How to Be An Expert Witness and Other Events

REGISTER FOR PHOENIX WORKSHOP NOW:

CLICK HERE EXPERT WITNESS WORKSHOP

see 2009ASBL_FINAL_03_Leibowitz survey of 2009 BKR proceedings and theory

UPDATE: LOOKS LIKE WE ARE GOING TO PUSH THIS BACK A LITTLE AND THE INABILITY TO TAKE CARDS AND PAYPAL WAS AN IMPEDIMENT THAT IS NOW SOLVED BY WWW.LIVINGLIES-STORE.COM.

I’m PUSHING BACK THE TENTATIVE DATE TO FEBRUARY 21-22 FOR Expert Witness Workshop REGISTER NOW: EXPERT WITNESS WORKSHOP

for Lawyers who litigate, lawyers who want to be expert witnesses, accountants (send a CPA a link to this post), forensic mortgage analysts, and TILA (Compliance) Auditors.

This is for people who have some credentials (academic degree, license or other indicator of existing expertise). The purpose of the workshop is to give existing professionals the option of appearing as experts, filing expert declarations, and presenting expert evidence either as lawyer on direct examination, lawyer on cross examination, or litigant arguing for the right to discovery and an evidentiary hearing.

THIS WORKSHOP IS FOR PEOPLE WHO CAN BE QUALIFIED AS EXPERTS AND WHO HAVE ACQUIRED KNOWLEDGE THROUGH THE GARFIELD, GARDNER OR CHARNEY WORKSHOPS, OR THEIR OWN RESEARCH AND PRACTICE. YOU SHOULD BE FAMILIAR WITH THE BASIC CONCEPTS OF SECURITIZATION, REAL ESTATE LAW, RECORDING, NEGOTIABLE INSTRUMENTS, EVIDENCE, DISCOVERY, MOTION PRACTICE AND TRIAL TACTICS.

An additional workshop for forensic analysts will be offered shortly as well. This one is larger and open to all kinds of people who want to acquire knowledge and maybe later become an EXPERT.

Whether you want to be an expert witness or you are looking to use one, the information in this Post will assist you. This seminar is going to take at least 2 days and will involve several presenters.

Because the curriculum in the expert witness workshop involves interactive participation between participants and mock hearings, the number of people who can attend must be limited to twenty people, more or less. I haven’t committed the date yet, but it will probably be within the next 4-6 weeks and located in Phoenix. The current plan is to provide (after the workshop) real-world telephone and email support to “graduates of this workshop.” Real-world assistance in preparing demonstrative exhibits for courtroom presentation will also be given. The idea is is create a bull pen of experts who can take the requests for service that I get and run with the ball, with my help.

If you are interested in attending the EXPERT WITNESS WORKSHOP, please send your contact information to ngarfield@msn.com no later than January 31, 2010 OR just sign up for it when it gets posted on EXPERT WITNESS WORKSHOP (still under construction but hopefully done later today)

1. The main issue I am addressing is the GAP between the end of a forensic review or compliance audit and what happens next.
2. The secondary issue is the confusion on the part of both lawyers and prospective experts between information and evidence.
3. Lastly, I wish to present a strategy that changes the course of the case from a he-said she-said argument in court and directs it into discovery toward an evidentiary hearing.

The current trend is a strategy that is working only sporadically and frequently offends the Judge’s sense of fairness when he/she perceives your goal of “getting a free house.” I want to change that into encouraging the Judge to allow homeowners and their attorneys to pursue truth and justice. The goal is not a free house. The goal is learning the identity of the creditor, tracing the documents, and getting a FULL accounting of all financial transactions affecting the specific loan that is in issue.

To make it clear, it is my opinion that in order to win any case you have to establish credibility and a rapport with the Judge and not try to badger him/her into some ideological position of how bad things are or how much of a hardship is imposed on the homeowner and then hope the Judge decides whether he/she will fashion a remedy for you. In most cases, they won’t and frankly that is not their job.

So instead of going into court and trying to play the magic bullet of “where’s the note” and then having nothing else to say, and instead of trying to become your own expert in securitization, securities, UCC, negotiable instruments, property law, civil procedure and other areas of the law, you should be able to present a position that virtually any Judge would agree with, to wit: that each case should be decided on its merits and the facts of that case and not on some subjective standard of fairness.

Third party testimony and reports is the channel that will and does accomplish this goal. Third party testimony establishes facts or issues of fact that are at variance with the misrepresentations made by counsel for the pretender lender. Expert fact testimony gives the Judge some insight into these facts and their significance. Expert opinion testimony gives the Judge even more in terms of defining the issues of fact and the need for discovery, the possibility (probability) for settlement and narrows the issues of fact and law that must be decided by Judge or jury.

The aim here is to guide the proceedings toward an evidentiary hearing wherein the pretender lender is identified not as a creditor but as someone who claims to represent the real creditor and who won’t disclose the identity of the the creditor. In most cases credibility shifts from the pretender lender to the homeowner once the point is driven home. This strategy maintains the Judge in the comfort zone of not making law (a job for the legislature) but instead deciding on the facts and the application law.

WHO CAN BE AN EXPERT WITNESS? Virtually anyone including a party to the litigation in most cases.The issue is really credibility, which comes down to credentials, knowledge, demeanor and knowing what to expect when your opinion or credibility is attacked. The side issue of course is the credibility of the party or attorney who is presenting the expert witness and whether he/she knows how to elicit credible testimony on direct examination such that the Judge is truly enlightened rather than baffled with bulls–t.

I would caution TILA auditors and forensic reviewers about considering their position as either third party fact finder or as expert witness. I think you cannot credibly be both. The expert should be someone who can say they have reviewed the audit or review or analysis and they have done some research on their own and and have come to the following conclusions based upon a reasonable degree of certainty within the context of the finance markets, housing market and mortgage origination and processing industries. Thus the attack on the audit becomes a matter for another day. If you are stuck defending the audit you will never get to the point where you are expressing fresh, independent expert facts and opinions about the industry and about the loan in question.

WHY BE AN EXPERT WITNESS? First, because the usual expert in complex litigation (i.e., mortgage litigation cases involving securitization) will charge an average of $350-$600 per hour with a five hour minimum and an additional $2500 per travel day plus all out of pocket expenses. Such experts will charge $1500-$2500 for an Expert Declaration (which I offer, but don’t have the time to meet all the demand, hence the workshop to increase the number of people who can sign such a document and defend it under cross examination or deposition). Even with a comparatively light caseload, the income is significantly higher than other areas of service for distressed homeowners. Another reason is there are pitifully few of us who can serve as true experts that can defend our positions under questioning. So the market is wide open for a lot of experts to enter the fray.

WHAT IS EVIDENCE? While there are many fancy definitions, for the purposes of this post and most actual situations in the courtroom, evidence is anything the Judge states that he/she is allowing in as evidence or anything that is presented in an evidential hearing without challenge from the other side. This one point accounts for nearly every situation in which the lawyer or litigant lost. Lawyers for pretender lenders take control of the courtroom dialogue but “laying the foundation” when they are neither a witness nor even knowledgeable about the loan. So when the lawyer comes in and introduces himself and says he represents Wells Fargo, you might want to challenge that and say you want proof that he does in fact represent Wells Fargo, or executive Trustee Services or whoever they say they represent. If he says his client is the lender, you want to challenge that and ask the Judge if this is an evidentiary hearing so you can cross examine the attorney under oath as his testimony, changing him from lawyer to material witness. Most lawyers and litigants walk out open-mouthed not knowing what hit them. Well here is the answer: representations were made in court by an unsworn witness without any personal knowledge (go look up competency of witnesses) of the facts WITHOUT CHALLENGE — so the Judge took the representations as true (as though you were stipulating to them). A quick look would reveal to anyone that you lost as soon as those representations were made and not challenged. If instead, you said “Judge, I object. I have an expert report that concludes that the facts are different than what counsel is representing,” then you give the Judge an opportunity to inquire and to allow discovery and an evidentiary hearing. And from what we have seen so far, the pretender lenders cannot survive discovery much less an evidentiary hearing UNLESS YOU LET THEM.

Oh yeah, you better be right.  I should mention that in order to be an expert witness, you have to really know what you are talking about, be able to explain it in simple terms, and be strong enough to stay on message when challenged. That’s why you need the other seminars and boot camps that are being offered around the Country.

By the way. I think the next Max Gardner Boot camp is scheduled for end of  January (commences 1/28, I believe). I’ve had the pleasure of speaking with or communicating with both Max and his graduates. I am extremely impressed by these lawyers. For Details see www.maxbankruptcybootcamp.com

Our next lawyers workshop (1 day) is shaping up for February as well, most likely Los Angeles area and details will be announced shortly. Send inquiries to foreclosuredefensegroup@gmail.com. It will also be posted on www.livinglies-store.com

We are also putting together a workshop for those who want to get their stuff together on doing forensic analysis and TILA (compliance) audits.

1,800,000 Visits and moving fast. Thank You Readers!!

Come visit our store to register for expert witness workshop, purchase workbooks, and arrange for services. www.livinglies-store.com

Don’t be so fast to leave your home just because you are “behind”. Those payments might not be due at all or if they are, they are probably not owed to the people you are paying.

We are very pleased with the responses from our devoted readers, many of whom are direct contributors to this site. The insights, forms and analysis from the many soldiers — lawyers and laymen alike has made this site the premier resource for assisting distressed homeowners in gaining relief — sometimes total relief — from Mortgages based upon false appraisals, using predatory lending practices and withholding vital information from borrowers at the closing table.

How many borrowers would have signed on the dotted line if they had known that they were signing a ticket for unprecedented and unjustified fees and profits earned by unknown parties — sometimes as much as the mortgage itself?

How many investors would have put up the money if they had known that only some of it was being used to fund mortgage transactions and that the rest was being kept as fees, profits and reserves to pay them out of their own money?

The victims here are all homeowners and all consumers and all investors and all  taxpayers. The companies seeking to foreclose never owned the mortgage, note or obligation. They have no right to your property or the proceeds of sale to your property. Use this blogsite as your resource to educate yourself. Consult with local counsel start with the listing of “Lawyers that Get It”. Get a forensic review NOT just a “TILA loan audit” and challenge EVERYTHING!

BUYER BEWARE OF SO-CALLED ENDORSEMENTS BY LIVINGLIES

The simple way of knowing is if we SAY ON THE BLOG we endorse them, then they are endorsed. So far, while we have our preferences we have endorsed nobody. IF WE JOIN FORCES WITH SOME FIRM, WE’LL ANNOUNCE IT AND PROMOTE IT. If you don’t see it here, then it doesn’t exist no matter what they claim.

STORE IS OPEN. GIVE IT A TRY AND LET US KNOW HOW IT WORKS FOR YOU

WWW.LIVINGLIES-STORE.COM

PAYPAL and MOST MAJOR CREDIT CARDS ACCEPTED

Million-dollar home sales continue to decline in California

Monday, February 8th, 2010, 2:41 pm

Million-dollar home sales continue to decline in California, as price declines are bringing homes below the $1m threshold and hesitant buyers have yet to return to the market, according to property data provider MDA DataQuick.

A total of 18,621 California homes sold for $1m or more last year, down 23.8% from 24,436 sales in 2008. It marks the fourth consecutive year of sales volume declines and follows similar year-over-year declines in 2007 (42,506 sales), 2006 (50,010) and the peak year of 2005 (54,773), DataQuick said.

The decline in higher-priced house sales was countered by higher sales in all price levels. Total California home sales increased 16.9% to 460,166 in 2009, from 393,703 in 2008, DataQuick said.

“Prestige home sales are a unique sub-category of the real estate market,” said DataQuick president John Walsh. “The buyers and sellers respond to a different set of motivations. In the multi-million-dollar price ranges, decisions are largely discretionary and aren’t as dependent upon jobs, prices and interest rates the way they are for most buyers and sellers.”

The overwhelming majority — 15,569, or 83% — of homes that sold for more than $1m priced between $1m and $2m. There were 1,902 homes sold between $2m and $3m. Another 590 units sold between $3m and $4m, 228 sold between $4m and $5m and 332 sold for more than $5m.

DataQuick calculates its figures from public records confirming the presence of a buyer, a seller, money transfer, and legal transfer of property ownership, including sales to companies and trusts. The data does not include property swaps, sales of multiple lots, sales where no price or loan amount was available, property tear-downs, or large farm or ranch properties.

The largest and most expensive purchase DataQuick confirmed for 2009 was a 22,721-square-foot, 9-bedroom, 10-bathroom Bel Air house built in 2008 that sold for $26.5m in July.

Million-dollar home sales in Riverside County dropped 48.6% last year, while they dropped 13.3% in Los Angeles County, DataQuick said. Sales in Portola Valley and Atherton in San Mateo County, Newport Beach in Orange County, Ross in Marin County and Rancho Santa Fe in San Diego County were almost exclusively million-dollar or higher transactions.

New homes accounted for 1,457 of last year’s $1m-plus sales, down 50.3% from 2,933 for 2008. There were 1,542 condo sales priced at $1m or more, down 34.7% from 2,362 in 2008. The median size for a million-dollar home was 2,646 square feet, with 4 bedrooms and 3 bathrooms.

There were 4,925 notices of default issued in 2009on homes previously sold for $1m or more, while the number of trustee deeds, which count total foreclosures, was 2,698 in 2009.

DataQuick said 29% of buyers in the $1m-plus range paid cash, up from 24% in 2008. In the $5m or higher category, two-thirds of buyers paid cash. The median down payment for a buyer who financed a purchase was 39.4% of the purchase price.

DataQuick said the lenders that extended the most credit for $1m or more home purchases were Bank of America (BAC: 14.48 -3.47%), Wells Fargo (WFC: 26.43 -3.61%) and Union Bank (UB: 0.00 N/A).

Write to Austin Kilgore.

Funny Thing About Trust and Credibility

Editor’s Note: business seems more concrete and logical than say, religion. But the truth is that all of finance and the economy is based upon three things: (1) trust, (2) credibility and (3) belief.

Example: If you believed that the U.S. Dollar was going to be worthless (as has happened in our history) would you believe it is worth anything? Obviously not. would you take it for payment? Obviously not. Then why are we expecting any long-term solution to come out of our current policy of pretending that the banks did ANYTHING right? The world is waiting for an answer.

U.S> domestic and foreign policy is restricted by the resentment arising from the act of financial terrorism that was perpetrated by a select few on wall Street. Our financial sector continues to drag down the sparkling image of the the U.S. as the world’s engine of growth and democracy.

The second part is worse than the first. With median incomes continuing to decline the price of housing will also continue to decline. Wealth will continue to vanish — even amongst those who owns and rents property to others. If they can’t get a monthly rental equal to their payments, strategic defaults like Stuyvesant will become common place putting even more housing in disrepair.

The simple truth is that we continue to pretend. It is a fairy tale that we have enough money to buy our way out of this and a continuing lie for us to continue to allow companies, banks, lenders, pretender lenders and others report earnings and assets they don’t have. The “equity” is gone.

The value of the mortgage backed securities is, in my opinion, zero unless some fair system of distributing the wealth is worked out after clawing back all those illegal profits. double undisclosed yield spread premiums and collections on insurance where the beneficiary was not the one who had lost any money. Fair market valuation is the only answer across the board.

Only when we transparently report that some very big companies are actually broke and only when we return the bottom half of the country to some sort of normalcy will we have a foundation for recovery.

Will We Ever Again Trust Wall Street?

by Jason Zweig
Monday, February 8, 2010

provided by

For many investors, the market’s turbulence hasn’t just destroyed wealth. It has shattered their faith in the financial system itself. Consider Philip Eberlin, 56 years old, who runs a woodwork-restoration business in Chicago Heights, Ill. Trading hot stocks a decade ago, Mr. Eberlin got burned on picks like Krispy Kreme and Tyco. In 2007 he got back into stocks, only to take another hit.

Having been burned twice in 10 years,” says Mr. Eberlin, he now has about 80% of his family’s assets   protected from the market” in certificates of deposit and fixed annuities. “I don’t have trust in Wall Street to help the small investor in any way, shape or form.” Mr. Eberlin isn’t alone. Late last year, Decision Research of Eugene, Ore., asked Americans how much they trusted bankers and other Wall Street leaders “to reduce the risk of the financial challenges the country is facing now.” On a scale of 1 to 5, with 1 meaning no trust at all, the rating averaged a paltry 1.7.

With such a loss of faith, how will companies be able to obtain the capital they need to expand? The foundations of the financial markets ultimately rest upon the confidence of mom-and-pop investors across the country.  But every investor has a fundamental need to believe that the world is just—that good people are ultimately rewarded, that bad people are eventually punished and that the system isn’t rigged to favor an undeserving few. This belief in a just world is partly delusional; most of us realize that nice guys often finish last. But this delusion makes short-term setbacks endurable. “A belief that the world is fair and predictable is necessary in order for people to delay gratification and to make investments that will pay off in the long run,” says James Olson, a psychologist at the University of Western Ontario.

So when bad things happen, “people often prefer to blame themselves rather than believe they live in a chaotic and unjust world,” says Dale Miller, a psychology professor at Stanford University.After tech stocks crashed in 2000-2001, for instance, many investors kicked themselves for taking foolish risks. This time around, however, many investors who followed the best advice were punished the worst. Someone who held a total-stock-market index fund lost more than 58% from October 2007 through March 2009 and remains 31% behind even after last year’s recovery.

These people can’t blame themselves; they did as they had been told. Meanwhile, they watched Wall Street firms parcel out billions in bonuses. I believe the old truths remain valid: Buying and holding a diversified stock portfolio still makes sense. Paradoxically, as fewer people cling to their faith in traditional stock investing, the future rewards from it are likely to grow greater. But that can take time. In 1952, two full decades after the Great Crash hit bottom, only 19% of wealthy Americans regarded stocks as the wisest investment choice, according to a Federal Reserve survey. Most investors thus sat out the great bull market of the 1950s, when stocks gained 19.4% annually.

How can faith be restored?  Wall Street firms need to be forthright in admitting their shortcomings. The more they protest their innocence, the more they make the typical investor feel that the financial world is unjust. The Pecora hearings, held in the U.S. Senate in the 1930s, served partly as a form of public expiation, in which Wall Street’s leaders apologized for their firms’ conduct. The Financial Crisis Inquiry Commission, formed by Congress in 2009 and now holding its own hearings, may help investors feel that Wall Street can own up to its mistakes. Finally, financial advisers need to be much less dogmatic and confident in their predictions. By admitting the extent of their own ignorance today, they would help prevent investors from feeling railroaded tomorrow.

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Principal Reduction: Fair or Welfare?

For those ideologues who blindly call for “personal responsibility” we direct your attention to the tens of billions of subsidies (corporate welfare) given to hundreds of corporation, some of whom act contrary to the interests of the American citizen and U.S. Foreign Policy. Either take the blinders off or admit that you don’t care about the facts. In the last year we gave more money from taxpayers to large corporations than all the social programs combined including social security and medicare and medicaid. Isn’t THAT welfare?

Principal reduction is fair and practical and proper. The failure of attempts to encourage modifications and mediated settlements can be traced to a few simple facts. First, the companies being encouraged to modify or mediate the bloated loan packages sold to homeowners and qualified investors, don’t own the deals. They don’t have any authority and they make more money keeping the loans in default and foreclosing than they could ever make by modifying the loans.

[So if you want a law that actually accomplishes anything, then you would require that those who would attend modification conferences be authorized to make decisions. A mediation process would be preferable because it would require the parties to prove their identity and relationship to the transaction]

Second, principal reduction is actually a misnomer. It should be called fair market valuation. The property was not and never will be worth what it was appraised at, so the mortgage on it will never be worth its nominal value and the investment package purchased by institutional investors as mortgage backed bonds are correspondingly worth far less than how they were rated or valued.

The correction for this fraud is to adopt plans that place the victims as close to their original position as possible before they were tricked into this scheme. Tactically, that would be easiest if the borrowers and the creditors (institutional investors owning MBS) got together, sued the intermediaries who caused all this, collected the proceeds of Federal bailouts, and used it to make the investors whole and force the accounting for the notes and mortgages to be reflected as fair market value.

Sure the homeowners who get a “benefit.” But it is a far cry from welfare when you give back what was taken through deceit. The government is far behind the curve on this and the situation is going to get far worse as people walk from the securitized debt because they can. Why should a homeowner, auto owner, student debtor or credit card debtor pay a party who never advanced the money? Free? No, it would be proper to take the interests of investors and their real debtors into account and develop a formula to return equity to the homeowner and money to the investor.

Securitization Hitting Auto, Student Loans, Credit Cards

Ailing securitisation market hits Citi asset sales

By Francesco Guerrera, Henny Sender and Aline van Duyn in New York

Published: February 7 2010 23:05 | Last updated: February 7 2010 23:05

The securitisation market’s failure to recover from its slump during the crisis is complicating efforts by Citigroup and other troubled financial groups such as AIG to sell unwanted assets and repair their balance sheets, bankers and executives say.

People close to the situation said that Citi had opened talks with private equity groups and hedge funds over the sale of $3bn-worth of car loans as part of its efforts to cleanse its balance sheet of billions of dollars in troubled assets.

EDITOR’S CHOICE

On Wall Street: Securitisation’s existential crisis – Feb-05

Cloud of uncertainty over securitisation – Jan-28

Signs of securitisation thaw in Europe – Jan-25

In depth: Citigroup – Feb-03

To make the business more attractive, Citi is believed to have offered to provide the buyers of the loans with finance for a few years after the sale.

Bankers said that the initial response from potential bidders had been encouraging.

Some of the Citi loans have already been securitised under the term asset-backed securities loan facility (Talf), a US government programme aimed at supporting the ailing securitisation market.

However, some private equity groups and hedge funds that have looked at the assets said that the lack of a thriving market for securitised bonds, which are backed by cash flow from loans, made the assets less attractive. They added that the absence of a fully functioning securitisation market increased the uncertainty over how buyers could fund the loans once Citi’s credit facility expired.

“Private equity can’t make a bid on anything where the business model requires a bet that the external funding markets and securitisation comes back,” said the head of capital markets at a big private equity firm.

Citi declined to comment.

In the run-up to the crisis, securitisation was a key driver of the boom in mortgages, credit card loans and auto loans as it transformed these loans into securities that investors could easily buy, lowering their costs and increasing demand for them.

After being virtually wiped out during the turmoil, the market has shown some signs of life but not enough to lure back many investors.

Government programmes have propped up some parts but many of the initiatives are due to expire soon and the financing available at low interest rates remains limited as many investors have held back.

The stumbles of the securitisation market have also contributed to the decision by AIG, the insurer that was bailed out by the US government, to pull back from a number of sales of units such as its aircraft leasing arm.

Goldman-AIG Conflict Reveals Inside Story on Housing Scheme

See NY Times Morgenstern Article on Goldman/AIG COnflict

See GRAPHICAL TIMELINE OF GOLDMAN\’S STRATEGIC \”DEFAULTS\”

Understandably this is a lot to take in so I invite you to pick up a copy of the New York Times, or go to the links above and study this article. First, I have excerpted what I think is important. second you have the whole article.

“Negotiating with Goldman to void the A.I.G. insurance was especially difficult, Federal Reserve Board documents show, because the firm did not own the underlying bonds. As a result, Goldman had little incentive to compromise.”THE MAIN POINT TO KEEP IN MIND, AS IT IS EXPRESSLY STATED IN THE ARTICLE, IS THAT THE INVESTMENT BANKS did not own THE mortgage bonds, THE OBLIGATIONS FROM HOMEOWNERS, THE NOTES SIGNED BY HOMEOWNERS OR THE MORTGAGE DEEDS OR DEEDS OF TRUST. THEY OWNED NOTHING BUT THEY WERE “TRADING” ANYWAY, SCREWING BOTH THE INVESTORS WHO ACTUALLY ADVANCED THE FUNDS FOR THIS SCHEME AND THE HOOMEOWNER WHO ADVANCED THE COLALTERAL OF THEIR HOMES.

This is important because it was the investment banks that initiated the securitization chains. The scheme started with them and was launched with the use of investor money unwittingly advanced into a pool of capital that would be used mostly to fund fees, profits, insurance proceeds, insurance premiums all for the benefit and paid to the investment banks and not the investors.

These were Fees and Relationships that were never disclosed to the homeowner despite very clear laws (Truth in Lending, Deceptive Lending) requiring full Transparency and Disclosure. It is quite clear that undisclosed fees, profits, kickbacks etc. are due back to the homeowner who signed the “loan” papers. I believe there are competing or complimentary claims from both the investors and the borowers against all that bailout and insurance money.

DEFAULT WAS UNNECESSARY: “if mortgage bonds were downgraded, if they were deemed to have lost value, or if A.I.G.’s own credit rating was downgraded. If all of those things happened, A.I.G. would have to make even larger payments.”The principal points you should come away with doubles down on prior comments (including yesterday’s post) about the manipulation or world finance and thus world politics. Until the financial oligopoly is broken apart like it was 100 years ago, we will continue to see nothing but worsening conditions in housing and the economy in general.

The actions of Goldman Sachs clearly show their intent and knowledge that they could cause a collapse and a government bailout. They did it because they could and they are still doing it.

We are now supposed to be lulled by the crisis in the Euro, which is chasing people in the U.S. dollar. Just browse the internet and you will bind blogs like www.baselinescenario.com and hundreds of others that will tell you and show you that this continues to be a banker’s dream scenario. Everytime there is a crisis or a boom the bankers make money on the movement of huge sums of capital. And now, they are controlling the crises and the booms. what could be better?

While the flood of money into the dollar is good for those who worry about inflation, it also guarantees that the housing market will, in real dollars, be down another 10-15% over the next year.

EXCERPTS:

Well before the federal government bailed out A.I.G. in September 2008, Goldman’s demands for billions of dollars from the insurer helped put it in a precarious financial position by bleeding much-needed cash. That ultimately provoked the government to step in.

The S.E.C. wants to know whether any of the demands improperly distressed the mortgage market, according to people briefed on the matter who requested anonymity because the inquiry was intended to be confidential.

$11 billion in taxpayer money that went to Société Générale, a French bank that traded with A.I.G., was subsequently transferred to Goldman under a deal the two banks had struck.

February 7, 2010

Testy Conflict With Goldman Helped Push A.I.G. to Edge

By GRETCHEN MORGENSON and LOUISE STORY

Billions of dollars were at stake when 21 executives of Goldman Sachs and the American International Group convened a conference call on Jan. 28, 2008, to try to resolve a rancorous dispute that had been escalating for months.

A.I.G. had long insured complex mortgage securities owned by Goldman and other firms against possible defaults. With the housing crisis deepening, A.I.G., once the world’s biggest insurer, had already paid Goldman $2 billion to cover losses the bank said it might suffer.

A.I.G. executives wanted some of its money back, insisting that Goldman — like a homeowner overestimating the damages in a storm to get a bigger insurance payment — had inflated the potential losses. Goldman countered that it was owed even more, while also resisting consulting with third parties to help estimate a value for the securities.

After more than an hour of debate, the two sides on the call signed off with nothing settled, according to internal A.I.G. documents and an audio recording reviewed by The New York Times.

Behind-the-scenes disputes over huge sums are common in banking, but the standoff between A.I.G. and Goldman would become one of the most momentous in Wall Street history. Well before the federal government bailed out A.I.G. in September 2008, Goldman’s demands for billions of dollars from the insurer helped put it in a precarious financial position by bleeding much-needed cash. That ultimately provoked the government to step in.

With taxpayer assistance to A.I.G. currently totaling $180 billion, regulatory and Congressional scrutiny of Goldman’s role in the insurer’s downfall is increasing. The Securities and Exchange Commission is examining the payment demands that a number of firms — most prominently Goldman — made during 2007 and 2008 as the mortgage market imploded.

The S.E.C. wants to know whether any of the demands improperly distressed the mortgage market, according to people briefed on the matter who requested anonymity because the inquiry was intended to be confidential.

In just the year before the A.I.G. bailout, Goldman collected more than $7 billion from A.I.G. And Goldman received billions more after the rescue. Though other banks also benefited, Goldman received more taxpayer money, $12.9 billion, than any other firm.

In addition, according to two people with knowledge of the positions, a portion of the $11 billion in taxpayer money that went to Société Générale, a French bank that traded with A.I.G., was subsequently transferred to Goldman under a deal the two banks had struck.

Goldman stood to gain from the housing market’s implosion because in late 2006, the firm had begun to make huge trades that would pay off if the mortgage market soured. The further mortgage securities’ prices fell, the greater were Goldman’s profits.

In its dispute with A.I.G., Goldman invariably argued that the securities in dispute were worth less than A.I.G. estimated — and in many cases, less than the prices at which other dealers valued the securities.

The pricing dispute, and Goldman’s bets that the housing market would decline, has left some questioning whether Goldman had other reasons for lowballing the value of the securities that A.I.G. had insured, said Bill Brown, a law professor at Duke University who is a former employee of both Goldman and A.I.G.

The dispute between the two companies, he said, “was the tip of the iceberg of this whole crisis.”

“It’s not just who was right and who was wrong,” Mr. Brown said. “I also want to know their motivations. There could have been an incentive for Goldman to say, ‘A.I.G., you owe me more money.’ ”

Goldman is proud of its reputation for aggressively protecting itself and its shareholders from losses as it did in the dispute with A.I.G.

In March 2009, David A. Viniar, Goldman’s chief financial officer, discussed his firm’s dispute with A.I.G. in a conference call with reporters. “We believed that the value of these positions was lower than they believed,” he said.

Asked by a reporter whether his bank’s persistent payment demands had contributed to A.I.G.’s woes, Mr. Viniar said that Goldman had done nothing wrong and that the firm was merely seeking to enforce its insurance policy with A.I.G. “I don’t think there is any guilt whatsoever,” he concluded.

Lucas van Praag, a Goldman spokesman, reiterated that position. “We requested the collateral we were entitled to under the terms of our agreements,” he said in a written statement, “and the idea that A.I.G. collapsed because of our marks is ridiculous.”

Still, documents show there were unusual aspects to the deals with Goldman. The bank resisted, for example, letting third parties value the securities as its contracts with A.I.G. required. And Goldman based some payment demands on lower-rated bonds that A.I.G.’s insurance did not even cover.

A November 2008 analysis by BlackRock, a leading asset management firm, noted that Goldman’s valuations of the securities that A.I.G. insured were “consistently lower than third-party prices.”

To be sure, many now agree that A.I.G. was reckless during the mortgage mania. The firm, once the world’s largest insurer, had written far more insurance than it could have possibly paid if a national mortgage debacle occurred — as, in fact, it did.

Perhaps the most intriguing aspect of the relationship between Goldman and A.I.G. was that without the insurer to provide credit insurance, the investment bank could not have generated some of its enormous profits betting against the mortgage market. And when that market went south, A.I.G. became its biggest casualty — and Goldman became one of the biggest beneficiaries.

Longstanding Ties

For decades, A.I.G. and Goldman had a deep and mutually beneficial relationship, and at one point in the 1990s, they even considered merging. At around the same time, in 1998, A.I.G. entered a lucrative new business: insuring the least risky portions of corporate loans or other assets that were bundled into securities.

A.I.G.’s financial products unit, led by Joseph J. Cassano, was behind the expansion. To reduce its own risks in the transactions, the company structured deals so that it would not have to make early payments to clients when securities began to sour. That changed around 2003, however, when A.I.G. began insuring portions of subprime mortgage deals. A lawyer for Mr. Cassano said his client would not comment for this article. A.I.G. also declined to comment.

Alan Frost, a managing director in Mr. Cassano’s unit, negotiated scores of mortgage deals around Wall Street that included a complicated sequence of events for when an insurance payment on a distressed asset came due.

The terms, described by several A.I.G. trading partners, stated that A.I.G. would post payments under two or three circumstances: if mortgage bonds were downgraded, if they were deemed to have lost value, or if A.I.G.’s own credit rating was downgraded. If all of those things happened, A.I.G. would have to make even larger payments.

Mr. Frost referred questions to his lawyer, who declined to comment.

Traders loved Mr. Frost’s deals because they would pay out quickly if anything went wrong. Mr. Frost cut many of his deals with two Goldman traders, Jonathan Egol and Ram Sundaram, who had negative views of the housing market. They had made A.I.G. a central part of some of their trading strategies.

Mr. Egol structured a group of deals — known as Abacus — so that Goldman could benefit from a housing collapse. Many of them were actually packages of A.I.G. insurance written against mortgage bonds, indicating that Mr. Egol and Goldman believed that A.I.G. would have to make large payments if the housing market ran aground. About $5.5 billion of Mr. Egol’s deals still sat on A.I.G.’s books when the insurer was bailed out.

“Al probably did not know it, but he was working with the bears of Goldman,” a former Goldman salesman, who requested anonymity so he would not jeopardize his business relationships, said of Mr. Frost. “He was signing A.I.G. up to insure trades made by people with really very negative views” of the housing market.

Mr. Sundaram’s trades represented another large part of Goldman’s business with A.I.G. According to five former Goldman employees, Mr. Sundaram used financing from other banks like Société Générale and Calyon to purchase less risky mortgage securities from competitors like Merrill Lynch and then insure the assets with A.I.G. — helping fatten the mortgage pipeline that would prove so harmful to Wall Street, investors and taxpayers. In October 2008, just after A.I.G. collapsed, Goldman made Mr. Sundaram a partner.

Through Société Générale, Goldman was also able to buy more insurance on mortgage securities from A.I.G., according to a former A.I.G. executive with direct knowledge of the deals. A spokesman for Société Générale declined to comment.

It is unclear how much Goldman bought through the French bank, but A.I.G. documents show that Goldman was involved in pricing half of Société Générale’s $18.6 billion in trades with A.I.G. and that the insurer’s executives believed that Goldman pressed Société Générale to also demand payments.

Goldman’s Tough Terms

In addition to insuring Mr. Sundaram’s and Mr. Egol’s trades with A.I.G., Goldman also negotiated aggressively with A.I.G. — often requiring the insurer to make payments when the value of mortgage bonds fell by just 4 percent. Most other banks dealing with A.I.G. did not receive payments until losses exceeded 8 percent, the insurer’s records show.

Several former Goldman partners said it was not surprising that Goldman sought such tough terms, given the firm’s longstanding focus on risk management.

By July 2007, when Goldman demanded its first payment from A.I.G. — $1.8 billion — the investment bank had already taken trading positions that would pay out if the mortgage market weakened, according to seven former Goldman employees.

Still, Goldman’s initial call surprised A.I.G. officials, according to three A.I.G. employees with direct knowledge of the situation. The insurer put up $450 million on Aug. 10, 2007, to appease Goldman, but A.I.G. remained resistant in the following months and, according to internal messages, was convinced that Goldman was also pushing other trading partners to ask A.I.G. for payments.

On Nov. 1, 2007, for example, an e-mail message from Mr. Cassano, the head of A.I.G. Financial Products, to Elias Habayeb, an A.I.G. accounting executive, said that a payment demand from Société Générale had been “spurred by GS calling them.”

Mr. Habayeb, who testified before Congress last month that the payment demands were a major contributor to A.I.G.’s downfall, declined to be interviewed and referred questions to A.I.G. The insurer also declined to comment for this article. Mr. van Praag, the Goldman spokesman, said Goldman did not push other firms to demand payments from A.I.G.

Later that month, Mr. Cassano noted in another e-mail message that Goldman’s demands for payment were becoming problematic. “The overhang of the margin call from the perceived righteous Goldman Sachs has impacted everyone’s judgment,” he wrote to five employees in his division.

By the end of November 2007, Goldman was holding $2 billion in cash from A.I.G. when the insurer notified Goldman that it was disputing the firm’s calculations and seeking a return of $1.56 billion. Goldman refused, the documents show.

In many of these deals, Goldman was trading for other parties and taking a fee. As the mortgage market declined, Goldman paid some of these parties while waiting for A.I.G. to meet its demands, the Goldman spokesman said. But one reason those parties were owed money on the deals was that Goldman had marked down the securities.

Adding to the pressure on A.I.G., Mr. Viniar, Goldman’s chief financial officer, advised the insurer in the fall of 2007 that because the two companies shared the same auditor, PricewaterhouseCoopers, A.I.G. should accept Goldman’s valuations, according to a person with knowledge of the discussions. Goldman declined to comment on this exchange.

Pricewaterhouse had supported A.I.G.’s approach to valuing the securities throughout 2007, documents show. But at the end of 2007, the auditor began demanding that A.I.G. provide greater disclosure on the risks in the credit insurance it had written. Pricewaterhouse was expressing concern about the dispute.

The insurer disclosed in year-end regulatory filings that its auditor had found a “material weakness” in financial reporting related to valuations of the insurance, a troubling sign for investors.

A spokesman for Pricewaterhouse said the company would not comment on client matters.

Insiders at A.I.G. bridled at Goldman’s insistence that they accept the investment bank’s valuations. “Would we call bond issuers and ask them what the valuation of their bonds was and take that?” asked Robert Lewis, A.I.G.’s chief risk officer, in a message in January 2008. “What am I missing here, so I don’t waste everybody’s time?”

When A.I.G. asked Goldman to submit the dispute to a panel of independent firms, Goldman resisted, internal e-mail messages show. In a March 7, 2008, phone call, Mr. Cassano discussed surveying other dealers to gauge prices with Michael Sherwood, Goldman’s vice chairman. At that time, Goldman calculated that A.I.G. owed it $4.6 billion, on top of the $2 billion already paid. A.I.G. contended it only owed an additional $1.2 billion.

Mr. Sherwood said he did not want to ask other firms to value the securities because “it would be ‘embarrassing’ if we brought the market into our disagreement,” according to an e-mail message from Mr. Cassano that described the call.

The Goldman spokesman disputed this account, saying instead that Goldman was willing to consult third parties but could not agree with A.I.G. on the methodology.

Trouble Grows at A.I.G.

By the spring of 2008, A.I.G.’s dispute with Goldman was just one of its many woes. Mr. Cassano was pushed out in March and the company’s defenses against the growing demand for payments faltered. By the end of August 2008, A.I.G. had posted $19.7 billion in cash to its trading partners, including Goldman, according to financial filings.

Over that summer, A.I.G. had tried, unsuccessfully, to cancel its insurance contracts with the trading partners. But Goldman, according to interviews with former A.I.G. executives, would allow that only if it also got to keep the $7 billion it had already received from A.I.G. Goldman wanted to keep the initial insurance payouts and the securities in order to profit from any future rebound.

In addition to offering to cancel its own contracts, Goldman offered to buy all of the insurance A.I.G. had written for several other banks at severely distressed prices, according to three people briefed on the discussions.

Negotiating with Goldman to void the A.I.G. insurance was especially difficult, Federal Reserve Board documents show, because the firm did not own the underlying bonds. As a result, Goldman had little incentive to compromise.

On Aug. 18, 2008, Goldman’s equity research department published an in-depth report on A.I.G. The analysts advised the firm’s clients to avoid the stock because of a “downward spiral which is likely to ensue as more actual cash losses emanate” from the insurer’s financial products unit.

On the matter of whether A.I.G. could unwind its troublesome insurance on mortgage securities at a discount, the Goldman report noted that if a trading partner “is not in a position of weakness, why would it accept anything less than the full amount of protection for which it had paid?”

A.I.G. shares fell 6 percent the day the report was published. Three weeks later, the United States government agreed to pour billions of dollars in taxpayer money into the insurer to keep it from collapsing.

The government would soon settle the yearlong dispute between Goldman and A.I.G., with Goldman receiving full value for its bets. The federal bailout locked in the paper losses of those deals for A.I.G. The prices on many of those securities have since rebounded.

Alan Feuer contributed reporting.

WHO CAN BE AN EXPERT WITNESS?

REGISTER NOW: EXPERT WITNESS WORKSHOP

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WHO CAN BE AN EXPERT WITNESS? Virtually anyone including a party to the litigation in most cases.The issue is really credibility, which comes down to credentials, knowledge, demeanor and knowing what to expect when your opinion or credibility is attacked. The side issue of course is the credibility of the party or attorney who is presenting the expert witness and whether he/she knows how to elicit credible testimony on direct examination such that the Judge is truly enlightened rather than baffled with bulls–t.

I would caution TILA auditors and forensic reviewers about considering their position as either third party fact finder or as expert witness. I think you cannot credibly be both. The expert should be someone who can say they have reviewed the audit or review or analysis and they have done some research on their own and and have come to the following conclusions based upon a reasonable degree of certainty within the context of the finance markets, housing market and mortgage origination and processing industries. Thus the attack on the audit becomes a matter for another day. If you are stuck defending the audit you will never get to the point where you are expressing fresh, independent expert facts and opinions about the industry and about the loan in question.

WHY BE AN EXPERT WITNESS? First, because the usual expert in complex litigation (i.e., mortgage litigation cases involving securitization) will charge an average of $350-$600 per hour with a five hour minimum and an additional $2500 per travel day plus all out of pocket expenses. Such experts will charge $1500-$2500 for an Expert Declaration (which I offer, but don’t have the time to meet all the demand, hence the workshop to increase the number of people who can sign such a document and defend it under cross examination or deposition). Even with a comparatively light caseload, the income is significantly higher than other areas of service for distressed homeowners. Another reason is there are pitifully few of us who can serve as true experts that can defend our positions under questioning. So the market is wide open for a lot of experts to enter the fray.

WHAT IS EVIDENCE? While there are many fancy definitions, for the purposes of this post and most actual situations in the courtroom, evidence is anything the Judge states that he/she is allowing in as evidence or anything that is presented in an evidential hearing without challenge from the other side. This one point accounts for nearly every situation in which the lawyer or litigant lost. Lawyers for pretender lenders take control of the courtroom dialogue but “laying the foundation” when they are neither a witness nor even knowledgeable about the loan. So when the lawyer comes in and introduces himself and says he represents Wells Fargo, you might want to challenge that and say you want proof that he does in fact represent Wells Fargo, or executive Trustee Services or whoever they say they represent. If he says his client is the lender, you want to challenge that and ask the Judge if this is an evidentiary hearing so you can cross examine the attorney under oath as his testimony, changing him from lawyer to material witness. Most lawyers and litigants walk out open-mouthed not knowing what hit them. Well here is the answer: representations were made in court by an unsworn witness without any personal knowledge (go look up competency of witnesses) of the facts WITHOUT CHALLENGE — so the Judge took the representations as true (as though you were stipulating to them). A quick look would reveal to anyone that you lost as soon as those representations were made and not challenged. If instead, you said “Judge, I object. I have an expert report that concludes that the facts are different than what counsel is representing,” then you give the Judge an opportunity to inquire and to allow discovery and an evidentiary hearing. And from what we have seen so far, the pretender lenders cannot survive discovery much less an evidentiary hearing UNLESS YOU LET THEM.

Oh yeah, you better be right.  I should mention that in order to be an expert witness, you have to really know what you are talking about, be able to explain it in simple terms, and be strong enough to stay on message when challenged. That’s why you need the other seminars and boot camps that are being offered around the Country.

Stumbling Bank Reform or Corporate Governance?

If you step back and look at our situation from a longer historical perspective, it is obvious that we have fundamental flaws in the governing of nations around the world. The “shadow banking” world that is unfathomable to both the common folk and political “leaders” has now achieved what they always wanted — a shadow government.

The truth behind Wall Street maneuvers is on these pages, on main stream media and in hundreds of blogs all over the world. Starting in 1983, at a level of zero, Wall Street created at least $700 trillion in “shadow” currency that has world economists and political leaders pooping in their pants. In 1983 we had the equivalent of $50 trillion in world currency that was issued and regulated by governments of the world. Now we have about the same amount of government currency dwarfed by proprietary currency issued by Wall Street.

These shadow bankers control 90% of all “currency” in the world. Blankfein, Dimon and the rest of them think they deserve a bonus because they literally took control of the world — and there is nobody to stop them because nobody in power understands the logistics and even those who have a clue lack the political will or power to do anything about it.

Their weapon of choice was generically speaking, derivatives. But derivatives existed long before 1983. It was a classic case of using an existing tool, making it so complicated that nobody could audit it, and then declaring its value and use from the private sector with the government looking on in consternation because neither the regulators nor the legislators had a clue about what was happening. The same holds true in the judiciary where only a handful of Judges are beginning to understand the fake premises upon which these schemes were hatched.

Wall Street, now holding the purse strings of the world (even China) is calling the shots and they have the simple goals of money and power. They have it but they don’t have a clue how to govern. Their only political agenda is to maintain and build their own wealth and power, disregarding loyalty to any national boundaries.

The private sources of finance, liquidity and money have often enjoyed positions of great power. The difference now is that it is virtually complete — except for one thing that they and hundreds of heads of state before them fail to realize in their hubris — it only works as long as people let it work. Ultimately, as Jefferson penned it in the Declaration of Independence, government depends entirely upon the consent of the governed. And eventually,  heads roll when the people have had enough.

People submit themselves to governance under the theory that the governors they elect or allow to “rule” them will act within some bounds of decency as defined by the moment. Now people realize that their rulers are “undisclosed principals” but the identity of many of the shadow rulers is apparent to many. The people are far ahead of both the politically elected or anointed leaders and far ahead of the shadow bankers who rule from board rooms.

People will often endure hardship long after the breaking point just to maintain their own little status quo and to avoid living a society in chaos. Not forever, though. My observation is that everything is going to get a lot worse before it gets better. The “bankrupt” nations endangering the viability of the Euro got there by the same twisted manipulations as we did.

Somewhere along the line, the chains will break and it won’t be pretty. In order for people to turn the government upside down in order to make it right side up, they must be very angry. Angry people tend to do things to excess. Excess and at least temporary anarchy leave us with chaos where our life-long assumptions and security are terminated like a light switch being turned off.

I don’t know if the judiciary in this and other countries will have the fortitude, power or will to maintain the status of a nation of laws instead of men. I hope so. We are all depending upon the Judges and Juries of our system to set things right. We are all hoping that the anger gets channeled through the system instead of against it. But current scenarios are playing out the other way.

Appraiser Sentenced in Massive Mortgage Fraud Case

Rizk was sentenced by United States District Judge Dean D. Pregerson, who warned that other professional real estate appraisers should know that if they inflate appraisals and lie about the value of homes, “there is an overwhelming likelihood that they will be caught and go to prison.“

Lila Rizk, 43, Rancho Santa Margarita, California, a former state-licensed real estate appraiser, was sentenced to three years in federal prison and ordered to pay more than $46 million in restitution for her role in a massive mortgage fraud scheme that caused tens of millions of dollars in losses to federally insured banks. Rizk received the three-year prison term after her conviction last summer on conspiracy, bank fraud and numerous loan fraud charges.
As previously reported on Mortgage Fraud Blog, as per the court documents (part 2 of court documents), the evidence presented at Rizk’s trial last summer showed that she was part of a wide-ranging and sophisticated scheme that obtained inflated mortgage loans on homes in some of California’s most expensive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach and La Jolla. Members of the conspiracy sent false documentation, including bogus purchase contracts and appraisals, to the victim banks to deceive them into unwittingly funding mortgage loans that were hundreds of thousands of dollars more than the homes actually cost. Lehman Brothers Bank alone was deceived into funding more than 80 such inflated loans from 2000 into 2003, resulting in tens of millions of dollars in losses. [Editor's Note: Deceived? I doubt it. They probably got part of the fee]
The evidence presented at trial showed that Rizk profited by collecting hundreds of thousands of dollars in fees for providing inflated appraisals in the scheme. Her appraisals typically valued the homes three times higher than what the homes really cost. In order to supposedly justify these inflated values, Rizk used “comps,” or comparable homes, that were far bigger, more luxurious, and in better neighborhoods than the homes she appraised. Once she had inflated a few dozen homes, she then used those homes as “comps” to supposedly justify inflated prices for homes later in the scheme.
Ten other real estate professionals have been convicted of federal charges related to the scheme. They are:
• Charles Elliott Fitzgerald, scheme leader, a developer formerly of Newbury Park and Beverly Hills, California, who previously was sentenced to 14 years in prison.
• Mark Alan Abrams, Los Angeles, California, a mortgage broker who along with Fitzgerald orchestrated the scheme, who is scheduled to be sentenced on April 12, 2010.
• Nicole LaViolette, Palm Springs, California, a loan processor, who is scheduled to be sentenced on June 14, 2010.
• Jamieson Matykowski, Laguna Niguel, California, who found houses for the scheme, is scheduled to be sentenced on March 29, 2010.
• Timothy Holland, Santa Ana, California, an escrow officer, who is scheduled to be sentenced on July 19, 2010.
• Richard Maize, Beverly Hills, California, a mortgage banker, who is scheduled to be sentenced on June 28, 2010.
• Thomas R. Schiff, Brentwood, California, a mortgage banker, who was previously sentenced to 6 months in prison.
• L. Scott Robinson, Dana Point, California, an appraiser, who is scheduled to be sentenced on April 2, 2010.
• Kyle Grasso, formerly of Santa Monica, California, a real estate agent, who is scheduled to be sentenced on February 19, 2010.
• Joseph Babajian, Los Angeles, California, a real estate agent, who is scheduled to be sentenced on February 22, 2010.
Rizk was sentenced by United States District Judge Dean D. Pregerson, who warned that other professional real estate appraisers should know that if they inflate appraisals and lie about the value of homes, “there is an overwhelming likelihood that they will be caught and go to prison.”
This case is the result of an investigation by the Federal Bureau of Investigation and IRS-Criminal Investigation