Fed Prints Profits – USG Faces Insolvency – Homeowner Mortgages Under Water

Rights Radio: Printing Money to Ease Their Pain w/ Dr. Joyce Starr. News that the Federal Reserve Bank turned an $82 billion profit by investing money it prints – and then claiming pure profit on such investments – made Wall Street giddy. Show Date: March 31, 2011.

To be accurate, the Fed doesn’t physically print the money. The Federal Reserve Act of 1913 authorizes the Fed to direct the Treasury to print money. The Treasury charges the Fed 2.3 cents for each note it prints. The Fed then lends their $100 unit Federal Reserve Notes (FRN) back to the government at face value plus interest.

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According to a long-standing petition to dissolve the Fed, the tax payment checks you send to the IRS  are endorsed on the back as “Pay Any F.R.B. Branch or Gen. Depository for Credit U.S. Treas. This is in Payment of U.S. Oblig.” The petition contends that every dime we pay in income taxes is given to the private banking families that own the FED, tax free.

The Federal Reserve Act of 1913 created a private, for profit, central Banking Corporation owned by a cartel of private banks, including the former Lehman Brothers, Goldman, Sachs and the Rockefeller families of New York. The Federal Reserve is not a federal agency, has no reserves and doesn’t pay taxes.

In fact, the FED is the only for-profit corporation that is exempt from both federal and state taxes. The FED takes in about one trillion dollars per year tax free. According to the petition, banking families that own the Fed above receive all that money. “To add insult to injury, the government has to create a bond for $1 million as security for the loan. And the rich get richer. The above was just an example, because in reality the FED does not even print the money; it’s just a computer entry in their accounting system. To put this on a more personal level, let’s use another example.”

The US Government is on the verge of insolvency – Dallas Federal Reserve President Richard Fisher.

Despite the money printing machine – or because of it – one candid Fed president admitted on March 22, 2011 that the US Government is on the verge of insolvency. What does insolvency mean? “If nobody will take your checks any more, you’re insolvent.”

The United States is on a fiscal path towards insolvency and policymakers are at a “tipping point,” a Federal Reserve official said on Tuesday. “If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when,” Dallas Federal Reserve Bank President Richard Fisher said in a question and answer session after delivering a speech at the University of Frankfurt. “The short-term negotiations are very important, I look at this as a tipping point.” But he added he was confident in the Americans’ ability to take the right decisions and said the country would avoid insolvency.”I think we are at the beginning of the process and it’s going to be very painful,” he added. ~ NYT

Talk about double-speak. Fisher also said the US economic recovery is gathering momentum.  Tell that to struggling homeowners.

A trillion dollars of mortgage debt is under water, but homeowners can’t print money to erase their pain – and they’re definitely not giddy.

All 50 state attorneys general are pushing for a foreclosure abuse settlement that could cost mortgage servicing banks $20 billion or more, (the Fed will probably “re-fund” their money). A substantial amount will be earmarked to reduce principal owed by homeowners facing foreclosure. The question is: Which category of borrowers?

What about underwater borrowers who have a job, paid on time and honored their obligations? Tough luck. The criteria for proving that you deserve a reduction in principle is nearly impossible to meet. One married couple that applied has a combined income of roughly $60k, both have stable jobs, have no other debt to speak of, but are underwater on their mortgage. Their bank has subjected them to paper submission torture several times over. Depending on the submission, either they earned too much or too little, owed too much or not enough. They’ve given up and hope for a short sale.

Your chances for a principle or interest reduction are relatively bleak if you continue to pay the mortgage you can’t afford. However, if you jumped at a Bank of America or Wells Fargo offer to stop paying your mortgage in order to qualify for the reduction – and then they reject you – you’ll lose your home even faster.

Bank of America states that more than 800,000 mortgages were modified in the last three years. And what about the millions of underwater mortgages that were not modified?

The modification program created by the Obama administration (HAMP), helped far fewer borrowers than planned. Republicans in the House of Representatives voted to kill the program in mid-March.

Meanwhile – Back at the Bank: Bank of America is getting richer by billions. “As the huge volume of loan losses recedes and the economy improves, Mr. Moynihan (Bank of America) said his company had the power to earn $35 billion to $40 billion a year. Bank of America lost $2.2 billion in 2010, weighed down by special charges and the lingering effects of the housing bust and the recession on consumers.”

What a surprise. The NYT revealed on March 31, 2011 that:

The Federal Reserve recently gave the all-clear for several banks to increase dividends and expand share buybacks, among them JPMorgan Chase, Wells Fargo, Citigroup and Goldman Sachs. That’s good news, at least in the short run for bank investors, but it is a dubious development for everyone else.

The dividend-boosting banks that were too big to fail before the crisis are even bigger now, while reforms to rein them in are under political attack even before they have been implemented. Sheer size and inadequate regulation — the combination that led to the crisis — argue for banks to use their earnings to build bigger capital cushions, not to pay dividends and repurchase shares.

Yet Fed officials have concluded that many banks are safe and sound enough to pay out cash and still withstand a severe shock should one occur again. It’s hard to share their confidence. Before it approved new dividends, the Fed required banks to test their crisis-readiness against several criteria, like elevated unemployment, but it did not release detailed results of the tests. Public data do not inspire confidence either. There is much debate over whether banks are valuing their mortgage assets correctly, and, by extension, whether they are adequately capitalized.

Do you think homeowners with underwater mortgages should receive more help from the banks – even if they can continue to pay?  What should be the cut-off? We welcome your thoughts.

To your next tax-free trillion!

Dr. Joyce Starr

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Mortgage Modification – How Banks Take Homeowners for a Ride

Mortgage Modification. More like Mortgage Mortification. Here’s a true story. My friend Sue lost her primary source of income in early 2009 with one day’s notice. That’s when she decided to apply for mortgage modification assistance through her bank – Wells Fargo/Wachovia. Show Date: June 17, 2010 w/ . .

Mortgage Modification – How Banks Take Homeowners for a Ride

Mortgage Modification. More like Mortgage Mortification. Here’s a true story. My friend Sue lost her primary source of income in early 2009 with one day’s notice. That’s when she decided to apply for mortgage modification assistance through her bank – Wells Fargo/Wachovia. Show Date: June 17, 2010 w/ Dr. Joyce Starr.

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The key criteria for receiving mortgage modification approval at Wells Fargo/Wachovia – like most banks – is your ratio of debt to earnings. If you lost your job, if you had a bad year, don’t bother applying.

Sue had worked for the company for four years, but was  paid as a consultant in order to eliminate the need for benefits. Now the company was in danger of going belly-up, and she didn’t qualify for unemployment compensation.

Bonus for pushing the government option:

“It’s a terrible catch-22,” admitted one Wells Fargo insider. “It’s a rotten game,” said a banker. “The banks will do everything in their power NOT to reduce your interest, because that’s where they make their money. Why should they give up hundreds, if not thousands, of dollars in monthly interest payments?”

Sue naively assumed that Wachovia would treat her with respect. Starting with an 8 percent mortgage many years ago, she’d already refinanced three times as interest rates began to fall. Her points alone had cost $7,500. So she approached her bank officer – the same person who had helped her previously. She was told that mortgage modifications were being handled by a special department that could only be contacted by phone. Bank officers were no longer involved.

Finally reaching a pleasant woman at the other end, she learned that there were two types of modifications available – Obama’s 2009 program and the bank’s internal program. Announced in April, 2009, few banks had signed up for the government’s Mortgage Modification Program by March, 2010. Wachovia enlisted and thereafter pushed the government option.

Explained a knowledgeable property investor: “To modify a mortgage, the bank must obtain approval from every financial institution that bought into the pool and thereafter, from the mortgage insurers. Its too much work, so they’d rather foreclose, take the write off and collect the mortgage insurance. Obama sweetened the deal by offering banks a $1500 cash bonus for each homeowner that applies for the government option.”

What’s the difference between the two mortgage modification programs?

Embedded in the fine print of the U.S. government option: Applicants must agree that their personal information can be assessed by employees of the Department of Housing & Urban Development, other relevant agencies and by foreign governments! Moreover, if any government or foreign official harbors “suspicions” that the applicant’s information is  incorrect (with or without proof), she/he can be prosecuted for fraud. It was terrifying. Sue chose the bank option instead, which carried no such bottom line. Wachovia reluctantly accepted her verbal application.

The bank also demanded a brief letter explaining her current predicament – the reason she was applying for the reduced rate – along with supporting documentation that should have been in her file. It wasn’t. She was starting from scratch. The bank appointed a liaison officer to handle her case. Two months later, she received a call from the liaison requesting additional information.

He stated that she would receive a personal phone call – not a letter – confirming whether her application was accepted or rejected. Then silence for the next few months. Sue tried reaching his extension. He never answered and never returned the call.

She finally reached a woman who would not disclose her last name or title.  She instructed Sue to call back every month. After five months of phoning, a person at the other end of the line – not her official liaison – disclosed that the there were handwritten notes in her file indicating that she’d been rejected. But he couldn’t tell her for sure, since he had no authority to do so.

Another month went by. More calls. Nothing. Finally, she received a rejection letter in the mail – solely based on her loss of income. She didn’t earn enough to warrant interest rates she could afford. Imagine that!

The national press seems mystified that mortgage applications are down.  To my view, American homeowners have been beaten down by humiliation and mistreatment. Mortgage modification is just another way of saying: Enjoy the ride.

Here’s an August 20, 2010 update from the US Treasury Department:

Nearly 50 percent leave Obama mortgage-aid program – BostonHerald.com: “A new report issued Friday by the Treasury Department said that approximately 630,000 people who had tried to get their monthly mortgage payments lowered through the effort have been cut loose through July. That’s about 48 percent of the 1.3 million homeowners who had enrolled since March 2009. That is up from more than 40 percent through June.

Borrowers say the program is “a bureaucratic nightmare.” Banks lose their paperwork and then claim the borrowers never turned it in. The report suggests foreclosures could rise in the second half of the year and weaken the ailing housing market, analysts say.”

How to be charged an additional monthly fee a mortgage reduction? Don’t apply. (You read that correctly.)

I received a comment about mortgage modification nightmares at Bank of America that all should read. Homeowner David Russell wrote:

In February 2010, I was solicited via the internet by my mortgage lender Bank of America about their Making Homes Affordable Program. I called to inquire, but was told I did not qualify. About 6 weeks later, I receive a FED-EX package about the program. I called Bank of America, was told the documents were sent by mistake and to “toss them in the trash.” That is exactly what I did.

On June 4, 2010, I noticed that $95.54 was missing out of my checking account. After looking through my bank statement my fixed rate mortgage had jumped from $474.03 to $523.75 in May of 2010.

I contacted Bank of America and was told, “This is your new payment as we opened an escrow account to pay your property taxes and insurance for the Making Homes Affordable Program. I explained to 7 people over a 2 hour time period that I was not eligible for the program, never signed any documents, nor submitted an application, and have paid my own taxes and insurance outside of the loan since I first purchased the property.

The bank did admit that I did not qualify for the program, but the escrow account had been set up and it could “never be terminated.” “You will have to just live with it Mr. Russell,” the rep explained. “I told her my taxes are $199 a year and my yearly insurance is $200, but “You’re withholding almost $600 a year!” Her response: “Well, at the end of the 27 years, we will refund you the difference.” I then informed her that Bank of America fraudulently changed the terms and conditions of my loan without permission, my knowledge, or any signed documents. Response: “We do this all the time. It’s perfectly legal for us to withhold for your taxes and Insurance. I stated that my taxes are paid to date and so is my insurance. They can’t legally raise my mortgage! (But they did.)

I explained to the representative that I may not even be able to pay my mortgage next month as Bank of America funneled $100.00 out of my checking account due to the increase. “Well Mr. Russell, if you don’t pay your mortgage, we will simply have to foreclose on you and have the Sheriff remove you.” I explained to her that I have a limited amount of money and pay my property taxes each year with a small bonus check I receive from work. My insurance is paid in small increments monthly, and I can’t afford a $50 monthly increase in my mortgage. The representative then hung up.

I called Bank of America back and basically was told pretty much the same thing after speaking with 4 more people and a supervisor. The supervisor informed me that he could “try to opt me out of the program” (could take months) – you know, the program I did not qualify for and never returned any documents or applications. He said, “Yes sir that one.” I demanded the $99.54 that Bank of America had fraudulently removed from my bank account via auto-pay. The authorization was only for $474.03 a month not $523.75. Response: “It’s not possible Mr. Russell.”

Bank of America fraudulently increasing my mortgage and is illegally withdrawing more than agreed upon. It is quite apparent that Bank of America is committing blatant fraud in order to account for the TARP money they received.

I contacted the “President’s office” of Bank of America. John Priest promised me that he would look into the matter and said this happened to thousands of people. Since then, Mr. Priest has not returned emails or phone calls.

I have spent countless hours on the phone with Bank of America, only to be threatened with foreclosure and the sheriff removing me from my home. The stress is making me physically ill – just trying to figure out how I can stretch my budget further. I have gone without eating to pay my mortgage, HOA dues, property taxes and insurance. My home (condo) takes well over half of what I make just to not go into foreclosure. I’m now ready to let them have it back! I owe 69,000 on a home that’s now worth 20K at best.

If you’re wondering why Bank of America numbers have increased by 70% in one month, allegedly enrolling more people in the Making Homes Affordable Program, this is how they are doing it. I will never be able to catch up or pay the higher unlawful increase in my mortgage. Did I mention that my taxes, insurance, HOA dues and loan payments have never been late!

I may end up losing my home just for inquiring about the government’s mortgage modification program.

To your mortgage modification rights!

Dr. Joyce Starr

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