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Fraud-Based Economy
Fraud-Based Economy
Originally posted at PSW: Monday Mortage Fraud - Does It Matter?
Did you see 60 Minutes last night?
This craziness is part of the "Fraudclosure" scandal that has been well documented by Barry Ritholtz over at The Big Picture so I'm not going to spend too much time on it other than to look at the overall trend. 37,000 people went to an event in Los Angeles for people who are in foreclosure and wanted to know their rights, 12,000 people came to a similar event in Miami, law firms are beginning to take cases on contingency in exchange for liens on the homes, which can become very valuable if the law firm successfully shoos the bank away from the Mortgage.
[Chart by William Banzai7]
LA and Miami are big cities so let's say that, nationwide, only 200,000 of the 4M homeowners facing foreclosure are able to challenge their loans and let's say only 50% are successful. That's still 100,000 mortgages that may be written off and, at $200,000 per average mortgage, that's $20Bn worth of bank write-offs to work through the system. But, if the 4M people who don't think this applies to them begin to see their neighbors ripping up mortgage documents - how long will it remain something only 5% of the affected people do? Just taking the banks to court over every loan can cause nightmares.
Understand that what 60-Minutes is looking at is beyond "robo-signing," where an actual bank official's name is signed by a computer without proper review. In those case, even if flaws are in the documents, it's hard to argue the banks don't have legal possession of the property. This is very different, this is fraud. Not only is the bank using fictitious names but they are blatantly using multiple people who represent themselves as the same person AND the notarizations are fraudulent. It's very easy to imagine many outraged judges voiding the entire transaction (which the banks charged the homeowners to complete) or even entertaining lawsuits by consumers that will go far beyond just walking away from mortgages.
Keep in mind this a whole new body of case-law so each lawsuit provides additional ammunition to be used against the banks as each attorney pokes at the many, many holes that have been created in the chain of title in the past decade. Last week, LaSalle Bank lost a case in which their right to foreclose was denied for simply failing to provide proof of assignment. If we use that as a benchmark, approximately 25% of the 75 Million mortgages in this country ($3.75 TRILLION) are "unforeclosable."
One of the dirty little secrets driving our economy in the past year is the fact that there are currently 7M people living in homes in the United States who are not paying their mortgage. There is not one single state in this country where the average number of days delinquent in a foreclosure proceeding is less than 365 days and states like NY and Florida are OVER 600 days past due on the average home in foreclosure process. The Mortgage Fraud issue has distorted these numbers very much to the downside as banks are not filing foreclosures on delinquent homes - the real numbers are incredibly worse.
In California, for example, "only" 188,097 homes are in foreclosure at this time. However, an additional 499,802 homes are more than 90 days delinquent. Even if the average mortgage payment were "just" $2,000 - that's $1,000,000,000 PER MONTH not being collected by the banks but, on the bright side, that's $1Bn PER MONTH that Californians can use to buy IPads or subscribe to NFLX or buy gold, stocks or oil futures.
Everyone is a winner in this game - by not foreclosing, the banks avoid writing off $100Bn worth of bad loans (and this is JUST California so you can multiply by 10 to get US figures) and the consumers are getting $12Bn a year in FREE MONEY and, of course, the Federal Reserve is papering over the whole thing by dumping 120Bn worth of MORE FREE MONEY on the banks.
In fact, the only people not winning are the suckers paying their mortgages as they have less free money to chase the inflationary prices that the people who live rent-free are able to stock up on. Another fun way the Government is giving out money is through "reverse mortgages," where seniors sign over the equity in their homes in exchange for no more mortgage payments or, sometimes, the bank even pays them.
There's nothing wrong with reverse mortgages (unless you are a kid watching your parents spend your inheritance) but consider another few hundred thousand people who are benefiting from the Fed's FREE MONEY to take the ultimate home equity loan (100%). This is why the cruise lines are doing so well - suddenly Grandma has an extra $1,500 a month to spend!
This is just another way our government is plunging further and further into debt in order to "extend and pretend" for the banks. Reverse mortgages are made possible by ultra-low interest loans from the Fed to the banks coupled with possibly tragically misguided expectations that home prices will rebound and, on that basis, the banks are effectively paying 4% interest on the home equity lines. I hesitate to mention it because it's certainly not for everyone but NRMLA has good information and a good calculator to check out how it works.
Unfortunately, every time we see home prices go down instead of up each month, it reminds us what a house of cards all these loans and, ultimately, bank earnings estimates (1/3 of all corporate earnings) is based on. Short-term, since mark to market is still a quaint practice that USED to happen in the bad old days, we can just keep going and ignore all this but the danger accumulates like radioactive water in a Japanese reactor and, ONE DAY, someone is going to have to take a drink...
Meanwhile, the market continues to party like it's 1999 and the Dow futures have already jumped 50 points off the lows last night on no actual news. Why shouldn't they be enthusiastic? As I said, we're handing out $10Bn a month to people who don't pay their mortgages and offsetting the discomfort felt by the banks by handing them $120Bn a month to play with and we have over 6M people who have been on unemployment for over a year as well as 45M people on food stamps and that's about $9Bn (at $200 per month) that goes to pay the inflationary weight of food prices.
No wonder manufacturers have gone with the idea of selling less food for more money lately. We're not expanding the markets but we are providing less product for more cash and that beefs up profits while keeping sales flat and even up. Essentially, we are living in a fraud-based economy but it doesn't seem to be bothering anyone so I guess we shouldn't let it bother us. Just because we know things will end very badly - it doesn't mean we can't enjoy the ride!
I was on a plane this weekend and a passenger walked out before the flight began and said "I'm not paying $400 to be treated like this!" We all burst into applause but then the other 199 of us passengers who were in the hot, smelly plane with one working bathroom and seats that were jammed so close together we could barely clap without poking the person next to us - all shut up and endured the flight to Florida that used to cost $250 with more legroom, working bathrooms, movies, free drinks and lunch just 2 years ago.
Oil topped out at $108.80 in overnight trading and I reminded those few Members that were up around midnight to short it at $108.50 (Members make sure you read last night's comments, we covered several major issues and there were trade idea for FXE and DUG). We're finally heading into our favorite week to short, when the NYMEX rollovers begin to loom large (still over 2 weeks away) and there is finally some real pressure on the price. Don't worry though - Goldman Sachs is on top of this oil issue and has doubled Lloyd Blankfein's pay to make sure he can tank up the limo on the way to the office! This is despite the fact that GS earnings were down 38% and the stock flat-lined.
Actual performance "just doesn't matter" in this modern economy - just perception...
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Again, why can anyone be shocked when the very premise of our "system" is based on infinite growth on a finite planet. The "plans" were fucked up from the start and there was NEVER any way out of this (except the inevitable collapse). Those that thinking that some group of people or some "event(s)" caused this are in denial about the very system (capitalism, or for those who believe that we haven't given "real" capitalism a shot, then "real" capitalism [go ahead, use a perfect-world scenario, though it can only be on a planet that's finite]).
I've a question for those who ask themselves questions?
Does anyone here who owns real property, allegedly free and clear of liens; have in their physical possession the original, wet-ink deed of trust instrument to their aforementioned property?
If not, why?
I have a "Satisfaction on Mortgage" filed electronically that I can print off. Nothing more.
Got to wonder how many billions were made by losing notes and pledging them to multiple securities. If you were crafty, you would just create digital borrowers and run a rocket docket to process the defaults. Then you'd send out 60 Minutes to assure the real borrowers, being sausaged in the due process, that Someone is looking into it.
Also politicians had better listen to voters rather than lobbyists or they too will be held accountable
In Florida for a couple weeks of sun and cant believe the For Sale signs, foreclosure and short sale listings. Real estate agents are even setting up booths at flee markets along I-95 trying to interest out of State buyers . Stories of hardship are everywhere. I also recall Greenspans advice on taking advantage of adjustable rate mortgages and Countrywide Financials lax policies . Hope Greenspan is having trouble sleeping and soon goes to his market paradise, as well as Mazulo on a bed of securitized mortgages. America has changed and the future will not be pretty unless uncontrolled greed is purged from the system and Fed becomes honest,accountable and not beholding to corrupt banking/investment industry.
My kids looked at a short sale in FL. Details about title insurance were whited out on the purchase and sale agreement. Replaced with "you're on your own". Still for sale...now half the price.
I live in Ft Laud area, my whole condo village built in 1988 is underwater and not in FHA approved neighborhood. Add condos to Case- Shill? We have more in common w/ Detroit than you think.
Hey PHIL! Yeah, way down here, do you read me? There is no need to figure out how many people have shitty docs, FIGURE OUT THE LOSSES THAT TBTFs ALREADY HAVE !!!!
Book the loss on the foreclosure before resale. TBTFs are holding the RESALES because it would kill them, get it?
PHILLLLLLLLLL!!!!!!!!
the great paper shuffle..
R U We Todd Did? R U Sofa King We Todd Did??????
Citizens Under Attack
Everything Obama, Geithner, & Bernanke do, they do it all for The Banksters.
Many people have lost their homes. Many more are paying inflated rates on inflated properties which the banks refuse to refinance. Savers are getting lousy rates on CDs, but are charged 10%-24% on a credit card. From the top of the credit menuboard to the bottom, The Banksters have FREE REIN to suck as much blood out of the middle class as they possibly can. It’s a criminal plan that TARP was paid for by The Taxpayers to save the banks from extinction, only for them to revive and viciously attack the hands that feed them. Henry Paulson should be charged with Treason for using The Taxpayers' Money to re-arm The Banks of Mass Destruction. Everybody is a victim, even the homeowner without a mortgage, his equity is dropping in its entirety; he's losing more than the guy with a mortgage. Condos sit empty because banks don’t want to pay associations’ maintenance fees, while those fees rise for the rest of unit-owners to make up the shortfall. The Banking Cartel is waging a war against every American Citizen, and it won’t be happy until every savings account is drained, every homeowner is broke & evicted, every credit card holder is “paying” 24.9% + $88/ mo. in overlimit and late fees, and every house is in their possession. Even the foreclosure process is financially draining for the owner, with insurance and electric payments continuing until property is taken out of owners’ name, an average of 2-3 years. (Upon repossession, the bank doesn’t book the loss until resale, artificially covering-up insolvency issues). Wake up people, its not us against each other, its Us vs. The Banksters who run their operation with impunity.
Further details of the covert TARP program, “Where the Bailout Went Wrong”, by Neil Barofsky:
http://www.nytimes.com/2011/03/30/opinion/30barofsky.html?_r=1&scp=1&sq=barofsky&st=cse
Addl: Ask Yngwie http://www.youtube.com/watch?v=MryijkW4bSs&feature=related
Hmmm..I guess Peter Schiff was right!
You know you are close to the pinnacle of fraud mountain when fixing any of it causes everyone to fall off the cliff. It doesn't really matter at this stage. Black Swan chicks are hatching daily.
It's the Nurse Ratched economic system. The fraudonomy and lobotomy crush.
i can attest personally that this is indeed a fraud based economy. the fraudsters are every where. realtors, title companies, mortgage brokers, loan officers, appraisers, sellers of real estate and lastly friends. the list just goes on and on. oh did i forget the word LAWyer?
hey plenty of lawyers are not crooks and are just as pissed off as you are!
Even if the mortgage were to be forgiven, the "winner" will then have a huge non-dischargeable debt.
1099-c bitchez!
The fair market value of the forgiven debt will be computed innto a large tax liabilty to the IRS, which will follow a person like a cancer.
Don't want to or can't pay, they will take the house anyway by forfeiture, along with all of the individuals other worldly possesions.
dup.
EDIT
The loan book value of the forgiven debt will be computed innto a large tax liabilty to the IRS, which will follow a person like a cancer.
"The loan book value of the forgiven debt will be computed innto a large tax liabilty to the IRS, which will follow a person like a cancer."
Bingo
The property appraiser (lender's agent) was given the magic number to capture an outcome based value. That was the soapy water that created the bubble...just add a little air.
So, it's truly a win-win.....for the banksta's and their pals
I'm of the view that the fraudclosure mess is the greatest clusterfuck in the history of finance. I marvel at the way the banks are telling us not to worry, everyone can be a winner. We can go one of two ways - the first is to deal with this appropriately, come up with a global solution, take the worst banks into public ownership via resolution authority and throw some people in jail, the second is to ride roughshod over property title laws and securities laws, leading to a catastrophic loss of faith in the US legal and financial system.
However, the one thing they cannot do is bury it, not this one.
What they are doing is a bit like TEPCO in Japan, claiming that because things aren't getting discernibly worse, everything must be ok, but you've got an unsolvable crisis and it won't stay as is forever.
Tru dat. This article cites only perhaps 5% of non delinquent borrowers taking banks to court.
Its going to be much higher than that and it wont necessarily be motivated by greedy 'lets see if we can get away with it'
At the moment, 100% of mortgage holders are (or should be) wondering what sort of fucked up complications will arise when they go to sell their house 5, 10, 20 years down the track - if the paperwork is all fucked up. When they hear shit like banks taking dudes to court for not continuing payments, not realising its because the mortgagee FINISHED PAYING THEIR FREAKING MORTGAGE OFF (2 known cases last i heard), everyone is going to be rushing to make their bank justify the paperwork.
The banks had better start thinking about seriously modifying some mortgages to keep people paying and staying in their homes. Let them go f*** themselves works both ways.
Jubilee?
America Inc. is one big tarpo...errr...scriveners error.
Bair is a disgusting "public" servant
ok ok ok... get ready for this baby
.
the next buble burst is going to be... this is sexy
.
healthcare
.
people are going out getting educations and college loans credit card debt building modern facilitys capable of handling billions of soiled diapers... overbuilt systems requiring infinate CREDIT that will never meet their pie in the sky goal of getting everyone to pay $x
.
Reggie am i right or am i right baby
The United States of Ponzi Schemes.
It's a plutocracy, stupid
http://english.aljazeera.net/indepth/opinion/2011/04/20114391843209245.html
(just the title of the article and not a remark directed at you)
This is the world of 'The Godfather'...America's iconic role model of the 70-80s. I know Marlon Brando and Al Pacino were/are great...but mistaking Hollywood goo for reality...is a price that the USA must now pay...in devalued dollars.
Could not pay me in silver, dancing girls and big bags of weed to short oil right now. When the CAN/USD trade is 1.10/.90 I'll look at burning every commodity off the map, until then....
..dirt bags aren't even bothering to hide the fact anymore. But that's expected. Last days of Rome I hardly think anyone cared what anyone was doing except the mob.
Fraud & force is what they know. When the fraud no longer fools people, they'll resort to force.
A $3.00 down day in SILVER would wipe all the longs off the face of Planet Stupider.
+2. Both paragraphs pretty much say it all, CPL.
We are in such sad and bizzare times I find myself praying for an alien invasion. I'd get on that UFO no-questions-asked at this stage.