Tuesday 26 October 2010

USA Mortgages = FRAUD

Baltic Dry Index. 2748 +21
LIR Gold Target by 2019: $3,000.

"It's strange that men should take up crime when there are so many legal ways to be dishonest. “

Al Capone

From sea to shining sea, nothing but a web of fraud. Sadly, with each new revelation, America forfeits its place as leader of the free world. There may be nothing to replace it, but in scandal after scandal a picture of America is emerging of unbridled criminality and a Wall Street bankster attempt to defraud the world. Somewhere after the 1987 stock market crash that unnerved fallen guru Greenspan, and turned him into a serial bubble creator until he created his last bubble that has now bankrupted America, criminal banksters and shysters took over America’s financial industry and paid off the politicians. Stay long precious metals. America’s banks are about to go broke once again, but this time round a furious and deceived US population is unlikely to bail them out. Little wonder the great vampire squids continue to loot the system with telephone number bonuses while they can. The insiders must see total collapse ahead in 2011. Up first, the NY Times on the growing black hole of US mortgages.

Editorial

The Mortgage Morass

Published: October 26, 2010

The mortgage mess just keeps getting messier. Last week, Bank of America announced that it had performed a “thorough review” of its processes, found nothing amiss and would soon restart 102,000 pending foreclosures. On Sunday, the bank acknowledged that it had in fact found errors in its filings, and would resume foreclosures only in a deliberate manner as new and corrected paperwork was submitted to the courts.

The repeated recalibration cast further doubt on Bank of America’s procedures and the ability of the entire industry to clean up this mess.

The immediate issue is robo-signing, in which employees at Bank of America, JPMorgan Chase and other banks falsely attested to having verified the facts in what may turn out to be hundreds of thousands, or more, court foreclosure filings. That has brought to light other problems, including crucial documents that have been lost or improperly transferred — raising questions about the banks’ legal standing to foreclose as well as the value of securities backed by these mortgages.

The state courts will have to resolve the question of whether banks can foreclose with defective or substitute documents. Courts will also have to rule on any disputes between banks and investors over mortgage securities, a complex and contentious process if it comes to that. The Obama administration needs to do a lot more to get hold of this crisis, before it gets any worse.

Last week, Bank of America also acknowledged receiving a letter from mortgage investors — including Freddie Mac and the Federal Reserve Bank of New York — demanding that it repurchase tens of billions of dollars in problem loans that were bundled into securities.

Investors can demand that banks repurchase loans that did not meet underwriting guidelines or were inadequately vetted or processed. The repurchases are important to taxpayers, because — through Fannie, Freddie and the Fed — the government now owns or backs a large number of problem loans and related securities. If the banks do not take the hit, the taxpayers will.

Fannie and Freddie have increased their repurchase demands on lenders over the past year, but banks are sure to resist large repurchases, setting up more clashes and disruption.

Bank of America has said it does not believe it is at fault for the loans’ poor performance. Freddie Mac and the Fed should push their claims hard.

The Obama administration needs to ensure that the taxpayers’ interests come first. Until now, the White House has focused far more energy on shoring up the banks — a stance that may have made sense in the thick of the financial crisis but is increasingly suspect now.

The administration has called on banks to correct the problems in their foreclosure paperwork. More is needed, including a plan to impose coherence on the increasingly chaotic mortgage system.

The White House needs to work with Congress to ensure that no foreclosures proceed — not just those with questionable paperwork — without homeowners’ first being offered fair and timely loan modifications. The Housing and Urban Development secretary, Shaun Donovan, has promised tougher action, but has been short on details and even refrained from naming the banks that have been laggards in loan workouts.

The administration and federal regulators should also acknowledge the potential hit to banks’ finances from the coming wave of litigation and repurchases. They should be taking precautions right now, say, by initiating more robust monitoring or new stress tests to gauge whether banks need to raise more capital to absorb the costs of any court fights and buying back bad loans.

The markets are relatively calm for now. That is the time to get ahead of problems that are not going away.

http://www.nytimes.com/2010/10/26/opinion/26tue1.html?_r=1&hp=&adxnnl=1&adxnnlx=1288078174-yiMMDtp+KXnWEFE87FAaHA

Next, the US Treasury cons the US taxpayers ahead of next weeks’ elections. Would you buy a used car from the US Treasury. Any surprise that the recent G-20 finance ministers meeting told the US Treasury Secretary to take a walk.

"We finished the year, and we reported that we had $17 billion of cash sitting at the bank's parent company as a liquidity cushion. As the year has gone on, that liquidity cushion has been virtually unchanged."

Bear Stearns CEO Alan Schwartz. March 12, 2008. Collapsed March 17, 2008

Treasury Hid A.I.G. Loss, Report Says

By MARY WILLIAMS WALSH Published: October 26, 2010

The United States Treasury concealed $40 billion in likely taxpayer losses on the bailout of the American International Group earlier this month, when it abandoned its usual method for valuing investments, according to a report by the special inspector general for the Troubled Asset Relief Program.

In our view, this is a significant failure in their transparency,” said Neil M. Barofsky, the inspector general, in an interview on Monday.

In early October, the Treasury issued a report predicting that the taxpayers would ultimately lose just $5 billion on their investment in A.I.G., a remarkable outcome, since the insurance company was extended $182 billion in taxpayer money in the early months of its rescue. The prediction of a modest loss, widely reported as A.I.G., the Federal Reserve and the Treasury rushed to complete an exit plan, contrasted with an earlier prediction by the Treasury that the taxpayers would lose $45 billion.

“The American people have a right for full and complete disclosure about their investment in A.I.G.,” Mr. Barofsky said, “and the U.S. government has an obligation, when they’re describing potential losses, to give complete information.”

An official of the Treasury disputed Mr. Barofsky’s conclusions, saying the department appropriately used different methods for different purposes. He said the smaller loss was a projection of future events, and the larger one was the result of an audit, which includes only realized gains and losses.

The Treasury will include more information about A.I.G. when it issues its own audited financial statement in November. Because those numbers must pass an auditor’s scrutiny, the loss it reports is likely to grow once again, to more than $5 billion.

http://www.nytimes.com/2010/10/26/business/26tarp.html?hpw

Amidst all the Wall Street fraud, in the real world home sales and prices are about to fall once again. 2011 now looks very ugly all round, with a stock market now priced far above reality, relying on dollar depreciation precipitated by the Fed’s next round of fiat money creation.

OCTOBER 26, 2010

Housing Gloom Deepens

Home Sales Rise, but Economists Don't See Prices Bottoming Till Late '11 or '12

Home sales picked up in September, but the long-term picture for housing is growing grimmer, say analysts and economists who are pushing back forecasts for a housing recovery.

Earlier this year, the housing market appeared poised for a turnaround, three years after it peaked. Federal tax credits for buyers spurred a flurry of activity, and the economy was adding jobs. That led some economists to forecast housing would hit bottom and begin to recover this year.

Now, some economists don't see a recovery until late next year or early 2012. "In most markets, the tide seems to be going back out," said Stan Humphries, chief economist at Zillow.com, a real-estate site. "The momentum is easing."

Adding to the mounting worries is the foreclosure crisis. Some banks suspended sales of foreclosed homes late last month to address questions about the integrity of the foreclosure process. If a substantial part of the market freezes for some weeks, that could further crimp sales.

---- The growing pessimism is attributed partly to rising inventory in many markets, a trend that doesn't bode well for prices. The Wall Street Journal's latest quarterly survey of housing-market conditions in 28 major metropolitan areas found inventories of unsold homes were up in 19 markets at the end of the third quarter, compared with a year ago, with especially large increases in San Diego, Los Angeles and Sacramento.

"We'll see some additional price declines," said David Berson, chief economist at PMI Group Inc., a mortgage-insurance company in Walnut Creek, Calif. "The gains we've seen can't be sustained given the current supply situation."

http://online.wsj.com/article/SB10001424052702304248704575574400829506316.html

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."

President F.D. Roosevelt, 1933

At the Comex silver depositories Monday, final figures were: Registered 52.12 Moz, Eligible 59.06 Moz, Total 111.18 Moz.

+++++

Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Some things are too good not to share, and so we gladly feature part of John Mauldin’s latest newsletter. Read on and understand a once great country usurped by thieves, banksters and corrupt politicians. Will American’s take back their country or leave it in the hands of the Ebenezer Squid banksters? With control of the US Treasury and the Fed, don’t under estimate the power of the Squids. Stay long gold and silver. The parasites are now killing off the host.

Why did I take up stealing? To live better, to own things I couldn't afford, to acquire this good taste that you now enjoy and which I should be very reluctant to give up.

Cary Grant. To Catch A Thief.

How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America
--and Spawned a Global Crisis

From John Mauldin’s “Outside the Box” update 25/10/10

For today’s Outside the Box I have something a little different. Michael Hudson has written a book called The Monster about the Mortgage industry, and specifically Ameriquest and Lehman. Someone sent me his introduction and I read it on the plane. I will buy the book. It made me angry. And the new financial regulations don’t address some of the real problem here.

It is an easy read, well written and lots of great quotes and stories. I won’t say enjoy but do take the tine to read and then think about what you just read and about the culture in our country.

How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America-- and Spawned a Global Crisis

Michael W. Hudson

Introduction:
Bait and Switch

A few weeks after he started working at Ameriquest Mortgage, Mark Glover looked up from his cubicle and saw a co-worker do something odd. The guy stood at his desk on the twenty-third floor of downtown Los Angeles's Union Bank Building. He placed two sheets of paper against the window. Then he used the light streaming through the window to trace something from one piece of paper to another. Somebody's signature.

Glover was new to the mortgage business. He was twenty-nine and hadn't held a steady job in years. But he wasn't stupid. He knew about financial sleight of hand—at that time, he had a check-fraud charge hanging over his head in the L.A. courthouse a few blocks away. Watching his coworker, Glover's first thought was: How can I get away with that? As a loan officer at Ameriquest, Glover worked on commission. He knew the only way to earn the six-figure inco me Ameriquest had promised him was to come up with tricks for pushing deals through the mortgage-financing pipeline that began with Ameriquest and extended through Wall Street's most respected investment houses.

Glover and the other twentysomethings who filled the sales force at the downtown L.A. branch worked the phones hour after hour, calling strangers and trying to talk them into refinancing their homes with high-priced "subprime" mortgages. It was 2003, subprime was on the rise, and Ameriquest was leading the way. The company's owner, Roland Arnall, had in many ways been the founding father of subprime, the business of lending money to home owners with modest incomes or blemished credit histories. He had pi oneered this risky segment of the mortgage market amid the wreckage of the savings and loan disaster and helped transform his company's headquarters, Orange County, California, into the capital of the subprime industry. Now, with the housing market booming and Wall Street clamoring to invest in subprime, Ameriquest was growing with startling velocity.

Up and down the line, from loan officers to regional managers and vice presidents, Ameriquest's employees scrambled at the end of each month to push through as many loans as possible, to pad their monthly production numbers, boost their commissions, and meet Roland Arnall's expectations. Arnall was a man "obsessed with loan volume," former aides recalled, a mortgage entrepreneur who believed "volume solved all problems." Whenever an underling suggested a goal for loan production over a particular time sp an, Arnall's favorite reply was: "We can do twice that." Close to midnight Pacific time on the last business day of each month, the phone would ring at Arnall's home in Los Angeles's exclusive Holmby Hills neighborhood, a $30 million estate that once had been home to Sonny and Cher.On the other end of the telephone line, a vice president in Orange County would report the month's production numbers for his lending empire. Even as the totals grew to $3 billion or $6 billion or $7 billion a month—figures never before imagined in the subprime business—Arnall wasn't satisfied. He wanted more. "He would just try to make you stretch beyond what you thought possible," one former Ameriquest executive recalled. "Whatever you did, no matter how good you did, it wasn't good enough."

Inside Glover's branch, loan officers kept up with the demand to produce by guzzling Red Bull energy drinks, a favorite caffeine pick-me-up for hardworking salesmen throughout the mortgage industry. Government investigators would later joke that they could gauge how dirty a home-loan location was by the number of empty Red Bull cans in the Dumpster out back. Some of the crew in the L.A. branch, Glover said, also relied on cocaine to keep themselves going, snorting lines in washrooms and, on occasion, in their cubicles.

The wayward behavior didn't stop with drugs. Glover learned that his colleague's art work wasn't a matter of saving a borrower the hassle of coming in to supply a missed signature. The guy was forging borrowers' signatures on government-required disclosure forms, the ones that were supposed to help consumers understand how much cash they'd be getting out of the loan and how much they'd be paying in interest and fees. Ameriquest's deals were so overp riced and loaded with nasty surprises that getting customers to sign often required an elaborate web of psychological ploys, outright lies, and falsified papers. "Every closing that we had really was a bait and switch," a loan officer who worked for Ameriquest in Tampa, Florida, recalled. " 'Cause you could never get them to the table if you were honest." At companywide gatherings, Ameriquest's managers and sales reps loosened up with free alcohol and swapped tips for fooling borrowers and cooking up phony paperwork. What if a customer insisted he wanted a fixed-rate loan, but you could make more money by selling him an adjustable-rate one? No problem. Many Ameriquest salespeople learned to position a few fixed-rate loan documents at the top of the stack of paperwork to be signed by the borrower. They buried the real documents—the ones indicating the loan had an adjustable rate that would rocket upward i n two or three years—near the bottom of the pile. Then, after the borrower had flipped from signature line to signature line, scribbling his consent across the entire stack, and gone home, it was easy enough to peel the fixed-rate documents off the top and throw them in the trash.

At the downtown L.A. branch, some of Glover's coworkers had a flair for creative documentation. They used scissors, tape, Wite-Out, and a photocopier to fabricate W-2s, the tax forms that indicate how much a wage earner makes each year. It was easy: Paste the name of a low-earning borrower onto a W-2 belonging to a higher-earning borrower and, like magic, a bad loan prospect suddenly looked much better. Workers in the branch equipped the office's break room wi th all the tools they needed to manufacture and manipulate official documents. They dubbed it the "Art Department."

At first, Glover thought the branch might be a rogue office struggling to keep up with the goals set by Ameriquest's headquarters. He discovered that wasn't the case when he transferred to the company's Santa Monica branch. A few of his new colleagues invited him on a field trip to Staples, where everyone chipped in their own money to buy a state-of-the-art scanner-printer, a trusty piece of equipment that would allow them to do a better job of creating phony paperwork and trapping American home owners i n a cycle of crushing debt.

Carolyn Pittman was an easy target. She'd dropped out of high school to go to work, and had never learned to read or write very well. She worked for decades as a nursing assistant. Her husband, Charlie, was a longshoreman.In 1993 she and Charlie borrowed $58,850 to buy a one-story, concrete block house on Irex Street in a working-class neighborhood of Atlantic Beach, a community of thirteen thousand near Jacksonville, Florida. Their mortgage was government-insured by the Federal Housing Administration, so they got a good deal on the loan. They paid about $500 a month on the FHA loan, including the money to cover their home insurance and property taxes.

Even after Charlie died in 1998, Pittman kept up with her house payments. But things were tough for her. Financial matters weren't something she knew much about. Charlie had always handled what little money they had. Her health wasn't good either. She had a heart attack in 2001, and was back and forth to hospitals with congestive heart failure and kidney problems.

Like many older black women who owned their homes but had modest incomes, Pittman was deluged almost every day, by mail and by phone, with sales pitches offering money to fix up her house or pay off her bills. A few months after her heart attack, a salesman from Ameriquest Mortgage's Coral Springs office caught her on the phone and assured her he could ease her worries. He said Ameriquest would help her out by lowering her interest rate and her monthly payments.

She signed the papers in August 2001. Only later did she discover that the loan wasn't what she'd been promised. Her interest rate jumped from a fixed 8.43 percent on the FHA loan to a variable rate that started at nearly 11 percent and could climb much higher. The loan was also packed with more than $7,000 in up-front fees, roughly 10 percent of the loan amount.

Pittman's mortgage payment climbed to $644 a month. Even worse, the new mortgage didn't include an escrow for real-estate taxes and insurance. Most mortgage agreements require home owners to pay a bit extra—often about $100 to $300 a month—which is set aside in an escrow account to cover these expenses. But many subprime lenders obscured the true costs of their loans by excluding the escrow from their deals, which made the monthly payments appear lower. Many borrowers didn't learn they had been tricked until they got a big bill for unpaid taxes or insurance a year down the road.

That was just the start of Pittman's mortgage problems. Her new mortgage was a matter of public record, and by taking out a loan from Ameriquest, she'd signaled to other subprime lenders that she was vulnerable—that she was financially unsophisticated and was struggling to pay an unaffordable loan. In 2003, she heard from one of Ameriquest's competitors, Long Beach Mortgage Company.

Pittman had no idea that Long Beach and Ameriquest shared the same corporate DNA. Roland Arnall's first subprime lender had been Long Beach Savings and Loan, a company he had morphed into Long Beach Mortgage. He had sold off most of Long Beach Mortgage in 1997, but hung on to a portion of the company that he rechristened Ameriquest. Though Long Beach and Ameriquest were no longer connected, both were still staffed with employees who had learned the business under Arnall.

A salesman from Long Beach Mortgage, Pittman said, told her that he could help her solve the problems created by her Ameriquest loan. Once again, she signed the papers. The new loan from Long Beach cost her thousands in up-front fees and boosted her mortgage payments to $672 a month.

Ameriquest reclaimed her as a customer less than a year later. A salesman from Ameriquest's Jacksonville branch got her on the phone in the spring of 2004. He promised, once again, that refinancing would lower her interest rate and her monthly payments. Pittman wasn't sure what to do. She knew she'd been burned before, but she desperately wanted to find a way to pay off the Long Beach loan and regain her financial bearings. She was still pondering whether to take the loan when two Ameriquest representati ves appeared at the house on Irex Street. They brought a stack of documents with them. They told her, she later recalled, that it was preliminary paperwork, simply to get the process started. She could make up her mind later. The men said, "sign here," "sign here," "sign here," as they flipped through the stack. Pittman didn't understand these were final loan papers and her signatures were binding her to Ameriquest. "They just said sign some papers and we'll help you," she recalled.

To push the deal through and make it look better to investors on Wall Street, consumer attorneys later alleged, someone at Ameriquest falsified Pittman's income on the mortgage application. At best, she had an income of $1,600 a month—roughly $1,000 from Social Security and, when he could afford to pay, another $600 a month in rent from her son. Ameriquest's paperwork claimed she brought in more than twice that much—$3,700 a month.

The new deal left her with a house payment of $1,069 a month—nearly all of her monthly income and twice what she'd been paying on the FHA loan before Ameriquest and Long Beach hustled her through the series of refinancings.

----- A long list of mortgage entrepreneurs and Wall Street bankers cultivated the tactics that fueled subprime's growth and its collapse, and a succession of politicians and regulators looked the other way as abuses flourished and the nation lurched toward disaster: Angelo Mozilo and Countrywide Financial; Bear Stearns, Washington Mutual, Wells Fargo; Alan Greenspan and the Federal Reserve; and many more. Still, no Wall Street firm did more than Lehman to create the subprime monster. And no figure or institution did more to bring subprime's abuses to life across the nation than Roland Arnall and Ameriquest….

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"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."

Shi Jianxun. China People’s Daily. September 16, 2008

The monthly Coppock Indicators finished September:

DJIA: +227 Down. NASDAQ: +321 Down. SP500: +221 Down.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. September is the fourth down month in a row.

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