Ms. Desoer said the underlying reason for the surge in foreclosures was the broader economic downturn, taking issue with critics who claim many of these loans should never have been made in the first place. “The economy declined, unemployment went up and house prices declined,” she said.
That's all that happened, right?
These mortgages were sold to Fannie Mae, Freddie Mac and other investors. Although we did not underwrite these mortgages, Citi did rep and warrant to the investors that the mortgages were underwritten to Citi credit guidelines.
In mid-2006 I discovered that over 60% of these mortgages purchased and sold were defective. Because Citi had given reps and warrants to the investors that the mortgages were not defective, the investors could force Citi to repurchase many billions of dollars of these defective assets. This situation represented a large potential risk to the shareholders of Citigroup.
I started issuing warnings in June of 2006 and attempted to get management to address these critical risk issues. These warnings continued through 2007 and went to all levels of the Consumer Lending Group.
We continued to purchase and sell to investors even larger volumes of mortgages through 2007. And defective mortgages increased during 2007 to over 80% of production.
Yes, that's Citibank, not Bank of America. Can we get similar under-oath testimony from your risk officers? Or better yet - how about Countrywide, which you acquired of your own free will and now own - including every fraudulent loan it made?
We argued that the FDIC should place Bank of America in receivership and the federal banking agencies should impose a moratorium on foreclosures until the mortgage servicers correct their systems, which currently often rely on massive fraud and perjury. There can be no assurance that foreclosures are lawful until the banks actually find the mortgage "wet ink" notes signed by debtors to prove they are the true beneficial owner of the mortgage debts, which is required to seize property. We also called on the banks to identify and compensate homeowners who were fraudulently induced to borrow by the lenders and their agents through a number of fraudulent practices variously marketed by lenders as "no doc", liar, and NINJA loans (all subspecies of what the industry aptly called "liar's" loans).
Don't bother telling the states that. They don't seem to give a damn - at least not in Florida. In some states they do, but not here. You'd think that private property rights and land title interests, which are historically major issues for the States, would be of interest here. Then again, perhaps the bribes that come in various forms are just too good. for the States to be bothered with doing their damn job.
We showed that outside studies by a wide range of parties showed massive fraud by the bank.
Let's not forget that studies are not necessary when you have an admission of guilt, which in the case of Citibank, we have - under oath.
The demands by investors that Bank of America repurchase loans and securities sold under false "reps and warranties" may cause exceptional losses if those making the demands document the broader fraud by the lenders. The article "Bank of America Resists Rebuying Bad Loans" shows that Bank of America's potential loss exposure to Fannie and Freddie is staggering: "[Bank of America] said it sold $1.2 trillion in loans to the government-controlled housing giants from 2004 to 2008 and has thus far received $18 billion in repurchase claims on those loans."
If Countrywide is anything close to Citibank, then what sort of losses are we talking about here? $200 billion? More? Probably. Countrywide was one of the largest producers - and in fact earned the moniker on one of their programs "fast and sleazy" by people in the mortgage industry (for their refinance/cash out deals.) Uh, yeah.
Such investors are like "people who come back and say, 'I bought a Chevy Vega, but I want it to be a Mercedes with a 12-cylinder [engine],'" Mr. Moynihan said in October. "We're not putting up with that."
One-third of its subprime business is in default and Mr. Moynihan thinks Countrywide was selling Vegas? If one third of Vegas crashed and burned within three years of being purchased the metaphor might be apt and completely incriminating. We argued that putting Bank of America into receivership is the proper remedy for its substantial violations of the law and for its continuing reliance on unsafe and unsound practices. Outside reviews have documented the most extensive and financially harmful violations of law and unsafe banking practices and conditions in history.
Uh, those weren't Vegas. They were Pintos, and these were the special type that didn't even require a crash to explode - they came with a pre-drilled hole in the gas tank and a chain dragging under the car to provide the sparks. Just drive faster, it'll all be good and you can outrun the vapor explosion behind you!
More to the point these mortgages and securities were like a box of chocolates that is labeled "1lb prime chocolate" (AAA rated!) but in fact were knowingly, by 2007 (again, from the Citi testimony), 80% used dog food upon which the bank painted a patina of chocolate so it would look and smell like the real thing.
That's all fine and well if you're just trading boxes of "chocolate" around.
It's a rather serious problem if you take a bite of one.
This problem is typically ignored -- at least by the financial sector and the mainstream media -- so we did "illuminate" the problem and the cause of action borrowers could bring for "fraud in the inducement."
We showed that the fraudulent senior officers that controlled home mortgage lenders created "liars," and NINJA loan programs designed to induce millions of Americans to take out loans they could not afford to repay. The endemic underlying fraud in the origination and sale of nonprime loans is critical to understanding why loan defaults are massive, why borrowers were typically the victims of the fraud and lost their meager savings due to the frauds, why loan modifications typically fail, and why foreclosure fraud has been so common. The endemic fraud also hyper-inflated the bubble and helped cause the economic crisis and severe loss of employment. Over a million Bank of America borrowers face these "challenges" that we "illuminated."
Yep. That's the issue, in a nutshell. Bill Black has been on this tirelessly, as have a few others, myself included. The mainstream media won't talk about it. I wonder why? Have you been watching CNBS and other "financial" channels lately? Notice who runs advertising on those networks? Uh, yeah.
Bank of America's response to us admit that, of their 1.3 million customers who are more than 60-days delinquent, 195,000 have not made a payment in two years. Of those loans which have not received a payment in two years, 56,000 are already vacant.
The reality is that banks are not foreclosing because then they have to recognize the loss.
There are a whole lot of people around here in this immediate area who haven't made a payment in two years. They're still in "their" house. That's not an accident.
Spot-on Bill and Randall.
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