Faces Of Foreclosure

I thought I had a 7-year loan modification from Wells Fargo. Well, maybe not . . . I don’t believe this.

VERY IMPORTANT: The very second you start negotiating with your lender regarding a loan modification, get a large binder and put everything in it. You will need it. During the Home Modification workshop with Wells Fargo, they repeatedly said they did not have this or that document. I did AND I had the FAX confirmation that it was sent to them and received. I handed it to them and said, “please make a copy and bring this right back to me.” We did that four or five times. I’m sure they were looking for a reason to NOT modify.

On May 24, 2010, I met with Wells Fargo at a Home Modification workshop they held in Oakland, California. I had been trying to get a loan modification for 18 months. This started out as a projected six months of financial strife. Wells Fargo helped stretch that into 20 months so far and I don’t see an end to it. (That image is of my 20 pound, 6 inch thick — and growing — binder.)

I came away from the modification workshop quite pleased and thinking I actually had a decent loan modification for five years — time to help me find the money to pay off this loan and get away from Wells Fargo for the rest of my life.

Wells Fargo is either the most crooked corporation I’ve seen in more than 50 years of working in corporate America — including a stint in the corporate finance department at a major bank — or they are the most inept.

In either case, if they have your money, you should be worried. They are part of various class actions across the nation and are an international financial collaborator with HSBC out of London, which is being investigated on three continents.

At that workshop, I signed an agreement with Wells Fargo, figured I bought a five-year “stay of execution,” and started to work on increasing my income with the prayer of being able to pay them off in the five year period. (The modification is actually for seven years, but it is not good in year six or seven.)

Today I received a statement dated July 5, 2010 (it is July 15 as I write this). It is 9:56 p.m. ’cause I just finished working from 8 a.m. this morning. (I am DETERMINED to pay off these bankers. There has to be a way.)

The agreement, which I have paid for two months, is roughly $2500/month; this statement is for $4,074.54 per month, and has tacked onto it $170.36 as late fees, two unapplied payments, the statement that $76,683.40 is due by August 1st.

I have the original agreement; it does NOT escalate to $4,074.54 per month in August of this year and $76,683.40 is NOT due on August 1st. This is insane, and it is NOT me that is insane.

Where is our government and/or our system of justice through this — either local judges or supervisors or governors or anyone? Have they all decided we are “wrong?” Are they married to lenders?

I can barely breathe. For the first time in my life I know what a “battered wife” must feel like. My back between my shoulders aches as though someone were pummeling me. I’m actually not a dramatic person, but I am a fighter. At this point, I don’t know who I am fighting. Wells Fargo agreed to a modification. This paperwork ignores that agreement. Who runs this company?

An aside. I heard someone at a meeting last week mention that Wells Fargo was going to institute drug testing to its employees — given his level, I assumed he meant middle-level executives. Turns out that 80% of them, per his information, tested positive for cocaine. Given that coke is the middle-level executive drug, and given how Wells Fargo is currently operation, I don’t doubt him.

I contacted Wells Fargo’s executive offices in Des Moines, Iowa. They had no answer as to why this continues, but said they will remedy it. Sure.

Then what? When I came home on Sunday, July 18th, 2010 to see a notice stuck in my front door . . . no name, no signature and no envelope (so much for confidentiality).

That notice reads:

Please Call: Wells Fargo Home Mortgage
Contact: Loan Administration
At: 800 766 0987
Notice: Our Representatives called on you today while you were out. There is an important matter we would like to discuss with you. This inspection is not in any way an attempt to collect a debt.

I called on July 19, 2010 at 8:27 a.m.: Lolitha (EN5) in Wisconsin couldn’t help. She didn’t know why the notice was on the door. I called and left a voice mail for Teresa Warnock in the offices of the President of their mortgage in Des Moines, Iowa. Teresa called back and sounded as confused as am I. My “case” is being monitored by someone else in their offices as there is an “internal issue” they are trying to resolve.

And, no sooner do we hang up then I get yet another “Loan Modification Agreement” delivered via FedEx from Wells Fargo. This one seems to duplicate the one dated April 22, 2010 and it is, in fact, dated that same date. And it STILL is not per my understanding of fully amortized PITI.

Dreaming Up America by Russell Banks

“A thoughtful and provocative meditation on our history, with a chilling look at what has happened to the American dream.” –Howard Zinn

Because my background is English literature and media, I couldn’t help it. I looked up the word evil. Wikipedia has it as:

Evil is the intention of causing harm or destruction while threatening or deliberately violating morality. Largely due to the subjectivity of the word morality (which may refer to a society’s moral code, one’s own moral system, relative morality, absolute morality, etc.), there is no agreement about whether evil is a matter of social custom or universally correct principle that overrides custom. Evil, however, is most commonly used to refer to any intention that is socially perceived as the antithesis of a morally right or good intention.

Yes, this is subject to interpretation, and my interpretation — along with millions of Americans — is that these lenders may be evil. And while you are ruminating over whether or not they are evil, please know that they are absolutely inept; if you are not yet worried about who has your money and/or investments, you should be.

This is so sad. Many people, me included, worked 50-60 years for a gracious retirement. What am I doing? Fighting with an institution that I know beyond the shadow of a doubt is inept and crooked if you view their history — they cut a deal with Pancho Villa is the early 1900s — and that was documented by university libraries.

Does anyone have a clue as to what we do? We KNOW what is going on. How are these lenders stopped?

My notes keeping track of this fiasco started in December 2008; they are now 15 pages long.

I told them I am billing them for my time spent on trying to clear up this mess and the repeated FAXing of documents that they repeatedly lose. I now average $100/hour working from home. I have spent easily 2 hours per day keeping track of this. So: $100/hour x 2 hours per day x 5 days per week x 20 months = roughly $80,000 . . . not counting all the money wasted in FAXing documents to them repeatedly.

WHAT IF each of the major crime dramas, i.e. “Lie to Me,” ” Criminal Minds,” “Without A Trace,” various “CSI” programs, “Burn Notice,” “Numbers,” “The Closer,” “Leverage,” the new “White Collar Crime” (which is excellent — check out the “young blue eyes” lead), etc. presents their spin on our current mortgage nightmares/foreclosures during a season, all on separate evenings so they don’t touch each other’s ratings.

Since this is again war on our own soil, what about staging a national fundraiser through crime television programs, each of whom present their own take on the story of an individual or family (a real family) who has lost their home through foreclosure? And what about photographing just one day in every state; every state has dozens of foreclosures per day.

WHY? ‘Cause SOMEONE has to do something effective! And because many denizens of Hollywood care deeply about their craft and country. Movies and television dramas do bring truth to light and light to truth.

These are the images you see on the news. You seldom see the men, women, children, dogs, cats, birds, etc. that have had to move. Some of these people have been out of work for awhile and have no money to move and/or can’t find rentals that will accept their pets. Where do they go? What happens to the uprooted children?

Have you done the math for the millions of homes that have been lost to foreclosure? It’s a shocking revelation. Surely lending institutions are not thinking of their future. Two million foreclosures (this year alone) translates to an average of 2.6 people per home (5.2 million people), times a 50% expected population growth by 2050 (41 years). More than 10 million people, all passing down the stories of how they lost their home because Wells Fargo or Bank of America or Chase would not assist even though they received billions in taxpayer dollars to help families keep their homes.

If the lenders think this is going to go away, it isn’t. People in the Southern United States are STILL upset over the Civil War which ended in 1865.

Think about the goodwill of such a project. And, again, that audience. Many of these shows have audiences exceeding 2 million anyway; this could add a few million more viewers to each show.

Depending on your position in our home foreclosure saga, you will be damned or you will be praised.

Whether or not anyone should receive a loan modification has become a moot point. A group of hard-working Americans who have been requesting loan modifications is unearthing extraordinary ineptness on the part of America’s largest lenders. One year into the request for loan modification, one binder is five inches thick with at least 20 bank errors in those pages and contains 12 typed pages, single spaced, of who said what to whom. Absolutely no one at this bank knows what anyone else is doing!

Of note recently is that Wells Fargo has sold a number of loans to HSBC after those loans have fallen in some type of default. Most believe that HSBC is based in China; it isn’t. It was started in China in the 1800s by a Scotsman . . . something to do with the opium trade. HSBC was incorporated in Wales/England prior to Hong Kong goin back to the Chinese. HSBC is the largest bank in England with holdings around the world. It is not globally answerable to anyone because, as it notes, each bank/branch is subject to local rules/regulations.

HSBC has partnered with Wells Fargo on commercial banking levels. Because of that, and because is bundling and selling defaulting loans in bulk to HSBC, don’t you wonder if this is some type of money laundering/offshore banking on a high level.

Following is text from HSBC’s web site; these are the rules they subject themselves to. (I did the same with Wells Fargo . . . if you are having trouble with loan modifications through Wells Fargo, you may want to read their code of ethics — it will amuse you, I’m sure.)

Both of these entities purport to act fairly and honestly at all times and insist that their employees do also. My apologies to them, but that is not what we are seeing and many of the employees are in the dark; I have heard repeatedly that they do not know what is going on.

HSBC USA Inc. – Statement of Business Principles and Code of Ethics

The Fundamental Principle

In all its endeavors, it is the policy of HSBC North America Holdings Inc. and each of its subsidiaries (collectively referred to herein as the “Corporation”) to act honestly and fairly at all times. It is the Corporation’s policy to comply with the spirit as well as the letter of all applicable laws and regulations in all that it does. Each employee of the Corporation is expected to do the same.

Violations of this policy and failures to report known violations will subject the employee to disciplinary procedures, including termination of employment. In addition, employees who should have, through the exercise of due diligence, discovered violations of this policy, but who fail to do so, may be subject to discipline, including termination of employment.

In dealing with employees, customers and suppliers, the Corporation makes decisions without regard to race, ancestry, color, religion, national origin, citizenship, marital status, veteran’s status, gender, gender identity, sexual orientation, age or disability that can be reasonably accommodated . . .

In dealing with customers, the Corporation is dedicated to offering top quality products and services and to supplying only honest information about them. The Corporation will offer products and services on a competitive basis and will not tolerate the use or attempted use of improper incentives to obtain business . . .

Compliance with Laws and Regulations: Numerous laws and regulations, both domestic and foreign, specifically govern various aspects of the Corporation’s business: the Foreign Corrupt Practices Act, the Financial Institutions Regulatory and Interest Rate Control Act (FIRA), the Community Reinvestment Act, the Truth-in-Lending Act, the Fair Credit Reporting Act, the Bank Secrecy Act, and various federal and state usury laws, to name just a few. In addition, laws and regulations of general applicability, such as the securities, equal employment, wage and hour and antitrust laws, affect us. Failure to comply with these laws and regulations can have serious consequences, including legal liability for damages and other penalties. You have a responsibility to learn and understand the laws and regulations applicable to the activities of your department and your particular responsibilities within your department. If you identify unresolved legal questions you should bring them promptly to the attention of your supervisor or department head. The General Counsel’s office is always available to provide further help.

The banking industry has concerns that money laundering schemes will increase and, if successful, will lead to the erosion of public confidence in the banking system. Bank personnel therefore must comply aggressively with the provisions of the Bank Secrecy Act — particularly the reporting of unusual cash transactions. Compliance will not only help the Corporation avoid stringent penalties, but also will assist us in fulfilling our obligations to our fellow workers, our parent company and our communities.

Corporate Sustainability: Our goal is to be one of the world’s leading brands in corporate sustainability. This is not solely an environmental or social agenda, nor is it confined to governance and ethics. Sustainability is about bringing all of these issues together into our business model, and about maintaining the long-term growth of a successful business for the benefit of our stakeholders. For HSBC, sustainability is about making decisions that maintain the right balance between the environment, society and the economy to ensure long-term business success.

We believe that it is our duty to our customers, investors and employees to foster an ethical, responsible and sustainable corporate philosophy.

While our biggest contribution to society is the responsible provision of financial services, we have also long sought to strengthen our ties with local communities through philanthropic partnerships. Education continues to be the primary focus for our corporate giving. The second philanthropic area we support is the environment.

Conflict of Interest: . . . A “conflict of interest” arises when your personal interest in a transaction, or an obligation you owe to someone else, comes into conflict with your obligation to the Corporation and its customers. This includes using your position to advance your own personal gain or advantage on the basis of sensitive information gained during your employment, whether or not you obtained this gain or advantage at our expense or at the expense of any entity of the Corporation or its customers . . .

Self Dealing, Fiduciary Appointments and Powers of Attorney: You may never participate in the consideration or approval of any extension of credit, any waiver of fees or any other transaction between the Corporation and yourself or anyone in your immediate family, or with other people, corporations, partnerships, trusts or other organizations in which you or any member of your immediate family have a significant financial interest . . .

Gifts from Suppliers or Customers: The Bank Bribery Act and other applicable laws prohibit you from seeking or accepting for yourself or any other person anything of value (including services, discounts or entertainment) from customers, suppliers or anyone else in return for any business, service or confidential information of the Corporation . . . exceptions to the general prohibition against seeking or accepting anything of value as follows:

(i) Lunches, dinners and other customary entertainment (e.g., sports events, golf, etc.) provided in the ordinary course of a supplier’s or customer’s business and in situations where we would normally reimburse the cost as a proper business expense;
(ii) Services or discounts customarily afforded by suppliers or customers in the ordinary course of their business;
(iii) Promotional gifts such as lighters, pencils, calendars and the like, routinely distributed by the donor; and
(iv) Gifts in connection with customarily recognized events (e.g., holidays, job promotions, etc.) not exceeding a $100 value.

You must promptly report to the General Counsel’s office anything of value beyond those items listed above if offered to you, received by you, or if you anticipate receiving such an item.

NOTE: Employees may never accept gifts of cash, checks or gift certificates convertible to cash, regardless of amount.

Borrowing Money from Suppliers or Customers: Employees are not permitted to borrow from any of the Corporation’s suppliers or customers . . .

Note: Because the Corporation is engaged in the business of lending, the Corporation’s employees must set an example. Failure to timely repay loans from the Corporation may place the employee in a conflict of interest situation. Therefore, the Corporation believes it appropriate to disclose an employee’s delinquent debt to the employee’s business unit manager.

Outside Employment and Business Activities: Other potential sources of conflict of interest include holding any outside employment position or conducting personal business which may interfere with the employee devoting full attention and loyalty to the Corporation during working hours; holding a direct or indirect financial interest in a competitor company or in any firm or entity with which the Corporation does business (excepting normal investments in publicly owned companies); holding a direct or indirect financial interest in any firm or entity that is a supplier of or vendor for the Corporation (excepting normal investments in publicly owned companies); holding or acquiring an interest in any property or business in which the Corporation has or proposes to acquire an interest; serving as a director or officer of any firm that is a competitor, customer or supplier of the Corporation; or conducting business on behalf of the Corporation with an individual related by blood, marriage or adoption. Accordingly, you should disclose and obtain approval for any outside employment from your manager or Human Resources . . .

You should know that certain types of outside employment, such as with other financial institutions or securities dealers, are prohibited by law. Refer questions relating to the appropriateness of such outside employment to the General Counsel’s Office.

Soliciting or Accepting Legacies or Other Favors: We do not allow you to solicit any legacy or other favor granted by an individual or organization where your relationship to the individual or organization arose primarily during the course of your employment.

Information About Our Customers and Employees: We expect you to treat information entrusted to us by our customers and employees as you perform your duties for the Corporation as confidential and privileged. This includes information relating to deposit and loan balances, information concerning the management, financial condition and future plans of our customers’ businesses, employee/salary information and information obtained in the course of fiduciary relationships. You must not disclose confidential information to anyone either inside or outside the Corporation except in compliance with the Corporation’s information protection policies. Your obligation to maintain the confidentiality of the information continues even after you leave the Corporation . . .

Limited Use of Confidential Information: While recognizing the need for a constant flow of information for the smooth operation of the Corporation, we expect you will not disclose confidential information pertaining to our customers’ affairs to your fellow employees unless they have a clear business need to know the information for the performance of their duties. You must exercise particular care in communicating confidential information to persons in other departments or in other corporate subsidiaries and affiliates who may have different responsibilities and possibly conflicting obligations . . . you cannot communicate nonpublic information . . .

Disclosure of Information to Outsiders: Apart from routine credit inquiries, you cannot release information concerning our customers’ affairs to outsiders, including law enforcement authorities, except in response to a valid subpoena or similar legal process within strict compliance of the Corporation’s established internal operating procedures. Treat information concerning the Corporation, its affiliates, or any of their customers as confidential . . .

Information About HSBC North America Holdings Inc., its Subsidiaries or Affiliates: Because of your position, you may obtain information about your business unit or HSBC North America Holdings Inc. or other HSBC subsidiaries or affiliates not otherwise available to the public. You cannot disclose confidential financial or other proprietary information concerning any of these entities to outsiders until it has been published in reports to security holders or otherwise made generally available to the public. HSBC policy requires the coordinated communication of sensitive information about HSBC or its affiliates to investors, security analysts and the press through properly designated representatives in our Investor Relations and Public Affairs areas. Your obligation to maintain information about HSBC and its affiliates as confidential remains in effect even after you are no longer employed by the Corporation. In addition, you may have legal liability if someone inside or outside your immediate family obtains a personal gain or advantage on the basis of confidential information obtained directly or indirectly from you.External Communications: You must refer all media inquiries directly without further comment to Public Affairs. Likewise, Public Affairs must coordinate all ongoing media contact. This ensures the preparation of official statements is consistent with corporate policy, monitored contacts and anticipated news coverage . . .

Personal Gain: You must not use confidential information about the Corporation or any of its affiliates, customers, or suppliers entrusted to you in the course of your employment for your personal gain or the personal gain of your family, friends, or others.

Securities Law Penalties: The improper or personal use of confidential information concerning the Corporation or its affiliates, customers or suppliers is a violation of the Corporation’s policies, and may subject both you and the Corporation to penalties under various securities laws and regulations . . .

Competition: The Corporation believes in the free enterprise system and is dedicated to the maintenance of fair competition in an open market. Employees are to avoid any circumstances that will, or would appear to, violate antitrust or competition laws . . . Normal business activities occasionally require contacts with competitors, but on such occasions discussion of any of the above-mentioned subjects must be avoided. Any violation of these conditions should be reported immediately to the General Counsel’s office . . .

Employees are prohibited from making, offering or soliciting any payment that is in the nature of a bribe, kickback or other illegal payment to any customer or supplier of the Corporation or to any other person. If any customer, supplier or any other person solicits or requests such a payment, that solicitation or request should be reported immediately to the General Counsel’s office.

Corporation Records: The Corporation’s books and records and other essential data are to be maintained with accuracy and honesty in strict compliance with applicable laws, accounting principles and management’s general authorization. When preparing such records, employees are not to make false or misleading entries in records nor permit to exist any fund or asset or liability which is not fully and properly recorded on the Corporation’s books. No transactions, agreements, programs, plans, obligations or payments shall be entered into, made or recorded with the understanding that their use is for other than the stated purpose.

Employees shall not make any false or misleading statements about such records or conceal information from management or the Corporation’s auditors . . .

Government and Public Affairs
The Corporation advocates the democratic system and is committed to upholding the political, legal and governmental processes of the local, state and federal systems of the United States and other countries where the Corporation operates.

Further the Corporation recognizes that participation by citizens in civic and political activities is necessary for this system to function properly. The Corporation encourages employees to exercise their right to vote, to participate actively in the political process, to be informed on public issues and on the positions and qualifications of public officials and candidates for public office and to support issues, candidates and parties of their choice, as individual citizens.

Employees should not use the Corporation’s name or the name of HSBC Holdings plc or any of their affiliated entities, either directly or indirectly, to endorse any public issue, political candidate, political party or business interest, product or service, unless otherwise authorized by the General Counsel’s office.

Political Activities and Contributions: Federal and state laws and regulations restrict, and in some cases prohibit, corporations from making payments or using their property to support candidates for political office or political parties or committees. As a matter of policy, HSBC and its subsidiaries do not use corporate funds to make contributions to federal, state or local candidates or committees. We prohibit the use of the Corporation’s employees or property, including office supplies, printing facilities, postage and equipment, to promote political candidates or parties. We prohibit you from making any expenditures for such purposes through travel and expense accounts and we do not allow recovery of any such expenditure.

Both state and federal laws, however, permit voluntary personal contributions to segregated funds established for political purposes, such as H-PAC, the political action committee (PAC) for employees of the Corporation. The Corporation may legally pay for the PAC’s administrative expenses, but the employees voluntarily provide the funds the PAC uses to financially support candidate campaigns.

The solicitation of the Corporation’s employees for political contributions on the Corporation’s premises is limited to H-PAC.

Holding of Public Office: Under the laws of the State of New York and most other states in which the Corporation does business, the holding of public office, elective or otherwise, may give rise to an illegal conflict of interest or could prevent us from having normal business relationships with the governmental body involved, including depository relationships and the purchase of its debt obligations. Whether or not the public official receives any salary or participates in the actual deliberations leading up to any contract or transaction does not affect this rule . . .

Improper Payments: The Corporation prohibits the use of corporate funds for bribes or for making improper payments of any kind to any persons or organizations in order to obtain their business or to influence their policies or decisions, or for any other reason. This prohibition includes any payment to any foreign or domestic government official, employee or agent not required by law. We also prohibit the making of any “kickback” or the sharing of fees with those who represent customers or suppliers of the Corporation.

We remind you that the Corporation and its affiliated companies conduct business throughout the world and that the Corporation will strictly comply with the applicable laws and regulations of the countries in which we do business. However, you must remember that laws and business customs vary from one foreign country to another and from the laws and customs of the United States. We forbid foreign practices that violate a U.S. law or regulation even when acceptable locally.

If you have questions concerning the legality of any payment, or any suspicion of a kickback, bribe or other illegal arrangement, you should report it immediately to the General Counsel’s office.

Personal Investments: Subject to any more restrictive divisional policies and procedures, you and the members of your immediate family may invest at your discretion in stocks, bonds and other corporate securities, as well as foreign currency, interest rate and commodity forwards, futures and options. However, because of your position with a financial institution, you should avoid excessive speculation or risk in your personal financial activities. You may easily measure excessive risk by determining if the loss of a particular investment would significantly affect your standard of living or cause you to encounter extreme financial hardship.

You also must avoid particular investments affecting your judgment with respect to making decisions for the Corporation or giving rise to the appearance of a conflict of interest if reported on the front page of The New York Times.

You must limit investments in the obligations of customers, suppliers and other parties doing business with the Corporation to securities publicly traded on a national securities exchange or in the over-the-counter market, unless you obtain the prior written approval of the General Counsel’s office. Investments in such publicly traded securities in excess of 1% of the company’s issued and outstanding shares require prior approval of the General Counsel’s Office.

In making your personal investment decisions, you must carefully avoid the use of any confidential information you have obtained through your employment. In order to avoid potential conflicts in this area, you should avoid investments in the securities of any corporate customer for which you currently have or anticipate having direct or indirect account responsibilities.

Trading and Margin Accounts: Subject to compliance with divisional policies and procedures applied because of your position with the Corporation, officers and employees may maintain accounts, including margin accounts, for their own personal trading and investment activities and those of members of their families and others. You are permitted to maintain these accounts with HSBC affiliates, such as HSBC Brokerage (USA) Inc., or with independent securities, foreign exchange or commodities firms.

The Rules of Fair Practice of the National Association of Securities Dealers restrict NASD registered broker dealers, including HSBC Brokerage (USA) Inc., from selling securities distributed in a public offering (i) to senior officers of commercial banks, investment companies and registered investment advisers, or (ii) to any employees of such entities engaged in buying or selling securities for such entities or their customers. These restrictions also apply to family members sharing the same household.

In addition, rules of the New York Stock Exchange provide that member firms may open margin accounts for bank employees if they first obtain the employer’s consent. Your supervisor or divisional compliance officer can provide such a consent, if requested to do so. Of course, officers and employees should not engage in trading or investment activities conflicting with their employment duties or considered imprudent under their own personal circumstances.

Reporting and Inquiries: The basic principles presented in this statement are intended as general guidelines rather than rules and regulations for all situations. Should any question arise as to the interpretation of a particular principle or situation, the employee shall refer the question to the General Counsel’s office.

Inquiries and information reported under this policy will be kept in confidence except as may otherwise be required to protect the Corporation’s interests. There shall be no reprisals for reporting information pursuant to this policy.

Violations of this policy and failures to report known violations will subject the employee to disciplinary procedures, including termination of employment. In addition, employees who should have, through the exercise of due diligence, discovered violations of this policy, but who failed to do so, may be subject to discipline, including termination of employment.

Reporting Violations: If asked or ordered to participate in, or you otherwise become aware of, any event violating the Corporation’s policies, applicable laws and government regulations, or both, you should report the information to the General Counsel’s office and/or contact the Employee Integrity Tip Line at 888-560-1777. The Employee Integrity Tip Line Unit will notify Corporate Security, if appropriate. Corporate Security conducts such investigations as are required under the circumstances and has responsibility for coordinating the related involvement of the Corporate Security Department, Human Resources Division and related division management . . .

Last Revised: July 23, 2008

The letter to the FBI (way down there) comes from a group digging into the foreclosure crises, all of whom are finding absolute non-cooperation by lenders, no matter what the background, ethnic group, income level, hair color, married or single, kids or sans kids, sexual preference, West Coast or East Coast denizen, etc.

It doesn’t matter whether you have a job or not — you either make too much for a loan modification or too little or it’s stated income and lenders will discount a percentage (as though a “real” job were more secure during these days of massive layoffs).

A portion of a friend’s income is through rental of two rooms; Wachovia decided they wouldn’t count all of it because rental income is not stable. Really? Her renters have been in her home for many years, the rent is reasonable, they all get along well. Where might they go?

Americans across the board are getting shafted in the current drill being exercised by mortgage lenders.

It is a fascinating time: In my 60+ years, I’ve never seen equal prejudice . . . There’s generally a “selection” process relating to skin color, height, race, income level, drug use . . . or some guy whose wife hates him decided he hates all women who resemble her. When I first moved to Marin County, California, it was reserved for the car you drive, i.e. foreign vs. domestic (domestic was declasse).

Mortgage companies have managed to level the playing field across this country; it doesn’t matter who you are, how tall you are, what color your eyes are, they are NOT going to cooperate. As every cloud has a silver lining, so does this one: We can all finally acknowledge that we ARE in the same boat; if we work together we can beat them back; perhaps this is the lesson here.

It IS fascinating!

The group I’m working with have noticed that Wells Fargo bundled and sold defaulted loans to HSBC. Wells Fargo and HSBC have agreements on a commercial level: Wells Fargo HSBC Trade Bank. They are in bed together:

The Wells Fargo HSBC Trade Bank is the only nationally chartered bank in the U.S. exclusively devoted to international trade . . . (per PR Newswire)

HSBC is not owned out of China, as many seem to think (due to its original name of HongKong Shanghai Bank of China; that was started by a Scotsman and had something to do with opium wars). HSBC is an English bank and “HSBC” has been all too frequently in the same paragraph as the words “money laundering”:

• Reuters (a reputable media company) reported, on February 17, 2010, that HSBC is accused of assisting in money laundering;
• HSBC is being questioned in Ireland in connection with Bernard (Bernie) Madoff schemes (and for those of you residing in Ireland reading this, please take into consideration that Wells Fargo is trying to open banks in Ireland . . . trust me, you DO NOT want that bank in Ireland;
• HSBC is accusing an employee of stealing client data and selling it to French authorities (from the “Office of Inadequate Security” . . . don’t you love the internet?);
• HSBC, Europe’s largest banking institution “created” dummy corporations to avoid one billion dollars offshore tax evasion . . . which is considered by the FBI to be Britain’s longest running organized criminal conspiracy and corruption case. FBI Interpol and Scotland Yard are investigating this one!;
• The chairman of HSBC is implicated in the above-mentioned “major criminal conspiracy case.”

When the City of Baltimore sued Wells Fargo Bank in 2009, HSBC was mentioned along with them in various news stories.

March 14, 2009, L.A. Times, E. Scott Reckard
The NAACP sued subsidiaries of two major banks Friday for allegedly steering African American borrowers unfairly into costly subprime mortgages. The suits — against Wells Fargo Bank and Wells Fargo Home Mortgage Inc., owned by Wells Fargo & Co., and against HSBC Mortgage Corp. (USA) and HSBC Bank USA, owned by HSBC Holdings — arrive at a time when the housing crisis and soaring unemployment already are causing disproportionate harm in black neighborhoods, leaders of the rights group said.

How does any of this affect you? Check the sales pattern of your home loan (if you can find it).

If you have a Wells Fargo loan, we can almost guarantee that somewhere along the line it was sold to HSBC. When I asked Wells Fargo about the location of my note (which WAS sold to HSBC per the County Recorder in mid-2009 even though Wells Fargo denied that transfer), Wells “assured” me that they are the holders of my note. IF they are, it would only be because of questions I am asking about HSBC and their “sales pattern.”

The FBI may be our best hope. Apparently, they bow to no one. God Bless ‘em. And if you were passed through HSBC, I think it’s worth contacting Scotland Yard. (Oh, God, I’m starting to sound like group members Gregory and Kraig . . . but our group has learned a LOT from them and we have saved 26 homes to date! — well, some are pending, but they are not gone yet).

So, if there is a mortgage broker or financier out there, woudl you kindly inform us of the pattern? Banks lend on the homes, bundle and sell them at discount to a lender that bundles and sells at discount to a lender . . .

Who takes the hit for the loss when they are sold at discount? My guess is that it gets back to taxpayer dollars.

If you are in the midst of dealing with these duplicitous lenders, try contacting the FBI with the following, which is from one of my committee members (the full PDFs of this will follow in a week or so). You have absolutely NOTHING to lose by calling their cards, and given that many of us have 10-12 pages of notes about their mistakes, lies in court, and incompetencies, you stand to win; sadly, they do not know what they are doing and they WILL be the demise of America if left unchecked. So check them:

Mortgage Company Name
Address
Your Property Address
Account Number

NOTICE OF FRAUD AND INTENT TO LITIGATE

This is Constructive Notice to you that I have discovered extensive fraud in regard to the mortgage and transactions associated with it on certain real property as noted below. It has come to my attention that you are involved in selling my promissory note without my knowledge, to finance the alleged loan. I have also discovered that COUNTERFEITING and CONSPIRACY TO DEFRAUD were committed during and since my real estate settlement, during the purchase of the above mentioned property; documented fraud has occurred.

This is your Constructive Notice that evidence in this matter will be personally delivered to the FBI and SECRET SERVICE, for investigation and prosecution, resulting from violations of Federal Law including, but not limited to, COUNTERFEITING and CONSPIRACY TO DEFRAUD if you refuse to accomodate. Information, including your identity, and what appears to be your participation in these violations of Federal Law, will be provided to additional Federal Agencies, and local authorities, for investigation and prosecution as well. Whether complaints are filed is your decision. It is based on your response to this serious notice.

If you were not previously aware of the above mentioned fraudulent and criminal activity, and may be an innocent party in this matter, I would urge your utmost cooperation with the notice demands as well as ceasing all activities relating to the ongoing fraudulent action. If, however, you would choose to move forward in any manner and participate in any way in the attempt to initiate foreclosure action at any time, you will demonstrate your complicity and willingness to be a party to the COUNTERFEITING and CONSPIRACY TO DEFRAUD. You have been noticed and will become subject to potential criminal prosecution and civil litigation for varying damages, if you fail to meet each demand.

You have hereby been lawfully noticed of this fraud and your involvement, whether knowingly or unknowingly, and you therefore may make no future claim of a lack of knowledge of these criminal activities, and your participation therein, which could absolve you of liability or culpability. If ignored, it is my intent to pursue any and all legal remedies against any and all participants regarding these fraudulent acts as necessary. The bonding companies of those involved will be notified of claims regarding any civil matters. Conduct yourself accordingly.

TAKE NOTICE

This is but one part of a substantial nationwide investigation, by law enforcement, of the mortgage industry and the complicit fraud therein. This is a very real and serious matter that is being, and will be, pursued with all those who are identified as being complicit in any fraud being prosecuted to the fullest extent of the law and civil action taken to recover varying damages as necessary.

In order to avoid preventable actions taken against you, you must comply with the following and provide evidence of the same to me within thirty (30) days:

1. Provide a full “Satisfaction of Mortgage”, filed with the Recorder of Deeds.

2. File a full re-conveyance of the property with the Recorder of Deeds, conveying full rights and title.

3. Release any and all liens in all public records.

4. Refund all profits associated in full.

If you refuse to cease all further pretense that you lawfully hold a claim to my property, you will be charged, investigated and convicted of each of the aforementioned crimes committed. Immediately after your refusal to cease is confirmed, complaints will be filed with the FBI, SECRET SERVICE, the UNITED STATES DISTRICT COURT and the CRIMINAL INVESTIGATION DIVISION of the INTERNAL REVENUE SERVICE.

It is in your best interest at this juncture to cease all forms of criminal activity and to accommodate immediately. If you for any reason do not complete processing the above demands, all complaints will be filed immediately, as warned. Prior to all litigation, your counsel must provide evidence first of holding a license to practice law, issued by the Secretary of State where the property is located.

Thank you very much for your prompt, righteous response and resolution of this urgent matter.

Sincerely,

I’m equally fascinated by how desperate these lenders are? Is money truly so important? The Bible has it that “the LOVE of money is the root of all evil” . . . money itself is not. It’s why you want it and what you do with it.

I cannot help but feel sorry for the trap these major lenders are in, and I can guarantee you that my life, for one, has been far more interesting and informative than anyone who lives only for the Almightly Dollar.

After 18 months of trying for a loan modification through Wells Fargo Bank, and after 8 months of working with a group fighting lenders, it is painfully clear that we have been duped across the nation. (The image is of the binder I have been keeping since December 2008. Wells Fargo lost one of my payments in 2007; it took weeks to straighten that out. So it seemed prudent to begin keeping a file of all correspondence with that lender. The binder is now six inches thick and weighs 20 pounds. My conclusion is that Wells Fargo is either insanely incompentent or frightenly corrupt — it is definitely one or the other or both, but their actions have nothing to do with good business practices and/or ethics.)

Yesterday, during a conversation with a worldly and knowledgable couple, who read the New York Times, Wall St. Journal, San Francisco Chronicle and the Marin Independent Journal, it was clear that they knew little of our national debacle (which has created an international debacle). Because newspapers cater to advertisers — even though they will swear they do NOT — the news you read is couched so as to not overly offend major advertisers and banks ARE major advertisers.

From Living Lies:

THE INCONVENIENT TRUTH: Profits piled up off-shore that are being repatriated on a gradual basis showing incredible gains at the Wall Street Banks that supposedly lost hundreds of billions of dollars. The truth is they never lost a dime. The truth is the loan was sold multiple times through multiple intermediaries each of whom in each “sale” were paid fees and profits vastly exceeding any prior compensation to those who arranged or made loans prior to securitization.

Second Hidden Yield Spread Premium: As I have pointed out before the hidden yield spread premium was jaw-dropping (when the loans were packaged by the aggregator and then sold to the Special Purpose Vehicle that issued and sold the mortgage-backed securities. This second YSP was sent off-shore to the Bahamas or the Caymans to Structured Investment Vehicles with their own trustees, who scattered the actual depository accounts all around the world. The beneficiaries were the 100 Club — the main players in the creation, promotions and protection of the scheme through government contacts, plausible deniability, and simple non-disclosure sometimes achieved through the sheer complexity of the arrangements.

Know Your Rights: The U.S. Constitution: And Fascinating Facts About It If you are new to the fight to save your home, you are going to think some of us who have been in the midst of this for 1-2 years are nuts. We’re not. We are hard-working responsible citizens who are being trampled on by not only lenders, but sometimes by local officials, some of whom have interests in the very banks we are up against. One of my early stops in the effort to get help was to Legal Aid of Marin County. The director of that agency, Paul Cohen, who has received funds to help people, handed me a one-page sheet on when I could expect to lose my home. He offered no help. Were it up to Mr. Cohen, I would be living under a bridge in a tent with a feral cat or two. My Cohen and his Legal Aid are a disservice to community. Were it up to me, he would be seeking new employment. My surname is Jewish, thus this is not from any type of prejudice; he is simply incompetent, he had my life in his hands, and he did NOTHING. I’m at an age where recovering from losing my home would be impossible.

Nobody wants to acknowledge this fact because it would be admission that the con game is still on and that government is still part of it. They took many trillions of dollars to “bail out” banks that had arranged the bad loans but never underwrote them.

The repercussions of what lenders have done during the past decade is playing out across the nation. People who worked hard to grow and provide for their families are sinking.

From the New York Times:

. . . The mayor and former bank loan officers point a finger of blame at large national banks — in particular, Wells Fargo. During the last decade, they say, these banks singled out blacks in Memphis to sell them risky high-cost mortgages and consumer loans.

(Editor’s Note: I don’t think the banks were as picky as stories would have it. It seems to me that people of ALL races have been hurt and wrote about this as Equal Opportunity Prejudice!.) The group I work with — Families Fighting Forelosure is pretty well balanced between Black, Hispanic and White and everywhere from around 30 years of age to 73 years of age. There does not seem to be a common denominator except that, perhaps, we trusted our lenders and did not read every single word of those loan documents. I was just told that I have an interest-only loan. In my opinion, negative-am loans and/or interest-only loans are insane. How does one ever own one’s home. I would not have agreed to an interest-only loan . . . thus my reason for having a forensic audit undertaken.

The City of Memphis and Shelby County sued Wells Fargo late last year, asserting that the bank’s foreclosure rate in predominantly black neighborhoods was nearly seven times that of the foreclosure rate in predominantly white neighborhoods. Other banks, including Citibank and Countrywide, foreclosed in more equal measure.

In a recent regulatory filing, Wells Fargo hinted that its legal troubles could multiply. “Certain government entities are conducting investigations into the mortgage lending practices of various Wells Fargo affiliated entities, including whether borrowers were steered to more costly mortgage products,” the bank stated.

Wells Fargo officials are not backing down in the face of the legal attacks. They say the bank made more prime loans and has foreclosed on fewer homes than most banks, and that the worst offenders — those banks that handed out bushels of no-money-down, negative-amortization loans — have gone out of business.

Know Your Rights: The U.S. Constitution: And Fascinating Facts About It

More than 200 families are working with Families Fighting Foreclosure to save their homes in Marin County, California. The sponsoring Group Marin Family Action has just been featured in the beginning of a series from Pulitzer Prize winning newspaper, the Pt. Reyes Light.

One of the strengths of the group is “The Buddy System.” No one goes to court alone when facing opposition from attorneys, lenders, and courtrooms. The group has been shocked at all turns by how sloppy and/or lazy some judges run their courtrooms.

The latest story is of a woman whose husband took out a second on their house without her knowledge. He died shortly thereafter, leaving her confused and about to lose her home from foreclosure. She tried repeatedly to find out what happened, to no avail.

This writer — who has been battling to save her home for 18 months — was in court during one of these legal proceedings (and thinks “illegal proceedings” might be a more appropriate term). The judge pronounced from the bench that “The file is incomplete. I have not reviewed it.” And “It is what it is.” That judge either opened the door for mis-trial, which happened in a round-about way, or she was performing her civic duties in a sloppy manner. It was an appalling view of justice; in fact no justice was going to happen that day if it stayed in the hands of the judge and opposing counsul.

Earlier during the day, that judge told the distressed homeowner that she should prepare to move. She was ready to throw her out of her home of 17 years without knowing any facts and without caring about the facts.

This is being written two weeks after that dreadful Day in Court, and it looks like it is going to have an amazingly happy ending. We’re not at liberty to say yet and the point of this is that you have to be willing to fight or “They” will run over you.

The story about families fighting foreclosure.

Brown Prosecution Sends Phony Foreclosure Consultants To Jail And Recovers Stolen Funds

SANTA ANA – In a clear “warning shot” to unscrupulous loan-modification consultants, Attorney General Edmund G. Brown Jr. today announced that two women have each been sentenced to one year in jail and ordered to repay dozens of homeowners who were charged thousands of dollars in up-front fees for non-existent foreclosure-relief services.

Is your lender in this picture?

Marianne Curtis, 69, of Costa Mesa and Mary Alice Yraceburu, 46, of Riverdale, who operated Fresno and Orange County-based Foreclosure Freedom, pleaded guilty last month to 71 criminal counts, including grand theft, conspiracy and unlawful foreclosure consulting. Both will serve one year in Orange County jail and an additional four years of probation.

“Curtis and Yraceburu shamelessly exploited homeowners desperate to avoid foreclosure, charging up to $1,800 in up-front fees for loan modifications that were never delivered,” Brown said. “Today’s jail sentences send a warning shot to loan-modification consultants: If you swindle homeowners, you face serious time behind bars.”

Brown’s office initiated its investigation into Curtis and Yraceburu in early 2008 after receiving a complaint from the Tulare County District Attorney. Charges were filed in Orange County Superior Court on March 19, 2009, against the defendants, and both pleaded guilty on March 24, 2010.

Brown’s investigation located victims in many California towns and cities: Antelope, Avenal, Bakersfield, Crows Landing, Elk Grove, Fairfield, Fresno, Galt, Hanford, Hayward, Hollister, Kingsburg, Mendota, Modesto, Petaluma, Placerville, Richmond, Ridgecrest, Rio Linda, Sacramento, Salinas, San Leandro, Simi Valley, Stockton, Taft, Vacaville, Vallejo and Ventura.

In addition to today’s jail sentences, Curtis and Yraceburu were ordered to repay 36 victims a total of $32,040. If eligible victims not named in the complaint come forward, the court can order additional repayment throughout the defendants’ probation term. As a condition of today’s sentence, both defendants are also prohibited from any future work in the telemarketing and real estate industries.

Brown’s investigation found that from April 2007 until February 2008, the two women paid for access to foreclosure listings so they could directly solicit hundreds of homeowners underwater on their mortgages with mailers promising relief.

When homeowners called the number on the mailer, they were told their mortgages could be renegotiated to a lower monthly payment. Victims, however, were required to pay up to $1,800 in up-front fees and were instructed not to contact their lenders.

Victims were assured the company had “private lenders and specialists exclusive to their company who are very experienced in the options and methods used to renegotiate home loans,” yet neither of the women who operated the company had real estate licenses, legal training or any experience in the home mortgage market.

Investigators found no evidence they had negotiated any successful loan modifications, and most of the victims were either forced into bankruptcy or lost their homes to foreclosure. Bank account records revealed the defendants took over $120,000 from unsuspecting homeowners.

Both Curtis and Yraceburu pleaded guilty to all 71 criminal counts including:
- 34 counts of unlawful foreclosure consulting
- 29 counts of grand theft
- 7 counts of attempted grand theft
- 1 count of conspiracy

By law, all individuals and businesses offering mortgage-foreclosure consulting or loan-modification and foreclosure-assistance services must register with Brown’s office and post a $100,000 bond. It is also illegal for loan-modification consultants to charge up-front fees for their services.

Non-profit housing counselors certified by the U.S. Department of Housing and Urban Development provide free help to homeowners. To find a counselor in your area, call 1-800-569-4287.

If you are a homeowner who has been scammed, contact Brown’s office at 1-800-952-5225 or file a complaint online at: www.ag.ca.gov/consumers/general.php.

Brown has sought court orders to shut down more than 30 fraudulent foreclosure-relief companies and has brought criminal charges and obtained lengthy prison sentences for dozens of other deceptive loan-modification consultants. Last month, Brown secured a court judgment that shut down two Orange County-based foreclosure-assistance companies, secured $1 million in restitution for victims and prohibited three individuals from ever working in the real estate industry again.

For more information on Brown’s action against loan-modification fraud visit: http://ag.ca.gov/loanmod.

A copy of the amended complaint, filed in Orange County Superior Court, is attached. # # # You may view the full account of this posting, including possible attachments, in the News & Alerts section of our website at: http://ag.ca.gov/newsalerts/release.php?id=1896

From the Guardian, London, England

Now we know the truth. The financial meltdown wasn’t a mistake. It was a con.

(Editor’s Note: Really? You FINALLY caught on! Where you been?)

Hiding behind the complexities of our financial system, banks and other institutions are being accused of fraud and deception, with Goldman Sachs just the latest in the spotlight. This has become the most pressing election issue of all.

The global financial crisis, it is now clear, was caused not just by the bankers’ colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud. Friday’s announcement that the world’s most famous investment bank, Goldman Sachs, is to face civil charges for fraud brought by the American regulator is but the latest of a series of investigations that have been launched, arrests made and charges made against financial institutions around the world.

Big Finance in the 21st century turns out to have been Big Fraud. Yet Britain, centre of the world financial system, has not yet levelled charges against any bank; all that we’ve seen is the allegation of a high-level insider dealing ring which, embarrassingly, involves a banker advising the government.

We have to live with the fiction that our banks and bankers are whiter than white, and any attempt to investigate them and their institutions will lead to a mass exodus to the mountains of Switzerland. The politicians of the Labour and Tory party alike are Bambis amid the wolves.

Just consider the roll call beyond Goldman Sachs. In Ireland Sean FitzPatrick, the ex-chair of the Anglo Irish bank was arrested last month and questioned over alleged fraud. In Iceland last week a dossier assembled by its parliament on the Icelandic banks huge lenders in Britain was handed to its public prosecution service.

A court-appointed examiner found that collapsed investment bank Lehman knowingly manipulated its balance sheet to make it look stronger than it was accounts originally audited by the British firm Ernst and Young and given the legal green light by the British firm Linklaters.

In Switzerland UBS has been defending itself from the US’s Internal Revenue Service for allegedly running 17,000 offshore accounts to evade tax. Be sure there are more revelations to come except in saintly Britain.

Beneath the complexity, the charges are all rooted in the same phenomenon deception.

Somebody, somewhere, was knowingly fooled by banks and bankers sometimes governments over tax, sometimes regulators and investors over the probity of balance sheets and profits and sometimes, as the Securities and Exchange Commission (SEC) says in Goldman’s case, by creating a scheme to enrich one favoured investor at the expense of others including, via RBS, the British taxpayer. Along the way there is a long list of so-called “entrepreneurs” and “innovators” who were offered loans that should never have been made. Lloyd Blankfein, Goldman’s CEO, remarked only semi-ironically that his bank was doing God’s work. He must wake up every day bitterly regretting the words ever emerged from his mouth.

For the Goldmans case is in some ways the most damaging.

The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured. If the Securities and Exchange Commission’s case is proved and it is aggressively rebutted by Goldman the charge is that Goldman’s vice-president Fabrice Tourre created a dud financial instrument packed with valueless sub- prime mortgages at the instruction of hedge fund client Paulson, sold it to investors knowing it was valueless, and then allowed Paulson to profit from the dud financial instrument. Goldman says the buyers were “among the most sophisticated mortgage investors” in the world. But this is a used car salesman flogging a broken car he’s got from some wide-boy pal to some driver who can’t get access to the log-book. Except it was lionised as financial innovation.

The investors who bought the collateralised debt obligation (CDO) were not complete innocents. They had asked for the bond to be validated by an independent expert into residential mortgage-backed securities a company called ACA management. ACA gave the bond the thumbs-up on the understanding from Fabrice Tourre that the hedge fund Paulson were investing in it. But the SEC says Tourre misled them, a pivotal claim that Goldman denies. The reality was that Paulson was frantically buying credit default swaps in the CDO that would go up in price the more valueless it became a trade that would make more than $1 billion. Worse, Paulson had identified some of the dud sub-prime mortgages that he wanted Tourre to put into the CDO. If the SEC case is true, this was a scam nothing more, nothing less.

Tourre could see what was coming. In one email in January 2007 he wrote: “More and more leverage in the system. The whole building is about to collapse anytime now only potential survivor, the fabulous Fab[rice Tourre] . . . standing in the middle of all these complex highly leveraged exotic trades he created without necessarily understanding all of the implications of those monstrosities”. Fabulous Fab, like his boss, will not be feeling very fab today.

(Editor’s Note: I can’t wait to see THAT movie!)

The cases not only have a lot in common using financial complexity allegedly to deceive and then using so-called independent experts to validate the deception (lawyers, accountants, credit rating agencies, “portfolio selection agents,” etc., etc.) but they also show how interconnected the financial system is. In Iceland Citigroup and Deutsche Bank covered the margin calls of distressed Icelandic business borrowers, deepening the crisis. Lehman uses the lightly regulated London markets and two independent British experts to validate that their “Repo 105s” were “genuine” trades and not their own in-house liability. The American authorities pursued a Swiss bank over aiding and abetting US nationals to evade tax.

Bankers will complain these cases all involve one or two misguided individuals, but that most banking is above board and was just the victim of irrational exuberance, misguided belief in free market economics and faulty risk management techniques. Obviously that is true but, sadly, there is much more to the crisis. Andrew Haldane, executive director of the Bank of England, highlights the remarkable reduction in the risk weighting of bank assets between 1997 and 2007.

Put simply, Europe’s and the US’s large banks exploited the weak international agreement on bank capital requirements in the so-called Basel agreement in 2004 to reclassify the risk of their loans and trading instruments. They did not just reduce the risk by 5 or 10%.

Breathtakingly, they claimed their new risk management techniques were so wonderful that the riskiness of their assets was up to half of what it had been despite property and share prices cresting to new all-time highs.

Brutally, the banks knowingly gamed the system to grow their balance sheets ever faster and with even less capital underpinning them in the full knowledge that everything rested on the bogus claim that their lending was now much less risky. That was not all they were doing. As Michael Lewis describes in The Big Short, credit default swaps had been deliberately created as an asset class by the big investment banks to allow hedge funds to speculate against collateralised debt obligations.

The banks were gaming the regulators and investors alike and they knew full well what they were doing. Simon Johnson’s 13 Bankers shows how the major American banks deployed vast political lobbying power and money to create the relaxed regulatory environment in which all this could take place. In Britain no money changed hands. Gordon Brown offered light-touch regulation for free egged on by the Tories, who wanted to go further.

This was the context in which Goldman’s Fabulous Fab created the disputed CDOs, Sean FitzPatrick allegedly moved loans between banks and Lehman created its Repo 105s along with the entire “debt mule” structure revealed this weekend of inter-related companies to shuffle debt around its empire. London and New York had become the centre of an international financial system in which the purpose of banking became making money from money and where the complexity of the “innovations” allowed extensive fraud and deception.

Now it has all collapsed, to be bailed out by western taxpayers.

The banks are resisting reform and want to cling on to the business practices and business model that has so appallingly failed.

The politicians tread carefully, only proposing what the bankers say is congruent with their definition of what banking should be. Labour and Tories alike are united in opposing improved EU regulation of hedge funds, buying the propaganda those operations had nothing to do with the crisis. Perhaps Paulson’s trades at Goldman, and the hedge funds’ appetite for speculating in credit default swaps, may disabuse them.

It is time to reframe the question. Banks and financial institutions should do what economy and society want them to do: support enterprise, direct credit to where it is needed and be part of the system that generates investment and innovation.

Andrew Haldane and the governor of the Bank of England are right. We need to break up our banks, limit their capacity to speculate and bring them back to earth.

Britain should also launch an official investigation into what went wrong–and hand the findings to the Serious Fraud Office. This needs to become this election campaign’s number one issue not one which either a compromised Labour party or a temporising Conservative party will relish. The Lib Dems, the fiercest critics of the banks, have begun to get very lucky.

Crisis timetable

(Editor’s Note: This is a bizarre timetable given that banks have been conducting business outside of any ethics for decades. A recently uncovered story indicates that Wells Fargo cut a deal with Pancho Villa, one of America’s famous outlaws, in the early 1900s.)

• September 2007: Funding problems at Northern Rock triggers the first run on a British bank. It is nationalised in February 2008.
• April 2008: Bear Stern faces bankruptcy after a run on the company wipes out cash reserves in less than two days. Backed by the Federal Reserve, JPMorgan buys up shares at far below market value.
• September 2008: Lehman Brothers files for bankruptcy protection, becoming the first major bank to collapse since the start of the credit crisis.
• December 2008: Bernard Madoff arrested for operating the largest Ponzi scheme in history.
• January 2009: The Bank of England launches £200bn quantitative easing.
• March 2010: Former chairman of Anglo Irish bank Sean Fitzpatrick is arrested in Dublin after failing to disclose details of loans worth millions from the bank.
• April 2010: Northern Rock former directors, David Baker and Richard Barclay, are fined £504,000 and £140,000 for deliberately misleading analysts prior to nationalisation.
• April 2010: The US Securities and Exchange Commission accuses Goldman Sachs of “defrauding investors by misstating and omitting key facts”.

SEC Charges Goldman Sachs with Fraud
April 16th, 2010

The Securities and Exchange Commission (SEC) has filed a civil complaint against Goldman Sachs alleging that the financial giant worked with one of its key clients to create collateralized debt obligations (CDOs) consisting of subprime mortgage-backed securities. Goldman Sachs then sold the CDOs to investors knowing that the client was betting heavily against the very same product.

The SEC’s complaint says that Goldman Sachs vice-president Fabrice Tourre, who was personally charged in the complaint, put the plan into operation in 2007, bragging in an email to a friend that he was “the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!” Fabrice Tourre has since been promoted to executive director of Goldman Sachs International in London. Mr. Tourre also has a profile on LinkedIn.

John Paulson, the hedge fund manager of Paulson & Co. was involved in choosing which securities would be part of the portfolio, according to the SEC’s complaint, but neither he nor Paulson & Co. have been charged with any crime. The SEC also alleged that Paulson took a short position against its ABACUS 2007-AC1 CDO in a bet that its value would fall spectacularly. Here is Paulson & Co.’s response to the SEC’s civil complaint.

More than $1 billion was lost by ABN Amro and IKB Deutsche Industriebank AG, two of the European banks that bought these toxic securities. According to the report in Yahoo News, John Paulson’s hedge fund ended up with the profits from those two banks’ losses.

Informed readers know that Goldman Sachs, which earned a staggering $4.79 billion in 4th quarter 2009, was one of the top recipients of corporate welfare at the largesse of taxpayers through the generosity of the Bush and Obama administrations. Rolling Stone writer Matt Taibbi, in his 2009 expose of Goldman Sachs, refers to the firm as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

And derivatives expert and Huffington Post blogger Janet Tavakoli, who also is the founder of Tavakoli Structured Finance, accuses Goldman Sachs of “malicious mischief” and of creating “bad securities”. Further, “the SEC itself has shirked its responsibilities in these matters for years” she said, adding that the SEC’s “hands have been forced by public voices” rather than its regulatory mandate to protect investors.

Read more on Yahoo and MSN. You can also read the SEC’s complaint against Goldman Sachs here.

This article was also published in Examiner.com by Monique Bryher.

Grand jury indicts 3 in loan modification scam
April 19th, 2010

Three people have been charged in an 83-count indictment by a Santa Clara County grand jury for loan modification fraud. The crimes that are alleged include enticing homeowners in foreclosure by promising them principal reduction that involved selling the homeowners’ loans to investors (or straw buyers) and then reselling the home at a lower price back to the original homeowners.

Prosecutors allege that San Jose residents Rene Alvarez and Mariano Ortega, and Cydney Sanchez of Los Angeles, were part of a seven state scam that involved 400 homeowners and the theft of more than $2 million.

The district attorney’s office states that Alvarez and Ortega owned and operated M&R Contemporary Solutions Inc., a Campbell-based “foreclosure consulting” company from 2008 to 2009. Sanchez was the owner/operator of West Coast Mortgage and Horizon Property Holdings in Beverly Hills.

The only good news in this story is that M&R’s bank accounts were frozen so that the victims could receive restitution if the defendants are found to be guilty.

SEC’s Goldman charges may be just the beginning

By Greg Gordon
McClatchy Newspapers

WASHINGTON — Goldman Sachs, whose tactics exiting the collapsing subprime mortgage market have been under government scrutiny for months, now faces federal fraud charges that it duped investors into losing $1 billion on a rigged offshore deal pegged to dicey home loans.

The suit, brought Friday by the Securities and Exchange Commission, accuses Goldman and one of its vice presidents, 31-year-old Fabrice Tourre, of allowing a Wall Street hedge fund to secretly select many of the securities in the deal.

The hedge fund, Paulson & Co., then bet that those subprime mortgage securities would fail. When they did, Paulson made a $1 billion profit and investors lost more than $1 billion, nearly all their money, the complaint charges.

In an e-mail to a friend in January 2007, the complaint says, Tourre remarked that, “The whole building is about to collapse anytime now” — an apparent allusion to a plunge in the housing market that would depress the value of the mortgage securities.

The case suggests that a reinvigorated SEC, after a long lull, is pressing to hold Wall Street accountable for its role in the worst financial crisis since the Great Depression. People familiar with the SEC investigation of Goldman said it could expand, and a special Senate investigations panel is preparing to hold a hearing that will put Goldman under yet another magnifying glass.

Elizabeth Nowicki, a former SEC attorney who’s a visiting law professor at Boston University, called the SEC’s fraud suit “a political case as much as it is a case that they needed to bring to stop this sort of favoritism.”

“The SEC wanted to convey the message that no, they’re not sitting back on their heels,” she said. “This is going after Goldman Sachs. You can’t really go after anybody bigger than that . . . . The SEC has the stomach to follow this out, absolutely, and they’ve got a bigger incentive now that they are clearly perceived as shamed and disempowered.”

It’s still unclear whether Goldman also could face legal exposure for failing to disclose to investors in 2006 and 2007 that it had secretly bet that the housing market would collapse when it sold off more than $40 billion in securities backed by subprime mortgages. McClatchy Newspapers described those dealings in a series of articles in November and December 2009, including Goldman’s role in betting on a housing downtown in at least a dozen offshore deals that it marketed.

The company, in a terse statement, denounced the charges as “completely unfounded in law and fact,” and vowed to “vigorously contest them and defend the firm and its reputation.”

Underscoring Goldman’s stature as the world’s most prestigious investment bank, the enforcement action triggered a 126-point drop in the Dow Jones index on Wall Street. Shares of Goldman led the way, plummeting nearly 13 percent.

After the market closed, Goldman issued a second statement, saying that it lost $90 million on the transaction and that all of the involved parties were “sophisticated” investors that were well aware of the risks.

Goldman said the largest investor, ACA Capital Management, selected the securities “after a series discussions, including with Paulson & Co.” Goldman called the exchange “entirely typical.”

Sylvain Raynes, a New York expert in structured securities of the type described in the SEC charges, said the stakes are huge for Goldman.

“To lose its reputation,” he said, “Goldman does not need to be found guilty many times. They only need one instance.”

Besides naming the company as a defendant, the civil complaint accuses Tourre of concealing Paulson’s role from investors in a synthetic securities deal known as ABACUS, 2007-AC1 — one in which investors didn’t actually buy any securities.

Instead, they effectively bet that a specified bundle of home loans to marginally qualified borrowers would perform well, while Paulson took “short” positions, meaning it bet that those bonds would founder.

Paulson profited grandly from the nation’s economic collapse, taking in a total of $3.7 billion from its bets. The SEC complaint says the firm paid Goldman $15 million to assemble the deal, which Tourre was principally responsible for structuring.

The marketing materials for the investment, known as a collateralized debt obligation, told investors that ACA Management LLC, an independent third party, selected the mortgage-backed securities. The Paulson firm wasn’t mentioned.

“The product was new and complex, but the deception and conflicts are old and simple,” SEC enforcement chief Robert Khuzami said in a statement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

The deal, one of about two dozen similar bundles in the ABACUS series, closed on April 26, 2007. Within six months, 83 percent of the mortgage-backed securities in the bundle had been downgraded and 27 percent were placed on negative watch by Wall Street ratings agencies, the complaint says.

By the following Jan. 29, it says, 99 percent of the portfolio had been downgraded, costing investors more than $1 billion.

Khuzami said that the Paulson firm, which isn’t affiliated with former Treasury Secretary Henry Paulson, wasn’t charged because it didn’t mislead investors.

However, the complaint charges that Goldman and Tourre “knew that it would be difficult, if not impossible,” to find investors for a synthetic CDO if they disclosed that a short player, such as Paulson, had a significant role in selecting the securities. Thus, they sought a third party for that role and approached ACA, calling it “important that we can use ACA’s branding” in an internal e-mail.

The complaint quoted Tourre, then 28, as saying in a Jan. 27, 2007 e-mail to a friend that was written in French and English: “More and more leverage in the system, The whole building is about to collapse anytime now . . . . Only potential survivor, the fabulous Fab(rice Tourre) . . . standing in the middle of all of these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities (sic)!!!”

A Feb. 11, 2007 e-mail to Tourre from the unidentified head of Goldman’s structured product correlation trading desk said, “the cdo biz is dead we don’t have a lot of time left,” according to the complaint.

Paulson said in a statement that, while it bought credit protection from Goldman via the ABACUS deals, “We were not involved in the marketing of any ABACUS products.”

It said that ACA “had sole authority over the selection” of all securities in the deal, noting that two Wall Street ratings agencies — Moody’s Investors Service and Standard & Poor’s — gave them Triple A grades, the highest investment rating.

Both Moody’s and S&P have suffered tremendous damage to their reputations as a result of issuing favorable ratings to pools of U.S. mortgages that turned out to be junk.

The SEC said the only other investor in the ABACUS deal, IKB, a commercial bank in Dusseldorf, Germany, lost nearly all of the $150 million it invested. Goldman said the largest investor, ACA Capital Management, put up $951 million. ACA lost nearly all the money.

Friday’s charges were the first to be filed by the SEC’s Structured and New Products Unit, formed to pursue abuses in highly sophisticated deals.

Many of these deals are sliced according to risk, with investors who take the greatest risk receiving the highest yield. In deals that were partially or entirely synthetic, Goldman or some of its clients would profit if the securities soured.

Gary Kopff, an expert in mortgage securities who’s studied Goldman’s role in betting against investors in deals it marketed though the Cayman Islands, said that, “They manifest, in my opinion, the same misconduct that the SEC asserts occurred in the ABACUS deal.”

Goldman created a structured product correlation trading desk in late 2004 or early 2005. A memo describing the ABACUS 2007-AC1 transaction to the company’s Mortgage Capital Committee on March 12, 2007, said that the “ability to structure and execute complicated transactions to meet multiple clients’ needs and objectives is key for our franchise,” the SEC complaint says.

Executing the deal “and others like it helps position Goldman to compete more aggressively in the growing market for synthetics written on structured products,” the e-mail said.

According to the complaint, Paulson came to believe that the underlying securities in the ABACUS 2007-AC1 deal “would become worthless.”

In late 2006 and early 2007, it charges, Paulson identified more than 100 mortgage bonds that it expected to collapse, favoring those backed by loans to borrowers with low credit scores, adjustable rate mortgages and located in overheated real estate markets such as Arizona, California, Florida and Nevada.

In early January, Tourre forwarded a list of 123 mortgage-backed bonds under the heading “Paulson Portfolio,” leading to negotiations among Paulson, Goldman and ACA over the final portfolio, which included a sizable number of those selected by Paulson.

Read more: Read More . . .

Oregon Targets Piggyback Lenders To Stop Foreclosures

By Peter G. Miller

While many efforts to encourage mortgage modifications have been tried during the past three years, the state of Oregon has come up with something original and unique: It’s moving forward with an idea that costs taxpayers nothing and will, er, motivate many lenders to write down loans.

Passed in the Oregon house by a vote of 58 to 0, and in the state senate by unanimous consent, HB 3656 doesn’t fool around with cash payments to lenders or other niceties. Instead, the deal is very simple: In a foreclosure action the right of a piggyback second lender to sue for a deficiency judgment is eliminated.

In practical terms here’s what Oregon is getting at.

In 2006 the Todds bought a home for $500,000. On the advice of their lender, and with approval of the lender’s underwriters, they financed the property with a piggyback loan that included a $400,000 first lien and a $100,000 simultaneous second loan.

The result of the Todds’ piggyback loan was this:

• It allowed the Todds to buy property with no money down, a property which they otherwise could not afford
• It allowed the lender to originate a conventional first loan equal to 80 percent of the purchase price. Because it’s 80 percent financing, this mortgage was instantly sold to Wall Street banks and brokers, packaged with other loans, and used to create a mortgage-backed security. Having sold the loan, the lender could use the cash it received to fund additional mortgages and generate new fees.
• While the first loan was a conventional mortgage and easy to sell, the second loan was more risky and not-so-easy to market. It may have been sold separately from the first loan to produce cash, or in some cases it may have been retained by the originating lender to generate interest income.
• Because the piggyback financing had an 80 percent first loan there was no need for the Todds to buy private mortgage insurance (PMI). This reduced their monthly cost of ownership.

The lender got to originate two loans instead of one and thereby pocketed more fees and charges.

Higher Prices For All
One result of the creative financing offered to the Todds and many other buyers was that they could bid more for real estate. This forced other purchasers to also raise their bids even if they were buying for cash. Artificially increasing the pool of potential buyers with “nontraditional” financing was one reason home prices rose so quickly for several years — and then collapsed so quickly when such mortgages were no longer available.

Let’s now move ahead to 2010. Mr. Todd has lost his job and the first lender agrees to modified mortgage terms under the federal government’s Making Home Affordable program. However, the second lender doesn’t agree to a modification, and that forces the property into foreclosure — even though the second lender will get nothing from a foreclosure.

Here’s why the second lender will get nothing.

In a foreclosure sale lenders are paid in order: The first lender receives all the money from a foreclosure sale until its claim is entirely satisfied. Any money left over is paid to the second lien holder. In the case of the Todd property, it might sell for $375,000 at foreclosure so the first lender would get back most of its money while the second lender will get nothing.

In this situation, the second lender opposes the loan modification because it thinks it can get money by suing the Todds for a deficiency judgment after the foreclosure. If it wins, the second lender can then bankrupt the Todds and take their few remaining assets.

The Oregon Approach
Oregon bill HB 3656 says this is nonsense. Specifically, a House summary of the bill explains that “in cases where a second loan was created as part of the same purchase or repurchase transaction as the one on which the foreclosure action was taken, and when it was owed to or originated by the beneficiary of the foreclosure or its affiliate, the holder of the second loan cannot sue for restitution.” Translation: Holders of simultaneous second loans cannot get a deficiency judgment after a foreclosure, so they may as well try to get what they can through the modification process.

“The targeted legislation seen in Oregon is simply a state-sponsored mortgage modification program,” says Jim Saccacio, chief executive officer of RealtyTrac.com, the leading online marketplace for foreclosure properties and data. “It effectively changes the terms of many second loans in a way which gives more leverage to troubled borrowers and first mortgage investors. At the same time, it doesn’t impact all second mortgages, only those which were part of the piggyback lending process.”

You can see where this is going. One can easily imagine lawmakers in other states introducing similar bills. Or, they can start taking a targeted approach to other aspects of the lending process.

For instance, there could be legislation which prohibits deficiency claims for any mortgage which allows negative interest. Or legislation which extends the foreclosure process by six months for any mortgage with a pre-payment penalty. The angry mood of the country is beginning to make such rules at the state level more feasible if not probable — just look at the votes in the Oregon legislature.

Second loans represent a lot of risk which is why lenders get higher interest rates for making them. The Oregon proposal makes that financial exposure real, a reckoning many would argue is only fair and appropriate.

U.S. Probes Foreclosure-Data Provider
Lender Processing Services Unit Draws Inquiry Over the Steps That Led to Faulty Bank Paperwork

April 3, 2010
Amir Efrati and Carrick Mollenkamp
The Wall Street Journal

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A subsidiary of a company that is a top provider of the documentation used by banks in the foreclosure process is under investigation by federal prosecutors.

The prosecutors are “reviewing the business processes” of the subsidiary of Lender Processing Services Inc., based in Jacksonville, Fla., according to the company’s annual securities filing released in February. People familiar with the matter say the probe is criminal in nature.

Michelle Kersch, an LPS spokeswoman, said the subsidiary being investigated is Docx LLC. Docx processes and sometimes produces documents needed by banks to prove they own the mortgages. LPS’s annual report said that the processes under review have been “terminated,” and that the company has expressed its willingness to cooperate. Ms. Kersch declined to comment further on the probe.

A spokesman for the U.S. attorney’s office for the middle district of Florida, which the annual report says is handling the matter, declined to comment.

The case follows on the dismissal of numerous foreclosure cases in which judges across the U.S. have found that the materials banks had submitted to support their claims were wrong. Faulty bank paperwork has been an issue in foreclosure proceedings since the housing crisis took hold a few years ago. It is often difficult to pin down who the real owner of a mortgage is, thanks to the complexity of the mortgage market.

During the housing boom, mortgages were originated by lenders, quickly sold to Wall Street firms that bundled them into debt pools and then sold to investors as securities. The loans were supposed to change hands but the documents and contracts between borrowers and lenders often weren’t altered to show changes in ownership, judges have ruled.

That has made it hard for banks, which act on behalf of mortgage-securities investors in most foreclosure cases, to prove they own the loans in some instances.

LPS has said its software is used by banks to track the majority of U.S. residential mortgages from the time they are originated until the debt is satisfied or a borrower defaults. When a borrower defaults and a bank needs to foreclose, LPS helps process paperwork the bank uses in court.

LPS was recently referenced in a bankruptcy case involving Sylvia Nuer, a Bronx, N.Y., homeowner who had filed for protection from creditors in 2008.

Diana Adams, a U.S. government lawyer who monitors bankruptcy courts, argued in a brief filed earlier this year in the Nuer case that an LPS employee signed a document that wrongly said J.P. Morgan Chase & Co. had owned Ms. Nuer’s loan.

Documents related to the loan were “patently false or misleading,” according to Ms. Adams’s court papers. J.P. Morgan Chase, which has withdrawn its request to foreclose, declined to comment.

Linda Tirelli, a lawyer for Ms. Nuer, declined to comment directly on the case.

Ms. Kersch said LPS didn’t actually create the document and that the company’s “sole connection to this case is that our technology and services were utilized by J.P. Morgan Chase and its counsel.”

While the majority of foreclosures go unchallenged, some homeowners have won the right to keep their homes by proving the bank couldn’t show, on paper, that it owned the mortgage.

Some lawyers representing homeowners have claimed that banks routinely file erroneous paperwork showing they have a right to foreclose when they don’t.

Firms that process the paperwork are either “producing so many documents per day that nobody is reviewing anything, even to make sure they have the names right, or you’ve got some massive software problem,” said O. Max Gardner, a consumer-bankruptcy attorney in Shelby N.C., who has defended clients against foreclosure actions.

The wave of foreclosures and housing crisis appears to have helped LPS. According to the annual securities filing, foreclosure-related revenue was $1.1 billion last year compared with $473 million in 2007.

LPS has acknowledged problems in its paperwork. In its annual securities filing, in which it disclosed the federal probe, the company said it had found “an error” in how Docx handled notarization of some documents. Docx also has processed documents used in courts that incorrectly claimed an entity called “Bogus Assignee” was the owner of the loan, according to documents reviewed by The Wall Street Journal.

Ms. Kersch said the “bogus” phrase was used as a placeholder. “Unfortunately, on a few occasions, the document was inadvertently recorded before the field was updated,” she said.

Court Upholds Sanctions Against Chase