A Foreclosure Moratorium?

[Jamie_B]

This won't likely happen but it was brought to my attention as a possiblity for stabilizing the market and fixing alot the mess were in.

http://tarpley.net/2010/10/11/advice-to-desperate-congressional-dems-ignore-wall-street-puppet-obama/

[quote]Advice to Desperate Congressional Dems: Ignore Wall Street Puppet Obama, and Demand a Five-Year Freeze on All Home Foreclosures in the Spirit of the Frazier-Lemke Act of 1935!
[Translate]
Webster G. Tarpley, Ph.D.
TARPLEY.net
October 11, 2010

In the last phase of the election campaign, an issue has emerged which allows voters to separate Wall Street stooges in both parties from real advocates of the middle class. The issue is the massive campaign of foreclosures against the American middle class being carried out by Wall Street zombie bankers who owe their very existence to taxpayer bailouts. Since the world derivatives panic began in 2007, millions of homes each year have been seized by the Wall Street predators, sometimes under the legal color provided by adjustable rate mortgages and, as has now been revealed, often using completely illegal paperwork to throw average Americans and their families out on the street and frequently into poverty and destitution.

The fact that so many foreclosures have been illegal as well as immoral and antisocial has now brought the foreclosure reissue to critical mass. The deeply flawed paperwork used by many bankers in their attack on working people’s homes is now a scandal which is bringing out the populist pitchforks everywhere. Even title insurance companies are now declining to be a part of this swindle. This past Friday, Bank of America, the largest US bank, stopped foreclosures in all 50 states because of the threat of counter-suits and public backlash. Previously, JP Morgan Chase & Co., Ally Bank’s GMAC Mortgage unit, and PNC Financial had halted foreclosures in the 23 states where the consent of the judge is required in order to seize a home.

The current chaos in home foreclosures is once again the direct responsibility of the zombie bankers themselves, who have neglected all traditional legal and accounting standards concerning the necessary paper trails in their frenzied desire to securitize mortgage loans and make them into toxic derivatives in the form of asset-backed securities and mortgage backed securities. The zombie bankers, already the recipients of $24 trillion of public largess in the form of the various bailouts, have turned out to be incompetent even in the technical aspects of their own thieving racket.

But the chaos in the bankers’ filing systems is nothing compared to the chaos created by the millions of foreclosures they have engineered, based on adjustable-rate mortgages and similar misleading contracts which never should have been legal in the first place. For some time, it has been evident that the defense of the American middle class requires a blanket, orderly, federal freeze (or moratorium) on all foreclosures on primary residences, similar to the New Deal protections offered to family farms by the landmark Frazier-Lemke Act of 1935-1949 during the previous depression.

Desperate to avoid defeat at the hands of crazed Tea Party fanatics, top Dems are starting to grasp the explosive potential of this issue and calling for stopping foreclosures: “Senate Majority Leader Harry Reid )D-Nev) …. urged five large mortgage lenders to suspend foreclosures in his state until they establish ways to make sure homeowners don’t lose their homes improperly. Attorney General Eric Holder said that the government is looking into the matter, and Democratic lawmakers urged bank regulators and the Justice Department to probe whether mortgage companies violated laws in handling foreclosures,” according to AP.

Speaking on Fox News Sunday earlier today, “Rep. Debbie Wasserman Schultz (D-FL), a top House Democrat, said she backed a foreclosure moratorium and government talks with the banking industry to concoct ways to let lenders reshape troubled mortgages. She said the foreclosure problem has been ‘extremely vexing’ in her state” of Florida, AP reported.

Make the GOP Line UP in Defense of their Wall Street Masters
In a response of great clinical significance, the number two reactionary Republican in the House and would-be majority leader, Rep. Eric Cantor of Virginia, immediately rushed to defend the Wall Street parasites and their right to feast on the flesh of the American people. Cantor said that ‘”a national moratorium would remove the protections that lenders need.” “You’re going to shut down the housing industry” with a national stoppage, Cantor added, pontificating that “People have to take responsibility for themselves.”‘1

There it was: the eternal reactionary refrain of the New Deal-hating GOP: in a conflict between a citizen and a bank, the citizen will be on his or her own. Canter’s response demonstrates that any time the Democrats attack Wall Street, the Republicans are immediately obliged to throw off their protective camouflage of “tea party” populism, and line up to defend the bankers who own them. This is the dirty secret of the “libertarian” GOP.

Axelrod Offers Nothing but Quick Eviction
Unfortunately, but characteristically, an additional defense of the Wall Street hyenas came from the Obama White House. Financier stooge David Axelrod undercut both Reid and Wasserman-Shultz in his eagerness to shield the zombie banks, telling CBS’ Face the Nation: “I’m not sure about a national moratorium because there are in fact valid foreclosures that probably should go forward,” if their documents are accurate, and the public be damned. “Our hope is this moves rapidly and that this gets unwound very, very quickly,” he added. (AP) In other words, Axelrod and Obama see the solution as speeding up foreclosures so that the crisis can “bottom out” in an orgy of liquidations and homelessness — precisely as prescribed by the anti-human reactionaries of the Austrian school of economics touted by the GOP. If a new object lesson in Obama’s status as an abject Wall Street puppet were needed, here it was.

Congressional Democrats, if they wish to survive, must realize that Obama is nothing more than an anchor tied around their necks. They need to ignore him as party leader now, as a prelude to dumping him as their presidential candidate for 2012.

The Obama White House did respond to the public outrage against Wall Street’s foreclosures by refusing to sign the infamous Leahy-Sessions bill, which would legalize a broad range of foreclosures which are currently illegal, thus catapulting more millions into homelessness. This veto should have been carried out with great fanfare and with extreme prejudice as a direct and defiant challenge to Wall Street and its Republican minions, but Obama, always true to form, did it surreptitiously and almost apologetically, using a form of pocket veto to send the bill back to Congress. so that it can be “improved.”

Elizabeth Warren Should Declare a Freeze on Foreclosures
One person who could do a great deal for the faltering fortunes of the congressional Democrats is Elizabeth Warren, recently named as White House overseer of the new consumer financial protection agency. With the help of some aggressive lawyers, it ought to be possible for Warren to find something in the new FinReg law to use as the basis for a freeze on mass foreclosures, given the current public scandal of faked records. This could also be done under the authority given by existing states of emergency dating back to the aftermath of 9/11. During the last depression, the Frazier-Lemke Moratorium Act of 1935 halted foreclosures on family farms for a three-year period, provided that a local court of law would give its approval both as to the propriety of the delay and the adequacy of the rental to be paid in the interim. Frazier-Lemke was challenged in the courts, “but the Supreme Court upheld the law in Wright v. Vinton Branch of Mountain Trust Bank of Roanoke. After expiring in 1938, the act was renewed four times until 1949, when it expired.”2

The measure most urgently required today is a freeze on foreclosures on one and only one primary residence per family, to continue for five years or for the duration of the current world economic and financial depression, which ever lasts longer. The alternative is social chaos, with Hoovervilles and Obamavilles on a mass scale, and a tragic deterioration in the present and future productivity of the working adults and children being sacrificed on the altar of Wall Street’s insatiable greed.

Combined with state laws requiring mandatory mediation before foreclosure could be carried out, plus the creation of the Home Owners’ Loan Corporation, New Deal measures were able to stop about 90% of the foreclosure plague, and also offered meaningful assistance to the 10% who were still victimized. This was in an age when the money center Wall Street banks had not received massive public bailouts to save them from insolvency, as occurred in 2008-2009. A halt in foreclosures could be considered a belated expression of gratitude by the Wall Street tycoons to the American people, without whose tax dollars not one major Wall Street institution would have survived the world derivatives panic of September-October 2008.

While she is at it, Elizabeth Warren should also use her new position to provide desperately needed relief to the American middle class against outrageous Wall Street abuses in the following areas:

She should declare a ban on Adjustable Rate Mortgages, which are always fatally flawed because they never allow the homeowner to know in advance just what level of interest is going to be charged, no matter how clear their language and no matter how big the print in which they are set down. ARMs are thus the consumer financial equivalent of ticking time bombs, and there is no place for them in the modern US economy.

Warren should also set up a de facto 10% maximum ceiling on interest rates on consumer financial products all over the United States. This would merely restore the pre-1979 usury laws which generally established a 10% upper limit on interest rates until the coming of Paul Adolf Volcker and his lunatic 22% prime rate during his tenure as boss of the Federal Reserve under Carter and Reagan.
Predatory payday loans and car title loans would be largely ruled out by a 10% upper limit on yearly interest rates, but Warren should institute additional safeguards as needed to ban these two kinds of wildly abusive financial marketing practices.

Elizabeth Warren should take these actions immediately and on her own authority, and not wait for the inevitable waffling that will come from the feckless Obama. The current election season provides her with a golden opportunity to determine whether her new job carries any real power with it, or whether it was simply a sop to certain strata of left-liberal opinion. She should act now against foreclosures and exorbitant interest rates, and see if Obama fires her. The best guess here is that he won’t dare. She should do this right now, when Obama knows that the penalty for firing Warren would be massive disaffection and bitterness among left liberals who believes in her mission and who forced him to appoint her over the objections of Tiny Tim Geithner and other Wall Street operatives.

As for the Republicans, they will start howling bloody murder as soon as any Wall Street privilege is touched or any Wall Street abuse challenged. To get them to drop their posturing and do this in the midst of their populist-demagogical election campaign would be of the greatest benefit to congressional Democrats. With a perfect opportunity offered by the departure of enforcers like Rahm Emanuel and Axelrod, Ms. Warren should dare to struggle and dare to win — now.[/quote]

[CincyInDC]

Ted Rall has been screaming for this for some time now. Therefore, conservatives will never go along with it.

[gatorclaws]

I didn't read the whole thing, but if you freeze foreclosures then what's going to stop someone from saying fuck it and not paying their mortgage for the next few years?

[Jamie_B]

[quote name='gatorclaws' timestamp='1288010606' post='934389']
I didn't read the whole thing, but if you freeze foreclosures then what's going to stop someone from saying fuck it and not paying their mortgage for the next few years?
[/quote]


If you dont whats to stop someone who's loan is under water to say "fuck it" and walk away like were seeing?

[Homer_Rice]

[quote name='gatorclaws' timestamp='1288010606' post='934389']
I didn't read the whole thing, but if you freeze foreclosures then what's going to stop someone from saying fuck it and not paying their mortgage for the next few years?
[/quote]
A viable description of how this might work is in the article, so sometimes it pays to read them...

[quote]This could also be done under the authority given by existing states of emergency dating back to the aftermath of 9/11. During the last depression, the Frazier-Lemke Moratorium Act of 1935 halted foreclosures on family farms for a three-year period, [b]provided that a local court of law would give its approval both as to the propriety of the delay and the adequacy of the rental to be paid in the interim.[/b] Frazier-Lemke was challenged in the courts, “but the Supreme Court upheld the law in Wright v. Vinton Branch of Mountain Trust Bank of Roanoke. After expiring in 1938, the act was renewed four times until 1949, when it expired.”[/quote]

BTW, this idea has been floated on the fringes since 2007 and was taken "off the table" as a potential policy then. That would be consistent with the "let's save the system" mentality that has been at the root of these crises (and also a primary reason for the continued exacerbation of these crises to a breaking point.)

[gatorclaws]

[quote name='Jamie_B' timestamp='1288012350' post='934402']
If you dont whats to stop someone who's loan is under water to say "fuck it" and walk away like were seeing?
[/quote]

yeah, it's definitely a huge issue. I just worry about passing something that allows them to walk away from payments but also gives them legal protection to live there for years without paying any more.

[quote name='Homer_Rice' timestamp='1288013342' post='934405']
A viable description of how this might work is in the article, so sometimes it pays to read them...


BTW, this idea has been floated on the fringes since 2007 and was taken "off the table" as a potential policy then. That would be consistent with the "let's save the system" mentality that has been at the root of these crises (and also a primary reason for the continued exacerbation of these crises to a breaking point.)
[/quote]

I clearly stated I didn't read the whole thing as it's fairly long... sometimes it pays to just explain without a smart-ass comment.

[Jamie_B]

It likely wont happen, but for saving the system, perhaps it should.

http://www.truth-out.org/zach-carter-foreclosuregate-fallout-how-bad-can-it-get-for-wall-street64503

[quote]Foreclosuregate Fallout: How Bad Can It Get For Wall Street?

Foreclosure fraud is ruffling a lot of feathers on Wall Street, and while the full scope of losses remains unclear, even major banks are now acknowledging that this is a multi-billion-dollar disaster, not just a set of minor paperwork headaches.

So how bad will it get for Wall Street? There are several disaster scenarios in which the housing market simply shuts down, where the potential losses for Wall Street are simply incalculable. But even situations that do not directly rip apart the basic functioning of the mortgage system could be enough to shut down one or more big banks, creating serious trouble for the financial system, and a major test of the recent Wall Street reform bill.

JPMorgan Chase loves using its research department to push its political agenda, and the bank is currently characterizing the foreclosure fraud outbreak as a set of “process-oriented problems that can be fixed.” That puts them in the rosy optimist camp for this crisis, and they’re projecting a total of $55 billion to $120 billion in losses for the entire industry, spread out over a few years.

But take a look at the analysts’ methodology. The actual scope of losses gets drastically larger if you just change a few arbitrary assumptions.

JPMorgan’s analysts look at about $6 trillion in mortgages issued between 2005 and 2007—this is the height of the bubble, but it excludes plenty of lousy loans issued in 2003, 2004 and 2008. They then estimate defaults of $2 trillion and losses of $1.1 trillion on those defaults.

So far, these estimates are reasonable. According to Valparaiso University Law School Professor Alan White, banks lose about 58 percent of the value of a subprime loan at foreclosure. JPMorgan is estimating 55 percent. The notion that one-third of mortgages issued at the height of the bubble will default may seem extreme, but the analysis includes both first-lien mortgages and second-lien mortgages (home equity loans). For houses with multiple mortgages, there’s going to be a double-hit when the first lien goes bad. Right now, the official statistics from Mortgage Bankers Association indicate that 14 percent of first mortgages are delinquent or in foreclosure. The longer unemployment stays near 10 percent, the higher that figure will go.

Things don’t get out of control until JPMorgan’s analysts start deploying their assumptions. First, they assume that Fannie and Freddie will attempt to sack banks with losses from 25 percent of the defaults they see. Of those 25 percent, they assume Fannie and Freddie will successfully force banks to eat losses on 40 percent, leading to total losses of 10 percent. Why 25 percent? Why 40 percent? The analysts don’t say. JPMorgan expects private-sector investors to be able to saddle banks with just 5 percent of foreclosure losses, citing a host of technical legal hurdles that make it hard for investors to have their cases heard in court.

So JPMorgan’s loss projections are nothing more than a guess—and a low-ball guess at that. JPMorgan is assuming that only five to 10 percent of looming foreclosure losses will actually hit big banks. Change that assumption—20 percent, 60 percent, 80 percent—and things get far worse for Wall Street than JPMorgan’s “worst-case” scenario predicts.

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Let’s consider the exposures of a single bank to put things in context, and let’s pick Bank of America, since analysts seem to agree that BofA has the most to worry about right now. They were a big issuer of mortgages themselves, but they also purchased the notoriously predatory Countrywide Financial and also picked up securitization behemoth Merrill Lynch in 2008, giving them far more problems (hilariously, BofA actually paid cash to acquire these balance-sheet-busters).

The most dire estimates for losses on Fannie and Freddie loans at BofA have come from Christopher Whalen at Institutional Risk Analytics and Branch Hill Capital. Whalen has estimated $50 billion in Fannie and Freddie losses for the megabank, while Branch Hill has estimated $70 billion.

The trick is, BofA has $2.1 trillion in total exposure to Fannie and Freddie, according to Whalen. That means even Branch Hill’s massive loss projection only amounts to a loss rate of about 3.5 percent.

As of July 2010, Fannie Mae had a serious delinquency rate of 4.82 percent—these are loans where families have missed at least three payments, but haven’t been evicted. For Freddie Mac, the number is 3.83 percent. Not all of those losses can be pushed back on the banks, but those numbers will go up as the unemployment rate stays high. Tip the scales just a few percentage points and it’s easy to envision catastrophic losses for banks.

But there’s reason to believe that Bank of America is in even worse shape with regard to Fannie and Freddie than any of its peers. Countrywide was the single largest provider of loans to Fannie Mae during the housing bubble. Literally 28 percent of the loans Fannie Mae bought up in 2007 came from Countrywide. Fannie even featured a full-page, smiling photograph of Countrywide CEO Angelo Mozilo in their 2003 Annual Report (.pdf, see page 16).

It’s much easier for banks to lose money on bad loans they sold to the GSEs than it is for them to lose money on securities they sold to purely private-sector investors. The fact that Bank of America’s most notorious wing was the top provider to Fannie Mae during the peak years of the housing bubble does not bode well for the bank’s balance sheet.

But this is just exposure to Fannie and Freddie. The private sector is angry about all kinds of things—from wronged borrowers to deceived investors. Investors are already organizing against both mortgage servicers—for improperly handling troubled loans—and against investment banks—for selling them garbage. They aren’t just angry about fraudulent foreclosures—evidence is mounting that mortgage servicers can’t even handle the profits from mortgages correctly, and aren’t sending investors reliable, verifiable payments.

Yesterday investors sent a letter pressuring Countrywide’s servicing arm to push losses from bad mortgage bonds back on the bank that sold them. Legally, it’s a complicated maneuver, since Countrywide itself issued those bonds—but that just shows the multiple levels at which megabanks like BofA are exposed to fraud losses. Their original sale of mortgages to borrowers, the packaging of those mortgages into securities, the handling of payments and foreclosures, and the accounting for all of these activities—all of this is about to be subjected to serious fraud examinations by people who are trying to make money.

Up until yesterday, big banks thought they had a get-out-of-jail free card on investor lawsuits. Investors have to bring together 25 percent of the buyers of any mortgage bond in order to sue the bank that issued it—even if the actual lawsuit is an open-and-shut fraud case. Investors had not been cooperating. But yesterday’s letter to Countrywide is a big deal—even though it’s not (yet) a lawsuit, some of the biggest names in finance were going after Countrywide’s cash: BlackRock, PIMCO and even the New York Federal Reserve.

Bill Frey, who runs the hedge fund Greenwich Capital, has organized a massive clearinghouse of mortgage investors for the express purpose of bringing lawsuits against big banks that issued bogus mortgage-backed securities. He told me this afternoon that he’s about to move: In the next couple of weeks Greenwich and other investors will bring big lawsuits against major banks.

Will these combined troubles be enough to sink any big banks? If investors can win a couple of lawsuits, easily.[/quote]

[Homer_Rice]

[quote name='gatorclaws' timestamp='1288018171' post='934446']
I clearly stated I didn't read the whole thing as it's fairly long... sometimes it pays to just explain without a smart-ass comment.
[/quote]
Well, "War and Peace" is long. But yes, you're right. Please accept my apology. In order to prove how sincere I am, please give me a call the next time you have to take a shit and I'll come over and wipe your ass for you.

[Jamie_B]

http://www.truth-out.org/moratorium-or-a-new-mortgage-fdr-sided-with-main-street64443


[quote]Moratorium or a New Mortgage? FDR Sided With Main Street

The recent furor over the issue of mismanaged and fraudulent practices among some of the nation’s largest issuers of home mortgages has led to calls among some leading policy makers and others that it is time for the federal government to impose a nation-wide freeze on home foreclosures. While public anger over the issue continues to mount, and while Shaun Donovan, Secretary of Housing and Urban Development, has gone so far as to call the practices of some of the major banks “shameful,” there has been no indication to date that the Obama Administration would support such a move. In fact, Secretary Donovan has said repeatedly that a moratorium on foreclosures would be counterproductive and would hurt homeowners and home buyers alike. The Secretary has also said that where there is evidence of fraud or evidence that a homeowner had been denied “the basic protections or rights they have under law, we will take actions to make sure the banks make them whole, and their rights will be protected and defended.” But the general administration approach to the overall problem has been hands-off, perhaps best exemplified by Assistant Secretary of the Treasury Michael Barr’s comment that “[T]his is not a problem for Secretary Donovan to fix. This is a problem for the banks and servicers to fix.”

In many respects, then, the Obama administration’s approach to the foreclosure abuse crisis mirrors its approach to the overall housing crisis. This, like its Home Affordable Modification Program, is focused not so much on providing direct federal support to struggling families, but rather on trying to manage the problem indirectly, through the lending institutions themselves (the exact opposite approach that his administration has taken with regard to the federal student loan program).

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Nearly 80 years ago, the Roosevelt Administration faced a very similar problem when an estimated fifty percent of all urban mortgages in the country in 1933 were delinquent or in foreclosure. But instead of focusing their efforts on trying to solve the mortgage crisis through the banks, the Roosevelt Administration took a far more direct approach. (The Hoover Administration’s approach to the foreclosure crisis was — like the current administration’s — based on kproviding Federal aid to lending institutions.) Guided by the principle that FDR articulated in 1932 when he said that the objective of government should be “to provide at least as much assistance to the little fellow as it is now giving to the large banks and corporations,” FDR set up the Home Owners’ Loan Corporation (HOLC), a new federal agency whose purpose was to refinance existing home mortgages that were in default and at risk of foreclosure. As has been reported here before, in its brief history the HOLC (which shut its doors within three years) managed to refinance roughly twenty percent of all the urban mortgages in the United States. It also revolutionized the US mortgage industry by offering terms not based on the typical short-term mortgage agreement of the time (a non-amortized loan of seven to ten years terminating with a balloon payment), but rather on the far more affordable amortized mortgage of between 25 and 30 years. This not only made home ownership much more affordable for families with average incomes, but it also provided the lenders with much needed relief, as the HOLC bought out the previously at-risk loans.

We should also note that the HOLC was not considered an entitlement program. Roughly half of all of the applications it received were withdrawn or rejected as homeowners were required to demonstrate a history and determination to meet their financial obligations. Equally important, by the time the program closed its books in 1951, the agency had not cost the US taxpayer any money, but had turned a small profit.

The HOLC was a highly successful and profitable federal program, which along with the other New Deal financial and regulatory reforms, helped shore up the critical US housing market and bring stability and security back into the US banking and financial system. Moreover, by offering beleaguered homeowners direct federal assistance — in essence attacking the root of the problem — it eliminated the need for a moratorium on bank foreclosures.

As we continue to struggle with this seemingly never-ending mortgage crisis, perhaps it is time we heeded FDR’s advice and shifted our attention from the large banks and corporations to the “little fellow.” If the New Deal is any guide, doing so might just make us all better off in the end.[/quote]

[|Elflocko|]

[quote name='Homer_Rice' timestamp='1288022864' post='934488']
Well, "War and Peace" is long. But yes, you're right. Please accept my apology. In order to prove how sincere I am, please give me a call the next time you have to take a shit and I'll come over and wipe your ass for you.
[/quote]

[Jamie_B]

http://www.msnbc.msn.com/id/21134540/vp/39836703%25252339836703

[Jamie_B]

[url="http://www.dailyfinance.com/story/investing/joseph-stiglitz-corporate-crooks-to-jail/19684353/"]Economist Joseph Stiglitz: Put Corporate Criminals in Jail [/url]

[Jamie_B]

[quote name='Jamie_B' timestamp='1288058449' post='934706']
[url="http://www.dailyfinance.com/story/investing/joseph-stiglitz-corporate-crooks-to-jail/19684353/"]Economist Joseph Stiglitz: Put Corporate Criminals in Jail [/url]
[/quote]


This Stigliz interview that is the video in it is [b]REALLY[/b] good.