Excerpt: "What is needed is leadership by President Obama on this issue. He should form an interagency task force to investigate and pursue potential civil and criminal wrongdoing by institutions and people whose conduct in the mortgage chain had the greatest economic impact."
#OccupyHomes march in Brooklyn. (photo: Josh Harkinson)
On the Trail of Mortgage Fraud
17 January 12
ueens has been harder hit by foreclosures than any other New York borough, and the Federal Bureau of Investigation believes it has found a culprit. Last July, the F.B.I. accused Edul Ahmad, a local broker, of a $50 million mortgage fraud, saying he lured fellow immigrants into subprime mortgages, inflated the values of their properties and concealed his involvement in deals that were ruinous for scores, if not hundreds, of borrowers. Mr. Ahmad pleaded not guilty, and posted $2.5 million bail. Now, according to court papers, as reported in The Times, he is plea-bargaining with federal prosecutors.
Whatever Mr. Ahmad did or did not do, one thing is sure: he did not act alone. The attention Mr. Ahmad has drawn highlights the relative lack of scrutiny of the big banks and their senior executives. Big banks created demand and provided credit for dubious mortgage loans, which they bundled into securities and sold to investors. If not for reckless lending and heedless securitizing, there would have been no mortgage bubble and no mortgage bust - and, in all probability, no Edul Ahmad.
There have been some prominent civil suits with settlements and fines, including the $550 million deal between Goldman Sachs and the Securities and Exchange Commission over the misleading of investors in a mortgage-backed investment. Bank of America, which bought Countrywide Financial in 2008, recently agreed to pay $335 million to settle a lawsuit by the Justice Department over Countrywide’s practice of steering black and Hispanic borrowers to subprime loans while similarly qualified white borrowers got better terms. But such cases have been narrowly focused and rarely name top executives.
What is needed is leadership by President Obama on this issue. He should form an interagency task force to investigate and pursue potential civil and criminal wrongdoing by institutions and people whose conduct in the mortgage chain had the greatest economic impact.
That would mean focusing on the large banks and their top echelons. The investigators would need to include the departments of Justice and Housing and Urban Development, the S.E.C. and the Internal Revenue Service, as well as bank regulators, with the formal co-operation of the most aggressive state attorneys general. The task force would need a leader with the impulses of a crusading prosecutor.
The investigations to date have not had this character. The Goldman Sachs settlement, for instance, was over one security and put the blame on a midlevel banker. When executives have been personally penalized, the fines have been a fraction of the wealth they amassed during the bubble. From 2000 to 2008, Angelo Mozilo, the chief executive of Countrywide, received total compensation estimated at $521.5 million; in 2010, without admitting or denying any wrongdoing, he paid $67.5 million to settle civil fraud charges brought by the S.E.C. The Justice Department, for its part, decided not to pursue a possible criminal case against Mr. Mozilo.
Lawsuits by state attorneys general, notably in Massachusetts and Nevada, may ultimately prove more revealing and helpful to wronged homeowners, because they tend to focus on foreclosure abuses by banks. New York’s attorney general, Eric Schneiderman, is building a comprehensive investigation of the mortgage chain from the origination and securitization of loans to banks’ foreclosure practices. That may lead to more actors in the system being held accountable for creating the mortgage crisis. Mr. Ahmad is accused of swindling naïve borrowers in Queens. There is more to the mortgage mess than that.
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Comments
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We cannot waste time and money figuring out which foreclosures are because the person was fooled a crooked lender or a crooked broker or whatever. We cannot waste time and money trying to determine if you are in default because you lost your job, got your pay reduced, have unexpected medical bills. And last of all, the most important reason to put all foreclosures on hold, families keep a roof over their head.
Second, during the freeze; which is indefinite in length; banks can renegotiate the loans that went bad. Since another hold feature is that interest cannot compound during the freeze, banks have an incentive to renegotiate.
So far, this has cost the US treasury exactly $0.00 in payouts.
Now the banks will have time to figure out who actually owns a house. Convince Congress that MERS should be made illegal since it distorts the value of the entire mortgage industry.
Once the banks have disentangled ALL mortgages from MERS and have clearly defined ownership of properties, foreclosures may begin again as long as the documents are lined in accordance with whatever state has the strictest laws.
"In June 2006, Lew was named chief operating officer of Citigroup's Alternative Investments unit, a proprietary trading group. The unit he oversaw invested in a hedge fund "that bet on the housing market to collapse." ... He is a member of the Council on Foreign Relations, the Brookings Institution Hamilton Project Advisory Board, ... On January 9, 2012, President Obama announced that Lew would replace Bill Daley as White House Chief of Staff." (wikipedia)
Counterfeiting: Through financial bubbles and loan pyramids, it creates facsimiles of official money for private gain unrelated to anything of real value.
Securities fraud: Selling shares in asset bubbles that are maintained solely by the constant inflow of new money is, in effect, a Ponzi scheme.
Reverse insurance fraud: Insurance fraud, by common definition, occurs when the insured deceives the insurer. In reverse insurance fraud, the insurer deceives the insured. In Wall Street practice this involves collecting premiums to cover risks the insurer lacks adequate reserves to cover and then refusing to pay legitimate claims.
Predatory lending: Using a combination of extortion, fraud, deceptive promises, and usury, predatory lenders lure the desperate into perpetual debt at exorbitant interest rates." (http://www.yesmagazine.org/blogs/david-korten/7-ways-to-stop-wall-streets-con-game)
(under the false assumption that they don't own the government - and everything else)
If most Americans took their money out of the major banks, we could deal them a blow they probably couldn't recover from -- and which would leave room to create alternative banking entities.
You are right. I do seriously doubt that any ideas to make this mortgage fraud disaster right will not get by any elected group of people. Right or Left. My point is that trying to determine who to blame and also punish while the victim is on the floor, barely alive, and bleeding profusely is an accessory to the crime.
On a parallel path, banks should be able to enforce property maintenance clauses in the mortgage. If a home is not being maintained, do the maintenance and add it into the principal (sp?). Once the foreclosure process begins, the bank MUST pay for maintenance. Cities and towns can petition the US government to assist in enforcing the maintenance requirements of the locale.
Now that we have stabilized and forced the banks to act within the law. Any bank that cannot comply will be taken over by the federal government and depending on its size will be either split up or merged with another collapsed bank. States have first dibs.
The next step is to go after the too big to fail banks, breaking them up and reinstating the parts of Glass-Steagall (sp?) that were erased by Clinton's signature.
Finally, start prosecuting the bastards. Now that the mess is cleaned up, we can about blaming and punishing people. They will have a lesser position of strength in any legal proceeding attempts at a plea bargain. Their so-called expertise will no longer be needed and the Government is acting from a position of strength.
Just my 2 cents, but in simple terms, lets fix the problem first. That is more important than spending time and money blaming people. Plenty of time for that afterward.
I they can't keep up the property, they shouldn't have taken on the responsibility in the first place and local government should take it over and return it to the defrauded homeowners.
I think you may be missing the objective. By actually performing the cleanup and charging it back to banks that let the property go "bad" banks will soon realize that they should resist foreclosing because of the financial hardships you are calling out. Also the reason I noted that cities and town can use the Federal government to assist them. I forgot to note that the cost is entirely borne by the banks.
I am not claiming that this idea is perfect, but if we can keep the ideas coming, somehow (I can be mystical at times) the zeitgeist will get up some momentum.
"...Angelo Mozilo, the chief executive of Countrywide, received total compensation estimated at $521.5 million; in 2010, without admitting or denying any wrongdoing, he paid $67.5 million to settle civil fraud charges brought by the S.E.C."
He, Mozilo, paid NOTHING. His Employer, BofA, ie the stockholders & customers, PAID that so HE could WALK. This is the quintessential debauched problem with these so-called "settlements." The perp walks, and everybody else involved picks up the tab for him...IT'S NUTS!!!
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