The Bishop and the Butterfly: Murder, Politics, and the End of the Jazz Age

    Bernanke & Fed Aim To Speed Foreclosures, Make them Faster, Easier For Banks

    By NCD on Thu, 12/02/2010 - 12:32pm |

    McClatchy is reporting that the Fed has proposed changing a key rule having to do with the the TILA (Truth in Lending Act of 1968). This rule currently allows a homeowner who can prove that they were not given proper disclosure on their loan up to 3 years to cancel the loan. Current law says in such a case, the lien on the home must be removed so the homeowner can use the home to get a new mortgage to pay off the first.

    The rule change would mean the lien would not be removed, and unless the homeowner had the entire cash amount available to pay off the loan  The loan would stand, and the homeowner could be foreclosed on if unable to meet its terms. The rule change would not only make foreclosures easier, it would also seem to make issuing fraudulent/predatory loans less risky, as there would be a very big money hoop for the homeowner to jump through to terminate a mortgage, and apparently far less adverse consequences for an absence of truth in lending.

    In a letter to the Fed's Board of Governors, dozens of groups that oppose the measure, including the National Consumer Law Center, the NAACP and the Service Employees International Union, say the proposal is bad medicine at the wrong time.

    "At the depths of the worst foreclosure crisis since the Great Depression, we are surprised that the Fed has proposed rules that would eviscerate the primary protection homeowners currently have to escape abusive loans and avoid foreclosure: the extended right of rescission."



    Read more: McClatchy link. The letter sent by consumer organizations, link.

    The key Fed proposal for rules changes was published on page 9 of a 250 page entry in the Federal Register from September. An excerpt:
    The Board’s current review of Regulation Z was initiated in December 2004 with an advance notice of proposed rulemaking.1 69 FR 70925, Dec. 8, 2004. At that time, the Board announced its intent to conduct its review of Regulation Z in stages.....

    If the consumer provides a notice of rescission after the initial three business-day period, however, the process is problematic....Therefore, a creditor may be reluctant to terminate the security interest until the consumer establishes that the right to rescind has not expired and the consumer can tender the loan balance....The proposal would ensure that if a consumer tenders the amount requested, the creditor must terminate its security interest in the consumer’s home......The sequence of rescission procedures set forth in TILA and the current regulation would seem to require the creditor to release its security interest whether or not the consumer can tender the loan balance (Obfuscation-the consumer must repay the loan or another lien can be placed but the Fed wants to just ease the work for banks, no recourse for predatory lending-pay up or shut up). The Board does not believe that Congress intended for the creditor to lose its status as a secured creditor if the consumer does not return the loan balance. (Bullshit-its worked OK for 42 years) Therefore, the proposal provides that when the parties are in a court proceeding, the creditor is not required to release its security interest until the consumer tenders the principal balance....
    Basically, the rule change would mean that a 'liar/predatory' loan that a homeowner has taken within the last 3 years can NOW be canceled, the property released, AND the homeowner can get a new loan from another party, and then must pay back the rescinded loan minus fees. If the homeowner does not repay, the bank can seek another lien on the property.
    The NEW rule would mean either in or out of court, the bank or loan holder must be paid back in full before releasing its hold on the property, in other words, the bank can go straight to taking the house unless the homeowner keeps paying on the disputed loan, or has the cash available to pay them off immediately.

    A three day limit for rescinding a loan will still be in effect, but if you don't read the fine print until the fourth day, you may be done according to the new proposed rule. It must be kept in mind that this law was called 'Truth in Lending' because the truth was not always given to the borrower!

     

    This is what the consumer groups are saying, see letter mentioned above at link.
    More evidence that the Fed, which showered trillions all over the entire  'free capitalist market' in 2008-09, to some of the biggest corporations in America, and Ben Bernanke, who flies his money printing helicopter only over Wall Street, is not on the side of Main Street.  As it says in the Fed charter, protecting banks is Job One.

    Comments

    Wait, what about Julien Assange?


    by Michael Wolraich on Thu, 12/02/2010 - 12:47pm

    September?  Where's it been all this time?  Haven't read the links, yet.  Jeezus, things are breaking too fast to read enough right now.  Have the Guv'nahs approved it then?  Seems like it may Step One to Permanent Fixes Screw-jobs, eh?  Next: Fix the MERS-concocted mortgages?  Guess this might, partially.

    Read about the long list the Fed put out yesterday; wow.  You might like, and understand more fully than I, this piece Yves Smith posted by Matt Stoller, "End This Fed".  It made me realize how little I know about the Fed and it's history, and how much control it has over the economy.  I liked his good news that so many Independent voters know a lot about the bank:  It's not just for John Birchers any more!

    http://www.nakedcapitalism.com/2010/12/matt-stoller-end-this-fed.html


    by we are stardust on Thu, 12/02/2010 - 1:02pm

    What's amazing, but not surprising to me about this is that the genesis of the idea is back in 2004-2005.  This makes sense, this is also around the time when the government was weakening the bankruptcy law making it harder for people in trouble to start over.  This was early on in the credit bubble, all being discussed at a time when Bernanke didn't even think there was a bubble.


    So now, 6 years later, after the economy has peaked and tanked, they're still pushing the exact same agenda as if nothing has changed.  So one one hand I'm angry about the thrust of the rule change, who it favors and who it hurts but on the other I'm just angry about the sheer incompetence.  This is like putting forward an idea to remove traffic lights from an intersection so that cars can speed through it easier and while you're debating it, 16 cars collide and 32 people die.  Then, while they're still towing wrecks away from the scene you say "ahem, are we going to get these traffic lights down or what?"


    by Michael Maiello on Thu, 12/02/2010 - 3:01pm

    The fact that they started the process for this 'Z' Truth in Lending rule change in 2004-see the date in quote above, makes one wonder if the Fed knew all along that the a housing bubble was on the horizon, with its missing papers, liar loans, fake signatures, etc. and their plan to 'change the rules in the middle of the scam' and save the banks from losses and legal bills due to the fraud and lack of documents is just running a little late.


    by NCD on Thu, 12/02/2010 - 3:31pm

    I'm curious about that too.  On the side of "they knew" is the notion that they were surely aware that the rise in home prices was propping up the consumer economy.  Heck, Greenspan told people to get floating rate mortgages. He encouraged them to refi at lower rates and he kept rates low to make it possible.

    Evidence against is "no bubble" public statements and the fact that a double digit national home price drop hadn't happened in the post war economy, leading many to believe it would never happen.  I wonder if they didn't think the crashes would be localized to the most over-developed states like California, Nevada, Florida and other parts of the sunbelt which still would have been big enough to do what you're suggesting.


    by Michael Maiello on Thu, 12/02/2010 - 3:56pm

    Greenspan, May 20, 2005:

    A national bubble is unlikely because the U.S. real estate market is composed of individual regions with different pricing trends, making a collapse that damages the overall economy unlikely, Greenspan said. Home purchases and sales also have high transaction costs, making it hard to speculate...There is ``considerable unlikelihood of a major decline'' in prices because that's ``very rare'' in the U.S., Greenspan said.

    Dumb, or deceitful and doesn't give a crap about any economy but his own? I go with the last two.


    by NCD on Thu, 12/02/2010 - 5:17pm

    Fascinating.  Good sleuthing.


    by Michael Maiello on Thu, 12/02/2010 - 5:23pm

    I sincerely hope it's okay, NCD, to post this video again.  Matt Stoller was freaking thrilled that it got over 3 million hits, even though it got complaints from the Fed for accuracy, and others 'rewrote it' to reflect that.  Feh!  Forgive me if that's in order, but I posted it here at dagblog, and it never made it to the center aisle (perhaps too controvertial, or not something-enough.  Anyhoo, it seems more relevant than EVER today:


    by we are stardust on Thu, 12/02/2010 - 9:25pm

    Great video, I hadn't seen it! thanks-


    by NCD on Thu, 12/02/2010 - 10:00pm

    Welcome.  You likely know all about this, given you know more than I about finance, but:

    http://dagblog.com/reader-blogs/bill-indemnify-mers-retroactively-7478

    And a bit o' Presidential humor:

    http://dagblog.com/reader-blogs/obama-modern-us-president-7292


    by we are stardust on Thu, 12/02/2010 - 10:24pm

    Some poster at Econbrowser rewrote it to reflect James Hamilton's critique, but it was rather boring.


    by Donal on Thu, 12/02/2010 - 10:25pm

    NCD, Dylan Ratigan covered the issue last night:

    http://www.msnbc.msn.com/id/31510813/#40480146

    Double-Arrrrgggghhhh!


    by we are stardust on Fri, 12/03/2010 - 10:08am

    Thanks!

    Not to worry about home foreclosures, on our 10th Christmas in Afghanistan, Obama say the momentum is changing, the Taliban are on the run......


    by NCD on Fri, 12/03/2010 - 2:59pm

    What, me worry?


    by we are stardust on Fri, 12/03/2010 - 3:16pm