if you just joined us for a welcome here in moscow top stories now syria's foreign ministry says the gangs were responsible for the massacre in the town of houla and a bit to start a civil war that is washington ready to sideline the un and go into syria. votes on whether to hand over the country's money matters to brussels which could see its sovereignty surrendered to. the father of poisoned alexander litvinenko believes the russian tycoon. was behind his murder in london. well that's the way it looks at the moment. but with the news team in half an hour

from now as the news continues in the meantime we go to our washington studios where lauren lyster gives her assessment on today's top economic events. good afternoon and welcome to capital account i'm more in leicester here in washington d.c. these are your headlines for wednesday may thirtieth two thousand and twelve right now at the world bank here in washington there is reportedly a global housing finance conference going on this theme is the importance of it now it's focused on emerging markets but how about a lesson in how housing finance can go terribly awry as we've seen in the united states we have this story you probably have not heard behind robo signing and mortgage backed securities from a u.s. government whistleblower that you haven't seen on t.v. and that was a blow or was fired from the u.s. congressional budget office which is purported to be nonpartisan and objective

remember now she believes it may have been because she gave an honest assessment of the issues facing the u.s. economy that was that odds with with this cvo and perhaps it's panel of economic advisors including morgan stanley and goldman sachs wanted to put out to the public so who is this c b o and congress really serving she's here to tell us why we should all be asking that question and remember that twenty five billion dollar mortgage settlement that was still proposed to help struggling homeowners or victims of foreclosure abuse well homeowners are suing in one state so the money doesn't go to filling state coffers instead of going to homeowners we'll talk about it let's get to today's capital account.

today we have a story you probably haven't heard that's behind the mortgage mess and foreclosure fraud in the united states let me give you some background before we get to our guest in the past century real estate law in transactions in the u.s. have been subject to state regulations with mortgage documents recorded at the county level now this works relatively well in a traditional mortgage market like we had for most of american history the bank that issues the mortgage keeps a loan on its books until maturity however this makes difficult if not impossible the type of financial engineering of mortgages we've seen in past years i'm referring to of course the slicing and dicing the repackaging and selling of homes in mortgage backed securities and collateralized debt obligations for example that

we saw during the refinancing credit boom of the two thousands now one glaring reason for this is that every time a financial product containing mortgages is sold various state laws would require that the sale of the mortgage be recorded in the local county office so this results in additional cost of course paperwork and perhaps most importantly chain of title trails now eager to work around these barriers of course the financial industry with all of its innovation created an alternative system for recording the issuance the sale and the redistribution of mortgages now that system is known as murmurs you probably never heard of at least i hadn't it's the mortgage electronic registration systems and it was founded in the mid ninety's with the help of the big banks you see here these are shareholders along with fannie mae and freddie mac. now mergers was created this is straight from their website by the mortgage banking industry to streamline the mortgage process by using electronic commerce to

eliminate paper now according to mers this would also. help reduce fraud and less fraud means lower costs for all borrowers now it may actually have accomplished the exact opposite of that stated objective so let's back up because what this did was effectively replaced the recording and the tracking of mortgage ownership and the paperwork at the county level with a privately controlled system for tens of millions of mortgages once more is winces to tooted this is what happened a lenders were still required to file initial paperwork at the county but with two key distinctions from how things were done in the past first the paperwork did not need to be filed with the name of the lender instead of bank of america our j.p. morgan or whatever it said mers that was substituted in place of the mortgage issuers now second and perhaps more importantly annie's subsequent modification in

terms or in change and ownership of that mortgage so what used to be paper at the county everything was filed through the county. instead would only be recorded now through mers through this database making it effectively a black box for the securitization industry and for the truly ns of dollars in mortgages that would subsequently be rolled up cut up sold in complex financial products to pension funds and other investors trillions of dollars in credit protection let me remind you was written on these very mortgages to adding another layer of exposure to a financial system run amok so fast forward mid ninety's mirza's founded by two thousand and seven it registered some two thirds of all the home loans in the u.s. that's according to harper's and it was around this time that the financial system

began to experience the credit convulsions that of course went on to become known as. the financial crisis now this led not only to a bailout of firms holding these toxic products but it also led to a one hundred eighty billion plus dollar bailout of the largest insurer of insurance protecting against the very products that were being pumped out like sausages on an assembly line and of course the federal takeover of fannie mae and freddie mac. which is still being footed by the taxpayer in the us now these are issues that dr lanty pham former principal analyst and financial economist at the congressional budget office was beginning to explore in her work there that was back in two thousand and ten but as soon as she started writing about things that this baby other like she was fired that's according to her now she's here to tell us her story and what these issues are that are still so important to housing to the

mortgage market to taxpayers homeowners and pretty much anybody that's watching this show so first of all welcome to the show dr pham we're very happy to have you on. so first let's back up for those of our viewers in our audience who are not familiar with your story let's first start out with who you are and how you came to work for the congressional budget office in the first place. well prior to coming to the congressional budget office i was an actual professor at a university for a brief time teaching graduate students in the graduate program the use of economics to examine policy but i was still very interested in working on real world issues as a father a dozen years ago i had worked in a firm where i was exposed to different aspects of housing finance issues from the regulatory side from the policy side. of banking all these issues which

have evolved to be at the center of the financial crisis in two thousand and eight as a follow in my teaching. at the congressional budget office at the congressional budget office i would be what they would call it senior staffer over principle analysts off a national economists in the seals the national analysis to the nation ok and as a congressional senior staffer and financial economist there your initial responsibilities as i understand them were to write a brief to congress on this day the foreclosure crisis and the alternative policy options in that crisis as well as cover banking and housing now when you presented this opinion to your supervisors specifically the c.b.o.t. chief economist and assistant director dr deborah look at what was her response. well i i at the time when i was writing the foreclosure grid to congress and also internal memos on the banking and mortgage sector there was help to provide input

into the macro economic forecast for the country at that time the robles lining up for closure of fraud issues emerged and i wrote about that and dr lucas the chief economist at told me that it was an issue of media sensationalism and discouraged me from writing about it. in response to what i wrote in the the memo she said that foreclosure fraud or robo signing was an issue that we should take the lead on that we should not be adding of that we should be adding skepticism to the issue rather than add to the media hype and that was the response from my writing up our proposal fraud and also a reason that was cited in my termination where the city of thought that i had poor judgment in writing up issues related to rebel signing and what it meant for chain

of title issues in mortgage securitization now as you said this wasn't just a dispute with your boss you did just disagree on the core issues here you were fired why do you believe you were fired. if there was fire because it was not only an issue of the robles landing but i also covered and wrote about the banking sector and the mortgage markets and all of these issues are inextricably linked and at the heart of the financial crisis in two thousand and eight and there were other concerns raised about the banking sector where there were issues to potential acquisitive problems and the solvency issues that came out of the financial crisis in two thousand and eight where she dismissed those concerns and reversed and actually she went through and then changed my my memory to reflect the views of the c.e.o.

that the banking sector was by the ruble signing of was just the look that would go away and that we should not be concerned about it and now that blip that they believe will go away has resulted now a few years later at a twenty five billion dollar mortgage settlement about those very practices related to bro both signing do you see that settlement as a testament to the fact that what you were raising was the right issue to be raising. well it's not just that i was raising these issues that are the supreme courts and being confronted with. currently actually just recently the washington state supreme court the oregon state supreme court heard arguments on the validity murders to foreclose and also it was an issue that required an act of congress when the issue emerged where congress quickly passed the nature of the bill that would have made difficult for homeowners to challenge

the well for closures that were improperly done with poor documents defective documents that were presented to the courts and so. the the settlement i'm not quite sure what it settled i think. what they did not say spoke volumes about. the issue rather than what was presented to the public with the settlement and i want to get more into that settlement as far as forward looking but first i want to back up because essentially you're saying that you were fired because this cabo didn't like your pessimistic point of view i also should mention that and your personal story that you've written you said you were told to include research include analysis from morgan stanley from goldman sachs so big wall street banks that were advising the c b o and at the heart of your criticism was something you just mentioned something

that i won over in my introduction called mers which stands for the mortgage electronic registry system now we gave a brief overview of this at the beginning of the show but could you just expand upon why it is so important in your view to this subsequent crisis we saw in the mortgage market and the larger financial crisis and talk about mergers. well and murders is another word for that is the title database that purports to have legal standing on over sixty five million i think it's over seventy million mortgages and as the robles signing issues emerged in the fall of two thousand and ten there were also increasing legal challenges in the use of mirrors in the banks and then in their thirty next use of moves to foreclose because until then or over the time that they found it mars all of these mortgages are recorded with mercy's name is so

they relied on the system in order to initiate or closures and at least half a dozen states have invalidated the use of the legal standing to foreclose. and so we're looking at a little system that is very. that is not that relatively unknown that holds the title to. sudden the million mortgages and the ramifications of the lack of legal standing for mers has serious consequences for investors for. fannie mae and freddie mac. which announced back stopped by taxpayers the exposures that the banks expos to in the mortgage backed securities that they issued and especially for investors as well because if there is a break in the chain of title because mers now has lacked legal standing in several states. that what they may end up with six and half or seven trillion dollars in

mortgage backed securities that are out there is it just that perhaps these executers may be on securitized or unsecured and dr pham a lot of implications here is basically opened the door to this the characterization to these trillions of dollars of mortgage backed securities that break that habit. and the economy into the financial system so when we get back we're going to talk more about that we'll have more with dr lanty pham former principal analyst and financial economist at the c.b. i will be back in just one minute stay right there also still ahead we'll have more with our whistleblower dr pham about how the mainstream media responded to her firing and her story about her job as c.e.o. but first her closing market numbers.

well. it's technology innovation all the latest developments around russia we've got the huge earth covered. welcome back today we have a very special guest we're talking to dr lanty pham she's a former principal analyst and financial economist at the congressional budget office supposed to be objective supposed to be nonpartisan dr pham she was fired when they didn't like her analysis because it wasn't as rosy as they would have

liked it to be they didn't want to talk about problems in the mortgage market the housing market problems with robo signing with the banking sector and of course robo signing we don't how that turned out there was just a settlement the problems in the mortgage market continue to plague us and she has actually said she was fired she's telling us about the issues she was finding the did play out which still very much play a role today one of them is something you maybe have never heard of mers it is this database that basically made all of this information that used to be filed with the county about mortgages private and this opened the door to mortgage backed securities is huge trillion dollar market in them so let's bring dr fan back in to talk about how mers played a role in all of this so that everybody does know the work she was doing so dr pham we were talking about mergers and how this brings up issues in the title of these mortgages and the chain of title and it appears almost after reading what you've

written that robo signing wasn't just advantageous for banks but it was necessary in order to foreclose because they're required documents were nonexistent or missing do i have that right can you explain. in the fall of two thousand and ten as. new problems emerged this is. and it isn't it was not just an unsolicited incident there were legal challenges to. but. as far as the missing documents with that result as a birth and did that lead banks to forge them to foreclose on people well yes because legal moves can no longer be used to initiate foreclosures in these banks and in the. in the banks names and so they had to emerge to foreclosure under their own name and if they had the proper documents they would have presented that to the

court and we would not have an issue but i believe that because of the break in the chain of title and the missing documents especially the mortgage how can this not promissory notes that were not available that the banks in the services had to resort to creating or fabricating are using defective or forged documents to foreclose and it was actually and how did mers create potentially over seven trillion dollars and i mean backed so-called mortgage backed securities. the securitization of mortgages relying on the investors ability to liquidate the collateral or access the collateral which is the homes that back these mortgage backed securities and the mortgages were registered inside mergers which has whose legal standing has been eroded

by the courts and so if they're not able to access the collateral then what is it that backs these mortgage backed securities and it's not just an issue of mercy as well because it's the issues in the way that miers was set up that raises the possibility is that what what is it that backs these m.b.'s is is that some court cases have shown that these banks i cannot even show which m.b.a.'s pulled the mortgages that they were trying to foreclose on so not only does it raise questions about whether these investors are holding secured assets as we've seen in the case recently where a large pension fund is suing the trustee of the bank of new york mellon overseeing thirty billion dollars in these mortgage backed securities that has suffered about nine billion dollars in losses and delinquencies and one of the charges in that

case is that the promissory notes and the mortgage documents were not delivered to the trust and that was made possible by this black box where mortgages are sliced and diced really hypothecated you said with the event the case possibly now all of this you have been investigating but when you were at the c b o you were fired and after that you wrote a letter to us senator grassley about your story because he's known as an advocate of whistleblowers what happened with the letter and the reporting inquiry that followed because we contacted his office he said that if it stands still yet we have this letter that he sent to the c.b. you know asking for some information on your personnel records e-mails c.b.l. tells us they have no comment so what's the status of all this. well the the story was not made public until a few months ago. through an article that was put out by the wall street journal in the third who were that there had been an ongoing inquiry for the past year now

with the way that the wall street journal wrote the article they found it with what came out it seemed they had great difficulty in talking about mergers or mortgage fraud for closure for mortgage securitization none of that came out in the article despite the fact that they had extensive access to the congressional inquiry the day after the wall street journal article came out it happened that the new york attorney general announced a lawsuit against mergers now that would have a validated all of the issues that i had written to senator grassley a year before. but the congressional inquiry declined to release the letter saying that it was a year old desponding that this announcement by the new york attorney general followed within a few days the department of justice and forty nine attorneys generals announcement

of a national a settlement on the foreclosure issue now i see you let me ask you this dr pant because you mentioned the wall street journal article i want to i want to show our audience other things that have been written about your story so we had the huffington post saying your story was the most important story of the day that was from janet have a callie after she read it in vero head on a blog which is the only place that your story appeared in it's entirety you mentioned the wall street journal did a story and a.b.c. did a story but you had some concerns about the way those stories were done how was the mainstream media's coverage of your story why do you think they didn't address some of the issues that you're talking about with mers with what you're calling foreclosure fraud and some of these other issues. my sense is that i think there is a fear of the system that runs the cations of murders and there are over seven million mortgages that are in the process of some process of the delinquency or foreclosure and there are. cases of the poor in the state supreme court that will

decide whether or not motors will have the legal standing to foreclose these issues have not been resolved because there is even just a month ago there was an amp history filed with the florida state supreme court expressing concerns about that than ality of closure sales because a buyer of a foreclosed property may not be the legal owner of that property as was decided in the case with the massachusetts supreme court and so these issues still exist they're still problematic but that the media has had great difficulty in speaking about mergers even kolya foreclosure fraud there's such a difficulty in calling presenting to the courts the forged documents deceptive documents so i find that curious and also if you see news.

had great difficulty or or actually as you said at the xcel in distortion as much of what we have talked about was unrecognizable by the time that a.b.c. news put out their story and depending on the day that you read the story the version changes and i shudder vamp down answer that let me get in here because we're up against the close to the end of the show and i really want to get to this point you're posing here and your story that you wrote who is this the b.o.'s serving who is congress serving who gets analysis from this what do you think is the answer to that and why do you think that's an important question to be asking. well i have a sense of what the answer is but it is those are questions that are put to the public and it is for the public to. hear my story and to ask questions about the congressional budget office because the congressional budget office is a very powerful agency that determines it can determine the course of the nation's

policy with the way that it does its analysis and its scoring of the bills and this . line in suggesting that. in diminishing the issue of robo signing as and to not add to the media hunk so this is a question that i put to the public for them to ask the congress and seaview. who it is that they so yeah i dr pham we appreciate you being on the show and talking to us we're out of time but i do want to tell our viewers i asked you earlier why now it's been two years since you worked for the cvo because these issues are still so important and there's so much that needs to be looked at so i really appreciate you being on this show to do just that dr pham former principal analyst and financial economist at the c b o thank you. now that's our show for today thank you so much for watching make sure to come back tomorrow. and in

the meantime you can follow me on twitter at lauren lester and give us feedback on the show or any that you missed you tube dot com slash capital account also check out hulu thanks so much for watching and have a great night.