The Political Win That Could Make Elizabeth Warren the Next President of The United States

By Miles Mogulescu

Led by Elizabeth Warren, this week progressive Democrats and the American people scored an unusual victory over Wall Street, Too Big To Fail Banks, and corporate Democrats.

Wall Street investment banker Antonio Weiss -- President Obama's nominee for the third ranking position in the Treasury Department, who had helped Burger King merge with a Canadian company to avoid U.S. taxes and stood to receive a $20 million payout from his bank for taking the Treasury job - withdrew his nomination rather than face questioning on his Wall Street ties in a Senate confirmation hearing.

On its face, Weiss's withdrawal might seem like a relatively small thing. But in politics, this is the equivalent of a large earthquake, and a big boost to Elizabeth Warren's political influence.

A presidential appointee is almost never withdrawn because of opposition from the president's own party. The last case I can remember is in 2005 when George W. Bush withdrew the Supreme Court nomination of his friend Harriet Miers after she was opposed by Republican Senators and activists.

As Joe Biden is known to say, "This is a big deal".

This political earthquake is a barometer of the growing influence of Sen. Warren, without whose outspoken opposition - joined by a grassroots campaign which generated over tens of thousands of signatures -- the nomination would have sailed through.

Four weeks ago, I wrote a piece on The Huffington Post entitled The Speech That Could Make Elizabeth Warren the Next President of the United States. Much to my surprise the piece went totally viral. Over the next few days, the piece was "Liked" by 243,000 readers, reposted by over 37,000 people on their own Facebook pages, and Tweeted by thousands more (including by Mark Ruffalo to his 1.2 million followers). The piece seemed to have touched a nerve in the political zeitgeist. The response indicated that there's a hunger for new leadership which is not bought and sold by corporate America, whether it's another Bush or another Clinton.

Even as Jeb Bush is staring to lock up Republican donors in the money primary that hugely influences who wins the actual voter primary, and Hillary adds top Clinton and Obama advisor John Podesta to her potential campaign staff, there's a growing grassroots outcry for a Warren candidacy.

MoveOn has raised $1m for a Draft Warren campaign, has opened staffed offices in Iowa, and has gathered over 200,000 signatures (sign here) which are growing daily. Democracy for America is launching an on-the-ground grassroots campaign this Saturday in New Hampshire. 300 former Obama campaign staffers have signed a letter urging Warren to run.

It's clear that if Warren runs, she'll have an army of experienced grassroots campaign organizers and donors. And unlike with Barack Obama, they're the type of grassroots organizers who would stay organized if she won to be sure that she and a reluctant Congress lived up to her campaign promises.

Even though it's early to put much stock in polls, a Colorado focus group of Republicans, Democrats and Independent organized by the Annenberg Center expressed widespread distaste for both Clinton and Bush and strong positive interest in Warren. A Republican-leaning independent, supported by half the participants, said "I wouldn't be opposed to Congress saying, 'If your last name is Clinton or Bush, you don't even get to run'". Words used by participants to describe Clinton were "Hopeful." "Crazy." "Strong." "Spitfire." "Untrustworthy." "More of the same." "Next candidate, please."

Comments on Jeb Bush were even worse.

But many participants responded positively when Elizabeth Warren's name was mentioned. Words used to describe her included "Passionate." "Smart." "Sincere." "Knowledgeable." "Intelligent." "Capable. Half of the participants said they'd pick Warren as their next door neighbor, including the most conservative member of the group. A Republican-leaning independent said, "She's personable and knowledgeable, and I think she's got a good handle on what's going on in the country". The Washington Post reported the pollster's takeaway:

"'One is [that] the political classes told us it's going to be Bush against Clinton. But these people are hundreds of miles away from that choice. Essentially what they're telling us is, 'I don't trust these people. They're part of an establishment that I don't like.'

That was one turning point, he said. The other was Warren. 'Elizabeth Warren, from every part of the compass, had a level of support," he said. "She's not invisible. She's not unknown. She's not undefined.' And, he added, she reached them on the issues so many people spoke about, which is their own economic concerns.

'You couldn't leave this without feeling how hard-pressed these people are and how they're looking for someone who will be a force for their cause. And Elizabeth Warren has broken through.'"

Given that Elizabeth Warren is the only national politician who addresses the economic concerns of the American people without the corporate ties of Bush, Inc. or Clinton, Inc., as an Atlantic Magazine" column put it, if Warren doesn't run, "she'll do a tremendous disservice to her principles and her party."

"Warren is the only person standing between the Democrats and an uncontested Hillary Clinton nomination. She has already made clear what she thinks of the Clintons.

Warren has suggested that President Bill Clinton's administration served the same "trickle down" economics as its Republicans and predecessors.

Warren has denounced the Clinton administration's senior economic appointees as servitors of the big banks.

Warren has blasted Bill Clinton's 1996 claim that the era of big government is over and his repeal of Glass-Steagall and other financial regulations...

Lead a fight for America's working people? Hillary Clinton wouldn't lead a fight for motherhood and apple pie if motherhood and apple pie were polling below 70 percent."

In contrast, Warren lays out a concrete program for giving average Americans a fighting chance in an increasingly unequal economy. As she told the National Summit on Raising Wages last week,

"We need to talk about what we believe:

• We believe that no one should work full time and still live in poverty - and that means raising the minimum wage.

• We believe workers have a right to come together, to bargain together and to rebuild America's middle class.

• We believe in enforcing labor laws, so that workers get overtime pay and pensions that are fully funded.

• We believe in equal pay for equal work.

• We believe that after a lifetime of work, people are entitled to retire with dignity, and that means protecting Social Security, Medicare, and pensions.

We also need a hard conversation about how we create jobs here in America. We need to talk about how to build a future. So let's say what we believe:

• We believe in making investments - in roads and bridges and power grids, in education, in research - investments that create good jobs in the short run and help us build new opportunities over the long run.

• And we believe in paying for them-not with magical accounting scams that pretend to cut taxes and raise revenue, but with real, honest-to-goodness changes that make sure that we pay-and corporations pay-a fair share to build a future for all of us.

• We believe in trade policies and tax codes that will strengthen our economy, raise our living standards, and create American jobs - and we will never give up on those three words: Made in America.

And one more point. If we're ever going to un-rig the system, then we need to make some important political changes. And here's where we start:

• We know that democracy doesn't work when congressmen and regulators bow down to Wall Street's political power - and that means it's time to break up the Wall Street banks and remind politicians that they don't work for the big banks, they work for US!"

Given the stark contrasts between Clinton's corporate bromides and Warren's specific plans to make the economy work for the 99%, how can Warren cede the Democratic nomination to Hillary Clinton without a contest?

Moreover, Warren's current political influence derives, in no small part, from her potential as a Presidential candidate. If she wins the Democratic nomination, she will become the most influential Democrat in the country, and if she wins the Presidency, she has a chance of effecting some of the transformational changes she proposes. Even if she loses a close nomination battle with Hillary, she will have established herself as a defining national figure and might force Hillary to move in a more populist direction.

But if, after all the fiery rhetoric, Warren sits out the presidential race, her political influence will quickly wane. She will become one more backbench Senator with little political influence. She'd be something like Bernie Sanders (whom I personally like) who's little more than a political gadfly but is unable to achieve much in the way of concrete accomplishments. And Elizabeth Warren doesn't strike me as the type of person who would be satisfied with talking big and accomplishing little.

So, Run Warren, Run. Anything less would be a disservice to yourself, your principles, your millions of supporters, and the American people.

URGENT: Time Running Out to Stop Congress Roll Back of Wall Street Reform

	Republicans put a big and dangerous giveaway to Wall Street in the budget, despite protests from Sen. Elizabeth Warren and votes against it by many House Democrats. The Senate will soon vote on this spending bill. It's up to you and me to convince enough senators to take it out. The provision – written by Citibank lobbyists – allows Wall Street banks to gamble on high-risk derivatives – the exotic instruments that helped blow up the economy. Worse, they get to pocket any winnings with taxpayers guaranteeing any losses. They will make ever bigger bets. And we will be played once more as the saps. Please click here now to call your senator and tell him or her to stand up against this dangerous attempt to rig the rules for Wall Street – and against us. The link will connect you to one of your senator's offices. Tell the person who answers that you want the senator to support stripping the Wall Street gambit out of the budget bill. A vote could happen within the next few hours, so please make the call now. Here's a sample message: I’m a constituent. My name is… I’m calling about the giveaway to Wall Street in the funding bill before the Senate. I want the senator to vote to take out the provision (in Section 630) that allows big banks to gamble using high-risk derivatives. Please tell the senator that his constituents want him to vote against the budget unless this dangerous gift to Wall Street is removed. I will be following your vote on this. Let's stop this deal while there's still time.

	© 2014 Campaign for America's Future Inc. 1825 K Street, NW, Suite 400, Washington, DC 20006

Skimmer Innovation: Wiretapping ATM's

By Brian Krebs

Banks in Europe are warning about the emergence of a rare, virtually invisible form of ATM skimmer involving a so-called “wiretapping” device that is inserted through a tiny hole cut in the cash machine’s front. The hole is covered up by a fake decal, and the thieves then use custom-made equipment to attach the device to ATM’s internal card reader.

According to the European ATM Security Team (EAST), a nonprofit that represents banks in 29 countries, financial institutions in two countries recently reported ATM attacks in which the card data was compromised internally by “wire-tapping” or “eavesdropping” on the customer transaction. The image below shows some criminal equipment used to perpetrate these eavesdropping attacks.

Equipment used by crooks to conduct “eavesdropping” or “wiretapping” attacks on ATMs. Source: EAST.

“The criminals cut a hole in the fascia around the card reader where the decal is situated,” EAST described in a recent, non-public report. “A device is then inserted and connected internally onto the card reader, and the hole covered with a fake decal”
[pictured, bottom right].

Pictured above are what appear to be wires that are fed into the machine with some custom-made rods. It looks like the data is collected by removing the decal, fishing out the wire attached to the ATM’s card reader, and connecting it to a handheld data storage device.

I sought clarification from EAST about how the device works. Most skimmers are card slot overlay devices work by using a built-in component that reads the account data off of the magnetic stripe when the customer inserts the card. But Lachlan Gunn, EAST’s executive director, suggested that this device intercepts the card data from the legitimate card reader on the inside of the ATM. He described the wiretapping device this way:

“It’s where a tap is attached to the pre-read head or read head of the card reader,” Lachlan said. “The card data is then read through the tap. We still classify it as skimming, but technically the magnetic stripe [on the customer/victim’s card] is not directly skimmed as the data is intercepted.”

The last report in my ATM skimming series showcased some major innovations in so-called “insert skimmers,” card-skimming devices made to fix snugly and invisibly inside the throat of the card acceptance slot. EAST’s new report includes another, slightly more advanced, insert skimmer that’s being called an “insert transmitter skimmer.”

Like the one pictured below, an insert transmitter skimmer is made up of two steel plates and an internal battery that lasts approximately one to two weeks. “They do not store data, but transmit it directly to a receiving device — probably placed less than 1 meter from the ATM.

An insert transmitter skimmer. Source: EAST.

Both of these card skimming technologies rely on hidden cameras to steal customer PIN codes. In a typical skimming attack involving devices that lay directly on top of the card acceptance slot, the hidden camera is a pinhole spy cam that is embedded inside the card slot overlay and angled toward the PIN pad. Just as often, the camera is hidden in a false panel affixed directly above the PIN pan with the pinhole pointed downward.

According to east, the use of false sidebar panels is becoming more prevalent (see image below for an example). It is not unusual for hidden cameras to be obscured inside of phony brochure racks as well.


As this and other insert skimmer attacks show, it’s getting tougher to spot ATM skimming devices. It’s best to focus instead on protecting your own physical security while at the cash machine. If you visit an ATM that looks strange, tampered with, or out of place, try to find another ATM. Use only machines in public, well-lit areas, and avoid ATM's in secluded spots.

Last, but certainly not least, cover the PIN pad with your hand when entering your PIN: That way, if even if the thieves somehow skim your card, there is less chance that they will be able to snag your PIN as well. You’d be amazed at how many people fail to take this basic precaution. Yes, there is still a chance that thieves could use a PIN-pad overlay device to capture your PIN, but in my experience these are far less common than hidden cameras (and quite a bit more costly for thieves who aren’t making their own skimmers).

Are you as fascinated by ATM skimmers as I am? Check out my series on this topic, All About Skimmers.

Wells Fargo Employee Emails CEO Asking For a Raise—Copies 200,000 Other Employees

By Joanna Rothkopf


Tyrel Oates, a 30-year-old Portland, Oregon-based employee of Wells Fargo, shot to Internet fame after emailing the company’s CEO John Stumpf (and cc’ing 200,000 other employees) to ask for a $10,000 raise… for everyone at the company.

The Charlotte Observer reports:

Oates proposed that Wells Fargo give each of its roughly 263,500 employees a $10,000 raise. That, he wrote, would “show the rest of the United States, if not the world, that, yes, big corporations can have a heart other than philanthropic endeavors.”

In an interview Tuesday, Oates…said he has no regrets and that he has received many thank-yous from co-workers who told him they shared his views.

And, at least as of Tuesday afternoon, he said he’s still employed by the company, where he processes requests from Wells Fargo customers seeking to stop debt-collection calls.
“I’m not worried about losing my job over this,” Oates said.

Oates has been working at the company for almost seven years and makes slightly more than $15 per hour, working 40 hours per week excluding mandatory overtime. “Just knowing the unease of my fellow team members as far as pay goes and how horrible our pay increases have been over the seven years… I just decided to send a letter to John Stumpf,” he said.

The full letter was posted on Reddit. Here it is:

Mr. Stumpf,

With the increasing focus on income inequality in the United States. Wells Fargo has an opportunity to be at the forefront of helping to reduce this by setting the bar, leading by example, and showing the other large corporations that it is very possible to maintain a profitable company that not only looks out for its consumers and shareholders, but its employees as well.

This year Wells Fargo in its second quarter alone had a net income of $5.7 billion, and total revenue of $21.1 billion. These are very impressive numbers, and is obvious evidence that Wells Fargo is one of, if not the most profitable company in the nation right now. So, why not take some of this and distribute it to the rest of the employees.

Sure, the company provides while not great, some pretty good benefits, as well as discretionary profit sharing for those who partake in our 401k program. While the benefits are nice, the profit sharing through the 401k only goes to make the company itself and its shareholders more profitable, and not really boost the income of the thousands of us here every day making this company the prestigious power house that it is.

Last year, you had pulled in over $19 million, more than most of the employees will see in our lifetimes. It is understood that your position carries a lot of weight and responsibility; however, with a base salary of $2.8 million and bonuses equating to $4 million, is alone one of the main arguments of income inequality. Where the vast majority, the undeniable profit drivers, with the exception of upper management positions barely make enough to live comfortably on their own, the distribution of income in this company is no better than that of the other big players in the corporate world.

My estimate is that Wells Fargo has roughly around 300,000 employees. My proposal is take $3 billion dollars, just a small fraction of what Wells Fargo pulls in annually, and raise every employees annual salary by $10,000 dollars. This equates to an hourly raise about $4.71 per hour. Think, as well, of the positive publicity in a time of extreme consumer skepticism towards banks. By doing this, Wells Fargo will not only help to make its people, its family, more happy, productive, and financially stable, it will also show the rest of the United States, if not the world that, yes big corporations can have a heart other than philanthropic endeavors.

P.S. – To all of my fellow team members who receive a copy of this email. Though Wells Fargo does not allow the formation of unions, this does not mean we cannot stand united. Each and every one of us plays an integral part in the success of this company. It is time that we ask, no, it is time that we demand to be rightfully compensated for the hard work that we accomplish, and for the great part we all have played in the success of this company.

There are many of us out there who come to work every day and give it our all, yet, we struggle to make ends meet while our peers in upper management and company executives reap the majority of the rewards. One of our lowest scored TMCS questions is that our opinions matter. Well they do!

This email has been sent to hundreds of thousands Wells Fargo employees, (as many as I could cc from the outlook global address book). And while the voice of one person in a world as large as ours may seem only like a whisper, the combined voices of each and all of us can move mountains!

With the warmest of regards,

          Tyrel Oates

Bank of America and Other Megabanks Say They Want to Make Nice With Poor People: Don't Buy It

By Lynn Parramore

How do we hate thee, Bank of America? Let us count the ways:
We hate thee for thy mortgage misdeeds, foreclosure frauds and grotesque fees. For unnecessarily kicking people out of their homes, extorting money from military families through predatory loan rates, and treating thy customers like garbage.

For basically being too-big-to-fail/too-big-to-jail blight on the economy and society thou hast proven to be, time and again.

Bank of America has earned itself the worst reputation of any big lender in the U.S., and that is no small feat. The megabank has incurred so many legal costs for its various frauds and abuses, to the tune of billions, its profits have seen a dip. Whatever is a big bank to do?

Under increasing pressure from regulators and widely despised by the public, Bank of America now wants us to believe hat it will make nice with poor people. In a recent report in the New York Times, we learn that BofA and other giant banks are trying to launder their public images by talking about offering low-fee services to people who have been left out of the banking system. BofA has launched a banking account it claims is intended to prevent troubled customers from running up fees for overdrawing their balances.

That’s very interesting, because so far, its accounts have been designed to do the opposite, which is why a lot of poor people don’t have bank accounts in the first place.

BofA’s public campaign showing us its touchy-feely side involves asking low-income people to create collages representing their emotions about money. One image shows a woman who appears to be naked wearing nothing but words like “power,” “want” and “desire” scrawled across her skin.

Other banks like JPMorgan, are following suit with lower-cost prepaid debit cards, checking accounts and what not. As the Times points out, it’s a bit difficult to start cheering:

"It is hard not to be skeptical, particularly because the banks, most recently in the subprime housing crisis, have traditionally wrung vast profits from some of these same customers, who paid steep rates for loans and high fees on basic checking accounts.”

You can say that again.

So here’s the real deal. Under the scrutiny of regulators, these banks have gotten cautious, so they’re trotting out a couple of products that are somewhat less rapacious than their normal fare (nonsensical fees still apply, they’re just lower). We’re guessing that the minute the regulators turn the other way, many of these targeted low-income customers will find themselves hit by some unexpected fee hikes that will send them right back where they came from, the land of the unbanked.

That’s how things roll in the oliogopoly that is the American banking system, where customers have the illusion of choice, but in reality face an industry dominated by a few gigantic players who decide how much abuse they can get away with at any given time. Bank of America is sort of like the lead dog in a small pack of rabid animals constantly scouring the landscape for prey. Whatever it signals, the rest will do, and the most vulnerable customers will be ripped, chewed and spit out.

According to Mehrsa Baradaran, an assistant law professor at the University of Georgia, more than one out of four Americans either don’t have a bank account or do have one, but primarily rely on unscrupulous check-cashing storefronts, payday lenders, title lenders, or pawnshops to survive. In her view, the best option for them would be to do their banking through the U.S. postal system. Elizabeth Warren, and many other progressives, have gotten on board with this idea.

Sounds kind of odd, until you consider that the post office comes with several advantages and an infrastructure that makes it uniquely suited to this role. For example, it has branches in many low-income neighborhoods that were long ago abandoned by private banks. Also, people have a sense of familiarity and comfort with the postal service that they will never have with the likes of BofA or JPMorgan.

Post offices already offer financial services like money orders, and postal banks could add things like savings accounts, debit cards and even simple loans, without relying on a profit model that takes advantage of people.

This is not a new idea. Baradaran notes that in 1910, President William Howard Taft created a government-backed postal savings system for recent immigrants and the poor, which lasted until 1967. Unfortunately, times changed as private banks got bigger and more powerful, and the poor were pretty much thrown to the financial wolves:

“By the 1990's, there were essentially two forms of banking: regulated and insured mainstream banks to serve the needs of the wealthy and middle class, and a Wild West of unregulated payday lenders and check-cashing joints that answer the needs of the poor — at a price.”

In a world in which cash is increasingly becoming obsolete, the poor urgently need financial services. But believing that giant banks operating in oligopolistic conditions and thinking of little beyond profit maximization are the answer is nothing more than a fairy tale. One that ends badly for those who can least afford to lose.

J.P. Morgan – the man and the bank

Posted by Jim Hightower

Listen to this Commentary

J.P. Morgan was recently socked in the wallet by financial regulators, who levied a fine of nearly a billion bucks against the Wall Street baron for massive illegalities.

Well, not a fine against John Pierpont Morgan, the man. This 19th century robber baron was born to a great banking fortune and, by hook and crook, leveraged it to become the "King of American Finance." During the Gilded Age, Morgan cornered the U.S. financial markets, gained monopoly ownership of railroads, amassed a vast supply of the nation's gold, and used his investment power to create US Steel and take control of that market.

From his earliest days in high finance, Morgan was a hustler who often traded on the shady side. In the Civil War, for example, his family bought his way out of military duty, but he saw another way to serve. Himself, that is. Morgan bought defective rifles for $3.50 each and sold them to a Union general for $22 each. The rifles blew off soldiers' thumbs, but Morgan pleaded ignorance, and government investigators graciously absolved the young, wealthy, well-connected financier of any fault.

That seems to have set a pattern for his lifetime of antitrust violations, union busting, and other over-the-edge profiteering practices. He drew numerous official charges – but of course, he never did any jail time.

Moving the clock forward, we come to JPMorgan Chase, today's financial powerhouse bearing J.P.'s name. The bank also inherited his pattern of committing multiple illegalities – and walking away scot free. Oh sure, the bank was hit with that big fine, but not a single one of the top bankers who committed gross wrongdoing were charged or even fired – much less sent to jail.

Banks don't commit crimes. Bankers do. And they won't ever stop if they don't have to pay for their crimes.

"Once Again, Punish the Bank but Not Its Top Executives," The New York Times, September 20, 2013
"As Inquiries Persist, JPMorgan Loses Favor," The New York Times, September 20, 2013.
"JP Morgan's Legal Hurdles Expected to Multiply," The New York Times, September 24, 2013.
"JPMorgan is fined $920m over London Whale fiasco," Financial Times, September 20, 2013.

Buy a House, Make Your Payments, Then Discover You've Been Foreclosed On Without Your Knowledge

By David Dayen

This should never happen, but it did, thanks to the sordid mortgage servicing industry.

A few months ago, Ceith and Louise Sinclair of Altadena, California, were told that their home had been sold. It was the first time they’d heard that it was for sale.

Their mortgage servicer, Nationstar, foreclosed on them without their knowledge, and sold the house to an investment company. If it wasn’t for the Sinclairs going to a local ABC affiliate and describing their horror story, they would have been thrown out on the street, despite never missing a mortgage payment. It’s impossible to know how many homeowners who didn’t get the media to pick up their tale have dealt with a similar catastrophe, and eventually lost their home.

As finance writer Barry Ritholtz has explained, home purchases involve a series of precise safeguards, designed to protect property rights and prevent situations where borrowers who are perfect on their payments get evicted. “In a nation of laws, contract and property rights, there is no room for errors,” Ritholtz writes. “The only way these errors could have occurred is if several people involved in the process committed criminal fraud.”

Any observer of the mortgage industry since 2009 is no stranger to foreclosure fraud, and the fact that virtually nobody has paid the price for this crime. But the case of the Sinclairs involves a new player in that rotten game: Nationstar. Unheralded just a few years ago, the firm, owned by a private equity behemoth, has been buying up the rights to service mortgages, accepting monthly payments and distributing the proceeds to the owners of the loan, taking a little off the top for itself.

Nationstar has racked up an impressively horrible customer service record in its short life, failing to honor prior agreements with borrowers and pursuing illegal foreclosures. The fact that Nationstar and other corrupt companies like it are beginning to corner the market for mortgage servicing should trouble not only homeowners, but the regulators tasked with looking out for them. It didn’t seem possible that a broken mortgage servicing industry could get worse, but it has.

Nationstar is at the forefront of a massive shift in mortgage servicing. In the past few years, the largest servicers were arms of major banks, like JPMorgan Chase, Wells Fargo, Bank of America, Citi and Ally Bank. Those were the “big five” servicers sanctioned for an array of fraudulent conduct in the National Mortgage Settlement, which mandated specific standards for servicers to follow, like providing a single point of contact for customers and an end to “dual tracking,” when a servicer offers a trial modification to a borrower and pursues foreclosure at the same time.

The banks realized that they could sell the servicing rights and evade these standards, along with the higher labor costs associated with implementing them. What’s more, they would avoid new, higher capital requirements associated with holding servicing assets, allowing them to give bigger dividends to shareholders and bigger bonuses to executives.

So the big banks started selling off their servicing rights, not to other banks, but to specialty financial services firms like Green Tree, Nationstar, Walter Investment Management and Ocwen, all of whom are in kind of an arms race to become the biggest servicer.

Last October, Ocwen purchased the entire servicing portfolio of Ally Bank, covering about $329 billion in loans. Ocwen has also purchased part of JPMorgan Chase’s servicing, as well as a slice from OneWest Bank; it is attempting to dominate the market.

Nationstar acquired business from Bank of America and Aurora Bank in 2012, and more in 2013.

Wells Fargo is poised to sell some servicing rights as well, and Nationstar will surely bid for those rights. As of June 30 of this year, Nationstar has the right to collect on $318 billion worth of home loans—growing three-fold in under two years—and it will seek to add even more in the future. The company, majority owned by the private equity firm Fortress Investment Group, recently raised $1.1 billion in capital to buy up more servicing rights from banks around the country.

This means that homeowners victimized by big-bank servicers, who were supposed to get a commitment to honest treatment as part of the National Mortgage Settlement, instead got their servicing rights sold to companies no longer bound by the terms of that settlement. So homeowners lose all of their protections, and often have to start back at square one with their new servicer. For example, if a borrower was in process on a loan modification with their old servicer, the new servicer can choose to simply not recognize that modification, and demand the full monthly payment under threat of foreclosure. This is a very common practice.

What’s more, this new breed of non-bank servicers scooping up all these servicing rights has proven themselves as a bunch of cheats profiting off their customers. Green Tree Servicing has a terrible record of ripoffs. Ocwen has been sued in state court over its practices, including an innovative scam involving sending homeowners a check for $3.50, and claiming that cashing the check automatically enrolls the customer in an appliance insurance plan, which costs $54.95 a month.

Fitch, the credit rating agency, wrote in a research note in June that the growth of non-bank servicers “may pose challenges to a potential orderly transfer of servicing,” and that the involvement of private equity firms “raises questions” about the ultimate endgame for these servicers. In effect, servicing has shifted from big banks to private equity and hedge funds, and neither really have the customer’s needs in mind.

Nationstar is no different in the non-bank servicer space. While the company promised California that it would adhere to all settlement obligations on the servicing rights it purchases, the Sinclairs were subjected to familiar abuse. The family paid their mortgage on time since purchasing their home in 2003. Last year, they received a loan modification. But their servicer sold the rights to Nationstar, and Nationstar didn’t honor the modification. In June, the Sinclairs sent in their mortgage payment, and Nationstar sent it back in full. Then it sold the home. When questioned, Nationstar claimed the Sinclairs didn’t notarize one page of their modification, which turned out to be untrue.

It was a clear attempt to find an excuse to deny the modification and push the Sinclairs into foreclosure. Mortgage servicers actually make more money with foreclosures than with loan modifications, because of how their compensation structure works. Servicers load up various foreclosure fees on homeowners that they get to keep, and they get paid off first in a foreclosure sale.

A loan modification simply cuts their percentage balance on the loan.

This is not Nationstar’s only scam. The Consumer Financial Protection Bureau, which recently started examining non-bank servicers, put out a report this summer on the illicit practices of these firms. CFPB found that servicers like Nationstar often failed to inform homeowners about the change in servicing rights when they are transferred, meaning that the homeowner kept paying the wrong servicer. This is a clever way to facilitate late fees; just don’t tell the customer where to send their money.

Servicers also delayed property taxes paid out of escrow accounts, making borrowers late on those taxes and triggering more delinquency fees; failed to refund insurance premiums and other fees due back to borrowers; did not communicate properly with borrowers in need of a loan modification; lost documents solicited from borrowers for that process and made it impossible to complete the applications; failed to even properly file documents associated with the transfer of servicing rights; and charged customers default fees “without adequately documenting the reasons for and amounts of the fees,” and neglected to waive certain fees or interest charges.

CFPB also found that non-bank servicers like Nationstar had no comprehensive compliance management system in place to ensure that they followed all applicable consumer protection laws. Many didn’t even have formal, written policies or independent auditors. They hadn’t been subject to any examination prior to CFPB, so this stands to reason.

Nationstar is being sued in New York’s Supreme Court for auctioning off non-performing loans that it would rather not service at a severe discount, shortchanging investors in the process. The company’s auction sales, made with an online auction company that its private equity parent firm has a “business affiliation” with, end up allowing Nationstar to recoup its take, with all the losses falling on the underlying loan owners. So Nationstar has managed to infuriate both sides of the mortgage deal, the lenders and the borrowers, with its unscrupulous practices.

Getting examiners inside these “specialty” companies is a start, and new servicer rules coming from CFPB in January would cover non-bank servicers as well. But no regulator has the resources to deal with such flagrant abuses. Mortgage servicing is a sewer, and it needs to be completely overhauled from the ground up. If Nationstar represents the future, then until it faces real penalties or an expulsion from the industry for its conduct, private property rights in America will have to be seen as theoretical. Just ask the Sinclairs.

David Dayen is a freelance writer based in Los Angeles, CA. Follow him on Twitter at @ddayen.

Bank of America employee: 'We were told to lie'

Visit NBCNews.com for breaking news, world news, and news about the economy

Big Banks Caught Rigging Currency Markets Again: Please, Can We Regulate Them Now?

By Elisabeth Parker

Today’s Republicans seem to think rigging currency markets and robbing customers and tax payers blind is a perfectly acceptable way for banks to operate. Image from www.bellybillboard.com.

What do you do when you have more money than God? Cheat so you can make even more money! Bloomberg reports that foreign exchange traders at “some of the world’s biggest banks”  got caught rigging currency markets to generate higher profits. Even more disturbing, it turns out they’ve been doing it for an entire decade. Basically, WM/Reuters sets foreign exchange rates and currency values each morning based on trades and quotes from the previous day. But traders can — and apparently often do — place massive buy and sell orders late in the day to weight values in their favor. This practice — the global financier’s version of the proverbial butcher surreptitiously placing a thumb on the scale — is controversial, but not explicitly illegal:

Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years. [...]

Furthermore, the foreign exchange market is considered to be “like the Wild West” even by the low standards of these anti-regulation, libertarian finance industry types:

The $4.7 trillion-a-day currency market, the biggest in the financial system, is one of the least regulated. The inherent conflict banks face between executing client orders and profiting from their own trades is exacerbated because most currency trading takes place away from exchanges.

Meanwhile, Peter Schroeder from The Hill reports that Senator Carl Levin (D-MI) issued a statement demanding that the Treasury Department revisit its recent decision to exempt foreign exchange from the stronger regulations mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act:

“The Treasury Department should reconsider its ill-advised exemption of foreign exchange derivatives from the full protections of the Dodd-Frank Act. Our financial regulators should protect American businesses and families from price rigging abuses by fully regulating these derivatives trades and by finalizing the long overdue Merkley-Levin provisions on proprietary trading and conflicts of interest.”

Considering how recently Barclays and other international banks got in hot water for fixing the London Interbank Offered Rate (LIBOR), you’d think folks in Washington would listen to the senator from Michigan. But … oh wait, I forgot … The House is run by a bunch of crazy Republicans who think unscrupulous traders from big banks should be able to do whatever the heck they want.

Despite the fact that the too-big-to-fail whales big banks have repeatedly proven they cannot be trusted, the GOP STILL doesn’t want us to regulate them. They have repeatedly tried to sabotage the Dodd-Frank act, so bankers and traders can lie, cheat, and rob people blind with impunity while destroying our economy, America’s middle class, and our faith in our financial system.

AI’s Justin Rosario reported earlier this week that Representative Jeb Hensarling (R-TX) vociferously objected when the Financial Stability Oversight Council identified “at least three” financial institutions as too-big-to-fail, and requiring higher levels of oversight and regulation to “keep them from dragging the entire financial sector under in a replay of the 2007-2008 collapse.” Apparently, Hensarling protested that taxpayers would be placed “greater risk of being forced to fund yet another Wall Street bailout,” and added, “Designating any company as ‘too big to fail’ is bad policy and even worse economics.”

For today’s Republicans, apparently, free markets are not supposed to be transparent, and companies should not be held accountable for their actions and lack of ethical behavior. Go figure.

If you’re curious about how the currency markets and foreign exchanges work, and have a half hour to kill, watch the British Broadcasting Corporation’s documentary, “Billion Dollar Day.” The 1986 film follows three traders in New York, London, and Hong Kong, as they wheel and deal and exchange over a billion dollars in various currencies over the course of 24 hours. These days, an average of $4.7 trillion is traded each day on the foreign exchanges. Here’s the video:



If you’re short on time, here’s the short version — an ancient, humorous commercial from a leading foreign exchange broker, Forex. Just substitute the Euro for the Great Britain Pound (GBP) and the Chinese Yuan for the Japanese Yen. Here’s the video:

Author: Elisabeth Parker  

 

Elisabeth Parker is a writer, Web designer, mom, political junkie, and dilettante. Come visit her at ElisabethParker.Com, "like" her on facebook, "friend" her on facebook, follow her on Twitter, or check out her Pinterest boards. For more Addicting Info articles by Elisabeth, click here.

Read more: http://www.addictinginfo.org/2013/06/12/wall-street-caught-rigging-currency-markets-but-gop-still-wants-less-regulation-video/#ixzz2W5RbmOec

GOP Outraged At Obama Plan To Stop Future Wall Street Bailouts

By Justin "Filthy Liberal Scum" Rosario

On Monday, the Financial Stability Oversight Council (created by the Dodd-Frank Wall Street Reform and Consumer Protection Act) designated at least three financial institutions as “systematically important.” In other words, they are “too big to fail” and require increased oversight and regulation to keep them from dragging the entire financial sector under in a replay of the 2007-2008 collapse.

Via Bloomberg:

AIG and Prudential, in statements issued yesterday after a meeting of the Financial Stability Oversight Council, said they were notified of the proposed designations. Russell Wilkerson, a spokesman for GE Capital, said in an e-mail that his company also received a notice.

The council didn’t identify the companies it decided should be subjected to heightened Federal Reserve oversight. AIG, Prudential and GE Capital had previously said they were in the final stage of review.

The companies so labeled will have 30 days to contest the finding in court and try to have it reversed. Of course, Republicans are appalled at the idea of staving off another wide-spread collapse by identifying institutions that will drag down the entire sector should they fall:

The council’s move puts taxpayers at “greater risk of being forced to fund yet another Wall Street bailout,” Jeb Hensarling, a Texas Republican, said in a statement. “Designating any company as ‘too big to fail’ is bad policy and even worse economics.”

Actually, alerting stockholders that a financial giant is simply too large to be allowed to run unregulated is pretty damn smart. What better way to increase confidence than by knowing that these “too big to fail” institutions are going to be under increased scrutiny? Not only will this significantly reduce the kind of reckless behavior that wiped out trillions of dollars of wealth just 6 years ago, but it also means that the other banks are not in a position to take out the entire economy if one of them collapses. Republicans are always crying about how “uncertainty” is bad for the economy, aren’t they? This is one way of alleviating the dread uncertainty that your bank will implode and make all of your money disappear again.

Think of it this way: you live in a building built on columns that collapsed a few years ago. The building was rebuilt with the same blueprints. This is not a cause for feeling secure. However, you are informed that only three or so of the columns are crucial to the integrity of the building. If the other columns collapse, you’ll be fine, if a little shaken, as long as the main columns are still standing. Oh, and those main columns will be inspected on a regular basis now.

It’s understandable why a bank might not want this label; it could be taken as a sign that they are unstable and opponents of the vital regulatory reform mandated by Dodd-Frank will not hesitate to paint it that way. The reality is that the designation has nothing to do with the health of the institution, simply that it is large enough to cause massive collateral damage should it fail for any reason, even one not of its own doing.

Will it keep the gamblers from taking extraordinary risks and making extraordinary profits? Probably. But those extraordinary risks (otherwise known as “unfettered greed”) are what plunged the country into the worst recession in almost a century. Keeping the economy safe by pissing off greedy market manipulators? That’s a risk worth taking.

Washington police arrest 17 in Occupy Justice foreclosure protests. Actions continue today

 By Meteor Blades

They knew some of them would be arrested Monday and 17 of them were. They were homeowners from across the nation demonstrating outside the Department of Justice offices in Washington, D.C., against the government's years-long failure to take legal action against banks. Some of the protesters were tazed. A coalition made of Occupy Wall Street, Occupy Homes, the Home Defenders League and the Campaign for a Fair Settlement, among others, the crux of demonstrators' message was that shielding the banks that are too big to fail is cowardly and unjust:

Five years after Wall Street crashed the economy, not one banker has been prosecuted for the reckless and fraudulent practices that cost millions of Americans their jobs, threw our cities and schools into crisis, and left families and communities ravaged by a foreclosure crisis and epidemic of underwater mortgages.

Nobody from DOJ came outside to talk with the protesters. Read below the fold for more on what sparked the protests:

The government worked out a $9.2 billion deal with the banks, with $3.3 billion meant to go to some four million eligible homeowners who had been foreclosed on in 2009 and 2010. Although the original plan was to have an independent review of how much each homeowner was owed, ultimately the decision was made to let the banks themselves decide. As an inevitable consequence of this ludicrous approach, many of those seeking foreclosure relief say they were unfairly compensated. For instance, Eric Krasner of Frederick, Maryland, was foreclosed on in 2010:

Krasner figured he was owed $62,000 from the settlement, but when his check came, he received only $2,000. Many in his situation received as little as $300 in compensation. "Until Eric Holder does his job and puts bankers in jail, this is going to continue," Krasner said.

A new report from Home Defenders League, Alliance for a Just Society and New Bottom Line Wasted Wealth: How the Wall Street Crash Continues to Stall Economic Recovery and Deepen Racial Inequity in America, points out the continuing impact on individuals and the economy from the foreclosure crisis. Some highlights:

The foreclosure crisis continued to destroy wealth on a large scale in 2012: Three years after the reported end of the Great Recession, the foreclosure crisis continued to destroy wealth on a large scale in 2012, with192.6 billion in wealth lost due to foreclosures across the U.S., an average of1,679 in lost wealth per household for each of the country’s 114.7 million households.

The most devastating impacts of the ongoing foreclosure crisis were in majority communities of color and racially diverse communities: ZIP codes with majority people of color populations saw 16 foreclosures per thousand households with an average of2,200 in lost wealth per household. In sharp contrast, segregated White communities experienced only 10 foreclosures per thousand households and an average wealth loss of1,300 per household.

More than 13 million homes are still underwater and at risk of foreclosure and more lost wealth: For reporting ZIP codes, there are at least 13.2 million underwater mortgages (when a homeowner owes more than the home is worth) on the books.1 The Congressional Budget Office estimates that 13% of underwater homeowners are already “seriously delinquent” on mortgage payments — they are foreclosures-in-waiting.2 If action is not taken to prevent these mortgages from going into foreclosure, Americans stand to lose nearly221 billion in additional wealth from these mortgages alone.

A strategy of principal reduction would save money for homeowners, boost the economy, and create jobs: Principal reduction—writing down underwater mortgages to current market values—would create significant savings for underwater homeowners. It would also generate new economic activity and create jobs in local economies. Using 2012 data, a principal reduction program could produce average annual savings of7,710 per underwater homeowner nationwide, boost the U.S. economy to the tune of101.7 billion, and create 1.5 million jobs.

Unemployment and underemployment contribute to the widening racial wealth divide. Median wealth ratios measure White wealth for every dollar of wealth for people of color. In 1995, the ratio of White to Black wealth was 7-to-1. In 2004, it was 11-to-1. By the reported end of the Great Recession 2009, it had ballooned to 19-to-1. For Latinos, the White-to-Hispanic wealth ratio was 7-to-1 in 2004. Five years later, it was 15-to-1. Wealth was lost across the board from the Great Recession, but significantly more so for people of color. From 2005 to 2009, White median net worth fell 16% to113,149. But net worth fell by 66% for Latinos to 18,359, and 53% for Blacks to 12,124.

The protesters' chief goals sound like an echo: prosecute Wall Street bankers; end the foreclosure crisis by resetting mortgages to their current value (“principal reduction”); restore and rebuild wealth stolen from communities of color that have been the hardest hit.
Meanwhile, they get tazed and arrested while the bailed-out bankers have returned to collecting their gargantuan bonuses with no fear that anybody in authority is going to give them any grief.

Originally posted to Meteor Blades on Tue May 21, 2013 at 08:01 AM PDT.

Also republished by Daily Kos.

Stunning List of Economists, Financial Experts and Bankers Say We Need to Break Up the Big Banks

Posted on March 1, 2013 by WashingtonsBlog

Top Economists and Financial Experts Say We Must Break Up the Giant Banks

The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashion:

• Nobel prize-winning economist, Joseph Stiglitz

• Nobel prize-winning economist, Ed Prescott

• Nobel prize-winning economist, Paul Krugman

• Former chairman of the Federal Reserve, Alan Greenspan

• Former chairman of the Federal Reserve, Paul Volcker

• Former Secretary of Labor Robert Reich

• Current Vice Chair and director of the Federal Deposit Insurance Corporation – and former 20-year President of the Federal Reserve Bank of Kansas City – Thomas Hoenig (and see this)

• Chief Stability Officer at the Bank of England, Andrew Haldane (and see this and this)

• Former Federal Reserve Bank of New York economist and Salomon Brothers vice chairman, Henry Kaufman

• Dean and professor of finance and economics at Columbia Business School, and chairman of the Council of Economic Advisers under President George W. Bush, R. Glenn Hubbard

• Former chief economist for the International Monetary Fund, Simon Johnson (and see this)

• President of the Federal Reserve Bank of Dallas, Richard Fisher (and see this)

• President of the Federal Reserve Bank of St. Louis, Thomas Bullard

• Deputy Treasury Secretary, Neal S. Wolin

• The Congressional panel overseeing the bailout (and see this)

• The former head of the FDIC, Sheila Bair

• The head of the Bank of England, Mervyn King

• The Bank of International Settlements (the “Central Banks’ Central Bank”)

• The International Monetary Fund

• The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz

• Economics professor and senior regulator during the S & L crisis, William K. Black

• Leading British economist, John Kay

• Economics professor, Nouriel Roubini

• Economist, Marc Faber

• Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales

• Economics professor, Thomas F. Cooley

• Economist Dean Baker

• Economist Arnold Kling

• Chairman of the Commons Treasury, John McFall

• The Director of Research at the Federal Reserve Bank of Dallas, Harvey Rosenblum

• Director, Max Planck Institute for Research on Collective Goods, Bonn, and Professor of Economics, University of Bonn, Martin Hellwig

And the head of the New York Federal Reserve Bank – and former Goldman Sachs chief economist – William Dudley says that we should not tolerate a financial system in which certain financial institutions are deemed to be too big to fail.

Federal Reserve Board governor Daniel Tarullo also backs a cap on the size of banks, and Former Treasury secretary under Reagan and George H.W. Bush, Nicolas Brady, says that we need to put a cap on leverage.

Top Bankers Call for Big Banks to Be Broken Up

While you might assume that bankers themselves don’t want the giant banks to be broken up, many are in fact calling for a break up, including:

• Former Citi CEO Sandy Weill

• Former Citi CEO John Reed

• Former Citi chairman Richard Parsons

• Former Merrill Lynch chairman and CEO David Komansky

• Former Morgan Stanley CEO Philip Purcell

• Former managing director of Goldman Sachs – and head of the international analytics group at Bear Stearns in London- Nomi Prins

• Numerous other bankers within the mega-banks (see this, for example)

• Founder and chairman of Signature Bank, Scott Shay

• Former Natwest and Schroders investment banker, Philip Augar

• The President of the Independent Community Bankers of America, Camden Fine

Indeed, a bipartisan consensus is forming regarding the need to break up the big banks. Click here for background on why so many top bankers, economists, financial experts and politicians say that the big banks should be broken up.

Elizabeth Warren Embarrasses Hapless Bank Regulators At First Hearing

Warren questioned top regulators from the alphabet soup that is the nation's financial regulatory structure: the FDIC, SEC, OCC, CFPB, CFTC, Fed and Treasury.

The Democratic senator from Massachusetts had a straightforward question for them: When was the last time you took a Wall Street bank to trial? It was a harder question than it seemed.



"We do not have to bring people to trial," Thomas Curry, head of the Office of the Comptroller of the Currency, assured Warren, declaring that his agency had secured a large number of "consent orders," or settlements.

"I appreciate that you say you don't have to bring them to trial. My question is, when did you bring them to trial?" she responded.

"We have not had to do it as a practical matter to achieve our supervisory goals," Curry offered.

Warner turned to Elisse Walter, chair of the Securities and Exchange Commission, who said that the agency weighs how much it can extract from a bank without taking it to court against the cost of going to trial.

"I appreciate that. That's what everybody does," said Warren, a former Harvard law professor. "Can you identify the last time when you took the Wall Street banks to trial?"

"I will have to get back to you with specific information," Walter said as the audience tittered.

"There are district attorneys and United States attorneys out there every day squeezing ordinary citizens on sometimes very thin grounds and taking them to trial in order to make an example, as they put it. I'm really concerned that 'too big to fail' has become 'too big for trial,'" Warren said.

A Warren constituent, open-Internet activist Aaron Swartz, recently committed suicide after being hounded by federal prosecutors who reportedly said they wanted to "make an example" of him. Warren had met and said she admired Swartz and, after he died, expressed her concern by attending his memorial in Washington.

The financial regulators can blame, at least in part, Wall Street lobbyists (along with outgoing Treasury Secretary Tim Geithner and Senate Republicans) for their embarrassing turn at the hearing. Warren would have been on the panel herself representing the Consumer Financial Protection Bureau, instead of a sitting senator, if her nomination to head the agency hadn't been thwarted in 2011.

"He's dying, he needs his name off this house."

Real estate horror continues with 'Zombie Foreclosures'

13 hr ago By Michelle Conlin

COLUMBUS, Ohio — Joseph Keller doesn't expect he'll live to see the end of 2013. He blames the three story house at 190 Avondale Avenue.

Five years ago, Keller, 10 months behind on his mortgage payments, received notice of a foreclosure judgment from JP Morgan Chase. In a few weeks, the house would be put up for auction at a sheriff's sale.

The 58-year-old former social worker and his wife, Jennifer, packed up their home and moved. Joseph thought he would never have anything to do with the house again. And for about a year, he didn't. Then it started to stalk him.

He had become caught up in a little-known horror of the U.S. housing bust: the zombie title. Six years in, thousands of homeowners are finding themselves legally liable for houses they didn't know they still owned after banks decided it wasn't worth their while to complete foreclosures on them. With impunity, banks have been walking away from foreclosures much the way some homeowners walked away from their mortgages when the housing market first crashed.

First, in 2010, the county sued Keller because the house, already picked clean by scavengers, was in a shambles, its hanging gutters and collapsed garage in violation of local housing code. Then the tax collector started sending Keller notices about mounting back taxes, sewer fees and bills for weed and waste removal. And last year, Chase's debt collector began pressing Keller to pay his mortgage, which had swollen, with penalties and fees, from $62,100.27 to $84,194.69.

The worst news came last January, when the Social Security Administration rejected Keller's application for disability benefits; the "asset" on Avondale Avenue rendered him ineligible. Keller's medical problems include advanced liver disease, hepatitis C and inactive tuberculosis. Without disability coverage, he can't get the liver transplant he needs to stay alive.

"I can't make it end," says Keller. "This house, I can't get out."

Keller continues to bear responsibility for the house because on Dec. 23, 2008 — about two months after he received Chase's notice of sale — the bank filed to dismiss the foreclosure judgment and the order of sale. Chase said it sent Keller a copy of its court filing on Dec. 9, 2008. Keller says he never received any notification. Either way, his name remained on the property title.

WITH IMPUNITY

"The banks are just deciding not to foreclose, even though the homeowners never caught up with their payments," says Daren Blomquist, vice president at RealtyTrac, a real-estate information company in Irvine, Calif.

Since 2006, 10 million homes have fallen into foreclosure, according to RealtyTrac, a number that in earlier, more stable times would have taken nearly two decades to reach. Of those foreclosures, more than 2 million have never come out. Some may be occupied by owners who have been living gratis. Others have been caught up in what is now known as the robo-signing scandal, when banks spun out reams of fraudulent documents to foreclose quickly on as many homeowners as they could.

No national databases track zombie titles. But dozens of housing court judges, code enforcement officials, lawyers and other professionals involved in foreclosures across the country tell Reuters that these titles number in the many thousands, and that the problem is worsening.

"There are thousands of foreclosures in limbo, just hanging out there, just sitting, with nothing being done," says Cleveland Housing Court Judge Raymond Pianka, whose pending court cases tied to derelict properties have doubled in the past two years, to 1,000. He says the surge is due largely to homes vacated by people who fled before an imminent foreclosure sale, only to learn later that they remain legally responsible for their house.

When people move out after receiving a notice of a planned foreclosure sale and the bank then cancels, municipalities are left to deal with the mess. Some spend public funds on securing, cleaning and stabilizing houses that generate no tax revenue. Others let the houses rot. In at least three states in recent months, houses abandoned by owners and banks alike have exploded because the gas was never shut off.

THREAT OF JAIL

Unsuspecting homeowners have had their wages garnished, their credit destroyed and their tax refunds seized. They've opened their mail to find bills for back taxes, graffiti-scrubbing services, demolition crews, trash removal, gutter repair, exterior cleaning and lawn clipping. At their front doors they've encountered bailiffs brandishing summonses to appear in court.

In some cities, people with zombie titles can be sentenced to probation — with the threat of jail if they don't bring their houses into compliance.

"These people have become like indentured serfs, with all of the responsibilities for the properties but none of the rights," says retired Cleveland-Marshall College of Law Professor Kermit Lind.

Banks used to almost always follow through with foreclosures, either repossessing a house outright — known in industry parlance as REO, for real estate owned — or putting it up for auction at a sheriff's sale. The bank sent a letter notifying the homeowner of an impending foreclosure sale, the homeowner moved out, the house was sold, and the bank applied the proceeds toward the unpaid portion of the original mortgage.

That has changed since the housing crash. Financial institutions have realized that following through on sales of decaying houses in markets swamped with foreclosures may not yield anything close to what is owed on them.

By walking away, banks can at least reap the insurance, tax and accounting benefits from documenting the loss — without having to take on any of the costs and responsibilities of ownership, according to a 2010 Federal Reserve paper. A walk-away also enables them to "sell the unpaid debt to debt collectors, sometimes noting to the court that the loan has been charged off," according to a Case Western Reserve University study released in 2011.

No regulations require that banks let homeowners know when they change their minds about a foreclosure. So they rarely do, according to housing court judges, homeowners' lawyers and academics who study foreclosure problems. "The banks do not answer inquiries, they do not answer phone calls, they do not answer letters," says Judge Patrick Carney of the Buffalo, New York, Housing Court. His zombie-title caseload has swollen in the past few years to well into the hundreds. "The whole situation is surreal," he says.

CLEAN UP OR ELSE

Marlon Sheafe, a 55-year-old who drove trucks for Sara Lee Corp for 25 years, was sentenced to probation in May. The citation from the Cleveland Housing Court says that if he doesn't fix the problems with the investment property he bought in 2005, the grandfather of three, who suffers from advanced cancer, will go to jail in May 2014.

Ocwen Financial Corp., the servicer of Sheafe's mortgage, foreclosed on the house in 2008, when Sheafe was hospitalized with congestive heart failure and later lost his job, forcing him into default. That was the last he heard about the house until a year and a half ago, when he received a summons to appear in Cleveland Housing Court for code infractions on the property: cracked steps, shredded siding, weeds as tall as the doors. There was also a $300 lawn-mowing bill.

A few weeks later, Sheafe appeared at the drab, brown-paneled chambers of the Cleveland Housing Court, packed, as it is every Tuesday and Thursday lately, with other people in his situation. Sheafe expected his appearance that day would clear up what he thought was a big mistake. Instead he left with the order to get the house up to code.

Sheafe started visiting the tall, crooked house every week. Looters had stripped the place bare. The "dope boys" had left their sneakers on the porch and their empty cans of sausages strewn around inside. Sheafe repaired the steps and spray-painted patches of the exterior where the vinyl siding had been ripped off. He returned every week to check on the house and mow the lawn.

While Sheafe worked on the house, Judge Pianka worked on the mortgage servicer, subpoenaing Ocwen to appear in court. In February, Ocwen released its lien on the house, which Sheafe hoped would enable him to donate it to the local land bank — one of many set up by local governments in recent years to manage abandoned properties.

But Sheafe still can't shake free of the house. The county sold his tax lien to a debt collector, which is now suing Sheafe for foreclosure. He also faces $4,185 for code violations, $185 for court costs and up to $10,000 if the city is forced to tear down the house.

"There's no end to this," Sheafe says. "I can't win."

Asked to comment, Ocwen issued a statement saying: "It is Ocwen's policy not to disclose details about specific customers. In this case, Ocwen has attempted to work with the borrower over a four-year period. Ocwen offered to settle the account with the borrower but never received a response to the offer."

Sheafe says he couldn't afford the amount Ocwen proposed in its settlement offer.

The Consumer Financial Protection Bureau, the federal agency established in the wake of the financial crisis to guard against predatory lending and other abuses, declined to comment for this article.

Joe Smith is the monitor of the National Mortgage Settlement, the agreement struck a year ago between major banks and state attorneys general to, in part, address foreclosure abuses. In a statement responding to a request for comment, he said: "To my knowledge, the servicers' behavior in the situation... is not covered by any standards in the settlement." He added: "However, it does sound like there are problems with this type of treatment. I recommend the borrowers contact their state's attorney general and remember that the settlement does not preclude borrowers from taking their own legal action."

Patrick Madigan, Iowa's assistant attorney general, was instrumental in crafting the National Mortgage Settlement. He said that he thought the consent decree would attempt to address the issue of foreclosure limbo, but that in the end, the language in the order was ambiguous. "It's a very difficult situation," Madigan said.

NO RESPONSIBILITY

Banks say that because they are not the legal owners of these homes, they aren't required to maintain them, pay taxes on them, or take any legal responsibility for them. Homeowners legally own their properties until the day of sale. And it's not until that day, the banks point out, that a homeowner's name vanishes from the title.

David Volker found that out the hard way. When the housing market crashed, so did Volker's contractor business, and he was unable to keep up with payments on his barn-like two-story house in Buffalo, N.Y. His mortgage servicer, HSBC, foreclosed on the home in 2009. A few months later, while he was staying with his girlfriend, he stopped by the house to find an HSBC padlock on the doorknob and bank stickers plastered across the door.

Shattered glass covered his front steps. When he crawled through a broken window, he found the place trashed — by whom, he doesn't know. Even the toilets were gone. Hearing nothing more from the bank, he figured the house was no longer his.

The place continued to decay. Gutters tore loose from the eaves. The yard turned into a dump for balding tires. Volker's neighbors started complaining to the Buffalo Housing Court, which eventually tracked down Volker at the rental where the 49-year-old was living and ordered him to appear in court. That's when Judge Carney told him that he was still the owner.

"I was stunned," Volker says. "I never for a moment thought I still owned this house."

Volker worked with a realtor to try to get HSBC to take several short-sale offers — deals under which the bank would allow Volker to sell the house for less than the amount owed on it — but he says HSBC turned them down. Since then, he's been asking the bank to agree to a deed in lieu, whereby he would give the house back to the bank. So far, he hasn't been able to make that happen.

He has $1,000 in water and trash bills and faces up to $30,000 in demolition fees if the city decides his house is a safety hazard and must be torn down.

HSBC declined to comment on Volker's case, citing privacy concerns. In a statement, the bank said it "has a strong commitment to home preservation and regards foreclosure as a last resort, only after alternatives have been exhausted and the borrower is seriously delinquent."

Cases against zombie-title holders are rising due to everything from sewer bills to tilting chimneys, and they are clogging the courts. In Milwaukee, Wis., about 900 cases in the foreclosure process involve zombie titles. In South Bend, Ind., the number is 1,275, up from 600 in 2006. In Memphis, Tenn., cases have doubled in the past two years to 1,500.

In Cleveland, 15 percent of foreclosures between 2005 and 2009 stalled out in foreclosure limbo, more than a third of them involving homeowners who had fled foreclosure notices, according to the Case Western Reserve study.

STATE ACTION

State tax authorities are getting into the game, too. When IndyMac foreclosed on Richard Chavarry's house in Victorville, Calif., in 2008, he had already relocated to Los Angeles to escape the 80-mile commute to his job. The renters he had initially relied on to help him keep up payments on the Victorville house were long gone, too. But he had no idea that IndyMac canceled the sale in October 2009. "They never notified me," Chavarry said.

Nearly two years passed before Chavarry started getting citations in the mail for code violations from the city of Victorville. In February, the California Tax Board seized his $631 tax refund to pay the city back for the costs of scrubbing graffiti, removing tumbleweeds and boarding up the windows of Chavarry's house.

In March, Chavarry filed a deed in lieu to try to get IndyMac, now owned by OneWest Bank, to take back the house. The bank rejected it. Chavarry still owes the county $5,731 in back taxes and fees for housing-code violations.

IndyMac declined to comment.

Once a bank walks away from a foreclosure, the real rot begins. Living rooms turn into meth labs. Falling shingles menace passers-by. Squatters' cooking fires turn into infernos. The latest iteration of the trend: gas explosions.

Electric companies usually shut off the juice when homeowners tell the utility they are moving. But natural-gas companies usually don't. In recent months, abandoned homes have exploded in Chicago, Cleveland and Bridgeport, Conn.. In all cases, foreclosed homeowners had moved out. With no one home to smell the gas, it went undetected — until the houses blew up.

"We are seeing more and more close calls," says Mark McDonald, a former natural gas public safety worker who now runs the New England Gas Workers Association. "These houses are a formula for disaster."

Cities are struggling to find ways to cope with growing numbers of blighted properties. Miami, Detroit and Las Vegas have created registries intended to force banks to take more responsibility for vacant houses.

The Mortgage Bankers Association has opposed these measures. Placing "unreasonable" and "onerous" requests upon servicers will only hurt the already ailing mortgage-lending business, the association says on its website.

The association did not respond to repeated requests for comment.

Registry advocates say the banking industry's opposition has helped water down some of those actions, such as a recently enacted Georgia law that requires banks to register vacant properties only after a foreclosure has been completed.

A vacant-property ordinance in Los Angeles requires banks to register a house as soon as they file a default notice. Failure to do so could result in a $1,000-a-day fee. However, "it's not being enforced," says Los Angeles Assistant City Attorney Tina Hess. "Part of the problem in L.A. is the building and safety departments have been cut so severely they don't have the inspection staff to monitor these properties."

"TO HELL AND BACK"

In Columbus, Ohio, Joseph Keller recently paid a visit to the empty house on Avondale Avenue. In the living room, the floor was littered with dirty diapers, pill bottles, condoms, sooty mattresses and soda cans. In the kitchen, squatters had hung pink curtains.

"They tore it to hell and back," Keller said, kicking at a dirty mattress. "We never would have left the home if we weren't told to get out."

The Kellers live in their daughter's dining room, where their queen-size bed leaves little room to maneuver. Joseph can't sit, stand or sleep for more than 15 minutes at a time. He can't take pain medication because of his diseased liver. Every few months, he makes a trip to the emergency room, where doctors drain his abdomen of excess fluid.

Last May, Chase's debt collector, Professional Recovery Services, sent Keller a letter: "At this time," it said, "we are able to offer you a settlement of $25,258.41 on this account to be paid within 15 days." He lacks that kind of money, as well as the $11,759.08 he owes to the county in back taxes.

Professional Recovery Services declined to comment.

At a hearing in early December, a Social Security administrative judge told the Kellers that he would review their appeal of the original denial of benefits, a process that he said could take two months.

Joseph Keller responded that he might not be around that long. Earlier this month, the judge sent the case back to the local office after it determined that the house was virtually worthless. Keller still has no benefits.

A Social Security Administration spokesperson declined to comment on the case.

"He's dying," says Keller's daughter, Barbara. "He needs his name off this house."