Wednesday, December 31, 2008
Monday, December 29, 2008
Sunday, December 28, 2008
A Mortgage Paper Trail Often Leads to Nowhere
By GRETCHEN MORGENSON
Published: December 26, 2008
WITH home prices in free fall and mortgage delinquencies mounting, pressure to modify troubled loans is ratcheting up.
Times Topics: Gretchen Morgenson
But lawyers who represent candidates for modifications say the programs are hobbled by the complexity of securitization pools that hold the loans, as well as uncertainty about who actually owns the notes underlying the mortgages.
Problems often emerge because these notes — which are written promises to repay the full amount of a mortgage — weren’t recorded properly when they were bundled by Wall Street into pools or were subsequently transferred to other holders.
How can a loan be modified, these lawyers ask, if the lender cannot prove that it actually owns the note? More and more judges are asking the same thing about lenders trying to foreclose on borrowers.
And here is another hurdle: Most loan servicers — the folks responsible for handling all the paperwork surrounding monthly mortgage payments — aren’t set up to handle all of the details involved in a modification.
Loan servicing operations are intended to receive borrowers’ payments; producing loan histories and verifying that payments were received or junk fees were not applied is considerably more labor intensive. This cuts into profits.
“These servicers are not staffed up and they don’t have a chance in the world to do the stuff they are supposed to do,” said April Charney, a consumer lawyer at Jacksonville Legal Aid. Many servicers continue to stonewall troubled borrowers who ask for a history of their loan payments and fees, she said.
“This is your biggest, hugest expense — your home — and when you ask for a life-of-loan history your servicer tells you to get lost,” she said. “And when you ask for a list of charges in the loan history that’s not going to happen.”
So even if loan modifications were to rise rapidly, it is unclear that borrowers can trust what lenders tell them about what they owe.
Consider a federal bankruptcy court case in Colorado. It involves two borrowers who got into trouble on their loan but agreed, under a bankruptcy plan, to make revised mortgage payments to get back on track.
The lender in the case is Wells Fargo, and last Monday the judge overseeing the matter took a tough stance on the bank’s recordkeeping and billing practices.
In June 2004, Brandon M. Burrier and Denon A. Burrier received a $183,126 loan for a property in Arvada, Colo. The note was later transferred to Wells Fargo, court filings show.
The Burriers fell behind on their loan and in February 2007, they filed a Chapter 13 bankruptcy, agreeing to pay $12,000 that Wells Fargo said they owed. Chapter 13 bankruptcies allow debtors to retain their property and work out a repayment plan based on their income and the level of their indebtedness.
The Burriers’ payment plan was confirmed by the bankruptcy court in August 2007; last December, a second plan requiring higher payments was approved by the court.
Two months later, Wells Fargo told the court that the Burriers had failed to make four of their payments and that it should be allowed to begin foreclosure proceedings.
The Burriers denied that they had missed payments, but in April, to keep their home, they agreed to make double payments to cover the ones Wells Fargo claimed they had missed.
If the borrowers could prove that the mortgage checks were submitted, Wells Fargo said, their account would be credited and they would no longer have to make up the payments. The proof required by Wells Fargo and approved by the court was “valid, accurate and true copies” of the front and back of the checks the borrowers sent in.
Last August, the parties were back in court, with Wells Fargo stating that the borrowers had failed to comply with the deal. Ms. Burrier testified that she had asked her local bank repeatedly for proof of the payments made to Wells Fargo, but had had no luck. The payments to Wells Fargo were processed electronically, she learned, and that meant it did not return the checks to her bank.
The borrowers did produce bank statements showing that the checks Wells said were missing were actually cashed by “WFHM,” an entity that they assumed was Wells Fargo Home Mortgage.
But Tara E. Gaschler, the lawyer representing the borrowers, said that Wells Fargo continued to maintain that it hadn’t received the money.
The bank flew in an expert to testify that all checks received by Wells Fargo from borrowers in Chapter 13 cases were processed by hand, Ms. Gaschler said. “Even when presented with bank statements, they told the court there must be some mistake,” she added.
Times Topics: Gretchen Morgenson
Finally, Wells Fargo demanded that the Burriers provide the routing number of the account at Wells Fargo that their money went into. If they could not, the bank said, they would have to keep making extra payments.
But Sidney B. Brooks, the judge overseeing the case, was clearly dismayed by the bank’s performance.
In his opinion, he fumed that Wells Fargo had asked the borrowers for canceled checks as proof of payment, even though such checks were often not available. Wells Fargo’s request for canceled checks was especially troubling, the judge said, given that the bank was a proponent of the 2003 law that allowed banks to stop returning canceled checks to customers.
The only institution that could have the original checks is Wells Fargo, he concluded.
“The payments have, evidently, been lost in a black hole of the creditor’s organization or through accounting mismanagement,” the judge wrote. “This is a major lender/mortgage loan servicer where the left hand does not know what the right hand is doing — the collection department does not know what the check processing and accounting departments are doing.”
Because this is not the first time the judge has encountered problems in Wells Fargo’s operations, he is considering sanctions on the bank.
“This dispute might portend a widespread abuse of collection practices or creditor overreaching,” he wrote, “demanding of debtors what it, the creditor itself, is unable to provide: accurate and reliable record keeping and billing practices.”
A spokesman for Wells Fargo said: “We are currently reviewing the court’s opinion to determine whether or not an appeal is appropriate. The Burrier case is quite factually specific, and we disagree with the court’s conclusions. We are confident that our payment processing practices are accurate and sound.”
Ms. Gaschler says that this kind of dispute is becoming more common in her practice and that borrowers wind up losing too often.
“A lot of times clients don’t keep canceled checks or maybe their bank account was closed and they can’t go and get the proof,” she said. “The bank gets that extra money for as long as the debtor can keep it up and when they can’t they are pushed out of their homes.”
While judges are starting to see how flawed loan servicers’ systems can be, those rushing to modify loans may not be as aware of the problems.
In the interests of fairness, modification programs should require life-of-loan histories from servicers and a justification of each entry. New loans, especially ones backed by taxpayers, are no place to bury dubious fees or extra borrower payments to cover those that were allegedly, but not actually, missed.
Friday, December 26, 2008
Caught between hope and fear in Zimbabwe
Two women, each expecting a baby, find it difficult to smile as conditions in their country collapse around them. The joy that marked early 2008 has been snuffed out by Mugabe.
By Robyn Dixon
December 26, 2008
Reporting from Harare, Zimbabwe -- When Asiatu thinks about having her first child, she wipes her hands over her face, as if washing away bad memories.
When Junica Dube thinks about giving birth again, she rests her hands on her belly, as still and silent as a statue.
The story of two babies, to be born in the new year, should be a joyful one. But their mothers do not smile.
Dube's baby will be the first to arrive, in January. Last year, she spent four days in labor, in a hospital where nothing worked and the nurses scolded her for crying out in pain. Her firstborn son lived just a few minutes. He died with no name.
Asiatu's baby is expected in May. Pretty and slender, with the same thin wrists and sad eyes as Dube, she doesn't know who the father is. All she knows is that he isn't the man she loved, the man she lost.
Haunted by their fears, the only thing that keeps these two going is a luminous thread of hope, looping forward against all odds into the darkness that is Zimbabwe, like a firefly fluttering out of reach.
The story of the two women, and the two babies yet to be born, is the story of Zimbabwe's violent journey between hope and fear this last year.
It's September. I'm running down a dusty Harare street. The frightened slap-slap of my feet joins an orchestra of thumping shoes, a crowd running away. Everyone is scared.
Part of it is pounding herd fear. But not far behind come our pursuers, a mob of young thugs for the ruling ZANU-PF party, hurling rocks.
As I run across a road called Rotten Row and pull around a corner out of the danger zone, a couple of old men laugh at me, and the idea that this 5-foot-tall white woman would come to their country in the state it's in.
"Look at the murungu!" they say, using the Shona word for a white. "Hey, white lady! Don't you know? This is Zimbabwe!"
I slap-slap for another half a block before slowing down, feeling slightly foolish.
When this day began, the sun was warm; people danced and sang. They believed that President Robert Mugabe, who has ruled Zimbabwe for 28 years, was finally going to agree to share power six months after voters handed him a stunning defeat. I perched on a precarious rock to see the singing crowd, a forest of red-and-white opposition T-shirts, swaying in hypnotic rhythm.
Everyone was smiling.
Then she appeared at the foot of my perch, a sunny girl of 21 with a smile so wide I didn't recognize her at first. The last time I had seen her, she was crying.
I jumped down and she introduced me to her mother. And then I watched her dive back into the choppy, joyful sea of people.
It was the only time I saw Asiatu really smile.
But then fights erupted between opposition supporters and a load of ZANU-PF reinforcements who had arrived after the power-sharing deal was signed. Rocks were hurled; T-shirts were torn. Hope evaporated.
Asiatu saw the crowds of people running away, and ran too.
When I first meet Asiatu, an opposition activist, in July, she's been imprisoned for nearly two months in a ZANU-PF militia base, a rambling old farmhouse with a thatched roof outside Harare. She has to call her captors "comrades."
It's just after the second round of the presidential vote, and Mugabe's campaign of violence, designed to reverse his poor first-round result in March, is still at full throttle.
Asiatu has seen his supporters kill people at the base, stoning them with bricks. She fears she could be killed too, if her full name is published.
When she's not cleaning or cooking, she's forced to sing ZANU-PF songs for hours on end. By turns bored and terrified, she is allowed out of the base for only a couple of hours each day to do family chores.
I meet her during one of her brief stints of freedom.
When I ask about her story, her face crumples and she starts to weep. She whispers that she's raped daily by five men.
I hug her as her body shakes with sobs.
The year in Zimbabwe began with soaring expectations, like a kite on a wind: People were sure of a change. Then it plunged into despair, as if someone had shot the fragile paper-and-wood construction from the sky. Most of the time, though, people are so preoccupied with the grind of just surviving that change seems a quixotic dream.
As I've traveled across Zimbabwe over the last two years, I've met people in moments of tragic upheaval. I tell their stories and go my way. Finding them later is often difficult. But if and when I do, things have usually gone downhill.
People don't fit their trousers anymore. Skinny limbs swim in their clothes like twigs tossed into a sack. In Harare, ragged beggar girls dash between the cars, palms open in supplication, dwarfed by the babies they carry on their backs. A mother sits on a dusty curb, her toddler's belly distended. Dilapidated pickup trucks plow between the potholes, with people crammed in the back like sheep going to slaughter.
On a November day, an old man's rattling 1962 bicycle tells its own story: Its tires no longer exist. Instead, he's tied on bits of scrap rubber with any rubber strap, string or wire he can find.
Along the highways you see people trudging steadily, their plastic sandals worn paper thin, their ancient T-shirts reduced to a net of holes. They scavenge whatever they can find. The grains of corn that scatter from passing trucks are carefully collected for the day's one meal.
I often think about Jane Sibanda, a 70-year-old woman I met last year near Lupane village in southern Zimbabwe. She was embarrassed to have to beg food from her neighbors, so she'd wait until hunger clawed at her insides like an insatiable beast. The food situation was terrible then.
But this year's hunger is much worse. People are dying in villages and being buried there, with no count of the dead ever made. Perhaps she died too. I try to trace her, but fail.
Last month, on a deserted track in a dry, forgotten corner of western Zimbabwe, two old women and a man plod along carrying heavy bags. Heads bowed, they don't even hope for a lift, for drivers usually ask for money. I tell my friend, who's driving, to stop. The women's faces are streaming with sweat. One carries a panting red hen. They say they have about 25 miles more to walk. Perhaps they're exaggerating?
But it turns out to be 36 miles -- what would have been a three-day march on a stony track.
When they get out, they lightly clap their palms together, in Zimbabwe's gentle thank-you gesture. I meet the older woman's gaze for a long moment. She has tears in her eyes.
Driving through the crowded township of Mufakose one warm evening after ZANU-PF's loss in the first-round elections, I pause to drop someone off. A crowd of young men catches sight of me, and the shout goes up, "Murungu! Murungu!"Murungu! Murungu!" They throng around the car, reaching, shaking hands and laughing.
"This is the new Zimbabwe! The new Zimbabwe!" they yell. And it almost seems true.
But by nightfall, I hear that intelligence agents are raiding hotels and arresting journalists for working without accreditation. It's started.
A few days later, I meet some opposition activists in a dark car. Their fear is so strong you can almost smell it. They describe being hunted down in their villages by ZANU-PF militias with AK-47 assault rifles. On their foreheads, beads of sweat glisten in the soft green light of the cellphone I'm using as a flashlight to take notes.
Week by week, the violence escalates. One late July night, I get a text message from an opposition man I've met only once: "Pliz help me, my life is in danger." I call, but can't get through. I hit redial again and again.
Every day in a well-to-do Harare neighborhood, I see a group of exhausted-looking gardeners landscaping a garden. When I talk to them in the lush, serene surroundings, their tale is surreal.
In the evenings, they're rounded up in their township by ruling party youth militias, forced to dance, sing liberation songs and beat people all night long.
Sometimes they beat their victims to death.
Then the next day, it's off to work by 8, laying tiles in neat circles, placing elegant statues in pretty corners, building ponds and water features in someone else's garden.
There are luxurious islands in the violence. One day in June, I walk past a long, black Mercedes and into a Harare restaurant where I have a lunch meeting with one of the ZANU-PF militia base commanders. It's warm in the restaurant garden; a flutter of tiny, colorful honeyeaters sips nectar from the flowers.
He's dressed in a casual fawn-colored outfit with a cap and orders a T-bone steak, well done. He's polite and refined and speaks so softly that at times he's inaudible. He holds his teacup in long, fine fingers, sipping delicately.
Even more delicate: the subject of the election violence. We wend in wary circles toward a subject he seems keen to avoid. He calls it "re-education" and says it's necessary.
He speaks in a singsong tone, sawing methodically at his meat.
"Now, what the government is doing, because of the utterances of the West, the government is saying: 'You see, you're forgetting that we got this country by shedding blood. You think it can be returned with a ballpoint pen. This is not going to happen.' "
More than a year after Junica Dube lost her son, she is almost ready to give birth again. A new life seems a happy event in a country full of pain.
But here, things keep on getting worse. It's not just the decaying roads and the crazy inflation. Earlier this year, most schools and hospitals worked. Now most don't.
Thinking of the birth, Dube, 29, stares blankly ahead.
"I can't even say how I feel. I'm worried because there are no doctors. There are no nurses. I have to buy everything that is needed for me to give birth. And you can't afford to buy anything."
"I feel very fearful," adds her husband, Luke Dube, 34, recalling the death of his newborn last year. "What I saw last time, if it can happen again, I'd rather die. We try to forget about it, but it comes back at any time and you think about it."
Once, Asiatu dared to fall in love, with a fellow MDC activist named Phainos. But he fled in May during the election violence and hasn't been heard of since.
"We were on the verge of getting married," she says. "I'm afraid for his life, because the silence is too long."
In her township, she often has to pass the "comrades" who raped her.
"I just look away and walk past. I feel so much hate and anger, sometimes I begin trembling."
When I visit her at home in December, Asiatu wants an HIV test. So I drive her to a clinic in town. When I come by the clinic later, she's sitting slumped on the curb, head bowed.
"I feel sorry for myself. They told me that I am pregnant," she says later.
Despite being four months pregnant, she says she hadn't realized her situation. "It hurts. It hurts a lot." The HIV result will come later.
She feels no joy over the thought of a child born of rape. The father "is one of those guys, but I don't know which one."
I try to tell her that a baby's always good news, but choke on my words. Sometimes, in Zimbabwe, it's not. I brush away a sudden stream of tears. Where to start?
I take out my cellphone and pull up pictures of my daughter. My voice shakes as I tell her that I never wanted to be a single mother, either. But as difficult as it is to believe, it will be all right.
Asiatu considers the photographs carefully as I scroll one by one through my pictures.
"She's beautiful," Asiatu says softly. She tells me her child will be a girl too.
I ask whether she feels happy about that. Finally, the ghost of a smile flickers.
"A little bit," she whispers.
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Sunday, December 21, 2008
Lavish life of Mugabe’s looter-in-chief
As starving Zimbabweans face their bleakest Christmas ever, the head of the state bank puts the last touches to his 47-bedroom palace
Friday, December 19, 2008
Dec 18th 2008
From The Economist print edition
Another e-mail from the president-elect’s inbox
“THE toughest decision you have to make about Iran is whether you are willing in the final resort to attack its nuclear facilities to stop it getting a bomb. Everything else flows from that call.
John McCain said the only thing worse than a war with Iran would be an Iran with a bomb. If diplomacy fails, you do have a military option: bombing the uranium-enrichment facility in Natanz and other plants would set back Iran’s programme a year or three and put the mullahs on notice to expect more if they tried again. But if we attack we cannot rule out a big response: missiles on Israel, terror attacks on our forces in Iraq and Afghanistan, strikes on oil shipments through the Gulf. Of course, we can respond to their response. But as a president elected on a peace ticket you would need all this like a hole in the head.
Besides, the McCain dictum is debatable. What’s Iran going to do with its bomb? If it drops it on Israel it’s committing suicide. Mutual assured destruction deterred the Soviets, didn’t it? True, a nuclear Iran will be a bolder Iran, tempted to push even harder against our interests in Iraq, the Gulf, Lebanon and Palestine. But we have ways to push back. We could, for instance, extend our nuclear umbrella beyond Israel to our Arab friends.
If you decide it’s better to let Iran get its bomb than to risk bombing it, we don’t have to tell anybody for a bit. Pretending to keep a military threat on the table while trying to talk or bribe Iran out of going nuclear is not a bad policy. But be under no illusion: it’s the policy the previous administration tried too, with zero results. You’ve promised bigger carrots and threatened bigger sticks. But President Bush and the Europeans tried a good-cop, bad-cop routine and Iran ran circles round them both. To get the Russians behind tougher sanctions you’ll have to give them something big, like dropping the idea of missile defence for Europe.
One new idea you bring to the table is the offer of direct talks. Some of our people think there’s a “grand bargain” to be had with the mullahs. (Others, though, reckon they want to get their bomb first, and the bargain later.)
It might work; but there’s not much time. Within a couple of months of your inauguration Iran could have enough low-enriched uranium for one bomb, once the stuff has been boosted (this could take less than another two months) to weapons-grade. We don’t know how close Iran would then be to a working device, but its chances of getting a bomb in the first half of your first term are high. In all likelihood, you will have to decide—bomb or deter—quite soon.
Oh, and the Israelis know all this as well. We need to warn them again not to go it alone in the hope of dragging us in to finish the job. If diplomacy fails and you decide that the military option is in the end the lesser evil, at least let it be our decision, not theirs.”