Friday, October 23, 2015

When people say Tim Geithner destroyed lives

In 2009 and 2010, Tim Geithner's little friend Dennis Stowe, president and CEO of Residential Credit Solutions, (RCS), was busy snuffling around the homes of others, looking for the nicest ones that the owners had fought hardest for, where the fatigue and despair became too great and they had left. In lender parlance they'd "walked away," but some of them would have been carried off.

Pigboy got a good deal in 2009, when Geithner lent him $65M to buy the shards of dead bank's loans with a face value of $1.3B. That's 5 cents on the dollar! Of course he wanted to do it again. And he did. He made a cabal with RBS (Royal Bank of Scotland...was that Forex fraud or mucking with LIBOR?) and CarVal, and three trotted away for some window shopping. That's poor peoples' front windows, not Lord and Taylor. Our front windows, because we are all poor when we are at risk of fraud condoned and abetted by federal agencies.

Background: The first trip to the FDIC trough

The 2009 deal was a stunner (covered by, a sweetheart set-up where without risking much more than a singed snout, Pigboy got most of the income and a sliver of the risk from a dead Texas bank's assets. It was supposed to be a proof of concept for PPIP*, but is sure was not. PPIP was supposed to help live banks shed worthless contracts, not dead banks. The problem is that no bank wanted to sell those junk pieces of paper. Eaten tended to be with a house.

Question for Geithner: why did you risk $65M, give away most of the upside, and be ready to take it in the neck if the whole thing goes belly up? Ya did it for Denny, didn't ya? You could have let RCS service the loans and if they'd got out of line, sent them back to the wallow. They did get out of hand, and the Consumer Financial Protection Bureau (CFPB) made a made an example of them in July, for multiple illegal foreclosures. That was about two weeks after Texas congressman Ted Cruz was squealing about shuttering the CFPB, a federal agency. No repercussions, FDIC?

One year later...

That was 2009. How about 2010? Anyone lose a house to something with AmTrust in the name? Pigboy paid 37 cents on the dollar for the right to foreclose on you. You owed $200,000? He got your house for $74,000. 

Piggers and pals got a very good deal.

RCS, RBS and "CVI Global Value Fund US LLC" (Carval in fancy dress) got together and made the winning bid when the assets of a bank called AmTrust went up for auction. Their group is called "AmTrust-NP SFR Venture, LLC ." Thirty-seven cents on the dollar, FDIC? Why not sell it to a community agency with a rent-to-own program for the owners? "Sell" the to the owner via a loan mod? They didn't deserve it, you say. And PigBoy, a criminal, does?

A lot of people lost their homes the day the Amtrust deal closed, though it might have taken years to find out. The servicing agreement, hosted on, is heavy on the legalese, but if I'm not mistaken it instructs RCS (who will service the loans) on what type of properties to foreclose on first and how to muck up trial payment plans if possible. The servicer goals, outlined in Item 3, Schedule 6 of the business plan specified:

(ii) prioritizing lowest risk and highest loss Mortgage Loans for modification;

Not an even playing field after all. Modifications should go to those who qualify for them, and if there is another scheme afoot, borrowers should be told. 

(vii) where feasible, applying any changes to the mortgage loan modification guidelines to Mortgage Loans currently in a trial modification prior to the loan converting to a final modification; that borrowers who'd been lead to believe they had a modification in place if they made the trial payments, and were making them, could be told during the process that the payments would be higher, or that they were no longer eligible. In the latter case, if they couldn't come up with the difference between the trial payments and their original payments, they risked foreclosure.

And everything would be would be kept on track by regular meeting of the Servicer and the Manager, both of which were RCS. 

Wording elsewhere in the same doc brings MERS and magic powers into the mix.
With respect to each Mortgage Loan that is registered on the MERS® System, (A) the Servicer [RCS] shall be designated as the "servicer" and the "investor" with respect to such Mortgage Loan...
That's how they kept you from knowing that you'd been lent money by a non-existent corporation.
...upon the request of the Manager [RCS] or the Initial Member [FDIC], the Servicer [RCS] ... if requested by the Manager [RCS] or the Initial Member ... shall cause MERS® to change the information in such fields, to the extent MERS® will do so in accordance with its policies and procedures, to reflect its instructions. 
For easy reference:
Servicing Agreement Outlines RCS's duties and permits them to make themselves "lender" in MERS and allows MERS to alter data upon request from RCS and Geitner.
There's a second deal between FDIC and Pigboy, signed by Dennie Pigboy Stowe the next day. It that says if Pigboy can't regurgitate the $169M his group borrowed to buy the loans by the two-year maturity date, they could have another term of the same length to do it, as long as it was because a) the laws changed and they weren't allowed to foreclose on as many loans as they'd planned to or b) what they owe is less than or equal to 30% of the liquidation value of the contractually current loans in the portfolio (where liquidation value is 65% of the very slippery "broker price opinion").

The lucky fake note-holders got to work quickly.
One of dozens and dozens of foreclosures following the 2010 deal.

You get the sense this was a straight foreclosure/REO play. Re-payment of the FDIC loan was predicated on ability to foreclose. Anyone who tried for a modification wasted their time and whatever money they spent. FDIC was much kinder to the home-hogs at RCS.

The FDIC's business with RCS is criminal because RCS are criminals. It might make you feel better to know that RCS screwed a former AmTrust homeowner so badly that a jury awarded her $2,000,000. This couple hasn't fared as well, their appeal denied though RCS was a no-show.

I wonder how the Geithner feels about transferring so much human labor into the yachts and villas of people who say hard work is talking on the phone 'til you're tired of talking. Not much probably. He's made of pretty stern stuff, when shove comes to push (the red button). The Intercept reported this and more last week.

(Turquoise elements added.)

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Have you had a go-round with RCS? (If you're willing to share any NPV input data you got, please let me know.(