Blog on the Run: Reloaded

Tuesday, November 29, 2011 8:25 pm

Theft baked in

Fraud and conspiracy were written into the computer code that handled mortgage foreclosures, reports Matt Stoller at New Deal 2.0 (h/t Fec):

The same banks that ran the corrupt home mortgage securitization chain are now committing rampant fraud in the foreclosure crisis. Here’s New Orleans Bankruptcy Judge Elizabeth Magner discussing problems at Lender Processing Services, the company that handles 80 percent of foreclosures on behalf of large banks (emphasis added):

In Jones v. Wells Fargo, this Court discovered that a highly automated software package owned by LPS and identified as MSP administered loans for servicers and note holders but was programed to apply payments contrary to the terms of the notes and mortgages.

The bad behavior is so rampant that banks think nothing of a contractor programming fraud into the software. This is shocking behavior and has led to untold numbers of foreclosures, as well as the theft of huge sums of money from mortgage-backed securities investors.

Here’s how the fraud works: Mortgage loan notes are very clear on the schedule of how payments are to be applied. First, the money goes to interest, then principal, then all other fees. That means that investors get paid first and servicers, who collect late fees for themselves, get paid either when they collect the late fee from the debtor or from the liquidation of the foreclosure. And fees are supposed to be capitalized into the overall mortgage amount. If you are late one month, it isn’t supposed to push you into being late on all subsequent months.

The software, however, prioritizes servicer fees above the contractually required interest and principal to investors. This isn’t a one-off; it’s programmed. It’s the very definition of a conspiracy! Who knows how many people paid late and then were pushed into a spiral of fees that led into a foreclosure? It’s the perfect crime, and many of the victims had paid every single mortgage payment.

(That would be the same Wells Fargo that just took over all the branches of Wachovia, which had been a venerable institution in this state for decades.)

A prediction: No one will go to prison for this. That’s because a federal bankruptcy judge is waving a red flag, banging on a fire alarm and yelling, “Fraud! Fraud!” and the Justice Department is doing exactly jack squat. IANAL, but I could run the Justice Department better than Eric Holder. In fact, my kitchen table could run the Justice Department better than Eric Holder.

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Wednesday, February 16, 2011 8:31 pm

Why am I not surprised?

My junior senator, Kay Hagan, appears hell-bent on topping predecessor Elizabeth Dole’s world land speed record for pissing away credibility.

You’ll recall that apparently she has some issues with investigating and prosecuting war crimes (and more about that later). Now, she’s apparently decided to join the criminals by becoming a co-chair of Third Way, a bogus corporate “think tank” that recently advanced the novel idea that banks ought to be able to foreclose on property to which they do not, in fact, have clear title.

Geez, Kay, why not just legalize cocaine trafficking and money laundering and call it Miller Time.

Friday, January 14, 2011 8:09 pm

Third Way: The rule of law is great, except when we get caught breaking it, and then it’s not

The bogus corporate think tank Third Way, which just spawned the new White House Chief of Staff, all of a sudden has decided that maybe requiring banks to actually have the legal right to foreclose on properties they’re trying to foreclose on might be a little excessive.

Look, we’re in the mess we’re in because banks committed nontrivial amounts of fraud. They sold stuff they didn’t own, pure and simple. If I try that with a hubcap or a stereo, I go to prison. You can’t put a bank in prison, more’s the pity, but you can make them eat the cost of stuff they claim to own but actually don’t. And if that bankrupts them, well, that’s what we have a Federal Deposit Insurance Corporation for. So the CEOs and stockholders and bondholders take it in the teeth? No reason they should be any different from the rest of us.

Friday, November 27, 2009 5:12 pm

Odds and ends for 11/27

  • Down in the desert: Dubai, whose potential sovereign-debt default is in today’s news, is messed up, economically and in other ways. Zero Hedge’s Marla Singer, who has spent time there, offers a pretty readable summary. Key takeaway: Dubai’s travails say a lot less about the pitfalls of capitalism than meets the eye.
  • Housing-market update: I’m not smart enough to know what to do about this, but more U.S. homes are in delinquency or foreclosure than are for sale.
  • The “deadbeat stimulus”: At least $160 billion a year.
  • Tim F. observes how the health-care reform bill is being set up to fail.
  • Martyrs: The people trying desperately to help Sarah Palin run her life are getting no help at all from the boss. I’m shocked.
  • The Obama-Bush Administration: The Obama Justice Department’s arguments against exoneration for former Alabama Gov. Don Siegelman are being prepared by the very same people involved in the original frame-up — the one in which Karl Rove was involved up to his eyeballs. So spare me all this talk about how much better things are in government now that Obama has replaced Bush.
  • So if we fire all the execs who ran the banking system into the ground, the banking system will crash and burn? Well, pardon me for agreeing with a former public official who barebacked a whore, but I’m thinking we should test that hypothesis.
  • Apologies are fine, but the Roman Catholic Church needs to take some of the time it’s spending on apologies and spend it on turning the guilty over to police. Also? Any institution with this kind of problem needs to get itself fixed before presuming to comment upon moral issues.
  • Relatedly, not only does a 2007 court filing by Bishop Thomas J. Tobin, last seen denying communion to Rep. Patrick Kennedy because Kennedy won’t oppose abortion, admit the existence of more than twice as many accused priests as the diocese had admitted just three years earlier, it also cites that high number (~125) as a reason why court-ordered disclosure of documents would be excessively “burdensome.” Awwwww …
  • Unproductive speculation: If anyone has any ideas about how to end it other than by taxing financial transactions — an idea devised in 1972 by a Nobel winner, by the way — I’m all ears. But it needs to end.

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