Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
Articles |The FORUM |Law Library |Videos | Fraudsters & Co. |File Complaints |How they STEAL |Search MSFraud |Contact Us
Nye Lavalle
The Financial Stability Forum (FSF) brings together senior representatives of national financial authorities (e.g. central banks, supervisory authorities and treasury departments), international financial institutions, international regulatory and supervisory groupings, committees of central bank experts and the European Central Bank. The FSF is serviced by a small secretariat housed at the Bank for International Settlements in Basel, Switzerland.

It WATCHES OVER the World's banking system...

I thought some of you might be interested in snippets of their recent report and the whole report that you can download at:

http://www.fsforum.org/publications/FSFWGG7Interimreport5Febfinal.pdf

Some findings....

II. Underlying causes and weaknesses

With conditions still evolving and extensive work streams within the FSF membership underway, it is too early to draw final lessons. The Working Group is distinguishing in its work between factors that contributed to the buildup of excessive credit exposures and those that triggered and amplified the turmoil. While
some factors can plausibly be assigned to either category, the distinction is useful in terms of developing and evaluating potential policy responses.
The build-up of excessive exposures had a range of causes and drivers. Unusually benign global macroeconomic, monetary and financial conditions over recent years bred high risk appetites, a reach for yield and rising leverage among financial institutions, investors and borrowers. A wave of financial innovation created instruments and risk exposures so complex that risk management systems at a broad range of financial institutions, including many of the largest global banks, failed to control them effectively. Among the specific weaknesses that the Working Group has identified as having played a critical role in contributing to the buildup
of exposures are the following:

• Poor underwriting and some fraudulent practices in the US subprime mortgage sector, in part reflecting gaps in the US regulatory structure, but also widespread expectations that house prices would continue to rise.
• Shortcomings in firms’ risk management practices: poor assessment and/or management of market and funding liquidity, concentration and reputational risks, including from off balance sheet exposures, and insufficient regard to tail risks and their interaction under stress.
• Poor investor due diligence practices, including excessive, too often mechanical, reliance on credit rating agencies (CRAs); limited understanding of the nature of the ratings and of the characteristics of the complex instruments; and inadequate use of information provided.
• Poor performance by the CRAs in evaluating the risks of subprime residential mortgage backed securities and CDOs of asset-backed securities.
• Incentive distortions of various kinds:
o The pre-Basel II capital framework that encouraged banks to securitise low risk
assets and, importantly, to support securitisation of high risk assets through
instruments with lower capital charges (such as 364-day liquidity facilities).
o Weak incentives for parties in the originate-to-distribute chain to generate and
provide initial and ongoing information on the quality and performance of
underlying assets. Mechanisms to address these issues weakened in recent years as
risk premia fell, securitisation markets grew and products became more complex.
o Compensation schemes in financial institutions that encouraged disproportionate
risk-taking with insufficient regard to longer-term risks. These risks were not
subject to adequate checks and balances in firms’ risk management systems.
• Public disclosures that were required of financial institutions that did not always make
clear the risks associated with their on- and off-balance sheet exposures.


The amplifiers relate to factors that shaped the responses of market participants and public authorities to market shocks, including the information available to them and their capacity to take stabilising actions. As in many previous episodes of financial turmoil, this one featured broad increases in risk aversion, falling market liquidity and de-leveraging that helped to amplify the initial shock. In addition, a number of specific amplifying factors played a prominent role in this episode. Amongst these were:
• Bank-sponsored off-balance sheet vehicles (conduits and SIVs) that issued shorter-term liabilities against these complex products and lacked adequate capital and liquidity resources to support the liquidity and maturity transformation in which they were engaged.
• Actions by firms to build up liquidity to fund contingent commitments and/or in
anticipation of the increased likelihood they would be called on to fund such commitments.
• Shortcomings in modelling and valuation of complex instruments, which meant that firms and investors misjudged or were unable to rapidly assess their exposures once ratings deficiencies emerged and liquidity evaporated.

In considering areas for policy responses, we are giving priority to identifying corrective actions going forward that are most likely to achieve tangible gains, whether these be actions by individual firms, by private sector groupings, or by public authorities.
Quote 0 0
srsd

Wow!   great post Nye!!!   It looks like with info like this, the courts or AG`s would do more and help the honest people and jail the people responsible for this mess.

Quote 0 0
Write a reply...