Baltic Dry Index. 2696 +244 on the week
LIR Gold Target by 2019: $3,000.
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.
More news from America’s black swan. Bank of America has now halted foreclosures in all 50 states. This is a problem that is going to grow and grow, and has big negative implications in mortgage backed derivatives. Is Bank Of America the next Lehman?
My guess is that this is about to become a triggering event in BofA CDS. My guess is that it’s the final nail in the coffin of hundreds of billions of CDOs and CDOs cubed. Our 1 quadrillion dollar house of derivatives cards, an inverted pyramid built on a global GDP of a mere 50 to 60 trillion, is now in danger of coming crashing down. Stay long precious metals. Bernocio and chums hasn’t a clue how to reverse a quadrillion, some estimates are as high as 1.4 quadrillion, in daisy chain derivatives going into meltdown. We’re already on extend and pretend, and mark to the fantasy model accounting, and now have the largest ever fraud in the history of the world blowing up. Bernie Madoff was a mere choirboy compared to the banksters greed of 2003-2007.
We do not err because truth is difficult to see. It is visible at a glance. We err because this is more comfortable.
Alexander Solzhenitsyn
OCTOBER 9, 2010
BofA Halts Foreclosures
Bank Expands Freeze After Pressure From Government-Run Mortgage Firm
Bank of America Corp. imposed a nationwide moratorium on foreclosures and the sale of foreclosed homes after it came under intense pressure from a government-run housing-finance giant worried about documentation problems, people familiar with the situation said.
The bank called the halt as concern mounted from legislators and state prosecutors about procedures used by lenders to foreclose on homes. Many banks use so-called robo signers, employees who sign hundreds of documents a day, without carefully reviewing their contents, when foreclosing on homes. Critics say that could result in improper foreclosures.
Freddie Mac, the government-run mortgage-finance company that along with Fannie Mae owns many of the mortgages serviced by banks, pressed Bank of America to expand its search for problems with the foreclosure documentation process, said the people familiar with the situation.
On a call Thursday with several banks that included Bank of America, a Freddie official said the mortgage company wanted the institutions to look at foreclosure documentation across all 50 states, and asked them to consider putting a stop to the entire foreclosure process, say people familiar with the call.
Many in the banking industry fear that the widening paperwork problem could cause further delay on foreclosures and threaten an already weak housing market, which in turn is stalling the broader U.S. economic recovery. On the other hand, it could provide a brief financial respite to people who have defaulted on their mortgages and are still occupying their homes.
As of August, there were more than 4.4 million home loans that were either in the foreclosure process or 90 days past due, according to mortgage research firm LPS Analytics. Since 2006, about 6.4 million homes have been lost through the foreclosure process.
-----Its decision is expected to stop "a couple of thousand" foreclosure sales scheduled for the next week, according to one person familiar with the matter said. The bank declined to specify how many homes it has in the foreclosure pipeline.
So far, Bank of America is the only lender to expand its foreclosure freeze, but others may be forced to begin or broaden a review, banking executives say. Wells Fargo & Co., one of the nation's largest mortgage lenders, says it hasn't stopped foreclosing on any properties.
At this point, J.P. Morgan isn't expanding its foreclosure moratorium, but is widening its document review beyond the 23 states where it has frozen foreclosures, according to a person close to the bank.
------Bank of America services 14 million mortgages, or one out of every five in the U.S., and its loan-servicing portfolio exceeds $2.1 trillion in size. Of its mortgages, 10 million came from its 2008 acquisition of troubled California lender Countrywide Financial Corp. More than 80% of its delinquent loans were acquired through Countrywide.
Janet Tavakoli On The "Biggest Fraud In The History Of Capital Markets"
In the following interview with the WaPo's Ezra Klein, Janet Tavakoli shares some more information on why every bank is about to shut down all foreclosures, in what she calls the "biggest fraud in the history of capital markets. Not very surprisingly, we are, so far, spot on in our 29th September projected timeline at this point: "We predict that within a week, all banks will halt every foreclosure currently in process. Within a month, all foreclosures executed within the past 2-3 years will be retried, and millions of existing home sales will be put in jeopardy."
Ezra Klein: What’s happening here? Why are we suddenly faced with a crisis that wasn’t apparent two weeks ago?
Janet Tavakoli: This is the biggest fraud in the history of the capital markets. And it’s not something that happened last week. It happened when these loans were originated, in some cases years ago. Loans have representations and warranties that have to be met. In the past, you had a certain period of time, 60 to 90 days, where you sort through these loans and, if they’re bad, you kick them back. If the documentation wasn’t correct, you’d kick it back. If you found the incomes of the buyers had been overstated, or the houses had been appraised at twice their worth, you’d kick it back. But that didn’t happen here. And it turned out there were loan files that were missing required documentation. Part of putting the deal together is that the securitization professional, and in this case that’s banks like Goldman Sachs and JP Morgan, has to watch for this stuff. It’s called perfecting the security interest, and it’s not optional.
EK: And how much danger are the banks themselves in?
JT: When we had the financial crisis, the first thing the banks did was run to Congress and ask for accounting relief. They asked to be able to avoid pricing this stuff at the price where people would buy them. So no one can tell you the size of the hole in these balance sheets. We’ve thrown a lot of money at it. TARP was just the tip of the iceberg. We’ve given them guarantees on debts, low-cost funding from the Fed. But a lot of these mortgages just cannot be saved. Had we acknowledged this problem in 2005, we could’ve cleaned it up for a few hundred billion dollars. But we didn’t. Banks were lying and committing fraud, and our regulators were covering them and so a bad problem has become a hellacious one
EK: It sounds almost like you’re saying we still need to go through the end of our financial crisis.
JT: Yes, but I wouldn’t say crisis. This can be done with a resolution trust corporation, the way we cleaned up the S&Ls. The system got back on its feet faster because we grappled with the problems. The shareholders would be wiped out and the debt holders would have to take a discount on their debt and they’d get a debt-for-equity swap. Instead we poured TARP money into a pit and meanwhile the banks are paying huge bonuses to some people who should be made accountable for fraud. The financial crisis was a product of our irrational reaction, which protected crony capitalism rather than capitalism. In capitalism, the shareholders who took the risk would be wiped out and the debt holders would take a discount but banking would go on.
http://www.zerohedge.com/article/janet-tavakoli-biggest-fraud-history-capital-markets
Man Who Had No Mortgage Faced Foreclosure Anyway: Ann Woolner
Oct. 8 (Bloomberg) -- Jason Grodensky paid cash for a South Florida home last December. With no mortgage and full ownership, he had no fear of foreclosure.
And yet, Bank of America foreclosed on the house seven months later, according to the South Florida Sun Sentinel. The court-ordered foreclosure took place July 15.
Grodensky tried for months to get answers from the lawyers and lenders involved. He got nowhere until he contacted the newspaper which started poking around. Now, Bank of America says it will straighten out the mess at its own cost, the Sun Sentinel reports.
------What’s happened over the past few years is that the very system of keeping track of who owns what property in the U.S. has been undermined by banks too busy to bother with doing it correctly.
This bad record-keeping became an enormous problem for banks when the housing market collapsed and borrowers defaulted. Missing the proper paperwork, foreclosure mills turned out documents misidentifying mortgage holders and containing multiple errors and omissions.
-----If judges had taken a closer look, they probably would have seen what Judge Arthur M. Schack in Brooklyn found when he actually read the foreclosure papers filed with his court.
In one case, for example, Deutsche Bank National Trust Co. filed to foreclose even though it had no legal right to do so, having already sold the mortgage to Goldman Sachs, the judge pointed out in an order.
-----In 46 out of 104 foreclosure motions Schack decided over a two-year span ending last year, the documents were so full of error that he refused to approve the foreclosures, the New York Times reported.
------It’s come to this because banks took a giant record- keeping shortcut to feed the insatiable hunger for securities backed by mortgages. They were too busy to do what had been done throughout U.S. history: record in a public deed room at the county courthouse each time a piece of property changed hands and each time a lien was filed.
How archaic that whole county courthouse thing seems, when you can digitize the information and never leave your chair.
That’s what banks did in 1997. They created the Mortgage Electronic Registration System, which computerized, centralized and privatized deed records on some 60 million mortgages. The industry saved an estimated $1 billion in fees over the next decade.
“They simply dispensed with the recording system and have transferred what appears to look like trillions of dollars of real property without recording them,” says U.S. Representative Alan Grayson, a Florida Democrat who’s been digging into the issue.
He points out that this deprived local governments of tax revenue from the transfers.
It also deprives the public of accurate, accessible records of property ownership.
http://www.businessweek.com/news/2010-10-07/man-who-had-no-mortgage-faced-foreclosure-anyway-ann-woolner.html
We end the weekend update with notice of food price inflation about to hit all through the winter. At this time of year with the big northern hemisphere grain harvests just about complete, grain prices normally fall towards their lows as supply triumphs over demand pressures. Not this year, thanks to a perfect storm of weather related problems. The world is now on a grain knife edge until next year’s northern hemisphere harvest is complete. However improbable, another growing year like this year’s, and currency wars and stock market crashes will be the least of our problems in the new dawning age of austerity.
"From a strictly economic point of view, buying gold in a major inflation and holding it probably presents the least risk of capital loss of any investment or speculation."
Henry Hazlitt
Corn rallies to two-year high after crop forecast
Soybeans, wheat prices also rise after report shows tight supply
SAN FRANCISCO (MarketWatch) — Corn and other grains futures shot up Friday after a U.S. Department of Agriculture report pointed to the tightest supply and demand balance for corn in 14 years.
The Agriculture Department on Friday forecast a 2010-11 corn crop 3.8% smaller than government expectations just a month ago, as a hot Midwest summer preceded by floods in June takes its toll.
The Agriculture Department said it now expects corn production to reach 12.66 billion bushels, from 13.16 billion forecast in September. September’s forecast itself had been a downgrade from August.
-----The tighter supply picture painted Friday underscores “the need for prices to move to $6 (a bushel) to ration demand,” analysts at Morgan Stanley said in a report to clients.
Soybeans and wheat are likely to trail corn, they said. With wheat, however, all eyes remain on the situation in Russia, the analysts added. A drought earlier this year has led Russia to enact an export ban through 2011.
Corn is expected to “continue to rally over the next month” on the bullish impact of the latest USDA report, said Luke Chandler, a London-based analyst at Rabobank’s commodity markets research. Demand will probably have to be curbed, either by lowering exports or rising prices, he added.
http://www.marketwatch.com/story/corn-at-two-year-high-after-crop-forecast-cut-2010-10-08
"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
Henry Hazlitt
Have a great weekend everyone.
GI.
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