Six degrees of separation – connect the dots

Six degrees of separation (also referred to as the “Human Web”) refers to the idea that everyone is on average approximately six steps away from any other person on Earth, so that a chain of, “a friend of a friend” statements can be made, on average, to connect any two people in six steps or fewer.

How far away are the members of the BOCC from wealthy “muni” bond investors?

1. Bank of America Merrill Lynch has just come out endorsing tax-exempt municipal bonds as a sound investment.

Bank of America has agreed to a $137 million settlement with several states including Florida amid an investigation into allegations members of the bank took part in a scheme involving bids on municipal bond derivatives. The Bank of America settlement is the latest installment of the federal government’s investigation into anticompetitive practices in the municipal-bond industry, including bid-rigging, price-fixing and kickback-paying.

Bank of America is a shareholder of Mortgage Electronic Registration Systems, Inc. (MERS).

2. MERS acts as a “nominee for Lender and Lender’s successors and assigns”. This allows blocks of home mortgages to be treated as a single entity for investment management and eliminating county transfer fees.

MERS is facing lawsuits from counties across the nation for lost revenue from missed filing fees. MERS and the MERS System’s role in the foreclosure crisis is being investigated by the U.S. House of Representatives Judiciary Committee.

3. The “MERS System” is used by member financial organizations to register single family home mortgages. With one such member company, Nationwide Title Clearing in Pinellas County, employees  had little knowledge about the thousands of mortgage assignment documents they have been signing, coining the term “robo-signing.” This caused nightmares for counties. Over 60% of single family home mortgages are in the MERS System.

4. What Government National Mortgage Association (GNMA), or Ginnie Mae does is guarantee investors the timely payment of principal and interest on Mortgage-Backed-Securities (MBS) backed by federally insured or guaranteed loans.

5. The Housing Finance Authority (HFA) of Hillsborough County recently requested County Board approval for a $250,000,000 “financing plan” to bond the purchase GNMA-guaranteed, single-family, low-income first-time home-buyer mortgages from banks OR TO PURCHASE SECURITIES FROM A MASTER SERVICER…

6. With very little discussion about “The Financing Plan” or the “master servicer”, The Hillsborough Board of County Commissioners, passed the resolution 7-0. County Commissioners also voted to find alternate funding sources for a Tampa light-rail system which had been soundly rejected by county voters. Coincidentally, the light-rail route would require the taking of existing rentals, thereby creating a new pool of first-time home buyers eligible for GNMA mortgages.

It can only be hoped that the dots are not as well connected as they seem.

<IMHO> Fred Jacobsen


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