Here’s what the California State Bar’s announcement said:

The State Bar will hold its annual hearings this month for the public or lawyers to make proposals or offer comments about attorney disciplinary procedures, attorney competency and admissions procedures.  The first hearing will begin at 10 a.m. Dec. 7 in the bar’s San Francisco offices at 180 Howard St. (fourth floor). The Los Angeles hearing is scheduled for 10 a.m. Dec. 13 at 1149 South Hill St. (seventh floor).

So… I appeared before the panel of attorneys to speak about how the State Bar has been handling SB 94 and how I believe the bar should be handling things related to the foreclosure crisis and lawyers representing homeowners who are seeking loan modifications.  On the panel were attorneys Lowell Carruth, Colin Wong, Randall Difuntorum and the new OCTC, Jayne Kim.

Off the record, I was told by the others in attendance that… “I killed it.”

I began by offering some of the most current foreclosure crisis statistics for the State of California, as follows:

• 1.2  million  foreclosures  statewide  since  2008… the  number  is expected to exceed 2 million  by  the  end  of  2012.
• California is the hardest  hit  of  ALL  fifty  states, one in every five foreclosures in the US is in California.
• The 2 million  foreclosures  expected  through  2012  are  estimated  to  cost  homeowners,  property   taxes,  and  local  governments  $650  billion  statewide.
• Roughly half of  California homeowners with a mortgage owe more on their  mortgages than their  homes are worth.

Then I broke out some Los Angeles’ foreclosure statistics:

• Foreclosures hurt all homeowners:  In the aggregate, LA  homeowners  will lose at least $80  billion in home value, directly attributable to 200,000 foreclosures 2008-­‐2012.
• Foreclosures destroy the property tax base: Property tax revenue losses estimated at $481 million in the wake of foreclosure crisis.
• Foreclosures cost local  governments:  The typical foreclosure costs local governments more  than $19,229 for  increased costs of safety inspections, police and fire calls, and trash removal, and maintenance.    In Los Angeles,  theses costs are estimated to be $1.2 billion.
• Foreclosures undermine economic recovery and cost jobs: Los Angeles has 79,029  homeowners underwater by  $7.3 billion. If banks wrote down those mortgages, it could mean $780 million into local economy and spur 11,353  jobs.

I spent a little time acknowledging how we all got here, and recognized the thinking behind SB 94… that it was based on what we knew then… and made the overriding point that we owed the people of California a more thoughtful response to the crisis because we know much more today than we did then.

I also explained that the numbers of homeowners in foreclosure, combined with the well-publicized abuses committed by mortgage servicers, combine to make it very clear that we need our lawyers to get through this crisis, and without theose lawyers representing distressed homeowners we are certain to experience a much deeper and longer lasting economic downturn.  I don’t believe there should be any question about that, at this point, and those that disagree either simply lack the knowledge to understand the dynamics involved… or they’re selling something.

Consider that as of today, we have 2,000,000 homeowners in foreclosure.  Forty percent of those have not made a payment on their mortgage in over two years… 70% haven’t made a payment in over a year, making them ineligible for a loan modification if their loan is owned by Fannie or Freddie.

If each homeowner required just ten hours of assistance, that would mean 20,000,000 man hours of assistance time, and assuming 260 workdays per year, and a very efficient process, that’s roughly 12,820 years.  If we had 1,000 people trained and ready to go, we’d work through that number of homeowners in 12.8 years.  Of course, more homeowners would join the ranks during that time, and we don’t have 1,000 trained people assisting homeowners, or any sort of efficient system.

And it’s worth saying that even if we had 10,000 people trained and ready to go, without the efficient system, we’d never even be able to get through that number of homeowners in 1.2 years, and even that would mean an additional 400,000 added to the pool as the original 2,000,000 were being processed.

Now, let’s understand something else about the scale of the problem.  Over the last three years we’ve accomplished nothing, except that we’ve foreclosed on 1.2 million California homes, and allowed housing prices to go into a free fall.  What do you suppose will happen as unemployment continues to increase?  What will happen once interest rates rise?  And at the current pace of home sales, the shadow inventory, which consists of REOs not on the market, is going to be around for a long time… and we’re not just talking about the lower income areas anymore.

For example, according to DrHousingBubble.com, 142 homes in Beverly Hills have the following:

-A notice of default filed

-Scheduled for auction

-Bank owned

Interestingly enough only SIX homes show up on the MLS search when you look for active Beverly Hills foreclosures.

I also spoke to the members of the panel about the need for the State Bar to give more careful consideration to how it can better support the legitimate and ethical attorneys that could provide representation to homeowners in need of assistance, and I informed them that I am about to submit a formal proposal for how this might work to the new Bar president, Jon Streeter.

I have to say that I was encouraged that all of the panel members seemed to be very attentive as I spoke, and I plan to schedule a meeting with Jayne Kim and State Bar CEO, Howard Dunn in the next few weeks to continue discussing ways to improve the current situation.  I think it’s safe to say that it could not get any worse, so I guess I can say that I remain optimistic.

If you’re a California attorney and have any questions or comments, feel free to get in touch by emailing me at mandelman@mac.com.

Mandelman out.

This article was originally posted on September 3, 2009… seems like forever ago, doesn’t it?  I’m re-posting it now because for one thing I know relatively few read it… I didn’t have all that many readers back then.  And for another, because it’s every bit as relevant today as it was back then… I was way early on this one… and I’m about to publish another article on how Geithner’s accounting rules are driving servicer behavior.  So, read this and then stay tuned.

I’ve been working on understanding this fast moving, gelatinous 3D jigsaw puzzle we call our housing crisis for over a year now, and it’s been nothing if not frustrating.  Here are a few of the questions that, even after a year, have been sticking around in my brain…

A. Forgetting the last administration’s mysterious behavior related to the housing crisis, why didn’t the Obama Administration’s housing rescue plan offer more to stop the flood of foreclosures that’s preventing any sort of economic recovery from taking hold?

In other words, they flubbed it?  Team Obama flubbed it?

All those extra smart guys in the administration and no one thought to do the grocery store math that was involved in figuring out what would and wouldn’t work.  Come on… why did they flub it?  They didn’t have to flub it… it was almost too easy to do right.  It had been flubbed recently.  They couldn’t have learned from past mistakes?  They certainly looked smart enough to handle something as simple as housing.  Health care?  Maybe not.  But housing?  Come on… I could fix housing and I’m not 22 Harvard grads, or how ever many of those people they have running around the White House these days.

So, alright they flubbed it.  Okay then.

B. Why aren’t the banks and servicers modifying more mortgages?  I’ve read so many opinions on this haziness that I can’t see straight at times.  Is it the investors’ unwillingness to maximize profits?  Servicing agreements that call for a banking executive human sacrifice in order to modify a mortgage?  How about their exceptionally short-sighted but greedy nature?

Oh, wait… maybe it’s their obvious inability to hire people, implement systems, answer a large number of phone calls, or stop their personnel from repeatedly losing file folders.

That last one has become my personal favorite, by the way.  Apparently, I’m being asked to believe that Bank of America, Chase, and Wells are continuing to have a dickens of a time doing things like hiring financial types, creating efficient processing systems, stopping paperwork from getting lost over and over again, and anything over a couple of thousand calls each day… basically their organizations shut down.

It’s like I went to bed, and when I woke up I was in a world where insurance companies couldn’t seem to stop overpaying claims, the DMV had a drive up window, and Bank of America can’t answer the phone, or hold onto a folder for over an hour.

“Where did I put that folder?  Oh no… Darn it.  I lost another one.  That’s 22 so far this week. I’m so silly.   Where do I keep putting them?  I swear, I’d lose my head if it wasn’t screwed on tight.”

C. Why are the banks more profitable all of a sudden?  Maybe I don’t understand how banks make money, or perhaps it’s that I don’t have a solid understanding of what the phrase “more profitable” means.  But see… the thing is… I aced the Money & Banking economics final exam back in grad school, and I just can’t help thinking… something very wrong here.

I just read that banks are more profitable, and they’re so profitable that they’re literally racing to shovel money back into the Treasury and we the taxpayers are making billions in unexpected profits.  Unexpected profits… everyone’s favorite kind of profits.  I still remember once when I found $20 in a pair of jeans I hardly ever wore, and it was a kick.

So, even Geithner himself didn’t expect these profits.  Like when he saw them come in he went: “Whoa now, what have we here?  Where the heck did this $10 billion come from?  Get Bernanke on the phone, he’s not going to believe this.  Woohoo!”

Unexpected profits, huh?  Down right super spooky.

Ten months ago, Obama looked like he was going to throw up in his mouth a little as he pronounced the economy near dead and then tried to convince us that we were basically months away from a soup line, and should be grateful for that.

Okay, so it’s The Great Depression Part 2… but it’s the kind of Great Depression that gets tons better in ten months?

As far as I’m concerned, if it was going to improve in ten months, I wish they hadn’t of even mentioned it to begin with… could have kept it to themselves.  I would have gladly focused on a little gay marriage over a bed of immigration and stem cell research nestled in Afghanistan with a side of nuclear Iran.  Yep, that would have filled me up for sure.

But still… you can’t help thinking about stuff like the banks not lending, employers not hiring, people not spending and foreclosures never ending… asset prices dropping, with no sign of stopping… but things are getting better… for the bank but not the debtor… and I can’t stop myself from rhyming, it seems I’m stuck in 4/4 timing… help… me… whew.  That was close.  Once I got stuck in a rhyming frenzy and had to be sedated.

You get my point though, right?  Why are the banks more profitable?  Are they holding car washes and bake sales on weekends?  Renting out conference rooms to MonaVie and Pre-Paid Legal meetings in the evenings?  I thought banks made money by lending it out.  I was sure it had something to do with lending it out.  But they’re not lending it out.  And they’re getting more profitable.  So, well… okay then.

And people aren’t spending, as they watch their home’s value sink past 1986 levels.  Some neighborhoods look like a Hollywood set in a movie about the end of time.  Empty streets… looks like whoever lived there left in a hurry.  It’s the kind of scene you might expect Rod Serling to walk into:

“Witness, Mr. Henry Beemis.  A small man with small ideas.  A man who’s job it was to remove people from their homes.  But as we’ll soon see, some homes don’t like it when their people are removed.  The kind of homes you’ll get to know as you move ever closer to… The Twilight Zone.”  (I wish I could insert the music.)

Employers aren’t hiring either.  The unemployment rate… the real one… is over 16% nationally, and even the administration is admitting that 10% plus is around the corner.  Half the homes in the country will soon be underwater.  There’s not even anything ahead that looks like it might make the banks more profitable.  They’ve got to downsize, assuming they survive at all.  For example, I’m pretty sure that Chase isn’t going to be fully utilizing WAMU’s 2,200 retail branches going forward.  Just a guess.

So, what’s the deal?  I’m about to tell you.  And you will not like it.  Not one bit.  It’s positively scandalous, besides being just plain awful.  Here’s what’s going on… the banks aren’t being irrational in their behavior, they’re acting that way on purpose.  Because it’s in their best interests.  Ready?  Okay… here we go:

JPMorgan Chase bought Washington Mutual in a fire sale.  They paid $1.9 billion for the whole kit and caboodle.  Such a deal.   $90 BILLION in mortgages on the balance sheet for $1.9 billion.  How about the $60 billion in servicing assets, the real estate, the $300 billion plus in retail deposits and a loss sharing agreement with the FDIC.  Everything a girl could hope for… wrapped up with a bow.

They paid $1.9 billion and got, in addition to everything else, $90 billion in mortgages.  Worth saying again.  Basically, they bought them for cents on the dollar.  But approve a principal reduction?  Unthinkable.  The guy owns a house and owes $300,000 but can’t make his payments and you only paid $3,000 for it… you cut the price and start collecting payments on the now performing loan.  But, not our banks.  They seem to prefer foreclosing, paying the extra costs, and trying to sell REOs, which makes no sense.

Why would a bank chose to foreclose and evict when there’s already someone living in the house who would love to buy it?  By modifying the loan, the bank won’t have to pay all the associated costs of foreclosure, and then put the property on the market where it might not sell for some time.  Selling an REO?  Lucky to get 50% in some areas.  Why not just write down the loan for the homeowner and save all the trouble?  Again, it makes no sense.

Until I went back and thought about the partial suspension of the accounting regulations imposed under FAS 157 & 159, which applies only to banks and only as of last April or May, I believe.  That’s when I started feeling queasy.

Under the partial suspension of the FSAB accounting rules, the banks don’t have to write down Level 3 assets to market value, if they state that the bank has no plans to sell the assets for an extended period.  In other words, if the bank says that it’s not going to sell a given house anytime soon, they can keep it on its books at its full fictional value.

So… a couple have a home on which they owe $300,000.  It now appraises at $150,000, but will sell as an REO for $130,000 tops.  The bank backs off the appraisal and says it’s worth $110,000.  Then they pay everything from property taxes to property preservation.  They take the home back as a foreclosure instead of modifying, which is a bummer for some family, but they get to leave it on their books for $300,000… until later… and by later I mean after the mid-term elections.

They don’t have to write it down because they say they’re not planning on selling it anytime soon.  The nice couple lost their house.  But the bank just totally cleaned up.  And with the FDIC loan freebies, they can sit there for years before they even consider trying to sell that house.  When they do sell it… who knows, maybe the market will be better?  Or maybe that particular banker will be retired by then.

So… Sec. Geithner is allowing the banks to recapitalize on the backs of homeowners losing their homes to foreclosure.

What’s next Tim?  Child labor tax credits?  That should boost productivity… let’s put 3^rd graders back on the assembly line where they belong?

I’ll say one thing for Secretary Geithner: He’s great at distraction.  He goes, “Lookie over here.”  Then he points his finger towards China… and a pigeon flies out of his ass.  You really have to watch this guy.  David Copperfield has nothing on this guy.

He’s full of beans, though.  He’s lying through his teeth every time he opens his mouth.  At the end of the day, he doesn’t really care if another million or two get put out of their homes, as long as he can get the banks recapitalized without having to go back to Congress before the mid-term elections.

New investors in IndyMac paid $13 billion and got $500 million per year in servicing assets, and 33 branches, $6 billion in retail deposits, an origination platform, a loss sharing agreement with the FDIC, and $40 billion in loans on the balance sheet, which is close to 200,000 loans.

But reduce principal?  Don’t be silly.  It just wouldn’t be prudent.  Not at this juncture.

Now, just so I’m clear about this… this means Obama knows this is happening.  I personally think that’s why Obama never talks about his team flubbing the housing thing.  I don’t think he can keep his food down when he thinks about it.  I mean, a mother’s son killed himself last week over being unable to obtain a loan modification from GMAC.  But I guess on the bright side, the new Ally Bank is giving away tee-shirts at its grand opening.

Oh what a tangled web we weave when first we practice to deceive.

Tim… you are a dickish man.  You really don’t see anything wrong with how this whole mortgage meltdown is being mangled, do you?  You’re really okay with it.  I bet there are people in this country that used to want to beat you up all the time.  Was 5^th grade hard for you, Tim?

Well, I’m here to tell you Mr. Secretary… you’re making a big and bad mistake.  You are underestimating the American people in a big way.  You think you’ll get things cooking again, at least on paper, and slide right through the midterms, and by then no one will care what you did.  But it’s not going to work like that, Timothy.

People are going to start figuring out that it wasn’t the borrowers who broke the world, Tim-O.  Poor people who bought houses they couldn’t pay for did not take out Wall St. inside of a week.  I know…it’s a fabulous story, but you had to know it wouldn’t hold indefinitely.  And when people figure it out… boy oh boy are they going to be… let’s see… how would your Ivy League buddies say it… oh yeah… they’re going to be miffed.

We’ve already seen how well you’ve handled the banks.  You said they were too big to fail, and since then you’ve allowed them to only get bigger.  Bam… did you see that pigeon?  Shot out of his ass like Apollo 13.

I’m going to have to start watching this guy a lot more closely.

Mandelman out.

NOTE: Okay, accounting gurus… I’m right, right?  That is what it says in the revised FASB regs, right?  Geithner’s just using another tool to extend and pretend and bring in insolvent banks for controlled crash landings, right?

Remember Arizona’s SB 1259?  It seems like only yesterday that we were watching it disappear on its way to Arizona’s House of Representatives after passing the senate by 28-2.

Come on, you remember… it’s the one that homeowner advocate Darrell Blomberg then tried to replace by drafting an amendment that Rep. Carl Seel was committed to proposing until a couple of days before the big day when he became a man of principle… and what I mean by that is that Ocwen granted him a principle reduction of… oh, I don’t know $100,000 give or take would put us in the neighborhood.

Okay, so that’s old news in Arizona by now, but I’m sure the lingering question was how did all of this flagrantly corrupt crap, in my opinion, happen in the first place.

Well, we know the driving force behind the terrorist attack on SB 1259 was Rep. Nancy McClain, in conjunction with Sen. Michelle Reagan, of course, without whom it would not have been possible.  But, was it Nancy’s idea, as she claimed, or was there someone else in the background pushing Nancy’s buttons?

Care to venture a guess?

One more thing, by way of background… When Rep. Seel, Rep. McClain and Sen. Reagan were all asked by various parties why they were killing bills that already passed the senate 28-2 in the middle of night or over the weekend, or failing to show up to propose other like amendments as you agreed… EVERYONE said the same thing…

It would have failed in the House of Representatives any way… no way it would have passed… a complete waste of time… why even bring it up?  The universal consensus was that SB 1259, or the Blomberg Amendment that never was, named for its author, would unquestionably be stillborn in the House, that much was certain.

Okay… did you guess?  The answer is: YES.  As it turns out, there was a button pusher pushing Nancy’s buttons after all.

CUT TO: A Meeting of the Arizona Mortgage Bankers Association (“AMLA”), this past Tuesday evening, and one Mr. Don Hagen, Vice President of Advocacy for the organization is speaking to attendees.

As I understand it from an unnamed source that was present at the meeting, he goes on to explain with some pride in his voice that he, along with AMLA’s legislative committee were successful in killing SB 1259 and the amendment.  Thanks to him, you guys in Arizona sure dodged a bullet there I’d have to say.

According to my source, who I would say is extremely reliable, Hagan said something very close to:

“We knew we had to react… it was a very bad bill with unintended consequences.”

(Note to Don: Actually, I think many people were looking at those as “INTENDED CONSEQUENCES.  And when you say “very bad,” would that be for you and your banker pals, Don?  Because it sure would have saved, I’d have to think, tens of thousands of Arizona’s homeowners at risk of foreclosure.)

Okay, so go on… how’d you di it.

Hagen went on to explain that he had lobbied “the individual that issued the strike everything amendment, which I would say would have to be Rep Nancy McClain, but I suppose it could also have something to do with Sen. Reagan.  And he told her such things as… and I’m paraphrasing here:

If you pass this bill you’ll have someone coming back three years later and making a claim that they didn’t have a right to foreclose and throw a poor homeowner out of their home.

Wow, now I don’t have to go to Burger King for a year, because that is one heck of a whopper.  I mean, a lie… one heck of a lie.

So, how about some truth… he’s almost right, except that it would have done nothing of the kind.

Arizona law clearly provides that any action to challenge a trustee’s sale may not be taken after the fact. Notably, A.R.S. § 33- 811 provides in pertinent part:

(B) . . .The trustee’s deed shall raise the presumption of compliance with the requirements of the deed of trust and this chapter relating to the exercise of power of sale and the sale of the trust property, including recording, mailing, publishing and posting of notice of sale and the conduct of the sale. A trustee’s deed shall constitute conclusive evidence of the meeting of those requirements in favor of purchasers or encumbrances for value and without actual notice. Knowledge of the trustee shall not be imputed to the beneficiary.

(C) The trustor, its successors or assigns, and all persons to whom the trustee mails a notice of sale under a trust deed pursuant to section 33-809 shall waive all defenses and objections to the sale not raised in an action that results in the issuance of a court order granting relief pursuant to rule 65, Arizona Rules of Civil Procedure, entered before 5:00 p.m. mountain standard time on the last business day before the scheduled date of the sale. A copy of the order, the application for the order and the complaint shall be delivered to the trustee within twenty-four hours after entering the order.

Trustor must first obtain an injunction under Rule 65 before the trustee’s sale occurs.  Moreover, A.R.S. § 33-811 clearly provides that the trustee’s deed “shall” provide conclusive proof of the notice requirements. Simply stated, Harter has missed any opportunity to object to the sale or any purported deficiency in its mechanics such as the prior Notice of substitution of Trustee (See also, Hills vs. OCWEN Federal Bank, 299 B.R. 581 (2002), Security Savings & Loan Association vs. Milton, 171 Ariz. 75, 76, 828 P.2d 1216, 1217 (1991); considering identical language to that contained in the current version of A.R.S. § 33- 811; Triano vs. First American Title Company, 131 Ariz. 381,643, P.2d 26 (1982)).

My expert in Arizona explained it this way:

“As is abundantly clear, Arizona law does not allow a trustor to challenge the notice of a non-judicial trustee sale after the fact. Moreover, upon issuance of the trustee’s deed, a clear presumption and waiver of defenses related to notice and other deficiencies is provided.”

What does it mean?  Well… to me it means that Don Hagan of the AMLA is a traitor to the people of Arizona.  Because he and his pals went after and killed the only legislation proposed this year with the potential to save thousands of Arizona’s homeowners from foreclosure.  And they did it because they were told it was good for them… and to hell with everyone else.

Were it now 150 years ago, I might suggest he be run out of the state on a rail.  But since it’s 2011, I can only suggest that you guys run him out of state on a rail.

So, he took his fabrication to Ms. Nancy McClain and must have scared her half to death because she made the damn bill vanish into thin area over a weekend.  And that’s strange because she was one of those that said the reason she was killing it was that it wasn’t going to pass anyway… no chance, no how, no way.

Nancy is running for reelection, in case you’re interested, and here’s what it says right on the Home Page of her website, third paragraph, about what she’ll do if re-elected to serve a 5^th term, I believe:

“My particular focus will be on revitalizing Arizona’s economic climate.”

(NOTE TO READERS: I just want to be very clear about something right here and now.  I do NOT need charity like that line being the first one of paragraph three on her website.  Didn’t ask for it.  Don’t need it.  If it wasn’t there for real, I still could have been funny somehow without it.  Geeze… she does my job for me… hardly makes it any fun when she does that.)

Okay, so that’s about all for now.  One more Arizona mystery solved.  I think I’ll start referring to this affair as, “The Case of the Disappearing Bill.” And the one about Ocwen’s principle reduction… well, why don’t we call that one, “The Case of the Corporate Seel.”

(I crack myself up sometimes.)

I figured that you might appreciate it if I left you will a little reading material… you know… until my next column, which I noticed a whole bunch of you in Arizona are reading everyday now… and I do appreciate it.

See below… it’s titled “2011 Legislative and Regulatory Priorities,” and it’s published by your friends at the AMLA.  Or, if you prefer:

“From the nice folks who brought you the foreclosure crisis.”

Mandelman out.

2011 Legislative and Regulatory Priorities

California Senate Bill 729 failed to pass in the Senate Banking Committee for the second time in the last two weeks.  In a related story, it seems that the rights of chickens have suffered yet another blow, with the Chicken Rights Bill failing garner the votes it needed to pass in the Colonel Sanders’s Committee, as well.

Well, now that certainly is some “breaking news” right there, wouldn’t you say?

Senate Bill 729 was just one more feeble attempt to bring reason to the foreclosure process, but it’s now quite clear that the mortgage bankers industry is just flat out too stupid to support anything that might change their little world today, even if it might just save their lives tomorrow.  Yes, you read me correctly… I said stupid… as in, stupid is as stupid does.

Here’s what SB 729 would have accomplished:

1. This bill would prohibit a mortgagee, trustee, beneficiary, or authorized agent from recording a notice of default unless that party makes reasonable and good faith efforts to evaluate the borrower for all available loss mitigation options to avoid foreclosure.

I was under the impression that servicers were supposed to be doing that already.  The federal government thought so too, I’m pretty sure..

2. The bill would prohibit a mortgagee, trustee, beneficiary, or authorized agent from recording a notice of default on residential mortgages and deeds of trust, as defined, until various notice requirements and other requirements regarding loan modifications are fulfilled.

The bill would include among these requirements informing the borrower of the deadline for applying for a loan modification, which would be prohibited from being earlier than a specified date.

Oh gee… now there’s a classic deal killer.  Some people might call that fairness, or even common decency.

3. The bill would prohibit a mortgagee, trustee, or beneficiary from recording a notice of default on a residential mortgage or deed of trust if a borrower who is eligible for a loan modification submits an application, as specified, unless the mortgagee, trustee, or beneficiary has, in good faith, reviewed the application, rendered a decision on the application, and sent the borrower a denial explanation letter.

Again, the goal is to modify loans, banker-people… are you with me on this?

4. The bill would provide a process for reviewing a mortgage loan modification application, which would depend, in part, on whether the mortgage servicer, as defined, is participating in the federal Making Home Affordable Modification Program.

Oh, good Lord no… not a “process.”  I’m not entirely sure the rest of the world would recognize mortgage servicers were they to start using even one single process.

5. The bill would require that a borrower who requests a loan modification and is denied receive a denial explanation letter stating the reason or reasons for the denial, as specified.

Don’t tell me you can’t handle this one, banker-people, because you send out denial letters better that any industry in history.  They’re often incorrect and guaranteed to be rude, but you send them out just fine.

6. The bill would require a mortgage servicer to whom the provisions described above apply, to perform specified actions as part of foreclosing on a residential mortgage or deed of trust, including compiling a record documenting compliance with those provisions, which would be signed, certified, and transmitted to the foreclosure trustee or authorized agent.

The bill would require the declaration of compliance to be included or attached to every notice of default recorded, as specified, and a notice of default recorded without the compliance declaration would be void.

This is another one that I just can’t imagine banker-people getting too hinkey about, because for one, “compiling a record documenting compliance,” isn’t exactly moving Mt. Everest.  And for another, in light of the problems in this area, such as selling homes while homeowners are under consideration for a loan modification, which is bordering on being considered a common practice, as opposed to an exception to the rule, I would think this would be seen as a reasonable request going forward as it would also protect the servicer in the event of legal action brought under the new law.

Is it headache sort of thing… okay, yes… perhaps it is.  But viewed in light of the larger picture problems, and recognizing that maintaining the status quo is not an option, I think servicers would be better severed to acknowledge and accept such “record keeping” changes as being a win.

7. The bill would prescribe a form for the declaration and would require that the declaration substantially comply with it.

The only thing I have to say about any objection to that is: YAWN.

8. The bill would permit an eligible borrower to enjoin a trustee sale if provisions of the bill are not satisfied, and would authorize a borrower to recover damages, attorneys fees, and costs, as specified, if the property is sold without compliance with the bills requirements.

Well, well, well… now let’s be honest about this one… this one’s the problem for you banker-people, isn’t that right?  You don’t so much care about the rest of the bill’s provisions were this one not included, right?  Yeah, I’m right.

You see, this provision is what’s know as “a private right of action with a provision for attorneys fees,” and it means that if a homeowner were damaged by a servicer’s failing to comply with the law as stated above, the homeowner would have the right to sue the servicer to recover the damages involved.  And not only that, but the lawyer hired by the homeowner would be able to send his or her bill for legal services to the servicer, assuming a victory in court, of course.

And that means that if a homeowner had a really good case, there would be many attorneys willing to take the case without charging the homeowner an arm or a leg… and maybe even not charge the homeowner at all.

I just learned about this private right of action issue this past year, and frankly I was shocked at what I learned.  It seems that there are instances where our legislators pass laws that sound like they have been passed for our protection, but because no private right of action is included, even if we are damaged when the law is broken, we can’t do anything about it.  Nice… isn’t it?

The HAMP rules are example of this… if servicers fail to follow them, and we lose homes as a result… tough luck pal… HAMP does not offer a private right of action.  And in California, Civil Code 2923.6, which basically says that a bank must modify a loan if it would be financially advantageous when compared with foreclosure.  A lovely sentiment, but no private right of action, so good luck showing up in court claiming it was violated.

In my opinion, failing to include a private right of action and provision for attorneys fees in a bill that impacts homeowners is irresponsible at the very least.  By including such provisions, you allow those who believe they have been damaged to have access to the judicial system, and the ability for an attorney to recoup his or her legal fees from the defendant means that high quality cases will find representation… as they should.

This past year, in the State of New York, a bill was introduced basically saying that whenever a mortgage on residential property allows the bank to recover attorney’s fees in a foreclosure proceeding, the mortgage must also allow the borrower the same right when the foreclosure is unsuccessful.  (I wrote about the bill at the time in my article titled: BANKERS: Count on them to be petty and offensive every single time.)

The reason I chose that headline, as opposed to one more neutral, was that the banking lobby was vigorously opposing the bill’s passage… and even once it passed, the financial industry’s lobbyists were reportedly still trying to convince the governor not to sign it.  Their points included the same sort or arguments the California Association of Mortgage Bankers made to kill this bill, SB 729, things like “a blizzard of litigation,” that its passage would be certain to unleash.

CMBA Member Alert – SB 729 Fails Passage in Committee Vote

SB 729 (Leno & Steinberg) failed passage in the Senate Banking & Financial Institutions Committee hearing today.  The bill also failed passage in the committee last week, but was granted reconsideration.  Among many problematic provisions, the bill would create a number of procedural traps in servicing/modification efforts, and would create a new private right of action (which would result in a blizzard of new lawsuits) that would extend for a year after the foreclosure sale.  A nearly identical bill was defeated last year.

CMBA has led the opposition to this problematic bill and will continue to closely monitor the situation.

Now, let’s face facts here… the bill in New York advocated what should be thought of as fundamental fairness.  To oppose what the New York bill was proposing, to my way of thinking, is like coming out against handicapped parking spaces, or brail on elevators.

After months of political wrangling, the governor did finally sign the bill, as reported by Peter R. Scribner, writing in Mortgages and Mortgage Foreclosures. And I’m still waiting patiently for the “litigation blizzard” to begin as a result.

New York Governor Patterson signed a new law on October 20, the “Access to Justice in Lending Act” (Chapter 550 of the Laws of 2010), which allows defendants who are successful in defending against foreclosures to have the bank pay their attorney fees. Bill A01239 (also known as S2614b), passed the New York State Assembly and Senate in June.

The bill states that if a mortgage document contains a provision that the lender may recover attorney fees and expenses in a foreclosure, then there shall be an “implied covenant” that the borrower may also recover attorney fees and expenses “in the successful defense of any action or proceeding” commenced by the lender against the borrower arising out of the mortgage contract.

Attempting to prevent homeowners in this country from being able to fight for their rights and their homes is like trying to stop the tide from coming in, or if you’d prefer, the dyke from bursting by telling the little boy to hold his finger in the first hole that appears.  It’ll never work, and all the mortgage bankers are doing is pulling the pendulum way far over to their side… watch out when they’re forced to let go and swings in the other direction.

The mortgage bankers would be well-served to read Hawaii’s new foreclosure law, signed by the governor today as a matter of fact, and they’ll see what legislation of the future looks like if they continue on their current path.

9. The bill would permit the Attorney General to enforce these provisions.

The mortgage bankers couldn’t be worried about this, California’s AG doesn’t prosecute banks for anything, ever… right?  I mean she did fine Mozilo something like $1.95, but so what?

10. The bill would also establish other penalties for certain acts, including for a false declaration of a lost note representing a mortgage or deed of trust.

I know, banker-people… you don’t like this one either, but look… you couldn’t have possibly believed that you’d be able to just continue lying to the courts forever.  You got away with it a few million times, and I think that should be enough.

11. The bill would provide that any person licensed by the State of California who violates the bills provisions is deemed to have violated the licensing law applicable to that person. Because the violation of certain licensing laws, including those regulating mortgage services, are punishable as crimes, this bill would impose a state-mandated local program.

I don’t even know what this one means, but it can’t be a reason to freak out and throw all your weight at killing a bill in committee.  I mean, modify a bill that affects foreclosures… okay.  But kill the thing completely?  Really?  Like this state doesn’t need anything to change as far as the foreclosure crisis is concerned?  Is that really your position?  Because that’s just insane.

Keep it up, banker-people… keep it up.

I’ve warned you guys for some time now that you may think you’re in the lead on this sort of thing, but have you noticed how over this past year, things are starting to crack… courts are going with homeowners more and more… and now both Hawaii and Arkansas have laws that are going to make foreclosing a real bear?

Do yourselves a favor and take my advice for once… start looking at the situation more objectively… you’re not really winning anything here.  Homes are all going back as REOs, they’re not selling.  Home prices are continuing to fall, and the federal government can’t just continue funneling you cash indefinitely.  And you’re becoming less popular than in this country than North Korea.

Save yourselves while you still can and get reasonable… become part of the solution instead of being 100% of the problem.  If you don’t… pretty soon, the people will start solving things without your input and you won’t like that one bit.

Remember Hawaii!

Mandelman out.

Sb 729 Senate Bill – Introduced

I didn’t realize it until now, but when I think about the State of Arkansas, only two things come immediately come to mind: Wal-Mart and William Jefferson Clinton.  That’s it.  Name a city in Arkansas?  Little Rock.  Name two cities in Arkansas?  Umm… errr… well… give me a minute… how about: Clinton?  Is there a Clinton, Arkansas?

Oh wait… isn’t there a Hot Springs, Arkansas?  I’ve heard of that, but I’m pretty sure that’s only because my mind connects a place called Hot Springs with naked people.  I have no idea whether there are naked people in the Hot Springs… it’s just that basically my brain is still at times the brain of a 15 year-old boy… so, sue me.

So, this whole thinking about Arkansas thing came up because Arkansas was the first state to pass legislation requiring banks to follow what are existing laws covering the transfer of real property prior to foreclosing on someone’s home.  (Yesterday, Hawaii became the second state to pass such legislation.)

Democratic Rep. Tiffany Rogers sponsored the bill, which was signed into law by Gov. Mike Beebe on March 31, 2011.

The new law, ACT 882, requires mortgage servicers to provide homeowners with copies of the note, mortgage and any assignments, along with the physical location of the note and payment history, BEFORE initiating foreclosure proceedings on their home.

But wait… that’s not all…

The new Arkansas law also extends the minimum number of days before a home is sold that the homeowner must be notified… it takes it up from five to 10, and I’m sorry… maybe it’s just late, but I find that hysterical.  It was five days before?

See… I just can’t help but wonder if the banking lobby fought that change tooth and nail as they do all others…

“Oh, no… now you’re going too far.  The banking industry cannot be expected to survive under such burdensome restrictions on free trade.  Being forced to notify the borrower more than five days ahead of selling his or her home just isn’t always possible.  If such a demand is placed on the lending industry, the impact will be to slow economic growth, reduce available lending capacity, and place upward pressure on interest rates paid by all… um…  Arkansasians, which will reduce homeownership throughout the state thus depriving credit worthy borrowers of the American Dream… and you know what comes next don’t you… that’s right… Communism and Fascism.

Oh my God, if that ever starts to happen again, would someone please grab a hammer and smash my fingers as they’re typing… I think I started to channel Sen. Shelby there at the end and now I’m inexplicably fighting the urge to picket in front of a Planned Parenthood facility, defund the NEA and NPR, and then have a sarsaparilla while I exchange naughty emails with a good looking young page just shy of his 18^th year.

Good Lord, did I just say that out loud?  I apologize… I don’t know what got into me.  That’s powerful stuff… you go down that path, even for a moment or two, and next thing you know you find yourself wondering about Obama’s birth certificate and blaming the Jews for most of what’s wrong with this world.

Relax, Martin… just breath, breath, slowly… See, what we need to do is build a fence across Texas, and then get us some buses… STOP IT, STOP IT, for the love of God and all that is Holy… STOP IT!

Okay, so the new Arkansas law also requires servicers to provide information about available assistance programs and encourage loss mitigation and loan modification before foreclosing… which should work out fine because if, as a group, these servicers are anything, Lord they are an encouraging bunch.

It also says that servicers have to… oh, who cares?  The point is that the new law requires mortgage servicers to provide homeowners with copies of the note, mortgage and any assignments, along with the physical location of the note and payment history, BEFORE initiating foreclosure proceedings on their home.

Isn’t that the 800 lb. gorilla in the room that we’re talking about here?  I mean, can they provide any of those things?  It certainly doesn’t seem so, unless LPS or DOCX or some foreclosure mill law firm is going to “create” them, or perhaps they’ve just taken their robo-signing divisions off shore.

I really don’t know what the banksters are planning next, but I’ve learned to expect just about anything, so am I’m staying tuned?  You’re darned tootin’.

I do know this, however…

If a group of human beings are faced with a problem situation… any type of problem situation… and they get together to brain storm the possible solutions… and at the end of the day they come up with something that sounds like this…

“I know what we can do… let’s have some guy sit in an office and sign 10,000 affidavits a month that he’s never read so we can try to pass them off with the judge…”

… then there weren’t all that many other ideas on their list of possibilities, if you get what I’m saying here.  I mean, you wouldn’t try to tell me that a group of adults CHOSE that idea off of a list, would you?  Because if that’s the case, then the other ideas on the list would have to be so far outside my powers of imagination, that if I had to guess and my life were on the line, I don’t think I could save it.

Do you remember the old television game show, The $10,000 Pyramid?  Contestants would have to chose a listing of things and then try to guess what would be on the list?  So, what if the question was: “List of Ideas for Solving a Problem on Which is Found Robo-Signing 10,000 Affidavits a Month to Take Into Court.”

Go ahead, try… what else do you see as being on that list?

Here, I’ve got one that might be there: KILL YOURSELF.  (Ding, ding, ding, ding.)

So, now because there are state laws popping like popcorn that all seem to be saying that you actually do need to prove you own something before you can throw someone out of it, and with only the promise of more to come, God willing, now the banks are going to magically find the documents they need to prove the loans were actually assigned to the trusts that are now trying to foreclose?

Last time they went with committing forgery and a fraud on the court, but that was just to avoid what?  Looking harder?  Sending someone to a warehouse across town?  The whole robo-signing strategy was only used because it was slightly more convenient than actually showing up with the real documents?  Seriously?

They robo-signed hundreds of thousands of affidavits to avoid something on a scale of rush hour traffic?  All of them?  At the same time?  Alrighty then, if you’re okay with it, then I’m okay with it.

And, all I can think to say to that is… thank heaven the recession has ended.

Mandelman out.

P.S. One thing I wasn’t able to figure out.  I read through the draft of the bill and I couldn’t find any mention of a “private right of action,” or anything about “reasonable attorneys fees paid by defendant,” as was the case with Arizona’s disappearing SB 1259.  So, that could mean that even if servicers break law, nothing can be done… which would sure dilute the whole thing.  If anyone can figure out whether the Arkansas law does or doesn’t provide for either of those things, let me know… I’d appreciate it… I’ve tried everything I know how to do to find it, but nothing comes up.

But, nonetheless… the way I look at it is that it’s a bill that imposes requirements that won’t be easy for servicers to comply with, so it’s going to be interesting to see how it plays out.  And it’s another defeat for the banking lobby, and that can never be a bad thing.

I admit it… I’m no different that most everyone else… I’ve got a crush on Matt Taibbi of Rolling Stone.  In case you’re unaware, Matt writes about many of the same topics I tackle on Mandelman Matters, except he’s younger than me, gets to swear like a sailor in his articles when he wants to, shows up on Bill Maher’s show now and again, lives in or near Hoboken, New Jersey, which is right across the Hudson River from Manhattan, and in general appears to have my dream job.

His recently published book, Griftopia, was one of my favorites of the past year… after reading the first seventy pages while in bed, I threw my copy onto my bed and said out loud… to no one but myself… damn it, he might just be funnier than me.  And for a moment, I questioned why I would ever write another word now that Matt was on the job.  I’ve since reconsidered, however, coming to the conclusion that while he is in fact clever, and occasionally even laugh-out-loud funny, he’s not definitively funnier than I am, and never breaks into show tunes in the middle of articles on the financial crisis that I’ve seen, so I’m going to continue my soirée with the printed word.

Matt’s also a relative newcomer to the financial and foreclosure crises, at least compared with me, but he does what he does for a living and obviously has resources that allow him to do some real investigative reporting, so when a reader of mine emailed me an excerpt from one of his recent articles, and the headline spoke of Wall Street “housewives” receiving $220 million from the Federal Reserve during the now infamous rich-guy-and-banking-buddy-bailout, well… I felt compelled to take a look at what Matt was describing… and I now wish more than anything that I hadn’t.

Just a few short days back from vacation and after reading Matt’s article, all I want to do is scream at the top of my lungs until I pass out.

You see, Congress has recently forced the Federal Reserve to at least partially open its books and allow the American people to see where some of the trillions in “bailout dollars” actually went.  As Matt says in his Rolling Stone article of April 12^th:

“It is as though someone sat down and made a list of every individual on earth who actually did not need emergency financial assistance from the United States government, and then handed them the keys to the public treasure. The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loanseach to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses.”

Well isn’t that just great to hear?  Our government officials… our best and brightest, one would certainly hope… spent a relative dollar ninety-five on stopping the foreclosure crisis that continues to stalwartly impede any sort of economic recovery from mattering to anyone but our Wall Street bankers, and about as much to stimulate job creation to any significant degree.

But, we did help out the rich people and propped up our financial institutions, not to the point of their being able to re-start any real amount of consumer lending, but at least to the point where the Street’s bonuses are as egregious as ever.  Absolutely crackerjack work is all I can think of to say, now can we please start making sense again?

Well, Matt’s story is titled, The Real Housewives of Wall Street, and it asks the question:

“Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?”

Here’s an overview of what Matt’s referring to, you’ll have to read his article in order to really become near suicidal or prone to acts of random violence.

Apparently, back in 2009, Morgan Stanley’s CEO, John Mack and his wife decided to purchase a $13.5 million property located on Manhattan’s tony Upper East Side, a 107 year-old limestone carriage house with an indoor 12-car garage, recently sold by the Mellon family of Robber Baron fame.  At the time, Mr. Mack was earning just $800,000 a year in salary, and was declining to award himself a bonus in what was the midst of the worst financial crisis in 70 years.

Now, I assume Mack had plenty of cash with which to buy the property, although I really don’t know the details of the transaction, but I’m thinking $800,000 a year isn’t enough income to shoulder a $13.5 million mortgage.  No matter, John Mack and his wife Christy together did purchase the inner-city estate so good for them.  (That’s it, just below.)

Matt Tiabbi describes Christy Mack as being: “… thin, blond and rich — a sort of still-awake Sunny von Bulow with hobbies. Her major philanthropic passion is endowments for alternative medicine, and she has attained the level of master at Reiki, the Japanese practice of palm healing.”

Here’s where it gets positively surreal…

Two months before the Macks purchased their Manhattan carriage house with indoor parking for 12 cars, it seems that Christy and her friend Susan, neither of which appear to have any background or education in finance, launched a new investment enterprise that would invest in student loans and commercial real estate, calling it “Waterfall TALF.”

The two Wall Street wives put up $15 million to set things up, and then they received $220 million in CASH from the bailout programs being offered by the Federal Reserve, most of which they used to buy student loans and commercial mortgages.

The loans from the Fed provided that Christy and Susan would keep 100 percent of any gains on their investments, while the Fed and the Treasury… as in, taxpayers… would cover 90 percent of any losses.  The arrangement was made as part of a bailout program that was sold as being designed to help Main Street by stimulating consumer lending.

So, the strategy now seems quite clear: Our government decided to address the financial crisis and economic meltdown by handing out hundreds of millions to the wives of Wall Street executives so they could invest in student loans and commercial mortgages on a risk-free basis.

See… when you say it like that it doesn’t sound nearly as stupid as it did a few minutes ago.  NO… WAIT A MINUTE… yes it does… it’s the dumbest idea in the history of the world, a complete abrogation of our democracy, and if there’s any justice in the world, those involved will be violently gang raped in prison every day for 50 years, or stricken with palsy.

The TALF bailout program was created just after Obama was elected with the stated purpose of stimulating consumer lending, but instead of just lending the money to consumers, our government… and yes, I’m talking about the Obama Administration here… decided to give the money to the same irresponsible greedy bastards that caused the crisis in the first place so they could lend it to consumers at a huge profit… essentially risk-free.

And the real beauty of TALF is that it doled out dough in the firm of NON-RECOURSE LOANS… the kind you don’t really need to pay back, unless it’s profitable to do so.  You get your money from the Fed, you buy your student loans and commercial mortgages, which you transfer to the Fed as collateral for the loan you just got from the Fed.  If your investments go down in value, you don’t re-pay the Fed, you just walkaway from the loans you invested in and send the bill to the taxpayer.

Of course, it should go without saying that if your investment increase in value, why then you take your investments and cash them in, repay the TALF loan you got from the Fed, and pocket the difference.  Neat-O, don’t you think?

While all of this financial engineering has been going on… accomplishing nothing… people are losing their homes to foreclosure every day and in record-breaking number because servicers are inept and uncaring on a scale historically reserved for our enemies during times of war.

Our government’s incompetence in dealing with the foreclosure crisis has become so apparent and consistent that essentially no one believes that the administration or the legislature has the slightest idea what’s happening, why it’s happening, or what to do about it.

And yet, as I write this… we don’t even have a program on the drawing board that could potentially stop the free fall in the housing markets that continues to erase roughly $10 trillion in consumer wealth each year.

But, I think it was last week or the week before that our government was consumed by a debate about a miniscule amount of federal funding for Planned Parenthood, and now we’re about to start another 18 months of presidential election circus politics, during which time nothing substantive will be accomplished and millions more will lose homes, leaving behind nothing but vacant and rotting structures emblematic of losses all around.

Is this state of affairs okay with anyone?

Mandelman out.

Ergo bibamus!

HAMP has permanently modified 521,630 mortgages, at a cost of only $840 million, according to the Financial Services Committee Press Release, distributed late on Thursday.  That’s roughly $1610 per permanent loan modification… an amount I would call “pocket change.”

The federal program designed to save homes from foreclosure before this one, had a budget of $320 billion, and modified just one mortgage, last I checked… it may have done a handful more before it was shut down for good.  All of the other programs that have been launched have been miserable failures.  HAMP is the only one to have saved any homes at all… better than a half a million people are still in homes they would otherwise have lost.

No one has any reliable re-default data, in fact, I’ve numbers in the single digits all the way up to 60%.  Like I said, no one has reliable re-default data.

Regardless of the CBO’s projections that HAMP would help another 300,000 homeowners before it’s scheduled termination next year, and the fact that the program is saving homes for only $1610 a piece…  the House Financial Services Committee… with our fabulous new House Republicans that have never even lifted a finger to help save a single house during this crisis… has voted to kill HAMP yesterday, by approving H.R. 839, the HAMP Termination Act.  Now the bill will move forward for consideration by the full House of Representatives.

According to the Committee’s Press Release:

“There is widespread criticism that HAMP is not working and is only making matters worse for many of the homeowners who participate or seek to participate. In addition to the SIGTARP, the Congressional Oversight Panel and the Government Accountability Office have detailed problems with HAMP.”

But this is what SIGTARP, Neil Barofsky, said in his report to Congress:

“… while HAMP may provide a significant benefit for those who are fortunate enough to benefit from a sustainable permanent modification, given the current pace of foreclosures, HAMP’s achievements look remarkably modest, and hope that this program can ever meet its original expectations is slipping away.”

Look, these guys are nothing but uncaring, insensitive and unknowledgeable jackasses, but then that’s what they’ve been for the last three years, so I’ve stopped expecting anything from them, I guess.  They’re in the pockets of the bankers, bought and paid for… all they care about is political grandstanding and they obviously consider us all to be morons… and as I said in my article from a few weeks back, Republicans Prepare to Play Politics With HAMP:

You should all hide your faces from the people who sent you to Washington… you should all be ashamed for everything you have and haven’t done.  Your ignorance and insensitivity will be disdained for many years to come.  You’ve done great harm to this once great nation and you should be deeply ashamed for what you are trying to do today.

But in point of fact, they are still helping some number of people remain in their homes… so make HAMP better… yes… you owe the American homeowners that and much more.  Don’t kill the only thing you’ve done that’s accomplished anything at all, just because it hasn’t done nearly enough… or because you think it will help you get elected in 2012… I assure you that it won’t.

That’s it and that’s all.  Obama… do whatever you want… there’s no way I could be more disappointed by you and your administration.  You’ve managed to do what I would have thought impossible.  I could have flipped a coin between you and McCain/Palin… and not cared on which side it landed.

You utterly failed at helping homeowners, and you haven’t even shown up to save, speak for, or try to fix your own housing rescue program… what a waste of a president you are.

Unbelievable.

Mandelman out.

Now this is really getting to be down right hysterical… or is surreal is a better word… no, maybe hysterical and surreal… along the lines of “Dr. Bailout… How I Learned to Stop Borrowing and Love the TARP.”

The top Republican on the Senate Banking, Senator Richard Shelby came out swinging, referring to the 27-page Term Sheet proposal that was given to the banks by the 50 State Attorneys General, a “regulatory shakedown.”

It seems he was referring, in large part anyway, to the $20 billion in damages proposed by the Consumer Financial Protection Bureau, which he inexplicably claimed was now $30 billion.  Here’s what Shelby said, as quoted by American Banker magazine:

“Under the guise of helping homeowners hurt by improper foreclosures, regulators are attempting to extract a staggering payment of nearly $30 billion for unspecified conduct.”

The use of the word “guise,” I have to admit, I would probably have to agree with, as it is really just a “show”.  Twenty billion dollars thrown at the foreclosure crisis is about like trying to stop a charging bull rhino by throwing ping-pong balls at him.

But, if it’s the lack of specificity in the description of servicer conduct that’s got his goat, well then I’d like to volunteer to provide as many specifics as his little heart desires.  I’d even be willing to break it down into sub-categories for him, such as LIES, FRAUDS, NON-VIOLENT CRIMES, ACTS OF VIOLENSE, TERRORIST ACTS, BURGULARY, EXTORTION, CHILD ABUSE, ELDER ABUSE, GRAND THEFT, PETTY LARCENY, UNFAIR BUSINESS PRACTICES… heck, if I could get a little help from a lawyer or two, I’m sure we could submit something pretty darn specific to the senator no later than end of business tomorrow, and even sooner if he’d prefer.

Senator Shelby went on, according to the American Banker story:

“Setting aside for a moment the attempt to end run Congress, I question whether removing $30 billion in capital through a back-door bank tax is the best way to jump-start lending. The long-term consequences of this settlement could be even more serious. It would politicize our financial system.”

First of all… a “back-door bank tax,” Senator?  I don’t think you’re grasping what this whole thing is about, sir.  First of all, there’s nothing “back-door” about it… it’s coming right through the front door, actually.  And it’s not a tax, it’s a fine… a sanction… a penalty… punishment… restitution, even… albeit a paltry sum in light of the egregious nature of the crimes that have been committed by servicers, Senator… haven’t you been paying attention to what’s been going on for the last three years.  Are you unaware of the role the servicers have played in ensuring our nation’s ongoing economic instability?

And “politicize our financial system?”  That’s a good one, Senator.  Yeah, we wouldn’t want to politicize our financial system… you know, I hadn’t ever heard you tell a joke before… you’re actually a funny guy, Senator.  Senator Al Franken’s got nothing on you, sir.

But, unquestionably, the best part of Senator’s Shelby’s largely unintelligible rant, was when he threw down the “don’t fine them or there’ll be no lending” card.  He draws that card like a gun, doesn’t he?  He even sounds just like a banker when he does it.

I’m sorry, Senator, but at this point, that threat should leave the vast majority of Americans in absolute stiches.  I mean, are you familiar with the story titled: “The Boy Who Cried Wolf?”

Jump-starting lending?  Is that what we were in the midst of doing in your mind Senator, because I’m not sure you’re using the right terminology there… you can’t really mean “jump-start,” right?  Because to “jump-start,” something actually implies not only that something is being started, but further, that it’s being started in a hurry, and that wouldn’t apply to lending by the private sector, now would it, Senator?  See… because there’s precious little of that going on, sir… but I don’t need to tell you that… you’re on the Senate Banking Committee, silly.

This argument about lending goes all the way back to the TARP debate where we funded $700 billion… to make sure that lending started up again… and since then… WITHOUT APPROVAL FROM CONGRESS, OR EVEN ANY MENTION BY CONGRESS… we’ve DUMPED some 13 TRILLION into the banks, all tin an effort to start lending again… and still… there is no lending… the federal government is today the only lender to speak of in this country.  Don’t you think pretty much all of us know that, Senator?

There won’t be any lending by private sector banks in this country until… well, until there ARE some private sector banks in this country.  As of today, all I can see are a bunch of zombie banks, propped up with virtually unlimited free cash from then Federal Reserve, and by the suspension and modification of accounting rules, and even so, still heavily in debt to the tax-payers… JPMorgan Chase, as of last October, still owed us about $32,837,870,000 according to the very easy to read spreadsheets that author, and ex-Goldman Sachs managing director, Nomi Prins is nice enough to keep updated on her Website.

You see, it’s those darn toxic assets, Senator… the ones that were clogging up the bank balance sheets back in the fall of 2008, you know… when it all came out that the banks had OVER BORROWED to the tune of about 40:1 and much more, and that’s without counting the off-balance sheet crap that you and I both know should be illegal ever since ENRON showed us how much fun accounting isn’t when there are no rules and no trustworthy auditors on the job.

Yes, these toxic assets are… can you guess, Senator?  Good!  That’s right… even more toxic, that’s correct.  And why would that be, sir?  Good again… because you guys forgot to do anything to stop the foreclosures from destroying the asset values of our housing markets, and guess what’s toxic about the toxic assets, Senator Shelby… it’s the mortgages, sir.  So, every time another house goes down to foreclosure, another mortgage-backed security goes bad, as do all of the derivatives whose values are “derived” from that mortgage-backed security.

It’s sort of a knee-bone’s-connected-to-the-ankle-bone-thing, sir.  Maybe you could sing that little ditty to yourself every time this subject comes up… it might help you to remember what the hell you’re talking about, Senator Shelby.

And if you don’t like that idea, sir… perhaps use a magic marker to make a note on your hand, or tie a string around your finger… I don’t care if you have your assistant tickle your testicles to keep this stuff top-of-mind, it would just be gosh darn lovely if once in a while when you opened your mouth, you sounded like you had some faint idea of what you were talking about, Senator Shelby… you know… like maybe if you did it just once, half of the old men in the senate would likely soil themselves.

Yes, those toxic assets we all heard so much about, during the fall of 2098 are for the most part, right where they were way back then on… AND OFF… of the balance sheets of our Too-Big-To-Fail… Too-Big-To-Save and, Lord knows… Too-Big-To-Prosecute banks.

In fact… Shhhhhhh…. please… be quiet.  One of the bankers might be resting right now, and as of last week, they are also to be considered Too-Big-To-Wake-Up-From-A-Nap.  Thanks for understanding…

So, tell me something, Senator Shelby… if we gave the bankers $13 TRILLION to stimulate lending, and it didn’t accomplish a damn thing in that regard, why would fining the all the servicers combined a measly $20 billion have any effect at all, one way or the other.

Do we all understand “TRILLION” here?  It’s okay if you don’t… it’s a pretty big number, after all.  Chances are a trillion is not a number you’re going to bump into even if you live to be a hundred and fifty years old… twice.  Here’s what I use to help me realize just how large numbers like that truly are…

A million seconds = 12 days.

A billion seconds = 32 years.

A trillion seconds?  32,000 years!

So, if we convert our banking/lending fear mongering example of yours into seconds, we’ve already given the banks 416,000 years, and you’re trying to tell us that if we make them give us 640 of those years back that they won’t be lending as a result?  640 out of 416,000 is a deal killer, Senator?

Man, these seem like some very touchy bankers, don’t you think, sir.  If you’re right and the 640 out of 416,000 is, in fact, going to upset their apple cart like that, not that they’re lending now, or that they have any plans to “jump-start” any such thing anytime soon… but, I’d say we need to fire these girls we’ve got running our banks, and get some more resilient types at the respective helms of our nation’s largest financial institutions.

Because, Senator Shelby… that sounds like we’ve got TROUBLE… It sure sounds like TROUBLE… I’m talking real TROUBLE… right here in River City… and look who’s here, sir… why, it’s Professor Harold Hill!  Did you order The Music Man, sir?  Let’s listen, I love this musical, sir…

Professor Harold Hill: Well… I’d say you’ve got trouble, my friends.  That’s right real serious trouble.  And it’s right there in your city.  Great big trouble… and not just any kind of trouble… it’s the kind of trouble that means you gotta’ stay sharp… Because the trouble I’m here to sing about started with TARP!

Cause you’ve got TARP…. And it’s not at all pretty

With capital T-A-R-P and ‘F’ which stands for FOOL

Oh yes, we’ve got TARP… Chase, Wells and Citi

Their lending got wiped out by those toxic pools.

~~~~

Yes, you’ve got TARP… an idea so shitty…

With a capital T-A-R-P and ‘B’ which stands for BANK.

Oh yes, you’ve got TARP… Chase, Wells and Citi

For the people it was a deal that really stank.

~~~~

You’ve got TARP… terrible, terrible TARP… we bailed out banks you called Too-Big-To-Fail.

Oh, you’ve got TARP, TARP, TARP (yes, you’ve got TARP, TARP, TARP)

Instead we should have sent them all to jail.

Oh you’ve got TARP, TARP, TARP… yes, they call it TARP, TARP, TARP… TARP, TARP, TARP… (Fade out…)

Where are you going, Senator Shelby?  Aren’t you going to stick around until the end?  It’s awful rude to walk out during a musical, sir… what will your constituents think, sir?  Senator Shelby… sir…?

Oh well… he probably had a meeting scheduled… I’m sure he’s busy this week, I’m told tomorrow is “Blow-a-Banker Day” in the District of Colombia.  I didn’t even think about that, because in California, we don’t celebrate it until late May.

It’s too bad though, because there was one more area I wanted to cover with him.  You see, getting back to American Banker’s article again… Senator Shelby and a couple of the other prominent House Republicans, were also attacking Elizabeth Warren’s involvement in the Consumer Financial Protection Bureau, because apparently she’s the one asking for the $20 billion from the servicers, wouldn’t you know.

So, it seems the other day good senator came right out and said:

“Just last year, I warned that the new Bureau of Consumer Financial Protection would prove to be an unaccountable and unbridled bureaucracy. I did not expect to be proven correct so quickly,”

(Memo to Senator Shelby: Don’t worry, sir… you weren’t.)

American Banker got a copy of a letter sent by Shelby, along with House Financial Services Committee Chairman Spencer Bachus, and Rep. Scott Garrett (R-N.J), and although they didn’t mention Elizabeth Warren by name, here’s what the letter said, among other things of course…

“Reports about the role played by political appointees in the Treasury Department — including those affiliated with the Consumer Financial Protection Bureau, an agency that does not yet have any regulatory or enforcement authority — raise further question about the process through which the terms of the settlement are being negotiated.”

I’ll tell you what… these Republicans are two things for damn sure:

1. Totally in the pocket of the banking lobbyists… and the bankers themselves, of course.
2. Really petty people for grown-ups.

They’re actually all upset because of Elizabeth Warren’s new federal agency, the Consumer Financial Protection Bureau, Is not yet officially open for business… and doesn’t officially until July… so therefore, she shouldn’t bring up any of her trouble-making ideas until then?

Boys, boys, boys… you just don’t get it do you?  The people HATE the bankers for what they’ve done these past two years, and you’re going to find out the hard way what happens to politicians who are so flagrantly on the side of the bankers in the next election.  The Dems got shellacked for the same thing last time out, or didn’t you realize?  Watch out… I’m telling you the backlash has been building and it’s going to explode…

Here’s Shelby one more time from the article in AB, making his point about Liz…

“The process by which it is being imposed is potentially far more concerning,” Shelby said. “The proposed settlement would fundamentally alter the regulation of our banks. Yet, this would be done without Congressional involvement. Instead, it would be done by executive fiat through intimidation and threats of regulatory sanctions.”

But, you see… that’s what’s so funny, because… well, because lately I’ve come to realize that there are quite a few people that think that TARP was THE banking industry’s bailout… but that’s not true at all… in fact, the $700 billion TARP fund, was actually the smallest of all the banking industry bailouts we provided in the last two years, and there were more before that.

Now, TARP is the one with the most memorable acronym… rhymes with “harp” and “carp,” but the others were funded into the TRILLIONS, as you can see below.  The thing is… none of these banking industry bailouts went through Congress either… that is to say that we authorized all of these TRILLIONS in taxpayer dollars… “without Congressional involvement,” to use Senator Shelby’s own words from his quote above.

I don’t recall Senator Shelby or either of the other two House Republicans that wrote the letter to Geithner about the 27-page AG Term Sheet proposal, bellyaching about that, do you?  It’s rhetorical… they, of course, didn’t say a word.

Quiet like church mice when we’re giving the bankers trillions, but try to fine the servicers for doing stuff they should really be in joal for, and the bankster politicians come running out onto the floor of the House or Senate every hour on the hour, yelling… Cukoo!  Cukoo!

Just below is a list of the less publicized taxpayer funded banker bailout programs from the last two years.  I’ll look them all up over the weekend and try to post an article explaining what each one was supposed to be for, and how much was spent to-date… stuff like that.

It pisses me off that they play games like this with all of us… they say… lookie over there… TARP, TARP, TARP… and then while we’re distracted, they spend trillions of our money without going through Congress.

Shelby’s fine with it, however, as long as it doesn’t negatively affect the bankers in any way… or come from The Desk of Elizabeth Warren… the ONLY person in Washington D.C. to even suggest that the servicers be fined as a result of what they’ve done to homeowners for three years… the ONLY one.

But Shelby shouldn’t worry his hypocritical little head over it, because she’ll be gone by July, so yet another win for the banksters… yay.

TLGP – The Temporary Liquidity Guarantee Program – $1.5 trillion

GSEP – Government Sponsored Entity Purchases  - $1.4 trillion

CPFF – Commercial Paper Funding Facility – $1.4 trillion

TALF – Term Asset-Backed Securities Loan Facility – $200 billion

TAF – Term Auction Facility – $600 billion

AMLF – Asset-Backed Commercial Paper Mutual Fund Liquidity Facility – $1.6 trillion

FEDS – Foreign Exchange Dollar Swaps – Undisclosed

PDCF – Primary Dealer Credit Facility – Undisclosed

(I’m pretty sure when they say “undisclosed” where the amount goes, it’s because it’s a really small number, aren’t you?  Of course you are… Geithner wouldn’t not disclose a really big number, would he?  Not Transparency Tim… no way in the world.)

Mandelman out.

HERE’S A COPY OF THE LETTER FROM THE SENATE AND HOUSE REPUBLIC ANS :

Servicing Letter to Geithner

Okay, who wants to feel stupid, weak, and helpless?  (Oh, I do… I do!  Pick me!  Pick me!)

Well, good boys and girls, because you will in just a minute.

Let’s start here: The federal government requires banks participating in HAMP not to foreclose on homeowners while they’re being considered for a loan modification.

Now, why that would even need to be a rule is beyond me.  What’s next?  How about this one: A new law prohibits car mechanics from selling someone’s car while they’re repairing it.  Whatever.

Banks, however, could give a rat’s petute about what the federal government wants them to do because the rule is voluntary and has no enforcement mechanism.  A voluntary rule with no enforcement mechanism?  Wow.  I don’t think I can remember seeing one of those before.  Actually, it makes total sense that there’d be no enforcement mechanism… since it’s a voluntary rule.  See, I’m starting to think like them.
Well, apparently banks aren’t much for volunteering, so they foreclose on homeowners while they’re being considered for a loan modification all the time.  Hell, half the time they sell someone’s house while considering them for a loan modification, so comparatively just foreclosing should seem like a day at the beach.  It’s one of those basically unsolvable problems servicers are having an impossible time fixing: selling homes while under consideration for a loan modification.  It’s like losing file folders full of paperwork over and over again.  Oh, dear me.  What to do, what to do?

And that seems like… if your car dealership blew up your car while they were repairing it… and then claimed it was a mistake.  Oh, my.  Did we do that again?  Sir, I’m so sorry… I had no idea… Larry… damn it… it was a break job.  You threw your cigarette into the gas tank again, didn’t you?  Look, we’ve talked about this before… Sir, I’m sorry, it looks like you’ll have to buy a new one.

So, California Senator Mark Leno came up with SB 1275, a bill that would have required lenders to provide homeowners with a fully considered loan modification decision prior to foreclosing.  And guess what else… it also would have given homeowners the right to sue their lenders if the bill’s process wasn’t followed.

It was looking good for a while. The California Senate and three Assembly committees approved SB 1275.  Yeah, baby.  It’s all downhill from here, right?  Well sort of…

I wrote an article about the bill some months ago and said, among other things, the following:

So, mail the notice of rights… so homeowners know their rights.  Seems like that would be a good thing.  Mail the homeowner an application for some alternative to foreclosure, such as a loan modification.  Yes, that doesn’t sound like it could hurt anything.  Actually check to see if the homeowner qualifies for a loan modification or some alternative to foreclosure.  How can that be a bad thing?  And when a homeowner is denied a loan modification, mail out a letter telling that homeowner why they were denied.  Seems like the only decent thing to do, doesn’t it?

The Center for Responsible Lending issued the following statement:

“The confusion and errors that cost Californians their homes, are devastating to the state’s housing market, but are avoidable and we need this measure to stop further deterioration of the California housing market.”

And in New York this year, the legislature approved a new law that gives the state attorney general permission to sue lenders for repeatedly failing to consider loan modifications in a timely manner and for foreclosing during the modification process.

So we can do this, right?  After all, we’re practically ground zero for the foreclosure crisis, right?  Please tell me I’m right… someone… anyone?

No, I’m wrong.  Even though the bill was supported by EVERYONE but the banking lobby, it was rejected 36-30 in the Assembly.  Even after it was approved by the state Senate and three Assembly committees.  This time… no… but thank you for playing.

All of the Republicans voted against it, but that’s no surprise… they’re supposed to be in Wall Street’s pocket.  All Assembly members who voted yes were Democrats, the other white meat… and NINE DEMOCRATS, all of whom were obviously threatened… I mean lobbied… by bankers, also voted no.  Nice job, you spineless, worthless, glad-handing, sycophants.  Way to throw your constituents under the bus.

Senator Mark Leno, D-San Francisco, told the San Francisco Examiner that he would continue to pursue a solution to the state’s mortgage crisis in the new legislative session, which will begin in January.

“We think we had a very wise compromise (in the bill), unless your philosophy is that the lenders should not be held accountable and not have repercussions for their actions,” Leno said.

Well, now that you mention it that does have a certain ring to it.  Not held accountable and no repercussions… where have I heard that before?  Hmmm… I swear I was just reading something that sounded a lot like that… what was it?

Oh yeah… I remember… voluntary and no enforcement mechanism!  That’s it!  No accountability and no repercussions.  I’m starting to feel a song coming on…

Seems to me I’ve heard that song before… Click it, and sing along…

The other day, I posted an article about how a deal had been negotiated in Congress that would make available $1 billion in federal bridge loans for homeowners who, due to unemployment or illness, are unable to make their mortgage payments.  You can find it here: New Legislation to Offer $1 Billion Fund for Unemployed

I came out saying I support the idea, basically because my expectations of what my government is capable of have been reduced to essentially nothing.  Everyone knows how much I love sarcasm… or at least have come to love sarcasm writing about the foreclosure crisis… and on this article I think I might have taken my sarcasm to such a level that readers, especially those that read quickly, may have missed it.

Anyway, I say this because I received an email last night from a reader and our conversation back and forth follows.  I thought it would be worth reading it for numerous reasons… but, it’s of course up to you… Mandelman

THE MANDELMAN MATTERS READER WRITES:

How can an unemployed person taking on even more loans, for what is most likely a well-underwater home mortgage situation, be a good thing?  I still believe the only thing that will work to help resolve this gigantic mess is principal forgiveness, not more loans.  Use a tax on banks, hedge funds, Wall Street firms of all types, to help reduce principal.  Start with those of us who had fully documented income when we got our loans, have lost income due to the negligent (and intentional egregious behavior of various banking types), and help us out with reductions.  I’m surprised that you would think this new program is a good idea (unless I’m reading it wrong).

MANDELMAN RESPONDS:

Well, when you look at it from the perspective of coming from a federal government that has not even come close to doing anything that even gets down the runway, let alone launches…

Bush’s Hope-4-Homeowners plan, which had a $320 billion authorized by American Jobs Creation Act of 2008, ended up modifying one loan and spending essentially nothing.

Obama’s HAMP was authorized at $380 billion and more than a year into it, has spent essentially nothing… $200 million.

Obama’s 2MP program, which was launched 14 months ago, has NOT modified one single solitary second mortgage.

Um, what else… I’m sure there’s more, but I’m tired. When you consider that kind of track record, and the fact that federal employees from two administrations, the entire congress and God knows how many others have been working on this for 3 years… Well, it would seem to me that you either leave the country, eat a gun, or start having some pretty diminished expectations as to the potential for competency that exists.

I mean, it’s like if you were listening to a game of one-on-one being broadcast on the radio, and you were rooting for your player, but he never seemed to be able to hold onto the ball, let alone shoot or score, and then you found out that the guy you were rooting for was playing against Kobe, but was actually a 7 year-old autistic dwarf with Down Syndrome… Well then you clap when he manages to bounce the ball and it doesn’t hit his own foot and rolls out of bounds… Right?

So, with that in mind… A billion in loans for people without jobs, while you allow the market to remain in a freefall with millions of foreclosures ongoing, and at this point nothing even on the drawing board that could potentially stop them… After three years and that many working on the problem…

So… YAY! loans for the unemployed!! YAY! Look, honey, he almost bounced the ball that time. Almost! I know, he hit his toe again, and Kobe got the ball, but the last time he just threw it directly out of bounds, while he shit his pants, slipped on the excrement and fractured his femur… So look how much better this time was!!!

So, YAY!!!’ Loans without jobs!!! That’s the way guys!!! GOOD JOB!!! Assuming they actually do end up making any of the loans that is. If I find out that there’s a requirement attached to the program that says that it only applies to unemployed homeowners with 700 FICO scores and above, and that the bill forgot to consider who the loan originator might be and then they forget to either print or distribute the applications… Well, then that will just be more of the status quo and I’ll have to stop cheering.

AND THE READER REPLIES:

No, it’s another useless program. You’re not applauding a handicapped kid; it’s applause for the Emperor-with-No-Clothes. Its not a kid that can’t do any better; it’s another administration who cant push through a difficult but necessary program.  More loans to underwater homes is simply pushing back the day of reckoning by a few months to a couple years. Another misguided program is worse than doing nothing.

AND MANDELMAN RESPONDS:

Well, of course it’s a useless program, in the sense that it is entirely devoid of thought or potential.  As in, more loans targeted for people without the ability to repay them?  That’s the answer?  Well, if they weren’t going to lose their homes, they certainly will now.  But then, maybe that’s the goal right?  (My sarcasm on this point may have gone too far.  Hey, is it okay if I print our interchange if I leave your comments anonymous?  MA

ONE MORE THING FROM MANDELMAN TO THE READER…

Oh, one more thought… I should add that in some ways, I am quite seriously in favor of the program.  Because our government has proven itself so entirely incompetent, people have taken their own lives and perhaps this program will delay even one person from committing suicide.  It probably won’t stop them from doing it, but maybe because of this program, they’ll do it a year later, and at this point… since this is the best case type of accomplishment I’ve come to expect from the government in this country… then good.

It’s the absolute pinnacle of incompetence… something I’d expect in a novel by George Orwell, or Ray Bradbury… a people conditioned to be happy because at least their government managed to delay one suicide by spending a billion dollars… because the other untold billions they’ve spent or tried to spend, accomplished even less.

And there you have it… ain’t life grand?