Posts Tagged ‘Wells Fargo’

ECONOMY   AlterNet / By Zach Carter

Treasury Makes Shocking Admission: Program for Struggling Homeowners Just a Ploy to Enrich Big Banks

The Treasury Dept.’s mortgage relief program isn’t just failing, it’s actively funneling money from homeowners to bankers, and Treasury likes it that way.

August 25, 2010 |

Flickr Creative Commons / Jay Tamboli

The Treasury Department’s plan to help struggling homeowners has been failing miserably for months. The program is poorly designed, has been poorly implemented and only a tiny percentage of borrowers eligible for help have actually received any meaningful assistance. The initiative lowers monthly payments for borrowers, but fails to reduce their overall debt burden, often increasing that burden, funneling money to banks that borrowers could have saved by simply renting a different home. But according to recent startling admissions from top Treasury officials, the mortgage plan was actually not really about helping borrowers at all. Instead, it was simply one element of a broader effort to pump money into big banks and shield them from losses on bad loans. That’s right: Treasury openly admitted that its only serious program purporting to help ordinary citizens was actually a cynical move to help Wall Street megabanks.

Treasury Secretary Timothy Geithner has long made it clear his financial repair plan was based on allowing large banks to “earn” their way back to health. By creating conditions where banks could make easy profits, Getithner and top officials at the Federal Reserve hoped to limit the amount of money taxpayers would have to directly inject into the banks. This was never the best strategy for fixing the financial sector, but it wasn’t outright predation, either. But now the Treasury Department is making explicit that it was—and remains—willing to let those so-called “earnings” come directly at the expense of people hit hardest by the recession: struggling borrowers trying to stay in their homes.

This account comes secondhand from a cadre of bloggers who were invited to speak on “deep background” with a handful of Treasury officials—meaning that bloggers would get to speak frankly with top-level folks, but not quote them directly, or attribute views to specific people. But the accounts are all generally distressing, particularly this one from economics whiz Steve Waldman:

The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system,” “the economy,” and “ordinary Americans.”

Mike Konczal confirms Waldman’s observation, and Felix Salmon also says the program has done little more than delay foreclosures, as does Shahien Nasiripour.

Here’s how Geithner’s Home Affordability Modification Program (HAMP) works, or rather, doesn’t work. Troubled borrowers can apply to their banks for relief on monthly mortgage payments. Banks who agree to participate in HAMP also agree to do a bunch of things to reduce the monthly payments for borrowers, from lowering interest rates to extending the term of the loan. This is good for the bank, because they get to keep accepting payments from borrowers without taking a big loss on the loan.

But the deal is not so good for homeowners. Banks don’t actually have to reduce how much borrowers actually owe them—only how much they have to pay out every month. For borrowers who owe tens of thousands of dollars more than their home is worth, the deal just means that they’ll be pissing away their money to the bank more slowly than they were before. If a homeowner spends $3,000 a month on her mortgage, HAMP might help her get that payment down to $2,500. But if she still owes $50,000 more than her house is worth, the plan hasn’t actually helped her. Even if the borrower gets through HAMP’s three-month trial period, the plan has done nothing but convince her to funnel another $7,500 to a bank that doesn’t deserve it.

Most borrowers go into the program expecting real relief. After the trial period, most realize that it doesn’t actually help them, and end up walking away from the mortgage anyway. These borrowers would have been much better off simply finding a new place to rent without going through the HAMP rigamarole. This example is a good case, one where the bank doesn’t jack up the borrower’s long-term debt burden in exchange for lowering monthly payments

But the benefit to banks goes much deeper. On any given mortgage, it’s almost always in a bank’s best interest to cut a deal with borrowers. Losses from foreclosure are very high, and if a bank agrees to reduce a borrower’s debt burden, it will take an upfront hit, but one much lower than what it would ultimately take from foreclosure.

That logic changes dramatically when millions of loans are defaulting at once. Under those circumstances, bank balance sheets are so fragile they literally cannot afford to absorb lots of losses all at once. But if those foreclosures unravel slowly, over time, the bank can still stay afloat, even if it has to bear greater costs further down the line. As former Deutsche Bank executive Raj Date told me all the way back in July 2009:

If management is only seeking to maximize value for their existing shareholders, it’s possible that maybe they’re doing the right thing. If you’re able to let things bleed out slowly over time but still generate some earnings, if it bleeds slow enough, it doesn’t matter how long it takes, because you never have to issue more stock and dilute your shareholders. You could make an argument from the point of view of any bank management team that not taking a day-one hit is actually a smart idea.

Date, it should be emphasized, does not condone this strategy. He now heads the Cambridge Winter Center for Financial Institutions Policy, and is a staunch advocate of financial reform.

If, say, Wells Fargo had taken a $20 billion hit on its mortgage book in February 2009, it very well could have failed. But losing a few billion dollars here and there over the course of three or four years means that Wells Fargo can stay in business and keep paying out bonuses, even if it ultimately sees losses of $25 or $30 billion on its bad loans.

So HAMP is doing a great job if all you care about is the solvency of Wall Street banks. But if borrowers know from the get-go they’re not going to get a decent deal, they have no incentive to keep paying their mortgage. Instead of tapping out their savings and hitting up relatives for help with monthly payments, borrowers could have saved their money, walked away from the mortgage and found more sensible rental housing. The administration’s plan has effectively helped funnel more money to Wall Street at the expense of homeowners. And now the Treasury Department is going around and telling bloggers this is actually a positive feature of the program, since it meant that big banks didn’t go out of business.

There were always other options for dealing with the banks and preventing foreclosures. Putting big, faltering banks into receivership—also known as “nationalization”—has been a powerful policy tool used by every administration from Franklin Delano Roosevelt to Ronald Reagan. When the government takes over a bank, it forces it to take those big losses upfront, wiping out shareholders in the process. Investors lose a lot of money (and they should, since they made a lousy investment), but the bank is cleaned up quickly and can start lending again. No silly games with borrowers, and no funky accounting gimmicks.

Most of the blame for the refusal to nationalize failing Wall Street titans lies with the Bush administration, although Obama had the opportunity to make a move early in his tenure, and Obama’s Treasury Secretary, Geithner, was a major bailout decision-maker on the Bush team as president of the New York Fed.

But Bush cannot be blamed for the HAMP nightmare, and plenty of other options were available for coping with foreclosure when Obama took office. One of the best solutions was just endorsed by the Cleveland Federal Reserve, in the face of prolonged and fervent opposition from the bank lobby. Unlike every other form of consumer debt, mortgages are immune from renegotiation in bankruptcy. If you file for bankruptcy, a judge literally cannot reduce how much you owe on your mortgage. The only way out of the debt is foreclosure, giving banks tremendous power in negotiations with borrowers.

This exemption is arbitrary and unfair, but the bank lobby contends it keeps mortgage rates lower. It’s just not true, as a new paper by Cleveland Fed economists Thomas J. Fitzpatrick IV and James B. Thomson makes clear. Family farms were exempted from bankruptcy until 1986, and bankers bloviated about the same imminent risk of unaffordable farm loans when Congress considered ending that status to prevent farm foreclosures.

When Congress did repeal the exemption, farm loans didn’t get any more expensive, and bankruptcy filings didn’t even increase very much. Instead, a flood of farmers entered into negotiations with banks to have their debt burden reduced. Banks took losses, but foreclosures were avoided. Society was better off, even if bank investors had to take a hit.

But instead, Treasury is actively encouraging troubled homeowners to subsidize giant banks. What’s worse, as Mike Konczal notes, they’re hoping to expand the program significantly.

There is a flip-side to the current HAMP nightmare, one that borrowers faced with mortgage problems should attend to closely and discuss with financial planners. In many cases, banks don’t actually want to foreclose quickly, because doing so entails taking losses right away, and most of them would rather drag those losses out over time. The accounting rules are so loose that banks can actually book phantom “income” on monthly payments that borrowers do not actually make. Some borrowers have been able to benefit from this situation by simply refusing to pay their mortgages. Since banks often want to delay repossessing the house in order to benefit from tricky accounting, borrowers can live rent-free in their homes for a year or more before the bank finally has to lower the hatchet. Of course, you won’t hear Treasury encouraging people to stop paying their mortgages. If too many people just stop paying, then banks are out a lot of money fast, sparking big, quick losses for banks — the exact situation HAMP is trying to avoid.

Borrowers who choose not to pay their mortgages don’t even have to feel guilty about it. Refusing to pay is actually modestly good for the economy, since instead of wasting their money on bank payments, borrowers have more cash to spend at other businesses, creating demand and encouraging job growth. By contrast, top-level Treasury officials who have enriched bankers on the backs of troubled borrowers should be looking for other lines of work.

Zach Carter is AlterNet’s economics editor. He is a fellow at Campaign for America’s Future, writes a weekly blog on the economy for the Media Consortium and is a frequent contributor to The Nation magazine.


LEHMAN BROTHERS’ Mortgage Troubles (nationally & locally); Evidence of Foreclosure Fraud, Deception, and Conspiracy with Wells Fargo; Deceptive Judicial Filings

Posted by Barbara Ann Jackson on September 14th 2008 to News

*REVISED again on 11/16/2008 (Freddie Mac, Wells Fargo & Louisiana Judicial Collusion; falsified IRS form 1099-A, etc.)~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

LEHMAN BROTHERS’ mortgage troubles provides a yet further occasion to call attention to Louisiana FORECLOSURE FRAUDS being carried out by via deceptive collections and Wells Fargo through use of the judicial system to further real estate FORECLOSURE racketeering and IRS fraud. In conjunction with the big Lehman Brother picture, the following is a small (local) component affecting Lehman’s decline.

Referring to a foreclosure case entitled:  “Lehman Brothers Bank v. Clement Bailey,” case #2007-5610 in Orleans Parish Civil District Court, and New Orleans federal case #08-3881, entitled:  “Wells Fargo v. Clement Bailey, JP Morgan Chase, Bank of America, and Allstate Flood Insurance Program.” The KEY issue about these 2 cases is that Louisiana debt collector attorney Herschel C. Adcock, Jr., filed a Lehman Brothers foreclosure in State Court claiming Lehman holds the note.  But, Wells Fargo filed the latter lawsuit claiming Wells Fargo owns that same note.  If Wells Fargo succeeds in concealing Lehman Brothers’ (true or untrue) claim against Clement Bailey’s property, Wells Fargo and Mr. Adcock will wound up gleaning $$$$ –most likely from JP Morgan Chase, Bank of America, and Allstate Flood Insurance.  [As mentioned, millions, perhaps billions of dollars being unlawfully gleaned by unscrupulous debt collectors through fraudulent foreclosures has too long remained an unheeded atrocity for which distressed property owners have long been subjected to, but now also impacts Investors!]  **MORE DETAILS, COURT PLEADINGS, and Prima Facie evidence of the orchestrated foreclosure fraud being engaged in involving Lehman Brothers, Wells Fargo, and Mr. Adcock –AS WELL AS A COPY OF THE LETTER Mr. Adcock (and others) wrote to JP Morgan Chase, is posted in this article. 

However, throughout this website is Res Ipsa Loquitur proof –with court pleadings / records  unequivocally showing how, for many years, Baton Rouge, LA collection lawyers Herschel C. Adcock, Jr.,  and Brett P. Furr, as well as the Monroe, LA debt collection law firm of Dean Morris have been utilizing the courts of certain New Orleans federal judges to unlawfully obtain and flip (via lack of “real party” interest foreclosures, “Lift Stay” Motions despite lack of standing filed in Bankruptcy Court ) real estate properties.  SEE ALSO especially proof & facts posted August 8, 2008, the letter to the Louisiana Secretary of State’s office concerning the deliberate falsified IRS form 1099-A that was filed by WELLS FARGO BANK, NA. **CLICK this link>> Statement to the Louisiana Secretary of State concerning Wells Fargo 1099’s.

Despite probes into factors of  the mortgage crisis, there has been almost no investigation of the most lethal mortgage mess component: FORECLOSURE ATTORNEYS DEBT COLLECTION ABUSES and JUDICIAL COLLUSION.  Congress needs to seek the whereabouts of perhaps billions of dollars and massive amounts of real estate that winds up in the collector attorneys’ possession -as well as examine the scores of attorney bankruptcy court frauds.

Such attorneys deliberately file foreclosures naming defunct mortgage companies, or companies which no longer hold the notes; or affix collectors’ fees exceeding “Acceleration Clauses.”  If homeowners sue for “Unfair Debt Collection Practices,” collectors make more $$ through protracted litigations. Additionally, some collectors file in Bankruptcy Court falsified motions to “Lift Stay” pleadings for purposes of accomplishing SIMULATED AUCTIONS of real estate properties.

Along these same lines, homeowner rescue and congressional measures for some people facing foreclosure is not even needed due to the fact that -for incalculable numbers of foreclosures- innumerable foreclosures are being filed by mortgage plaintiffs which LACK STANDING, and therefore are NULL foreclosures.  Thus, Congress also should exert equal energy into probing valid of foreclosure proceedings –especially in States such as corrupt Louisiana which has not outlawed “CONFESSED JUDGMENTS.”

Further, aside from sheer acts of torture, judicial misrepresentations, and abusive practices upon consumers (which is a major reason why most states in the USA have banned confessed judgments) –this particular kind of foreclosure fraud really benefits unscrupulous mortgage lenders because it allows those lenders to repeatedly FLIP properties, and it allows such lenders to repeatedly mislead WALL STREET Investors into believing the real estate market is thriving. However, the more realistic picture is that often foreclosure collector attorneys gain the true benefit.  Compare what happened with the INTERNAL REVENUE’s unrealized expectations, of which only $31 million of the IRS’s projected $185 million was obtained –and the legal bill added to the negative. “IRS Tax Advocate Renews Criticism of Private Collectors.”


This first exhibit here is from the Orleans Parish Civil Sheriff Docket record for the Lehman Bros. v. Clement Bailey foreclosure that was filed by debt collector attorney Herschel C. Adcock, Jr.  Undeniably, this foreclosure case is asserting that Lehman Brothers owns the note for Bailey’s house.  Among other things, as shown by docket entry number 10, on 11/30/2007 an “ADA” code was entered.  A closer look into what that means is that amount due attorney reflects an amount to Adcock of $2,203.00.

Bailey 1.jpg

The second exhibits are a letter dated October 10, 2007 written by Adcock to J.P.Morgan Chase, wherein Adcock informs that Adcock is representing -not Lehman Brothers’ interest in the Bailey property, but Wells Fargo; and a page from the Orleans Parish Civil Sheriff website pertaining to real estate auctions / seizures. [In Louisiana, the foreclosure attorney is often listed as “plaintiff.” This misleading factor goes a long way toward (intentional or unintentional) enablement of deceptive and simulated auctions and fraudulent conveyances.  Furthermore, because the New Orleans Clerk of Court, Dale Atkins, admittedly (*READ>> Dangerous, Dale N. Atkins, Clerk of Court: Killing Us Softly) STEERS newly-filed lawsuits to the judge of Atkins’ selection, and Atkins facilitates and accommodates groundless removal of state court cases to FORUM-SHOPPED federal judges, it is not easy to tackle the long-standing Louisiana White Collar real estate flippings and foreclosure frauds.]  At any rate, Adcock was clearly seeking $$$ from Chase Bank, Allstate, and Bank of America purportedly on Wells Fargo’s behalf while at the same time Adcock was maintaining a foreclosure case on Lehman’s behalf.
Bailey -Adcock ltr.jpg Lehman Brothers foreclosure3.jpg
This third exhibit is page one of the lawsuit that Wells Fargo filed in state court against Bailey, J.P. Morgan Chase, Bank of America, and Allstate Insurance. (Defendant Allstate removed the Wells Fargo case to federal court.) Lehman Brothers is nowhere mentioned in that lawsuit.  Not only does it appear that Wells Fargo is in conspiracy with Adcock to deceptively gain money from those defendants, those defendants are being forced to defend a sham lawsuit.  In fact, the language of the entire lawsuit omits a whole lot as to why / how Wells Fargo is holder of the note.Bailey lawsuit.jpg