Greatly Reduce or Even Eliminate Client Complaints,

Increase Firm Effectiveness, Improve Morale

& Increase Profitability.

If you’re helping homeowners with loan modifications, this shouldn’t be missed under any circumstances.  It’s shouldn’t be considered optional, and I’m only doing it live once.  It’s literally mission critical… crucial to your firm’s survival, because I’ll provide both the insight and proven tools you need to transform your firm immediately.

After a year spent researching and writing over 200 articles on the foreclosure crisis, and on how firms help homeowners avoid foreclosure and negotiate loan modifications, I think it’s pretty safe to say that I’ve come to understand the situation like no one else in the country.

Attendees will receive the methodologies and tools that I’ve developed to reinvent the way firms helping today’s homeowners think and operate, so that they can:

• Change your perspective on your firm’s mission.
• Greatly reduce client complaints, the #1 threat to a firm’s survival.
• Significantly improve efficiency & profitability NOW.
• Dramatically increase referrals & improve workplace morale.

Attorneys and firm managers attending this Mandelman Matters Webinar will learn why ALL law firms that offer to assist clients with loan modifications were set up wrong from day one, and how these firms must change if they are to survive in the future, continuing to serve homeowners facing the worst and ongoing economic collapse since The Great Depression.

Ask yourself the following question:

Do you view your firm’s mission as trying to help homeowners avoid foreclosure through loan modifications and other arrangements?

If so, this Webinar will explain why that view is entirely inadequate and can only lead to serious problems.  It’s time… long since time… to take a fresh look at how your firm operates, and that’s exactly what this Webinar is all about.

The Mandelman Matters Webinar will not only provide you with an entirely new way of thinking about your firm’s practices, but you’ll also receive the step-by-step instructions, client communications campaigns, and support staff training tools that you’ll need to begin transforming your firm immediately.

It’s really not optional… it’s a matter of survival for all firms operating in this space today.  And the fact is, it will unquestionably stop some of the lawyers who are trying to help homeowners from being disbarred, or worse.  And after interviewing over 2,000 homeowners at risk of foreclosure, studying roughly 900 written complaints written by homeowners, and becoming intimately familiar with the practices of more than 300 attorneys across the country, I’m not guessing… I’m dead on certain.

I’ve decided to offer the information and tools I’ve developed through the Webinar, because I simply want attorneys and others who are dedicated to helping homeowners to start doing it better as soon as possible, and since I can’t physically be in that many places at once, the Webinar seemed like the only answer.

If you’re not already familiar with what I’ve written on Mandelman Matters or in The Niche Report magazine, you’re making a mistake.  Period.  And if you’re an attorney or other expert and you’re running a firm that offers to assist homeowners and you don’t attend my upcoming Webinar, you’re literally playing with fire.

WHEN: FRIDAY, NOVEMBER 20, 2009

TIME: 10:00 AM PST

COST: $195

TO REGISTER CLICK BELOW:

So… commercial real estate has been the next financial shoe to drop for some time now.

The best thing about the meltdown in commercial property, for me anyway, is that it’s just a variation on a now all too well-known theme: Underwater properties cannot be refinanced so when loans come due… it’s foreclosure time.  And foreclosures on underwater properties result in losses for banks and other investor groups, which in turn lead to federal bailouts, at least in cases where the bank is deemed TBTF – too big to fail, which should really be renamed TPCTF – or “too politically connected to fail”.  So, at least I don’t have to spend time explaining what’s causing the problem… capiche?

And although I don’t know how successful such efforts are, some are now offering to work with lenders to get these loans modified, and its been talked about for the last year by those claiming knowledge of the space.

To be entirely candid, I expected to be hearing more about the impact of commercial property defaults tearing into bank balance sheets by now.  A few months back I read about the John Hancock building in downtown Chicago being bought by a new investor group for something like $600 million less than the amount of the last mortgage, and I thought to myself… ouch, that’s gotta’ smart.

The commercial property meltdown is also familiar territory in that, even though there are hundreds of billions of dollars in underwater loans that will likely end up blowing up on bank balance sheets, Treasury Secretary Tim Geithner says there’s nothing to worry about.  According to Bloomberg, on October 29^th of this year, while Tim was speaking at the Chicago Economic Club, he was asked whether defaults on commercial real estate could lead to another banking meltdown, he responded by saying:

“I don’t think so.  That’s a problem the economy can manage through even though it’s going to be still exceptionally difficult.”

I don’t care what anyone says… I love Tim.  He’s really is the best, don’t you think?  This is a guy that would have awoken on the morning that Katrina slammed into the Gulf Coast, looked out the window of his hotel, and said:

“It’s a bit damp, but I’m sure it will clear up by this afternoon.”

And, lest you think I exaggerate Tim’s propensity to view the future through only the rosiest of lenses, Tim said what he did about the commercial real estate market on October 29^th, just a few days AFTER Capmark Financial Group, one of the country’s largest commercial real estate lenders, filed for bankruptcy protection.  According to Moody’s, Capmark has originated more than $10 billion in commercial property loans.

Capmark came into existence in 2006, when an obviously prescient group of investors, including KKR & Co., Goldman Sachs and Five Mile Capital Partners acquired GMAC’s commercial-real estate business, renaming it Capmark.  The group ended up with about 75% of the company, with GMAC and its employees holding onto the rest.

Capmark reported a second quarter loss of $1.6 billion this year, and finally filed for bankruptcy around the 24^th of October.  KK&R has already written down its investment in Capmark to… wait for it… zero.  Maybe the guys at KK&R haven’t spent enough time hanging out with Tim, because they sound like real downers.

The FDIC has also notified Capmark that it must raise capital in order to increase liquidity at its Utah bank, which also has roughly $10 billion in assets, although the bank is not included in Capmark’s bankruptcy filing… don’t ask me why.  That’s funny, isn’t it?  The FDIC going around telling other financial institutions about their need to raise capital and increase liquidity.  I’m not saying it’s wrong… that’s the FDIC’s job and all, but it’s still funny to me.  Sort of like Bernie Madoff going around telling fund managers what they need to do to remain in compliance with SEC regulations.  Not exactly, but sort of.

Predictably, Capmark was just another company that relied heavily on selling the loans it made into the now non-existent, secondary market.  When that market froze solid, as a result of the fabulous rating system we’ve developed in this country, and property values fell as a result, poor Capmark found itself stuck owing more to lenders than its loans were worth.

Doesn’t that make you wonder why homeowners aren’t described in that light?

Why is it that when Capmark goes bankrupt as a result of owing more on real estate than it’s worth, as a result of the secondary (read: bond) market freezing solid, the company is described as being the victim of unfortunate circumstances beyond its control?  But, when the same exact thing happens to a homeowner, that homeowner becomes an irresponsible individual who assumed real estate prices would go up forever, used his or her home as an ATM, and bit off more than he or she could chew.

The problem is that between now and 2013, more than $2 trillion in commercial mortgages will need to be refinanced, according to a Deutsche Bank report published last July.  Commercial mortgages aren’t like their residential cousins, because they typically have 5-10 year terms, as opposed to thirty.

With Moody’s/REAL Commercial Property Price Index showing that commercial properties have declined in value by 40% since their peak in October of 2007, the owners of these properties are going to have a dickens of a time refinancing them, assuming they’d want to in the first place.  Homes are all about emotion, but I’m not sure the guy who owns a strip mall center in Des Moines feels all that much of an emotional connection to his property.  Maybe I’m wrong, we’ll soon see.

The Philadelphia Inquirer recently quoted a guy by the name of Paul Halpern, who is a partner at Versa Capital Management of Philadelphia.  Paul’s view is that a lack of available financing for commercial real estate has prevented properties from trading at depressed values.  He says that may help some lenders that would otherwise be facing huge write-offs.  But then he got all Geithner-like when he said:

“By the time financing is available, asset prices will have recovered substantially, though not enough to save everybody.”

Where do these guys get their sense of humor… or rather “hubris”?  Rock on, brother Paul, rock on.

Okay, so does anybody have any questions about what’s going on here?  Commercial real estate, a couple of trillion worth, is now circling the drain and soon we’re all going to hear that loud flushing sound we’ve all come to know and love, coming from banks all over the country.

I can’t keep up with the number of banks that have closed their doors forever during this past year, the list grows too quickly, but I think we’re at something in the neighborhood of 126, give or take, and you know that many of these regional banks… the ones not TBTF… have gone down as a result of their commercial loan portfolios.

Wilbur Ross, the at least somewhat creepy looking Chairman & CEO of WL Ross & Co. told CNBC on September 15^th, that he sees perhaps 1,000 more regional banks going under in the months to come.  But here’s the rub… his characterization of this catastrophic forecast is that it will “create opportunities for investors”.  Oh, well in that case, let the rooting and cheering begin.  Fail banks, fail!  Fail banks, fail!

I’ll say:                         What do we want?

You say:                       Opportunity!

I’ll say:                         How will we get it?

And you say:               By 1,000 banks failing in the next few months!

Ross also told CNBC that his company will be looking to pick up some of the smaller institutions that fail, but… and pay attention here… he said: “There will be opportunities, but we will need federal assistance in them, because what we’re mainly looking for is stable sources of deposits, not so much the loan portfolio.”

You might want to go back and read that last paragraph.  What he just said, besides that he’s looking to buy banks in order to get “federal assistance,” which is a euphemism for you know what, but far more importantly in my view, he’s looking to pick up “stable sources of deposits” at a discount.  “Stable sources of deposits?”  That sounds suspiciously like the bank accounts of regular folk… homeowners, if you will.

Does that say anything important to you, because to me it speaks volumes.  Maybe “the people” have more power than they think.  I wonder what would happen to Mr. Ross’ interest if the stability of those coveted deposits was somehow lessened.  I don’t know, it’s besides the point… just thinking out loud over here.

Okay, so there’s not a whole lot of question that the implosion of commercial real estate is upon us, and that its growth as a destructive force over the next several years is assured.  So, what is our government doing about this clear and present danger, to borrow a line from Tom Clancy?

It’s simple, really.  And predictable, too, I suppose.  Just conjure up some new rules and regulations that allow banks to ignore the losses, what else?  I mean, it’s working fabulously well in the residential real estate market, so why quit on a winner?

According to the Halloween issue of the Wall Street Journal, federal bank regulators, including the FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency (“OCC”), have issued guidelines that allow banks to keep commercial property loans on their books as “performing,” regardless of the true value of the underlying properties.  It seems that the new guidelines were provided because of the government’s concern about commercial property owners that are… are you ready for this…

“Experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties.”

Oh, poor babies… Now I’m worried about them too.  How could I not be?  You have to feel sorry for anyone that’s making less money, has property whose value has dropped quite a bit, and who’s having trouble selling or renting their property as a result, right?  I mean… UNLESS THEY’RE JUST REGULAR OLD HOMEOWNERS, THAT IS!  If you’re a homeowner in exactly that SAME position, for exactly the SAME reasons… well, excuse my French, but vous êtes baisé.

The guidelines also point out that “restructurings are often in the best interest of both lenders and borrowers,” so what do you know about that?

Up until now, it seems, banks have been suppressing losses on commercial real estate the traditional way, which is by using a methodology known in financial circles as “extending and pretending,” or as my mother would call it… “LYING”.  Basically, when a loan on commercial property comes due, the bank just pretends it hasn’t come due yet.  Analysts and investors criticize the practice of “extending and pretending” because they say that pretending the maturity date hasn’t arrived will only put the pain off into the future.

Ya’ think?  You don’t mean to say that pretending that a certain date hasn’t yet arrived doesn’t permanently stop that date from arriving, do you?  Heaven forefend.  I pretend that my birthday hasn’t arrived every year, and I’m still not yet 24.  Morons.

The Rush to Fabrication

I think “Mish” Shedlock said it best this past week when, commenting on the new rules that allow banks to ignore losses on commercial real estate, he said: “It should come as no surprise that the banks are rushing to adopt the new rules.”  And the Wall Street Journal concurred:

Banks are moving quickly to restructure commercial mortgages under new U.S. guidelines that are more forgiving of battered property values and can help banks avoid bigger losses.”

Citigroup Inc., regional bank Whitney Holding Corp. and other lenders around the country are planning to review loans now considered nonperforming to determine if they can be reclassified under the guidelines announced Oct. 30 by bank, thrift and credit-union regulators, according to bank executives and people familiar with the matter. The moves could help the banks absorb fewer losses on troubled real-estate loans and preserve capital.

“It’s a positive all the way around,” said James Smith, chief credit officer for National Bank of South Carolina, a unit of Synovus Financial Corp.

“Regional and small banks are the most likely financial institutions to benefit from the guidelines because of their exposure to commercial real estate. 2,600 banks and thrifts have commercial real-estate-loan portfolios that exceed 300% of total risk-based capital and regulators ignored it every step of the way.  Now that loan losses are soaring, regulators came up with new rules so that banks can pretend the losses are not real.”

Regulators consider the 300% threshold a red flag, though it doesn’t necessarily mean the banks are in danger of failing. Risk-based capital is a cushion that banks use to cover losses. Commercial real-estate woes contributed to 100 of the 120 bank failures this year, according to Foresight Analytics.

Responds “Mish”…

These kind of reporting games do not really help anyone.  All the pretending does is prolong the agony. Banks know the true score even if investors don’t.  Thus, such measures to free up capital for banks to lend will not work here anymore than the same shell games encouraged lending in Japan.

The fact that regulators are resorting to such shell games is just further proof as to how weak the financial system is.  This is an effort by Bair to stem the tide of bank takeovers.  However, the time to do that was before (not after) 2,600 banks accumulated commercial real-estate-loan portfolios exceeding 300% of total risk-based capital.

The Response to the Criticism…

I should not have been the least bit surprised to find out that banking regulators responded by saying that in their view, they are in fact, being “prudent,” and that any banks that misinterpret the new rules to mean that there is an opportunity for leniency will be in big trouble.

Exactly what I was thinking… I better not hear about any bankers that think just because the government is allowing them to not recognize billions in losses, that the government’s being in any way lenient with them.  No leniency here, Boy-O… that’s the absolute last thing anyone should take away from these new rules.  Strictness… that’s what the government’s trying to impart as far as any message goes… total strictness.

I do have one more thing to say: Why did I not become a banker?  I don’t remember anyone telling me about any of the fringe benefits involved.  I mean, had I understood that bankers get all the profits and the government picks up the losses, or at least doesn’t make the bankers recognize them, I might have said… “Well, alrighty then…”

Yeah, I’m pissed, but I’m also starting to envy these guys.

A Related Article I Hope You’ll Read:

A Hundred Thousand Homeowners – Voices of Hope & Change

Government Overstated Job Creation Numbers

Get Over it America?

I spend time talking with homeowners every single day. I listen to their stories day after day and it’s so painful, because I feel so helpless.  Many times I want to scream. The foreclosure crisis that has been allowed to continue in this country must be stopped, and I’m quite sure it would have been months ago… if homeowners had a powerful lobby in Washington… if America’s homeowners had a voice that could be heard.

Well, this next year is a very important election year on both sides of the aisle, and to the Obama Administration.  And it’s time for the voices of homeowners to be heard.

I’d like to think that there is no stronger or more outspoken advocate for homeowners in this country than Mandelman Matters, and we started filming homeowners at risk of foreclosure for a documentary on the crisis over a year ago.  Since then, we’ve been looking for the “right” project… one that would carry the voices of distressed homeowners to the politicians on both sides of the aisle, to the bankers and mortgage servicers, to the media, and to the nation as a whole… and we’ve now found that “right” project in “A Hundred Thousand Homeowners – Voices of Hope & Change”.

“A Hundred Thousand Homeowners” is a documentary that will deliver a cacophony of outrage at the way our government has addressed the foreclosure crisis.  It will make loud the voices of a hundred thousand homeowners.

The finished documentary, will be distributed using the power of the Internet, but it will also be distributed on DVD, wrapped in high-impact “A Hundred Thousand Homeowners” packaging.  It will land on the desks of every single elected representative in the House of representatives and the U.S. Senate.  It will be sent to the governors of all 50 states… to every single banking industry CEO… to every major media outlet.  It will be seen, the voices it represents will be heard, and the story will be told.

GOALS OF THE DOCUMENTARY:

A. We want Congress to act to strengthen the HAMP program by adding hard and fast rules under which banks MUST modify a mortgage.  The program is funded by tax dollars and is NOT working on a completely voluntary basis. Here’s how banks view loan modifications.

B. We want the Treasury Department and/or Congress to impose penalties on lenders and servicers who break the rules under HAMP.  Here’s what a judge said about HAMP rules.

C. We want Congress to pass the bankruptcy reform that President Obama spoke of in his speech introducing the program that would allow for judicial loan modifications.  We need to give judges the power to modify mortgages on primary residences in bankruptcy, because the threat alone wold motivate banks to do it themselves. My article on the subject: A Time for Good Judgement – We Need Judges to Modify How Banks Behave.

D. We want HAMP to require principal reductions under appropriate circumstances.  It’s not fair for banks to be able to foreclose on a home and then sell it to a new buyer for half the balance on the mortgage just to get it off of their books.  Congress must remove incentives that banks have to foreclose. Read Diane Thompson’s testimony in front of the senate.

We need everyone’s help to make this happen, and it’s far too important to be allowed to fail.  People ask me all the time how they can help.  Well, here’s how.  Together we can be heard… together we will make a difference.

The Documentary: A Hundred Thousand Homeowners

A Hundred Thousand Homeowners will open with President Obama’s speech introducing his Making Home Affordable program, which was to help millions, but has fallen far short of its goals.  It will include interviews with real homeowners… unscripted… as they share what they’ve been forced to endure trying to save, or losing their homes.

It will deliver the real numbers of loan modifications, the real costs of the failed program, and the real need to do something to fix what’s so clearly broken… NOW.  It will illustrate why it’s not homeowners who are at fault, for it was not they that caused this catastrophe… without question it was the banks and investment banks that brought us to where we are today.

The federal programs that have been put in place to rescue those banks and their shareholders and investors, have cost the American taxpayer trillions.  While the American homeowner has received little more than a series of broken promises and outright lies.

I’ve written close to 200 articles on Mandelman Matters to-date, and if you’ve read even one, you know that I’m quite capable of breaking eggs when an omelet is ordered.  I don’t pull any punches, and I’m not beholding to anyone but myself… and I’m a homeowner, just like you.

A Hundred Thousand Homeowners will be a wake-up call in Washington D.C. It will send the very clear message that doing nothing is not an option… that favoring the banks over the American people, at a time like this, can only result in being voted out of office.  The voices any one American homeowner may be faint to the point of being inaudible, but the voices of A Hundred Thousand Homeowners will be deafening as the sound echoes through the halls of our legislature, and into the Oval Office.

A Virtual March on Washington…

Everyone can join this virtual march on Washington but there is a minimum cost to participate: $1.00.  That’s “one dollar,” just so everyone’s clear about this.  And by contributing one dollar, you’re name will be listed as one of the 100,000 voices, if you want it to be… or kept anonymous, if you’d prefer it that way.

By contributing $1.00, you’ll be supporting something important… something that will be heard… something that has to at least start to make a difference, because when politicians see that 100,000 people have taken the time to support something, they know that behind those 100,000 are many more who feel the same way.

Of course, you can decide to send more… you could send $5, or $10, or even $20 in support of the project.  The thing about producing a video program is that you can always do more… interview more people, increase its production values, license music.  And you can trust that we will use as much as we receive to make the documentary have that much more impact.  If we receive $150,000, we’ll be able to use a celebrity host or voice… if we receive more, we may be able to air the program on cable.

But, all we need to make it happen is $1.00 from 100,000 people who understand what Mandelman Matters is all about, and want their voice to be heard.  Who knows… if everyone loves what we accomplish, maybe we’ll do it again… and again.  I have to believe that at some point… the madness of the foreclosure crisis will have to be stopped, because in the end, this is still very much a country of the people, by the people, and for the people.

Please take the time to send in your $1.00 today.  Time is of the essence, and it’s not easy to get 100,000 people to do anything.  So, send your dollar now, and help spread the word by asking others to do the same.  We plan to have the documentary program completed and distributed by Valentine’s Day, but we can’t do it without everyone’s support.

You can send your dollar via credit card and Pay Pal by clicking on the “Contribute to the Cause” button, which you’ll find at the top right of the Mandelman Matters site.

Or you can send your check to:

A Hundred Thousand Homeowners

1472 Marelen Drive

Fullerton, CA 92835

# # #

The Outspoken $100

FOR THOSE WITH SOMETHING IMPORTANT TO SAY…

Do you have a few choice words you’d like to say to those in Congress, to The White House, to the press, your governor, and/or of course, to your bank?  Well, here’s your chance.

When you sign on to support “A Hundred Thousand Homeowners” as a member of the OUTSPOKEN $100, you can send in YOUR OWN 2-4 MINUTE MESSAGE on digital tape or as a digital file.  Any digital video camera will do.  Your message may or may not be included on the DVD, but IT WILL BE POSTED on the “AHundredThousand Homeowners.com” Website, and it will be easy to find because we’ll organize each homeowner video by bank, or topic.

JUST IMAGINE… when anyone is looking for information about say, Bank of America, they’ll find this site and everyone’s video message about Bank of America right under the Bank of America heading.  And when politicians, their staffers, members of the media and/or others see what’s there, they’ll get the message… your message.

ALL IT TAKES IS $100. We don’t expect many homeowners to do it, and frankly we wish we could offer to everyone for free, but unfortunately it will take a great deal of time and money to present your video comments in the proper light.

# # #

Performance Guarantee: Although I don’t foresee this being an issue, in the unlikely event that we do not receive sufficient funds to complete and distribute the project, we will donate all excess proceeds to Homes for Our Troops, which assists severely injured service men and women and their immediate families, supplying building materials and professional labor and coordinating the process of building new adapting existing homes with handicapped accessibility.

The Obama Administration’s Making Home Affordable program may have gotten off to a slow start, but ever since the press started criticizing the program’s insipid results, things have improved quickly and dramatically.

According to data released by the U.S. Teaseury Department, when you add up the numbers of loan modifications being reported by the Hope Wow Alliance, Chaseme, Bunk of America, Wheres Fargo, MUD, and other skanks and servicers, as of November more than 3.6 billion homeowners have been offered loan modifications.  At this point the government says it’s outpacing foreclosures by a margin of nine to one.

“We’re still not quite where we wanted to be, but we’re happy with the progress,” said a spokesperson for the Teaseury Department.  “At this point, our goal is to modify at least 50% of the homes on the planet, and we’re closing in on that goal.  We’re modifying homes regardless of whether they are mortgaged or not.”

Wells Fargo, the nation’s largest home lender, has begun 930,652,000 trial modifications, or 29 percent of the eligible mortgages in North, Central and a good part of South America, under the HAMP program so far this year, according to U.S. Teaseury data released Tuesday.  After initially being criticized for its slow pace of modifications, the San Francisco-based bank now has among the highest modification rates in the free world. U.S. Bancorp has modified 150 million mortgages, even though the Minneapolis-based bank did not enter the HAMP program until September.

Housing counselors and lending experts say that HAMP is having a meaningful impact on the global foreclosure rate, and Lucely Figures, a housing economist at Muddy’s expects at least another 3 billion loan modifications next year.

A recent report by banking regulators explained that mortgage modifications come in many forms.  In some cases, lenders can lower interest rates, extend the loan term, or reduce the amount of the loan by forgoing part of the principal.

The Obama Administration was quick to point out that although in the past, many of the loans modified resulted in homeowners being saddled with higher payments, of the loans modified over the last 45 days, only 8% resulted in significantly higher payments, and 92% of the payments were left unchanged or only slightly higher.

“Clearly the program has found its legs,” said President Obama in a speech to an adoring crowd of Lithuanian quilt makers.  Lithuania is the eleventh stop on the president’s Hope-to-Stay-on-Tour-Until-the-Midterms tour of the most obscure Baltic States.

“I think there’s no question that the new data released today shows that we’re figuring out the housing problem,” the President said, “I’m confident that most if not all of the modifications will have exactly the same payments they had before they were modified from this point forward.  And Americans should be happy about that.”

The government’s data shows that 73.4 percent of modifications that left payments unchanged, were only 30 days more delinquent, thirty days after they were modified.  And, according to the Office of the Comptroller of the Currency, a federal bank regulator, lenders and servicers are supporting efforts to modify loans where payments remain unchanged.

“Banks and servicers have heard the administration’s demands to stop increasing payments when modifying loans, and the industry has decided that it’s ready to get behind an initiative to leave the payments right where they were before the loan was modified,” said Edward Chingching, President of the American Bankers Cabal.”

“Look, the financial institutions of this country recognize that without the American taxpayer, along with the government officials the industry keeps in its pocket, most of the banking executives in this country would not have received eight and nine figure bonuses this past year.  To show how appreciative the banks are for the countless trillions in taxpayer support, the industry sees it as being entirely appropriate to continue modifying loans so that every single homeowner’s payment remains unchanged,” added ChingChing.

The Obama Administration plans to respond to the banking industry’s generosity by increasing the $75 billion originally allocated to the banks and serivcers that modify loans under the program, to an even $1 trillion.  However, according to the President, most Americans will not see their taxes go up as a result.

“We’re going to fund the program simply by taking all of the wealth of the richest 1,000 people in this country, after they’ve passed away,” explained a spokesperson for the White House who asked not to be named because he didn’t want to be chastised by his pals at the Harvard-Yale-Princeton Club for spoiling a surprise.  “The timing is right, because most of the richest 1,000 are quite old already, but we might even kill someone from another country, if he or she were rich enough.”

“Of course, that doesn’t mean we’d be shipping the job overseas,” President Obama added quickly.  ”We’d certainly make every effort to use an American hit-person; I am resolved that if it can be done by an American, it should be.  Unless, of course, it’s A LOT cheaper to have a foreigner do it, like if you’re talking running shoes or something like that.  There’s no point in our trying to compete with essentially enslaved people in sweat shops being paid $2 a week.  Besides they do a great job with running shoes over there.”

Some critics are still whining that the number of trial modifications are still too high, and that it’s taking far too long for homeowners to obtain a modification from their lender or servicer, but the Teaseury Department was quick to dismiss such voices of dissent.

Said Secretary Geithner: “Those are simply not issues with the way the plan is working now.  I’ll admit that going into it, we underestimated how difficult it would be to convince the banks to leave payments unchanged after a modification, they just naturally started making them higher.  We also failed to realize how annoying it would be to answer all of those calls placed by whiny, deadbeat homeowners.”

“That’s why today, we’ve set it up so that banks don’t have to talk to a homeowner in order to modify their mortgage.  Today, all the banks just add up the number of homes in a specified geography, such as the Eastern or Western Hemisphere, and then divide the number up by bonus size.  Then each banker simply has to fly over the general area of homes being modified and report their numbers to Teaseury,” Geithner explained.

The Wall Street Journal reported that Goldman Sucks CEO, Lord Blankcheck received $100 million in compensation this year, the most of any bank, so the Golden Man was given the most modifications.  Goldman, however, couldn’t utilize the modifications in this quarter, so their Fictional Asset Development team, known as FAD, converted them into a series of leveraged derivatives and swaps that opened and immediately tripled in heavy trading in Asian bond markets.

Goldman says that it expects to post a $97 billion gain for the quarter, and sees nothing standing in the way of another year marked by Powerball-size bonuses.

Related Articles You Might Enjoy:

Goldman Sachs You’re a Liar!

Bank of America Says They’ve Modified 50,000 loans.  Whatever that means.

Wells Fargo’s Ghetto Loans and the Mud People

It’s a terrible thing, but truth be told, I’m not much of a sports fan anymore. Haven’t been since 1980, the year I turned nineteen and left my childhood home in Pittsburgh, Pennsylvania to join the United States Air Force. It’s not that I don’t like sports, I do. I love to play just about all of them. (I can do without ice hockey, so sue me.)

But watching them… well, it’s just never been the same as it once was, back in the days when the Pittsburgh Steelers dominated the NFL, and commanded the attention, respect and adoration of a city to such a degree that no one who was there could ever possibly forget it even for a moment. Pittsburgh was a single city, but it was still a case of the best of times, and the worst of times.

Between 1972 and 1980, the Pittsburgh Steelers, under the leadership of Coach Chuck Noll, won eight divisional championships and four, count them, four Super Bowl championships. I was eleven years old in 1972 when they won the AFC divisional playoffs for the first time ever. It was the first time I remember hearing the unforgettably nasal voice of Pittsburgh’s most famous and beloved sportscaster, Myron Cope, who passed away last year, and so didn’t live to see his team win their sixth Super Bowl championship. That was the year of the “immaculate reception,” the play that some call “the greatest play of all time”.

The year 1972 was the beginning of the Pittsburgh Steelers’ dynasty. Franco Harris caught the ball that bounced off of Jack Tatum, who played for the Oakland Raiders, the team we hated more than any other by far. He ran for a touchdown and Raiders fans have been whining about it ever since. Raider’s coach, John Madden has said that he’ll never get over that play. (As a Steelers fan, all I can think to say is: So?)

I was almost nineteen when, in 1980 against the Los Angeles Rams, they became the first team to win four Super Bowls and Terry Bradshaw became the first to win back-to-back MVPs since Bart Starr in Super Bowl’s I & II. The Steelers beat the L.A. Rams 31-19 that year, coming from behind twice. Bradshaw threw for over 300 yards that day, and two touchdowns. He completed 14 out of 21 passes. He was a God.

I like to tell my friends who did not grow up in Pittsburgh: “We had Super Bowl parties like you guys had Halloween.”

In the Steelers, we didn’t just have a team for which to root… we had heroes that went into battle in defense of our city on Sunday afternoons. In bitter cold and blinding snow we cheered, not just our team, but each individual player… we knew them all by name, by face, and by number. They were ours, and we were theirs.

Of course, before this year’s Steeler victory over the Arizona Cardinals (I could have sworn they were a base ball team, by the way) both Dallas and San Francisco had won the same number of Super Bowl titles, but neither record can really be compared. No team in NFL history can stand along side the Pittsburgh Steelers in terms of stability in ownership, coaching and playing style.

The Steelers didn’t have an “owner,” they belonged to the City of Pittsburgh. Instead they had a “founder,” Mr. Art Rooney, who started the team in 1933, in the midst of the Great Depression, and whose family still owns the team today. I hope they always will.

All told, 22 of our Steelers played in all four Super Bowls, and nine of those players were later inducted into the Pro Football Hall of Fame. The first time they won was in 1975 and I was fourteen, just starting High School. That was the year that Myron Cope was asked to come up with a “gimmick”. And the “Terrible Towel” was born.

Then, the following year, when I was in tenth grade, the Steelers won again. It was 1976… the year of the country’s Bicentennial… which was nice and all, but it was no Steelers Super Bowl back-to-back victory. We poured out of our homes and into the streets toilet papering everything that didn’t move out of the way.

They didn’t win in 1977 or 1978, but we knew that at any moment they could be back on top, so every game was super to us. And then in 1979, my last year in High School, and again in 1980… our Steelers showed the world that they were as strong as the steel city ever was… and the feeling was one of indescribable elation.

The Steelers didn’t have just a defense… they had a “Steel Curtain”. And it was, in our eyes, impenetrable. When it snowed, and boy did it snow in the Pittsburgh of the 1970s… it was awe-inspiring. The Steel Curtain would line up, like warriors preparing to do battle under unbearable conditions. You could see their muscles flex and feel them ache, and you knew that no matter what, our Steelers would never give up. They were playing for us… fighting for us. And in return, we’d never turn our backs on them… we’d sit through sub-zero temperatures and frostbite inducing wind… win or lose… we’d come home proud.

And that feeling of pride was much needed in the Pittsburgh of my youth, because it was a time when so many of our city’s residents weren’t feeling very proud at all. It was the end of the American steel industry, and for the hundreds of thousands of Pittsburgh’s iron and steel workers, whose fathers and grandfathers had worked in the mills, the mines and on the barges before them, it must have felt like the world was coming to an end.

Pittsburgh’s industrial demise meant massive unemployment, and coupled with the nationwide recession of the late 1970s, the impact was nothing short of devastating to Pittsburgh’s economy. When I applied for a job at a fast food restaurant in 1978, the manager who took my application just smiled kindly as he said: “I’m sorry son, those jobs are for men with families.” And I understood.

The money problems were only part of the story. Once proud and mighty steel workers who had helped to build our nation, had been robbed of their livelihoods, but worse than that, they had been stripped of their self worth. And you could see it in their eyes as they drove the busses and cabs, took your ticket at the movies, and stood in line for day labor jobs… none of which paid half what they had earned stoking the blast furnaces of Pittsburgh’s fiery steel mills that used to run 24 hours a day, every singled day of the year… except on Christmas.

I didn’t grow up as a part of “that Pittsburgh”. I grew up in another Pittsburgh, a well-to-do, tree-lined Pittsburgh, with large, stately homes made of brick and stone that had been built by the Robber Barons of the Industrial Age. Men like Frick, Mellon and Andrew Carnegie. No, the Pittsburgh I grew up in seemed a million miles away from the mills, mines and barges. We knew “they” were there, we saw the lines cut into their weathered faces… and we were taught to respect them and feel deep compassion, but we had little in common with the lives they had known or now were forced to know starting in the 1970s.

As a kid, I couldn’t have fully understood the implications of what was really happening… Of being left behind by a society that simply no longer needs you.

Throughout the 1970s, the U.S. economy felt recessionary. But when the steel industry left our shores for Japan, it took a lot of Pittsburgh’s pride with it… and for that part of the city, it would never return. Even today, with Pittsburgh now a vibrant cultural Mecca, dominated by its universities and world famous medical centers, it still feels like a city living with a dual economy. Some of the people, those whose histories are in the mills and mines are still there… and you can seem them… walking across the bridges, staring down the rivers and dreaming of the days when they watched the men steer the barges of coal which fired the mills that made the metals that built the nation… of which we were all taught to be so proud.

As we slide towards increasingly difficult economic times, I am haunted by my memories of the Pittsburgh from my youth. A city divided by economic realities beyond anyone’s control… or comprehension. A feeling of loss that never quite went away… except, of course, on Sunday afternoons when, for a few hours anyway, the only things that were “terrible,” were the towels.

Read Along With Me, With Rhythm & Rhyme… Introducing the 1979 Pittsburgh Steelers.

Jack Lambert, Jack Ham, Rocky Bleier, Donnie Shell, Franco Harris, Mean Joe Greene, Mel Blount and Theo Bell.

Mike Wagner, Ron Johnson, John Banaszak, and Lynn Swan. Larry Anderson, John Stallworth, Craig Colquitt, and Greg Hawthorne.

Bennie Cunningham and Jim Smith, Randy Grossman, Robin Cole. Dwayne Woodruff, Dennis Winston, and Rick Moser all had soul.

Larry Anderson and Sidney Thornton could be seen around the town, and everybody cheered when they saw Larry Brown.

Anthony Anderson, Mike Kruczek and who else, well, let me see… Oh, of course, Terry Bradshaw and Matt Bahr… kicking for three!

Now watch this short segment on ABC News on the Terrible Towel’s legacy… it’s really worth it… I think.

http://abcnews.go.com/Video/playerIndex?id=6824255

Cioffi and Tannin had been led away in handcuffs in June of 2008, accused of lying to and defrauding investors about the condition of their funds, which consisted of heavily leveraged mortgage-backed securities, as they were imploding.  Prosecutors focused on the pair’s emails that showed that they knew things were very bad, while they told investors things were very good.

Investors lost $1.6 billion as a result of what Cioffi and Tannin created and then destroyed, and federal prosecutors had referred to the case as “a clear case of Wall Street fraud,” and “a chance to bring to account two culprits of the sub-prime age”.

So, absolutely cracker jack work there, fellas.  The SEC says it will proceed with its civil suit against the two, so perhaps they’ll win a judgement they can wallpaper their walls with, or perhaps recover some miniscule percentage of the money investors lost.  I guess it’s better than nothing, but does make one want to say “Oh, who cares”.

Of course, when you stop to consider the pain, both financial and otherwise, that these two and too many others like them caused in this country, it’s hard to stomach their acquittal.

I suppose the only consolation is that the Justice Department still have something like 570 investigations against financial types open, so maybe next time the outcome will be different… I certainly hope so.

Regardless, it’s hard to imagine that you can cost investors $1.6 billion, get caught with a paper and email trail that shows that you knew what you were doing as you lied your ass off along the way, and then go home, watch a little T.V. and have a beer.  Is this a great country or what?

If you didn’t read my coverage of Cioffi and Tannin, you can find it here in Part 1:

http://mandelman.ml-implode.com/2009/10/cioffi-tannin-future-household-names-if-anyone-still-owns-a-house-in-the-future/

And here in Part 2:

http://mandelman.ml-implode.com/2009/10/cioffi-tannin-bankers-that-broke-the-world-part-2/

1. How’s this for a headline in the Miami Herald: “As foreclosures in South Florida continue to skyrocket, more and more homeowners are turning to lawyers for legal help.”

And apparently, unlike the federal government and of course the banks themselves, the University of Miami Law School thinks it’s an excellent idea for homeowners to be represented by attorneys.  So, the law school is now offering up its graduates to help people caught in the foreclosure crisis, as part of its Foreclosure Fellowship program.

This is so weird.  I wonder if the California State Bar knows about this.  Or the U.S. Treasury Department.  Or Wells Fargo, Chase, Bank of America, or any of the trained chimps in the banking industry that have spent the last two years running around telling people they shouldn’t hire a lawyer to help them avoid foreclosure.  How embarrassing for them.

The Miami Herald has reported that there are now six freshly trained attorneys that have been taught to represent clients in court, and to provide them with other alternatives, like the negotiations related to short sales and loan modifications.  The legal representation is provided without cost to the homeowner, although each fellow receives $10,000 upon completion of the 180-day program.

Michael Froomkin is a University of Miami law professor, and the head of the fellowship program.  He says that he became motivated to create a Foreclosure Fellowship program after learning of the thousands of foreclosure cases at Florida courthouses.  As quoted by the Herald:

“When the foreclosure happens, the number of important legal defenses that may be available are not always obvious to people without legal training.  Some of these options will buy you time, and some of these will do a lot more . . . even those that buy you time are a way of getting a lender’s attention and stimulating a negotiation.”

So, let’s see… the University of Miami Law School and Law School Professor Froomkin thinks homeowners should be represented by legal counsel when at risk of foreclosure, but Aurora Loan Services disagrees?  Gee, I’m not sure whose opinion I should trust here: The law school and law school professor, or the company that stuffs and mails me my payment coupon each month, and can’t seem to answer their phone?  Are you friggin’ kidding me?

Barbeth Foster is a recent graduate of the law school. He and his team of lawyers, supervise three law students, who signed up to work 15 hours per week.  According to Foster:

“People don’t realize what options are available; they don’t have to roll over and take whatever is happening to them.”

They don’t?  I certainly love this guy’s enthusiasm.  Maybe someone should send him a homeowner whose mortgage is with IndyMac/One West Bank.  Because isn’t that IndyMac’s/One West’s latest slogan…

“Roll over and take it, whatever it is.  And leave the driving to us.”

It’s something like that… right?

2. Think the Great Recession is Over? Maybe it’s headlines like these that made you feel that way:

A. Stocks Soar As Bank Aid Ends Fear of Money Panic

B. Brokerage Houses Are Optimistic on Recovery of Stocks, Brokers in Meeting Predict Recovery

C. Brokers Believe Worst Is Over, Recommend Buying Real Bargains - Wall Street, in looking over the wreckage, has come generally to the opinion that high-grade investment issues can be bought now, without fear of a drastic decline.

The only thing is… chances are those headlines all appeared in print before you were born.

A. New York Herald Tribune, March 28, 1929

B. The New York Times, October 25, 1929

C. New York Herald Tribune, October 27, 1929

By April 1930, the stock market had gained 48% since its crash in October of 1929.  By September 1930, many investors had started feeling the same sort of optimism many are feeling today.

“The economy is showing unquestionable signs of life.”  U.S. Labor Secretary, September 12, 1930.

“We have passed the low point of the recession.”  President of New England Council, September 13, 1930.

Over 75% of brokerage houses now recommend buying stocks.  Brokers, business executives and even the general public are more optimistic. Wall Street Journal, September 14, 1930.

Those that were there say that investors lost more money in the rebound than they did in the initial crash of 1929!  By 1933, the market had fallen 89% from the rebound high it reached in 1930.

(Hey, don’t get mad at me… I only do the reporting, remember… you guys do all the deciding.)

3. We Interrupt this Museletter to Bring You a Story from ABC News Correspondent, Bill Weir

A homeowner in the Phoenix lost their home to foreclosure, after they had hired a firm to help save it.

The firm they hired did succeed in getting the mortgage servicer to offer the homeowner a loan modification, but the homeowner turned it down saying that it wasn’t enough.  They started the process in January.  They completed their package and submitted it to their servicer in February.  They were offered a modification in June.  They declined it, and lost their home to foreclosure in July.

Bill Weir, a correspondent with ABC News, obviously sensing the opportunity for a smear story, showed up unannounced in the lobby of the loan modification firm hired by the homeowner.  The firm’s owner, recognizing the familiar face of the ABC News personality, and seeing the film crew milling about, came out to greet them, invited them inside, and agreed to an interview.

They sat down to talk.  The owner of the loan modification firm mentioned that he could see that the producer was concealing a small video camera, attempting to hide it by holding it down by his hip.  He told the producer that hiding the camera wasn’t necessary and that he was free to bring it out and tape him out in the open.

The producer declined, saying only “that’s okay,” in response.  It seemed strange, so the owner asked if they just wanted to create the illusion that it was a hidden, undercover camera.  He got no response, but when the story aired there was no question about it… all of the footage appeared to have been shot from under someone’s jacket at hip level.

Well, all I can say is thank goodness for investigative journalists like Bob Weir at ABC News.  Without professionals like Bobby… well, we might actually be shown the truth.

4. House Painting as a Career Choice. Or… The Future of the Mortgage Broker.

Being the self-proclaimed thought leading, out-of-the-box thinker that I am, I set out to do some out-of-the-box, thought leadership type thinking on the subject of what the future holds for mortgage brokers, and I think I’ve come up with something that hasn’t already been written about exhaustively in the press.  If you’re a mortgage broker keep an open mind… the idea may grow on you.

House painting.

Who has more experience with homes than you do?  Oh sure, there are real estate agents and appraisers, but they never made any real bubble money anyway, so to most of them this meltdown just means spending more time carpooling the kids, or picking up a teaching job.  And besides, homes are still going to be bought and sold, so they’ll be fine.  Homes will still be financed too, of course, just not by you, so it’s you that has the real problem here.

There are quite a few other reasons why mortgage brokers should consider transitioning to the house painting industry… and in a sincere effort to be helpful, I thought I’d outline a few that came to mind, in order to help get the ball rolling.

12 Reasons Mortgage Brokers are Uniquely Positioned to Dominate the House Painting Industry:

1. You know where the homes are.

2. It’s a growth industry – Can’t buy or sell, might as well paint.

3. Leverage your existing knowledge of homes, and still get to talk about TARPs.

4. “Yield Spread Premium” replaced by “Premium Yield Spread”.  The phrase now applies to choosing paint, but no one cares if it’s ever disclosed to homeowners.

5. Expertise in “refinancing” replaced with expertise in “refinishing”.

6. Skill using a calculator remains at a premium, and when lease on Mercedes or Lexus runs out a 1992 pick-up fits in culturally with new peer group.

7. Opportunity for predatory painting, so being bilingual still a plus.

8. Instead of competing with banks, you can submit a bid to paint them.

9. Relationships with real estate agents and brokers more valuable than ever.

10. Trade in “white-collar” job for “no-collar” job.  Paris Hilton says: “Overalls are hot.”

11. Flexible hours, save on dry cleaning, work at home.  (Not your home, perhaps, but “a” home.)

12. Painting & Decorating Contractors of America (PDCA) Est. 1884, offers scholarships, emphasizes safety, and provides networking opportunities at trade shows.

See, and I bet you thought I was going to be sarcastic, instead of thoughtful, insightful and caring, as I so clearly was.

(The above list was excerpted from, “The Future of the Mortgage Broker,” which is the feature story in the November issue of The Niche Report magazine.  To subscribe to The Niche Report click here: Subscribe to The Niche Report Free!)

5. California Attorney General Jerry Brown Wants Answers About Foreclosures. Why, all of a sudden, do you suppose?

The Attorney General in California is Jerry Brown… remember him?  He was the guy in politics that slept with pop singer, Linda Ronstadt, during the 1970s.  Yeah, well Jerry wants some answers.  Apparently, someone woke him from his nap and told him that there were a bunch of Option ARM mortgages that just might explode next year, causing a whole gaggle of new foreclosures.

Now, when I first read the story about how Jerry wrote a letter to all the major bankers asking them to give him a bunch of information I thought… oh look… how cute… he’s trying to learn.  But then I thought… no, that can’t possibly be right.  Then I thought… maybe he’s interested in changing something.  But then I realized… nah, no chance of that!

So, why does Jerry care about future foreclosures all of a sudden.  It would be like if Obama went on television tomorrow and was all of sudden interested in the economy.  Wouldn’t that be spooky?  Why does Jerry care?  Why is he so interested?  Why now?  Jerry’s letter asked the bankers that received it for the following information:

• How many Option ARMS do you have in California?
• How many have experienced negative amortization and how much negative amortization?
• An explanation of the efforts taken to handle customer service concerns, including any increased     staffing and a description of any notices to borrowers whose loans are about to reset.
• A detailed explanation of the loan modification plans developed for option ARM loans, including     circumstances allowing for reduction of principal, and the possible amounts of principal reduction.
• If the plans for modifying option ARM loans have changed since the beginning of the foreclosure     crisis, an explanation of the changes and the reasons for those changes.

Jerry’s letter went to Bank of America Home Loans & Insurance Wells Fargo & Company JP Morgan Chase & Co. Goldman Sachs’ Litton Loan Servicing, GMAC’s ResCap, Ocwen Financial, OneWest Bank, formerly IndyMac, American Home Mortgage Servicing, Saxon Mortgage Services and Select Portfolio Servicing.

Well, guess what… Jerry may run for governor again next year.  You don’t suppose that’s why he’s asking these questions, do you?  Not that they’ll be answered, mind you, and not that the bankers give a crap about California’s AG, unless maybe his ex-whatever-she-was was going to perform, “When Will I Be Loved” at the ABA Convention.

And then it came to me… Option ARMS… of course… RICH WHITE PEOPLE LOSING HOMES!

Remember the Rodney King riots in LA?  I do.  They went on all afternoon, and we were all safe in office-white Orange County watching everyone in South Central set everything on fire, with a little looting on the side.  It was like watching a NatGeo special on the struggles of the inner city, or something close.  Then at something like 4:30 PM, someone through a bottle across Wilshire… it landed in Beverly Hills… and the President called out the National Guard.

So, interesting dynamic at work here:

Sub-prime loans = Poor brown people.              Option ARMS = Rich white people.

Foreclosures affecting rich white people?  Members of congress are going to look like it’s the first time they’ve heard of the foreclosure crisis… what’s that you say… losing their homes… my, oh my… I did not know that.

Of course… I called this over a year ago.  Next year’s an election year and he’s running… better batten down the hatches, which is a euphemism for “Better settle down the rich white people before running for office.”  Up until now, when Jerry looked at the sub-prime mortgages in foreclosure all he said to himself was: “Big deal.  What can BROWN do to me?”

WELL, THAT’S IT FOR ISSUE 5.0

of MANDELMAN’S MONTHLY MUSELETTER

But don’t worry… ISSUE 6.0 is only a few weeks away.

]]> http://mandelman.ml-implode.com/2009/11/2309/feed/ 0 http://mandelman.ml-implode.com/2009/11/how-banks-view-loan-modification/ http://mandelman.ml-implode.com/2009/11/how-banks-view-loan-modification/#comments Mon, 09 Nov 2009 18:29:22 +0000 Mandelman http://mandelman.ml-implode.com/?p=2280

I can’t think of any subject that has been so widely and frequently discussed and studied, over such a long period of time, by such a large number of experts and observers, who continually espouse such a diverse range of opinions and cite such a large number of conflicting facts, that is still is so misunderstood… or understood differently by different people… or in short, is such a mess… that affects so many people… and is so important to our government and our economy… yet remains pretty much unsolvable… AS LOAN MODIFICATIONS.

See… loan modifications today represent such a complex subject that even writing a sentence describing the situation surrounding them, such as the one above, was a pain in the neck.

Let’s start with the questions on everyone’s mind… Why aren’t more loans getting modified?  Why is it so difficult to get the bank to modify a mortgage?  Why are trial modifications ending in foreclosure?  Why is it that people are consistently treated so poorly by the banks?  Is it the investors that are making it hard to get a loan modification?  Is the government doing enough to get banks to modify loans?  And should people hire an attorney to help them obtain a loan modification, or go it alone?  That’s at least a pretty good start, right?

I think the fundamental thing that almost no one understands involves how a bank views a borrower’s request for a loan modification.  Lot’s of people, including me in past articles, have said that banks simply don’t want to modify mortgages.  Lot’s of people, including me, have also pointed out that servicers make more money by foreclosing than modifying loans.

All of those points apply in certain circumstances, but they’re also beside the point to some degree.

A Banker’s View…

Your bank views you calling to request that your mortgage be modified as the beginning of a process.  Maybe you truly need and deserve a loan modification, but maybe not.  The only way the bank will be able to tell one way or the other is by putting you through that process, and it’s not a pleasant process in the least.

Let’s say that you’re someone that has good credit, you’ve never missed a payment, and now are saying that you need your loan modified or you may lose your home to foreclosure.  When you call your bank to ask about a loan modification, they’re going to tell you that they can’t talk to you until your payment is delinquent by at least 30 days.

You hang up the phone.  You’re disappointed.  And you now have your first decision to make: Do you let your credit score get trashed by going 30 days late on your mortgage?  It’s not easy decision.  Once you head down that path it’ll be years before your credit score is back up where it’s always been, and if you need your credit to be good for other reasons, chances are you’ll decide that you no longer want a loan modification because the cost of trying to get one… sacrificing your credit score… is too high.

The bank’s process has just saved the bank quite a bit of money.  Had the bank agreed to modify your loan, it would have been like throwing money away unnecessarily because you kept making your payments without them having to modify your loan.

Now, let’s say that you decide to go 30 days delinquent on your mortgage.  You call back, now 30 days late, but now your bank tells you that you have to be 90 days late before you can be transferred to a negotiator.  You hang up the phone.  Again, you’re disappointed.  Do you go 90 days late, or do you bring your loan current and forget the whole thing?  Some bring their loans current, others don’t.

If you don’t bring your loan back to current status, you’re about to start receiving a series of letters and phone calls designed to make you feel ashamed, guilty and scared.  And those letters will come more and more frequently, and they’ll be written using stronger and stronger terms.  And chances are you’ll feel worse and worse as time goes by.

Then in 90 days, assuming you’ve gone the distance, you call the bank again.  This time they’ll tell you that your credit score is now too low to qualify for a loan modification.  Now you’re enraged.  You stomp your feet.  And then, if there’s anyway you can do it, chances are you bring your loan current and try to forget the whole idea of a loan modification.  Maybe you get rid of a car payment to do it, maybe you rent out a room or take on a part-time job to generate the extra income you need, or maybe you borrow the money from a relative.

You never even bring up the whole experience to your friends or family members because you’re ashamed that it even happened.  You’re ashamed that you were having trouble making the mortgage payment that you signed up for, and you’re ashamed about having gone 90 days late on your mortgage payment and almost losing your home.  The whole thing becomes one of those skeletons that you hope will soon fade away in your closet of memories.

Besides, what would your friends or family members even say if you did tell them?  Do you think they’d be on your side and angry at the way your bank treated you?  Or would they take the view that the bank had every right to handle your situation the way they did, because after all, you signed the mortgage and agreed to make the payments… the bank has no obligation to lower your payment just because you having trouble making it.  You’re lucky the bank didn’t foreclose, in the eyes of your friends or family members.

Oh, and one or two more things, while we’re at it… maybe you should have opted for a little less house and not gone quite so far out on a limb… maybe you should have spent a little less on your car too, and not used your credit cards for all those nice clothes you wear… maybe you’re just living way beyond your means.  You’re probably not saving for retirement either.  You’re one of THOSE irresponsible people and maybe losing your home to foreclosure would teach you a lesson.

Whew… it’s exhausting, isn’t it?

But, let’s say for a moment that you could not find a way to bring your mortgage payment current when told, when you were 90 days delinquent, that your score was now to low to qualify for a modification.  Now you’re 120 days behind, and soon it’s been six months since you’ve made a payment to your bank on your loan.

By now the bank is sending you the most threatening letters imaginable.  They could foreclose at any moment, according to the letters and their tone tells you that you are basically an irresponsible failure who cannot be trusted because your word means nothing.  You promised to make the payment and now you’re not living up to that promise.  You’re a promise breaker… a liar.  How do you sleep at night?  You shouldn’t even have friends, because if your friends knew what you were up to, they likely wouldn’t want to be your friend anymore.

Nonetheless, you’re now seven months late, then eight, and then nine.  Now the bank is calling you almost daily, the pressure is becoming unbearable, you’re trying everything to make more money so that you can make the payment.  If you do find a way to come up with the cash, you bring your mortgage payment current immediately.  If you get a new job that pays more, you call your bank and start begging and explaining that everything is going to be okay… you’re working again… if they’d just please understand… you’re a good person… you’ll pay your payment every month and on time from now on… you’re sooooo sorry to have gotten behind… How about $1200 this week, and then $1200 the following week, and then $2000 by the end of the… blah, blah, blah.

You’re a babbling fool that will agree to just about anything the bank says at that moment.  If the person you’re talking to at the bank acts the slightest bit nice to you, or comes off as even a little bit understanding of your situation… you gush with appreciation and feel like you want to be their BFF.   Thank you, thank you, thank you, thank you, thank you, thank you… really… thank you so much.  My husband thanks you, my children thanks you… my dog thanks you.  Yuck.  It’s disgusting, really.  I just threw up in my mouth a little.

Or, maybe that’s not what happens.  And now you’re almost eleven months late.  You’re working.  You could make a reasonable payment if you weren’t so far behind.  You’ll never be able to pay off the arrears though, so what’s the point.  You’re desperate… you’re about to give up and resign yourself to the fact that you’re going to lose your home to foreclosure.  You’re trying to get used to the idea that you’ll soon be packing and calling the moving truck… its heart wrenching for anyone to watch.

Well, guess what?  Depending on the specifics of your situation… whether there’s any equity in your home… how far underwater you are… how long are homes like yours and in your area remaining on the market before being sold? Things like that.

Do you see what’s going on?

Since foreclosure is now imminent, the bank can’t threaten to ruin your credit score anymore, as it’s already ‘F’ and would be ‘G’ if scores went that low.  The bank is now trying to figure out two things:

1. What is the likelihood of you being able to make the payment if the bank modifies your loan?  What if they take the amount in arrears, tack it on to the back end of the loan, and reduce your monthly payment by a couple hundred a month?  Would that do it?  Or would you agree to the deal and then not be able to make the modified payment… and again in six months end up right back in foreclosure where you are now.

If the bank thinks that might happen, they won’t modify your loan.  They’d rather foreclose now than go through this same thing next year and end up foreclosing then.  Real estate values will likely be lower next year, so by waiting the bank just assures itself of a bigger loss on the property.

The cost of foreclosure to your bank is going to be 30% to 50%, or even more in the worst of instances.  But that’s not the most important factor to your bank… this is all about your bank’s degree of certainty that if they modify your loan, you won’t be back in foreclosure anytime soon, and likely never.  Your bank views a loan modification as pretty close to unthinkable in the first place, so it’s unquestionable that it’s a once in a lifetime thing in their eyes.  You should be too embarrassed to even ask a bank to modify a loan a second time, according to your bank.  It’s almost like… if that happens, you’ll probably want to change your name and move to another state. What a load of crap the banks have peddled our way all these years.

So, you see… it’s a range.  In order to get your loan modified, you need to fall somewhere between “Definitely won’t default again if loan reasonably modified,” and “Will self-cure the mortgage before home is actually taken back by the bank”.  Get it?

I talk to people all the time that have recently applied for a loan modification, and they always talk to me about how it will cost the bank more to foreclose on their particular house, so they expect the bank to modify the loan.  But then the bank refuses, and I hear people say that they can’t understand it because the bank should do what’s in the best interests of investors.  Then we start talking about how servicers make more money foreclosing, all of which is true.

The problem with this line of thinking, however, is that it fails to incorporate all the data… it’s not just a numbers game to the bank.  First they need to know, if they offer you nothing, will you really end up losing the home to foreclosure, or will you let the Devil himself rent out a room to avoid that shameful outcome?  Then they need to know that if they do accommodate you and provide you with a modification, chances are good that you’ll never miss a payment for the rest of your life.

Shame, shame, shame…

So, how should a bank go about getting the answer to either or both of those key questions?  Self-cure and/or re-default?  It’s not like you can find the answer to either of those questions from looking at an application or a credit report.  You certainly can’t tell by talking to someone on the phone.

The only way a bank can know for sure whether you’re going to self-cure and eject yourself from the foreclosure process, is to let you get to that point and see what you do.

It’s like a game of poker… will you fold under extreme stress and pressure and show up with the money to save your home, or will the bank actually be forced to foreclose, and therefore better off to modify your loan… and if they do approve your “mod,” as they say in the biz, will you make it just fine for a long, long time, or will you end up right back where you next year at this time, if not sooner?

Once a bank knows the answer to those two questions about you, then the bank’s cost comparison between modification and foreclosure becomes pivotal, but until then, chances are the bank will play out its inherently superior hand and count on you folding your cards before foreclosure by coming up with the money you said you could not possibly come up with when you were talking with your bank’s representative about a loan modification.

I talked to a woman a few days ago, she said she was in her early sixties, said she owned two homes, desperately needed at least one loan modified and probably both, otherwise she’s going to be on the street.  She wanted me to recommend a few attorneys for her to talk to, and I gave her the contact information for the lawyers I knew in reasonably close proximity to her home.  Then she asked me a few questions, and the last one I’ll always remember.  Referring to the lawyer, she said:

“Do you think I have to tell him about my trust account?”  (Adorable, right?)

I answered as honestly as I could.  I said: “I wouldn’t.”  (It’s probably not the right answer, I realize, but I’m just saying…)

If this were a tennis match, the score would always read: Advantage – Banks & Servicers

The reason that, other things being equal, I advise people to hire an attorney to help them negotiate a loan modification is that their lender or servicer will ALWAYS have a huge built in advantage in any negotiation over the settlement of a debt you contracted to repay, because the moral norms for borrowers work against them, and the market norms that apply to banks, support the bank doing pretty much whatever it thinks it needs to do to get the borrower into compliance with the terms of his or her loan… or reclaim the property.

Even when people hear that a bank did something really egregious or even illegal, many of them just say: “Yeah, well, I guess that can happen.”  It’s as if to say that perhaps the bank went too far, but the borrowers were juggling flaming chainsaws in terms of risk, and the bank still has the right to take back its home and punish the irresponsible homeowner who fell outside of our society’s norms by failing to fulfill his or her promise to repay a debt.

See, there are some things in our society that work the way they do only because we believe they will work the way they do.  The FDIC, or Federal Deposit Insurance Corporation, is a commonly offered example of this principle at work.  The FDIC “guarantees” cash deposits up to $250,000 per account, as of last year, I believe.  So, no one has to worry about rushing down to the bank to get their money out if there’s a problem at the bank, the FDIC will cover any loss up to $250,000 per account.

Except, even in the best of times, the FDIC could not possibly come up with the money to cover even a small fraction of bank deposits in this country.  If there ever were a disaster that caused all the banks to fail, the FDIC would be meaningless.  The FDIC is an independent agency of the federal government and you might call it a “faith based” organization because it only exists to give us faith in our banking system, and only works as intended because of that faith.

Well, loan modification negotiations are a little bit like that.  The bank gets to use shame, guilt and fear to get you into compliance with your loan.  Once you’re deeply ashamed, you won’t tell anyone what’s going on… and you’ll feel worse every day.  Then you become afraid to answer the phone.  Then you’re turning off the machine… you won’t even want to hear the phone ring.

Your bank will also greatly exaggerate what it will cost you to lose your property to foreclosure.  You’ll be told that you won’t be able to buy anything for a decade, and all kinds of other nonsense.  By the time you’re done reading a few of the letters you get from your lender each week, you can easily become convinced that losing your home is almost the end of all opportunity in your life.  Might as well be a bum after that.  It’s absurd of course… you can buy another home in 2-3 years, if that’s even what you want to do.  There’ll be so many foreclosures on the market… you’re going to be hearing about foreclosures selling ten years from now.

The Point Is…

The point is, that when homeowners start the process of negotiating with their lender, they’re not only subject to being made to feel guilty and ashamed, but they are also likely to over-estimate the personal cost of foreclosure, all as a result of the bank’s and our society’s intentional efforts to make borrowers feel that way.  It’s no accident, is what I’m trying to say.

You see, we keep the banks open and safe by believing in the FDIC, and we keep people from walking away from their homes when the value of those homes drops significantly by imposing our society’s moral norms, which include shame, guilt and fear, related to repaying debts.  If the government and the banks can make homeowners deeply ashamed and afraid to lose their homes, then fewer people will even ever ask for a modification in the first place.  With me?

Why the Bank Doesn’t Want You to Hire a Lawyer or other Expert…

When a homeowner hires an attorney to help negotiate a loan modification, that attorney is not going to being made to feel ashamed, guilty, or afraid… the borrower can be made to feel all of those things and more, but the lawyer, not so much.  He or she is a hired gun, if you will.  That’s why the banks don’t want homeowners to be represented, and why they want homeowners to call them directly.

Treasury looks the other way on this “put-the-borrower-through-hell” process because it understands that banks have to make sure that they are not throwing away money by modifying loans for borrowers who would have self-cured.  Nor does the government want the banks to modify loans for people who won’t be able to make the modified payment.  And since the only way for the bank to really know either of those things is to put the borrowers through their paces, as it were.  Many will self-cure, some should be foreclosed upon… blend, shake, stir and pour,,, see what comes out.  And of those that fall somewhere in the middle, some will have more or less equity, and some will be in markets where houses are selling relatively faster than others.

Out of that psycho-social-financial-market analysis, the bank will modify some loans… but the process used to conduct the so-called analysis is guaranteed to frustrate the hell out of everyone who enters it that’s determined to obtain a loan modification.

Being represented by an attorney or other expert throughout the process is unquestionably better than not being represented, mostly because that attorney won’t be subject to the bank’s tactics of trying to shame, guilt or scare, and as a result of that, is likely to think more clearly than you would be able to.  And also because of the attorney’s or other expert’s knowledge of the law related to the foreclosure process and the HAMP guidelines, that attorney is more likely to get a result that’s acceptable to you, the homeowner… and by acceptable, I mean a modification that’s sustainable over time.

Is This How Things Should Be Done Today?

Absolutely not.  The situation we’re in today is NOT a normal market correction, and I thought I’d better make it clear how I feel about how the banks are handling loan modifications: I hate everything about it, and I think it could not be more wrong.  The Obama Administration has continued our government’s tradition of implementing pointless programs designed to help stop the foreclosure crisis.  Nothing our government has done has helped in the least… they’ve failed us at every turn.

It’s not today’s homeowners that are responsible for the position in which they find themselves… no matter what anyone tells you… it is NOT your fault.  If someone would like to debate that point with me, bring it.  I’m easy to find and can be emailed at mandelman@mac.com.  But come to the discussion prepared, because I am.

This meltdown was caused by this country’s financial institutions, and not by people with mediocre credit scores who wanted to buy houses.  It’s the banks that did this, but no one is making them do anything to fix what they’ve clearly broken.

We’ve given the banks in this country something like $11 TRILLION so far, and we’re going to have to give them a lot more.  The so-called toxic assets are still right where they were last fall, and the banks that were too big to fail last year, are now bigger.  They have an obligation to act in the best interests of the homeowners they screwed, and in the best interests of our nation’s economy because without American taxpayers, they wouldn’t even be open for business.

So, don’t read what I’ve written and come away thinking that I approve of the way banks view borrowers asking for loan modifications… I don’t.  I’ve only written what you’ve just read because I think it’s important that people understand the dynamics of what’s going on… that the reason they feel guilty and ashamed is because the banks and our government want them to feel that way, so that people don’t just start walking away from their mortgages because they’re so far underwater.

They’re manipulating you into feeling ashamed for being in trouble on your mortgage… but don’t let them make you feel that way.  It’s not your fault… it’s the banks that wear the black hats in this horror movie, make no mistake about that.

And, in the event that you’ve already lost a home to foreclosure, don’t believe the crap about how your life will be ruined for another ten years.  It’s simply not true.  You may not be able to buy another house for the next few years, but so what?  We haven’t come close to hitting bottom, so you wouldn’t want to buy another home in the near future anyway.

All forecasts say that we’ll have 12 million more foreclosures in the next two years, and that number is probably low, so don’t feel alone and ashamed about your situation.  The people you’re talking to down the street have problems too, they’re just too ashamed to tell anyone about their situation, just like you’ve been afraid to talk about yours.

Let it go… and let’s turn up the heat on exposing what the banks have done and continue to do.  Next year the mid-term elections will mean that every single representative in the House is up for re-election.  Let’s just see if we can’t send a message they’ll hear and listen to… I’m sure we can, if we want to.

It’s not over until it’s over.  Don’t give up the fight.  Knowledge is power.  As Winston Churchill once said:

“Never give up.  Never give up.  Never.  Never.  Never.”

There are some things that every single US citizen should know…

Preface

In 2003, the Office of the Comptroller of the Currency (“OCC”), proposed a regulation that would preempt essentially all state banking and financial services laws as applied to national banks and their operating subsidiaries.  In other words, if a state’s governor, legislature or Attorney General didn’t like the way a bank was operating for whatever reason… tough cheese… not much could be done about it.  The regulation meant that only federal agencies could do much of anything as far as the national banks were concerned.

The regulation was opposed by the National Conference of State Legislatures, which is an organization that’s supposed to make sure that state legislatures have a strong and cohesive voice in the federal system, but in this instance that “strong and cohesive” voice must have lacked strength and/or cohesiveness, because in 2004, the OCC got its way and their proposed regulation went into effect.

But that’s no way to start telling a story…

Our story begins in New York, way back in 2005…. the good old days, as it were… when, for the first time ever, the Federal Reserve released home mortgage data that included information on the race, sex and income of loan applicants.   Well, New York’s then-Attorney General, Elliot Spitzer, apparently perused the Fed’s data and noticed that if a person had a high interest (read: sub-prime) mortgage, the odds were quite good that he or she was a minority.

In other words, Elliot got the idea in his head that maybe… just maybe, the banks were taking unfair advantage of inner city lower income types by forcing them into lousy loans just because they could.  Crazy, I know.  Where in the world would he get a wild-ass idea like that, do you suppose?  Oh that’s right, from the Federal Reserve’s published data, I forgot.  Anyway, Spitzer decided he’d better take a closer look into the lending practices of national banks.

Spitzer claimed authority to conduct his investigation under federal and state anti-discrimination and consumer protection laws, and sent “letters of inquiry” to the banks asking for information related to their lending practices.

Now, here’s where it starts to get weird…
In response to Spitzer’s “letter of inquiry,” the Clearing House Association (“CHA”), which can be described as a “consortium,” (or perhaps “cabal” is a better word) of national banks,” filed a lawsuit against Spitzer, asking the court to issue an injunction stopping Spitzer from issuing any subpoenas in his investigation.  Not to be left out, the OCC brought a similar action and the two suits were combined into one.  Obviously, somebody didn’t want the AG of NY looking at any bank lending practices.

In The National Bank Act it states: “No national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof.”

The courts agreed with the position taken by the CHA and OCC, issuing a permanent injunction against Attorney General Spitzer that prevented him from issuing any subpoenas or demanding an inspection of any national banks’ records.  The New York Attorney General was not going to be allowed to take a closer look at any of the bank’s lending practices.  The court held that the phrase “visitorial powers” is ambiguous, but that the OCC’s interpretation of the phrase, in that it preempted the states from enforcing state laws on national banks, was reasonable and therefore entitled to something called “Chevron deference”.

“Chevron deference” is not a new fuel additive that keeps your car’s engine clean.  The term does, however, come from a U.S. Supreme Court decision involving the oil and gas company, Chevron.

Chevron deference is considered a doctrine of administrative law.  It states that when a law is judged to be ambiguous, but it falls within the subject matter jurisdiction of a federal agency, then as long as the agency’s interpretation is considered reasonable, then it’s the final word on the subject.  In other words, when no one can agree what a law means, and you let a federal agency decide the answer, it’s known as “Chevron deference”.

Spitzer was never one to be easily dissuaded; he appealed the decision, but lost again.  And that was the end of Elliot’s go at the national banks.

Then, in 2007, a Supreme Court decision again confirmed OCC’s preemption of state laws and regulations as related to banks, when the court ruled that Wachovia Mortgage Corporation, which was a wholly owned subsidiary of Wachovia Bank, was not subject to regulation by the Michigan Office of Insurance and Financial Services.

Still with me?  Hang in there… it’ll be worth it.

Cuomo v. Clearing House: This Changes Everything

Fast forward to 2009, New York’s Attorney General is now Andrew Cuomo and he’s decided to pick up where Elliot left off when he was rudely interrupted spending money on a hooker.  AG Cuomo basically argued that the OCC’s interpretation so significantly altered the balance of power between state and federal governments, that it required a clear statement by Congress.  He even questioned whether “visitorial powers” were involved in his actions.  All he wanted to do was enforce state laws.

Cuomo also argued that the OCC’s interpretation made national banks immune from any state enforcement of consumer protection and/or antidiscrimination laws.  He said that because the OCC doesn’t have the ability and expertise to emulate the roles of state attorneys general, it should not be permitted to preempt the states’ traditional role, protecting consumers’ interests.

It’s the Supreme Court we’re talking about here, so there was a fair amount of arguing back and forth, but to make a long story at least somewhat shorter, the bottom-line is that he won… Cuomo did it!  The Supreme Court finally overturned their previous decisions on the OCC interpretation and as of this past June 28^th ruled 5-4 that federal banking regulations did not preempt the ability of states to enforce their own fair-lending laws.

In reaching that decision, the court opened up the national banks to being investigated by state attorneys general related to violations having to do with state consumer protection laws.  At that moment, the bankers knew, as the song says, that they had trouble… right here in River City.

And that, ladies and germs, is why you’ve got to love the good old judicial branch, with their lifetime appointments.  It may not sound like much, but at least we know that there are five people with power in our government that don’t concern themselves  with the banking lobby’s highly influential and well-funded influence peddlers.

State Attorneys General Start Your Engines…

Although the media has only recently started to catch on, the impact of the court’s decision was immediately understood by state Attorneys General across the country, many of whom have already started assigning their staffs to the exploration of how their new-found power might be used.  Unquestionably, their first stop is the foreclosure crisis, although future efforts are likely to include other lending related issues such as credit cards, and the like.

Arizona’s AG, Terry Goddard, is one of the attorneys general leading the pack.  Arizona continues to be one of the states hardest hit by foreclosures, and Goddard has had enough with the lip service of lenders and servicers.  Foreclosures across his state now consistently exceed 7,000 a month.

Lenders and servicers have been asking Goddard to encourage homeowners to contact them directly, so that’s exactly what he’s done to-date.  But the homeowners that try to contact their banks, just end up calling the AG back, basically saying they’d likely have more success obtaining a loan modification by calling a cactus.

According to a recent story in The New York Times, Goddard said: “People call and get the runaround.  Their paperwork gets lost.  It’s time to stop this absurd dance.”

The Times’ story quotes Goddard as saying that he and other AGs have tried to be persuasive with the lenders and servicers in an effort to get them to be a meaningful part of a solution to the crisis that they had such a large role in creating.  But Goddard says: “… their waterfall of excuses, the abysmal numbers of modifications, tells us that persuasion is not working.  As a result, we’re moving much closer to litigation.”

Goddard and his peers in other states are considering lawsuits accusing the banks of creating and marketing millions of bad loans, and failing to fulfill their promises related to loan modifications.  Such lawsuits would have been impossible prior to June’s Supreme Court decision in Cuomo v. The Clearing House.

Every state has laws that prohibit fraud in consumer lending, and states are now exploring the idea of litigation alleging that the banks engaged in massive fraud against consumers by marketing unintelligible loans that they knew would be impossible for most people to repay.  Banks did so to earn what added up to billions in short-term fee income from originating the loans, and then quickly sold the loans to government entities, like Fannie and Freddie, who then required costly taxpayer funded bailouts.

Cranky Bankers…

The banks and their powerful lobbies, it should go without saying, are none too pleased with the recent developments inspired by the Supreme Court’s decision.  The Mortgage Bankers Association, one of those lobbies, declined to comment on the situation when asked by The New York Times, but spokesperson John Mechem had the unmitigated audacity to warn… or rather, threaten that consumers would be the ones that end up paying for any increased legal activity.

As quoted by the Times, Mechem said: “Lawsuits add to the patchwork of regulations that increases compliance costs to lenders, which in turn increases the cost of credit to borrowers.”

What a jackass this guy is.  I mean, I don’t think I can remember hearing anyone say anything quite that offensive, since perhaps that little pocket-knife rattling moron in Iran said something about taking on the world over nuclear power.  I’m not proud of what I’m about to admit, but when I read what Mechem said, all I could think of was kicking his insipid little ass all around a parking lot.

How dare you, Mr. Mechem?  Who in the world do you think you are?  Did you really just respond to the possibility of state lawsuits designed to right the unthinkable wrongs committed against American consumers and our society as a whole by those who write your paycheck, by saying that we better not because your guys will make us all pay?  Did you think that would get us to back down and let your guys off the hook?  You’re an idiot, Mechem, a real life, honest to goodness idiot.

And not only that, but did you really threaten us with increasing the cost of credit?  Seriously?  Seriously?

How in the world could taxpayers possibly ever pay more for the cost of credit than we’re paying NOW as a result of what the banks did over the last so many years?  You mean that you’ll make us pay more than that?  More than the $700 billion in TARP, and the countless TRILLIONS in free loans?

What are the banks going to do, charge 70% on credit card balances?  More than 390% on hard money loans, the new limit set by the credit card reform legislation that you weakened before allowing it to pass through the legislature earlier this year?  How about more than $25 for a $2.50 overdraft?

Go ahead, Mechem, go tell the bankers of this country to just try to punish us by heading down such a path, and the next time I personally borrow a nickel will be… hmmm… let’s see… perhaps when pigs fly, comes to mind, which will be roughly the same year your pals get their next zillion dollar bonus.  I’d rather live in a tent under the 405 Freeway and keep my retirement savings in a Hills Brothers coffee can, then back down to your bullying threats.

The Banking Lobby Shifts Into High Gear…

Every single American should know: If the banks have anything to do with it, the American consumer’s victory won’t last long.  The banks are hot and heavy lobbying Washington D.C. to make this problem go away.  They want Congress to block the states from being able to take more aggressive legal action.  They want Congress to preempt any state laws that are more restrictive than federal statutes.

In fact, just two weeks ago, the House Financial Services Committee voted to give the federal government the power to stop states from regulating the behavior of national banks in certain instances.  The new rule says that the OCC can override the states in cases where the OCC finds that a state’s laws interfere with regulatory policies at the federal level.  Not the end of the world, perhaps, but it’s sure to represent only the beginning of the bank’s efforts to dismantle any laws that attempt to level the playing field or place them at risk of being held accountable for what they’ve done or may do in the future.

When it comes to the banks, you can count on the fact that they only want to play in a game where it’s heads they win and tails we lose.

Goddard says that after the Cuomo v. Clearing House decision he had a virtual parade of bank executives coming through his offices expressing the desire to better address the 7,000 monthly foreclosures by improving the loan modification process.  But, Goddard says that the bankers were unwilling or unable to provide him with any of the information he asked for, such as how many and what types of loans they have in his state.

Goddard is far from alone in his thoughts about the banks and servicers.  Illinois Attorney General Lisa Madigan brought a civil rights suit against Wells Fargo.  When the suit started, the Wells Fargo branches were operating under a state charter, and the bank responded to the state’s subpoena.  But soon, the Illinois branches were moved and placed under control of Wells’ national bank charter and that was the end of that.  Wells Fargo immediately informed the state of the change, stopped cooperating with the subpoenas, and basically said: “But thank you for playing.”

Madigan says that this sort of maneuvering has made it easy for those in the banking industry to hide misconduct and avoid prosecution for years.  And Ohio’s Attorney General, Richard Cordray was quoted by the Times as saying: “For the better part of eight years, the federal regulators were not being aggressive, and at the same time we were disabled.  There was nothing holding back irrational and irresponsible practices.”

Wake up, America.  Or as sure as I’m writing this, defeat will be snatched from the jaws of victory…

So far this year, while most Americans have seemingly been preoccupied with other things, the banking lobby has managed to have its way with every single piece of legislation our legislature has considered or ultimately passed.  The Democrats, and some Republicans, and supposedly President Obama wanted to reform the bankruptcy code to allow judges to write down mortgages on primary residences for homeowners filing bankruptcy… but the banking lobby, after spending a reported $45 million in lobbying efforts, killed the legislation… twice.

The credit card reform bill came in like a lion, but when the banking lobby was done with it, was passed into a lamb of a law.  The controversial Home Valuation Code of Conduct, or HVCC, which gives the banks greater control of appraisals, and removes all the other parties to a real estate transaction from the picture, was adopted nationally without it even going though the legislative process.

H.R. 1728, which has been named the Mortgage Reform and Anti-Predatory Lending Act, neither reforms mortgages, nor does it meaningfully address what most people think of as predatory lending.  Instead, this bill, which has already passed the House and is now in the Senate, limits the rules and increases the costs born by individuals when selling homes they themselves own.

And, as far as passing any legislation even remotely designed to prevent the global meltdown of our financial markets in the future by tightening up regulatory oversight of the commercial and investment banks in this country… well, we’ve done absolutely nothing in that regard.  Even the creation of a new federal agency, whose purpose would be to protect consumers from the often egregious acts of banks and other financial institutions, has been moving though our legislature with the speed and grace of a wild boar moving whole, through the digestive tract of a python.

There should be no question in anyone’s mind at this point that our government is being driven by the financial oligarchy that has amassed too much legislative clout over the last thirty years of bull market.  What’s in the best interests of Wall Street should no longer be seen as being in the best interests of the country as a whole.  And if we don’t let our elected representatives know that we are watching and will not tolerate our elected officials blindly voting according to the wishes of the banking lobby, then our economy will not begin the recovery we’re hoping for, and frankly, we will deserve everything we collectively get.

The United States Supreme Court has decided that a state can look into and prosecute financial institutions that operate as part of our national banking system when they’re suspected of having broken the laws of that state.  And that will be the law of our land, unless we say nothing, in which case I have no doubt whatsoever, that the banking lobby will persuade Congress to pass legislation that will render the court’s ruling moot and let lenders and servicers off the hook for wrong doing yet again.

It’s up to us, the voters, as we enter the coming election year, to make sure our elected representatives hear our voices loud and clear:

Vote as the banks tell you to vote and there’s not enough money in the world to get you reelected, but vote in the best interests of the people of this country, and you won’t need the banking lobby’s money to get reelected.

Iowa’s AG, Tom Miller, seemed downright thrilled with the Supreme Court’s decision, by the way.  The story in the Times quoted Mr. Miller as enthusiastically saying:

“We’re back on the field.  That’s really important.  Certainly there will be some litigation.”

I sure hope so, Mr. Miller, I certainly do hope so.

It was the best of times and then it was the worst of times, until it was the best of times again, before returning to the worst of times, which lasted until it was the best of times once more, and then settling into being the worst of times… which became the best of times and then…

The Story You Are About to Read is 100% TRUE…

IndyMac Bank, now One West Bank, whose major shareholders include liberal billionaire George Soros and his young ward, computer industry all-around good guy, Michael Dell, appears to have embarked on a mission to defraud as many people as possible out of their homes through a clever trial loan modification scheme.  Here’s how one homeowner was introduced to the bank’s underhanded tactics.

This is the story of how IndyMac offered a homeowner in the Inland Empire region of Southern California four separate trial loan modifications over the past six months.  Let’s say that they’re family name is Geithner, just for fun… The Geithner Family.  They have two kids.  We’ll call them Danny and Fanny.

The Geithners had owned their home for a decade, having purchased it with 6% down back in 1999.  Their 700 FICO score, as of six months ago, showed that they always made their payments on time. They refinanced a few years back with a loan from IndyMac, who apparently felt that the Option ARM mortgage design was the young family’s ideal option.

Their starting payment was around $1800, but roughly a year later had jumped up unexpectedly to $2200.  When Mrs. Geithner’s father fell, injuring his neck quite seriously, what else could the family do but invite him to move in with them where he could be waited on hand and foot and ultimately nursed back to health.  They decided perhaps they could qualify for the President’s loan modification program.

Since they started working towards getting IndyMac to approve a loan modification, they’ve done absolutely everything the bank asked them to do, made every single one of their payments on time and as agreed, and never touched their noses unless the bank said “Simon Says.”  But now, regardless of all that, their home is due to be sold out from under them on November 19^th.

Our story begins last February…

It was February of this year when the Geithners retained an attorney to help them negotiate a loan modification with IndyMac Bank.  His name was Robert Scurrah of CDA Law Center, and he had been practicing for roughly thirty years.  On March 3^rd, Mr. Scurrah’s office arranged for a conference call with the nice folks at IndyMac Bank to review the family’s financial situation.  The bank offered the Geithners a two-month trial modification with a trial payment of $1469.99, and the Geithners agreed.  (Yay!)

The very next day, the Geithners received a letter in the mail from IndyMac Bank.  It read: “We want to help you stay in your home.”  The letter offered a trial payment of $1711.52, so imagine how pleased the Geithners were that they had been offered and agreed to a payment of $1469.99 only one day earlier and they continued making their agreed to payment.

On April 20^th, the Geithners received another letter in the mail from IndyMac.  This time the letter said that the bank was denying their request for a loan modification.  Apparently, the bank believed their home to be vacant, which as you might imagine came as quite the shock to the Geithner family who was living there at the time.  (Oh no.)

Two weeks later, however, on May 6^th, the Geithners received another friendly letter from IndyMac, with the now familiar headline, “We want to help you stay in your home”.  Thank goodness for that, the family thought.  This time the trial payment offered was $1467.32.  (So, yay!  Again.)

That very same day the Geithners received an agreement in the mail.  It was the “Stipulated Forbearance to Loan Modification Agreement,” and it outlined the terms of the loan modification.  The Geithners mortgage would start at 3% fixed and remain there for five years.  In year six the interest rate would go up a point to 4% fixed, and after that, it would increase to 4.75% for the remainder of the loan.  (Again, yay!)

The Geithners readily agreed to the terms of the loan modification IndyMac had offered, so they signed and dated the modification agreement and returned it to the bank on May 11^th along with their cashier’s check in the amount of the modified payment, which IndyMac deposited.  And everything was good.  (Major yay!)

But then on July 9^th, the Geithners received another letter from IndyMac.  It said they had been declined for their loan modification yet again because the bank said they never received the check they deposited, nor did they receive the signed agreement they had received with the check they deposited but never received.  (Oh no.)

Then on August 11^th, they went to their mailbox to find another letter from IndyMac, and again read that the nice folks at the bank were saying: “We want to help you stay in your home”.  This time the letter offered a trial modification with a trial payment of $1395.98.  (So… yay?)

The Geithners, figured they might as well give it another trial, so they made both the August and September payments on time and in the amount of $1395.98.  (Okay… one more time, yay.)

But on October 2^nd, the Geithners, who had by now developed a case of letteraphobia, a fear of receiving anything in the U.S. Mail, received yet another letter from good old IndyMac Bank.  Again, they were being denied a loan modification.  This time, however, no reason was given.

They called their attorney immediately who in turn contacted IndyMac Bank.  Not too worry, Mr. Scurrah was told by the bank’s representative, it was just a mistake… must have crossed in the mail, or in the system, or something like that.  You can just imagine the Geithner’s relief upon hearing the news… I’m sure everyone had a good laugh.  (Oh what the hell… yay.)

Except that a few days later, upon returning home at the end of a long October day at the office, the Geithners found a notice pinned to their door saying that their home would be sold out from under them on November 19, 2009.  (You’ve got to be kidding me.)

Again, they placed a call to their attorney, who again contacted IndyMac Bank.  This time he asked two things: Whether the bank’s bipolar disorder was causing it much trouble when socializing with the other banks.  And why… this time around… had the evidently schizophrenic financial institution denied the Geithner’s loan modification, after approving it, before they had denied it, before they had approved it, which was before they had denied it, which was right before they had approved it, only to deny it.

Scurrah inquired as to why the modification was being declined again.  After all, he explained, they had signed and paid as agreed all four times they had been granted trial payments and modifications.  IndyMac’s representative explained that it was all quite simple really.  At $6,100 a month, Mrs. Geithner made too much money to qualify for a loan modification.

“Well,” said Mrs. Geithner, “that’s a relief.  Why didn’t you say so sooner?  When do I start making the $6,100 a month?  Because as soon as I do, the payments will be no problem.”  Unfortunately, IndyMac was wrong.  Mrs. Geithner’s paycheck stubs and W2 showed that she only made $4,100 a month, but she was perfectly willing to forego the whole loan modification thing in exchange for a two grand a month raise.

Mrs. Geithner explained that she still made $4,100 a month, just like she had since last February when she sent in the paperwork IndyMac required when applying for a loan modification, although for the life of her at that moment, she couldn’t imagine why.

Their attorney asked where the bank could have gotten the $6,100 figure when they had received the paycheck stubs and W2 last February and they showed $4,100 a month.  IndyMac replied that they had received the $6,100 figure “orally”.  Under his breath, Mr. Geithner asked if they could resubmit the correct figures to the bank anally.

The nice woman at IndyMac, the bank that had “wanted to help the Geithners keep their home,” on so many occasions that no one could remember, responded that it didn’t matter at this point.  It was too late.  The Geithners would need to come up with $29,200 in the next five days to save their home.  Otherwise, it would be auctioned off on November 19, 2009… just seventeen days from now.

The irony of the story is that the new owner will likely pay about half as much as the balance on the Geithner’s loan, so in a way IndyMac will be granting the new buyer a principal reduction right off the bat, but don’t worry about the bank… they only paid about 20¢ on the dollar to buy the Geithner’s mortgage in the first place.

Alright… that is Goddamn enough!  Did you enjoy that 100% TRUE STORY?  Did you?

What are we going to do about IndyMac/One West Bank?  I’ve now interviewed a dozen law firms and dozens of homeowners; all are currently being lied to and jerked around by IndyMac/One West Bank.  The way things look all will end up losing their homes to foreclosure, even though they all should qualify for loan modifications under the President’s Making Home Affordable program.

I am convinced there are hundreds of others in this situation with IndyMac/One West Bank… to say nothing of the myriad of other lenders and servicers who continue to break the rules, deceive our government, and destroy our economy after we the tax payers bailed them out to the tune of $11 billion in Indy Mac/One West’s case alone.

So, what do we do about this?  Nothing, I suppose?  Because doing nothing seems to have become a tradition in this country ever since Barack Obama went on television to tell the country that he would do better than his predecessor.  Did he lie?  Or he is incompetent.  You are free to choose between the two, but those are the options… A or B.

And speaking of Mr. Obama… where the hell is he on this issue.  The last time we heard from him on this subject was last February and here we are about to rob a liquor store to put a turkey on the country’s table.  How he sleeps at night I could not tell you.  I could not, were I in his shoes.

Obama told me and everyone else that watched his speech last February that he had a plan that would help save 7-9 million homes.  Yet this year, we’re on track to hit five million foreclosures.  He was going to create jobs, too.  Well, absolutely cracker jack work so far, Mr. President.

I did get an email from Joe Biden today… I’m sure millions got it as well.  He wanted me to help fight the war related to the president’s health care proposal.  I replied: NO!  Why would anyone in their right mind trust this administration to fix health care after proving themselves completely incompetent and uncaring about the housing crisis… a crisis much worse than anything this country has ever seen in health care?

I won’t and no one else should either.

I’m announcing today that I will write and publish every story I receive about a homeowner being jerked around by IndyMac/One West Bank.  Every single one.  Write to me and I’ll put it out there.  And I’ll ask everyone to forward it along to friends online.  And maybe… just maybe… someone will be listening… someone will care… and someone will force this despicable failed bank’s hand… force them to do what the president’s plan requires them to do: modify a loan when it makes more sense to do so than it does to foreclose.

I’d also like to call for a boycott on Indy Mac/One West Bank… if you bank there… please move.  There are plenty of other choices, why would you want to give your money to a bank that is lying, cheating and stealing from the American people and from our government.  Congress continues to meet and talk.  Vote with your wallet and bank somewhere else.  Please… do this for the people being so totally jerked around every day by Indy Mac/One West Bank.  Show them that this is still a country of laws and rules… still a country where the people have the power.

The stories are coming.  The war is on.

You can email me at mandelman@mac.com.