Monday, April 21, 2008

Wells Fargo Caught Pulling Fairbanks Trick

For those who’ve been ‘round the predatory mortgage servicing bay very long, we recall the infamous “BPO” (Broker’s Price Opinion) became more than just an expense to be passed on to Fairbanks’ victims. In fact, not only was it marked up, many of them came from a Fairbanks subsidiary of another name – Residential Real Estate Review and were then marked up by Fairbanks as if they had actually paid someone for it.

Those fraudulent practices must have garnered the attention of giant squaliforme Wells Fargo, because a class-action suit was filed last week in the Louisiana Federal Court for fraudulently created charges for BPO’s (among a few other typically predatory things like mishandling payments).

Given this squaliformes’ size, if a class is certified for trial, one can only guess how many current and former borrowers could see some form of restitution when the settlement is reached.

For those not familiar with how mortgage servicing squaliformes play the fee-stacking game, consider a typical example of how this works and why it works:

BPO’s are authorized in almost all loan documents and can be charged in a situation where the loan is in default, typically when the loan is 30 days late. A payment received past the “grace period” might wind up in suspense while the notice is sent to the borrower, or the servicer may even send the payment back.

In any event, when and if the loan gets to the 30 day late term, it is typically in default and an order to get a BPO is almost automatically generated and a fee charged to the borrower.

Legally speaking, and this can’t be considered legal advice, the servicer can’t mark-up the fees it pays to a third party and thus profit from them, but in practice, they have two ways to get around these laws. First, they can pay the bill as invoiced by the service provider and then for all the business they generate for that provider, they get a kickback, or, as in the Fairbanks and Wells cases, they own the service provider and don’t disclose the fact that they aren’t paying anything on a cash-out per-service-act basis.

This one could be hard for Wells to defend on a fact basis; a Bankruptcy Court Judge has already ruled that Well’s has been charging bogus, inflated fees “disguised as third party costs” in bankruptcy filings, including the rather damning comment that their “management practices are questionable.”

How far back this could reach is going to be something only the court or the settlement can determine; were the case presented here, every penny they ever charged for a BPO would be distributed to the class as should the $1,000 per RESPA violation plus the attorney’s fees.

Then we’d get a rope.

The Honorable Judge Roy Bean

Tuesday, April 08, 2008

Ohio is Doomed

Y'all up north sure have some odd ducks in charge of stuff.

Ohio’s “Compact to Help Ohioans Preserve Homeownership” is being promoted as a first of it’s kind in the US by none other than Governor Ted Strickland; it is indeed a first of it’s kind but the guv is seriously confused about this bit of public-relations fluff.

In the first place, while admitting it’s not legally enforceable, they like to call it “a cooperative step.” Strickland defended any lack of legal standing by claiming: "These companies are putting their honor and prestige on the line."

Newsflash, guv – they didn’t put anything on the line. You can't put up what you don't have. Whoever wrote that for you may actually believe those companies are honorable and have any prestige. That either gullible or ignorant staffer needs to find another occupation – one that doesn’t put his or her leader in a position of playing the fool in press conferences.

The servicers (among them some of the most-predatory companies in the industry and notably without uber-squaliforme EMC Mortgage) crossed their fingers and signed up to “work with the state in making every possible attempt to prevent default loans and foreclosures in Ohio.”

Wink-wink, nod-nod and (drum-roll please) here’s what they will supposedly do:

1. Engage in a substantial and large-scale loan modification effort for adjustable-rate mortgage resets and subprime mortgages.

2. Identify, evaluate and make good-faith attempts to contact at-risk or defaulting borrowers as soon as possible.

3. Modify loans to the extent permissible within fiduciary, contractual or other legal obligations and in accordance with prudent mortgage lending and servicing practices.

4. Create incentives for staff and foreclosure counsel to modify loans rather than foreclose.

5. Report progress to the Ohio Department of Commerce.

6. Enter into a nonbinding agreement with the state for a defined period of time. The agreements extend to June 30, 2009.

Well, let ol’ Judge Bean take a look at those one by one:

Number one is nothing more than meaningless blah-blah-blah-blah.
Question: "What the hell is “a substantial and large-scale loan modification effort?”
Answer: Anything the servicer says it is.

Number two is something they’re supposedly already doing – the hiccup is that pesky thing known as “good faith.” They indeed may make a good-faith effort to contact the at-risk borrower, but many at-risk borrowers know who they're dealing with and may not want to jump into the water with the squaliforme while they're bleeding from fresh injuries. And of course, if they do make contact, whether the servicer will then act in "good-faith" in trying to prevent a foreclosure is supposedly but inadequately addressed in number three.

Three is where the alleged agreement becomes a complete nullity. That little phrase “in accordance with prudent mortgage lending and servicing practices,” is the problem; the companies are the sole determinants of what those practices are or should be, and prudence dictates staying in business and maximizing returns for the ownership of the company, which among the predatory and opportunistic servicers means defaults and expeditious foreclosures when they alone, deem them appropriate.

Four is interesting because someone is letting it slip that the previous incentives weren’t geared toward what the servicers have been claiming they have been doing all along – trying to maintain borrowers in their homes.

Five is another one of those meaningless statements because there isn’t even an attempt to determine what “progress” is; but whatever they say it is will have to be reported.

"Dear Ohio Department of Commerce:

Progress is good.



And the non-binding agreement has an oxymoronic term limitation of a little over a year.

Finally, consider the clause that Litton Loan 's agreement has:
"... is not intended to convey, and does not convey, any beneficiary rights to any person, entity, government or regulatory authority, including, without limitation, borrowers, lenders, investors, counselors or advocacy groups."
If this isn’t just a late April Fool’s blunder, Ohioans should be concerned that their Governor is either a simpleton when it comes to making agreements on behalf of the citizenry or he is a simpleton when it comes to selecting staff members to make agreements on behalf of the citizenry.

The Honorable Judge Roy Bean

Wednesday, April 02, 2008

The Washington Post Wakes Up - Maybe

How long this will remain up and available is subject to speculation, but in order to preserve the Post's rather remarkable exploration of "Big Brother" already at work, consider this old news presented as something new:

Centers Tap Into Personal Databases
State Groups Were Formed After 9/11

By Robert O'Harrow Jr.
Washington Post Staff Writer
Wednesday, April 2, 2008

Intelligence centers run by states across the country have access to personal information about millions of Americans, including unlisted cellphone numbers, insurance claims, driver's license photographs and credit reports, according to a document obtained by The Washington Post.

One center also has access to top-secret data systems at the CIA, the document shows, though it's not clear what information those systems contain.

Dozens of the organizations known as fusion centers were created after the Sept. 11, 2001, terrorist attacks to identify potential threats and improve the way information is shared. The centers use law enforcement analysts and sophisticated computer systems to compile, or fuse, disparate tips and clues and pass along the refined information to other agencies. They are expected to play important roles in national information-sharing networks that link local, state and federal authorities and enable them to automatically sift their storehouses of records for patterns and clues.

Though officials have publicly discussed the fusion centers' importance to national security, they have generally declined to elaborate on the centers' activities. But a document that lists resources used by the fusion centers shows how a dozen of the organizations in the northeastern United States rely far more on access to commercial and government databases than had previously been disclosed.

Those details have come to light at a time of debate about domestic intelligence efforts, including eavesdropping and data-aggregation programs at the National Security Agency, and whether the government has enough protections in place to prevent abuses.

The list of information resources was part of a survey conducted last year, officials familiar with the effort said. It shows that, like most police agencies, the fusion centers have subscriptions to private information-broker services that keep records about Americans' locations, financial holdings, associates, relatives, firearms licenses and the like.

Centers serving New York and other states also tap into a Federal Trade Commission database with information about hundreds of thousands of identity-theft reports, the document and police interviews show.

Pennsylvania buys credit reports and uses face-recognition software to examine driver's license photos, while analysts in Rhode Island have access to car-rental databases. In Maryland, authorities rely on a little-known data broker called Entersect, which claims it maintains 12 billion records about 98 percent of Americans.

In its online promotional material, Entersect calls itself "the silent partner to municipal, county, state, and federal justice agencies who access our databases every day to locate subjects, develop background information, secure information from a cellular or unlisted number, and much more."

Police officials said fusion center analysts are trained to use the information responsibly, legally and only on authorized criminal and counterterrorism cases. They stressed the importance of secret and public data in rooting out obscure threats.

"There is never ever enough information when it comes to terrorism" said Maj. Steven G. O'Donnell, deputy superintendent of the Rhode Island State Police. "That's what post-9/11 is about."

Government watchdogs, along with some police and intelligence officials, said they worry that the fusion centers do not have enough oversight and are not open enough with the public, in part because they operate under various state rules.

"Fusion centers have grown, really, off the radar screen of public accountability," said Jim Dempsey, vice president for public policy at the Center for Democracy and Technology, a nonpartisan watchdog group in the District. "Congress and the state legislatures need to get a handle over what is going on at all these fusion centers."

Fusion centers were formed in the wake of revelations that counterterrorism and law enforcement authorities missed or neglected evidence that the Sept. 11 attackers were in the United States while preparing to strike.

Because they are organized by the states, the centers have developed in different ways. Some are small operations focused on crime, while others are full-fledged criminal and counterterrorism operations. From 2004 to 2007, state and local governments received $254 million from the Department of Homeland Security in support of the centers, which are also supported by employees of the FBI and other federal law enforcement agencies. In some cases, they work with the U.S. Northern Command, the Pentagon operation involved in homeland security.

The centers have been criticized for being secretive, but authorities said that this is largely for security reasons. Activists want to know more about their activities, the kinds of information they collect and how the information is being used.

The Electronic Privacy Information Center filed a lawsuit in Virginia last month seeking the release of records about communication among state fusion center officials and the departments of Homeland Security and Justice. Marc Rotenberg, the privacy center's executive director, said his group was responding to a proposed state law that would sharply limit access to records about the fusion centers' activity.

Sue Reingold, deputy program manager in the Information Sharing Environment office, a federal operation with a mandate to improve information sharing, said state and local officials "must have access to a broad array of classified and unclassified information" to perform their mission. But Reingold said that an "important part of this is appropriate training and oversight that is well understood and transparent to the public."

"Fusion centers are vital to state and local efforts to fight crime, including terrorism," she said.

The list includes a wide variety of data resources along with software that finds patterns and displays links among people.

Most of the centers have subscriptions to Accurint, ChoicePoint's Autotrack or LexisNexis. These information brokers are Web-based services that deliver instant access to billions of records on individuals' homes, cars, phone numbers and other information.

Some of the centers link to records of currency transactions and almost 5 million suspicious-activity reports filed by financial institutions with the Treasury Department's Financial Crimes Enforcement Network.

Massachusetts and other states rely on LocatePlus, an information broker that claims that it provides "the most comprehensive cell phone, unlisted and unpublished phone database in the industry." The state also taps a private system called ClaimSearch that includes a "nationwide database that provides information on insurance claims, including vehicles, casualty claims and property claims," the document said.

The center in Ohio has access, through authorized users, to an FBI "secret level repository," the document said.

Rhode Island reported that it has access, also through the FBI, to "Top Secret resources" such as "Proton, which allows queries of CIA databases," the document shows. Officials at the Rhode Island State Police, FBI and CIA declined to discuss the system and the kinds of information it contains.

In addition to databases run by Entersect, Maryland fusion center analysts have access to wage and property records, corporate charters, utility records and a host of government files, including criminal justice information and traffic tickets. Jason Luckenbaugh, the center's chief of staff, acknowledged concern about the government's ability to tap into new sources of information. But he said the databases enable analysts to fight crime and protect against terrorism, and help local authorities do the same. "We're not trying to threaten them in any way," he said.

Once again, we can say goodbye personal privacy. This tip-of-the-iceberg realization by the Post is far too little too late to stem the tide.

The Honorable Judge Roy Bean

Tuesday, April 01, 2008

News Flash!

JRB Newswire
Washington, D.C.

In response to the deepening problems of the investment banking industry, the nation’s top economic thinkers issued a formal set of proposed “Economic Recovery, Realignment and Operating Rule Standards,” promulgated by the President’s recent series of “International Debt, Interest and Optimized Trade Summits.”

Secretary Paulsen, who sent key staff members to the hastily-gathered meetings of major investment bank leaders and market experts, was quick to praise the results, saying, “The ERRORS will send a message to the financial community around the world that this country is stronger than the press would have everyone believe.”

He added that there will be another series of IDIOTS “…sometime in January of 2009.”