over $50 trillion of credit default swaps – obviously an impossibility.
We need look at only one recent example of a credit default swap which “blew up” to make it clear that most of this market was a complete sham. In “Bankster Sues Bankster – AGAIN”, I referred to a lawsuit between Citigroup and Morgan Stanley.
In this example, it was Morgan Stanley which wrote the phony “insurance”, and Citigroup which was the beneficiary. Even after Morgan Stanley liquidated the collateral which “backed” this “insurance”, it is facing a 300:1 pay-out on this “policy”. With the entire U.S. mortgage market still sitting with a 10% delinquency level in this $50 trillion insurance scheme, and with each and every pay-out at astronomical odds (due to the grossly insufficient “collateral” for this insurance), a large number of pay-outs in this market must bankrupt Wall Street – as a matter of simple arithmetic.
This is yet another reason why Wall Street is hiding millions of already-foreclosed properties on their books – and refusing to sell them. The moment that the foreclosure sale takes place, the loss on the mortgage is “crystallized” and the credit default swaps are triggered. In my commentary on Friday, I explained how/why I estimated that Wall Street is currently hiding at least 5 million foreclosed properties in this manner. Meanwhile, the next big wave of foreclosures is just to about to begin (also covered in Friday's commentary).
Returning to the housing bubble, the conspiracy by U.S. regulators and U.S. ratings agencies to allow Wall Street to leverage the entire U.S. financial system by 30:1 (from 10:1) meant roughly three times as much financing available for the same size of housing market. To accommodate the most rapid and extreme flow of “easy money” in the history of human commerce, many if not most U.S. banks simply erased their “lending standards”. Two years before the U.S. housing bubble officially burst “liars loans” had already become a common term of usage within the financial sector. Again, U.S. regulators were silent accomplices in allowing the eradication of lending standards.
Even without the use of such colourful terms to describe this fraudulently-created housing bubble, it would be obvious to any responsible regulator, rating agency, or banker that if you suddenly lend-out three times as much money to a population whose real incomes are steadily falling that their must be a huge increase in defaults. Thus, not only was this housing bubble a massive fraud on the individual level (through liars loans and other derelictions of duty), but collectively it was also a massive fraud, as it had to be obvious to the U.S. government (and specifically the relevant regulators) that there was an unsustainable “bubble” in the sector, as a whole.
This means that day after day, when Ben Bernanke got in front of the microphone to call the U.S. markets, the U.S. housing sector, and the economy as a whole a “Goldilocks economy” (where everything would keep going up in value) he could not possibly have believed his own words. They were uttered solely to enable the multi-trillion dollar Wall Street Ponzi-scheme to ensnare more victims.
It was thus apparent before the Wall Street-created U.S. housing bubble began that it would end in an unprecedented wave of foreclosures and defaults. In Part II, I will discuss Wall Street's premeditated plan for dealing with these foreclosures, through its new “front man”, MERS.
[Disclosure: I hold no position in Citigroup or Morgan Stanley]
Themes: U.S. housing sector, U.S. financial sector, U.S. corruption
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TeresaE:
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Great thoughts Jeff.
Truthfully, and no one in America understands this, the "homeowners" are not the people paying (or defaulting) on the mortgage. The owners are the banks.
Once you realize this little nugget of truth and then apply the truth to our situation, it should scare your pants off.
EVERY program out of WDC that is "helping homeowners" is not helping citizens, these programs are helping one thing-and one thing only - the banks.
The credits, modifications and stays only help the true owners - the banks.
Yet somehow we citizens believe that Congress is working for us.
bwaaahaaahaaa.
Can't wait to read the rest. Thanks
What are the legal rights of lenders and homeowners in foreclosure?
Posted by Edward Harrison on 23 October 2009 at 11:10 am
After I published the recent story on the case against servicing agent MERS in the Kansas Supreme court, I noticed a lot of chatter about some mortgage servicing line items in Wells Fargo’s earnings report. So I wanted to quote a few blurbs from the Kansas Appeals Court and Supreme Court decisions as background for another post on future mortgage service revenue streams in banking.
The Appeals Court case had a narrow focus as to whether MERS was a ‘necessary party’ in this particular foreclosure case. The finding was that MERS was not. The Kansas Supreme court agreed that MERS was not “contingently necessary.” They went further in concluding that the fact that MERS neither possessed the promissory note or had authority to assign it may mean it cannot file suit.
However, because this is not a comprehensive judgment as to MERS’ role as nominee, clarification is needed. Given the number of foreclosures in the US, I expect this case is going to the Supreme Court.
Here are the facts.
Landmark National Bank v. Boyd A. Kessler summary
My summary of the case is as follows:
A homeowner based in Kansas came into economic difficulty, causing him to fall behind on his mortgage and file for bankruptcy on 13 April 2006. While he could have exempted his house in discharging his personal liabilities in bankruptcy, the homeowner opted instead to surrender the house.
Three months after he filed, on 27 Jul 2006, the bank with his primary mortgage decided to foreclose. It did not inform MERS (the central repository which tracks changes in mortgage ownership and servicing rights). Nor did it inform the bank holding the secondary mortgage.
On 6 September 2006, the district court then entered a default judgment and ordered a sale on 29 September 2006. Notice of the sale went out into newspapers and a couple picked up this foreclosed property on the cheap on 14 November 2006. So far, so good.
Except that very day, a full seven after the bankruptcy filing, the secondary bank filed a petition to set aside the district court opinion, arguing that MERS was a “contingently necessary party.” It wanted the money it was owed. And on 16 January 2007, MERS joined the bank in filing. By 1 February 2007, the district court denied the petition to vacate the original default judgment.
The case was appealed to both the Kansas Appeals and Kansas Supreme Courts
Here are some of the issues:
Is MERS as a mortgage servicing registry a “contingently necessary party” in this particular or any bankruptcy involving a property in its database?
In what instances can MERS act as a nominee for the mortgagees in court to enforce a foreclosure?
If MERS can act as a nominee, does MERS have to produce the original mortgage promissory note in order to foreclose?
If MERS can act as a nominee, can a homeowner sue MERS or the mortgage servicing agent for the original lenders’ alleged predatory lending?
Is the mortgage servicing agent a nominee or agent of the mortgagee or even a principal? If so, what are the obligations of the servicing agent to help affect a mortgage loan modification?
All of these questions arise because of the convoluted process we have for mortgages as a result of the mortgage-backed security market. These questions have only become acute because the rise in foreclosures has made them a serious issue.
Excerpts from the Kansas Appeals Court decision
A party is not contingently necessary in a mortgage-foreclosure lawsuit when that party is called the mortgagee in a mortgage but is not the lender, has no right to the repayment of the underlying debt, and has no role in handling mortgage payments.
In a mortgage-foreclosure lawsuit, a district court does not abuse its discretion when it denies a motion to intervene that is filed by an unrecorded mortgage holder or its agent after the mortgage has been foreclosed and the property has been sold
What is MERS’s interest? MERS claims that it holds the title to the second mortgage, not the real estate. So it does, but only as a nominee. In terms of the roles that we’ve discussed in the mortgage business, MERS holds the mortgage but without rights to the debt. The district court found that MERS was merely an agent for the principal player, Millennia. While MERS objects to its characterization as an agent, it’s a fair one.
MERS had no right to the underlying debt repayment secured by the mortgage; MERS did not even act as the servicing agent to receive the payments and remit them to the lender. MERS’s right to act to enforce the mortgage was strictly limited: if "necessary to comply with law or custom," MERS could foreclose the mortgage or enter a release of the mortgage. MERS certainly could not act at odds to its principal, the lender. Its role fits the classic definition of an agent: one "’authorized by another to act for him, or intrusted with another’s business.’" In re Tax Appeal of Scholastic Book Clubs, Inc., 260 Kan. 528, 534, 920 P.2d 947 (1996) (quoting Black’s Law Dictionary 85 [4th ed. 1968]).
Kansas law does require through K.S.A. 58-2309a that a mortgage holder promptly release a mortgage when the debt has been paid; MERS could be required as a matter of law to file a mortgage release after a borrower proved that the debt had been paid. Other than that, however, it is hard to conceive of another act that MERS—instead of the lender—would be required to take by law or custom.
We do not attempt in this opinion to comprehensively determine all of the rights or duties of MERS as a nominee mortgagee. As the mortgage suggests may be done when "necessary to comply with law or custom," courts elsewhere have found that MERS may in some cases bring foreclosure suits in its own name.
Excerpts from the Kansas Supreme Court decision
K.S.A. 60-219(a) defines which parties are to be joined in an action as necessary for just adjudication:
"A person is contingently necessary if (1) complete relief cannot be accorded in his absence among those already parties, or (2) he claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action in his absence may (i) as a practical matter substantially 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."
The relationship that MERS has to Sovereign is more akin to that of a straw man than to a party possessing all the rights given a buyer. A mortgagee and a lender have intertwined rights that defy a clear separation of interests, especially when such a purported separation relies on ambiguous contractual language. The law generally understands that a mortgagee is not distinct from a lender: a mortgagee is "[o]ne to whom property is mortgaged: the mortgage creditor, or lender." Black’s Law Dictionary 1034 (8th ed. 2004). By statute, assignment of the mortgage carries with it the assignment of the debt. K.S.A. 58-2323. Although MERS asserts that, under some situations, the mortgage document purports to give it the same rights as the lender, the document consistently refers only to rights of the lender, including rights to receive notice of litigation, to collect payments, and to enforce the debt obligation. The document consistently limits MERS to acting "solely" as the nominee of the lender.
The Missouri court found that, because MERS was not the original holder of the promissory note and because the record contained no evidence that the original holder of the note authorized MERS to transfer the note, the language of the assignment purporting to transfer the promissory note was ineffective. "MERS never held the promissory note, thus its assignment of the deed of trust to Ocwen separate from the note had no force."
"MERS does not take applications, underwrite loans, make decisions on whether to extend credit, collect mortgage payments, hold escrows for taxes and insurance, or provide any loan servicing functions whatsoever. MERS merely tracks the ownership of the lien and is paid for its services through membership fees charged to its members. MERS does not receive compensation from consumers." 270 Neb. at 534.
My reading of these statements is that MERS is a nominee and not much more. This should limit its ability to act on behalf of a mortgagee in foreclosure. How much and in what ways due process is at stake has yet to be decided in the courts, the reason I expect this case to receive a look from the Supreme Court.
Sources
Landmark National Bank v. Boyd A. Kessler, Kan 2009, No. 98,489 – Kansas Courts Documents
See my post “Why mortgages aren’t modified and what a ruling stopping foreclosures means” for the Appeals Court decision; http://www.creditwritedowns.com/2009/10/why-mortgages-arent-modified-and-what-a-ruling-stopping-foreclosures-means.html
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A thanks to Edward Harrison who publishes the blog “Creditwritedowns.com” for his superb explanation of foreclosure and title issues dealing with “foreclosed” properties;
Click on title above to see Harrisons article; http://seekingalpha.com/instablog/407380-jeff-nielson/32957-who-owns-foreclosed-u-s-properties-part-i-scam-in-the-making
– in his commentary “What are the legal rights of lenders and homeowners in foreclosure?” http://www.creditwritedowns.com/2009/10/what-are-the-legal-rights-of-lenders-and-homeowners-in-foreclosure.html#ixzz0V58C0GR0
It was that article which inspired me to write about some of the legal ramifications, based upon his research and analysis.
There is a lot of material in Mr. Harrison's commentary, so for those interested in this issue, I recommend going to the source to read it in full. I intend to focus on two of the extremely important issues in that piece: the question of who holds title to a securitized mortgage, and (just as important) who has “standing” to initiate and prosecute a foreclosure.
For people with no familiarity with legal jargon, who has “standing” in a legal proceeding is a question of “proximity” to the case before the court. The test for this issue generally being some direct proprietary interest.
The problem for the Wall Street oligarchs, as they began to hatch their schemes to create the U.S. housing bubble (and their own, concurrent Ponzi-scheme) centered on the importance of their new “invention”: mortgage “securitization”. It is this “securitization” which was the key to creating the U.S. housing-bubble from the supply side – rather than most asset-bubbles which are (at least initially) fueled by demand.
Through this process, banks initiate a mortgage – and then immediately sell it to a 3rd-party. If Wall Street didn't initiate the mortgage themselves, then they became the first buyer in the chain. Once holding this mortgage, these “financial wizards” sliced-and-diced these mortgages, mixed them together, and packaged and sold them in such a convoluted manner that even with the resources of the U.S. legal system at their disposal, courts have been unable to determine who holds clear, legal title to these mortgages.
However, the Wizards of Wall Street anticipated this legal dilemma. In 1995, they created a shadowy entity called Mortgage Electronic Registration Systems (MERS). Wikipedia defines MERS in this manner:
Mortgage Electronic Registration Systems is claimed to be a privately held company that controls a confidential [emphasis mine] electronic registry designed to track mortgages and the changes of servicing rights and ownership of mortgage loans in the United States.
Before I explain the role being played by MERS, and the importance of that role, let me get back to securitization. The reasons why it was absolutely essential in creating a housing-bubble, and Wall Street's subsequent scams are relatively straightforward, when laid out step-by-step.
Wall Street pretended they were “reducing risk” by securitizing these mortgages and more or less moving them off of their own balance sheets. At first, this was probably true: by taking a fixed amount of debt, and dividing it amongst more people, the risk to the system as a whole (and the individuals) is reduced.
As a simple, numerical example, if I take $100 dollars of debt and initially divide that amongst 10 people, there is a given level of risk for each of these individuals and for the system as a whole (if too many parties should default). If I then split that same $100 dollars of debt and divide it evenly among 100 people, then that reduces both the individual risk and the systemic risk – since the smaller the individual debt, the lower the probability of default. The problem was that Wall Street (and the other players in this market) never intended for the amount of debt to remain fixed.
If you then take the same numerical example, but repeat that process nine more times you now have $1000 worth of debt (ten times the original amount) – but split amongst a group which is ten times larger. Thus, not only do the risks of each party revert to the original ratios (and risks of default) but the systemic risk is ten times greater because ten times more money and ten times more players are now identically leveraged.
It was through these debt “daisy-chains” that the Wall Street oligarchs were allowed to move from the reckless-but-standard 10:1 average leverage for this sector to an insane average of 30:1.
The problem was that both ratings agencies and regulators still pretended that there had been neither an increase in individual risk nor in systemic risk. To persuade these accomplices to “look the other way” with respect to risk required adding one, more ingredient: “credit default swaps” (CDS).
These were bogus “insurance policies” created by Wall Street to “insure” its entire Ponzi-scheme. This provided the pretext for credit-rating agencies to continue rubber-stamping “AAA” on these toxic securities, and allowed regulators Ben Bernanke and Tim Geithner (head of the New York Fed, at the time) to pretend that “systemic risk” was being “controlled”.
As I say, this was clearly and obviously fake “insurance”. Because everyone was pretending that systemic risk was only a tiny fraction of what it actually was, the same regulators allowed Wall Street to only list a tiny fraction of the necessary collateral/assets to write such “insurance policies”. It was through the willful participation of the ratings agencies and the Federal Reserve that Wall Street oligarchs supposedly “insured” over $50 trillion of credit default swaps – obviously an impossibility.
We need look at only one recent example of a credit default swap which “blew up” to make it clear that most of this market was a complete sham. In “Bankster Sues Bankster – AGAIN”, I referred to a lawsuit between Citigroup and Morgan Stanley.
In this example, it was Morgan Stanley which wrote the phony “insurance”, and Citigroup which was the beneficiary. Even after Morgan Stanley liquidated the collateral which “backed” this “insurance”, it is facing a 300:1 pay-out on this “policy”. With the entire U.S. mortgage market still sitting with a 10% delinquency level in this $50 trillion insurance scheme, and with each and every pay-out at astronomical odds (due to the grossly insufficient “collateral” for this insurance), a large number of pay-outs in this market must bankrupt Wall Street – as a matter of simple arithmetic.
This is yet another reason why Wall Street is hiding millions of already-foreclosed properties on their books – and refusing to sell them. The moment that the foreclosure sale takes place, the loss on the mortgage is “crystallized” and the credit default swaps are triggered. In my commentary on Friday, I explained how/why I estimated that Wall Street is currently hiding at least 5 million foreclosed properties in this manner. Meanwhile, the next big wave of foreclosures is just to about to begin (also covered in Friday's commentary).
Returning to the housing bubble, the conspiracy by U.S. regulators and U.S. ratings agencies to allow Wall Street to leverage the entire U.S. financial system by 30:1 (from 10:1) meant roughly three times as much financing available for the same size of housing market. To accommodate the most rapid and extreme flow of “easy money” in the history of human commerce, many if not most U.S. banks simply erased their “lending standards”. Two years before the U.S. housing bubble officially burst “liars loans” had already become a common term of usage within the financial sector. Again, U.S. regulators were silent accomplices in allowing the eradication of lending standards.
Even without the use of such colourful terms to describe this fraudulently-created housing bubble, it would be obvious to any responsible regulator, rating agency, or banker that if you suddenly lend-out three times as much money to a population whose real incomes are steadily falling that their must be a huge increase in defaults. Thus, not only was this housing bubble a massive fraud on the individual level (through liars loans and other derelictions of duty), but collectively it was also a massive fraud, as it had to be obvious to the U.S. government (and specifically the relevant regulators) that there was an unsustainable “bubble” in the sector, as a whole.
This means that day after day, when Ben Bernanke got in front of the microphone to call the U.S. markets, the U.S. housing sector, and the economy as a whole a “Goldilocks economy” (where everything would keep going up in value) he could not possibly have believed his own words. They were uttered solely to enable the multi-trillion dollar Wall Street Ponzi-scheme to ensnare more victims.
It was thus apparent before the Wall Street-created U.S. housing bubble began that it would end in an unprecedented wave of foreclosures and defaults. In Part II, I will discuss Wall Street's premeditated plan for dealing with these foreclosures, through its new “front man”, MERS.
[Disclosure: I hold no position in Citigroup or Morgan Stanley]
Themes: U.S. housing sector, U.S. financial sector, U.S. corruption
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TeresaE:
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Great thoughts Jeff.
Truthfully, and no one in America understands this, the "homeowners" are not the people paying (or defaulting) on the mortgage. The owners are the banks.
Once you realize this little nugget of truth and then apply the truth to our situation, it should scare your pants off.
EVERY program out of WDC that is "helping homeowners" is not helping citizens, these programs are helping one thing-and one thing only - the banks.
The credits, modifications and stays only help the true owners - the banks.
Yet somehow we citizens believe that Congress is working for us.
bwaaahaaahaaa.
Can't wait to read the rest. Thanks
What are the legal rights of lenders and homeowners in foreclosure?
Posted by Edward Harrison on 23 October 2009 at 11:10 am
After I published the recent story on the case against servicing agent MERS in the Kansas Supreme court, I noticed a lot of chatter about some mortgage servicing line items in Wells Fargo’s earnings report. So I wanted to quote a few blurbs from the Kansas Appeals Court and Supreme Court decisions as background for another post on future mortgage service revenue streams in banking.
The Appeals Court case had a narrow focus as to whether MERS was a ‘necessary party’ in this particular foreclosure case. The finding was that MERS was not. The Kansas Supreme court agreed that MERS was not “contingently necessary.” They went further in concluding that the fact that MERS neither possessed the promissory note or had authority to assign it may mean it cannot file suit.
However, because this is not a comprehensive judgment as to MERS’ role as nominee, clarification is needed. Given the number of foreclosures in the US, I expect this case is going to the Supreme Court.
Here are the facts.
Landmark National Bank v. Boyd A. Kessler summary
My summary of the case is as follows:
A homeowner based in Kansas came into economic difficulty, causing him to fall behind on his mortgage and file for bankruptcy on 13 April 2006. While he could have exempted his house in discharging his personal liabilities in bankruptcy, the homeowner opted instead to surrender the house.
Three months after he filed, on 27 Jul 2006, the bank with his primary mortgage decided to foreclose. It did not inform MERS (the central repository which tracks changes in mortgage ownership and servicing rights). Nor did it inform the bank holding the secondary mortgage.
On 6 September 2006, the district court then entered a default judgment and ordered a sale on 29 September 2006. Notice of the sale went out into newspapers and a couple picked up this foreclosed property on the cheap on 14 November 2006. So far, so good.
Except that very day, a full seven after the bankruptcy filing, the secondary bank filed a petition to set aside the district court opinion, arguing that MERS was a “contingently necessary party.” It wanted the money it was owed. And on 16 January 2007, MERS joined the bank in filing. By 1 February 2007, the district court denied the petition to vacate the original default judgment.
The case was appealed to both the Kansas Appeals and Kansas Supreme Courts
Here are some of the issues:
Is MERS as a mortgage servicing registry a “contingently necessary party” in this particular or any bankruptcy involving a property in its database?
In what instances can MERS act as a nominee for the mortgagees in court to enforce a foreclosure?
If MERS can act as a nominee, does MERS have to produce the original mortgage promissory note in order to foreclose?
If MERS can act as a nominee, can a homeowner sue MERS or the mortgage servicing agent for the original lenders’ alleged predatory lending?
Is the mortgage servicing agent a nominee or agent of the mortgagee or even a principal? If so, what are the obligations of the servicing agent to help affect a mortgage loan modification?
All of these questions arise because of the convoluted process we have for mortgages as a result of the mortgage-backed security market. These questions have only become acute because the rise in foreclosures has made them a serious issue.
Excerpts from the Kansas Appeals Court decision
A party is not contingently necessary in a mortgage-foreclosure lawsuit when that party is called the mortgagee in a mortgage but is not the lender, has no right to the repayment of the underlying debt, and has no role in handling mortgage payments.
In a mortgage-foreclosure lawsuit, a district court does not abuse its discretion when it denies a motion to intervene that is filed by an unrecorded mortgage holder or its agent after the mortgage has been foreclosed and the property has been sold
What is MERS’s interest? MERS claims that it holds the title to the second mortgage, not the real estate. So it does, but only as a nominee. In terms of the roles that we’ve discussed in the mortgage business, MERS holds the mortgage but without rights to the debt. The district court found that MERS was merely an agent for the principal player, Millennia. While MERS objects to its characterization as an agent, it’s a fair one.
MERS had no right to the underlying debt repayment secured by the mortgage; MERS did not even act as the servicing agent to receive the payments and remit them to the lender. MERS’s right to act to enforce the mortgage was strictly limited: if "necessary to comply with law or custom," MERS could foreclose the mortgage or enter a release of the mortgage. MERS certainly could not act at odds to its principal, the lender. Its role fits the classic definition of an agent: one "’authorized by another to act for him, or intrusted with another’s business.’" In re Tax Appeal of Scholastic Book Clubs, Inc., 260 Kan. 528, 534, 920 P.2d 947 (1996) (quoting Black’s Law Dictionary 85 [4th ed. 1968]).
Kansas law does require through K.S.A. 58-2309a that a mortgage holder promptly release a mortgage when the debt has been paid; MERS could be required as a matter of law to file a mortgage release after a borrower proved that the debt had been paid. Other than that, however, it is hard to conceive of another act that MERS—instead of the lender—would be required to take by law or custom.
We do not attempt in this opinion to comprehensively determine all of the rights or duties of MERS as a nominee mortgagee. As the mortgage suggests may be done when "necessary to comply with law or custom," courts elsewhere have found that MERS may in some cases bring foreclosure suits in its own name.
Excerpts from the Kansas Supreme Court decision
K.S.A. 60-219(a) defines which parties are to be joined in an action as necessary for just adjudication:
"A person is contingently necessary if (1) complete relief cannot be accorded in his absence among those already parties, or (2) he claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action in his absence may (i) as a practical matter substantially 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."
The relationship that MERS has to Sovereign is more akin to that of a straw man than to a party possessing all the rights given a buyer. A mortgagee and a lender have intertwined rights that defy a clear separation of interests, especially when such a purported separation relies on ambiguous contractual language. The law generally understands that a mortgagee is not distinct from a lender: a mortgagee is "[o]ne to whom property is mortgaged: the mortgage creditor, or lender." Black’s Law Dictionary 1034 (8th ed. 2004). By statute, assignment of the mortgage carries with it the assignment of the debt. K.S.A. 58-2323. Although MERS asserts that, under some situations, the mortgage document purports to give it the same rights as the lender, the document consistently refers only to rights of the lender, including rights to receive notice of litigation, to collect payments, and to enforce the debt obligation. The document consistently limits MERS to acting "solely" as the nominee of the lender.
The Missouri court found that, because MERS was not the original holder of the promissory note and because the record contained no evidence that the original holder of the note authorized MERS to transfer the note, the language of the assignment purporting to transfer the promissory note was ineffective. "MERS never held the promissory note, thus its assignment of the deed of trust to Ocwen separate from the note had no force."
"MERS does not take applications, underwrite loans, make decisions on whether to extend credit, collect mortgage payments, hold escrows for taxes and insurance, or provide any loan servicing functions whatsoever. MERS merely tracks the ownership of the lien and is paid for its services through membership fees charged to its members. MERS does not receive compensation from consumers." 270 Neb. at 534.
My reading of these statements is that MERS is a nominee and not much more. This should limit its ability to act on behalf of a mortgagee in foreclosure. How much and in what ways due process is at stake has yet to be decided in the courts, the reason I expect this case to receive a look from the Supreme Court.
Sources
Landmark National Bank v. Boyd A. Kessler, Kan 2009, No. 98,489 – Kansas Courts Documents
See my post “Why mortgages aren’t modified and what a ruling stopping foreclosures means” for the Appeals Court decision; http://www.creditwritedowns.com/2009/10/why-mortgages-arent-modified-and-what-a-ruling-stopping-foreclosures-means.html
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Tuesday, October 6, 2009
Lack of Legal Help: One More Way the Deck Is Stacked Against Homeowners
From HuffPost;
As bad as America's foreclosure crisis is -- and it's very bad, with over 300,000 homes receiving a foreclosure filing every month -- it's being made even more devastating by the lack of legal assistance available to beleaguered homeowners.
According to a new study by the Brennan Center for Justice, set to be released tomorrow, "the nation's massive foreclosure crisis is also, at its heart, a legal crisis" -- with the vast majority of homeowners facing foreclosure doing so without legal counsel.
For example, in New York's Nassau County, in foreclosures involving subprime or non-traditional mortgages (which disproportionately are targeted at minorities), 92 percent of the homeowners did not have a lawyer.
Having legal help can be the difference between people keeping their homes and being evicted. A lawyer can stop foreclosure proceedings or put enough pressure on lenders to get them to rework the terms of the loan. A lawyer can also intervene in other ways, such as enforcing consumer protection laws or spotting legal violations by banks and lenders.
According to the report, the barriers keeping homeowners from obtaining proper legal representation are twofold. The first, not surprisingly, is funding.
In 1996, the budget for the Legal Services Corporation, the primary agency that provides help for low-income Americans in civil cases, had its budget cut by one-third. At this point, to match the funding level the Legal Services Corporation received in 1981 would require an increase of $753 million. If Goldman Sachs or Bank of America needed that kind of cash (or even 10 times that kind of cash), Washington wouldn't think twice. But low-income homeowners have no clout in DC. No wonder the Brennan Center found that legal service programs for the poor are currently "besieged with requests for foreclosure assistance."
The second barrier is that restrictions to adequate legal help have been deliberately built into the system. Remember the "Contract With America"? It turns out one of its provisions severely limited the ability of homeowners to get legal protection from predatory lenders. For instance, homeowners represented by the Legal Services Corporation are barred from bringing class action suits. Nor are they able to make the other side pay attorneys' fees even when the law would normally allow it. As the report states, "the possibility of having to pay attorneys' fees provides a critical incentive to help ensure that a better funded legal adversary does not drag out proceedings in an attempt to exhaust the indigent client's resources."
The Obama administration has called on Congress to remove many of these limitations, but its $789 billion stimulus plan didn't contain a single dollar for foreclosure-related legal help. That's about as "shovel ready" a program as one could ask for, but it somehow didn't make the cut.
I've written before how foreclosures are a gateway calamity, with every foreclosed home creating a whole other set of crises. The Brennan study backs this up with cold hard statistics. According to the report, an estimated 40 million homes are located next door to a foreclosed property. The value of these homes drops an average of $8,667 following a foreclosure. This translates into a total property value loss of $352 billion. And vacant properties take a heavy toll on already strapped local governments: an estimated $20,000 per foreclosure (California is estimated to have lost approximately $4 billion in tax revenue in 2008).
And the negative impact of a foreclosed home can affect the entire community: a one percent increase in foreclosures translates into a 2.3 percent rise in violent crimes.
But even though the collateral damage of the foreclosure crisis is widespread, the crisis continues to get short shrift by the media and by Washington. And as the Brennan Center study powerfully demonstrates, the legal deck is utterly stacked against struggling homeowners. It's time to do the right thing and give at-risk homeowners -- especially those who have been the victims of discriminatory lending practices -- access to at least a tiny fraction of the legal tools at the disposal of the banks forcing them into foreclosure.
Click on title to read the full report in pdf format;
http://www.brennancenter.org/content/resource/foreclosures
As bad as America's foreclosure crisis is -- and it's very bad, with over 300,000 homes receiving a foreclosure filing every month -- it's being made even more devastating by the lack of legal assistance available to beleaguered homeowners.
According to a new study by the Brennan Center for Justice, set to be released tomorrow, "the nation's massive foreclosure crisis is also, at its heart, a legal crisis" -- with the vast majority of homeowners facing foreclosure doing so without legal counsel.
For example, in New York's Nassau County, in foreclosures involving subprime or non-traditional mortgages (which disproportionately are targeted at minorities), 92 percent of the homeowners did not have a lawyer.
Having legal help can be the difference between people keeping their homes and being evicted. A lawyer can stop foreclosure proceedings or put enough pressure on lenders to get them to rework the terms of the loan. A lawyer can also intervene in other ways, such as enforcing consumer protection laws or spotting legal violations by banks and lenders.
According to the report, the barriers keeping homeowners from obtaining proper legal representation are twofold. The first, not surprisingly, is funding.
In 1996, the budget for the Legal Services Corporation, the primary agency that provides help for low-income Americans in civil cases, had its budget cut by one-third. At this point, to match the funding level the Legal Services Corporation received in 1981 would require an increase of $753 million. If Goldman Sachs or Bank of America needed that kind of cash (or even 10 times that kind of cash), Washington wouldn't think twice. But low-income homeowners have no clout in DC. No wonder the Brennan Center found that legal service programs for the poor are currently "besieged with requests for foreclosure assistance."
The second barrier is that restrictions to adequate legal help have been deliberately built into the system. Remember the "Contract With America"? It turns out one of its provisions severely limited the ability of homeowners to get legal protection from predatory lenders. For instance, homeowners represented by the Legal Services Corporation are barred from bringing class action suits. Nor are they able to make the other side pay attorneys' fees even when the law would normally allow it. As the report states, "the possibility of having to pay attorneys' fees provides a critical incentive to help ensure that a better funded legal adversary does not drag out proceedings in an attempt to exhaust the indigent client's resources."
The Obama administration has called on Congress to remove many of these limitations, but its $789 billion stimulus plan didn't contain a single dollar for foreclosure-related legal help. That's about as "shovel ready" a program as one could ask for, but it somehow didn't make the cut.
I've written before how foreclosures are a gateway calamity, with every foreclosed home creating a whole other set of crises. The Brennan study backs this up with cold hard statistics. According to the report, an estimated 40 million homes are located next door to a foreclosed property. The value of these homes drops an average of $8,667 following a foreclosure. This translates into a total property value loss of $352 billion. And vacant properties take a heavy toll on already strapped local governments: an estimated $20,000 per foreclosure (California is estimated to have lost approximately $4 billion in tax revenue in 2008).
And the negative impact of a foreclosed home can affect the entire community: a one percent increase in foreclosures translates into a 2.3 percent rise in violent crimes.
But even though the collateral damage of the foreclosure crisis is widespread, the crisis continues to get short shrift by the media and by Washington. And as the Brennan Center study powerfully demonstrates, the legal deck is utterly stacked against struggling homeowners. It's time to do the right thing and give at-risk homeowners -- especially those who have been the victims of discriminatory lending practices -- access to at least a tiny fraction of the legal tools at the disposal of the banks forcing them into foreclosure.
Click on title to read the full report in pdf format;
http://www.brennancenter.org/content/resource/foreclosures
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