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.

Thus far GMAC, Chase, and Bank of America have had to suspend foreclosures in the 23 states that require judicial review of foreclosures because a judge in one of them finally said he wasn’t satisfied with the signatures on the paperwork.  It has now become clear that there was “robo-signing” of huge numbers of documents and complete fabrication of many files and records connected to foreclosures.  Banks have argued over who had the correct paperwork and the right to foreclose.  The mystery behind the true ownership of properties between the banks and the investors in the securitization pools has finally shown all of these Wall Street emperors to be totally without clothes.  The irresponsible fabrications of the banks have not only collapsed the foreclosure and modification side of the market, but reports today indicate that the banks have also had to alert Fannie Mae and Freddie Mac

that properties foreclosed and turned over to them, might not have been in “good faith” and are now being withdrawn from the market even where there were completed sales contracts.  Attorney-Generals in non-judicial review states like Texas and others are now clamoring that they want the foreclosure suspensions extended to their states, since hey don’t like fraud either.

Wow!  Who is surprised when Treasury turns over a program of saving the chickens to the very foxes that prowl the properties, that it ends up such a fiasco?

Is this serious?  Yes indeed!  We may tell people in places like India or Peru that the Bill of Rights is the heart of the American declaration and constitution, but in truth it’s always been property rights and how to protect and extend them whether the argument was about land, chattel, or the crown.  After billions of dollars with of bailouts and almost singlehandedly crashing the economy, the banks may have finally even crossed a line that Congress and the President will not allow.  In fact Obama pocket vetoed a bill that was charging through Congress (passed Senate on a unanimous voice vote – who was asleep there?) that would have allowed the foreclosure process to be accelerated.

Stop the madness!  All of the records are bad.  Look at the sample case files from Phoenix compiled by Arizona Advocates and Actions (www.advocatesandactions.org) for a shocking look at total incompetence by the banks and the servicers.

Some things need to be done now:
There needs to be a complete and total national moratorium on all foreclosures.
The government NOT the banks needs to take over the foreclosure modification process immediately.
Foreclosures and the TARP modification money need to be moved to HUD and away from the banks buddies and kissing cousins at Treasury for anything to work.
A special commission or authority needs to be able to review whether foreclosures already executed where based on valid or fraudulent paperwork,and void any that were not based on correct signatures and notarizations.
We need to devise an insurance program for homeowners to protect their mortgages against downturns and foreclosure risks so that citizen wealth is preserved, rather than just devising an insurance program for banks.  [Professor Steve Soifer, University of Maryland School of Social Work and I have been working on this program together.]

The  banks have to finally be made to realize that property means something to the working stiff, not just the Wall Street swell, and our rights must be protected by our elected representatives as well.  This is out of hand, and heads will continue to roll unless we finally start protecting people and their fight to hold on to their homes.

Tegucigalpa and Mexico City

It was a little more complicated than that from what I could tell.  The bank  had been swept up in a public/private takeover which was going to require ACORN International to do a fair amount of research and figure out, but especially since the golpe de estadio, it was no longer a worker and poor family friendly institution.  Even with the political  turmoil which only exacerbated the worldwide Great Recession, the bank had now become unwilling to meet and was maintaining interest rates that were way out of whack in these times.

What about the unions?  Had they moved their money out of the bank and stopped endorsing the bank once the private interests took over?  The answer according to the organizers seemed to be “No.”  How could  they not be ashamed of what was being done with their money now?  They would be according to the people I talked to but no one had looked hard enough at their practices yet.

This might be some leverage in moving forward to improve living conditions in the colonias with an active campaign and care to avoid the political repression that seemed to weigh so heavily on every sentence and each part of every conversation.  Yes, the organizers were saying, it could be done, si se puede, but we would have to be very, very careful.  People could be killed.

This is not the normal nature of an organizing and campaign conversation obviously!

Walking around the colonias, the huge towers for TIGO, the telecommunications giant were everywhere in the middle of the barrio?  What were they doing?

Looking at the waste water runoff, I found myself looking down the mountain at a runway of the international airport.  I talked to the organizers about a giant banner that we could put up and take down and spread around to sent our message clearly and carefully:  Beinvenidos Turistas!  You are drinking our shit!  In Spanish of course, but powerfully making the point that without potable water or any sewerage facility, the runoff from the colonias was going right down to the airport grounds.

Even with the government paralyzed, the Banco de Los Trabajadores could put up the loans for housing improvements needed in the colonias and TIGO and the Airport, managed by the Swiss incidentally, could guarantee them.

It would take careful planning, lots of work, and great care, but there were many ways to skin this cat!  And, that’s what community organizing is all about!

New Orleans

In recent years sitting across the table from banks and sub-prime lending companies, we had this argument frequently over what was called “stated income” loans (I cover this at more length in my book, Citizen Wealth). Stated income allowed the potential borrower to prove their income in a variety of ways that substituted for the simple and standard W2 that a direct employee could provide.  This allowed tipped employees as well as self-employed workers to prove their incomes without W2’s.  The fact that many of the companies did virtually nothing to supervise the broker networks “manufacturing” of stated income loans was the problem (New Century had half of its portfolio in stated income loans right before the collapse!), not the existence of the loan itself.

The casualization of the workforce has increased the number of workers in self-employed categories along with the arcane definitions in labor law.  Not only do these self-employed categories include fancy jobs (though not necessarily high paying) as artists, musicians, consultants, and investors, but also straight forward jobs like taxi drivers, construction workers, many healthcare workers, some hospitality workers, and a pile of others.

Of the more than 20.4 self-employed workers (and even with the most modest family calculations we could double or triple the impact here), some already own homes, but for those attempting to access the assets to create citizen wealth, this arbitrary credit refusal is unjust, inequitable, and bad public policy.

Fannie Mae seems to be part of the problem here.  David Streitfield’s article includes this:

A Fannie spokesman, Brian Faith, said tighter regulations screened out those unprepared to be owners.

“One of the important lessons learned in the past few years is that it is not enough to help a borrower own a home,” Mr. Faith said. “We must also help ensure that they will be able to stay in the home over the long term.”

If there is a prize for gratuitous and meaningless statements for the day, then here’s to Brian Faith!  Not only were these NOT the lessons learned in the “past few years,” but even arguably if they were, Fannie and the rest of the gang are doing NOTHING to “help ensure” folks who want to own and are qualified to somehow achieve sustainability and security “over the long term.”  Please send me a copy of THAT program and its non-existent guidelines?

In the meantime, as I often say, “there’s no substitute for good judgment,” and that’s supposedly what these folks collect fees and interest to exercise.  Get at it!