Saturday, December 25, 2010

Merry X-mas; Open thread

Find out who has been naughty and nice. Track Santa via NORAD's helpful website.

How Merrill Lynch was destroyed within

Written by Biloxi

Charles E. Merrill  and Edmund C. Lynch, the original founders of Merrill Lynch, would roll over in their graves to see how their empire close to 100 years ago would go up in flames from greed within the company employees and executives. When mortgage-backed securities became a major concern of the investors in the real estate market, Merrill Lynch came up with a solution: Bankers at the company to offer bonuses to Merrill Lynch's own traders to invest in the securities.

From a new piece from ProPublica, Merrill Lynch created a new unit in 2006 and bought “tens of billions of dollars” of Merrill’s AAA-rated mortgage-backed assets. And these value of the securities fell to pennies on the dollar that later helped to sink Merrill Lynch. How did Merrill Lynch make a deal with the Merrill Lynch traders? Merrill Lynch offered big bucks in exchange for buying risky securities. Propublica wrote:

Within Merrill Lynch, some traders called it a “million for a billion” — meaning a million dollars in bonus money for every billion taken on in Merrill mortgage securities. Others referred to it as “the subsidy.” One former executive called it bribery. The group was being compensated for how much it took, not whether it made money….

The agreement, according to a former executive with direct knowledge of it, generally worked like this: Each time Merrill’s CDO salesmen created a deal, they shared part of the fee they generated with the special group that had been created to “buy” some of the CDO. A billion-dollar CDO generated about $7 million in fees for Merrill’s CDO sales group. The new group that bought the CDO would usually be credited with a profit between $2 million and $3 million — despite the fact that the trade often lost money.

The major question should be asked is whether the former Merrill Lynch CEO John Thain benefitted from the new unit's operation. After all, Mr. Thain did lavish himself in bonuses and expendures at the company:
On January 22, 2009, it was revealed that, in early 2008, Thain spent $1.22 million in corporate funds to renovate two conference rooms, a reception area, and his office, including $131,000 for area rugs, a $68,000 antique credenza, guest chairs costing $87,000, a $35,000 commode, and a $1,400 wastebasket. Thain subsequently apologized for his lapse in judgment, and reimbursed the company in full for the costs of the renovation

Thain accelerated approximately $4 billion in bonus payments to employees at Merrill just prior to the close of the deal with Bank of America. Bank of America was aware of the decision, as the payout was reportedly one of the conditions under the merger agreement. Speculation mounted that TARP funds were used for the bonus payments, but the TARP recipients are yet to disclose how TARP funds were segregated, or what they were used for.

In 2009, Mr. Thain is currently under investigation by then New York Attorney General Andrew Cuomo for criminal fraud. Merrill Lynch is certainly an example of how far some companies went in sowing these astronomical incentives into their business models and how certain corporate business models need reform.

Biloxi Buzz for Saturday

WikiLeaks Ramps Up Spending

Bloomberg's aides provided political support for Ground Zero mosque, released emails show  —  Mayor Bloomberg's top deputies went to great lengths to help the developers of a planned mosque near Ground Zero - even drafting a letter to the community board for them

Companies Involved In Oil Spill Now A Part Of Investigation

Hawaii Governor Takes On 'Birthers'

Last week's poll had asked:

Is Facebook co-founder a worthy winner for person of the year 2010?  JL readers answered no. This week's poll is now up.

Creation of bank dual track system in foreclosure mess

Written by Biloxi

I have been reading on so many homeowners whose homes have been mistakenly foreclosured on. Many of the homeowners were either current on their mortgage payments, applied or in process of the loan modification program, or refinanced their homes for a lower interest rate. But, what is not discussed is the dual track system that the banks initate the homeowners to miss mortgage payments to apply and qualify for a loan modification while simultanously processing those homeowners in foreclosure and attaching late fees.

Dual track system was first reported in fall of 2009 by reporter Sarah Buduson  in Phoenix, Arizona. Ms. Buduson first reported as "Parallel Foreclosure." Ms. Buduson reported a case in Arizona  on how
JP Morgan Chase Bank sold an Arizona couple's home out from under them, even as they were working on a loan modification.  Here is the video of the couple's story. Click here.  There has been more cases reported by homeowners in the media as well as in lawsuits and courts that banks create a dual track system when one system has the banks initating to homeowners to miss payments while homeowners simply attempt to apply for the government's Home Affordable Modification Program or HAMP so that homeowners can reduce their monthly mortgage payment. And the other system sets in motion of having homeowners resend loss paperwork and documents while the late fees and foreclosure process clock begins to tick against the homeowners. As a result of the dual process system, lenders ahve circumvent legal tools like affidavits that prove that a borrower's payments and documents are in order before taking their property. And one tool that has been used which has been under investigation is the use of robo-signers to sign off on foreclosure affidavits.

In Propublica, former Bank of America enployees told Nevada Attorney General that they were told to mislead homeowners of the status of their applications:

One employee told the Nevada Attorney General’s office, “I felt like I was always lying to borrowers ”

saying they were told to mislead homeowners about the status of their applications. The employee complained to a supervisor, and says of what happened next: “Her instructions in response were just to give the borrowers their status and to tell them that they are ‘in the process,’ in spite of the fact that the computer showed that nothing was happening.”

Other employees bemoaned  the poor training Bank of America provided its staff. One said, “The main point of the training is to teach us how to get customers off the phone in less than ten minutes .” Another said, “Nobody at BOA seems to  what we actually say to the borrower, as long as we get them off the phone.”

Bank executives have recently admitted in the Congressional and Senate hearing weeks ago that they use a dual track system but didn't say that they would demolish that system. In December 1 opening statement to the Senate Committee by Office of Comptroller of Currency acting head John Walsh, Mr. Walsh addressed the bank's dual track system:

We agree that this dual track is unnecessarily confusing for distressed homeowners, and the OCC is directing national bank servicers to suspend foreclosure proceedings for successfully performing modifications where they have the legal ability and are not already doing so.

Dual track system leaves non-judicial state homeowners with limited recourse. The non-judicial states allow lenders to foreclose on property without having to go through the court system. The only recourse for owners in the non-judicial states is to sue the bank. Federal Housing Finance Agency defends the dual track system while the Attorney Generals in all 50 states that are investigating bank practices want the banks to do away with the dual-track system.

The question should be asked: Who benefits from the dual tracking system? The bank servicers or investors? Well, it is certainly not the investors. In the dual track system, bank servicers benefitted from the collections of late fees, collecting incentives by the government's HAMP program, and collecting attorney fees and other fees from a foreclosure home. What does the investors lose? It is their investment from a foreclosured home. What would investors gain from a loan modification? A continuation of profits for the investors from a home that have been saved. The mortgage servicers got in the foreclosure business and not the loan modification business. Certainly, the entire mortgage servicer business model need an extreme makeover.

Bristol Palin Pays $172,000 Cash For Foreclosed Tract House In Arizona

The Arizona Republic reports:

The purchase of the five-bedroom house represents a typical real-estate saga in Arizona. Public records show the home was built in 2006 and bought for $329,560. It went into foreclosure in January of this year.

Said the person who bought the REO for $137,200 and cleaned it up and sold it to Sarah Palin’s Alaskan daughter for some reason, “I’m not sure why she wanted to buy that home, but we are real happy for her.”

No one’s sure.

Remember, this is Maricopa, Arizona. This is not a resort area. This is not Scottsdale or Sedona. This is the flat, awful, very far edge of the Phoenix sprawl. The two-lane highway that doubles as Maricopa’s “Main Street” is lined with the decrepit shacks of cotton pickers and lonesome old people waiting to die.

Friday, December 24, 2010

Open thread for Friday

Have a safe and wonderful holiday!

Biloxi Buzz for Friday

Bradley Manning Speaks About His Conditions … Sign the letter to the Commanding Officer of Bradley Manning's brig urging for Bradley's unnecessary POI order to be lifted  —  Bradley Manning, the 23
Bush Policy On Lands Is Reversed  —  The Interior Department reversed a Bush-era policy on wilderness on Thursday, restoring the authority of its Bureau of Land Management to identify and recommend new areas for protection.  —  Since 2003, the department has excluded wilderness as a criterion


Alden Berner, Legal Process Specialist Wells Fargo Home Mortgage. Signed verifications of complaints.

Courtesy of


8 Q. Did you do anything to attempt to

9 verify whether or not the original note and mortgage

10 were actually in the custody of the trustee by the

11 time the closing date for the trust occurred?

12 MR. WINSTON: Object to form.


14 BY MR. FLANAGAN: (resumed)

15 Q. Do you even get involved in that at

16 all?

17 A. No.

18 Q. Have you seen any documents that

19 establish what the relationship is between HSBC Bank

20 and Wells Fargo Home Mortgage?

21 MR. WINSTON: Object to form.


23 BY MR. FLANAGAN: (resumed)

24 Q. Do you know how it is that Wells Fargo

25 Home Mortgage came to be selected to do the

1 verification for HSBC Bank in this particular case,

2 the case?

3 MR. WINSTON: Object to form.


5 BY MR. FLANAGAN: (resumed)

6 Q. Do you know if there is some document

7 that designates you to be the person to verify on

8 behalf of HSBC Bank.

9 MR. WINSTON: Object to form.

10 THE WITNESS: Me personally?

11 MR. FLANAGAN: Yes, sir.


13 BY MR. FLANAGAN: (resumed)

14 Q. How about for Wells Fargo Bank, NA, is

15 there any document that you’re aware of that

16 designates you to have the authority to sign these

17 verifications on behalf of Wells Fargo Bank, NA?

18 MR. WINSTON: Object to form.

19 THE WITNESS: No, but I don’t need to,

20 because I’m an employee of Wells Fargo Home

21 Mortgage, which is owned by Wells Fargo Bank, N A.

22 BY MR. FLANAGAN: (resumed)

23 Q. Are they a subsidiary, as far as you

24 know?

25 A. Yes.


NY Fed rules sideline JP Morgan Chase CEO Dimon and banks

Jamie Dimon, chief executive of JP Morgan Chase, has been barred from voting on senior Federal Reserve bank appointments, under new corporate governance rules announced yesterday.

According to the New York Fed's revised procedures, all three "class A" directors are now ineligible to vote for presidents and first vice presidents of Reserve Banks.

Neither will the directors - who all represent banks - be able to approve the Fed's budget.

In a statement, the Fed's nine-member board of directors said that the change will ensure that bank directors will be unable to play "any role" in bank supervision.

The new rules were mandated in the Dodd-Frank Wall Street Reform and Consumer Protection Act and introduced on 16 December, it said.

"The board approved the revised and expanded rules, which are meant to further ensure that the board functions free from conflicts of interests, or the perception of such conflicts," it said.

Read on.

Thursday, December 23, 2010

Open thread for Thursday


RE: Emergent Amendments to Rules 1:5-6, 4:64-1 and 4:64-2

In light of irregularities in the residential foreclosure practice as reported in sworn deposition testimony in New Jersey and other states, the Court has adopted, on an emergent basis, amendments to Rules 1:5-6, 4:64-1 and 4:64-2. These amendments are effective December 20, 2010. The new rule and the amendments, along with the Order adopting them, appear with this notice. The Court’s Order also contains directions for counsel in pending uncontested residential foreclosure cases.


Biloxi Buzz for Thursday

111th Congress comes to a close; new session begins on Jan. 5  —  The House on Wednesday evening passed a motion to adjourn the 111th Congress “Sine Die”, bringing to a close Democrats four-year reign in the lower chamber.  —  It also ended what has been the most productive lame-duck session in recent memory.

Obama signs DADT repeal before big, emotional crowd  —  President Obama signed the landmark repeal of the military's “don't ask, don't tell” policy Wednesday morning, handing a major victory to advocates of gay rights and fulfilling a campaign promise to do away with a practice that he has called discriminatory.
Senate Passes Arms Control Treaty With Russia, 71-26  —  WASHINGTON — The Senate gave final approval on Wednesday to a new arms control treaty with Russia, scaling back leftover cold war nuclear arsenals and capping a surprisingly successful lame-duck session for President Obama just weeks after his party's electoral debacle

Senate Passes Health Bill for 9/11 First Responders

In a Sign of Foreclosure Flaws, Suits Claim Break-Ins by Banks

TRUCKEE, Calif. — When Mimi Ash arrived at her mountain chalet here for a weekend ski trip, she discovered that someone had broken into the home and changed the locks.

When she finally got into the house, it was empty. All of her possessions were gone: furniture, her son’s ski medals, winter clothes and family photos. Also missing was a wooden box, its top inscribed with the words “Together Forever,” that contained the ashes of her late husband, Robert.

The culprit, Ms. Ash soon learned, was not a burglar but her bank. According to a federal lawsuit filed in October by Ms. Ash, Bank of America had wrongfully foreclosed on her house and thrown out her belongings, without alerting Ms. Ash beforehand.

Continue reading here…



In submitting any future orders of reference said application shall include an affidavit from plaintiff indicating whether this loan is subject to a H.A.M.P. review and whether plaintiff is or is not prevented from proceeding with the instant foreclosure by reason of any applicable federal H.A.M.P. directives


Wednesday, December 22, 2010

Open thread for Wednesday

Arizona Attorney General Wants Bank of America Held in Contempt

PHOENIX (CN) - Bank of America violated a consent judgment it signed almost 2 years ago to provide loan modifications and help relocate borrowers, the Arizona attorney general claims in Superior Court. Attorney General Terry Goddard says BofA "has shown callous disregard for the devastating effects its servicing practices have had on individual borrowers and on the economy as a whole," and continued to make misrepresentations and foreclose on homes despite the terms of the settlement.

The consent decree, signed March 13, 2009, "resolved allegations that Countrywide [Financial Corp.] engaged in consumer fraud in its mortgage lending practices," Goddard says in his complaint in Maricopa County Court. Bank of America acquired Countrywide on July 1, 2008.

Goddard claims Bank of America has continued to misrepresent "to Arizona consumers whether they were eligible for modifications of their mortgage loans, when Bank of America would make a decision on their modification requests, whether Bank of America had approved their modification requests, why Bank of America declined their modification requests, and whether and when Bank of America would foreclose upon their homes."

Since the consent judgment was filed, the bank has "initiated foreclosure proceedings or moved eligible borrowers toward foreclosure while their requests for loan modifications are pending, despite the bank's commitment to halt foreclosures during that time," the state claims.

Biloxi Buzz for Wednesday

GOP Senator To Block 9/11 Responders Bill

Senate Kills Foreclosure Aid

House Dem: John McCain Is Holding Up Military Suicide Prevention Bill

Top German official: WikiLeaks 'no threat'

Bank of America,UBS assets seized in Italy swap probe

Dec. 21 (Bloomberg) — Italy’s finance police seized 22 million euros ($29 million) from six lenders including Bank of America Corp. amid allegations of fraud in a probe focusing on the sale of derivatives to five municipalities in central Italy.

Police said they took 15 million euros from Bank of America, and 1.7 million euros each from Deutsche Bank AG and UBS AG, according to an e-mailed statement. The remainder was seized from Natixis SA, Dexia Crediop SpA and Banca Monte Paschi di Siena SpA.

The amount represents the alleged illicit profit the banks made from selling derivatives to the city of Florence, the region of Tuscany and three other municipalities in the region, the police said. The local governments have lost about 123 million euros on the swaps that adjusted payments on 1.4 billion euros of debt, the police said.

Tuesday, December 21, 2010

Open thread for Tuesday

Fannie Mae prohibits technology vendors from charging attorneys

Attorneys and trustees assigned a Fannie Mae mortgage loan can no longer be charged any technology or electronic invoice submission fees by the servicer or a third-party vendor used by the servicer effective Feb. 1, 2011.

Fannie Mae made the announcement Monday. On Sept. 1, Fannie limited the amount vendors could charge attorneys for technology and invoicing fees to $25 per loan and $10 for submitting electronic invoices. It also prohibited any servicer from requiring or encouraging attorneys to use specified vendors.

But for any referral on or after Feb. 1, "attorneys and trustees handling Fannie Mae mortgage loans may no longer directly or indirectly be charged any technology or electronic invoice submission fees by the servicer or any outsourcing companies or third-party vendors utilized by the servicer," according to the announcement.

Read on.

Fannie Mae issued a directive today which effectively eliminates the payment of certain types of fees to firms like LPS. In LPS’s Default Services Group, which accounts for nearly half the firm’s revenues.

LPS Scorecard Redacted

Wikileaks Founder Julian Assange to Write His Memoirs

Wikileaks founder Julian Assange cleared one legal hurdle last week when he was granted bail in the U.K. over sexual assault charges filed in Sweden. And as the embattled 39-year-old Australian hacker's lawyers fight his extradition, he'll be working on a memoir. The book will be published in the U.S. by Knopf, a division of Random House, and in the U.K. by Edinburgh-based Canongate.

Canongate publisher Jamie Byng confirmed the news to DailyFinance by email, adding that the U.K. publisher was handling all translation rights. (A spokesperson for Knopf was on vacation and didn't return request for comment.) Caroline Michel of the U.K.-based literary agency Fraser, Peters & Dunlop brokered the English-language book deals, and both publishers expect Assange to deliver a finished manuscript by March, with plans to publish later in 2011.

See full article from DailyFinance:

Rove’s hand seen in Julian Assange prosecution, sources allege

From Robert Shuler of Legal Schnauzer:

Former Bush White House strategist Karl Rove likely is playing a leading role in the effort to prosecute WikiLeaks founder Julian Assange, a source with ties to the justice community tells Legal Schnauzer.

Assange was arrested last week in London for alleged sex crimes in Sweden. A lawyer for Assange said Monday that the arrest was a ruse designed to give the United States more time to build a case against Assange on other charges. The lawyer said a grand jury is being prepared in Washington, D.C., to look into WikiLeaks' activities. Meanwhile, Assange has a court date today in the UK, where he is expected to seek a release on bail.

That Assange's legal troubles would originate in Sweden probably is not a coincidence, our source says. Swedish Prime Minister Fredrik Reinfeldt has been called "the Ronald Reagan of Europe," and he has a friendship with Rove that dates back at least 10 years, to the George W. Bush campaign for president in 2000. Reinfeldt reportedly asked Rove to help with his 2010 re-election in Sweden.

On the hot seat for his apparent role in the political prosecution of former Alabama Governor Don Siegelman, Rove sought comfort in Sweden. "When [Rove] was in trouble and did not want to testify on the three times he was invited [by the U.S. Congress], he wound up in Sweden," our source says. "Further, it was [Reinfeldt] that first hired Karl when he got thrown out of the White House.

"Clearly, it appears that [Rove], who claims to be of Swedish descent, feels a kinship to Sweden . . . and he has taken advantage of it several times."

Why would Rove be interested in corralling Julian Assange? To help protect the Bush legacy, our source says. "The very guy who has released the documents that damage the Bushes the most is also the guy that the Bush's number one operative can control by being the Swedish prime minister's brain and intelligence and economic advisor."

Read on.

Ernst & Young Faces Fraud Charges in Lehman Collapse

From the Wall Street Journal:

New York prosecutors are poised to file civil fraud charges against Ernst & Young for its alleged role in the collapse of Lehman Brothers, saying the Big Four accounting firm stood by while the investment bank misled investors about its financial health…

The suit stems from transactions Lehman allegedly carried out to make its risk appear lower than it actually was…

The suit, led by Mr. Cuomo, New York’s governor-elect, could come as early as this week. It is part of a broader investigation into whether some banks misled investors by removing debt from their balance sheets before they reported their financial results to mask their true levels of risk-taking, a person familiar with the case said. The state may seek to impose fines and other penalties…

The attorney general’s investigation, which began after the bankruptcy examiner’s report, found that Ernst & Young specifically approved of Lehman’s use of Repo 105 transactions and provided the investment bank with a complete audit opinion from 2001 through 2007…

The Lehman bankruptcy examiner’s report also stated that there may be evidence to support negligence and malpractice claims against Ernst & Young regarding Lehman’s audits and its lack of response to a whistle-blower at Lehman who raised red flags about the repo trades.

California Attorney General reaches settlement with Wells Fargo estimated $2B to Californians with risky adjustable-rate mortgages

Wells Fargo certainly play it smart with the state Attorney Generals. Wells Fargo has been far aggressive unlike the other major banks to reach a mortgage settlement with the state Attorney Generals. In October, fifty state Attorney Generals announced a joint investigation into the foreclosure fraud, robo-signing, and whether the lenders misrepresented foreclosure claims. Now, Wells Fargo reaches a settlement with California.

According to state Attorney General Jerry Brown's website, Attorney General Brown has reached a settlement with Wells Fargo today that Wells Fargo is to provide loan modifications estimated at $2 billion to thousands of California homeowners with "pick-a-pay" loans and to pay an additional $32 million to thousands of borrowers who lost their homes through foreclosure. "Pick-a-pay" loans or pay option adjustable-rate are mortgage loans that allowed borrowers to make payments at various levels. According to state Attorney General website, "The highest level fully covered the monthly interest and principal due. Another level covered interest only. At the minimum level, payment was insufficient to cover the monthly interest owed, and the unpaid interest was added to the loan balance. Ultimately, the loans would reset, increasing the monthly payments dramatically." This type of loans have caused many homeowners to simply not afford the mortgage payments in the housing bubble. 

Here is a breakdown of the settlement:

Under the settlement, Wells Fargo will offer affordable loan modifications to an estimated 14,900 California borrowers with pick-a-pay loans made by World Savings or Wachovia. Many of the modifications will include significant principal forgiveness. The total value of the modifications mandated by the settlement is projected to be more than $2 billion.

Wells Fargo is also required to pay $32 million in restitution to more than 12,000 pick-a-pay borrowers in California who lost their homes through foreclosure, plus approximately $1.8 million in costs to the state. Payments to foreclosed homeowners are expected to average more than $2,650.

World Savings was eventually taken over by Wachovia in 2006. And Wells Fargo taken over Wachovia in October 2008. None of the loans were made by Wells Fargo. These "pick-a-pay" loans were from Wachovia and World Savings, the banks that Wells Fargo acquired.

According to the state Attorney General website, Wells Fargo will send notice to the Calfornia borrowers who are eligible for a loan modification within the next two months, and those borrowers who suffered foreclosures should be notified during the first six months of 2011.  Here is a copy of the settlement. Click here.

In addition to California, Wells Fargo has entered similar agreements with the following states: Arizona, Colorado, Kansas, Florida, Illinois, Nevada, New Jersey, Texas and Washington.

Freddie Mac: Foreclosure suspension for active duty military

OOHOORAH! Foreclosures Suspended for Active Duty Military!

Freddie Mac has instructed its loan servicers to delay initiating foreclosure for at least nine months for financially troubled service members who are released from active duty through the end of 2011 and have Freddie Mac-owned mortgages

N.J. Supreme Court intervenes in mortgage foreclosures by six lenders

New Jersey's highest court has stepped in to monitor the filing of real estate foreclosures in the state.

Supreme Court Chief Justice Stuart Rabner today announced that six lenders suspected of irregularities will have to present a case in court next month or face having their foreclosure actions suspended.

Rabner writes that the court "has become increasingly concerned about the accuracy and reliability of documents submitted to the Office of Foreclosure."

A special master could be appointed to review the foreclosure practices of companies including Wells Fargo, JP Morgan Chase and Citibank.

Order to Show Cause Issued by Judge Mary Jacobson - Residential Mortgage Foreclosures - Robosigning

Biloxi Buzz for Tuesday

Dems Introduce Bill To Give Unemployment Benefits To 99ers

Citigroup Analyst Jumps To Her Death In Manhattan

GOP Ends Blockade Of Obama's Judicial Nominees

A powerful foreclosure testimony by Sandra Hines

I has posted Ms. Hines' story on Justice League. Click here. Sandra Hines, a Detroit resident and evicted homeowner, lost her home that was in her family for 38 years to foreclosure. She testified to the House committee last week. A must see.

Former BofA employees: “I felt like I was always lying to borrowers”


Interviews with former bank employees provide a window into the bank’s call centers. One employee told the Nevada Attorney General’s office, I felt like I was always lying to borrowers [8],”
saying they were told to mislead homeowners about the status of their applications. The employee complained to a supervisor, and says of what happened next: “Her instructions in response were just to give the borrowers their status and to tell them that they are ‘in the process,’ in spite of the fact that the computer showed that nothing was happening.”
Other employees bemoaned [9] the poor training Bank of America provided its staff. One said, “The main point of the training is to teach us how to get customers off the phone in less than ten minutes [10].” Another said, “Nobody at BOA seems to care  [11] what we actually say to the borrower, as long as we get them off the phone.”

Why New York Foreclosures Are Grinding to a Halt

Some excerpts from the report…

On Oct. 20, New York State Chief Judge Jonathan Lippman ended robo-signing in New York state foreclosures by requiring a special affirmation from the banks’ attorneys. They now must swear that they know the banks’ documents are true because they checked the paperwork.

Further Affirmations Required

Similarly, on Dec. 1, Suffolk County Supreme Court Judge Peter Fox Cohalan issued an order dismissing all 127 foreclosures pending before him because the banks’ attorneys hadn’t filed the affirmation. While all the cases can be refiled once the banks documents are in order, Cohalan’s order requires the banks to go beyond the Lippman affirmation. In his court at least, a bank employee is going to have to sign an affirmation even more detailed than what Judge Lippman ordered for lawyers. The bank affirmation comes from Cohalan’s concern with robo-signing, explains Daniel J. Murphy, Judge Cohalan’s chief law assistant.

Going forward, banks that want to foreclose in Cohalan’s court will have to have “whoever is looking at the documents provide an affidavit that the amounts are correct, the mortgage is present, the assignments of mortgage have been correctly signed and dated and the paperwork before court is accurate.” To prevent robo-signing of those affidavits, Cohalan also requires bank representatives to list every document they reviewed for the affidavit. That list must include the note, and they must explain who they are, how long they’ve been at the bank and what their educational background is.

Only Real Vice Presidents Can Sign

Murphy explains the purpose of that mini-resume is to make sure these employees understand what they’re looking at and that any “person claiming he is the vice president of the bank is in fact a vice president of the bank.” While that sounds silly — why would someone sign a document with an inaccurate title — the robo-signing scandal has exposed the practice of people signing as a vice president who have no link to the financial institution except for a resolution authorizing them to sign.

See full article from DailyFinance:

Monday, December 20, 2010

Open thread for Monday

BofA Threatens Foreclosure on 1100 homes for “Nonpayment” of Current Taxes

A letter sent to hundreds of Bank of America’s mortgage borrowers in Clark County contained news no one wants to hear: Your home could be foreclosed for nonpayment of property taxes.

The letter from a Bank of America affiliate was sent to about 1,100 Clark County homeowners who’d actually paid their taxes.

Homeowners were quick to take action. Clerks at the Clark County Treasurer’s office fielded hundreds of queries last week from worried homeowners, said Michelle Denman, the office’s tax service manager.

A Bank of America official acknowledged the mixup Monday, saying the bank had requested tax payment status reports on Bank of America mortgage-holders before the final payments were due. Many people do not pay taxes until close to the due date.

Check out the rest here…

Inside the Mortgage Monster

I look forward to buying this book. It is a must read...

Source: Truthout

In this excerpt from his new book, The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America--and Spawned a Global Crisis,
investigative reporter Michael W. Hudson tells the story of Travis Paules’ first year and a half inside America’s biggest—and most predatory—subprime mortgage empire.

As more borrowers signed loans and more dollars flowed in from Wall Street, Ameriquest began hiring new salespeople and opening new branches around the nation. Travis Paules was one of the company’s hires in 1998. The company recruited him away from his job at a consumer finance company and put him in charge of opening an Ameriquest outpost in Camp Hill, Pennsylvania, a suburb of Harrisburg.

Paules was twenty-eight. He had been working for three years in nearby Lancaster for American General Finance. He wasn’t, he later recalled, an upstanding guy. He smoked pot every day, boozed, gambled, frequented strip clubs when he had a little extra cash. One thing he did have going for him was a work ethic. His mother had been a disciplinarian. She’d hated laziness. When he was thirteen, his father had given him a copy of Napoleon Hill’s Think and Grow Rich, the bestselling guide to striving and success. At American General, he was a “company man,” a by-the-book branch manager, always on time and diligent with his paperwork. He cut no corners because American General made it clear that it didn’t want him to cut corners, and that he should balance the need for loan production with the need to make sure borrowers could really repay their loans. “I played within the sandbox they allotted me,” he said. “I always liked to say: My personal morals aren’t good, but I have good business morals.”

He was earning just under $50,000 a year. An acquaintance who worked at Ameriquest suggested he could make a lot more at the up-and-coming mortgage lender. As much as $150,000 a year running a branch. Soon after, Paules’s supervisor at American General told him that he’d have to wait on the promotion he had been expecting, and that he shouldn’t expect more than a 3 percent raise for the year. Paules picked up the phone and dialed Ameriquest.

About the only guidance he received before he opened the Camp Hill branch came from his new supervisor. She suggested he bring a list of American General employees and borrowers with him. He could draw from the employee list as he recruited for the new branch and hit up American General’s customers with offers to refinance their debts. Paules thought that sounded strange. It wasn’t the way he’d been taught to operate at American General. He quickly learned, though, that Ameriquest was a different company from the one he had worked at before.

Soon after he started, he traveled to Las Vegas for an Ameriquest managers’ conference. The lender had booked rooms at the MGM Grand, the world’s largest hotel-casino complex, replete with nightclubs, waterfalls, and theme-park rides. Here was a company, he mused, that knew how to reward and motivate its employees. There were free drinks and a “money booth” that offered exuberant branch managers the chance to jump in and grab as many wind-churned bills as they could stuff in their pockets. The training sessions seemed to be an afterthought.

Before Paules left Vegas, a senior executive suggested that he and Paules make a “side bet.” It was a ritual at Ameriquest. Bosses spurred underlings to greater production by betting on what their numbers would be over a specific time period. If Paules could get his branch to hit at least $1.5 million in its first full month of operation, the company would multiply the standard commissions for Paules and his employees by a factor of 1.5.

Back home in Pennsylvania, he leaned heavily on his list of American General customers. The branch recruited more than a dozen customers away from his previous employer and by the end of the month it had booked twenty-one loans in all, a company record for a new branch. Those twenty-one mortgage contracts translated into $1.6 million in loan volume.

Paules had won his bet and made a lot of money for himself and his staff. He swaggered a bit as the new month began. But he quickly learned that last month was old history. At Ameriquest, you were only as good as your current month. The branch had exhausted the leads from his pool of American General borrower. As the new month came to an end, the office’s numbers had dropped dramatically. While fellow branch managers listened in on a conference call, a supervisor chewed him out, counting off a roll call of epithets that described his performance: “one-month wonder,” “king for a day,” “shitting the bed.”


Paules regrouped, aiming to prove he was a top producer. If he’d done everything by the book at American General, it was because that’s what had been required of him. At Ameriquest, he followed cues that let him know that he needed to be creative about booking loans and making money. It wasn’t a case of an innocent being corrupted. It was a case, he said, of an unprincipled personality finding a place that encouraged his self-serving instincts. “It’s hard to have a guilty conscience if you don’t have a conscience,” he said. “Anything that benefited production—that benefited me and benefited my wallet—I’d do it.”

About the only check on his behavior was the risk of getting caught. At Ameriquest, the risk was low, if you covered your tracks and didn’t get too out of control. He let his workers fiddle with about 10 percent of the loan files, only the deals where falsifying a number or creating a fake document would provide a significant boost to the branch’s commissions. He didn’t allow his employees to alter pay stubs or tax documents, though he did allow them to use Wite-Out to alter the monthly benefit amounts listed on a couple of elderly borrowers’ Social Security award letters.

He learned from his colleagues that one of the best ways to game the system without endangering yourself too much was to employ what they termed the “Whoops Technique.” If a borrower had an annual income of $56,000, for example, he might instead report it as $66,000. If somebody in underwriting caught the discrepancy, he could explain that it was a typo— a single flubbed keystroke.

If a borrower really couldn’t afford the deal Ameriquest was writing for them, Paules learned, there were ways around that, too. As long as borrowers made their first payment, the loan officers and managers who’d put together the deal could collect their commissions.

If you gave a borrower enough cash out of the deal, they could afford to make their monthly payments for a little while, at least. Another way to ensure the borrower could make the first payment was to work out a deal with the title company that helped collate the final loan documents. The title company could slip an extra charge onto the customer’s initial loan balance, and then book a credit for that amount to serve as the customer’s first payment. The best part was that this sly arrangement also allowed loan officers to promise mortgage applicants that Ameriquest would make their first payment for “free.”

Once Paules started taking shortcuts and playing around in what Ameriquest workers called the “gray area,” it was hard not to go further. “An inch becomes a yard,” he recalled. “And a yard becomes ten thousand yards real quick.” Many of the tactics that Ameriquest employees used spread informally, through back channels and over break room bull sessions. Simply by hinting that top-performing Ameriquest branches were cutting corners to post big production numbers, Paules could nudge his underlings into employing a bit of their own derring-do to bring in loans. If somebody wasn’t figuring it out for themselves, he paired them with an experienced coworker who could demonstrate the tricks of the trade.

For those who’d already become proficient at these sleights of hand, he used various incentives to encourage them to push their production ever higher, including one that he’d learned at his first management seminar with the company: the side wager. Paules approached two of his salesmen with a proposition. Like Paules, they were young and wild. They liked to party. He promised the pair that if they could top their previous monthly bests, he’d stay after hours with them on the last business day of the month and host a private party for them— complete with a stripper. The pair won the bet, and their party. The next month, Paules increased the stakes. If the two salesmen could once again set personal records, he’d hire two strippers. Again, the salesmen beat their goal and Paules rewarded them—and himself—with an alcohol- fueled celebration in the office that didn’t let up until early the next morning.


The branch was performing so well, many months it outdid all of Ameriquest’s other Pennsylvania locations combined. Paules earned $170,000 in his first eight months at Ameriquest, more than he’d pocketed in four years at American General. After fourteen months as a branch manager, Paules was promoted to area manager. He was now overseeing his old branch and five others in the state. He hadn’t made it to his thirtieth birthday yet, and he had six branch managers, forty loan officers, and various support staff reporting to him.

Higher up the line, Ameriquest’s senior management put policies in place that encouraged managers to prod their employees to squeeze as much profit out of borrowers as possible, even those who had solid credit histories. The company awarded bonuses to area managers, Paules said, if more than 80 percent of the loans produced under their supervision included a “prepayment penalty”—a nasty surprise tucked away in loan contracts that could cost borrowers thousands of dollars if they tried to refinance and get away from Ameriquest. Hitting that target, he said, could put another $5,000 a month in his pocket.

Management also controlled employees by keeping count of just about everything they did. It counted the number of loans made each month by every branch and every loan officer, tracked how much revenue the sales reps had built into the deals, even noted how many phone calls reps were making in any given time span. The company’s computer system allowed senior executives to monitor loan officers’ telephone usage. It wasn’t unusual for Paules to pick up the phone and find his regional manager on the other end of the line, demanding to know why a particular loan officer had only made, say, eight sales calls in the past hour. Paules’s job was to go out and let the salesman know he better get himself into gear.

Paules generally didn’t find too much cause to yell at the people who worked under him—they were fun to party with and they were making him lots of money. But the pressure got to him a few months into his tenure as area manager. He was demanding more and more volume from his sales corps. Near the end of one month, his branch managers assured him that he could expect big numbers for the month. Paules reported the projections up the chain of command. When things shook out, though, production for the six branches was far below what he’d predicted. His regional manager berated him. In turn, Paules summoned all of his branch managers to a conference call and screamed at them like he never had before. His face grew a deeper shade of purple with each expletive he spat out. “Get out of your fucking glass offices and get out on the fucking floor with your fucking people!” If their salespeople didn’t start producing, he told the managers, the solution was simple: get rid of them and hire someone else. If the loan officers couldn’t close loans, the branch managers needed to step in and do it for them. Paules later calculated that he’d set a personal record: he’d used various forms of “the f-word” perhaps five hundred times in the fifteen to twenty minutes he was on the phone. Only later did one of his managers confess: Paules had been pushing them so hard that they’d been afraid to tell him the truth, and instead had given him rosy projections for how loan volume was shaping up for the month. They thought they could always find some trick to catch up.

Travis Paules eventually rose to vice president at Ameriquest. After he left the company, he experienced religious awakening that, he said, prompted him to give us his carousing and “wickedness.” He wrote two books and began looking for publishers. The first one was an autobiographical novel—the main character is named “Trevor Palmer”—that he titled Whiteout, an allusion to Ameriquest’s tradition of altering and fabricating borrowers’ paperwork. The second manuscript was a memoir of his spiritual journey. He titled it 180.

DOJ considering considering conspiracy charges, not espionage against Wikileaks

This week, the New York Times reported the Justice Department was considering conspiracy charges against Wikileaks founder Julian Assange, rather than espionage charges.

On Sunday's Meet the Press, Biden said he can't talk about the grand jury investigation. In the next sentence, he said:

If he conspired to get these classified documents with a member of the U.S. Military, that’s fundamentally different than if somebody drops on your lap here.. "Here is-- classified material."

Biloxi Buzz for Monday

Lawyers cry foul over leak of Julian Assange sex-case papers  —  LAWYERS for Julian Assange have expressed anger about an alleged smear campaign against the Australian WikiLeaks founder.  —  Incriminating police files were published in the British newspaper that has used him as its source for hundreds of leaked US embassy cables.
Biden Says US to Be out of Afghanistan by 2014  —  Vice President Biden says ‘come hell or high water’ US to be out of Afghanistan by 2014  —  Despite uneven progress in Afghanistan, Vice President Joe Biden said next summer's planned withdrawal would be more than a token reduction …

Mobile woman sues Bank of America over foreclosure

Food Safety Bill Passes Senate By Unanimous Consent

CNBC: WikiLeaks reiterated its plans to release information about banks

WikiLeaks founder Julian Assange told CNBC Friday that he’s being “attacked” by banks in Dubai, Switzerland, the US and the UK.

Assange did not specify what he meant by "attacked."

WikiLeaks reiterated its plans to release information about banks in January, although Assange didn’t specify which "leaks" the website would address. Friday's statement to CNBC marks the first time Assange has mentioned banks in Dubai.

Assange added that it is the "normal business" of WikiLeaks to publish information about banks. He also said that WikiLeaks has a cache of some 250,000 documents and that the site has released fewer than 2,000.

Read on.