'Whistleblower' Says Mortgage Securitization Still an Issue for U.S. Homeowners

Lan Pham, an economist fired by the Congressional Budget Office two years ago, is still asking whether the watchdog agency appeared to "diminish or deny" the problem of foreclosure fraud while providing analysis to Congress.

As lawmakers enter budget season in Washington D.C. and wrangle over House Republicans' new budget blueprint, Pham is hoping to draw more attention to the housing market's woes.

"Why is one of the most powerful government agencies that can determine the direction of the nation's policies appearing to diminish or deny that the issue of mortgage securitization is a problem?" she said. "If it is a problem, we have a $7 trillion in mortgage-backed securities that has brought chaos to homeowners, whether or not they are in foreclosure."

Pham said her questions like those have led attorneys general to reach the $25 billion foreclosure abuse deal announced last month, and could affect not just underwater homeowners across the country but the entire U.S. housing market.

With a Ph.D. from the University of Minnesota, Pham worked for the Congressional Budget Office (CBO) for only two and a half months before she was fired in December 2010. In Pham's termination letter, her supervisor, Deborah Lucas, CBO's assistant director, said "a number of performance issues are the basis for the decision."

But Pham said she was fired for providing an analysis about the banking sector and foreclosure fraud issues involving mortgage-backed securities and robosigning that she said displeased her bosses. Pham said the main issues of foreclosure problems relate to securitization, the pooling of mortgages that collateralize mortgage-backed securities, and the Mortgage Electronic Registration System, which has electronic records of ownership on about 65 million mortgages, about half in the country.

In her first interview since releasing a letter addressed to Sen. Chuck Grassley, R-Iowa, through the website Zero Hedge on Thursday, Pham said she is less concerned with losing her job but rather with bringing more transparency to her former employer.

"Because you see the losses around the country from those who purchased homes with banks foreclosing on homeowners that don't have the title to the mortgage, this is an issue where financially we're talking about a $7 trillion mortgage backed securities problem," Pham, who is looking for employment, said. "To me, talking about my career is just beside the point."

Pham said she was assigned to write a brief, or short paper, about foreclosures and that her supervisor rejected her discussions on the decline in property taxes, home prices, and the impact of foreclosures on homeowner assets or wealth.

Pham said her supervisor handed her policy thoughts from Morgan Stanley and Goldman Sachs which "appeared to minimize the exposure of banks to securitized mortgage problems."

She said her supervisor said foreclosure problems were just media "sensationalism," and asked, "Don't you want house prices to go up?"

The CBO has produced analysis that shows the effects of foreclosures in the housing market, but has not detailed problems with foreclosure fraud. Those reports include one from August 2010 that states that "low levels of construction over the past two years have failed to diminish [excess vacant housing units] because the recession and a sharp rise in mortgage foreclosures have reduced the number of individuals and families able to maintain independent households."

Another report from December 2010 describes decreased property tax revenue and lower property values.

Pham wrote a letter to Sen. Grassley, ranking member of the Senate Judiciary Committee, dated Feb. 23, 2011, asking for help and explaining her story and writing that "there is room for doubt" about the perception of the CBO as objective and non-partisan.

Read Pham's letter to Sen. Chuck Grassley here.

After the Wall Street Journal published a story about the CBO, raising questions about how its assessments are compiled and including Pham's story, CBO Director Douglas Elmendorf published a blog post defending the agency.

"We have the utmost confidence in the objectivity of our work and devote considerable time and energy to explaining the basis of our findings as clearly as we can to help Members of Congress understand the work that we do," Elmendorf wrote. "In fulfilling its responsibility to the Congress, CBO works hard to ensure that its cost estimates and other analyses are impartial and well-researched."

Asked to comment about Pham's letter to Sen. Grassley, a spokeswoman for the CBO said the agency could not discuss individual personnel matters or on CBO's specific interactions with members of Congress, as a matter of policy.

Grassley wrote a letter to Elmendorf on March 24, 2011, requesting personnel files about Pham and wrote that some factors in Lucas' background "could raise concerns about the appearance of CBO's objectivity," including her participation in "Obama for America" and her donation to President Obama's campaign.

Pham did not allege that Lucas' political views played a role in her firing, but Grassley wrote, "when a person with such strong views is hired for an 'objective' and 'non-partisan' position, it naturally raises red flags."

A spokeswoman for Grassley said the senator "continues to look into Dr. Pham's account of the issues surrounding her firing," but the "CBO refused to cooperate with Sen. Grassley and has made it very difficult to learn more about Dr. Pham's serious contentions."

Sen. Grassley raised the issue with the House of Representatives' inspector general, and it is not certain whether the inspector general will or can take any action.

"[Grassley] continues to explore options for injecting more transparency into this situation," she said.

The office of the inspector general did not immediately return a request for comment.

For now, Pham continues to ask whether mortgage securitization and the $25 billion settlement with attorneys general and foreclosed homeowners will lead to further accountability.

"You can see all of the issues that are coming out of this mortgage fraud settlement," she said. "The problems of mortgage securitization bring up a whole host of issues. Most homeowners are probably not aware who owns their mortgage. If they don't own it, then who does? You can imagine the chaos that is emerging with more information, and this issue continues to grow."