Three House Democrats, including Barney Frank of Massachusetts, the chair of the powerful financial services committee, took government housing corporation Fannie Mae to task on Friday. In a sternly worded letter, the three Dems grilled the company on its use of powerful law firms—some of which have been accused of breaking the law—to handle foreclosures. The letter, co-signed by Frank, Reps. Alan Grayson (D-Fl.) and Corinne Brown (D-Fl.) and addressed to Fannie CEO Michael Williams, cites the criticism and investigations of these firms, often called "foreclosure mills," and charges that "Fannie Mae seems to specifically delegate its foreclosure avoidance obligations out to lawyers who specialize in kicking people out of their homes."

The letter raises many of the same issues as a recent investigative story of mine, "Fannie and Freddie's Foreclosure Barons," which focused in part on one powerful firm in southern Florida, the Law Offices of David J. Stern. As I wrote,

Backdated documents, according to a chorus of foreclosure experts, are typical of the sort of shenanigans practiced by a breed of law firms known as "foreclosure mills." While far less scrutinized than subprime lenders or Wall Street banks, these firms undermine efforts by government and the mortgage industry to put struggling homeowners back on track at a time of record foreclosures. (There were 2.8 million foreclosures in 2009, and 3.8 million are projected for this year.) The mills think "they can just change things and make it up to get to the end result they want, because there's no one holding them accountable," says Prentiss Cox, a foreclosure expert at the University of Minnesota Law School. "We've got these people with incentives to go ahead with foreclosures and flood the real estate market."

The Stern firm, which I describe in great detail, is one of four Florida foreclosure firms now under investigation by the state attorney general's economic crimes division. Stern's firm is also retained by Fannie to handle foreclosures in the Sunshine State. That a conflict might be present when a firm accused of ripping off homeowners and under investigation for subverting the law is getting paid by Fannie, a ward of the federal government surviving on nearly a hundred billion dollars in taxpayer money, isn't lost on Frank, Grayson, and Brown:

Why is Fannie Mae using lawyers that are accused of regularly engaging in fraud to kick people out of their homes? Given that Fannie Mae is at this point a government entity, and it is the policy of the government that foreclosure are a costly situation best avoided if there are any lower cost alternatives, what steps is Fannie Mae taking to avoid the use of foreclosure mills? What additional steps is Fannie Mae going to take to ensure that foreclosures are done only when necessary and only in accordance with recognized law?

Here's the full letter. While it (surprisingly) doesn't mention Mother Jones outright—the last letter from Congress on the foreclosure mills did—rest assured that at least the folks in Rep. Grayson's office have followed our foreclosure reporting.

Letter to Fannie on Foreclosure Fraud


In a surreal act of political theater, Stephen Colbert testified in character before a House hearing on immigrant farm workers Friday morning. The Comedy Central host had spent a day picking produce on a farm on behest of the United Farm Workers, who have been running a cheeky "Take Our Jobs" campaign that invited native-born Americans to apply for jobs typically taken by illegal immigrant workers. Rep. Zoe Lofgren (D-Ca.), chairwoman of a House Judiciary subcommitee, invited him to testify before Congress based on that experience. There's really no way to summarize Colbert's testimony, so here's the video of his statement from the hearing:

Colbert's live testimony almost didn't happen. Before the witnesses spoke, House Judiciary Committee chair Rep. John Conyers (D-Mich.) described himself as a big fan of Colbert—praising the rally that he and Jon Stewart planned for next month—but said he'd "would recommend that we've got all this attention, you could excuse yourself." Colbert ultimately ended up staying, but Conyers' remarks reflected anxieties among some Democrats who thought the publicity stunt would ultimately trivialize the issues at hand and humiliate them. (Colbert isn't the first fictional character to appear before Congress: as Rep. Judy Chu (D-Ca.) pointed out, Republicans once invited Elmo to speak about music education before a House committee. (They also invited Loretta Swit, who played "Hot Lips" on the TV show M.A.S.H.)

House Republicans took their shots in the hearing. "Maybe we should spend less time watching Comedy Central and more time looking for the jobs that are out there," said Rep. Steve King (R-Iowa), the ranking Republican on the subcommittee. Later on, King even accused Colbert of not actually doing typical farm work during his one-day stint with the UFW, claiming that the comedian was packing corn into a box in an unusual manner. Colbert responded in full deadpan with his own zinger: "I was a corn packer. I know that term is offensive to some people, because corn packer is a derogatory term for a gay Iowan."

Colbert did take an earnest turn at the end of the hearing. When Chu asked him why he was interested in migrant farm workers above other issues, he said immigrant workers were seen, particularly during a recession, as "the least of our brothers." While he "didn't want to take any of their hardship away from them," Colbert concluded, breaking character, that "migrant workers suffer, and have no rights."

Earlier this week, I reported on the brewing controversy surrounding multi-billion-dollar mortgage company GMAC, a subsidiary of Ally Financial, and its attempts to fix dubious paperwork the company used to foreclose on homeowners in 23 states. On September 17, GMAC surprised the industry by ordering a halt to foreclosure evictions and sales while it dealt with "technical" and non-factual errors in its court filings. Foreclosure defense attorneys and legal experts, however, said the practices GMAC was trying to remedy were industry-wide, and that the company's admission cast doubt on the validity of possibly millions of foreclosures that used similarly questionable paperwork.

Today, Bloomberg News reports that the Iowa and Texas attorneys general have opened investigations into GMAC's mortgage practices. "The integrity of the foreclosure process is of utmost importance, and we are very concerned by the issues that have been raised regarding Ally Financial’s treatment of affidavits," Iowa assistant attorney general Patrick Madigan told Bloomberg.

No doubt, the two states' probes will examine the use of "robo signers" at GMAC. As I noted on Tuesday:

In recent years, as the number of foreclosures on banks' books mounted, some came to rely on what critics call "robo signers"—employees whose job it is to sign countless documents to keep the foreclosure process chugging along. (The attitude here is similar to that of the assembly line-like law firms litigating foreclosures for banks, often called "foreclosure mills," which Mother Jones has extensively reported on.) That would include people like GMAC's [Jeffrey] Stephan. But attorneys representing homeowners and other advocates question the validity of foreclosures that rely on documents executed by robo signers. If they execute 18,000 cases a month, as Chase Home Finance employee Beth Cottrell described in a May deposition, then there's no way bank employees who sign off can have personal knowledge of every document, critics argue. As Palm Beach, Florida-based defense attorney Margery Golant says, "They don't have any personal knowledge of this stuff. They've made a mockery out of the legal system."

The problem with this assembly-line approach is that it subverts federal civil rules of procedure, which say officials signing off on affidavits used in court must have "personal knowledge" of the information in those documents and must be willing to defend the documents' contents in court. But when asked in a June deposition, "Other than the due date and the balances due, is it correct that you do not know whether any other part of the affidavit that you sign is true?" GMAC employee Jeffrey Stephan, who was tasked with signing off on thousands of documents each month, replied, "That could be correct."

While somewhat late to the party, federal prosecutors are now diving headlong in the foreclosure morass. In addition to the Iowa and Texas AG's investigations, Florida attorney general Bill McCollum has two investigations into some other big players in the foreclosure world: the deep-pocketed powerful law firms who litigate foreclosures for the banks, also known as "foreclosure mills." McCollum's economic crimes division is probing four Florida law firms—Florida Default Law Group, Shapiro and Fishman, the Law Offices of Marshall Watson, and the Law Offices of David J. Stern, the latter the focus of an investigative story of mine in August.

With subpoena power and public ire at their backs, state investigators will surely turn up some fascinating nuggets in the coming months. And what they turn up, you can bet, won't be pretty.

At the beginning of the year, the savvy reporters over at NPR's Planet Money purchased their very own toxic asset. You know, the financial products, made up of home mortgage loans, that were at the heart of financial crisis. These assets earned investors a steady return while the housing bubble grew, in the mid-2000s. But as borrowers started defaulting on their mortgages and the financial sector imploded, these assets forged out of home loans turned, well, toxic, toppling banks and causing some trillions of dollars in losses to the economy. NPR's financial reporters decided to buy one such toxic asset, warmly named "Toxie," to understand exactly how these creatures worked. Throughout the year, they tracked Toxie's declining health, as more of the loans backstopping the asset went sour, and even flew down to Florida to meet the borrowers whose loans went into Toxie. (Those reports are classic; they're here and here.)

Today, I arrived at work to sad news: a message from David Kestenbaum, one of the Planet Money reporters, saying Toxie had died. To mark the occasion, here's a fantastic animated video imagining Toxie's funeral and telling her story:

And here's a rundown, via Kestenbaum, of what the Planet Money crew say they learned from the experiment:

  • Toxic assets really are toxic. Toxie was a slice of a giant bond filled with some 2,000 mortgages from around the country. Half of those homeowners are not making payments or have been foreclosed on. The Planet Money team lost over half the money they spent on Toxie. That, despite careful research and the help of experts in purchasing her.
  • Toxie was a snapshot of the housing market: With the help of an investigative reporter in Florida, our reporters managed to find some of the homeowners whose mortgages are in Toxie. (This is no easy task, Toxie came with 300 pages of documentation, but not the addresses of the actual mortgages.) Some of the homeowners they met were people who had overstretched to buy a dream home. But others were investors who had purchased multiple homes in hopes of making money. And one mortgage from Toxie is listed in an FBI affidavit as fraudulent and possibly connected to a large house flipping scheme.
  • Toxie is survived by many other toxic assets: Remember, during the crisis, how people worried some of the world’s largest banks might be insolvent? A major reason was that they held toxic assets, and no one knew what they were worth. We now know what one was worth. Toxie turned out to be worth $449.06. But there are many more bonds like her out there. Toxie is survived by millions of investors and homeowners, who are part of some other toxic asset’s story. Two years into this mess, the housing market is still unstable and we don’t know how those stories will end.

I won't add any more other than to say, Damn you, Toxie—you should've stuck it out a bit longer. The "Toxie" project (the full catalog of stories is here) was probably one of my favorite pieces of financial reporting throughout this entire mess. She'll be missed.

Glenn Beck wasn't invited to testify at Thursday's congressional hearing focusing on his favorite gold company, Goldline International, but he was certainly there in spirit. The House Committee on Energy and Commerce was ostensibly meeting to consider legislation that would better regulate the sale of gold coins. But to hear the Republicans on the committee tell it, the hearing was nothing more than a witch hunt against a respectable company that had the nerve to advertise on conservative talk radio shows. Rep. Ed Whitfield (R-KY) quoted several news headlines about the hearing that started with something like "Glenn Beck's Favorite Gold Company..." Whitfield suggested that were it not for Beck, the Democrats in charge would never have taken up the gold issue to begin with, though charitably he added, "I hope that's not why we're here."

Rep. Anthony Weiner (D-NY), who has made gold scams one of his crusades and who pushed to introduce the legislation, was incensed: "This hearing is not about whether Glenn Beck keeps shilling for this company. That's Fox News' problem." Instead, he fumed, the hearing was designed to help protect consumers from unscrupulous coin dealers preying on their fears about the poor economy.

But the Republicans were prepared and had even come with props to counter claims that Goldline vastly overcharges people for its products. Whitfield had dispatched his staff to buy a roll of coins from the U.S. Mint for $35. He said the "melt value" of the gold in those coins was substantially less than what they paid for them—to the tune of a 2000 percent markup. "Even the US government is doing a tremendous job of marking up its product as well," Whitfield observed.

Rep. Steve Scalise (R-La.) found an unusual way to defend Goldline: He blamed Obama and liberal Democrats in Congress for not fixing the economy, thereby forcing aAmericans to seek out companies like Goldline. Rather than find ways to create jobs, Scalise ranted, "liberals' answer is to go beat up on the people selling gold." Committee chairman Rep. Henry Waxman (D-Calif.), who made a brief appearance at the hearing, chastised Scalise for trying to politicize the hearing by suggesting that people were getting ripped off "because liberals are running Congress."

Carly Fiorina, the Republican candidate for Senate in California, released a television ad on Thursday attacking her opponent, Dem Sen. Barbara Boxer, as a symbol of "Washington arrogance." The ad focuses entirely on an incident in June 2009, when Boxer, at a congressional hearing, asked a brigadier general who was testifying to do her "a favor" and refer to her as "Senator" instead of "ma'am." This, apparently, is a totally outrageous request. God forbid that a woman politely ask to be addressed in a way she prefers. People flipped out. As blogger Melissa McEwan pointed out at the time, videos of the exchange and articles about it were deluged with comments referring to Boxer as "Senator C***face" and "every other variation on 'Senator + Misogynist Slur,'" you can think of.

Here's the thing, though: even if you were sort of annoyed by Boxer's request, who does it hurt? You don't even have to know the reason why Boxer doesn't want to be called ma'am. It could be that she worried that not using her title was a form of deliberate disrespect. (It probably wasn't, but who cares?) It could be, as blogger Echidne posited, that she "has had plenty of experiences of sitting in a room with other dignitaries, hearing how they are called by their last names while she's called Barbara," and that annoyed her. It could be that she just likes the sound of the word "senator." Maybe she is just "arrogant," as Fiorina charges. The real question is: who cares? The ad provides no evidence that wanting to be called "senator" has any bearing on Barbara Boxer's ability to do her job, or to make effective public policy. It's just a content-free personality based attack, and should be treated as such. This is the kind of discourse that makes us all dumber.

Boxer, meanwhile, has recently released an attack ad of her own. The Boxer ad, in contrast to Fiorina's, focuses on actual issues—on Fiorina's actual, real-life record of accomplishments and failings. It's not very nice, but at least it is a starting point for a conversation about policy:

As it turns out, you can say a lot of really harsh things about Carly Fiorina in an attack ad without straying from the facts. Boxer's ad was rated "mostly true" by (they quibbled a bit with how Boxer's ad calculated that Fiorina "tripled" her salary). And the attack ad didn't even mention that Fiorina was once ranked as one of the worst CEOs of all time

Fiorina doesn't seem to want to focus on issues and records—and Boxer does. The contrast between these two ads is illuminating, but in some ways it's unsurprising. Boxer is a very liberal senator. To a self-proclaimed tea partier like Fiorina, Boxer's record should offer any number of tempting targets for criticism. But California is a liberal state. It's going to be hard to attack Boxer's policies from the right and still win. What's Fiorina going to do—come out as proudly in favor of paying CEOs millions of dollars to ship jobs to China?

It's good for voters to learn more about the candidates in this race—their records and their issue positions. But on balance, a focus on substance will help Boxer more. After all, if you were running against Carly Fiorina, who laid off tens of thousands of workers when she ran HP—who "nearly destroyed" the company—you'd want voters to focus on her record, too. Expect more of the same from both candidates.

U.S. Army Spc. William B. James of Columbus, Ga., forward observer for 4th Platoon, Company D, 1st Battalion, 327th Infantry Regiment, Task Force Bulldog, shoots at the enemy during a more than three hour firefight at the Shege East Afghan National Police Checkpoint Sept. 18. Photo by U.S. Army Staff Sgt. Gary A. Witte, 300th Mobile Public Affairs Detachment. Photo via U.S. Army.

David Corn and Pat Buchanan got into a fiery face-off over the relative merits of Harry Reid and Sharron Angle on MSNBC's Hardball with Chris Matthews. Sparks start to fly at the 7 minute mark and the look on Chris Matthews face is priceless.

David Corn is Mother Jones' Washington bureau chief. For more of his stories, click here. He's also on Twitter.

The Republican right's Pledge to America is widely being compared with Newt Gingrich's Contract with America. But for those of us with long enough memories, it more clearly harkens back a decade further, to the early days of the Reagan Administration. Now, as then, the Republican agenda has two major political thrusts.

First, the Republicans are advancing a Reaganesque program based around defense Keynesianism, an economic pump-prime through military spending. It signals a victory for the Pentagon generals who have been fighting Obama to further expand what certainly appears to be a futile war in Afghanistan and parts of Pakistan—one that can go on and on indefinitely. Moreover, the Republicans want to fund an expensive missile defense system. Just as with Reagan, once this kind of spending gets going, they will be congratulating themselves on new jobs making armaments. At the same time, they can talk of shrinking the deficit by reducing or eliminating domestic programs.

The first wave of big changes under the new health care law take effect today. As my colleague Kevin Drum points out, the changes include some of the provisions that Democrats thought would be the most popular with the public—including a requirement for insurance companies to cover all children, including those with pre-existing conditions, to offer free preventative care, and to allow those under 26 years to be covered by their parents' plans.

Democratic leaders are holding a smattering of press events today to celebrate the new provisions that are going into effect, and some pro-reform advocacy groups like the Progressive States Network are doing the same. But expect the cheerleading for health reform to die down as quickly as it's flared up. In the warm afterglow of health reform's passage six months ago, Democrats predicted that the law would help bolster the party's image before voters. Instead, the Democrats never came out in full force to defend health reform, and vulnerable members up for re-election began running away from reform.

While some anti-reform Democrats have used TV ads to advertise their opposition to the law, barely any pro-reform lawmakers have run ads in support of it. Meanwhile, Republicans have gotten a big boost from outside third-party groups, which have poured $23.6 million into TV ads overall, while their Democratic counterparts have only spent $4.8 million on TV. Progressive fundraising has been anemic, and groups like Health Care for America Now—an advocacy group that went all out during the reform debate—says that it will stay off the airwaves in individual races, focusing its efforts instead on phone calls to seniors.