March 12, 2012 archive

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Crossposted from The Stars Hollow Gazette

Wall Street’s Broken Windows

By William K. Black, New Economic Perspectives

Sunday, March 04, 2012

James Q. Wilson was a political scientist who often studied the government response to blue collar crime. The public knows him best for his theory called “broken windows.” The metaphor was what happens to a vacant building when broken windows are not promptly repaired. Soon, most of the windows in the abandoned building are broken. The criminals feel little compunction against petty destruction because the building’s owners evince no concern for the integrity of their building. Wilson took social norms, community, and ethics seriously. He argued that as community broke down fewer honest citizens were active in monitoring and policing behavior. The breakdown in community was criminogenic – it led to widespread serious blue collar crime. He urged us to take even minor blue collar crimes and breaches of civility seriously and to demand that they be contained through social pressure and policing.



Wilson was strongly conservative. His research focus in criminology was almost exclusively blue collar crime. That was a shame because “broken windows” theory is most compelling in the context of elite white-collar crime and because the application would reveal interesting twists in the theory’s potential.



He predicted in his work on “broken windows” that tolerating widespread smaller crimes would lead to epidemic levels of larger crimes because it undermined community and social restraints. The epidemics of elite white collar crime that have driven our recurrent, intensifying financial crises have proven this point. Similarly, corruption that is excused and tolerated by elites is unlikely to remain at the level of “a few deals.” Corruption is likely to spread in incidence and severity precisely because it undermines community and the rule of law and it is likely to grow more pervasive and harmful the more we “tolera[te]” it.



In the elite white collar crime context we have been following the opposite strategy of that recommended under “broken windows” theory. We have been breaking windows. We have excused those who break the windows. Indeed, we have praised them and their misconduct. The problem with allowing broken windows is far greater in the elite white collar crime context than the blue collar crime context. The squeegee guys make tiny amounts of money and are hated and politically powerless. The mediocre financial CEO who engages in accounting control fraud because it is a “sure thing” causes the bank to report record (albeit fictional) profits and becomes wealthy and politically powerful. He uses his wealth to make charitable and political contributions that make him far harder to sanction. He claims that any crackdown on him is “class warfare” by “neo-Bolsheviks.” Incredibly, the Wall Street Journal continues to serve as the cheerleader and apologist for those who become wealthy by breaking windows, communities, and economies.

Wilson warned of blue collar “super predators.” He called them “feral” – wild animals. These criminals are in fact dangerous, but they are odd candidates for the title of “super predators.” Wilson noted that they were disproportionately black and that they were confined almost entirely to the poorest neighborhoods in America where their pickings are poor. Accounting control frauds occupy Wall Street and other financial centers – the richest neighborhoods in the world. Their “take” from fraud is extraordinary. The blue collar criminals that occupied Wilson’s attention late in his career were politically and socially powerless. The fraudulent CEOs that drive our recurrent, intensifying financial crises are wealthy and socially and politically dominant.

When is Foreclosure Theft? When the Mortgage is Recorded at MERS

Author: L. Randall Wray, EconoMonitor

March 1st, 2012

(O)ne bank lawyer tried to defend home theft as a “victimless crime”: “As a lawyer who did foreclosure work for many years for both borrowers and lenders, I assure you that robosigning is a victimless technicality. In only a handful of exceptions is there a wrongful foreclosure in which the outcome would have changed had the technicality been corrected. I am astonished to see foreclosure characterized as “theft” on an otherwise reputable site.”

Well, I guess it is nice that the lawyer thinks this site is “otherwise reputable”. But, in fact, robosigning is a go-to-jail crime. And illegally taking a home is certainly not victimless. Let us count the victims:

  • The homeowner
  • The neighborhood
  • The national economy
  • The justice system
  • Property rights



When is a foreclosure a theft? When the mortgage was recorded at MERS. MERS has no standing to foreclose. The typical mortgage was bought and sold about ten times before it finally got securitized. And those sales and purchases were not recorded at the county recorder’s office. Several important court cases have ruled that servicers using MERS have no standing to foreclose because the chain of title was thereby broken. That is about two-thirds of all mortgages made since the megabanks created the MERS monster. Now, those who go up against banks trying to foreclose using the “MERS destroyed the chain of title” defense do not always win. Judges are having a hard time getting their minds around the fact that banks have destroyed property law in the US. Or, they make a calculation that recognizing this fact will throw the whole real estate sector into disarray, hence overlook the home thefts as the lesser of evils.



It is instructive just to read down the list of the variety of frauds the banks are using to illegally take homes, things like:

  • Falsely claiming to be the owner/holder of the mortgage;
  • Falsely claiming standing by use of names such as Trustee, Assignee, Nominee, Beneficiary, etc.;
  • Fraudulently invoking the jurisdiction of the court;
  • Preying on the ignorance of the court and homeowner;
  • Falsely claiming Pooling & Servicing Agreements, industry standards, rules, guidelines or other industry-authored writings supersede the law;
  • Failing to follow PSA guidelines;
  • Robo-Signing legal documents without the legal authority to do so.
  • Entering on-time payments as late, to exact illegal and unauthorized fees;
  • Manipulating account records;
  • Backdating legal documents;
  • Filing forged documents in courts and public records;
  • Charging force-placed insurance when the homeowner already has full coverage;
  • Falsely reporting a default to the credit bureaus when it is the pretender lender who is manufacturing the default;
  • Paying property taxes late, then charging the late penalties to the borrower;
  • Paying taxes and insurance on the wrong property;
  • Refusing payments to guarantee default;
  • Adding thousands of dollars in unearned legal fees to create a default;
  • Ignoring customer complaints and “qualified written requests”;
  • Arrogantly violating numerous laws and regulations;
  • Coercing the homeowner into signing a forbearance agreement to strip away their legal rights;
  • Falsifying records and documents;
  • Committing fraud upon the courts by stating they are the Holder and Owner of the Note – when in fact – they do not own or hold the “original” Note;
  • Intentionally causing delays to run up your legal expenses;
  • Creating fictitious documents (Lost Note Affidavits, Power of Attorney, etc.);
  • Triggering the terms of the null and void Deed of Trust/Mortgage
  • Apply to the trust for reimbursement after deducting the fees from the borrowers p&i payments, (Known as double-dipping)
  • Rounding up ARM rates when on a downward trend;
  • Not adhering to the terms of the loan documents;
  • Creating additional false deficiencies through a variety of questionable practices;
  • Adding misc. fees to purposely create a deficiency with the borrower’s next payment;
  • Not applying payments to principal and interest;
  • Committing perjury through misrepresentations;
  • Withholding or redacting discovery evidence;
  • Tampering with court transcripts and removing evidence from the record;
  • Conjuring up events that never happened while refusing to provide documentation to support their fallacies;
  • Refusing to cooperate with attempts to refinance and stop the illegal foreclosure;
  • Using abuse of litigation, appeals and malicious prosecution to litigate forever;
  • Payoffs to the consumer’s attorney, law enforcement officials, judges, court personnel and government officials;
  • Threats & intimidation;
  • Electronic surveillance;
  • Wire Fraud / Mail Fraud;
  • Conspiracy;
  • Fraud in the inducement;
  • Unjust Enrichment;
  • Embezzlement;
  • Racketeering – RICO;
  • Extortion;
  • Abuse of Process;
  • Violation of ethics;
  • Grand Theft;
  • Tax Fraud (REMIC);
  • Public Corruption;
  • Notary Fraud;
  • Evidence Tampering;
  • Theft of Government Services;
  • Perjury;
  • Felonious Influence of Public Officials;
  • Money Laundering;
  • Insurance Fraud;
  • Securities Fraud;
  • Constitutional and Civil Right violations.



Ah, yes, the banks are truly innovative. Keep this in mind the next time some bank lawyer tries to convince you that all this is “victimless crime”.

OCC Servicer Review Firm Also "Scrubs" Loan Files, Fabricates Documents

Yves Smith, Naked Capitalism

Tuesday, March 6, 2012

(T)here is considerable evidence of a widespread, perhaps pervasive, failure among the parties to mortgage securitizations to adhere to the terms of the contracts that created these deals. Specifically, they were required to transfer the notes (the borrower IOU) through multiple parties and get them to the securitization trust by a specified date. This process was laborious because each time, the note had to be signed (the term of art is “endorsed”) and the mortgage assigned (which confusingly is the lien against the home, although both professionals and laypeople often refer to the note + the mortgage, which are actually two separate instruments, as the mortgage).



Notes are like checks, they are negotiable instruments. You can’t enforce a copy or use a copy to try to recreate an original. This is exactly the sort of activity that got the notorious DocX shuttered. Yet he seemed to think the use of a copy or a “replacement” adequate. But you can’t “replace” a note; it’s an original, and you need to have the borrower’s signature for it to be binding, and I can guarantee no one is getting borrowers to sign replacement notes.

Similarly, one thing that foreclosure defense attorneys have seen as a huge red flag of servicer chicanery is the use of allonges. An allonge is a separate piece of paper used for endorsements that is required by the Uniform Commercial Code to be “affixed” to the note and used for endorsements when there is no more space left on the note for signatures. Allonges were pretty much never seen until the robosigning scandal, since all the space on a note (meaning the back and the margins) can be used for endorsements.

But SolomonEdwards official said that they’ve been able to get copies of the note from the seller and have been able to “bring them forward with allonges that were re-executed.” When asked, he confirmed that they create allonges now that confirm with the transfers that they’ve found ought to have taken place, either via the PSA, MERS, or other routes. Again, in a securitized trust, that it tantamount to trying to transfer the note now and is not valid. When I pressed him on how they did that, how they got signatures from intermediary parties, he demurred and said, “I don’t want to give away too much of our secret sauce.”

He also discussed using lost note affidavits. That is permissible only on an exception basis; indeed, many deals limited how many lost note affidavits could be used. If a firm like SolomonEdwards is seeing more than a couple of missing notes on a deal, that means transfers did not happen and there is a much more fundamental problem with the securitization, potentially a contract formation failure (if no notes were transferred by the cutoff date, the trust was not formed).

The SolomonEdwards executive also made it clear that he regarded the mortgage assignments as more important than the note, which is backwards (the lien follows the note) and that they spent more time on getting them executed. He said that his firm found “missing” mortgage assignments (“they can’t be found”) to be common. Again, since the assignments had to be completed by the cutoff date, that means they are either making obviously invalid assignments, are deliberately making back-dated assignments (not kosher) or have a time machine.



In fact, these reviews sound like documentation theater. The partner stressed how through SolomonEdwards was and how they had software that allowed them to record up data items and capture whether a item was material or not material and then risk rate an entire loan file.



(T)he reality is that there are really only 5-10 things you need to look at: Do you have an original note? Does it have all the endorsements that the PSA says it should have? Do the mortgage assignments correspond to the endorsements? Were they all completed on time?



It was disconcerting to speak to someone who obviously thinks his firm is highly professional engaged in activities that include document fabrication, which is what creating allonges now amounts to. And the worst is I have no doubt SolomonEdwards is more careful than most firms in the industry. This confirms, as we have said repeatedly, that there was a massive failure in the industry to conform to the requirement of the legal agreements that it devised. And there is a very big business, now with a government seal of approval, in covering up that fact.

On This Day In History March 12

Cross posted from The Stars Hollow Gazette

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

March 12 is the 71st day of the year (72nd in leap years) in the Gregorian calendar. There are 294 days remaining until the end of the year.

On this day in 1947, in a dramatic speech to a joint session of Congress, President Harry S. Truman asks for U.S. assistance for Greece and Turkey to forestall communist domination of the two nations. Historians have often cited Truman’s address, which came to be known as the Truman Doctrine, as the official declaration of the Cold War.

In February 1947, the British government informed the United States that it could no longer furnish the economic and military assistance it had been providing to Greece and Turkey since the end of World War II. The Truman administration believed that both nations were threatened by communism and it jumped at the chance to take a tough stance against the Soviet Union. In Greece, leftist forces had been battling the Greek royal government since the end of World War II. In Turkey, the Soviets were demanding some manner of control over the Dardanelles, territory from which Turkey was able to dominate the strategic waterway from the Black Sea to the Mediterranean.

Truman stated the Doctrine would be “the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures.” Truman reasoned, because these “totalitarian regimes” coerced “free peoples,” they represented a threat to international peace and the national security of the United States. Truman made the plea amid the crisis of the Greek Civil War (1946-1949). He argued that if Greece and Turkey did not receive the aid that they urgently needed, they would inevitably fall to communism with grave consequences throughout the region.

The policy won the support of Republicans who controlled Congress and involved sending $400 million in American money, but no military forces, to the region. The effect was to end the Communist threat, and in 1952 both countries joined NATO, a military alliance that guaranteed their protection.

The Doctrine was informally extended to become the basis of American Cold War policy throughout Europe and around the world. It shifted American foreign policy toward the Soviet Union from d├ętente (friendship) to, as George F. Kennan phrased it, a policy of containment of Soviet expansion. Historians often use its announcement to mark the starting date of the Cold War.

Long-term policy and metaphor

The Truman Doctrine underpinned American Cold War policy in Europe and around the world. The doctrine endured because it addressed a broader cultural insecurity regarding modern life in a globalized world. It dealt with Washington’s concern over communism’s domino effect, it enabled a media-sensitive presentation of the doctrine that won bipartisan support, and it mobilized American economic power to modernize and stabilize unstable regions without direct military intervention. It brought nation-building activities and modernization programs to the forefront of foreign policy.

The Truman Doctrine became a metaphor for emergency aid to keep a nation from communist influence. Truman used disease imagery not only to communicate a sense of impending disaster in the spread of communism but also to create a “rhetorical vision” of containing it by extending a protective shield around non-communist countries throughout the world. It echoed the “http://en.wikipedia.org/wiki/Quarantine_Speech quarantine the aggressor]” policy Franklin Delano Roosevelt sought to impose to contain German and Japanese expansion in 1937. The medical metaphor extended beyond the immediate aims of the Truman Doctrine in that the imagery combined with fire and flood imagery evocative of disaster provided the United States with an easy transition to direct military confrontation in later years with communist forces in Korea and Vietnam. By presenting ideological differences in life or death terms, Truman was able to garner support for this communism-containing policy.

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Cilliae

Late Night Karaoke

March 11 and no Bomb Iran

Thank you all.

I predicted March 2-9.  Thank you.

Thank you for writing your congress idiot.  Thank you for thinking about it.  Thank you for praying about averting it.  Thank you for bitching about the price of gas and the globalist banker assholes who are making six figures off of the war on errorism and Iran’s intentions of selling oil in ANYTHING but American dollars.

Yes, we took the Apocalyptic horses out for a nice trail ride today.  It is after all a remarkable warm day in March in New England.  Al Gore’s bullshit carbon tax crap is already embedded in lamestream culture and government policies but hey “we” nor Israel has not started World War Three.  It is a two day accomplishment.  One day at a time is the theme I guess.

Thank you.

OK, so maybe they start with Syria and that leads to Iran.  You know kind of like Saddam had weapons of mass instruction and or that vast high tech global spy ring operating out of caves in Afghanistan made George Bush continue reading My Pet Goat.  Ah, old news, old rant.

On to the staged news picked up by “our” media.

http://www.globalresearch.ca/i…

Killed my first mosquito today March 12.  That has gotta be another first in my 56 years.

Pique the Geek 20120311: More on Hydraulic Fracturing (Fracking)

Hydraulic fracturing (fracking) is back in the news since the Ohio Department of Natural Resources indicated that it was likely that disposal of those fluids after the actual fracturing operation was likely the cause of seismic activity in the Youngstown area, the largest of which was a magnitude 4.0 on 20111231.  It turns out that it us usually not the fracturing activity itself that caused the seismic, but rather deep well injection for disposal of the spent fluids after use.

This not the only potential problem with this procedure, however.  I have written about the process before, but am returning to give a more in depth treatment of it.  I was first drawn to the subject when earthquakes occurred in Guy, Arkansas last year.  The Guy area is not known for seismic activity, but sure enough after deep well injection of the spent fluids began so did the earthquakes.

Before we look at the potential problems with this process, we should look into why it is done and some historical background.  It turns out that the process is over a century old.