Fight Foreclosure – Make ‘Em “Produce the Note”

April 1, 2012

Fight Foreclosure: Make ‘Em Produce The Note!

Using the “produce the note” strategy is something all homeowners facing foreclosure can do. If you believe you’ve been treated unfairly, fight back. We have created templates for a legal request, a letter to your lender and a motion to compel to help you through the process. Read the step by step “how to” under the videos.

Special note: In some states, a lender can foreclose on your home without going to court. These are called non-judicial foreclosure states. You can still use the “Produce the Note” strategyin these states, but it takes a few more steps on your part.


Produce the Note – Steps To Follow:

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When Did the Consumer Become the Enemy?

May 24, 2011

By Angie Moreschi:

Why is it that every time you turn around these days, you find a lawmaker up on Capitol Hill trying to stick it to the consumer?  Of course, it’s very important to protect multi-million dollar corporations from those pesky people who buy stuff from them; we all know that.  But gosh, isn’t this going a bit far.  First, we must ensure our oil companies continue to get their tax breaks, and now Republican Congressman from North Carolina Patrick McHenry is taking cheap shots at the person trying to set up a Consumer Protection Bureau.

Consumer Advocate and Harvard Professor Elizabeth Warren came up with the crazy idea that there should be someone looking out for consumers these days, since they’re getting ripped off so much.

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It May Not Be Too Late for the Polar Bears

March 23, 2011

By Judy Schropp Hoyer:

It would be nice if there were hope for the polar bears, but hope may not be all it’s cracked up to be.  Consider this excerpt from an Associated Press article, December 16, 2010:

Two groups of scientists are suggesting a sliver of hope for the future of polar bears. A study published online in the Journal NATURE rejects the often used concept of a “tipping point,” or point of no return, when it comes to sea ice and the big bear that has become the symbol of climate change woes.  The study optimistically suggests if the world dramatically changed its steadily increasing emissions of greenhouse gases, a total loss of critical summer sea ice for the bears could be averted.  Another research group projects that even if global warming doesn’t slow — a more likely near-future scenario – a thin, icy refuge for the bears would still remain between Greenland and Canada.

A “thin, icy refuge”  – great.  What more could they need?  And why should we care?

But, did I mention the oceans? Consider this from Matthew Knight for CNN, Dec. 12, 2010:


The chemistry of the world’s oceans is changing at a rate not seen for 65 million years, with far-reaching implications for marine bio-diversity and food security, according to a new United Nations study. 

“Environmental consequences of ocean acidification,” published by the U.N. Environmental Program (UNEP), warns that some sea organisms including coral and shellfish will find it increasingly difficult to survive, as acidification shrinks the minerals needed to form their skeletons.

Lead author of the report Carol Turley, from the UK’s Plymouth Marine Laboratory, said in a statement: “We are seeing an overall negative impact from ocean acidification directly on organisms and on some key ecosystems that help provide food for billions.  We need to start thinking about the risk to food security.

It’s CO2 Again

Why?   We’re back to CO2.  CO2 emissions are absorbed by the oceans where they turn into carbolic acid.  This causes the oceans to acidify.  Acidification affects the growth and structural integrity of tropical reefs and, coupled with ocean warming, could limit the habitats of crabs, mussels and other shellfish.  In turn, this will affect the rest of the food chain (right on up to the polar bear and us).   Fish depend upon coral reefs for shelter and food.  And a billion people rely on fish as a key source of protein.

Aw, who needs stupid fish anyway?  We can eat cake.  Or become vegetarian.  Eat meat.   Or, maybe, we could all stop needing so much oil.

Editor’s note:  Judy Schropp Hoyer is an attorney, mother and organic farmer. She joins CWN with an occasional essay on the state of the world.

Is it Getting Hot in Here?

March 16, 2011

By Judy Schropp Hoyer

Our planet is getting warmer.   “All but the most ignorant, biased, and skeptical now admit this truth…” (Tim Flannery, Chairman of the Copenhagen Climate Council).  That’s because there’s more CO2 (carbon dioxide) and methane gases  – once simply called “pollution” –  in the atmosphere than ever before.

 A Quick Non-Scientific Explanation of CO2 In the Atmosphere

Carbon is in the oil, gas , limestone and coal  – all that fossilized organic matter –  that we dig out of the ground.  When we dig that stuff up, and when we burn it to make electricity, we release the carbon into the air.  The atmospheres of Mars and Venus – planets where life does not exist – are made up mostly of CO2.  In contrast, CO2 makes up only a few parts per 10,000 of Earth’s atmosphere.  Carbon in the air is drawn into the earth, primarily by the oceans.  The more we burn, the more CO2 results, both in the air and in the sea.  CO2 and methane are the principal “greenhouse gases” that are warming our planet.

More about methane later.

 What Can Slow Down the Effect of Greenhouse Gases?

There are two things which naturally slow down the rate at which greenhouse gases will warm the earth –  the oceans which absorb the CO2 and the ice which currently covers about 10% of our planet.  The ice reflects a lot of the sun’s heat back out into the atmosphere and also stores cold, a sort of natural refrigerator.

 But the ice is melting and the oceans are becoming warmer.  These are facts. 

 WARMER EARTH SEEN AS THREAT TO GRAIN PRICES  –  Associated Press, Dec. 2, 2010.

 Oh, yeah, it will affect our food supply.

 CLIMATE CHANGE’S THREAT TO THE FLORIDA ECONOMY  –  St. Petersburg Times,  Jan.  19, 2011.

 Oh, yeah, it will affect our economy.

 Maybe we really should use less coal, oil and gas.

Editor’s note:  Judy Schropp Hoyer is an attorney, mother and organic farmer. She joins CWN with an occasional essay on the state of the world

Higher Gas Prices are Coming – Part Two

March 7, 2011

By Judy Schropp Hoyer

It’s an economic law –  price is highly dependent upon the ratio of supply and demand.   There are other factors affecting the price of gas and oil for the consumer besides supply – the cost of getting it out of the ground, the cost of refining it, and  the cost of transporting it, plus the taxes and profit added on to those costs.   But, ultimately, it will come down to supply because supply actually is limited.  We will run out someday.  When?   Depends on how fast we use up the finite supply.   The population of the world is increasing, and China and India are not only growing in population but also supplying a larger percentage of their people with electricity.

It’s all a matter of time

There are about 6.9 billion people in the world now.  In 40 years there will be nine billion.  At our current rate of 87 million barrels per day, it’s estimated that we’ll run out of recoverable oil as soon as 2050. (Until then, prices will continue to rise.  Four dollars a gallon at the pump will be a sweet memory, much as 35 cents per gallon is now. 

I remember my mother pulling into a “service station” (this was the 1950s) and asking the man who came out to pump the gas and wipe the windshield and check the oil for “Two dollars of regular, please.”  We’d ride all week in our Ford station wagon on that. 

Then, in 1971 came a terrible rumor:  gas prices would go over a dollar in the next year.  It didn’t actually happen that year.  But then OPEC cut down on the amount it would supply the US and other countries – the “Arab Oil Embargo.”   After that came the “gas lines” of 1973 –  our first real scare.  After that the price of gas went up rapidly, and consumers were glad to pay it.

President Ford was in the White House then, but did nothing to curb our dependence on OPEC.  Nor did President Carter.   Nor any of them since then. 

 The last big scare

Our last big scare was 2008 when prices went over $4 per gallon.  In some places that summer, supply lines were interrupted by storms.  I was in Western North Carolina then.  If someone saw a gas station that actually had gas, that person would tell all his friends (after he’d filled up) and – even if my tank was ¾ full –  I’d go fill up, too.   Then, tell my friends.  Can you imagine living like that?  In my mind I pictured the poor Russian peasant women waiting in line at the bread store, then waiting in line at the butcher, then….  Or my own mother with her rationing stamps during WWII, trying to get sugar to bake my older brother’s birthday cake.   Think it can’t happen?    Then you’re not scared enough.

But maybe you should use less oil.

Editor’s note:  Judy Schropp Hoyer is an attorney, mother and organic farmer. She joins CWN with an occasional essay on the state of the world.

Higher Gas Prices are Coming

February 10, 2011

By Judy Schropp Hoyer:

So far, rising gas prices have failed to change the habits of most American drivers, but the climb is not over yet.  Consider the following:

  • OIL PRICE HEADING TO $100 A BARREL. The price has risen to $91.38, a 34 percent increase since May. – Associated Press, January 1, 2011.
  • Gas prices on New Year’s Day were about $3 a gallon. A month earlier gas prices were about $2.80. A year ago they were about $2.60. In July 2008 they were about $4. In 2011 they’ll go up again as oil goes from about $85 per barrel to about $100.

Why? It’s not a simple supply-and-demand issue. There are actually three major factors, as I see it.

1. OPEC controls the production of a lot of oil and thereby sets the price – to some extent. Meaning, if they haul less out of the ground the price will go up, and OPEC can arbitrarily decide to haul less out of the ground.
2. The cost to oil producers to get the stuff out of the ground. As oil companies use up the stuff that’s closer to the earth’s surface, they’ll have to dig deeper and that costs more. The deeper stuff is harder to refine, too, so that’s two costs of production that will go up.
3. China and India want more. The United States is the biggest consumer (20%) of oil in the world and our consumption is expected to rise by 1% this year. But China’s consumption will go up by 5% this year and India’s will go up by slightly less than that. We have 311,909,000 people; China has 1,341,820,000 and India has 1,192,910,000. That’s a lot.

Unrest in the Middle East could, by itself, raise the price of oil as production is disrupted and oil companies take advantage of “market conditions.”

A Good Year for Profits

Now, is it necessary that prices go up? EXXON MOBIL CORP, CHEVRON CORP and CONOCO PHILLIPS posted $105 billion in profits last year. (BP – even after paying about $40 billion in costs relating to the Gulf Oil spill – posted profits of about $20.2 billion). Could the oil companies make do with a little less profit? Obviously. But why should they? And why would they?

Perhaps we should make do with a little less oil.

A Quick Non-Scientific Explanation of Oil

Petroleum is made out of fossilized organic materials. Stuff that was once alive died, rotted and was smushed into the ground and held under layers of rock where it was very hot. It turned into oil and gas. Oil is usually black or dark brown and thick. Since the Industrial Revolution began, most of the petroleum that humans have dug up out of the ground has been burned for energy. Today, we burn 84% of it. The other 16% is used to make plastic and pesticides, solvents, fertilizers and pharmaceuticals.

Of course, we’ll eventually run out of oil, even the hard-to-get stuff deeper in the ground. So, maybe we should use less.

Editor’s note:  Judy Hoyer is an attorney, mother and organic farmer. She joins CWN with an occasional essay on the state of the world.

Mandatory Health Insurance and the Founding Fathers

February 2, 2011

From Forbes:

The ink was barely dry on the PPACA when the first of many lawsuits to block the mandated health insurance provisions of the law was filed in a Florida District Court.

The pleadings, in part, read – “The Constitution nowhere authorizes the United States to mandate, either directly or under threat of penalty, that all citizens and legal residents have qualifying health care coverage.” State of Florida, et al. vs. HHS

It turns out, the Founding Fathers would beg to disagree. Read more at

The Monster Tells How Predatory Lending Fleeced America

January 6, 2011

A new book by award winning reporter Michael Hudson tells the tale of how predatory lenders and Wall Street stuck it to American homeowners during the housing boom.  When it all came crashing down it was the average guy left holding the bag.  Hudson captures the essense of how they pulled it off by talking to the insiders who were there.  Here’s an excerpt from the book:

The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America--and Spawned a Global Crisis

Bait and Switch

A few weeks after he started working at Ameriquest Mortgage, Mark Glover looked up from his cubicle and saw a coworker do something odd. The guy stood at his desk on the twenty-third floor of downtown Los Angeles’s Union Bank Building. He placed two sheets of paper against the window. Then he used the light streaming through the window to trace something from one piece of paper to another. Somebody’s signature.

Glover was new to the mortgage business. He was twenty-nine and hadn’t held a steady job in years. But he wasn’t stupid. He knew about financial sleight of hand—at that time, he had a check-fraud charge hanging over his head in the L.A. courthouse a few blocks away. Watching his coworker, Glover’s first thought was: How can I get away with that? As a loan officer at Ameriquest, Glover worked on commission. He knew the only way to earn the six-figure income Ameriquest had promised him was to come up with tricks for pushing deals through the mortgage-financing pipeline that began with Ameriquest and extended through Wall Street’s most respected investment houses.

Glover and the other twentysomethings who filled the sales force at the downtown L.A. branch worked the phones hour after hour, calling strangers and trying to talk them into refinancing their homes with high-priced “subprime” mortgages. It was 2003, subprime was on the rise, and Ameriquest was leading the way. The company’s owner, Roland Arnall, had in many ways been the founding father of subprime, the business of lending money to home owners with modest incomes or blemished credit histories. He had pioneered this risky segment of the mortgage market amid the wreckage of the savings and loan disaster and helped transform his company’s headquarters, Orange County, California, into the capital of the subprime industry. Now, with the housing market booming and Wall Street clamoring to invest in subprime, Ameriquest was growing with startling velocity.

Up and down the line, from loan officers to regional managers and vice presidents, Ameriquest’s employees scrambled at the end of each month to push through as many loans as possible, to pad their monthly production numbers, boost their commissions, and meet Roland Arnall’s expectations. Arnall was a man “obsessed with loan volume,” former aides recalled, a mortgage entrepreneur who believed “volume solved all problems.” Whenever an underling suggested a goal for loan production over a particular time span, Arnall’s favorite reply was: “We can do twice that.” Close to midnight Pacific time on the last business day of each month, the phone would ring at Arnall’s home in Los Angeles’s exclusive Holmby Hills neighborhood, a $30 million estate that once had been home to Sonny and Cher.On the other end of the telephone line, a vice president in Orange County would report the month’s production numbers for his lending empire. Even as the totals grew to $3 billion or $6 billion or $7 billion a month—figures never before imagined in the subprime business—Arnall wasn’t satisfied. He wanted more. “He would just try to make you stretch beyond what you thought possible,” one former Ameriquest executive recalled. “Whatever you did, no matter how good you did, it wasn’t good enough.”

Inside Glover’s branch, loan officers kept up with the demand to produce by guzzling Red Bull energy drinks, a favorite caffeine pick-me-up for hardworking salesmen throughout the mortgage industry. Government investigators would later joke that they could gauge how dirty a home-loan location was by the number of empty Red Bull cans in the Dumpster out back. Some of the crew in the L.A. branch, Glover said, also relied on cocaine to keep themselves going, snorting lines in washrooms and, on occasion, in their cubicles.

The wayward behavior didn’t stop with drugs. Glover learned that his colleague’s art work wasn’t a matter of saving a borrower the hassle of coming in to supply a missed signature. The guy was forging borrowers’ signatures on government-required disclosure forms, the ones that were supposed to help consumers understand how much cash they’d be getting out of the loan and how much they’d be paying in interest and fees. Ameriquest’s deals were so overpriced and loaded with nasty surprises that getting customers to sign often required an elaborate web of psychological ploys, outright lies, and falsified papers. “Every closing that we had really was a bait and switch,” a loan officer who worked for Ameriquest in Tampa, Florida, recalled. ” ‘Cause you could never get them to the table if you were honest.” At companywide gatherings, Ameriquest’s managers and sales reps loosened up with free alcohol and swapped tips for fooling borrowers and cooking up phony paperwork. What if a customer insisted he wanted a fixed-rate loan, but you could make more money by selling him an adjustable-rate one? No problem. Many Ameriquest salespeople learned to position a few fixed-rate loan documents at the top of the stack of paperwork to be signed by the borrower. They buried the real documents—the ones indicating the loan had an adjustable rate that would rocket upward in two or three years—near the bottom of the pile. Then, after the borrower had flipped from signature line to signature line, scribbling his consent across the entire stack, and gone home, it was easy enough to peel the fixed-rate documents off the top and throw them in the trash.

At the downtown L.A. branch, some of Glover’s coworkers had a flair for creative documentation. They used scissors, tape, Wite-Out, and a photocopier to fabricate W-2s, the tax forms that indicate how much a wage earner makes each year. It was easy: Paste the name of a low-earning borrower onto a W-2 belonging to a higher-earning borrower and, like magic, a bad loan prospect suddenly looked much better. Workers in the branch equipped the office’s break room with all the tools they needed to manufacture and manipulate official documents. They dubbed it the “Art Department.”

At first, Glover thought the branch might be a rogue office struggling to keep up with the goals set by Ameriquest’s headquarters. He discovered that wasn’t the case when he transferred to the company’s Santa Monica branch. A few of his new colleagues invited him on a field trip to Staples, where everyone chipped in their own money to buy a state-of-the-art scanner-printer, a trusty piece of equipment that would allow them to do a better job of creating phony paperwork and trapping American home owners in a cycle of crushing debt.

Carolyn Pittman was an easy target. She’d dropped out of high school to go to work, and had never learned to read or write very well. She worked for decades as a nursing assistant. Her husband, Charlie, was a longshoreman.In 1993 she and Charlie borrowed $58,850 to buy a one-story, concrete block house on Irex Street in a working-class neighborhood of Atlantic Beach, a community of thirteen thousand near Jacksonville, Florida. Their mortgage was government-insured by the Federal Housing Administration, so they got a good deal on the loan. They paid about $500 a month on the FHA loan, including the money to cover their home insurance and property taxes.

Even after Charlie died in 1998, Pittman kept up with her house payments. But things were tough for her. Financial matters weren’t something she knew much about. Charlie had always handled what little money they had. Her health wasn’t good either. She had a heart attack in 2001, and was back and forth to hospitals with congestive heart failure and kidney problems.

Like many older black women who owned their homes but had modest incomes, Pittman was deluged almost every day, by mail and by phone, with sales pitches offering money to fix up her house or pay off her bills. A few months after her heart attack, a salesman from Ameriquest Mortgage’s Coral Springs office caught her on the phone and assured her he could ease her worries. He said Ameriquest would help her out by lowering her interest rate and her monthly payments.

She signed the papers in August 2001. Only later did she discover that the loan wasn’t what she’d been promised. Her interest rate jumped from a fixed 8.43 percent on the FHA loan to a variable rate that started at nearly 11 percent and could climb much higher. The loan was also packed with more than $7,000 in up-front fees, roughly 10 percent of the loan amount.

Pittman’s mortgage payment climbed to $644 a month. Even worse, the new mortgage didn’t include an escrow for real-estate taxes and insurance. Most mortgage agreements require home owners to pay a bit extra—often about $100 to $300 a month—which is set aside in an escrow account to cover these expenses. But many subprime lenders obscured the true costs of their loans by excluding the escrow from their deals, which made the monthly payments appear lower. Many borrowers didn’t learn they had been tricked until they got a big bill for unpaid taxes or insurance a year down the road.

That was just the start of Pittman’s mortgage problems. Her new mortgage was a matter of public record, and by taking out a loan from Ameriquest, she’d signaled to other subprime lenders that she was vulnerable—that she was financially unsophisticated and was struggling to pay an unaffordable loan. In 2003, she heard from one of Ameriquest’s competitors, Long Beach Mortgage Company.

Pittman had no idea that Long Beach and Ameriquest shared the same corporate DNA. Roland Arnall’s first subprime lender had been Long Beach Savings and Loan, a company he had morphed into Long Beach Mortgage. He had sold off most of Long Beach Mortgage in 1997, but hung on to a portion of the company that he rechristened Ameriquest. Though Long Beach and Ameriquest were no longer connected, both were still staffed with employees who had learned the business under Arnall.

A salesman from Long Beach Mortgage, Pittman said, told her that he could help her solve the problems created by her Ameriquest loan. Once again, she signed the papers. The new loan from Long Beach cost her thousands in up-front fees and boosted her mortgage payments to $672 a month.

Ameriquest reclaimed her as a customer less than a year later. A salesman from Ameriquest’s Jacksonville branch got her on the phone in the spring of 2004. He promised, once again, that refinancing would lower her interest rate and her monthly payments. Pittman wasn’t sure what to do. She knew she’d been burned before, but she desperately wanted to find a way to pay off the Long Beach loan and regain her financial bearings. She was still pondering whether to take the loan when two Ameriquest representatives appeared at the house on Irex Street. They brought a stack of documents with them. They told her, she later recalled, that it was preliminary paperwork, simply to get the process started. She could make up her mind later. The men said, “sign here,” “sign here,” “sign here,” as they flipped through the stack. Pittman didn’t understand these were final loan papers and her signatures were binding her to Ameriquest. “They just said sign some papers and we’ll help you,” she recalled.

To push the deal through and make it look better to investors on Wall Street, consumer attorneys later alleged, someone at Ameriquest falsified Pittman’s income on the mortgage application. At best, she had an income of $1,600 a month—roughly $1,000 from Social Security and, when he could afford to pay, another $600 a month in rent from her son. Ameriquest’s paperwork claimed she brought in more than twice that much—$3,700 a month.

The new deal left her with a house payment of $1,069 a month—nearly all of her monthly income and twice what she’d been paying on the FHA loan before Ameriquest and Long Beach hustled her through the series of refinancings. She was shocked when she realized she was required to pay more than $1,000 a month on her mortgage. “That broke my heart,” she said.

For Ameriquest, the fact that Pittman couldn’t afford the payments was of little consequence. Her loan was quickly pooled, with more than fifteen thousand other Ameriquest loans from around the country, into a $2.4 billion “mortgage-backed securities” deal known as Ameriquest Mortgage Securities, Inc. Mortgage Pass-Through Certificates 2004-R7. The deal had been put together by a trio of the world’s largest investment banks: UBS, JPMorgan, and Citigroup. These banks oversaw the accounting wizardry that transformed Pittman’s mortgage and thousands of other subprime loans into investments sought after by some of the world’s biggest investors. Slices of 2004-R7 got snapped up by giants such as the insurer MassMutual and Legg Mason, a mutual fund manager with clients in more than seventy-five countries. Also among the buyers was the investment bank Morgan Stanley, which purchased some of the securities and placed them in its Limited Duration Investment Fund, mixing them with investments in General Mills, FedEx, JC Penney, Harley-Davidson, and other household names.

It was the new way of Wall Street. The loan on Carolyn Pittman’s one-story house in Atlantic Beach was now part of the great global mortgage machine. It helped swell the portfolios of big-time speculators and middle-class investors looking to build a nest egg for retirement. And, in doing so, it helped fuel the mortgage empire that in 2004 produced $1.3 billion in profits for Roland Arnall.

In the first years of the twenty-first century, Ameriquest Mortgage unleashed an army of salespeople on America. They numbered in the thousands. They were young, hungry, and relentless in their drive to sell loans and earn big commissions. One Ameriquest manager summed things up in an e-mail to his sales force: “We are all here to make as much fucking money as possible. Bottom line. Nothing else matters.” Home owners like Carolyn Pittman were caught up in Ameriquest’s push to become the nation’s biggest subprime lender.

The pressure to produce an ever-growing volume of loans came from the top. Executives at Ameriquest’s home office in Orange County leaned on the regional and area managers; the regional and area managers leaned on the branch managers. And the branch managers leaned on the salesmen who worked the phones and hunted for borrowers willing to sign on to Ameriquest loans. Men usually ran things, and a frat-house mentality ruled, with plenty of partying and testosterone-fueled swagger. “It was like college, but with lots of money and power,” Travis Paules, a former Ameriquest executive, said. Paules liked to hire strippers to reward his sales reps for working well after midnight to get loan deals processed during the end-of-the-month rush. At Ameriquest branches around the nation, loan officers worked ten- and twelve-hour days punctuated by “Power Hours”—do-or-die telemarketing sessions aimed at sniffing out borrowers and separating the real salesmen from the washouts. At the branch where Mark Bomchill worked in suburban Minneapolis, management expected Bomchill and other loan officers to make one hundred to two hundred sales calls a day. One manager, Bomchill said, prowled the aisles between desks like “a little Hitler,” hounding salesmen to make more calls and sell more loans and bragging he hired and fired people so fast that one peon would be cleaning out his desk as his replacement came through the door.As with Mark Glover in Los Angeles, experience in the mortgage business wasn’t a prerequisite for getting hired. Former employees said the company preferred to hire younger, inexperienced workers because it was easier to train them to do things the Ameriquest way. A former loan officer who worked for Ameriquest in Michigan described the company’s business model this way: “People entrusting their entire home and everything they’ve worked for in their life to people who have just walked in off the street and don’t know anything about mortgages and are trying to do anything they can to take advantage of them.”

Ameriquest was not alone. Other companies, eager to get a piece of the market for high-profit loans, copied its methods, setting up shop in Orange County and helping to transform the county into the Silicon Valley of subprime lending. With big investors willing to pay top dollar for assets backed by this new breed of mortgages, the push to make more and more loans reached a frenzy among the county’s subprime loan shops. “The atmosphere was like this giant cocaine party you see on TV,” said Sylvia Vega-Sutfin, who worked as an account executive at BNC Mortgage, a fast-growing operation headquartered in Orange County just down the Costa Mesa Freeway from Ameriquest’s headquarters. “It was like this giant rush of urgency.” One manager told Vega-Sutfin and her coworkers that there was no turning back; he had no choice but to push for mind-blowing production numbers. “I have to close thirty loans a month,” he said, “because that’s what my family’s lifestyle demands.”

Michelle Seymour, one of Vega-Sutfin’s colleagues, spotted her first suspect loan days after she began working as a mortgage underwriter at BNC’s Sacramento branch in early 2005. The documents in the file indicated the borrower was making a six-figure salary coordinating dances at a Mexican restaurant. All the numbers on the borrower’s W-2 tax form ended in zeros—an unlikely happenstance—and the Social Security and tax bite didn’t match the borrower’s income. When Seymour complained to a manager, she said, he was blasé, telling her, “It takes a lot to have a loan declined.”

BNC was no fly-by-night operation. It was owned by one of Wall Street’s most storied investment banks, Lehman Brothers. The bank had made a big bet on housing and mortgages, styling itself as a player in commercial real estate and, especially, subprime lending. “In the mortgage business, we used to say, ‘All roads lead to Lehman,’ ” one industry veteran recalled.Lehman had bought a stake in BNC in 2000 and had taken full ownership in 2004, figuring it could earn even more money in the subprime business by cutting out the middleman. Wall Street bankers and investors flocked to the loans produced by BNC, Ameriquest, and other subprime operators; the steep fees and interest rates extracted from borrowers allowed the bankers to charge fat commissions for packaging the securities and provided generous yields for investors who purchased them. Up-front fees on subprime loans totaled thousands of dollars. Interest rates often started out deceptively low—perhaps at 7 or 8 percent—but they almost always adjusted upward, rising to 10 percent, 12 percent, and beyond. When their rates spiked, borrowers’ monthly payments increased, too, often climbing by hundreds of dollars. Borrowers who tried to escape overpriced loans by refinancing into another mortgage usually found themselves paying thousands of dollars more in backend fees—”prepayment penalties” that punished them for paying off their loans early. Millions of these loans—tied to modest homes in places like Atlantic Beach, Florida; Saginaw, Michigan; and East San Jose, California—helped generate great fortunes for financiers and investors. They also helped lay America’s economy low and sparked a worldwide financial crisis.

The subprime market did not cause the U.S. and global financial meltdowns by itself. Other varieties of home loans and a host of arcane financial innovations—such as collateralized debt obligations and credit default swaps—also came into play. Nevertheless, subprime played a central role in the debacle. It served as an early proving ground for financial engineers who sold investors and regulators alike on the idea that it was possible, through accounting alchemy, to turn risky assets into “Triple-A-rated” securities that were nearly as safe as government bonds. In turn, financial wizards making bets with CDOs and credit default swaps used subprime mortgages as the raw material for their speculations. Subprime, as one market watcher said, was “the leading edge of a financial hurricane.”

This book tells the story of the rise and fall of subprime by chronicling the rise and fall of two corporate empires: Ameriquest and Lehman Brothers. It is a story about the melding of two financial cultures separated by a continent: Orange County and Wall Street.

Ameriquest and its strongest competitors in subprime had their roots in Orange County, a sunny land of beauty and wealth that has a history as a breeding ground for white-collar crime: boiler rooms, S&L frauds, real-estate swindles. That history made it an ideal setting for launching the subprime industry, which grew in large measure thanks to bait-and-switch salesmanship and garden-variety deception. By the height of the nation’s mortgage boom, Orange County was home to four of the nation’s six biggest subprime lenders. Together, these four lenders—Ameriquest, Option One, Fremont Investment & Loan, and New Century—accounted for nearly a third of the subprime market. Other subprime shops, too, sprung up throughout the county, many of them started by former employees of Ameriquest and its corporate forebears, Long Beach Savings and Long Beach Mortgage.

Lehman Brothers was, of course, one of the most important institutions on Wall Street, a firm with a rich history dating to before the Civil War. Under its pugnacious CEO, Richard Fuld, Lehman helped bankroll many of the nation’s shadiest subprime lenders, including Ameriquest. “Lehman never saw a subprime lender they didn’t like,” one consumer lawyer who fought the industry’s abuses said.Lehman and other Wall Street powers provided the financial backing and sheen of respectability that transformed subprime from a tiny corner of the mortgage market into an economic behemoth capable of triggering the worst economic crisis since the Great Depression.

A long list of mortgage entrepreneurs and Wall Street bankers cultivated the tactics that fueled subprime’s growth and its collapse, and a succession of politicians and regulators looked the other way as abuses flourished and the nation lurched toward disaster: Angelo Mozilo and Countrywide Financial; Bear Stearns, Washington Mutual, Wells Fargo; Alan Greenspan and the Federal Reserve; and many more. Still, no Wall Street firm did more than Lehman to create the subprime monster. And no figure or institution did more to bring subprime’s abuses to life across the nation than Roland Arnall and Ameriquest.

Among his employees, subprime’s founding father was feared and admired. He was a figure of rumor and speculation, a mysterious billionaire with a rags-to-riches backstory, a hardscrabble street vendor who reinvented himself as a big-time real-estate developer, a corporate titan, a friend to many of the nation’s most powerful elected leaders. He was a man driven, according to some who knew him, by a desire to conquer and dominate. “Roland could be the biggest bastard in the world and the most charming guy in the world,” said one executive who worked for Arnall in subprime’s early days. “And it could be minutes apart.”He displayed his charm to people who had the power to help him or hurt him. He cultivated friendships with politicians as well as civil rights advocates and antipoverty crusaders who might be hostile to the unconventional loans his companies sold in minority and working-class neighborhoods. Many people who knew him saw him as a visionary, a humanitarian, a friend to the needy. “Roland was one of the most generous people I have ever met,” a former business partner said.He also left behind, as another former associate put it, “a trail of bodies”—a succession of employees, friends, relatives, and business partners who said he had betrayed them. In summing up his own split with Arnall, his best friend and longtime business partner said, “I was screwed.”Another former colleague, a man who helped Arnall give birth to the modern subprime mortgage industry, said: “Deep down inside he was a good man. But he had an evil side. When he pulled that out, it was bad. He could be extremely cruel.” When they parted ways, he said, Arnall hadn’t paid him all the money he was owed. But, he noted, Arnall hadn’t cheated him as badly as he could have. “He fucked me. But within reason.”

Roland Arnall built a company that became a household name, but shunned the limelight for himself. The business partner who said Arnall had “screwed” him recalled that Arnall fancied himself a puppet master who manipulated great wealth and controlled a network of confederates to perform his bidding. Another former business associate, an underling who admired him, explained that Arnall worked to ingratiate himself to fair-lending activists for a simple reason: “You can take that straight out of The Godfather: ‘Keep your enemies close.’ ”

Excerpted from The Monster by Michael W. Hudson
Copyright 2010 by Michael W. Hudson
Published in 2010 by Times Books/Henry Holt and Company

Trillions In Federal Deficits – Who’s To Blame?

March 30, 2010

By John Newcomer:

Approval ratings for Congress is at an all time low. With our staggering federal deficits, owing debts our grand-kids will still be trying to pay off, it seems like everyone is blaming our elected officials for this fiscal mess. Well, guest columnist LeRoy Goldman has a different point of view. If you have the courage read on:

By Guest Columnist LeRoy Goldman:

moneyBack in the mid-seventies, when I worked in the Senate, there was growing concern about the increasing size of the federal deficit and the extent to which it was adding to the national debt. That concern led to the enactment of the Congressional Budget Act of 1974. At that time the Federal deficit was about $50 billion and the national debt was about $500 billion. Although the Budget Act has been in operation for 36 years, there is no doubt that it has been a colossal failure.

The projected Federal deficit this year is $2.9 trillion and the national debt will grow to $14.1 trillion. Even when one adjusts these numbers for inflation, it remains obvious that, as a nation, we are inexorably headed into fiscal and economic Armageddon – and soon.

If one digs into the Federal Budget, it doesn’t take long to determine that the main problem is what Washington calls MANDATORY SPENDING. At the present time MANDATORY SPENDING consumes about 60% of the entire Federal Budget. The four largest components of such spending are Social Security ($730 billion), Medicare ($500 billion), Medicaid ($300 billion), and interest payments on the national debt ($200 billion). According to the projections of the Obama Administration, debt payments will increase to about $840 billion a year by 2020. Medicare is projected to be in bankruptcy by 2017. Social Security is projected to be bankrupt not too long thereafter.

While most Americans have no detailed insight into the looming catastrophe, Washington has known about it for decades. Every President, every Treasury Secretary, and every member of Congress, all the way back to the Ford Administration in the seventies, has been clear about the magnitude and the inevitability of the coming crisis. Let’s give it the name that it deserves–a bipartisan conspiracy of denial.

All these politicians that we have elected to serve us have failed, and willfully so. It’s no wonder that today there is such a deep and growing sense of outrage and fury in the nation directed at the incumbents of both parties. There is a very real chance that the election this fall will be a bloodbath for incumbents of both parties. Readers of this space know that I think that will be a welcome outcome.

But, not so fast kemosabe. Such a bloodletting, while necessary, will deal only with a symptom of this problem–not the problem itself. Let’s pause and ask ourselves why it has been the case that all these politicians have refused to deal with a growing national calamity that they knew was coming? What were they all afraid of? The answer is obvious–us.

The hard fact of the matter is that the root of this problem is not the government. It’s you and me. We have allowed ourselves to become addicted to the ultimate free lunch, while we blame the politicians for not fixing it. Would you reelect a member of Congress who called for cuts in your, or your parent’s, Medicare and Social Security? No, you would not. And that’s why the politicians have kicked the can down the road for 35 years.

Well folks, we’re about out of road. Just ahead is the cliff. And we can’t blame Toyota for this stuck accelerator.

As Cassius said in Shakespeare’s Julius Caesar: “the fault, dear Brutus, is not in our stars, but in ourselves”

LeRoy Goldman worked for the federal government from 1964-2001.

Fight Foreclosure: Make ‘Em Produce the Note

March 30, 2010

By Angie Moreschi:

Using the “produce the note” strategy is something all homeowners facing foreclosure can do. If you believe you’ve been treated unfairly, fight back. We have created templates for a legal request, a letter to your lender and a motion to compel to help you through the process.  Read the step by step “how to” under the videos.

Special note:  In some states, a lender can foreclose on your home without going to court.  These are called non-judicial foreclosure states.  You can still use the “Produce the Note” strategy in these states, but it takes a few more steps on your part.

Produce the Note – Steps To Follow:

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