On The Money with Peter Hebert

December 23, 2010

Federal Reserve Proposed Rules – Reject the Proposed Truth in Lending Act Amendment (FRB Docket Number R-1390)

Filed under: Commentary — Peter Hebert @ 10:18 PM

December 23, 2010

Peter Hebert
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Re: Reject the Proposed Truth in Lending Act Amendment (FRB Docket Number R-1390)

Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, Northwest
Washington, D C 20551

Dear members of the Board of Governors,

I am writing to insist that the Federal Reserve reject consideration of the proposed amendment to the Truth in Lending Act (TILA). Amending TILA would abolish the extended right of rescission, which is a key defense to foreclosure. I oppose the proposed amendment for the following reasons:

First, the foreclosure crisis was the result of an “inside job.” The foreclosure crisis was not the result of the Community Reinvestment Act or the push to increase homeownership 2.5 percent from 65 to 67.5 percent. This media driven misinformation has dominated the narrative as a result of banks using public relations firms and sloppy journalism with no investigation. This foreclosure crisis was the result of predatory lending, layered risk in origination and underwriting, and loan officer directed mortgage fraud in many different forms. Refusing to amend TILA would permit defrauded borrowers with an opportunity to refinance their way out of a personal crisis that has become a national catastrophe.

Second, I know from first hand observation after having worked as a banker, correspondent lender, and as a broker that loan officer directed mortgage fraud was routine. Loan officer’s directed the overstatement of income using loan origination software to get the borrower qualified, not to ensure that the borrower had an ability to repay. These practices were the result of absurdly loose underwriting standards across the industry. Baiting and switching borrowers with alternative mortgage products was also routine. Lenders further defrauded customers by failing to provide key disclosures. Borrowers may have signed them, but sometimes copies were not given to them afterwards. Changes in loan terms during an application process were not necessarily followed up with a redisclosure. Borrowers rarely had full understanding of the process or the system. The amendment to TILA that should be considered is that the banking regulators would handle the forensic loan audit on behalf of injured borrowers rather than burdening struggling households with the legal expenses paid to for-profit law firms that have carved out a niche as a result of regulatory failure.

Third, what the public wants to see is corporate accountability. Thus far, the public has witnessed legislative malfeasance in each law that addressed different aspects of the housing, finance, and economic crisis. The banks need to be held accountable for their low hiring standards, poor training of their staff, and lack of adequate quality controls. Thus far, the free market alone has held the banks accountable, but government and regulatory intervention has distorted the free market. Let the banks borrow their way out of the crisis of their own making, and if they fail due to excessive debt, let them fail and be sold off to those capable of restructuring and better managing them.

Fourth, the foreclosure crisis and the circumstances around this is worse than many realize. Foreclosures are at three times the level of 1933. Abolishing TILA’s defense to foreclosure would make the foreclosure crisis worse.

Fifth, the credibility of the Federal Reserve is on the line. Many mistakenly believe that the extended low interest rate policy created the housing bubble. I believe that this policy was only a contributing factor. The primary culprit for the bubble and the foreclosure crisis was financial engineering that produced “affordability products,” which consumer advocacy groups have correctly labeled as predatory lending. In the beginning of the crisis, there was a blurred line between predatory lending and subprime lending, because predation in fact was at the heart of targeting products designed to fail into a credit market niche. Reverse redlining was routine due to list brokers that acquired and then sold consumer credit data to lenders. Refusing to amend TILA on behalf of the banks would serve to shore up public confidence in the Federal Reserve.

When borrowers discover they were defrauded by their lender, they have a three year right to block the lender’s ability to foreclosure, they can refinance, and get a refund of fees and interest paid. Those refunds, obviously, have hurt the banks. The banks are responsible for the actions of their employees, who they hired and trained. Saying no to the member banks that have petitioned the Federal Reserve to amend TILA would serve as an ideal opportunity to restore credibility to the central bank as a regulator and protect injured borrowers, who have a right to defend themselves from inappropriate foreclosure actions.


Peter Hebert
Author of Mortgaged and Armed, Freedom House Press, July 4, 2010

December 21, 2010

Peter Hebert’s 2010 Year in Review

Filed under: Commentary — Peter Hebert @ 7:41 PM

Dear friends,

I am writing to wish you a Merry Christmas and a Happy New Year. The hyperlinks in this email take you to a radio interview and news video clips.

This year I launched my first book Mortgaged and Armed and worked to complete my second book The Collapse of Home Prices and the Foreclosure Crisis. I chose to delay publishing Predator Nation until later in 2011 since it is a more complex book, and time permits better perspective and more in depth research.

While Mortgaged and Armed was in the final stages, I discovered that the book’s cover artist David Dees was on the Anti-Defamation League’s list for being a controversial “extremist.” I had a brief WTF moment, read the organization’s remarks, and disagreed with them. I then discovered to my surprise that Dees has a global following, because he is provocative, talented, and has the ability to cut through the special interest, media, government, and corporate-driven nonsense through in your face art. Dees’ greatest fault is that he questions prevailing assumptions including the politics of Zionism. I do not agree with all controversial or satirical political art, but would rather see more of this than tolerate any smears of artists or suppression of our most valued free speech right. This year, I concluded that the Anti-Defamation League (ADL) and the Southern Poverty Law Center (SPLC) are threats to free thought and free speech in the United States, because their roles are to smear, suppress, silence, and sideline. They use fear mongering as means to raise revenues. Another target of ADL and SPLC was the “extremist” Robert Schulz, the chairman of We The People Foundation for Constitutional Education. Schulz is the man who sued the federal government to challenge the constitutionality of bailing out AIG. One man’s “extremist” is another man’s advocate for free inquiry, personal liberty, and government and corporate accountability. Those who cannot refute controversial messages attack people and characters, which is one step short of book burning. When political cartoonist G.B. Trudeau ran a Doonesbury strip in 2009 that showed the White House with the words, “It feels like 1933,” his prescient remarks, I believe, went over the heads of most Americans.

Also this year, I learned how to make video thanks to Apple’s MacBook Pro. I developed an experimental video for my books. I spoke at various real estate offices and civics groups to discuss the issues of the day. At the prodding of my brother Jonathan, I bypassed mainstream new outlets and reached out to the alternative media as part of my book tour to discuss mortgages, foreclosures, and the industry. That resulted in appearances with George Noory of Coast to Coast AM, Jack Blood of Deadline Live, and Keith Barrett of Truth Jihad. (The latest radio interview with Jack Blood on December 16, 2010 starts at 1:08 minute mark in the link). At the prodding of Jo McLaughlin, I resumed submitting articles to trade publications. That resulted in a series of pieces for Scotsman Guide and The Niche Report. In the coming year I will broaden my media network, publication venues, and social contacts in order to reach a more diverse audience.

I wanted to share some thoughts on 2010.

Congress passed the Wall Street Reform and Consumer Protection Act. That Act blamed the U.S. Department of Housing and Urban Development for the failure of Fannie Mae and Freddie Mac. The executives who mismanaged these two agencies were not fingered for accounting fraud or incompetence. This “financial reform” was short sighted and has nothing in common with New Deal reform. Predatory lending remains legally undefined. Reverse mortgages were exempted from the Act. The Act was silent on the dual track foreclosure and modification process. The Act continued the voluntary government loan modifications to pay banks $1,000 per modified loan, but lenders overwhelmingly pursued their own proprietary modifications or foreclosures due to the profit motive.

The Financial Crisis Inquiry Commission, the nation’s official sideshow, failed to deliver its report to Congress in December 2010 due to rumored political infighting. It is probable that the Commission will also blame the U.S. Department of Housing and Urban Development. At issue is President Clinton’s housing initiative, which pushed homeownership from 65 percent to a whopping 67.5 percent. The homeownership rate, however is one of serval mainstream media driven rabbit hole arguments since foreclosures will push the homeownership rate below the 65 percent level by the time the crisis is over.

The collapse of home prices is still underway. There is a 40 month inventory of 7 million bank owned properties across the United States. Excess inventory, tighter credit, and consumer reluctance meant that home prices will continue to drop in many housing markets.

The foreclosure crisis and the circumstances around this is worse than many realize. Foreclosures are at three times the level of 1933. At the pressure of the banks, the Federal Reserve sought to abolish a defense to foreclosure afforded under the Truth in Lending Act. When borrowers discover they were defrauded, under this consumer protection law, they have a three year right to block the lender’s ability to foreclosure, they can refinance, and get a refund of fees and interest paid. Those refunds have hurt the banks, and the banks pressured the Federal Reserve to end the consumer’s defense to foreclosure. Also, it came to light that Fannie Mae, Freddie Mac, and many banks created and became members of the Mortgage Electronic Registration System, or MERS. In so doing, it appears that the banks circumvented the public records system and undermined their security interests and standing in court. Moreover, they defrauded the local jurisdictions of filing fees needed for public services. Finally, it came to light that the banks, their staff, and their attorneys had been routinely defrauding the courts in foreclosure actions as alleged by the states’ attorneys general. Due to local print journalists and legal aid attorneys, the attorneys general from all states began an investigation.

The Federal Reserve came under much scrutiny. Ben Bernanke appeared on 60 Minutes
to defend quantitative easing, and with nervously twitching facial muscles and verging on tears, said that the Federal Reserve was not printing money. Bernanke, however, was silent on disclosing M3, which is the true money supply measure that the central bank stopped publishing on March 23, 2006. A Bloomberg opinion poll indicated that 39 percent wanted the Federal Reserve to be more accountable to Congress and 16 percent wanted the central bank abolished. Only 37 percent said leave things as they are. Though the Wall Street Reform and Consumer Protection Act has an audit provision of the central bank, it is not an audit. It is just a limited disclosure. Congressman Ron Paul (R-Texas) was appointed to the head the Domestic Monetary Policy Subcommittee. Paul’s complaints about the Federal Reserve are that it is a private banking cartel and that it has been operating in a cloak of secrecy since 1913.

Securities and Exchange Commission fraud on investors became apparent in Capitol Hill testimony concerning the big banks. The big banks are holding second mortgages in their own portfolios. Many are tied to homes with negative equity. If the accounting rules required the banks to value these second mortgages as worthless, the banks would lack the regulatory capital to operate. They would be insolvent. This accounting fraud, enabled by the federal government, permits the banks to operate, prevents another immediate bailout, but defrauds naive investors who own bank stocks.

Consumers have cut back on the use of credit in favor of cash. This has had the impact of stalling economic recovery since consumers are no longer over leveraging. At issue is the tension between the real, cash-based economy and the synthetic, debt-based economy promoted by the banks. When the Federal Reserve pumped record amounts of “money” into the banking system, no mainstream media outlet conveyed the truth that the banks made more credit available, which consumers do not want. That, however, did not stop mindless consumer stampedes at some stores on Black Friday. In 2010, employees and customers got trampled, but no one died as was the case in 2008.

The economy has structural problems. The champions of globalism exported American jobs abroad, and without incentivizing legislation, they are not coming back. The true unemployment rate is over 17 percent, not just under 10 percent. The difference is due to government and media reporting U3, not U6, as the measure for unemployment issued by the Bureau of Labor Statistics. Since 70 percent of the American economy is driven by consumers, this makes our current circumstances worse than during the Great Depression when consumers only drove 25 percent of the economy. No mainstream media outlet addresses these troubling facts. Instead, government and the media present a misleading picture of the real world.

Conspiracy theories, I believe, may have come from the periphery and smack into the center of American thinking. At one time, it was considered lunacy to think that the Federal Reserve was a private banking cartel that was formed in secrecy. In fact Ezra Pound got himself into trouble for promoting that idea and other ideas as well. Ezra Pound’s legal defense when tried by the government for sedition was insanity. The government’s response was to offer him a tax payer-funded pre-frontal lobotomy. Ezra Pound’s supporters, however, rebuffed the government’s gracious attempts at forever silencing the loan voice in the wilderness. Today, the spirit of Ezra Pound is alive across the United States. That is the spirit that loathes an out of control federal government, corporate driven war mongering for profit, and a debt based money system that only benefits the banks and the ridiculously affluent.

Conspiratorial fears of a New World Order became tangible and took on apocalyptic dimensions with news reports of plans to microchip the population by 2017. The corporate motives are driven by profit, because corporate-friendly legislation mandates the widespread use of new technology. The government’s motives are control, security, and real time surveillance. The G-20 meetings and the police state tactics underscore the disturbing direction central bankers are taking the developed nations. Those familiar with the Bible know that Old and New Testament prophets warned that in “the end times” there would be a short lived global government, those within it would terribly suffer, the global government would fail, and the tyrants of globalism and their willing subjects would be removed from the earth so that “the meek shall inherit the earth.” The words of the prophets are written on both the subway walls and the hearts of millions of people.

The mid-term elections permitted Americans to release some pent up steam and anger due to the policy failures in government. In London, Madrid, , , Athens, and Rome student riots became bloody, fiery, and smokey as unabated street warfare broke out. In London, students shouted, “Off with their heads!” as Prince Charles and his wife Camilla, the Duchess of Cornwall, drove by in their Rolls Royce. , . A year ago in Italy, Italian prime minister Silvio Berlusconi was attacked. In Greece, Kostis Hatzidakis got his had repeatedly bashed and bloodied. Russia Today’s media coverage and raw video footage from citizen journalists provided the world with a window into the breakdown of social democracies burdened by excessive government debt and structural adjustments imposed by creditors. It’s the 1960s all over again, but this time the students are not protesting against foreign wars. They are protesting against the financial sector’s warfare against households and governments (the thesis of Mortgaged and Armed and Predator Nation). They are not in the moral right for violent rioting. In all murky times, however, oftentimes doing the right thing is wrong and doing the wrong thing is right. Without dissent and protest, the financial sector will plunge governments, businesses, and households into ruin and government would declare a code red national emergency. The Chinese proverb holds true for all of us, “May you live in interesting times.”

As Emerson, Lake & Palmer noted in their classic song I Believe in Father Christmas, , “the Christmas we get is the Christmas we deserve.”

Wishing all of you a Merry Christmas and a Happy New Year.

Peter Hebert

December 7, 2010

Radio Interview with Peter Hebert: “Are the Banksters Killing America…or the World?

Filed under: Commentary — Peter Hebert @ 6:18 AM

Dear friends,

I was the first hour guest on American Freedom Radio Saturday, December 4, 2010. The topic was “Are the Banksters Killing America?” I addressed the SEC and FASB fraud on investors, mainstream media shortcomings, the few valiant investigative journalists, the Founding Fathers, the Federal Reserve, lender-directed mortgage fraud, the extended right of rescission, the Bureau of Consumer Financial Protection, drug money laundering and the Alt-A connection, and the Mortgage Electronic Registry System. Here is the link for the archived radio interview: www.americanfreedomradio.com/archive/Truth-Jihad-32k-120410.mp3

Amazon.com has set a holiday special price of $14.36 on MORTGAGED AND ARMED. Everyone needs to understand how to fight back and force the system to change. If you are not part of the solution, you are part of the problem. Get copies today as gifts for loved ones and friends.

Peter Hebert

December 3, 2010

Ask the Federal Reserve to Stand Down

Filed under: Commentary — Peter Hebert @ 7:41 PM

Dear friends,

There is a financial sector war being waged against homeowners. That’s the central premise of MORTGAGED AND ARMED. Write the Federal Reserve a brief note, and ask the agency to stand down. The Federal Reserve has proposed amending the extended right of rescission within the Truth in Lending Act. This has been used as a defense against foreclosure when lenders defrauded their borrowers by failing to provide disclosures at closing. The foreclosure rate today is three times greater than the foreclosure rate in 1933, which was during the banking panic and opening years of the Great Depression. The public comment period ends December 23, 2010. Ask the Federal Reserve to stand down. Submit your comments to: regs.comments@federalreserve.gov.

In the September 24, 2010 issue of the Federal Registry, the Federal Reserve proposed amending a 42 year old right of rescission provided by the Truth in Lending Act. The three year rescission provision has been used by homeowners, who have discovered after closing, that their lender had violated the law in the application process by not providing all of the required disclosures. They discovered fraud. Homeowners in foreclosure have used forensic loan audits to uncover material disclosure violations in order to exercise their extended right of rescission. When successful, this defense against foreclosure forces the creditor to drop its security interest and its ability to foreclose. The homeowner then refinances and pays off the outstanding loan balance minus the payments made and finance charges and fees from closing.
The significance of the Federal Reserve’s proposal should not be downplayed. It erodes the provisions of the defense to foreclosure provision in Subtitle B of Title XIV, the Mortgage Reform and Anti-Predatory Lending Act. Not unlike the battle lines drawn in the fight that led to Watters v. Wachovia, the Mortgage Bankers Association leans in favor of the Federal Reserve. In contrast, 16 national consumer and civil rights organizations, 33 state and local legal services programs, and 216 attorneys regularly representing homeowners fighting foreclosure opposed the proposal. In a letter to the Federal Reserve, they asked that any proposed regulatory changes be made after the Bureau of Consumer Financial Protection assumes its statutory responsibilities on July 21, 2011.

“FEDERAL RESERVE SYSTEM, 12 CFR Part 226 [Docket No. R–1390], Regulation Z; Truth in Lending,”
Federal Register/Vol. 75, No. 185/Friday, September 24, 2010/Proposed Rules, 58539;
Online at http://edocket.access.gpo.gov/2010/pdf/2010-20667.pdf.

Tony Pugh, “Fed Wants to Strip a Key Protection for Homeowners,” McClatchy Newspapers, December 1, 2010;
Online at http://www.truth-out.org/fed-wants-strip-a-key-protection-homeowners65589.

Letter to Withdrawal Request for the Proposed Truth in Lending Mortgage Regulations
(FRB Docket Number.R-1390), November 16, 2010;
Online at http://www.federalreserve.gov/SECRS/2010/November/20101117/R-1390/R-1390_111610_54647_562063438823_1.pdf.

The Book
Amazon.com has set a holiday special price of $14.36 on MORTGAGED AND ARMED. Everyone needs to understand how to fight back and force the system to change. If you are not part of the solution, you are part of the problem. Get copies today as gifts for loved ones and friends.

Peter Hebert

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