I’ll be brief because this article from the Michigan Messenger (hat tip furzy mouse) stands on its own. Readers may recall that some registers of deeds (the county officials responsible for recording mortgage transfers) are less than happy at the way MERS has deprived their governments of income by skipping recording fees for some mortgage transfers (that was the point, after all) and making a mess of title records.
Two counties in MIchigan, Oakland and Ingham, have decided to do something about it. To my knowledge, this is the first litigation of this type:
Oakland County Treasurer Andy Meisner is suing mortgage giants Freddie Mac and Fannie Mae in the nation’s first federal lawsuit seeking to recoup tax payments never paid on properties that were transferred several times during the height of and during the foreclosure crisis that has gripped the nation over the last few years,
“I do think it’s fraudulent and I do think there is strong evidence to suggest there has been fraud. I do think it is a fraudulent conspiracy,” Meisner said. “We are identfying the people involved and we are systematically working to hold them accountable.”
While Ingham County Register of Deeds Curtis Hertel Jr. would not go so far as to allege a “fraudulent conspiracy” he says that the aim of his lawsuit is to find out just how deep the malfeasance went.
“This is about getting to the truth,” Hertel said Wednesday, standing in front of one of the many foreclosed and empty houses in the city of Lansing. “I believe the crisis has been further exacerbated by a systematic attempt to avoid state transfer taxes in my office.”
Hertel’s lawsuit alleges that the defendants and their agents claimed tax exemptions they were not entitled to. Specifically, the defendants are alleged to have claimed an exemption which prevents the federal government from having to pay the property title transfer company. The defendants claim that Freddie Mac and Fannie Mae are federal entities.
Meisner’s lawsuit alleges the same claim against just Freddie Mac and Fannie Mae.
“Defendants have not paid the Transfer Tax because they have claimed on the face of the documents they have recorded that the transaction is exempt from the Transfer Tax. They sometimes claim the transaction is exempt because they are government entities and, under Michigan statute, government entities are exempt. Other times they claim they are exempt pursuant to federal statute.
“Neither claimed exemption applies. Defendants are federally chartered private corporations and not government entities. Defendants’ federal law exemption from certain taxes does not include the Transfer Tax.”
Both Freddie Mac and Fannie Mae are publicly traded companies, according to their websites.
The official transfer tax rate for counties in Michigan is $1.10 for every $1,000 of value being transferred. So the sale of a $100,000 home would typically carry a $1,100 tax. State taxes on the same transactions stretch even further – $7.50 for every $1,000 of value being transferred.
Those taxes add up, both officials said in interviews. Meisner says Oakland County has lost about $1.5 million from its general fund in the last six years, while those same cases in Oakland meant an estimated $10.5 million kept from the state. Hertel would not put an exact dollar figure on the potential losses caused by the alleged actions of the defendants, but said the county had lost “millions” while the state had lost “tens of millions” in tax revenues.
Update: Reader IF points out the computation in the article regarding the typical fee per transfer is wrong. If the $1.10 per $1000 is correct, the fee would be $110, which even then is on the high side of what I have heard recording fees often are (the question is whether the “transfer tax” is a different beast than a recording fee, and whether it might actually be $1.10 per $100, which would make the $1,100 charge correct). I look to Michiganders to provide input.
The latest report by Shahien Nasirpour at Huffington Post confirms two things you’ve heard here and on some other sites following this sorry affair: first, that Tom MIller, Iowa attorney general who is leading the 50 state attorneys general negotiations on mortgage abuses, is a liar, and second, that any settlement will be a whitewash.
Actually, we already knew Miller was a liar. Shortly after the effort was launched, Miller promised that “”We will put people in jail.” He then started walking that back. Not only did he tell Bloomberg that they were NOT pursuing criminal charges, but per an e-mail:
I was w/ a European documentary maker this weekend who spoke to Miller a few days ago and said Miller relayed the fraud isn’t so bad, everything will be worked out .. the standard line; he’s already made up his mind. He doesn’t want those European governments demanding their money back. The meeting is a photo-op setup because the too-big-to-fail crowd is scared of put-back liability and shorts; they’re working hard to make it appear they’re doing something to quiet everybody down.
Note this message was sent BEFORE MIller made the “jail the baddies” promise that MIller recanted. And it indicates that this entire affair was intended to be an exercise in kabuki theater rather than anything remotely resembling a real investigation.
That brings us to MIller’s second lie. After a staffer ‘fessed up that no investigations were being undertaken, Miller maintained that extensive examinations were underway. That, as Nasiripour indicates, confirming earlier intelligence via Gretchen Morgenson, is complete crap (emphasis ours):
According to sources familiar with the ongoing state and federal probes, state and federal officials have wasted months not digging into the details of the foreclosure crisis, yielding little of value in court and undercutting the lenders’ incentive to strike a settlement of greater benefit to homeowners and taxpayers.
The investigators have yet to gather many documents, conduct depositions or assemble tallies of aggrieved homeowners. They don’t yet have a good handle on the number of wrongful foreclosures, the amount of fraudulent documents filed in local courts or the volume of legal instruments processed by so-called “robo-signers,” the agents that lenders employed to process foreclosure filings en masse without examining the underlying paperwork.
“The evidence a prosecutor would use is not in the possession of the prosecution,” said one person familiar with the ongoing settlement talks.
Even Richard Shelby, the ranking member of the Senate Banking Committee, and a long-standing critic of Wall Street, is not happy with the lack of investigations:
We need a full-fledged investigation,…There’s no substitute for a thorough investigation and finding of fact
The piece later details the evidence the prosecutors say they have obtained, and shows how it actually adds up to very little. This was a feature, not a bug. Consistent with the objective of doing nothing more than provide air cover for the banks, no meaningful investigations were conducted (and on top of that, there have been plenty of other irregularities in how the discussions were conducted). We pointed out this was essential to have any negotiating leverage: a party agrees to settle in order to escape possible litigation. The HufPo article underscores that point:
“I would never want to go into a negotiation without solid evidence of actual misconduct to hold as leverage over my counterpart,” said Neil M. Barofsky, the former special inspector general for the Troubled Asset Relief Program, which was crafted to bail out teetering banks. “It would also be very dangerous from a public policy perspective to waive all future claims as part of such a settlement if you do not have a good sense of the size, scope and severity of the underlying misconduct.”
If you don’t have a credible threat to launch a suit, why should anybody bother? The answer here is obvious: this isn’t a “settlement”; it’s a cash for a broad release (effectively, an indemnification). And since the AGs have done nada in the way of a probe, only the banks know the value of that waiver, and they won’t enter into a deal unless they think it is a bargain.
And indeed, the intended deal is a “get out of liability for almost free” card:
….expedience now appears to be trumping other considerations in settlement talks with major mortgage servicers. Despite failing to marshal a strong case proving misconduct during the foreclosure crisis, the government is seeking to craft a settlement quickly, in the hopes that this will inject greater certainty into the financial system, stabilize home prices and add vigor to a flagging economy.
Ah, yes, if we just give the banks another bailout, surely that will fix the economy! We can see how well that movie is working. As if “fixing the economy” is a good reason to ignore crooked behavior. By that logic, the government shouldn’t go after companies that sell beef full of e-coli because they provide employment.
And have no doubt, the Administration’s fingerprints are all over any deal:
The Justice Department is pressing state attorneys general to release the banks from liability for a host of alleged violations in exchange for a far-reaching settlement, people familiar with internal discussions said.
And the AGs have been sold a complete bill of goods:
The government fears that if it can’t stanch the flood of foreclosures by lowering troubled homeowners’ monthly mortgage payments — and if mortgage servicers cannot resume taking possession of homes for which borrowers have long been delinquent and sell them to people able to afford them — the housing crisis could drag on for years, keeping the broader economy in a feeble state. This is the scenario the government is seeking to stave off by striking a swift settlement with banks, restoring legal clarity to the foreclosure process and providing additional relief for distressed borrowers.
By including assistance for homeowners in the settlement agreement — like loan modifications that reduce payments or the overall amount owed — state and federal authorities said they believe they can help the housing market recover.
This is utter rubbish. First, the AGs are NOT going to “restore clarity to the foreclosure process.” Any action by the AGs will have no impact on the judiciary (the settlement will apparently include useless boilerplate about how banks will follow the law. They are supposed to be following the law regardless; an extra affirmation is pointless). The reason the banks are having so many trouble foreclosing is pervasive problems with how ownership interests were handled in the securitization process. In most cases, they are not amenable to easy fixes, which is why there has been so much fraud committed in courts all over the country.
The story indicates that the states are willing to sell out because any cash settlement would help fill yawning state budget gaps. But what we have been told by well placed sources is that the banks will take a deal only if it is very close to free: a minimal cash component (the $30 billion number in the HuffPo article is pure smoke and mirrors), with the rest being credits of various sorts, including for past mortgage mods. Oh, and any settlement is tax deductible, further lowering what little real cost there will be.
To the extent the AGs believe they need to bribe the banks to do mods, they’ve been snookered. The Fed and the OCC had the power to make them happen, now. The biggest banks all have large second lien portfolios (almost entirely HELOCs). They’ve refused to modify first mortgages because it’s a lot of work they don’t get paid for, and they make good money foreclosing. And they are able to keep borrower looking current on seconds via a combination of bullying and accepting very skinnied down payments.
If the Fed and the OCC told banks that they had to write down the second liens on delinquent mortgages, and write off the second liens on homes where they started foreclosing on the first, you’d see a 180 degree change in behavior. Banks would be falling all over themselves to do mods Indeed, if these regulators were to take this step (which is within their power) you’d probably see an bank change of heart on bankruptcy cramdowns too (banks twice beat back legislation to write down the value of a mortgage to the market value of the house in bankruptcy proceedings, which is done with very other type of secured consumer debt).
If you are as upset with this as I am, call your state attorney general and give him a piece of your mind. You can find their phone numbers here.
We already know that the News of the World hacked the phones of virtually everyone in England, including dead people and the prime minister and, probably, you. But with the latest revelation, the scandal has actually ...
<b>News</b> of the World Hacked Cops Investigating <b>News</b> of the World HackingThe company's stock price has dropped since the revelations of a wider phone hacking scandal at News of the World.
<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>The watchdog group Citizens For Responsibility and Ethics in Washington is calling on Congress to investigate Rupert Murdoch's News Corp. for evidence that the company's sprawling phone hacking scandal reached the United ...
CREW Calls On Congress To Investigate <b>News</b> Corp. After Phone <b>...</b>
bobby gap fergusonWe already know that the News of the World hacked the phones of virtually everyone in England, including dead people and the prime minister and, probably, you. But with the latest revelation, the scandal has actually ...
<b>News</b> of the World Hacked Cops Investigating <b>News</b> of the World HackingThe company's stock price has dropped since the revelations of a wider phone hacking scandal at News of the World.
<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>The watchdog group Citizens For Responsibility and Ethics in Washington is calling on Congress to investigate Rupert Murdoch's News Corp. for evidence that the company's sprawling phone hacking scandal reached the United ...
CREW Calls On Congress To Investigate <b>News</b> Corp. After Phone <b>...</b> I’ll be brief because this article from the Michigan Messenger (hat tip furzy mouse) stands on its own. Readers may recall that some registers of deeds (the county officials responsible for recording mortgage transfers) are less than happy at the way MERS has deprived their governments of income by skipping recording fees for some mortgage transfers (that was the point, after all) and making a mess of title records.
Two counties in MIchigan, Oakland and Ingham, have decided to do something about it. To my knowledge, this is the first litigation of this type:
Oakland County Treasurer Andy Meisner is suing mortgage giants Freddie Mac and Fannie Mae in the nation’s first federal lawsuit seeking to recoup tax payments never paid on properties that were transferred several times during the height of and during the foreclosure crisis that has gripped the nation over the last few years,
“I do think it’s fraudulent and I do think there is strong evidence to suggest there has been fraud. I do think it is a fraudulent conspiracy,” Meisner said. “We are identfying the people involved and we are systematically working to hold them accountable.”
While Ingham County Register of Deeds Curtis Hertel Jr. would not go so far as to allege a “fraudulent conspiracy” he says that the aim of his lawsuit is to find out just how deep the malfeasance went.
“This is about getting to the truth,” Hertel said Wednesday, standing in front of one of the many foreclosed and empty houses in the city of Lansing. “I believe the crisis has been further exacerbated by a systematic attempt to avoid state transfer taxes in my office.”
Hertel’s lawsuit alleges that the defendants and their agents claimed tax exemptions they were not entitled to. Specifically, the defendants are alleged to have claimed an exemption which prevents the federal government from having to pay the property title transfer company. The defendants claim that Freddie Mac and Fannie Mae are federal entities.
Meisner’s lawsuit alleges the same claim against just Freddie Mac and Fannie Mae.
“Defendants have not paid the Transfer Tax because they have claimed on the face of the documents they have recorded that the transaction is exempt from the Transfer Tax. They sometimes claim the transaction is exempt because they are government entities and, under Michigan statute, government entities are exempt. Other times they claim they are exempt pursuant to federal statute.
“Neither claimed exemption applies. Defendants are federally chartered private corporations and not government entities. Defendants’ federal law exemption from certain taxes does not include the Transfer Tax.”
Both Freddie Mac and Fannie Mae are publicly traded companies, according to their websites.
The official transfer tax rate for counties in Michigan is $1.10 for every $1,000 of value being transferred. So the sale of a $100,000 home would typically carry a $1,100 tax. State taxes on the same transactions stretch even further – $7.50 for every $1,000 of value being transferred.
Those taxes add up, both officials said in interviews. Meisner says Oakland County has lost about $1.5 million from its general fund in the last six years, while those same cases in Oakland meant an estimated $10.5 million kept from the state. Hertel would not put an exact dollar figure on the potential losses caused by the alleged actions of the defendants, but said the county had lost “millions” while the state had lost “tens of millions” in tax revenues.
Update: Reader IF points out the computation in the article regarding the typical fee per transfer is wrong. If the $1.10 per $1000 is correct, the fee would be $110, which even then is on the high side of what I have heard recording fees often are (the question is whether the “transfer tax” is a different beast than a recording fee, and whether it might actually be $1.10 per $100, which would make the $1,100 charge correct). I look to Michiganders to provide input.
The latest report by Shahien Nasirpour at Huffington Post confirms two things you’ve heard here and on some other sites following this sorry affair: first, that Tom MIller, Iowa attorney general who is leading the 50 state attorneys general negotiations on mortgage abuses, is a liar, and second, that any settlement will be a whitewash.
Actually, we already knew Miller was a liar. Shortly after the effort was launched, Miller promised that “”We will put people in jail.” He then started walking that back. Not only did he tell Bloomberg that they were NOT pursuing criminal charges, but per an e-mail:
I was w/ a European documentary maker this weekend who spoke to Miller a few days ago and said Miller relayed the fraud isn’t so bad, everything will be worked out .. the standard line; he’s already made up his mind. He doesn’t want those European governments demanding their money back. The meeting is a photo-op setup because the too-big-to-fail crowd is scared of put-back liability and shorts; they’re working hard to make it appear they’re doing something to quiet everybody down.
Note this message was sent BEFORE MIller made the “jail the baddies” promise that MIller recanted. And it indicates that this entire affair was intended to be an exercise in kabuki theater rather than anything remotely resembling a real investigation.
That brings us to MIller’s second lie. After a staffer ‘fessed up that no investigations were being undertaken, Miller maintained that extensive examinations were underway. That, as Nasiripour indicates, confirming earlier intelligence via Gretchen Morgenson, is complete crap (emphasis ours):
According to sources familiar with the ongoing state and federal probes, state and federal officials have wasted months not digging into the details of the foreclosure crisis, yielding little of value in court and undercutting the lenders’ incentive to strike a settlement of greater benefit to homeowners and taxpayers.
The investigators have yet to gather many documents, conduct depositions or assemble tallies of aggrieved homeowners. They don’t yet have a good handle on the number of wrongful foreclosures, the amount of fraudulent documents filed in local courts or the volume of legal instruments processed by so-called “robo-signers,” the agents that lenders employed to process foreclosure filings en masse without examining the underlying paperwork.
“The evidence a prosecutor would use is not in the possession of the prosecution,” said one person familiar with the ongoing settlement talks.
Even Richard Shelby, the ranking member of the Senate Banking Committee, and a long-standing critic of Wall Street, is not happy with the lack of investigations:
We need a full-fledged investigation,…There’s no substitute for a thorough investigation and finding of fact
The piece later details the evidence the prosecutors say they have obtained, and shows how it actually adds up to very little. This was a feature, not a bug. Consistent with the objective of doing nothing more than provide air cover for the banks, no meaningful investigations were conducted (and on top of that, there have been plenty of other irregularities in how the discussions were conducted). We pointed out this was essential to have any negotiating leverage: a party agrees to settle in order to escape possible litigation. The HufPo article underscores that point:
“I would never want to go into a negotiation without solid evidence of actual misconduct to hold as leverage over my counterpart,” said Neil M. Barofsky, the former special inspector general for the Troubled Asset Relief Program, which was crafted to bail out teetering banks. “It would also be very dangerous from a public policy perspective to waive all future claims as part of such a settlement if you do not have a good sense of the size, scope and severity of the underlying misconduct.”
If you don’t have a credible threat to launch a suit, why should anybody bother? The answer here is obvious: this isn’t a “settlement”; it’s a cash for a broad release (effectively, an indemnification). And since the AGs have done nada in the way of a probe, only the banks know the value of that waiver, and they won’t enter into a deal unless they think it is a bargain.
And indeed, the intended deal is a “get out of liability for almost free” card:
….expedience now appears to be trumping other considerations in settlement talks with major mortgage servicers. Despite failing to marshal a strong case proving misconduct during the foreclosure crisis, the government is seeking to craft a settlement quickly, in the hopes that this will inject greater certainty into the financial system, stabilize home prices and add vigor to a flagging economy.
Ah, yes, if we just give the banks another bailout, surely that will fix the economy! We can see how well that movie is working. As if “fixing the economy” is a good reason to ignore crooked behavior. By that logic, the government shouldn’t go after companies that sell beef full of e-coli because they provide employment.
And have no doubt, the Administration’s fingerprints are all over any deal:
The Justice Department is pressing state attorneys general to release the banks from liability for a host of alleged violations in exchange for a far-reaching settlement, people familiar with internal discussions said.
And the AGs have been sold a complete bill of goods:
The government fears that if it can’t stanch the flood of foreclosures by lowering troubled homeowners’ monthly mortgage payments — and if mortgage servicers cannot resume taking possession of homes for which borrowers have long been delinquent and sell them to people able to afford them — the housing crisis could drag on for years, keeping the broader economy in a feeble state. This is the scenario the government is seeking to stave off by striking a swift settlement with banks, restoring legal clarity to the foreclosure process and providing additional relief for distressed borrowers.
By including assistance for homeowners in the settlement agreement — like loan modifications that reduce payments or the overall amount owed — state and federal authorities said they believe they can help the housing market recover.
This is utter rubbish. First, the AGs are NOT going to “restore clarity to the foreclosure process.” Any action by the AGs will have no impact on the judiciary (the settlement will apparently include useless boilerplate about how banks will follow the law. They are supposed to be following the law regardless; an extra affirmation is pointless). The reason the banks are having so many trouble foreclosing is pervasive problems with how ownership interests were handled in the securitization process. In most cases, they are not amenable to easy fixes, which is why there has been so much fraud committed in courts all over the country.
The story indicates that the states are willing to sell out because any cash settlement would help fill yawning state budget gaps. But what we have been told by well placed sources is that the banks will take a deal only if it is very close to free: a minimal cash component (the $30 billion number in the HuffPo article is pure smoke and mirrors), with the rest being credits of various sorts, including for past mortgage mods. Oh, and any settlement is tax deductible, further lowering what little real cost there will be.
To the extent the AGs believe they need to bribe the banks to do mods, they’ve been snookered. The Fed and the OCC had the power to make them happen, now. The biggest banks all have large second lien portfolios (almost entirely HELOCs). They’ve refused to modify first mortgages because it’s a lot of work they don’t get paid for, and they make good money foreclosing. And they are able to keep borrower looking current on seconds via a combination of bullying and accepting very skinnied down payments.
If the Fed and the OCC told banks that they had to write down the second liens on delinquent mortgages, and write off the second liens on homes where they started foreclosing on the first, you’d see a 180 degree change in behavior. Banks would be falling all over themselves to do mods Indeed, if these regulators were to take this step (which is within their power) you’d probably see an bank change of heart on bankruptcy cramdowns too (banks twice beat back legislation to write down the value of a mortgage to the market value of the house in bankruptcy proceedings, which is done with very other type of secured consumer debt).
If you are as upset with this as I am, call your state attorney general and give him a piece of your mind. You can find their phone numbers here.
We already know that the News of the World hacked the phones of virtually everyone in England, including dead people and the prime minister and, probably, you. But with the latest revelation, the scandal has actually ...
<b>News</b> of the World Hacked Cops Investigating <b>News</b> of the World HackingThe company's stock price has dropped since the revelations of a wider phone hacking scandal at News of the World.
<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>The watchdog group Citizens For Responsibility and Ethics in Washington is calling on Congress to investigate Rupert Murdoch's News Corp. for evidence that the company's sprawling phone hacking scandal reached the United ...
CREW Calls On Congress To Investigate <b>News</b> Corp. After Phone <b>...</b>
travelers bobby fergusonWe already know that the News of the World hacked the phones of virtually everyone in England, including dead people and the prime minister and, probably, you. But with the latest revelation, the scandal has actually ...
<b>News</b> of the World Hacked Cops Investigating <b>News</b> of the World HackingThe company's stock price has dropped since the revelations of a wider phone hacking scandal at News of the World.
<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>The watchdog group Citizens For Responsibility and Ethics in Washington is calling on Congress to investigate Rupert Murdoch's News Corp. for evidence that the company's sprawling phone hacking scandal reached the United ...
CREW Calls On Congress To Investigate <b>News</b> Corp. After Phone <b>...</b>
travelers bobby ferguson
