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Monday, April 16, 2012

Obama Foreclosure Scandal

Chuck Morse Speaks 
Why has it taken the Obama Administration over three years to address the foreclosure scandal and have they actually addressed it? The scandal, which has been referred to in some quarters as “Foreclosure-gate” involves mortgage companies using a phony practice called “robo-signing” in order to fraudulently foreclose on homeowners. The company behind most of these so-called robo-signings is called Mortgage Electronic Registration Systems, known as MERS. This national privately owned company has served as a clearinghouse and as a rapid computer generated paperwork processor for the big banks and secondary mortgage investors seeking to process and re-process mortgages. MERS tracks an average of 65 million mortgages by computer and processes mortgage transactions without human intervention. The MERS process is presently being challenged in court in several states and jurisdictions.

MERS worked closely with Fannie Mae, Freddie Mac, and the other big national mortgage lenders in the years leading up to the mortgage meltdown and the Trillian dollar TARP bailout. MERS had aided in the process of bundling, in the creation of credit default swaps, and in derivative leveraging by making the process seamless and efficient.

Before becoming Attorney General, Eric Holder worked as a partner in the white shoe law firm of Covington & Burling which represented MERS. In 2006, while Holder was a partner, Covington and Burling defended MERS in a growing number of lawsuits brought by local municipalities and title providers which claimed that MERS was bypassing conventional methods of processing mortgages. It should be noted that as Attorney General, Eric Holder has failed to investigate these practices by MERS, by Fannie and Freddie, and by the banks who received TARP funds. There have been no investigations, no indictments, and no significant changes in the status quo regarding these banking practice since Holder and Obama have been in office. Indeed, billions in TARP funds have continued to flow to Fannie and Freddie.

Once the robo-signing scandal came to light, after a 60 Minutes expose in October, 2010, Holder, under political pressure, assigned several investigators to the case, investigators who, like himself, are former employees of Covington and Burling. Holder also directed the FBI to partner with the Mortgage Banking Association, MBA, which represents the banks implicated in this practice, as part of their investigation. Working together, Holder’s FBI and the MBA, developed a definition of mortgage fraud which exempts MERS and the big banks. Thus the banks will not be investigated under the protective wing of the Obama Administration.  Instead, the FBI will be going after small-time operators and mortgage holders.

Meanwhile, the foreclosure settlement is so confusing and vague that it is unlikely that any relief will be received by those who were defrauded by the robo-signatures any time soon. In fact, it is being projected that the practical effect of the settlement will be that the big banks will increase the number of foreclosures with the assurance that they will be protected by the immunity clause in the agreement. Another byproduct of the settlement has been that housing courts around the country have become choked with a backlog of cases. All the while, Obama is trotting out the agreement as a cornerstone of his justification for re-election.

The failure of the Obama Administration Attorney General Holder to investigate the mortgage scandal should be the focus of a congressional investigation. Such an investigation might open the whole can or worms around the TARP bailout of Fannie, Freddie and the big banks and  the Obama Administration’s tepid actions toward banking reform and investigation of fraud.  

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