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Let Them Eat Crumbs

posted by Elizabeth Warren

The Treasury Department has yet another voluntary plan to fix the mortgage meltdown.  This one gives families an extra thirty days to pack their belongings before they lose their homes to foreclosure.  For the 2 million families estimated to go into foreclosure this year, the mortgage industry, backed by the current administration says, in effect, "Let them eat crumbs."

The administration plan is, once again, voluntary, and only a half-dozen lenders have agreed.  What about the teaser-rate and sleaze-ball mortgages sold by everyone else? I guess those home owners had better pack fast.

The mortgage lenders are hailing the extra 30 days as "stopping foreclosures" and giving time to negotiate new loans.  But there are no commitments in that rhetoric. Indeed, this is described as valuable for people who are already 90 days in default--and with whom the mortgage servicer didn't work something out during that time. 

The mortgage industry has been ferociously lobbying against changes in the bankruptcy law that would help an estimated 600,000 families refinance their mortgages at 100% of the current market value of the home.  This is a solution that will be painful for many families, forcing them into bankruptcy to get some relief.  But it is the only game in town right now to help families negotiate a permanent solution without rewarding the high-risk lenders.

The lenders' first attack on the bankruptcy bill was to claim that the bankruptcy changes would drive all mortgages up by 2 percentage points--a claim that Barney Frank said was made up and that Professor Adam Levitin proved was just flat wrong.  So the lenders have a new plan:  30 days to pack your bag. 

Some say that this new proposal is just designed to head off a bankruptcy bill.  I can't believe that a let-them-eat-crumbs proposal would slow down any serious efforts to help homeowners and to try to stabilize the real estate market.


With all due respect, Professor, you are going on the assumption that the majority in the industry actually WANT to help homeowners. There is a reason that the credit card industry calls consumers who pay their bill in full every month "deadbeats". It's because the industry makes more money on those consumers who choose only to make minimum payments. Now extrapolate that to the mortgage industry.

The mortgage industry, servicers to be exact, makes more money when a borrower is in some form of default and generating various (usually late) fees. Modification fees may also be pocketed by servicers as "additional servicing compensation" as can assumption fees, force placed insurance fees ,etc. What a servicer is allowed to keep as "additional servicing compensation" depends solely on the negotiations of the Pooling & Servicing Agreement of the trust prospectus.

The longer a servicer can keep a borrower in default **before foreclosing** the more late fees, BPO fees, legal fees, interest on corporate advances, etc. can be tacked on to a borrower's loan thereby eating up as much equity as possible. The act of "foreclosure" and the associated auction of the property is simply the final act of laundering a property off of a servicer's books. And if the property is purchased by a third party at auction it is also off of the note holder's books and thereby 100% "laundered" and ready for the next transaction. And don't think that a borrower is going to recover any "leftover" equity in a property ESPECIALLY if it is bought back by the note holder. If a $200k property has a $140k note on it and another $10k in associated "fees" then the property is going to be purchased for $150k. And $50k in equity simply evaporates as far as the borrower is concerned. When the market is fairly stable or on an up shoot as in the last 5 years +/- it is the entity that purchased the property who pockets the profit on the sale of the foreclosed home and nothing is returned to the now previous borrower.

Run "Mark Harmon" through the Ma Sec'y of State's corporate site sometime. In addition to owning Harmon Law Offices, he also owns Commonwealth Auction Associates, Northeast Title Abstract and Realty Funding as well as the family trust. Try comparing the public notices where Harmon appears to the Commonwealth Auction listings sometime. Is it a coincidence that Commonwealth handles a large portion of the foreclosure auctions resulting from foreclosure actions handled by Harmon ?

This game is rigged more than anyone apparently wants to believe. Right down to the fraudulent Assignment of Mortgage created by Fairbanks in my own case and filed more than two years after the supposed transfer of ownership of my note from Superior Bank to Merrill Lynch. I'll be more than happy to walk you through it sometime if you like. Drop me a line or give me a call. Carol should still have my contact info.

Fairbanks.....Wow. What happened to them? They had that huge class action and settled. What happened to all of those fraudulent fees ie. inspection fees etc which was the basis for the class action? They paid x amount to the debtors then went ahead and sold those accounts off. Did they tell the new purchasers of the amounts they paid back to the debtors involved in the class action....???? Probably not. I suspect that the new purchasers are collecting on those fees even though Fairbanks reimbursed the debtors for them. Saw it in a recent discharged chapter 13. It was a payout as ordered by way of a reduction in principal amount for violations of 11 U.S.C. 362(h) but when I reviewed a pay history and the servicer and purchaser history I came upon the fact that the new mortgage co. had pre-petition amounts of course minus what was paid thru the 13. Smack dab in the middle of the 13 is when the debtor received the notice of the class action and received proceeds. Soon after it was sold off and placed with a servicer. Little did I know that the basis that we used to hold Fairbanks in contempt was the basis of the class action in that they were violating the stay by placing demand notices on the debtors' door and charging inspection fees for them, Im talking like 3-4 times a month of course violating the stay. I just couldn't make the connection at the time that the fees were fraudulent or at least alleged fraudulent....

What happened to Fairbanks, Patches, is...well...nothing. They coughed up $55 million - actually I believe that someone coughed it up FOR them - in exchange for admitting no wrongdoing and changed their name to Select Portfolio Servicing Inc. 45 days +/- after USA/Curry was signed off on by Judge Woodlock in May 2004. Any "proceeds" that the debtor may have seen from USA/Curry settling came at the cost of all of their rights to go after SPS or any of their associates, assigns, vendors, etc. If the $40M allocated for "reimbursement" was spread evenly over the full 280,000 "opt-ins" that's about $143 each. Couldn't have done much to help the debtor. The big question there is was the debtor properly notified of USA/Curry?

As my litigation continues I keep hearing stories from other Fairbanks/SPS victims to this day including violations of Best Practices that were agreed to in USA/Curry.

Feel free to drop me a line if you'd like to chat further. foreclosurestory AT getdshirtz dot com.

In reflecting our wishful optimism, Professor Warren clings to the belief that there might be found, hidden in the dusty archives of Law, a potent weapon to battle the darks forces of avarice in an declining empire. Across campus, the historians reflect that this rarely happens, but we can hope she' right.

Any Judge could, sua sponte, declare an interest over 5% above prime (the commonly-accepted usury rate), unconscionable, and any such contract unenforceable. They could declare that the credit card contract and credit rating system are a conspiracy in interstate commerce to restran trade and monopolize the credit rating and consumer lending business.

Judges with the ability to multiply, know that the credit scores, without a full knowledge of total assets and liabilities are a fiction - they fail to identify actual risk, and merely provide an excuse for predation. For when any submitting lender reduces the lender's credit line, the credit rating goes down - regardless of assets or performance. This in turn dissuades competing lenders from offering lower rates.

They know the credit contract is predatious, permitting an virtually unlimited interest rate increase while failing to state with clarity the circumstances under which the interest rate would decline.

With the Fed rate at 3-4%, it is so far from the 7% or 1% above the window rate, encoded in the National Bank Act of 1864, or the 8% in the Massachusetts Bodie of Liberties, or even the 20% criminal usury in current Massachusetts law, as to be unconscionable on its face.

Unfortunatley, the Court's institutionalization of bankers as loan sharks, executives in public corporations as thieves of shareholder wealth, and war profiteering by the military-industrial complex, reflects the Court's true values - that a controlling oligarchy has the right, if not obligation, to exploit the few remaing coppers of the great unwashed masses.

'We have wont of an honest (lawyer/judge), if such species exist in nature' Bostonian Edward Randolph to the English Crown (1689)

In the fullness of time, it has, indeed, come full circle...the very same people who demanded the 'evil bankers' issue subprime credit to the great unwashed, in the name of CRA et al, are now calling these very same 'evil bankers' predators, once they issued the subprime credit.
Almost laughable, if not so devastating.
Yes, there were excesses on both sides of this issue...it's just too bad cooler heads did not prevail.
That is all.

If only it were that simple, Jake...

Off-topic: Speaking of usury, can someone tell me how the check cashing, loans-for-title places can charge up to 200% legally? I really don't understand this.

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