What happened to all the homes foreclosed on when the housing bubble burst? Millions of people lost their homes and most of their life savings when the value of their homes plummeted during the most recent financial collapse. Many found they could not keep up with mortgage payments, either because they lost their jobs during the recession or because they were overextended financially for some other reason. Some would say many never should have been offered the loans in the first place. The fact remains that many people went from pursuing the “American Dream” of home ownership to struggling just to keep a roof over their heads by renting in a very short span of time.
The banks lost tons of money on loans that would never be paid in full, but they did have something very tangible in place of the money – the property. The real estate still belonged to them. Home buyers were left with nothing after pouring thousands of dollars into the effort to purchase a home, only to be turned out when they simply did not have the resources to complete the transaction. The banks were promptly bailed out by the taxpayers, despite questionable lending practices that ultimately resulted in sizable settlements. Little of the proceeds of these settlements ultimately made it into the hands of the people actually wronged. Some of the states used large chunks of the settlement money to fill budget holes instead of compensating former homeowners for their losses.
Many contend that being able to just pay some money, often obtained by questionable means to begin with, without admitting any guilt on the part of the lending institutions or any of their executives was inadequate punishment for the serious nature of the wrongs perpetrated. That the companies were willing to spend that much money to avoid criminal prosecution or admission of any guilt indicates our government may have let them off too lightly. Certainly many of those most affectedly believe that is the case.
The result of all the foreclosure activity was the availability of enormous numbers of homes to be resold, often in bulk, for vastly reduced prices. Who better to step into the void created by the individuals forced into foreclosure than large institutional buyers – hedge funds and other private equity companies capable of raising large amounts of capital to invest in the family home market. This happened to a large degree. particularly in areas of the country where the housing market became the most depressed in terms of property values. The idea was often to turn these properties into rental units until such time as property values returned to levels that would allow them to be sold at a tidy profit. The result could then end up being that people who had lost their homes to foreclosure would end up renting similar property from one of these large institutional owners. They would have a place to live, but be unable to accumulate any equity in the property to be used in the future as a cushion against possible financial difficulties, or to pass on to heirs.
In effect, this trend has resulted in even further redistribution of wealth in this country upward – from the poor and particularly the middle working class people to the wealthy. Investors in private equity companies and hedge funds on this scale do not, for the most part, supplement their low wage incomes with food stamps or social security checks. People who live from paycheck to paycheck (believe me, there are many more of us than the Wall Street crowd would like us to believe) do not have spare change to put into a hedge fund waiting for the profits to start rolling in.
So the banks either get their money back from the bailout, or from the proceeds from reselling the repossessed real estate. The large investors get their money back with a profit for just collecting rent or repairing and reselling the properties. The only people who have little or nothing to show for their efforts are those who toiled to earn enough money to start trying to purchase a home, only to see it all evaporate in a sudden economic downturn. Their money ended up in the hands of the flimflam artists who sold them the rotten loans in the first place, along with those wealthy enough to buy the properties at rock bottom prices and further profit from them upon a resurgence in the real estate market.
Something is drastically wrong with a system such as ours which enables a very small percentage of the population to profit greatly at the expense of so many more others. The notion that only minimal amounts of money (in terms of the enormous wealth gained in the process) are seen by the powers that be to be adequate recompense for the misery created by these transactions is appalling. These companies and people produced far more economic damage to far more people than Bernie Madoff ever dreamed of. He was sentenced to 150 years in prison. They received bonuses. Attempts begun at effectively regulating the responsible financial institutions to ensure that a repeat performance can be avoided have been stymied at every turn by politicians, many of whom are beholden to the very interests they claim to want to regulate.
Some say we have the best government money can buy. It certainly serves the moneyed interests far better than rest of us. There are some elected officials willing to stand up to them and fight for rest of us. Unfortunately, they are currently a small minority in Congress and the legislatures of most states. Until we get effective regulation of the financial services industry to prevent future robbery of this sort, the economic inequality and impoverishment of ever more members of our society will continue. We need to back those who are willing to stand up for us and increase their numbers and influence in our government at every opportunity. Never again should this sort of disaster be allowed to be perpetrated on such a large segment of the American people with absolutely no accountability on the part of those responsible for it. Never again should the victims (in this case, the American taxpayers) be held responsible for financing this sort of economic chicanery, while those responsible stash their take in tax shelters and pay not a dime of their own money in fines or spend as much as a day in prison. This is a case where the punishment has to this point fallen far short of the seriousness of the crime.
Further Suggested Readings:
Wall Street Hedge Funds Buy Up Rental Properties
Hedge Funds As Landlords? In Search of Returns, Wall Street Buys Up Foreclosed Homes
Hedge Fund Blackstone Buying $100 Million in Foreclosed Homes Every Week
Hedge Funds Crowd First-Time Buyers Out of Housing Market
Foreclosure Bulk Sales Program Allows Banks and Hedge Funds to Buy Low After Selling High
Hedge Funds Are Fueling Foreclosure Inflation
Private Equity Has Too Much Money to Spend on Homes
Source: Rcooley123's Blog
Showing posts with label Housing. Show all posts
Showing posts with label Housing. Show all posts
Wednesday, January 1, 2014
Tuesday, November 20, 2012
Where is the grace? Where is the compassion?
I am haunted by this picture. It is of a woman unsuccessfully trying to stop a bulldozer from demolishing her home in Lenasia. No one seemed to have thought of asking the woman her name. The newspapers said she was “unidentified”: Like so many other black woman in South Africa she is literally treated as being without an identity, without a history, without a personality. Why did the Gauteng government want to demolish this woman’s home and why did a court grant an order allowing the demolition?
The bulldozing of people’s homes is an emotionally laden issue in South Africa. Anyone with a passing knowledge of the apartheid past must recall the horrible images of bulldozers wrecking people’s homes in Fietas, Sophiatown, District Six and in many other parts of the country. It therefore came as a shock to hear that our government sought, and a South African court ordered, the demolition of houses in Lenasia.
The Gauteng local government and housing department began destroying the houses two weeks ago because the land they were built on was intended for government housing, and had been sold illegally. About 50 houses had been destroyed and another 113 were in line to be demolished before the South African Human Rights Commission went to court to try and stop this. The plots of land were apparently sold fraudulently for amounts ranging from R2500 to R95 000. The buyers were given forged deeds of sale with the department’s logo.
On 29 September last year, the South Gauteng High Court ordered the relevant residence of Lenasia to vacate their homes and to demolish the homes or structures erected on the property. In the event of failure to remove or demolish within the time period given, the City was granted the right to demolish the homes. The Order did not require the City to provide those evicted with alternative accommodation.
Given the Constitutional Court’s jurisprudence on forced evictions and the provisions of the Prevention of Illegal Evictions from and Unlawful Occupation of Land (PIE) Act, it is difficult to agree with the court for granting this court order – which in any case the Gauteng Government should never have asked for. I guess if one does not live at Nkandla, one’s home is not seen as either private or sacred by our government.
In terms of section 26(3) of the Constitution, when considering whether to order the forced eviction of unlawful occupiers from their homes, a court must take into account all relevant factors. As the Constitutional Court stated in Port Elizabeth Municipality v Various Occupiers, our Constitution “acknowledges that a home is more than just a shelter from the elements”. A home “is a zone of personal intimacy and family security” and the forced removal from a home “is a shock for any family”. It does not make any difference whether that home is lawfully or unlawfully occupied.
The PIE Act confirms that a court must take into account all the relevant circumstances under which people occupied the land. In the PE Municipality case justice Albie Sachs warned that a court should be slow to order the eviction of its citizens from state owned land as “the state generally has further land to meet its obligations”. The degree of emergency or desperation of people, who have sought a spot on which to erect their shelters, would always have to be considered. And persons “occupying land with at least a plausible belief that they have permission to be there” can be looked at with far greater sympathy than those who deliberately invaded land with a view to disrupting the organised housing programme and placing themselves at the front of the queue.
It is settled law that a court should be reluctant to grant an eviction against relatively settled occupiers unless it is satisfied that a reasonable alternative is available. In City of Johannesburg v Blue Moonlight Properties the Constitutional Court found – in slightly different circumstances than the present – that the City’s housing policy was unconstitutional to the extent that it excluded some people evicted from privately owned property from consideration for temporary accommodation. It found that such an exclusion was unreasonable. This does not mean that the City would always have to provide alternative accommodation, but if it failed to do so in circumstances where people would be left homeless the eviction would almost never be granted.
In the end a court must consider all relevant factors but should not do so in a mechanical way or in a way that gave too much weight to the bureaucratic needs and plans of the Municipality and too little weight to the needs of those who might be affected by the eviction. In PE Municipality Sachs explained the approach as follows:
In this case, the residents were defrauded. They built structures on government owned land believing that they had bought the plots. They built solid structures, using their own money, believing they had a right to do so. They did not do so because they wanted to jump the queue for land or housing. Those who committed the fraud are being prosecuted, but it is unclear why those who were duped must be punished for their crime.
It is unclear what constitutionally permitted purpose is being served by the eviction of such innocent people from their homes. How does the bulldozing of their homes demonstrates the Gauteng government’s commitment to a caring society, one which is animated by the principle of Ubuntu, which holds that we are all demeaned if some among us are treated without grace and compassion – all in order to pursue a coldhearted and bureaucratic housing plan without any consideration of the feelings of those affected?
I wonder if the Gauteng Premier and the judicial officer who granted the eviction and demolition order have had time to pause for a moment to consider the feelings of the unnamed woman in the picture. Have they asked themselves what must have gone through her mind as she desperately threw her body in the path of that bulldozer? Do they wonder about all the hopes and dreams she had about her new home and how these have now been shattered by the greedy fraudsters who sold these plots to innocent citizens, abetted by the Gauteng Government and by the court who ordered the eviction?
Where is the grace? Where is the compassion? Where is the common decency? Or are these feelings only reserved for one “special” person, a person who might bleed and sleep and eat and have sex and defecate like the rest of us, but who somehow is viewed as more important and more worthy of concern and respect than the unnamed woman in Lenasia who planted her body in front of that bulldozer?
Why is it that we are told (in expensive adverts in the Sunday papers) not to care that the homes of some citizens are bulldozed, while we are also told that it is none of our business that more than R250 million of public funds are being used to upgrade the private homestead of our king, our leader, our father in chief – all while some of our people who contributed to the upgrade of the President’s house do not have a roof over their heads and will be forced to sleep under a bush or in a ditch tonight and for many, many, more nights to come?
Source: Constitutionally Speaking
The bulldozing of people’s homes is an emotionally laden issue in South Africa. Anyone with a passing knowledge of the apartheid past must recall the horrible images of bulldozers wrecking people’s homes in Fietas, Sophiatown, District Six and in many other parts of the country. It therefore came as a shock to hear that our government sought, and a South African court ordered, the demolition of houses in Lenasia.
The Gauteng local government and housing department began destroying the houses two weeks ago because the land they were built on was intended for government housing, and had been sold illegally. About 50 houses had been destroyed and another 113 were in line to be demolished before the South African Human Rights Commission went to court to try and stop this. The plots of land were apparently sold fraudulently for amounts ranging from R2500 to R95 000. The buyers were given forged deeds of sale with the department’s logo.
On 29 September last year, the South Gauteng High Court ordered the relevant residence of Lenasia to vacate their homes and to demolish the homes or structures erected on the property. In the event of failure to remove or demolish within the time period given, the City was granted the right to demolish the homes. The Order did not require the City to provide those evicted with alternative accommodation.
Given the Constitutional Court’s jurisprudence on forced evictions and the provisions of the Prevention of Illegal Evictions from and Unlawful Occupation of Land (PIE) Act, it is difficult to agree with the court for granting this court order – which in any case the Gauteng Government should never have asked for. I guess if one does not live at Nkandla, one’s home is not seen as either private or sacred by our government.
In terms of section 26(3) of the Constitution, when considering whether to order the forced eviction of unlawful occupiers from their homes, a court must take into account all relevant factors. As the Constitutional Court stated in Port Elizabeth Municipality v Various Occupiers, our Constitution “acknowledges that a home is more than just a shelter from the elements”. A home “is a zone of personal intimacy and family security” and the forced removal from a home “is a shock for any family”. It does not make any difference whether that home is lawfully or unlawfully occupied.
It is not only the dignity of the poor that is assailed when homeless people are driven from pillar to post in a desperate quest for a place where they and their families can rest their heads. Our society as a whole is demeaned when state action intensifies rather than mitigates their marginalisation. The integrity of the rights-based vision of the Constitution is punctured when governmental action augments rather than reduces denial of the claims of the desperately poor to the basic elements of a decent existence. Hence the need for special judicial control of a process that is both socially stressful and potentially conflictual.
The PIE Act confirms that a court must take into account all the relevant circumstances under which people occupied the land. In the PE Municipality case justice Albie Sachs warned that a court should be slow to order the eviction of its citizens from state owned land as “the state generally has further land to meet its obligations”. The degree of emergency or desperation of people, who have sought a spot on which to erect their shelters, would always have to be considered. And persons “occupying land with at least a plausible belief that they have permission to be there” can be looked at with far greater sympathy than those who deliberately invaded land with a view to disrupting the organised housing programme and placing themselves at the front of the queue.
It is settled law that a court should be reluctant to grant an eviction against relatively settled occupiers unless it is satisfied that a reasonable alternative is available. In City of Johannesburg v Blue Moonlight Properties the Constitutional Court found – in slightly different circumstances than the present – that the City’s housing policy was unconstitutional to the extent that it excluded some people evicted from privately owned property from consideration for temporary accommodation. It found that such an exclusion was unreasonable. This does not mean that the City would always have to provide alternative accommodation, but if it failed to do so in circumstances where people would be left homeless the eviction would almost never be granted.
In the end a court must consider all relevant factors but should not do so in a mechanical way or in a way that gave too much weight to the bureaucratic needs and plans of the Municipality and too little weight to the needs of those who might be affected by the eviction. In PE Municipality Sachs explained the approach as follows:
The Constitution and PIE require that in addition to considering the lawfulness of the occupation the court must have regard to the interests and circumstances of the occupier and pay due regard to broader considerations of fairness and other constitutional values, so as to produce a just and equitable result. Thus, PIE expressly requires the court to infuse elements of grace and compassion into the formal structures of the law. It is called upon to balance competing interests in a principled way and promote the constitutional vision of a caring society based on good neighbourliness and shared concern.
In this case, the residents were defrauded. They built structures on government owned land believing that they had bought the plots. They built solid structures, using their own money, believing they had a right to do so. They did not do so because they wanted to jump the queue for land or housing. Those who committed the fraud are being prosecuted, but it is unclear why those who were duped must be punished for their crime.
It is unclear what constitutionally permitted purpose is being served by the eviction of such innocent people from their homes. How does the bulldozing of their homes demonstrates the Gauteng government’s commitment to a caring society, one which is animated by the principle of Ubuntu, which holds that we are all demeaned if some among us are treated without grace and compassion – all in order to pursue a coldhearted and bureaucratic housing plan without any consideration of the feelings of those affected?
I wonder if the Gauteng Premier and the judicial officer who granted the eviction and demolition order have had time to pause for a moment to consider the feelings of the unnamed woman in the picture. Have they asked themselves what must have gone through her mind as she desperately threw her body in the path of that bulldozer? Do they wonder about all the hopes and dreams she had about her new home and how these have now been shattered by the greedy fraudsters who sold these plots to innocent citizens, abetted by the Gauteng Government and by the court who ordered the eviction?
Where is the grace? Where is the compassion? Where is the common decency? Or are these feelings only reserved for one “special” person, a person who might bleed and sleep and eat and have sex and defecate like the rest of us, but who somehow is viewed as more important and more worthy of concern and respect than the unnamed woman in Lenasia who planted her body in front of that bulldozer?
Why is it that we are told (in expensive adverts in the Sunday papers) not to care that the homes of some citizens are bulldozed, while we are also told that it is none of our business that more than R250 million of public funds are being used to upgrade the private homestead of our king, our leader, our father in chief – all while some of our people who contributed to the upgrade of the President’s house do not have a roof over their heads and will be forced to sleep under a bush or in a ditch tonight and for many, many, more nights to come?
Source: Constitutionally Speaking
Wednesday, September 19, 2012
Richmond Farm Transit Camp in KwaMashu
Mchunu and Others v Executive Mayor of eThekwini and Others ('Mchunu')
implementation of court order - Siyanda - Durban High Court
In this matter, SERI and Abahlali baseMjondolo (AbM) seek an order against the Executive Mayor of eThekwini (Durban), together with two other senior officials in their personal capacities, to take all the steps necessary to implement a court order requiring housing to be provided to 37 occupants of the Richmond Farm Transit Camp in KwaMashu. The occupiers were evicted from the Siyanda informal settlement in March 2009 in order to allow the construction of a road. One of the conditions of the eviction order was that the occupiers would be provided with permanent housing within a year. The deadline for doing so expired almost two years ago and nothing has been done to comply with the order.
This is an important case because it establishes whether individual officebearers can be held personally responsible for the state’s failure to perform on specific obligations. SERI served the application in February 2012, and filed a replying affidavit in May 2012. Heads of argument were filed on 4 September 2012, and the case was heard in the Durban High Court on 17 September 2012.
On 19 September 2012, Acting Judge Nigel Hollis granted an order and delivered an ex tempore judgment in the Durban High Court. His decision requires the Mayor of eThekwini, the City Manager and the Director of Housing to take all the necessary steps, within three months, to provide permanent housing to the 37 families. They are “constitutionally and statutorily obliged to take all necessary steps” to comply with the 2009 order. If they do not, they may be held in contempt and fined or imprisoned.
In this matter, SERI and Abahlali baseMjondolo (AbM) seek an order against the Executive Mayor of eThekwini (Durban), together with two other senior officials in their personal capacities, to take all the steps necessary to implement a court order requiring housing to be provided to 37 occupants of the Richmond Farm Transit Camp in KwaMashu. The occupiers were evicted from the Siyanda informal settlement in March 2009 in order to allow the construction of a road. One of the conditions of the eviction order was that the occupiers would be provided with permanent housing within a year. The deadline for doing so expired almost two years ago and nothing has been done to comply with the order.
This is an important case because it establishes whether individual officebearers can be held personally responsible for the state’s failure to perform on specific obligations. SERI served the application in February 2012, and filed a replying affidavit in May 2012. Heads of argument were filed on 4 September 2012, and the case was heard in the Durban High Court on 17 September 2012.
On 19 September 2012, Acting Judge Nigel Hollis granted an order and delivered an ex tempore judgment in the Durban High Court. His decision requires the Mayor of eThekwini, the City Manager and the Director of Housing to take all the necessary steps, within three months, to provide permanent housing to the 37 families. They are “constitutionally and statutorily obliged to take all necessary steps” to comply with the 2009 order. If they do not, they may be held in contempt and fined or imprisoned.
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SERI and Abahlali baseMjondolo media statement (19 September 2012) here.
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Draft order (19 September 2012) here.
- Occupiers' supplementary heads of argument (14 September 2012) here.
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Respondent's heads of argument (13 September 2012) here.
- SERI and AbM press release (29 February 2012) here.
- Short film entitled "A Fish in a Tin" about the eviction and relocation to Richmond Farm Transit Camp here.
- Notice of motion (12 December 2012) here.
Wednesday, September 5, 2012
Kenya: High Court Ruling in Mortgage Dispute
(Obiter as per Ogola, J.)
Captain J N Wafubwa vs Housing Finance Co. of Kenya
High Court at Nairobi - Milimani Commercial Courts
E.K O Ogolla. J
April 26, 2012
Ownership of a home in Kenya is a dream for many Kenyans. That is why many banks have gone into mortgage financing in a quest to fulfill the dream of many citizens of owning a home by taking a mortgage. Usually, the mortgage instrument is a standard contract across the board that gives the Bank the right to sell the mortgaged property in case the borrower is unable to repay the loan as stipulated in the Contract.
In exercising its right of statutory power of sale, the bank may sometimes err and cause serious frustrations to the borrower of the loan similar to what happened in the present case. Captain Wafubwa took a mortgage from the defendant, Housing Finance (HFCK) in 1989 and ran into arrears which gave HFCK the right to sell his mortgaged property to recover the loan.
The facts
The Plaintiff in this case, Captain Wafubwa took a mortgage with Housing Finance Company of Kenya in 1989. He fell into arrears with the repayments. The bank in exercise of its statutory power of sale held a public auction in 1996 and sold off the property for Ksh 4.5M to United Millers Ltd who were supposed to pay 25% of the price at the fall of the hammer.
United Millers paid the 25% but did not follow through the transaction and therefore the house was not transferred to them. They therefore forfeited the deposit of about Kshs. 1,125,000. The bank in its testimony testified that the said deposit of the money went to its profit and loss account and therefore the borrower still owed the bank money.
In 2009, the Bank sold the suit property through a private treaty to a third party for Kshs 4.5M an amount, which it was worth 13 years back. At that point in time, HFCK claimed they were owed Ksh. 11M by Captain Wafubwa. With this amount, the Bank credited Captain Wafubwa's account and still asked him to repay more than Kshs. 6.8M remaining as part of the debt.
Before the bank did the private treaty, the Captain had sought to redeem his house to no avail and had taken his battle to the Court of Appeal. In the Court of Appeal, it was agreed by a majority decision that the right of redemption by Captain Wafubwa had been extinguished at the fall of the hammer but with one Judge of Appeal dissenting.
The dissenting Judge argued that the right to redeem the house had not been extinguished at the fall of the hammer since the sale was never finalized and as such, the owner still had a chance to redeem his house. However, since a decision by the majority of the Judges had been reached, the owner had no recourse but to seek alternative civil remedy, which resulted in this suit. The Captain went to court claiming wrongful eviction and also claiming the deposit paid in 1996 of Kshs. 1,125,000 and the balance of Kshs. 20,000.
The mortgage had been entered into under the Indian Transfer of Property Act 1882 (now repealed) which at section 69 (c) provides for the mechanism of how proceeds of a sale or attempted sale are to be applied when a bank exercises its statutory power of sale. The section provides;
"The money which is received by a mortgagee, arising from a sale by him under the mortgagee's statutory power of sale after discharge of prior encumbrances to which the sale is not made subject, if any, or after payment into court of a sum to meet any prior encumbrances, shall be held by him in trust to be applied by him, first, in payment of all costs, charges, and expenses properly incurred by him as incident to the sale or any attempted sale, or otherwise, and secondly in discharge of the mortgage - money, interest, and costs, and other money, if any, due under the mortgage, and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorized to give receipts for the proceeds of the sale thereof."
Court Findings
The court opined that the auction sale which took place on November 8, 1996 was a "sale" or an "attempted sale" and therefore the deposit received from it could only be spent as provided under the Act and the balance thereof after deducting the costs and charges had to be used to reduce the mortgage debt and interest, with the residue, if any, given to Captain Wafubwa.
From the foregoing the court found that Captain Wafubwa was entitled to the said credit balance of Kshs.20, 662.80 immediately the deposit of 25% was made pursuant to the attempted sale on 8th November 1996. This being so, his property ought not to have been sold by private treaty in February 2009 as at that time the Captain did not owe HFCK any money on account of the aforesaid mortgage transaction. Captain Wafubwa was therefore entitled to his property.
However since the property was sold to a purchaser for value without notice of the preceding events, and since title had passed to the said purchaser upon the transfer registered on April 21, 2009, Captain Wafubwa was only entitled to the value of his property as at the time of the transfer to the Purchaser together with the expected appreciation in value since, the court said.
Judgment was hence entered for Captain Wafubwa for (a) Kshs.20,662.80/= with interests at 27.5% p.a. with effect from November 12, 1996 till payment in full, (b) Kshs.4, 500,000/= with interest at 27.5% p.a. with effect from February 9, 2009 till payment in full being the value of the suit premises from date of sale and (c) Cost of the Suit with interests thereon at court rates.
Source: All Africa
"Really where is justice? Banks cannot just hide behind the contracts they make, regardless of how unjust they are, to literally destroy their customers. Without their customers the banks cannot operate. A time has come for banks in Kenya to look into the eyes of their customers and answer the question: Are banks Kenyans? Or have they just entered Kenya for business? Banks in Kenya reign large.
I am reminded of a predator who after killing the prey is not satisfied to leave the carcass to the vultures, but becomes both the predator and the vulture, killing the prey and gleaning the meat from the carcass to ensure the prey is really dead. I am also reminded of a robber killing his victim and not only attending his funeral, but insisting on carrying the casket to the grave to confirm that his victim is dead and buried."
Captain J N Wafubwa vs Housing Finance Co. of Kenya
High Court at Nairobi - Milimani Commercial Courts
E.K O Ogolla. J
April 26, 2012
Ownership of a home in Kenya is a dream for many Kenyans. That is why many banks have gone into mortgage financing in a quest to fulfill the dream of many citizens of owning a home by taking a mortgage. Usually, the mortgage instrument is a standard contract across the board that gives the Bank the right to sell the mortgaged property in case the borrower is unable to repay the loan as stipulated in the Contract.
In exercising its right of statutory power of sale, the bank may sometimes err and cause serious frustrations to the borrower of the loan similar to what happened in the present case. Captain Wafubwa took a mortgage from the defendant, Housing Finance (HFCK) in 1989 and ran into arrears which gave HFCK the right to sell his mortgaged property to recover the loan.
The facts
The Plaintiff in this case, Captain Wafubwa took a mortgage with Housing Finance Company of Kenya in 1989. He fell into arrears with the repayments. The bank in exercise of its statutory power of sale held a public auction in 1996 and sold off the property for Ksh 4.5M to United Millers Ltd who were supposed to pay 25% of the price at the fall of the hammer.
United Millers paid the 25% but did not follow through the transaction and therefore the house was not transferred to them. They therefore forfeited the deposit of about Kshs. 1,125,000. The bank in its testimony testified that the said deposit of the money went to its profit and loss account and therefore the borrower still owed the bank money.
In 2009, the Bank sold the suit property through a private treaty to a third party for Kshs 4.5M an amount, which it was worth 13 years back. At that point in time, HFCK claimed they were owed Ksh. 11M by Captain Wafubwa. With this amount, the Bank credited Captain Wafubwa's account and still asked him to repay more than Kshs. 6.8M remaining as part of the debt.
Before the bank did the private treaty, the Captain had sought to redeem his house to no avail and had taken his battle to the Court of Appeal. In the Court of Appeal, it was agreed by a majority decision that the right of redemption by Captain Wafubwa had been extinguished at the fall of the hammer but with one Judge of Appeal dissenting.
The dissenting Judge argued that the right to redeem the house had not been extinguished at the fall of the hammer since the sale was never finalized and as such, the owner still had a chance to redeem his house. However, since a decision by the majority of the Judges had been reached, the owner had no recourse but to seek alternative civil remedy, which resulted in this suit. The Captain went to court claiming wrongful eviction and also claiming the deposit paid in 1996 of Kshs. 1,125,000 and the balance of Kshs. 20,000.
The mortgage had been entered into under the Indian Transfer of Property Act 1882 (now repealed) which at section 69 (c) provides for the mechanism of how proceeds of a sale or attempted sale are to be applied when a bank exercises its statutory power of sale. The section provides;
"The money which is received by a mortgagee, arising from a sale by him under the mortgagee's statutory power of sale after discharge of prior encumbrances to which the sale is not made subject, if any, or after payment into court of a sum to meet any prior encumbrances, shall be held by him in trust to be applied by him, first, in payment of all costs, charges, and expenses properly incurred by him as incident to the sale or any attempted sale, or otherwise, and secondly in discharge of the mortgage - money, interest, and costs, and other money, if any, due under the mortgage, and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorized to give receipts for the proceeds of the sale thereof."
Court Findings
The court opined that the auction sale which took place on November 8, 1996 was a "sale" or an "attempted sale" and therefore the deposit received from it could only be spent as provided under the Act and the balance thereof after deducting the costs and charges had to be used to reduce the mortgage debt and interest, with the residue, if any, given to Captain Wafubwa.
From the foregoing the court found that Captain Wafubwa was entitled to the said credit balance of Kshs.20, 662.80 immediately the deposit of 25% was made pursuant to the attempted sale on 8th November 1996. This being so, his property ought not to have been sold by private treaty in February 2009 as at that time the Captain did not owe HFCK any money on account of the aforesaid mortgage transaction. Captain Wafubwa was therefore entitled to his property.
However since the property was sold to a purchaser for value without notice of the preceding events, and since title had passed to the said purchaser upon the transfer registered on April 21, 2009, Captain Wafubwa was only entitled to the value of his property as at the time of the transfer to the Purchaser together with the expected appreciation in value since, the court said.
Judgment was hence entered for Captain Wafubwa for (a) Kshs.20,662.80/= with interests at 27.5% p.a. with effect from November 12, 1996 till payment in full, (b) Kshs.4, 500,000/= with interest at 27.5% p.a. with effect from February 9, 2009 till payment in full being the value of the suit premises from date of sale and (c) Cost of the Suit with interests thereon at court rates.
Source: All Africa
Friday, August 31, 2012
What Land and Housing Rights Reveal About a Country’s Commitment to Open Society
Homeowners in Moscow’s Rechnik
district likely did not expect to wake up to bulldozers on the morning
of January 21, 2010. Thrown out of their homes by armed police, families
could only watch as their houses were demolished. Under the direction
of Moscow’s then-mayor, Yuri Luzhkov, famous—or infamous—for his embrace
of fast-paced, high-priced development, municipal authorities decided
to invalidate land permits issued during the Soviet era and reject
residents’ de facto titles to what has since become valuable land and to
the houses they had built on it. Had they built illegally? What is the
state’s responsibility to citizens in this process? What, if any, were
the underlying interests at stake in this demonstration of force? With
similar situations played out all over the globe, state actions to take
away people’s land or expel them from their homes tell us volumes about a
government’s commitment to transparency, democracy, and other elements
of good governance; they lay bare the true human rights record of a
place.
The Open Society Foundations’ Human Rights Data Initiative, a joint project of the Human Rights and Governance Program and the Information Program, has begun a year-long study of housing and property expropriations. The study will track how the issue is connected to a range of internationally recognized human rights, and explore how human rights and accountability organizations approach the problem of the abuse of states’ claim to eminent domain. Though states are empowered to use eminent domain for the public good, abuse of this authority is widespread. What we’ve found is that violations of the “positive right” to housing are only one part of the issue. The process of state infringement on land ownership illuminates a host of other problems, including the state’s failure to uphold the rule of law, provide equal protection to all citizens, tackle corruption, and engage in economic development that is respectful of ethnic minorities and the urban poor. Invariably we also find citizens shut out of decisions regarding their surroundings, the shape of their city, and preservation of its cultural heritage. Land and housing policy is a revelator that tells us about the reality and depth of commitment to open society values in a given country.
In a broad survey of the work of the Open Society Foundations, we’ve seen that the threat to where they live is many people’s first encounter with the potential harm of predatory state interests. Human rights and transparency organizations report incidences with alarming frequency: Azeri families living in central Baku find themselves stripped of their property and forced from their homes to make way for a glittering stadium for the Eurovision Song Contest. In Equatorial Guinea, where a small ruling clique of families reaps huge profits while over 60 percent survive on less than $1 per day, citizens were evicted with inadequate or nonexistent compensation in the name of an “urban renewal” and public utility development, that has given birth to hotels, offices and luxury housing that few will ever access. Similar dubious state claims to promoting “public good” were raised in the case of Roma settlements on municipal land in Bulgaria. Tolerated by the state for decades, communities found themselves threatened with eviction when the land was privatized without offer of alternative housing. That case was finally settled at the European Court of Human Rights in a decision that cited state responsibility to assess the necessity of the action, as well as the effects of interference an eviction will have on the right to private and family life as deciding factors against the government of Bulgaria. Activists in Brazil have documented the effect of evictions on an estimated thirty thousand people in the run-up to the “mega events” of the World Cup 2014 and 2016 Olympic Games in Rio—mass evictions carried out without sufficient compensation, forewarning, or community consultation. In many of these cases, when citizens raised their voices through the channels of protest open to them, they were answered by the state with resistance, violence, and restriction of their liberties.
If forcible removal is one end of the spectrum of violations, at the other, state bureaucratic policies can be less blatant but just as insidious. Though bureaucratic reform toward openness in land policy can be a good thing, when states institute open records and land-ownership reform to counteract corruption in legal titling of land, the process can be turned on its head. Take India, for example, where individuals began taking advantage of records opened in an effort to help the rural poor take out loans or apply for government benefits. Because they had better technical skills and access to information, wealthier residents could create what open data expert Michael Gurstein called “unequal contests around land titles,” exploiting mistakes and gaps to their own advantage. In Georgia, the buying and selling of land has been drastically simplified in the past several years, including through the establishment of electronic land records—a major step forward in limiting corruption—but curious exceptions to the speed and ease of that process have appeared when such slowdowns are in the state interest, and when dozens of citizens at a time “donate” their land in a valuable tourist zone to the state.
Land and housing rights excite communities in ways that many other rights issues do not. Housing procedures are often the most widely felt of the harms done by a chaotic or captured state, where high-level corrupt political and economic exchange between government and a small number of firms is pervasive. The combination of abusive practice and non-transparent procedures can create citizen outrage, and introduce them to their fundamental rights and the challenges and exhilaration of citizen action. As acts of state policy, evictions and eminent domain can affect large numbers of citizens from different classes and social strata, and all of them experience the lack of rule of law, and the need for information and the right to free expression to pull the levers of citizen governance.
The issue also marries disparate communities and inspires conversations about history and preservation, rights and due process, economic growth and the tangibles and intangibles of livability, livelihood, and public good. Expropriation of land and housing filters through many of the key issues of the Open Society Foundations—from corruption and poor governance, to lack of access to information, use and abuse of force, lack of independence of the judiciary, and intolerance of dissent. Open Society Foundations’ own work to mitigate the impacts of the national foreclosure crisis on low-income communities and communities of color in the U.S. highlights how the lack of transparent and accountable financial markets can lead to widespread displacement and wealth-stripping among vulnerable populations.
State policies on housing and the use of eminent domain not only energize individuals, but can also have a galvanizing effect on civil society organizations. NGOs focused on a key population are often motivated by housing and property dilemmas to develop full-context arguments on human rights, development, transparency, and citizen access to decision-making. In doing so, these organizations find new partners and new channels for activism, policy work and redress of abusive practices. At the same time, they face new challenges. Given the large amounts of money at stake, documenting procurement contracts and development deals can be very dangerous and difficult.
And finally, the expansion of access to information and technology enrich the potential for development to be conducted in ways that reflect open society values. As instruments of development, international financial institutions and technology can affect the direction of state policy on questions of housing and land. International financial institutions already exert a good deal of influence over the direction of development projects that they sponsor. Because of their leverage, IFI can either be a springboard for state abuse or a catalyst for a more transparent and equitable approach, negotiating rights-respecting plans and ensuring an open process. Technology can be used to increase efficiency and fairness by bringing game-changing data to light, or obscure processes and privilege those who already have access to knowledge and broadband.
As the Human Rights Data Initiative examines this theme, we are focusing on three key questions:
How can we do this better? We need more data: as the Lincoln Institute of Land Policy points out, governments do not produce systematic information on the use of eminent domain, and legal research does not tell us about other dimensions of this government practice. We need to help transparency and human rights organizations to work together to ensure that people’s civil and political rights are protected during the process of urban development, with particular attention to the rights essential to expression of dissent and participation in decision making processes. And we need to know from international lenders and experts what the key elements of development planning are that can preserve people’s human rights, and insist on their inclusion in negotiated agreements regarding sponsored economic development projects. It will be essential for lenders to share that information with civil society groups and bring such groups into the process as allies. States must seek to make honest transactions between public need, livelihood, and individual rights, and this transaction should be observed for the opportunity it represents to scratch the surface of commitments to civil and political liberties.
Source: Open Society Foundations
The Open Society Foundations’ Human Rights Data Initiative, a joint project of the Human Rights and Governance Program and the Information Program, has begun a year-long study of housing and property expropriations. The study will track how the issue is connected to a range of internationally recognized human rights, and explore how human rights and accountability organizations approach the problem of the abuse of states’ claim to eminent domain. Though states are empowered to use eminent domain for the public good, abuse of this authority is widespread. What we’ve found is that violations of the “positive right” to housing are only one part of the issue. The process of state infringement on land ownership illuminates a host of other problems, including the state’s failure to uphold the rule of law, provide equal protection to all citizens, tackle corruption, and engage in economic development that is respectful of ethnic minorities and the urban poor. Invariably we also find citizens shut out of decisions regarding their surroundings, the shape of their city, and preservation of its cultural heritage. Land and housing policy is a revelator that tells us about the reality and depth of commitment to open society values in a given country.
In a broad survey of the work of the Open Society Foundations, we’ve seen that the threat to where they live is many people’s first encounter with the potential harm of predatory state interests. Human rights and transparency organizations report incidences with alarming frequency: Azeri families living in central Baku find themselves stripped of their property and forced from their homes to make way for a glittering stadium for the Eurovision Song Contest. In Equatorial Guinea, where a small ruling clique of families reaps huge profits while over 60 percent survive on less than $1 per day, citizens were evicted with inadequate or nonexistent compensation in the name of an “urban renewal” and public utility development, that has given birth to hotels, offices and luxury housing that few will ever access. Similar dubious state claims to promoting “public good” were raised in the case of Roma settlements on municipal land in Bulgaria. Tolerated by the state for decades, communities found themselves threatened with eviction when the land was privatized without offer of alternative housing. That case was finally settled at the European Court of Human Rights in a decision that cited state responsibility to assess the necessity of the action, as well as the effects of interference an eviction will have on the right to private and family life as deciding factors against the government of Bulgaria. Activists in Brazil have documented the effect of evictions on an estimated thirty thousand people in the run-up to the “mega events” of the World Cup 2014 and 2016 Olympic Games in Rio—mass evictions carried out without sufficient compensation, forewarning, or community consultation. In many of these cases, when citizens raised their voices through the channels of protest open to them, they were answered by the state with resistance, violence, and restriction of their liberties.
If forcible removal is one end of the spectrum of violations, at the other, state bureaucratic policies can be less blatant but just as insidious. Though bureaucratic reform toward openness in land policy can be a good thing, when states institute open records and land-ownership reform to counteract corruption in legal titling of land, the process can be turned on its head. Take India, for example, where individuals began taking advantage of records opened in an effort to help the rural poor take out loans or apply for government benefits. Because they had better technical skills and access to information, wealthier residents could create what open data expert Michael Gurstein called “unequal contests around land titles,” exploiting mistakes and gaps to their own advantage. In Georgia, the buying and selling of land has been drastically simplified in the past several years, including through the establishment of electronic land records—a major step forward in limiting corruption—but curious exceptions to the speed and ease of that process have appeared when such slowdowns are in the state interest, and when dozens of citizens at a time “donate” their land in a valuable tourist zone to the state.
Land and housing rights excite communities in ways that many other rights issues do not. Housing procedures are often the most widely felt of the harms done by a chaotic or captured state, where high-level corrupt political and economic exchange between government and a small number of firms is pervasive. The combination of abusive practice and non-transparent procedures can create citizen outrage, and introduce them to their fundamental rights and the challenges and exhilaration of citizen action. As acts of state policy, evictions and eminent domain can affect large numbers of citizens from different classes and social strata, and all of them experience the lack of rule of law, and the need for information and the right to free expression to pull the levers of citizen governance.
The issue also marries disparate communities and inspires conversations about history and preservation, rights and due process, economic growth and the tangibles and intangibles of livability, livelihood, and public good. Expropriation of land and housing filters through many of the key issues of the Open Society Foundations—from corruption and poor governance, to lack of access to information, use and abuse of force, lack of independence of the judiciary, and intolerance of dissent. Open Society Foundations’ own work to mitigate the impacts of the national foreclosure crisis on low-income communities and communities of color in the U.S. highlights how the lack of transparent and accountable financial markets can lead to widespread displacement and wealth-stripping among vulnerable populations.
State policies on housing and the use of eminent domain not only energize individuals, but can also have a galvanizing effect on civil society organizations. NGOs focused on a key population are often motivated by housing and property dilemmas to develop full-context arguments on human rights, development, transparency, and citizen access to decision-making. In doing so, these organizations find new partners and new channels for activism, policy work and redress of abusive practices. At the same time, they face new challenges. Given the large amounts of money at stake, documenting procurement contracts and development deals can be very dangerous and difficult.
And finally, the expansion of access to information and technology enrich the potential for development to be conducted in ways that reflect open society values. As instruments of development, international financial institutions and technology can affect the direction of state policy on questions of housing and land. International financial institutions already exert a good deal of influence over the direction of development projects that they sponsor. Because of their leverage, IFI can either be a springboard for state abuse or a catalyst for a more transparent and equitable approach, negotiating rights-respecting plans and ensuring an open process. Technology can be used to increase efficiency and fairness by bringing game-changing data to light, or obscure processes and privilege those who already have access to knowledge and broadband.
As the Human Rights Data Initiative examines this theme, we are focusing on three key questions:
- What is the shape of the use and abuse of eminent domain and other tools of the state with respect to property? What is it used for, whom does it affect, and how?
- In projects where citizens, organizations, or other interests have successfully countered a demonstrably bad decision in this space, what has been the deciding factor: did access to more data tip the scales? Did evocative documentary photographs motivate new actors? Was it sharp statistical analysis, or targeted campaigning?
- How can campaigners leverage this issue to engage with citizens on open information and governance, and effect better policymaking around development?
How can we do this better? We need more data: as the Lincoln Institute of Land Policy points out, governments do not produce systematic information on the use of eminent domain, and legal research does not tell us about other dimensions of this government practice. We need to help transparency and human rights organizations to work together to ensure that people’s civil and political rights are protected during the process of urban development, with particular attention to the rights essential to expression of dissent and participation in decision making processes. And we need to know from international lenders and experts what the key elements of development planning are that can preserve people’s human rights, and insist on their inclusion in negotiated agreements regarding sponsored economic development projects. It will be essential for lenders to share that information with civil society groups and bring such groups into the process as allies. States must seek to make honest transactions between public need, livelihood, and individual rights, and this transaction should be observed for the opportunity it represents to scratch the surface of commitments to civil and political liberties.
Source: Open Society Foundations
Friday, August 17, 2012
Lonmin shootings will change SA labour relations
THE emergence of a rival union in the platinum space must be the most worrying event in the 30-year history of the National Union of Mineworkers (NUM). The union is one of the biggest and certainly most politically powerful under the blanket of the Congress of South African Trade Unions, representing close to a fifth of its entire membership and has an important place in the African National Congress (ANC) alliance.
Given the importance of mining in the South African economy, support from the union is integral to the ruling faction in the ANC. It is this political role on which its leaders may have placed too much focus because of populist nationalisation rhetoric as well as the succession battle, to the detriment of its core mandate.
Straying from that focus on the interests of its workers has opened up space on its shop floors for a rival union, the Association of Mineworkers and Construction Union (Amcu). This happens as the situation remains dire for miners in the platinum sector as prices for the metal remain weak and costs keep rising because of poor management and other factors.
The NUM lays the blame for the unfolding violence in North West on mining houses for making unilateral salary adjustments that undermine existing wage agreements. Amcu may have been opportunistic in using those grievances from the disparities in pay to muscle in, but where has the NUM been? The union should have been alert and ready to react to the grievances.
You’ve got to think the union, which once had held sway over the entire mining industry, has taken its eyes off the ball in a big way. After the warning shots at Impala Platinum, the world’s second-biggest miner, the battle is playing out at Lonmin, the third biggest.
For the first time in the course of the Lonmin dispute, which has caused a number of fatalities, platinum prices have responded. In late afternoon trade, it had its biggest percentage gain in a month.
Anglo American Platinum, the world’s biggest miner, could well be the next explosion point in this festering battle. The NUM has warned that the turf war could spread to other mineral segments too.
The 30-year old NUM monopoly has certainly been challenged and it looks likely that it will continue to be unless its leadership gets focused on the matters at hand, instead of who occupies Luthuli House and the Union Buildings.
The deaths of the Lonmin workers yesterday have changed labour relations in the mining industry forever. Miners and the government may have to invite another party to the negotiating table, further complicating an already complicated mining regime.
...
FOR the average Chinese citizen without access to international markets, there are very few places to go to grow their wealth. The stock market in the world’s second-biggest economy has underperformed all its emerging market peers as well as other major equity markets, with the Shanghai Stock Exchange index down almost 20% over the past 12 months.
In that time, the JSE all share has gained 19%, London’s FTSE 8,9% and the S&P has rallied 18%.
The only alternative is to invest in property and that has been quite the story over the past 10 years. In the country’s major cities, house prices are about 30 times the annual salary and in the smaller metros 10 times. Compare that to five times the annual salary in the US at the height of its housing bubble.
Realising the risk posed by this growth in housing prices, last year the Chinese government raised rates to both cool the housing market and to combat inflation.
Inflationary pressures have eased this year, unfortunately so has growth.
So much so that foreign direct investment in what was once the golden goose in terms of investment destinations has seen the biggest drop in two years.
Data out of China yesterday showed investment slid 8.7%, the eighth drop in nine months and the smallest inflow since July 2010.
China has now come under pressure from investors, much like the US and Europe has over the past four years, to look at measures to boost economic growth — either by cutting rates or lowering the reserve margin required by banks.
But just how far can China go to boost its economy without further fuelling concerns over its property market? It must be keeping the political powers in that part of the world awake at night, especially as there will be a change of guard by the end of the year.
As for other central banks in the global economy, there’s not much room to manoeuvre.
Source: Business Day
Given the importance of mining in the South African economy, support from the union is integral to the ruling faction in the ANC. It is this political role on which its leaders may have placed too much focus because of populist nationalisation rhetoric as well as the succession battle, to the detriment of its core mandate.
Straying from that focus on the interests of its workers has opened up space on its shop floors for a rival union, the Association of Mineworkers and Construction Union (Amcu). This happens as the situation remains dire for miners in the platinum sector as prices for the metal remain weak and costs keep rising because of poor management and other factors.
The NUM lays the blame for the unfolding violence in North West on mining houses for making unilateral salary adjustments that undermine existing wage agreements. Amcu may have been opportunistic in using those grievances from the disparities in pay to muscle in, but where has the NUM been? The union should have been alert and ready to react to the grievances.
You’ve got to think the union, which once had held sway over the entire mining industry, has taken its eyes off the ball in a big way. After the warning shots at Impala Platinum, the world’s second-biggest miner, the battle is playing out at Lonmin, the third biggest.
For the first time in the course of the Lonmin dispute, which has caused a number of fatalities, platinum prices have responded. In late afternoon trade, it had its biggest percentage gain in a month.
Anglo American Platinum, the world’s biggest miner, could well be the next explosion point in this festering battle. The NUM has warned that the turf war could spread to other mineral segments too.
The 30-year old NUM monopoly has certainly been challenged and it looks likely that it will continue to be unless its leadership gets focused on the matters at hand, instead of who occupies Luthuli House and the Union Buildings.
The deaths of the Lonmin workers yesterday have changed labour relations in the mining industry forever. Miners and the government may have to invite another party to the negotiating table, further complicating an already complicated mining regime.
...
FOR the average Chinese citizen without access to international markets, there are very few places to go to grow their wealth. The stock market in the world’s second-biggest economy has underperformed all its emerging market peers as well as other major equity markets, with the Shanghai Stock Exchange index down almost 20% over the past 12 months.
In that time, the JSE all share has gained 19%, London’s FTSE 8,9% and the S&P has rallied 18%.
The only alternative is to invest in property and that has been quite the story over the past 10 years. In the country’s major cities, house prices are about 30 times the annual salary and in the smaller metros 10 times. Compare that to five times the annual salary in the US at the height of its housing bubble.
Realising the risk posed by this growth in housing prices, last year the Chinese government raised rates to both cool the housing market and to combat inflation.
Inflationary pressures have eased this year, unfortunately so has growth.
So much so that foreign direct investment in what was once the golden goose in terms of investment destinations has seen the biggest drop in two years.
Data out of China yesterday showed investment slid 8.7%, the eighth drop in nine months and the smallest inflow since July 2010.
China has now come under pressure from investors, much like the US and Europe has over the past four years, to look at measures to boost economic growth — either by cutting rates or lowering the reserve margin required by banks.
But just how far can China go to boost its economy without further fuelling concerns over its property market? It must be keeping the political powers in that part of the world awake at night, especially as there will be a change of guard by the end of the year.
As for other central banks in the global economy, there’s not much room to manoeuvre.
Source: Business Day
Saturday, March 31, 2012
The crime which went away: obituary to Cosmo Desmond
Early in 1968 the apartheid government decreed that African people in and around the community at Maria Ratschitz mission near Ladysmith were to be forcibly removed and dumped on barren exposed land called at Limehill. This was not the first or the last of the forced removals characteristic of the apartheid regime's determination to deny towns and cities to the African people and instead to constitute black political entities, "homelands", on the remaining land occupied by Africans.
The apartheid dream was of South African cities and farms emptied of black people and "homeland" black police states fighting semi-autonomously against the inevitable resistance. Africans would then be confirmed as citizenless foreigners in the land of their birth. But the Limehill removal was the signal for a sustained campaign of opposition which pulled together the internal opposition, exposed the crimes of the Nationalist Party government, and spurred even dilatory Western powers into formal opposition. These horrors led to apartheid being declared a crime against humanity.
At the centre of this opposition was Cosmas Desmond, the priest located at Maria Ratschitz, who died on Saturday, March 31. He gave himself to the task of documenting and exposing these removals taking place throughout the country. A veteran VW Beetle was bought and he disappeared down dirt roads and beyond into roadless rural areas bearing previously unrecognised names such as Mondlo, Mdantsane, Sada, Ilinge, Dimbaza, Zwelitsha, Botshabelo, Alcockspruit, Waschbank, KwaNgema and Driefontein. He would reappear in Johannesburg in 1969 with notes and manuscripts which eventually made up the book published by the Christian Institute as The Discarded People. His book chronicled the dumping of people wrongly located in the plan of apartheid and "surplus" to the needs of capitalism in remote areas without houses, food and support.
Removals in isolated rural areas involved the humiliation of people reduced to quietly ascending the removal trucks under the gaze and guns of the police and left destitute on barren land. This institutionalised, administrative violence was designed to drive the "surplus" and "expendable" out of sight to live or die as they may in the police-state Bantustans. Death, disease and despair were the result. But the campaign ensured they were located, brought back to mind and that the regime was subject to surveillance and sanctions. Desmond's work triggered widespread publicity which was particularly effective in electronic media. The film Last Grave in Dimbaza which carried the graphic detail of degradation and death of sites around the country caused an international outcry and provided the evidence of such inhuman acts of systematic oppression.
This necessary documentation was critical to the United Nations presenting the International Convention on the Suppression and Punishment of the Crime of Apartheid for adoption in 1973. The crime of apartheid was defined as "inhuman acts committed for the purpose of establishing and maintaining domination by one racial group of persons over any other racial group of persons and systematically oppressing them". Forced removals to compress people into racial categories was a unique feature of the system. The timing of the declaration links closely to the exposure of forced removals.
Desmond's work would later be taken up in a series of studies in the Report of the Surplus People's Project which provided an extended review and fresh detail into the 1980s. At his 70th birthday party I approached Cos Desmond and said he must record what he could about his life experience in writing the Discarded People. He laughed wryly at the idea of an autobiography and gave me a maybe ... he might just turn his mind to chronicling his work but he wasn't so sure of its significance. Was his life and contribution really so important?
Rewards
Anti-apartheid combatants have been rewarded but also diminished by the ending of apartheid. The reward was the freeing of our people from the bondage of apartheid, but they have also been diminished by the trivialisation of great work of resistance in words and deeds and the careless dealing with crimes against humanity. The concluding scene in Last Grave in Dimbaza is of row after row of the graves of children who died after this dumping. As one of a group of students in discussion after film audition of in 1973 which was inspired by Desmond's work we resolved that a version of the Nuremburg Trial would have to be held in the post-apartheid era. That was not to be.
To my knowledge none of the bureaucrats of death were named and shamed. Now Dimbaza is a township on far-flung hills about 66km outside of East London. This name and even that of Limehill has lost its sting. South Africa has grown and these areas are now integrated into the road system and have their local municipalities. The memory fades. What was all the fuss about? This diminution of these historic crimes and the slow pace of genuine transformation had its effect on Cos Desmond, his work and his feeling of self-worth. He had often had to stand alone not only by the action of the regime but also by the priests in the Bantustans who found his research inconvenient and irritating and the shying away of the Catholic Church (with the notable exception of Archbishop Hurley).
His friendship with members of Black Consciousness (he enjoyed the ready open respect of Steve Biko and other BC leaders) did not serve favour with the Congress Movement and the ANC. In the new South Africa he was further diminished along with the lighter weighting of the crimes he chronicled. Cosmas never stood on his dignity or pronounced on his worth. His references to himself were often diffident, self deprecatory and ironic. Recently I was intrigued to hear that Van Gogh wrote that he knew he was regarded by society as a non-entity, an eccentric and a curiosity. He responded, "All right, then ... I should one day like to show by my work what such an eccentric, such a nobody, has in his heart." This was not quite Cos who was loved and held in high regard by the circle he cared for but there is a certain line in parallel.
He criticised the compromises and social degradation in the country of his adoption as only one who loved it so deeply would do. Despite the black majority gaining electoral power, the long standing effects of forced removal policy remain and perpetuate the gaping and widening inequality in income, wealth and land characteristic of our society. What happened to the crime of inhumanity declared in response to these forced removals and the promise of redistribution? History will revise judgment of the life and worth of Cosmas Desmond.
Source: Mail & Guardian
The apartheid dream was of South African cities and farms emptied of black people and "homeland" black police states fighting semi-autonomously against the inevitable resistance. Africans would then be confirmed as citizenless foreigners in the land of their birth. But the Limehill removal was the signal for a sustained campaign of opposition which pulled together the internal opposition, exposed the crimes of the Nationalist Party government, and spurred even dilatory Western powers into formal opposition. These horrors led to apartheid being declared a crime against humanity.
At the centre of this opposition was Cosmas Desmond, the priest located at Maria Ratschitz, who died on Saturday, March 31. He gave himself to the task of documenting and exposing these removals taking place throughout the country. A veteran VW Beetle was bought and he disappeared down dirt roads and beyond into roadless rural areas bearing previously unrecognised names such as Mondlo, Mdantsane, Sada, Ilinge, Dimbaza, Zwelitsha, Botshabelo, Alcockspruit, Waschbank, KwaNgema and Driefontein. He would reappear in Johannesburg in 1969 with notes and manuscripts which eventually made up the book published by the Christian Institute as The Discarded People. His book chronicled the dumping of people wrongly located in the plan of apartheid and "surplus" to the needs of capitalism in remote areas without houses, food and support.
Removals in isolated rural areas involved the humiliation of people reduced to quietly ascending the removal trucks under the gaze and guns of the police and left destitute on barren land. This institutionalised, administrative violence was designed to drive the "surplus" and "expendable" out of sight to live or die as they may in the police-state Bantustans. Death, disease and despair were the result. But the campaign ensured they were located, brought back to mind and that the regime was subject to surveillance and sanctions. Desmond's work triggered widespread publicity which was particularly effective in electronic media. The film Last Grave in Dimbaza which carried the graphic detail of degradation and death of sites around the country caused an international outcry and provided the evidence of such inhuman acts of systematic oppression.
This necessary documentation was critical to the United Nations presenting the International Convention on the Suppression and Punishment of the Crime of Apartheid for adoption in 1973. The crime of apartheid was defined as "inhuman acts committed for the purpose of establishing and maintaining domination by one racial group of persons over any other racial group of persons and systematically oppressing them". Forced removals to compress people into racial categories was a unique feature of the system. The timing of the declaration links closely to the exposure of forced removals.
Desmond's work would later be taken up in a series of studies in the Report of the Surplus People's Project which provided an extended review and fresh detail into the 1980s. At his 70th birthday party I approached Cos Desmond and said he must record what he could about his life experience in writing the Discarded People. He laughed wryly at the idea of an autobiography and gave me a maybe ... he might just turn his mind to chronicling his work but he wasn't so sure of its significance. Was his life and contribution really so important?
Rewards
Anti-apartheid combatants have been rewarded but also diminished by the ending of apartheid. The reward was the freeing of our people from the bondage of apartheid, but they have also been diminished by the trivialisation of great work of resistance in words and deeds and the careless dealing with crimes against humanity. The concluding scene in Last Grave in Dimbaza is of row after row of the graves of children who died after this dumping. As one of a group of students in discussion after film audition of in 1973 which was inspired by Desmond's work we resolved that a version of the Nuremburg Trial would have to be held in the post-apartheid era. That was not to be.
To my knowledge none of the bureaucrats of death were named and shamed. Now Dimbaza is a township on far-flung hills about 66km outside of East London. This name and even that of Limehill has lost its sting. South Africa has grown and these areas are now integrated into the road system and have their local municipalities. The memory fades. What was all the fuss about? This diminution of these historic crimes and the slow pace of genuine transformation had its effect on Cos Desmond, his work and his feeling of self-worth. He had often had to stand alone not only by the action of the regime but also by the priests in the Bantustans who found his research inconvenient and irritating and the shying away of the Catholic Church (with the notable exception of Archbishop Hurley).
His friendship with members of Black Consciousness (he enjoyed the ready open respect of Steve Biko and other BC leaders) did not serve favour with the Congress Movement and the ANC. In the new South Africa he was further diminished along with the lighter weighting of the crimes he chronicled. Cosmas never stood on his dignity or pronounced on his worth. His references to himself were often diffident, self deprecatory and ironic. Recently I was intrigued to hear that Van Gogh wrote that he knew he was regarded by society as a non-entity, an eccentric and a curiosity. He responded, "All right, then ... I should one day like to show by my work what such an eccentric, such a nobody, has in his heart." This was not quite Cos who was loved and held in high regard by the circle he cared for but there is a certain line in parallel.
He criticised the compromises and social degradation in the country of his adoption as only one who loved it so deeply would do. Despite the black majority gaining electoral power, the long standing effects of forced removal policy remain and perpetuate the gaping and widening inequality in income, wealth and land characteristic of our society. What happened to the crime of inhumanity declared in response to these forced removals and the promise of redistribution? History will revise judgment of the life and worth of Cosmas Desmond.
Source: Mail & Guardian
Thursday, March 22, 2012
Nationwide Foreclosure Rescue Company Shut Down
Bella Homes LLC was sued in a civil action for orchestrating a foreclosure rescue scheme, which has ended in a Consent Judgment and signals the end of a national foreclosure rescue scheme. The perpetrators, operating through Bella Homes LLC, had promised hundreds of distressed homeowners that Bella Homes would help homeowners avoid foreclosure. Instead of helping homeowners, the perpetrators helped themselves to a lavish lifestyle replete with fancy cars, vacations, and even gold coins.
The Civil Action, brought jointly by the United States Attorney's Office for the District of Colorado and the State Attorney General of Colorado, put an end to a scheme that started in March 2010, in the basement of a convicted felon in Georgia, and went national, affecting homeowners in Colorado, and other states all across the country. The Civil Action that put an end to the scheme was filed in the United States District Court for the District of Colorado on February 14, 2012, and resulted in a Consent Judgment, in which Bella Homes "admits the allegations in the Complaint and acknowledges its role in defrauding homeowners who signed over title to their homes to Bella Homes." Bella Homes further admitted that all deed transactions in which it entered should be deemed void.
The Scheme:
As alleged in the Complaint, the Defendants, through Bella Homes, engaged in a fraudulent scheme in which they solicited homeowners to convey title to their homes to Bella Homes for no consideration and to enter into purported lease agreements under which the homeowners, instead of making their mortgage payments, paid Bella Homes monthly "rent." To entice homeowners into this arrangement, Defendants made or caused to be made numerous material misrepresentations to homeowners to convey the false and fraudulent impression that:
• Bella Homes would stop any foreclosure on the home;
• Bella Homes would purchase or otherwise settle the existing mortgage on the home from the lender;
• Federal law provided the homeowner the right to remain in the home for the duration of the lease with Bella Homes; and
• The homeowner would have an option to repurchase the home in three years from Bella Homes for significantly less than the amount currently owed on the mortgage.
Defendants made these false representations on a website and in solicitations and documents sent to interested homeowners across the country. Contrary to Bella Homes' representations and promises, Bella Homes admitted in response to a subpoena that it had not purchased any mortgages as of October 2011, and that it lacked the financial capacity to purchase mortgages. In all, more than 560 homeowners were victimized by Bella Homes. Throughout the life of the scheme, the company only acquired one mortgage just before the Complaint was filed. As part of the Consent Judgment, the single mortgage may be sold and the proceeds returned to victims.
Who was involved, and what they did:
The Complaint alleged that Mark Stephen Diamond, Daniel David Delpiano, David Delpiano and Michael Terrell were involved in running Bella Homes. Through the Consent Judgment, these individual Defendants confess liability to Counts Six and Seven of the Complaint, which allege violations of the Mortgage Assistance Relief Services Rule (MARS Rule).
Specifically, the individual Defendants confess liability to: - violating Section 322.3(c) of the MARS Rule by making a representation, expressly or by implication, about the benefits, performance, or efficacy of any mortgage assistance relief service without competent and reliable evidence that substantiates that the representation is true. - violating Section 322.5(a) of the MARS Rule, which makes it a violation of the MARS Rule to: Request or receive payment of any fee or other consideration until the consumer has executed a written agreement between the consumer and the consumer's dwelling loan holder or servicer incorporating the offer of mortgage assistance relief the provider obtained from the consumer's dwelling loan holder or servicer.
What Happens Now:
As part of the Consent Judgment, the Defendants have permanent restrictions on their ability to work in the mortgage industry and residential real estate related businesses. In addition, the Defendants must return any vehicles in their possession that were leased by Bella Homes, Mark Diamond, Diamond and Associates, or Diamond Corporation. Finally, money previously frozen in Defendants' bank accounts, as well as cash in a safe deposit box, and the proceeds of gold coins obtained by Bella Homes, will all be made available to the Department of Law at the State of Colorado to be returned to homeowner victims. To this amount, Defendant Mark Stephen Diamond will add an additional $300,000 within the next 90 days. After that time, the Defendants will make additional payments of approximately $200,000 over the next five years, for a total anticipated recovery of approximately $1.2 million.
Homeowner Victims:
If you are a victim of Bella Homes, visit the website set up by the Colorado Department of Law, at:https://www.coloradoattorneygeneral.gov/departments/consumer_protection/consumer_protection_cases/bella_homes. This law enforcement action is part of President Barack Obama's Financial Fraud Enforcement Task Force.
President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes. For more information on the task force, visit: http://www.stopfraud.gov
The United States Attorney for the District of Colorado, John F. Walsh, and the Colorado Attorney General, John W. Suthers, announced the consent judgment. "Today brings an end to a scheme that harmed distressed homeowners across the country," announced United States Attorney, John F. Walsh.
"With false promises, the perpetrators of this scheme convinced hundreds of homeowners to hand over the last of their life savings and turn over the deed to their homes. Together with our partners in the State Attorney General's Office, we stopped this fraud from harming additional victims within our State, and across the nation. This agreement not only will help Bella Homes' victims, but it also will bar the defendants from engaging in any kind of mortgage or foreclosure activity ever again," Suthers said.
"Foreclosure-rescue scams prey on distressed homeowners' desire to save their homes and to find any means to help fix their dire financial situations. Our work in cooperation with the U.S. Attorney's Office quickly shut down this scam and should send a message that we and our partners in law enforcement will vigorously pursue any foreclosure or mortgage scam preying on Colorado homeowners."
Source: Mortgage Fraud Blog
The Civil Action, brought jointly by the United States Attorney's Office for the District of Colorado and the State Attorney General of Colorado, put an end to a scheme that started in March 2010, in the basement of a convicted felon in Georgia, and went national, affecting homeowners in Colorado, and other states all across the country. The Civil Action that put an end to the scheme was filed in the United States District Court for the District of Colorado on February 14, 2012, and resulted in a Consent Judgment, in which Bella Homes "admits the allegations in the Complaint and acknowledges its role in defrauding homeowners who signed over title to their homes to Bella Homes." Bella Homes further admitted that all deed transactions in which it entered should be deemed void.
The Scheme:
As alleged in the Complaint, the Defendants, through Bella Homes, engaged in a fraudulent scheme in which they solicited homeowners to convey title to their homes to Bella Homes for no consideration and to enter into purported lease agreements under which the homeowners, instead of making their mortgage payments, paid Bella Homes monthly "rent." To entice homeowners into this arrangement, Defendants made or caused to be made numerous material misrepresentations to homeowners to convey the false and fraudulent impression that:
• Bella Homes would stop any foreclosure on the home;
• Bella Homes would purchase or otherwise settle the existing mortgage on the home from the lender;
• Federal law provided the homeowner the right to remain in the home for the duration of the lease with Bella Homes; and
• The homeowner would have an option to repurchase the home in three years from Bella Homes for significantly less than the amount currently owed on the mortgage.
Defendants made these false representations on a website and in solicitations and documents sent to interested homeowners across the country. Contrary to Bella Homes' representations and promises, Bella Homes admitted in response to a subpoena that it had not purchased any mortgages as of October 2011, and that it lacked the financial capacity to purchase mortgages. In all, more than 560 homeowners were victimized by Bella Homes. Throughout the life of the scheme, the company only acquired one mortgage just before the Complaint was filed. As part of the Consent Judgment, the single mortgage may be sold and the proceeds returned to victims.
Who was involved, and what they did:
The Complaint alleged that Mark Stephen Diamond, Daniel David Delpiano, David Delpiano and Michael Terrell were involved in running Bella Homes. Through the Consent Judgment, these individual Defendants confess liability to Counts Six and Seven of the Complaint, which allege violations of the Mortgage Assistance Relief Services Rule (MARS Rule).
Specifically, the individual Defendants confess liability to: - violating Section 322.3(c) of the MARS Rule by making a representation, expressly or by implication, about the benefits, performance, or efficacy of any mortgage assistance relief service without competent and reliable evidence that substantiates that the representation is true. - violating Section 322.5(a) of the MARS Rule, which makes it a violation of the MARS Rule to: Request or receive payment of any fee or other consideration until the consumer has executed a written agreement between the consumer and the consumer's dwelling loan holder or servicer incorporating the offer of mortgage assistance relief the provider obtained from the consumer's dwelling loan holder or servicer.
What Happens Now:
As part of the Consent Judgment, the Defendants have permanent restrictions on their ability to work in the mortgage industry and residential real estate related businesses. In addition, the Defendants must return any vehicles in their possession that were leased by Bella Homes, Mark Diamond, Diamond and Associates, or Diamond Corporation. Finally, money previously frozen in Defendants' bank accounts, as well as cash in a safe deposit box, and the proceeds of gold coins obtained by Bella Homes, will all be made available to the Department of Law at the State of Colorado to be returned to homeowner victims. To this amount, Defendant Mark Stephen Diamond will add an additional $300,000 within the next 90 days. After that time, the Defendants will make additional payments of approximately $200,000 over the next five years, for a total anticipated recovery of approximately $1.2 million.
Homeowner Victims:
If you are a victim of Bella Homes, visit the website set up by the Colorado Department of Law, at:https://www.coloradoattorneygeneral.gov/departments/consumer_protection/consumer_protection_cases/bella_homes. This law enforcement action is part of President Barack Obama's Financial Fraud Enforcement Task Force.
President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes. For more information on the task force, visit: http://www.stopfraud.gov
The United States Attorney for the District of Colorado, John F. Walsh, and the Colorado Attorney General, John W. Suthers, announced the consent judgment. "Today brings an end to a scheme that harmed distressed homeowners across the country," announced United States Attorney, John F. Walsh.
"With false promises, the perpetrators of this scheme convinced hundreds of homeowners to hand over the last of their life savings and turn over the deed to their homes. Together with our partners in the State Attorney General's Office, we stopped this fraud from harming additional victims within our State, and across the nation. This agreement not only will help Bella Homes' victims, but it also will bar the defendants from engaging in any kind of mortgage or foreclosure activity ever again," Suthers said.
"Foreclosure-rescue scams prey on distressed homeowners' desire to save their homes and to find any means to help fix their dire financial situations. Our work in cooperation with the U.S. Attorney's Office quickly shut down this scam and should send a message that we and our partners in law enforcement will vigorously pursue any foreclosure or mortgage scam preying on Colorado homeowners."
Source: Mortgage Fraud Blog
Tuesday, March 13, 2012
Surprising insights on transformation from the Constitutional Court
What do we mean when we talk about transformation of the judiciary and of the legal culture? Do the members of the Judicial Service Commission (JSC) and the President believe in the substantive transformation of the legal culture and legal doctrine away from its colonially-inspired formalistic roots and away from the deeply embedded assumptions about free choice and equal bargaining power, (assumptions that promote the interests of the wealthy over those who are marginalised, disempowered or poor)?
Or do they use the term rather disingenuously to try and justify the appointment of essentially anti-poor, deeply formalistic judges whose judgments will disregard the interests of the marginalised and might even champion the interests of the rich and powerful? Moreover, which judges are best placed to take on the challenges of legal transformation — within the disciplining boundaries of the separation of powers doctrine — and which judges merely cling to notions of legal formalism to the detriment of the poor and marginalised and in resistance to the transformation of the legal culture?
These questions are all raised by the fascinating Constitutional Court judgment in the case of Maphango and Others v Aengus Lifestyle Properties (Pty) Ltd, which was handed down today.
The majority judgment, written by Justice Edwin Cameron (Moseneke DCJ, Froneman J, Nkabinde J, Skweyiya J, Yacoob J and Van der Westhuizen J concurring), grapples with the transformative effects of the Constitution and the Rental Housing Act on the relationship between landlords and tenants. The judgment also attempts to empower Rental Housing Tribunals, Tribunals created by the democratic legislature to protect the rental housing market while also addressing the unequal power relations between landlords and tenants.
The minority judgment, written by acting judge Ray Zondo, who has reportedly been earmarked for appointment to the Constitutional Court (Mogoeng CJ and Jafta J concurring), displays a surprisingly formalistic and pre-constitutional attitude to the law that applies between landlords and tenants. The minority judgment, relying on what seems to me to be misguided technical arguments, would have upheld the freedom of a landlord to cancel a lease, hike rents or have tenants evicted who cannot afford the steep hikes on rentals, regardless of how unfair the landlord might have acted (all because they supposedly failed to plead their case correctly). The minority judgment also seems rather disrespectful of the principle of separation of powers, which would have required them to engage seriously with the Rental Housing Act, a piece of legislation passed by our democratic Parliament.
The narrow question in this case seemed to turn on the question of when a landlord could legally cancel a lease and evict its tenants. But behind this formal question lurked the larger question of how the constitutional protection against arbitrary eviction (enshrined in section 26(3)), as well as the protections afforded to tenants by the Rental Housing Act, limited the discretion of the landlord to evict tenants or raise rents.
The applicants are tenants in Lowliebenhof, a ten-storey block of flats in Braamfontein, in the inner city of Johannesburg. The flats are their homes, and they live there in terms of various leases. The respondent landlord bought the building, upgraded it, and then wanted to increase the rent. To do so, it cancelled the tenants’ leases, but offered them new tenancies, on identical terms, though at rents of between 100% and 150% higher than the original rents. The tenants resisted and the landlord brought eviction proceedings. The original lease only allowed an annual rent increase of between 10% and 15% and the cancellation of the leases were aimed at circumventing these clauses.
The tenants put forward several arguments about why the landlord was not permitted to cancel the leases to raise the rents, based on the Constitution, contract law and public policy as well as on the interpretation of certain provisions of the Rental Housing Act. In the end the majority argued that it was unnecessary to develop the common law of contract to deal with this case. Instead it relied on the provisions in Rental Housing Act, which state that the landlord may not engage in “unfair practices” in its dealings with tenants. The Supreme Court of Appeal (SCA) had found that this phrase did not apply to a case like the present because an unfair practice contemplated in the relevant section was “incessant and systemic conduct”, not a once off termination of a contract aimed at hiking the rents.
The majority rejected this view and said that the Rental Housing Tribunal should have decided whether there was an unfair practice in this case. It pointed out that the Act provides that an unfair practice ruling “may include a determination regarding the amount of rental payable by a tenant” or may relate to any termination of the lease in respect of rental housing property “on grounds that do not constitute an unfair practice “.
The Act states that when a Tribunal makes a determination about the rent to be charged, it “must be made in a manner that is just and equitable to both tenant and landlord”. In addition, the rent determination must take “due cognisance” of “(a) prevailing economic conditions of supply and demand; (b) the need for a realistic return on investment for investors in rental housing; and (c) incentives, mechanisms, norms and standards and other measures introduced by the Minister in terms of the policy framework on rental housing…”.
The majority thus found that the Act demands that a ground of termination must always be specified in the lease, but even where it is specified, the Act requires that the ground of termination must not constitute an unfair practice. A Tribunal can decide whether such a termination constituted an unfair practice — regardless of what the lease might have stipulated. The effect of these provisions is that contractually negotiated lease provisions are subordinate to the Tribunal’s power to deal with them as unfair practices.
Given this expansive interpretation of the Rental Housing Act (an interpretation influenced by the provisions in the Constitution that prohibits arbitrary evictions from housing and guarantees for everyone the right of access to housing), the majority held over final determination of the appeal (which was originally based on the request to have the tenants evicted) to enable the landlord and tenants, if so advised, to bring suitable proceedings before the Tribunal.
The minority had no truck with this airy-fairy, bleeding heart, approach to the old fashioned area of contract law, which would have shown some deference to the democratically elected Parliament who passed the Rental Housing Act. Instead the minority would have preferred to rely on traditional contract law principles that would have allowed the landlord to cancel the lease, and to evict the tenants unless they agreed to a 150% hike in their rents. The minority argued that this case was never argued on the basis of the Rental Housing Act (although the SCA interpreted this Act narrowly in making a finding in favour of the landlord) and hence that the majority was wrong now to rely on this progressive piece of legislation to come to the assistance of the tenants.
The minority, seemingly channeling early twentieth Century British attitudes about the distinction between law, on the one hand, and values and morals, on the other, (as if there was an absolute distinction between these), argued that whether the landlord had engaged in unfair practices was not a legal question at all, but rather a value judgment requiring a judge to rely on moral values (not “law”). The Constitutional Court should therefore not have engaged with this issue at all, according to the minority.
Relying on the legal fiction that the parties “freely and voluntarily entered into leases with clauses that allowed either party to terminate them on notice and which did not say that the termination would not be permissible when effected for a certain purpose or when effected with a certain motive”, the minority would not have referred the matter back to the Rental Housing Tribunal (as the majority did).
Zondo AJ argued that:
As Justice Froneman (in a concurring judgment) pointed out, this denial that it was permissible for the Constitutional Court to consider the interpretation of the Rental Housing Act (which might protect the tenants) in this case, was difficult to square with the law and the facts of this case.
Both the High Court and the Supreme Court of Appeal interpreted the Act and came to the conclusion that the respondent’s right to cancel the leases was unaffected by its provisions. The majority found “that interpretation to be wrong. That the interpretation of the Act lies at the heart of this matter, however pleaded, has never been doubted… I thus have considerable difficulty in understanding how this appeal can be determined in this Court without interpreting the Act. Whether the Act applies to leases in general is a matter of law. So is the question whether the cancellation.”
Moreover, justice Froneman also dispensed with the deeply conservative and formalistic argument about the distinction between morals and value judgments on the one hand and legal questions on the other:
The various judgments therefore illustrate a clear distinction between one set of judges who are engaged with the transformative project and with the transformation of legal culture and the interpretation and application of law (all done while displaying suitable respect for the elected branches of government who passed the Rental Housing Act) and another set of judges stuck in a colonial-inspired formalist mindset (with potentially adverse consequences for disempowered tenants) who rejected the notion that constitutional values and the morals underpinning them, have any role to play in the adjudicating process in this case.
For those of us studying court judgments and legal articles produced by a (still largely) conservative academia, this insight will perhaps not come as a surprise. The surprising aspect of the judgement arise from discovering which judges came out on which side of this profoundly important judicial and philosophical divide.
Source: Consitutionally Speaking
Or do they use the term rather disingenuously to try and justify the appointment of essentially anti-poor, deeply formalistic judges whose judgments will disregard the interests of the marginalised and might even champion the interests of the rich and powerful? Moreover, which judges are best placed to take on the challenges of legal transformation — within the disciplining boundaries of the separation of powers doctrine — and which judges merely cling to notions of legal formalism to the detriment of the poor and marginalised and in resistance to the transformation of the legal culture?
These questions are all raised by the fascinating Constitutional Court judgment in the case of Maphango and Others v Aengus Lifestyle Properties (Pty) Ltd, which was handed down today.
The majority judgment, written by Justice Edwin Cameron (Moseneke DCJ, Froneman J, Nkabinde J, Skweyiya J, Yacoob J and Van der Westhuizen J concurring), grapples with the transformative effects of the Constitution and the Rental Housing Act on the relationship between landlords and tenants. The judgment also attempts to empower Rental Housing Tribunals, Tribunals created by the democratic legislature to protect the rental housing market while also addressing the unequal power relations between landlords and tenants.
The minority judgment, written by acting judge Ray Zondo, who has reportedly been earmarked for appointment to the Constitutional Court (Mogoeng CJ and Jafta J concurring), displays a surprisingly formalistic and pre-constitutional attitude to the law that applies between landlords and tenants. The minority judgment, relying on what seems to me to be misguided technical arguments, would have upheld the freedom of a landlord to cancel a lease, hike rents or have tenants evicted who cannot afford the steep hikes on rentals, regardless of how unfair the landlord might have acted (all because they supposedly failed to plead their case correctly). The minority judgment also seems rather disrespectful of the principle of separation of powers, which would have required them to engage seriously with the Rental Housing Act, a piece of legislation passed by our democratic Parliament.
The narrow question in this case seemed to turn on the question of when a landlord could legally cancel a lease and evict its tenants. But behind this formal question lurked the larger question of how the constitutional protection against arbitrary eviction (enshrined in section 26(3)), as well as the protections afforded to tenants by the Rental Housing Act, limited the discretion of the landlord to evict tenants or raise rents.
The applicants are tenants in Lowliebenhof, a ten-storey block of flats in Braamfontein, in the inner city of Johannesburg. The flats are their homes, and they live there in terms of various leases. The respondent landlord bought the building, upgraded it, and then wanted to increase the rent. To do so, it cancelled the tenants’ leases, but offered them new tenancies, on identical terms, though at rents of between 100% and 150% higher than the original rents. The tenants resisted and the landlord brought eviction proceedings. The original lease only allowed an annual rent increase of between 10% and 15% and the cancellation of the leases were aimed at circumventing these clauses.
The tenants put forward several arguments about why the landlord was not permitted to cancel the leases to raise the rents, based on the Constitution, contract law and public policy as well as on the interpretation of certain provisions of the Rental Housing Act. In the end the majority argued that it was unnecessary to develop the common law of contract to deal with this case. Instead it relied on the provisions in Rental Housing Act, which state that the landlord may not engage in “unfair practices” in its dealings with tenants. The Supreme Court of Appeal (SCA) had found that this phrase did not apply to a case like the present because an unfair practice contemplated in the relevant section was “incessant and systemic conduct”, not a once off termination of a contract aimed at hiking the rents.
The majority rejected this view and said that the Rental Housing Tribunal should have decided whether there was an unfair practice in this case. It pointed out that the Act provides that an unfair practice ruling “may include a determination regarding the amount of rental payable by a tenant” or may relate to any termination of the lease in respect of rental housing property “on grounds that do not constitute an unfair practice “.
The Act states that when a Tribunal makes a determination about the rent to be charged, it “must be made in a manner that is just and equitable to both tenant and landlord”. In addition, the rent determination must take “due cognisance” of “(a) prevailing economic conditions of supply and demand; (b) the need for a realistic return on investment for investors in rental housing; and (c) incentives, mechanisms, norms and standards and other measures introduced by the Minister in terms of the policy framework on rental housing…”.
The majority thus found that the Act demands that a ground of termination must always be specified in the lease, but even where it is specified, the Act requires that the ground of termination must not constitute an unfair practice. A Tribunal can decide whether such a termination constituted an unfair practice — regardless of what the lease might have stipulated. The effect of these provisions is that contractually negotiated lease provisions are subordinate to the Tribunal’s power to deal with them as unfair practices.
It means that unfair practices are not determined by taking into account only the common law legal rights of a tenant or landlord, but by considering also their statutory interests. This makes it even clearer that the statutory scheme does not stop at contractually agreed provisions, and conduct in reliance on them. It goes beyond them. It subjects lease contracts and the exercise of contractual rights to scrutiny for unfairness in the light of both parties’ rights and interests.
Given this expansive interpretation of the Rental Housing Act (an interpretation influenced by the provisions in the Constitution that prohibits arbitrary evictions from housing and guarantees for everyone the right of access to housing), the majority held over final determination of the appeal (which was originally based on the request to have the tenants evicted) to enable the landlord and tenants, if so advised, to bring suitable proceedings before the Tribunal.
If the Tribunal should hold that the termination of the tenants’ leases was an unfair practice, and should the relief it grants include an order setting aside the termination, the eviction order granted against the applicants may have to be set aside. The parties must be granted leave to set the matter down in this Court for finalisation of the appeal on papers supplemented as they think fit.
The minority had no truck with this airy-fairy, bleeding heart, approach to the old fashioned area of contract law, which would have shown some deference to the democratically elected Parliament who passed the Rental Housing Act. Instead the minority would have preferred to rely on traditional contract law principles that would have allowed the landlord to cancel the lease, and to evict the tenants unless they agreed to a 150% hike in their rents. The minority argued that this case was never argued on the basis of the Rental Housing Act (although the SCA interpreted this Act narrowly in making a finding in favour of the landlord) and hence that the majority was wrong now to rely on this progressive piece of legislation to come to the assistance of the tenants.
The minority, seemingly channeling early twentieth Century British attitudes about the distinction between law, on the one hand, and values and morals, on the other, (as if there was an absolute distinction between these), argued that whether the landlord had engaged in unfair practices was not a legal question at all, but rather a value judgment requiring a judge to rely on moral values (not “law”). The Constitutional Court should therefore not have engaged with this issue at all, according to the minority.
Relying on the legal fiction that the parties “freely and voluntarily entered into leases with clauses that allowed either party to terminate them on notice and which did not say that the termination would not be permissible when effected for a certain purpose or when effected with a certain motive”, the minority would not have referred the matter back to the Rental Housing Tribunal (as the majority did).
Zondo AJ argued that:
the applicants may also have insisted on clauses that excluded certain reasons or motives for the termination of their leases. They did not do so and they have not put up any case to suggest that their bargaining position did not allow them to do so. The matter must then be decided upon the basis that, like the two tenants who included the unusual clauses that their leases could only be terminated at their discretion, the applicants, too, could have included a clause to the effect that their leases could not be terminated to enable the landlord to increase rents by amounts higher than those permitted by their leases. They failed to do so.
As Justice Froneman (in a concurring judgment) pointed out, this denial that it was permissible for the Constitutional Court to consider the interpretation of the Rental Housing Act (which might protect the tenants) in this case, was difficult to square with the law and the facts of this case.
Both the High Court and the Supreme Court of Appeal interpreted the Act and came to the conclusion that the respondent’s right to cancel the leases was unaffected by its provisions. The majority found “that interpretation to be wrong. That the interpretation of the Act lies at the heart of this matter, however pleaded, has never been doubted… I thus have considerable difficulty in understanding how this appeal can be determined in this Court without interpreting the Act. Whether the Act applies to leases in general is a matter of law. So is the question whether the cancellation.”
Moreover, justice Froneman also dispensed with the deeply conservative and formalistic argument about the distinction between morals and value judgments on the one hand and legal questions on the other:
It is common cause that section 26 of the Constitution is implicated. Interpretation of what constitutes an “unfair practice” under the Act in light of this is thus inevitably a constitutional issue, a matter of law. Interpretation and application of the law under the Constitution is never a mechanical application of rules; it always involves a value judgment. Our Constitution and law are infused with moral values. The days of denying the value-laden content of law are long gone.
The various judgments therefore illustrate a clear distinction between one set of judges who are engaged with the transformative project and with the transformation of legal culture and the interpretation and application of law (all done while displaying suitable respect for the elected branches of government who passed the Rental Housing Act) and another set of judges stuck in a colonial-inspired formalist mindset (with potentially adverse consequences for disempowered tenants) who rejected the notion that constitutional values and the morals underpinning them, have any role to play in the adjudicating process in this case.
For those of us studying court judgments and legal articles produced by a (still largely) conservative academia, this insight will perhaps not come as a surprise. The surprising aspect of the judgement arise from discovering which judges came out on which side of this profoundly important judicial and philosophical divide.
Source: Consitutionally Speaking
Sunday, February 19, 2012
Obama administration brokers pro-bank mortgage fraud settlement
The Obama administration announced on Thursday a settlement between five major banks and the federal and state governments over massive fraud relating to home foreclosures. The terms of the agreement are entirely favorable to the banks, while doing little or nothing to aid the millions of people who have been devastated by the collapse of the US housing market.
Government officials reported that the final deal is valued at about $25 billion spread out over a multi-year period. This is a paltry sum in relationship to the extent of the housing crisis, the profits of the banks and the scale of corporate criminality. However, only a small portion of this would come from direct financial sanctions on the banks.
Forty-nine of the 50 US states signed on to the settlement with the five banks—JPMorgan Chase, Wells Fargo, Citigroup, Bank of America (which bought mortgage firm Countrywide), and Ally Financial Inc. (formerly GMAC, the financial arm of General Motors). These five banks involved had net profits of $46 billion last year alone.
In exchange for the settlement, the banks will be released from liability for fraudulent and likely criminal activities. This includes “robo-signing,” in which the banks had employees sign hundreds of thousands of legal foreclosure documents without any knowledge of the underlying mortgages. Banks were also involved in forging documents. The true extent of the illegal operations is not known, and keeping this information secret is one of the aims of the settlement.
Evidence of these actions first emerged in 2010. States launched investigations in response, and the Obama administration stepped in to package these investigations and lead them to a settlement favorable to the banks. Over the past several weeks, the administration has placed heavy pressure on several state holdouts to sign on to the deal.
Of particular importance for Bank of America is the fact that the settlement will end a lawsuit filed by Nevada and Arizona over allegations that the bank has been deceiving homeowners seeking to participate in a refinancing program.
Only about $5 billion of the settlement will take the form of direct payments, including, according to government officials, a payment of about $2,000 to some individuals who had their homes foreclosed between September 2008 and December 2011.
Despite the evidence of fraud, no one will get their home back. Since 2007, there have been some 4 million home foreclosures.
About $17 billion will come from the modification of existing loans, spaced over a three-year time period. Details are still emerging, but it is evident that decisions on what loans to modify will be left to the banks themselves. Many of the loans have already been packaged off and sold to investors (“securitized”), thus minimizing the impact on bank assets.
The $17 billion in loan modifications is a tiny fraction of the total negative equity (the value of loans in relation to the value of the underling houses) of $700 billion to $750 billion. The deal will affect less than 10 percent of US homeowners who are “under water.”
An additional $3 billion is to come in the form of mortgage refinancing, again left to the discretion of the banks.
The banks will be tasked with self-reporting their actions. The industry and the state attorneys general selected North Carolina banking commissioner Joseph Smith to “oversee” the agreement and determine whether the banks are in compliance based on the bank reports. Smith is a former bank lawyer with close ties to the industry.
Markets reacted enthusiastically to the terms and bank stocks rose Thursday. The banks involved already have set aside funds that cover the amount of the agreement. Indeed, since many banks have written down the value of their existing loans, the agreement could have a positive net impact on their balance sheets.
“I wouldn’t say it’s a panacea for the housing industry,” commented Barclays analyst Jason Goldberg, “but it is good for the banks to get this behind them.”
Perversely, the deal will likely lead to a surge in home foreclosures, with banks now confident that they can proceed with business as usual. Bloomberg News commented, “Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year… With today’s agreement, banks are likely to resume property seizures.” Increased foreclosures will also lead to a further fall in home prices.
In hailing the deal, Obama said that it would “speed relief to the hardest-hit homeowners, end some of the most abusive practices of the mortgage industry, and begin to turn the page on an era of recklessness that has left so much damage in its wake.”
In fact, as with every component of the administration’s policy, the agreement will leave things entirely as they are, while giving a free pass to corporate criminals responsible for the economic crisis.
Source: World Socialist Web Site
Government officials reported that the final deal is valued at about $25 billion spread out over a multi-year period. This is a paltry sum in relationship to the extent of the housing crisis, the profits of the banks and the scale of corporate criminality. However, only a small portion of this would come from direct financial sanctions on the banks.
Forty-nine of the 50 US states signed on to the settlement with the five banks—JPMorgan Chase, Wells Fargo, Citigroup, Bank of America (which bought mortgage firm Countrywide), and Ally Financial Inc. (formerly GMAC, the financial arm of General Motors). These five banks involved had net profits of $46 billion last year alone.
In exchange for the settlement, the banks will be released from liability for fraudulent and likely criminal activities. This includes “robo-signing,” in which the banks had employees sign hundreds of thousands of legal foreclosure documents without any knowledge of the underlying mortgages. Banks were also involved in forging documents. The true extent of the illegal operations is not known, and keeping this information secret is one of the aims of the settlement.
Evidence of these actions first emerged in 2010. States launched investigations in response, and the Obama administration stepped in to package these investigations and lead them to a settlement favorable to the banks. Over the past several weeks, the administration has placed heavy pressure on several state holdouts to sign on to the deal.
Of particular importance for Bank of America is the fact that the settlement will end a lawsuit filed by Nevada and Arizona over allegations that the bank has been deceiving homeowners seeking to participate in a refinancing program.
Only about $5 billion of the settlement will take the form of direct payments, including, according to government officials, a payment of about $2,000 to some individuals who had their homes foreclosed between September 2008 and December 2011.
Despite the evidence of fraud, no one will get their home back. Since 2007, there have been some 4 million home foreclosures.
About $17 billion will come from the modification of existing loans, spaced over a three-year time period. Details are still emerging, but it is evident that decisions on what loans to modify will be left to the banks themselves. Many of the loans have already been packaged off and sold to investors (“securitized”), thus minimizing the impact on bank assets.
The $17 billion in loan modifications is a tiny fraction of the total negative equity (the value of loans in relation to the value of the underling houses) of $700 billion to $750 billion. The deal will affect less than 10 percent of US homeowners who are “under water.”
An additional $3 billion is to come in the form of mortgage refinancing, again left to the discretion of the banks.
The banks will be tasked with self-reporting their actions. The industry and the state attorneys general selected North Carolina banking commissioner Joseph Smith to “oversee” the agreement and determine whether the banks are in compliance based on the bank reports. Smith is a former bank lawyer with close ties to the industry.
Markets reacted enthusiastically to the terms and bank stocks rose Thursday. The banks involved already have set aside funds that cover the amount of the agreement. Indeed, since many banks have written down the value of their existing loans, the agreement could have a positive net impact on their balance sheets.
“I wouldn’t say it’s a panacea for the housing industry,” commented Barclays analyst Jason Goldberg, “but it is good for the banks to get this behind them.”
Perversely, the deal will likely lead to a surge in home foreclosures, with banks now confident that they can proceed with business as usual. Bloomberg News commented, “Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year… With today’s agreement, banks are likely to resume property seizures.” Increased foreclosures will also lead to a further fall in home prices.
In hailing the deal, Obama said that it would “speed relief to the hardest-hit homeowners, end some of the most abusive practices of the mortgage industry, and begin to turn the page on an era of recklessness that has left so much damage in its wake.”
In fact, as with every component of the administration’s policy, the agreement will leave things entirely as they are, while giving a free pass to corporate criminals responsible for the economic crisis.
Source: World Socialist Web Site
Thursday, February 16, 2012
Foreclosures (2012 Robosigning and Foreclosure Abuse Settlement)
The end of the housing boom in 2006 set in motion a vicious circle that led to disaster for millions of homeowners whose property has been seized or threatened, and for the lenders themselves, who have had to write off tens of billions in losses. Foreclosures helped accelerate the fall of property values, helping to spur more foreclosures. The losses they created brought the financial system to the brink of collapse in the fall of 2008. The steep recession that followed led to even greater homeowner delinquencies, as homeowners who lost their jobs often lost their homes. Tens of millions of others found themselves in homes worth less than their mortgages, unable to sell or refinance. All told, roughly four million families lost their homes to foreclosure between the beginning of 2007 and early 2012.
In late 2010, evidenced emerged that the foreclosure process may have been deeply tainted by sloppy recordkeeping, cut corners and possible fraud, epitomized by high-profile cases of “robo-signing’' — cases in which foreclosures took place based on forged or unreviewed documents. More than 40 states attorneys general began investigations into foreclosure abuse, and worries about the legal fallout from the scandal led to a sharp slowdown in the rate of foreclosure filings and of repossessions in 2011. In February 2012, government authorities and five of the nation’s biggest banks agreed to a $26 billion settlement that could provide relief to nearly two million current and former American homeowners.
Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out; earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected. Still, the agreement is the broadest effort yet to help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders or able to refinance their homes at lower rates. Another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000. And because of a complicated formula being used to distribute the money, federal officials say the ultimate benefits provided to homeowners could equal a larger sum — $45 billion in the event all 14 major servicers participate. The aid is to be distributed over three years, but there are incentives for banks to provide the money in the next 12 months. In addition to disagreements over the total amount, negotiations had been held up over the question of how much latitude authorities would have in pursuing investigations into mortgage abuses. In the agreement’s expected final form, the releases are mostly limited to the foreclosure process, like the eviction of homeowners after only a cursory examination of documents.
The prosecutors and regulators still have the right to investigate other elements that contributed to the housing bubble, like the assembly of risky mortgages into securities that were sold to investors and later soured, as well as insurance and tax fraud. Officials will also be able to pursue any allegations of criminal wrongdoing. The banks involved in the settlement in February were Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.
In a sign of how pervasive the problems were, an audit by San Francisco county officials of about 400 recent foreclosures there determined that almost all involved either legal violations or suspicious documentation. The courts have also become more aggressive about challenging foreclosures. In January 2011, Massachusetts’s top court voided the seizure of two homes by Wells Fargo & Company and US Bancorp after the banks failed to show that they held the mortgages at the time of the foreclosures, and courts in several states are considering similar cases.
Background
The root of today’s problems goes back to the boom years, when home prices were soaring and banks pursued profit while paying less attention to the business of mortgage servicing, or collecting and processing monthly payments from homeowners.
Banks spent billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide. Lowly servicing became an afterthought. When borrowers began to default in droves, banks found themselves in a never-ending game of catch-up, unable to devote enough manpower to modify, or ease the terms of, loans to millions of customers on the verge of losing their homes. Now banks are ill-equipped to dealwith the foreclosure process.
The revelations about the sloppy paperwork emboldened homeowners and law enforcement officials in many states to challenge notarizations — including those by so-called robo-signers,’ employees who approved hundreds of documents in a day — and to question whether lenders rightfully hold the notes underlying foreclosed properties. Evictions were expected to slow sharply — good news for many homeowners. But at the same time, the freezes further disrupted an already shaky housing market.
As banks’ foreclosure practices have come under the microscope, problems with notarizations on mortgage assignments have emerged. These documents transfer the ownership of the underlying note from one institution to another and are required for foreclosures to proceed. In some cases, the notarizations predated the preparation of the legal documents, suggesting that signatures were not reviewed by a notary. Other notarizations took place in offices far away from where the documents were signed, indicating that the notaries might not have witnessed the signings as the law required.
The swelling outcry over fast-and-loose foreclosures thrust the Obama administration back into the uncomfortable position of sheltering the banking industry from the demands of an angry public. While Mr. Obama did block a law passed by Congress that was seen as unintentionally making it easier to speed up foreclosures, his aides spoke out against calls from many Democrats for a national freeze on evictions, fearing that a moratorium could hurt still-shaky banks.
The Three Waves
Overall, there have been three distinct waves in foreclosures. The initial spike involved speculators who gave up property because of plunging real estate prices, and the secondary shock centered on borrowers whose introductory interest rates expired and were reset higher. The third wave represents standard mortgages, known as prime, written to people who had decent credit ratings, but who have lost their jobs in the economic downturn and are facing the loss of homes they had considered safe.
Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis. Economy.com said in 2009 that it expected that 60 percent of the mortgage defaults that year would be set off primarily by unemployment, up from 29 percent in 2008.
The slowdown in evictions may give such borrowers time to accumulate some capital or more leverage in settlement talks with their lender. Some analysts said that could conceivably help the housing market get back on its feet, by ending the undermining effect of a steady stream of foreclose houses going up for sale. Others, however, worried that blocking sales in an already weak market would drive prices down even further, continuing a spiral that has been deeply destructive to banks and communities.
A Mess Years in the Making
Interviews with bank employees, executives and federal regulators suggest that this mess was years in the making and came as little surprise to industry insiders and government officials.
Almost overnight, what had been a factorylike business that relied on workers with high school educations to process monthly payments needed to come up with a custom-made operation that could solve the problems of individual homeowners.
To make matters worse, the banks had few financial incentives to invest in their servicing operations, several former executives said. A mortgage generates an annual fee equal to only about 0.25 percent of the loan’s total value, or about $500 a year on a typical $200,000 mortgage. That revenue evaporates once a loan becomes delinquent, while the cost of a foreclosure can easily reach $2,500 and devour the meager profits generated from handling healthy loans.
And even when banks did begin hiring to deal with the avalanche of defaults, they often turned to workers with minimal qualifications or work experience, employees a former JPMorgan executive characterized as the “Burger King kids,” walk-in hires who often barely knew what a mortgage was.
At Citigroup and GMAC, dotting the i’s and crossing the t’s on home foreclosures was outsourced to frazzled workers who sometimes tossed the paperwork into the garbage. And at Litton Loan Servicing, an arm of Goldman Sachs, employees processed foreclosure documents so quickly that they barely had time to see what they were signing.
San Francisco Foreclosure Audit
Anecdotal evidence indicating foreclosure abuse has been plentiful since the mortgage boom turned to bust in 2008. But the detailed and comprehensive nature of the San Francisco findings released in February 2012 suggest how pervasive foreclosure irregularities may be across the nation.
The improprieties range from the basic — a failure to warn borrowers that they were in default on their loans as required by law — to the arcane. For example, transfers of many loans in the foreclosure files were made by entities that had no right to assign them and institutions took back properties in auctions even though they had not proved ownership.
Commissioned by Phil Ting, the San Francisco assessor-recorder, the report examined files of properties subject to foreclosure sales in the county from January 2009 to November 2011. About 84 percent of the files contained what appear to be clear violations of law, it said, and fully two-thirds had at least four violations or irregularities.
In a significant number of cases — 85 percent — documents recording the transfer of a defaulted property to a new trustee were not filed properly or on time, the report found. And in 45 percent of the foreclosures, properties were sold at auction to entities improperly claiming to be the beneficiary of the deeds of trust. In other words, the report said, “a ‘stranger’ to the deed of trust,” gained ownership of the property; as a result, the sale may be invalid, it said.
In 6 percent of cases, the same deed of trust to a property was assigned to two or more different entities, raising questions about which of them actually had the right to foreclose. Many of the foreclosures that were scrutinized showed gaps in the chain of title, the report said, indicating that written transfers from the original owner to the entity currently claiming to own the deed of trust have disappeared.
The audit also raises serious questions about the accuracy of information recorded in the Mortgage Electronic Registry System, or MERS, which was set up in 1995 by Fannie Mae and Freddie Mac and major lenders. The report found that 58 percent of loans listed in the MERS database showed different owners than were reflected in other public documents like those filed with the county recorder’s office.
The report contradicted the contentions of many banks that foreclosure improprieties did little harm because the borrowers were behind on their mortgages and should have been evicted anyway. “We can deduce from the public evidence,” the report noted, “that there are indeed legitimate victims in the mortgage crisis. Whether these homeowners are systematically being deprived of legal safeguards and due process rights is an important question.”
Source: New York Times
In late 2010, evidenced emerged that the foreclosure process may have been deeply tainted by sloppy recordkeeping, cut corners and possible fraud, epitomized by high-profile cases of “robo-signing’' — cases in which foreclosures took place based on forged or unreviewed documents. More than 40 states attorneys general began investigations into foreclosure abuse, and worries about the legal fallout from the scandal led to a sharp slowdown in the rate of foreclosure filings and of repossessions in 2011. In February 2012, government authorities and five of the nation’s biggest banks agreed to a $26 billion settlement that could provide relief to nearly two million current and former American homeowners.
Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out; earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected. Still, the agreement is the broadest effort yet to help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders or able to refinance their homes at lower rates. Another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000. And because of a complicated formula being used to distribute the money, federal officials say the ultimate benefits provided to homeowners could equal a larger sum — $45 billion in the event all 14 major servicers participate. The aid is to be distributed over three years, but there are incentives for banks to provide the money in the next 12 months. In addition to disagreements over the total amount, negotiations had been held up over the question of how much latitude authorities would have in pursuing investigations into mortgage abuses. In the agreement’s expected final form, the releases are mostly limited to the foreclosure process, like the eviction of homeowners after only a cursory examination of documents.
The prosecutors and regulators still have the right to investigate other elements that contributed to the housing bubble, like the assembly of risky mortgages into securities that were sold to investors and later soured, as well as insurance and tax fraud. Officials will also be able to pursue any allegations of criminal wrongdoing. The banks involved in the settlement in February were Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.
In a sign of how pervasive the problems were, an audit by San Francisco county officials of about 400 recent foreclosures there determined that almost all involved either legal violations or suspicious documentation. The courts have also become more aggressive about challenging foreclosures. In January 2011, Massachusetts’s top court voided the seizure of two homes by Wells Fargo & Company and US Bancorp after the banks failed to show that they held the mortgages at the time of the foreclosures, and courts in several states are considering similar cases.
Background
The root of today’s problems goes back to the boom years, when home prices were soaring and banks pursued profit while paying less attention to the business of mortgage servicing, or collecting and processing monthly payments from homeowners.
Banks spent billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide. Lowly servicing became an afterthought. When borrowers began to default in droves, banks found themselves in a never-ending game of catch-up, unable to devote enough manpower to modify, or ease the terms of, loans to millions of customers on the verge of losing their homes. Now banks are ill-equipped to dealwith the foreclosure process.
The revelations about the sloppy paperwork emboldened homeowners and law enforcement officials in many states to challenge notarizations — including those by so-called robo-signers,’ employees who approved hundreds of documents in a day — and to question whether lenders rightfully hold the notes underlying foreclosed properties. Evictions were expected to slow sharply — good news for many homeowners. But at the same time, the freezes further disrupted an already shaky housing market.
As banks’ foreclosure practices have come under the microscope, problems with notarizations on mortgage assignments have emerged. These documents transfer the ownership of the underlying note from one institution to another and are required for foreclosures to proceed. In some cases, the notarizations predated the preparation of the legal documents, suggesting that signatures were not reviewed by a notary. Other notarizations took place in offices far away from where the documents were signed, indicating that the notaries might not have witnessed the signings as the law required.
The swelling outcry over fast-and-loose foreclosures thrust the Obama administration back into the uncomfortable position of sheltering the banking industry from the demands of an angry public. While Mr. Obama did block a law passed by Congress that was seen as unintentionally making it easier to speed up foreclosures, his aides spoke out against calls from many Democrats for a national freeze on evictions, fearing that a moratorium could hurt still-shaky banks.
The Three Waves
Overall, there have been three distinct waves in foreclosures. The initial spike involved speculators who gave up property because of plunging real estate prices, and the secondary shock centered on borrowers whose introductory interest rates expired and were reset higher. The third wave represents standard mortgages, known as prime, written to people who had decent credit ratings, but who have lost their jobs in the economic downturn and are facing the loss of homes they had considered safe.
Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis. Economy.com said in 2009 that it expected that 60 percent of the mortgage defaults that year would be set off primarily by unemployment, up from 29 percent in 2008.
The slowdown in evictions may give such borrowers time to accumulate some capital or more leverage in settlement talks with their lender. Some analysts said that could conceivably help the housing market get back on its feet, by ending the undermining effect of a steady stream of foreclose houses going up for sale. Others, however, worried that blocking sales in an already weak market would drive prices down even further, continuing a spiral that has been deeply destructive to banks and communities.
A Mess Years in the Making
Interviews with bank employees, executives and federal regulators suggest that this mess was years in the making and came as little surprise to industry insiders and government officials.
Almost overnight, what had been a factorylike business that relied on workers with high school educations to process monthly payments needed to come up with a custom-made operation that could solve the problems of individual homeowners.
To make matters worse, the banks had few financial incentives to invest in their servicing operations, several former executives said. A mortgage generates an annual fee equal to only about 0.25 percent of the loan’s total value, or about $500 a year on a typical $200,000 mortgage. That revenue evaporates once a loan becomes delinquent, while the cost of a foreclosure can easily reach $2,500 and devour the meager profits generated from handling healthy loans.
And even when banks did begin hiring to deal with the avalanche of defaults, they often turned to workers with minimal qualifications or work experience, employees a former JPMorgan executive characterized as the “Burger King kids,” walk-in hires who often barely knew what a mortgage was.
At Citigroup and GMAC, dotting the i’s and crossing the t’s on home foreclosures was outsourced to frazzled workers who sometimes tossed the paperwork into the garbage. And at Litton Loan Servicing, an arm of Goldman Sachs, employees processed foreclosure documents so quickly that they barely had time to see what they were signing.
San Francisco Foreclosure Audit
Anecdotal evidence indicating foreclosure abuse has been plentiful since the mortgage boom turned to bust in 2008. But the detailed and comprehensive nature of the San Francisco findings released in February 2012 suggest how pervasive foreclosure irregularities may be across the nation.
The improprieties range from the basic — a failure to warn borrowers that they were in default on their loans as required by law — to the arcane. For example, transfers of many loans in the foreclosure files were made by entities that had no right to assign them and institutions took back properties in auctions even though they had not proved ownership.
Commissioned by Phil Ting, the San Francisco assessor-recorder, the report examined files of properties subject to foreclosure sales in the county from January 2009 to November 2011. About 84 percent of the files contained what appear to be clear violations of law, it said, and fully two-thirds had at least four violations or irregularities.
In a significant number of cases — 85 percent — documents recording the transfer of a defaulted property to a new trustee were not filed properly or on time, the report found. And in 45 percent of the foreclosures, properties were sold at auction to entities improperly claiming to be the beneficiary of the deeds of trust. In other words, the report said, “a ‘stranger’ to the deed of trust,” gained ownership of the property; as a result, the sale may be invalid, it said.
In 6 percent of cases, the same deed of trust to a property was assigned to two or more different entities, raising questions about which of them actually had the right to foreclose. Many of the foreclosures that were scrutinized showed gaps in the chain of title, the report said, indicating that written transfers from the original owner to the entity currently claiming to own the deed of trust have disappeared.
The audit also raises serious questions about the accuracy of information recorded in the Mortgage Electronic Registry System, or MERS, which was set up in 1995 by Fannie Mae and Freddie Mac and major lenders. The report found that 58 percent of loans listed in the MERS database showed different owners than were reflected in other public documents like those filed with the county recorder’s office.
The report contradicted the contentions of many banks that foreclosure improprieties did little harm because the borrowers were behind on their mortgages and should have been evicted anyway. “We can deduce from the public evidence,” the report noted, “that there are indeed legitimate victims in the mortgage crisis. Whether these homeowners are systematically being deprived of legal safeguards and due process rights is an important question.”
Source: New York Times
Friday, February 10, 2012
Obama administration brokers pro-bank mortgage fraud settlement
The Obama administration announced on Thursday a settlement between five major banks and the federal and state governments over massive fraud relating to home foreclosures. The terms of the agreement are entirely favorable to the banks, while doing little or nothing to aid the millions of people who have been devastated by the collapse of the US housing market.
Government officials reported that the final deal is valued at about $25 billion spread out over a multi-year period. This is a paltry sum in relationship to the extent of the housing crisis, the profits of the banks and the scale of corporate criminality. However, only a small portion of this would come from direct financial sanctions on the banks. Forty-nine of the 50 US states signed on to the settlement with the five banks—JPMorgan Chase, Wells Fargo, Citigroup, Bank of America (which bought mortgage firm Countrywide), and Ally Financial Inc. (formerly GMAC, the financial arm of General Motors). These five banks involved had net profits of $46 billion last year alone. In exchange for the settlement, the banks will be released from liability for fraudulent and likely criminal activities. This includes “robo-signing,” in which the banks had employees sign hundreds of thousands of legal foreclosure documents without any knowledge of the underlying mortgages. Banks were also involved in forging documents. The true extent of the illegal operations is not known, and keeping this information secret is one of the aims of the settlement.
Evidence of these actions first emerged in 2010. States launched investigations in response, and the Obama administration stepped in to package these investigations and lead them to a settlement favorable to the banks. Over the past several weeks, the administration has placed heavy pressure on several state holdouts to sign on to the deal. Of particular importance for Bank of America is the fact that the settlement will end a lawsuit filed by Nevada and Arizona over allegations that the bank has been deceiving homeowners seeking to participate in a refinancing program. Only about $5 billion of the settlement will take the form of direct payments, including, according to government officials, a payment of about $2,000 to some individuals who had their homes foreclosed between September 2008 and December 2011.
Despite the evidence of fraud, no one will get their home back. Since 2007, there have been some 4 million home foreclosures. About $17 billion will come from the modification of existing loans, spaced over a three-year time period. Details are still emerging, but it is evident that decisions on what loans to modify will be left to the banks themselves. Many of the loans have already been packaged off and sold to investors (“securitized”), thus minimizing the impact on bank assets. The $17 billion in loan modifications is a tiny fraction of the total negative equity (the value of loans in relation to the value of the underling houses) of $700 billion to $750 billion. The deal will affect less than 10 percent of US homeowners who are “under water.” An additional $3 billion is to come in the form of mortgage refinancing, again left to the discretion of the banks.
The banks will be tasked with self-reporting their actions. The industry and the state attorneys general selected North Carolina banking commissioner Joseph Smith to “oversee” the agreement and determine whether the banks are in compliance based on the bank reports. Smith is a former bank lawyer with close ties to the industry.
Markets reacted enthusiastically to the terms and bank stocks rose Thursday. The banks involved already have set aside funds that cover the amount of the agreement. Indeed, since many banks have written down the value of their existing loans, the agreement could have a positive net impact on their balance sheets. “I wouldn’t say it’s a panacea for the housing industry,” commented Barclays analyst Jason Goldberg, “but it is good for the banks to get this behind them.”
Perversely, the deal will likely lead to a surge in home foreclosures, with banks now confident that they can proceed with business as usual. Bloomberg News commented, “Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year… With today’s agreement, banks are likely to resume property seizures.” Increased foreclosures will also lead to a further fall in home prices.
In hailing the deal, Obama said that it would “speed relief to the hardest-hit homeowners, end some of the most abusive practices of the mortgage industry, and begin to turn the page on an era of recklessness that has left so much damage in its wake.” In fact, as with every component of the administration’s policy, the agreement will leave things entirely as they are, while giving a free pass to corporate criminals responsible for the economic crisis.
Source: World Socialist Web Site
Government officials reported that the final deal is valued at about $25 billion spread out over a multi-year period. This is a paltry sum in relationship to the extent of the housing crisis, the profits of the banks and the scale of corporate criminality. However, only a small portion of this would come from direct financial sanctions on the banks. Forty-nine of the 50 US states signed on to the settlement with the five banks—JPMorgan Chase, Wells Fargo, Citigroup, Bank of America (which bought mortgage firm Countrywide), and Ally Financial Inc. (formerly GMAC, the financial arm of General Motors). These five banks involved had net profits of $46 billion last year alone. In exchange for the settlement, the banks will be released from liability for fraudulent and likely criminal activities. This includes “robo-signing,” in which the banks had employees sign hundreds of thousands of legal foreclosure documents without any knowledge of the underlying mortgages. Banks were also involved in forging documents. The true extent of the illegal operations is not known, and keeping this information secret is one of the aims of the settlement.
Evidence of these actions first emerged in 2010. States launched investigations in response, and the Obama administration stepped in to package these investigations and lead them to a settlement favorable to the banks. Over the past several weeks, the administration has placed heavy pressure on several state holdouts to sign on to the deal. Of particular importance for Bank of America is the fact that the settlement will end a lawsuit filed by Nevada and Arizona over allegations that the bank has been deceiving homeowners seeking to participate in a refinancing program. Only about $5 billion of the settlement will take the form of direct payments, including, according to government officials, a payment of about $2,000 to some individuals who had their homes foreclosed between September 2008 and December 2011.
Despite the evidence of fraud, no one will get their home back. Since 2007, there have been some 4 million home foreclosures. About $17 billion will come from the modification of existing loans, spaced over a three-year time period. Details are still emerging, but it is evident that decisions on what loans to modify will be left to the banks themselves. Many of the loans have already been packaged off and sold to investors (“securitized”), thus minimizing the impact on bank assets. The $17 billion in loan modifications is a tiny fraction of the total negative equity (the value of loans in relation to the value of the underling houses) of $700 billion to $750 billion. The deal will affect less than 10 percent of US homeowners who are “under water.” An additional $3 billion is to come in the form of mortgage refinancing, again left to the discretion of the banks.
The banks will be tasked with self-reporting their actions. The industry and the state attorneys general selected North Carolina banking commissioner Joseph Smith to “oversee” the agreement and determine whether the banks are in compliance based on the bank reports. Smith is a former bank lawyer with close ties to the industry.
Markets reacted enthusiastically to the terms and bank stocks rose Thursday. The banks involved already have set aside funds that cover the amount of the agreement. Indeed, since many banks have written down the value of their existing loans, the agreement could have a positive net impact on their balance sheets. “I wouldn’t say it’s a panacea for the housing industry,” commented Barclays analyst Jason Goldberg, “but it is good for the banks to get this behind them.”
Perversely, the deal will likely lead to a surge in home foreclosures, with banks now confident that they can proceed with business as usual. Bloomberg News commented, “Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year… With today’s agreement, banks are likely to resume property seizures.” Increased foreclosures will also lead to a further fall in home prices.
In hailing the deal, Obama said that it would “speed relief to the hardest-hit homeowners, end some of the most abusive practices of the mortgage industry, and begin to turn the page on an era of recklessness that has left so much damage in its wake.” In fact, as with every component of the administration’s policy, the agreement will leave things entirely as they are, while giving a free pass to corporate criminals responsible for the economic crisis.
Source: World Socialist Web Site
Wednesday, February 8, 2012
Push to Avert Foreclosures Hits Court Logjam
New York has been among the most aggressive states in trying to protect homeowners from foreclosure, granting new legal protections and turning courts across the state into teeming negotiation centers working to keep people in their homes. But four years into the foreclosure crisis, the state’s courts are largely at a stalemate, facing an estimated 100,000 foreclosure cases — a record number — with tens of thousands more expected. Courts statewide have been mired in often hopeless cases involving loans that have left bus drivers and grocery clerks, among others, owing $700,000 or more on homes that have fallen in value.
As the Obama administration works on new mortgage-relief programs, lawyers and officials say New York’s experience shows the limits of a state’s ability to cope with the national foreclosure morass. “We are a shining example of somebody’s best efforts falling short through no fault of our own,” said Paul Lewis, a senior official in the New York court system who has been helping coordinate foreclosure cases since the start of the crisis.
Special funding to provide lawyers for homeowners has largely dried up, with more than 75 percent of New York City residents going into foreclosure court without a lawyer, state data shows. The state’s judges have grown increasingly vocal about what some of them have called “outrageous” conduct, “patently false” statements and “inexcusable” actions by lenders’ lawyers.
The hearings that form the core of New York’s approach — special settlement conferences, which are required to try to modify mortgages to make them affordable — have become comic exercises slowed by endless paperwork, requests for additional information and the mysterious loss of documents. During a day of more than 30 of the conferences in State Supreme Court in Queens last week, homeowners with screaming children and wheelchair-bound grandmothers appeared befuddled by the paper chase. Some of the cases had already been taken up in the settlement conferences as many as nine times, over many months, only to be delayed each time until yet another meeting. “We don’t have the full file,” said a bank’s lawyer during one of the conferences. “Unfortunately, I wasn’t able to review the documents,” said another lender’s lawyer in another case a few minutes later. “We should have received it, but it didn’t get into our system,” said a third. A fourth lawyer conceded that the homeowners had mailed information to the bank, but said that “only fax and e-mail” were acceptable.
On several occasions the court official who conducted the conferences that day, Tracy Catapano-Fox, mentioned to homeowners the system’s Catch-22: as they rush to gather newly demanded tax and bank records, information they supplied earlier to address other questions grows too old to be useful.
Completed applications turn back into incomplete ones, leading to more delays to collect more information while the newest information, in turn, grows stale. Ms. Catapano-Fox told one homeowner after another of the trap that awaited them. “I have psychic powers,” she said with a sympathetic grimace, having conducted hundreds of the conferences. “There’s no question that the next time we come in here, they will claim that the documents are stale.”
In the hallway after the latest of what he said had been a dozen monthly appearances in his yearlong foreclosure case, Juan Adon, a Jamaica homeowner, said he was baffled. “It doesn’t make any sense,” he said. Ms. Catapano-Fox had dryly mentioned during his hearing that there was a notation in his file indicating that the bank’s representative had said in August that it needed no additional information. Yet it seemed that nothing had happened.
Statewide, after some 82,000 of the settlement conferences were held, with many cases taken up multiple times, just 4,253 cases reached settlements during the 11-month period ending in September, according to a recent report by the chief administrator of the state courts. And some of those settlements led to the loss of homes anyway. “We are concerned that the gains we have made are being lost,” the report said. “We’re at a fork in the road,” said Anne Erickson, president of the Empire Justice Center, which represents low-income homeowners. “We can continue leading the way or we can watch the whole thing unravel.”
Lawyers say the difficulties encountered in the New York courts show how complex the task of working through the jumble of subprime mortgages can be, made worse by issues like “robo-signing,” the practice of having foreclosure documents signed by lenders in such high numbers that they could not possibly have been reviewed carefully.
After attention on robo-signing abuses that led to improper foreclosures, the New York courts adopted a rule in 2010 to try to repair what its chief judge, Jonathan Lippman, called “a deeply flawed process.” The rule required lawyers who pursued foreclosure suits to file a certification stating they had personally checked the accuracy of the claims about a homeowner’s loan.
Court officials quickly noticed that, while banks’ lawyers continued to file foreclosure cases at a rapid rate, they adopted a new strategy that seemed to be aimed at evading the new requirement. They filed the cases, causing damage to people’s credit ratings and adding to the fees they paid, but did not push the cases far enough to set off the requirement for the lawyer’s certification.
Around the state, court officials estimate there may be 25,000 or more such “shadow” cases in addition to the 75,000 already moving through the courts. In the cases in which lawyers do file the newly required certification, some judges have ruled that the lawyers had changed the mandated wording or otherwise resisted compliance.
The difficulties posed by the lawyer’s certification requirement are only the latest problem in the foreclosure docket to irritate judges. In a March ruling, a frustrated Queens judge, Anna Culley, described a foreclosure case that was much like many others. In one settlement conference, the bank asked for additional banking records from the homeowner, the judge wrote.
At another session, it demanded pay stubs. In a third, it asked for tax forms. In a fourth, it asked for all the paperwork to be resubmitted. At two meetings, the bank’s representative said a modification of the mortgage had been granted, lowering the required payments. But after two and a half years, the judge wrote, the bank had yet to modify the loan, and the foreclosure case was still pending.
Source: New York Times
As the Obama administration works on new mortgage-relief programs, lawyers and officials say New York’s experience shows the limits of a state’s ability to cope with the national foreclosure morass. “We are a shining example of somebody’s best efforts falling short through no fault of our own,” said Paul Lewis, a senior official in the New York court system who has been helping coordinate foreclosure cases since the start of the crisis.
Special funding to provide lawyers for homeowners has largely dried up, with more than 75 percent of New York City residents going into foreclosure court without a lawyer, state data shows. The state’s judges have grown increasingly vocal about what some of them have called “outrageous” conduct, “patently false” statements and “inexcusable” actions by lenders’ lawyers.
The hearings that form the core of New York’s approach — special settlement conferences, which are required to try to modify mortgages to make them affordable — have become comic exercises slowed by endless paperwork, requests for additional information and the mysterious loss of documents. During a day of more than 30 of the conferences in State Supreme Court in Queens last week, homeowners with screaming children and wheelchair-bound grandmothers appeared befuddled by the paper chase. Some of the cases had already been taken up in the settlement conferences as many as nine times, over many months, only to be delayed each time until yet another meeting. “We don’t have the full file,” said a bank’s lawyer during one of the conferences. “Unfortunately, I wasn’t able to review the documents,” said another lender’s lawyer in another case a few minutes later. “We should have received it, but it didn’t get into our system,” said a third. A fourth lawyer conceded that the homeowners had mailed information to the bank, but said that “only fax and e-mail” were acceptable.
On several occasions the court official who conducted the conferences that day, Tracy Catapano-Fox, mentioned to homeowners the system’s Catch-22: as they rush to gather newly demanded tax and bank records, information they supplied earlier to address other questions grows too old to be useful.
Completed applications turn back into incomplete ones, leading to more delays to collect more information while the newest information, in turn, grows stale. Ms. Catapano-Fox told one homeowner after another of the trap that awaited them. “I have psychic powers,” she said with a sympathetic grimace, having conducted hundreds of the conferences. “There’s no question that the next time we come in here, they will claim that the documents are stale.”
In the hallway after the latest of what he said had been a dozen monthly appearances in his yearlong foreclosure case, Juan Adon, a Jamaica homeowner, said he was baffled. “It doesn’t make any sense,” he said. Ms. Catapano-Fox had dryly mentioned during his hearing that there was a notation in his file indicating that the bank’s representative had said in August that it needed no additional information. Yet it seemed that nothing had happened.
Statewide, after some 82,000 of the settlement conferences were held, with many cases taken up multiple times, just 4,253 cases reached settlements during the 11-month period ending in September, according to a recent report by the chief administrator of the state courts. And some of those settlements led to the loss of homes anyway. “We are concerned that the gains we have made are being lost,” the report said. “We’re at a fork in the road,” said Anne Erickson, president of the Empire Justice Center, which represents low-income homeowners. “We can continue leading the way or we can watch the whole thing unravel.”
Lawyers say the difficulties encountered in the New York courts show how complex the task of working through the jumble of subprime mortgages can be, made worse by issues like “robo-signing,” the practice of having foreclosure documents signed by lenders in such high numbers that they could not possibly have been reviewed carefully.
After attention on robo-signing abuses that led to improper foreclosures, the New York courts adopted a rule in 2010 to try to repair what its chief judge, Jonathan Lippman, called “a deeply flawed process.” The rule required lawyers who pursued foreclosure suits to file a certification stating they had personally checked the accuracy of the claims about a homeowner’s loan.
Court officials quickly noticed that, while banks’ lawyers continued to file foreclosure cases at a rapid rate, they adopted a new strategy that seemed to be aimed at evading the new requirement. They filed the cases, causing damage to people’s credit ratings and adding to the fees they paid, but did not push the cases far enough to set off the requirement for the lawyer’s certification.
Around the state, court officials estimate there may be 25,000 or more such “shadow” cases in addition to the 75,000 already moving through the courts. In the cases in which lawyers do file the newly required certification, some judges have ruled that the lawyers had changed the mandated wording or otherwise resisted compliance.
The difficulties posed by the lawyer’s certification requirement are only the latest problem in the foreclosure docket to irritate judges. In a March ruling, a frustrated Queens judge, Anna Culley, described a foreclosure case that was much like many others. In one settlement conference, the bank asked for additional banking records from the homeowner, the judge wrote.
At another session, it demanded pay stubs. In a third, it asked for tax forms. In a fourth, it asked for all the paperwork to be resubmitted. At two meetings, the bank’s representative said a modification of the mortgage had been granted, lowering the required payments. But after two and a half years, the judge wrote, the bank had yet to modify the loan, and the foreclosure case was still pending.
Source: New York Times
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