naked capitalism Sun 2010-10-10 12:54 EDT

FUBAR Mortgage Behavior: Florida Banks Destroyed Notes; Others Never Transferred Them

...But to give readers the latest report of modern FUBAR, mortgage edition, let us continue with the sorry saga of ``Where's My Note?'' For the benefit of newbies, what everyone calls a mortgage actually has two components: the note, which is the borrower IOU, and the mortgage (in some states, it's called a deed of trust) which is the lien on the property. In 45 states, the mortgage is a mere accessory to the note; you must be the real party of interest in the note in order to foreclose. The pooling and servicing agreement, which governs who does what when in a mortgage securitization, requires the note to be endorsed (just like a check, signed by one party over to the next), showing the full chain of title...The endorsements also have to be wet ink; no electronic signatures permitted. I've had a lot of anecdotal evidence to support the idea that these procedures, which were created in the early days of mortgage securitizations, were simply not observed on a widespread, if not a universal basis...

Florida Banks Destroyed Notes; FUBAR Mortgage Behavior; naked capitalism; transfer.

Fri 2010-10-08 21:27 EDT

Bank of America Suspends Foreclosures in All States >> naked capitalism

Yves Smith

...The robo signing of affidavits was clearly done across all sorts of court actions. As we indicated, the bogus affidavits are used in all foreclosures in judicial states; they aver various things about the plaintiff's indebtedness, including the plaintiff's ownership of the debt that are integral to the process. Providing an improper affidavit is considered to be a fraud on the court...affidavit abuses are mere symptoms of much deeper problems with the mortgage securitizations. Why, pray tell, are law firms and servicers engaging in false representations and widespread document forgeries? It is because, as we have stressed, they made a botch of getting the notes (the borrower IOU) into the trusts, and simple fixes don't work, hence the need to create a phony document trail. The Bank of America suspension of foreclosures in all states appears to be a tacit admission that the problems are as pervasive as we have suggested...

America suspends foreclosures; bank; naked capitalism; state.

Fri 2010-10-08 21:11 EDT

4ClosureFraud Posts Lender Processing Services Mortgage Document Fabrication Price Sheet >> naked capitalism

Yves Smith

...document fabrication is widespread in foreclosures. The reason is that the note, which is the borrower IOU, is the critical instrument to establishing the right to foreclose in 45 states (in those states, the mortgage, which is the lien on the property, is a mere ``accessory'' to the note). The pooling and servicing agreement, which governs the creation of mortgage backed securities, called for the note to be endorsed (wet ink signatures) through the full chain of title...Evidence is mounting that for cost reasons, starting in the 2004-2005 time frame, originators like Countrywide simply quit conveying the note. We are told this practice was widespread, probably endemic. The notes are apparently are still in originator warehouses. That means the trust does not have them (the legalese is it is not the real party of interest), therefore it is not in a position to foreclose on behalf of the RMBS investors. So various ruses have been used to finesse this rather large problem...We finally have concrete proof of how widespread document fabrication was...This revelation touches every major servicer and RMBS trustee in the US...The story that banks have been trying to sell has been that document problems like improper affidavits are mere technicalities. We've said from the get go that they were the tip of the iceberg of widespread document forgeries and fraud...

4ClosureFraud Posts Lender Processing Services Mortgage Document Fabrication Price Sheet; naked capitalism.

naked capitalism Fri 2010-08-06 19:34 EDT

Auerback: The Real Reason Banks Aren't Lending

Marshall Auerback

...there is a widespread belief that government fiscal stimulus has run up against its ``limits'' on the grounds of ``fiscal sustainability'' and the need to retain ``the confidence of the markets''. Consequently, goes this line of reasoning, as private credit conditions improve the private sector must pick up the baton of growth where the public sector leaves off. If this proves insufficient, there is room for an expansion of monetary policy via ``quantitative easing``...The premise is that the central bank floods the banking system with excess reserves, which will then theoretically encourage the banks to lend more aggressively in order to chase a higher rate of return. Not only is the theory plain wrong, but the Fed's fixation on credit growth is curiously perverse, given the high prevailing levels of private debt...credit growth follows creditworthiness, which can only be achieved through sustaining job growth and incomes. That means embracing stimulatory fiscal policy, not ``credit-enhancing'' measures per se, such as quantitative easing, which will not work. QE is based on the erroneous belief that the banks need reserves before they can lend and that this process provides those reserves. But as Professor Scott Fullwiler has pointed out on numerous occasions, that is a major misrepresentation of the way the banking system actually operates...We would like to see the Obama Administration at least begin to make the case that fiscal stimulus, whether via tax cuts or direct public investment, is still required to generate more demand and employment...deficit cutting per se, devoid of any economic context, is not a legitimate goal of public policy for a sovereign nation. Deficits are (mostly) endogenously determined by the performance of the economy. They add to private sector income and to net financial wealth. They will come down as a matter of course when the economy begins to recover and as the automatic stabilizers work in reverse...

Auerback; Lends; naked capitalism; real reason Bank.

PRAGMATIC CAPITALISM Tue 2010-05-18 15:15 EDT

A DEFLATIONARY RED FLAG IN THE $U.S. DOLLAR

TPC

...the performance of the dollar is the surest evidence of the kind of environment we're currently in. The surging dollar is a clear sign that inflation is not the concern of global investors. This is almost a sure sign that deflation is once again gripping the global economy and should be setting off red flags for equity investors around the world. The recent action in the dollar is eerily reminiscent of the peak worries in the credit crisis when deflation appeared to be taking a death grip on the global economy and demand for dollars was extremely high...As for the gold rally, I think it's clear gold is rallying in anticipation of its potential to become a future reserve currency. The potential demise of the Euro has become a rally cry for inflationistas who don't understand that the Euro is in fact another single currency system (like the gold standard) which is destined to fail. In the near-term, the rise in gold is likely justified as fear mongering and misguided governments increase demand for the yellow metal. Ultimately, I believe investors will realize that there is little to no inflation in the global economy and that the non-convertible floating exchange systems (such as the USD and JPY) are fundamentally different from the flawed currency system in place in Europe. Debt deflation continues to plague the global economy. Thus far, policymakers have been unable to fend off this wretched beast and I attribute this largely to the widespread misconceptions regarding our monetary systems. This extends to the very highest levels of government...Positioning yourself for hyperinflation and a U.S. dollar collapse has been a recipe for disaster and will continue to be a recipe for disaster as debt deflation remains the single greatest risk to the global economy.

DEFLATIONARY RED FLAG; PRAGMATIC CAPITALISM; U.S. dollar.

THE PRAGMATIC CAPITALIST Wed 2010-02-10 11:22 EST

AN INSIDER'S VIEW OF THE REAL ESTATE TRAIN WRECK

TPC

The first time I spoke with real estate entrepreneur Andy Miller was in late 2007, when I asked him to serve on the faculty of a Casey Research Summit...what most intrigued me about Andy was that he had been almost alone among his peer group in foreseeing the coming end of the real estate bubble, and in liquidating essentially all of his considerable portfolio of projects near the top...he remains deeply concerned about the outlook for real estate...the United States home mortgage market has been nationalized without anybody noticing...If government support goes away, and it will go away, where will that leave the home market? It leaves you with a catastrophe...eventually the bond market is going to gag on the government-sponsored paper...commercial properties are not performing and that values have gone down, although I've got to tell you, the denial is still widespread, particularly in the United States and on the part of lenders sitting on and servicing all these real estate portfolios...The current volume of defaults is already alarming. And the volume of commercial real estate defaults is growing every month...When you hit that breaking point, unless there's some alternative in place, it's going to be a very hideous picture for the bond market and the banking system...second quarter 2010 is a guess...the FDIC and the Treasury Department have decided that rather than see 1,000 or 2,000 banks go under and then create another RTC to sift through all the bad assets, they'll let the banking system warehouse the bad assets. Their plan is to leave the assets in place, and then, when the market changes, let the banks deal with them. Now, that's horribly destructive...it's exactly a Japanese-style solution...The entire U.S. residential mortgage market has in effect been nationalized, but there wasn't any act of Congress, no screaming and shouting, no headlines in the Wall Street Journal or the New York Times...That's a template for what they could do with the commercial loan market.

insider's view; pragmatic capitalists; Real Estate Train Wreck.

Jesse's Café Américain Wed 2010-02-03 20:13 EST

Italy Seizes Bank of America Assets In Derivatives Fraud Probe

Jesse

"more than 519 municipalities that face 990 million euros in derivatives losses"...Globalization is used as a rationale for stripping nations of their sovereign rights, and the people from their ability to rule and protect themselves in accord with their own beliefs and preferences...The US is a relative safe haven for multinational corporations that engage in various forms of fraud and market manipulation around the world, like modern day privateers. It appears unable to regulate them because of widespread political corruption and the self interest of its monied elite.

America assets; Derivatives Fraud Probe; Italy Seizes Bank; Jesse's Café Américain.

The IRA Analyst Sun 2009-09-13 12:14 EDT

House Testimony: The Trouble With Models Starts With Subjectivity

...we have now many examples where a model or the pretense of a model was used as a vehicle for creating risk and hiding it. More important, however, is the role of financial models for creating opportunities for deliberate acts of securities fraud..the widespread use of [VaR] statistical models for risk management suggest that financial institutions are subject to occasional "Black Swans" in the form of risk events that cannot be anticipated...We don't actually believe there is such a thing as a "Black Swan."...leaders in finance and politics simply made the mistake of, again, believing in what were in fact flawed models...Or worse, our leaders in Washington and on Wall Street decided to be short sighted and not care about the inevitable debacle...We need to simply ensure that all of the financial instruments in our marketplace have an objective basis, including a visible, cash basis market that is visible to all market participants. If investors cannot price a security without reference to subjective models, then the security should be banned from the US markets as a matter of law and regulation. To do otherwise is to adopt deception as the public policy goal of the US when it comes to financial markets regulation.

House testimony; IRA Analyst; models starting; subject; Troubles.

Jesse's Café Américain Fri 2009-09-04 19:42 EDT

"Let's Just Whack the Oil"

Jesse

``The markets used to be about capital formation,'' said Mr. Quast, the consultant. ``Now 80 percent of trading is driven by some form of statistical arbitrage. We are buying into a statistical house of cards that could unravel very quickly.'' ...this manipulation is getting so blatant and widespread and regular that it is crippling daily market operation, not to mention robbing the general public of millions of dollars every day in their 401K's, pensions, and investment accounts. It has more of the appearance of organized crime than it does of a financial system.

Jesse's Café Américain; Let's Just Whack; Oil.