U.S. Trying to Assess Foreclosure Crisis Scope: FDIC

[cal04]

Source: Reuters

Financial regulators are trying to gauge the scope of improper processing of foreclosures while banks need to assess their level of risk exposure, banking regulator Sheila Bair said on Sunday.

Federal Deposit Insurance Corp Chairman Sheila Bair said in an interview on C-SPAN's "Newsmakers" that the problems with processing foreclosures appeared to be an industry-wide practice, at least with larger loan servicers.

"I think this is really a symptom of size. It's very unfortunate," she said. "So in our backup supervisory capacity we are working with our regulatory colleagues. I think it is necessary for the regulators to go in and verify."

(snip)
"Foreclosure is a very serious thing and it should only being undertaken after loan modification efforts are not feasible. And that the files are fully documented."

Read more: http://www.nytimes.com/reuters/2010/10/17/us/politics/politics-us-usa-foreclosures-bair.html?_r=1&hp

[Skink]

1. Did banks sell these loans right before the ARMS reset?

if so they must have known they could make these crazy loans.

[northernlights]

3. they package them up and sell them immediately

in some cases the bundles were pre-sold and they were looking for mortgages to fill the orders.

Yes, they knew they could make these crazy loans. And they lured naive people in to fill the pre-orders.

By the time the ARMS reset, they had been resold many times over.

[xchrom]

2. oy good luck with that. i bet that stuff is a mess. nt

[bvar22]

4. Didn't we already solve this problem?

I clearly remember Paulson demanding $800 Billion Dollars to "rescue troubled assets".
He got it in less than a week with No Strings Attached in a sickening display of Bi-Partisanship.

Now THIS is “Bi-Partisanship” !
Better get used to it!!
Hahahahahahahahaha!



Are they telling me that they did NOT use the $800Billion dollars to "rescue troubled assets"?
And instead used OUR money to pay themselves HUGE Bonuses and buy up other Banks further consolidating Money & Power into fewer hands?
Really?
.
.
That should be against the law!

[JDPriestly]

5. The foreclosure papers are just the tip of the iceberg.

If you subpoena the internal e-mails and letters and documents related to the preparation of some of these mortgages, you may find that the mortgage companies were quite aware that some of the borrowers' credit histories and ratings did not justify giving a loan.

You would have to go case by case. The mortgage companies were, in some instances, more than complicit in fraud on those to whom they sold the faulty mortgages. Remember, for every homeowner who is being foreclosed, there are investors who bought part or all of the mortgage. The mortgage companies not only misled the homeowners into thinking that the loan could be refinanced before the interest rate increased, but also misled the investors who bought the loans. And why did the mortgage companies do that? Because of the commissions, fees and other charges that the mortgage companies collected on each loan -- bogus or merited.

[chervilant]

6. hmm...

Well, now, you're almost right...

The Big Five mortgage lenders responsible for this fiasco {Bank of America, Chase, Countrywide, Wells Fargo and Washington Mutual)colluded with the Feds to create mortgages that would enable them to 'tap into' the enormous market comprised of those individuals for whom conventional loans were 'not an option,' because these 'untapped' individuals had lower credit scores (hello--big red flag, anyone?), little or no reserves (ibid), and/or well over the traditional mortgage expense to income ratio (some in excess of 55%!). Thus were born the "subprimes" that lenders could repackage into CDOs and sell to investors by asserting that "we're a well-vetted lending industry with an amazing track record for responsible lending, so these CDOs are as good as gold!"

These rich and powerful hedonists, driven by the ubiquitous 'profit' motive (read excuse) of the dysfunctional economic system we call 'Capitalism,' were not only aware of what they were doing, they reveled in it. One of my district managers bragged incessantly about the $50 million dollars a day our district was 'raking in' from the CDOs our company was selling on the back end. As long as they were 'getting theirs,' nothing else mattered. And, look where it's gotten us...

[JDPriestly]

8. chervilant, yes. I know. I've seen this stuff. It's awful. It's incriminating.

And the Attorney General of the United States should be subpoenaing these documents in the context of criminal prosecutions. The mortgage lenders, in some cases, knew very well precisely what they were doing. I'm sure that is not the case in all of the foreclosures. Some of them were good loans that went bad as the economy collapsed.

But lots of the loans were awarded to borrowers based on lies that the mortgage company extracted from the borrower.

For example, in one case, let's say that a prospective borrower did not qualify for the loan because the borrower's income was not high enough. The mortgage company rep would suggest that the borrower get someone with some additional income to live on the property being mortgaged with the borrower. So, at the mortgage rep's suggestion, the borrower would ask a cousin or a friend or someone to sign some papers. Of course, the cousin, friend or whoever agrees (out of ignorance of the potential consequences). The mortgage rep knows full well that the cousin, friend, etc. will never actually live in the house and that the cousin, friend, etc.'s income will not help pay for the loan, but the loan is awarded anyway. And there were lots of things like that going on. In the example I am giving, the borrower would never have thought of asking someone else to pretend they would move in the house and live there, but the mortgage rep does not explain that the co-signer, co-payor in some instances really has to move into the house and contribute toward paying of the mortgage. That deal was presented as being just a formality. A friend of mine told me that the bank had asked her to get a friend to sign on her mortgage and then -- afterwards -- said as an aside, "Now your friend should move in with you." In that case, the house was big enough to accommodate my friend and her friend so my friend's friend really did move in. But generally in cases like this, the friend did not move in -- and the rest is history.

That is just one example in which mortgage company reps really encouraged what was in fact fraud. The mortgage company did not properly explain to customers why the second signature was needed and what it could mean for all involved.

Remember, that is just one example of what was going on.

[chervilant]

7. AND,

I'll tell you what I've told my friends and family since I adamantly refused to sell subprimes, and left the financial sector:

banks always, always, always, always, always (have I said always enough?) always get their money!

[JDPriestly]

9. True. In California, we have non-judicial foreclosure -- but for

ordinary homeowners with one mortgage, very possibly no deficiency payment. in other words, under certain circumstances, the banks have no recourse against homeowners for the balance due on the loan after foreclosure. It's a tricky matter so I hesitate to say this. But non-judicial foreclosure is common in California. The formalities, the filings, the prove-up papers are not so important in many cases.