New Orleans  

The hammer hit the nail early in the story:

An increasing number of the nation’s large banks — U.S. Bank, Regions Financial and Wells Fargo among them — are aggressively courting low-income customers alike … with alternative products that can carry high fees. They are rapidly expanding these offerings partly because the products were largely untouched by recent financial regulations, and also to recoup the billions in lost income from recent limits on debit and credit card fees.

The story carried a picture of a fellow who had borrowed $1000 to pay for medicine for his cystic fibrosis where he paid $100 in fees and stands to pay even more if he’s late on payments.  If that doesn’t make you want to do something between weeping and pull down a wall with your bare hands, then there is just plain something wrong with you, and please immediately see someone for that.

The loophole is that legislation regulating payday lenders does not apply to the big boys, so they are trying to grab what others can no longer touch.  Payday lending has been a huge campaign for ACORN Canada, so this leads me scurrying back to make sure we didn’t leave this backdoor unlocked in the Great North.  Spokespeople for the newly organized Consumer Financial Protection Bureau were reportedly looking to see if any of this was out of whack, but I’m afraid that will be a vain search.

It goes without saying that some banks won’t think twice about steering lower income customers towards more expensive products.  Can you say “subprime mortgage loans!”

Many of these scalawags charge costly fees for transactions on “prepaid” cards.  These are cards loaded by the holder with cash money so there is NO RISK.

There ought to be a law but there probably won’t be one at the federal level.  In some place maybe a state might be willing to shut the loophole.  In other it will simply be another sad, tragic example of business as usual which in cases like these ought to have the same criminal penalties as grand theft robbery has.

Tegucigalpa    

Signs of the fire were still everywhere, even though the space was bustling with activity where the shopkeepers were hammering, sawing, and constructing rough plywood type structures and shelving to hold their wares.  Next door another market had also been damaged and the bent steel and twisted sheeting was still being cleaned up and wheelbarrowed away.  The small merchants we met with under a blue tarp (the common cloth of disasters large and small) felt some satisfaction at the fact that a recent meeting with the Mayor had gotten the cleanup moving next door.  

What the merchants had on the agenda for discussion with us was their problem with banks.  They weren’t the only problem, but they were the boulders in the road to recovery.  To restock would cost each of them about $6000 USD.  They were worried of course that under their tarps their customers would diminish with the heat until some semblance of order was restored or the new building was long on the way.  Many of them had existing bank loans at 19% which they couldn’t pay and had been given some limited (and expensive!) forbearance for three months, but in trying to refinance to restock the same banks were now saying they wanted 28%, and they all wanted it now.  A look around made it clear that repayment was impossible.  Dilcia Zavala, ACORN’s organizer, said there was a law that mandated forbearance for up to a year after disasters, but even meetings with the Mayor and Governor had not seemed to convince the banks to relent from their harsh terms.

These banks were not local moneylenders.  Talking to the small vendors the names sometimes sounded local like Banco Pro Creidito, but that bank was German.  HSBC and Citi both were involved and have visible offices in central Tegucigalpa.  This was big business and a 28% it was usurious.

We had research to do, but clearly the only hope that these women had to not end up as sharecroppers in the square for international banks the rest of their lives was if they had some leverage.  The only leverage seemed to be to force the government to give the law enough teeth to buy some time so that they could survive in the marketplace long enough to get on their feet, even though they might be shackled later with 28% interest.

They call this disaster profiteering for a reason!

Orleans

As we have discussed earlier, lawyers who have successfully litigated with these outfits have called this nothing but grant larceny.  I had the discussion with my banker at Capital One who could only rationalize that it was being considered because “they had to raise money somewhere.” We all know that the defense that “you needed the money” is both the truest and least effective response any criminal can make.

The Times did a sad service with a front page article on the shrewd calculations that Bank of America and its colleagues have made by pushing direct and automatic payments for customers to their regular vendors from utilities to credit card companies to home mortgages and back again.  The story was an easy reminder for readers both how easy it is to sign up for such payments and how hard it is to unravel them to the degree you become welded to your bank regardless of the outrageous charges and abuse.   We are near the point where we are going to need to demand an easier “exit” policy from our banks, just as we had to achieve with our cell phone companies around keeping our phone numbers in recent years.  The little things can kill you!

Even though Occupy has not been successful in seeing any traction on the urgent “Geithner Must Go!” campaign to hold him responsible for some much of the Wall Street pandering and pampering he led first as the critically important head of the New York Federal Reserve Bank, the storm may finally be coming on the horizon.  Amazingly a story in today’s Times documents the giveaway with AIG where banks were paid in full from the federal coffers and were not asked to take any haircut, but in face were even required to shave.  Even banks that offered to take less that they were owed were informed by Geithner’s Fed, since he was head at the time, that they would be paid in full.

At least Geithner, now at Treasuery, with Ben Bernacke at the Federal Reserve are having to line up to finally provide some regulation for non-bank banks in recent hearings in the wake of Occupy.  Of course it is not enough, but even bringing 30 financial institutions like Mass Mutual, Zurich, some hedge funds and outfits like Blackrock and others under regulation because they control over $50 Billion in assets is something.  The Financial Stability Oversight Council still has to wait for comments so the lobbyists will be feeding at the trough, but at least now they need to realize that they might have to reckon with real, immediate, and potentially powerful political outrage if the boys give yet another break to the bankers.

New Orleans

Here are some of the likely elements of the deal:

• Foreclosure staff will finally have to be properly trained which seeks to correct the problem of hiring, literally, from Burger King drive-by windows.
• Third-party groups, including the shyster “mod-shops” and law firms.  I know Phoenix and there will be a lot of folks in this sub-industry looking for new jobs!
• Every homeowner in default will have one “single point of contact” which would finally put an end to the anarchic madness and referral phone banks from Guatemala used by Bank of America for example.

All of that is nice and there’s an indication that there might be fines in the future for the scofflaws who don’t mend their ways, but there are two ingredients that made a profound difference for the victims and could be game changers if there is finally a fair deal for the beleaguered folks trying to hold onto their homes and in some cases having them stolen from them.

• I’ve talked endlessly over the last year about the case of Frances Gomez in Phoenix.  While in the process of negotiating and being approved for a loan modification on her family home of 30 years, Bank of America foreclosed on her home and took it out from under her.  With pressure from the media, Advocates & Actions, and others, Bank of America admitted publicly that they had made a mistake.  They claimed that they bought the house back from foreclosure. They assigned it to a law firm in Phoenix to supposedly return the home to Ms. Gomez.  Now moving on almost a year later, Frances still does not have her home and has been caught in an endless “catch-22” which I have often shared with her as she has tried to get the “old deal” revived and seen Bank of America and its agents try to restore the original loan terms, pretending that this is a modification, that are almost three times the current value of the home.  Sure she could have the home back, but she would have to be crazy or rich, and she’s neither, so she continues to rent with her daughter and son-in-law and mourn the loss.  Well, this agreement may finally provide some relief, even if not her home!  The servicers will be required to employ an “independent consultant” who will review foreclosures over the last two years (why two?!?), and if homeowners were ripped off by predatory practices and fees or errors, incompetence, and theft as Frances experienced, then “they will be compensated.”  Let’s fight for that, Frances!
• Furthermore, this agreement reportedly will prevent there being more “Frances Gomez” cases in the future.  It will bar servicers from being able to foreclose while home owners “are pursing loan modifications that might allow them to stay in their homes.”  That’s what we’re talking about, and that will make a difference in dealing with these scalawags.

At least maybe it will.  Nothing has worked so far and no promises have been kept to date by any of these bums from the street to Pennsylvania Avenue.

The difference could be that finally there may be some real weapons we have to fight with to force a fair deal and a little justice for homeowners trying to hang on, and that’s hope that can fuel a plan!

New Orleans

I was crushed to read this.  First, I had touted the deal, based on the few emerging details, as finally providing real relief to desperate homeowners trying to hold onto their homes in the face the continuing recession.  Secondly, I had thought the unbought and unbowed AGs were finally breaking the co-dependency cycle of Wall Street-White House – Treasury Department, which has led to so little reform, so little relief, and now soaring bank stock prices and executive paychecks and dividend awards.   Finally, it is a terrible deal based on an agreement to call black white essentially, since all of the banks have long recognized that in reality these secondary liens were already wiped out.   I can remember a meeting with HSBC, a huge 2^nd mortgage holder and financier in the suburbs of Chicago in late 2007 before the full level of the crises was front page news, and listening to them tell us they were going to have to wipe out the 2^nd and were willing to do so to protect the firsts for themselves and others.  Those were gallant comments probably long forgotten as the red ink started flowing in rivers, but it was based on the “old school” understanding that you couldn’t keep an asset that was clearly not collectable.

Essentially what this report indicates is that the “deal” would allow banks and their servicers to keep the 2^nd mortgages on their books and only reduce their value by the same proportion that they had written off on the first mortgage.  Clearly, this does NOT make the 2^nd anymore collectible, especially because part of this reduction of the loan is conforming to the level that home prices are underwater, and may stay underwater for years, if not decades.

Does it matter?  Hell, yes!  Look at the prize the banks are wresting here:

“The top four banks now have about $408 billion worth of second liens on their balance sheets, according to Portales Partners, an independent research firm specializing in financial companies. Wells Fargo, for instance, has more money in second liens than it has tangible common equity, or the most solid form of capital. If banks had to write these loans down substantially, acknowledging the true extent of their losses, they would have to raise capital — and might even teeter on the brink of insolvency.”

The only good thing about this report is that now that it’s hit the light of day, hopefully there will be enough of an uproar to send the negotiators back to the table, because this is a too big of a bank holiday giveaway.

These second mortgages are history.  Let them blow away like the dust they are worth.

New Orleans

So if US Bancorp and Wells Fargo are not to blame who is?  Sit down and focus now, because anyone might lose their feet in these dizzying explanations, and I for one don’t want to be responsible, and clearly the bank are not willing to be responsible for anything at all!

• According to the Times the spokesman for US Bancorp says it’s not them, but the servicer, American Home Mortgage Servicing, the messed up.  Why?  They were “solely a trustee concerning a mortgage owned by a securitization trust.”
• Same for Wells Fargo according to their spokeswoman, who gilds the lily by saying, “The loans…were not originated, owned, serviced, or foreclosed upon by Wells Fargo.”  They were just the trustee, so it was someone else’s fault, is their claim.

Some of this is nothing more than poppycock.  I remember well meeting with representatives of Deustche Bank in New York City and elsewhere on these issues repeatedly, when they were one of the leading trustees for many mortgage securitization pools.  They would complain about how little they made as trustees and describe their role as technical, almost like a name of the door with little real power or authority, but the gatekeeper for all of the investors in the pool and the holder of record.  The conversations in 2007 and 2008 drove us crazy because in real estate records, the trustee’s name appears routinely as the foreclosing agent and would often be on signs in the neighborhood in places like Oakland where they were prominent.  They would fuss and fume, but the bottom line was that they routinely made the offer to me that they would pull out any controversial mortgage from the pool rather than have it become an issue and when I gave them a list of properties where we had issues, they offered to identify the servicer so that we could work out a solution.

So the “trustee” might have had the short stick in this game, but contrary to the claims of their spokesfolks, they were paid to do what the court found them guilty of not doing well, and they were anything but innocent bystanders here!

The only one talking truth here seems to be one of the lawyers, Paul Collier, representing an aggrieved borrower:

“It’s been pretty clear…that the securitization industry has behaved as though it were immune from consumer protection laws, state homeowner protection laws and real estate regulations in its underwriting, securitization and foreclosure practices.  I am quite confident that this is merely the first petal off the rose with regard to predatory foreclosure practices.”

Amen, brother!

New Orleans                       The New York Times

The Times draws a line around the fact that the banks may have done this because of concerns that Wikileaks might drop some leaks on the way they do business.   Possibly?  From my personal and organizational experience I would say it is just as likely that they just didn’t want to be seen as associated with Wikileaks if there was a mess, so they were in full run and hide mode.

When the right wing went wild about ACORN and my name became a ping pong ball out there, I found myself caught in the same catch 22 in 2008 and 2009 in the banking world.  I had had a bank account personally and organizationally with Whitney National Bank in New Orleans since 1978.  My banking had been in Little Rock but we were opening operations in New Orleans and banks were putting a 10-day hold on access to funds because the checks were not local.  My dad was working for a local oil company in the city in their bookkeeping department, and when I told him about the problem, he had me meet him and we walked across the street, met the local Whitney branch manager, opened the accounts, and away we went.  Whitney ended up handling all of the centralized banking for ACORN for more than 30 years from that time on.

In the middle of the press storm of anti-ACORN business around the country, I got a series of letters without explanation for every account of every organization I directed after resigning from ACORN in mid-2008 giving us 30 days to find alternative banking arrangements.  Some months later I received a note about my personal account as well.  There was never any explanation.  Local bank officers whose careers had been welded to us and our business simply answered that they were unavailable and sorry.  The letters said nothing other than “move.  So we moved, and were glad to do so, just as Wikileaks probably will be more comfortable finding a financial institution that is unfair rather than one that runs like a rabbit in the weeds, but there’s no doubt that it is a hassle, inconvenient, and interrupts funds and business – and costs money.

Nor is there any question that it is unjust, though evidence is everywhere on a daily basis proving that banks, fairness, and justice simply don’t fit together in any sentence or any world we might recognize.  There should be laws that provide safe havens for critics and the controversial, rather than allowing the optics of business and the conflict adverse nature of modern society to prevent and stifle anything that seems different or oppositional.  Whitney, the largest bank in Louisiana, went under this week, bought by a bank from Mississippi, so there’s some justice in the dog-eat-dog world, but that’s not sufficient to solve the problem of allowing all of us to play on a flat, despite uneven playing field.

Phoenix    

Within 100 yards of either direction of the folks I was visiting, there were perhaps 8 to 10 houses that had been foreclosed; including the house I was being shown.  There were a couple of “for sale” signs, but mainly the houses were dark and abandoned, big 80 gallon garbage cans rolled up in the front yards.

The house I visited had gone underwater and been lost on a “short sale.”  A brother-in-law of a friend had a wife’s cousin who had lost the home and my friends had rented as a favor.  There was talk of buying.  The price was almost ridiculous:  $22000!  The house was laid out nicely with new cabinets in the kitchen, paint only a year or two old in the bedrooms, and tile almost brand new.  The owners had had a notion to close in the back patio, probably as a den or family room, and it was almost finished.  Nothing is perfect.  The air conditioners were shot, so it had been a hot Phoenix late summer.  The water heater was out, so cold showers were the rule, but at $22,000 these were relatively small problems.

In saving neighborhoods this would be a good example of a house that would be a perfect match for people who wanted to love it.  Even at $22000 and a note with taxes and insurance that would be only a shade over $400 per month on the terms being offered, it would still be cheaper than rent, but with no subprime lending market or stated income loans, where would even that small sum be borrowed?

Risk investment pools had been created it seems.  For $6000 down and closing, my friends had been offered a loan at 9% — double the prevailing rate – for 5 years with a balloon payment at the end.  The investors probably didn’t really care what would happen to house or homeowners.  Given the 1 to 1.5% interest out there on money, they stood to recover quickly on such a modest loan at these rates or they could flip the house again and hope that in 5 years when the even the Phoenix housing market might start recovering that reselling would gain more.  The market is so far down now, anything might look like up, and only the families that have already lost their homes or who are begging for modifications along with their bankers have any real memory that 2 years ago the house might have been priced and mortgaged over $150,000.

Here in Foreclosureville it’s hard to see any happy endings yet for families, houses, or neighborhoods, and I don’t see one here yet either.  Banks are clueless and without a plan.  Cities and states are either broke or in Arizona’s case broke and disinterested in anything that might look like a helping hand.  Another 10 houses on this long stretch of block not far from Camelback and this area could be at the tipping point of a horizontal ghetto of broken and abandoned properties.

I don’t even think governments and banks really understand what is happening in Foreclosureville, but having visited once again and spent time here, I can guarantee it won’t  be pretty even with all of the hustle and bustle to try and start something fresh that I found in this one house along a dark stretch under the starlit sky of Phoenix.