Rep. Grayson Asks the Financial Stability Oversight Council to Require a Special Capital Buffer to Large Banks Due to Foreclosuregate

Dear Secretary Geithner and members of the Financial Stability Oversight Council,

I’m writing concerning the foreclosure fraud crisis and the resulting potential need for a special capital buffer for large systemically significant institutions. I’m particularly worried about the title insurance market, and attempts to lay off title liability onto large banks without corresponding changes in capital requirements.

Recently, Bank of America struck a deal with Fidelity National Title Insurance to indemnify the title insurer should legal problems with foreclosures create unanticipated title liability. Title insurers are clearly worried that they may face higher legal and policy costs if foreclosures are reversed, or should legal ambiguity cloud titles they already have insured. Bank of America’s deal with Fidelity may be necessary to help keep the housing market functioning. Since title insurers have in some cases just refused to insure this market, someone must pay for the liability these insurers have refused to incur.

The extent of this liability is unclear. On October 8, Bank of America CEO Brian Moynihan told the public and investors that, despite the self-imposed foreclosure moratorium, his bank had not “found any foreclosure problems”. He said, explaining the foreclosure moratorium, that “[w]hat we’re trying to do is clear the air and say we’ll go back and check our work one more time.” The bank’s SEC Form 8-K reinforced these comments. Yet two weeks later, the Wall Street Journal just reported that Bank of America, in reviewing 102,000 cases of problematic foreclosures, found problems “in 10 to 25 out of the first several hundred foreclosures it examined.”

Both banks and regulators are claiming that the problems are simply process-oriented document errors that aren’t really causing harm to the public at large. I suspect that no one really knows the extent of the problem, or the potential liability. What we do know is that title insurers are demanding indemnification.

With that in mind, it would seem prudent to require additional capital buffers for systemically significant institutions until the extent of the foreclosure fraud crisis is understood, or until title insurers decide that they no longer need indemnification for increased risk. It may also be useful to conduct a new round of stress tests to determine the resilience of the financial system with respect to these serious problems.


Alan Grayson

Member of Congress


I sure could use some…


Rep. Grayson Asks the Financial Stability Oversight Council to Require a Special Capital Buffer to Large Banks Due to Foreclosuregate

11 Responses to “Rep. Grayson Asks the Financial Stability Oversight Council to Require a Special Capital Buffer to Large Banks Due to Foreclosuregate”
  1. tara says:

    i cannot even get wells fargo to lower my interest rate. they refuse to modify and most certainly are not following obama’s guidelines . i have been told twice by the bank that i do qualify for a 2 % modification, but then they change their mind. i tried the Naca program, but banks are not acting in good faith in negotions thru them, and though current in august, and told not to pay by the banks until i get the new amount, i have just found out i am on the fast track to forclosure.

    • usjustice4all says:

      I looked up my security that Wells says it is under and found over 30 homes on the docket for being sold. Wells wants the insurance money!!!!

  2. l vent says:

    P.S. My lawyer also told me that the more people that default on their home loans, the better for us being able to save our homes. With millions underwater and skyrocketing property tax bills,millions of defaults are happening right now. The Fed and the Banksters are shooting themselves in the foot by not working with homeowners. They need to back off of fraudclosing on homeowners and help work to keep homeowners in their homes by giving them a payment they can afford.

  3. Mark says:

    I’m not surprised this looks and smells funny, like another big bailout, what a crock of bullshit to the american public, bankers and politicians crying again, please give me a drink.

  4. l vent says:

    I spoke with an attorney yesterday about the realities of the foreclosure crisis. It seems that my home, which I paid $ 292,000..00 for in 1992 is now worth about $100,000 in todays housing market. I refinanced in 2005 for $350,000.00. They can collect at least 3 times that from AIG on their crappy credit default insurance scheme.Then they can either sell the house cheap now,or hang on to it until the housing market prices rise back to they are hoping, early 90’s level prices. No loss to the BANKSTER CROOKS HERE. I was also told that the judges are in the pockets of the powers that be and the best you can hope for here is to buy time in your home and hopefully something will come up the pipe here for homeowners such as principle reduction to keep us in our homes. The judges do not care about the fraud, all they care about is the debt owed that needs to be payed to SOMEBODY, mosly FOREIGN INTERESTS, MAINLY CHINA. Seems China had a ball buying MBS’s. The lawyer told me the best advice he could give is to try and buy time in your home and when they finally fraudulantly foreclose on you, refuse to leave your home. Pretty shitty,huh? Obama needs stop the insanity and MORATORIUM ALL FORECLOSURES NATIONWIDE. THE BANKS NEED TO BE FORCED TO WORK WITH HOMEOWNERS HERE AND FACE UP TO THE REALITIES OF PRINCIPLE REDUCTION. THE LAWYER ALSO TOLD ME THAT THE BANKS ARE PROTECTED UNDER THE CONSTITUTION FROM THE GOVERNMENT FORCING THEM TO DO ANYTHING TO HELP HOMEOWNERS. SO IF OBAMA WANTS TO STAY OUT OF THE WAY AND HIS HANDS ARE TIED SO TO SPEAK, LET THE GOVERNORS OF THE STATES MORATORIUM FORECLOSURES, STATEWIDE,NATIONWIDE. THE PLAYING FIELD NEEDS TO BE LEVELED HERE SOMEHOW. WHEN THE MIDDLE CLASS GOES SO GOES THE NATION. THE COUNTRY IS IMPLODING UNDER THE WEIGHT OF ITS OWN DEBT. THROWING TAX-PAYERS OUT INTO THE STREET IS NOT THE SOLUTION HERE. GIVING PEOPLE PAYMENTS THEY CAN AFFORD IS. IT WAS NEVER ABOUT FREE HO– USES. The rich cannot sustain this nation, the proof is what is going on right now with our economy. Everything is crumbling before their eyes. GEITHNER AND BERNANKE NEED TO BE THROWN OUT OF THERE ON THEIR ASSES!!!!

  5. l vent says:

    SAVE THE RICH STARVE THE POOR. This is obviously what is going on here. President Obama has Timothy Geithner and Ben Bernanke trying to fix this countries financial problems .This is clearly not working, our NATION IS CRUMBLING All they want to do is keep propping up the banks and paper over the debt problems by creating money out to of thin air. Healthcare is no good when people do not have jobs.SO YOU PROPPED UP BIG PHARMA AND THE HEALTHCARE INDUSTRY SO THEY DONT FAIL BECA– USE PEOPLE DONT HAVE JOBS AND CANT PAY DOCTORS nor afford expensive tests or surgeries.. Give the people down here on mainstreet some of that money instead of the banks. The banks are bust and are clearly a criminal enterprise. Break up the big banks. AS THE MIDDLE CLASS GOES, SO GOES THE NATION. Wake up President Obama, this country is crumbling before your very eyes. The FAT CATS in Congress only care about filling their pockets with tons of cash from the lobbyists from corporate AMERICA. You can begin to heal this crumbling nation by putting a NATIONWIDE MORATORIUM ON ALL FORECLOSURES. THIS COUNTRY IS GOING TO LOOK LIKE A THIRD WORLD COUNTRY WITH TENT CITIES ALL OVER THE PLACE IF YOU DONT KEEP PEOPLE IN THEIR HOMES. THIS WILL BE A DISGRACE ON YOUR PRESIDENCY. STOP LISTENING TO BERNANKE AND GEITHNER AND CONGRESS YOU NEED TO SAVE THE MIDDLE CLASS STARTING TODAY . STOP SAVING THE RICH, IT IS CLEARLY NOT WORKING AND IS MAKING MATTERS WORSE!!!!

    • housemanrob says:

      I agree with the potential of all of us “boycotting” our mortgage payments! The investors all have a “stroke” and the BANKS ALL FAIL! Look at it this way… the banks and wall street all robbed us “thick as thieves”. NOW WE SHOULD ROB THEM!!!

  6. joe parisi says:

    It’s amazing how the banks and wall st. hire the best PR firms to turn this around and put it on the backs of the public one more time! Can we say slap on the wrist one more time.

  7. John R. says:

    I’m kind of surprised that Mr. Grayson doesn’t seem to recognize the impact on the local County governments, Nationwide, if the past and present foreclosures, and the subsequent Auctioning of these properties, ARE (and we all know now that they are) illegal.

    In the County in which I live, at the foreclosure sales, the County guarantees the Deed. So, an ex homeowner finds out he lost the house unlawfully and petitions the Court to Vacate the judgment and wins. They then move back into the house. But this house was bought by someone who thought the Deed was lawful. Their recourse is against the County Govt. who is going to have to make the purchaser “whole” again. This is going to deplete the County Govt.’s treasuries, which are already suffering. Now the County can go after the Bank, but again, we’re talking about County govt.’s that have stretched budgets. And litigation could take years remembering we’re fighting some very well healed Lenders.

    It would seem prudent then to also require the banks to create another “special capitol buffer” in anticipation of the losses that are destined to be suffered by all of this nations County Govt.’s.

    Whereas we haven’t yet seen the depth of this rabbit hole, it sure does seem to be getting real wide!

    John R.

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