Posts Tagged ‘systemic risk’

Foreclosure Fraud For Dummies, Part 2: What’s a Note, Who’s a Servicer, and Why They Matter

Foreclosure Fraud For Dummies, Part 2: What’s a Note, Who’s a Servicer, and Why They Matter

Mike Konczal defines the key players in the foreclosure fraud mess. **This is Part 2 in a series giving a basic explanation of the current foreclosure fraud crisis. You can find Part 1 here.

By Mike Konczal, courtesy of New Deal 2.

What is the note?

The SEIU has a campaign: Where’s the Note? Demand to see your mortgage note. It’s worth checking out. But first, what is this note? And why would its existence be important to struggling homeowners, homeowners in foreclosure, and investors in mortgage backed securities?

There’s going to be a campaign to convince you that having the note correctly filed and produced isn’t that important (see, to start, this WSJ editorial from the weekend). It will argue that this is some sort of useless cover sheet for a TPS form that someone forgot to fill out. That is profoundly incorrect.

Independent of the fraud that was committed on our courts, the current crisis is important because the note is a crucial document for every party to a mortgage. But first, let’s define what a mortgage is. A mortgage consists of two documents, a note and a lien:

mortgage, foreclosures

The note is the IOU; it’s the borrower’s promise to pay. The mortgage, or the lien, is just the enforcement right to take the property if the note goes unpaid. The note is crucial.

Why does this matter? Three reasons, reasons that even the Wall Street Journal op-ed page needs to take into account. The first is that the note is the evidence of the debt. If it isn’t properly in the trust, then there isn’t clear evidence of the debt existing.

And it can’t be a matter of “let’s go find it now!” REMIC law, which governs the securitization, is really specific here.  The securitization can’t get new assets after 90 days without a tax penalty, and it can’t get defaulted assets at all without a major tax penalty. Most of these notes are way past 90 days and will be in a defaulted state.

This is because these parts of the mortgage-backed security were supposed to be passive entities. They are supposed to take in money through mortgage payments on one end and pay it out to bondholders on the other end — hence their exemption from lots…
continue reading


Tags: , , , , , , , , , ,




Foreclosure Fraud For Dummies, 1: The Chains and the Stakes

Foreclosure Fraud For Dummies, 1: The Chains and the Stakes

mike-konczal-2-100

By Mike Konczal, courtesy of New Deal 2.0

All you need to know to follow the trail of wrongdoing.

The current wave of foreclosure fraud and the consequences for the economy are difficult to follow. As such, I’m going to write a few posts to simplify what is going on so you can follow stories as they unfold.  This is very 101 level, and will include a reading list of blog posts and articles at each stage to help provide depth.   (Special thanks to Yves Smith for walking me through much of this.)  Let’s make three charts of the chains involved in the process. The first is what is currently going on with foreclosure fraud (click through for a larger image):
foreclosures

As you can see, in judicial review states like Florida the courts require that servicers, or those who administer the bonds that are full of mortgages (securitization, residential mortgage backed securities, RMBS, are all phrases they use), say that they have everything necessary in order to have standing to bring a foreclosure. They need to have the note for a mortgage, which is supposed to be in the trust — part of the mortgage backed securities — that they administer.

What is breaking down here? In Florida, a judicial review state, it was found that one person was notarizing documents far faster than anyone reasonably could have. Someone found forged documents necessary for the foreclosure process, like the note. A separate court system was set up to resolve these foreclosures faster, at the expense of allowing serious challenges to the documents. Here’s Smith on how kangaroo these courts look up close. Here’s WaPo on one individual and the nightmare of trying to challenge an invalid foreclosure. Keep him in mind when you hear about deadbeats and whatnot: the current system is designed to make it difficult for anyone to challenge their case.

Meet the robo-signer who kicked it off here at this WaPo story. I almost feel bad for this patsy; the real battle here is between junior and senior tranche holders, and this doofus could end up in jail in order to keep John Paulson rich. After reading about this guy, I’m asking our elites to take better care of their goons. (Can we get a Financial Patsy Fordism social contract movement going? If…
continue reading


Tags: , , ,




So What Did We Do? We Made ‘Em Even Too Biggier To Fail

So What Did We Do? We Made ‘Em Even Too Biggier To Fail

bigCourtesy of Joshua M Brown, The Reformed Broker 

So how did America solve the problem of the Too Big To Fail Banks?  Simple, we doubled the size of them.  Now they’re too gigantic to fail.

You couldn’t make this stuff up.

Here’s Stephen Grocer in the WSJ with this incredible story (emphasis Daddy’s):

Citi, BofA, J.P. Morgan and Wells Fargo now control $7.7 trillion in assets and $3.2 trillion in deposits as of March 30. To put that in perspective: The $7.7 trillion in assets is almost double the combined assets of the next 46 biggest banksand 37% more in deposits.

More importantly, those four banks control more assets today than they did in December 2007, when Deal Journal first wrote about “too big to fail.” Back then J.P. Morgan, Citigroup, BofA and Wells held $4.95 trillion in assets.

In the brokerage business, we have a term called Concentrated Position, meaning an account with a greater-than-normal percentage of assets in one or two large holdings.  Accounts with concentrated positions are seen to carry more risk (obviously) and are ineligible for margin privileges in some cases.  Essentially, the entire banking system has become one big concentrated position account, in worse shape than it was in before the crash (thanks to mergers and attrition, no doubt, but still).

This is an interesting solution to the systemic risk problem we were all carrying on about over the last few years.  Bravo.

Source:

Would Washington Let JPM, Citi, B of A or Wells Fail?  (WSJ)

Hat Tip Daniel Hicks (NewsAudit)  


Tags: , , ,




How to compound systemic risk—the Obama plan

Discussion on systemic risk, too big too fail institutions, and regulator capture.  Courtesy of Benign Brodwicz (intro) and Simon Johnson at The Baseline Scenario - Ilene

How to compound systemic risk—the Obama plan

Courtesy of Benign Brodwicz at the Animal Spirits Page

The Obama plan is exactly backwards in its approach to systemic risk.  It will increase systemic risk.

As pointed out by one of the leaders of econophysics, Eugene Stanley (here), one of the prime results in the exploding field of network theory is that densely connected networks are chaotic and unstable compared to sparsely connected networks.

This only makes sense.  If every part of a network affects every other part of a network it becomes very easy for large perturbations to propagate through the network, and rebound, and so on. 

The Obama-Summers-Geithner solution to our problem of systemic risk is evidence of an intellectual obtuseness that is breathtaking.

The Fed created or permitted by neglect of its duties the systemic risk that caused this crash, and the Great Depression before it.  Mish got this right. 

The obvious solution given that systemic risk is a characteristic of the structure of the financial system is to change the structure of the system to reduce systemic risk.  Break up investment banks and commercial banks.  Eliminate financial institutions that are big enough to create systemic risk all by themselves (no more “too big to fail”).  Make it impossible for the system to become densely connected by limiting leverage.  The plan does increase capital requirements but not enough.  And it leaves the trading of CDSs, the densely-linked network of derivatives that largely caused the supposed near melt-down of the system last fall, lightly regulated and less than transparent. 

You can’t leave the TBTF institutions in place, or they will capture the regulators again.  Or perhaps it’s better to say they’re not letting them go at this time.

Glass-Steagall and the other laws that the neocons undid over the past thirty years worked.  They kept the system stable for sixty years.

Let’s bring them back. 

Here is Simon Johnson’s take:

Too Big To Fail, Politically

What is the essence of the problem with our financial system – what brought us into deep crisis, what scared us most in September/October of last year, and what was the


continue reading


Tags: , , , , , , , ,




 
 
 

Phil's Favorites

Global Shipping Rates Run Dry

 

Global Shipping Rates Run Dry

Courtesy of Dana Lyons

A key index of global shipping prices is nearly 50% below its previous record low level.

We swore we wouldn’t devote any more Charts Of The Day to the Baltic Dry Index (BDI) after it broke its all-time low in November. Things are really getting out of hand now, though, so it deserves at least a mention. The previous record low in the BDI was 553, set back in 1986. Upon breaking that low in November, the BDI continued to crater. As of today, the Baltic Dry Index is listed at 303.00 – nearly a full 50% below its previous all-time low.

 

 

So what is the ...



more from Ilene

Zero Hedge

And Now "Some Important News About JPMorgan's New Cash Policies"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Want to deposit cash at JPMorgan Chase? Then prepare to be treated if not like a criminal, then certainly a suspect of a very serious crime. The charge: being in possession of that "barbarous relic" known as cash.

Soon, as cash becomes increasingly frowned upon, cash deposits will be slowly but surely phased out in their entirety forcing those few savers left in Obama's grand economic "recovery" experiment, to engage in commerce only in a way that allow...



more from Tyler

All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

more from David

Kimble Charting Solutions

S&P could reach 1,600 if this gives way, says Joe Friday

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

S&P 500 tops in 2000 and 2007 took place 91 one months apart. Did another top take place 91 months after the 2007 top. So far it looks very possible.

If you double that time frame, you get 182 months. What is the odds that the NDX 100 topped 182 months after the 2000 high, at the SAME price it hit in 2000?

We applied monthly momentum to the charts above, reflecting that momentum for the S&P is back at 2000 and 2007 highs and turning lower and the momentum for the NDX is back at 2000 levels.

...

more from Kimble C.S.

Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Tech-stock wreck destroys $514B this year (USA Today)

The bad year for stocks is getting worse by the minute - and tech investors are feeling the brunt of the pain.

The 462 information technology stocks in the broadRussell 3000 index have shredded a total of $514 billion this year thanks to their average decline of 13.4%, according to a USA TODAY analysis of data from S&P Capital IQ.

Citi: 'We Should All Fear Oilmageddon' (Bloomberg)

A feedback loop of the U.S. dollar, crude, capital flows, and emerging markets....



more from Paul

ValueWalk

Why Most Investors Fail in the Stock Market

 

Why Most Investors Fail in the Stock Market

Courtesy of ValueWalk, by  

Throughout the past 30 days of wild volatility, here’s what I didn’t do.

Panic. Worry. Sell.

In fact, the best I did was add to a couple of positions yesterday. The world was already in an uncertain state for the past 3+ years. It’s just that with the market rising, we pushed the issue to the back of our  mind and ignored it.

If you read Howard Marks latest memo, ...



more from ValueWalk

Insider Scoop

Tyson Foods' Stock Ticks Higher Following Q1 Print

Courtesy of Benzinga.

Related TSN 7 Stocks You Should Be Watching Today Earnings Scheduled For February 5, 2016 Tyson Foods beats by $0.26, misses on revenue (Seeking Alpha)

Shares of Tyson Foods, Inc. (NYSE: TSN) were trading higher by more nearly 4 percent early Friday morning after the company reported its ...



http://www.insidercow.com/ more from Insider

Chart School

Pause in Action

Courtesy of Declan.

Small Gains as indecision held sway. The S&P finished inside the range of last Friday's breakout and held rising support, but the index did the minimum to pacify bulls.


The Nasdaq breakout has eased alongside former resistance turned support. Volume was lighter, and the spinning top finish marks indecision. While Thursday's action offered no side an advantage, a push towards 4,900 would appear to be the favoured path.


The Russell 2000 is caught inside t...

more from Chart School

OpTrader

Swing trading portfolio - week of February 1st, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



more from OpTrader

Digital Currencies

2016 Theme #3: The Rise Of Independent (Non-State) Crypto-Currencies

Courtesy of Charles Hugh-Smith at Of Two Minds

A number of systemic, structural forces are intersecting in 2016. One is the rise of non-state, non-central-bank-issued crypto-currencies.

We all know money is created and distributed by governments and central banks. The reason is simple: control the money and you control everything.

The invention of the blockchain and crypto-currencies such as Bitcoin have opened the door to non-state, non-central-bank currencies--money that is global and independent of any state or central bank, or indeed, any bank, as crypto-currencies are structurally peer-to-peer, meaning they don't require a bank to function: people can exchange crypto-currencies to pay for goods and services without a bank acting as a clearinghouse for all these transactions.

This doesn't just open t...



more from Bitcoin

Sabrient

Sector Detector: New Year brings new hope after bulls lose traction to close 2015

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Chart via Finviz

Courtesy of Sabrient Systems and Gradient Analytics

Last year, the S&P 500 large caps closed 2015 essentially flat on a total return basis, while the NASDAQ 100 showed a little better performance at +8.3% and the Russell 2000 small caps fell -5.9%. Overall, stocks disappointed even in the face of modest expectations, especially the small caps as market leadership was mostly limited to a handful of large and mega-cap darlings.

Notably, the full year chart for the S&P 500 looks very much like 2011. It got off to a good start, drifted sideways for...



more from Sabrient

Promotions

PSW is more than just stock talk!

 

We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more!

PhilStockWorld.com features the most important and most interesting news items from around the web, all day, every day!

News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...



more from Promotions

Pharmboy

Baxter's Spinoff

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...



more from Pharmboy

Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 

Since...



more from M.T.M.

Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




FeedTheBull - Top Stock market and Finance Sites



About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>