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Yet Another Gift to the Banks

Blog | Posted by Josh Zinner | February 17, 2012

 

The big “robo-signing” settlement announced last week by the Obama Administration and state Attorneys General is a gift to the banks.  This was made painfully clear with the front page New York Times story yesterday about the San Francisco assessor’s audit of foreclosure files.  The San Francisco audit reviewed 400 recent foreclosures, and found clear evidence of sketchy documentation or legal violations in almost all of the filings.  In the vast majority of the cases reviewed, banks either did not have the legal right to foreclose, or their right to foreclose was highly questionable. 

The San Francisco audit is further evidence that the big banks have been using state foreclosure processes to systematically violate the due process rights of homeowners around the country.  These practices have caused enormous harm to families and communities, particularly communities of color and low income communities that have been hardest hit by the economic tsunami. 

Government officials are touting the size of the settlement as $25 billion – a drop in the bucket given the scope of the liability and asset size of the five large banks that are party to the settlement.  In fact, the banks will actually have to pay out a much smaller amount, closer to $5 billion total among the five banks.  The rest of the alleged $25 billion will be in the form of credits for reducing principal on loans that were likely to be written down on the books anyway—and much of that value will come out of the investors’ pockets.    On closer scrutiny, it appears that few of the settlement’s financial benefits will reach communities that were hit hardest by the abusive lending practices that led up to this crisis.

In exchange, the settlement would release the big banks from liability for most of their foreclosure abuses.  The settlement will make it difficult, if not impossible, to hold banks ultimately accountable for a wide array of abusive practices in the origination, securitization, and servicing of mortgages—and will virtually guarantee that the banks will never be forced to provide meaningful relief to the huge number of homeowners and communities harmed by their abusive practices.

Federal and state officials pushed hard for a settlement without investigating the depth of the problems.  The San Francisco audit is a bitter reminder that any real investigation would have turned up vast, systemic fraud and illegality, creating leverage for a settlement that could have brought meaningful relief to communities.   Once again – banks win, people lose.

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The Procrastinator's Guide to Bank Transfer Day

Blog | Posted by Deyanira Del Rio | November 5, 2011

You want to do it. You've been meaning to do it. Here are 5 reasons to finally ditch your too-big-to-fail bank and move your money to a local credit union.

#1. You'll be voicing your opposition to a broken, destructive financial system. The big banks gambled with our money, created a catastrophic housing bubble that brought down the global economy, and got bailed out after being deemed "too big to fail." We now have a banking system in which the five largest banks control 40 percent of deposits, and the top six hold $9.5 trillion in assets -- equal to 63 percent of the United States GDP.

Far from being humbled or held accountable, bankers have continued to destabilize communities through discriminatory lending and foreclosure practices, while paying themselves million-dollar bonuses and shamelessly lobbying against even the most basic financial reforms.

By joining the groundswell of people moving their money, you will send the big banks a clear message that their reckless practices must change. The banks are listening -- as Bank of America and others made clear this week when they backed down on plans to institute new debit card fees.

#2. Credit unions are not-for-profit financial cooperatives, owned and controlled by their members. Credit unions are more than "nice banks" -- they are democratic institutions that represent a fundamentally different way of doing business. When you open an account at a credit union, you become a member and shareholder of the institution. Members elect the credit union's board of directors, made up of other members who serve as unpaid volunteers and make decisions about how the credit union is run. Like any democratic system, a credit union's success depends on its members' participation; if you decide to join a credit union, consider getting involved as a volunteer or active voting member.

The structure of credit unions helps ensure that they remain accountable to their members. Credit unions, in fact, can lend money only to their members. This means they can't gamble on Wall Street investments, or siphon money out of local communities to invest in environmentally destructive projects abroad. And because they are not-for-profit and governed by unpaid directors, credit unions are able to charge less for services and prioritize members' needs over maximum profits.

#3. Your money will support your local community and economy. Community development credit unions, in particular, are dedicated to strengthening low income neighborhoods and communities of color historically redlined by banks. They reinvest their members' deposits back into their communities in the form of loans for affordable housing, small business and community development. You can find a list of community development credit unions here.

Credit unions are part of a broader cooperative movement that includes housing, food, and worker co-ops. A new series of film shorts by SolidarityNYC highlights the role that co-ops (including my credit union, the Lower East Side People's Federal Credit Union) play in creating the Solidarity Economy.

#4. Your money is safe in a credit union. One of the most commonly asked questions about credit unions is whether or not they are safe. The money you deposit in a credit union account is federally insured, up to $250,000. Credit unions are regulated and examined for safety and soundness by the National Credit Union Administration. Credit unions, in fact, are required to meet strict capital requirements, and are prohibited from charging more than 18% interest on credit cards and most loans (compared to no interest cap for national banks).

#5. Even if you're not ready to break up with your bank completely, you can move some of your business to a credit union. Consider opening a savings account, or replacing your bank credit card with one issued by a credit union. You'll get a better deal and will get to know the credit union over time. Moving your checking account down the line won't seem so daunting, and you'll have time to do it safely and without triggering any surprise bank fees.

Taking Action:
Find a list of credit unions in your area here. Call ahead to find out if you're eligible to join and what information you need to bring. Consider supporting a community development credit union, where your money will likely make the biggest difference.

While you're at it, send your former bank a letter explaining why you're closing your account. Occupy the Boardroom has set up a website where you can leave a message that they promise to deliver to Jamie Dimon, Brian Moynihan, or other banker "pen pal" of your choice.

There are many ways to protest right now, from joining teach-ins at Zuccotti Park and demonstrating with Occupy Wall Street, to joining state and national coalitions that have been working for economic justice for years. Moving your money is one clear, concrete way to align your actions with your values and begin to hold banks accountable to the public.

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Bringing Wisconsin to Wall Street

Blog | Posted by Deyanira Del Rio | May 11, 2011

Tomorrow, thousands of New Yorkers will be hitting the streets of lower Manhattan for a historic day of teach-ins and marches. Their message: No more cuts to jobs, education, housing and safety net programs. Make Wall Street banks and millionaires pay their fair share.

Organized by a broad-based coalition of labor and progressive groups, the May 12 actions are a radical response to Mayor Bloomberg's proposed budget cuts, which take aim at teachers, libraries, summer jobs for youth, homeless shelters, adult literacy programs, and other services relied upon by struggling New Yorkers. 

The actions begin at 4:00 pm at public assembly sites throughout Lower Manhattan.

Click here to find out where to go.

Speaking to a deep sense of injustice felt by citizens across the city and country, the May 12 organizers explain:

The Big Banks crashed our economy, destroying jobs, foreclosing on millions of homes and wrecking city and state budgets across the country. After trillions in taxpayer funded bailouts, Wall Street is making billions in profits and giving away record bonuses to CEOs.

But our communities are still hurting. Here in New York City, tens of thousands have lost their homes and their jobs. Now, Billionaire Mayor Mike Bloomberg is proposing devastating budget cuts as the only solution to the economic crisis that Wall Street caused. Enough is enough.

The May 12 Coalition has issued a report describing how the city can equitably close the budget shortfall, including by ending tax breaks and subsidies to Wall Street that have cost New York City $1.5 billion.

As the report points out, the nation's six largest banks - JPMorgan Chase, Bank of America, Citibank, Wells Fargo, Goldman Sachs, and Morgan Stanley - are now raking in $199 million per day in profits, and hardly need help from the city.

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Nor have the banks fulfilled their promises to create jobs in exchange for subsidies. JPMorgan Chase alone owes New York City 4,857 jobs, or $211.8 million in subsidies, according to the report.

The May 12 campaign has already caused a stir in New York City through a week of actions leading up to Thursday's mobilization.

On Monday, protesters converged on the midtown hotel where House Speaker John Boehner was speaking to business and finance execs about his plan to cut trillions in federal spending. Demonstrators also interrupted the Real Estate Board of NY's meeting, blasting the trade association for opposing renter protections and the NYS millionaire's tax.

Today, organizers rallied in front of Bank of America's Bryant Park office tower, in solidarity with activists who were speaking at the bank's shareholder meeting in North Carolina about "Bad for America's" destructive lending and foreclosure practices.

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May 12'ers have brought new energy and momentum to the fight for economic justice. Let's hope the Mayor and our elected officials get the message.

I'll be reporting back about the teach-ins and marches, and what lies beyond May 12th. In the meantime, learn more about the campaign at www.onmay12.org.

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Perils of Prepaid Cards

Blog | Posted by Deyanira Del Rio | December 22, 2010

Financial justice activists may have the Kardashian sisters to thank.  Unwittingly, the famous trio has helped raise awareness about one of the most abusive financial products on the market today – prepaid debit cards.

The sisters recently introduced – and quickly pulled, under fire from consumer groups and Connecticut’s Attorney General, among others - the Kardashian Kard (actual spelling).  The reloadable spending card, displaying the MasterCard logo along with the sisters’ famous figures, cost $99.95 for a 12-month plan, on top of a slew of fees every time someone added money, withdrew money, checked their balance, or basically came within ten feet of the card.  

Fans of alliteration will miss the fun of kriticising the kostly kard, now that it’s kaput.  But the teenagers who were no doubt its target customers are safer with the Kard off the market.

Or are they?

While the Kardashian Kard was an easy target - SNL even did a sketch about it - there are countless other fee-sucking prepaid cards that target young people, as well as low wage workers, immigrants, and other financially-strapped groups.

At a New York City Council hearing last week, NEDAP and other groups testified at length about the predatory fees and weak consumer protections associated with prepaid cards.  Contrary to industry claims that prepaid cards are sound alternatives to bank accounts, groups representing low income New Yorkers underscored how these largely unregulated products further marginalize people who have the fewest resources or who are newest to the banking system.  Better options for people disillusioned with banks include community development credit unions, which are not-for-profit and dedicated to reinvesting in their local communities.

Invoking the Kardashian Kard debacle, Democrats in the U.S. Senate recently introduced the Prepaid Card Consumer Protection Act, which would bring prepaid cards under much-needed federal regulations, more on par with bank accounts.  And the new federal Consumer Financial Protection Bureau will have authority to rein in abusive financial practices, including by prepaid card companies.  These reforms could go far to strengthen basic consumer protections for people who use the cards.

In the meantime, stay away from these inferior pieces of plastic.  In their current form, prepaid cards are nothing more than the latest in a long list of “second-tier” financial products for which the poor pay more.

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We've Only Just Begun

Blog | Posted by Sarah Ludwig | December 2, 2010

Take a moment to celebrate passage of the Consumer Financial Protection Bureau.  Okay, now get back to work. 

This was the message Elizabeth Warren delivered today at Consumer Federation of America’s Financial Services Conference, in Washington, DC.  She praised groups for staying on message throughout the legislative process about the need for the financial watchdog agency – and for their David vs. Goliath victory over Wall Street special interests, which spent millions of dollars lobbying relentlessly against the agency’s creation.  But with Republicans soon to control the House of Representatives, we’ve got to gear up for a new round of battles, with nothing less than the new consumer agency’s viability at stake. 

Professor Warren sought to temper expectations of all of us who'd hoped she'd get right to the business of writing targeted rules that ban abusive financial products and practices.  Instead, she will focus her energy on establishing a strong vision and clear goals for the agency.  She is looking to garner broad, lasting public buy-in, so that the bureau can withstand attacks by those who have vowed to undercut its authority, funding, and effectiveness. 

Citing credit card reform that Congress enacted in 2009, Professor Warren explained the limitations of targeted rulemaking.  Although the “CARD Act” eliminated some of the most egregious credit card practices, its narrow approach failed to address the industry’s systematic obfuscation of credit card terms – intended to prevent people from ever making heads or tails of the risks and pricing of financial products, necessary to making informed choices.  “It’s as if the basic rule of law in contracts has been changed,” she said.  While customers sign credit card agreements, “the lender has its fingers crossed behind its back.”

Far from radical, her vision is one of basic fairness, for the public and for industry alike.  To be sure, she added, that vision needs to be “backed up with meaningful rules and vigorous enforcement,” competitive markets, and a level playing field for all financial services providers. 

So get a good night’s sleep.  We have tons of work to do.   As Professor Warren admonished us today, “The challenge of consumer protection is permanent.”

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A Worthless Education Can Cost you Thousands

Blog | Posted by Herman De Jesus | November 2, 2010

NEDAP is receiving a growing number of hotline calls from low income New Yorkers saddled with student loan debts from their enrollment at for-profit trade schools, often decades ago.  

In 1987, Denise was an unemployed, disabled, single mother when she saw an advertisement for a cosmetology trade school.  The school offered certification "in as little as six months and immediate job placement," and announced in big print that financial aid was available.  Struggling to make ends meet, Denise believed that becoming a certified cosmetologist would offer her new job opportunities and solid income.  The ad, after all, boasted that graduates earned between $50,000 and $100,000 a year.

As it turned out, the availability of financial aid was the only true statement in the ad.  That’s because most trade schools, like the one Denise attended, exist not to train and certify people in new fields, but to make gobs of money by drawing down federal grants and other public funds. 

According to Denise, the school was more of a social gathering place than a learning environment.  The instructor rarely showed up for classes, and Denise gained no meaningful skills through the program.  She was never able to find a job in cosmetology, and soon fell behind on her student loans.  Over the years, the debt ballooned from $6,625 to $26,000. 

Since the unpaid loans were federally-insured, the government used its authority over the course of a decade to intercept Denise's income tax refunds and garnish her Social Security Disability benefits.  But still the debt would not go away.  With NEDAP’s assistance, Denise was able to consolidate her loan and lower her monthly payments.  But she remains indebted for tuition paid to a sham trade school that provided her with no educational benefit and recruited students like Denise through false advertising. 

Many recently unemployed New Yorkers are turning to for-profit trade schools for certificates and degrees they hope will make them more marketable to potential employers.  Unbeknownst to them, the ads plastered on subway cars and filling radio and TV airwaves are false and misleading.  Many of the certificates they receive will not be recognized as "real" degrees by prospective employers. They will end up worse off than if they hadn’t attended the trade school in the first place – with huge student loans and few job prospects.   

People seeking assistance should visit www.studentloanborrowerassistance.org.  Visit www.IBRinfo.org for information on the Income Based Repayment plan for federal student loans, a program that enables eligible borrowers to enter into an affordable monthly payment plan.

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It's Okay When the Bankers Do It

Blog | Posted by Josh Zinner | October 21, 2010

Since the latest scandal broke about fraudulent foreclosure filings by the banks, industry representatives have been trying to change the subject by complaining that borrowers should just pay their bills. 

What a rich irony, then, that the Mortgage Bankers Association (MBA), the national trade association and powerful lobbyist for more than 2,400 banks and mortgage lenders, recently walked away from millions of dollars in debt on a building that it purchased in 2007 at the over-inflated value of $79 million.  When the MBA couldn't pay its own mortgage, it negotiated a short sale on the building for $41 million, leaving its own lenders holding the bag. But this is just a business decision, right?  Pay your bills, MBA.

This double standard for banks was on display again today in the Wall Street Journal, in an article by a reporter hell-bent on blaming the the latest disclosure of widespread bank fraud on the consumer lawyers defending homeowners.  Claiming that foreclosure defense attorneys have "sown confusion and turmoil in the housing market" (how dare they catch the banks committing fraud?!), the WSJ complains that "lawyers in the field now commonly use a technique more identified with corporate litigation: probing depositions, designed to uncover any lapses in judgment, flaws in a process or wrongdoing." 

Otherwise stated: only corporations are entitled to having their interests protected in the courts.  The rest of us should shut up and get out of the way.

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[October 19, 2010 -- Bank of America announced today that it is resuming foreclosures in the 23 states that require foreclosures to go through the courts.] 

Bank of America Strains Credulity

Blog | Posted by Josh Zinner | October 19, 2010

Implausible.  Are we really to believe that Bank of America: (a) reviewed tens of thousands of loan files in two weeks; and (b) didn't find a single impropriety in those files?  This claim runs counter to the numerous problems that have emerged around the country with the chain of ownership on mortgages that B of A is servicing.

B of A's announcement is a naked attempt by the bank to contain the damage and boost its sagging share price.  Yet again, this demonstrates why banks cannot be trusted to police themselves, and why the investigation by the 50 State Attorneys General is critical to getting to the bottom of this debacle.

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It’s Not about Shoddy Paperwork

Blog | Posted by Sarah Ludwig | October 18, 2010

The revelation that lenders have been routinely filing false affidavits in foreclosure proceedings has led some of the country’s largest mortgage lenders – Bank of America, JPMorgan Chase, and GMAC—to stop foreclosing on homes while they sort out the mess.  It has also led to a new phase of finger-wagging by pundits eager to defend the banking industry and blame homeowners for the crisis. 

A blogger with Crain’s New York Business today expressed what’s becoming a common refrain in the mainstream press.  He opined that “the crisis over shoddy handling of foreclosure documents” is really just an issue of legal technicalities.  Lenders will simply correct the technical errors, re-file their foreclosure actions in the courts, and carry on as usual.

The other emerging theme is that homeowners are now enjoying a free ride, getting away with not paying their mortgages thanks to a procedural triviality.  But the foreclosure document mess is not simply a matter of shoddy paperwork, corner-cutting, or legal technicalities.   Lest we forget, knowingly submitting false affidavits to the court – as was likely done hundreds of thousands of times in recent years – is a crime, not a mere technicality.  The “robosigning” of documents masks defects in the chain of ownership of mortgages, which became ever-complicated as Wall Street made untold billions by packaging, selling and reselling mortgages.  A lender can’t legally take someone’s home unless it owns the mortgage, and in many cases lenders simply cannot prove that they do.

The rampant fraud in foreclosure filings did not occur in a vacuum.  It is part of the continuum of fraud and abuse – in the marketing, origination, and servicing of loans – that have characterized large segments of the mortgage industry for years. 

Since the crisis began, more than 2.5 million Americans have lost their homes to foreclosure, and another eight million are projected to lose their homes in the next three years.  It will take decades to recover from the devastation that the foreclosure crisis is causing for families, communities, and the economy at large. The least we can demand is that lenders seeking to take a person’s home prove that they have the legal right to do so.

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