Skip to main content

tv   Nightly Business Report  PBS  October 14, 2010 6:30pm-7:00pm EDT

6:30 pm
>> it's like stealing from the blind. >> tom: this man says he's a victim of robo-signing, people who allegedly signed mortgage documents without verifying them, and it almost cost him his house. >> this is an industry that is broken, their systems are completely broken, and mers is a part of that. >> suzanne: we'll talk to the c.e.o. of mers about why the record keeping firm says it can legally foreclose on mortgages it doesn't own. you're watching "nightly business report" for thursday, october 14. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: #x
6:31 pm
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt
6:32 pm
>> tom: good evening and thanks for joining us. concerns escalated today about the nation's growing foreclosure mess. on wall street, financial stocks slumped as investors worried about legal scrutiny of the foreclosure process. and, in boston, bank of america c.e.o. brian moynihan said he's "not so concerned" the investigations would hurt the u.s. housing market. >> suzanne: tom, it was late last month when banks began to take a closer look at foreclosure documents. but that didn't stop them from seizing more than 100,000 homes in september. 102,000 properties were taken back by banks. it's the first time repos have topped 100,000 in a single month. >> tom: we have two stories tonight looking at the foreclosure process and so- called "robo-signing" of foreclosure documents. we begin with stephanie dhue and the mortgage industry's controversial use of a record- keeping firm. >> reporter: this is the headquarters of the mortgage electronic registry systems,
6:33 pm
mers, which tracks half of all home loans. mers was set up in the '90s to keep tabs on a home loan each time it changed hands. the company is owned by some of the biggest names in the industry, including fannie mae, freddie mac, bank of america, g.m.a.c., washington mutual, and wells fargo. mers c.e.o. r.k. arnold says the system was designed to reduce paperwork. >> the mortgage industry saw a need for a database to house that information. >> reporter: there's a lot of information-- home loans are packaged, bought and sold on a regular basis. mers' job is to keep track of who owns what. >> what we track are the parties that have those documents; so we don't have the documents, but we point to the parties that do have those documents. >> reporter: mers has come into the crosshairs because it is foreclosing on properties, but its authority to do that is being challenged. consumer attorney ira rheingold says mers doesn't have the right to foreclose. >> when mers goes to court and
6:34 pm
says, "i have a right to foreclose against your home," courts are saying, "but wait a second-- if you're going to take someone's home, you have to establish that you have a legal right to their home." >> reporter: what gives mers the right to foreclose? >> the mortgage-- the borrower and the lender have both agreed that it's a condition of this loan that mers will be placed in the land records. that mortgage has a standard paragraph that is not different than other mortgages, giving mers the power to foreclose. but mers doesn't make the decision to foreclose-- that's made by the people to whom the money is owed. >> reporter: mers recently opened up its web site to show who owns a mortgage on a property, but in many cases, the investor isn't disclosed. without a clear paper trail, there is doubt about many foreclosures. rheingold says lenders should be able to retrace their steps. >> if, in fact, these transfers were recorded properly back
6:35 pm
then, mortgage companies should be able to rebuild who owns what. it should be in there. and if they want to foreclose against someone's home, they can simply identify themselves and take possession of the mortgage and note and foreclose. >> reporter: if lenders can't do that, many borrowers may avoid foreclosure. stephanie dhue, "nightly business report," washington. >> jeff: this is jeff yastine in miami. dennis brown can tell you plenty about his fight with mortgage servicing companies and, by default, mers. >> it's just like playing in a card game, and you find up they're holding cards up under the seat. >> jeff: he and his wife bought this house in 2002. everything was fine until a not- so-funny thing started happening. the browns were regularly sending in their monthly mortgage payments, yet, somehow, someway, the servicer of their loan-- citimortgage-- wasn't crediting them for the payments. and no matter who brown talked to, no one could tell him why he wasn't getting credited or where his money was going.
6:36 pm
still, the browns continued to pay. >> so we sent a monthly note in, and they said we had this much money. "you still haven't caught up." so i start sending two house notes a month. >> jeff: this is two checks a month? >> two checks. >> jeff: for how much? >> what was it, about $1,600 apiece. then, i sent another $1,600, somewhere up in there. and then we started getting the same ordeal. >> jeff: eventually, citimortgage sought to foreclose on their home. the browns hired a lawyer, kenneth eric trent, to fight back. when trent requested a key piece of paper, called the mortgage assignment, he noticed something odd: the document, from mortgage electronic registration systems, or mers, was signed and witnessed. but the actual signatures of those supposedly different people were exactly the same. >> it's not the sort of thing you can brush off. how can you have two different people with the same signature? on a document with the importance of this one, which is essentially bestowing the right
6:37 pm
upon the plaintiff who's suing my client, to take his home? >> jeff: trent had stumbled into what we now have come to know as "robo-signing" of key mortgage documents. >> obviously, this is an important document. it's the essence of the case. if they hadn't produced a document like this, or a similar instrument, i would be entitled to summary judgement, and they would not be able to take my client's home. >> jeff: as it turns out, the signers of the document weren't mers employees. they were workers at a law firm hired by citimortgage to do the foreclosure. trent has since found many examples of such robo-signing. in one, the house was in orange county, florida. but the notary on the mortgage assignment indicated orange county, california. in others, there hardly appears to be a signature at all, or perhaps someone was doodling instead. >> what you end up with is a person who has not the slightest knowledge of the underlying loan
6:38 pm
transaction, payments that were made by the homeowner, or any right, title, or interest of any of these corporate entities to proceed with the foreclosure or collect payments. in other words, a person with no knowledge. >> jeff: trent, and brown, eventually won in court. the foreclosure case was dismissed. but brown knows there are thousands of other homeowners who are not so lucky. >> it really worries me, because with what i went through, my blood pressure went up. i could imagine what they went through, and they lost their homes. and not only that, but they probably got caught up in layoffs and other things of that nature. so that's double trouble. it's like stealing from the blind. >> jeff: jeff yastine, "nightly business report," miami. >> suzanne: here are the stories in tonight's "n.b.r. newswheel." stocks closed down slightly as investors tried to judge the fallout from the foreclosure mess. the dow fell 1.5 points, the nasdaq lost almost six, and the s&p 500 down four points.
6:39 pm
big board volume weighing in at over a billion shares-- that's down a touch from yesterday-- while nasdaq volume managed to stay above two billion shares for a second session. u.s. states can move forward with their lawsuit seeking to overturn health care reform. a florida judge today ruled that 20 states seeking to contest president obama's health care laws can go to trial. the case will likely wind up before the u.s. supreme court. the job market continues to struggle. the number of americans filing first time applications for unemployment benefits unexpectedly rose last week. claims increased by 13,000 to 462,000. it was only the second rise in two months. mortgage rates continue their downward slide. this week, the rate on a 30-year fixed rate mortgage slipped to 4.19%. 15-year fixed rate loans are down to 3.62%. those are the lowest levels since freddie mac began keeping track in 1971.
6:40 pm
and still ahead, quantitative easing made easy. we'll get both sides of the issue from minyanville's kevin depew. >> as we mentioned a record number of homes were repossessed by banks last month. the firm behind that data realtytrac predicts a drop. rick shargas is the senior vice president of realtytrac and joins us from california this evening. welcome to nightly business report. >> thank you for having me. >> how much of an impact could these another closure moratoriums we've seen over the past few weeks have on repossession for the rest of the year. >> they could have a pretty significant affect. of the 23 or 24 states that primarily do traditional foreclosures, we're talking about 40% of the nation's foreclosure activity and about 36% of all the bank repossessions. so if procedures grind to a halt in those states, you'll see a pretty dramatic
6:41 pm
dropoff in foreclosure proceedings. >> so that's looking ahead. but what about the increase we saw in september. why the increase in bank repossessions have they gotten more aggressive ahead of this process review? >> no, i don't think that they were planning on the process review taking affect. i think that sort of blindsided them to be honest with you. what we are really seeing is sort of a flushing out of the pipeline. there are about 1.2 million homes that are in foreclosure right now. and a lot of these homes have been in foreclosure for quite some time. the lenders are finally getting around to having exhausted all the loan modification options, having decided short sales aren't the right approach for these homes. they are finally getting around to finishing the foreclosures. >> so here we are at this point in the september numbers you release here today and when you look at home sales in the month of september, 18% were of sales of homes that were seized by lenders. in other words, essentially are you talking about bun out of almost every five homes sold last month had
6:42 pm
been repossessed by the bank and resold so have banks been putting more of these repossessed homes on the market and what is the implication for home prices? >> the banks have really been putting a pretty steady stream of repossessed properties on the market for the last couple of years. and in fact, in addition to the bank owned propertys there is a lot of properties in foreclosure that are also being sold. that would take the number up to about 30% of all home sales in residential homes being foreclosure properties of one type or another. so you can imagine the havoc we would wreck on the housing market if suddenly people weren't allowed to buy 30% of the homes that are out there in inventory. >> but isn't that just the setup that we are seeing here with the foreclosure process moratoriums now in place and being called for in all 50 states? >> well, what could happen is we could see a moratorium across-the-board, in terms of new foreclosure actions, processing foreclosures that
6:43 pm
are already in the works, and ultimately being able to sell properties that had been foreclosed on. >> final seconds, rick, do you support a nationwide moratorium? >> i think a nationwide moratorium while it sounds good and is probably well intend dodd have devastating effects effects on the house market and the overall economy and could subsequently lead to even more foreclosures. >> we'll have to leave it there. rick, we appreciate the opinion, rick sharga with real estate tracking firm realtytrac.
6:44 pm
>> tom: financial stocks were behind much of the selling today, even as the indices rebounded in the last hour of trading to end with tiny losses. let's take a look at tonight's "market focus." investors sold bank stocks, especially those caught up in the foreclosure document worries. bank of america was the biggest loser of the dow industrials, falling more than 5% on huge volume, more than three times average. just ahead of b-of-a on the most active list was citi. shares fell 4.5%, and j.p. morgan slid almost 3%. wells fargo may have sparked some of the selling. in a deposition, an employee admitted to signing hundreds of foreclosure affidavits a day, even though she did not verify the information. she said it wasn't her job to do so. wells fargo stock dropped 4% on four times its usual volume. the bank says it is doing additional reviews.
6:45 pm
as the worries over foreclosure processing build, mortgage bond insurers saw buying interest. ambac financial and m.b.i.a. each saw double-digit gains. ambac remains below $1 a share, though. it's a two-year high for m.b.i.a. and assured guaranty stock saw ten times its average volume on its 9% jump. some speculate business may pick up with the foreclosure mess. after the close tonight, google blew away earnings expectations, and its shares responded in kind. first, the results-- earnings were almost a full dollar over the estimate. advertisers paid google more money per click last quarter compared to a year ago. google stock was a little weaker today; after the close, it jumped 9%. if that holds through until tomorrow's session, the stock would hit its highest price since april. speaking of search, buy-out
6:46 pm
rumors were back around yahoo. this time involving private equity investors and a.o.l. this chatter got shareholders excited. yahoo stock up 4.5% on strong volume. the rally takes yahoo to a five- month high. when microsoft tried to buy yahoo two years ago, it offered $31 per share. another merger rumor around data storage firm e.m.c. saw that stock pop 4.5% on heavy volume. there have been a few deals recently in computer storage, adding to the speculation e.m.c. may be a target. one other tech earnings call after the close today-- advanced micro devices. the semiconductor maker easily beating the street's expectation. earnings were more than twice analyst consensus as revenues and margins both improved. a.m.d. stock was a little weaker during the regular trading session before the result. after hours, shares were up as much as 5%. we mentioned last night for-
6:47 pm
profit education company apollo withdrew its earnings forecast over regulatory uncertainties. those uncertainties took a toll on the entire sector today. apollo and education management saw their market values drop by more than 20%. devry and strayer education each saw double-digit losses, too. new government guidelines on student loans and for-profit colleges will take effect next summer. and that's tonight's "market focus." >> suzanne: talk about a complicated subject. you've probably heard all the recent chatter on "quantitative easing" and the federal reserve.
6:48 pm
it's also know as q.e. or "q.e.2," and there are two ways to play it. earlier today, i spoke with kevin depew of minyanville and asked if he could please define it for us. >> that's right, suzanne, it's a tough concept to grasp but in a nutshell it's called quaint tateive easing because the central bank, the federal reserve is going to take a predetermined quantityity of money and they are going to purchase assets directly from banks and thereby increasing cash reserves in the banks, that ease money into the system and into the economy as hoped. >> and kevin, financial markets pretty much expect this to happen. make prot case for why it would be a good thing for the economy. >> well, the pro case is that it's going to reduce the cost of debt, the cost of capital for businesses and households. it's hoped that by reducing the cost of capital for households that that will increase money into the economy it will increase consumption t will stabilize housing. >> and also in terms of what will it do for cash and
6:49 pm
bonds? >> well, the hope is that it forces money away from low-yielding cash accounts and treasury bonds which are at historic low yields and force that money into higher yielding as sets, riskier assets like stocks. >> so make the opposite case, the con case because there certainly are those on that side of the picture who think it will not only be bad for the economy but it also could damage the credibility of the fed, et cetera. >> well, i means that's absolutely right. let's face it. when you get to the point where you need quantitative easing it means all other policy measures have failed. so the economy by definition has to be in shambles by the time we get to this point. so everybody is going to be a negative about it everybody feels bad about it. but the reality is you can't fight debt by increasing debt. and that's what the bottom line of the bare case boils down to. >> isn't the issue also that interest rates are already so low and people aren't actually partaking in loans, even though the rates are at historically low levels? >> absolutely. i mean the issue is not the
6:50 pm
cost of capital. rates have been 1%. the federal funds rate has been 1% or lower for almost a year now. the problem is that there is no availability of funds to households and businesses. banks are reluctant to lend. they don't want to lend because they're afraid they are not going to be paid back which is what happens when the economy is like this. >> so what is your position on quantitative easing, should it happen or should it not? >> well, if you type in will qe 2 work into google you get about 600,000 results, almost uniformly negative so as a natural contrarian i think people are a little too pessimistic about what happens with it and it's only natural because the economy is in terrible shape right now. but it depend os on what you mean by work. if by will it work will it postpone the day of reckoning when we have to face up to the fact that we have too much debt supported by too little real productivity and income, then yeah t will postpone it. will it work longer term? i just don't think that that is really going happen. >> so thank you, kevin depew of minyanville for educating us on this rather arcane
6:51 pm
topic. >> thank you, suzanne. >> here >> tom: here's what we're watching for tomorrow: our friday "market monitor" is stephen wood, chief market strategist at russell investments. we'll get an update on inflation with september's consumer price index along with last month's total retail sales. and say cheese! our "all in the family" series continues with a look at a wisconsin farm run by four brothers, each with an unique role in the business. >> suzanne: if you have a 401(k) account, it'll soon be easier to learn about your investment choices. the labor department is changing the rules for the retirement vehicle. starting in january 2012, companies that offer 401(k) plans to their employees must spell out fees, charges, and other expenses. the goal is to make the accounts more understandable, and to make it simpler to compare costs of investment options. the new rules will affect 72 million workers. >> tom: drug store chain cvs caremark has been fined $75 million for letting customers repeatedly buy a key
6:52 pm
ingredient that can be used to make methamphetamines. the company is required by federal drug laws to monitor sales of the ingredient psuedoephedrine. it's found in cold medicines. cvs admits it broke its own policies in making the sales, and says it has worked to fix the problem. euquu
6:53 pm
>> suzanne: less than three weeks to go until americans go to the polls to vote for new lawmakers. the economy will be a key factor in those mid-term elections. tonight's commentator suggests what you should look for when making your choices. she's maya macguineas, director of the fiscal policy program at the new america foundation. >> fiscal responsibility is clearly one of the central issues of the upcoming election. and yet, the policies on the table seem to involve either adding $4 trillion to the debt by extending all of president bush's expiring tax cuts, or adding $3 trillion by extending them for folks making less than $250,000. seriously, this is the best we can do? fiscal responsibility is hard. that is why politicians like to sing its praises, but don't like to get into specifics. it's also why nonsensical arguments take over the discussion like "cutting taxes will raise more money", or we shouldn't make changes to social security's benefits, never mind
6:54 pm
that the program's own trustees have warned that changes need to be made. if you're actually interested in supporting fiscal responsibility, here's what you need to look for. a candidate who acknowledges that, even though the economy is weak and changes should be made gradually, we are going to have to make tough choices to the budget. in the coming years, changes are going to require going beyond normal budget myths, such as "we could fix the problem by eliminating earmarks or cutting foreign aid." no. tax expenditures, which are all those targeted credits, reductions and exceptions which run through the tax code, should be cleared out of the tax base as much as possible. to really fix this budget mess, we are going to have to make significant changes to the two largest programs-- social security and medicare. okay, now there is a reason i am not a political advisor. but if we want fiscal responsibility, we'll have to demand this kind of straight talk from the candidates. while we will hear a lot about fiscal responsibility this election, i'm keeping my fingers crossed that we'll in fact see some follow through. i'm maya macguineas.
6:55 pm
>> tom: that's "nightly business report" for thursday, october 14. i'm tom hudson. good night, everyone, and good night to you, too, suzanne. >> suzanne: good night, tom. i'm suzanne pratt good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:
6:56 pm
this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh
6:57 pm
6:58 pm
6:59 pm


info Stream Only

Uploaded by TV Archive on