CFPB Safe Harbor Rule Would Allow Homeowners to Fight Bad Mortgages

Editor’s Comment: The practice of disregarding normal loan underwriting standards creates a claim that homeowners were tricked into loans that they could never repay. The Consumer Financial Protection Bureau, built by Elizabeth Warren under Obama’s direction is about to pass a rule that addresses that very issue. The new Rule would allow homeowners contesting foreclosure to introduce evidence challenging whether the “lender” correctly determined a borrower’s ability to repay the loan.

The details of the test for the “safe harbor” provision that is being contested are not yet known. The objective is to separate those who are using general knowledge of bad practices in the industry from those who were actually hurt by those practices. It would provide the presiding judge with a simple, clear test to determine whether the evidence submitted (not merely allegations — so the burden is still on the homeowner) are sufficient to determine that the “lender” wrote a loan that it knew or should have known could not be repaid.

The game being indirectly addressed here is that the participants in the fake securitization scheme intentionally wrote bad loans and then were successful at entering into contracts that paid insurance, credit default swap and federal bailout proceeds to the participants in the scheme even though they neither made the loan nor did the forecloser actually buy the loan (no money exchanged hands).

Those who do not meet the test would have “frivolous” claims dismissed summarily by the Judge. But they would have other grounds to sue the “lender” or the party making false claims of default and foreclosure. Those who do meet the test, would defeat the foreclosure leaving the loan in a state of limbo.

The net legal effect of the rule could be that the mortgage is void and the note is no longer considered evidence of the entire transaction — because the risk of loss on the homeowner shifts to the lender, at least in part. This would clear the path for principal reduction and new loans that would correct the corruption of title in the county title records.

The rule is coming at the behest of the Federal Reserve, which has is own problems on how to account for the trillions they have advanced for “bad” mortgages or worthless bogus mortgage bonds.

The question remains whether the purchase of these bonds conveys some right of action to collect money that the investors advanced, and who would receive that money. It also leaves open the question of whether a mortgage bond purportedly owned by the Federal reserve or even sold by the the Federal Reserve changes the players with standing to bring lawsuits or other foreclosure proceedings.

This rule, when it is finally written and passed, won’t solve all the problems but it could have a cascading effect of restoring at least some homeowners to at least a better financial condition than the one in which they find themselves.

The issue that would be interesting to see litigated is whether the homeowners who meet the test now have a claim to recover part or all of the money they paid on the mortgage thus far or if they are given an additional credit for the overage they paid — another way of reducing principal.

The bottom line is that there is recognition at all levels of government agencies —Federal and State — that there are problems with the origination of the loans and not just with the robo-signed assignments, allonges endorsements and fake powers of attorney. This recognition is going to be felt throughout the regulatory and judicial system and will redirect the attention of Judges to the reality that Wall Street banks wanted bad loans so they could make millions on each bad loan through multiple sales of the same loans using insurance, credit default swaps, TARP and other schemes to cover it all up.

http://www.housingwire.com by John Prior

Consumer Financial Protection Bureau Director Richard Cordray told a House committee Thursday that mortgage lenders would still not be safe if the bureau elects to grant a safe harbor provision to the upcoming Qualified Mortgage rule.

“The safe harbor versus rebuttable presumption is a mirage,” Cordray said. “Even safe harbor isn’t safe. You can always be sued for whether you meet the criteria or not to get into the safe harbor. It’s a bit of a marketing concept there. The more important point is are we drawing bright lines? If someone were to say to me safe harbor or anything else, I would go with a safe harbor. But I don’t think safe harbor is truly safe. And I think it oversimplifies the issue.”

Rep. Michael Grimm, R-N.Y. then right away pressed Cordray on which he would choose: a safe harbor or rebuttable presumption. The director was forced to remind him the rule was still under development and would be finalized in January.

“I have not taken a position. I have discussed the issue,” Cordray said.

Mortgage industry lobbyists have been pressing the bureau since it overtook QM rulemaking responsibility from the Federal Reserve last year to install “clear, bright lines” and a legal safe harbor that protects lenders from future homeowner suits during foreclosure.

A rebuttable presumption provision allows homeowners to introduce evidence in court challenging whether the lender correctly determined a borrower’s ability to repay the loan before it was written. But a safe harbor allows a simple test for a judge to find if the mortgage met the QM rule, and frivolous suits could be dismissed early.

The Mortgage Bankers Association even showed the CFPB that attorney fees go up to an average $84,000 for a summary judgment from $26,000 if it’s dismissed. The risk of this increased cost would be passed on to borrowers, they claim.

Some consumer advocacy groups previously said such suits are rare, and a safe harbor could clear lenders from risks down the road rule makers cannot anticipate now.

Cordray repeatedly said in the hearing Thursday that his goal on QM and upcoming rules for the mortgage market is to protect consumers but not cut off access to credit. Forcing courts to define areas left gray by regulators is not something he would permit.

“As a former attorney general in Ohio, gray areas of the law are not appreciated,” Cordray said. “They’re difficult for people trying to comply. If we write rules that are murky, they’ll end up getting resolved in courts and it will take years and be very expensive. We are making real efforts to draw very bright lines.”

jprior@housingwire.com

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58 Responses

  1. @dcb

    I’m working on it…

  2. CARIE
    I dont care what or why–all this crossfire—but please before you hang up the line–do you have the link?

  3. @CARIE
    you said:
    ” According to the Fed Res Opinion to the TILA Amendment, when there are multiple creditors, the creditor who holds the largest percentage interest in the loan, must identify itself to the borrower”

    This is very relevant to my recent work on developing a plan of audit review of a note transfer. Please advise as to a link or reference to the cited material–thankyou in advance. This should be more often done where the trusts are shaky–where no mortgage loan schedules were filed so the trusts did not materialize–merely joint interests in pools as you state—–a

    now let postulate something: say trust X failed ab initio—-merely a set of accounts on some servicers books—servicer bluffs a homeowner or court into tuning over a house without a note presentment and surrender

    then major investor of this in fact joint investment pool comes along and has a bale of mortgage notes—-under your analysis would not the big investor be the correct party to enforce the note–release the mortgage?

    wheres that leave the mortgage released by bigbluff—the debt owed on the note?

  4. Now that we can agree upon! *giggles* Its a start!

  5. you’re one silly broad.

  6. @ Carie ….. Are you talking to Kathy or Charlotte? Since you know everything, I just thought I would ask.

  7. … invest in a dictionary and look it up yourself!

  8. @K.C. …what’s a “you duff”?

    Sad that you find joy in belittling…some things never change…oh well.

  9. “…Why is the assignment to the purchasing bank never apparent — because in real securitization, the asset/liability balance sheet receivables are removed from the balance sheet to an off-balance sheet conduit (such as a REMIC). BUT, THE SUBPRIME WAS NOT REAL MORTGAGES, THEY WERE GSE CHARGE OFFS, WITH ONLY COLLECTION RIGHTS SURVIVING. (There is irrefutable evidence of this.) Collection rights are not reported as “receivables” on an asset balance sheet. Any pass-through of cash is considered income, not collection of receivables (you can not have receivables when the loan was previously charged-off). Thus, the subprime REMICs were never “true sales” of anything. They were not legitimate balance sheet transfers.

    Many of the original tranches to the bogus REMICs have been paid off. At the very least, by the TILA amendment, the remaining certificate holders to the REMICs could be considered your creditor (remember there are only about 15 tranches to begin with). Creditor is NOT the derivative security investors. According to the Fed Res Opinion to the TILA Amendment, when there are multiple creditors, the creditor who holds the largest percentage interest in the loan, must identify itself to the borrower. Thus, the tranche holder with the largest position in your loan — should be identified. This is not happening — foreclosures continue under the bogus name of the trustee to the trust. Again, and again, security investors, trusts, trustees, and servicers are not the creditor. And, Neil is on bad track when he starts saying that “security investors” funded the loan. This is in gross error, and has caused more harm than good.”

  10. Like I said Neil … make sure you get the spelling right on those invitations… its spelled Wine not Whine. We wouldnt want to focus on the facts to long and forget about petty detials now would we. Fact … you didnt save for retirement, you spent everything that came thru the door, so you would have no knowledge of Investing or saving.. your ramblings are Moot! Fact.. you did not fight to save your home because you said you could not afford it and you did what was best for your family. Why do you continue to look for Errors of others? Why cant you live with your decision? Why must you look for others to blame? Ohh thats right …. you think your owed something because you made the wrong choices for yourself …. so you wanna keep the investors money to pay off your free house and to hell with their many years of hard work and loyalty to this country? To hell with their grandchildren enjoying the fruits of their grandparents labors …. lets make sure you and your grandkids get a free ride on someone else life labors Right?….. Do you suppose that is why you gave up and walked away …. you didnt have a chance in mayham! YEP! You gotta second chance … I hope you get it right this time … because as a taxpayer I dont wanna support you to set around on your carcus and complain about investors while trying to screw the taxpayers. Get off you duff and Get a Life!

  11. and it’s YOU”RE—not YOUR—when you are saying YOU ARE.
    But, of course—you “know more than me”…

  12. WRONG AGAIN, K.C.

    These security investors do NOT fund mortgages, they do NOT give borrowers money, and they are NEVER the creditor. The creditor “investor” is the bank that originally purchased the subprime mortgage — that was never a “mortgage” to begin with.

    As far as a “home”—I am surrounded by family and people that love me…THAT’S a real home…I guess you are more materialistic than me…oh well.

    *SPLAT*SMACK*CRUNCH*SLAP*GIGGLES*,etc…

  13. A is the investors who pooled their money into a Wholesale Warehouse Line of cash to fund mortgages but got nothing in return. B is/was pretender lender and C wants your money but know they can not file a satisfaction of your mortgage and clear the title. Its all about who is seeking to Enforce the contract.

  14. Yes SC—but real issue is burden of proof to establish this and that–so you are correct —the party seeking to enforce must prove several points relating exclusively to facts associated with ownership, transfers, and custody of the note.

    And you must recover that ORIGINAL NOTE in order to wipe out the personal liability—AND assure that the party releasing the mortgage was truly entitled to do it.

    If you think about –the system was designed to be self-policing. So long as homeowners made sure they got their notes back—-automaticall [almost] the right of the releasor was established. But when the servicers simply ignored the note return aspect–the wheel fell off the cart

    its as if you and i agree that i can release your mortgage by filing a complaint and cutting a deal—-to hell with the real claimant——great i release the mortgage on your property in favor of me—-i sell the property pocket the proceeds and get the hell outta dodge–sound familiar?

    Increasingly, I am concerned about the state of all titles encumbered by such mortgages since 2003——i keep hearing stories about reluctant buyers —buyers with money scared to touch property in Florida especially. Its hard to see why any property down there that was touched by mortgages is clean. should be at leadt 30% discount–not really enough if it gets caught in a group suit—some recent buyer gets named——house gets lis pendens—trapped like a rat for years

  15. @dc.. no this does not work if you have already lost your home. You can let the breach of contract slide …. YOU WANT THE CONTRACT ENFORCED….. I.E…… you will tender in full for satisfaction of your mortgage. If title co say you must provide evidence that party b paid off party a and that party c paid off party b …… because A did not file satisfaction of mortgage and note, b did not file release of lis pendens and c says they bought the loan from b (but b never owned it n filed judicial claims it did in addition to LP filed on title several years ago) (do you get why BOA absorbed CW Neil?). C can not prove b paid off a. So homeowner would have to satisfy AB&C to clear title for sale. OR homeowner must show proof b paid off a and c paid off b. …. and we all know about discovering nothing but snowballing time in discovery…….

  16. SC you said
    “Sue for Breach of Contract and to Enforce It… then you can Sing like a Canary. Loan Mod”

    If there is a breach of most contract provisions—then damages under breach of contract in a whole new case–new complaint.

    But failure to provide authentication of note is a matter of completion of the intitial foreclosure action–reopen–pay reopen fee—-and state the note was not delivered etc?????

    Of significance is the retroactive effect of reopening on the failure to deliver note. Failure to deliver invokes the inquiry as to whether the court had jurisdiction ab initio. Thus repoener could overturn the release of mortgage. The entire foreclosure action should be undone.

    A new breach of contract case cannot recover the house but by disgorgement of unjust enrichment–in lieu of damages—-?????

    But by the time the matter is litigated the homes are signifacantly deteriorated, damaged—-large recovery front end cost—perhaps entire house frozen pipes etc—

    on top of usual house issues–just physical issues—so its better to pursue damages in contract action in many instances–dont get emotional about the house—sometimes i wonder why these servicers dont just do swap-downs with people—take the Illinois Mcmansion and give back a Florida condo? they have no imaginations—probably because of the attorney fee schedules

  17. @dc… I let the cat out of the bag … I thought sure you caught it. Your on the right path … just stop a second and look back ……. do you see it? Dont deny the cats there .. just deny its your cat. Then enforce the contract with your cat, make your cat fulfill its obligations or at least prove that in can fulfill its obligations under the contract. Can your cat meet its obligations of the contract or is it just a hairball to distract you? Most Effictive way to Control Hairballs is use Hairball Control before the mess spills out into the courts.. it gets a lil messy there and alot of marking territory goes on. Prrrrr

  18. all this is over. It won’t be too long anymore

    ????? Is that because the Mayan calendar is running out or do you have some other evidence–even a nice anecdote would be a lift–cause i see no end in sight—-if fact looks worsening to me–now

    they are past the point of even giving lip service to mods because there are hungry investment bankers out there want to sell your home to a rent REIT. Call the moving van–theyv figured out a quick way to cash out the seized home…this is throwing gasoline on the fire

    comments

  19. These security investors do NOT fund mortgages, they do NOT give borrowers money

    at least not anymore —they give it to wholesale buyers of REO to RENT—with Fed Support–part of $40 billion/mo? if so maybe it will spark some jobs repairing millions of homes–probably $10 k average at leasei to meet HUD standards

  20. @DC… No Loan Mod! Sue for Breach of Contract and to Enforce It… then you can Sing like a Canary. Loan Mod …pfffft! You just cant buy some Folks!

  21. Ooops! I see my Horns …. sheesh Enraged! I told you when you see my Horns say “Duct Tape”! Now I’m gonna have to sue you to enforce our contract. *Chuckles*

  22. @ALL
    See link re SILENCE CLAUSES
    Connecticut Couple Claims Bank of America Would Only Modify Terms of Mortgage If They Kept Quiet About It
    Published: Saturday, September 22, 2012

    http://www.countytimes.com/articles/2012/09/22/business/doc505dba878893e205319146.txt?viewmode=fullstory

    There are several types of secrecy provisions that find themselves in various negotiated contracts with servicers on the supposed premise that there is a trust somplace with authority to enforce the note. and that “owner” has authorized the servicer to act as the trust’s agent.

    Modifications
    Short sales agreements
    Negotiated settlements of foreclosure complaint context
    OTHER?

    The 1st type of secrey is “confidential discussions” of settlement or whatever other issue noted above. Once a victim homeowner enters the confidential discussions —so bound—–then the servicer is largely free to use any dastardly act or deception that the most devious minds might invent.

    You cannot make the information known to the press. It is questionable –dependant on particular facts–as to whether a homeowner is entitled to report the actions to legal authorities. The Chill factor is there no matter what the legal conclusion of reputation damage to the downtrodden servicer might be.

    Confidentiality clause—arises in any agreement that implements “confidential discussions” . The confidentialty clause requires the dirty deeds be kept secret indefinitiely. There is usually a provision giving the court jurisdiction indefintely to enforce the secrecy provision by contempt of court risk–another CHILLING event.

    The Confidentiality clause addresses the discussions, writings or publication of the secret “confidential discussions”—along with whatever civilly or criminally nasty the nature of those secret talks, and subsequent related conduct. This centers around the most secret document of all: the “settlement agreement”.

    There is good reason. The settlement agreements are so lopsided in every respect as to defy the concept of good faith bargaining. The low quality of the servicer’s conduct in “negotiating” the settlement is challenged for lowness only by implementation.

    And necessarily since the servicers are only too aware of how nasty the contracting party’s treatment at servicers hands at the end of the supposedly settled day—–they endeavor to add in a whole new dimension. NONDISPARAGEMENT Clause.

    An ND clause prevents thehomeowner from disclosing even true facts about the servicer arising from activities totally outside the transaction and settleent agreement. A victimized homeowner cannot even say the servicer is a bad actor if it was in the newspaper that morning.

    ANY PROVISION WHICH INVOLVES SECRECY is a red flag..

  23. Nanny Nanny Boo”Boo” … your a Copycat. Missed Again .. I’m sheilded by the Whole Truth-You havnt got a chance baby girl!. Now thats out of the way, lets answer your Question Carie. My comment and question ” Look at where I am and Look at where you are. Fact or Opinion? You Decide. You answered a question with a question baby girl … Caries Question…Where are You? My Answer is In My Home!!! Can you say the same Carie? Yeah! I thought NOT! And the correct answer is …… FACT ………………*Splat*!

  24. *SPLAT*!—Gotcha!

  25. If your going to throw snowballs, you should practice your aim. You Missed! If you can not use your own words … Don’t Open Your Mouth! @ Guest, your on the right Path with dc. When you reach the end you earn a bottle of “White Out”. Just Remember… Play Nice! And Play by the Rules. And no licking the windows on the Bus on your ride back HOME. Its Rule#1 …. Rule#2 ..Enjoy the Ride and Have Fun along the way. God Bless

  26. @GUEST
    Yes i know you did pass that piece along and i appreciate it. Fell free to email me @ dcbreidenbach@aol.com

  27. @dcbreidenbach

    I sent the Fannie Mae document you mentioned. You and I seem to be going the same direction with some of the issues, such as ensuring that we are paying the owner of the obligation (or its authorized representative) who can discharge our debt dollar for dollar. The Veal decision covered this well.

    It seems also that we share no interest in weeding through the nonproductive diatribe posted here lately. Is there some way I can contact you privately? I have something else I’d like to share with you and get your view of it.

  28. Kathy—“Inflicked”? Hmmm…yeah, you “know more” than me…good one.*SPLAT*! ;)

  29. @Enraged, and we Shall! I look forward to meeting you. I just hope Neil gets the invitations right … Your supposed to bring Wine not Whine! Got that Neil! Get the Spelling Right .. *Grins*

  30. I’m sorry to inform you Carie, I’m not much for self inflicked abuse. Something you seem addicted to. You should seek immediate medical attention because this is destructive behavior.

  31. 10) “…The CDO “security” investors are, the pension funds, insurance co., etc, that Neil refers to when he talks about “those who put up the money.” These security investors, however, did not put up one dime to the borrowers, they were just the “synthetic” security INVESTOR IDIOTS that bought the idea that the derived CDOs, derived from the REMIC certificates, derived from the bogus loans, were actually triple A rated (this deriving is what is called “leverage”). These security investors do NOT fund mortgages, they do NOT give borrowers money, and they are NEVER the creditor. The creditor “investor” is the bank that originally purchased the subprime mortgage — that was never a “mortgage” to begin with…”

  32. And where are you exactly, K.C.? Besides in some strange, bitchy, twisted, pathetic, stuck up world of your own making…
    Conceit and haughtiness are very unattractive…and sad…
    *SPLAT!* *SMACK!* *SLAP!* yourself.

  33. Shadowcat

    Witty as hell… sharp as a tack…
    Hope to meet you a Garfield’s BBQ when all this is over.
    It won’t be too long anymore.

  34. @Enraged, the last I heard KathyCharlotte was sent to the corner with a box of crayons and a bag of cheetos. They took her scissors and colored pencils away .. something about being to sharp. I’m just a shadow on the wall ……. pay me no attention unless my horns slip out from under my Halo … then feel free to use the duct tape. hehehehe

  35. @Shadowcat,

    Are you Kathy Charlotte? You sound like her… A real survivor. And witty as hell!

  36. Gosh .. you really do have a short memory dont you? Take Notes this Time!! I work for myself, (and/for my grandkids..*smiles*) I am a public servant, a child advocate, a consumer advocate, an investor, a taxpayer a homeowner, I have big feet and a big mouth, I will tell you how it is … point blank! *SPLAT* … Smiles are Always Free! A Good Laugh … well thats a Bonus! As for Knowing more than you … Thats a Given…. Look where I am and Look where you are. Fact or Opinion? You Decide!

  37. We have the evidence, @shadowcat…no “half-truths” here…who do YOU work for?

  38. The Whole Truth is Supported by Evidence! It is not made up of Half-Truths and Opinions. There are those with Opinions and those with Facts that are Supported by Evidence! A Half-Truth is only wanting to believe the half that benifits YOU and replace the half you dont or wont sink into your hard-noggin with Opinion! And for the venting about the Ilinois AG … if you knew half of what you pretended to know…. You would know what she did to Save our Private Right of Action. But Hey … float your own boat in whatever direction!

  39. regarding E. ToLLe, Thank you, I do write to Ca AG, The White House, The Major of SJ, The Feds, FDIC…I write long personal stories on how my family was hurt. I hope to break their hearts, so to wake them up. There were over 30 children grown in my home, we all worked hard, I love them and miss each of them. Our family was torn apart, and now we see each other on Facebook.
    My question is still how do these people sleep at night knowing what they have done?

  40. @shadowcat

    When something is in quotes that means it’s a quote…;)
    Everyone who’s been here a while knows who wrote it.
    It’s the truth, and people need to know the truth.

  41. As to the above article posted by Neil, there’s this from another website:

    Per the Dodd-Frank Act, the CFPB will likely choose between two provisions for lenders: (#1) a rebuttable presumption provision that would allow homeowners to introduce evidence in court challenging whether the lender correctly determined a borrower’s ability to repay the loan, or (#2) a safe harbor, which allows a judge to determine if the lender met the qualified mortgage rule and if so, dismiss the suit early.

    Now, seeing as how every single proposal aimed at helping borrowers has been routinely trashed by the banking lobby and their order-takers in congress, why would I even bother getting aroused by the above possibility? Let’s see, would the judge choose #1…..restoring justice upon the land? Or #2, more of the same injustice that’s reading like a disaster movie script from sea to shining sea? Hmmm.

    I remember back to the multi-year backroom deals that went on with the 50 state AGs. I still can’t for the life of me figure out why those talks were done in secret, with blackout curtains and no press, when it was the rights of citizens in every state that were being negotiated, or should I say sold. And we all know how that mass rape of the citizenry ended, without a single dinner or a solitary kiss. Understand this folks….the AGs did not have the right to do what they did. It was all a sham.

    One of these days it would be nice to live in a country where the citizens are represented by people who consider the needs of their constituency. The constituency being living, breathing human beings, not multi-corporations.

  42. @ 4closed30kids, no, you didn’t make a huge mistake when not understanding your loan. You were duped, plain and simple. There’s no end to studies proving that this whole deal was the slickest crime spree ever unleashed. But what can you do about that?

    Plenty. First, get off the victim stance. It doesn’t do anyone any good. Now that you see things for what they are, get proactive, not only with your own set of facts into court, but on the legislative level as well. We have to let the courtrooms know that we will not take this lying down. We also have to get into the faces of our AGs and legislators and let them know in no small way that we will not take it any more. Plain and simple.

    When I read yesterday that certain legislators and AGs are working furiously behind the scenes trying to water down Dodd-Frank, I wonder how anyone can live in the states inhabited by these sellouts without storming their offices in protest. These people have to go….the rot has to be pruned.

    We all have to get over the initial rush of victimness….yes it’s impossible to believe that this could be happening in America. But while we all slept and over the last few decades, our rights were sold down the river and our laws eroded away like sand in a windstorm.

    After you get through with demanding reform NOW in the foreclosure arena, move over to the fact that Monsanto has been and continues to take over the entire world’s seed supply with life altering pseudo-science that is making us all sick.

    Then go after the frackers who after our water rights, an Earth-given right that has no price tag, and any that think otherwise should simply be removed in handcuffs or worse. If you do these things not out of fear, but with a sense of purpose tied to the betterment of all mankind, it can only help to heal what they’ve dis-eased upon us all.

    Money in politics, free health care for all humanity, rolling back odometers…..I don’t care what your passion is, but it must be focused away from what they did to us and channeled into what we’re going to do to them, if they don’t immediately change their tune. Sooner than later we’ll have to fight them, as they’re proving totally unwilling to do anything but extract from us. But remember, for every 1 of them, there are 99 of us.

  43. And which overwhelmed broke homeowner exactly is going to be able to afford the time, money$$$ and effort to use this defense?

  44. And which homeowner exactly is going to be able to afford the time and $$ necessary to use this defense?

  45. F. Payment by the Maker

    If the maker of the note pays a “person not entitled to enforce,” he/she is not discharged from liability on the note, and faces the prospect of having to pay the true owner when that person surfaces with proof of ownership of the note (see §§3-601 and 3-602 above). Courts must take special care not to expose the maker to such double liability.http://douglaswhaley.blogspot.com/2010/11/update-mortgage-foreclosure-and-missing.html

  46. The FED is the biggest entitlement program for the rich on the planet. The truth is all of their debt is insolvent…They all got to greedy overselling investments in nothing to investors. I wouldn’t send the FED or ANY of their investors another dime to put in their pockets. They are not victims…they are crooks. How else would you explain investors insuring themselves on AAA rated…good as gold agency paper…? They were all insured to the tune of a gazillions by good old TBTF AIG..according to the documentary Plunder the Crime of Our Time…The documentary Inside Job said they were ALL insured on the “risk” of AAA rated securities tanking… ???? Everyone was insured on these AAA rated securities except for the U.S. TAXPAYERS…WHO FUNDED THEIR WHOLE SCAM….That’s not just wrong, that REEKS and THEY ALL REEK OF FRAUD & MALFEASANCE.

  47. We all made mistakes, I like many made a huge one. I wish I could go back and change it. Yes I am guilty of not understanding my loan and my whole family is paying the price. Although I can go to bed knowing when I go to work as a school bus driver, I do the best job I can everyday and I would never try to take one of my kids lunch money…
    I wonder were these bankers doing there jobs everyday to the best of their ability?
    I wnder

  48. @Carie, …. I dont see anywhere in your post that suggest someone else wrote it. Plagerism again? I thought you were old enough to know better, but on the other hand you seem to avoid the subject of Savings,Pensions, 401ks…. I am assuming you didnt have any and you didnt loose any…. because I’m sure if you did, you wouldnt be posting someone elses Garbage calling us Idiots! Oh Silly Me … I forgot.. you want us to pay for your free house and to hell with our working 30 plus years and paying off our own mortgage? Pffft! Greed is Greed not matter how you dress it up!!

  49. How is this any different than what Maddoc did this is against the law and anyone who knew or managed these CDO’s etc. should get a ” go to jail ticket ” they were playing the ol Monopoly game. Tag Your It…… wrap them in a bow and throw away the key….

  50. Oh, I’m not upset with you Enraged. I understand where you are coming from. Those Investors you speak of were the ones who made millions with insider trading . The are the 1% who got richer at the expense of our life savings and our homes.

  51. Shadowcat,

    I didn’t mean to offend you and I apologize if i did.

    I wasn’t referring to those investors (I happen to be one of them as well: very low-risk, AAA 401K and it’s gone. Somehow, I believe we were conned and I am exploring the liability of the different players involved since I, as an investor, listened to the pro. Eventually, it will have to be litigated like everything else.)

    I was referring to the thousands upon thousands who were looking for a too good to be true. sure thing at 20% interest. In a sound economy, nothing increases that fast and most of them, in retrospect, admit they knew it but were swept on by the idea of a high, get rich quick return.

    Anyway, putting blame isn’t fixing the problem and there’s been enough of that already, coupled with a complete lack of prosecution and justice. What I’m waiting for now is solutions. Doubtful we’ll get everything back. Some of it would help. We’ll get there.

  52. @ Enraged, we worked for our pensions (we had no say in how they were invested). We worked for our 401ks and put the money in a SAFE HARBOR Triple AAA rated securites. with low returns… they LIED to us TO! There was no triple AAA ratings … just toxic waste!

  53. My point is simple. MortgageIT for instance was mortg banker in FL. wrote my loan. In maybe 6 months later they were gone. kaput. Just settled for $200 million with feds over FHA loan fraud. my loan was junk. I will take my lumps for part of it but the banks should take theirs. they should not come to court waiving a crap mortgage that failed all underwriting. makes perfect senes.

  54. @shadowcat (we know who you really are—you changed your moniker)

    I didn’t author that—SOMEONE ELSE DID.

    You need to wake up to reality and get off your high horse.

  55. Investors were as guilty as anyone else in this whole mess. Spend a couple of evenings watching “American Greed” and you’ll come to realize that all those investors crying foul today were people with a few bucks who, against all common sense, bought into the idea that they could double or triple their money overnight.

    Many who lost a lot are saying now “It didn’t make sense. At the beginning, I didn’t want anything to do with that. When I saw that the Joneses were investing and getting all that interest monthly, I figured that it was legit. In retrospect, I knew better than to send my money. I lost all my retirement, savings and kids’ college funds ”

    Madoff could not have put his hands on anyone’s money but for greed, his and investors’. Nothing happens in a vacuum.

  56. Idiots? Carie? If it were not for us folks you refer to as idiots …. you would not have gotton a Loan in the first place! It was our Money! You should have planned and lived within your means like we did! I’d rather be an Idiot than Greedy! Pffft!!!!

  57. “…What happened with subprime mortgage loans. CDOs (collateralized debt obligations) were the investments that most “mortgage” security investors were investing in. They are largely synthetic because they were not derived directly from the asset itself — they were derived from the securities that were derived from the loan “assets.” The banks that owned the REMICs (the banks did own them), would package different tranches from multiple REMICs into CDOs — and that is what the pension funds, insurance companies, etc. would invest in.

    A REMIC is typically structured with about say– 15 tranches. Since these were not mortgage loans by which securities could be derived for Triple A rating, these REMICs had to structure the trusts to provide credit enhancement that the rating agencies would use to “upgrade” the rating quality

    Here is how the process went. 1) the subprime loans were sold to one of the major banks (this is NOT reflected in any assignments, and only some REMICs disclose this). (will explain why not reflected in assignments in a later here). 2) the bank’s subsidiary Depositor deposits the loans in an off-balance sheet trust (some Depositors were not subsidiaries of big banks — but they had corridor agreements to sell to the banks — which we also do not see by REMIC disclosoure — (Corridor agreements to sell to the banks, but the Depositor name would remain on the trust ) 3) the REMICs are structured into certificates, which are all sold to the security underwriter (except the bottom tranche which the servicer would usually own). 4) the security underwriters were subsidiaries of the big banks. 5) the top tranches of the REMICs were rated the highest because the lower tranches provided support to the upper tranches — that is, given a default, losses would accrue to the lower tranches first. 6) the big banks sold the top tranches to Fannie/Freddie and kept them for themselves (Louis Ranieri — grandfather of the subprime trust has explained this). 7) Ranieri has stated that the lower tranches (credit enhancement) were sold first — to hedge funds, and other distressed debt investors, while the banks retained the upper tranches 8) some of the tranches were sold to other big banks.

    9) Then the banks would take different tranches from different REMICs trusts, and package them into CDOs — to be sold to security investors. And, yes, the guy who sold the software for these CDOS is right — one had to be an idiot to invest in these CDOs, because the ratings on the REMIC trusts from which the CDOs were derived, were manipulated. Anyone who read the prospectus for the REMICs would know that the CDOs were derived from risky “loans”, and that they were not legitimate. 9) From CDOs, CDS (credit default swaps) were derived — which are contracts not even “synthetic securities.” 9) Sometime CDOs were repackaged into Structured Investment Vehicles (SIVs).

    10) The CDO “security” investors are, the pension funds, insurance co., etc, that Neil refers to when he talks about “those who put up the money.” These security investors, however, did not put up one dime to the borrowers, they were just the “synthetic” security INVESTORS IDIOTS that bought the idea that the derived CDOs, derived from the REMIC certificates, derived from the bogus loans, were actually triple A rated (this deriving is what is called “leverage”). These security investors do NOT fund mortgages, they do NOT give borrowers money, and they are NEVER the creditor. The creditor “investor” is the bank that originally purchased the subprime mortgage — that was never a “mortgage” to begin with.

    11) the CDS (default swaps) remove collection rights from the cash pass-through structure. Once removed from the above — who knows what the original bank does with your loan. Very often, collection rights are sold to the hedge funds who provided credit enhancement by purchasing the lower tranches of the REMIC trust. The “servicer” who owed the bottom tranche, continue to “service” for unidentified CDS holders — who have nothing to do with the REMIC trustee (as CDS are contracts not securities). So creditor is never identified.

    12) Back to #1 — why the assignment to the purchasing bank is never apparent — because in real securitization, the asset/liability balance sheet receivables are removed from the balance sheet to an off-balance sheet conduit (such as a REMIC). BUT, THE SUBPRIME WAS NOT REAL MORTGAGES, THEY WERE GSE CHARGE OFFS, WITH ONLY COLLECTION RIGHTS SURVIVING. Collection rights are not reported as “receivables” on an asset balance sheet. Any pass-through of cash is considered income, not collection of receivables (you can not have receivables when the loan was previously charged-off). Thus, the subprime REMICs were never “true sales” of anything. They were not legitimate balance sheet transfers.

    13) Many of the original tranches to the bogus REMICs have been paid off. At the very least, by the TILA amendment, the remaining certificate holders to the REMICs could be considered your creditor (remember there are only about 15 tranches to begin with). Creditor is NOT the derivative security investors. According to the Fed Res Opinion to the TILA Amendment, when there are multiple creditors, the creditor who holds the largest percentage interest in the loan, must identify itself to the borrower. Thus, the tranche holder with the largest position in your loan — should be identified. This is not happening — foreclosures continue under the bogus name of the trustee to the trust. Again, and again, security investors, trusts, trustees, and servicers are not the creditor. And, Neil is on bad track when he starts saying that “security investors” funded the loan. This is in gross error, and has caused more harm than good.

    Security investors were chasing high yields — they expected the subprime borrowers to fund their pensions. I find outrage in this. Interest rates on these loans could go as high as what one might consider “usury.” And, the further outrage is that the properties that funded the bogus subprime were inflated to make these bogus loans higher and higher — which would generate more and higher cash flows. The fact the government still has done nothing to help these victims is the final OUTRAGE…”

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