Another strong week for the equity markets comes to a close and yet my comfort level continues to decline. Technically speaking I have no reason to worry. The NYSE Composite looks strong, the carry trade (AUD/JPY) supports the rally and credit markets continue to improve.
However, last week I highlighted the relative underperformance of the Financial group and this issue continues to cause consternation. I have, for your convience, created a list of stories that surfaced this week with regard to the forclosure fraud fiasco. Perhaps this story explains in part the weakness of the Financial group.
We must keep a close eye on these developments and protect principal if recent equity market strength reverses.
Have a good weekend and enjoy the read if you can:
BofA Extends Freeze on Foreclosures to All 50 States
Bank of America Corp., the biggest U.S. lender, extended a freeze on foreclosures to all 50 states as concern spread among federal and local officials that homes are being seized based on false data.
“We will stop foreclosure sales until our assessment has been satisfactorily completed,” the Charlotte, North Carolina- based company said today in a statement. “Our ongoing assessment shows the basis for foreclosure decisions is accurate.”
Bank of America, JPMorgan Chase & Co. and Ally Financial Inc. already froze foreclosures in 23 states where courts supervise home seizures amid allegations that employees used unverified or false data to speed the process. Bank of America’s new policy extends its moratorium to the entire nation, and the announcement spurred more demands from public officials and community groups for other banks to follow suit.
Foreclosure Furor Rises; Many Call for a Freeze
The uproar over bad conduct by mortgage lenders intensified Tuesday, as lawmakers in Washington requested a federal investigation and the attorney general in Texas joined a chorus of state law enforcement figures calling for freezes on all foreclosures.
Representative Nancy Pelosi, the House speaker, and 30 other Democratic representatives from California told the Justice Department, the Federal Reserve and the comptroller of the currency that “it is time that banks are held accountable for their practices.”
In a request for an investigation into questionable foreclosure practices by lenders, the lawmakers said that “the excuses we have heard from financial institutions are simply not credible.”
Delaware AG Joins Cries For Foreclosure Freeze, As Mortgage Meltdown Moves Away From Just Judicial States
The populist chorus for a foreclosure freeze is now approaching 100 dB. The latest to join the fray is Delaware AG Beau Biden’s, whose office, according to the AP, sent letters Tuesday asking three mortgage lenders to suspend all pending foreclosures until the banks can review their policies. While not all that surprising, this latest move is slightly peculiar as Delaware is not part of the 23 “judicial” states in which GMAC, JPM and BofA have instituted a voluntary foreclosure halt (for an analysis by Barclays of why the judicial states are mostly impacted, for now, click here). Per the AP, “the letter also asks Bank of America Corp., JP Morgan Chase & Co. and Ally Financial Inc. officials to describe their foreclosure review and verification process, and provide copies of Delaware homeowner complaints about the foreclosure process, including concerns about court documents that contained inaccurate information, improper notarization or signatures to Biden’s fraud and consumer protection division.” Which means that as other AGs follow suit, the foreclosure halt will immediately expand from merely the 23 judicial states to all, especially since as Bloomberg just reported, “JPMorgan, Bank of America face “hydra” of foreclosure probes.” We couldn’t have coined a better visual if we tried.
Ohio AG Cordray To Sue GMAC Mortgage And Ally Financial, May Sue Chase And BofA
06Oct10 RTRS-OHIO AG CORDRAY SAYS TO SUE GMAC MORTGAGE AND ALLY FINANCIAL
06Oct10 RTRS-OHIO AG CORDRAY SAYS THERE MAY BE MORE LAWSUITS
06Oct10 RTRS-OHIO AG CORDRAY SAYS SUIT ALLEGES GMAC’S ACTIONS MAY VIOLATE OHIO’S CONSUMER LAWS BY USING FALSE AFFADAVITS AND OTHER DOCUMENTS
Janet Tavakoli On The “Biggest Fraud In The History Of Capital Markets” In the following interview with the WaPo’s Ezra Klein, Janet Tavakoli shares some more information on why every bank is about to shut down all foreclosures, in what she calls the “biggest fraud in the history of capital markets. Not very surprisingly, we are, so far, spot on in our 29th September projected timeline at this point: “We predict that within a week, all banks will halt every foreclosure currently in process. Within a month, all foreclosures executed within the past 2-3 years will be retried, and millions of existing home sales will be put in jeopardy.”
Disclosure: Short: JPM,BAC,MS,GS,XLF