Essentially, what is happening is that the banksters have been having great difficulty in local and state courts showing that they actually have the legal right to foreclose on homes. This is because in the past three decades of mortgage securitization, the simple paper work filed with local court clerks showing who owned the mortgage, was effectively undermined by the increasing complexities and intricacies of the financial derivatives created for securitizing mortgages. In effect, Wall Street's funny money games destroyed the record keeping necessary for a fair and free market based on property rights. Quelle surprise!
To overcome this major legal hurdle, the banksters have simply been forging the documents required by the courts. Just outright forging the documents! Florida Congressman and progressive firebrand Alan Grayson a few days ago released a video, one scene of which shows not two, not three, but SIX different examples of a forged signature of a lending officer.
Ohio Secretary of State Jennifer Brunner was the first to raise the alarm about what is going on:
H.R. 3808 is known as the "Interstate Recognition of Notarizations Act." It passed the House under a suspension of the rules in April 2010. It requires federal and state courts to recognize any notarization that is lawful in the state where the notary is licensed. Now, in one day, it passed in the Senate.
When I learned of it last Thursday, it sounded innocuous to me, but then I started looking at the timing of the bill. GMAC, owned by Ally, had just suspended its foreclosure actions in 23 states, including Ohio. I had already referred Chase Home Finance, LLC, on August 23, 2010, to the U.S. Department of Justice, asking it to review and investigate Chase's document notarization practices in home foreclosures (18,000 documents per month were being notarized by 8 people, along with other irregularities). I license notaries in the State of Ohio. Even though I don't have the power under state law to investigate or prosecute, I couldn't stand idly by without acting. That's why I'm asking you to email or call the President at 202-456-1111 to ask him not to sign the bill.
Last Wednesday, the day before I announced the DOJ referral, JPMorgan Chase announced it was having third party counsel review its document procedures for foreclosures. Just two days before, the U.S. Senate had rushed through H.R. 3808. Something didn't seem right. Since then others agree with me.
Yves Smith of Naked Capitalism explains what this means:
Yves here. This development reveals how this battle is likely to play out. Now that judges in some states are starting to take these dubious, potentially fraudulent measures seriously, the next line of attack is to get the more bought and paid for Federal government to intercede on behalf of the banks. As the e-mail by the Ohio Secretary shows, this is a state versus Federal rights issue. And the problem is that these solutions will be depicted as "efficient," just as securitizations and other "innovations" were.
And while efficiency in theory is a good thing, it must always be kept secondary to the overall integrity of the system, otherwise, you run the risk of breakdown. Using dubious arguments to overturn well settled law to get the banking industry out of a monster mess it created is a Faustian bargain. It makes it abundantly clear what is really at stake here, which is the rule of law. Banks that were quick to defend unjustifiable pay deals by invoking "sanctity of contract" have no inhibition about ignoring their own contracts to pad their bottom line, and ultimately, the wallets of the top executives.
Rather than deal with the considerable consequences of these abuses, the banks are prepared to bulldoze well settled state laws to give them an easy way out. And I'm not basing my view on this story alone; I had a conversation yesterday with a Congressional staffer who matter-of-factly (but with little understanding of the underlying issues) that Congress would intervene on behalf of the industry, via its authority over national banks.
The result is that we institutionalize kleptocracy while keeping largely gutted forms of due process as theater. The powers that be hope that the broad public will remain unaware of what is really at work.
4closurefraud.org has an action alert up, asking people to call or email the White House TODAY to tell President Obama not to sign a sneaky law that will let the banksters off the hook.
This is a moment of truth for President Obama. His administration thus far has utterly failed to halt the rising and increasingly destructive tide of home foreclosures. If the President signs the legislation letting the banksters off the hook for criminally submitting fake documents in foreclosure proceedings, it will show that he was never really interested in helping ordinary Americans to begin with.
Readers will be interested to know that I was among those who were urging timely and extremely action to stop foreclosures, back in February 2009, when I wrote as a suggested speech for President Obama:
If I were President . . . [Ending Wall Street's rule]When you call or email the White House, you can also strongly suggest that the President define the characters involved in this disastrous scam - the mortgage brokers, the derivatives specialists, the bankers, the companies the banks are now using to forge documents "proving" ownership, the lawyers knowingly submitting fake documents to the courts - as financial terrorists, thus allowing Obama's unitary executive to move quickly and forcefully to actually defend the American people against terrorism.And, no, this is not snark. This is turning the tables on the bastards.
The same legal principle of odious debt may be extended to the millions of mortgages that were sold on false pretenses, serving only to boost the earnings and bonuses of mortgage brokers and bankers. There is a complete circle of fraud here, beginning with home buyers who were often encouraged to lie about their incomes. The banks and brokers committed fraud, not just by encouraging people to lie, but also by failing to perform the due diligence required to estimate the credit worthiness of a home buyer. The companies that bought these mortgages and bundled them together committed fraud by deliberately under-estimating the risk of cascading defaults, and by failing to inform buyers of these sophisticated instruments of their full complexity and credit risk.
Clearly, however, where the greatest tragedy lies is in the suffering and anguish of individual human beings who are forced out of their homes. Almost all these people to some extent placed their trust in the banks and brokers that sold them mortgages to deal fairly and not place them in a situation in which they could not make the payments. This was misplaced trust.But stopping these individual tragedies may be the easiest thing we can do at this point. I am deputizing as Federal Marshalls all county marshals and other local law enforcement officials responsible for carrying out home foreclosures, and ordering them to immediately cease all foreclosure proceedings on residential properties.
I am also instructing them to insist that all creditors that have begun foreclosure proceedings on residential properties must produce clear titles and documentation of liens to the property. If the mortgage holder refuses to work with the court and the home owner to keep the home owner in the residence, I am instructing these new Federal Deputies to seize the residence on behalf of the home owner, to protect the homeowner in that residence, and to oppose all further proceedings against that property. (See Amy Goodman’s article on what Rep. Marcy Kaptur has been telling her constituents: Facing foreclosure? Don't leave. Squat.)
Our banking system is comprised of over 8,000 institutions, but the crises we face is actually the result of the policies and actions of only a handful of the largest institutions. I have directed the Secretary of the Treasury, the Comptroller of the Currency, and the Director of the FDIC to work with the Federal Reserve in taking effective control of the large banks and financial institutions the taxpayers already own. These institutions are: Citigroup, Bank of America, JPMorganChase, Wells Fargo, and to a lesser degree, Goldman Sachs, and Morgan Stanley.According to information collected by the Comptroller of the Currency, almost 90 percent of financial derivatives activities are concentrated in just these six institutions. We have yet to determine how much of each institution’s financial derivatives activities are fraudulent, as in the case of credit default swaps discussed above, but we will move quickly to identify, and invalidate those contracts.
1. Ohio Secretary of State Jennifer Brunner wrote a diary on DailyKos yesterday, which is where the quote was taken by Yves Smith and BobSwern: President Obama Should Not Sign the Interstate Recognition of Notarizations Act.
2. Secretary Brunner's blog post links to the National Notary Association, which opposes electronic notarization. Another point to throw at the White House.
3 This topic is covered today over at Clusterstock. You might want to visit just to read some of the comments. My favorite exchange:
Ford Prefect on Oct 7, 8:11 AM said:
Bottom of the 3rd inning
blutown on Oct 7, 8:33 AM said:
But I thought the Banksters were the home team?
Ford Prefect on Oct 7, 9:11 AM said:
The peasants always bat last because we can vote everybody out, or in the case of some other countries, simply revolt. There have been many countries where the bankers and political leadership thought they batted last and found out that they didn't.
It is the peasants' choice if they want to just go down looking at called third strikes though. So far, there has been a lot of that over the last couple of decades.