tagged w/ axelrod
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by Zach Carter, Media Consortium blogger
A massive foreclosure fraud scandal is rocking the U.S. mortgage market. Wall Street banks and their lawyers are fabricating documents, forging signatures and lying to judges—all to exploit troubled borrowers with enormous, illegal fees, and in some cases, improperly foreclose on borrowers who haven’t missed any payments.
The fraud is so widespread that it could put some big banks out of business and even spark another financial collapse. Fortunately, things haven’t fallen apart just yet. With strong leadership from President Barack Obama and Congress, the government can help keep troubled borrowers in their homes and prevent another meltdown.
One fraud begets another
As Danny Schecter emphasizes in an interview with GRITtv’s Laura Flanders, this mess is just one element of a broader, criminal fraud at the heart of the foreclosure fiasco and resulting financial crisis. Banks pushed fraudulent loans onto borrowers during the housing bubble because the loans could be packaged into mortgage-backed securitizations and pawned off on hedge funds and other banks. Banks made a lot of money from this process, until the mortgages went bad and the fraud-packed securities plummeted in value.
Document drama
At the heart of any mortgage is a document called “The Note”, which lays out the terms of the mortgage and the kinds of fees that banks can levy against borrowers if they fall behind on their payments. Owning the note also gives banks the right to foreclose when a borrower stops paying.
The trouble is, in an effort to cut costs and boost bonuses, banks haven’t kept actually kept track of the note—in fact, they’ve actively destroyed the document so they don’t have to deal with filing it. Now that mortgages are going bad, banks are taking advantage of the documentation vacuum they created to levy massive, illegal fees on borrowers both before and during the foreclosure process. They do this by manufacturing fake documents, forging signatures, and getting bogus signatures from notaries to approve sham documents.
This is all terribly unfair to borrowers. In some cases, illegal fees push borrowers over the edge into foreclosure, while in others, borrowers get saddled with tens of thousands of dollars in illegal fees after getting kicked out of their home. The situation is a national disgrace.
Failure to produce
But the situation also creates legal liabilities that can push banks into failure. If banks can’t pony up the note, they don’t have the right to foreclose—not without some serious, expensive legal maneuvering. And what’s more, if the banks who created these shoddy securities can’t supply notes, investors who bought the securities can force losses back on the banks that created them. Given that there are $2.6 trillion in mortgage-backed securities out there, banks are very worried that losses and lawsuits stemming from shoddy documentation could spark another round of major financial turmoil.
The sheer lack of documentation makes it very difficult for investors to decipher which banks are exposed to loads of red ink, and which banks are not. That’s a recipe for financial panic.
Silencing employees
The banks know they’re in serious trouble. That’s why, as Andy Kroll notes for Mother Jones, mortgage servicers like GMAC are trying to silence employees who can testify about the extent of these frauds. GMAC employee Jeffrey Stephan confessed to robo-signing 10,000 foreclosure documents every month without actually examining them. His acknowledgment sparked the current public scrutiny of foreclosure fraud, which has expanded to banks including JPMorgan Chase and Bank of America.
Kroll was one of the first to report on these fraudulent foreclosure mills and their illegal fees, and his coverage of the issue is essential reading for anybody following the unfolding crisis. Kroll also highlights the wave of new investigations and inquiries being launched by attorneys general in eight states, a phenomenon that is likely to expand as the crisis widens.
As Annie Lowrey details for The Washington Independent, one of those states is Ohio, where Attorney General Richard Cordray is suing GMAC, seeking $25,000 in damages for every fraudulent document the company has filed. In Ohio alone, there have been 190,000 foreclosures over the past two years. Cordray hasn’t won his suit, and not every foreclosure will include fraud, but that’s a potential loss of over $7 billion to GMAC from foreclosures in Ohio alone over the past two years. And that doesn’t include what would be much higher losses to banks who packaged the mortgage securities, who are forced to repurchase them by burned investors.
Banks are doing their best to minimize the appearance of scandal, but the scope of potential losses from outright fraud is quite clearly a threat to the viability of the financial system. It’s easy to imagine a disaster scenario in which the government has no choice but to take major action to prevent the economy from imploding (yes, it can actually get worse).
Obama needs to pick up the slack
So far, President Obama is sending mixed signals about his intentions. As Steve Benen notes for The Washington Monthly, Obama vetoed a bill that would have made it harder for borrowers to show that banks were engaging in fraud during the foreclosure process. That was on Friday—but by Sunday, top Obama adviser David Axelrod was telling the press that the administration was not ready to support a foreclosure moratorium, dismissing the fraud crisis as a set of “mistakes” with lender “paperwork.”
As I note for AlterNet, Axelrod’s comments are a complete mischaracterization of what’s going on in the foreclosure process, and of what can be done. The housing market is a mess because banks have been systematically committing fraud. We cannot rely on such fraudsters to fix the mess– some kind of government action is going to be necessary. Whatever the solution, the administration cannot stand with big Wall Street banks against the borrowers and investors that are being defrauded. Any solution must take the interest of troubled borrowers as paramount. We’ve already tried saving the banks without saving homeowners, and as the unfolding foreclosure fraud crisis illustrates, it didn’t work.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.by Zach Carter, Media Consortium blogger
A massive foreclosure fraud scandal is... more
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"SCHULTZ (08:12): So Mika starts looking at her Blackberry and so does Scarborough and obviously the White House is texting them or emailing them or whatever and they didn't like the show. Because Arianna had been on there, I'm on there, Howard Dean had been on there and they wanted some balance.
Now think about that - here's the White House getting in contact with 'Morning Joe' because they're afraid there's too many lefties on the air! Now if that's not sensitivity at its highest level, I don't know what is! I told ya a few days ago they had rabbit ears! They don't like anything that's being said right now, they're getting beat up!"
"The enemy of my enemy is my friend?" Please break out of the left/right paradigm. To get started, I recommend 'Fall of the Republic'. You can watch the full length movie on YouTube."SCHULTZ (08:12): So Mika starts looking at her Blackberry and so does... more
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Axelrod cannot explain Obama's Nobel Prize
By: DAVID FREDDOSO
Commentary Staff Writer
10/09/09 8:37 AM EDT
In 2007, a 97-year-old Polish woman named Irena Sendler was nominated to receive the Nobel Peace Prize. During World War II, she saved 2500 Jewish children from the Nazis through a network that hid them from the Nazis with Polish families and in Catholic churches and convents. For her activities, Sendler was arrested and tortured, her arms and legs broken. She would have been executed but for a well-placed bribe that won her release. After the war, she was also persecuted by the Polish Communists.
That year's Nobel Peace prize went not to Sendler but to Al Gore, a serial self-promoter who personally contributes as much to global warming as many small American cities.
This is why the award of this year's peace prize to President Obama -- who has accomplished even less than Gore -- is not as surprising as it might seem. Even if Obama turns out to be the greatest president since George Washington, he has so far done nothing in office worthy of such an honor. With 205 nominees this year, worthier candidates must have abounded. This award should come as an embarrassment to the White House -- you might even hear Republicans use the phrase "Nobel-prize-winner" when describing Obama's failures during next year's election campaign. If he's wise, President Obama will turn it down.
This morning on MSNBC, presidential adviser David Axelrod was at pains to explain how his boss could possibly deserve this prize. "I think it's an affirmation by the Nobel committee that the things he's been working on and talking about around the world are important for humanity."
Incredibly, "just words" appear to have been good enough to win the Nobel Peace Prize.Axelrod cannot explain Obama's Nobel Prize
By: DAVID FREDDOSO
Commentary Staff... more
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http://www.GetReal.tv - When David Axelrod stood up to say that his message to all of "those" people - ie the protesters in Washington for the TeaParty Express demonstration on September 12th 2009, were "wrong" he said a mouth full.
Tell us, Mr. Axelrod: With which of these voters' statements do you disagree, and why?
See you at the polls...http://www.GetReal.tv - When David Axelrod stood up to say that his message to all of... more
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