For Immediate Release: July 19, 2011
Contact: Alan Barber 202-293-5380 x115

Washington, D.C.–  Dean Baker, co-director of the Center for Economic and Policy Research  (CEPR), issued the following statement on the Gang of Six deficit plan:

“The  budget plan produced by the Senate’s “Gang of Six” offers the promise  of huge tax breaks for some of the wealthiest people in the country,  while lowering Social Security benefits for retirees and the disabled.   Despite claiming that they will “reform” Social Security on a “separate  track, isolated from deficit reduction,” the plan includes cuts to  Social Security that would be felt in less than six months, as the plan  calls for a new inflation formula that will reduce benefits by 0.3  percentage points a year compared with currently scheduled benefits. The  plan also calls for a process that is likely to reduce benefits further  for future retirees.

“The proposed cuts to Social Security  are cumulative. This means that after ten years, a beneficiary in her  70s will see a cut of close to 3 percent. After 20 years, the cuts for  beneficiaries in their 80s will be close to 6 percent, while the  reduction in annual benefits will be close to 9 percent by the time  beneficiaries are in their 90s. For a beneficiary in her 90s living on a  Social Security income of $15,000, this means a loss of more $1,200 a  year in benefits.

  “The plan also calls for large cuts in tax  rates including a targeted top rate of between 23-29 percent, which will  be at least partially offset by elimination of tax deductions. For the  highest-income people, this is likely to mean a very large reduction in  taxes. For example, Jamie Dimon and Lloyd Blankfein, the CEOs of J.P.  Morgan and Goldman Sachs, respectively, are both paid close to $20  million a year at present. If this pay is taxed as ordinary income, then  they would be paying close to $7.5 million a year in taxes on it after  2012. However, if the top rate is set at 29 percent, they may save as  much as $1.9 million a year on their tax bill. If the top tax rate is  set at 23 percent then the Gang of Six plan may increase their after-tax  income by more than $3 million a year.

  “It is striking that the  Gang of Six chose to respond to the crisis created by the collapse of  the housing bubble by developing a plan that will give even more money  to top Wall Street executives and traders. By contrast, the European  Union is considering imposing financial speculation taxes to reduce the  power of the financial industry and raise more than $40 billion a year  in revenue.

  “The plan calls for substantial cuts elsewhere in the  budget which are likely to cut into the incomes of large segments of  the population, especially the sick and the elderly. The cuts it  proposes to the military are just over 1.0 percent of projected spending  over the next decade.

  “In short, this is a plan that should be  expected to please the wealthy since it will mean large reductions in  their tax liability in the decades ahead. On the other hand, most of the  rest of the country is likely to feel the effects of lower Social  Security, Medicare and Medicaid benefits, in addition to other cuts that  are not yet fully specified.”

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Longtime readers know I’ve been covering the registers of deeds, county officials who wield some degree of power in the case of foreclosure fraud, because they hold in their offices a good deal of physical evidence about mortgage assignments and associated documents. Jeff Thigpen, the register of deeds for Guilford County, North Carolina, did a preliminary investigation of a set of documents in his office and found widespread fraud, particularly from forged documents. Thigpen’s key partner, John O’Brien, a register in Southern Essex County, Massachusetts, has been fighting this fight as well. He vowed not to record any documents he suspected of fraud, which would slow some foreclosures. He demanded that MERS pay millions of dollars in back recording fees which were not paid when banks tracked their own mortgage transfers on a database. But O’Brien hadn’t done the work of auditing his office. Until this week, at a convention for county registers.

At the Annual Conference of The International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT), Register John O’Brien revealed the results of an independent audit of his registry. The audit, which is released as a legal affidavit was performed by McDonnell Property Analytics, examined assignments of mortgage recorded in the Essex Southern District Registry of Deeds issued to and from JPMorgan Chase Bank, Wells Fargo Bank, and Bank of America during 2010. In total, 565 assignments related to 473 unique mortgages were analyzed.

McDonnell’s Report includes the following key findings:
• Only 16% of assignments of mortgage are valid
• 75% of assignments of mortgage are invalid.
• 9% of assignments of mortgage are questionable
• 27% of the invalid assignments are fraudulent, 35% are “robo-signed” and 10% violate the Massachusetts Mortgage Fraud Statute.
• The identity of financial institutions that are current owners of the mortgages could only be determined for 287 out of 473 (60%)
• There are 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership can be traced.

McDonnell told O’Brien… “What this means is that the degradation in standards of commerce by which the banks originated, sold and securitized these mortgages are so fatally flawed that the institutions, including many pension funds, that purchased these mortgages don’t actually own them because the assignments of mortgage were never prepared, executed and delivered to them in the normal course of business at the time of the transaction. In a blatant attempt to engineer a ‘fix’ to the problem, the banks set up in-house document execution teams, or outsourced the preparation of their assignments to third parties who manufactured them out of thin air without researching who really owns the mortgage.”

This is why, and I’ll get into this in a future post, the Bank of America settlement with investors, which appears to indemnify the bank and facilitate a conspiracy of silence between banks and investors on these securitization issues, is a really raw deal. It “solves” one problem, BofA’s exposure to the investors in its mortgage backed securities. But it in no way solves the much larger problem, namely who actually owns these mortgages. An independent auditor, after looking at the evidence, could not figure it out.

Continue reading Forensic Study Exposes Massive Foreclosure Fraud →