Jon Tester has expressed his opposition to mortgage write-down in bankruptcy (cramdown). "I just think a deal’s a deal. I have a lot of empathy for folks who tend to get led astray, but I just think it’s going to create some problems," he says.
The underlying Rick Santellian-assumption is that homeowners entered into good faith deals with banks, and should now have to live up to them. When Bill Black was on Moyers recently, he made mention of Fitch — the smallest of the ratings agency — and what they found when they began looking at loan files after the markets had collapsed. "The results were disconcerting," he said, "in that there was the appearance of fraud in nearly every file we examined."
So I asked Bill — where did this fraud originate? He pointed me to a document released by the FBI entitled Financial Crimes Report to the Public For Fiscal Year 2007:
Here’s the key quotation: "Based on existing investigations and mortgage fraud reporting, 80 percent of all reported fraud losses involve collaboration or collusion by industry insiders."
Even the Mortgage Bankers Association’s group that tracks mortgage fraud cites this FBI passage as accurate:
The FBI reports that, based on existing investigations, 80 percent of all reported fraud losses arise from fraud for profit schemes that involve industry insiders.
Source: "Mortgage Fraud: Strengthening Federal and State Mortgage Fraud Prevention Efforts" (2007). Tenth Periodic Case Report to the Mortgage Bankers Association, produced by MARI.
Deals are frequently not enforced in accordance with their original terms. The central premise of U.S. bankruptcy law (which is distinct from the Germanic pattern) is the reorganization and every reorganization involves renegotiation of the original terms in a manner that disfavors some creditors. "Strategic" bankruptcies have been common in the U.S. for at least two decades. The term refers to corporations that would not traditionally be considered insolvent filing Chapter 11 petitions so that they can restructure their debts, escape future contract obligations (e.g., labor contracts), and/or reduce future liabilities (e.g., for asbestos claims).
Lenders frequently renegotiate terms with borrowers, e.g., troubled debt restructurings (TDRs) because they know that the alternative is a default that will cause even greater losses to the lender.
Based on existing investigations and mortgage fraud reporting, 80 percent of all reported fraud losses involve collaboration or collusion by industry insiders.
Tester sits on the Senate Banking Committee, he knows all of this. It’s pure demagoguery. He also knows that despite all the trillions in bailouts to banks, no meaningful help has been given to the homeowners who relied on Alan Greenspan’s guarantee that there was no housing bubble, the market would never collapse and home prices would always continue to rise.
One of the things banks have been pushing for in the Housing Bill is a provision that negates their liability if in the course of bankruptcy proceedings it’s discovered that they committed fraud when the loan was originated. Non-disclosure of fees and penalties, interest rate hikes, etc., etc. I guess that all just falls under the category of being "led astray."
Hey, a deal’s a deal, right?
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Heads I win, tails you lose.
Hey a deal is a deal on your first house but on your second, third etc. or on that mall you have things are different.
wow. he’s speaking directly to us and how we are stuck with a demagogue after being led astray by an organic farmer in 06
Oh thank you thank you for this post. I know you have been supportive, but this must come to light. It’s been cover up so badly. I have used the following euphemism to make my point: “It’s like they raped the drunk girl at the party”. By choosing to exploit those with less than stellar credit ratings, they have a perfect excuse for the their behavior. It’s a distraction. It’s not legal to have sex with someone who does not consent. It’s a crime. Just because you steal from poor people doesn’t mean it isn’t stealing.
In my case, I was steered by a broker who was paid by the mortgage company because I was a single woman buying a house. My credit rating when I bought my home from my landlord was 750.
In my case, they have lied about what I owe. When I began my chapter 13 bankruptcy I owed 8300.00$. Today, 4 years later the mortgage company says I owe 10,000.00$. The company is Homecomings a subsidiary of GMAC.
They have hauled me into court twice saying I was behind in my payments when I was not. The bankruptcy job wanted warned them about punitive damages to me.
I have asked for my payment history twice and have not recieved even an answer from them. My lawyer sent letters twice. This is a violation of RESPA laws.
They have charged me with fees for process my checks (10.00 per payment). They have charged me for property inspection fees, (though I have never seen an inspector). They have charged me with “miscellaneous fees” that equal roughly 5000.00$.
My lawyer says the fees are a grey area completely unregulated. He said that the question is whether the fees are “excessive” and that what is “excessive” is a grey area. I will not be able to fight some of these fees, but suing them for my payment history will help lay it out to the judge as to what is really going on.
I would not be in bankruptcy if it had not been for this home loan that began charging excessive fees as soon as I feel 30 days late in 2003, when my ex suddenly quit paying child support after 10 years.
There are literally thousands of posts like mine on the internet if you google mortgage fraud, homecomings and mortgage fraud. The proof is there. All the stories are just like mine.
Thank you…yes, I know that Black is talking about a kind of fraud between banks, but at the bottom of that fraud, when you look at the books, will be the fraud perpetrated upon helpless americans who lost homes to this illegal behavior.
It’s been a nightmare for me and many others who ended up with one of these loans. Call me stupid, naive, try to blame me as you might the girl at the party who get raped when drunk, but understand this…it’s a crime. It’s stealing.
And it has not stopped…It must be stopped.
“I just think a deal’s a deal.”
Does that also apply to our being a signatory to the Geneva Convention on torture?
No, I didn’t think so.
We generally react subjectively to everything-like it isn’t torture when they do it to the other guy, but it’s torture when they do it to me. Not only will the bank bailouts be ineffective, they are intended to save the high fliers who don’t want to be told “a deal’s a deal”. That’s the last thing they want to hear.
Furthermore, in terms of the equities between the respective parties, the banks dealt with people who didn’t understand the legalese behind something like a negtive amortization loan. The banks quite often, it seems, didn’t prepare Truth in Lending disclosures properly, but mounting a defense to foreclosure is an expensive proposition so the banks mostly get away with it.
i still don’t like specter
Jon Tester said this? You sure it wasn’t Herbert Hoover. It sure sounds like the kind of thinking that drove us deep into depression.
And how does Tester feel about fraud? Oh I guess that’s different. That’s being led astray. You notice he didn’t say anything like: “I just think fraud is fraud.”
It is telling that he said the one but not the other.
No surprise that the largest amount of PAC money Tester has received comes from the Financial, Insurance and Real Estate industries.
I guess Tester also missed Elliot Spitzer’s op-ed in February 2008, when Spitzer pointed out ALL 50 states’ attorneys general had problems with the Bush administration’s invocation of the 1863 National Bank Act to undermine every state’s predatory lending laws.
Maybe if Tester had actually checked with his state’s attorney general he’d have found out predatory lending was a serious problem even in his own backyard.
excuse the typos… a little emotional. This is literally the most difficult thing I have ever faced in my life. I am a mother of 4 kids, single parent who worked 2-3 jobs while working on a master’s degree. I work in non profit work helping survivors of sexual assault, domestic violence and vets/vets families with PTSD. Please understand that for each foreclosure, there are people who do not know the laws, have reported the behavior and gotten no where, and don’t know how to fight back against the behavior. They have picked on the most vulnerable population and they picked their victim well. It’s so easy to make you all believe that this couldn’t be happening. But it is. Thank you so much for this post.
Isn’t SCOTUS hearing oral arguments on that today?
simple stuff here as far as progressives are concerned;
“you want government help you cram down your loans, you don’t want to cram down your bad loans get relief from the private sector”
It is certainly demagoguery but I don’t know if Tester “knows” all this or not.
Every time I have listened to a Senate or House hearing on finance or the economy I have been stunned by the level of ignorance and dimwittery Congress members routinely exhibit, even those who are supposed to be “experts” in these fields.
Not that it would register with Mr. Tester, but contracts for fraudulent products, fraudulently sold are not binding.
Cramdown is already used for second/vacation homes. Can we just designate Tester’s Montana farmhouse as a first home for all potential foreclosees, so their newly designated “vacation home” can be crammed?
Why can’t Tester understand that cramdown for existing loans will actually increase revenue to the security/note holders? Bankruptcy is enough of a hurdle that you won’t get anyone doing this who wasn’t going to get foreclosed on anyways.
If they are, can you link to anything about it here in thread? I think this is a critically important issue underpinning the entire foreclosure crisis; the roots of this go all the way to the White House, based on the use of OCC against consumers instead for them.
wavpeac, is your state Atty. General or your state regulatory commission a place to file complaints about this? It seems like it would be worthwhile to at least check in with them about this, find out who else has complaints, if they are willing to look at the class-action side of this picture.
Warm and supportive thoughts for you, wavpeac.
Lets get this straight; a retiree can get a reduction in his retirement crammed down if a corporation files but if he was counting on that income to meet his obligations, tough shit. Equal protection under the law is a bad joke.
Since he is still gonna be opposed to EFCA he can still be primaried in the Dem primary. Joe Biden may have promised no DSCC/DNC support for a primary opponent, but Specter can still be beat in PA without their money- witness Lamont v Lieberman. Without Labor’s backing he is toast.
Hope this works.
wavpeac, if you have any public participation blogs, Facebook, other links in your community, maybe you can reach out through them and find others in the same situation who would like to work collaboratively to address these abuses. Surely you are not alone, there must be lots of people who might be able to more effectively pool resources to go after this.
No, the attorney general’s hands have been tied in regard to fees. Yes, I filed a complaint (I have a master’s degree and have become pretty knowledgeable…I speak out for the many who do not have the same resources I do). However, back to the A.G. What most folks don’t realize is that it takes 30 days of a behavior documented that must be sent to the A.G. Then the A.G does a 30 day investigation. Then they send their findings to the mortgage company who has 30 days to respond to the findings…then it goes on and on. In my case the state did force the mortgage company to communicate with me. Which was my original complaint. I had 5000.00 (received in court when the ex was finally brought in) I thought this could pay off my foreclosure, but they would not return calls, faxes, nada, so that i could get a pay off.
This story is too long, but please understand I have done all I can to fight back. Our hands are tied. The fees are a grey area and my A.G is slow to respond as is every agency that I have filed with. Most of the folks in my boat do not have my communication skills.
Their are going to be literally thousands who lost homes to illegal behavior. It will be a major mess. And I believe Obama is hoping to avoid this truth from surfacing too soon.
Jon Tester, the great populist hero. Didn’t take him too long to change in DC. He won’t cosponsor EFCA either.
Specter launched his career working as a whore for the murderers of a popular Democratic president.
Tester’s idicoy brings up the point though that Obama and the Congress have done nothing to address any of the fundamental financial problems that confront us. There are some benchmarks that we can use to tell when and if they ever become serious about them.
1. Glass-Steagall
2. Bank nationalization
3. Cramdowns
4. When we start seeing more efforts to find jobs for people than ways to help banks.
There are many others but these are the bellwethers.
There is a class action lawsuit but of course, GMAC is broke. We are last on the list for damages. My lawyer says that cram down legislation is essential. Which is why they spent billions fighting it.
if you want to be really sick – look at his Top Contributors page – hence my comment at 3 above.
henrythefifth @ 24 – another Dem f**king Labor over – note #6 contributors
Tester can afford to be generous with the bankers and not so much with homeowners – Montana has one of the lowest foreclosure rates in the Country. He might have a different view of the world if more of his constituents were struggling.
Myopia – it’s a wonderful thing.
I guess that all just falls under the category of being “led
astray.” led to the Ashtray” is more like it!btw – would love to know when Bain Capital made their contribution
Linkmeister !
asshole.
asshole
Hey CBL!
my 33 & 34… I meant Tester & Specter. Not the commenter.
There are public complaint boards which have been very helpful. Many of us have contacted each other, but we are all having varying degrees of success, depends on the state. This is why cram down legislation is important. Each state has different laws, different programs to deal with the problem. The new restructuring loans have been a scam. My mortgage company would not even participate by lowering interest rates or fees. Then the headline is that the restructuring of loans doesn’t work because “the lazy non paying borrowers who were irresponsible to begin with just can’t pay their bills no matter what break we give them”. Unfortunately…breaks were not given. The fees remained. They really feel the need to count on this bogus money. Money they created out of think air and lies.
There is likely another player involved in the mix as well, depending on the state in which you live.
Michigan, for example, has attempted to write foreclosure moratorium legislation not once but twice and under two different terms; the legislation would provide a 90-day freeze during which homeowners can work with special counselors to renegotiate their loans, and refi them with state banks. The state banks were on board, wanting the national banks out of the picture after the same national banks had effed up the entire housing market. Representatives from community organizations working on behalf of homeowners were on board. But the bills keep getting squashed by a Republican-majority senate.
Why? Because the Republicans OWN the senate, quite literally — and the biggest bundler in the state, John McCain’s landlord for his campaign, is the biggest foreclosure services company in the state. They process 75% or so of the foreclosures in Michigan, and are Fannie Mae/Freddie Mac preferred service provider. The same firm has not only donated to many of the Republicans who are suppressing the legislation, but has actually written new legislation the Republicans back, intended to replace the legislation which has already passed the Democratic-majority state house.
It might be worth poking around to see if similar dynamics are in play in your state.
Thanks Rayne…my bet is that this is true. I feel like their are multiple obstacles. As soon as we get through one, we find another. It’s been daunting at best.
The only party that seemed “see” the behavior was my bankruptcy judge. But he could not remove the fees. The thing is that those bankruptcy judges are privy to the crap they pull, it happens right in front of them. They get to see the statements, they get to seem my bank statements showing my payments, they see the fees. They know what is going on.
But thanks, I will poke around on that one. I hadn’t thought of that. State of Nebraska is pretty red…necked!!
As a “country of laws” we have to stand by legal, again LEGAL contracts. If bankruptcy courts are allowed to change the total ammount and the monthly payments on any contract then what is to prevent everyone from wanting in on the deal? So then would it be ok that if the value of his house went up then so should the homeowners mortgage and payments?
I go back to questions that I have seen in real estate columns. Q. I bought my house for $200K. from the builder. The house next to mine, which is identical, was sold by the builder for $150K. How do I go back and make the builder change the price on my house? Ans. (always the same) You signed a contract to purchase your house for a specific sum, if the house next door sold for $300K would you go back to the builder and demand that the price of your house be raised? Or would you be saying to yourself, wow I got a great deal?
That is what it all boils down to. The homeowner signed a contract to purchase a product(house) at a specific price. If that price had gone up the buyer would have made money. But because the price went down, the buyer lost money. What exactly is it about that that is not understood?
OK, sure, lots of people signed contracts that they should not have. Lots of people bought houses that they could not afford. But how is any of that the fault of the seller? How is it the fault of the current mortgage holder who purchased the mortgage in good faith? Why should the current mortgage holder lose money because of what 1-the buyer and 2-the mortgage underwriter did? Sure, the original mortgage underwriter, in some cases, made loans that should never have been made either because the buyer had no job, owed to much money or simply had insufficient income to purchase said home. Myself, for every home that I have purchased, I went to a mortgage company before I went looking for a house and got prequalified for a maxium amount. Then I went out and got a house at or under the sum I could borrow and repay. I insured that I got a fixed interest loan and had the interest locked in before I closed. People who were “tricked” into purchasing a house that they could not afford have no right to be crying now. The entire contract system is based on one fact. Let the buyer beware. If the buyer allowed himself to be talked into a contract that he could never afford, then that buyer forgot the two things that I always remember-and insured that my 4 kids knew also. 1-THERE IS NO SUCH THING AS A FREE LUNCH(TINSTAAFL) and 2-If the deal seems to be too good to be true, it probably is.
Sure, lots of innocents are going to be hurt. It happens. If the price of their house had gone up you would not hear a peep from them, but because they got into a deal that they were to naive to fully understand or that they did not understand what variable interest rate ment, then they should never have signed the loan. Which, if they could not afford it, should never have been approved.
A person without a job should never have gotten a loan-how on earth did he expect to pay it back? I saw on 60 min where a man with no job and his wife who ran a day care out of their home managed somehow to get a house worth over $200K. How on earth is that possible? When I purchased my last house, they checked over every single debt on my credit report. The total house payment + what I owed and what normal monthly expenses would be could not exceed a certain percentage of my monthly income. Yet people were buying half million dollar homes with $30K a year incomes.
Sorry, but I have no sympathy for anyone who got themselves into that position. They should have known better. If they did not, well con men are everywhere looking for suckers.
Because is says no where in my contract that I should pay fees for them to take money out of my account electronically despite the fact I sent a paper check. Bottom line. There is no contract that validates their behaviors or fees. The fees are not listed in my “deal”. Are you saying they don’t have to follow RESPA and TILA laws? Are there not consequences for them violating those laws even when I am 30 days late??
I do agree with you, the law is the law. They violated the laws in many of these loans and committed fraud. Those Judges can see it happening and their hands are tied. The fees are not laid out when you sign your mortgage. Just because you get behind in your loan does not mean they have a right to violate the law.
I heard on NPR (ugh) this morning that the States Attorneys General filed a lawsuit against the Feds for not allowing them to go after predatory lenders. This is what the Elliot Spitzer letter to the editor was about. I believe it is being heard today.
Legal contracts get torn up every day in bankruptcy court; indeed if you have a second house you can have the mortgage contract for it crammed down in bankruptcy. Many borrowers deserve some blame, but when cramdown is the best solution to our foreclosure problems, and the best for the note-holders’ long term interests, maybe it is best to not worry about punishing the few who are the least of the causes.
Yes, without a doubt Spitzer was my only hope for awhile until he got blown..up. Yes, there was a memo from bush basically preventing the A.G’s from effectively fighting these lenders. It all ties in with the AG. scam.
Please stay on top of Tester, Jane. He has been a huge disappointment to all of us who spent a lot of time and a lot of money on his Senate race. I had misgivings about his populist sincerity. When I pressed him on corporate monopolies or labor issues during the primary he would wiggle a little too much for my taste. I’m afraid like our other Democrats here, Tester is a business opportunist or a business libertarian.
I’ve left messages about whether he will support the “Global Food Security Act” which gives 7.7 Billion to the genetically modified seed companies (Monsanto and Syngenta). This is anti-organic farming that needs tons of pesticides and herbicides and more water than traditional seeds. If the Organic Farmer isn’t speaking out against this, his whole campaign is a big fraud. It won’t be enough for him to vote against this kind of thing. They can always let him do that if it’s going to pass anyway. But he must speak out.
He and Max also want to raise the ceiling of the Estate Tax to 10 million for a couple. At a time when the nation needs money, this is also cynical.
I’m tired of writing letters to this hoser. Help me by writing to him too.
Well done, Jane. Trillions for tribute, but not one dime for justice.
The reason the Banks oppose cramdown for primary mortgages may be that they do not want many bankruptcy judges examining their business, and building a set of court records on their behavior.
That would set the scene for a very large class action lawsuit, with much evidence already in the court records, and really cut the amount of discovery and Bank obfuscation.
Also, like many commentators these days, Timr seems to misunderstand what credit is.
Credit is money lent against the borrower’s future earnings (if the borrower had the money already, he’d hardly need to borrow). It is called “credit” (from the Latin “credere”, to believe) because the creditor believes that the borrower will, in fact, earn the money and a little more, which becomes the creditor’s interest. The creditor is essentially betting on the debtor’s abilities and future good luck.
If, due to unforeseen circumstances, the debtor does not earn what was expected, the debtor goes bankrupt and the creditor loses his bet. For him, it’s just a cost of doing business, if he’s generally good at picking his bets. If he isn’t, then HE goes bankrupt and goes into another line of work.
So, even if it were true that small borrowers were leaving banks holding the bag, I can’t see how you the Right can be so fast to blame the borrower for the creditor’s lack of core competence as a businessman.
Then there is the fraud angle that this article illuminates. The kind of fraud described happens when the creditor does not really “credit” (believe) that the borrower can ever earn the amount of money being loaned. Yet he pretends that he does and makes the loan anyway. He may even doctor up the borrower’s application to make it more believable to anyone else that looks and may add money to the original request. Why? Because he does not care whether the principle is returned and is not planning to live on interest paid. He is lending someone else’s money and getting a fat commission and fees for doing so.
So when I hear someone vilifying poor borrowers who can’t make payments in a looming Depression, I say, be careful what you believe/credit and, please, don’t sign anything when you talk to your banker. You’ll be walking in just when he is starting to fear that people are getting too smart.
No offense intended. ‘Cramdown’ is one of those Frank Luntz words. It makes it sound like the prepetrators – the banks/mortgage companies – are being mistreated. Can we come up with a better term? How about ‘mark-to-market’ for the individual piece of property being foreclosed. If the fair market value of the property has declined then marking down the mortgage makes sense unless of course you were one of the tricksters/con-men setting up the original scheme. Forcing to the mortgage holders to value the property for what it is currently worth seems fair to me.
Most of the banks in Montana are Community banks. Cram downs could be devastating to these independent banks, which are the only banks lending money today.
Maybe we should be taking about a tiered approach to cram downs with the obvious fraud being open to restructuring by the courts, as opposed to people who got in over their heads due to greed.
The entire mortgage and securitization bubbles were based on fraud, as I’ve been noting for some time. Virtually every major bank, brokerage and credit rating executive should be being investigated for fraud.
If it’s any consolation, after reading your post I got busy emailing not only Sen. Tester, but the other fifteen senators listed on Matt Renner’s truthout report last Wed. who were opposing S. 61 at that time. I’d already called Sen. Hagan and Blue Dog Shuler last week, asking them to support homeowners. Just for good measure, I asked Tester et al to sponser a bill to investige the rats that got us into this mess, as Bill Black suggests. No chance of that, but they need to hear it anyway. Hang in there.
Around US tax deadline time this month, I heard the goverment (Congress or the IRS?) made a deal for investors who lost money in the Madoff scandal. Investors got to recoup a majority of their losses through tax write offs.
The reasoning: they were swindled.
No similar write offs for the small fry homeowners, I believe, who were similarly swindled out of their houses, 401K retirement funds, and credit card debts via Wall Street, AIG and friends.
Isn’t Jon Tester a Rahm recruit? Thought he was a fluke. Not.
You’ll know economic recovery is coming when derivative markets are regulated (or suspended), and Citi, BofA, AIGFP, and a handful of others are forced into conservatorship or liquidated.
Until then, we’ll hit bottom and skiff along indefinitely.
Jon beat the chosen one from DNC in the Dem primary.