They are discussing eliminating mortgage interest and child tax credits breaks.

Sacrosanct tax breaks, including deductions on mortgage interest, remain on the table just weeks before the deficit commission issues recommendations on policies to pare back with the aim of balancing the budget by 2015.

The tax benefits are hugely popular with the public but they have drawn the panel's focus, in part because the White House has said these and other breaks cost the government about $1 trillion a year.

Sacrosanct tax breaks, including mortgage-interest deductions, remain on the table just weeks before the deficit commission issues recommendations on ways to balance the budget by 2015. Alan Murray and David Weidner discuss. Also, Jennifer Levitz discusses a leading national tea-party group that is laying plans to maintain pressure on new members of Congress after the Nov. 2 vote.

At stake, in addition to the mortgage-interest deductions, are child tax credits and the ability of employees to pay their portion of their health-insurance tab with pretax dollars. Commission officials are expected to look at preserving these breaks but at a lower level, according to people familiar with the matter.

The officials are also looking at potential cuts to defense spending and a freeze on domestic discretionary spending. It is unclear if the 18-member panel will be able to reach an agreement on any of the items by a Dec. 1 deadline.

Even if they do reach an agreement, any curbs on current tax breaks would likely face tough sledding in Congress. The banking and real-estate lobbies have fiercely rebuffed efforts to rescind the mortgage-interest deduction in the past.

Still, officials have found there aren't any easy ways to balance the budget, and they are expected to steer clear of more polarizing issues like Medicare, Medicaid, Social Security and a broad rewrite of the tax code in their short-term recommendations. The panel could still make long-term recommendations to change these issues, but they would be less concrete.

"My concern is that the talk of tax expenditures is couched as 'tax reform,' but it's not tax reform," said Alison Fraser, director of the Thomas A. Roe Institute for Economic Policy Studies at the conservative Heritage Foundation. "It's simply a revenue-raising exercise."

Committee officials plan to try to broker a deal in November, after the midterm elections. They have until Dec. 1 to win the support of 14 of the commission's 18 members to endorse a final report. It is possible that the panel's Democrats and Republicans would issue separate reports if they can't agree, people familiar with the process said.

President Barack Obama created the National Commission on Fiscal Responsibility and Reform in February, amid concern from lawmakers and economists that the growing budget deficit could damage the country's long-term fiscal condition. The bipartisan panel, made up mostly of lawmakers but also business and labor leaders, has met for months, at times more constructively than many expected.

"There's a lot of potential for agreement on the committee," said panel member Alice Rivlin, a senior fellow at the liberal-leaning Brookings Institution.

If the commission reaches a consensus, House or Senate leaders could agree to bring some of the changes up for a vote, perhaps early next year, although there is no deadline.

To balance the budget by 2015, excluding interest payments on debt, means officials would need to find roughly $240 billion in annual savings, according to commission documents. Panel officials also hope to issue recommendations that would "meaningfully improve" the country's long-term fiscal situation.

Even though officials are focusing on issues where they believe they can get broad agreement, they will likely face stiff resistance from certain lawmakers and interest groups. Some Republicans are expected to label any caps on tax breaks as a backdoor way of raising taxes. Several lawmakers' offices declined to comment on specific proposals as negotiations aren't yet under way.

Committee officials have also focused on the $700 billion in annual defense spending, which accounts for more than half of domestic discretionary spending. Critics say the government could cut some of the $400 billion spent on outside contractors. But many conservative groups have said cutting military spending would be a mistake, citing national security risks.

Changes to Medicaid and Medicare are unlikely to be recommended despite their looming presence in the U.S. budget. The Congressional Budget Office has estimated that if laws don't change, federal spending on health care alone will grow from 5% of gross domestic product in 2010 to 10% in 2035.

Commission officials looked closely at making short-term changes to Social Security, but talks shifted in recent weeks toward incorporating those ideas into a longer-term plan. This is in part because any changes would probably have to be phased in over years, delaying the budgetary impact for at least a decade.

"My sense from talking to members of the commission is that's where they are focusing [on the long-term recommendation], Social Security reform," said Martin Feldstein, an economics professor at Harvard University who served as a senior official in the Reagan administration.

It remains unclear whether the panel will reach a consensus with negotiations taking place right after the midterm elections, when Washington tends to buzz with political jostling. The imminent debate over whether to extend all or part of the Bush-era tax cuts could also complicate its efforts. The panel isn't expected to weigh in on this issue.

The White House said this month that the budget deficit for the last fiscal year was $1.3 trillion, the second highest in 60 years. The government's revenue was roughly $2.16 trillion in the year ended Sept. 30, compared with $3.46 trillion in outlays.

The White House hasn't signed off on any of the potential proposals as it's waiting for the panel to complete its work.

Mr. Obama "expects that the fiscal commission will continue the process of discussing and analyzing a wide range of ideas and it is premature to describe any specific idea as a conclusion of a commission that has not even voted yet," White House spokesman Amy Brundage said.

The commission "is the last best hope right now for getting some substantive movement on the issue of the deficit, the debt, and the financial disaster we're facing," Sen. Judd Gregg (R., N.H.), a member of the commission, said in a recent interview.

Foreclosuregate Explained: Big Banks on the Brink
Thursday 28 October 2010
by: Peter White

Scandal is spreading across Wall St. like a very bad case of poison ivy. A rash of fraudulent home foreclosures has exposed some of the nation's biggest banks to an even worse condition ... bankruptcy.

Until late 2007, the money boys on Wall St. made a bundle in the housing market. After the bubble burst, they were just itching to cash in on the down side, calling in all those bad loans they made and selling off millions of repossessed homes. According to RealtyTrac, Inc., which compiles such data, lenders foreclosed on 3.2 million properties in the last three years, 288,000 in the last quarter, the highest number on record.

But evidence came to light, first in New York, then Florida, Maine, Ohio, and other states that lenders were taking shortcuts to speed up foreclosures. Law firms hired so-called "robo-signers," some of whom have admitted in depositions that they routinely signed off on thousands of foreclosure papers they had never read and sometimes forged signatures of notary publics who were not present.

"Why don't we have Mickey Mouse sign the thing, instead of having a human being sign it? I mean it becomes meaningless," New York Supreme Court Judge Arthur Schack told PBS "Newshour."

Legally meaningless maybe, but not without consequence for hundreds of thousands of Americans who have been evicted from their homes, many of whom have no jobs, and who were snookered into sub-prime mortgages in the first place.

In the wake of mounting public outrage, attorneys general of 50 states and the District of Columbia have launched a joint investigation into what financial writers are calling "Foreclosuregate." Industry spokespersons have downplayed the controversy surrounding foreclosure mills and "robo-signers." Bank of America and JP Morgan Chase are conducting internal reviews of thousands of foreclosures, but say they believe all the underlying facts in their foreclosures are true and that any potential issues will be quickly addressed.

However, Bank of America and GMAC stopped foreclosures in all 50 states and Chase stopped them in the 23 states where a judge must approve foreclosures. Other lenders like PNC Financial and Litton Loan Savings followed suit in what amounted to a national moratorium on foreclosures. But it only lasted a couple of weeks. Bank of America and GMAC have since started up foreclosure suits again despite the bad press, pressure from bondholders and even the Federal Reserve, which wants big lenders to start buying back the bad mortgages on which they are trying to foreclose.

"The bottom line is not that those properties won't be repossessed. They simply won't be repossessed as quickly," said Rick Sharge, vice president of RealtyTrac. But others predict that if GMAC and Bank of America stick to their guns, they just might go down in smoke.

"This is not simply a glitch in paperwork," wrote Iowa Attorney General Tom Miller, who is heading up the states' joint investigation into the mortgage paper fraud mess.

"This was an industry wide scheme designed to defraud homeowners," Florida attorney Peter Ticktin told The Associated Press.

Ohio Attorney General Richard Cordray filed a lawsuit against lender GMAC in October that aims to stop sales of all repossessed homes foreclosed with robo-signed documents and to reverse judgments on those foreclosed homes that have not yet been sold. In addition, the suit seeks damages for homeowners and a $25,000 fine for every fraudulently filed court document.

In Kentucky, Heather McKeever filed a class action lawsuit against GMAC on behalf of homeowners there alleging the giant lender, a recipient of $16 billion in federal bailout money, violated the RICO Act. "This is organized crime by people in suits but it is still organized crime," she said.

If other states file similar lawsuits like those in Ohio, Kentucky and Mississippi, it could mean billions of dollars in damages and fines, criminal perjury prosecutions of "robo-signers" and disbarment for the lawyers who filed the fraudulent papers. Some analysts say the potential liability of major banks is so large, another financial crisis is a real possibility.

The fraud allegations raise the question of who actually owns the bad loans. If banks cannot show an unbroken chain of title from the original borrower to themselves, they have no legal right to foreclose. At least that's the argument defense lawyers are making.

"When they tried to industrialize the loan securitization market, which is really what they did, they tried to automate everything they could. They started digitizing loan documents and shredding originals.... and, of course what that means is, we have no clue who owns what," foreclosure expert Walter Hackett told PBS "Newshour."

Hackett turned into a consumer advocate after nearly three decades on the inside. He knows exactly where to bite the hand that used to feed him. And he was referring to a private database lenders have relied on for years to track loans that would be bundled into investment vehicles called mortgage-backed securities (MBS), which are traded back and forth between investors daily.

To collect fees from those trades, Wall Street relies on the Mortgage Electronic Registry System (MERS), which had three million loans listed in its database in early 2001. Today, it has more than 62 million and virtually all of the home loans made in the US since 2005. But since MERS is essentially Excel spreadsheets shared between bankers and brokers, it is really just a bunch of numbers. MERS was designed to make money out of the mortgage market, not parse exactly who owes what to whom.

One foreclosure expert estimates that just 6 to 7 percent of the loans made in the last three years can produce properly recorded title transfers from borrower to final lender. Legally assigning, or recording title transfers was much too slow and cumbersome for the fast-paced trade in MBS, so most banks just ignored those requirements, according to testimony, analysts and consumer advocates like Hackett. On many mortgages, the loan owner's name was routinely left blank, the titles never recorded and title transfer fees not paid.

Banks invented an investment vehicle in 1987 called REMICs (Real Estate Mortgage Investment Conduits) to allow them to profit from MBS trading. A Real Estate Mortgage Investment Conduit is what the name implies - an empty pipe that allows banks to collect fees as trustees of MBS' without owning any of the assets that back them. It also allows them to avoid taxes and title transfer fees since they only pass through titles to property held as collateral for the MBS' they sell.

But this is clearly a convenient fiction for huge consumer lenders like Bank of America and GMAC, which are trying to have things both ways. REMICs were a real sweet deal for banks until the bottom fell out of the housing market in 2007, triggering the worse recession in 75 years. Banks soon found themselves going to court to repossess property they had been claiming for years they never owned.

They hired foreclosure mills to retroactively produce documents showing the chain of ownership ended with them. In many cases, foreclosure mills provided affidavits of lost mortgage notes attempting to prove banks' control of mortgages in hopes of winning a favorable judgment.

Banks are in a big pickle. If they can prove they own the title to properties they want to foreclose on, they are liable to the IRS for unpaid taxes and penalties. If they don't, the are liable to be sued by bond holders for lack of due diligence in the bundled mortgages they sold to investors.

This is good news for homeowners facing eviction, and there has been an increase in the number of contested foreclosures in Florida, ground zero of the foreclosure scandal.

Both Bank of America and GMAC got billions in federal bailouts, so playing hardball with borrowers when the Obama administration put up an additional $75 billion to persuade banks to refinance troubled loans may jeopardize their "too big to fail" status in Washington.

Housing Secretary Shaun Donovan told reporters in Washington last Wednesday that the federal government would act soon to force banks to offer loan modifications for mortgages backed by the Federal Housing Administration. (How many?)

Meanwhile, investigations are underway not only by the states' attorneys general, but also by federal banking regulators, the US Justice Department and the Securities Exchange Commission. A number of lawsuits have been filed in Ohio, Kentucky, Mississippi, and other states, and all this attention may force banks to renegotiate their loans with more affordable terms for borrowers.

But banks are not heading down that path, instead, they are redoing questionable foreclosure papers they hope will pass muster in court.

"There has been an attempt by some of the major services to indicate there are no problems," Iowa Assistant Attorney General Patrick Madigan, told The New York Times.

"We're not at the end of this process. We're at the beginning," he said.

Only time will tell how the foreclosure scandal plays out. Federal regulators say their investigation won't be completed before the end of the year. And several foreclosure experts agree with Madigan that the fight over foreclosures is just beginning.

Source: http://www.truth-out.org/foreclosuregate-explained-big-banks-brink64621

If you owe a lot you may have a chance of hanging on as the bank would have a difficult time selling a foreclosed home, but if the mortgage is almost paid up it would be easier to take that home (if in foreclosure) and make a profit off of it.

You can imagine how many are really praying for a global EMP just so they never have to make a house payment again.