Defending the Truth

Banks are racking up more than $50 billion per year in "service fees", sometimes in sleezy ways...

I'm not sure if this man's advice will apply to American banking, but a really good source of advice about it is MoneySavingExpert: Consumer Revenge - Credit Cards, Shopping, Bank Charges, Cheap Flights and more .

If you want to watch vids on YouTube about it, he can be found there too.

I can't remember what credit agency has the advertisement, but the ad pretty much summed up this thread...

The ad opens up with people entering the bank. Then the bank employees put on masks while the 'leader' of the bank starts ordering people to lay on the floor and to put their money, personal items, etc. into the bags the other employees are going around with.

One woman looks up and the 'leader' tells her not to get brave. Of which she returns to laying on the floor.

After the customers have everything of value removed from them, the 'leader' then tells them they are free to go and thanks for doing business with them that day.

The end of the ad then tells people that if they are sick of being robbed by their banks, to do business with them where they won't get robbed.

Telegraph.co.uk

Saturday 30 June 2007

Banks 'set to call in a swathe of loans'

By Ambrose Evans-Pritchard

Last Updated: 7:25am BST 26/06/2007

The United States faces a severe credit crunch as mounting losses on risky forms of debt catch up with the banks and force them to curb lending and call in existing loans, according to a report by Lombard Street Research.

The group said the fast-moving crisis at two Bear Stearns hedge funds had exposed the underlying rot in the US sub-prime mortgage market, and the vast nexus of collateralised debt obligations known as CDOs.

"Excess liquidity in the global system will be slashed," it said. "Banks' capital is about to be decimated, which will require calling in a swathe of loans. This is going to aggravate the US hard landing."

Charles Dumas, the group's global strategist, said the failed auction of assets seized from one of the Bear Stearns funds by Merrill Lynch had revealed the dark secret of the CDO debt market. The sale had to be called off after buyers took just $200m of the $850m mix.

"The banks were not prepared to bid over 85pc of face value for CDOs rated "A" or better," he said.

"God knows how low the price would have dropped if they had kept on going. We hear buyers were lobbing bids at just 30pc.

"We don't know what the value of this debt is because the investment banks shut down the market in a cover-up so that nobody would know. There is $750bn of dubious paper out there in the form of CDOs held by banks that have a total capitalisation of $850bn."
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US property writer Paul Muolo described the Bearn Stearns crisis as the “subprime Chernobyl”, saying the bank had created a “cone of silence”.

Abandoned by fellow banks, Bear Stearns has now put up $3.2bn of its own money to rescue one of the funds, a quarter of its capital.

This is the biggest bail-out since the Long-Term Capital Management crisis in 1998, which Bear Stearns refused to join at the time. Bear Stearns is now alone, a case of rough justice being served.

Lombard Street’s warning comes as fresh data from the US National Association of Realtors shows that the glut of unsold homes reached a record of 8.9 months supply in May. Sales of existing homes slid to an annual rate of 5.99m.

The median price fell for the 10th month in a row to $223,700, down almost 14pc from its peak in April 2006. This is the steepest drop since the 1930s.

The Mortgage Lender Implode-Meter that tracks the US housing markets claims that 86 major lenders have gone bankrupt or shut their doors since the crash began.

The latest are Aegis Lending, Oak Street Mortgage and The Mortgage Warehouse.

“There isn’t a recovery about to happen,” said Ara Hovanian, head of the building group Hovanian Enterprise.

Nouriel Roubini, economics professor at New York University, said there were now concerns about “systemic risk fall-out” from the Bear Stearns debacle as investors look more closely at the real value of CDOs.

“These highly illiquid securities have been priced so far on unrealistic and distorted credit ratings as the ratings industry has been complicit,” he said.

“They have not been rerated in a way that is consistent with rising subprime default rates. “That is why Wall Street is in a panic. “Losses will be massive once these assets are correctly priced to market.”

Lombard Street said the Bear Stearns fiasco was the tip of the iceberg. The greatest risk lies in the “toxic tranches” of lower grade securities held by the banks.

Much-trumpeted claims that banks had shifted off the riskiest credit exposure on to the asset markets was “largely a fiction”, said Mr Dumas

. The worst of the US property crisis has yet to hit since there is an overhang of $2,000bn of mortgages with adjustable rates which have yet to be reset. Many borrowers could see payments jump by half, or even double.

At the same time, a spike in 10-year US bond yields by 0.65 percentage points over the last six weeks has drastically repriced the cost of fixed mortgages, knocking away a key prop for the US housing market.

“With defaults at their highest in the 37 years that records have been kept, it could be a long hot summer,” said Mr Dumas.

Historian Murray Rothbard wrote of the Bank of US in his book Panic of 1819:
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Beginning in the summer of 1818, the Bank precipitated the Panic of 1819 by a series of deflationary moves. The branches of the Bank were ordered to call on the state banks to redeem heavy balances and notes held by the Bank. ...The severe monetary contraction, lasting through 1820, led to a wave of bankruptcies throughout the country". Mr. Rothbard noted a speech in the Congress by Senator Ninian Edwards concerning a bill proposed in the Congress for the relief of debtors:

The debtors, like the rest of the country, had been infatuated by the short-lived, "artificial and fictitious prosperity." They thought that the prosperity would be permanent. Lured by the cheap money of the banks, people were tempted to engage in a "multitude of the wildest projects and most visionary speculations," as in the case of the Mississippi and South Sea bubbles of previous centuries.

…The Bank of the United States foreclosed more than fifty thousand acres of farmland in Ohio and Kentucky alone.
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The "Cosmopolitan Financiers" have been doing this for millenia, filching wealth out of wherever and whatever they please. Nothing new here…

Journalist Gretchen Morgenson wrote for the New York Times 15 November 2007:
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A federal judge in Ohio has ruled against a longstanding foreclosure practice, potentially creating an obstacle for lenders trying to reclaim properties from troubled borrowers and raising questions about the legal standing of investors in mortgage securities pools.

Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.

The pooling of home loans into securities has been practiced for decades and helped propel real estate prices in recent years as investors sought the higher yields that such mortgage trusts could provide. Some $6.5 trillion of securitized mortgage debt was outstanding at the end of 2006.

But as foreclosures have surged, the complex structure and disparate ownership of mortgage securities have made it harder for borrowers to work out troubled loans, in part because they cannot identify who holds the mortgage notes, consumer advocates say.

Now, the Ohio ruling indicates that the intricacies of the mortgage pools are starting to create problems for lenders as well. Lawyers for troubled homeowners are expected to seize upon the district judge's opinion as a way to impede foreclosures across the country or force investors to settle with homeowners. And it may encourage judges in other courts to demand more documentation of ownership from lenders trying to foreclose.

The ruling was issued Oct. 31 by Judge Boyko, and relates to 14 foreclosure cases brought by Deutsche Bank National Trust Company. The bank is trustee for securitization pools, issued as recently as June 2006, claiming to hold mortgages underlying the foreclosed properties.

On Oct. 10, Judge Boyko, 53, ordered the lenders' representative to file copies of loan assignments showing that the lender was indeed the owner of the note and mortgage on each property when the foreclosure was filed. But lawyers for Deutsche Bank supplied documents showing only an intent to convey the rights in the mortgages rather than proof of ownership as of the foreclosure date.

Saying that Deutsche Bank's arguments of legal standing fell woefully short, the judge wrote: "The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the court to stop them at the gate."

A spokesman for Deutsche Bank declined to comment on the ruling. But the inability of Deutsche Bank, as trustee for the pools, to produce proof of ownership at the time of the foreclosures will fuel borrowers' concerns that they are being forced out of their homes by entities that may not even hold the underlying loans.

"This is the miracle of not having securities mapped to the underlying loans," said Josh Rosner, a specialist in mortgage securities at Graham-Fisher, an independent research firm in New York. "There is no industry repository for mortgage loans. I have heard of instances where the same loan is in two or three pools."

The process of putting together a mortgage pool begins when a home loan is originated by a bank or mortgage lender. That loan is typically sold to a Wall Street firm that pools it with thousands of others. Once a pool is packaged, it is sold to investors in different slices, based on risk. A trustee bank oversees the pool's operations, ensuring that payments made by borrowers go to the appropriate investors.

Lawyers who represent troubled borrowers complain that trustees overseeing home loan pools often do not produce proof, usually in the form of a mortgage note, that their investors own a foreclosed property. And a recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership. Such proof gives a creditor standing to foreclose against a borrower and is required by law.

"The big issue in all these cases, whether we are dealing with a bankruptcy court, a state court or a federal court, is who really owns the mortgage note, and that is allegedly what they securitized," said O. Max Gardner III, a lawyer who represents borrowers in foreclosure in Shelby, N.C. "A collateral question is, has that mortgage note really been transferred and assigned to the securitization trust? If not, then they really don't have standing. It's Law School 101."

When a loan goes into a securitization, the mortgage note is not sent to the trust. Instead it shows up as a data transfer with the physical note being kept at a separate document repository company. Such practices keep the process fast and cheap.

Because most foreclosures proceed without challenges from borrowers, few judges have forced trustees like Deutsche Bank and Bank of New York to prove ownership by producing a mortgage note in each case.

Borrower advocates cheered Judge Boyko's ruling.

The plaintiff's argument that "'Judge, you just don't understand how things work,'" the judge wrote, "reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process." The cases could be filed again in state court, however.

April Charney, a consumer lawyer at Jacksonville Area Legal Aid in Florida, who has been practicing foreclosure law since the late 1980s, said she rarely sees proof of ownership in cases involving securitization trusts. Her group has 30 to 50 such cases and not one of the lenders' representatives has produced proof of ownership predating the foreclosure action.

"We see a trend toward judges having enough of this trampling of the rules and procedure and care and reverence with which lawyers and litigants and participants in the judicial process should comply," Ms. Charney said. "Hopefully this will convince everybody that the time to work out these home loans is now."

Journalist Gretchen Morgenson wrote for the New York Times 17 November 2007:
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Judge Demands Documentation in Foreclosures — After the recent dismissal of 14 foreclosure cases by a federal judge in Cleveland, another federal judge in Ohio has given lenders 30 days to prove that they own the properties they intend to seize from troubled homeowners in 27 other cases.

The second judge, Thomas M. Rose of Federal District Court, in Dayton, ruled Thursday that while the lawyer filing 26 of the cases had claimed his clients owned the properties at the time the foreclosures began, he had not submitted the necessary proof to the court.

“Failure in the future by this attorney to comply with the filing requirements,” Judge Rose said, “may only be considered to be willful.”

Taken with Judge Christopher A. Boyko’s dismissal of 14 cases in Cleveland last month, the latest ruling indicates that some courts are growing tougher on lenders foreclosing on delinquent borrowers without providing proof of ownership.

It has long been a common practice for lenders to bring foreclosure proceedings without attaching proof of ownership of the underlying note. Tracking down such documentation may be more challenging because of securitization, the pooling of mortgages into trusts that are subsequently sold to investors.

Citibank is trustee in one case overseen by Judge Rose; it represents a securitization trust sold in 2005 by First Franklin, a loan originator now owned by Merrill Lynch. At issue in the case is a mortgage on a property in Miamisburg, Ohio, for $191,000. The borrower defaulted in August 2006.

Another case involves HSBC, which is foreclosing on a $144,000 mortgage on a property in Dayton. The mortgage was underwritten in 2004 and has been in default since October 2006.

A Citigroup spokeswoman said the company did not comment on pending litigation. An HSBC spokeswoman said the bank had not studied the ruling and could not comment.

An estimated two million families may lose their homes to foreclosure in the coming years, specialists say. A recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership.

Such proof gives a creditor standing to foreclose against a borrower and is required by law.

Judge Rose cited Ms. Porter’s study in his ruling.

What's new here? Banks have controlled the wealth of the world for thousands of years.

Yeah, "When Banks Turn Evil" implies that they were at one point not evil.

Isn't that the consumer's responsibility to know their rights though. When I joined the Marine Corps I got gouged by one bank and vowed I would never again deal with a bank unless absolutely necessary and I was the one in control.
All of my assets are now in two Credit Unions with no monthly fees at all. My mortgage is with a bank because my discounts on my house were tied to a particular lender, but I still got the lowest interest rate as advertised on Bankrate.com at the time.
Would someone tell me why a bank shouldn't foreclose on a house when someone defaults on a loan. If the bank failed to hold up any end of their responsibility, the consumer would be up in arms about that as well. You apply for a loan of upwards of $200k which the bank supplies in a lump sum. Isn't it reasonable for the bank to expect the loan to be paid back?