Why Obama’s Home Affordable Modification Program Failed (Spoiler Alert: Thank Bank Of America et al)

Back when the Executive and Congress at least pretended not to abdicate all power to the Fed, one of the centerpiece programs designed to boost the housing market for the benefit of the poor (as opposed to letting Ben Bernanke make marginal US housing a rental industry owned by a handful of private equity firms and hedge funds), was Barack Obama’s Home Affordable Modification Program (or HAMP), which attempted to prevent foreclosures by lowering distressed borrowers’ mortgage payments. Under the program, homeowners would be given trial modifications to prove they can make reduced payments before the changes become permanent. The program was a disaster as of the 3 million foreclosures that were targeted for modification in 2009, only 905,663 mods have been successful nearly five years later – a tiny 13% of the 6.9 million who applied (still, numbers which Obamacare would be delighted to achieve). Part of the reason: the program’s reliance on the same industry that sold shoddy mortgages during the housing bubble and improperly sped foreclosures afterward. But there was much more. For the definitive explanation of everything else that went wrong, we go to Bloomberg’s Hugh Son whose masterpiece released today explains how and why once again the banks – and especially one of them – won, and everyone else lost.

The story begins at Bank of America where instead of helping homeowners as promised under agreements with the U.S. Treasury Department, the bailed out bank stalled them with repeated requests for paperwork and incorrect income calculations, according to nine former Urban Lending employees. Urban Lending was one of the vendors brought in to handle grievances from
lawmakers and regulators on behalf of borrowers, also operated a
mail-processing center for HAMP documents. Some borrowers were sent into foreclosure or pricier loan modifications padded with fees resulting from the delays, according to the people, all but two of whom asked to remain anonymous because they signed confidentiality agreements. Curiously, Bank of America authorized Urban Lending to refer to itself as the Office of the CEO and President in letters and telephone conversations to “provide a seamless experience for homeowners who complained directly to Moynihan” in a way that would represent Urban and other vendors like Urban is as an extension of Bank of America.

Son chronicles the accounts of former employees of the BofA (non-) division who help explain why Obama’s plan fell far short of the 3 million averted foreclosures targeted in 2009.

The story continues, once again, at Bank of America:

Bank of America stands out in a program that lawmakers and former Federal Deposit Insurance Corp. Chairman Sheila Bair have called a failure, leaving many homeowners worse off. The second-largest U.S. lender canceled more trial modifications than any mortgage firm and sent the highest percentage of rejected customers into foreclosure, Treasury data show.

 

To help run its modification program, Bank of America relied on managers who had worked at Countrywide Financial Corp., the subprime lender it took over in 2008. Those executives created and enforced quotas for resolving complaints, according to the former employees. Among them was Rebecca Mairone, found liable by a federal jury in October for defrauding government-backed housing companies Fannie Mae and Freddie Mac while working at Countrywide.

 

Urban Lending staff, struggling to meet those quotas, resorted to falsifying records and improperly purging complaints, the people said. They sent letters containing inaccurate statements on Office of the CEO and President stationery to lawmakers and U.S. agency officials who sought assistance on behalf of borrowers, the former employees said.

Next, we learn some more about how Bank of America took its foreclosure modification duties seriously:

Tens of thousands of HAMP modifications were improperly denied by Bank of America and Urban Lending since April 2009, according to a July complaint filed by homeowners against the two companies in federal court in Colorado.

 

Everyone knew that we weren’t helping people,” said Erik Schnackenberg, a customer-service manager who left Urban Lending in 2011 and now runs a yoga studio in Longmont, Colorado. “They were giving us all the pressure and none of the power to change anything. It was this absurd, self-contained ecosystem of worthlessness.”

 

Schnackenberg and other former employees, who spent from four months to three years at Urban Lending as customer-service representatives and auditors, said they spoke when contacted by Bloomberg News because they’re distressed by what they saw.

To be sure, the relationship was quite lucrative for Urban Lending…

Revenue at Urban Lending surged to $183.5 million last year from $8 million in 2007, making it one of the country’s fastest-growing minority-owned businesses, according to Black Enterprise magazine. Sanders, whose other holdings include the Pittsburgh restaurant Savoy and a stake in energy-drink maker Fever, declined to comment for this article.

 

Urban Lending expanded in Colorado after winning the Bank of America contract, moving into a five-story brick building in Broomfield with views of the Rocky Mountains. The firm also had a warehouse in Broomfield for processing documents from tens of thousands of HAMP applications.

 

There, unopened mail was stacked to the ceiling, said three people who spent time at the warehouse. Time-sensitive documents such as pay stubs grew stale, and paperwork was scanned into computer systems late or partially, triggering loan-modification rejections, the people said.

… if only the outfit took its tasks as seriously as it deposited the Bank of America checks. It turns out the only work that was taken seriously was how to find shortcuts to doing any actual work:

At the office in Broomfield, Urban Lending employees examined every letter from lawmakers to determine which were computer-generated and which were signed by a human, according to four former employees. The handwritten ones got special attention and were called wet signatures, they said. The others were referred to as dry.

 

The signatures of some U.S. senators, including Democrats Harry Reid of Nevada, Carl Levin of Michigan and Charles Schumer of New York, were enlarged to two to three feet and tacked on the walls of a quality-control room to help employees identify wet signatures, the people said.

It was only downhill from there:

The most common tactic used to stall and reject homeowners was to claim they hadn’t submitted paperwork, according to all nine former employees. Urban Lending requested new applications and supporting documents including pay stubs every 30 to 60 days, even if the customer had sent them, the people said.

 

“People went through years of sending documents in,” said Daniel Ellersdorfer, 37, a customer advocate who left Urban Lending after 13 months in September 2012 and is now a scuba-diving instructor. “There were people who did everything right and they would still get screwed over and have to start the modification process all over.”

What was the motivation to delay the process? Simple: fees, and natural attrition that would ultimately make the applicants unacceptable for modification:

Borrowers whose modifications were delayed for a year or longer accumulated thousands of dollars in fees and interest and were disqualified for HAMP because their debt-to-income ratios worsened over time, four former Urban Lending employees said. Foreclosure or modifications under the bank’s own program, typically with higher interest rates, often became the only options, the people said.

 

Bank of America said it had given 891,100 of its own modifications as of October, more than three times as many as provided under HAMP. That’s because most of the bank’s customers didn’t qualify for the government plan, Sturzenegger said. The bank gave legal assignments, title searches and appraisals to its own subsidiaries, including Recontrust and LandSafe. Fees charged to homeowners ranged from about $45 a month to inspect the outsides of homes to about $850 for legal filings, according to three former Urban Lending employees.

Sure enough, if it was Bank of America’s intent to accumulate the largest possible inventory of houses in foreclosure it did so admirably, with a trial foreclosure rate under HAMP of 33%: double the industry average, and the highest of the big bank participants.

Bank of America, which inherited hundreds of thousands of overdue borrowers from Countrywide, sent 33 percent of canceled HAMP trials into foreclosure through the end of July, the highest percentage of any of the biggest servicers, Treasury data show. The figure was 27 percent for Wells Fargo & Co. and 20 percent for both JPMorgan Chase & Co. and Citigroup Inc. The industry average was 22 percent.

 

 

“While the country as a whole has made significant progress, there is still room for improvement for servicers, and the Treasury is committed to applying pressure on the mortgage-servicing industry to improve servicer behavior,” Treasury Deputy Assistant Secretary Tim Bowler said in an e-mail.

The fact that Urban Lending was staffed with grotesquely underqualified workers certainly helped the end-goal of sequestering as much property as possible into shadow inventory, and thus taking it off the market (why: read all about Foreclosure Stuffing here).

The reality of working at Urban Lending contrasted with the training they received, six of the people said. Recruits were told during six-week introductory sessions that they were being paid $16 to $18 an hour to help Americans keep their homes.

Once they started, employees learned that Bank of America quotas applied to everyone from customer advocates to auditors and quality-control staff, the people said. They worked 15-hour days and on weekends with the knowledge they could be fired if they couldn’t meet targets. Properly resolving complaints was often impossible because Urban Lending employees couldn’t access needed files among a dozen software programs and relied on Bank of America personnel who often ignored requests, they said.

“Smart people would leave right away,” said Schnackenberg, the former Urban Lending manager. “You were left with people trying to take care of complex, aged files who were formerly assistant manager of a Taco Bell. It was a recipe for failure for homeowners.”

Under pressure from bank managers to close cases, Urban Lending workers resorted to shortcuts, six people said. That included forging power-of-attorney letters or removing notations that a customer hired a lawyer, making it easier to close files.

Managers purged complaints after business hours, circumventing an internal review process set up by Accenture Plc, according to two of the people. Employees falsified records to show late-night conversations with borrowers that didn’t happen, the people said.

In retrospect, with such rampant, unsupervised (or perhaps premeditated) criminality going on, one can see why the big banks were (and are) so eager to pay up any settlement proposal they get from Eric Holder, as long as nobody ends up in jail, and guilt is neither admitted nor denied of course.

But the biggest irony is perhaps that Bank of America used none other than the very same employees who originally were peddling the mortgages to consumers at Countrywide (purchased by Bank of America in the worst M&A deal of all time), to facilitate the HAMP “goals”:

Bank of America used ex-Countrywide managers to push Urban Lending to meet its goals, according to the former employees. One of them was Mairone, the only individual named in the government’s first mortgage lawsuit from the financial crisis to reach trial.

 

Mairone was part of the Countrywide team that set up a program known as the Hustle, which removed quality-control steps for mortgages sold to Fannie Mae and Freddie Mac, costing the U.S.-backed firms $863.6 million, according to a Nov. 8 filing by prosecutors in federal court in New York.

 

She helped create Bank of America’s HAMP policies as the firm’s lead default-servicing executive, according to the July lawsuit.

Where is Mairone now? “Mairone joined JPMorgan in 2012 and now oversees vendors for that bank, according to a New York Times article.” It really doesn’t get any more hilarious than this…

Not stupid, Bank of America of course realized that one day an article such as this one would come out, so it took preventative steps:

Urban Lending employees were told by trainers that they should never admit fault on the bank’s behalf in writing or over the phone, four former workers said. They were warned that e-mails could be subpoenaed, the people said.

 

To soothe homeowners frustrated by delays, employees had a monthly allotment of $25 and $50 gift cards they could give customers, said three of the former workers. The joke among staff: It was just enough money to buy moving boxes.

 

Urban Lending employees said they were told by their managers that the orders to reduce homeowners’ complaints came directly from Moynihan and Bank of America board members, who checked caseload figures daily. One such push was called the “Drive to Five,” a plan in late 2010 to lower complaints to 5,000 from more than 15,000.

None other than BofA CEO Brian Moynihan has spoken of the bank’s perverse conflicts of interest in this matter: “He told an Atlanta Rotary Club prayer breakfast in October 2011 that foreclosing is “always the option of last resort,” according to prepared remarks. “Foreclosure is not only the worst outcome for a customer, it’s also the worst financial outcome for the servicer and the owner of the mortgage,” he said. “The best decisions are the ones that go beyond our own narrow self-interest.”

This, of course, is a lie: recall that the explicit subsidy that is stuffing bank balance sheets to the gills with “shadow inventory” achieved its mission perfectly: removing millions of housing units in supply from the market, and in the process creating an artificial subsidy as demand had to chase artificially reduced supply, thus pushing home prices higher, and in the process making home ownership far less affordable for everyone else, especially those Americans who not only dutifully pay their taxes, but have a steady job and are willing to pay the monthly mortgage fee. It is they who were and are most impacted by Bank of America’s actions. As for the bank, now that prices are artificially higher by 10%, 20% or more percent, watch as slowly but surely the BofA, JPMs and Wells proceed to release ever more housing inventory from their balance sheets, but from a far higher equilibrium price, thus affording them a few quarters of selling into what is still a sellers market, if not for much longer.

But perhaps the best way to visualize how HAMP failed, is through a case study:

Jose De Santiago, a municipal inspector in Mission Viejo, California, was in the midst of a modification in December 2011 when he got the letter: He had five days to leave his two-bedroom condo. De Santiago, 43, spent Christmas packing his belongings with his son Joseph, then 13, and was out the next day.

 

After a Bloomberg News reporter alerted the lender’s communications department, Bank of America bought the condo from Alton Holdings Inc., which had purchased it in a foreclosure auction. A bank lawyer apologized, and De Santiago was allowed to move back after two weeks.

 

Bank of America offered $5,000 to compensate him for furniture lost in the eviction, according to a draft of a proposed settlement. De Santiago refused because he would have had to sign a liability release, he said. He’s still fighting the lender to get it to repair his credit scores.

 

“They asked me to put in writing how well they treated me,” De Santiago said. “I can’t believe Bank of America was allowed to do the horrible things it did to me and others.” Bank of America’s Sturzenegger said some customers who should have received government assistance may have fallen through the cracks of the system the lender created.

 

“If you went back and re-reviewed the documents, based on today, would they have qualified for HAMP?” Sturzenegger said. “Possibly. That’s the best way to answer it.”

And with Bank of America doing all of the above, one can be certain that every other bank was doing the same.

As for the endgame: “The CEO, dogged by investors’ questions about mortgage costs since taking over in 2010, is dismantling the division that handles delinquent borrowers. The unit had 6,200 contractors as of June, down from its peak of 16,900 last year.”

Since the grotesquely criminal behavior described above likely only touches the surface of what went on at Bank of America et al, one can see why, and one wonders: just what else will be revealed when the centrally-planned experiment to prevent the grand reset finally fails and the Fed’s liquidity tide finally goes out. Whatever it is, we can fast forward to the conclusion and inform American taxpayers that the biggest losers will, once again, be you.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/DTTTooEZoPM/story01.htm Tyler Durden

Why Obama's Home Affordable Modification Program Failed (Spoiler Alert: Thank Bank Of America et al)

Back when the Executive and Congress at least pretended not to abdicate all power to the Fed, one of the centerpiece programs designed to boost the housing market for the benefit of the poor (as opposed to letting Ben Bernanke make marginal US housing a rental industry owned by a handful of private equity firms and hedge funds), was Barack Obama’s Home Affordable Modification Program (or HAMP), which attempted to prevent foreclosures by lowering distressed borrowers’ mortgage payments. Under the program, homeowners would be given trial modifications to prove they can make reduced payments before the changes become permanent. The program was a disaster as of the 3 million foreclosures that were targeted for modification in 2009, only 905,663 mods have been successful nearly five years later – a tiny 13% of the 6.9 million who applied (still, numbers which Obamacare would be delighted to achieve). Part of the reason: the program’s reliance on the same industry that sold shoddy mortgages during the housing bubble and improperly sped foreclosures afterward. But there was much more. For the definitive explanation of everything else that went wrong, we go to Bloomberg’s Hugh Son whose masterpiece released today explains how and why once again the banks – and especially one of them – won, and everyone else lost.

The story begins at Bank of America where instead of helping homeowners as promised under agreements with the U.S. Treasury Department, the bailed out bank stalled them with repeated requests for paperwork and incorrect income calculations, according to nine former Urban Lending employees. Urban Lending was one of the vendors brought in to handle grievances from
lawmakers and regulators on behalf of borrowers, also operated a
mail-processing center for HAMP documents. Some borrowers were sent into foreclosure or pricier loan modifications padded with fees resulting from the delays, according to the people, all but two of whom asked to remain anonymous because they signed confidentiality agreements. Curiously, Bank of America authorized Urban Lending to refer to itself as the Office of the CEO and President in letters and telephone conversations to “provide a seamless experience for homeowners who complained directly to Moynihan” in a way that would represent Urban and other vendors like Urban is as an extension of Bank of America.

Son chronicles the accounts of former employees of the BofA (non-) division who help explain why Obama’s plan fell far short of the 3 million averted foreclosures targeted in 2009.

The story continues, once again, at Bank of America:

Bank of America stands out in a program that lawmakers and former Federal Deposit Insurance Corp. Chairman Sheila Bair have called a failure, leaving many homeowners worse off. The second-largest U.S. lender canceled more trial modifications than any mortgage firm and sent the highest percentage of rejected customers into foreclosure, Treasury data show.

 

To help run its modification program, Bank of America relied on managers who had worked at Countrywide Financial Corp., the subprime lender it took over in 2008. Those executives created and enforced quotas for resolving complaints, according to the former employees. Among them was Rebecca Mairone, found liable by a federal jury in October for defrauding government-backed housing companies Fannie Mae and Freddie Mac while working at Countrywide.

 

Urban Lending staff, struggling to meet those quotas, resorted to falsifying records and improperly purging complaints, the people said. They sent letters containing inaccurate statements on Office of the CEO and President stationery to lawmakers and U.S. agency officials who sought assistance on behalf of borrowers, the former employees said.

Next, we learn some more about how Bank of America took its foreclosure modification duties seriously:

Tens of thousands of HAMP modifications were improperly denied by Bank of America and Urban Lending since April 2009, according to a July complaint filed by homeowners against the two companies in federal court in Colorado.

 

Everyone knew that we weren’t helping people,” said Erik Schnackenberg, a customer-service manager who left Urban Lending in 2011 and now runs a yoga studio in Longmont, Colorado. “They were giving us all the pressure and none of the power to change anything. It was this absurd, self-contained ecosystem of worthlessness.”

 

Schnackenberg and other former employees, who spent from four months to three years at Urban Lending as customer-service representatives and auditors, said they spoke when contacted by Bloomberg News because they’re distressed by what they saw.

To be sure, the relationship was quite lucrative for Urban Lending…

Revenue at Urban Lending surged to $183.5 million last year from $8 million in 2007, making it one of the country’s fastest-growing minority-owned businesses, according to Black Enterprise magazine. Sanders, whose other holdings include the Pittsburgh restaurant Savoy and a stake in energy-drink maker Fever, declined to comment for this article.

 

Urban Lending expanded in Colorado after winning the Bank of America contract, moving into a five-story brick building in Broomfield with views of the Rocky Mountains. The firm also had a warehouse in Broomfield for processing documents from tens of thousands of HAMP applications.

 

There, unopened mail was stacked to the ceiling, said three people who spent time at the warehouse. Time-sensitive documents such as pay stubs grew stale, and paperwork was scanned into computer systems late or partially, triggering loan-modification rejections, the people said.

… if only the outfit took its tasks as seriously as it deposited the Bank of America checks. It turns out the only work that was taken seriously was how to find shortcuts to doing any actual work:

At the office in Broomfield, Urban Lending employees examined every letter from lawmakers to determine which were computer-generated and which were signed by a human, according to four former employees. The handwritten ones got special attention and were called wet signatures, they said. The others were referred to as dry.

 

The signatures of some U.S. senators, including Democrats Harry Reid of Nevada, Carl Levin of Michigan and Charles Schumer of New York, were enlarged to two to three feet and tacked on the walls of a quality-control room to help employees identify wet signatures, the people said.

It was only downhill from there:

The most common tactic used to stall and reject homeowners was to claim they hadn’t submitted paperwork, according to all nine former employees. Urban Lending requested new applications and supporting documents including pay stubs every 30 to 60 days, even if the customer had sent them, the people said.

 

“People went through years of sending documents in,” said Daniel Ellersdorfer, 37, a customer advocate who left Urban Lending after 13 months in September 2012 and is now a s
cuba-diving instructor. “There were people who did everything right and they would still get screwed over and have to start the modification process all over.”

What was the motivation to delay the process? Simple: fees, and natural attrition that would ultimately make the applicants unacceptable for modification:

Borrowers whose modifications were delayed for a year or longer accumulated thousands of dollars in fees and interest and were disqualified for HAMP because their debt-to-income ratios worsened over time, four former Urban Lending employees said. Foreclosure or modifications under the bank’s own program, typically with higher interest rates, often became the only options, the people said.

 

Bank of America said it had given 891,100 of its own modifications as of October, more than three times as many as provided under HAMP. That’s because most of the bank’s customers didn’t qualify for the government plan, Sturzenegger said. The bank gave legal assignments, title searches and appraisals to its own subsidiaries, including Recontrust and LandSafe. Fees charged to homeowners ranged from about $45 a month to inspect the outsides of homes to about $850 for legal filings, according to three former Urban Lending employees.

Sure enough, if it was Bank of America’s intent to accumulate the largest possible inventory of houses in foreclosure it did so admirably, with a trial foreclosure rate under HAMP of 33%: double the industry average, and the highest of the big bank participants.

Bank of America, which inherited hundreds of thousands of overdue borrowers from Countrywide, sent 33 percent of canceled HAMP trials into foreclosure through the end of July, the highest percentage of any of the biggest servicers, Treasury data show. The figure was 27 percent for Wells Fargo & Co. and 20 percent for both JPMorgan Chase & Co. and Citigroup Inc. The industry average was 22 percent.

 

 

“While the country as a whole has made significant progress, there is still room for improvement for servicers, and the Treasury is committed to applying pressure on the mortgage-servicing industry to improve servicer behavior,” Treasury Deputy Assistant Secretary Tim Bowler said in an e-mail.

The fact that Urban Lending was staffed with grotesquely underqualified workers certainly helped the end-goal of sequestering as much property as possible into shadow inventory, and thus taking it off the market (why: read all about Foreclosure Stuffing here).

The reality of working at Urban Lending contrasted with the training they received, six of the people said. Recruits were told during six-week introductory sessions that they were being paid $16 to $18 an hour to help Americans keep their homes.

Once they started, employees learned that Bank of America quotas applied to everyone from customer advocates to auditors and quality-control staff, the people said. They worked 15-hour days and on weekends with the knowledge they could be fired if they couldn’t meet targets. Properly resolving complaints was often impossible because Urban Lending employees couldn’t access needed files among a dozen software programs and relied on Bank of America personnel who often ignored requests, they said.

“Smart people would leave right away,” said Schnackenberg, the former Urban Lending manager. “You were left with people trying to take care of complex, aged files who were formerly assistant manager of a Taco Bell. It was a recipe for failure for homeowners.”

Under pressure from bank managers to close cases, Urban Lending workers resorted to shortcuts, six people said. That included forging power-of-attorney letters or removing notations that a customer hired a lawyer, making it easier to close files.

Managers purged complaints after business hours, circumventing an internal review process set up by Accenture Plc, according to two of the people. Employees falsified records to show late-night conversations with borrowers that didn’t happen, the people said.

In retrospect, with such rampant, unsupervised (or perhaps premeditated) criminality going on, one can see why the big banks were (and are) so eager to pay up any settlement proposal they get from Eric Holder, as long as nobody ends up in jail, and guilt is neither admitted nor denied of course.

But the biggest irony is perhaps that Bank of America used none other than the very same employees who originally were peddling the mortgages to consumers at Countrywide (purchased by Bank of America in the worst M&A deal of all time), to facilitate the HAMP “goals”:

Bank of America used ex-Countrywide managers to push Urban Lending to meet its goals, according to the former employees. One of them was Mairone, the only individual named in the government’s first mortgage lawsuit from the financial crisis to reach trial.

 

Mairone was part of the Countrywide team that set up a program known as the Hustle, which removed quality-control steps for mortgages sold to Fannie Mae and Freddie Mac, costing the U.S.-backed firms $863.6 million, according to a Nov. 8 filing by prosecutors in federal court in New York.

 

She helped create Bank of America’s HAMP policies as the firm’s lead default-servicing executive, according to the July lawsuit.

Where is Mairone now? “Mairone joined JPMorgan in 2012 and now oversees vendors for that bank, according to a New York Times article.” It really doesn’t get any more hilarious than this…

Not stupid, Bank of America of course realized that one day an article such as this one would come out, so it took preventative steps:

Urban Lending employees were told by trainers that they should never admit fault on the bank’s behalf in writing or over the phone, four former workers said. They were warned that e-mails could be subpoenaed, the people said.

 

To soothe homeowners frustrated by delays, employees had a monthly allotment of $25 and $50 gift cards they could give customers, said three of the former workers. The joke among staff: It was just enough money to buy moving boxes.

 

Urban Lending employees said they were told by their managers that the orders to reduce homeowners’ complaints came directly from Moynihan and Bank of America board members, who checked caseload figures daily. One such push was called the “Drive to Five,” a plan in late 2010 to lower complaints to 5,000 from more than 15,000.

None other than BofA CEO Brian Moynihan has spoken of the bank’s perverse conflicts of interest in this matter: “He told an Atlanta Rotary Club prayer breakfast in October 2011 that foreclosing is “always the option of last resort,” according to prepared remarks. “Foreclosure is not only the worst outcome for a customer, it’s also the worst financial outcome for the servicer and the owner of the mortgage,” he said. “The best decisions are the ones that go beyond our own narro
w self-interest.”

This, of course, is a lie: recall that the explicit subsidy that is stuffing bank balance sheets to the gills with “shadow inventory” achieved its mission perfectly: removing millions of housing units in supply from the market, and in the process creating an artificial subsidy as demand had to chase artificially reduced supply, thus pushing home prices higher, and in the process making home ownership far less affordable for everyone else, especially those Americans who not only dutifully pay their taxes, but have a steady job and are willing to pay the monthly mortgage fee. It is they who were and are most impacted by Bank of America’s actions. As for the bank, now that prices are artificially higher by 10%, 20% or more percent, watch as slowly but surely the BofA, JPMs and Wells proceed to release ever more housing inventory from their balance sheets, but from a far higher equilibrium price, thus affording them a few quarters of selling into what is still a sellers market, if not for much longer.

But perhaps the best way to visualize how HAMP failed, is through a case study:

Jose De Santiago, a municipal inspector in Mission Viejo, California, was in the midst of a modification in December 2011 when he got the letter: He had five days to leave his two-bedroom condo. De Santiago, 43, spent Christmas packing his belongings with his son Joseph, then 13, and was out the next day.

 

After a Bloomberg News reporter alerted the lender’s communications department, Bank of America bought the condo from Alton Holdings Inc., which had purchased it in a foreclosure auction. A bank lawyer apologized, and De Santiago was allowed to move back after two weeks.

 

Bank of America offered $5,000 to compensate him for furniture lost in the eviction, according to a draft of a proposed settlement. De Santiago refused because he would have had to sign a liability release, he said. He’s still fighting the lender to get it to repair his credit scores.

 

“They asked me to put in writing how well they treated me,” De Santiago said. “I can’t believe Bank of America was allowed to do the horrible things it did to me and others.” Bank of America’s Sturzenegger said some customers who should have received government assistance may have fallen through the cracks of the system the lender created.

 

“If you went back and re-reviewed the documents, based on today, would they have qualified for HAMP?” Sturzenegger said. “Possibly. That’s the best way to answer it.”

And with Bank of America doing all of the above, one can be certain that every other bank was doing the same.

As for the endgame: “The CEO, dogged by investors’ questions about mortgage costs since taking over in 2010, is dismantling the division that handles delinquent borrowers. The unit had 6,200 contractors as of June, down from its peak of 16,900 last year.”

Since the grotesquely criminal behavior described above likely only touches the surface of what went on at Bank of America et al, one can see why, and one wonders: just what else will be revealed when the centrally-planned experiment to prevent the grand reset finally fails and the Fed’s liquidity tide finally goes out. Whatever it is, we can fast forward to the conclusion and inform American taxpayers that the biggest losers will, once again, be you.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/DTTTooEZoPM/story01.htm Tyler Durden

Despite Proposed Pay Caps, London Bankers Expect 44% Bonus Increase

The European Union’s February decision to outlaw banker bonuses that are more than twice fixed pay was an effort to curb excessive payouts and asymmetric risk-taking. The UK challenged the caps as illegal in September (and the case has yet to be decided) but the European Banking Authority softened its stance last week by allowing banks to exempt staff earning up to EUR 1 million from the rules that cap bonuses. It seems the bankers are making hay while the sun shines as Bloomberg now reports, Managing Directors at banks in London are expecting a 44% rise in bonuses for 2013 – to more than double their average salary.

 

 

Via Bloomberg,

Managing directors at banks in London are expecting a 44 percent rise in bonuses for 2013 even as European authorities seek to scale back compensation, according to a recruiter’s survey.

 

The average bonus for managing directors may increase to 166,955 pounds ($271,686) from 115,618 pounds a year earlier, Astbury Marsden said in an e-mailed statement. That’s more than double their average salary, up from 88 percent in 2012, the recruitment firm said.

 

Despite pressure to keep a lid on bonuses, as the economy recovers and bank profits start to return, it’s not unreasonable that bonus expectations also rise,” Mark Cameron, chief operating officer at Astbury Marsden in London, said in the statement. “Although prospects have improved, some may find themselves disappointed this year.”

 

The European Union brokered a deal in February to outlaw banker bonuses that are more than twice fixed pay, a move lawmakers said would prevent excessive payouts and curb risk-taking. The U.K. in September challenged the caps as illegal at the EU’s highest court in a case that has yet to be decided.

 

The European Banking Authority softened its stance on bonuses somewhat, stating on Dec. 13 that banks will be able to ask national regulators to exempt staff earning as much as 1 million euros ($1.4 million) from rules that cap bonuses at twice fixed pay.

 

 

Britain was home to 2,188 investment bankers earning more than 1 million euros in 2012, the largest share in the EU, while Spain had 37, the London-based EBA, set up in 2011 to harmonize banking rules in the EU, said in a survey last month. France and Germany had 117 and 100, respectively.

It truly seems like we learned nothing from 2008 – though, given the even larger central bank put, the asymmetric return from risk-taking is now even larger… “the music is playing so keep dancing” appears to be the meme once again


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/79GFHFLozSo/story01.htm Tyler Durden

Riverside Cops Pretend To Be High Schoolers, Arrest 25 Students For Pot

Riverside County cops — the same guys responsible for
tricking an autistic teenager into buying marijuana as part of a
drug sting last year
— are back on high school campuses.
Apparently undeterred by
the media
firestorm
 surrounding last year’s arrests and a
lawsuit
charging the department with negligence, the Riverside
County Sherriff’s Department of Riverside County, Calif., has
decided to continue its controversial undercover drug investigation
program. Under this program, officers spend their days in local
high schools pretending to be students. Over a semester, the
officers try to build their underaged “classmates'” trust, then
arrange drug deals with a few dozen students and ultimately arrest
them. 

On Dec. 12, officers arrested 25 students from Perris and Paloma
High Schools for allegedly selling illicit drugs, including
cocaine, prescription pills, and marijuana. According to Lieutenant
Paul Bennett, most of the drug buys were for small
amounts of marijuana

Students say the officers walked into classrooms with photos of
the teen suspects and handcuffed them in front of their peers.
Twenty-three of the suspects are juveniles and two are 18 or
older. 

According to several students who were interviewed
by the Press Enterprise
, the scene was “scary” and
made them suspicious of their peers and teachers. “You think you
can trust people – you just never know,” Bruce Hollen, 16,
said. 

The investigation was carried out with enthusiastic support from
Jonathan Greenberg, superintendent of the Perris Union High School
District. 

From the Press
Enterprise
:

Greenberg said he had no reservations.

“It was a question of what we could do to assist [the
officers],” he said.

“This is a very well-researched program,” he added. “The people
in it are all professionals.”

Greenberg said there were only three district officials who knew
about the investigation. No one on the two campuses was told. He
said he informed school board members Wednesday night [the night
before the arrests].

Unlike last year’s arrests though, Lt. Bennett clarified that no
autistic or learning-disabled teens were arrested; only “mainstream
students” in general classes were. Bennett said the deputies
selected to go undercover this year had received additional
training about dealing with developmentally disabled students.

The Los Angeles Police Department pioneered undercover high
school drug stings decades ago but
discontinued
 the program in 2005 when school officials
noticed eerily similar patterns to now: Special needs kids were
increasingly getting busted and police typically found small
amounts of pot. 

Despite objections from parents,
police
, and
drug policy reform groups
 that the program is ineffective,
“sick”, and emotionally damaging to teens, the Riverside County
Sheriff’s Department stands by it. From the department’s press
release announcing the arrest of the teens:

One of the goals of the Riverside County Sheriff’s Department’s
Special Investigations Bureau (SIB) is to maintain a drug-free
living environment for the community. Because our neighborhood
children are the future, our objective is to keep children
productive and drug-free and provide a safe learning
environment.

The underage students were taken to a juvenile detention hall
while the two adults, 18-year-old Serina Ramirez and 19-year-old
Erick De La Cruz, were taken to a detention center.

Watch a Reason TV video on Riverside County cops tricking an
autistic teen into buying pot:

from Hit & Run http://reason.com/blog/2013/12/16/riverside-cops-pretend-to-be-high-school
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Is Bitcoin Bringing The “Dark Web” Into The Light?

Despite the best efforts of the search engines, the majority of the Internet is unsearchable with estimates of this “Unlit” Web as high as 90%. As ConvergEx’s Nick Colas notes, some of this content (no one knows how much) is dark for a reason – hosting every form of criminal behavior known to man – but the rest from the increasing interest in anonymous Internet use in light of widely publicized government surveillance.

Among the least well understood emerging themes in technology, Colas points out, is the “Dark Web”, adding that Oscar Wilde famously opined that “All human beings have three lives: public, private and secret.”  The existing structure of the Internet handles the first two very well.  The Dark Web is, apparently, for the third. The first innovation to move from “Dark” to “Lit” Web is bitcoin, but it certainly won’t be the last.

Via ConvergEx’s Nick Colas,

If you are a fan of the movie The Princess Bride, you might recall the character of Dread Pirate Roberts.  His was as inherited position, with one man handing down the job to a worthy apprentice when he grew tired of the pirating game.  This approach allowed a series of people to benefit from the efforts of many predecessors rather than having to build up their own “Brand” on the high seas.

I am sorry to report that the name Dread Pirate Roberts is now not just a memory from a delightful book and movie, but the nom du guerre of a man accused of running a real life drug website and attempting to arrange several contract killings.  His real name is Ross Ulbricht, and these are the particulars of his case:

According to Federal prosecutors, the FBI arrested Ulbricht at the Glen Park branch of the San Francisco Public Library on October 1st.  They confiscated his laptop computer, where they noted he was logged into a website call Silk Road as an administrator. This was a popular site for the sale and distribution of illegal drugs and other contraband.  The FBI had successfully tracked the operation of the site to Ulbricht, according to court documents related to the case.

 

In documents found on the seized computer, investigators found a journal, which they claim chronicles Ulbricht’s own development of the site back to its founding in 2010.  This included the odd fact that he had grown several kilos of hallucinogenic mushrooms so the site would have something to sell when it went live but before other sellers began to offer their own illegal drugs.

 

As if running an online portal for illicit drugs wasn’t bad enough, Ulbricht also allegedly tried to arrange six murders-for-hire.  The reported targets, all of who are still apparently alive, ranged from blackmailers to fraudulent sellers on the site.  These presumably eroded Silk Road’s reputation and user trust.

 

As of this writing, Ulbricht is being held without bail.  The Federal government confiscated 144,000 bitcoins as part of the investigation, worth $122 million as of today.  Several press accounts of the case theorize that this stash was only part of Ulbricht’s total holdings and that, if true, would give him access to hundreds of millions of dollars in notional wealth with which to flee the country.

The bitcoin piece of this story got some press, given all the recent interest in the online “Currency”; what got lost in the wash was the presence of the “Dark Web” – a parallel, if much larger Internet, to the one we all use every day.  A brief description here:

Google, Yahoo and Bing, among other search engines, only track part of the Internet – essentially the bits that website owners want the public to see.  Business owners strive to optimize their sites to appear on pages 1 or 2 of a given search, knowing that most users will not travel farther.  Time magazine recently ran a cover article on the “Deep Web”, essentially the Internet which search engines do not reach, and estimated that +90% of online content cannot be found by the typical search engines we all use every day.  Wired magazine puts the number at 99%.  Either way, most of the Internet is essentially “Dark”.

 

A large chunk of this “Missing” data must come from its formatting, unfriendly to Google/Yahoo/Bing search algorithms.  Just consider all the economic data available through the Federal Reserve’s datasets.  Typing “FRED inflation” into Google does get you to the St. Louis Fed’s excellent database of economic indicators, but from there you have to enter exactly what you want.  Google, among others, is busy trying to integrate this information; there is a link after the text to a paper describing this effort.  Another example of the Dark Web: your financial information at your bank or broker, held behind security firewalls but available to you with an ID and password.

 

Then there is the part of the Internet that doesn’t want to be found, and where the “Dark Web” means something else.  Silk Road is one example, and even though that site is now shuttered there are other places on the Dark Web where users can purchase illegal drugs.  From there, it gets a lot worse.  There are sites advertising contract killings, illegal pornography, money laundering, and stolen financial information.  Some press reports link global terrorism to the Dark Web.

Now, you won’t find the Dark Web on your Explorer, Safari or Firefox browser.  To find these sites you’ll need something called Tor, short for “The Onion Router”, or other software which essentially makes you anonymous online.  These browsers route your heavily encrypted traffic through a rabbit warren of servers around the world, making it nearly impossible to connect your computer to any individual site you might visit.  Tor was actually developed by the U.S. Navy for secure communication, but the software is available for free here: https://www.torproject.org

Secure and anonymous access to the Internet is becoming a growth business, and Tor is one of the hottest tickets to that show.  The Google search phrase “Tor search” has tripled in the last year, and the query “Tor” is up 100% over the same period.  Like most fashion-forward tech trends, searches for Tor cluster on the coasts, in Oregon, Washington state, California and New York.  Since search engine capability doesn’t reach the Dark Web – by design, of course – TorSearch is now available for users, with a reported 130,000 sites listed and something like a tripling of use in the last few weeks, according to media accounts.

There is an obvious tension between a growth opportunity for business and the need for society to regulate and control the illegal use of any technology.  A few points here:

Aside from search engine companies, there is not much academic research dedicated to the Dark Web.  We spent the better part of day trolling the usual scholarly sites, with little success.

 

Law enforcement seems poorly equipped to handle the challenge.  There was one high profile takedown of a server hosting a range of illegal activities in Ireland over the summer (link below), but its success seems to have been caused by a flaw in the Firefox browser software used by Tor.  The flaw has since been fixed.  It wasn’t a technical gltich that brought down Silk Road – one of the supposed hitmen contracted for the murder-for-hire plot was an undercover agent.

 

We did find one consumer product offering related to Tor – something called pogoplug – which directs your web traffic into the anonymous network.  It cost $49 and has wifi for your cell phone.  The downside: Tor is slower than conventional access since your information transits through more connections than the customary point-to-point process.

All that said, we do have one innovation – bitcoin – that successfully made the transition from Dark to “Lit” web.  Silk Road was clearly an early enabler of the online “Currency” but it now has the tacit recognition of everyone from the Federal Reserve to business television. Like the Dark Web, its early appeal was anonymity, but its low cost utility for money transfer should allow it to survive increasing regulatory scrutiny.  It won’t be a flawless transition, considering its birth in the primordial ooze of the Dark Web, but it seems well on its way.

Can there be other innovations, developed in the shadows of the Dark Web, which hit the mainstream?  It seems inevitable.  Revelations of government spying around the world provide the notional demand for anonymous Internet use.  Oscar Wilde famously opined that “All human beings have three lives: public, private and secret.”  The existing structure of the Internet handles the first two very well.  The Dark Web is, apparently, for the third. 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FeD7NNb2JFM/story01.htm Tyler Durden

Is Bitcoin Bringing The "Dark Web" Into The Light?

Despite the best efforts of the search engines, the majority of the Internet is unsearchable with estimates of this “Unlit” Web as high as 90%. As ConvergEx’s Nick Colas notes, some of this content (no one knows how much) is dark for a reason – hosting every form of criminal behavior known to man – but the rest from the increasing interest in anonymous Internet use in light of widely publicized government surveillance.

Among the least well understood emerging themes in technology, Colas points out, is the “Dark Web”, adding that Oscar Wilde famously opined that “All human beings have three lives: public, private and secret.”  The existing structure of the Internet handles the first two very well.  The Dark Web is, apparently, for the third. The first innovation to move from “Dark” to “Lit” Web is bitcoin, but it certainly won’t be the last.

Via ConvergEx’s Nick Colas,

If you are a fan of the movie The Princess Bride, you might recall the character of Dread Pirate Roberts.  His was as inherited position, with one man handing down the job to a worthy apprentice when he grew tired of the pirating game.  This approach allowed a series of people to benefit from the efforts of many predecessors rather than having to build up their own “Brand” on the high seas.

I am sorry to report that the name Dread Pirate Roberts is now not just a memory from a delightful book and movie, but the nom du guerre of a man accused of running a real life drug website and attempting to arrange several contract killings.  His real name is Ross Ulbricht, and these are the particulars of his case:

According to Federal prosecutors, the FBI arrested Ulbricht at the Glen Park branch of the San Francisco Public Library on October 1st.  They confiscated his laptop computer, where they noted he was logged into a website call Silk Road as an administrator. This was a popular site for the sale and distribution of illegal drugs and other contraband.  The FBI had successfully tracked the operation of the site to Ulbricht, according to court documents related to the case.

 

In documents found on the seized computer, investigators found a journal, which they claim chronicles Ulbricht’s own development of the site back to its founding in 2010.  This included the odd fact that he had grown several kilos of hallucinogenic mushrooms so the site would have something to sell when it went live but before other sellers began to offer their own illegal drugs.

 

As if running an online portal for illicit drugs wasn’t bad enough, Ulbricht also allegedly tried to arrange six murders-for-hire.  The reported targets, all of who are still apparently alive, ranged from blackmailers to fraudulent sellers on the site.  These presumably eroded Silk Road’s reputation and user trust.

 

As of this writing, Ulbricht is being held without bail.  The Federal government confiscated 144,000 bitcoins as part of the investigation, worth $122 million as of today.  Several press accounts of the case theorize that this stash was only part of Ulbricht’s total holdings and that, if true, would give him access to hundreds of millions of dollars in notional wealth with which to flee the country.

The bitcoin piece of this story got some press, given all the recent interest in the online “Currency”; what got lost in the wash was the presence of the “Dark Web” – a parallel, if much larger Internet, to the one we all use every day.  A brief description here:

Google, Yahoo and Bing, among other search engines, only track part of the Internet – essentially the bits that website owners want the public to see.  Business owners strive to optimize their sites to appear on pages 1 or 2 of a given search, knowing that most users will not travel farther.  Time magazine recently ran a cover article on the “Deep Web”, essentially the Internet which search engines do not reach, and estimated that +90% of online content cannot be found by the typical search engines we all use every day.  Wired magazine puts the number at 99%.  Either way, most of the Internet is essentially “Dark”.

 

A large chunk of this “Missing” data must come from its formatting, unfriendly to Google/Yahoo/Bing search algorithms.  Just consider all the economic data available through the Federal Reserve’s datasets.  Typing “FRED inflation” into Google does get you to the St. Louis Fed’s excellent database of economic indicators, but from there you have to enter exactly what you want.  Google, among others, is busy trying to integrate this information; there is a link after the text to a paper describing this effort.  Another example of the Dark Web: your financial information at your bank or broker, held behind security firewalls but available to you with an ID and password.

 

Then there is the part of the Internet that doesn’t want to be found, and where the “Dark Web” means something else.  Silk Road is one example, and even though that site is now shuttered there are other places on the Dark Web where users can purchase illegal drugs.  From there, it gets a lot worse.  There are sites advertising contract killings, illegal pornography, money laundering, and stolen financial information.  Some press reports link global terrorism to the Dark Web.

Now, you won’t find the Dark Web on your Explorer, Safari or Firefox browser.  To find these sites you’ll need something called Tor, short for “The Onion Router”, or other software which essentially makes you anonymous online.  These browsers route your heavily encrypted traffic through a rabbit warren of servers around the world, making it nearly impossible to connect your computer to any individual site you might visit.  Tor was actually developed by the U.S. Navy for secure communication, but the software is available for free here: https://www.torproject.org

Secure and anonymous access to the Internet is becoming a growth business, and Tor is one of the hottest tickets to that show.  The Google search phrase “Tor search” has tripled in the last year, and the query “Tor” is up 100% over the same period.  Like most fashion-forward tech trends, searches for Tor cluster on the coasts, in Oregon, Washington state, California and New York.  Since search engine capability doesn’t reach the Dark Web – by design, of course – TorSearch is now available for users, with a reported 130,000 sites listed and something like a tripling of use in the last few weeks, according to media accounts.

There is an obvious tension between a growth opportunity for business and the need for society to regulate and control the illegal use of any technology.  A few points here:

Aside from search engine companies, there is not much academic research dedicated to the Dark Web.  We spent the better part of day trolling the usual scholarly sites, with little success.

 

Law enforcement seems poorly equipped to handle the challenge.  There was one high profile takedown of a server hosting a range of illegal activities in Irelan
d over the summer (link below), but its success seems to have been caused by a flaw in the Firefox browser software used by Tor.  The flaw has since been fixed.  It wasn’t a technical gltich that brought down Silk Road – one of the supposed hitmen contracted for the murder-for-hire plot was an undercover agent.

 

We did find one consumer product offering related to Tor – something called pogoplug – which directs your web traffic into the anonymous network.  It cost $49 and has wifi for your cell phone.  The downside: Tor is slower than conventional access since your information transits through more connections than the customary point-to-point process.

All that said, we do have one innovation – bitcoin – that successfully made the transition from Dark to “Lit” web.  Silk Road was clearly an early enabler of the online “Currency” but it now has the tacit recognition of everyone from the Federal Reserve to business television. Like the Dark Web, its early appeal was anonymity, but its low cost utility for money transfer should allow it to survive increasing regulatory scrutiny.  It won’t be a flawless transition, considering its birth in the primordial ooze of the Dark Web, but it seems well on its way.

Can there be other innovations, developed in the shadows of the Dark Web, which hit the mainstream?  It seems inevitable.  Revelations of government spying around the world provide the notional demand for anonymous Internet use.  Oscar Wilde famously opined that “All human beings have three lives: public, private and secret.”  The existing structure of the Internet handles the first two very well.  The Dark Web is, apparently, for the third. 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FeD7NNb2JFM/story01.htm Tyler Durden

White House Wants to Borrow As Much As Government Can Spend, Not Negotiating on Debt Ceiling

"nothing left toThe most recent debt ceiling crisis, when the
debt ceiling was at somewhere under $17 trillion, led to the
mechanism being temporarily suspended, as the US government
continues to borrow money to cover its spending. Congress may be

on the verge
of passing a new spending deal that rolls back
some of the sequester’s attempts to stymie spending, but the White
House isn’t interested in talking about the debt ceiling.


From USA Today:

The White House says President Obama has not changed
his position: He will not negotiate raising the debt ceiling next
year.

White House spokesman Jay Carney said Monday he hopes Republicans
will not make demands “when it comes to the full faith and credit
of the United States.”

Paul Ryan, who helped negotiate the latest spending deal, which
passed the House
overwhelmingly
, claims he wants to keep the door open to
extracting concessions on the debt limit when it is unsuspended
next year.

Follow these stories and more at Reason 24/7 and don’t forget you
can e-mail stories to us at 24_7@reason.com and tweet us
at @reason247.

from Hit & Run http://reason.com/blog/2013/12/16/white-house-wants-to-borrow-as-much-as-g
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Tonight on The Independents: Historic NSA Ruling, Senate Budget Showdown, NoKo Madness, Affluenza, Gay Laws in India, and Delicious Jacob Sullum!

He knows when you're awake. |||Well, nothing much for a new
libertarian-leaning cable news program
to discuss tonight…OH
WAIT—D.C. District Court Judge Richard Leon issues a
preliminary injunction
against the National Security Agency’s
hoovering of metadata, declaring it “almost-Orwellian” and likely
unconstitutional. Reason Senior Editor Jacob Sullum will
break it down for the 9 pm (Eastern) crowd (6 pm Pacific, repeats
at midnight). Meanwhile, panelists Ellis Henican and Kayleigh McEnany will
help America process last night’s
60 Minutes NSA infomercial
, including discussion about

amnesty
for whistleblower Edward Snowden and
more.

With the Senate tomorrow
expected to pass
the
sequester-busting
Ryan-Murray plan
overwhelmingly approved by the House
, the question arises: Have
Establishment Republicans finally
kicked the fiscally conservative grassroots to the curb
?
FreedomWorks President/CEO
Matt Kibbe
will be on to count heads and take names.

The ... horr-or. |||Also: What’s worse—”affluenza” as a
criminal defense
, or the
lack of criminal defense
available to the non-affluent? Looking
overseas,
India just re-criminalized certain kinds of sex
between
consenting adults, and North Korea’s Lil’ Kim Jong Un is busy

executing family members
.

All these topics and more, tonight at 9 pm ET, with your host
Kennedy, plus
co-hosts Matt
Welch
 and Kmele Foster. Click
on the links to read the open threads for Episodes
Four
,
Three
, and
Two
. Send raw Twitter snark to @IndependentsFBN
(#independents) and the best of the SFW lot will displayed on the
television screen.

Open thread commence!

from Hit & Run http://reason.com/blog/2013/12/16/tonight-on-the-independents-historic-nsa
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