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Mortgage Settlement? Not So Fast!
Mortgage bondholders are threatening legal action over the $25 billion national mortgage settlement, which will give the five largest servicers credits for principal writedowns that the bondholders may be forced to take. As American Banker notes, the investors in those trusts were not a party to the settlement agreement, and now they are objecting to being forced into taking losses - to the banks' benefit - as a result of it. The government is forcing investors to take losses even though they were not responsible for the foreclosure process abuses that led to the banks' settlement with state and federal officials. "The banks are trying to pay these fines with our money," says Vincent Fiorillo (of DoubleLine). Chris Katopis, the executive director of the bondholder trade group, says it is considering its legal options, including filing a friend of the court amicus brief or suing servicers individually..."Banks are shifting their liability to first-lien investors that were innocent of robo-signing,".
American Banker: MBS Investors Cry Foul Over National Mortgage Settlement
The settlement does nothing to change the contractual pooling and servicing agreements between investors and mortgage servicers...
If a contract does not permit principal writedowns, the servicer cannot take them, according to an official at the Department of Housing and Urban Development...
But if they have to take writedowns without getting paid by the banks, mortgage investors don't want banks to get credit for them...
Bondholders are especially concerned about writedowns from Bank of America, which has privately securitized more than $285 billion worth of mortgages originated by Countrywide Financial Corp. (B of A acquired Countrywide in 2008)...
The settlement must be approved by a federal district court, and "there is the possibility that some private investors could resist the settlement," Bordia wrote in his report...
"Even after court approval, an indiscriminate application of modifications to non-agency loans is likely to be met with legal challenges," he added. "The possibility of legal challenges from investors cannot be ruled out if indiscriminate mass modifications were to take place."...
"How can the government impose a benefit on servicers at the expense of the investor?" asks Walter Schmidt...
Bondholders also claim that during a Feb. 14 conference call with 90 investors, HUD Secretary Shaun Donovan assured them that the number of private-label securities that could be modified under the settlement would be capped at 15%. The settlement did not include a cap, angering investors who claim the government favors banks over bondholders.”
While it is a very short-time-frame, we note mortgage spreads leaking modestly wider the last 2 days but still remain notably near their tightest levels (as we pointed out yesterday).
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Shared sacrifice.
I was talking to someone yesterday in the mortgage finance industry and they said that the next big round of lawsuits are going to come from VA loans where the banks were screwing veterans. Should keep it fun.
They may soon learn that "shared sacrifice" trumps rule of law now too.
This is starting to make "Animal Farm" look like a happy ending.
Did your friend say how banks are screwing veterans?
Uinta
Did your friend say how banks are screwing veterans?
Comment:
Old article - google
Hill staff begins probe of alleged mortgage loan fraud of veterans
By Steve Vogel, Oct 16
The chairman of the House Veterans’ Affairs Committee ordered his staff to begin an investigation Friday into allegations that some of the nation’s largest lending institutions have cheated veterans and taxpayers out of hundreds of millions of dollars by charging illegal fees in home refinancing loans.
Source: http://www.washingtonpost.com/politics/hill-staff-begins-probe-of-allege...
Wednesday, March 7th, 2012 | Posted by Chris BirkMortgage Banks to Compensate Military Homeowners for Illegal Foreclosures, Other SCRA Violations
Wells Fargo, Ally Financial and Citigroup will pay nearly $117,000 plus interest and lost equity to active military members whose homes were illegally foreclosed upon since 2006.
Source: http://www.veteranstoday.com/2012/03/07/mortgage-banks-to-compensate-mil...
Ah....
Lemme see here. Bond holders being forced to take losses not in the ordinary course of business within the parametrics of the indentures? Like prepayments of defaults?
Can you spell an event of Default?
I thought you could. :)
Uh, I don't think that "foreclosure process abuses" fall under the ordinary course of business.
A quick googling turned up some older news ...
I have know knowledge if this is what the guy was talking about.
Regards,
Cooter
My thought exactly: Oh boy! This should be fun!
>> from VA loans where the banks were screwing veterans
How are they screwing veterans?
Eat your peas
Nothing like a government backed cartel to suppress competition and ensure "profits". Go FED!!
That would be $4,620,000,000 to their shareholder banks.
See, there is a happy ending to be had by raising the debt ceiling.
/sarc
Do these threats have teeth?
Or just losers' talk?
Mises is absolutely correct: “There is no means of avoiding a final collapse of a boom brought about by credit expansion”. Whatever politicians, bankers, economists or others experts say, there is no solution to this crisis. We have reached the end of the road and are now staring into the abyss.
The credit manufacturing system that started in 1913 when the Fed was founded, began its terminal phase in 1971 when Nixon abolished gold backing of the dollar. It has been clear to us for at least 20 years that the outcome was inevitable. It was never a question of “if” but only “when” it would happen. It is now clear to us that the false prosperity that the world has experienced by printing unlimited amounts of money will very soon come to an end.
more
http://www.mmnews.de/index.php/english-news/9031-deus-ex-machina
.....what the caterpillar regards as death, the butterfly sees as birth....
and now the government will come and steal whatever they need at gunpoint. groceries will be delivered to the hamptons by army truck.
What's sad is how freakin long it took them to stand up and say something. This facturedness in the bondholders is what banks have been using to their advantage since day one.
Bondholders can afford the very best sleeping agents on the market.
Taking their lead from:
1. Screwing the GM bondholders 101
2. Screwing the Greek bondholders 101
And the fed owns what 7+ trillion of the 15? If I hear one more sheep claim China owns us I am going to punch them square in the nose!
China owns you...
Crooked.Is.As.Crooked.Does.
Why would you buy a mortgage pool? Spreads are low, rates are insanely low by Fed mandate and, importantly, you could be forced to take a principal hit through lawsuits/settlements or a potential Obama/Congress/Fed waving their magic wand and forcing writedowns.
Low single digit return possibility and possible principal loss in double digits? That sounds great, thanks.
That was my thought. It's almost funny that there are still MBS owners hanging onto the dream of being made whole somehow. Mark that POS to zero and move on already.
We need a gif of Willy Wonka screaming "You get nothing!"
(None of this is meant to defend the banks or make their lives easier.)
"...the government favors banks over investors" shocking...the banks own the government
Just ask, who makes the largest campaign contributions and you'll find the winner.
ZeroHedge 7/28/11
"Florida’s Attorney General Pam Bondi took campaign contributions from TWO companies CURRENTLY under investigation by her office for foreclosure fraud-related activities, Lender Processing Services and Provest. Lender Processing Services donated directly to Bondi’s campaign through LPS, its subsidiaries/affiliates, its in-house counsel, and at least one attorney employed by its in-house counsel. Members of Provest’s senior management, including its founder and CEO, as well as an executive vice president’s WIFE, contributed to Bondi’s campaign."
http://www.zerohedge.com/contributed/pam-bondi-lender-processing-services-provest-and-campaign-contributions-companies-under-
I've said it 1000x. Nobody is to blame here except for your state AG and your state governor. They have sold you out to keep their budgets in the black for another year. No other reason makes sense.
Yep, all Uncle Sugar has to do is to start hinting at demanding repayment of all of the money the states have borrowed to fund unemployment benefits. I think they just made them pay interest for the first time ever in Jan. (or was that just another threat?)
The state 'rats have no recourse except to STFU and hold out their hands.
Your state AG sold you out and sold out the rule of law because the states are in especially big fiscal trouble due to the Medicaid spending. The percentage of healthcare spending, mostly Medicaid, is about to put a harder and harder squeeze on the states under Obamacare. The states cannot retire debt; they have to roll it over. The states cannot afford to have a bidders' strike at a bond auction. The Texas AG played along. Texas had a bond offering. S&P rated Texas debt paper AAA. The auction went off at 0.27%.That would be two basis points higher than money left on deposit overnight at the Fed.
And that's the way it is.
Gee Wally, I'm sure glad no actual crimes were committed by the banks.
This is going to sound simplistic ... but it really is fundamental.
Publish this information out through the people you know. I sent this out to my extended family on Sunday:
http://www.economicmusings.com/
What’s the Truth?
Only $5bil of the $25bil is actual cash being paid out by the banks. The banks earn “credits” for the remaining $20bil by modifying either loans that they own on their own books or securitized private label MBS that they service. Which will they choose to modify? Alison Frankel described the incentives last week in this article, “Banks receive a $1 credit for every dollar of principal they reduce in a loan they own outright. They earn a 45 cent credit for every dollar written down on a securitized loan. That incentive, in combination with the strictures of the pooling and servicing agreements with investors, was intended to limit the number of securitized mortgages the banks would modify.” The major question you should be asking yourself, and the overall premise of this article, is why are non-agency mortgage investors who did no harm being asked to foot the bill for the sins of the TBTF robo-signers? If you were a bank holding a loan at par, would you rather modify a given loan and take a dollar for dollar capital hit to get a credit towards the $20bil bogey, or modify twice as much of a MBS holders loan that you service (taking no capital hit yourself) and get the same credit? As former SIGTARP Neil Barofsky tells Bloomberg, ”this would be comical if it wasn’t so tragic”.
The kicker is bondholders in this case include pensions, institutional investors and some 401(k) funds.
If nothing else, you can help disabuse therm from the disinformation pushed at them 24/7 by the media and the Obama administration.
barliman
Interesting....
This characterization is a bit of an exaggeration. Banks carry their MSR's (mortgage servicing rights) on balance sheet; these are important assets to the bank, and not small ones.
The real question is whom the banks will choose to offer the adjustment to. There's a difference here between directly held loans and MSR's, all right: If you own the loan, then default hurts you but prepayment doesn't--or not nearly as much, anyway. To the holder of an MSR a default and a prepayment have the same effect: termination of the servicing fee on that balance.
The only monetary interest the bank still has in the securitized loans is a fixed percentage of the total principal balance--irrespective, BTW, of their actual payment performance because the MSR claims are senior to everybody else's in the capital structure. So the banks don't really care who they reduce in the servicing pool, as long as it doesn't lead to prepayments.
I haven't looked to see how low the banks can go in terms of the kinds of loans they can do the principal reduction on. Obviously if there are no restrictions, the bondholders would prefer that you reduce the principal of those who aren't paying anyway. That will piss off some guys at the bottom but has no practical cash flow effect on the deal and would most probably actually increase the excess spread available to the senior pieces.
Now that you bring up the subject of pension funds and 401(k)'s, etc, keep in mind those things have investment committees that are governed under ERISA law. The people on those committees are fiduciaries and under ERISA can be held PERSONALLY liable for plan losses if they have not done their due diligence or acted 100% in behalf of plan participants. They better the hell protest/litigate this issue or risk a class action from employees to sue them for losses. Unfortunately the reality is the people on these committees don't really give a shit about doing what is best for plan participants. They don't want to get off their ass to do anything thjat takes any extra effort other than sign off on what their consultants tell them. Plus most of them are between brain dead and clueless. (Good thing I'm not communicating what my opinion of these people is...) If a corporate employee is reading this, pass it around the company. Certainly other employees would be interested to know that they have recourse against the people who oversee their retirement plan investments.
Will anyone please explain why these investors are entitled to remain anonymous in foreclosure complaints?
Isn't it very odd that servicers routinely cite confidentiality agreements between said investors in discovery?
When pressed in court with a Motion to Compel they typically respond with a Motion for Protective Order.
Why hide if there is no need? Since they do it practically all the time; there must be a need.
So, what is it?
Imagine you're an investor. Would you want your name made public as being an "obstructionist" to a government settlement that is promising to fix everything? Well, everything except what you're owed, even though you did nothing wrong and have no culpability? Especially when it is government policies that created the very problem being addressed?
Dunno if that's supposed to an answer to what sounded like a good question, but what the investor "wants" isn't a relevant issue in the legal process. Obviously, the investor didn't "want" to get ripped off the in the first place.
What if they're anonymous because none of them are "people" and it would be considered prejudicial?
I'll take a stab at anwsering my own question.
Because, you know what? Many of these trusts have triggered CDS pursuant to the PSAs that govern them and they no longer exist.
The investors got paid by an insurance company that got bailed out and can't, coincidentally, account for vast chunks of their bailout money.
The remainder of the loans in the trusts that no longer exist and have been extinguished in SEC filings (that's what they are hiding) continue to be collected by Mr. Servicer Man.
Mr Servicer Man is not owed that money but continues to collect payments none the less.
If the savvy anonymous investors beat too hard on the servicers, the servicers will remind them that the collateral obligations were not placed in the trusts within the REMIC tax window making them guilty of tax fraud on a wide scale. That in addition to the fact they have been already been made whole (and sometimes way more that whole) by their incestuous bailed out insurance cronies makes for a very deep rabbit hole.
Please do not tell me you blame this on the Community Reinvestment Act.
I blame this on the community reinvestment act! Ha Ha
That's perfect because this is still sitting on my clipboard from something I threw on another post.
In the Real Estate hay day, back when they weren't making any more Real Estate, money started looking for people. To this day, some remain stubbornly reliant on an obtuse and incomplete interpretation of the "Community Reinvestment Act" as a convenient neon red-herring on which to affix blame. To suggest (over and over again) that any politician, regardless of spot or stripe, would give a fig, lift a finger, bat a lash, or make anything more affordable for anyone other than themselves is mere cacophony.
Some will even put forth the equally absurd notion that lenders were strong-armed into making loans for fear of lawsuits from powerhouse organizations like ACORN. (Banks afraid of lawsuits...how cute)
The money was looking for people for one reason and one reason only.
I've said this before (aided by the clarity of hindsight) but the sociopaths had the vision to see this coming and acted accordingly. Presently, there isn't anything left to steal except debt.
How do you steal money from those who don't have any?
Simple. Just give it to them.
This seemingly chivalrous and selfless act of making the "American Dream" of home ownership more affordable to minorities or the otherwise disenfranchised was actually anything but chivalrous and selfless.
It was the perfect crime.
While keenly focusing on the fact that no one was making more Real Estate, it was triple A safe to assume the value of Real Estate would never do anything but go up. This "conventional wisdom", often called "speculative", "irresponsible" and "reckless" nowadays, was repeatedly and professionally affirmed by experts in the form of property appraisals.
The zenith of all this chivalry is the appraisal and exemplifies the brilliance of the perfect crime.
Precisely at that moment, the vaporous, phantom, wealth of debt is born. Hold on to your hats all you disenfranchised minorities, you will soon be disemboweled. The money has found you and welcomes you aboard the "American Dream".
Fast forward...
There is actually plenty of Real Estate and it never does anything but go down in value. In keeping with the state of affairs we find ourselves in; we are forced to re-examine the definition of "value".
Once upon a time, the value of something was a direct corollary to what someone would pay for it.
Not anymore. Value is defined in a cell on a spreadsheet[s] and that never budges.
Enter the Credit Default Swap.
As chivalrous as the lenders were, way back when they weren't making more Real Estate, they had a sneaky suspicion the disenfranchized minorities they tried to help were secretly chiseling deadbeats. They had to buy insurance in case they didn't pay back the captured amount in all those spreadsheet cell[s].
Buying and selling this insurance was especially lucrative and worked like a charm for a few, but was really bad for many. You see, there was never any intention by these insurance companies to actually pay, much less have the ability to pay any of these claims. The only logical and prudent thing to do, absent any other possible option, was to once again foist this on the sap of last resort, the taxpayer.
Fortunately for TBTF, the taxpayers are busy pointing fingers at each other, exactly as planned. They are laughing at us. Oh, and as a bonus, all this chivalry has created clouds over millions and millions of titles and wild deeds as far as the eye can see.
"It was the perfect crime".
Exactly. And with a small number of TBTF players, easier than you would think to execute. Anytime someone blames the government, remember that the government does nothing on it's own. There is ALWAYS a force from outside the wall, moving the board pieces around. If you do not believe this, then you are in the "no one could see it coming" camp.
Excellent post.
I think that is the best comment I've read here since I started about two years ago. Longer posts are normally boring but not this one.
Good job! Thank you.
I gotta agree with the other replies chunga that was a damn good post
My hunch? Either some of these loans have been pledged as collateral to multiple investment pools, or the investment pools themselves have been dissolved and no longer exist. Either way, servicers are screwing EVERYONE, repeatedly. Of course, exposing this fraud would bring the entire banking industry down, literally overnight.
Thank you.
Easy! Government is the most organized form of crime.
The banks own the corporation pretending to be government.
Corporate Sponsored Statism - Top Crime Family this Decade - The North Side Bankers Gang
THEY SCREW VETS BY JACKING UP THE FEES ON THE CLOSING STATEMENT.
What, by law, should be only 1.5 to 2 points, winds up being 6 to 7 points, obscurely added to the mortgage amount.
Comrade Investors, Please study the GM and Chrysler bailouts closely. This we call "getting Fwanked" as in Bawney Fwank.
And you guys thought the banksters were being punished......and life was fair and I wouldn't in your mouth.
"The settlement did not include a cap, angering investors who claim the government favors banks over bondholders."
No way. The government doesn't favor banks.
My only question is....Why does this stuff just keep 'dribbling' out?
The alternative to rule of law is rule by shame. It occurs when governments and legal authorities are too weak to enforce action against oligarchs.
Plato would say you reign in oligarchies by introducing a dictator. Check in with me in a couple years and see if we've done that.
Another means to reign in oligarchs is an alternative force. Ask if the Zapata's want to branch into a new line of business, kneecaping bankstas.
Full disclosure would expose the banks' utter and complete insolvency.
I don't know exactly how this affects me, but I've been living mortgage-free since July 2009, and last week, Bank of America paid all of my back and current property taxes, about $9,800. I live in upstate New York, where high taxes keep property values down.
It makes no sense to me since BofA started a foreclosure proceeding in March 2010, then stopped cold after my answer. Have heard nothing since, except for a letter from BofA seeking to collect a "debt" - note, not the property, they wanted money - stating unequivocally that Fannie Mae holds the note, which is most likely BS, since it was a MERS/Countrywide mortgage to begin with, so there is likely no note to be found.
Besides, in NY, the most recent case law - Suffolk country, I believe - found that MERS could not foreclose, nor could the banks on a wide variety of mortgages, rob-signing immaterial to the matter.
I do not understand why the bank would not press the foreclosure action and instead pony up nearly $10K in back and current taxes. Do they intend to go back into court and say, "see your honor, we paid the taxes, ergo, we are the owners."
Most judges would respond with stifled laughter, I suppose and ask for title documents and chain of custody. At the very least, I figure another 12-18 months while we wend our way through the court, that is, if the bank actually makes any motions.
Also, I will probably file a TILA or RESPA federal fraud action, which would stop the foreclosure in its tracks, and I'm not even a lawyer, but apparently have a better handle on this than the moron thieves disguised as upstanding banksters.
Any comment on my situation would be appreciated and might actually stop my uncontrollable laughter.
FreeNewEnergy:You are a manifestation of all that is wrong in this country. While you are fully exercising your legal rights, you are living mortgage-free and rubbing it in how you are gaming the system. This makes you no better than the corrupted banking system. In fact, while you may be feasting on your free lunches, we, the tax payers are picking up the tab. The moral backbone in this country is getting shredded by cancers like you.
AC: "...we, the tax payers are picking up the tab..."
Isn't that the only real problem? And whose fault is that? A large majority of Americans opposed TBTF bailouts, but they happened anyway.
OO: I see your point, but moral integrity is the main ingredient that distinguishes great countries from banana republics. We don't win if everybody tries to cheat the system, we just accelerate our decline.
I hate to say it but I will; Don't hate the player, hate the game.
The game is called financial assrape and either you either run on the field with your ass clenched or ride the bench and get your ticket punched.
It's not glamorous, and there is a moral hazard for certain, but I really do believe there are honorable ways to perform a "strategic default" and still be able to hold your head high.
Don't be a fucking idiot, Aunty. Abiding by some sort of imaginary rulebook in a rigged game in which the banks hold every conceivable advantage is a ticket straight to the local homeless shelter.
Probably the same situation as me.
BoA as servicer for MBS trust tried to foreclose on me.
I have them cold and all their phoney paperwork has already ben filed in Court and cannot be withdrawn.
Beat them in Court.They are only allowed two trys,finito.
Could be they waiting on Pino case in Fla Supreme Court.That could set horrible
precedent for the "pretender lenders",and their lawyers.
Don't get me wrong all my payments are now sitting in escrow.No payment is going anywhere until
someone can prove they are the correct party to pay.I fell behind at one point(illness) ,BoA
would not give any leeway,then I found out they represent no-one except themselves.
I got better and made the money up.
Everything the banks say and do is a lie.
My mortgege and probably 75% of every mortgage written between 2001 to 2007 are in
limbo land.Thats why they had to forge docs in the first place.Demand your Promissory note.
Let them pay.Its unsecured debt,just like your 'mortgage" probably is as well.
Bye the bye, check out your states Statute of Limitations on mortgage debt.
The clock starts when you stop paying.
So glad to read that someone has the integrity to pursue this kind of thing in court and pay into an escrow account.
Yes, the bank is going to take you to court. and say, "look we paid the taxes." They must have a judge in their pocket. I would go see the tax man and say you reject someone else paying your taxes, tomorrow.
Tough to say without more details, but my guess is that they're moving as quickly as possible to foreclose on any and all low-hanging fruit. The fact that you responded at all was an indication that you're not a total pushover, and thus a litigation risk (read: expensive). It's much more profitable to go after the 97% of people who simply allow the banks to roll over them (please correct this figure, I'm working from memory here).
Be sure to do your homework before going to battle, because TILA and RESPA violations have pretty short statute of limitations (3 or 4 years, IIRC).
Best of luck!
chunga, thank you for your post, i was wondering a similar thing. adds another level to their game of mirrors
I just want to watch live when God's workers test gravity by hanging from the neck from lamposts...can I be part of the kangaroo court that convicts them?
> the government favors banks over bondholders
Now that's just not fair. The government has shown a lot of love for holders of Citi, B of A, and AIG bonds, to name just a few.
Squirm f*ckers. You should have bought metal instead of bonds.
...and so The Big Money Wars have commenced. Perhaps these types of conflicts will be what brings down the world-wide financial system of Extend and Pretend and massive fraud and deceit on a scale never before seen on The Planet.