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“They Were Suspending My Credit Line”

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So Mitt is still trying to dig himself out of the hole he created when he declared, “Let Detroit go bankrupt”?

I suspect most of the commentary on this ad will focus on the irony that, had Mitt had his way, all of GM’s dealers would have gone under, and without the buyout deals they ultimately got.

Me, I’m a bit surprised that Mitt didn’t choose an IN Chrysler dealer. Not only did Chrysler offer its dealers a much stingier package, but some dealers from IN fought losing their franchises all the way to SCOTUS, and some are still suing over “takings.”

But I’m most surprised by the sparse language used here to portray a dealer closure: “I received a letter from General Motors: they were suspending my credit line.”

Credit lines?!?!? Mitt wants to tug at heart strings and hit Obama with an attack akin to the Bain attacks that are working so well in swing states by invoking credit lines?!?!? Really?

Yes, it is true that at the heart of any car dealer is a credit line. But by including that in this ad, it seems to me, Mitt does several things. It reminds everyone who knows what role a credit line plays in a car dealer that the precipitating cause of the auto crash was the credit crash. It reminds viewers that the banksters, in killing their own industry, also killed the car industry. And not just any banksters, either. In GM’s case, the bankster in question was 51% owned by Cerberus Capital, a bunch of high profile Republicans (Dan Quayle and John Snow, among others) who were trying to do what Mitt got rich off: looting companies (in Cerberus’ case, including Chrysler) while profiting from the financialization that such looting offered. Only they were so bad at it, they effectively had to be bailed out by the taxpayers along with GM and Chrysler.

Thus, the villain in this ad–at least as described by the dealer–is someone just like Mitt, only stupider. The villain in the ad is not Obama–not to people who know how the auto industry works. It’s Mitt’s stupid Republican friends.

GMAC Still Can’t Process Mortgages Properly

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You’d think after it had become the poster child for robo-signing foreclosure fraud, at a time when it was facing a class action suit arising out of that fraud, and at a time when all servicers had been anxiously awaiting the result of the US Bank v. Ibanez suit in MA, GMAC would be very very careful about the way its purchase of mortgage notes interacted with its servicing department.

You’d be wrong. The Consumerist has the story of a guy whose local originator told him and his wife that GMAC would probably be buying the note when they refinanced back in November. But the day after GMAC actually completed that purchase, they started pestering him with claims he was delinquent on a payment he had made 11 days earlier.

This afternoon I answered my cell phone and heard a recorded message that GMAC was trying to reach me. Interested, because we have no relationship at all with GMAC at this time, I held on the line until a gentlemen spoke, asking me “Am I speaking with (my first and last name)?”

I confirmed that he was speaking to me and asked who he was, explaining that I have no relationship at all with GMAC. He responded by telling me he was calling about the property at my address. I reiterated that I have no relationship with GMAC and demanded that he explain what the purpose of the call was. He coldly stated that he was calling regarding a delinquency on a mortgage for the property at my address.

[snip]

After several calls with the originator, they were able to explain what happened. Apparently, GMAC indicated they wanted to buy the mortgage back in November, when we closed on it, but never actually purchased it (and I’m sure I’m not using the correct industry terminology here) until YESTERDAY, January 11th. The originator did receive my payment for the 1st but were unable to send it to GMAC until GMAC officially owned the note.

So, GMAC let my note sit with the originator for more than a month and a half before they actually purchased it. Then, one day after they took ownership, it was flagged in their computer as delinquent and they immediately called me about it.

Now, I’m actually really curious whether this simply reflects GMAC is so on top of collections that it really did make a call on the loan the day after they purchased the note. Or, as would be more damning, whether GMAC’s servicing department is still doing what led to all the robo-signing in the first place: putting loans into their servicing system before they have the legal basis to do so.

In any case, it suggests GMAC’s claims that they’ve reviewed all their processes and fixed any problems with them may be over-optimistic.

Oversight and Investigation: “Why Should They Take You Seriously?”

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Yves Smith has a post laying out one of the most troublesome aspects of the response to the revelation of foreclosure fraud. As she explains, to conduct an “independent review” of its PR-servicing “review” of its own servicing practices, GMAC picked the lawfirm that has been in charge of its national counsel on servicing issues.

A Birmingham, Alabama law firm, Bradley Arant Boult Cummings, has been GMAC’s national counsel on real estate servicing matters for some time (see here for examples of some of the matters it has handled).

Curiously, Bradley Arant is one of the firms that GMAC engaged to conduct an “independent review” after its use of robo signing became public:

GMAC Mortgage is initiating an independent review of foreclosures in all 50 states and examining foreclosure sales nationwide to ensure procedures and documentation are accurate….

The firms hired to conduct the review are Sullivan & Cromwell LLP, Bradley Arant Boult Cummings LLP, Morrison & Foerster LLP and PricewaterhouseCoopers LLP, said a person familiar with the matter.

Given Bradley Arant’s long-standing and extensive involvement in GMAC’s mortgage business, how can it legitimately be part of the team conducting the review? It’s incentives will be to minimize any problems, for a host of reasons, the most important being so as not to ruffle a big meal ticket and to avoid the exposure of any issues that might create liability for the firm.

[snip]

Bradley Arant is certain to frame its examination as narrowly as possible and not consider potentially troublesome but germane questions such as who at the contracting organizations (LPS, Fannie, other servicers) might also be culpable.A broader look is key to understand who really bears responsibility. Foreclosures of securitized loans increasingly look to be what Bill Black would call a criminogenic environment, in which the major perps are deeply entwined and work together. And if caught, it is clearly in their best interest to cut loose the weakest, most dispensable actor in their tidy group, the foreclosure mill.

So in many ways, the selection of Bradley Arant makes perfect sense. It is familiar with the terrain, so it will be able to issue a plausible-sounding report. It is also so deeply part of this questionable backwater that it is highly unlikely to make a bottoms up investigation and potentially rock the boat.

Couple the prospect of law firms involved in the fraud conducting “independent” investigations of their own fraud with this exchange from Thursday’s House Financial Services hearing on robo-signing. Maxine Waters asks the Acting Comptroller of the Currency, John Walsh, whether or not OCC (which regulates the big banks) has imposed any penalties on the servicers for their fraud.

Waters: I asked earlier about whether or not fines had been levied from the Treasury Department [see that exchange here]. Let me turn to the OCC. Since we started experiencing the fallout from the subprime boom, has OCC taken any enforcement actions against servicers?

[long pause]

Walsh: We have certainly issued supervisory requirements on them, matters requiring attention and other things to remedy–

Waters: Have you levied any fines?

Walsh: I do not believe that we have.

Waters: Have you issued any cease and desist orders?

Walsh: I don’t believe that there have been any public actions against them.

Waters: Have you threatened to revoke any charters?

Walsh: No.

Waters: Do you think that the servicers really believe that you mean business if they don’t have to fear any consequences?

Walsh: Well, I think the consequences are quite clear and present to them. I mean that we can compel action and the threat of more serious penalties–

Waters: But you haven’t done that. You haven’t done any of that! Why should they take you seriously?

Walsh: The supervisory process is one that happens–does not mainly happen in the public spotlight. It happens in the dealings directly with the institution through the process of examination, matters requiring attention, and other things. Only when a particular problem is identified that rises to the appropriate level do we get into the area–

Waters: Let’s talk about examiners. If you have examiners onsite, can you explain how you don’t know about all the problems that have recently come to light? What do the examiners do?

Walsh: There’s, as I mentioned, our attention was focused on the modification process, it would be quite unusual for us to be in the room or present at the point where an affidavit is being signed or a notarization is taking place. We do rely on the systems and controls of the financial institution, its own internal audit, or any flags that raise the issue, like our complaint function. And unfortunately those did not raise an alarm about this process. [my emphasis]

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About that AG “Investigation” and “Settlement”

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About four hours ago, Iowa’s Attorney General Tom Miller testified to the Senate Banking Committee  it would be months before the combined AG “investigation” came up with a settlement (he also suggested that there were new aspects that were just being added to the “investigation”).

Dodd: How long AG investigation?

Miller: Months, rather than year or longer. Depends on negotiations. If we expand scope, expands time. Maybe something on fees allowed. Forced insurance, huge abuse. Same thing w/dual track. If you all could solve the 2nd lien problem.

That’s almost exactly the moment when the WaPo posted a story reporting the AGs were close to a settlement.

The 50 state attorneys general are in negotiations over an agreement over foreclosures that would include a victims’ compensation fund that would provide money for borrowers whose homes have been taken away improperly, according to state and industry officials.

The discussions are still preliminary and the final deal may change significantly as details are hammered out and the settlement is vetted by 50 separate state offices, the official said.

Now, there’s a lot that’s weird with this story, aside from the way it seemingly contradicted what Miller was saying to Congress at precisely the moment he was saying it. First, only three of the big servicers were mentioned in the story:

While there’s no universal agreement that would apply industry wide and the AGs are negotiating separately with each bank, many of the stipulations are the same for the agreements being discussed with the three largest mortgage servicers: Bank of America, JP Morgan Chase and Wells Fargo.

No mention of GMAC or Citi–or Goldman Sachs, which just announced a freeze on its foreclosures.

And this story reported that dual-track processing–in which people are being processed for modification at the same time they’re being foreclosed on–“should” stop.

They also agree that there should be no more “dual track” loan modification negotiations that end suddenly with foreclosures.

Yet at almost precisely the time when WaPo published this claim, BoA’s President of Home Loans, Barbara Desoer was explaining that they couldn’t end dual-track processing except on those loans BoA held on its own books and/or for loans that qualify for HAMP, and Chase’s CEO of Home Lending David Lowman was testifying that they wouldn’t end dual-track processing (he did suggest there was something Congress could do to give servicers safe harbor to end dual-track processing, but that he wouldn’t describe it in the hearing).

Then there’s the claim that there would be a compensation fund set up for those wrongly foreclosed.

The most radical part of the settlement deal has to do with providing monetary compensation for homeowners who have lost their homes but can prove that they have been foreclosed on wrongly. This is the most contentious item because the amount of the funds that would go into this have not been worked out and it’s also unclear how it would be administered.

At least the WaPo had the grace to suggest, without saying outright, that any such fund would be ripe for abuse by the banksters. The banks, after all, are often unable to give any real accounting of the amounts owned (and if they were able to, they’d be unwilling to show the illegal fees and accounting they were using). So how is a wrongly-foreclosed homeowner supposed to prove they were wrongly-foreclosed?

And then the article mentions nothing about modifications going forward. In other words, this “settlement” would achieve absolutely nothing–except for getting a bunch of banksters excused, again, for breaking the law. Not that I find that hard to believe. Just odd that WaPo wouldn’t mention that this alleged “settlement” wouldn’t accomplish the primary requirement of any “settlement:” fixing any problem but the legal liability of the banksters.

Mind you, I did note during the hearing that Miller didn’t seem to have consumers’ interests in minds when he was talking about any settlement, so I guess the outlined proposal is a possible one.

But most of all, note the big news in this story.

There is no mention of an investigation.

There was not a single soul at today’s hearing who claimed to have a good sense of the scope or reasons for the massive foreclosure fraud perpetrated by the banks. Indeed, almost everyone acknowledged the need for further investigation to make that clear.

That “investigation” was supposed to be conducted by the 50 AGs.

But if this article has even a shred of truth to it then the AG “investigation” is instead a fast-track effort not to “investigate” (god forbid, because you might actually expose how the banksters had ended private property and rule of law in the United States), but to find a way to get the banksters out of any accountability for their crimes.

Richard Shelby’s Selective Investigation

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Let me make a rare statement: I agree with just about everything Richard Shelby said in his call for an investigation of mortgage servicers.

The Federal Banking Regulators should immediately review the mortgage servicing and foreclosure activities of Ally Financial, JP Morgan Chase and Bank of America. The regulators should determine exactly what occurred at these institutions and make those findings available to the Banking Committee without delay.

Furthermore, because it appears that the regulators have failed yet again to properly supervise the entities under their jurisdiction, the Committee should immediately commence a separate, independent investigation into these allegations. It is the Committee’s fundamental responsibility to conduct oversight of the banking regulatory agencies and the firms under their jurisdiction.

With the recent passage of the Dodd-Frank Act wherein the financial regulators were granted even broader powers, I am highly troubled that once again our federal regulators appear to be asleep at the switch.

But I am rather curious about one thing. Just days after Goldman Sachs announced that its servicing arm, Litton Loan Servicing, was suspending foreclosures in some states, why aren’t they–or the other big servicers, Citi and Wells Fargo, on Shelby’s list?

Mind you, given HUD Secretary Shaun Donovan’s announcement that the government has been investigating FHA servicers since May and had already identified problems from some servicers (but had apparently done nothing about those problems), maybe Shelby has reason to pick on just three of the servicers.

But Shelby’s choice of targets sure does bear watching.

How Much More Foreclosure Fraud Is Under Seal?

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The NYT has a fascinating story about the $75,000 house that led to the GMAC deposition on robosigning that finally alerted the world to the extent of the fraud behind foreclosures. It’s worth reading for the description of Thomas Cox, a lawyer who volunteers at legal assistance to make right for his years of doing foreclosures, the description of the errors GMAC made even after the court started looking closely, and the detail that GMAC has now spent more on legal fees trying to foreclose on this house than the house itself is worth.

But I’m particularly interested in this:

Mr. Cox vowed to a colleague that he would expose GMAC’s process and its limited signing officer, Jeffrey Stephan. A lawyer in another foreclosure case had already deposed Mr. Stephan, but Mr. Cox wanted to take the questioning much further. In June, he got his chance. A few weeks later, he spelled out in a court filing what he had learned from the robo-signer:

“When Stephan says in an affidavit that he has personal knowledge of the facts stated in his affidavits, he doesn’t. When he says that he has custody and control of the loan documents, he doesn’t. When he says that he is attaching ‘a true and accurate’ copy of a note or a mortgage, he has no idea if that is so, because he does not look at the exhibits. When he makes any other statement of fact, he has no idea if it is true. When the notary says that Stephan appeared before him or her, he didn’t.”

GMAC’s reaction to the deposition was to hire two new law firms, including Mr. Aromando’s firm, among the most prominent in the state. They argued that what Mrs. Bradbury and her lawyers were doing was simply a “dodge”: she had not paid her mortgage and should be evicted.

They also said that Mr. Cox, despite working pro bono, had taken the deposition “to prejudice and influence the public” against GMAC for his own commercial benefit. They asked that the transcript be deleted from any blog that had posted it and that it be put under court seal. [my emphasis]

GMAC’s first response to this affidavit was a request to the judge to prevent it from being posted to the Toobz (presumably 4closureFraud.org). But the judge refused.

Stephan’s deposition was taken to advance a legitimate purpose, and the testimony elicited has direct probative value to this dispute. Attorney Cox did not himself take action other than to share the deposition with an attorney in Florida. That the testimony reveals corporate practices that GMAC finds embarrassing is not enough to justify issuance of a protective order. Further, Plaintiff has failed to establish that GMAC has been harmed specifically as a result of the dissemination of the June 7, 2010 deposition transcript, given that similarly embarrassing deposition testimony from Stephan’s December 10, 2009 Florida deposition also appears on the Internet, and will remain even were this Court to grant Plaintiff’s motion. Accordingly, because Plaintiff has failed to satisfy its burden of persuasion under Rule 26(c), its Motion for Entry of Protective Order is denied.

There are, we are learning, depositions all over the country showing that servicer employees committed outright fraud. But presumably, every time they’re taken, the servicer attempts to hide them behind claims of trade secrets.

How much more evidence of corporate law-breaking is hiding in foreclosure courts under seal?

Remember the Stress Tests?

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The other day, I noted that Administration claims that they were helpless to affect what they now depict as loan servicers’ “sloppiness” but what really amounts to fraud ignores their decision to stop pushing for cramdown–and with it, leverage over the loan servicers.

I think (though I’m less sure of this) they’re ignoring one other source of leverage they once had over the servicers: the stress tests.

First, remember that the top servicers also happen to be the biggest banks. Here is Reuters’ list of the top loan servicers.

  • Bank of America (19.9%)
  • Wells Fargo (16.9%)
  • JPMorgan Chase (12.6%)
  • Citi (6.3%)
  • GMAC (3.2%)
  • US Bancorp (1.8%)
  • SunTrust (1.6%)
  • PHH Mortgage (1.4%)
  • OneWest (IndyMac) (1.4%)
  • PNC Financial Services (1.4%)

And here is the list the nineteen banks that had to undergo stress tests in 2009.

  • American Express
  • Bank of America
  • BB&T
  • Bank of New York Mellon
  • Capital One
  • Citigroup
  • Fifth Third
  • GMAC
  • Goldman Sachs
  • JP Morgan Chase
  • Key Corp
  • MetLife
  • Morgan Stanley
  • PNC Financial
  • Regions
  • State Street
  • SunTrust
  • U.S. Bancorp
  • Wells Fargo

So all of the top mortgage servicers–Bank of America, Wells, JP Morgan Chase, Citi, and even GMAC–had to undergo a stress test last year to prove their viability before the government would allow them to repay TARP funds and therefore operate without that government leverage–which was threatened to include limits on executive pay, lobbying, and government oversight of major actions–over their business. Significantly, all but JPMC were found to require additional capital.

Now, I’m not sure what I make of this. The stress tests were no great analytical tool in the first place. Moreover, the stress tests focused on whether the banks could withstand loan defaults given worsening economic conditions, not whether they could withstand financial obligations incurred because their servicing business amounted to sloppiness fraud.

But in letters between Liz Warren (as head of the TARP oversight board) and Tim Geithner in January and February 2009 discussed foreclosure modification, stress tests, and accountability for the use of TARP funds (Geithner made very specific promises about foreclosure modifications and refinancing which Treasury has failed to meet). And those discussions–and the stress tests–took place as COP reported on the problems with servicer incentives, servicer staffing and oversight, and the lack of regulation of servicers more generally (the COP report came out March 6, 2009; the stress test results were announced May 7, 2009). So at the same time as the Administration was officially learning of problems with servicers, it was also giving those servicers’ bank holding companies a dubious clean bill of health. And with it, beginning to let go of one of the biggest pieces of leverage the government had over those servicers.

Beyond that, I’m not sure what to think of any relationship between the stress tests and the servicer part of these banks’ business. Rortybomb has an important post examining how this foreclosure crisis may go systemic. If it does, these same banks that eighteen months ago promised the government they could withstand whatever the market would bring will be claiming no one could have foreseen that they’d be held liable for their fraudulent servicing practices. Ideally, we would have identified this as a systemic risk eighteen months ago, and based on that refused to let the big servicers out of their obligations (which would have provided the needed incentive for the servicers not only to treat homeowners well, but to modify loans). Had the stress tests included a real look at these banks’ servicing business, these banks might not have been declared healthy.

Dan Coats’ Hypocritical Lobbying: Floorplans, Not Cars

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Eric Kleefield uncovers a heap of hypocrisy in IN Senate candidate Dan Coats’ lobbying record, but he misunderstands what it means.

Former Sen. Dan Coats (R-IN) is running for his old Senate seat, apparently on a platform of opposing government takeover of the private sector. But as it turns out, in 2008 he lobbied the Senate on the TARP bill, on behalf of none other than Chrysler’s parent company.

The NBC affiliate in South Bend quoted Coats early this week, explaining why he was returning to politics. “Well, nobody anticipated that government’s going to try to run auto companies, bank insurance companies, take over the private sector,” said Coats.

However, according to a federal lobbying report for the third quarter of 2008, Coats served as a lobbyist on behalf of Cerberus Capital Management, the firm that owned a majority share in Chrysler.

[snip]

Coats’s campaign press secretary Pete Seat says that despite what the lobbying filings show, Coats did not seek bailout help for Chrysler. “Dan Coats never lobbied on behalf of Chrysler in pursuing federal assistance. Anything to the contrary is false and pure politics,” Seat told us.

Instead, Seat says, Coats was lobbying for “small business” loan guarantees. Seat says: “Dan’s only related work was on behalf of small businesses – the very lifeblood of our economy – to ensure they could raise the capital needed to increase production, inventory and add jobs. Dan Coats did more for job growth in the third quarter of 2008 than Democrats did in all of 2009.”

Kleefield spends some time talking about Cerberus’ stake in Chrysler, the car company. But he seems unaware of what Cerberus’ big interest was: Chrysler Financial and GMAC–and of what the phrase “small business loan guarantees” means in the auto business.

Cerberus, after all, was really never that interested in the car business, notwithstanding that little Chrysler millstone it had around its neck. Rather, in the years leading up to 2008’s crash, Cerberus was making a big play for finance companies–Chrysler Financial and GMAC. And certainly in 2008, when the auto business was going south, it hoped that it would be able to become the big auto finance company.

And the GOP-wired company in fact did manage to get into the TARP world by managing to turn GMAC into a bank holding company (though it had to give up much of its 51% stake in the company to do so). Read more →

Cerberus Still Seeking to Privatize Profit, Pass on Risk?

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Cerberus appears to be seeking to capitalize on the woes of the auto industry to do two things: first help its Republican buddies break the UAW, and after doing so, pawn off its unwanted "investment" in Chrysler onto the same union. I’m not sure I understand all the steps in this process, yet, but here are three data points.

Cerberus Protects Client Retirees But Not Chrysler Retirees

Let’s start with Cerberus’ statement on Friday in response to the bridge loan announcement. It celebrates the bridge loan as an opportunity to wring concessions from two stakeholders: bond-holders and union labor.

In addition to this, Cerberus believes that concessions by all relevant constituencies will be required to facilitate a full restructuring and recapitalization of Chrysler. In order to achieve that goal Cerberus has advised the Treasury that it would contribute its equity in Chrysler automotive to labor and creditors as currency to facilitate the accommodations necessary to affect the restructuring. Unless Chrysler’s labor costs can achieve parity with the foreign transplants, and without the restructuring of Chrysler’s debt, Chrysler cannot be restored to long-term health and the government loan will be unlikely to be fully repaid.

As seems to be true of all Republicans talking about concessions from stake-holders, Cerberus fails to mention any concessions from dealers, a critical requirement for any successful restructuring.

But what I like best about Cerberus’ statement (as in, like not at all) is the way it excuses its unwillingness to put any Cerberus money into Chrysler by appealing to America’s retirees.

Cerberus’ investors are comprised of pension and retirement plans (including funds invested for teachers, organized labor and municipal employees), charitable and educational endowments, fund-of-funds, and individual family savings. Cerberus is, therefore, entrusted with the life savings of many retirees, teachers, municipal workers and ordinary citizens.

As I’ve suggested, one of the two ways the UAW can meet Bob Corker’s Cerberus’ demands is to agree to allow Chrysler to renege on its promises to Chrysler retirees.

In short, Cerberus is pleading that it may require UAW retirees to give up their pensions because it must protect the pensions of other retirees. For some reason, Cerberus must have thought that logically inconsistent argument would nevertheless be more persuasive than admitting it might demand UAW retirees to give up a piece of their retirement so as to protect the current earnings of John Snow and Dan Quayle.

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