MORTGAGE MELTDOWN / Interest rate 'freeze' - the real story is fraud / Bankers pay lip service to families while scurrying to avert suits, prison

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New proposals to ease our great mortgage meltdown maintain resonant in. First the Treasury Department urged the creative activity of a new monetary fund that would purchase hazardous mortgage chemical chemical bonds as a maneuver to conceal what those bonds were really worth. (Not much.) Then the thought was to utilize Fannie Mae and Freddie Macintosh to purchase the hazardous loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that program went south after Fannie suffered a new accounting scandal, and Freddie's existent loan losings shot up more than than expected.

Now, just unveiled Thursday, come ups the "freeze," the inspiration of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage loaners will freeze involvement rates on a limited figure of "teaser" subprime loans. Other householders facing foreclosure will be offered aid from the Federal Soldier Housing Administration.

But unfortunately, the "freeze" is just another fraud - and like the other bailout proposals, it have nil to make with U.S. house prices, with "working families," keeping people in their places or any of that nonsense.

The exclusive end of the freezing is to forestall proprietors of mortgage-backed securities, many of them foreigners, from suing U.S. Banks and forcing them to purchase back worthless mortgage securities at human face value - right now almost 10 modern times their marketplace worth.

The ticking clip bomb in the U.S. banking system is not resetting subprime mortgage rates. The existent job is the contractual ability of investors in mortgage chemical bonds to necessitate Banks to purchase back the loans at human face value if there was fraud in the inception process.

And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memoes floating around showing that many people in banks, investing Banks and assessment companies - all the manner up to senior direction - knew about it.

I can hear the humming of shredders working overtime, and maybe that is the new "hot" industry to put in. There are tons of people who would wish to gun muzzle subpoena-happy New House Of York Lawyer General Saint Andrew Cuomo to purchase clip and do this all spell away. Cuomo is just ins from getting what he necessitates to begin putting a batch of people in prison. I wager some people are trying right now to do him an offering "he can't refuse."

Despite Thursday's ballyhooed new trade with mortgage lenders, makes anyone really believe that it can ultimately halt fraud lawsuits by mortgage chemical bond investors, many of them distribute out across the globe?

The ruinous effects of chemical bond investors forcing conceivers to purchase back loans at human face value are beyond the current mass media discussion. The loans at issue midget the working capital available at the biggest U.S. Banks combined, and investor lawsuits would raise arresting liability sufficient to do even the biggest U.S. Banks to fail, resulting in monolithic taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.

The job isn't just subprime loans. It is the full mortgage market. As place terms fall, defaults will lift sharply - period. And so will the forbearance of mortgage bondholders. Different social classes of mortgage chemical bonds from assorted hazard pools are owned by different cardinal banks, funds, pensions and investors all over the world. Even your pension or 401(k) might have got some of these chemical bonds in it.

Perhaps some U.S. authorities section can make veiled menaces to foreign states to propose they will endure unpleasant effects if their biggest holders (central Banks and investing funds) don't travel along with the plan, but how could it be possible to strong-arm everyone?

What would be prudent and logical is for the Banks that sold this toxic waste material to purchase it back and for a batch of people to travel to prison. If they knew about the fraud, they should have got to purchase the chemical bonds back. The clip to look into this is before the shredders have got worked their magic - not five old age from now.

Those merchandising the "freeze" have got suggested that mortgage-backed securities investors will profit because they lose more than with rising foreclosures. But with fast-depreciating collateral, the last thing investors in mortgage chemical bonds ought to make is set off foreclosures. Rate freezes are at best a tool for delaying the inevitable foreclosures when even the most optimistic predictors anticipate place terms to fall. In October, Emma Goldman Sachs issued a study prediction an unbelievable 35 to 40 percentage driblet in Golden State place terms in the approaching few years. To minimise losses, a mortgage bondholder would obviously be better off foreclosing on a place before terms plunge.

The end of the freezing may be to detain chemical bond investors from suing by putting off the large foreclosure moving ridge for respective years. But it may also be to halt chemical bond investors from suing. If the investors agreed to loan alterations with the "real" pay and plus information from refinancing borrowers, mortgage conceivers and bundlers would have got an alibi once the foreclosure occurred. They could say, "Fraud? What fraud?! You knew the borrower's existent income and plus information later when he refinanced!"

The cardinal is to refinance borrowers whose current loans involved fraud in the inception process. And I guarantee you it was a minority of borrowers whose loans didn't affect fraud.

The authorities is trying to carry through wide-scale refinancing by tricking chemical bond investors, or by tricking U.S. taxpayers. Guess who will pick the measure now that the Federal Housing Administration is entering the fray?

Ultimately, the people in these secret Paulson meetings were probably less disquieted about economy the mortgage marketplace than with economy themselves. Some mightiness be looking at prison house time.

As main of Emma Goldman Sachs, Paulson was involved, to grades as yet unrevealed, in the mortgage securitization procedure during the halcyon years of mortgage fraud from 2004 to 2006.

Paulson became the U.S. Treasury secretary on July 10, 2006, after the extent of the fiasco was coming into focusing for those in the know. Emma Goldman Sachs achieved recent awards in the marketplaces for having stake heavily against the lodging market, while Citigroup, Lewis Henry Morgan Stanley, Bear Sterns, Merrill Lynch and others got hammered for failing to clip the end of the recognition bubble.

Goldman Sachs is the lone major investing depository financial institution in the United States that have emerged as yet unharmed from this debacle. The success of its scheme must have got resulted from fairly significant stakes against housing, mortgage banking and related to industries, which also intends that Emma Goldman Sachs saw this approaching at the same clip they were bundling and merchandising these loans.

If a mortgage chemical bond investor Sues Emma Emma Goldman Sachs to coerce the establishment to purchase back loans, could Paulson be forced to attest as to whether Goldman Sachs knew or had ground to cognize about fraud in the inception procedure of the loans it was bundling?

It is truly astonishing that right now everyone in the state is deferring to Paulson and the caputs of Countrywide, JPMorgan, Depository Financial Institution of United States and others as the best grouping to work out a solution to this problem. No 1 is talking about the fact that these people created the job and profited to the melody of 100s of millions of dollars from it.

I surmise that such as a grouping first sat down and tried to calculate out how to protect their fiscal involvements and avoid criminal liability. And then when they agreed on the plan, they decided to sell it as "helping workings households remain in their homes." That's why these meetings were secret, and newsmen and the public weren't invited.

The adjacent clip that Paulson is before the Senate Finance Committee, instead of asking, "How much money make you believe we should give your banking buddies?" I'd wish to see New House Of York Sen. Chow Schumer inquire him what he knew about this lurching fraud at the clip he was main of Emma Goldman Sachs.

The Emma Emma Goldman study in October proposes that rampant investor demand is to fault for inception fraud - even though these investors were misled by high recognition evaluations from chemical bond evaluation federal agencies being paid millions by the U.S. investing banks, like Goldman, that were selling the bundled mortgages.

This logic is like saying shoppers seeking bargain-priced soup promote the grocery shop store proprietor to steal it. I mean, we're talking about criminal fraud here. We are on the cusp of a gigantic fiscal crisis, and the Federal Soldier Modesty and the U.S. Treasury are trying to restrict the liability of their banking friends under the pretense of trying to assist borrowers. At interest is nil short of the continued being of the U.S. banking system.

Sean Olender is a San Mateo attorney. Contact us at .