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US banks continue to steal homes
The largest US banks continue to fabricate documents, rip off customers and illegally kick people out of their homes, says Salon.com
 
While announcing the National Mortgage Settlement on 9 February 2012, President Barack Obama had said that it would “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.”  However, in an investigative report, Salon.com says, it does not appear that any of those abusive practices have ended and the government, at all levels, has basically walked away from its responsibility to protect homeowners. The largest banks in the US have apparently continued to fabricate documents, rip off customers and illegally kick people out of their homes, even after inking a series of settlements over the same abuses, says Salon.com in a report. It reports that, “...the worst part of it all is that the main settlement over foreclosure fraud was so weakly written that it actually allows such criminal conduct to occur, at least up to a certain threshold. Potentially hundreds of thousands of homes could be effectively stolen by the big banks without any sanctions.”
 
The National Mortgage Settlement, the $25 billion deal concluded in February 2012 between 49 state attorneys general, federal agencies like the Justice Department and the Department of Housing and Urban Development, and five largest mortgage servicers: Bank of America, JPMorgan Chase, Wells Fargo, Citi and GMAC/Ally Bank. Under the settlement, banks pay a trifling amount in hard dollars to the states as well as foreclosure victims, and provide principal reductions and other loan modifications to struggling borrowers. They also agreed to comply with a broad set of servicing standards for the time period of the settlement, covering three years.
 
According to Salon.com, much of the focus (of this settlement) has been on the principal reductions, and whether the banks are actually accomplishing them for the benefit of home owners. But it’s these servicing standards that are being violated. That’s the inescapable conclusion of new evidence disclosed by the Centre for Investigative Reporting and NBC Bay Area. Focusing on mortgage documents and foreclosures in the San Francisco region, they found that “banks and their subsidiaries continue to file invalid documents and foreclose on properties to which they appear to have no legal right,” the report says.
 
Citing an example, Salon.com said, one mechanical engineer Joji Thomas, in a last-ditch bid to save his home, delivered a cashier’s check for $27,777.85 to Bank of America, which promptly lost the payment, and foreclosed anyway. In another case, BofA transferred a property to a separate entity that was already closed down, and they clumsily switched the dates on the document to make it look correct. Reporters also uncovered documents prepared by “robo-signers,” individuals hired to attest to the veracity of thousands of mortgage documents without having any underlying knowledge of the contents (basically a mass perjury scheme), the report added.
 
According to the report, these are precisely the kinds of abuses that state and federal regulators professed to stop with the National Mortgage Settlement. It said, “...this is not the only evidence that Bank of America and its counterparts simply went on with business as usual, fabricating documents to prove a shaky chain of ownership before initiating foreclosures, or ripping off borrowers seeking a modification or trying to save their homes. A few brave county recording clerks have examined mortgage documents in their offices and found massive fraud. And the same week that state and local officials announced the settlement, Wells Fargo posted online job listings seeking a “loan servicing specialist” to basically robo-sign documents.”
 
The question is whether these criminal activities violate the terms of the National Mortgage Settlement and could this be the lever to reopen the entire foreclosure fraud case against the banks?
 
Salon.com says, the answer is yes and no. “The individual cases do violate the terms. Banks agreed in the settlement to stop robo-signing, to provide modifications for those homeowners who qualify, to keep accurate payment records and deposit payments properly, to only charge applicable fees, and other steps. There’s even an oversight monitor, empowered to check incoming data from the banks, ensure compliance, and make quarterly reports on their actions,” it said.
 
Quoting writer and attorney Abigail Field, the reports says, he (Field) first pointed out last year, for all of these different servicing standards, the banks have a “threshold error rate” that allows them to violate their obligations, up to and including illegally taking someone’s home, a certain amount of times. 
 
For the vast majority of standards, the threshold error rate is 5%, for a few it’s as high as 10%. That means that banks could violate these standards, which often leads to illegal foreclosures, on one out of every 20 mortgages they service, and the settlement monitor has no ability to do anything about it. For context, RealtyTrac estimated 1.8 million foreclosure filings just in 2012. Under the National Mortgage Settlement, 90,000 of those could be fraudulent, without sanction.
 
According to Salon.com, it gets worse. It says, “That 5% threshold is based on “reportable errors” in a given reporting period, such as a quarter. The settlement monitor, Joseph Smith, does issue quarterly reports, but as it says right in the Office of Mortgage Settlement Oversight FAQ and in the settlement language, the oversight process begins with compliance reports from the banks themselves.”
 
It said, “An 'Internal Review Group' tests the servicing standards to compute the quarterly metrics. They are allegedly 'independent from the line of business whose performance is being measured', but they are still paid by that bank, and they compose the baseline review that the settlement monitor uses.”
 
“The monitor can solicit more information from the banks if he perceives a non-compliance problem (though he doesn’t really have the resources to engage in a full review). But really, their job is one of checking the banks’ work. If this is such a good idea, we should stop sending out food inspectors and let agribusiness self-report their findings on tainted meat and produce, and the inspectors will sit back in Washington and verify everything. (Oh wait, we’re doing that too.),” the report added.
 
The first court-ordered quarterly report from the settlement monitor is due in May, and there is little reason to believe it will give anything other than a free pass. Even if by some miracle the monitor did find violations above the threshold, under the settlement, the banks have the right to appeal the findings. The settlement monitor must “confer” with the servicer over non-compliance, and the servicers have the “right to cure” any violation, sort of a “no harm, no foul” situation where the bank fixes some errors to get below the threshold.
 
One of the main points of a law enforcement apparatus is to collectively look out for individual abuses, and to use their leverage and resources to bring criminal enterprises to justice. That just isn’t happening in the case of foreclosure fraud. Instead, we see settlements where the criminal conduct gets institutionalized, and where hundreds of thousands of violations go unpunished, really all of the violations — since there’s no independent, workable compliance system in place, Salon said in the report.
 
Courtesy: Salon.com

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Maharashtra asks doctors to issue only typed post-mortem reports
Illegible handwriting of doctors, especially in the medical reports, like post-mortem report, causes tremendous problems during court trials and was one of the impediments in meeting the ends of justice
 
The Maharashtra government through a circular has directed all doctors in the state to issue only typed post-mortem reports instead of the hand-written ones. The circular comes after the Nagpur bench of Bombay High Court issued a notice to the state government.
 
Citing a notice issued by the High Court, the recently issued circular by the state public health department said it should be seriously noted by all concerned that henceforth, no handwritten post-mortem report should be issued, in any circumstances.
 
The responsibility of its proper implementation has been fixed on civil surgeons, district health officers and in-charges of hospitals.
 
In January 2013, Nagpur-based Dr Indrajit Khandekar, who was peeved by the illegible handwriting of doctors especially in medico-legal reports (MLRs) including clinical, forensic and postmortem reports, had filed a public interest litigation (PIL) in the Bombay High Court. He had prayed for computerisation of all MLRs and its generation through forensic medical software.
 
The PIL was based on his detailed study report, which was earlier submitted to the state government.
 
Khandekar, an associate professor at Sewagram's Mahatma Gandhi Institute of Medical Sciences (MGIMS), found that illegible handwriting of medicos in forensic reports often resulted in several problems during dispensation of justice in courts and criminal justice system was adversely affected. 
 
The PIL had pointed out that illegible handwriting caused tremendous problems in day-to-day functioning of the courts and was one of the impediments in meeting the ends of justice. It led to wastage of valuable time of judiciary during the trial of cases.
 
The PIL also submitted that the MLRs prepared by doctors in sexual assault cases, injuries in cases of assault and other such cases played a major role in meeting the ends of justice.

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How strong action by the new govt can define RBI’s role

No top level changes in RBI are needed. Strong economic measures by the Modi government would automatically limit RBI's role to monetary policy 

 
The Narendra Modi-led National Democratic Alliance (NDA) is going to form the new government shortly. For a country, trapped in never ending inertia in the context of critical policy decisions, the decisive mandate comes as a huge relief. It is expected that in the days to come, policy paralysis will give way to quick decision resulting in rapid economic development.
 
Much before election results were announced, Indian media was agog with the fate of Raghuram Rajan, the governor of Reserve Bank of India (RBI) in the event of the Bharatiya Janata Party (BJP)-led government coming to power. There were apprehensions that the new government will either clip the wings of the governor or a new governor will be appointed. What most of the people have failed to notice is the role of RBI as an institution in an era where the Centre takes strong decisive actions. 
 
The development of an economy is often driven by a series of fiscal policy measures accompanied by monetary policy steps. These two measures need to be supplemented by adequate regulatory changes to give wings to the economy like attracting investments from both domestic as well as foreign players. But in event of government not performing well, the role of monetary policy starts acquiring significance of a larger than expected magnitude. It has been seen that when fiscal policy measures along with other critical decisions by the government stops working, monetary policy starts acting as the sole instrument of economic stability and growth.
 
This is what precisely happened in the Manmohan Singh-led United Progressive Alliance (UPA)-II regime, especially post 2010. The governance started paving way for populist measures and there were many instances of back and forth approach in the policy making. Foreign direct investments (FDI) in retail was a classic example of things going horribly wrong. The end result of this policy is known to us when FDI in retail failed to do anything tangible for the economy. A series of failures by the Manmohan Singh government resulted in economy suffering from high inflation, slowdown of growth and increasing current account deficit. This is why from 2010 onwards, there was an increased activism by the central bank in India when it took the mantle of managing the economy through harsh monetary policy measures realising that the government has started failing and inflation, growth and currency can be managed only by using instruments of monetary policy. 
 
Now with the new government in place, there is a scope to start actions, which will result in the economy coming back on the growth path. The role of RBI in stabilising the economy and providing the necessary push for growth is likely to get reduced. This reduction is required as monetary policy cannot be the sole driver of growth in the economy. Government action on the following fronts can substantially reduce the larger the life image that RBI has acquired recently in our economy.
 
Tackle inflation by removing supply side constraints: Inflation cannot be controlled by just monetary policy measures. RBI has been trying to make inflation, especially food inflation, look like a demand side issue, which it is predominately a supply side constraint. India has enough food grains to feed its population but two critical issues have been pushing food prices high which are 1) supply change management of food grains and 2) pricing policy in the form of procurement prices.
 
The farmer gets Rs3 per kg for something like an onion, but the same product is sold for as high as Rs20 a kg in cities. So who is the real beneficiary of this price difference? The government needs to have a look at this. Aren’t middlemen and undesirable intermediaries pushing up the price? Similarly, the procurement price of food grains has always been a political issue often used to win voters. There is a need to have a serious look at the mechanism of procurement price and ensure that prices are not hiked arbitrarily.
 
Indian rupee will grow stronger by attracting more investments: Indian rupee has grown younger in last one week, only on the news that a new government is going to be at the helm of affair. This is quite in contrast to what we saw last year when there was carnage in the currency market and the Indian rupee went as low as Rs68 to the US dollar. There is very limited role for RBI to stabilise currency though it was prima donna managing the currency volatility. If the new government starts putting policy framework in place, the Indian rupee will get stable and keep on marginally appreciating for sometime. While this may not be good for exporters in the short term, in the long run it will provide the necessary boost to India. It is noteworthy that China has performed well on the export front in spite of a stable and appreciating Renminbi against the US dollar. We need to make industries competitive to help them grow their exports and not essentially though measures like depreciation of currency.
 
Forget repo rate, encourage growth: Economic growth and development are not slaves of repo rate  (RBI's main policy rate at which it lends to banks). The RBI governor himself has stated many times that the rate of interest does not decide the growth rate in the country. While high rates of interest may act as a temporary bottleneck, right policy measures can still propel growth. The government needs to promote an investment climate, especially promotion of small and medium enterprises to push employment and growth. There is a need to build huge infrastructure across country and avoid delays, which often results in cost escalation. Infrastructure building has to be a private-public partnership.
 
While RBI will have a role in context of monetary policy measures, action on part of government will automatically dwarf the role of RBI. The central bank can definitely contribute as many central banks do in context of overall policy framework in the country and should not setting economic policy for growth. In the days to come, the government will decide what kind of role RBI has to play not by changing the governor or its key officials, but by initiating action.
 
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)

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COMMENTS

Yerram Raju Behara

3 years ago

The country is fast getting out of the biggest deficits of all: the TRUST deficit. The swearing in by the Prime Minister at the end of sweltering heat, in the presence of warm hearts of thousands who gathered at the ceremony and millions warming up for support, the quick actions that followed, the no-nonsense approach to dealing with externalities, etc., point out that the country is heading for a strong economy and strong nationhood.

REPLY

Suiketu Shah

In Reply to Yerram Raju Behara 3 years ago

100% correct:)

MG Warrier

3 years ago

I am posting this comment a week after this article has been online. The pre-Election apprehensions about post-Election scenario have given way to cautious optimism factoring in the possibilities emerging from a stable government. So far, the indications are that Modi Government believes in the strength of the institutions in India to carry out their mandated responsibilities. Though the political leadership had shown signs of weakness or symptoms of ill-health occasionally, by and large bodies like Election Commission, CAG, RBI, Judiciary at higher levels, Defence Forces, Scientific Community and the bureaucracy in India have a history of consistent mature performance, irrespective of the permutations and combinations in coalition governments at Centre aand States. Modi’s stance so far is congenial for smooth functioning of institutions responsible to uphold the mandate of Indian Constitution.

Yerram Raju Behara

3 years ago

A weak financial sector and strong economy can hardly coexist, I agree with Vivek that the strong fiscal measures, creating conducive climate for growth through the Gujarat-like Single Window Scheme, enactment of bankruptcy law, will be the harbingers for a big push to the economy. RBI will only be too happy to lend full support to the Government through effective monetary policy interventions. Well before that, it is time that the RBI and the GoI look at the recommendations of PJ Nayak Committee Report and take action on creating and empowering Boards of the PSBs first by the RBI itself pulling out of the Bank boards; second, by setting up a collegium of directors; third, by winding up the Department of Banking in the Ministry of Finance and the GoI stopping to act as yet another regulator on priority basis. These will set the tone for financial sector reforms.

SuchindranathAiyerS

3 years ago

From Pakistan to the Economy, I am nervous that the BJP might betray its mandate and go soft on accountability and enabling a meritocracy with integrity to flourish. The Atal example and the sixty six year momentum of forgiving India's Neta-Babus and neighbours all their trespasses might expand.

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