Today mortgage lender GMAC pulled a gun and aimed it at the head of Massachusetts.
Because yesterday, the state’s AG filed suit against it and four other banks’ illegal mortgage practices.
In retaliation, the company announced that it will no longer make any loans in the state of Massachusetts:
GMAC Mortgage, the mortgage lender of Ally Financial Inc., is exiting the vast majority of its lending in Massachusetts a day after the state sued it over its foreclosure practices....Recent developments have led mortgage lending in Massachusetts to no longer be viable.
For “no longer viable,” read “all of a sudden held to a standard of law.”
These are the things Mass. attorney general Martha Coakley’s lawsuit alleges:
•Banks used fraudulent documentation in the foreclosure process. This included “robo-signing”; in which bank personnel signed affidavits that were untrue, or about which a make-believe “bank officer” did not have actual knowledge. According to the suit,
Evidence also suggests these practices were not confined to the foreclosure process, but also used in the assignment, transfer and modification of mortgages secured by property in Massachusetts.
• They foreclosed without holding the actual mortgage:
They commenced foreclosures on mortgages where they were not the holders of those mortgages.
• They corrupted Massachusetts’ land recording system, willfully obfuscating the registration and title records to property.
• They failed to uphold loan modification promises to Massachusetts homeowners:
Through the National Homeownership Retention Program, which commenced on November 6, 2008, these banks represented that they would work with borrowers to help them avoid unnecessary foreclosures by reducing monthly mortgage payments to affordable and sustainable levels. [But] these banks misled borrowers about their eligibility for this program and the amount of relief available, failed to achieve a significant level of modifications, and often strung along borrowers for months in trial modifications that were ultimately rejected.
What made these charges—and GMAC’s retaliation today—even more egregious was GMAC’s acceptance of three separate bailouts by the federal government, totaling $17.2 billion. These bailouts set the taxpayers’ (including those who live in Massachusetts) stake in the company at a whopping 74%.
You'd think three-quarters' ownership would buy you some consideration. But that is because you are a dope. Instead, in a fit of 1% pique, these guys went all in by declaring they are no longer going to do business with people who are their owners.
It gets even better.
In 2006, GMAC sold a majority of its mortgage business to an outfit called Cerebrus (board chairman John Snow, former Bush treasury secretary. Odd John Snow fact: his brokers bought $10 million of debt issued by Fannie Mae and Freddie Mac on the day and day after Snow was sworn into office as Treasury Secretary.)
Most of this mortgage business was in subprime, securitized loans that had been sliced and diced to give cover to ratings agencies who for a fee would rate dog turds AAA.
Shortly afterward, poof! went the subprime market, and poof! (ostensibly) went the money held by Cerebrus and GMAC shareholders.
But the government stepped in and bailed the company out. So they did not lose. Nosiree, thanks to the largess and generosity of taxpayers like me and you. As Allen Sloan remarked, “Cerberus investors and GM - got a free ride of sorts on the government's nickel. Instead of owning 100 percent of a company worth nothing, they now own 26 percent of a company with a stated value of more than $12 billion.”
So they were rescued from calamity. Unlike the poor taxpayers illegally foreclosed by GMAC. Who lost 100% of their houses. Unlike the poor taxpayers laid off when the market melted down. Who lost 100% of their jobs. Unlike poor working taxpayers whose pension funds were invested in mortgage backed securities, who are now being told they must work without hope of retirement and are being blamed for the whole mess by the sneering 1%.
You may have seen GMAC trumpeting loudly that they repaid their federal loans. What they didn’t mention is that they did not repay the loans from their earnings.
What did they use instead? Two sources. One, income GMAC made from selling some of its shakiest loans to Fannie Mae. That Fannie Mae. Two, interest income GMAC made from the widespread snakeoil bankster practice of borrowing money essentially for free from the Treasury (through access to the Temporary Liquidity Guarantee Program that allows companies to borrow money at blushingly low interest rates), and then investing what they borrowed in risk-free treasuries, netting several automatic percent off the poor taxpayer, not for doing jack shit, but for being there when the fix was put in.
And now GMAC--and its owner, Ally Financial--have got a gun to Massachusetts’ head. Saying “We do business this way. Accept it, or we pull the trigger.”
Oh, I think it is so time to stop accepting nonsense.