Ohio Uses State Monies to Deal with Mortgage Fraudsters and Foreclosures.

I had posted earlier that a lot of the mortgages were turned into Credit Default Swaps, which meant that the mortgages themselves were not held by financial companies, but split over and over into some very ugly, shady deals.

My earlier post on this issue, click here.

The State of Ohio has found grounds to agree with me, and they are actually going ahead with a plan to deal with the greedy jerks who perpetrated some pretty nasty frauds.

How significant is the foreclosure problem in Ohio?
It’s immense. One in 58 households [is] facing foreclosure. That’s one per neighborhood.

Why did you decide to address the mortgage problem by creating this team of lawyers?
The first thing we talked about was whether we could create mediation programs in the courts by asking the judges to encourage or force the servicers to at least sit down and talk to borrowers about an arrangement. But what we concluded was that there is a real inequality, because to file a mortgage foreclosure you have to be a lawyer. And homeowners—particularly those that are in default on their mortgage note—don’t have lawyers. They are at a real disadvantage in negotiating. So it was not good enough just to have mediation, but both parties in the mediation need to be represented by lawyers.

What will the lawyers do?
The lawyers will work with the borrowers to see if there are defenses to the actual foreclosure, whether there was fraud or unsuitability in the creation of the mortgage to begin with, and then to assist in two other ways: either to help litigate the case or to help structure a settlement.

What legal footing might you have to mount defenses against foreclosures?
With these complex mortgage products—the adjustable rates, the no-document loans that were out there—there are all types of things in the generation of loans that give rise to defenses. And with the fact that these loans then started to become sold seven, eight, nine, 10 times in the process, there are even legitimate legal issues as to whether or not the person filing the foreclosure has the legal right to file a foreclosure because they don’t have ownership of the mortgage note.

In Ohio, documents related to real estate have to be in writing; it’s called the statute of fraud. We just convinced a court of appeals—the 10th District Court of Appeals in Franklin County, Ohio—to find that you can’t bring a foreclosure action if you don’t have paper that proves that you own the house.

What percentage of struggling Ohio homeowners could mount a credible defense against foreclosure?
I think in probably 25 percent to 50 percent of the cases. If you look at the foreclosures, I use the following rules of thumb. About half of them are related to some form of financial catastrophe—a medical problem, loss of a job. Of the remaining half, about 25 percent are mortgages that involved outright fraud, where the buyer, the seller, the appraiser—everybody was cut in. So it’s that last 25 percent where people got in over their heads through buying a house that they simply couldn’t afford, or they got loans that they didn’t understand the terms of.

What percentage of home foreclosures do you think you might be able to prevent?
I think the vast majority of them. It would be in the best interest of the servicer and the borrower to try to find some accommodation.

But these contracts are between the borrower and the lender. Why should the government of Ohio be legally challenging them?
The fact is that the evidence is mounting that these wholesalers—and mortgage brokers who supplied them—targeted working-class, middle-class, unsophisticated consumers for generating these loans. So the fact is that there was a conscious effort to find people who wouldn’t be able to negotiate the contract at arm’s length. If a mortgage professional says, “Look, your payment is $500. I know this says it goes up in a year—don’t worry, we’ll come back and refinance you,” I think it’s very reasonable to think that it is not entirely the homeowner’s fault that the mortgage goes into default.

Yep. This is what my own point is, that some people got “snookered” by some people who made money off the backs of people who trusted in financial services, brokers and others.

Frankly, I would love to see these fraudsters charged, fined, lose their own property as “assets gained through illegal actions”. Yes, even the heads of banks, brokerages, real estate companies, developers should be dealt severely by the law.

For those living in Ohio, you need to be very glad you, at least, have someone willing to step up and do something effective.

Tax Money, Whose Is It?

Town council, city council, state, province, federal, even tax for schools and roads, all depend on someone having to pay up. Lately I have noticed a laissez-faire attitude toward the spending, the use of those tax dollars, as if the supply will always be endless and plentiful. Bad attitude!

Whose dollars are those? Whose pounds, yens, pesos, are those? Often they come from the pockets of the poor, the fastest growing segment of most societies. This means children are often eating poorly, going without new shoes, clothing, so the taxes can be paid. Those taxes are coming from families with single parents working part-time, paying for daycare, rent and all those other daily expenses. Tax dollars come from the people who work in minimum-wage stores with no health plan. Tax dollars come from the small shops who make or sell things. Tax dollars come from welfare payments, retirement income, the small trust funds of children who have lost a grandparent. Tax dollars are seldom gained from those who live in the high-income brackets, because there are write-offs, tax deductions for stock losses, and other means to avoid paying taxes. For every 100 tax dollars, less than half of 1 % is from those who make the most.

Poverty bashing has been a growing game, with those who are forced to live on food stamps, unemployment payments, and welfare the people targeted for derision, scorn.  “Get a job!” “Come on, get off your butt and get out there, earn your own way!” “Stand on your own two feet, I am tired of you sitting there and collecting money, tax money, from my hard earnings!” Take a look at almost every industrialized country statistics and you will find a very ugly trend. Poverty is growing. One in ten children now live in poverty in countries that have huge wealth, why? Wages for single parents are usually low, college, university, even health care courses are all well out of the range for any children of single parents. Costs have risen consistently at all those higher education sites, putting the squeeze on money. How could any of those children even consider getting out of the poverty black hole? Food banks are a common sight now, when once, food banks were only seen in cities with huge populations.

This is where Barack Obama had it right, START AT THE BOTTOM! The real bottom. The middle class has virtually disappeared because of the huge gap between those earning the high wages and income and the lower. The middle class is quickly becoming part of the poverty class, the lowest rung on the ladder.

When the 3 auto makers showed up in Washington, for example, there was a severe public relations gaff they made. People were aghast that those CEO’s showed up via private jets to ask for the tax money. Hmm not a good plan, guys! This showed a complete lack of understanding and even comprehension about tax funds, where the money comes from.

This current shakeup is, in a way, ironic. Those who “invested” in CDS, who played funny-money with others hard-earned money, have lost a huge chunk of their own income from the stock market collapse, the losses in the real-estate speculations, the property bought as “investment” for rental. So, no longer are those people walking around looking like they “own” the world. But, those people are the very ones who distained the ordinary working person, the money and taxes from the growing poverty class, and spent like a lottery winner. CRUNCH!  Now maybe some people will realize that every person who is going hungry, who lives in misery, is directly connected to all of us, and in ways we don’t see, we are the ones who are hungry and miserable too.

The bottom line here is respect. We need to relearn respect for ourselves, to do what we know as well as we can. We need to have those who want to have our tax money learn to respect the work required.  Maybe, just maybe, we can then learn to respect those who live with the hardest struggles, those who have been scorned and derided, the Vietnam veteran, the father, the mom, the sister, the son or daughter who live on the cold streets.  Yes, they deserve respect too.

Most of all, we all need to respect our own lives, to realize that we do all have unique abilities, skills, and underneath, we all are sacred, no matter what religion or belief system we use. We also have to respect our world, making sure that we don’t create such a mess that animals starve or get sick and die from poisons we add to the world.

Every being alive looks for a better future, wants to create a better world, and every one of us is capable of doing that. What the definition of “better” is, is where we have to put respect, honour and care into choosing what we do.

Child and Family Poverty Growing in Canada

Little Change For 20 Years in Poverty Rates

Welsh Children and Families living in poverty

National Center on Child Poverty, Letting Poverty Remain Costs All Of Us

State by State Cost Of Child Poverty in the U.S.

As long as we all believe that we MUST be compared to others, we all lose perspective. Poverty WILL grow now, with job losses, houses foreclosed, debts rising, and support systems being slashed.

The Stock Market Continue to Fall, Why?

You call your book THE PREDATOR STATE, what do you mean predator?

“JAMES GALBRAITH: What I mean is the people who took over the government were not interested in reducing the government and having a small government, the conservative principle. They were interested in using these great institutions for private benefit, to place them in the control of their friends and to put them to the use of their clients. They wanted to privatize Social Security. They created a Medicare drug benefit in such a way as to create the maximum profit for pharmaceutical companies.

They used trade agreements to extend patent protections for various interests or to promote the expansion of the corporate agriculture’s markets in the third world. A whole range of things that were basically political and clientelistic. That’s the predator state.”

That has been the way of previous governments, to enact laws that favoured corporate behaviour, corporate interests, corporate profits and extend the interest of the companies as much as possible.

Read this book: “The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too” Written by James K Galbraith.  We cannot remain in ignorance any more.

Read “The Crash of 1929” by John Kenneth Galbraith too. It shows just how closely what we are all living through parallels that time, but with some exceptions.

All around the world stock markets plummet, and there have been so many people thinking on this that some may end up with a headache trying to figure it out.

My own thinking, sans headache, is this. Banks, investment houses, lenders of all kinds as well as those who have bought into CDS and other hidden “instruments” are now being asked to repay, restore, and get the money back to those they owe. How can they do that? Sell off stocks,even at low prices, to pay up.

Remember there are a huge number of those hidden “instruments” now coming due. When the two investment houses, Morgan Stanley and Goldman Sachs both went to full-service banks, they cut out a huge amount of funding to those who were in the investments. That money is no longer there.

Shorter version, the debts are now being called, and demands for payment are here. This time there is no room for renegotiation, no putting off “paying the piper” so the markets are seeing pain.

Federal Deficits. There is a howling going around about them.  How can any country live with an increase in the national deficit. Well, the cold, hard truth is that there is NO other choice. A country can either refuse to go into debt and see the deficit rise regardless, or use the borrowing capacity to make decisions that will shorten or lighten the harsh reality down the road.  I am not alone here in thinking this.

It’s the dollar or nothing. So the United States basically can finance itself to the extent necessary to deal with this crisis. And I’m right now quite sanguine about that, quite confident that we won’t face a problem.

James K Galbraith

Credit Default Swaps and Banking Screwups Killing Economies

60 Minutes on These

I finally got some information on these and now perhaps it is time to make someone aware of how totally unregulated these were and are. The show “60 Minutes” put up one very simplified but complete explanation of what CDS are and how they were used to make some banks and people millions on the backs of mortgages, loans, and other money transactions.

In layman’s terms the CDS is essentially an unregulated insurance policy. It guarantees the performance of a security instrument , e.g., a mortgage. The buyer of the CDS pays the maker a fee or “premium” (think insurance) for protection against a loss. Historically the US Treasury has not classified derivatives as “insurance,” and therefore they trade free of any government regulations. Because of that, the firm selling the CDS is not required to set aside any reserves from the premiums received to insure against possible future loss claims. This obviously makes the sale of the Credit Default Swaps extremely profitable and default loss payments very expensive.

These were made against banks themselves, by banks, and if the Swap moves around, banks may end up with Swaps against themselves as well as having other banks “owning” Swaps against each other!  With no regulation, no means of tracking these, they remain hidden, still able to take down corporations, banks, and virtually everything with a loan on it, including mortgages still being paid today!

Basically the banks, Bear Stearns, Lehman Brothers and Citibank, along with virtually every bank in the US, along with a few international banks got caught with their hands in the cookie jar, bringing down a really nasty recession on everyone.

Swaps ARE insurance, but because insurance IS  regulated, the banks and investment houses used the term “Swap” to blatantly circumvent insurance regulations.

On September 23, 2008, Christopher Cox, Chairman of the U.S. Securities and Exchange Commission, placed the worldwide CDS market at $58 trillion, and stated it was “completely lacking in transparency and completely unregulated.” The U.S. Office of the Comptroller of the Currency reported the notional amount on outstanding credit derivatives from reporting banks to be $16.4 trillion at the end of March 2008. (For reference and perspective, the U.S. GDP for 2007 was $13.8 trillion, while the world’s GDP for 2007 was estimated at $54.3 trillion)

See the problem here? Playing high stakes poker, literally, put the bets beyond the ENTIRE world Gross Domestic Production!

What happened is that the mortgages were turned into “Swaps”, even good mortgages, the resold over and over again, until the hidden market was well over the actual value of the entire world GDP. What is truly scary is that there is absolutely no way of knowing EXACTLY how much of this toxic paper is out there, or the true value of any of it, BECAUSE it is a hidden, secret market.

Why am I reiterating this now? Well, those very “instruments” are now being put on the market this week, and there are still no regulations on creating more right as I am posting this!

“It is an insurance contract, but they’ve been very careful not to call it that because if it were insurance, it would be regulated. So they use a magic substitute word called a ‘swap,’ which by virtue of federal law is deregulated,” according to Michael Greenberger, a law professor at the University of Maryland and a former director of trading and markets for the Commodity Futures Trading Commission.  The deregulation of the swaps market is thanks to provisions in The Commodity Futures Modernization Act of 2000. Who was President and Secretary in the US at this time??

One large difference between credit default swaps and insurance, is you do not need to own the bond or instrument being insured in order to obtain insurance on it. If the bond fails, then, theoretically, you get paid, possibly along with many others. Yet the “insurer” of the bond is not regulated and the transaction is beyond federal or state regulation. This allow speculators to make money by purchasing insurance on a company’s bonds and then shorting the stock of the company in great quantity and getting a payoff that exceeds their risk of shorting if the price of the company’s stock increases. The fact that you need not be a party to owning the bond also explains why the total value of credit default swaps is so high, indeed higher than the total value of the bonds issued.

Translation of bafflegab to ordinary language? You and I do NOT even have to put any money or have a stake in this to be paid off! Speculators all cashed in here!

AIG sold them, bought them, moved and split them, and some banks are still making, moving, splitting them right now.

Until the banks can declare openly what they have in CDS, what they risk, and where their money is being invested in, this will be open season on the government funds, central banks all over the world, and I have yet to see any demands on ANY banks to disclose their swaps.

Obviously this has yet to come out with any transparency, any real idea of what kind of real trouble we are all in, all because of some sneaky, coniving, greedy banks, investment houses, speculators, and the government officials who KNEW these were out there and did absolutely nothing.