Fannie Mae Pushed Banks to Foreclose
By Todd A. Heywood, Michigan Messenger
17 August 11

Revelations called ‘disgusting,’ but not surprising.

Michigan leaders in the fight against the foreclosure crisis reacted strongly Sunday to revelations that mortgage giant Fannie Mae appears to have been pushing banks to foreclose on homeowners rather than continue negotiating loan modifications.

The story broke in the Detroit Free Press, which reported it had been given some 2,300 internal records and memos from Fannie Mae. Those documents included indications that lenders should proceed to foreclosure sales rather than allow any time for modifications, and memos which indicate the company was threatening to charge a penalty to lenders who allowed foreclosures to wait too long before they were executed.

Particularly troubling was the fact that these memos came at the same time that Fannie Mae officials were testifying before Congress that they were doing everything in their power to prevent foreclosures. [CONTINUE READING on RSN]
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By DEADLY CLEAR

How much more obvious does it have to become before local state and federal legislators come to grips with the fact that the Federal government (Fannie Mae is under Federal conservatorship) has no intention or is unable to modify or reconstruct loans with homeowners?

The modification process is stressful, redundant, frustrating, unconscionably one-sided and apparently worthless.  Homeowners are willing to make payments.  Homeowners are naively willing to maintain the debt in hopes that the value will return on a home that may be hundreds of thousands of dollars underwater.  Fannie and the government know that the investor market is unable to return any time soon and that the values of these properties, at least in the near future, will likely continue to decrease.

This is why discussions about reduction in principal keep surfacing.  CNNMoney reported in May 2011 that at a town hall meeting Obama stated, “In addition to these short-term loan modifications, we want to see if we can get longer-term loan modifications. And in some cases, principal reduction, which will be good for the … person who owns the home, but it’ll also be good for the banks over the long term.”

This apparently stirred the Wall Street banks and it appears from the statement that President Obama may not have been aware of what his administration was doing to thwart his philosophy.  The banks do not want modifications, loan reductions or mortgage reconstruction – because they wrote more loans than they can hold.  They do not have the capital to hold 120 million mortgages – even at reduced prinicpals.  [Editor’s Note: For these reasons, states should consider taking over the mortgages written between 2003-2008 and reconstructing the loans with the homeonwers.]

The Wall Street banks are being sued by investors who want their money back. The lawsuits allege that Wall Street lied, cheated, committed fraud, inflated appraisals, manipulated underwriting standards and inflated bond ratings to bait investors and steal their money – most of which belonged to government workers, unions and corporate retirement beneficiaries.  The monies are gone – gambled away on Wall Street.

Homeowners had nothing to do with any of these allegations.  A little known fact that is just beginning to surface relates to the “manipulated underwriting standards” – a set of guidelines used by all of the lenders.  In order to “play” at the mortgage crap table, lenders had to abide by rules (like MERS) and use dedicated licensed software programs.  One such program called MindBox controlled the 1003 mortgage application form. Prior to 2005 the patent had restraints that limited the data imput opportunity to a one time deny or approval process without supervisor overrides.  By 2006, the restraints had been rewritten and the loan officer to massage data until he got a loan approval.

These programs link to the banks’ backdoor ability to obtain records and files on every homeowner with just an application and a social security number… actually the application wasn’t even necessary – it just made access appear more legal. By the turn of the century, banks had full access to everything the applicant owned, bought, sold, credit scores, credit cards, phone text, payroll, bank accounts, tax returns, shopping and personal habits, not to mention all of his friends and family members.

There was and is really no need for “paperwork” and a simple stroke on the keyboard can access every bit of data necessary to approve or deny a borrower. Social networking like Facebook, Twitter, etc. also play a part identifying the borrower and how he lives. MindBox is said to be so invasive that it can read the inscription on the inside of a wedding ring – likely because the jeweler’s order was in an email … as if that adds any comfort.

The stage was set – anyone could get a loan and Wall Street used it to bait investors not on quality but on volume.  The intent to defraud is made clearer by understanding the tools the banks had at their deposal.  MindBox appeared on the scene at the turn of the century and became even more sophisicated with time.  A Business Wire news report  from September 11, 2000 stated in its description of MindBox,  “From auto loans to online mortgages to corporate tax services, companies have successfully incorporated MindBox artificial intelligence applications into their business operations and have seen dramatic savings in time, money, and staff resources as a result. Companies are also generating new revenue streams by using MindBox technology to automate cross-selling and up-selling of products and services, thus simultaneously addressing customer needs better with personalized product choices, as well as capturing a larger share-of-wallet.”

While the more in-depth details of the lenders’ intelligence programs are ripe for another post – it is becoming quite apparent that “liars’ loans” are certainly misdirected at the borrower. It appears, at least by the banks, there was motive aforethought by having the capability to weed out bad loan prospects at their finger tips and yet manipulated their own systems, changed the patents and lending criteria to enable the fraud.

Some legal scholars consider this area to incorporate gross negligence. It is more than simple inadvertence, but it is just shy of being intentionally evil. It ultimately caused the collapse of the American economy.