This is the best news I've heard today. Without criminal penalties, this behavior will continue.
With criminal penalties we'll still have a problem, but it's a good start. It's time to start holding the enablers and perpetrators of the bubble accountable.
This is on the checklist of things to do before writing the financial players a multi hundred billion dollar check. Same with the taxpayer stimulus Congress just passed.
Once these things are done the government will say "Hey, we gave the little guy money as our first preference, and prosecuted a whole lot of crooks. But now it looks like we really have to bail out the industry, as a last resort of course."
It's a hogwash. Some junior sales person will targeted for not explaining risks to clients. Everyone takes ethics training and then it's buisness as usual.
There are several articles up on the testimony of SocGen's "rogue" trader.
A few excerpts:
_ "I remain convinced that they were aware of my positions, and in that, I inform you of the existence of several alerts sent to my superiors ... during 2007, several e-mail queries from the back office were sent to several of my co-worker assistants to get explanations on the operations recorded in my book. These e-mails were about operations that didn't return to the back office."
_ "I can't believe that my superiors were not aware of the amounts I was committing, it's impossible to generate such profits with small positions, which leads me to say that when I'm in the black, my superiors close their eyes about the methods and volumes committed."
The amazing thing is that the Enron guy, the WorldCom guy, the Adelphia guys etc were just led away in shackles to serve long years yet corporate executives continue to engage in this kind of behavior.
They just don't get it, do they?
It's a hogwash. Some junior sales person will targeted for not explaining risks to clients. Everyone takes ethics training and then it's buisness as usual
Ha! Spoken like a seasoned voice of experience.
I hope it turns out differently. In my long experience with senior executives and the financial industry, they don't really pay much attention to anything but their bonuses until the very moment they get traded for a pack of Camels.
That is good news - had to write both my senators on that one - now if they will just lose that expansion of the backward look on losses...and get it all intact out of committee!
'The Senate plan does not include the proposal by the House to increase the limits on conforming mortgages that can be bought by Fannie Mae and Freddie Mac, or insured by the Federal Housing Administration.'
'The Senate plan does not include the proposal by the House to increase the limits on conforming mortgages that can be bought by Fannie Mae and Freddie Mac, or insured by the Federal Housing Administration.
-- Loss from continuing operations of $7.94 per diluted share
-- Sales (orders) decreased 10% to 5,537 (down 2% on a per neighborhood basis)
-- Reduced homebuilding SG&A expenses by 31% or $116 million
-- Reduced inventory of unsold homes by 33% to 4,259
-- Homebuilding cancellation rate decreased 550 basis points to 33.0%
...Total (borrowed)reserves for two weeks ending January 16 are $39.988 billion. Inquiring minds are no doubt wondering where $40 billion came from. It's a good question. The answer is the Term Auction Facility. You can see that figure in Table 1 of the H3 release, accessible through the link above.
Were it not for the Term Auction Facility, banks would have had to raise $40 billion in capital by selling assets or some other means. We will look at "other means" in just a moment."
This is the Bush FBI we are talking about, and if you expect it to prosecute the big banks or any other powers-that-be, you haven't been paying attention to what has happened to our legal system in the past seven years. The FBI, CIA, NSA, and every other law enforcement agency of the federal gov't is now run by grads of Pat Robertson's law school. True Believers, who only do what the administration tells them to do.
They'll fry some small fish and call it a satisfying dinner.
That is good news - had to write both my senators on that one...
I emailed the 2 senators for CO too - referencing the reuters article about TO-BE-DELIVERED MBS traders baulking about getting lumpy Jumbos in their mortgages quoting some extracts and pointing out that this would be a sign of things to come.
I got auto replies from both with a promise of a more considered response in due course. It met my expectation - which was set by how Members of Parliament in the UK are supposed to behave and mostly behaved - they are supposed to act as your champion - in voting matters and interceding on your behalf with govt. bureaucracy.
I hope it turns out differently. In my long experience with senior executives and the financial industry, they don't really pay much attention to anything but their bonuses until the very moment they get traded for a pack of Camels.
i thought you were talking about capital raising from a SWF for a minute then!
Let's not be too cynical, the CEO of Mercury Finance (small time subprime auto lender) is doing time at the New Club Fed. Yeah, I now that case is ten years old and he was only sent up in 2007. But he was sent up.
The mortgage crooks will use the "Rogue Trader defense" and claim that they committed crimes because they were overworked.
"Friends of rogue trader Jerome Kerviel last night blamed his $7 billion losses on unbearable levels of stress brought on by a punishing 30 hour week."
"Kerviel was known to start work as early as nine in the morning and still be at his desk at five or even five-thirty, often with just an hour and a half for lunch."
Fraud for housing sometimes doesn't cause a loss. Sometimes the fraudsters are able to make their payments, or sell and everybody's paid off. The other kind--naahhh.
"The liquidity crunch also contributed to the significant decline in the median price due to the lack of financing options for loans above the conforming loan limit of $417,000, Brown said. It is imperative that the proposed increase to conforming loan limits that is part of the economic stimulus package receive swift approval by both houses of congress"
Calif RE and mortgage industry is looking at this as the lifesaver, even a few more JUMBO loans approved would move the median up providing a new wave of media bottom calls.
Remember, the WSJ is talking about the FBI looking into fraud in mortgage securitization.
That's interesting, but the FBI often starts investigating things, only to have field office top operatives transfered to BF Egypt, the office reorganized, and the investigation moth balled.
Because I don't know they could be looking at in this chain without causing some serious implosions.
NEW YORK - Fitch Ratings cut its rating on more than 37,500 municipal bonds on Tuesday because of doubts about the insurer pledging to cover losses on the bonds.
O.C. schools could lose $152 million in state funding
Orange County public schools could lose as much as $152.5 million in state funding next fiscal year under a budget proposed by Gov. Arnold Schwarzenegger, according to some estimates. That could mean between 4 to 6 percent less money than school districts were anticipating from the state. Gov. Arnold Schwarzenegger's proposed budget will cut spending by $305 per student statewide. O.C. schools could lose $152 million in state funding | districts, budget, funding - News - The Orange County Register
CALIFORNIAS AT THE BOTTOM OF THE BARREL: California is now 50th on the list of states in the amount of money it spends on public schools thought youd like to know.
FBI - LOL! Put this up their with the Super SIV, Monoline Bailout, Every Warren Buffet rumor, etc... just more news out there to let the sheeple think something is acutally going to happen to Da Boyz on WS...
As did I. No response yet, other than being added to their spam lists soliciting contributions.
Those people are so worthless.
Terry | 01.29.08 - 5:02 pm | #
Me too, got a reasonably on topic response from Sherrod Brown (I'm sure written up by a staffer and sent to everyone who wrote about the whole stimulus package, but it just barely touched on the GSE limit issue). No response yet from Voinovich.
Running off Kicker's OT comment - ok, sorta expected it, but seeing it in the flesh... wow.
Security Capital (SCA) insures US$150 Billion in debt. Fitch downgraded them 5 days ago. And of the insured, 37,451 bonds (most of the amount insured, I gather) got downgraded as well. I think I hear the sounds of a LOT of scrambling in the night.
Yep, C&C, add this to the FBI notice and all the rest. Tomorrow will be interesting, I think.
Morgan Stanley Reclassifies Assets, Receives Subpoenas on Subprime Debt
Morgan Stanley Tuesday said it has received subpoenas and requests for information from regulators relating to subprime mortgages, and separately reclassified $7 billion of assets as Level 3 from Level 2, meaning they are more difficult to value.
This will solve... ..Nothing i believe, the damage is already done here. Yes, perhaps a escape goat or two might be shoot. But, I cant see how this is going to solve any of the more fundamental problems?
Well perhaps it will solve one problem, the average man will have 4 to 5 years of peace and quiet until the next batch of "new thinkers" enters the stage. Then it will be like nothing ever happened all over again.
Well not exactly as the next time, -This time it's only "?" that can only go up!
(When i grow old, i will laugh in the face of the youth... The sad thing? They will probably put me away in some quiet place)
That's interesting, but the FBI often starts investigating things, only to have field office top operatives transfered to BF Egypt, the office reorganized, and the investigation moth balled.
Off Topic, however some what related. Brad Setser posted an interesting comment on his blog on whether the dollar is becoming the new Yen in the carry trade. He seems to conclude that with the lack of external surplus, probably not, but in the comments seems to admit that we may be a conduit for Foreign Central Bank funds and speculates that this might match some of the dollar meltdown scenarios. Anyone have any insights on this?
Under the heading "you can't make this stuff up" Monoline could default on Monorail NEW YORK, Jan 29 (Reuters) - Nearly $446 million of bonds insured by troubled AMBAC Financial Group (ABK.N: Quote, Profile, Research) for the Las Vegas Monorail project could default in as soon as two years, according to Moody's Investors Service, which on Tuesday sliced the monorail's credit three notches to "Caa3" from "B3."
Of course MBIA stock is up on this news. Targets of the SEC probe include Swiss bank UBS AG (VTX:UBSN.VX - News) and U.S investment banks Morgan Stanley (NYSE:MS - News), Merrill Lynch (NYSE:MER - News), Bear Stearns (NYSE:BSC - News), as well as bond insurer MBIA (NYSE:MBI - News).
Despite everything the Bush clan has done to politicize and undermine the justice department, there are still a lot of good career prosecutors out there.
Patrick Fitzgerald is perhaps the best example . . . not as much for Scooter Libby's prosecution as for taking out the rapacious Conrad Black.
I'm not holding my breath . . . but this could be very, very big.
The bonds downgraded by Fitch include debt floated by such local government entities as the Bernards Township Board of Education in New Jersey, the Comanche County Consolidated Hospital District in Texas and the Wayne County Public Library in Ohio.
The question is...how do these bonds stack up against, say, the unsecured debt of a small or mid-size company?
I think they are about the same. So, the default rates going forward should be about the same for recessions, which is 5-10%.
Here's what people don't get. Muni bond insurance has created an automatic refi for these issuers for 20 years. They didn't actually need to be solvent because they could constantly keep rolling over principal and tacking on a little more interest. Now, it's gone. At the same time muni revenue flows are drying up.
I might buy the library bonds from Ohio...if I actually thought Ohio was going to be here in a few years.
MR:
The commodity boom... well, metals theft has been hitting Oregon quite a bit for the past three or four years. Most interesting is the farmer's irrigation pipe, bridge guardrail members (aluminum).. last week a life sized bronze statue of Sacagewea was stolen in Astoria.
Poor economic conditions have something to do with it, too. It's not just the commodities boom.
Well, I guess I'm glad my house is made of wood. . .Wait, maybe I can cover it with metallic paint, somebody will steal it, and my insurance will pay off the bank wiping out my mortgage.
A new and wonderful solution for the walk-away-from-the-mortgage conundrum.
The Pension funds that hold thes newly downgraded Muni bonds will have work to do tomorrow: Selling at any cost due to the rules of their charter. Prices will be sweet until they reinsure themselves once Buffet is up and running in all 50 states.
Nearly $446 million of bonds insured by troubled AMBAC Financial Group (ABK.N: Quote, Profile, Research) for the Las Vegas Monorail project could default in as soon as two years, according to Moody's Investors Service, which on Tuesday sliced the monorail's credit three notches to "Caa3" from "B3."
This is how it has worked. Some city dreams up a project that will never be profitable, that nobody would ever pay for with real money, and they pay for it with muni bonds. Investors are happy to give them half a billion, sight unseen, because of good ol' Ambac.
Now, tell me again how it's only the structured credit side of Ambac that's in trouble and the muni side is just fine.
And what's gonna happen to the Las Vegas monorail after it defaults? SCRAP METAL that will be worth a lot more than Ambac.
The Pension funds that hold thes newly downgraded Muni bonds will have work to do tomorrow: Selling at any cost due to the rules of their charter. Prices will be sweet until they reinsure themselves once Buffet is up and running in all 50 states.
Blonde Vigilante
we went over this yesterday. pension funds are NOT big holders of munis. mostly wealthy individuals and mutual funds.
They don't have to be big holders for their selling to drive down prices. Mutual funds also have rules about the ratings of securities they hold. They can also be forced to sell to meet requirements.
Father in law is a GP Attorney in rural Indiana. He told me that people are raiding anything metal that isn't tied down (alot of old half-rusted scrap metal in the farmlands)
On the upside it is a nice way to remove rural blight.
This is the Bush FBI we are talking about, and if you expect it to prosecute the big banks or any other powers-that-be, you haven't been paying attention to what has happened to our legal system in the past seven years. The FBI, CIA, NSA, and every other law enforcement agency of the federal gov't is now run by grads of Pat Robertson's law school. True Believers, who only do what the administration tells them to do.
They'll fry some small fish and call it a satisfying dinner.
O.C. schools could lose $152 million in state funding
...
CALIFORNIAS AT THE BOTTOM OF THE BARREL: California is now 50th on the list of states in the amount of money it spends on public schools thought youd like to know.
Anonymous,
Maybe you should check you facts before you post. Try looking here at Census Bureau data: US Census Press Releases. You will see that California is 28th from the top, not 50th. You aren't a school teacher with an agenda are you?
I have to chuckle at the possible investigation into mortgage fraud. I mean, wouldn't the tru nature of the boom cause severe impairments to the banks? Are thry not "Too Big To Fail"? Charges and prosecution would undo all the good that BernanSpan are doing as they cut rates to 1%. Nothing to see here.
Concur with REBear & Unirealist, this is only a public relations move unless some SVPs & EVPs of subprime companies & banks are charged, along with broker principals and managing directors at the investment banks. The FBI agenda is going to be changed again in November, on to the next crisis.
An Observer, Yes I checked. It would be nice to see the data normalized by cost-of-living or something useful that might make the raw data more meaningful and then to see whether national test scores & graduation results correlate.
Justaminit, though... perhaps I'm recalling from having read here?
Don't the big banks and brokers have to buy back some of those structured instruments if there was evidence of mortgage fraud in the origination process?
"It's a hogwash. Everyone takes ethics training and it's business as usual."
REBear-
Sorry, but the FBI is not in the business of giving "ethics training" classes.
When I think of the FBI, Secret Service or the IRS Criminal Investigation Division, I generally think of people that are smarter than me and a government body with a higher than normal conviction rate.
That, and a federally-mandated minimum 85% time served for any convicton, one best be prepared for the worst.
People that exhibit apathetic and contemptuous attitudes get taken to the cleaners.
As we learned from Enron and WorldCom, the trick is to catch the criminals before the money is gone.
Where's a cop when you need one?
Other than streamlining the indictment process and ramping up for litigation, this should not be much of an investigative challenge for the FBI, as there was obviously massive fraud at every level.
Can someone explain to me in a couple of hundred words what the fraud is? If I want to make a lousy loan - how is that fraud? If I have lousy credit - and someone wants to lend me money anyway - how is that fraud? If I want to sell my lousy loan to a sophisticated third party (and no one here is suggesting that the parties who bought and sold these loans weren't "sophisticated" investors - as opposed to merely stupid) - how is that fraud?
Remember all the "dot com" fraud lawsuits? Perhaps I am wrong - but the plaintiffs' lawyers don't seem to have hit any home runs there yet. Just because you have to eat a dumb investment decision doesn't mean there's fraud.
I know that some borrowers are hurting. Here is an article about low income foreclosures in Jacksonville in our local paper today:
FWIW - I really enjoyed the post about convexity. As for books that deal with this - an earlier poster who mentioned Fabozzi is right. I own several editions of the Handbook of Fixed Income Securities. It's the bible. But basically very much over the head of people of most people who don't know a lot about fixed income securities.
I think one very easy way to think about convexity in terms of mortgage backed securities - without talking about convexity - is thinking about what kinds of bonds you want to own in different interest rate environments (in terms of duration characteristics - not credit quality). If you think rates are going to go down - then you want very long term bonds with the most call protection you can find. The best example of this long term non-callable zero coupon bonds. If you think rates are going to go up - you want short term bonds/notes. Think 3 month tbill. Mortgage backed securities don't fit the bill in either of these scenarios. Which makes them suitable - if the yield is sufficiently attractive - and the quality is very high - only in stable or range bound interest rate environments.
FWIW - I think the MBS market is way over the head of even the above average retail investor (apparently it is above the head of the average institutional investor too - which is why we have the current mess we're in). The only part of it I deal with is callable CDs which are designed to act like mortgage backed securities. There is interest rate risk - but no credit quality risk. I have noted some new players in this market in recent months - like WAMU and Wachovia. These CDs have consistently yielded 100-150 bp over treasuries in the last 6-7 years. A decent investment for an average conservative retail investor. Roby
Robyn- I don't know about the investigation, but I have personal experience of people lying (or attempting to lie) on their mortgage apps, mortgage brokers/real estate agents falsifying numbers, and a lender asking not to see tax returns, but some other proof of an ongoing business, so they wouldn't have to verify income. I'm guessing it didn't stop there. That lender most likely made inaccurate statements about it's confidence in it's research.
Don't know if their going to hit the home run, but at least they're in the batter's box.
Citigroup has just about worked through the dot com lawsuits and has $2.8 billion to finish it up.
Looks like they will get their next batch before they can finish up the pending stuff.
from the 10q.
As of September 30, 2007, the Companys litigation
reserve for these matters, net of amounts previously paid or
not yet paid but committed to be paid in connection with the
Enron class action settlement and other settlements arising out
of these matters, was approximately $2.8 billion.
The Company believes that this reserve is adequate to
meet all of its remaining exposure for these matters.
This is the Bush FBI we are talking about, and if you expect it to prosecute the big banks or any other powers-that-be, you haven't been paying attention to what has happened to our legal system in the past seven years.
You are deluded by your apparent hatred of a lame duck administration. The FBI and other Federal Law enforcement rank and file are career appointees, not political. Some of the younger ones will still be in DC long after the Bush administration will be as relevant then as the Carter years are now.
By the time indictments (if any) are handed down, we'll be well into the Obama|McCain|Edwards administration.
This case will be the stuff careers are made of, you see The FBI, CIA, NSA, and every other law enforcement agency of the federal gov't is now run by grads of Pat Robertson's law school.
Well, even if I accept that dubious assertion, wouldn't overly sanctimonious religous fanatics be just the type to overprosecute?? What is your point, other than you think that DC has been taken over by the God squad?
The bankers are like the witch in Snow White. The witch conned Snow White into eating the pretty red poisoned part of the apple by eating the green part. The banks bought some of the subprimes themselves just like the witch ate some of the apple and now they try and use that to whitewash themselves.
I have little hope that anything real will come out of this witchhunt as deserved as it may be, but I hope the FBI includes the lawfirms who created the system and created the securities in their investigation. Unlike the bankers lawyers have a duty to our nation and our Constitution. Some of them actually felt the stuff they were creating was crap and were amazed anyone would buy it, yet they created it none the less.
That's interesting, but the FBI often starts investigating things, only to have field office top operatives transfered to BF Egypt, the office reorganized, and the investigation moth balled....
Actually it is Missoula Montana.
Nova | 01.29.08 - 6:10 pm | #
They should be so lucky... fish all summer, ski all winter and investigate out breaks of cow tipping.
barely writes:
An Observer, Yes I checked. It would be nice to see the data normalized by cost-of-living or something useful that might make the raw data more meaningful and then to see whether national test scores & graduation results correlate.
barely | 01.29.08 - 7:41 pm | #
Barely,
Interesting... I will admit I never considered the aspect of normalization for cost of living. Honestly, when I first read your response, I thought "what the heck does cost of living have to do with anything?" After a moment, a light came on. Facilities, labor, etc., will cost much more in Kalifornia than Podunk. Therefore, the comparison is marginally useful without adjustment. Nuts, I guess I should have to pay more in CA...
It will come down to was there collusion to manipulate data & misrepresent facts regarding the whole transaction trail. Not whether one or a bunch of loans were wise to make.
For example if the appraisers & loan originators colluded & artificially manipulated applicants data to make risky loans apps look less risky... with or without the applicants actually being accomplices... then you have fraud and possibly conspiracy right there.
Likewise if the securitizers & rating agencies collaborated to manipulate loan pool data to make the resultant MBS offerings rate higher... then you have fraud and possible conspiracy right there.
The key test will be were these transactions arms length & independent... or is there solid evidence or a paper (email) trail of actual collusion or clearly expressed quid pro quo... if the prosecutors don't have that evidence then they won't get to first base.
Even the informants mentioned in the article aren't a lock - witnesses can be broken on the stand as we all know. But those informants can maybe tell the investigators where the paper trail is buried - find that then they have a shot.
Make a list of the real estate sales contracts and the pre-appraisal contract price during the period under investigation.
For each of those contracts, list the appraisal value.
Subtract.
You will find that on almost every deal, the appraisal value exactly equals the contract price.
How does that happen, I wonder? Could the buyers and sellers be so tuned into market values that they hit the appraisal value each time? Talk about a perfect market!
I've purchased several properties over the past 10 years, and gone through several refinancings, and each time the appraisal value exactly matches the desired price.
I wonder how the EAppraiseit! WAMU mess plays into this? I know that the Pam Crowley/EAppraiseit! suit got a lot of Appraisers angry...A lot of people who played it straight and kept their heads down also kept emails for the day,and i am sure the FBI is getting the benefit now.Administrations come and go,but bureaucracies are forever,and this Administration is not in good odor with the military or law enforcement.
You and many other people have experienced the same strange coincidence. Appraisers call it number hitting.
As in "hit the number needed, the deal closes, everyone gets paid, borrower gets the house or the cash out, and appraiser gets repeat business from the oh so grateful mortgage originator(s)"
In addition, there were pressure requirements from the loan originators for appraisers to overlook such things as bad roofs, shifting foundations, peeling paint, worn out flooring, faulty electrical and plumbing systems, etc etc.
There are numerous poorly trained ranging to outright unethical "appraisers" who had a business model of hitting the number, hopefully these will get caught up in the wash along with the rest of the colluders and put away, at least lose
licenses they never should have had.
It was easy money while it lasted.
See Rachel Dollar's "Mortgage Fraud Blog" site for numerous examples.
In my opinion, appraising since 1985 and not losing any sleep at night over my being implicated in any FBI action involving a fraudulent appraisal, the appraiser is paid the least of just about anyone involved in the loan chain. Just a flat fee, but with a guarantee of repeat business, that was incentive enough
for many.
This is not to say there are not good reasons for appraised values to equal sale prices, just that the law of averages suggests "not all the time".
For your refis, I would bet the loan officer generated that "desired number"; and that your mortgage debt plus credit cards plus car loans and other bills you wanted to pay off played a part in figuring that "desired number".
Whether or not you were aware of it, and I'm not saying you were or had any reason yourself to pick a number that worked just dandy.
Multiply this same action by millions of the greedy and you get a fair share of the mess the lending industry is now in.
The honest appraisers lost a lot of work from lenders who used the number hitters, we are not crying over any fines, penalties or jail time these co-enablers get thrown at them now.
observer, As I said, that was all in an email I received though it may not have been clear. Thanks for the info though. I am personally of the opinion that they should "teach more efficiently".
Those of you who think these federal probes will go nowhere should remember something: the investigations will be headed by ambitious prosecutors. People like Spitzer and Giuliani. These guys and gals will be looking for trophy heads for their political rec rooms.
Lily Tomlin might work but she is picky about so many things especially shoes and costars. You know she hates Dolly Parton. Who could hate dear Dolly? Shirley MacLaine is too old and overexposed. Now, that nice John Travolta made a fine figure of a woman in Hairspray and he adores fuzzy bunny slippers.
The FBI and other Federal Law enforcement rank and file are career appointees, not political.
Central Scrutinizer, are you naive, or not paying attention? Aren't you aware of the administration firing federal prosecutors and replacing them with True Believers? Are you aware of how many of Pat Robertson's law school grads have been hired by the Bush Justice Dep't? Are you aware of the political-preference litmus tests applied to new hires in Justice?
IMO, the administration even got to Patrick Fitzgerald, who was, yes, a great prosecutor.
The Bush/Cheney team did not just take office in 2000. They took over, top to bottom. Especially law enforcement. They made Nixon, Agnew, and Mitchell look like pikers. It will take years to dislodge all amoral incompetents they put in place in the federal government.
"The Bush/Cheney team did not just take office in 2000. They took over, top to bottom. Especially law enforcement. They made Nixon, Agnew, and Mitchell look like pikers. It will take years to dislodge all amoral incompetents they put in place in the federal government."
In order to replace them with the amoral incompetents sympathetic to interests of the president elect. To expect otherwise would be - yes! - naive or demonstrating lack of attention for the last few decades...
Lenders and how we get them to listen!
As many borrowers know from their own experience is that the resistance from
their lender is high and just getting through to the appropriate person is very
difficult. However, when MyRecast is
involved it seems as if the calls start to get answered and the letters are
responded to. On our MyRecast Team we have the best HUD advisors involved, state
wide attorney representation and the BEST sub-prime underwriters to QC / and
audit the original files.
We use powerful laws like the Truth in Lending Act (TILA) and the Real Estate
and Settlement Procedures Act (RESPA) to bring lenders to their knees. So,
naturally, the lenders will be very amicable to working and negotiating with
MyRecast Team for a modification of the note and work out to more affordable terms to avoid costly
litigation. Not to mention your credit and
how this will affect your ability in the future.
Jackie
What? The Justice department doing something than arresting bongmakers and entrapping idiot terrorists?
When did they decide to stop pursuing internet gambling and goo after real crooks?
It is perhaps worth noting that "fraud for housing" could be difficult to distinguish from a no doc, "self-underwritten" loan.
This is the best news I've heard today. Without criminal penalties, this behavior will continue.
With criminal penalties we'll still have a problem, but it's a good start. It's time to start holding the enablers and perpetrators of the bubble accountable.
This is on the checklist of things to do before writing the financial players a multi hundred billion dollar check. Same with the taxpayer stimulus Congress just passed.
Once these things are done the government will say "Hey, we gave the little guy money as our first preference, and prosecuted a whole lot of crooks. But now it looks like we really have to bail out the industry, as a last resort of course."
It's a hogwash. Some junior sales person will targeted for not explaining risks to clients. Everyone takes ethics training and then it's buisness as usual.
There are several articles up on the testimony of SocGen's "rogue" trader.
A few excerpts:
_ "I remain convinced that they were aware of my positions, and in that, I inform you of the existence of several alerts sent to my superiors ... during 2007, several e-mail queries from the back office were sent to several of my co-worker assistants to get explanations on the operations recorded in my book. These e-mails were about operations that didn't return to the back office."
_ "I can't believe that my superiors were not aware of the amounts I was committing, it's impossible to generate such profits with small positions, which leads me to say that when I'm in the black, my superiors close their eyes about the methods and volumes committed."
It is all window dressing just like when the fed goes after TanMan and Bob Toll. Make examples of a few and call it a day.
The "fraud discovery" part of this financial mania is slightly ahead of schedule.
There are still so many victims yet to be ruined, and turned into blood-thirsty litigants...
This will be just like the investigation into torture at Guantanamo Bay. It was only a few rogue soldiers. No one at the top knew anything.
FBI is not in the business of preventing fraud. It only comes in to clean up after the whole world is talking about it.
How long before Mozillo "dies of a heart attack" then quickly cremated, never to be seen again? http://thumbsnap.com/v/lk3S0GWM.gif
The amazing thing is that the Enron guy, the WorldCom guy, the Adelphia guys etc were just led away in shackles to serve long years yet corporate executives continue to engage in this kind of behavior.
They just don't get it, do they?
Its not the guy selling the loan, its the guy telling the junior MBA how to modify the securitization model until he likes it (creating bonus money).
Vindicated!
It's a hogwash. Some junior sales person will targeted for not explaining risks to clients. Everyone takes ethics training and then it's buisness as usual
Ha! Spoken like a seasoned voice of experience.
I hope it turns out differently. In my long experience with senior executives and the financial industry, they don't really pay much attention to anything but their bonuses until the very moment they get traded for a pack of Camels.
To be effective, punishment need not be severe, it just needs to be swift and sure.
When does that ever happen in the US?
Instead, we go for slow and Draconian.
Anon,
That is good news - had to write both my senators on that one - now if they will just lose that expansion of the backward look on losses...and get it all intact out of committee!
CEO blood.
We want CEO blood.
.
'The Senate plan does not include the proposal by the House to increase the limits on conforming mortgages that can be bought by Fannie Mae and Freddie Mac, or insured by the Federal Housing Administration.'
Really?
After hours story so bank shares stay afloat until Bernanke cut?
Hmmmm....
The Senate plan does send a $500 check to Bill Gates, thank God.
--
Just Released Data...
CA SFH Resale Price Down 20.4% from Peak Price 8 Months Ago, or 29.0% Annual Rate
Page Not Found!
Peak Price Apr-07\t$597,640
Current Price Dec-07\t$475,460
Jas
oops....
Anon..that is huge news. I cant imagine these guys letting that one get away. What am I missing?
(eternal skeptic)
OT but not - CTX reports:
-- Loss from continuing operations of $7.94 per diluted share
-- Sales (orders) decreased 10% to 5,537 (down 2% on a per neighborhood basis)
-- Reduced homebuilding SG&A expenses by 31% or $116 million
-- Reduced inventory of unsold homes by 33% to 4,259
-- Homebuilding cancellation rate decreased 550 basis points to 33.0%
The housing and financial stocks have "priced in" a raise of conforming limits. More so than another rate cut imo.
Markel,
That's because some Senator's kid got a cracked version of Vista Ultimate, and was about to get nailed for piracy.
Cheers,
"had to write both my senators on that one"
As did I. No response yet, other than being added to their spam lists soliciting contributions.
Those people are so worthless.
btw..yhoo, goog etc getting whacked after hours (based on yhoo earnings)
Hopefully Mid-America will refuse to pay for CA's playthings.
OT
Minyanville says: "Bank Reserves Go Negative"
Bank Reserves Go Negative-Minyanville
...Total (borrowed)reserves for two weeks ending January 16 are $39.988 billion. Inquiring minds are no doubt wondering where $40 billion came from. It's a good question. The answer is the Term Auction Facility. You can see that figure in Table 1 of the H3 release, accessible through the link above.
Were it not for the Term Auction Facility, banks would have had to raise $40 billion in capital by selling assets or some other means. We will look at "other means" in just a moment."
-- Hiding Out
Jas Jain | 01.29.08 - 4:57 pm |
Jas,
Any data on existing home sales volumes?
I wrote a little back volumes are scary low in Fl...
The percent drops are pretty incredible,with more to go !!
Chris
This is the Bush FBI we are talking about, and if you expect it to prosecute the big banks or any other powers-that-be, you haven't been paying attention to what has happened to our legal system in the past seven years. The FBI, CIA, NSA, and every other law enforcement agency of the federal gov't is now run by grads of Pat Robertson's law school. True Believers, who only do what the administration tells them to do.
They'll fry some small fish and call it a satisfying dinner.
CTX 2007 fiscal net income so far:
1st Q -122M
2nd Q -644M
3rd Q -975m
energyecon writes:
Anon,
That is good news - had to write both my senators on that one...
I emailed the 2 senators for CO too - referencing the reuters article about TO-BE-DELIVERED MBS traders baulking about getting lumpy Jumbos in their mortgages quoting some extracts and pointing out that this would be a sign of things to come.
I got auto replies from both with a promise of a more considered response in due course. It met my expectation - which was set by how Members of Parliament in the UK are supposed to behave and mostly behaved - they are supposed to act as your champion - in voting matters and interceding on your behalf with govt. bureaucracy.
-K
I hope it turns out differently. In my long experience with senior executives and the financial industry, they don't really pay much attention to anything but their bonuses until the very moment they get traded for a pack of Camels.
i thought you were talking about capital raising from a SWF for a minute then!
The housing and financial stocks have "priced in" a raise of conforming limits. More so than another rate cut imo.
Unless the changed conforming limits include 150%+ LTV they're not going to make much difference.
Let's not be too cynical, the CEO of Mercury Finance (small time subprime auto lender) is doing time at the New Club Fed. Yeah, I now that case is ten years old and he was only sent up in 2007. But he was sent up.
ah, they got a headliner so...
Executive Gets 20-Year Term for Hedge Fund Scheme
but maybe they're thinking ahead to their new boss and it won't fade away entirely.
A new CSI: Mortgage Fraud Investigation.
When will the Tanta action figure be out?
The mortgage crooks will use the "Rogue Trader defense" and claim that they committed crimes because they were overworked.
"Friends of rogue trader Jerome Kerviel last night blamed his $7 billion losses on unbearable levels of stress brought on by a punishing 30 hour week."
"Kerviel was known to start work as early as nine in the morning and still be at his desk at five or even five-thirty, often with just an hour and a half for lunch."
daebNYC- You have no faith in the House's motivation, obviously.
Fraud for housing sometimes doesn't cause a loss. Sometimes the fraudsters are able to make their payments, or sell and everybody's paid off. The other kind--naahhh.
I say we lock up everyone with over a billion dollars, just to be sure. Except maybe Soros and Buffett - they seem ok.
"unbearable levels of stress brought on by a punishing 30 hour week"
Gotta love the French...those 30 hour workweeks are killers!
"The liquidity crunch also contributed to the significant decline in the median price due to the lack of financing options for loans above the conforming loan limit of $417,000, Brown said. It is imperative that the proposed increase to conforming loan limits that is part of the economic stimulus package receive swift approval by both houses of congress"
Calif RE and mortgage industry is looking at this as the lifesaver, even a few more JUMBO loans approved would move the median up providing a new wave of media bottom calls.
Rich, you know that quote was from a satirical story right? Sorry if you're joking and I missed it.
Remember, the WSJ is talking about the FBI looking into fraud in mortgage securitization.
That's interesting, but the FBI often starts investigating things, only to have field office top operatives transfered to BF Egypt, the office reorganized, and the investigation moth balled.
Because I don't know they could be looking at in this chain without causing some serious implosions.
Cheers,
I fear the outcome will be something like this...
Authorities: "Their actions were clearly reprehensible, but they didn't technically break any rules or regulations".
Public: "You mean we don't have any rules or regulations against that?"
Authorities: "No, your elected leaders decided that the industry would operate most efficiently without a lot of regulations".
Public: "Thanks, my trust in the system is re-established".
CR,
Might I suggest using the convention of placing a "$" after a reference which requires a subscription.
ex. From the WSJ$:
Thanx
Jim
Running the economy with many differnt participants wanting things their way must be like 17 guys making 1 hamburger
Better fire up some more angry letters to Senators:
FHA Reform Dropped from House Economic Stimulus Plan : HousingWire || financial news for the mortgage market
Paulson & Wall Street VERY desperate..this is what they really want.
OT:
NEW YORK - Fitch Ratings cut its rating on more than 37,500 municipal bonds on Tuesday because of doubts about the insurer pledging to cover losses on the bonds.
Forbes.com File Not Found
Write Your Senators
Write Your Senators
OT An email I received
O.C. schools could lose $152 million in state funding
Orange County public schools could lose as much as $152.5 million in state funding next fiscal year under a budget proposed by Gov. Arnold Schwarzenegger, according to some estimates. That could mean between 4 to 6 percent less money than school districts were anticipating from the state. Gov. Arnold Schwarzenegger's proposed budget will cut spending by $305 per student statewide.
O.C. schools could lose $152 million in state funding | districts, budget, funding - News - The Orange County Register
CALIFORNIAS AT THE BOTTOM OF THE BARREL: California is now 50th on the list of states in the amount of money it spends on public schools thought youd like to know.
FBI - LOL! Put this up their with the Super SIV, Monoline Bailout, Every Warren Buffet rumor, etc... just more news out there to let the sheeple think something is acutally going to happen to Da Boyz on WS...
"had to write both my senators on that one"
As did I. No response yet, other than being added to their spam lists soliciting contributions.
Those people are so worthless.
Terry | 01.29.08 - 5:02 pm | #
Me too, got a reasonably on topic response from Sherrod Brown (I'm sure written up by a staffer and sent to everyone who wrote about the whole stimulus package, but it just barely touched on the GSE limit issue). No response yet from Voinovich.
Re. ZackAttack | 01.29.08 - 5:21 pm
I want to know who will play Tanta on TV.
Running off Kicker's OT comment - ok, sorta expected it, but seeing it in the flesh... wow.
Security Capital (SCA) insures US$150 Billion in debt. Fitch downgraded them 5 days ago. And of the insured, 37,451 bonds (most of the amount insured, I gather) got downgraded as well. I think I hear the sounds of a LOT of scrambling in the night.
Yep, C&C, add this to the FBI notice and all the rest. Tomorrow will be interesting, I think.
The US already has the world's highest documented incarceration rate: approximately 7 million people behind bars as of 2006.
That's 25% of the WORLD'S incarcerated population.
Still plenty of room for some crooked CEO's I say.
OT, news from WSJ$ site:
Morgan Stanley Reclassifies Assets, Receives Subpoenas on Subprime Debt
Morgan Stanley Tuesday said it has received subpoenas and requests for information from regulators relating to subprime mortgages, and separately reclassified $7 billion of assets as Level 3 from Level 2, meaning they are more difficult to value.
Morgan Stanley Reclassifies Assets, Receives Subpoenas on Subprime Debt - WSJ.com
-Thumbsup!
This will solve... ..Nothing i believe, the damage is already done here. Yes, perhaps a escape goat or two might be shoot. But, I cant see how this is going to solve any of the more fundamental problems?
Well perhaps it will solve one problem, the average man will have 4 to 5 years of peace and quiet until the next batch of "new thinkers" enters the stage. Then it will be like nothing ever happened all over again.
Well not exactly as the next time, -This time it's only "?" that can only go up!
(When i grow old, i will laugh in the face of the youth... The sad thing? They will probably put me away in some quiet place)
Misean Said:
That's interesting, but the FBI often starts investigating things, only to have field office top operatives transfered to BF Egypt, the office reorganized, and the investigation moth balled.
Actually it is Missoula Montana.
Off Topic, however some what related. Brad Setser posted an interesting comment on his blog on whether the dollar is becoming the new Yen in the carry trade. He seems to conclude that with the lack of external surplus, probably not, but in the comments seems to admit that we may be a conduit for Foreign Central Bank funds and speculates that this might match some of the dollar meltdown scenarios. Anyone have any insights on this?
RGE - Brad Setser's Blog
I know it's OT, but here is proof of the coming commodity boom:
Story not found - OregonLive.com
I want to know who will play Tanta on TV.
Lily Tomlin, or I'm not signing the contract.
Under the heading "you can't make this stuff up" Monoline could default on Monorail NEW YORK, Jan 29 (Reuters) - Nearly $446 million of bonds insured by troubled AMBAC Financial Group (ABK.N: Quote, Profile, Research) for the Las Vegas Monorail project could default in as soon as two years, according to Moody's Investors Service, which on Tuesday sliced the monorail's credit three notches to "Caa3" from "B3."
Lily Tomlin, or I'm not signing the contract.
oh, it's only julia roberts for the movies?
Of course MBIA stock is up on this news. Targets of the SEC probe include Swiss bank UBS AG (VTX:UBSN.VX - News) and U.S investment banks Morgan Stanley (NYSE:MS - News), Merrill Lynch (NYSE:MER - News), Bear Stearns (NYSE:BSC - News), as well as bond insurer MBIA (NYSE:MBI - News).
unirealist and crispy,
Despite everything the Bush clan has done to politicize and undermine the justice department, there are still a lot of good career prosecutors out there.
Patrick Fitzgerald is perhaps the best example . . . not as much for Scooter Libby's prosecution as for taking out the rapacious Conrad Black.
I'm not holding my breath . . . but this could be very, very big.
The bonds downgraded by Fitch include debt floated by such local government entities as the Bernards Township Board of Education in New Jersey, the Comanche County Consolidated Hospital District in Texas and the Wayne County Public Library in Ohio.
The question is...how do these bonds stack up against, say, the unsecured debt of a small or mid-size company?
I think they are about the same. So, the default rates going forward should be about the same for recessions, which is 5-10%.
Here's what people don't get. Muni bond insurance has created an automatic refi for these issuers for 20 years. They didn't actually need to be solvent because they could constantly keep rolling over principal and tacking on a little more interest. Now, it's gone. At the same time muni revenue flows are drying up.
I might buy the library bonds from Ohio...if I actually thought Ohio was going to be here in a few years.
MR:
The commodity boom... well, metals theft has been hitting Oregon quite a bit for the past three or four years. Most interesting is the farmer's irrigation pipe, bridge guardrail members (aluminum).. last week a life sized bronze statue of Sacagewea was stolen in Astoria.
Poor economic conditions have something to do with it, too. It's not just the commodities boom.
Well, I guess I'm glad my house is made of wood. . .Wait, maybe I can cover it with metallic paint, somebody will steal it, and my insurance will pay off the bank wiping out my mortgage.
A new and wonderful solution for the walk-away-from-the-mortgage conundrum.
The Pension funds that hold thes newly downgraded Muni bonds will have work to do tomorrow: Selling at any cost due to the rules of their charter. Prices will be sweet until they reinsure themselves once Buffet is up and running in all 50 states.
This is how it has worked. Some city dreams up a project that will never be profitable, that nobody would ever pay for with real money, and they pay for it with muni bonds. Investors are happy to give them half a billion, sight unseen, because of good ol' Ambac.
Now, tell me again how it's only the structured credit side of Ambac that's in trouble and the muni side is just fine.
And what's gonna happen to the Las Vegas monorail after it defaults? SCRAP METAL that will be worth a lot more than Ambac.
The Pension funds that hold thes newly downgraded Muni bonds will have work to do tomorrow: Selling at any cost due to the rules of their charter. Prices will be sweet until they reinsure themselves once Buffet is up and running in all 50 states.
Blonde Vigilante
we went over this yesterday. pension funds are NOT big holders of munis. mostly wealthy individuals and mutual funds.
Tanta loves her cough syrup.
Idoc;
They don't have to be big holders for their selling to drive down prices. Mutual funds also have rules about the ratings of securities they hold. They can also be forced to sell to meet requirements.
MR-
Father in law is a GP Attorney in rural Indiana. He told me that people are raiding anything metal that isn't tied down (alot of old half-rusted scrap metal in the farmlands)
On the upside it is a nice way to remove rural blight.
Comment of the day:
unirealist writes:
This is the Bush FBI we are talking about, and if you expect it to prosecute the big banks or any other powers-that-be, you haven't been paying attention to what has happened to our legal system in the past seven years. The FBI, CIA, NSA, and every other law enforcement agency of the federal gov't is now run by grads of Pat Robertson's law school. True Believers, who only do what the administration tells them to do.
They'll fry some small fish and call it a satisfying dinner.
Wow. On the button!
BV, idoc is right . . . pension funds don't need the tax benefits of munis, so they go elsewhere for better yields.
With all the lawsuits happening, there is an obvious investment opportunity:
Collateralized Lawsuit Obligations (CLO, TM by me:)
Anonymous writes:
OT An email I received
O.C. schools could lose $152 million in state funding
...
CALIFORNIAS AT THE BOTTOM OF THE BARREL: California is now 50th on the list of states in the amount of money it spends on public schools thought youd like to know.
Anonymous,
Maybe you should check you facts before you post. Try looking here at Census Bureau data: US Census Press Releases. You will see that California is 28th from the top, not 50th. You aren't a school teacher with an agenda are you?
I have to chuckle at the possible investigation into mortgage fraud. I mean, wouldn't the tru nature of the boom cause severe impairments to the banks? Are thry not "Too Big To Fail"? Charges and prosecution would undo all the good that BernanSpan are doing as they cut rates to 1%. Nothing to see here.
Concur with REBear & Unirealist, this is only a public relations move unless some SVPs & EVPs of subprime companies & banks are charged, along with broker principals and managing directors at the investment banks. The FBI agenda is going to be changed again in November, on to the next crisis.
An Observer, Yes I checked. It would be nice to see the data normalized by cost-of-living or something useful that might make the raw data more meaningful and then to see whether national test scores & graduation results correlate.
Justaminit, though... perhaps I'm recalling from having read here?
Don't the big banks and brokers have to buy back some of those structured instruments if there was evidence of mortgage fraud in the origination process?
"It's a hogwash. Everyone takes ethics training and it's business as usual."
REBear-
Sorry, but the FBI is not in the business of giving "ethics training" classes.
When I think of the FBI, Secret Service or the IRS Criminal Investigation Division, I generally think of people that are smarter than me and a government body with a higher than normal conviction rate.
That, and a federally-mandated minimum 85% time served for any convicton, one best be prepared for the worst.
People that exhibit apathetic and contemptuous attitudes get taken to the cleaners.
As we learned from Enron and WorldCom, the trick is to catch the criminals before the money is gone.
Where's a cop when you need one?
Other than streamlining the indictment process and ramping up for litigation, this should not be much of an investigative challenge for the FBI, as there was obviously massive fraud at every level.
Can someone explain to me in a couple of hundred words what the fraud is? If I want to make a lousy loan - how is that fraud? If I have lousy credit - and someone wants to lend me money anyway - how is that fraud? If I want to sell my lousy loan to a sophisticated third party (and no one here is suggesting that the parties who bought and sold these loans weren't "sophisticated" investors - as opposed to merely stupid) - how is that fraud?
Remember all the "dot com" fraud lawsuits? Perhaps I am wrong - but the plaintiffs' lawyers don't seem to have hit any home runs there yet. Just because you have to eat a dumb investment decision doesn't mean there's fraud.
I know that some borrowers are hurting. Here is an article about low income foreclosures in Jacksonville in our local paper today:
Poor poorly served in home loss | Jacksonville.com
Unfortunate - yes. But fraudulent?
FWIW - I really enjoyed the post about convexity. As for books that deal with this - an earlier poster who mentioned Fabozzi is right. I own several editions of the Handbook of Fixed Income Securities. It's the bible. But basically very much over the head of people of most people who don't know a lot about fixed income securities.
I think one very easy way to think about convexity in terms of mortgage backed securities - without talking about convexity - is thinking about what kinds of bonds you want to own in different interest rate environments (in terms of duration characteristics - not credit quality). If you think rates are going to go down - then you want very long term bonds with the most call protection you can find. The best example of this long term non-callable zero coupon bonds. If you think rates are going to go up - you want short term bonds/notes. Think 3 month tbill. Mortgage backed securities don't fit the bill in either of these scenarios. Which makes them suitable - if the yield is sufficiently attractive - and the quality is very high - only in stable or range bound interest rate environments.
FWIW - I think the MBS market is way over the head of even the above average retail investor (apparently it is above the head of the average institutional investor too - which is why we have the current mess we're in). The only part of it I deal with is callable CDs which are designed to act like mortgage backed securities. There is interest rate risk - but no credit quality risk. I have noted some new players in this market in recent months - like WAMU and Wachovia. These CDs have consistently yielded 100-150 bp over treasuries in the last 6-7 years. A decent investment for an average conservative retail investor. Roby
First Bank To Settle I.P.O. Suit - NY Times
There have been billions collected in ipo/laddering and Enron/Worldcom civil suits.
Robyn- I don't know about the investigation, but I have personal experience of people lying (or attempting to lie) on their mortgage apps, mortgage brokers/real estate agents falsifying numbers, and a lender asking not to see tax returns, but some other proof of an ongoing business, so they wouldn't have to verify income. I'm guessing it didn't stop there. That lender most likely made inaccurate statements about it's confidence in it's research.
Don't know if their going to hit the home run, but at least they're in the batter's box.
Citigroup has just about worked through the dot com lawsuits and has $2.8 billion to finish it up.
Looks like they will get their next batch before they can finish up the pending stuff.
from the 10q.
As of September 30, 2007, the Companys litigation
reserve for these matters, net of amounts previously paid or
not yet paid but committed to be paid in connection with the
Enron class action settlement and other settlements arising out
of these matters, was approximately $2.8 billion.
The Company believes that this reserve is adequate to
meet all of its remaining exposure for these matters.
This is the Bush FBI we are talking about, and if you expect it to prosecute the big banks or any other powers-that-be, you haven't been paying attention to what has happened to our legal system in the past seven years.
You are deluded by your apparent hatred of a lame duck administration. The FBI and other Federal Law enforcement rank and file are career appointees, not political. Some of the younger ones will still be in DC long after the Bush administration will be as relevant then as the Carter years are now.
By the time indictments (if any) are handed down, we'll be well into the Obama|McCain|Edwards administration.
This case will be the stuff careers are made of, you see
The FBI, CIA, NSA, and every other law enforcement agency of the federal gov't is now run by grads of Pat Robertson's law school.
Well, even if I accept that dubious assertion, wouldn't overly sanctimonious religous fanatics be just the type to overprosecute?? What is your point, other than you think that DC has been taken over by the God squad?
Is haloscan working. It seems at best to be sluggish.
The bankers are like the witch in Snow White. The witch conned Snow White into eating the pretty red poisoned part of the apple by eating the green part. The banks bought some of the subprimes themselves just like the witch ate some of the apple and now they try and use that to whitewash themselves.
I have little hope that anything real will come out of this witchhunt as deserved as it may be, but I hope the FBI includes the lawfirms who created the system and created the securities in their investigation. Unlike the bankers lawyers have a duty to our nation and our Constitution. Some of them actually felt the stuff they were creating was crap and were amazed anyone would buy it, yet they created it none the less.
IMO, the mortgage racket should qualify, and be tried, under the RICO laws.
The organized crime that is clearly evident far surpasses any thing the cosa nostra ever dreamed up.
That's interesting, but the FBI often starts investigating things, only to have field office top operatives transfered to BF Egypt, the office reorganized, and the investigation moth balled....
Actually it is Missoula Montana.
Nova | 01.29.08 - 6:10 pm | #
They should be so lucky... fish all summer, ski all winter and investigate out breaks of cow tipping.
Hi Quincy ,
Sorry, but the FBI is not in the business of giving "ethics training" classes.
I meant to say ethics training will be part of the court settlement.
barely writes:
An Observer, Yes I checked. It would be nice to see the data normalized by cost-of-living or something useful that might make the raw data more meaningful and then to see whether national test scores & graduation results correlate.
barely | 01.29.08 - 7:41 pm | #
Barely,
Interesting... I will admit I never considered the aspect of normalization for cost of living. Honestly, when I first read your response, I thought "what the heck does cost of living have to do with anything?" After a moment, a light came on. Facilities, labor, etc., will cost much more in Kalifornia than Podunk. Therefore, the comparison is marginally useful without adjustment. Nuts, I guess I should have to pay more in CA...
how is that fraud?
It will come down to was there collusion to manipulate data & misrepresent facts regarding the whole transaction trail. Not whether one or a bunch of loans were wise to make.
For example if the appraisers & loan originators colluded & artificially manipulated applicants data to make risky loans apps look less risky... with or without the applicants actually being accomplices... then you have fraud and possibly conspiracy right there.
Likewise if the securitizers & rating agencies collaborated to manipulate loan pool data to make the resultant MBS offerings rate higher... then you have fraud and possible conspiracy right there.
The key test will be were these transactions arms length & independent... or is there solid evidence or a paper (email) trail of actual collusion or clearly expressed quid pro quo... if the prosecutors don't have that evidence then they won't get to first base.
Even the informants mentioned in the article aren't a lock - witnesses can be broken on the stand as we all know. But those informants can maybe tell the investigators where the paper trail is buried - find that then they have a shot.
How to prove fraud:
Make a list of the real estate sales contracts and the pre-appraisal contract price during the period under investigation.
For each of those contracts, list the appraisal value.
Subtract.
You will find that on almost every deal, the appraisal value exactly equals the contract price.
How does that happen, I wonder? Could the buyers and sellers be so tuned into market values that they hit the appraisal value each time? Talk about a perfect market!
I've purchased several properties over the past 10 years, and gone through several refinancings, and each time the appraisal value exactly matches the desired price.
I wonder how the EAppraiseit! WAMU mess plays into this? I know that the Pam Crowley/EAppraiseit! suit got a lot of Appraisers angry...A lot of people who played it straight and kept their heads down also kept emails for the day,and i am sure the FBI is getting the benefit now.Administrations come and go,but bureaucracies are forever,and this Administration is not in good odor with the military or law enforcement.
MR,
You and many other people have experienced the same strange coincidence. Appraisers call it number hitting.
As in "hit the number needed, the deal closes, everyone gets paid, borrower gets the house or the cash out, and appraiser gets repeat business from the oh so grateful mortgage originator(s)"
In addition, there were pressure requirements from the loan originators for appraisers to overlook such things as bad roofs, shifting foundations, peeling paint, worn out flooring, faulty electrical and plumbing systems, etc etc.
There are numerous poorly trained ranging to outright unethical "appraisers" who had a business model of hitting the number, hopefully these will get caught up in the wash along with the rest of the colluders and put away, at least lose
licenses they never should have had.
It was easy money while it lasted.
See Rachel Dollar's "Mortgage Fraud Blog" site for numerous examples.
In my opinion, appraising since 1985 and not losing any sleep at night over my being implicated in any FBI action involving a fraudulent appraisal, the appraiser is paid the least of just about anyone involved in the loan chain. Just a flat fee, but with a guarantee of repeat business, that was incentive enough
for many.
This is not to say there are not good reasons for appraised values to equal sale prices, just that the law of averages suggests "not all the time".
For your refis, I would bet the loan officer generated that "desired number"; and that your mortgage debt plus credit cards plus car loans and other bills you wanted to pay off played a part in figuring that "desired number".
Whether or not you were aware of it, and I'm not saying you were or had any reason yourself to pick a number that worked just dandy.
Multiply this same action by millions of the greedy and you get a fair share of the mess the lending industry is now in.
The honest appraisers lost a lot of work from lenders who used the number hitters, we are not crying over any fines, penalties or jail time these co-enablers get thrown at them now.
observer, As I said, that was all in an email I received though it may not have been clear. Thanks for the info though. I am personally of the opinion that they should "teach more efficiently".
Now I look at that data and it is from 2004 and 2005 yet the PR is from 2007. I guess they don't have computers to compile this info.
Someone asks
I want to know who will play Tanta on TV.
And Tanta replies:
Lily Tomlin, or I'm not signing the contract.
Somehow, I was envisioning Shirley MacLaine.
Those of you who think these federal probes will go nowhere should remember something: the investigations will be headed by ambitious prosecutors. People like Spitzer and Giuliani. These guys and gals will be looking for trophy heads for their political rec rooms.
Lily Tomlin might work but she is picky about so many things especially shoes and costars. You know she hates Dolly Parton. Who could hate dear Dolly? Shirley MacLaine is too old and overexposed. Now, that nice John Travolta made a fine figure of a woman in Hairspray and he adores fuzzy bunny slippers.
Hairspray (2007)
The FBI and other Federal Law enforcement rank and file are career appointees, not political.
Central Scrutinizer, are you naive, or not paying attention? Aren't you aware of the administration firing federal prosecutors and replacing them with True Believers? Are you aware of how many of Pat Robertson's law school grads have been hired by the Bush Justice Dep't? Are you aware of the political-preference litmus tests applied to new hires in Justice?
IMO, the administration even got to Patrick Fitzgerald, who was, yes, a great prosecutor.
The Bush/Cheney team did not just take office in 2000. They took over, top to bottom. Especially law enforcement. They made Nixon, Agnew, and Mitchell look like pikers. It will take years to dislodge all amoral incompetents they put in place in the federal government.
Years.
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"The Bush/Cheney team did not just take office in 2000. They took over, top to bottom. Especially law enforcement. They made Nixon, Agnew, and Mitchell look like pikers. It will take years to dislodge all amoral incompetents they put in place in the federal government."
In order to replace them with the amoral incompetents sympathetic to interests of the president elect. To expect otherwise would be - yes! - naive or demonstrating lack of attention for the last few decades...
Lenders and how we get them to listen!
As many borrowers know from their own experience is that the resistance from
their lender is high and just getting through to the appropriate person is very
difficult. However, when MyRecast is
involved it seems as if the calls start to get answered and the letters are
responded to. On our MyRecast Team we have the best HUD advisors involved, state
wide attorney representation and the BEST sub-prime underwriters to QC / and
audit the original files.
We use powerful laws like the Truth in Lending Act (TILA) and the Real Estate
and Settlement Procedures Act (RESPA) to bring lenders to their knees. So,
naturally, the lenders will be very amicable to working and negotiating with
MyRecast Team for a modification of the note and work out to more
affordable terms to avoid costly
litigation. Not to mention your credit and
how this will affect your ability in the future.
Jackie