The Fallout From Toxic Mortgage Processing

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Robo signers, robo judges, foreclosure mills, MERS. These are the buzzwords connected to foreclosure fraud. Although the largest banks along with Fannie Mae (FNM) and Freddie Mac (FRE) and government majority owned GMAC Mortgage have implemented various foreclosure moratoriums in an effort to sort out the mess, it wasn’t until October 14 that the “paperwork problem” really began affecting the stock market. A look at present, past and future planetary influences explains why the situation has now reached a crisis point and what its impact could be on the banking industry and the overall economy.

A mortgage is a “dead pledge.” The loan dies when the mortgage has been paid in full. If the borrower fails to make payments on the loan, the home becomes “dead” to the borrower who must relinquish the home to the lender. Both debt and death are ruled by Pluto, the planetary energy of transformation. Pluto in Capricorn since 2008 has shown the structure of mortgage finance to be on anything but solid ground. As home values decreased and adjustable rate mortgage payments increased as lending standards tightened, more and more borrowers could not afford to pay their mortgage or kill the debt by selling their home.

Venus rules money, values, and the banking system. The cycle of Venus in Pluto-ruled Scorpio from September 8, 2010 to January 7, 2011 represents the value and costs of debt: money gained or lost through lending, buying, selling, and servicing all types of debt; leverage; and central banks monetizing debt. Venus in Scorpio describes deficits, taxes, insurance, and bankruptcy. All of these matters gain further emphasis since Venus is spending a longer than usual amount of time in Scorpio due to being retrograde from October 8 to November 18. During the six weeks that Venus from Earth’s vantage point appears to be moving backward in the sky is a time to reevaluate matters related to these issues as what has been kept simmering under the surface gets revealed.

Foreclosures are the nuclear fallout from the toxic combination of easy credit and excess leverage. Yet it is foreclosure sales that are driving existing home sales as about 1 in 4 homes sold in the second quarter were in some stage of the foreclosure process according to RealtyTrac.

Venus is retrograde about every 18 months and is retrograde in the same sign every 8 years, so this is the first time since Pluto has been in Capricorn that Venus has been retrograde in Scorpio. Pluto describes events that have a massive effect as part of its cycle of decay, destruction, death and rebirth.

Examining the other planetary influences at the time Venus went retrograde describes why the foreclosure process has ground to a halt now. Mercury, the planetary energy of communication, commerce, and movement rules all documentation connected to mortgages. As Mercury moved into Venus-ruled Libra (October 3) and squared Pluto in Capricorn (October 5), the evidence was rapidly unraveling that not only were the mortgage servicers careless with this paperwork, but several law firms contracted by the servicers and the GSEs were manipulating the paperwork in order to process as many foreclosures as possible. More mistakes were being reported of homeowners being foreclosed on who were paying their mortgage and even instances of foreclosure proceedings on homeowners who did not even have a mortgage.

As is often the case, the New Moon on October 7 brought new developments. Libra is symbolized by the scales of balance and justice. With the New Moon in Libra conjoining Mercury and Saturn in Libra, President Obama announced he would not sign the Interstate Recognition of Notarizations Act of 2010 which would have streamlined the foreclosure process by permitting documents to be notarized in one state and legally valid in another state, and that documents could also be processed electronically. The irony here is that in a rare show of bipartisanship the bill was unanimously passed by voice vote in both chambers and was the first major piece of legislation to be vetoed by the President.

Saturn and Capricorn represent government and can bring blockages and delays by slowing things down as Saturn describes contracting conditions that can become frozen. The nation’s top tier banks had already issued moratoriums in the 23 states where foreclosures had to go before a judge. As Venus turned retrograde and Mercury conjoined Saturn on October 8, Bank of America (BAC) extended their moratorium to all 50 states. A couple of title insurers announced they would stop issuing policies on foreclosed homes. On the October 14 First Quarter Moon which represents the “crisis in action”* phase of the 29.5 day lunar cycle, it was announced that the Attorney Generals in all 50 states will conduct a coordinated inquiry to investigate foreclosure fraud. There was no need for the White House to issue a foreclosure moratorium since the process was already freezing up.

From 2008-2024, Pluto in Capricorn is bringing government and corporate corruption to the surface. Although Fannie and Freddie recently dropped Florida attorney David J. Stern’s law firm from its list of approved vendors, the GSEs have not removed all the foreclosure mills cited in a lawsuit by Florida’s Attorney General.**

With Pluto in Capricorn the ruler of time, we must examine the past to understand the present in order to establish a solid foundation for a better future. The roots of the mortgage mess began in October 1993 when Uranus and Neptune conjoined in Capricorn for the first time in 171 years. This alignment brought the use of new technologies and reforms (Uranus) that would dissolve (Neptune) established structures and geographical barriers (Capricorn). The start of a new Uranus/Neptune cycle ushered in major free trade agreements, outsourcing, the internet revolution, along with the repeal of the Glass-Steagall Act and the rise of financial “innovation.”

A new way to process mortgage documents was born that month at the annual convention of the Mortgage Bankers Association when the GSEs backed what would become known as the Mortgage Electronic Registration System (MERS). Based on the model of brokerages holding stocks in street name as opposed to issuing stock certificates to investors, MERS is an electronic registration system that tracks a mortgage “from cradle to grave” using an 18-digit mortgage identification number (MIN).

By using MERS, mortgages could be traded like a stock which was essential to expanding the securitization market. (Ironically it was Lehman Brothers who issued the first AAA rated security comprised of MERS registered loans in February 1999.) Each time a loan’s beneficial ownership or servicing rights is transferred, MERS provides a mechanism for participants avoiding recording in the county courts. A Member of MERS can appoint an employee to serve as an “Officer” of MERS to act in the name of MERS to assign loans, release liens and foreclose (except in Florida).

In the USA chart, Venus (banking) conjoins Jupiter in Cancer (Capricorn’s opposite sign), reflecting that real estate is viewed as the way to greatly expand bank profits. Pluto in Capricorn rules the sector of the chart representing the nation’s wealth indicating that wealth is accumulated through debt. Together with Saturn ruling this sector and Saturn in Libra located in the sector representing the government, the government enacts regulations and laws to facilitate lending for home ownership.

The October 7 Libra New Moon conjoined the USA Saturn, a precursor to when the USA experiences its first Saturn return December 3 for the first time in 29 years. Now the financial innovations that traced their earliest roots back to the early 1980s are waning as the era lacking a strong and uniform structure as its backbone is coming to a close. Saturn in Libra’s job is to put the scales back into balance which requires Democrats and Republicans cooperation to solve the mortgage mess.

Pluto in Capricorn made its first opposition to the USA’s natal Venus in Cancer on March 8, 2009 – two days after the last time Venus turned retrograde. This was at the time the stock market made multiyear lows and speculation about nationalizing the big banks was running rampant. A combination of fiscal and monetary stimulus was starting to work its magic, and bank stocks became the biggest beneficiaries of the market’s resurgence.

As Pluto opposes the USA Venus for the fifth*** and final time on October 18, Venus is once again retrograde and the shares of the largest banks are declining over the uncertainty of how much the mortgage mess will impact their earnings.

Fully resolving all the paperwork issues connected to the foreclosure process could take up to a year. However, Venus turning direct on November 18 squaring the USA Pluto on the same day Jupiter in Pisces also turns direct, could bring a major court ruling at this time that begins to move the process forward again. Bank stocks could experience large moves as the fears might be overblown. Jupiter in Aries transiting the sector of the USA chart representing real estate from late January to early June 2011 indicates a big increase in the number of homes for sale which would reflect the backlog of foreclosures is being processed.

Just as Venus ends its transit in Scorpio in early January 2011, Pluto in Capricorn will oppose the USA’s natal Jupiter in Cancer for the first time in the nation’s history through November 2011. Through their lawsuit, the state Attorney Generals could accomplish what the Administration has been unable to do: force the banks to make mortgage modifications. Combined with extracting penalties for their state coffers, this will have an immediate earnings impact that will affect banks’ capital (but it is likely their regulators will cut them a bit of slack with their capital requirements). Pluto opposite the USA Jupiter indicates it’s time for the lawyers who fraudulently profited to start getting hauled into court.

The greatest threat to the top tier banks is the representations and warranties lawsuits pending from the GSEs, mortgage bond insurers, monolines, and securitization trusts. Estimates range from $70 billion to almost double that in mortgages requested to be bought back. Banks have been playing hardball, asking investors to prove their case on a loan by loan basis rather than accept statistical analysis of the poor quality of the originations. Fannie and Freddie have been the most successful in getting top tier banks to repurchase, but even they have reached a high frustration level by the lack of responsiveness from the top tier banks. Others have been virtually stonewalled.

The leverage cuts both ways as the top tier banks need to sell new originations to Fannie and Freddie, however the GSEs cannot easily exclude the top originators without damaging the economy. The transits of Uranus in Aries squaring the USA Venus (May 2011 to February 2012) and Jupiter (April 2012 to January 2013) together with Saturn transiting Libra and Scorpio, and Pluto in Capricorn opposing the USA Sun in Cancer indicate this process might not conclude until early November 2015.

The courts will need to determine what a breach of warranty is. This is not always completely obvious. When the mortgage application contains an inaccurate credit score or that a home is owner occupied when it was intended to be an investment might be unquestionable. But when a stated income loan shows a housekeeper or migrant worker earning $100,000, the courts will have to determine who lied – the applicant or the loan originator. Should the originator have processed a loan they knew was fraudulent? The courts will also have to determine the acceptability of statistical sampling in claims.

Real estate is ruled by Cancer and the Moon. When the USA’s progressed Moon**** conjoined the USA’s natal Neptune in Virgo in late June, I wrote at the time that “the public is waking up to the deception by the government and the financial and real estate industrial complexes.” Neptune in Aquarius conjoining the USA’s Moon for the final time in mid January 2011 conveys a similar theme.

The financial crisis has proven that home values can go down just as easily as they went up. Until homes are owner occupied for their utilitarian value instead of being used like stocks to be traded, you cannot have a healthy and sustainable real estate market. Home buyers will begin to understand that paying the lowest possible price for a home is far cheaper than obtaining the lowest mortgage rate. When a homeowner goes to sell, it doesn’t matter what their monthly payment or the interest rate was when they purchased. Pluto in Capricorn works its transformation slowly but surely.

*As described by Dane Rudhyar in his book, “The Lunation Cycle.”

**For more information, I recommend reading “Fannie and Freddie’s Foreclosure Barons” by Andy Kroll (Mother Jones)

***The other times were May 2 and December 26, 2009 and August 9, 2010.

****A mathematical calculation that moves the planets forward in time as a method of prediction.

USA: July 4, 1776 5:10 PM Philadelphia, PA

Related Post: “2010 Autumnal Equinox/Harvest Moon: The Regulators Are Running The Show Now

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