Stopping Illegal Foreclosures By Banksters

God damn YouTube removed my favorite video of all the ones I ever made, a simple slide show for Mojo Nixon's classic, I Hate Banks. Marsoupeel, who did the version above, didn't get quite as worked up with his version as I did when Mojo sings a couple of his most bloodthirsty classic lines:

Well I hate banks
Just can't stand 'em
Gimme a shovel and, man, I'll plant 'em
Six feet under
That's where they belong
I hate banks is the same of the song

...Financial institutions
Think they're so high falutin'
Just a buncha fruits in three-piece suits
Tryin' to steal all my loot

...Steal from the poor and give to the rich
I want to make a bank president twitch in a ditch...

Gotta have a trial first though. We can't condone vigilante justice, even if banksters are, by having their paid thugs break into peoples' houses. And that brings us to H.R. 3808, the Interstate Recognition of Notarizations Act of 2009, which looks like it's going to be Obama's first veto! Yesterday Dan Pfeiffer explained on the White House blog why the President has decided not to sign it:

Today, the White House announced that President Obama will not sign H.R. 3808, the Interstate Recognition of Notarizations Act of 2010, and will return the bill to the House of Representatives. The Interstate Recognition of Notarizations Act of 2010 was designed to remove impediments to interstate commerce. While we share this goal, we believe it is necessary to have further deliberations about the intended and unintended impact of this bill on consumer protections, including those for mortgages, before this bill can be finalized.

Notarizations are important for a large range of documents, including financial documents. As the President has made clear, consumer financial protections are incredibly important, and he has made this one of his top priorities, including signing into law the strongest consumer protections in history in the Wall Street Reform and Consumer Protection Act. That is why we need to think through the intended and unintended consequences of this bill on consumer protections, especially in light of the recent developments with mortgage processors.

The authors of this bill no doubt had the best intentions in mind when trying to remove impediments to interstate commerce. We will work with them and other leaders in Congress to explore the best ways to achieve this goal going forward.

The problem is foreclosure "fraud factories" that are making it possible for banksters to trick people out of their homes. The worry is that the bill could make it more difficult for homeowners to fight fraudulent foreclosures. Yesterday both John Conyers and Pat Leahy announced that they agree with the veto. Conyers: "I support the President’s decision not to sign the Interstate Recognition of Notarizations Act of 2009. Although I believe the bill was originally well intentioned, I now believe this issue requires more careful review and discussion before the law is changed. There is substantial concern that this legislation may exacerbate the problems we are seeing with improprieties in the foreclosure documents being processed by mortgage lenders. We have not held a hearing on this matter since 2006 and I think it is worth our time to take another look at this issue before we consider legislation to ensure it does not harm consumers. At a time when three of the nation’s largest mortgage companies-- Ally Financial, JP Morgan Chase, and Bank of America-- have suspended legal proceedings in 23 states due to document flaws, we need to be very careful not to pass legislation that could allow increased deficiencies."

Meanwhile, Rep. Alan Grayson is keeping the pressure up-- high. He sent the following letter to Geithner and the other members of the new Financial Stability Oversight Council calling for a foreclosure freeze pending an investigation into the systemic implications of foreclosure fraud. Remember, when lenders-- many of whom are now out of business-- originally lent money to borrowers, they often did so knowing that the terms of the loans could not possibly be honored. They sought fees-- which were tied to bonus schedules-- not repayment as part of a long-term, responsible business model. These lenders put people in predatory loans, induced massive amounts of fraud, and Wall Street banks misrepresented the loans to investors when they moved through the securitization chain. They were stealing money from investors, and from homeowners. They belong in prison.

Dear Secretary Geithner and members of the Financial Stability Oversight Council (FSOC),

The FSOC is tasked with ensuring the financial stability of the United States, which includes identifying and addressing possible systemic risks. There is a well-documented wave of foreclosure fraud sweeping the country that presents such a risk. Bank of America and JP Morgan Chase have both suspended foreclosures in 23 states where that fraud could be uncovered and stopped by the courts. Connecticut has suspended foreclosures.

I write to encourage the FSOC to appoint an emergency task force on foreclosure fraud as a potential systemic risk. I am also writing to ask the members of the FSOC to use their regulatory authority to impose a foreclosure moratorium on all mortgages originated and securitized between 2005-2008, until this task force is able to understand and mitigate the systemic risk posed by the foreclosure fraud crisis.

So far, banks are claiming that the many forged documents uncovered by courts and attorneys represent a simple 'technical problem' with foreclosure processes. This is not true. What is happening is fraud to cover up fraud.

The mortgage lending boom saw the proliferation of predatory lending and mortgage fraud, what the FBI called at the time 'an epidemic of mortgage fraud.' Much of this was lender-induced.

When lenders-- many of whom are now out of business-- originally lent money to borrowers, they often did so knowing that the terms of the loans could not possibly be honored. They sought fees, not repayment. These lenders put people in predatory loans, they induced massive amounts of fraud, and Wall Street banks misrepresented these loans to investors when they moved through the securitization chain. They were stealing money from investors, and from homeowners.

Obviously these originators and servicers didn't keep good records of who owed what to whom because the point was never about getting paid back, it was about moving as much loan volume as possible as quickly and as cheaply as possible. The banks didn't keep good records, and there is good reason to believe in many if not virtually all cases during this period, failed to transfer the notes, which is the borrower IOUs in accordance with the requirements of their own pooling and servicing agreements. As a result, the notes may be put out of eligibility for the trust under New York law, which governs these securitizations. Potential cures for the note may, according to certain legal experts, be contrary to IRS rules governing REMICs. As a result, loan servicers and trusts simply lack standing to foreclose. The remedy has been foreclosure fraud, including the widespread fabrication of documents.

There are now trillions of dollars of securitizations of these loans in the hands of investors. The trusts holding these loans are in a legal gray area, as the mortgage titles were never officially transferred to the trusts. The result of this is foreclosure fraud on a massive scale, including foreclosures on people without mortgages or who are on time with their payments.

The liability here for the major banks is potentially enormous, and can lead to a systemic risk. Fortunately, the Dodd-Frank financial reform legislation includes a resolution process for these banks. More importantly, these foreclosures are devastating neighborhoods, families, and cities all over the country. Each foreclosure costs tens of thousands of dollars to a municipality, lowers property values, and makes bank failures more likely.

I appreciate your willingness to assess possible systemic risks to the country, and would again encourage you to suspend foreclosures until this problem is understood and its ramifications dealt with.

This is when it really counts having someone like Grayson in office.

It's not as good as making them twitch in a ditch, but the FDIC is making noises about seeking $1 billion from failed or crooked banksters. I'll believe it when I see it.

The Federal Deposit Insurance Corp. has authorized lawsuits against more than 50 officers and directors of failed banks as the agency aims to recoup more than $1 billion in losses stemming from the credit crisis.

The lawsuits were authorized during closed sessions of the FDIC board and haven’t been made public. The agency, which has shuttered 294 lenders since the start of 2008, has held off court action while conducting settlement talks with executives whose actions may have led to bank collapses, Richard Osterman, the FDIC’s acting general counsel, said in an interview.

... The recently authorized lawsuits, if filed by the agency and not settled, would claim damages of more than $1 billion, according to FDIC spokesman David Barr. Osterman said the goal is to reach as many settlements as possible.

“It’s in both our interest and theirs to try and settle this matter before it gets into the court and we get into expensive litigation,” he said.

If the savings-and-loan crisis is any guide, more lawsuits are coming. During that period, the FDIC sued executives from more than 24 percent of the 1,813 lenders that failed.

“The process went on 20 years ago and is happening again now,” Thomas Vartanian, a partner at law firm Dechert LLP in Washington, said in an interview. “This is the way it’s going to go over the next few years as they catch up with doing these investigations and doing claims.”

FDIC Chairman Sheila Bair has said 2010 will be the peak year for failures, and the agency’s list of so-called problem lenders suggests banks will keep collapsing at an accelerated rate in coming months. The confidential list had 829 banks with $403 billion in assets at the end of the second quarter.