Banks question mortgage pact
But Bank of America, Wells are reducing principal for some borrowers voluntarily.
By Rick Rothacker, charlotteobserver.com -- Mar. 11, 2011
Big banks continue to push back against a possible settlement that could require them to forgive billions in mortgage balances, even as they reduce principal through select programs.
Bank of America Corp. on Thursday announced a plan to assist borrowers in the military, days after executives raised concerns about the fairness and effectiveness of a regulatory settlement that could cost big banks $20 billion or more.
[...]
Banks are resisting a broad settlement with federal banking regulators and attorneys general for a number of reasons, experts said. In many cases, the lenders who service the loans don't actually own the mortgages. There are questions about who deserves to receive principal reduction -- distressed borrowers or borrowers working hard to make their payments. And then there's the magnitude of the problem.
More than 11 million, nearly 25 percent, of all U.S. residential properties are "underwater," meaning the borrower owes more than the value of the home, according to research firm CoreLogic. Altogether, borrowers have negative equity of $750 billion.
"It's the sheer size of it," Guy Cecala, publisher of Inside Mortgage Finance, said of the banks' resistance.
The trial-ballon Settlement "could cost big banks $20 billion or more" and the Big Banks are still resisting?
Don't they know that $20 billion doesn't go as far as it used to?
Perhaps they should keep reading ...
Regulators want to make this Wall Street-inspired Foreclosure problem -- simply go away.
The Wall Street Bankers in the middle of it all, still want to feign -- innocence.
Really!?
Bank Regulators Said to Push $20 Billion Foreclosure Settlement
By Lorraine Woellert and Robert Schmidt, Bloomberg, businessweek.com -- Feb 24, 2011
Feb. 24 (Bloomberg) -- U.S. regulators probing flawed and illegal mortgage-foreclosure practices may try to extract $20 billion of penalties in a settlement with banks that serviced the loans, according to two people briefed on the talks.
Terms of the potential accord, from regulators led by the Treasury Department and Department of Housing and Urban Development, haven’t been formally presented to banks, according to the people, who spoke on condition of anonymity because the discussions aren’t public. Lenders embroiled in the investigation include Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co.
The government originally floated a $25 billion penalty, which banks rejected, one person said. Banks are resisting a large settlement because while regulators have found widespread flaws and violations in documents and procedures, the federal agencies said they so far have uncovered few examples of wrongful foreclosures.
Meanwhile Regulators want to "fine the banks" for playing games with Mortgage and Deed transfers -- and for using electronic "documents" of very questionable legality, as their legal-basis to foreclose on Americans' Homes.
Bad Banks! Don't you do that again, now. What, were you thinking!
BofA, Citigroup, PNC Say MERS Mortgage Database Draws Probes
By Laura Marcinek, Bloomberg, businessweek.com -- March 02, 2011
March 2 (Bloomberg) -- Bank of America Corp., Citigroup Inc. and PNC Financial Services Group Inc. may face added costs or fines after investigators questioned the use of a mortgage database instead of original documents to justify foreclosures.
Earnings at Bank of America, the largest U.S. lender, may suffer materially if using Mortgage Electronic Registration Systems or MERS is found to be invalid, according to a regulatory filing last week. Citigroup and PNC said fines or other penalties may result from investigations into MERS and allegations of faulty foreclosure practices.
[...]
MERS is a private database run by closely held Merscorp Inc. that tracks ownership in about half of all U.S. home mortgages. It allows banks to buy and sell loans without having to record transfers with the county, and some lenders named MERS as their agent to bring foreclosures. Consumer advocates argue that MERS records aren’t a legal substitute for traditional documents, prompting some courts to throw out foreclosures.
Bankruptcy Judge Robert Grossman has ruled that MERS doesn't have a "legal leg" to stand on. The Judge is steamed too. I bet there is some serious Appeals Court "Judge-shopping" going on about now. By the "effected parties".
The Judge has ruled 'there is very often no legal chain of ownership', for these Mortgage Backed Security (MBS) investment schemes -- that Wall Street invented, for their own short-term gains. Basically, legally deficient 'virtual-documents' [MERS spreadsheets] have been used as the basis of far too many Home Foreclosures, and as the basis for far too many Financial Derivative transactions too, over the last several years ...
New York's US Bankruptcy Court Rules MERS's Business Model Is Illegal
L. Randall Wray, businessinsider.com -- Feb. 17, 2011
United States Bankruptcy Judge Robert Grossman has ruled that MERS's business practices are unlawful. He explicitly acknowledged that this ruling sets a precedent that has far-reaching implications for half of the mortgages in this country. MERS is dead. The banks are in big trouble. And all foreclosures should be stopped immediately while the legislative branch comes up with a solution.
MERS was a fraud from day one, whose purpose was to evade property recording fees and to subvert five centuries of property law.
[...]
Here's MERS's business model in brief. Real estate property sales and mortgages are supposed to be recorded in local recording offices, with fees paid. With the rise of securitization, each mortgage might be sold a dozen times before it came to rest as the collateral behind a mortgage backed security (MBS), and each of those sales would need to be recorded. MERS was created to bypass public recording; it would be listed in the county records as the “mortgagee of record” and the “nominee” of the holder of mortgage. Members of MERS could then transfer the mortgage from one to another without all the trouble of changing the local records, simply by (voluntarily) recording transactions on MERS's registry.
[...]
At each transfer, the note and mortgage are supposed to be “assigned” to the new owner; MERS claimed that because it was the “mortgagee of record” and the “nominee” of both parties to every transaction, there was no need to assign the “mortgage” until foreclosure.
[...]
The Judge rejected every aspect of MERS's argument. The Court rejected the claim that MERS could be both holder of the mortgage as well as nominee of the “true” owner. It also found that “mortgagee of record” is a vague term that does not give one legal standing as mortgagee. Hence, at best, MERS is only a nominee. It rejected MERS's claim that as nominee it can assign notes or mortgages -- a nominee has limited rights and those most certainly do not include the right to transfer ownership unless there is specific written instruction to do so.
[...]
The half of America's homeowners whose mortgages are registered at MERS have been handed a “get out of jail free” card. Wall Street has no right to foreclose on their property. [...] foreclosure by members of MERS is theft -- so class action lawsuits may be the way to go.
MERS is dead, but can the banks survive? There are two separate issues.
[...]
The second issue is that the mortgages backing the securities were supposed to be placed in Trusts (affiliates of the securitizing banks), with the Trustee certifying not only that the mortgages met the reps and warranties but also that the documents were up to snuff and safely locked away. We know they were not. As mentioned above, MERS told the servicers to hold the notes, and many or most of them were destroyed or lost. Further, the notes were separated from the mortgages -- making them null and void. In any case, they are not at the Trusts. This means the MBSs are not backed by mortgages, meaning the MBSs are unsecured debt. MERS's business model ensures that. So, again, the banks must take back the fraudulent securities -- paying off the investors.
Uh oh! Wall Street must face the wrath of the People Lawyers of angry MBS Investors. This could get expensive, for them -- if this "free-market self-regulating" trend is allowed to "run its course".
SOOOO ... Wall Street Bankers are busily assessing their own legal options. They seem to have decided to "throw MERS under Legal Bus".
They are pointing the finger at MERS questionable practices. They are starting to link MERS with Fannie Mae and Freddie Mac, too. Take note, Govt Regulators.
The suits are being filed.
BofA, Citigroup, PNC Say MERS Mortgage Database Draws Probes
By Laura Marcinek, Bloomberg, businessweek.com -- March 02, 2011
Merscorp said on Feb. 16 it will propose a rule change to stop members from foreclosing in its name. It’s owned by Fannie Mae and Freddie Mac, the government-owned mortgage companies that have received $151 billion in government aid since 2008, and financial firms including Bank of America, Citigroup and JPMorgan Chase & Co., according to the MERS website.
Relying on MERS
Bank of America said legal challenges against MERS have asserted that use of the system can “cloud ownership” of a loan, according to its filing. [...]
The process “is based on a well-established body of law that establishes ownership of mortgage loans by the securitization trusts, and we believe that we have substantially executed this process,” Bank of America said in its filing.
The question of MERS’s “legitimacy” drew scrutiny from the U.S. Justice Department and Congress as well as regulators and state attorneys general, Citigroup said in its filing.
Consumer advocate and Progressive stalwart Maxine Waters, has been trying to stand up for the forgotten victims in this Wall Street-funded Foreclosure scandal -- the American Homeowner!
Rep Waters is saying that a $20 billion dollar settlement would be WAY, WAY, TOO LOW ...
Rep. Waters: $20 Billion Settlement Would Be Too Low
By Nick Timiraos, wsj.com -- February 25, 2011
A top Democrat on the House Financial Services Committee signaled that the broad outlines of a settlement to resolve mortgage-servicer abuses should push for penalties higher than the reported $20 billion figure.
[...]
The settlement could push for banks to write down loan balances for troubled borrowers, and several stakeholders in the talks have pushed for a settlement of more than $20 billion.
Rep. Maxine Waters (D., Calif.) issued a statement on Friday implying that such a figure would be too low.
“Though this figure sounds like a large settlement to those unfamiliar with the scale of the foreclosure crisis, we must remember that over 3 million homes have been lost to foreclosure since 2006,” she said in the statement. “This settlement is too small, [...]
Ms. Waters also said that any settlement should be contrasted with the one that Bank of America Corp. reached with state attorneys general in 2008 to settle alleged predatory lending abuses on behalf of Countrywide Financial Corp., which it acquired that year. The settlement was valued at $8.6 billion.
She also said that regulators should focus additional attention on potential failures within the transfer of notes during the securitization process that might run afoul of federal tax rules for the treatment of certain mortgage-backed securities.
Given the established precedent of $8.6 billion damages in California;
Given the flaunting of centuries well-established Mortgage and Title Laws;
Given the likely avoidance of Federal Tax payments by these Mortgage-Backed Securities "investment vehicles;"
-- you'd think that the Wall Street Bankers would jump at the opportunity to "settle up" with the Govt Regulators -- for a mere $20 Billion.
Don't they know that $20 billion doesn't go as far as it used to?
Oh right, with "their disease", being what it is -- Extreme Greed just won't let them pursue the reasonable or just course, for their Get-Rich-Quick schemes, Gone-Wild.
"Accountability" is NOT in their vocabulary.
Extreme Greed will dictate, they take the "litigious course" instead. I suspect MERS will be hiring their lawyers too. Afterall the stakes are enormous.
Hopefully, the investigators from Treasury Department and Department of Housing and Urban Development, won't get left in their very cloudy dust. A high-stakes firestorm that's about to get kicked up -- for real.