Obama puts critics of financial overhaul on notice! Just more of the same old ****. Video of “Regulators reporting to Congress”

Have you read this …….

WASHINGTON – President Barack Obama said Saturday that current financial rules exploit consumers and he put critics of his proposed overhaul on notice: “While I’m not spoiling for a fight, I’m ready for one.”

Obama used his weekly radio and Internet address to defend his recent proposal, which is intended to prevent a repeat of the breakdown that has sent the U.S. economy reeling. But such major changes face a fight in Congress and opposition from some leaders in the banking and insurance industries.

In the address, Obama focused on a consumer watchdog office that he wants to set up.

“This is essential,” Obama said. “For this crisis may have started on Wall Street. But its impacts have been felt by ordinary Americans who rely on credit cards, home loans and other financial instruments. http://news.yahoo.com/s/ap/20090620/ap_on_go_pr_wh/us_obama_consumers

It is generally agreed that the current financial crisis started in the mortgage industry and the primary entities responsible for the collapse were Fannie Mae and the Federal Reserve. Yes, the same Federal Reserve Obama wants to give more power too.

Do you know how many “Federal Regualtors” were employed to “over see” Fannie Mae in the last deacade?  Two hundred, full time regulators. Were they asleep at the wheel?  Heck No! They did their jobs and then were ignored by Congress when they reported the misdeeds they uncovered.

The video below is a sample of one group of regulators reporting to Congress on this very issue ……

Franklyn Raines – CEO of Fannie Mae, later entered into a plea deal on charges of cooking the book …..

Note that a question was asked in the video, “why should Congress trust OFEO?” (the Regulatory Agency) who both discovered and alerted Congress to the misdeeds  – The real question is can the people trust “politically motivated” Polticians who ignore the Regualtors who are already in place.  

What did the Congress suggest – changes in Fannie Mae?  Heck No. Listen to Congresswoman Maxine Waters – the Regulators were “to blame” for trying to stop Fannie Mae – yep tose are Rep. Waters word the Regulators were to balme for trying to Fannie from starting this crisis. Presented with evidence of the problem Barney Frank denies a problem existed – listen to his words above and listen to him later try to deny these very same words below …

Take this article, from the Boston Globe, as a uniquely honest example of reporting on the topic ….

 The Boston Globe

Frank’s fingerprints are all over the financial fiasco

 

‘THE PRIVATE SECTOR got us into this mess. The government has to get us out of it.”

That’s Barney Frank’s story, and he’s sticking to it. As the Massachusetts Democrat has explained it in recent days, the current financial crisis is the spawn of the free market run amok, with the political class guilty only of failing to rein the capitalists in. The Wall Street meltdown was caused by “bad decisions that were made by people in the private sector,” Frank said; the country is in dire straits today “thanks to a conservative philosophy that says the market knows best.” And that philosophy goes “back to Ronald Reagan, when at his inauguration he said, ‘Government is not the answer to our problems; government is the problem.’ “

In fact, that isn’t what Reagan said. His actual words were: “In this present crisis, government is not the solution to our problem; government is the problem.” Were he president today, he would be saying much the same thing.

Because while the mortgage crisis convulsing Wall Street has its share of private-sector culprits — many of whom have been learning lately just how pitiless the private sector’s discipline can be — they weren’t the ones who “got us into this mess.” Barney Frank’s talking points notwithstanding, mortgage lenders didn’t wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so – or else.

http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/09/28/franks_fingerprints_are_all_over_the_financial_fiasco/

For a history of the Federal Reserves’ active participation and the Feds “active regulatory activity” that started this mess see this article: http://johnrlott.tripod.com/op-eds/FoxNewsMortgagesReg091808.html

The last thing America needs is more regulation from the same people who “regulated” the colapse into being in the first place. Amercia needs to get the Politican out of our wallets and 401ks and let America get back to work. Higher taxes and additional, corrupt regulation, won’t create more jobs. It will mean a weaker economy.

Additional Regulation won’t work if Congress can ignore the Regulators who are already in place …… while they take cash from the regulated ……..

and using their offices to work sweetheart deals (Senator Chris Dodd and Countrywide Bank) with those being regulated ….

Before you respond that Fox News is biased – check out this report from NBC …

Angello Mazillo, CEO of Countrywide has been charged with fraud and insider trading …..

http://money.aol.com/article/sec-charging-ex-countrywide-ceo-mozilo/481893?bId=MoneyBoard&tId=mfida481893&bpId=%2F&sort=3&pg=4

We don’t need more regulations that the crooked Politicians refuse to enforce …. We need fewer crooked Politicians.

Citibank Announces Moratorium On Mortgage Foreclosures – Private Plan That Won’t Cost Taxpayers A Dime

NOT A GOVERNMENT BAILOUT – A PRIVATE ACTION THAT WON’T COST TAXPAYERS A DIME – WHY IS CITI DOING THIS? IT MAKES GOOD BUSINESS SENSE – THAT IS WHY !

Citigroup says it is imposing a moratorium on most foreclosures as part of a series of initiatives aimed at helping at-risk borrowers remain in their homes — making Citi the latest big bank to announce sweeping efforts to try to curtail losses from souring mortgages.

Citi said late Monday it won’t initiate a foreclosure or complete a foreclosure sale on any eligible borrower who seeks to stay in a home if it is the borrower’s principal residence, the homeowner is working in good faith with Citi and has sufficient income to make affordable mortgage payments.

Citi said it is also working to expand the program to include mortgages the bank services but does not own.

Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are deemed as potentially needing assistance to keep current with their payments. This represents about one-third of all the mortgages that Citigroup owns, the bank said.

Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal, or increasing the term of the loan, steps known in the mortgage industry as a workout.

Of the four biggest U.S. banks — Citigroup, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. — Citi has been on the shakiest footing as a result of the mortgage crisis, reporting losses in the past four consecutive quarters while its rivals have managed to post profits. The steps announced Monday are designed to stem those losses.

“Typically the lender loses the most money when a house goes into foreclosure,” said Barry Zigas, director of housing policy at the Consumer Federation of America. “(The lender) takes some kind of loss that’s usually much greater than what they sacrificed through some kind of workout.”

Sanjiv Das, chief executive of CitiMortgage, said, “It is in our interest that borrowers stay in their homes and actually make the payments.”

Citi is targeting homeowners in geographic areas with higher-than-average unemployment and foreclosure rates, primarily in Arizona, California, Florida, Michigan, Ohio and Indiana, Das said. The program is expected to affect about $20 billion in mortgages.

“As the unemployment rate is starting to creep up on us, there is going to be increasing distress in the marketplace,” Das said in an interview with The Associated Press. “It’s not going to distinguish between what type of mortgage they have.”

“There is a huge amount of anxiety among borrowers,” he said. “We will reach out to them before they become delinquent.”

Since early last year, Citigroup has helped about 370,000 families avoid foreclosure, representing more than $35 billion in loans, the bank said.

Citi has avoided negative amortization loans, option adjustable-rate mortgages, and other types of risky mortgages, defaults on which have skyrocketed since the start of the housing bust in the middle of last year. Still, the bank has nonetheless been hurt by the relentless downturn in housing that fed the mortgage and credit crisis, and in turn, the near-breakdown of the financial system.

With defaults mounting, other lenders, including JPMorgan and Bank of America, have also become more aggressive about modifications to mortgage agreements.

But a moratorium only solves so much, according to Zigas. “A moratorium on foreclosure will be effective at stopping foreclosure, it won’t be effective at stopping the underlying reasons of why people are in trouble,” he said.

By taking a proactive approach, Citigroup isn’t waiting until it’s too late to deal with delinquent borrowers, said Steve Curnutte, president of InsBank Mortgage in Nashville, Tenn. However, the problem is growing faster than most banks can handle, he said.

“It’s nearly an insurmountable undertaking,” said Curnutte. “The number of bad loans that they can modify using their resources is being quickly outstripped by the number of new loans that need to be modified.”

More than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.

Late last month, JPMorgan expanded its workout program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.

JPMorgan also said it will not put any loans into foreclosure as it implements the expanded program over the next 90 days.

Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with state officials in early October.

http://www.chicagotribune.com/business/chicago-big-banks-mortgages-nov11,0,5250204.story?track=rss

Countrywide Lawsuit Settled – Lender to Modify Mortgages In 11 States

 

Published: October 5, 2008
Countrywide Financial has agreed to the largest program ever to modify home loans, as part of a settlement with officials in 11 states, just days after the federal government adopted a giant financial rescue package without any relief for distressed homeowners.

Countrywide, the nation’s largest lender and loan servicer, recently acquired by Bank of America, had been sued by the states over what they said were predatory lending practices. To settle the suits, it will provide $8.4 billion in direct loan relief, affecting an estimated 400,000 borrowers nationwide, while waiving certain fees and setting aside additional funds to help people in foreclosure and relocating.

“Countrywide’s greed turned the American dream into a nightmare for thousands of Californians who now face foreclosure,” said Jerry Brown, the attorney general of California. He led the negotiations for the states with Lisa Madigan, the Illinois attorney general. “Our goal here is to help as many people stay in their homes as possible and get some compensation for those who have already been pushed out of their homes,” he said.

Mr. Brown expects loans worth $3.4 billion to be modified in California, where homeowners have been hit hard in the housing bust.

The Countrywide effort is the most comprehensive, mandatory loan workout program since the mortgage crisis began last year. Congress has proposed various programs, but those measures did not make it into the final $700 billion government bailout. Since taking control of Fannie and Freddie Mac, the two housing giants, the Federal Housing Finance Agency has said it is looking at expanding modifications on the loans that Fannie and Freddie own or guarantee.

After seizing IndyMac, the Federal Deposit Insurance Corporation began a loan modification program that it said could be a template in other takeovers. The agency hopes to help tens of thousands of borrowers whose interest rates are being reset higher in the early stages of that program.

It is encouraging people who have fallen severely behind on their payments or who have defaulted to switch into a fixed-rate mortgage at current rates of about 6 percent. Countrywide has made pledges before to modify large swaths of loans. Late last year, it vowed to help about 82,000 borrowers who were facing higher payments through 2008. But the new program will be mandatory and will be monitored by state officials.

Along with the direct relief, Countrywide will waive late fees of $79 million and prepayment penalties of $56 million and suspend foreclosures on delinquent borrowers with the riskiest loans.

A foreclosure relief fund will be created with $150 million from Countrywide to help borrowers who are four months or more behind on their payments or whose homes have already been foreclosed on. The company will also provide $70 million to help troubled borrowers relocate to rental housing. In all, Countrywide is setting aside $8.7 billion to help borrowers.

A Bank of America spokesman, James E. Mahoney, said that the cost of the program had been anticipated by the company in its acquisition of Countrywide.

“We have worked with attorneys general across the country to resolve the issues relating to Countrywide’s practices,” Mr. Mahoney said. “Bank of America has put our own leadership in charge of Countrywide and have committed to a very different set of business practices going forward.”

Countrywide settled with the states without admitting any wrongdoing.

Under the terms of the settlement, Countrywide will reduce principal balances in some cases and cut interest rates in others. Rates could decline to 2.5 percent, depending upon a borrower’s ability to pay, and remain at that level for five years. Then the rate will adjust to prevailing interest rates charged by Fannie Mae on its fixed-rate mortgages.

The program will focus on borrowers who were placed in the riskiest loans, including adjustable-rate mortgages whose interest rates reset significantly several years after the loans were made. Pay-option mortgages, under which a borrower must pay only a small fraction of the interest and principal, thereby allowing the loan balance to increase, are also included in the modifications.

Borrowers whose first payment was due between Jan. 1, 2004, and Dec. 31, 2007, can participate. The loan balance must be at least 75 percent of the current value of the home, and the borrower must be able to afford the adjusted monthly payments.

“We have created the first comprehensive, mandatory loan-modification program with the largest loan servicer in the country, and it is going to help homeowners stay in their homes,” Ms. Madigan said. “We will use this model when we work with other servicers as well.” She said that approximately $185 million worth of loans in Illinois would be modified under the settlement.

Illinois had accused Countrywide of relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims, like its “no closing costs loan.” Countrywide also created incentives for its employees and brokers to sell questionable loans by paying them more on such sales, the complaint said. In reviewing one Illinois mortgage broker’s sales of Countrywide loans, the complaint said the “vast majority of the loans had inflated income, almost all without the borrower’s knowledge.”

Other states in the settlement are Arizona, Connecticut, Florida, Iowa, Michigan, North Carolina, Ohio, Texas and Washington. It is the largest predatory lending settlement in history, far exceeding the $484 million deal struck in 2002 with the Household Finance Corporation.

“This agreement demonstrates the effectiveness of states in addressing predatory lending and other consumer protection matters, proving states should not be pre-empted by federal legislation,” said Mr. Brown.

The program will be administered by state officials who will examine regular reports from Bank of America. The program will begin Dec. 1 as Bank of America contacts borrowers. In the meantime, Bank of America said Countrywide customers can call 800-669-6607 to discuss their loans.

The terms of the settlement do not address Angelo R. Mozilo, the former chief executive of Countrywide Financial, or David E. Sambol, the company’s former president. The states had included both as defendants. Mr. Brown said he would pursue litigation against both men. Neither could be reached for comment.

http://www.nytimes.com/2008/10/06/business/06countrywide.html?_r=1&ref=business&oref=slogin

THE MORTGAGE SCANDAL – HOW FEDS CREATED THE MORTGAGE MESS

By STAN LIEBOWITZ

February 5, 2008

PERHAPS the greatest scandal of the mortgage crisis is that it is a direct result of an intentional loosening of underwriting standards – done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults.

At the crisis’ core are loans that were made with virtually nonexistent underwriting standardsno verification of income or assets; little consideration of the applicant’s ability to make payments; no down payment.

Most people instinctively understand that such loans are likely to be unsound. But how did the heavily-regulated banking industry end up able to engage in such foolishness?

From the current hand-wringing, you’d think that the banks came up with the idea of looser underwriting standards on their own, with regulators just asleep on the job. In fact, it was the regulators who relaxed these standards – at the behest of community groups and “progressive” political forces.

In the 1980s, groups such as the activists at ACORN began pushing charges of “redlining” – claims that banks discriminated against minorities in mortgage lending. In 1989, sympathetic members of Congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants; this allowed various studies to be ginned up that seemed to validate the original accusation.

In fact, minority mortgage applications were rejected more frequently than other applications – but the overwhelming reason wasn’t racial discrimination, but simply that minorities tend to have weaker finances.

Yet a “landmark” 1992 study from the Boston Fed concluded that mortgage-lending discrimination was systemic.

That study was tremendously flawed – a colleague and I later showed that the data it had used contained thousands of egregious typos, such as loans with negative interest rates. Our study found no evidence of discrimination.

Yet the political agenda triumphed – with the president of the Boston Fed saying no new studies were needed, and the US comptroller of the currency seconding the motion.

No sooner had the ink dried on its discrimination study than the Boston Fed, clearly speaking for the entire Fed, produced a manual for mortgage lenders stating that: “discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants.”

Some of these “outdated” criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification. Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant’s ability to manage debt.

Sound crazy? You bet. Those “outdated” standards existed to limit defaults. But bank regulators required the loosened underwriting standards, with approval by politicians and the chattering class. A 1995 strengthening of the Community Reinvestment Act required banks to find ways to provide mortgages to their poorer communities. It also let community activists intervene at yearly bank reviews, shaking the banks down for large pots of money.

Banks that got poor reviews were punished; some saw their merger plans frustrated; others faced direct legal challenges by the Justice Department.

Flexible lending programs expanded even though they had higher default rates than loans with traditional standards. On the Web, you can still find CRA loans available via ACORN with “100 percent financing . . . no credit scores . . . undocumented income . . . even if you don’t report it on your tax returns.” Credit counseling is required, of course.

Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed “the most flexible underwriting criteria permitted.That lender’s $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003.

Who was that virtuous lender? Why – Countrywide, the nation’s largest mortgage lender, recently in the headlines as it hurtled toward bankruptcy.

In an earlier newspaper story extolling the virtues of relaxed underwriting standards, Countrywide’s chief executive bragged that, to approve minority applications that would otherwise be rejected “lenders have had to stretch the rules a bit.” He’s not bragging now.

For years, rising house prices hid the default problems since quick refinances were possible. But now that house prices have stopped rising, we can clearly see the damage caused by relaxed lending standards.

This damage was quite predictable: “After the warm and fuzzy glow of ‘flexible underwriting standards’ has worn off, we may discover that they are nothing more than standards that lead to bad loans . . . these policies will have done a disservice to their putative beneficiaries if . . . they are dispossessed from their homes.” I wrote that, with Ted Day, in a 1998 academic article.

Sadly, we were spitting into the wind.

These days, everyone claims to favor strong lending standards. What about all those self-righteous newspapers, politicians and regulators who were intent on loosening lending standards?

As you might expect, they are now self-righteously blaming those, such as Countrywide, who did what they were told.

Stan Liebowitz is the Ashbel Smith professor of Economics in the Business School at the University of Texas at Dallas.

http://www.nypost.com/seven/02052008/postopinion/opedcolumnists/the_real_scandal_243911.htm?page=0

Breaking News Update:FBI investigating companies at heart of meltdown

WASHINGTON – The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a $700 billion bailout.

Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, and insurer American International Group Inc. Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation.

The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official said.

The law enforcement officials spoke on condition of anonymity because the investigations are ongoing and are in the very early stages.

Officials said the new inquiries bring to 26 the number of corporate lenders under investigation over the past year.

Spokesmen for AIG, Fannie Mae and Freddie Mac did not immediately return calls for comment Tuesday evening. A Lehman spokesman did not have an immediate comment.

Just last week, FBI Director Robert Mueller put the number of large financial firms under investigation at 24. He did not name any of the companies under investigation but said the FBI also was looking at whether any of them have misrepresented their assets.

Over the past year as the housing market cratered, the FBI has opened a wide-ranging probe of companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors. Mueller has previously said the FBI’s hunt for culprits in the nation’s subprime mortgage crisis focused on accounting fraud, insider trading, and failure to disclose the value of mortgage-related securities and other investments.

The investigations revealed Tuesday come as lawmakers began considering whether to approve emergency legislation that would give the government broad power to buy up devalued assets from troubled financial firms.

In the past two weeks, the government has taken over Fannie Mae and Freddie Mac, the country’s two biggest mortgage companies, with a bailout plan that could require the Treasury Department to put up as much as $100 billion for each of them over time if needed to keep them afloat as mortgage losses mount.

Last week, the Federal Reserve provided an emergency $85 billion loan to AIG, which teetered on the brink of bankruptcy. Lehman Brothers was forced to file for bankruptcy after attempts to engineer a private rescue fell apart. All the companies were laid low from bad bets on complex mortgage-related securities tied to sub-prime mortgage loans.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke made the joint decision last week that the only way to stop the carnage was to address the symptoms of all the troubles, billions of dollars in bad mortgage debt sitting on the books of major financial companies. This debt has triggered the worst credit crisis in decades, causing credit markets to essentially freeze up despite the fact that the Fed joined with major central banks around the world to pump billions of dollars of reserves into the financial system.

Additionally, the FBI is investigating failed bank IndyMac Bancorp Inc. for possible fraud. Countrywide Financial Corp., formerly the nation’s largest mortgage lender and now owned by Bank of America Corp., is also under scrutiny.

http://news.yahoo.com/s/ap/20080924/ap_on_go_ca_st_pe/financial_meltdown_investigation

This article originally claimed that the Fed was addressing the “root cause” of the problem – that is incorrect – the bad debt on the books – from bad mortgages – are in fact the “symptoms” of the broken system. The root cause is the underwriting of these bad loans. The proposed bailout is silent as to what will be done to prevent a repeat of the horrendous lending practices.  

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