Originator's Opinion

Major Banks Not Guilty of Libor Manipilation (So Far...)

noreply@blogger.com (Anonymous) — Tue, 02 Apr 2013 04:56:00 +0000

The court system has decided that only some of the private claims against the large banks be allowed to continue litigation suing the banks that allegedly manipulated the LIBOR index. Although some banks have admitted guilt and paid penalties, most of the alleged offenders have yet to pay any penalties. Yet again, the major players that created the current worldwide recession escape responsibility.

It's almost like we are in the rabbit hole - what's up is down and what's down is up. Thing just don't make any sense. The responsible parties have been identified. We now know culprits - this financial bust did not happen by accident. It was manufactured by the ones who gained the most from it's tragic results. And they go unpunished.

I don't believe ghat every person at every bank or investment house is guilty of wrong doing. In fact, I believe the 80/20 rule should be used here, just like everywhere else. In fact, I would go as far to say that 90% of the people working at these firms are completely innocent. They are honest, hard working people.

I don't know who, BUT someone has got to be made responsible. And I don't believe it's the consumer's fault. Oh sure, greed was rampant, and everyone was a real estate speculator in their own sense, but the cards were stacked against them from the beginning. The public was NEVER going to profit from the real estate bubble. This was always going to happen.

I will continue to blog about the unfairness towards banks in the creation and the responsibility of the financial crises until someone changes it...

Too Big to Jail...

noreply@blogger.com (Anonymous) — Sun, 24 Mar 2013 21:15:00 +0000

I have not blogged in couple of months now. But I had to come out of hiding for this one...The current U.S. Attorney General Eric Holder let the cat out of the bag. Or should I say he said something that all of us already know - you cannot prosecute high finance. The reason ? The possibility of causing a world wide financial panic, where global markets freeze because of an indictment of a CEO at a major financial firm.

Today's upper echelon of financial institutions are the modern day rulers of society. They own everything, including the law. They cannot be controlled. They cannot be punished. They are above the law. And they are without flaw.

Now, of course, I personally don't agree with this idea. The only way this reasoning works is because our society allows it. Some people just get an automatic pass for bad behavior because they are a athlete, a rock star, a congressman or a investment banker. And this, of course, is wrong. This is what makes the general public feel like they are not important, or they don't matter in the overall scheme of things.

You know, lately these "icons" of society have suffered with their fair share of public scrutiny, with prosecution and jail time being the result, in some cases. And many have fallen out of favor in the public eye. It's time for a major prosecution of some of the individuals and groups that conspired to fraud their neighbors, their cities, and their country by privately gambling with other peoples money, and betting against their own possibility of a loss or failure.

I will be frank - because of their shenanigans, these people have made my job lot harder. I am a loan originator, and after five years, it's still difficult to give a easy, simple loan to a person who has a 811 credit score that just wants to refinance his primary home. This is ridiculous. Heads should roll. Or at least ONE HEAD should roll. Take your pick as to which one it should be - it doesn't matter to me.

I know that newly elected Senator Elizabeth Warren is a polarizing figure, but she sure has one thing right - if you screw up your firm, you cease to exist as an entity. If this possibility exist, it will automatically lead to more sincere accountability, and large "too big to fail" banks and businesses will start making more sound judgments and financial decisions about how they operate their businesses, and how to manage the risk associated with running that business.

So, how do you get rid of concept of "too big to fail" ? Who knows ? Break up the banks. Restrict banks from being allowed to conduct business as investment and or insurance firms. I don't know. But we have to do something as a society, and do something now. The punishable must be punished. The guilty businesses must be put on alert - if you play with fire and get burned, you are out of business, never to put your risky way of conducting business as a burden to the public. I am afraid if we don't do something, and something soon - there will be no lessons learned. And without the lessons of the past, history has a a way of repeating itself...

LIBOR Deception...Is Finance Today's Wild Wild West ?

noreply@blogger.com (Anonymous) — Tue, 15 Jan 2013 03:29:00 +0000

During the housing boom, borrowers constantly tried to get as much house as they could afford. They wanted Interest Only loans, Adjustable Rate Mortgages, Limited Documentation, Stated Documentation, NO Documentation. Whatever the lenders were offering that would get them into that house, get them approved for that mortgage - they went after it.

Adjustable Rate Mortgages (or ARMs - any mortgage that the interest rate of the loan is not fixed), along with Student Loans, financial derivatives and a lot of other financial products were tied to the LIBOR index, or the London Interbank Offered Rate. This is the interest rate one bank will loan money to another. LIBOR is used around the world as a signature index.
In July 2012, the news broke that the index was being manipulated by the banks and their employees. The banks used the index to boost their credit worthiness and to increase their income by falsely manipulating the index.

The manipulation had a serious effect on ARM loans. According to Libor Scandal information on the Wikipedia website, the index consistently rose on the first day of the month between 2000 and 2009.

This puts the responsibility of a lot of foreclosures suffered in the United States directly into the laps of the London banks. By manipulating the index, the caused untold millions of homeowners to miss their mortgage payments during the first adjustment period. Once the homeowner misses the first payment, it becomes more and more difficult to get back in control of their mortgage payment. The way mortgage work today, you cannot refinance your home if you have been late more than 1 month late on your mortgage in a 12 month period. Homeowners then decided to try to get their loans modified, but that system was rigged as well - TO GO AGAINST THE HOMEOWNER. No wonder there were so many foreclosures - and more to come. The ENTIRE system was set up for the homeowner to fail...

The first bank to receive a fine for wrong doing was Barclays Bank. Their fine of $450 million is nothing compared to the $1.5 billion fine levied against UBS. While Barclays manipulated LIBOR to boost it's rating, UBS used the index to line it's pockets.

After reading this, I truly wonder how many other scandals are waiting to be uncovered. I believe that borrowers were greedy, and they purchased way more house than they could afford during the housing boom. But the cards were stacked against them from the beginning. From liar loans to liar interest rates, they never had a chance. Modern day financing is the current day Wild Wild West. People who are allowed to make their own rules often choose to not have any...

I wonder what we will find out next ?

**UPDATE** Since I started this blog, Deutshe Bank, according to Mark Gongloff with the Huffington Post, has reported via Wall Street Journal that the bank turned nearly $654 million in profits on small bets connected to LIBOR in 2008.

This story is going to continue to grow. Watch and see...

INTRODUCTION - Or Why I Started This Blog...

noreply@blogger.com (Anonymous) — Sun, 06 Jan 2013 00:15:00 +0000

The idea for this blog came to me some time ago, but I never really seemed to have the time or the guts to do it. What's different now ? Well, not much, and a lot. I do have the time (I always did, it seems), but I did not have the nerve to really blog about the current mortgage, finance, or real estate industries. It's been a rough four years for the financial sector of the U.S. economy, especially for mortgages and real estate.

They have all taken a beating, and public opinion has rightfully been very negative. I'm not saying the public isn't correct in feeling the way they do. I agree with them whole heartily.

But I do think there were a lot of scapegoats. Borrowers were victims for sure. But there were also a lot of good, honest and hard working loan officers, brokers, appraisers, attorneys and a whole host of support staff that were negatively portrayed in their connection with the 2008 financial crisis. I was a mortgage loan officer at the time, and I was totally caught off guard when everything began to collapse. Loan Officers were supposedly the main culprits in fraudulent behavior that lead to the crisis, and it just seemed to be a safe bet to just go away quietly and let the whole thing simmer down a bit.

At the same time I was content to run and hide, I was also a bit angry. I had always conducted myself with the utmost integrity, and was miffed at the fact that myself and others in my profession were being accused of being the main reason the country was falling apart. We were responsible for returning the country to a 1930's style depression. It just wasn't true. Sure there are loan officers, but there are also bad teachers, lawyers, priest, doctors, dentist and dog owners, but in their case, the many are not judged by the few.

Well, as the facts eventually revealed - it was not the lowly loan officer or two that were deceptive cheaters that brought down the whole house of cards. Oh sure, they broke the law, but they didn't break the BANK! The banks and investment firms invented a way of doing that all by themselves.

Sometimes when things are incorrect, or the blame for something is being placed in the wrong direction, some one has to say something. I have decided to try and be that someone.

So...The idea behind this blog is to engage the public in how world events affect the work of a the loan officer, or what is now known as a Mortgage Loan Originator. Or at least, provide a outlook of the situation in one Originator's Opinion...