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Public Pension Funds Seek Foreclosure Reviews
Ilaina Jonas of Reuters reports, Public pension funds seek foreclosure reviews:
A
coalition of seven major public pension systems, led by New York City
Comptroller John Liu, has asked the boards of four of the largest U.S.
banks to examine their mortgage and foreclosure practices.
In
a letter dated January 6, the pension fund coalition urged the Audit
Committees of Bank of America Corp, Citigroup Inc, JPMorgan Chase &
Co, and Wells Fargo L& Co to launch independent examinations of their loan modification, foreclosure, and securitization policies and procedures.
"This
will help to prevent future compliance failures and restore the
confidence of shareholders, regulators, legislators and mortgage
markets participants," the coalition said in the letter.
Bank representatives could not be reached for immediate comment on Sunday.
On
January 7, in a decision that could slow foreclosures nationwide,
Massachusetts' highest court voided the seizure of two homes by Wells
Fargo & Co and US Bancorp after the banks failed to show they held
the mortgages at the time they foreclosed.
That
sent fears through the market as investors worried that decision could
threaten lenders' ability to work through hundreds of thousands of
pending foreclosures.
The
Supreme Judicial Court of Massachusetts' unanimous decision upheld a
lower court ruling and was among the earliest cases to address the
validity of foreclosures done without proper documentation.
That
issue, including the use of "robo-signers" who approved foreclosure
documents without reviewing them, last year prompted an uproar that led
lenders such as Bank of America, JPMorgan Chase and Ally Financial Inc
to temporarily stop seizing homes.
Courts
in other U.S. states are considering similar cases, and all 50 state
attorneys general are examining whether lenders are forcing people out
of their homes improperly.
The
pension fund coalition represents more than $430 billion in pension
fund investments, including $5.7 billion invested in the four banks.
Liu
represents the five NYC pension funds. The coalition also includes the
Connecticut Retirement Plans and Trust Funds, the Illinois State Board
of Investment, the Illinois State Universities Retirement System, the
New York State Common Retirement Fund, the North Carolina Retirement
Systems, and the Oregon Public Employees Retirement Fund.
The
coalition called for the banks to report the findings of their
independent examinations in their 2011 proxy statements this spring.
At
the end of the last year, the coalition's combined holdings in each
bank included: 97.1 million Bank of America shares valued at $1.3
billion; 226.6 million Citigroup shares valued at $1.1 billion; 40.7
million JPMorgan Chase shares valued at $1.7 billion, and 50.6 million
Wells Fargo shares at $1.6 billion.
It's about
time public pension funds get involved and use their clout to pressure
banks to examine their loan modification, foreclosure, and
securitization policies and procedures. I'm not sure anything will come
out of this but the foreclosure crisis has sounded the alarm bell and
banks need to respond to make sure that measures are in place to prevent
this type of abuse from ever happening again.
Finally, I leave you with some thoughts from Graham Turner of GFC Economics, one of the best independent economic consultancy shops for institutional clients:
The rise in interest rates is not sustainable. However, this is very typical of what happened in Japan during the 1990s. The
promise of fiscal support/stimulus and an uptick in growth will be a
toxic mix for bond markets, causing more of a sell-off. But this in
turn will increase the risk of a second crash in housing.This
goes to the heart of the Fed's failure to use QE to control the bond
market, and again shows how little the authorities have learnt from
either Japan (1990s) or the US/UK (1930s). (The US economy is
recovering because of a refi wave, which has now already ended. The
Fed has failed to get traction on the housing market from QE2. Eleven
out of the 20 cities in the S&P/Case Shiller's 20-city composite hit
a new low in October.)Combine that with
Congressional inaction on the Fed deficit, and you have the perfect
set-up for a bond market panic. Their only (potential) hope is that the
current improvement in the labour market will loop back into a lower
delinquency rate and in turn support the housing market. I am sceptical of such a scenario, because of the serious arrears/foreclosure backlog, which is vast.It
is a all a question of balance. Perhaps, just perhaps, if rates had
been held at the low levels reached in the Fall of 2010, we might then
have had a more durable recovery.The US is likely to head into
trouble just as Ireland/Greece/Spain run into more difficulties.
Yesterday's EU Commission Survey showed an extraordinary divergence
between Germany on the one hand, and Ireland/Spain/Greece on the
other. This single currency is in gettiing deeper into trouble. Bond
yields are reflecting this.My advice is to go with the flow / sell off and look for an opportunity to re-enter fixed income markets in the Spring.
I
thank Graham for sharing his thoughts with me and also fear that if
yields rise too fast, you'll get a second crash in housing, which means
more foreclosures. This underscores the need for promptly reviewing foreclosure
rules and policies.
thank Graham for sharing his thoughts with me and also fear that if
yields rise too fast, you'll get a second crash in housing, which means
more foreclosures. This underscores the need for promptly reviewing foreclosure
rules and policies.
»
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From one gene to another ,you stated the problem correctly, in that fraud has been commited and that fiduciary responsibility of pension fund managers will drive any initiative to find the culprits as everyone is running for cover and pointing fingers. In meantime pension fund managers are still in a quandry seeking to meet assumption targets by turning to hedge fund managers and the like to find quick fixes therby setting up the next bubble. Entire exercise is a mockery of any interpretation of "fiduciary responsibility" by pension fund managers ,bankers or government officials .
Leo in the past has had thoughts on hedge fund managers as a solution. Perhaps real solution is getting back to living within our means and driving out exesses which also means admitting our mistakes, not compounding them
Well there is one obvious winner in this.
Lawyers and courts.
Funny how it works when Congress is filled with lawyers and their ilk. We won't even mention the court system and its millions and millions of voting, union, employees that elect their leaders.
I'm sure there is absolutely no correlation, or causation, between the two.
bwaaahhaaa.
Congress really does believe we are ignorant sheep.
Sadly, they are probably right.
The markets are up; nothing else matters; everything is fine.
Graham is wrong. There will be no housing recovery for the forseeable future. There is no such thing as a jobless recovery.
The smartest thing anyone can do if they are underwater is to stop paying and sit tight for as long as possible. Use this as an opportunity to lighten the debt load and re enter. You can buy your neighbors house when it comes on the market in a couple of years and he can buy yours for cash or your appreciated Silver and Gold.
"Their only (potential) hope is that the current improvement in the labour market will loop back into a lower delinquency rate and in turn support the housing market. I am sceptical of such a scenario, because of the serious arrears/foreclosure backlog, which is vast. "
"Graham is wrong. There will be no housing recovery for the forseeable future. There is no such thing as a jobless recovery."
the only "improvement in the labour market" is based on accounting tricks like dropping another 297K workers from the roles of eligible workers - does anyone really believe that 297K people decided in November that they would no longer participate in the job market?
you can't pay rent or a mortgage payment without a job so, like beastie says, there will be no housing recovery without a recovery in employment - a recovery in employment means that we need to create about 8 million legitimate jobs (ie, not fictional jobs via the birth-death model and not barrista jobs at Starbucks)
housing still has a long ways to go in its current down cycle - another 21 years according to Martin Armstrong's cycle work
sure looks like the public pensions are in big trouble and i dont think most private sector taxpayers care
And, no sympathy whatsoever for the pension fund managers who sat tight on these positions and took it up the chute. They've had years to sell these instruments, get hedged, whatever they needed to do.
It seems to me that if this collective of pension plan arbitrators were concerned with the holdings in the first place they would have demanded these type of audits when the market was a boomin, but sadly no one cared to peak under the covers at the fraud when the light was green all the way to prosperity. I fell no pity for the pension plan managers who jumped mouth frothing at the gravy train and humped its leg all the way over the cliff. I only pity those who will suffer because of the malfeasance.
"It may not come to anything", but in my opinion it is not suppose to. It is a dog and pony show to give some credibility back to the pension plans who gambled away peoples retirements.
thanks leo, for this post, great read†
What the public pensions should really be doing is furiously auditing some of these REMICs to determine if the deeds-in-lien were properly conveyed to their respective trusts, and if not, demand that the banks buy them back.
My WAG is that they have not been, that this was by design in order to a) make it more difficult to prove origination fraud and b) allow the same mortgage to be securitized multiple times.
I don't think we have the luxury of time to clear the apportioning of liability through the courts; in some regards I think that is what the banks were playing for,. There's been talk in committee about a risorgiomento in the tax-law, presumambly with the end-result of sorting the fiscal liabilities by diktat. ..and as long as there's the capacity to tune the law in the future, that may be a good option from a procedural point of view. ..the problems are now much bigger than house equity, which itself is huge. We're talking about global output and demand - this is the great Depression at a global level. So, there is a certain usefulness in hoping for a functioning tax and legal code, as well as a stable monetary standard. ..so, any which way you look at it the forces are in place for there to be a 'transfer of ownership' from Banks to 'productive organizations'; the questions are about how and what that'll look like. If we go that way through the way of the pen and it is done even half-properly, it would be a massive victory
WTF not let the banks eat their shit and die ? Why sould we abrogate the rule of law and further bail the banks out of their fraud by retroactively changing tax law back a decade or more ? WTF is wrong with people that perp walks, prison time, bankruptcy and clawbacks are insupportable ideas ?
Screw the banking system. Dozens of non-encumbered banks can pick up the slack of the TBTF banks. We don't need or want any bank that exists only on taxpayer largesse and special rules.
Let it all fail and rot.
Correct. Abrogation of the well established rules of property law, varied though they may be from State to State, spells the end of the Republic. First and foremost in the minds of the States' AGs should be the upholding of the established law concerning the conveyance of property within its own borders, and to hell with any Federal mandate or legal sleight of hand.
If you rise above the confusion, you can easily see that the more important economic problem in the fraudclosure mess is not a matter of forcing people out of their homes improperly. When the dust settles, the poor saps that were sold homes they couldn't afford will lose their homes to "someone." And that someone will be identified somehow because that someone (or someone else) who has been collecting the money is no longer being paid.
The larger problem is the validity of the securitization process itself and the proper execution of it. And the resolution of that, in each case, will become a matter of whose ox ultimately is gored. That is the investors in the mortgage- backed securities, which are not in fact mortgage-backed or are backed by garbage, rated AAA and insured by shaky monoline insurers and/or elusive credit default swaps. It is a mess, to be sure. But the investors with resources, including pension funds with fiduciary obligations, are waking up to the real possibility that they and their pensioners were just as defrauded as the victims of Bernie Madoff. And it is those investors who will be tenacious in tracking down the fraud and deep pockets.
This not a problem that the state AG's can settle. It is a matter of civil liability for breach of contract, negligence and fraud -- dmages and punitive damages. The lawyers are salivating. It is far from over.
Don't buy bank stocks.
The banks took their cue from the government, and figured they would kick the can down the road. By doing this they could drag out the foreclosure proceess, tacking on huge penalty and administartive fees along the way. They kept paying the bond holders during the process. Alos, it allowed them to not recognize the stalled foreclosures as a loss on their books.
It has all backfired like a bean dinner washed down with xlax. It has given the AGs time to follow the crooked path taken as the mortgages were packaged and roboed down the murky MERS highway.
If you rise above the confusion, you can easily see that the more important economic problem in the fraudclosure mess is not a matter of forcing people out of their homes improperly. When the dust settles, the poor saps that were sold homes they couldn't afford will lose their homes to "someone." And that someone will be identified somehow becauat that someone (or someone else) who has been collecting the money is no longer being paid.
The larger problem is the validity of the securitization process itself and the proper execution of it. And the resolution of that, in each case, will become a matter of whose ox ultimately is gored. That is the investors in the mortgage- backed securities, which are not in fact mortgage-backed or are backed by garbage, rated AAA and insured by shaky monoline insurers and/or elusive credit default swaps. It is a mess, to be sure. But the investors with resources, including pension funds with fiduciary obligations, are waking up to the real possibility that they and their pensioners were just as defrauded as the victims of Bernie Madoff. And it is those investors who will be tenacious in tracking down the fraud and deep pockets.
This not a problem that the state AG's can settle. It is a matter of civil liability for breach of contract, negligence and fraud -- dmages and punitive damages. The lawyers are salivating. It is far from over.
Don't buy bank stocks.