Thanks to RJ Matson and the St. Louis Post Dispatch for this wonderful cartoon! It sums up our feelings quite nicely.

Freddie Mac’s Regulator ‘Completely Puzzled’ by Allegations of Conflict

If Edward DeMarco is puzzled by the outrage over the revelation that Freddie Mac was investing in securities that paid off if homeowners couldn’t refinance, than call us puzzled by his puzzlement. Either he’s a bold-faced liar or he is just plain dense.  Does he really not get it?

DeMarco, the acting director of the Federal Housing Finance Agency, had the gall to tell National Public Radio this morning that one of his major responsibilities was to make sure that Freddie Mac didn’t lose money. NPR, by the way, was one of the agencies that broke the story in the first place.

Eddie, you’re a now a government-run company. You were semi-private at one point, but now you are an arm of the government. You should be looking out for the homeowner, and that’s it. You can claim that these investments, which for all intensive purposes were betting against homeowners, were just routine financial transactions.

We ain’t buying it.

Freddie Mac was created solely to help ease up the mortgage market and make it easier for people to get into homes. Anything counter to that, which clearly these investments were, goes against your mission statement. We’re not interested in profit, we want to see more people in homes.

Eddie, as Donald Trump would say, You’re Fired!

Schneiderman Suing Banks For ‘Deceptive And Fraudulent Foreclosure Practices’

We gotta give Eric Schneiderman another ‘atta boy’ because he has not let up against the banks!! This time its because of their creation and use of the Mortgage Electronic Registration System, better know as MERS.

Today we learned he is suing, in his role as New York Attorney General, Bank of America, JP Morgan Chase and Wells Fargo, along with MERSCORP and a host of other companies because of their use of the foreclosure registry. Schneiderman alleges the banks submitted documents to MERS that had false and misleading information to make it appear they had the authority to foreclose when in fact they didn’t.

He contends homeowners were at a distinct disadvantage because MERS made it impossible for them to track property transfers through public records.

It all comes back to the key point that we have railed against, that the banks often could not prove that they they owned the homes they were trying to foreclose on, and used fraudulent documentation to cover their tracks. Schneiderman may not be the first to call out MERS, but he has zeroed in on the problem with it and the banks poor record keeping.

Keep it up Eric!

Swiss Bank Wegelin Charged in U.S. With Aiding Tax Evasion

We’re not exactly sure how you can put a bank in an American jail, especially when it’s not even in the US, but we’re glad the government is trying!

Wegelin & Company, a 270-year-old Swiss bank, has been indicted on federal charges of tax evasion here in the United States. Prosecutors allege they helped over 100 American clients hide more that 1.2 BILLION dollars in assets from the IRS. Three of its top officials are also facing charges.

Wegelin has already said on their website  that most of their customers and employees are being transferred to another bank in the wake of these charges.

It’s great to see the government get tough with Wegelin, but when are they are they going to bring US banks up on similar charges for what they’ve done to the homeowners and for not playing by the same rules as the rest of us?

Have a great Super Bowl weekend and we’ll see you Monday — From The Trenches!

Aaron Eckart as "Two-Face"

Aaron Eckhart might have played Two-Face in the last Batman movie, but Freddie Mac seems to have settled into the role these days.

Non-profit ProPublica and National Public Radio allege that Freddie Mac, which was set up to make home loans more accessible, was in fact betting against homeowners.

It’s a highly disturbing, and completely shocking report. ProPublica’s Jessie Eisinger and Chris Arnold of NPR claim that the government-owned mortgage company was investing in securities that paid substantially more if people continued to pay off high-interest mortgages.

At the same time, they were tightening the grip on credit, making it difficult for homeowners to refinance and get out of such mortgages.

So what was good for Freddie Mac’s bottom line was diametrically opposed to what was right for some people who had mortgages with them.

Heath Ledger as "The Joker"

It’s a scheme so devious The Joker wishes he thought of it first.

Now Freddie Mac officials claim there was a Chinese wall set up between the staffers responsible for their investments and those who dealt with credit regulations.

They deny there was any intent to manipulate credit regulations to enhance their pockets, and the investigation offered no evidence that there was.

Yet they’ve already agreed to stop making these risky investments, known as inverse floaters, after the Federal Housing Finance Agency leaned on them once the investigation became public.

Even if you buy Freddie Mac’s explanation, it doesn’t soften the blow. The conflict of interest here is unequivocal.  The company is now essentially, owned by the taxpayers, and has a direct impact on who and who can not get a home loan.

So even if this just a case of the left hand not knowing what the right was doing, it’s inexcusable. The possibility that the company could have profited off homeowners misfortune, intentional or not, can not be left alone.

The banks have long been resistant to refinancing.  Why? Well they never wanted to refinance, never had to refinance, and let’s face it, they’re just greedy bastards. Now Freddie Mac looks no better than their corporate brethren.

At a time when President Obama is finally talking tough about holding lenders accountable, there must be sanctions for the government- run company run amuk.

If the American public is going to take Obama seriously, he must bring the hammer down just as firmly on his own house as he intends to do on private banks.

The South Florida Law Blog loves a good burger!

We’re finally starting to catch our breath, with the substantial amount of news we’ve seen come down the pipeline in the housing market this week.

President Obama’s State of the Union, and the apparent collapse of the federal government’s settlement with the banks have been our focus this week, and rightfully so.  But there’s been lots of other stories that have crossed our desk this week, some big, some small, but all important.

Republicans Offer Unpopular Solutions for Housing Fix

Most of our attention has been on the President this week, but we’ve also been keeping our eyes of the Republicans as well. With the Florida GOP Primary just days away, the candidates have been descending on Florida as expected. Foreclosure, which has been long absent from the GOP discussion, has become a more focal issue this week.

Unfortunately, it feels like much of the talking points have focused on the candidates blaming each other for causing the housing crisis, and less on what they plan to do to fix it.

This excellent piece in The Street details all the remaining Republicans comments on foreclosure. They all have suggested a hands-off approach, and appear to be under the misguided notion that the market will correct itself on its own. Gingrich and Paul have made one-note villains out of the Dodd-Frank Act and The Federal Reserve, respectively.

Romney’s past comments about market correction have come back to haunt him as he tries to pass himself off as sympathetic to the homeowners’ plight. Frankly we don’t feel like any of the Republican candidates are looking out for the homeowners.

Chase, BofA may lose $131 million in HAMP payments

Anything that hurts the banks in the pocketbooks, we’re all for. We realize that $131 million is chump change to them, but it’s great to see the banks being held accountable for failing to live up to expectations. This story further proves how little the banks have done to correct their own mistakes.

The Special Inspector General for the Troubled Asset Relief Program (TARP) is threatening to take away this money because both banks have failed to improve their performance in the in the Home Affordable Modification Program. In a report released this week, the SIG said both had failed to properly evaluate homeowners for the HAMP program.

While the report states that Bank of America has made some headway, it was particularly critical of JPMorgan Chase, saying “JPMorgan Chase’s continuing refusal to comply with program requirements is deeply troubling and there must be serious repercussions.”

Florida Attorney General bashes states that rejected nationwide foreclosure settlement

We can’t get through this recap without some mention of the robo-signing settlement, as Republican Pam Bondi continues to stand with it as it crumbles. Our Attorney General, whose been accused before of being soft on lenders, came out Thursday saying the deal needs to be passed now so Floridians can start getting foreclosure relief. Bondi has been one of the settlement’s biggest backers.

“The settlement under discussion contains all the elements California purports to be looking for; transparency, substantial relief for distressed homeowners, and strict enforcement,” Bondi said.We of course, strongly and respectfully disagree, particularly when it comes to her belief the settlement offers strict enforcement, which is why Obama’s plan to form a new investigative unit is so necessary.

From foreclosure king to burger king: Stern buys into Five Guys

From the sublime to the ridiculous  – Foreclosure attorney David Stern, the lawyer at the center of one of the largest foreclosure mills in Florida, is now making money in the fast food business.Stern has now invested in a company that owns several Five Guys Burger and Fries  franchises.

Stern’s law firm closed last March, and Stern is now being sued by the company that paid him $60 million and now claims his business was unlawful, so he has to make money somehow right? Of course the fact that he has money to invest in such a large chain probably doesn’t make homeowners too happy.If you’re hungry we’d be cautious about stepping into one of his restaurants, Stern might steal the fries right off your plate!

Like the characters in "The Blair Witch Project", the banks are running scared!

Well what a wild week it has been.  When we came to work on Monday we feared President Obama would put the housing crisis to bed without ever holding the banks’ feet to the fire.

The settlement with the banks, which we have blogged about ad nauseam this week, seemed as sure as a chip-shot field goal.

But thanks to President Obama’s suddenly get-tough approach, as evidenced by his State of the Union speech, we’ve seen the banks’ kick go wide-right and now all bets are off.

Can There Be Real Change In Mortgage Industry?

Now we are not completely sold that things will play out exactly as homeowners would like, this is of course the federal government we’re talking about, but for the first time we have a true sense of optimism. The President may finally be seeing things our way, and we want to throw our full support behind him.

There is no doubt cages have been rattled in the mortgage industry, and nerves have been frayed. If Obama’s plan to re-write the foreclosure rules didn’t have some kind of teeth, then we doubt we’d be seeing the type of reverberation thorough the media and the top echelons of government that we’ve detected in the last few days.

Banks Are Fearful of Settlement Collapse

The settlement could be falling apart at the seems, at least JPMorgan Chase CEO Jamie Dimon thinks so.  He told CNBC this morning that Obama’s announcement to investigate the packaging and servicing of mortgage loans could stop the settlement cold.

“It has a pretty good chance of derailing it,” Dimon said in a televised interview from Switzerland, adding later, “I think it would be better for America if the settlement took place.”

Guess Dimon hasn’t been reading the South Florida Law Blog. You and I know it would be better for the BANKS if a settlement took place now, and we suspect Dimon knows that too.

From the moment the details of the settlement became public, there was push back from some of the Attorneys General, the legal community, and the media.

The New York Times mirrored our thoughts, in this Op-Ed piece published in Thursday’s paper they also wondered if this was finally the investigation that would end with criminal prosecution and dare we say, jail time.

New York AG Promises to Leave No Stone Unturned

The importance of the appointment of New York AG Eric Schneiderman, which we mentioned yesterday, can not be understated. His new unit, which will answer to the existing Financial Fraud Enforcement Task Force, will be composed of members of the Department of Justice, the SEC and the IRS. It will also be working with the existing hierarchies of those organizations.  So his reach will be far and wide, and we believe this investigation has the potential to do some real good.

Schneiderman, along with California AG Kamala Harris, have been some of the most outspoken critics of the settlement, and he is promising a thorough investigation of ‘every aspect of the conduct that created the bubble and crash’.

To us, those words ring true. Obama is embracing real change with his appointment, and we can’t wait to see what happens next.

With details of the proposed $25 billion settlement with the nation’s largest banks over the robo-signing fiasco now out in the public eye thanks to the Associated Press, we feel a large sense of disappointment.

There’s no question that this deal will change the mortgage industry for the better. Some homeowners will even have a much better chance of being able to restructure their loans when facing foreclosure under this deal.

No One’s Getting Their Keys Back

Yet, there are many out there who are going to feel little comfort with this agreement. Here’s what the deal is NOT going to do. It’s not going to put people who’ve lost their homes (again because of deceptive foreclosure practices) back in those houses, or give them any real financial security.

According to the deal, about 750,000 Americans, which by the way is about ½ of the people who are eligible for help under this settlement, may get a check for about $1,800. That’s the equivalent of one of those parting gifts they’d give contestants when they lose on Wheel of Fortune. In other words, it does them very little good.

Now it’s true that about a million current homeowners will supposedly get their loan balances reduced by an average of 20 thousand dollars. That’s great, and something we here at the South Florida Law Blog have been begging for. But when you consider their are about 11 million out there with underwater mortgages, A LOT of people will be no better off.

Banks Still On Easy Street

And here’s the other thing this deal doesn’t do. It doesn’t hold the banks accountable. Why after the mountains and mountains of evidence of wrong-doing, is the government still playing nice-nice with the nation’s lenders?

The funny thing about this settlement, despite the fact that it’s long overdue, it feels rushed.  There hasn’t been a full investigation into the banks’ conduct, no discovery, yet here this deal is, as if they are trying to push it through before anyone notices. It’s feels as if they are trying to avoid the investigation in the first place!

Red Flags Already Raised

Several politicians, including Ohio Senator Sherrod Brown, are already raising concerns over a lack of a proper investigation.  We should also point out that the attorneys general in New York and California, a state with one of the highest foreclosure rates, have split from the federal government to pursue their own investigations.  The ink on this deal isn’t dry and yet it’s already raising red flags.

“Wall Street is again trying to pass the buck,” Brown told the Associated Press, “Instead of criminal prosecutions, we’re talking about something that’s not more than a slap on the wrist.”

The banks have dragged their feet, in order to escape any real punishment. The perception still remains that the banks are too big to be punished, there is nothing in this deal that invalidates that notion. While we agree this deal should be and is about fixing the system, there is a call for retribution from homeowners that this deal simply doesn’t address.

“This is not vengeance against the banks,” Brown told HousingWire about the deal.

But shouldn’t it be?

President Barack Obama delivers remarks on the economy at Shaker Heights High School,Shaker Heights, Ohio, Jan. 4, 2012. (Official White House Photo by Chuck Kennedy)

We really haven’t seen President Obama insert himself directly into the housing crisis, but there are rumblings that he may do just that during Tuesday’s State of The Union address.

The fact is that is what homeowners have been clamoring for. A new USA TODAY/Gallup Poll found 58% of Americans want the government to do more to help people keep homes.

According to HousingWire, Ohio senator Sherrod Brown told reporters today that there was evidence that Obama would address the robo-signing case which involves several major banks.  A North Carolina congressman even said there were rumours that Obama would announce a settlement, something HUD secretary Shaun Donovan suggested last week was ‘very close’, as we mentioned in our Week In Review on Friday.

For the record, Obama’s press secretary refused to confirm any details, saying only that the President was “focused on the issue of housing”.

Between Dononvan’s comments and the recent white paper sent out by the Federal Reserve, it seems that more and more top government officials are finally realizing how important the housing market is to our economic recovery, not to mention their own political survival.

This is not news to us here at the South Florida Law Blog.

Florida Homeowner Slams Judge Hearing 300 Cases

In the absolutely-not-surprising-in-any-way file, one of the 300 homeowners who went before a Seminole County judge during a three day session this week thinks he was treated flimsily by the court.

Blaize McMonagle told ABC News that Judge Alan Dickey sped through his case without being given the chance to defend himself.

Dickey was quoted in the Orlando Sentinel earlier in the week stating that he was only going to be able to give each defendant about 30 seconds if everyone showed up. With retired judges no longer aiding to help navigate through the foreclosure backlog, we expect to see more and more complaints from homeowners.

Florida’s Hardest Hit Program Not Providing Real Relief

Our skepticism about Florida’s Hardest Hit Program being able to help homeowners in the long-run was confirmed in the Palm Beach Post this week. Sheryl Stuart, a Jupiter homeowner enrolled in the federally-funded program since September said she had doubts she’d ultimately be able to stay in her home once the payments ended because the salary at her new job wouldn’t cover her mortgage.

We believe the program might only delay the inevitable, and only with substantive help like principal reduction  will homeowners have a real chance to get back on their feet.

UPDATE: After Stuart was profiled by the Post, she found out her payments, which are set to end in February, are being suspended because she also owns two condos, which are also in foreclosure. She claims the credit counselor who helped her with application for Hardest Hit was aware of this and never informed her of the limit.

Donvovan: ‘Very Close to Robo-Signing Settlement

Stop us if you’ve heard this one before.

HUD Secretary Shaun Donovan came out this week and said a settlement with the big banks over their shady foreclosure practices is near. About one million homeowners would see their principals reduced as a result of the settlement, Donovan said, while others would be directly compensated by the banks.

We’ll believe it when we see it.

Foreclosure Crisis: Will Government Right This Sinking Ship?

Courtesy: Miami Herald

Finally we’d like to end the week by sharing a fresh perspective on the local housing collapse, courtesy of the Miami Herald. Indices from the Federal Housing Finance Agency show that home appreciation levels locally were much higher than the national average when the housing market peaked in 2007.

In both Broward and Miami-Dade counties, home prices were average well over 100 percentage points better than the national average, which was 166 percent 5 years ago. With numbers like that, in retrospect it should have easy for anyone to see that the bubble was about to burst, at least in South Florida.

It’s worth noting that homes locally have held their value better than the average US home. Hopefully that’s a sign of good things to come.

Have a great weekend and we’ll see you next week in the trenches!