Proponents of the rule of law were cheered last week by the Massachusetts Supreme Court's decision that banks had to prove they held a mortgage to foreclose on it, one of the niceties that has seemed to have gone by the wayside in the housing crisis.
Never fear, banksters, the Third Way has jumped in with a proposal [pdf] in response to the US Bank v. Ibanez decision in Massachusetts. Yves Smith takes a comprehensive look at the proposal.
Their proposal, not surprisingly, is yet another bailout.
The big difference between the original and the new, improved version of the bailout model is that the payouts to the banks were at least in part visible the first time around. This is an effort yet again to spare the banks any pain, not only at the cost of the rule of law but also of investor rights.
This proposal guts state control of their own real estate law when the Supreme Court has repeatedly found that "dirt law" is not a Federal matter. It strips homeowners of their right to their day in court to preserve their contractual rights, namely, that only the proven mortgagee, and not a gangster, or in this case, bankster, can take possession of their home.
This sort of protection is fundamental to the operation of capitalism, so it’s astonishing to see neoliberals so willing to throw it under the bus to preserve the balance sheets of the TBTF banks. Readers may recall how we came to have this sort of legal protection in the first place. England learned the hard way in the 17th century what happens with low documentation requirements: abuse of court procedures, perjury and corruption become the norm. Parliament enacted the 1677 Statute of Fraudsto establish higher standards for contracts, such as witnessing by a third party, to stop the widespread theft of property that was underway.
The memo completely ignores the harm to investors from the bank mistakes and lacks any provisions for damage to investors to be remedied. Moreover, denying borrower rights removes their leverage to obtain deep principal mortgage modifications, which for viable borrowers produces lower losses than costly foreclosures and sales of distressed property. Thus this shredding of contractual protections in mortgages not only hurts borrowers but also harms investors.
So to save the banks from their own, colossal abuses of contracts that they devised, the Third Way document advocates Congressional intervention into well established, well functioning state law. This is a case where these matters can and should be left to the courts and ultimately state AGs to coordinate the template of a more broadbased solution.
But this proposal is this memo is a direct result of the banks losing in court and the fear that they will continue to lose. The Massachusetts Supreme Judicial Court Ibanez decision is clearly the trigger for the release of this plan. The SJC said its decision was merely articulating well established law. Consistent application of these principles will mean more losses for the banks. This memo is clearly an attempt to stop this as soon as possible. The real message of this document is clear: we can’t permit justice to prevail if it will hurt bank profits and balance sheets.
Why worry about what a bunch of wankers at Third Way propose? Because those wankers have emerged, particularly now with Third Way board of trustees member Bill Daley on his way to the White House (once he sells his $7.6 million worth of JP Morgan Chase stock). Yves writes, "These people sit at the nexus of politics and finance, and are conduits for big bank friendly information flow into the administration and Congress." When it comes to economic policy, they are frighteningly influential.
And as Marcy convincingly argues, they think there should not be any consequences for the banksters who have been illegally seizing people's homes. For the Third Way, the rule of law just doesn't apply to everybody.
Today, JPM announced results, which presumably beat on the top line, while the bottom line is largely irrelevant as banks continue to operate under the auspices of FASB mark-to-myth, and as such no numbers can be trusted. As for the improvement in the credit card business, cited largely as a reason for the $1.12 EPS beat compared to $1.00 consensus, when consumers don't have to pay mortgages, they at least can afford to pay for trinkets. Which is why we believe the bulk of the numbers in the company's 23 page Q4 earnings presentation are largely worthless. The two slides that however bear mentioning are 9 and 10, which deal with the elephant in the room, mortgage repurchasing risk, and the foreclosure process update. Below are the highlights, among which we find that as of Q4, the average delinquency at foreclosure for JPM is now 14 months.
Retail Financial Services – year-end 2010 reserve position
- Mortgage repurchase risk assessed and appropriately reserved
- Agency repurchase exposure
- Repurchase losses life to date of $2.6B
- End of period reserve balance of $3.0B; reserved for presented and probable future demands
- 2011 realized losses estimated at $1.2B +/-
- Private label exposure – we have significant reserves
- Agency repurchase exposure
- Real Estate Portfolios
- Total reserves of $9.7B (excluding WaMu purchased credit-impaired) remain; 4Q10 NCOs annualized (before one-time impact) of $4.6B
- WaMu purchased credit-impaired portfolio is appropriately reserved for best estimate of remaining lifetime losses
Based on current conditions, we believe we are well-reserved going into 2011
Update on foreclosure process
We make every effort to avoid foreclosure
- Offered over 1mm modifications; 285,000 completed
- Prevented foreclosures at 2x the rate of those completed
- 51 Chase Home Ownership Centers (CHOCs) – plan to add 25 more in 2011
- 6,000 loss mitigation counselors to assist borrowers, across the country
Key facts about foreclosures
- Average delinquency at foreclosure is 14 months
- Recent foreclosure sales showed the following customer/loan characteristics:
- 57% non-owner occupied, of which 52% were vacant at foreclosure
- 43% owner-occupied, of which:
- 25% were vacant at foreclosure
- 53% did not qualify for modification (e.g., High DTI, unemployed, etc.)
- 18% did not respond to solicitations or trial modifications
Update on foreclosure process
- In September/October, we suspended approximately 127,000 foreclosures in 43 states
- Enhanced foreclosure processes
- All personnel involved in foreclosure affidavit process re-trained and re-certified
- All loans subject to pre-foreclosure sale review to confirm foreclosures are appropriate
- Implemented revised quality assurance and quality control processes
- We are resuming foreclosure proceedings
All fine. We would certainly like to hear however how the bank can make the last claim when it is clearly counterfactual, and espcecially now in a "post-Ibanez" world, the firm finds itself at a huge disadvantage. We will be listening to the 9 am earnings call closely for details.
Full presentation
Source:http://removeripoffreports.net/
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