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.
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Joe B

I like his statement at the end of the post---

"I have no interest in bailing out lenders or property speculators.”

Could it be that he actually undertands a bit of the problem? Could it be that the banks don't have his ear? Could it be that he is not in the pocket of special interests? Could it be that the hedge funds haven't bought his opinion?

Maybe I am too optimistic, but this is the first guy who seems to be interested in helping homeowners instead of the banks.

NOW--- if we could get him to focus on MS Fraud, we might be getting somewhere. Anybody made any contact with this guy? He understand the significance of the overall housing problem to the economy, he understands that banks share some culpability, and if we could educate him on the servicers contribution to this disaster, perhaps he could do something about it...

Just my $.02!


Paulson: Tough response needed for housing
Treasury Secretary says U.S. housing crisis is ‘significant’ economic risk
The Associated Press
Updated: 11:36 a.m. ET Oct 16, 2007

WASHINGTON - Treasury Secretary Henry Paulson called Tuesday for an aggressive response to deal with an unfolding housing crisis that he said presents a significant risk to the economy.

In the administration’s most detailed reaction to the steepest housing slump in 16 years, Paulson said that government and the financial industry should provide immediate help for homeowners trying to refinance current mortgages before they reset at much higher rates.

He also called for an overhaul of laws and regulations governing mortgage lending to halt abusive practices that contributed to the current crisis.

“Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy,” Paulson said in a speech delivered at Georgetown University’s law school. “The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth.”

In his most somber assessment of the crisis to date, Paulson said that the housing correction is “not ending as quickly” as it had appeared it would and that “it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet.”

Paulson spoke a day after officials from the nation’s three biggest banks announced the creation of a fund with up to $100 billion in resources to buy troubled assets such as mortgage-backed securities.

Treasury Department officials participated in the behind-the-scenes discussions that led to creation of the fund, but no government resources have been pledged to the effort.

Paulson said that the government must balance the need to help homeowners stay in their homes against the threat that government action can encourage investors to make risky decisions in the future.

“We must help as many able homeowners as possible stay in their homes,” Paulson said. “Foreclosures are costly and painful for homeowners.”

But Paulson also stated, “When investors are relieved of the cost of bad decisions, they are more likely to repeat their mistakes. I have no interest in bailing out lenders or property speculators.”


© 2007
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Joe B

More detail and better article on Bloomberg. Interesting that this article also refers to off-balance sheet accounting. For those that are unfamiliar, this is precisely what led to Enron's collapse. I suspect that many of these off balance sheet entities will end up in this new special investment vehicle (SIV) being put together by the gov't, and banks... This will aid transparency, but also shed light on what I expect will be a great deal of ugliness!!!
"The most significant current risk to our economy!!"  These are pretty tough words...

Paulson Plans to Review Off-Balance Sheet Bank Units (Update4)

By John Brinsley and Jesse Westbrook

Oct. 16 (Bloomberg) -- Treasury Secretary Henry Paulson said the Bush administration will evaluate accounting rules for the off-balance sheet units that large U.S. banks set up to invest in assets including mortgage-backed securities.

Congress tried to tighten rules for off-balance sheet transactions after the collapse of Enron Corp., which engineered deals off its books that were hidden from investor scrutiny. The structured investment vehicles that banks set up were forced to sell $75 billion of assets in the past three months after investors balked at buying the asset-backed commercial paper the SIVs used to fund themselves.

``Transparency is important here,'' Paulson, 61, said in a speech in Washington. ``We need to ensure yesterday's excesses are not repeated tomorrow.''

Paulson, a former Goldman Sachs Group Inc. chief executive officer, facilitated a SIV rescue plan led by Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. Some investors welcomed the banks' initiative to set up a fund to buy SIV assets, while others said it risks shielding the lenders from the consequences of poor decisions.

President George W. Bush's Working Group on Financial Markets, which includes the Treasury, Federal Reserve, Securities and Exchange Commission and Commodity Futures Trading Commission, will do the study, Paulson said.

``This is a way of Paulson saying `our job here is to make sure that any transactions comply with accounting guidance and I'm not trying to meddle in markets,''' said Lawrence Cunningham, a law professor at George Washington University in Washington. ``It may be too late for him to avoid criticism.''

`Market Based'

Paulson stressed in his speech at Georgetown University's law school that ``I have no interest in bailing out lenders or property speculators.'' Responding to a question, he added that the bank fund is ``a 100 percent market-based solution.''

Paulson's call for a review of transactions that ``Wall Street is hiding off-balance sheet from investors, after Congress already got one, is clearly grasping at straws in light of the ongoing bailout,'' said Lynn Turner, a former chief accountant at the SEC. ``Treasury just needs to get the accounting fixed, rather than wasting time with yet another study that appears to be an attempt to deflect criticism.''

The Treasury chief also said the decline in the housing market is ``the most significant current risk'' to the U.S. economy and called for an ``aggressive plan'' by mortgage lenders to head off foreclosures.

Not `Finger Pointing'

``This is not about finger pointing,'' Paulson said, at the same time telling mortgage servicers that ``you have an obligation to help meet this challenge.'' Mortgage companies must work harder to renegotiate terms for homeowners, he added, saying ``the current plan is not working well.''


(JB here: Yeah, you think???)

He also endorsed consideration of national regulation of mortgage brokers. (JB here: Good idea, but do you think that Congress has the stones to actually do this?)

Bank regulators last month called on mortgage lenders to stave off foreclosures by cutting or postponing home payments for cash-strapped borrowers.

``The ongoing housing correction is not ending as quickly as it might have appeared late last year,'' Paulson said. ``It now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet.''

His comments on the economy echoed those of Fed Chairman Ben S. Bernanke, who said yesterday that the housing industry's contraction will be a ``significant drag'' on growth. The economy will grow 2 percent this year, the least since 2002, according to a Bloomberg News survey of economists.

`Penalty' to Growth

``The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth,'' Paulson said, adding that ``we have a healthy, diversified economy that will continue to grow.''

The Treasury secretary also said Bush's working group is examining the role of credit-rating agencies in the subprime debacle, after their top ratings for some mortgage-backed securities spurred investors to pile into the debt.

Mortgage defaults by Americans with poor credit histories prompted the collapse in June of two hedge funds managed by Bear Stearns Cos. and triggered a worldwide rout in the debt markets. (JB here: Curious that the story blames borrowers, and not the fact that these funds were so over-leveraged, that it was a ticking time bomb. Yes, the defaults lit the fuse, but the fund itself and poor management decisions are what caused the explosion!) Paulson said that with a few exceptions, hedge funds ``have not proven to be a significant problem'' for financial markets.

Paulson called on lenders including Fannie Mae and Freddie Mac to make mortgages more easily available. The government- sponsored enterprises want regulators to lift caps on their investment portfolios, and the Treasury chief called on Congress to pass legislation that would create a tougher regulator for them.

``GSE reform has cleared the House, and also awaits action in the Senate,'' he said. ``Congress should act quickly as possible.''

To contact the reporter on this story: John Brinsley in Washington at

Last Updated: October 16, 2007 14:53 EDT


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