Liput Group Financial News Blog

Payrolls decreased in 28 U.S. states and the unemployment rate climbed in 21, showing most parts of the world’s largest economy took part in the November labor- market setback.

North Carolina led the nation with 12,500 job cuts last month, followed by Massachusetts with 8,600 dismissals, and Ohio with 7,800, figures from the Labor Department showed today in Washington. Joblessness increased most in Georgia and Idaho, while workers in Nevada faced the highest rate in the country at 14.3 percent.

The report is consistent with figures on Dec. 3 that showed unemployment increased last month for the first time since August.

Credit: Bloomberg News

The new mortgage crisis, fraud in the foreclosure process, is being downplayed by the media big time. The news articles talk about "document errors" as if this is simply someone filing the wrong paper by mistake. What is going on is far more insidious and troubling. It involves the very nature of the mortgage securitization scam, bundling mortgage loans into a security called "trusts" to sell to individual and insitutional investors in certificates around the world, and not planning for or caring what would happen if the loans themsleves which make up the corpus of these "trusts" went bad. When the mortgage market collapsed because the banks were writing fraud loans, knowing full well that the borrowers could not afford them, the big banks-Wells, BOA, Deutche Bank, Chase-all faced sudden and immediate calamity because the trustees were putting back these loans in huge numbers under the terms of the agreements wherein the loans were placed into the trusts...the reps and warranties that guaranteed the quality of the loans required them to be repurchased, that is their full face value paid back, if they went bad. After writing millions of these crappy loans, the idea that these banks, as big as they are, would have to fork over the cash to repurchase their bad product created a fear of the financial market collapse. This is why the government rushed to give them Trillions of dollars in TARP money, although they failed to fully explain the real reason to the public. Now the government bail out was supposed to help the banks pay off the investors who bought their bad loans right? But where did this money actually go? Some surmise that the banks never used the money for that purpose (maybe thats how they could still pay out big bonuses even after they were begging for taxpayer relief) and instead they told the trustees to wait on their money. Suppose instead of using their own money or the federal dollars (which they would have to pay back) to pay the investors, the banks came up with a better idea....they would engage in a little "self-help" loss mitigation. Even though they no longer owned the notes nor held the mortgages in their name, they would start foreclosure actions on the bad loans forcing property owners into REO sales, and then using the money to....pay off the investors pressuring them to buy back the crappy loans. But how to do that without having the notes and mortgages wind their way back through a chain of title into their hands, which could only happen with payment in full? Perhaps by creating false assignments of mortgage, falsely stating that the loans were in their hands (assigned back to them when the notes had never even been delivered) and hoping no one would be the wiser? If that was the case, then what about all those foreclosure actions...could they be invalidated? Would they have to withdraw them and start over again only after proving the notes were endoresd back to them, marked paid, and proper mortgage assignemts delivered and recorded? But no the White House said...we cannot have that because it would "stall the economic recovery" because we need to "get those properties back on the market and sold", and so BOA announced today that foreclosures are "back on track"....perhaps the WH knows that the banks need the money from foreclosure sales to pay of the investors and avoid collapse? Also, is that why banks accept mortgage modification applications from people in default and never make them permanent? Because they cannot modify a loan they do not legally own, and/or they prefer foreclosure because they need cash, not a modified loan that is already in default and being put back to them by an investor? That might help explain why 4 Million people have applied for mortgage modifications and only 100,000 have had them permanently granted. And also why when you apply, they lose your documents 6 times, and after 10-12 months cannot get you a decision when it takes them 30-45 days to originate a brand new loan. But what about all those "trial modifications" people are getting? And those 3 month trial modifications everyone was getting?....well maybe because the government agreed to pay banks $6000 per loan for trial modifications but zero for permanent modifications, banks were able to finagle millions if not billions from the government doing something on a "temporary basis" they had no intention, nor ability to do on a permanent basis?

We all may find out soon because at 3:46 pm today it hit the wires that the NY Fed and 8 large instiutional investors that own these mortgage backed securities are suing BOA because of a "breach of their agreements"....I guess BOA never really bought back those bad loans after all. So then how do they explain foreclosing on them? HHMMMM...the plot thickens. Look for politicians in Washington to rush through legislation to "fix things" in the lame duck Congress...that's how business is done between Wall Street and Washington. And the poor shmucks on Main Street get left holding the bag....by the way, an average of 10 months later, I'm still waiting to hear a decision about more than a dozen of my clients' loan modifications. Any word BOA?.... Anyone, anyone....(sounds of crickets chirping).

Unemployment, as measured by Gallup without seasonal adjustment, increased to 10.1% in September -- up sharply from 9.3% in August and 8.9% in July. Much of this increase came during the second half of the month -- the unemployment rate was 9.4% in mid-September -- and therefore is unlikely to be picked up in the government's unemployment report on Friday.

Credit: Gallup Organization

Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents.

Bank of America isn't able to estimate how many homeowners' cases will be affected, Dan Frahm, a spokesman for the Charlotte, N.C.-based bank, said Friday.

The move adds the nation's largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them.

Two other companies, Ally Financial Inc.'s GMAC Mortgage unit and JPMorgan Chase, have halted tens of thousands of foreclosure cases after similar problems became public.

A Bank of America official acknowledged in a legal proceeding in February that she signed up to 8,000 foreclosure documents a month and typically didn't read them. The Associated Press obtained the document Friday.

The official, Renee Hertzler, said in a deposition in a Massachusetts homeowner's bankruptcy case that she signed 7,000 to 8,000 foreclosure documents a month.

"I typically don't read them because of the volume that we sign," Hertzler said.

Credit: Washington Post

BoA Will Raise Customer Fees Despite TARP Bailout for "Lost Revenue"

Bank of America will charge clients new monthly fees if their accounts do not meet a minimum balance, the bank's CEO Brian Moynihan said on Tuesday.

"We will increase the account balance minimums or charge monthly fees in lieu thereof, which is the choice of the customer," Moynihan said at a Barclays Capital conference in New York.

These and other measures will allow the bank to compensate for revenue lost due to new regulations put in place following the 2008 financial crisis that led the US government to salvage many bank with massive bailouts, he said.

Interesting to see how this will play on Main Street, and if it gets play in the 2010 midterm elections this Fall.

So Far, Obama Administration's Bailout of Banks Helping only Wall Street, not Main Street

In 2009, much was made of the "emergency" need to rescue the nation's largest banks, lest the country enter a downward economic spiral that would have catastrophic consequences for ordinary Americans.

Towards that end the Obama Administration has thrown nearly $3 Trillion Dollars as a "lifeline" to banks.  Initially the explanation given was that the money would offset "toxic assets", those bad loans that were stuck in the pipeline with no investors due to their default status or the nature of the loan product by which they had been originated.  By doing so, we were told, these banks would be able to free up money to begin lending again which would help "Main Street" which was desperately seeking refinances and other loan products to allow new home sales to continue to fuel the economy, and existing home mortgages to be adjusted to free up consumer capital for spending.

Furthermore, "Main Street" was promised that because the banks were now being "highly regulated" and supervised by the Administration's watchdogs, that loan modifications would increase using new standards established by the Treasury Department.  A nice website was created to give "hope" to homeowners who want to stay in their homes but who have been impacted by rate changes and depressed home values, as well as overall economic stresses.  The idea, touted by President Obama himself, was that banks would now modify any problem loan of a primary homeowner, following Administration guidelines, allowing "Main Streeters" to remain in their homes rather than face foreclosure.

Now for the reality.  By throwing large sums of money at the banks, the Administration succeeded in obtaining the largest measure of government control over the financial industry since the Great Depression.  This has been more of a political victory for Democrats rather than a carefully planned solution to America's Main Street mortgage problems.

Rather than open up lending policies, creating more loan products, and establishing helpful and conciliatory loan modification procedures, banks have reacted in an opposite manner.  Lending guidelines are so stringent thousands are being denied loans who would have qualified before the bank crisis.  Loan underwriting guidelines are not uniform, change weekly if not daily, and are frustrating loan originators who cannot seem to do anything to satisfy a bank that their client is qualified for a mortgage. Loan modifications are even worse.  Although the Administration recently boasted that 140,000 loans were modified as of Janaury 2010, that number represents a drop in the bucket of the over 4 Million borrowers seeking relief at this time.  In reality those who are trying to assist homeowners with modifications are discovering that banks are stalling making modification decisions, or simply sitting on requests for months, despite the fact that requests are meeting the Administrations recommended guidelines for a modification.

Why would bank act this way? Because the consequence of not forcing the banks to clean up their own mess, through private investment and internal restructuring, which would have also forced them to make deals with defaulting homeowners, has been to create a "welfare state" mentality on Wall Street.  As long as the federal government is willing to cover their losses, with what appears to be a blank check policy, why should they care about making loans with any risk whatsoever, and why negotiate bad debt when at the end of the day their losses are covered?  In addition some banks are finding that foreclosures generate an immediate return on their investment (and a recoupment of all costs) rather than retsructuring and collecting monthly payments. 

What we are witnessing, to our detriment, is the psychology of socialism. When the government can be relied upon to take care of all problems, then competition, self-regulation, incentive to grow markets and cater business to consumers is wiped away.  The slippery slope of these policies, which are affecting our largest industries (financial, automobile, soon health care) will result in greater inefficiencies and greater financial burdens on taxpayers.

For homeowners, and indeed for all Americans, what began as a promise of "hope" appears now to be an out of control train ride to disaster right in the middle of Main Street.

National Mortgage Servicer Slammed for Deceptive and Illegal Practices against Defaulting Homeowners

American Home Mortgage Servicing Inc., a national mortgage loan servicing companys, has been charged by Texas law enforcement officials with using illegal debt collection tactics and improperly misleading struggling homeowners.

According to state investigators, the defendant claimed to have a "Home Retention Team" to assist distressed homeowners. Many customers found that AHMS could not qualify homeowners and that they were of no help to halt the foreclosure process. Some homeowners who actually obtained loan modifications found that their monthly payments increased rather than decreased, which worsened their problem with foreclosure.

Additionally, AHMS collections agents used aggressive and unlawful tactics to collect payments from homeowners who had difficulty meeting their payment obligations. Because of the company's unlawful conduct, homeowners defaulted on their loans, leading to foreclosure proceedings.

Housing numbers show some improvement but mortgages closings still lagging due to credit restrictions, low values. While pending home sales rose an unexpected 5.2 percent in July, the National Association of Realtors reported yesterday, seasonally adjusted pending sales had dropped 2.8 percent in June and almost 30 percent in May.

Unemployment Remains Stagnant at 9.7% While Underemployment Figures Continue to Exceed 20%

As a reminder of the labor market's continued weakness, the unemployment rate stayed at 9.7% last month, in line with economists' expectations. The jobless rate is calculated by the Bureau of Labor Statistics using a different, household survey.

The U.S. economy has lost nearly 8.5 million jobs as a result of the most severe recession in about 80 years. Although the downturn probably ended nine months ago, companies remain reluctant to ramp up hiring because the economy's recovery is expected to be moderate.

Meanwhile when economists factor in the "underemployed" those seeking better jobs, working at reduced salaries and in positions below their skill level, the rate jumps to over 20%, which has been constant for several months now.

Source:  US Department of Labor

New Home Sales Fall To Lowest Level Yet in Latest Housing Figures

Sales of new homes in the U.S. unexpectedly fell in February to a record low as blizzards, unemployment and foreclosures depressed the market.

Purchases decreased 2.2 percent to an annual pace of 308,000, figures from the Commerce Department showed today in Washington.

Source: US Commerce Department