The Pasadena Police Department would like to inform the public that buying gold is against the law unless you are licensed through the California Department of Justice. Gold buyers are required by law to ask for identification from whoever they buy from and maintain a description of the items they are buying. This information is then reported to local law enforcement.
“Given the current economic constraints, selling excess jewelry has become a viable option for some people,” says Chief of Police Phillip Sanchez. “But we want to caution people that care should be taken to buy from and sell to only licensed second hand dealers. This helps to prevent crime and will prevent people from buying stolen property unknowingly.” Businesses that do not possess a second hand dealer’s license and engage in buying and selling gold and other items are breaking the law, are subject to arrest, a $1500.00 fine and accusations of dealing in stolen property.
Several businesses in the City of Pasadena advertise “We Buy Gold” and these businesses must be licensed as a “Second Hand Dealer”. They are regulated by the Pasadena Police Department. Some businesses may knowingly or unknowingly take in stolen property that belongs to a victim of a crime.
This license also applies to those who are buying other used items that bear a serial number or identifying marks such as laptop computers, iPods, cell phones and gaming devices. These goods have been found to constitute a “significant class of stolen goods” and must be reported to law enforcement.
“By using reputable, licensed businesses, the average citizen can curb the buying and selling of stolen goods,” continues Chief Sanchez. “When we make it harder for thieves to sell their ill gotten gains, there is more of a chance to stem property crimes related to burglary.
For more information or to become licensed by the Department of Justice, please call Detective Sergeant Marie Sell at 626-744-3816.
This is the story of a debt crisis few are talking about.
Americans now owe more on their student loans than they do on their credit cards — a debt fast approaching $1 trillion with no end in sight.
Students borrow because they see little choice. A college education, after all, is a key to success. That, it seems, is an article of faith.
For Rick and Tami Tuipers, of the Chicago suburb of Tinley Park, Ill., the world revolves around their kids.
"We've committed to our children's education from day one," said Tami. "That's the commitment we made when they were born."
Zach is a high school sophomore and, at 15, the youngest in the family. Shelby, 18, is a senior and interested in science.
To read more click here:
Student loans leave crushing debt burden - Business - CNBC TV - msnbc.com
WILMINGTON, Del., Dec 15 (Reuters) - Retailer Loehmann's [ARCABL.UL] said on Wednesday it reached an agreement with unsecured creditors that will allow the department store chain to exit bankruptcy by Feb. 18.
Loehmann Capital Corp's current owner, Istithmar, a unit of Dubai World [DBWLD.UL], and Whippoorwill Associates Inc will backstop a rights offering that will invest $25 million in the company when it exits Chapter 11.
The pair will likely end up owning 71 to 85 percent of the company when it exits Chapter 11, depending on the outcome of the rights offering.
Loehmann's, which opened in Brooklyn in 1921, sells designer brands at steep discounts through its stores. It has been unable to meet its debt load even as competitors such as TJX Cos Inc (TJX.N) and Ross Stores Inc (ROST.O) have reported robust sales.
Loehmann's began the year with around 60 stores, but has been closing its weaker locations and currently has about 46.
The company has been trying to restructure its debt for months, but failed to reach an agreement with enough bondholders to prevent a bankruptcy.
The unsecured creditors had opposed the company's original bankruptcy plan, which offered them a recovery of about 4.2 percent.
Under the revised deal reached on Tuesday, the unsecured creditors will get a recovery of about 7.6 percent.
The deal allows Loehmann's to restructure, rather than seek a quick sale, as happens with most bankrupt retailers. The operator Trade Secret beauty salon chain and Urban Brands Inc, which owns the Ashley Stewart clothing chain, both sought quick sales in bankruptcy in recent months.
The Loehmann's agreement is subject to court approval.
The company will also have a $33 million revolving credit facility with Crystal Financial LLC to fund its operations once it exits bankruptcy as well as a $7 million junior facility provided by Whippoorwill. (Reporting by Tom Hals; Editing by Richard Chang)UPDATE 2-Loehmann's strikes deal for quick bankruptcy exit | Reuters
11/15/2010—This holiday season, the FBI reminds shoppers that cyber criminals aggressively create new ways to steal money and personal information. Scammers use many techniques to fool potential victims, including conducting fraudulent auction sales, reshipping merchandise purchased with stolen credit cards, and selling fraudulent or stolen gift cards through auction sites at discounted prices.
Fraudulent Classified Ads and Auction Sales
Internet criminals post classified ads and auctions for products they do not have and make the scam work by using stolen credit cards. Fraudsters receive an order from a victim, charge the victim’s credit card for the amount of the order, then use a separate, stolen credit card for the actual purchase. They pocket the purchase price obtained from the victim’s credit card and have the merchant ship the item directly to the victim. Consequently, an item purchased from an online auction but received directly from the merchant is a strong indication of fraud. Victims of such a scam not only lose the money paid to the fraudster, but may be liable for receiving stolen goods.
Shoppers may help avoid these scams by using caution and not providing financial information directly to the seller, as fraudulent sellers will use this information to purchase items for their schemes. Always use a legitimate payment service to ensure a safe, legitimate purchase.
As for product delivery, fraudsters posing as legitimate delivery services offer reduced or free shipping to customers through auction sites. They perpetuate this scam by providing fake shipping labels to the victim. The fraudsters do not pay for delivery of the packages; therefore, delivery service providers intercept the packages for nonpayment and the victim loses the money paid for the purchase of the product.
Diligently check each seller’s rating and feedback along with their number of sales and the dates on which feedback was posted. Be wary of a seller with 100 percent positive feedback, with a low total number of feedback postings, or with all feedback posted around the same date and time.
Gift Card Scam
Be careful when purchasing gift cards through auction sites or classified ads. It is safest to purchase gift cards directly from the merchant or retail store. If the gift card merchant discovers that your card is fraudulent, the merchant will deactivate the gift card and refuse to honor it for purchases. Victims of this scam lose the money paid for the gift card purchase.
Phishing and Smishing Schemes
In phishing schemes, a fraudster poses as a legitimate entity and uses e-mail and scam websites to obtain victims’ personal information, such as account numbers, user names, passwords, etc. Smishing is the act of sending fraudulent text messages to bait a victim into revealing personal information.
Be leery of e-mails or text messages that indicate a problem or question regarding your financial accounts. In this scam, fraudsters direct victims to follow a link or call a number to update an account or correct a purported problem. The link directs the victim to a fraudulent website or message that appears legitimate. Instead, the site allows the fraudster to steal any personal information the victim provides.
Current smishing schemes involve fraudsters calling victims’ cell phones offering to lower the interest rates for credit cards the victims do not even possess. If a victim asserts that they do not own the credit card, the caller hangs up. These fraudsters call from TRAC cell phones that do not have voicemail, or the phone provides a constant busy signal when called, rendering these calls virtually untraceable.
Another scam involves fraudsters directing victims, via e-mail, to a spoofed website. A spoofed website is a fake site that misleads the victim into providing personal information, which is routed to the scammer’s computer.
Phishing schemes related to deliveries are also rampant. Legitimate delivery service providers neither e-mail shippers regarding scheduled deliveries nor state when a package is intercepted or being temporarily held. Consequently, e-mails informing of such delivery issues are phishing scams that can lead to personal information breaches and financial losses.
Here are some tips you can use to avoid becoming a victim of cyber fraud:
Do not respond to unsolicited (spam) e-mail.
Do not click on links contained within an unsolicited e-mail.
Be cautious of e-mail claiming to contain pictures in attached files, as the files may contain viruses. Only open attachments from known senders. Scan the attachments for viruses if possible.
Avoid filling out forms contained in e-mail messages that ask for personal information.
Always compare the link in the e-mail with the link to which you are directed and determine if they match and will lead you to a legitimate site.
Log directly onto the official website for the business identified in the e-mail, instead of “linking” to it from an unsolicited e-mail. If the e-mail appears to be from your bank, credit card issuer, or other company you deal with frequently, your statements or official correspondence from the business will provide the proper contact information.
Contact the actual business that supposedly sent the e-mail to verify if the e-mail is genuine.
If you are asked to act quickly, or there is an emergency, it may be a scam. Fraudsters create a sense of urgency to get you to act quickly.
Verify any requests for personal information from any business or financial institution by contacting them using the main contact information.
Remember if it looks too good to be true, it probably is.
To receive the latest information about cyber scams, sign up for e-mail alerts on this website. If you have received a scam e-mail, please notify the IC3 by filing a complaint at www.ic3.gov.
FBI — New E-Scams & Warnings
Posted: 11/22/2010 08:22:47 AM PST
VENTURA, Calif.—Former New York Mets outfielder Lenny Dykstra took out $18 million in loans three years ago to buy a California estate overlooking the Sherwood Country Club Golf Course.
It sold at bankruptcy auction last week for $760,712.
A junior lienholder bought the 12,713-square-foot Lake Sherwood home. Index Investors representative Jeff Smith says he was the lone bidder at the Ventura County courthouse on Nov. 17.
There's still a $13.5 million senior mortgage held by J.P. Morgan Chase & Co. The Oregon-based private equity firm is negotiating with J.P Morgan to deal with that debt.
Dykstra filed for bankruptcy protection in July, saying he owed more than $31 million and had about $50,000 in assets.
Dykstra told the Ventura County Star on Saturday that he doesn't know anything about the auction.
Dykstra's Calif estate sold at bankruptcy auction - Pasadena Star-News
Please circulate it!
"It is the duty of nations as well as of men to own their dependence upon the overruling power of God; to confess sins and transgressions in humble sorrow, yet with assured hope that genuine repentance will lead to mercy and pardon; and to recognize the sublime truth, announced in the Holy Scriptures and proven by all history, that those nations are blessed whose God is the Lord (Psalm 33:12). We know that by His divine law, nations, like individuals, are subjected to punishments and chastisements in this world. May we not justly fear that the awful calamity of civil war which now desolates the land may be a punishment inflicted upon us for our presumptuous sins, to the needful end of our national reformation as a whole people?
We have been the recipients of the choicest bounties of heaven; we have been preserved these many years in peace and prosperity; we have grown in numbers, wealth and power as no other nation has ever grown.
But we have forgotten God. We have forgotten the gracious hand which preserved us in peace and multiplied and enriched and strengthened us, and we have vainly imagined, in the deceitfulness of our hearts, that all these blessings were produced by some superior wisdom and virtue of our own. Intoxicated with unbroken success, we have become too self-sufficient to feel the necessity of redeeming and preserving grace, too proud to pray to the God that made us.
It has seemed to me fit and proper that God should be solemnly, reverently and gratefully acknowledged, as with one heart and one voice, by the whole American people. I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November as a day of Thanksgiving and praise to our beneficent Father who dwelleth in the heavens."
We, as a nation must fall to our knees!
Debt collectors utilize Facebook to embarrass those who owe | Tampa Bay, St. Petersburg, Clearwater, Sarasota | WTSP.com 10 News
Melanie Beacham says she fell behind on her car payment after getting sick and taking a medical leave from work. She contacted MarkOne Financial to explain the situation but says the harassing phone calls, as many as 20 per day, kept coming. Then one day she got a call from her sister saying the company contacted her in Georgia.
"I was telling her, 'No way, because you're not even a reference,'" said Beacham, who later found out MarkOne contacted her sister and other relatives via Facebook.
Beacham says the company claimed they were doing nothing wrong but, upset over what happened, she contacted Tampa based consumer attorney Billy Howard of Morgan & Morgan.
"Now Facebook does a debt collectors work for them. Now it's not only family members, it's all of your associates. It's a very powerful tool for debt collectors to use," says Howard.
He believes Facebook will soon become a regular method for contact if nothing is done.
"It's getting the desired result, and that is to start a domino effect of panic and embarrassment among family and friends, and people will do anything to stop that."
Howard has now filed a first of its kind lawsuit against MarkOne asking a judge to ban the company from using Facebook and other social networking websites to contact friends and family members over a debt.
10 News was unable to reach MarkOne Financial for comment Monday regarding the suit filed in Pinellas County.
Beacham hopes the lawsuit will keep debt collectors from exploiting consumers on Facebook.
"Nobody should have to go through what I went through," said Beacham. "I was hurt because I just felt I didn't need my family going through that."
Beau Zimmer, 10 News
Debt collectors utilize Facebook to embarrass those who owe | Tampa Bay, St. Petersburg, Clearwater, Sarasota | WTSP.com 10 News
swindling distressed homeowners
Sacramento-area lawyer James Sandison, already facing State Bar charges of misusing his client trust account and named in a $60 million loan modification fraud suit by the attorney general, has now been charged by the State Bar with “swindling distressed homeowners.”
Principal and founder of U.S. Loan Auditors and general corporate counsel for My U.S. Legal Services, Inc., Sandison, 55, provided forensic loan audits, guaranteed foreclosure prevention and then did nothing to help prevent the foreclosures, according to bar prosecutors. One of 11 homeowners named in the State Bar complaint paid Sandison $56,000 over a nine-month period. Others paid him between $2,000 and $24,000 after he promised to stop foreclosure. Some clients lost their homes.
Sandison [bar number 148812], whose businesses are located in Rancho Cordova, is charged with 11 counts of moral turpitude, dishonesty and corruption. He also was charged Oct. 27 with making untrue or misleading representations, unfair competition, collecting advance fees, failure to provide proper disclosures, collecting advance fees from clients in foreclosure and failure to register his businesses as foreclosure consultants.
“The State Bar continues to aggressively prosecute those lawyers engaging in loan modification misconduct,” said Chief Trial Counsel James Towery. “We have removed from practice 17 of these lawyers with more disciplinary proceedings pending. This small group has caused significant public harm.”
According to the State Bar charges, Sandison defrauded the homeowners by making promises to avoid foreclosure that he never kept. Those allegations are similar to charges filed against Sandison, his companies and four others by Attorney General Jerry Brown on Oct. 6. In that suit, Brown seeks $60 million in civil penalties, restitution for victims and permanent injunctions to keep the defendants from fraudulently marketing forensic loan audits and legal services that have no value. The State Bar assisted Brown’s office and the Department of Real Estate in the investigation.
The attorney general’s suit alleged that homeowners paid thousands of dollars for forensic loan audits, which the companies said could be used as the basis for suits against lenders. Forensic loan audits purportedly show instances in which lenders have violated rules ranging from consumer privacy requirements to calculating mortgage amounts. Many homeowners were persuaded to stop making their loan payments and instead file lawsuits. As a result, they lost thousands of dollars and, in some cases, their homes.
The suit said the lawyers used “a variety of deceptive advertising and marketing techniques to persuade homeowners they had been victims of ‘predatory lending.’” They claimed that suing the lenders would give the homeowners leverage in obtaining a loan modification, staving off foreclosure or collecting damages.
Many clients took the advice “and as a result placed themselves in even greater danger of losing their homes,” the attorney general’s suit said. “Defendants then bilk their clients for months, collecting thousands of dollars in fees for ‘legal services,’ when in reality [they] do little more than file and serve a boiler-plate complaint. In order to keep the monthly payments flowing, Defendants dodge their clients’ phone calls, refuse to provide their clients any accounting of how their money is being spent and/or string their clients along with false assurances that a settlement is in progress, or that litigation takes time.”
Sandison also was named by the State Bar in a separate case in October. He was charged with hiding $300,000 in collections he received on behalf of his client, failing to put funds into a client trust account and stealing money from his partner and client.
By MICHAEL POWELL
PHOENIX — Bank of America and GMAC are firing up their formidable foreclosure machines again today, after a brief pause.
But hard-pressed homeowners like Lydia Sweetland are asking why lenders often balk at a less disruptive solution: short sales, which allow owners to sell deeply devalued homes for less than what remains on their mortgage.
Ms. Sweetland, 47, tried such a sale this summer out of desperation. She had lost her high-paying job and drained her once-flush retirement savings, and her bank, GMAC, wouldn’t modify her mortgage. After seven months of being unable to pay her mortgage, she decided that a short sale would give her more time to move out of her Phoenix home and damage her credit rating less than a foreclosure.
She owes $206,000 and found a buyer who would pay $200,000. Last Friday, GMAC rejected that offer and said it would foreclose in seven days, even though, according to Ms. Sweetland’s broker, the bank estimates it will make $19,000 less on a foreclosure than on a short sale.
“I guess I could salute and say, ‘O.K., I’m walking, here’s the keys,’ ” says Ms. Sweetland, as she sits in a plastic Adirondack chair on her patio. “But I need a little time, and I don’t want to just leave the house vacant. I loved this neighborhood.”
GMAC declined to be interviewed about Ms. Sweetland’s case.
The halt in most foreclosures the last few weeks gave a hint of hope to homeowners like Ms. Sweetland, who found breathing room to pursue alternatives. Consumer advocates took the view that this might pressure banks to offer mortgage modifications on better terms and perhaps drive interest in short sales, which are rising sharply in many corners of the nation.
But some major lenders took a quick inventory of their foreclosure practices and insisted their processes were sound. They now seem intent on resuming foreclosures. And that could have a profound effect on many homeowners.
In Arizona, thousands of homeowners have turned to short sales to avoid foreclosures, and many end up running a daunting procedural gantlet. Several of the largest lenders have set up complicated and balky application systems.
Concerns about fraud are one of the reasons lenders are so careful about short sales. Sometimes well-off homeowners want to portray their finances as dire and cut their losses on a property. In other instances, distressed homeowners try to make a short sale to a relative, who would then sell it back to them (a practice that is illegal). A recent industry report estimates that short sale fraud occurs in at least 2 percent of sales and costs banks about $300 million annually.
Short sales are also hindered when homeowners fail to forward the proper papers, have tax liens or cannot find a buyer.
Because of such concerns, homeowners often are instructed that they must be delinquent and they must apply for a modification first, even if chances of approval are slim. The aversion to short sales also leads banks to take many months to process applications, and some lenders set unrealistically high sales prices — known as broker price opinions — and hire workers who say they are poorly trained.
As a result, quite a few homeowners seeking short sales — banks will not provide precise numbers — topple into foreclosure, sometimes, critics say, for reasons that are hard to understand. Ms. Sweetland and her broker say they are confounded by her foreclosure, because in Arizona’s depressed real estate market, foreclosed homes often sit vacant for many months before banks are able to resell them.
“Banks are historically reluctant to do short sales, fearing that somehow the homeowner is getting an advantage on them,” said Diane E. Thompson, of counsel to the National Consumer Law Center. “There’s this irrational belief that if you foreclose and hold on to the property for six months, somehow prices will rebound.”
Homeowners, advocates and realty agents offer particularly pointed criticism of Bank of America, the nation’s largest servicer of mortgages, and a recipient of billions of dollars in federal bailout aid. Its holdings account for 31 percent of the pending foreclosures in Maricopa County, which includes Phoenix and Scottsdale, according to an analysis for The Arizona Republic.
The bank instructs real estate agents to use its computer program to evaluate short sales. But in three cases observed by The New York Times in collaboration with two real estate agents, the bank’s system repeatedly asked for and lost the same information and generated inaccurate responses.
In half a dozen more cases examined by The New York Times, Bank of America rejected short sale offers, foreclosed and auctioned off houses at lower prices.
“When I hear that a client’s mortgage is held by Bank of America, I just sigh. Our chances of getting an approval for them just went from 90 percent to 50-50,” said Benjamin Toma, who has a family-run real estate agency in Phoenix.
Bank of America officials also declined interview requests. A Bank of America spokeswoman said in an e-mail that the bank had processed 61,000 short sales nationwide this year; she declined to provide numbers for Arizona or to discuss criticisms of the company’s processing.
Fannie Mae, the mortgage finance company with federal backing, gives cash incentives to encourage servicers, who are affiliated with banks and who oversee great bundles of delinquent mortgages, to approve short sales.
But less obvious financial incentives can push toward a foreclosure rather than a short sale. Servicers can reap high fees from foreclosures. And lenders can try to collect on private mortgage insurance.
Some advocates and real estate agents also point to an April 2009 regulatory change in an obscure federal accounting law. The change, in effect, allowed banks to foreclose on a home without having to write down a loss until that home was sold. By contrast, if a bank agrees to a short sale, it must mark the loss immediately.
Short sales, to be sure, are no free ride for homeowners. They take a hit to their credit ratings, although for three to five years rather than seven after a foreclosure. An owner seeking a short sale must satisfy a laundry list of conditions, including making a detailed disclosure of income, tax and credit liens. And owners must prove that they have no connection to the buyer.
Still, bank decision-making, at least from a homeowner’s perspective, often appears arbitrary. That is certainly the view of Nicholas Yannuzzi, who after 30 years in Arizona still talks with a Philadelphia rasp. Mr. Yannuzzi has owned five houses over time, without any financial problems. When his wife was diagnosed with bone cancer, he put 20 percent down and bought a ranch house in North Scottsdale so that she would not have to climb stairs.
In the last few years, his wife died, he lost his job and he used his retirement fund to pay his mortgage for five months. His bank, Wells Fargo, denied his mortgage modification request and then his request for a short sale.
The bank officer told him that Fannie Mae, which held the mortgage, would not take a discount. At the end of last week, he was waiting to be locked out of his home.
“I’m a proud man. I’ve worked since I was 20 years old,” he said. “But I’ve run out of my 79 weeks of unemployment, so that’s it.”
He shrugged. “I try to keep in the frame of mind that a lot of people have it worse than me.”
Back in Phoenix, Ms. Sweetland’s real estate agent, Sherry Rampy, appeared to receive good news last week. GMAC re-examined her client’s application and suggested it might be approved.
But the bank attached a condition: Ms. Sweetland must come up with $2,000 in closing costs or pay $100 a month for 50 months to the bank. Ms. Sweetland, however, is flat broke.
A late afternoon desert sun angles across her Pasadena neighborhood.
“After this, I’ll never buy again,” Ms. Sweetland says. “This is not the American dream. This is not my American dream.”
Friday, October 22, 2010; A25
Don't blame the lawyers. The crisis over faulty or fraudulent paperwork in mortgage foreclosures -- which is either a big deal or a humongous deal, depending on which experts you believe -- is the fault of arrogant, greedy lenders who played fast and loose with the basic property rights of homeowners.
Banks and other lenders, it seems, made statements in courts of law that turned out not to be true. Because judges have such an underdeveloped sense of humor when it comes to prevarication, this mess may be with us for a while.
The mortgage industry would love to blame the whole thing on predatory, opportunistic lawyers who are seizing on mere technicalities to forestall untold numbers of foreclosures that should legitimately proceed. The bankers are right when they complain that the delays are gumming up the housing market, as potential buyers for soon-to-be-foreclosed properties are forced to bide their time until all the questions about documentation and proper title are answered.
But it's the bankers' fault that there are so many instances of foreclosure documentation with legal loopholes big enough to drive a moving van through. During the years of the real estate boom, lenders cut corners with paperwork to make as many loans -- and sell them to other lenders, which often sliced and diced them into securities that were then sold to investors -- as quickly as possible. This haste and inattention to detail, now coming to light, are partly responsible for the current crisis.
Laws vary from state to state, but all accept the principle that borrowers who fail to meet the contractual obligation to pay their mortgages can be subject to foreclosure and eviction. The process is devastating for families and for neighborhoods. In many cases, I believe, all parties would be better off if some way could be found to avoid foreclosure -- modifying the terms of the loan, say, by lowering the interest rate or even reducing the principal to reflect the fall in housing prices. I recognize, however, that there are many other cases in which foreclosure is the preferable option or perhaps the only option.
But it's also necessary that the mortgage holder have the legal right to foreclose. Anyone who has ever bought a house is familiar with the inches-thick stack of documents that have to be signed, sealed, initialed and notarized. It turns out that financial institutions often didn't dot every "i" or cross every "t" -- meaning that in some cases, it may not be clear that the nominal mortgage holder has the clear and undisputed right to take possession of the property.
These may be technicalities, but there's nothing mere about them. For one thing, if borrowers are expected to play by the rules, lenders should be expected to do the same. For another, there can't be a functioning real estate market without the ability to establish clear title. Lawyers probing this aspect of the foreclosure crisis are doing the system a favor.
The other big problem is that lenders have been processing foreclosures with assembly-line speed, eliminating delay wherever possible -- sometimes substituting electronic signatures for the ink-on-paper kind, for example. In the information age, some of this qualifies as sensible streamlining. But what doesn't make sense is moving the foreclosure documents along so quickly, and in such overwhelming volume, that the people signing them -- whether by computer or quill pen -- couldn't possibly have time to read them. We now know that some individuals, working as processors, have been signing off on up to 10,000 foreclosure documents a month.
In 23 states, every foreclosure must involve a court hearing. Sharp-eyed attorneys, representing delinquent homeowners, have unearthed cases in which high-volume "robo-signers" submitted affidavits attesting that they reviewed all the loan files personally -- when, in fact, they had not. This is just the sort of thing that puts judges in a really bad mood.
The Obama administration has declined to call for an official moratorium on foreclosures. This is understandable: In most cases a moratorium would just delay the inevitable, while impeding any momentum the housing market might otherwise be able to build.
But maybe the crisis will make the banks realize that they ought to be doing fewer foreclosures and more loan modifications -- sensible adjustments that allow deserving families to stay in their homes. And if this happens, we'll have the lawyers to thank.
The uproar over bad conduct by mortgage lenders intensified Tuesday, as lawmakers in Washington requested a federal investigation and the attorney general in Texas joined a chorus of state law enforcement figures calling for freezes on all foreclosures.
Representative Nancy Pelosi, the House speaker, and 30 other Democratic representatives from California told the Justice Department, the Federal Reserve and the comptroller of the currency that “it is time that banks are held accountable for their practices.”
In a request for an investigation into questionable foreclosure practices by lenders, the lawmakers said that “the excuses we have heard from financial institutions are simply not credible."
Officials from the federal agencies declined to comment.
Texas Attorney General Greg Abbott, a Republican, sent letters to 30 lenders demanding they stop foreclosures, evictions and the sale of foreclosed properties until they could provide assurances that they were proceeding legally.
Both developments indicated that scarcely two weeks after the country’s fourth-biggest lender, GMAC Mortgage, revealed that it was suspending all foreclosures in the 23 states where the process requires judicial approval, concerns about flawed foreclosures had mushroomed into a nationwide problem.
Some of the finger-pointing was also being directed back at Congress. The Ohio secretary of state, Jennifer Brunner, suggested in a telephone interview on Tuesday that a bill passed by Congress last week about notarizations could facilitate foreclosure fraud.
Dubious notary practices used by banks to justify foreclosures have come under scrutiny in recent weeks as GMAC and other top lenders suspended homeowner evictions over possible improper procedures.
Ms. Brunner, who has recently referred possible cases of notary fraud in her state to federal authorities, worries that the legislation would allow the lowest standard for notaries to become a nationwide practice. She said she also worried that the changes were coming in the middle of a foreclosure storm where people could lose their homes improperly.
“A notary’s signature is that of a trusted, impartial third party, whose notarization bolsters the integrity of the document,” Ms. Brunner said. “To take away the safeguards of notarization means foreclosure procedures could be more susceptible to fraud.”
As banks’ foreclosure practices have come under the microscope, problems with notarizations on mortgage assignments have emerged. These documents transfer the ownership of the underlying note from one institution to another and are required for foreclosures to proceed.
In some cases, the notarizations predated the preparation of the legal documents, suggesting that signatures were not reviewed by a notary. Other notarizations took place in offices far away from where the documents were signed, indicating that the notaries might not have witnessed the signings as the law required.
Notary practices vary from state to state and the bill, sponsored by Representative Robert B. Aderholt, a Republican from Alabama, would essentially require that one state’s rules be accepted by others. If one state allows its notaries to sign off on electronic signatures, for example, documents carrying such signatures and notarized by officials in that state would have to be recognized and accepted in any state or federal court.
Ms. Brunner pointed out that some states had adopted “electronic notarization” laws that ignored the requirement of a signer’s personal appearance before a notary. “Many of these policies for electronic notarization are driven by technology rather than by principle, and they are dangerous to consumers,” she said.
Mr. Aderholt had introduced the bill twice before and both times it passed the House of Representatives but not the Senate. Mr. Aderholt reintroduced the bill last October and it passed the Senate on Sept. 29. It is awaiting President Obama’s signature.
Mr. Aderholt’s press secretary, Darrell Jordan, said there was no connection between the timing of the bill and the current notarization problems with foreclosures. In a statement announcing the bill’s passage, Mr. Aderholt said: “This legislation will help businesses around the nation by eliminating the confusion which arises when states refuse to acknowledge the integrity of documents notarized out of state.”
Last week, JPMorgan Chase and Bank of America joined GMAC in suspending foreclosures in the states where they must be approved by a judge. The judicial states do not include California or Texas. But Mr. Abbott, the Texas attorney general, told lenders in letters dated Oct. 4 that if they used so-called robo-signers — employees who signed thousands of foreclosure affidavits a month, falsely attesting that they had reviewed the material — it would be a violation of Texas law.
As a result, he wrote, “the document and therefore the foreclosure sale would have been invalid.”
The three lenders who are at the center of the controversy, GMAC Mortgage, JPMorgan Chase and Bank of America, declined to comment. Other lenders singled out by Mr. Abbott include Wells Fargo, CitiMortgage, HSBC and National City.
Meanwhile, shares of a major foreclosure outsourcing company, Lender Processing Services of Jacksonville, Fla., fell 5 percent on Tuesday, adding to a slide that began last week.
The company’s documentation practices are stirring questions, including how the same employee can have wildly varying signatures on mortgage documents. L.P.S. blamed a midlevel manager’s decision to allow employees to sign forms in the name of an authorized employee. It says it has stopped the practice.
The United States Attorney’s Office in Tampa began investigating L.P.S. in February. An L.P.S. representative could not be reached Tuesday for comment.
Other calls for investigations came from Senators Al Franken, a Democrat from Minnesota, and Robert Menendez, a Democrat from New Jersey.
Foreclosure Furor Rises - Many Call for a Freeze - NYTimes.com
SAN FRANCISCO (MarketWatch) -- U.S. consumer bankruptcy filings rose 11% in the first nine months of this year, versus the same period in 2009, the American Bankruptcy Institute said Monday, citing data from the National Bankruptcy Research Center. Filings totaled 1,165,172 nationwide during the first nine months of 2010, compared to 1,046,449 total consumer filings during the same period a year ago. The bankruptcy filings so far in 2010 represent the highest total since 2005. "We expect that there will be nearly 1.6 million new bankruptcy filings by year end," ABI Executive Director Samuel Gerdano said in a statement. Consumer bankruptcies totalled 130,329 in September. That was 3.3% up from August 2010.
Consumer bankruptcy filings climb 11% - MarketWatch
Washington Post Staff Writer
Thursday, September 30, 2010; 10:39 PM
A top federal bank regulator said Thursday that he has directed seven of the nation's largest lenders to review their foreclosure processes after learning about the widespread mishandling of homeowner evictions by the industry.
John Walsh, acting director of the Office of the Comptroller of the Currency, told lawmakers during a hearing on the financial regulatory overhaul enacted this summer that some lenders "clearly had deficiencies" in their system for foreclosures.
The banks contacted by regulators include J.P. Morgan Chase, which announced Wednesday that it was freezing 56,000 foreclosures after finding errors in its preparation of documents, according to OCC spokesman Kevin Mukri. Other lenders contacted include Bank of America, Citibank, HSBC, PNC Bank, U.S. Bank and Wells Fargo.
"We both want to see that they fix the processing problems but also to look to see whether there is specific harm [that has been caused] in individual cases," Walsh said.
Revelations about widespread paperwork problems with foreclosures led Ally Financial, another major lender, to suspend evictions last week in 23 states where a court order is required to seize a property. Since then, the industry's handling of foreclosures has come under close scrutiny from regulators, with attorneys general in several other states calling for Ally to halt foreclosures.
The paperwork problems range from potentially forged documents to bank employees who never read borrowers' files before signing off on an eviction.
In J.P. Morgan's case, Mukri said the bank "determined that its affidavit procedures were non-compliant with foreclosure processing requirements in some states." He added that although J.P. Morgan has fixed internal procedures, the "negative impact or harm to customers has not been determined at this point."
"While we don't expect our review to find that consumers were harmed, we will take appropriate action if we find any impact," JP Morgan spokesman Tom Kelly said.
Mukri would not comment about other banks but said that the OCC has teams permanently stationed at each one and that those teams have been in close contact with senior management at the banks to ensure the reviews are completed in a timely manner.
Citibank declined to comment on the OCC's request but said it has strong training to ensure that employees in its foreclosure group are aware that they should have personal knowledge of the information in documents that require this before signing them and that staffing levels are adequate to allow them to review them properly.
There was no immediate comment from the other banks on Thursday.
Walsh made the remarks in response to questions from Christopher J. Dodd (D-Conn.), chairman of the Senate banking committee, about the spreading problem with foreclosure processing.
Referring to a front-page article in The Washington Post, Dodd called the news about lenders initiating improper foreclosures "very troubling." He asked senior bank regulators at Thursday's hearing - including Federal Deposit Insurance Corp. Chairman Sheila C. Bair and Federal Reserve Chairman Ben S. Bernanke - to comment on the matter.
Bair, whose agency insures deposits at thousands of U.S. banks, called the issue of document processing errors "troubling" and said "it's just a further indication of how wrong we went with the mortgage origination process and securitization process."
Bernanke said that "it's been a managerial challenge to the banks to deal with these foreclosure modifications." And, he added, "they haven't always met that challenge.
7 major lenders ordered to review foreclosure procedures
Sunday, September 26, 2010; 4:03 AM
A new wave of distressed home sales is rippling, more quietly this time, through American cities and suburbs.
Its unsettling effects are playing out here in Manassas, along Brewer Creek Place, a modest, horseshoe-shaped street lined with 98 brick townhouses. Several years after the U.S. foreclosure crisis erupted, the U-Hauls are back.
The last time, banks seized nearly every fourth house on the street through foreclosure. This time, homeowners are going another route: a short sale.
"I love this house, but I just have to leave," said Leanna Harris, 27, the owner of a corner unit that used to be the builder's model, with a stone path in the yard and a gourmet kitchen. "I'm at peace with it now."
The original owner bought the home for $400,714 in 2006; Harris and her husband, both bartenders, paid what seemed to be a bargain price, $289,000, in 2008. But they have fallen behind on their mortgage payments, in part because her husband was out of work. Now they have a $246,000 offer for the home, and the balance on their mortgage is more than that. They want to accept the offer. All they need is their bank's okay.
That kind of deal is called a short sale, and it's sweeping the country. In these deals, a lender allows a troubled borrower to sell a home for less than what's owed on the mortgage.
Completed short sales have more than tripled since 2008, and 400,000 of these deals are projected to close this year, according to mortgage research firm CoreLogic. The giant mortgage financier Fannie Mae approved short sales on 36,534 home loans it owned in the first half of the year, nearly triple the number in 2007 and 2008 combined. Freddie Mac, its sister company, approved 22,117 in the first half of 2010, up from a mere 94 in the first half of 2007.
Distressed homeowners are being drawn to short sales in large part because they can help protect a borrower's credit rating and thus the chance of buying another home later on.
"I worked hard for a long time to keep my credit score close to perfect, and I know a foreclosure would be much worse for my credit than a short sale," said Harris, who listed her Brewer Creek Place home as a short sale about a month ago. "If there's a chance we can avoid foreclosure, we'd rather do that."
In a short sale, homeowners must get the go-ahead from the mortgage lender. Sometimes that happens before the property is put on the market, and other times before the deal closes.
In some areas of the country, including the Washington region, lenders can later pursue borrowers for the difference between the proceeds collected from the short sale and the amount owed on the mortgage, also called a deficiency. But lenders say they only do so if they conclude the borrowers skipped out on a loan that they could afford.
For lenders, short sales are less expensive than foreclosures to handle and help ensure that homes transfer in good shape. And for the wider real estate market, these sales could help shore up the floor under housing values because homeowners - unlike with foreclosures - have a vested interest in getting the best price. That's because the higher the offer, the more likely the lender will approve the sale.
But short sales are prone to maddening delays and often fall through because they require the approval of many, often-competing parties - including the primary mortgage lender and in some cases the holders of second and third liens.
Across the Washington region, short-sale listings now far outpace the number of foreclosures available for sale, according to RealEstate Business Intelligence, a subsidiary of the local multiple listing service. About 14 percent of area homes for sale are short sales, more than double the figure for foreclosures, with some of the greatest volume in Prince George's and Prince William Counties, where the drop in housing prices has been especially pronounced.
Brewer Creek Place, which wraps around the back end of the Independence subdivision south of the Prince William Parkway, was first developed five years ago on the eve of the housing market meltdown. Most of the residents bought their townhouses at a time when mortgage lending standards were especially lax, leaving some borrowers saddled with staggering debts when the home-loan market collapsed.
Yet along the street, there are few signs of the turmoil. Kids zip around on scooters. Neighbors primp their flower beds.
But from her driveway, Brenda Holliday has watched the crisis spread. Taking a break from hosing down her convertible PT Cruiser on a recent Saturday, she pointed to the three homes to her right. Each had sold as a foreclosure since 2008.
Then she pointed to the door to her immediate left with a lock box hanging on it.
"That's a short sale," she said. She nodded to the corner unit further down the block. "I think that's a short sale, too."
To Holliday, 60, her townhouse seemed ideal when moved in four years ago shortly after she was widowed. She's been renting the place from the owner with half of each monthly payment credited toward her eventual purchase of the home, which she initially agreed to buy for $365,000.
But as she's grown older, the stairs have gotten harder, she said, and now she feels a bit trapped. If she leaves, she loses the money she put toward the purchase. If she stays, she'll have to pay about $150,000 more than the townhouse is worth. Its value has been eroded by the steady stream of foreclosures and short sales.
Holliday squeezed the hose full throttle.
"A moving van pulls up and another family is gone - that's all I know," she said. "It's plain sad."
Leanna Harris may have been the first on the street to buy a home as a short sale. When she did, in early 2008, such deals were so rare that Prince William County hadn't even started to track them yet.
"I wanted this house really bad," said Harris, who went to settlement on the home the day after their baby girl was born. "It is my dream house."
But before long, she and her husband were looking at a short sale from the other side. The Harrises fell behind on their payments and never regained financial footing, she said.
The couple received temporary relief for six months from Bank of America. But Harris said the bank ultimately rejected them for a permanent loan modification and threatened foreclosure unless they immediately made up the $10,000 in payments that had been deferred, including interest and fees, or sold the house.
Harris said she felt tricked. But she listed her home as a short sale because it seemed to offer a relatively painless way out. She said she doesn't expect the bank's approval to come quickly.
Lenders acknowledge that they are overwhelmed with the volume of short sales coming their way.
"It has taken considerable effort to build up the capacity to do these [short sale and modification] processes and also to connect them together," said David Sunlin, a senior vice president at Bank America. "We're adding staff and vendors and technology."The giant mortgage financier Fannie Mae approved short sales on 36,534 home loans it owned in the first half of this year, nearly triple the number in 2007 and 2008 combined. Freddie Mac, its sister company, approved 22,117 in the first half of 2010, up from a mere 94 in the first half of 2007.
The Obama administration, meanwhile, has been seeking to encourage even more short sales as a way of reducing the nation's inventory of vacant and abandoned properties.
In April, the administration launched a program that financially rewards lenders and borrowers for successfully negotiating a short sale if the borrower's loan could not be modified through the federal government's year-and-a-half-old foreclosure prevention effort. Lenders receive $1,500 and borrowers another $3,000 for moving expenses. Under the initiative, all eligible borrowers must be notified of the option to sell their homes short before their loans are referred to foreclosure.
The Treasury-run program also sweetens the deal for borrowers by relieving them of any obligation to repay a deficiency.
Clearing the way for a short sale has often proved cumbersome because there can be so many parties to a potential deal. Aside from lenders, transactions may also have to be green lighted by investors who own the mortgages, local tax authorities, appraisal firms, escrow companies, homeowners associations, mortgage insurance companies and subordinate lien holders.
That's why the administration cannot simply order a lender to approve a short sale, said Laurie Maggiano, policy director at the Treasury Department's homeownership preservation office.
"We have to give servicers discretion to make intelligent business decisions as to which properties are likely to be successful short sales, rather than say everybody has to get one," she said.
It can also be difficult to persuade lenders to participate, because of the risk. According to Frank McKenna, a vice president at CoreLogic, the industry is on track to incur about $310 million of unnecessary losses on these transactions every year.
Monica Valladares, 29, has been trying to offload her home on Brewer Creek Place for more than a year.
She bought it new for $329,000 in 2006. Keeping up with her mortgage payment was easy when her three roommates - her grandmother and two cousins - were chipping in. But the arrangement fell apart, the family scattered and Valladares, a single mom, said she could not afford the home on her salary as a researcher for a telecommunications company.
In early 2009, Valladares listed the townhouse as a short sale for the first time. The home, overlooking a wooded lot and playground, quickly attracted multiple offers. The highest was $220,000, she recalled. She moved out, thinking the turnaround would be quick. But her agent could not get the bank to review even the most lucrative contract, she said.
When the potential buyers dropped out about six months later, Valladares applied to Bank of America for a loan modification that would reduce her payments. A few months later, Valladeres was told she did not qualify, she said.
Desperate, Valladares tried the short-sale route again.
"I don't know what else to do, what else to try," Valladares said during a recent visit back to the vacant town home. "This house is damaging my credit big time."
Within days, she received a $220,000 offer.
When she called her primary lender to get approval for the deal, however, the bank said she wasn't eligible for a short sale because she had been enrolled in a loan modification program after all, Valladares recalled. Straightening out the confusion took weeks. The lender finally agreed to the sale. But there were more obstacles. For one, the homeowners association said Valladares must pay $4,000 in dues and late fees before it will clear the sale, she said, adding she doesn't have the cash.
Yet another problem is that Valladares had taken out a second mortgage to help her finance the original purchase of her townhouse. The lender on that second loan has yet to approve the short sale, said Roger Derflinger, her current real estate agent.
"The offers come quick," Valladares said. "It's the bank that's slow."
Staff researcher Alice R. Crites contributed to this report.
Officials with Victorville's 101-bed Victor Valley Community Hospital blame the California budget impasse in part for their financial woes, saying the state owes it $2.5 million in Medi-Cal reimbursements.
The bankruptcy filing Monday in Riverside says the hospital was $20 million in debt.
Prime Healthcare Services Foundation Inc., owner of Desert Valley Hospital, announced this week it has agreed to acquire Victor Valley Community.
The Victorville Daily Press says the hospital plans to remain open during reorganization and there are no plans for layoffs.
Information from: Daily Press, www.vvdailypress.com
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2010/09/16/state/n083129D90.DTL&type=business#ixzz0zzloTtHd
Former G-Unit member Young Buck has reportedly filed for bankruptcy just weeks after his home in Tennessee was raided by the Internal Revenue Service (IRS). Better known to the government as David Darnell Brown, Young Buck filed for protection under chapter 13 of the bankruptcy code.
Items the IRS took...
• A "Breitling Bentley Watch with diamond face and band," said to be worth $31,000. • More than $20,000 worth of music-recording gear. • More than a dozen plaques, photos and other memorabilia related to albums by rapper 50 Cent, with who Brown has been in a feud for several years. • A portrait of rappers Lloyd Banks, Tony Yayo, 50 Cent, Eminem and Young Buck. • "G-Unit Beg for Mercy Award pictures." • "Faux fur men's light grey coat w/ 'YB Cashville' stitched inside." • Six televisions, including four with screen dimensions between 43 and 55 inches. • "Ms. Pac Man video game." • "Hand crafted snake skin purse from Nigeria." • "Indigenous Art from Australia." • "X-Box machine." (Brown complained after the raid that "they took my kids' Playstation.")
Daniela P. Romero, Esq.
I’ve found that many people are worried about filing for bankruptcy because they are concerned about how long it will take to rebuild their credit. I often tell them that it is easier to rebuild their credit than they think because they will have gotten rid of many of the expenses that they had prior to the bankruptcy. Additionally, if you’re credit is already bad from excessive late payments, then bankruptcy will improve your credit rating after your debts are discharged.
The first thing you should do after your bankruptcy is discharged is get a credit card. You may be able to get an unsecured card, but if not, then you should get a secured card. If you continue to make your payments on time, then your credit rating with the credit bureaus will improve.
Next, you should obtain a secured line of credit, possibly with a store that sells electronics, televisions, refrigerators or other home goods. Make sure that you continue to make your payments on time. After about a year, you can apply for a car loan which will help rebuild your credit even further. Finally, about two to three years after your bankruptcy, you can apply for a home loan.
Rebuilding your credit after bankruptcy is not as hard as it seems. Taking the necessary steps I outlined above and continuing to pay your bills on time should put you on the road to good credit again.
The Associated Press
Friday, July 23, 2010; 12:43 AM
SACRAMENTO, Calif. -- California finance officials will consider Friday whether to loan as much as $12.5 million to Modoc County as the rural, cash-poor municipality prepares for the possibility of filing for bankruptcy protection.
Other California cities and counties have seen steep slides in tax revenue during the recession, but Modoc County's trouble stems largely from another problem: For more than a decade, the county has been funding its hospital using money that was intended for other purposes, such as education and transportation projects.
An audit last year by the state controller's office determined that the county was violating state law by shifting dollars away from their intended purpose, prompting the current financial crisis. The county has hired a bankruptcy attorney in case it needs to declare itself insolvent, said Dan Macsay, chairman of the Modoc County Board of Supervisors.
"We don't want to go bankrupt," he said Thursday. "It does nothing for us - it doesn't help the state, it doesn't help anybody. But what we're doing is preparing for the worst."
He said it's unclear whether Modoc County will have enough money to pay expenses for the current fiscal year that began July 1, considering it must repay millions in debt. The county borrowed $12.5 million from special funds to support the hospital for about 15 years, but never repaid the money.
Modoc County is in California's far northeastern corner, a sparsely populated region of forests and wind-swept plains that is tucked between the Oregon and Nevada borders. In January, the state listed its population at 9,777.
On Friday, the state treasurer, controller and others will discuss proposals to help the county stay afloat. The county has requested a loan from the state's Pooled Money Investment Board, which oversees a portfolio that was worth $69.4 billion as of June. But California has its own financial troubles and is facing a $19 billion deficit.
State officials say they also want Modoc County to avoid bankruptcy.
"When a local entity files for bankruptcy protection, it has a ripple effect on the reputation of the state," said Tom Dresslar, spokesman for state Treasurer Bill Lockyer. "It creates headlines that do not serve the state well when it, for example, tries to sell bonds."
Municipal bankruptcies are rare in California. The most high-profile one was Orange County's bankruptcy filing in 1994; the San Francisco Bay area city of Vallejo filed for bankruptcy protection in 2008 amid a revenue crisis.
Yet helping Modoc County by providing a loan comes with its own dangers. If one financially strapped municipality gets a loan from the state, it could prompt other local officials to ask for handout, too. Dresslar said if the state does issue a loan, it would want to make clear that it's not setting a precedent.
Dresslar also said a loan would carry strict conditions, such as allowing the state to intercept other tax money destined for the county.
"We don't think any county will be chomping at the bit to place themselves under the scrutiny and conditions that this kind of loan would carry with it," Dresslar said.
One question that must be answered immediately is whether Modoc County can use the money it has to pay its bills or whether it is legally obligated to use that money to repay debts, said state Assemblyman Jim Nielsen, R-Yuba City, who represents the region. It remains unclear whether the county will be able to deliver the next paycheck to its employees until that is resolved, he said.
Meanwhile, Modoc Medical Center has had to stop offering services such as minor surgeries and delivering babies, said Macsay, the county supervisor.
The hospital used to deliver about 35 babies per year, he said, but could no longer do so because it can't afford to keep an anesthesiologist on staff.
"The fact is that they have a limited audience to capture," Macsay said. "They were offering services that they really couldn't afford."
Instead, Modoc County residents will have to drive more than two hours to hospitals in Redding or across the Oregon border to receive those services. Calif. considers loan for troubled Modoc County
Countrywide Financial Corp.'s controversial "VIP" mortgage program made 153 loans to employees of Fannie Mae, the giant federally backed financial institution that helped fuel Countrywide's growth, according to a letter released Tuesday by Rep. Darrell Issa.
Another 20 such VIP loans, which often provided mortgages on terms more favorable than those available to the general public, went to employees of Freddie Mac, another big government-backed buyer of mortgage loans, the Issa letter said.
While it has been reported that VIP loans went to some top Fannie Mae officials, the latest information indicates that the activity was more widespread.
In an interview Tuesday, Mr. Issa, of California, said the new information provides further evidence that Countrywide Financial was improperly trying to "curry favor and get an edge" by passing out financial favors. He says the dealings between Countrywide and Fannie Mae in particular contributed to the downfall of those firms and to the broader problems in the mortgage industry.
In 2008, Fannie Mae and Freddie Mac were taken over by the federal government, which has spent about $145 billion to keep them afloat. Also in 2008, Countrywide was purchased by Bank of America Corp. The House Oversight and Government Reform committee, on which Mr. Issa is the ranking Republican, last fall subpoenaed the records of the now-defunct VIP program.
Mr. Issa's letter went to the Federal Housing Finance Agency, or FHFA, which oversees Fannie Mae and Freddie Mac. It is the latest salvo in a two-year-old investigation of the VIP program spearheaded by Mr. Issa. Last week he released a letter saying that 30 VIP loans had gone to U.S. Senators or Senate employees. He says the investigation is ongoing and is also turning up information on loans to others in government.
A Fannie Mae spokesman declined to comment on the Issa letter. A Freddie Mac spokeswoman deferred comment to the FHFA. An FHFA spokesperson said the agency had received Mr. Issa's letter and "will respond to him promptly."
House investigators Tuesday also released an internal 2001 Countrywide email regarding a loan made to Daniel Mudd, who served as Fannie Mae's chief operating officer and later as its chief executive. The email spoke of the need to "understand the sensitivity of this deal. We already are taking a loss, it would be horrible to add a service complaint on top and lose any benefit we generate." While Mr. Mudd's refinancing of a home loan with Countrywide had been previously reported, the internal details from the company about it hadn't.
Mr. Mudd, now chief executive of Fortress Investment Group, New York, said Tuesday in a statement that he "did not seek any preferential treatment." He said that he had a financial adviser obtain loan quotes from several lenders and that Countrywide was offering "competitive" terms. Mr. Mudd said the loan was obtained through a local Countrywide retail branch.
Mr. Issa's letter to the FHFA said the subpoenaed Countrywide records show that the Mudd loan went through the VIP program. It didn't say whether Mr. Mudd knew which Countrywide unit was handling the matter.
The Issa letter said that a cluster of VIP loans to Fannie Mae employees came in 1998, a year before Fannie Mae agreed to buy billions of dollars of Countrywide loans. If Fannie Mae or Freddie Mac employees accepted discounted loans or other preferential treatment, they might have violated the enterprises' conflict-of-interest policies, Mr. Issa wrote.
The Issa letter listed loans to 42 individuals, but in most cases provided only job titles, including several directors and vice presidents as well as lower-level positions. The only names provided were those of a few former senior officials, such as Mr. Mudd, who had previously been identified publicly as Countrywide borrowers.
The number of individuals receiving VIP loans was less than the number of loans given, sinceSome people received more than one loan. For instance, if a person took out a Countrywide loan and later refinanced it, that would be counted as two loan transactions.
In a huge win for labor, a federal appeals court has ruled that a corporation in bankruptcy cannot terminate its retirees' health and life insurance benefits -- even if its ERISA plan explicitly reserved its right to unilaterally terminate such benefits -- unless it can show that doing so is a necessary part of its reorganization plan.
The 95-page decision from the 3rd U.S. Circuit Court of Appeals in In re Visteon Corp. promises to alter the playing field in big corporate bankruptcies by mandating compliance with Section 1114 of the Retiree Benefits Bankruptcy Protection Act without exception.
It marks the first time that any federal appeals court has squarely addressed the scope of Section 1114 and, by demanding a plain reading of the law, could reverse a strong trend among bankruptcy and district court judges to avoid the requirements of Section 1114 whenever the debtor corporation would have been free to terminate retiree benefits prior to the bankruptcy.
"We hold that Section 1114 is unambiguous and clearly applies to any and all retiree benefits," Chief U.S. Circuit Judge Theodore A. McKee wrote. The lower courts that have refused to apply Section 1114 broadly have reasoned that doing so would produce "absurd" results by giving retirees more rights in the bankruptcy context than they would have enjoyed before.
But McKee found that Congress was setting out to protect retirees during the high-pressure period of a bankruptcy reorganization and that the use of very broad language in the statutory test was designed to provide a wide umbrella of protection.
In Section 1114, Congress provided both procedural and substantive protections for retiree benefits during a Chapter 11 proceeding.
The law says that the bankruptcy trustee must attempt to reach an agreement with the retirees regarding modification of retiree benefits before it can ask the bankruptcy court to modify or terminate them. In doing so, the trustee must also provide the retirees with information about the company's financial situation to allow for informed evaluation of the proposal.
The law also says a bankruptcy court should grant a motion to modify retiree benefits only if it finds that doing so "is necessary to permit the reorganization of the debtor and assures that all creditors, the debtor, and all of the affected parties are treated fairly and equitably, and is clearly favored by the balance of the equities."
Section 1114 also provides additional protection for retiree benefits by giving them priority they would not otherwise have. Any payment for retiree benefits required to be made during a Chapter 11 proceeding has the status of an "allowed administrative expense" rather than the general unsecured status that would otherwise apply.
Visteon's lawyers successfully argued in both the bankruptcy and district courts that applying Section 1114 would make no sense since the company's ERISA plan gave it the power to terminate retiree benefits unilaterally. Giving retirees more rights in bankruptcy court would be absurd, they argued.
But the 3rd Circuit flatly rejected that argument.
"Despite arguments to the contrary, the plain language of Section 1114 produces a result which is neither at odds with legislative intent, nor absurd," McKee wrote in an opinion joined by Judges Marjorie O. Rendell and Walter K. Stapleton.
"Disregarding the text of that statute is tantamount to a judicial repeal of the very protections Congress intended to afford in these circumstances. We must, therefore, give effect to the statute as written," McKee wrote.
McKee said he recognized that "the majority of bankruptcy and district courts that have addressed this issue have concluded that Section 1114 does not limit a debtor's ability to terminate benefits during bankruptcy when it has reserved the right to do so in the applicable plan documents."
But that view is mistaken, McKee found, because Congress made room for no such exceptions.
"Section 1114 could hardly be clearer. It restricts a debtor's ability to modify any payments to any entity or person under any plan, fund, or program in existence when the debtor files for Chapter 11 bankruptcy, and it does so notwithstanding any other provision of the bankruptcy code. There is therefore no ambiguity as to whether Section 1114 applies," McKee wrote.
"By using the word 'any' three separate times, Congress ensured that the statute would apply to all benefits," McKee wrote. "We are, therefore, unpersuaded by the suggestion that failure to specifically address benefits that could be unilaterally terminated outside of bankruptcy somehow breathes ambiguity into the word 'any.'"
The ruling is a victory for attorneys Thomas M. Kennedy and Susan M. Jennik of Kennedy Jennik & Murray in New York, who filed the appeal on behalf of the Industrial Division of the Communications Workers of America.
About 2,100 retirees objected when auto parts supplier Visteon Corp. terminated their health and life insurance benefits without following the procedures set forth in Section 1114.
But U.S. Bankruptcy Judge Christopher Sontchi ruled in March that Visteon was free to do so, and the retirees lost their first round of appeals when U.S. District Judge Michael M. Baylson, on special assignment to the Delaware court, refused to disturb Sontchi's ruling.
An expedited appeal to the 3rd Circuit followed and the retirees have now emerged victorious with a ruling that breathes new life into Section 1114 by mandating that its protective provisions apply in every case where the debtor corporation seeks to terminate retiree benefits.
McKee's opinion includes a lengthy discussion of the law's legislative history, beginning with a highly controversial bankruptcy in which 78,000 retirees lost their benefits, and shows that Congress was setting out to establish a mechanism that must be followed in any bankruptcy to ensure fairness to workers who often agreed to forgo raises over decades in return for the promise of lifelong benefits.
The widespread trend to ignore Section 1114, McKee concluded, stemmed from misunderstandings of the law's purposes and mandates.
"Courts that have concluded it is absurd to apply Section 1114 to benefits that could be terminated outside of bankruptcy have often misinterpreted the rigidity of the section's protections, and therefore the extent to which the statute is in tension with ERISA," McKee wrote.
"Section 1114 does not prohibit the termination of benefits during a bankruptcy proceeding. Rather, it creates an equitable procedure through which the debtor can argue the economic necessity of doing so, and the retirees can counter with their own arguments about economics, fairness, and equity," McKee wrote.
For the most part, McKee said, "all Section 1114 guarantees retirees is a voice, and some minimal amount of leverage, in a process that could otherwise be nothing short of devastating to them and to their families and communities."
Visteon spokesman Jim Fisher declined to comment except to say that the company was "disappointed by the ruling" and is "assessing an appropriate course of action."
One immediate effect has been teacher layoffs — probably in the thousands, although neither state officials nor the California Teachers Assn. have final numbers.
Since the beginning of 2010, the number of school systems that may be "unable to meet future financial obligations" has increased by 38%, according to the state Department of Education.
Education: More California school districts edging closer to insolvency, state says - latimes.com
Negotiator in Rangers' bankruptcy case being threatened | Sports News | News for Dallas, Texas | Dallas Morning News
Security at the courthouse was stepped up after Snyder received threatening phone calls, U.S. Bankruptcy Judge Michael Lynn said Monday.
Snyder declined comment on the threats.
Security was stepped up at the federal courthouse Friday, when Snyder attended a Rangers bankruptcy hearing. A Federal Protective Service vehicle was parked conspicuously in front of the entrance, and the number of guards on duty was more than doubled.
"I don't know anything more than that Snyder has received threatening calls," Lynn said in an e-mail relayed from the bench.
Although a source close to the case said the calls were serious enough to alert federal officials, Lynn downplayed any potential danger. No one would describe the content of the threats or say how many have been received.
"I am not particularly worried about them," the judge said. "After all, we do get those e-mails from disgruntled fans who believe -- as, I understand, do some sports writers -- that I should construe the Bankruptcy Code as wished for by the fans.
"I don't expect anyone to shoot at him or me," he said. "A baseball through my window is another matter."
Negotiator in Rangers' bankruptcy case being threatened | Sports News | News for Dallas, Texas | Dallas Morning News
It’s “Chapter 66” as U.S. States Face De Facto Bankruptcy :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website
When an individual goes bankrupt in the United States, it’s usually a Chapter 7. When a business goes under, it’s Chapter 11. Farmers have a Chapter 12, and there is a more complex individual option known as Chapter 13.
But what do you call it when a U.S. state goes under? There’s no official “chapter” for that. But it’s looking more and more like there should be. Your humble editor proposes “Chapter 66,” in honor of a famed stretch of interstate.
U.S. Route 66, also known as “Will Rogers Highway,” “Main Street of America” and “the Mother Road,” was one of the original routes in the U.S. highway system. Opened up to cars in the year 1926, it originally ran 2,448 miles, from Chicago, Ill., to Los Angeles, Calif.
Route 66 was also a major path for westbound migrants, seeking relief from the “dust bowl” conditions of the 1930s.
It’s fitting that Illinois and California were the termination points of that iconic road, because “Chapter 66” is a dark and looming reality for those two states now – with a number of others on the same path. As America endures a sort of new financial dustbowl, the “state of the states” looks grim.
Amber Waves of Debt
The Globe and Mail describes the situation as “red ink, from sea to shining sea.”
“Forty-eight of 50 states face budget shortfalls this year,” they further report. “Many shortfalls amount to more than 20 percent of planned spending. The plunge in state tax revenue is the worst on record.”
(Budget shortfalls may be in the news, but it's not the only thing moving the market right now. If you’re looking for additional market analysis, sign up to read fellow editor Adam Lass' latest on financial market trends and investment commentary.)
How did we get to this sorry spot? By and large the same way Greece did… by spending money we didn’t have, and ignoring the consequences as long as possible.
Oh Boy, Illinois
Illinois is something of an idiot poster child for how bad things have gotten… and how tough the fix will be.
“It is getting worse every single day,” the Illinois state comptroller laments. “We are not paying bills for absolutely essential services. That is obscene.”
Illinois is facing a $12 billion deficit and a $5 billion budget shortfall. To add insult to injury, the state’s pension system is 50% underfunded by conservative estimates.
It has reached the point where the state has, quite literally, stopped paying bills. This means that jobs are getting cut, paychecks are getting delayed, and businesses are being shut down. There is simply – and again, quite literally – no more money.
Meanwhile, the state’s pension shortfall is no longer a potential catastrophe. It is a guaranteed one. According to Fitch, one of the big three ratings agencies, “Their pension is the most underfunded in the nation… they can’t grow their way out of this.”
So what is the Illinois governor’s response to all this? Why, spending more money of course. Staff members have reportedly received 43 salary increases at an average of 11.4%. And 40,000 union workers in Illinois have successfully rammed through a pay raise of 14%.
The politicians and union bosses running Illinois are not just rearranging deck chairs on the Titanic. They are cheerily giving themselves pay hikes even as the iceberg heads straight for them.
California is another poster child for impossible foolishness.
“People think we’re becoming a third world country,” says Arnella Sims, a Los Angeles County court reporter. “We are on the verge of system failure,” warns the executive director of the California Budget Project.
“California’s fiscal hole is now so large,” The Globe and Mail further adds, “that the state would have to liberate 168,000 prison inmates and permanently shutter 240 university and community college campuses to balance its budget in the fiscal year that begins July 1… Mass layoffs, slashed health and welfare services, closed parks, crumbling superhighways and ever-larger public school class sizes are all part of the new normal.”
In an effort to fight back the tide, California governor Arnold Schwarzenegger – the “governator” – took a bold step last week, ordering 200,000 state workers to take a temporary pay reduction to $7.25 per hour, the federal minimum wage. The state comptroller balked.
It would be amusing if it weren’t so tragic. This is the kind of stuff that happens when you run out of money, courtesy of spending what you don’t have for years or even decades at a time.
Growth Won’t Do It
In the past, the prevailing belief was that economic growth would cover all sins. No matter how foolishly federal and local governments spent, no matter how recklessly the money was squandered, a tide of rising prosperity would ensure there would always be more. The great American growth engine would keep the coffers filled.
Sadly, it is exactly that attitude that brought us to where we are now. The terrible debt crisis that America faces was brought on precisely through a mixture of laziness and overconfidence. No matter how much was earned, the belief was always that things could be even better if we just leveraged up that prosperity by a factor of X.
Like the man who thinks that becoming a millionaire entitles him to spend like a billionaire, that mindset was always guaranteed to end in tears. And now we have reached that terrible point in the cycle where economic growth – the very thing we have always relied on in the past – is being choked off by mountainous levels of accumulated debt.
As Hunter Thompson once said: “The Edge... there is no honest way to explain it because the only people who really know where it is are the ones who have gone over.”
We were bound and determined to find the edge. And now we are in the process of going over. Be prepared.
Don't forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.
By Justice Litle
Justice Litle is the Editorial Director of Taipan Publishing Group, Editor of Justice Litle’s Macro Trader and Managing Editor to the free investing and trading e-letter Taipan Daily. Justice began his career by pursuing a Ph.D. in literature and philosophy at Oxford University in England, and continued his education at Pulacki University in Olomouc, Czech Republic, and Macquarie University in Sydney, Australia.
Aside from his career in the financial industry, Justice enjoys playing chess and poker; he enjoys scuba diving, snowboarding, hiking and traveling. The Cliffs of Moher in Ireland and Fox Glacier in New Zealand are two of his favorite places in the world, especially for hiking. What he loves most about traveling is the scenery and the friendly locals.
Copyright © 2010, Taipan Publishing Group
Pasadena Playhouse Emerges From Bankruptcy
By ROBIN POGREBIN
The Pasadena Playhouse has emerged from Chapter 11 and plans to mount a production this fall, the theater announced on Thursday.Two months after it filed for bankruptcy protection, the playhouse’s reorganization plan was approved on Wednesday by the United States Bankruptcy Court in Los Angeles.
In February, the playhouse laid off its entire staff of 37 and scheduled to close its doors because of deep debt. During its 90 years in operation, the playhouse has presented productions — most recently “Looped,” starring Valerie Harper — that have moved to Broadway, but it has also closed and filed for bankruptcy before. News of the playhouse’s struggles led to a $1 million matching pledge from anonymous donors, which helped to put the theater on better footing.
The city, along with the theater’s board, staff and advisers, “have all combined to create a plan to resurrect the Playhouse from years of unbearable debts,” the executive director, Stephen Eich, said in a statement. “Although we will be moving slowly in the future to ensure financial responsibility and stability, we will in fact be back.”
In the next weeks, the theater will announce plans for at least one production, a spokeswoman said, but there will not be a full 2010-2011 season. “The plans are to get back to work,” the artistic director, Sheldon Epps, said in a telephone interview on Thursday.
Pasadena Playhouse Emerges From Bankruptcy - ArtsBeat Blog - NYTimes.com
Foreclosure Is Valid Because MERS Has Power to Designate New Trustee under Deed of Trust,
Even Though It Holds No Interest in Underlying Note.
A district court in California has held that MERS had the power to designate a new trustee under a deed of trust (thus validating the designee's foreclosure), even though neither MERS nor the designee held any interest in the underlying promissory note. [Lane vs. Vitek Real Estate Industries Group, 2010 Westlaw 1956707 (E.D. Cal.).]
Facts: Two borrowers filed suit against their mortgage lenders and Mortgage Electronic Registration Systems, Inc. ("MERS"), claiming that the defendants had wrongfully conducted a nonjudicial foreclosure sale of the borrowers' home. MERS had been initially designated as the "nominal beneficiary" under the deed of trust and had then executed a substitution of trustee in favor of another entity, following the borrowers' default.
As part of the borrowers' wrongful foreclosure claim, they asserted that the foreclosure was improper because none of the parties to the foreclosure were beneficiaries of the underlying note and instead held interests in the deed of trust. MERS moved to dismiss that aspect of the borrowers' claim.
Reasoning: The court ruled in favor of MERS, holding that MERS and its assignees could foreclose on the deed of trust, even though MERS held no interest in the underlying note:
Under California Civil Code section 2924(a)(1), a “trustee, mortgagee or beneficiary or any of their authorized agents” may conduct the foreclosure process. Under California Civil Code section 2924b(4), a “person authorized to record the notice of default or the notice of sale” includes “an agent for the mortgagee or beneficiary, an agent of the named trustee, any person designated in an executed substitution of trustee, or an agent of that substituted trustee.” . . . . There is no stated requirement in California's nonjudicial foreclosure scheme that requires a beneficial interest in the Note to foreclose. Rather, the statute broadly allows a trustee, mortgagee, beneficiary, or any of their agents to initiate nonjudicial foreclosure. Accordingly, the statute does not require a beneficial interest in both the Note and the Deed of Trust to commence a nonjudicial foreclosure sale.
This interpretation is consistent with the rulings of this court, along with many others, that MERS has standing to foreclose as the nominee for the lender and beneficiary of the Deed of Trust and may assign its beneficial interest to another party.
AUTHOR'S COMMENT: Although there is some disagreement across the country on this issue (see below), the emerging trend in California is to validate the role of MERS as a nominee. The court in Lane relied primarily upon the wording of the statute to reach that result. However, Stephen Dyer (one of my four co-authors of California Real Estate Finance) has alerted me to a possible contractual glitch resulting from Paragraph 24 of the standardize Freddie Mac form, used throughout California, which provides: "Lender, at its option, may from time to time appoint a successor trustee to any Trustee appointed hereunder by an instrument executed and acknowledged by Lender and recorded in the office of the Recorder of the county in which the Property is located . . . . This procedure for substitution of trustee shall govern to the exclusion of all other provisions for substitution." [Source:http://www.freddiemac.com/uniform/doc/3005-CaliforniaDeedofTrust.doc.]
The problem, of course, is that MERS is not identified as the "lender" in that form, and the "lender" is defined as the originating lender itself. Therefore, although the statute would appear to empower an agent (such as MERS) to execute a substitution of trustee, the current wording of the contract itself seems more restrictive, empowering no one other than the originating lender to execute a substitution of trustee.
Ideally, the Freddie Mac form should be amended to make it clear that MERS is authorized to appoint a successor. Admittedly, an amendment would not retroactively solve the problem under the existing documentation. My guess is that if a California court were presented with this contractual argument, the court would probably use the wording of the statute to empower MERS, as the agent of the lender, to act on its behalf, even if the document itself did not say so. The only caveat is that there are a few bankruptcy courts, primarily in Southern California, that have subjected MERS transactions to very strict scrutiny; those courts might not rescue the lender from the effect of the Freddie Mac language.
For discussions of other cases involving MERS and its standing as an agent or nominee, see:
-- 2009 Comm. Fin. News. 103, Assignee of Mortgage Lacks Standing to Foreclose Because Assignee Failed to Show That MERS Assigned Underlying Promissory Note, Along with Mortgage.
-- 2009 Comm. Fin. News. 72, Senior Lienholder's Failure to Give Notice of Foreclosure to MERS Did Not Affect Validity of Senior's Foreclosure Because MERS Was Merely a Nominee.
-- 2009 Comm. Fin. News. 59, Assignees of Mortgages Cannot Enforce Unendorsed Notes in Their Possession Because MERS Documentation Does Not Expressly Authorize Assignment of Notes.
These materials were written by Professor Dan Schechter of Loyola Law School for his Commercial Finance Newsletter, published weekly on Westlaw. Westlaw holds the copyright on these materials and has permitted the Insolvency Law Committee to reprint them.