Archive for February 3rd, 2011

Banks Keep Stealing – Why Keep Paying?

Below is an article written by MSNBC’s Dylan Ratigan, who makes a compelling argument for strategic default

The dire straits of the middle class of America has made it near impossible for our politicians to keep up the pretense that our current government truly works for the “people.” Between the multiple overt and secretive bailouts, the massive bonuses and the circular use of our tax money to lobby for these continued handouts, you can no longer hide from the evidence.

When Senator Durbin said “The banks… frankly own this place,” you realize it was not in jest.

Couple this with recent protections handed by the Supreme Court to corporations to directly influence elections and it can make things seem hopeless for those not on Wall Street or their chosen politicians. Favored CEOs and now even foreign countries get all the printed money they need, leaving us paying both our bills and theirs.

And now nearly a quarter of all Americans are currently underwater in their mortgage because of that steadfast honor.

If you are one of them, chances are you didn’t do anything wrong. Almost all of you were not subprime borrowers or speculators, but merely people buying a house that they thought they could afford at the time. You were just unlucky in that you bought a house during a time when an outdated Wall Street and their complicit politicians decided to use housing to regain the income they lost due to the Schwabs and Etrades of the internet age.

You didn’t cause this mess. They did.

Now you are struggling to make the same payments on this mortgage on your now overpriced home even in light of a crashing economy and massive deflation, all while the government does everything in its power to help Wall St. keep the bonuses coming.

Well, it is becoming time to take matters into your own hands… I suggest that you call your lender and tell them if they don’t lower you mortgage by at least 20%, you are walking away. And if they don’t agree, you need to consider walking away.

It probably doesn’t feel right to you.

That is because you probably are a good person. But your mortgage is a business deal, and it is not immoral to walk away from a business deal unless you went in to the deal with the intention of defaulting.

But somehow, even though the corporations are pumped to exercise their new rights, former bankers like Henry Paulson, current ones like Jamie Dimon and — get this — now even Fannie Mae execs want to keep you from exercising your rights.

But before you let them (or anyone commenting below) force you into paying that $500k mortgage on a $300k house, ask them if they’ll push Jerry Speyer into “honoring his obligation” by breaking into his $2 billion personal piggy-bank to keep paying for Stuyvesant Town?

Or how about asking Hank and Jamie to lecture fellow bailed-out CEO John Mack about how “you’re supposed to meet your obligations, not run from them”? Maybe make him use some of his $50+ million for those buildings he bought in San Francisco?

And before shaming and punishing American homeowners, did they nag Steve Feinberg about helping “teach the American people…not to run away” by writing a check out of his billion-dollar pocket to cover all the stiffed landlords and vendors at Mervyn’s? After all, at least you aren’t single-handedly putting 1,100 employees out of work when you walk on your mortgage.

As part of the deal for your house, your mortgage holder gets interest payments from you and they also use the note to your house for their capital reserves. In return, they take the risk of a foreclosure. In many states, you paid extra to have a non-recourse loan where the lender just gets the house back if you stop paying — your interest rate would’ve been much lower if you were held personally liable like a student loan. But if you still feel bad, then donate the money saved to charity instead of to their bonuses. And when someone tries telling you why it is so wrong, here are some answers:

– Yes, it might seem selfish, but you are actually going to help fix our country the right way, through the use of pure capitalism. There are 3 parties involved in your mortgage — the mortgage holders, the servicing bank and you. You probably want to stay in your house. Most of the people who actually own your mortgage also want you to stay in your house, preferring a mortgage reduction that you keep paying instead of the total loss of a foreclosure. But the major banks (BofA, Wells Fargo, JP Morgan, Citi, etc.) that underwrite and service the loans don’t care about either of you. They (with the aid of their government) just care about hiding their true financial condition for long as possible so they can continue to bonus themselves outrageously. The credible threat of you walking away from your mortgage en masse is the only market-based solution that will force these banks to work with the mortgage holders on your behalf.

– No, you will not “hurt” your neighbors — certainly not near the scale of the banksters. Chances are someone just as nice will you will move in and (unlike you) pay a fair, non-inflated price for the house. Encourage your neighbors to fight back against the banks and ask for their own mortgage reductions as well.

– Yes, it might make getting a loan harder for everyone. Considering the spate 0% down NINJA loans over the past decade, that probably isn’t a bad thing.

– Yes, it might hurt your credit. But with time, people bounce back from having foreclosures on their record. Search online and then talk to a lawyer about the repercussions, which vary by state.

– No, the banks won’t necessarily pass the losses on to customers. They already make a lot of money. If costs are passed on to every consumer without banks competing on price, that’s a sign of illegal collusion or a monopoly. Let’s fix that instead of just letting banks ruin our lives. They might, however, not all make $145 billion in bonuses next year doing something fundamentally so easy that it is an unpaid job in Monopoly.

Meanwhile, our captured government has made it clear that they want to further reward these banksters because there are clearly better ways to “save” the economy without rewarding those most responsible for the damage.

Instead of claw backs for the past theft and strong financial reform for the future, they choose to cover-up the gross misuse of our tax money, making our country worse by helping the criminals on the backs of the most honest.

But thankfully, in this country we still have the tools to fight back and regain our country. Our vote, our voice, our laws and what we choose to do with every penny we have that doesn’t go to taxes are the benefits of our hard-fought freedom, and in this battle we must use them all to fight back. It’s time for the citizens to once again own this place.

Mark Stopa

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Getting Away With Foreclosure Fraud

There is a rule of procedure in Florida that enables a plaintiff to dismiss a lawsuit, voluntarily, at any time.  The case can be on the eve of trial, after years of work and preparation, and the plaintiff can dismiss the case (and there’s nothing the defendant can do about it).  The parties can be entering a hearing on a defendant’s motion for summary judgment, which the plaintiff realizes will be granted, and the plaintiff can dismiss the case (and there’s nothing the defendant can do about it).  In both instances, yes, the case is over, and yes, the defendant has “prevailed,” but if the dismissal is without prejudice, the plaintiff can re-file the exact same lawsuit at any time in the future. 

In a recent foreclosure case, the fairness and practicality of this rule was put to the ultimate test.  The underlying facts were the classic example of foreclosure fraud.  You can read the entire opinion here, but here’s my Cliff Notes version.  The plaintiff lacked standing when it filed suit for foreclosure.  A bright foreclosure defense attorney began proving as much.  Rather than admitting their lack of evidence, the bank and its lawyers created a fraudulent assignment of mortgage.  Instead of accepting the assignment as gospel, the homeowner’s attorney challenged its veracity and began pushing for sanctions for fraud on the court, seeking some extreme but appropriate (on these facts) remedies, including dismissal with prejudice and, essentially, elimination of the mortgage. 

Undoubtedly realizing they were caught in a fraud, the bank and its lawyers voluntarily dismissed the case.  Then they prepared a new assignment and filed a new lawsuit, acting as if the fabricated evidence never existed.  The homeowner’s attorneys pushed back, asserting they shouldn’t be able to dismiss the case and sweep the fraud under the rug. 

So that was the issue before the appellate court – can a bank, when confronted with damning evidence of fraud on the court, fabricating evidence, and foreclosure fraud, simply dismiss the case, create a new assignment, and re-file (essentially sweeping its own misconduct under the rug)?  

Florida’s Fourth District Court of Appeal recognizes the significance of this question.  That’s why all of the judges on the court joined in the opinion (making it an en banc opinion, which is rare, as opposed to the standard three-judge panel), and certifying the question to be of great public importance to the Florida Supreme Court.  The judges also acknowledged the pervasive nature of fraud in foreclosure cases, ruling ”many mortgage foreclosures appear tainted with suspect documents.”  Unfortunately, however, all but two of the judges ruled that the bank could dismiss its case, and re-file, despite the rather obvious fraud on the court and fabrication of evidence.   

I readily acknowledge there are technical, legal arguments to be made in support of such a ruling.  As I said at the outset of this blog, there is legal precedent for the court’s ruling.  However, I find the decision to be a travesty of justice.  Think about it.  What is the court saying via this ruling? 

Banks, you can commit foreclosure fraud.  You can fabricate evidence.  If you get caught, simply dismiss the case, fix your evidence, and re-file a new lawsuit (without penalty).  

Everyone knows foreclosure fraud is a huge problem in Florida courts.  Even the judges in this decision acknowledge as much.  Hence, this ruling is yet another illustration of how nobody in a position of authority is willing to do anything about it. 

One aspect of the ruling that I can’t get out of my head is where the court says, in certifying the question as one of great public importance, that if the sanctions this homeowner sought were available after a voluntary dismissal, it would “dramatically affect the mortgage foreclosure crisis in this State.”  I have this horrible, nagging feeling that is what’s driving the court’s ruling.  The judges realize there is fraud (as all of us do), but they don’t want to “dramatically affect the mortgage foreclosure crisis” in Florida, so they issue a ruling that basically lets the banks get away with fraud.  In other words, as I read the ruling, what I see is “we don’t want every homeowner in Florida to be claiming fraud, and clogging up our court system, so we’ll let the banks get away with fraud for the sake of the system.” 

Maybe I’m wrong.  I’d like to think I am.  Time and time again, though, I’ve seen Florida judges be presented with an opportunity to uphold justice, to disavow fraud, and to prove they won’t tolerate fraud by big banks.  Yet time and time again, Florida judges don’t avail themselves of the opportunity to send such a message.  Respectfully, what does this say about our court system?  Our system of justice? 

We will administer justice, unless it’s inconvenient, or creates a backlog on our dockets, in which case we’ll turn the other cheek for the sake of the system.

The irony here is that if Florida judges made strict rulings disavowing fraud then it would help the very system with which they are so concerned.  To illustrate, suppose banks knew they would be harshly sanctioned for foreclosure fraud.  Eventually they’d realize (at least in theory), that they can’t engage in that fraud, so they’d prosecute cases the right way.  If that happened, foreclosure defense lawyers like me would have less to talk about in defense of homeowners, as banks were prosecuting cases correctly.  But lawyers like me virtually always have defenses to assert, often fraud, because banks routinely engage in fraud, often because there is no punishment for their having done so.  And hence the cycle continues, on and on.  Banks commit fraud, homeowners complain about it, judges won’t sanction it, banks commit more fraud, homeowners complain more, etc., etc. 

Imagine if Florida somehow passed a law that legalized armed robbery.  Do you think there’d be an increase in armed robbery?  I do.  Most people, for moral reasons, would still refrain from it.  But if armed robbery were legal, more people would commit it.  Foreclosure fraud works the same way.  Without a deterrent, more banks will do it.  Hence, where homeowners are prevented by law from robbing a bank, it seems that banks are somehow protected by our laws from robbing homeowners.

Mark Stopa

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