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Mortgage Settlement Defines Racketeering

Posted by Larry Doyle on March 13, 2012 5:51 AM |

If the Wall Street mortgage settlement is supposed to define justice, then crime certainly does pay.

Having asked repeatedly in 2011 whether Wall Street mortgage servicing practices qualified as a racket and thus the charges filed should have been addressed as a RICO violation, yesterday we received our answer.

By any measure of ‘sense on cents’, the evidence provided screams of a RICO violation. The verdict delivered? 

Crime pays.

In typical white collar fashion, though, the only face on this crime is that of the American taxpayer who gets screwed coming and going. Let’s navigate as The Wall Street Journal reports, Foreclosure Pact Alleges a Pattern of Malfeasance:

U.S. and state officials accused five large U.S. banks of overcharging and misleading borrowers in court documents filed Monday as part of the $25 billion settlement of alleged foreclosure abuses.

The filing offered a detailed description of how the five banks allegedly violated state and federal law. Officials spent more than a year investigating foreclosure practices that began as a probe of “robo-signing,” or employees approving documents without proper review.

Do you think the banks were talking to each other about ‘best practices‘ during this period? Might that qualify as collusion and thus part of a racket? I have no doubt.

Banks “engaged in a pattern of unfair and deceptive practices” and made “false or fraudulent” claims to the federal government, according to an eight-count complaint filed in U.S. district court for the District of Columbia.

A “pattern of unfair and deceptive practices”? As in “on a regular basis” or as a “normal course of business”? In layman’s terms, can you spell, R-A-C-K-E-T??!!

In settling, the five banks—Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co . and Wells Fargo & Co .—neither admitted nor denied guilt.

The American system of justice just sunk to a new low. These business units involved in this racket—er, I mean, business—were run by machines, right? I mean, is there a chance that senior executives just might have been overseeing these businesses? Neither admit nor deny guilt, right? Pay $25 billion but no guilt? Can you say joke?

The issues laid out in the complaint go well beyond the allegations of robo-signing. Among other things, the complaint alleges that the five banks charged borrowers excessive or improper fees, failed to properly apply borrower loan payments and wrongfully denied borrowers loan modifications.

The banks also provided homeowners with “false or misleading information,” failed to have appropriate staffing levels to meet the surge in troubled loans, and overcharged and improperly foreclosed on members of the military, according to the complaint.

Banks also engaged in a “continuing abuse of the bankruptcy process” and filed “false or fraudulent claims” for reimbursement from the Federal Housing Administration’s mortgage insurance program, according to the court filing.

The issues are clearly egregious, but the terms of settlement have absolutely no meaning to me. Why?

This settlement exposes the fact that a basic sense of fair dealing and business ethics were non-existent within these business units. As such, the settlement is little more than an acknowledgment that the banks were engaged in an assault upon our fellow citizens and nation as a whole.

There is NO price of justice for charges that serious and activities this coordinated. I mean, what is typically handed out for treason? 

How might Americans render their own form of justice?

I would not do business with these firms.

How about you? What do you think?

Navigate accordingly.

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

Larry Doyle

  • Obsvr-1

    simply disgusting, we know nothing of their laws and justice. We have all been sold a bag of crap in believing there is equal justice for all … so sad.

    • There is no justice for most of America. In Wisconsin, Gov. Walker is using the settlement money for Wisconsin’s budget instead of going to the people it harmed.

  • fred

    LD,

    I’m still not completely sold on the ‘greviousness’ or criminality of Robo-signing and I think strategic defaulters are just as guilty of crimes against America as the big banks you accuse of RICO crimes.

    But, when you take a moment and think about the unmitigated gall of these big banks committing ‘real’ crimes against homeowners after bailouts, funded by American taxpayer, pulled them from the abyss of bankrupcy makes my blood boil!

    Clearly, the corporate culture of the big banks has been polluted by an attitude that they are beyond reproach and that the public can be abused and violated without fear of retribution.

    This attitude MUST BE CHANGED. Americans must trust their ‘institutions’ and clearly the ‘too big to fail’ label affixed to these banks creates a moral obligation on them to act in an ethical manner consistent with the public interest.

    Systematic abuses of the law within the banking industry cannot be tolerated. Executives and Boards of Directors, who are paid to know, must bear the responsibility of knowing and be held accountible.

    But, how different is the callous behavior of the big banks when compared to current fed policy (prolonged neg real rates) or the actions of an administration hell bent on re-election no matter what the LT cost to taxpayers?

    Of one thing you can be certain, the stock market will continue to melt up to the benefit of big banks until risk averse savers are squeezed so tightly that they must capitulate and buy the stock that big banks will be waiting to sell them. Only then will a correction in the stock market begin in earnest.

  • Obsvr-1

    May be interesting/entertaining for folks to peruse

    Meeting Of Central Bankers, “Godfather” Style

  • Obsvr-1

    @fred said: — I’m still not completely sold on the ‘greviousness’ or criminality of Robo-signing and I think strategic defaulters are just as guilty of crimes against America as the big banks you accuse of RICO crimes.

    ***
    So it is ok for business and the financial industry to use strategic default (where the term originates) but not for a homeowner (I should say home investor).

    I guess it was perfectly OK to skim the “rent” (interest) on the loan as long as the asset was viewed as “always appreciating”; knowing that the bank can foreclose on the investor at any point the loan becomes non-performing (default). In a market that only goes up, there was very little risk in default, as the homeowner would sell the asset to payoff the loan and then either downsize or become a renter. BUT …

    when the market tanked (thanks to the financial industry greed, fraud and malfeasance) and the asset goes underwater — “OH the HORROR of it all, those immoral defaulters …”

    Lets just use the same language of the bankster class — “We are just following the contract” … “you can’t claw back bonuses on illusory gains, we are just following the contract …”

    So, lets just follow the contract; if a homeowner (home investor) defaults on the loan (either strategically or for any other unfortunate need) then the Mortgage Contract says, foreclose, take back the asset as that was the collateral for the loan (note). There was no moral clause, or deficiency clause, just sieze the collateral. The banksters should also follow the contract, the rule of law and not violate hundreds of years of property law and title practices for the sake of efficiency. They created the MERS system to circumvent the transfer and recordation process for efficiency and to bypass the fee’s to the state/county.

    Yes, there are those who took advantage of the bubble system, but there are many more that are being taken advantage of by the purveyors of crony-capitalism (banks, FED, Gov’t).

    Take an example of someone that has always kept 20-30% equity in the home and has been paying the mortgage for years (5,10,15) and then the market falls 30-40%, so now they are underwater (Far from an irresponsible sub-prime position of zero down or neg-amort ARM). Then because the over leveraged financial system blows up, the person loses his/her job so can not continue to make payment (default) and loses the home — now what say ye about condemnation for this utterly irresponsible homeowner.

    What makes this whole situation worse is anyone that is trying to play by the rules and trying to live a decent life has been irreparably scarred by the continuous fraudulent activities of the plutocrats.

    • fred

      I guess there’s a question in there.

      I define a strategic defaulter as someone who has the financial means to make the payment but because their investment is ‘under-water’, chooses not to. In my opinion, someone invoking a strategic default posesses a certain degree of ‘financial sophistication’ and most likely was motivated by a certain degree of greed at the time of purchase; willing participants in an market that was clearly overvalued.

      I do not defend the wrongdoings of big banks, they should be vigorously prosecuted, but to me two wrongs don’t make it right.

      Default leads to foreclosure, foreclosure depresses prices. So when do those rollbacks on property taxes begin?
      I always said, the only time you want your homes value higher is when your trying to sell it.

      Sure adjustible teaser rates were responsible for higher affordability and higher prices but so was stimulative Fed policy.

  • Obsvr-1

    The original ‘sin’ from all of the fraud and malfeasance from the FIRE industry created and then bust the housing bubble is so tremendously large, any strategic default at the margins would not register a balance of 2 wrongs to make a right.

    Anyone that had put money down (5,10,20%) or had equity built by the meager principle component has lost real money. If folks have paid $ to upgrade and improve the property, they lost real money. As long as folks continue to pay the inflated (bubble) mortgage the banks have not lost a dime, they continue to get the revenue stream (interest) from the bubble mortgage. Until the homeowner stumbles and the home goes into default, the banks do not suffer any loss. In fact, since the Mark-to-Market rules were defanged in 2009 the banks do not have to report or hold capital against the risk.

    The MSM are mystified why there are not more people refinancing in the middle of the lowest interest rates in history. No mystery, if you do not have a 80% LTV (either equity or down payment) they can not get those rates, and many not in a position to qualify, so they are hunkered down paying excessive payments with respect to the market value of the home. Many are stuck and can not sell to move, because they do not have a sufficient return to put 20% down on a replacement home.

    If everyone that has an underwater mortgage strategically defaulted, imagine how many of the banks would pass on that stress…

    The MSM blather about irresponsible homeowners does nothing but take the focus away from the ‘original sin’ and on-going fraudulent activities.

    • fred

      I guess we can agree to disagree. Banks provided mtg loans but home buyers agreed to pay the inflated prices.

      Are some recent (post 2000) home buyers and second mtg borrowers underwater, YES. Did easy money policy by the inflate prices and create a housing bubble, YES. Did banks lower their lending standards and make mtg loans availible to borrowers who were, in hind-sight, bad credit risks, but for the most part willing borrowers, YES. Did MBS processing contribute to the adoption of substandard lending practices akin to boiler room telemarketing scams, YES.

      But, why should American consumers, taxpayers and investors be required to bail out banks who made bad loans and home buyers who paid inflated prices?

      (Maybe banks should be required to mark to market and add to reserves before dividend payments are allowed to resume).

      Isn’t it only a matter of time before the Fed swaps out at 100 cents on the dollar for these mortgages and buries them on America’s balance sheet? What then an extended period of low deposit savings rates, high food and fuel prices and higher taxes due to gov’t deficits?

  • sundevil

    how great are the chances the court will reject this settlement? doesn’t the handling of first and second liens rewrite existing law? wouldn’t congress have to change the laws?






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