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More and more of you are getting the message that you have remedies and defenses that might be stronger than what the “lenders” have. More and more lawyers are getting the same message but it is proceeding slowly. Some states have made if official: if you don’t own the note (which is the case in most foreclosures) then you can’t foreclose. But lawyers are slow on this one because they underestimate the value of the service they could be performing, underestimate the fees they could be earning and overestimating their own knowledge.

We’re Working on It.

The legal research on the cases was continuing when I ran across the San Diego case which stated grounds for the County to stop Countrywide foreclosures and could stop others as well. The intersection of the new California law, when read carefully, would indicate that the homeowner can at the very least buy time by demanding that the procedures be invoked. In all events, of course, I defer to the opinion of local counsel.

As several states, including Georgia, Florida, New Jersey, Ohio and others have already come to realize, the securitization of loans has created a cloud on two different titles — real estate and UCC. One is obviously dealing with a recorded instrument and the other is dealing with a negotiable instrument. In any case you end up advising or representing homeowners in distress, you will find that there are many defenses, many avenues for rescission and cancellation (including usury), appraisal fraud, common law fraud, RICO etc.

But in ALL cases I have reviewed, there is one common thread: the “lender” was paid in full plus a premium of around 2.5% that was not disclosed. The payment came from a third party who in turn parceled pieces of the note out to multiple third parties.

Several states now outright bar a mortgage servicer from bringing a foreclosure action for this reason — they have no interest in the note, they don’t have the note and they have no knowledge of upstream payments from AMBAC or other third parties that guaranteed revenue stream. In interest only loans it is highly probable that at least part of the “deficiency” has been paid to the real holder in due course — i.e., the investor holding certificates of pass through asset backed securities (who are ONLY holders in due course if they were unaware of thee various fraud and deficiencies at closing).

The position of the Lenders is simple. My “theory” (accepted in over 100 cases that are reported and apparently several times that number in unreported cases that have come to my attention through speaking with the lawyers who obtained the dismissals, is allegedly “gibberish.” (I have that in a letter).

They assert they are holders and that this entitles them to enforce the note and since the note follows the mortgage, I am all vapor, smoke and mirrors. Unfortunately, they didn’t read the provisions of the UCC carefully. The note does not follow the mortgage if the parties show an intent otherwise. And in the securitization of the note, they definitely separated the right to enforce the mortgage from the note itself — which they virtually admit by asserting that even though they don’t have the note they still have the right to enforce the mortgage filed in County records. The separation occurred in the Pooling and servicing Agreement and subsequent assignments to various entities and tranches within the entities and subsequent issuance of certificates of pass though asset backed securities.

Their assertion of being holder faces two problems.

First they probably are lying outright. Most notes disappeared because the assigned notes into the pool were forged by “lender” operatives who attached the forged notes to assignments in anticipation of loan closings that sometimes didn’t close at all (we have four Wells Fargo cases where there was no loan closing but they are foreclosing on the properties anyway) or where the actual note signed by the borrower was (a) filled in after the assignment into the pool of a forged note in blank or (b) differed from the forged note signed in blank that was assigned into the pool.

The second problem they have is that there is a presumption that because they are the holder or can produce a fraudulent affidavit of lost note signed by someone with no personal knowledge (see the King’s County Case), that there is nothing we can do. The holder doctrine is only a presumption. It can be rebutted by showing ANY evidence that this holder knew, should have known or could have known of the improprieties at closing. It can also be rebutted by ANY evidence that the holder is aware or should have been that there are third parties — necessary and indispensable parties — who have legal, constructive or equitable rights to either or both of the note and mortgage (Deed of Trust in non-judicial states).

The law states not that a holder can enforce, but that a holder in due course can enforce. Without the presumption of the holder being a holder in due course they are back at square one without any authority.

It is for this reason that in most states and under most circumstances, it is my opinion that properties subject to any mortgage acquired during 2001-2008 should be examined and investigated to determine if a quiet title action should be filed against the nominal lender, the nominal servicer (who probably has “authority” from a party that did not have the power to grant it) and John Does 1-1000 being holders of asset backed securities whose identity has been sought informally from the lender and which requests have been uniformly ignored.

So you see we are back to the Single Transaction. An investor put up money, part of which was used to fund your loan, and the other part was used to feed the sharks who took it as fees, and are now taking it again as they mark down the assets, give the losses to the borrowers and the investors while they pocket the difference by having received the money, the property and a judgment for “deficiency” as well.

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  5. I am seeking a lawyer to handle the case below am seelomg an attorney.

    I am a well financed, private party .

    I own a $600,000 mortgage that is now in first position. I have been sued by Major Bank who holds a mortgage on the same position . Their mortgage is now in second position.

    Major bank says that the reason they are in second position is due to a mistake made by banks attorney at closing.

    I claim that when Major Bank closed their loan in 2007, theyknewof the fact that I had a mortgage on the property that was recorded in 2005 and I say that my 2005 mortgage is not subject to their claim of mistake.

    There is evidence that Major bank was involved in lying and in fraud.

    The facts are lengthy … in appreviated form, here are the facts/

    In 2003 Mr. Jones gave WAMU a mortgage of $ 400,000.
    In 2005 Mr. Jones gave Dennis a mortgage of $ 600,000
    In 2007 Mr Jones gave WAMU a mortgage of $ 570,000

    WAMU paid Jones $170,000 out of the $ 570,000 and applied the
    remaining $ 400,000 to pay off the 2003 / $ 400,000 mortgage.

    The closing was handled by a Title Company.The Title Company
    wrote a title policy which lists the $ 600,000 mortgage owned
    by me, Dennis .

    At closing, the title company simply ignored my mortgage AMU Refi mortgage

    The mortgage closed on October 4, 2007.

    After closing in 2007, WAMU sells the 2007 mortgage to Freddy Mac Freddy does not do a title search because the insurance company issued a policy at closing. When Freddy buys this mortgage, Freddy does not know about and does not care about the fact that it ( Freddy) is buying a mortgage that it thinks is a first mortgage but actully Dennis is in first postion.Thats because there is a title policy as above.

    In September 2008 WAMU is placed in receivership.All of its loans are sold to Chase Bank. But since the WAMU 2007 loan has been sold to Freddy
    Chase does not acquire the 2007 loan.

    In March 2008 even though WAMU is in receivership and no longer exists, WAMU files a lawsuit and names Dennis as plaintiff.

    I will explain the rest of this story on inquiry.

    Thank you.

    Dennis Cook

  6. I became a member – and got my case dismissed. I need to cancel the CC fee coming out of my account. Please tell me how to do it – you need a CONTACT US link on your site.

  7. Yes I will donate $25. Please let me know how.
    Mary Cochrane

  8. Dear Patriots,

    I would love to make a small donation. Please have someone contact me via e-mail. I don’t do check, unless they are over the phone. I can give you a debit, or credit card as well.
    My name is Tim, please contact me asap.

    You all are awesome! Thank You so much for your information that has helped so many.

    Tim

  9. I attempted to find a phone number or a way to contact Neil or an associate. Unsuccessful so far.

    Please have someone contact me.

    Steven
    (702) 361-8429

  10. Great/Thanks for the/Good post. I’ll be sure/be back/make the time to read the rest of your blog.

  11. Neil
    Is there a way to donate online or over the phone…. or better yet where can I have my bank send the payment?

    sorry I don’t own a printer

  12. WOW , 500,000 AND GROWING !

    THE NEXT MILLION HITS WILL BE EASY NOW !

    YOU ARE AMAZING NEIL .

    THANK YOU !

    ALAN

  13. Neil and associates,

    Thank you for this very encouraging web site. I am facing foreclosure and I need help. I feel as though I have been led right down this foreclosure path by Flagstar Bank in Michigan while doing everything they asked me to do. Supposedly ” helping ” me. Now I’m really stuck. Will someone please contact me ? Thank you so much. dennisschoeny@hotmail.com

  14. CALIFORNIA LEGISLATURE FINDINGS

    3. Recently, the California Legislature found and declared the following in enacting California Civil Code 2923.6 on July 8, 2008:

    (a) California is facing an unprecedented threat to its state economy because of skyrocketing residential property foreclosure rates in California. Residential property foreclosures increased sevenfold from 2006 to 2007, in 2007, more than 84,375 properties were lost to foreclosure in California, and 254,824 loans went into default, the first step in the foreclosure process.

    (b) High foreclosure rates have adversely affected property values in California, and will have even greater adverse consequences as foreclosure rates continue to rise. According to statistics released by the HOPE NOW Alliance the number of completed California foreclosure sales in 20’07 increased almost threefold from 2002 in the first quarter to 5574 in the fourth quarter of that year. Those same statistics report that 10,556 foreclosure sales, almost double the number for the prior quarter, were completed just in the month of January 2008. More foreclosures means less money for schools, public safety, and other key services.

    (c) Under specified circumstances, mortgage lenders and servicers are authorized under their pooling and servicing agreements to modify mortgage loans when the modification is in the best interest of investors. Generally, that modification may be deemed to be in the best interest of investors when the net present value of the income stream of the modified loan is greater than the amount that would be recovered through the disposition of the real property security through a foreclosure sale.

    (d) It is essential to the economic health of California for the state to ameliorate the deleterious effects on the state economy and local economies and the California housing market that will result from the continued foreclosures of residential properties in unprecedented numbers by modifying the foreclosure process to require mortgagees, beneficiaries, or authorized agents to contact borrowers and explore options that could avoid foreclosure. These Changes in accessing the state’s foreclosure process are essential to ensure that the process does not exacerbate the current crisis by adding more foreclosures to the glut of foreclosed properties already on the market when a foreclosure could have been avoided. Those additional foreclosures will further destabilize the housing market with significant, corresponding deleterious effects on the local and state economy.

    (e) According to a survey released by the Federal Home Loan Mortgage Corporation (Freddie Mac) on January 31, 2008, 57 percent of the nation’s late-paying borrowers do not know their lenders may offer alternative to help them avoid foreclosure.

    (f) As reflected in recent government and industry-led efforts to help troubled borrowers, the mortgage foreclosure crisis impacts borrowers not only in nontraditional loans, but also many borrowers in conventional loans.

    (g) This act is necessary to avoid unnecessary foreclosures of residential properties and thereby provide stability to California’s statewide and regional economies and housing market by requiring early contact and communications between mortgagees, beneficiaries, or authorized agents and specified borrowers to explore options that could avoid foreclosure and by facilitating the modification or restructuring of loans in appropriate circumstances.

    4. “Operation Malicious Mortgage’ is a nationwide operation coordinated by the U.S. Department of Justice and the FBI to identify, arrest, and prosecute mortgage fraud violators.” San Diego Union Tribune, June 19, 2008. As shown below, Plaintiffs were victims of such mortgage fraud.
    5. “Home ownership is the foundation of the American Dream. Dangerous mortgages have put millions of families in jeopardy of losing their homes.” CNN Money, December 24, 2007. The Loan which is the subject of this action to Plaintiff is of such character.
    6. “Finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy. High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets and the broader economy. Therefore, doing what we, can to avoid preventable foreclosures is not just in the interest of the lenders and borrowers. It’s in everybody’s best interest.” Ben Bernanke, Federal Reserve Chairman, May 9, 2008. Plaintiff alleges that Defendants had the duty to prevent such foreclosure, but failed to so act.
    7. “Most of these homeowners could avoid foreclosure if present loan holders would modify the existing loans by lowering the interest rate and making it fixed, capitalizing the arrearages, and forgiving a portion of the loan. The result would benefit lenders, homeowners, and their communities.” CNN Money, id.
    8. On behalf of President Bush, Secretary Paulson has encouraged lenders to voluntarily freeze interest rates on adjustable-rate mortgages. Mark Zandl, chief economist for Mood’s commented, “There is no stick in the plan. There are a significant number of investors who would rather see homeowners default and go into foreclosure.” San Diego Union Tribune, id.
    9. “Fewer than l%• of homeowners have experienced any help “from the Bush-Paulson plan.” San Diego Union Tribune, id. Plaintiffs’ are not of that sliver that have obtained help.
    10. The Gravamen of Plaintiff’s complaint is that Defendants violated State and Federal laws which were specifically enacted to protect such abusive, deceptive, and unfair conduct by Defendants, and that Defendants cannot legally enforce a non-judicial foreclosure.VIOLATION OF CALIFORNIA CIVIL CODE 2923.6

    64. Plaintiff reallege and incorporate by reference the above paragraphs as though set forth fully herein.
    65. Defendants’ Pooling and Servicing Agreement (hereinafter “PSA”) contains a duty to maximize net present value to its investors and related parties.
    66. California Civil Code 2823.6 broadens and extends this PSA duty by requiring servicers to accept loan modifications with borrowers.
    67. Pursuant to California Civil Code 2823.6(a), a servicer acts in the best interest of all parties if it agrees to or implements a loan modification where the (1) loan is in payment default, and (2) anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis.
    68. California Civil Code 2823.6(b) now provides that the mortgagee, beneficiary, or authorized agent offer the borrower a loan modification or workout plan if such a modification or plan is consistent with its contractual or other authority.
    69. Plaintiffs’ loan is presently in default.
    70. Plaintiffs are willing, able, and ready to execute a modification of their loan on the following terms:
    (a) New Loan Amount: insert
    (b) New Interest Rate: insert
    (c) New Loan Length: insert
    (d) New Payment: insert

    71. The present fair market value of the property is insert value.
    72. The Joint Economic Committee of Congress estimated in June, 2007, that the average foreclosure results in $77, 935.00 in costs to the homeowner, lender, local government, and neighbors.
    73. Of the $77,935.00 in foreclosure costs, the Joint Economic Committee of Congress estimates that the lender will suffer $50,000.00 in costs in conducting a non-judicial foreclosure on the property, maintaining, rehabilitating, insuring, and reselling the property to a third party. Freddie Mac places this loss higher at $58,759.00.
    74. The anticipated recovery through foreclosure on a net present value basis is $insert amount or less.
    75. The recovery under the proposed loan modification at $insert amount exceeds the net present recovery through foreclosure of $ insert amount by over $5,000.00.
    76. Pursuant to California Civil Code §2823.6, Defendants are now contractually bound to accept the loan modification as provided above.

  15. Here below, is what I posted on Craiglist under RANTS & RAVES (maybe a lame choice) in South Florida from my home in Cambridge, MA.

    After I change the content enough to get under Craigslist’s spamming radar, I plan to post under SERVICES (Legal – or wherever I see loan modification or foreclosure services advertised) and HOUSING (wherever I see short sales advertised, etc.)

    I also created a posting for the Boston area, but made sure content was different enough that Craigslist wouldn’t block it. They don’t tolerate SPAM or OVER-POSTING.

    SUGGESTION: First fully understand the Garfield Continuum, then create your own wording, spell-check twice so you don’t come across as not credible, and post on a Craigslist near you. Craigslist allows reposting after 48 hours in most areas. Best to set up a Craigslist account that allows you to REPOST in minutes, and track what you’ve posted.

    Know your audience!

    If motivated and you have the time, participate in online discussion groups (AOL, Yahoo, Facebook, etc.), start a ‘foreclosure’ thread if need be. Write up canned talking points you can cut and paste where appropiate. Neil may have suggestions on what to highlight.

    Also, REPLY with a suggestion to check out Neil’s Livinglies blog to EVERY Craigslist poster who needs foreclosure or loan modification advice or is advertising they are distressed!

    If enough of us Foreclosure Defense ADVOCATES zealously do this like COMMUNITY ORGANIZERS – ALL OVER THIS VAST COUNTRY – even 20 minutes every day, imagine what a grassroots movement we collectively could set in motion!

    Thanks, Neil for starting out small with something important that’ll be BIG! You’ll soon need a full-time staff!

    Any suggestion for us foot soldiers, General Garfield?

    RSVP
    Allan
    BeMoved@AOL.com

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~

    south florida craigslist > miami / dade > rants & raves
    please flag with care:

    miscategorized
    prohibited
    spam/overpost
    best of craigslist
    Please report suspected exploitation of minors to the appropriate authorities

    FORECLOSURE DEFENSE: My Mortgage Meltdown HEROES (Why do so many folks hand over the keys?)
    Reply to: [ANONYMOUS or YOUR email address here]
    Date: 2008-12-14, 8:32PM EST

    Ever wonder WHY some banks refuse to MODIFY defaulting loans or WHY entities such as Federal Loan Modification and others are springing up nationwide to entice you to modify your loan to avoid FORECLOSURE? Why judges are throwing out foreclosure suits, and stopping or setting aside foreclosure sales all over the nation?

    It’s due to Wall Street’s SECURITIZATION of mortgages (1999 – 2008), the accompanying promissory notes, and the often fraudulent paper trail of assignments that often accompany these (often ‘lost’) documents.

    Learn about people who are successfully FIGHTING FORECLOSURE, and about LAWYERS who are NOT clueless about how truly to turn the tables on culpable LENDERS.

    Wall Street securitization brought us the Mortgage Meltdown with its “toxic assets.” This gives us many opportunities to put up a fight and to walk away from our mortgages and legally own our homes free and clear! Under Wall Street securitization, lenders made out like bandits using OUR mortgages as THEIR assets to get sometimes 70 to 1 leverage to make multiples of their value in profits for themselves. Who put up the asset (your mortgage) that allowed investment banks to rake in trillions? How did investment banks afford to pay out billions in bonuses? Now they want another WINDFALL when they seek to foreclose your home?

    Have you done a TILA or RESPA audit? Was there fraud?

    Once you modify your loan, which is mostly in the interest of the (sometimes hidden) lender (whoever that entity might be this month), not necessarily yours, you give up ALL YOUR DEFENSES AND THE RIGHTS you might currently have to attack or question the original obligation.

    If there was predatory lending, or your loan was voidable due to violations of TILA (Truth In Lending Act), RESPA, usury, and other consumer statutes, or there was fraud in the inducement, forgery, etc., by modifying your loan you give up your LAST CHANCE to turn the tables on your lender, rescind your mortgage, and have the house legally become yours free and clear.

    Be sure the lawyer you’ve retained, or the loan officer eager to modify your loan, is truly looking out for YOUR interests, not theirs or the culpable lender’s.

    Not all lawyers are the same or current on foreclosure law. Some desperately need to update their learning and acquire new tools in their defense arsenal. Few lawyers ‘get it’ when it comes to foreclosure defense in the age of Wall Street’s mortgage securitization. Be sure you shop around and interview for the right one. The right lawyer can save you hundreds of thousands of dollars AND your home.

    For those of you who cannot afford a lawyer, don’t despair! Many pro se defendants, facing foreclosure, have stood up to and prevailed against lawyers who represent (sometimes fraudulently) culpable lenders with deep pockets. Learn how to be another David confronting Goliath! Make the American justice system work for you, now that judges are onto the fact that many lenders seeking to foreclose are not legally entitled to do so. Fight for your home and your legal rights! Learn how at:

    GO TO: http://www.LivingLies.WordPress.com

    * Location: Why do so many folks hand over the keys?
    * it’s NOT ok to contact this poster with services or other commercial interests

    PostingID: 958088122

    Copyright © 2008 craigslist, inc. terms of use privacy policy feedback forum

  16. We may have began to bring the Banksters to their knees.
    This was my gut feeling in the onslaught.I once told my wife that the day would come when I would get my hands on the necks of the banksters,this day may have come.

  17. A new wave of fraud and fast-dealing is ripping the homes right out from under thousands upon thousands of Americans. It’s the ironic undercurrent of what for homeowners has been mostly good news: the coast-to-coast spike in real estate values.
    Scam artists fish where the fish are, and one of the great mother lodes of cold, hard cash these days is literally under many Americans’ mattresses – the homes they sleep in each night. As home price appreciation handily outpaces both inflation and traditional housing appreciation rates1 many Americans, sometimes unwittingly, find themselves sitting on five- and six-figure chunks of home equity.
    But the growth of this pile of wealth — and an unprecedented variety of ways to tap it — has coincided with tremendous financial pressures on a wide swath of American families. Rising costs for housing, health care and education, coupled with increasing job insecurity, income volatility and downward pressure on real incomes, have fueled a dramatic surge in bankruptcy filings, mortgage defaults and other financial distress.2
    A very considerable role in this distress is also played by the nation’s lenders, with their increasingly reckless extension of credit plus their striking array of grossly unfair and extremely high-priced credit products collectively known as “predatory lending.” Assistant Minnesota Attorney General Prentiss Cox goes so far as to blame part of his state’s recent outburst of foreclosure “rescue” scams on “the tail-end effects of a sub-prime lending cycle” where consumers threw in the towel trying to pay off high-priced loans.
    And then there’s the nature of foreclosure itself and the current system’s severe shortcomings. Homeowners facing foreclosure are by definition short of money and vulnerable. Many states have non-judicial foreclosure, meaning no court is overseeing the process. And it’s a process sadly lacking in transparency; a homeowner holding a notice of default often is given no clear sense of where to turn next or how much time there is to make crucial decisions.
    Finally, there’s the troubling lack of people who might help. Consumer law can be difficult
    1 See “U.S. Housing Boom Benefited More Markets in ’04, Study Says” in the Wall Street Journal May 4, 2005. The story cites a Federal Deposit Insurance Corporation study in stating that “More U.S. housing markets were booming in 2004 than at any time in at least 30 years,” with a boom defined as “a three-year, inflation-adjusted price gain of 30% or more.” Also see “Home Prices: Our Towns” in the 2/11/05 Wall Street Journal for a brief overview of the breadth and depth of the price-appreciation surge.
    2 Among many other sources documenting what’s come to be known as “The Middle-Class Squeeze” are the publications of the non-profit research and advocacy group Demos (at http://demos-usa.org/) and the work of Harvard Law School professor and noted bankruptcy expert Elizabeth Warren (lists of her work at http://www.law.harvard.edu/faculty/directory/facdir.php?id=82)
    DREAMS FORECLOSED: The Rampant Theft of Americans’ Homes Through Equity-stripping Foreclosure “Rescue” Scams
    8
    and esoteric, lawyers often cannot recover reasonable fees for taking these cases, and low-cost alternatives like legal services clinics have become an increasingly endangered species.
    It’s at the intersection of this new array of pressures and surging home values that foreclosure “rescue” scams find their opening.
    l. What’s a Foreclosure “Rescue” Scam?
    These scams revolve around heavily-promoted deals supposedly designed to save the homes of people facing foreclosure, those who’ve fallen behind on their mortgage payments. But with frightening regularity this “help” from a “rescuer” either drains off the property’s built-up equity or leaves the “rescuer” owning the house outright – and the family evicted from their home.
    In many cases it’s hard to escape the conclusion that that’s exactly what the “rescue” is designed to do.
    The predominant foreclosure “rescue” scams appear to come in three varieties. The first might be called “phantom help,” where the “rescuer” charges outrageous fees either for light-duty phone calls and paperwork the homeowner could have easily performed, or on a promise of more robust representation that never materializes. In either event the homeowner is usually left without enough assistance to actually save the home but with little or no time left to prevent this grievous loss by the time s/he realizes it. The “rescuer” essentially abandons the homeowner to a fate that might well have been prevented with better intervention. Examples of this variant can be found in the California, Michigan, New York, Ohio and Oklahoma sections of this report.
    A second variety of the scam is the “bailout” that never quite works. This scenario includes various schemes under which the homeowner surrenders title to the house in the belief that s/he is entering a deal where s/he’ll be able to remain as a renter, and buy it back over the next few years. Homeowners are sometimes told that surrendering title is necessary so that someone with a better credit rating can secure new financing to prevent the loss of the home. But the terms of these deals are almost invariably so onerous that the buyback becomes impossible, the homeowner permanently loses possession, and the “rescuers” walk off with all or most of the home’s equity. Examples of this variant can be found in the California, Colorado, District of Columbia, Illinois, Massachusetts, New York and Washington state sections of this report.
    The third variety is a bait-and-switch where the homeowner does not realize s/he is surrendering ownership of the house in exchange for a “rescue.” Many homeowners later insist that they believed they were only signing documents for a new loan to make the mortgage current.
    Concerning income pressures and growing income inequality see BusinessWeek’s May 31, 2004, cover story titled: “Working…and Poor.” The subtitle says it all: “One in four workers earns $18,800 a year or less, with few if any benefits. What can be done?” That 1-in-4 equals 28 million American workers.
    DREAMS FORECLOSED: The Rampant Theft of Americans’ Homes Through Equity-stripping Foreclosure “Rescue” Scams
    9
    Many also say they had made it quite clear they had no intention of selling or giving up their home to anyone. Further evidence that homeowners are being gulled by this variant of the scam is the many cases in which the home is transferred for a ridiculously small fraction of its actual value.
    It’s important to note here that a substantial number of these cases involve fraud and forgeries of deeds. Worse, in many cases the original homeowner is left holding the original mortgage on the home s/he no longer owns! Examples of this variant can be found in the Colorado, District of Columbia, Florida, Illinois, Minnesota, Nevada and Virginia sections of this report.
    Based on National Consumer Law Center’s numerous interviews plus a review of cases and reports from consumer attorneys, law enforcement officials and the news media in seventeen states plus the District of Columbia, here’s an outline of typical tactics employed in these scams:
    􀂾 The “rescuer” identifies distressed homeowners through public foreclosure notices in newspapers or at government offices. These records are more readily accessible than in the past because they’re computerized and because more private firms now compile and sell the lists. The homeowner has not been foreclosed on yet, but is merely threatened with foreclosure after falling behind on mortgage payments.
    􀂾 The “rescuer” then contacts the homeowner by phone, personal visit, card or flyer left at the door (see examples of these solicitations in Appendix A), or advertising. Initial contact typically revolves around a simple message such as “Stop foreclosure with just one phone call,” “I’d like to $ buy $ your house,” “You have options,” or “Do you need instant debt relief and CASH?” This contact also frequently contains a “time is of the essence” theme, adding a note of urgency to what is already a stressful and possibly desperate situation.
    􀂾 Initial meetings stress the promise of a “fresh start” – likely what a frightened homeowner most wants to hear – and often feature written or recorded “testimonials” from other homeowners the “rescue” scammer has supposedly saved. While it is true that these programs “work” for some, what’s glossed over is that even that help often comes at a very steep price.
    􀂾 Homeowners are also frequently instructed to cease all contact with lawyers or the mortgage lender and let the “rescuer” handle all negotiations.3 This doubly-devious tactic simultaneously cuts off access to possible re-financing options while running out the clock on ways to prevent the foreclosure.
    􀂾 Once it’s too late to save the home the property is either taken by the “rescuer” or, having been drained of substantial equity through the “rescuer’s” imposition of heavy fees and other charges, simply lost to foreclosure.
    􀂾 After things fall apart many homeowners suffer the added stress and indignity of being evicted by their “rescuer” from the home they once owned.
    􀂾 Separately but also quite worrisome, this scam appears to have spawned a side-industry of scam artists who teach others how to drain equity from homes facing foreclosure. These scam teachers often advertise their seminars under the rubric of buying real estate with no money down, cashing in on the so-called pre-foreclosure market, helping those in distress or some such.
    3 One of many examples: A document sent by a “rescue” service to a Maryland homeowner states: “We have learned that any discussion between you, the homeowner, and the mortgage company or their attorney(s) at this point, will pre-empt our efforts and prevent us from being successful.”
    DREAMS FORECLOSED: The Rampant Theft of Americans’ Homes Through Equity-stripping Foreclosure “Rescue” Scams
    10
    ll. Why Do Homeowners Fall for These Scams?
    A scam by its nature disguises its intent and that’s certainly the case here. The predominant theme of virtually all the come-ons for this scam is one of “rescue,” when in fact it’s all too often the type of “rescue” Harvard Law School bankruptcy expert Elizabeth Warren refers to as “the cement life jacket.”
    How do “rescue” scammers get homeowners to take the bait? A checklist of a few of the scam artist’s best friends, all of which you will find in this report:
    􀀹 SATURATION MARKETING of “rescue” services, with lies, exaggerations and pressure tactics common.
    􀀹 TRUST: Exploiting either the homeowner’s belief that someone would not lie to his or her face — a belief reinforced by that slew of sympathetic-sounding and often face-to-face sales pitches – or the homeowner’s belief that s/he is in the process of being helped when in fact s/he’s being led down the road to ruin.
    􀀹 KEEPING THE HOMEOWNER IN THE DARK about the foreclosure process, its deadlines, his/her legal rights in the process, and low-cost alternatives that can save the home. This often goes hand-in-hand with another favorite scam artist’s tool….
    􀀹 FRAUD AND DECEPTION, including but not limited to forgeries, piles of complex documents that disguise the “rescuer’s” equity-stripping intent, and documents that conveniently run out of space for signatures on pages containing text, meaning that the homeowner signs a blank page that can then be fraudulently married to an entirely different document.
    􀀹 DESPERATION to save the home, obtain needed cash or get a fresh start, again in an atmosphere where the homeowner is encouraged to believe there’s very little time to act.
    􀀹 “AFFINITY MARKETING,” where African-Americans market these scams to African-Americans, Christians to Christians, older folks to older folks, Spanish-speaking to Spanish-speaking, military to military, and so on. The idea is that people like you are on your side, and what’s more they’re protecting you from those who don’t have your best interests at heart. This is perhaps one of the most cynical and heartless weapons in the scam artist’s arsenal.
    􀀹 LACK OF ECONOMIC SOPHISTICATION that causes many homeowners to fall for what amounts to extremely high-interest loans, or gigantic fees for just a few days (or hours!) of work. The homeowner simply doesn’t realize how expensive the deal is, and it doesn’t help that terms of these deals are quite often disguised.
    DREAMS FORECLOSED: The Rampant Theft of Americans’ Homes Through Equity-stripping Foreclosure “Rescue” Scams
    11
    CALIFORNIA SCHEMIN’: TWO STORIES
    A taste now, on the following two pages, of what these scams means to real people in one hard-hit region. NCLC’s Steve Tripoli visited two Southern California residents after their cases were brought to our attention by local legal services attorneys and California Attorney General Bill Lockyer’s office.
    It’s important to note that these cases, bad as they are, represent two homeowners who found their way to an attorney before their homes were irrevocably lost, though the fate of one of those homes remained in doubt as of mid-May 2005. Unfortunately even such limited victories, stressful though they might be, are far from typical. Time and again we hear from attorneys, consumer advocates and law enforcement officials that the number of victims losing their homes or big chunks of home equity to these scams far outweighs the number of clients they see. That’s because most victims simply don’t realize they’re being scammed even when they lose their homes. They think that’s just the way foreclosure works and that nothing more could have been done, a perception often happily reinforced by the people ripping them off.
    DREAMS FORECLOSED: The Rampant Theft of Americans’ Homes Through Equity-stripping Foreclosure “Rescue” Scams
    12
    “I Said, ‘The House is Still in My Name!’ And She Said, ‘You’re in Trouble’”
    It’s tough to fault Charleen Trana’s falling for a scam that may cost her the home she’s lived in for 50 years. She’s 78 years old, in poor health, attached to her town, and worried about a developmentally-disabled son who has trouble making it on his own.
    Her five-room ranch house in San Fernando, just outside Los Angeles, shows its age. But in Southern California’s sizzling housing market it’s almost certainly worth $350,000 and maybe even $400,000.
    Trana and her late husband worked hard, logging a combined 76 years at the aviation industry’s Lockheed and Bendix plants nearby. They’d paid off the mortgage years ago but then Trana’s son Mike was having trouble living on his own, losing several jobs to layoffs, so she took out a $100,000 mortgage with Ameriquest and paid Mike’s rent for two years.
    But Trana’s own living expenses, including health problems requiring costly prescription drugs, meant she couldn’t handle the mortgage payments, and Ameriquest threatened to foreclose.
    Right after the foreclosure notice was published she says three “extremely nice” men came to her door, told her they knew of her troubles and offered to help. They said they’d either take care of her mortgage woes and help her move or take over the house, pay off her $1,100-a-month Ameriquest mortgage, and let her stay in the house as a renter.
    “Their offer to let me stay in the house” was the clincher, Trana says. “I’ve been in this town since I was nine years old and I said do or die, come hell or high water, I wanted to stay here. I was at my lowest point. I thought I was going to be sitting out on the street with my furniture in the front yard and I thought, with this deal, Mike and I could get our bills paid off.”
    All Charleen Trana wanted to hear was that she could die in her own place, and that’s what the three men promised.
    She just didn’t grasp how steep the price would be.
    She agreed to take $3,000, a used Honda Accord, and the promise of $5,000 more
    for Mike when she dies. In exchange she signed away the house, was told her mortgage would be paid off, and that she could rent the house back from its new owners for $900 a month (just $200 less than her mortgage payment!) until she dies.
    “I signed a stack of papers, my God, it was about this thick,” says Trana, holding her thumb and index finger a couple of inches apart. “And when I asked for a copy I only got about half of what I signed.”
    Still, she says she knew she’d signed ownership of the house away and didn’t think it was such a bad deal at the time. But she hadn’t fully grasped the numbers. For $3,000 plus a used car, the promise of $5,000 more, and a payoff of the $100,000 mortgage, she was exchanging a house that had about a quarter million dollars’ worth of equity over and above what she was supposed to receive. And she was paying rent to boot!
    “I wasn’t thinking straight,” she says now. “I was so down and out I felt like I was 100 years old.”
    Nevertheless, Charlene Trana’s “rescuers” would have gotten away with their deed and Trana’s quarter million dollars in equity had they not, inexplicably, failed to pay off Trana’s Ameriquest mortgage as promised. But then again there was little pressure on them. Charleen Trana’s name was still on that mortgage even though she was also faithfully paying $900 a month to her “rescuers.” And so Ameriquest quite logically was still threatening Charleen Trana with losing everything.
    Trana called a girlfriend after one threat from Ameriquest, “and I said, ‘The house is still in my name!’ And she said, ‘you’re in trouble.’”
    That’s when some friends helped Charleen Trana find a lawyer, Debra Zimmerman of Bet Tzedek Legal Services.
    As of mid-May Zimmerman says Trana’s mortgage delinquency has been paid off by Trana and her “rescuers,” and Zimmerman has filed suit against the “rescuers” seeking recovery of the home’s title for Trana. But as of May those “rescuers” still hold the title to Charleen Trana’s house, even though the mortgage remains in Trana’s name.
    DREAMS FORECLOSED: The Rampant Theft of Americans’ Homes Through Equity-stripping Foreclosure “Rescue” Scams
    “…and I Still Didn’t Feel Like They Were Lying to Me”
    Olivia and Rogelio Ortiz were finally homeowners after 15 years married, and even then it was a stretch. They dipped into retirement savings to buy the condo in Santa Ana in 1999.
    Everything was fine until 2002, when both lost their jobs to layoffs. By early 2003 they were falling behind on their mortgage, and by June a notice of default and threat to foreclose was in the mail. A couple of weeks later another letter arrived.
    “It looked official, and we were at our wit’s end,” says Olivia Ortiz. “It had all the information from the county about our mortgage, our lender, everything, and it really looked official.”
    The letter was from Housing Assistance Services (HAS), about which you’ll be hearing more in this report.
    “A debt collector had been calling my husband at work (he’d found a new job) and we just couldn’t take the pressure any more. I was impressed with the professional appearance of the letter and we wanted to save our home, so I called them the same day,” says Ortiz. She says she reached a man named Jeremy Buttke at HAS, and right away the hurry-up began. Buttke said he’d fax a contract and other documents, “and they said we’ve gotta sign them and fax them back immediately, so they could do their work. I didn’t read the contract because I was desperate to get it back to them and desperate to save my house.”
    A close examination of the “Housing Assistance Agreement” she signed might have increased Olivia Ortiz’s distress (see the document immediately after this account). The agreement essentially released Housing Assistance Services from responsibility for doing much of anything for the Ortizes, explicitly stating that “in no event shall Housing Assistance Services be responsible for the loss of client’s home.” There are vague promises of help, financial education materials and the like, but little more.
    The Ortizes, however, had significant responsibilities under the contract. For one thing they agreed to pay a basic fee of $1,250 plus a slew of potential smaller fees, including $36 to run a credit report, a $25 “DocuSave” fee, “an additional one time $225 reinstatement processing fee,” $10 each month for a year for HAS to “monitor each client’s repayment plan” and $9 a month for 36 months’ worth of financial training materials.
    Grand total: $1,980. An amount that can well be seen as an indirect drain on the home’s equity as well. What’s worse, contract provisions made any fees the Ortizes paid into the program largely non-refundable regardless of HAS’s performance.4 And the Ortizes also agreed to have most payments to HAS automatically deducted from payroll or checking accounts, giving this “assistance” service a long arm to reach into the Ortizes’ finances — a long arm HAS didn’t hesitate to use.
    HAS representatives had one specific piece of advice for Olivia Ortiz: Don’t deal with your mortgage lender. “They said if the lender called, to call them (HAS) right away.”
    Armed with a boatload of fees and a thimbleful of responsibilities, by all appearances HAS then proceeded to do……..next to nothing. For three months.
    Notice of a foreclosure sale of the Ortiz home scheduled for October 10th arrived in mid-September. After several attempts, Olivia Ortiz says she reached HAS by phone and was assured that something would be worked out and that she shouldn’t worry. HAS representatives told her these things often go down to the very day of the foreclosure sale.
    On October 7th – three days away — she called HAS again. “Now I’m feeling like, I’m worried. And I still didn’t feel like they were lying to me but it was getting too close.”
    There were more reassurances from HAS representatives. They were dealing with her lender, they told Ortiz, and had asked for postponement of the foreclosure sale. But by now Ortiz had the presence of mind to insist on a letter from the lender guaranteeing that the sale was postponed. Without it, she was prepared to file for bankruptcy to save her house.
    The next day, after already dunning Olivia’s debit card for $1,311 in fees, the “rescuers” at HAS dunned the card for an additional $255. On October 9th, the Ortizes had their attorney file for bankruptcy.
    But the lender hadn’t cancelled the foreclosure sale. The 10th arrived and the Ortizes, both nervous wrecks, still weren’t sure they’d acted in time.
    “I arrived home for lunch that day at 1:45,” says Olivia. “The sale was scheduled for 2, and people were on my doorstep, taking pictures through the windows, shouting bid prices into telephones. By this time I’m inside my house and I’m about to pass out.”
    The sale went forward, and “we spent a very long weekend in a very nervous limbo. It was horrible.” Only on the next business day was she sure that her lawyer had been able to reverse the sale.
    The Ortizes went into bankruptcy and are now in the second year of a five-year repayment plan. And a good thing — the condo they’d bought for $150,000 just six years ago is now worth close to $400,000. They’d been flirting with the loss of a quarter-million dollars in built-up equity.
    As for the “rescuers” at Housing Assistance Services, Olivia Ortiz went after them in small claims court and got a call from HAS President Marc Sheckler, “a very good talker” who convinced her to settle for reimbursement of only part of what she’d paid to HAS.
    Her hard-earned lessons from all this? “Just not to trust anybody, I guess. And to talk to my own creditors and lenders.”
    Olivia Ortiz also learned to ignore the solicitations jamming her mail. “Even during this whole thing we would come home and our mailbox would be stuffed with things like HAS,” she says. “They’d say, ‘we’ll save you!’ Or, ‘we’ll negotiate with your lender!’ Some of them were handwritten! There’s a ton of them just saying the same thing.”
    Postscript: Last July California Attorney General Bill Lockyer won a court order freezing HAS’ assets after filing a lawsuit alleging the firm illegally and deceptively sold mortgage assistance services to numerous homeowners in foreclosure. “Con artists such as these defendants rank among the worst offenders of our consumer protection laws,” said Lockyer. “They prey on highly vulnerable people, people who need to save every penny, and who can least afford to throw their money away on false promises.” On May 18, just as this report was being finalized, the two sides filed with the court agreement on a permanent injunction and final judgment in favor of the state and against HAS. Deputy Attorney General Benjamin Diehl says the agreement forces HAS to fully refund fees paid by any of its victims who did not come away with new payment plans to resolve their mortgage delinquencies. HAS must also refund 10% of the fees paid by clients who did receive such a plan and pay civil penalties, and the firm is enjoined from a lengthy list of specific practices alleged in the original suit. Diehl estimates the refunds and penalties will cost HAS about half a million dollars and says he is “very satisfied” with the outcome.
    4 The contract defined HAS’s “performance” under it in this exceptionally loose way: “The actions Housing Assistance Services performs
    involved with packaging client’s information constitute performance and no refund shall be due Client in any case.”

  18. A Matter of Reality

    There is a lot going on around the world. But I want to talk to each one of you
    about this life, about this time that we have. It’s not often that somebody
    points out the importance of life itself. We live in a world that sees it very
    differently.
    I’ll give you an example. Today, I wanted to know about the latest hurricane.
    So I turned on the TV. They were talking about how many people might get
    hurt, how many millions of dollars in damages the last hurricane had caused,
    and how much damage this one could do. Then, all of a sudden, there was an
    advertisement saying, “Are you overweight? Would you like to lose five to ten
    pounds? Then this medicine is for you!” And I’m thinking, “Wait a minute. Half
    of the United States is in trouble, and we’re talking about being five to ten
    pounds overweight?” That’s the world we live in. What reality is and what it is not has become an incredibly fine line.
    So fine, in fact, that it is almost indistinguishable.
    A long time ago, someone said, “As far as your eyes can see, you can consider it
    to be an illusion.” In our little world, we have made compartments for everything.
    So when we hear a deep statement like this, we don’t really want to act on it. If
    we did, the consequences would be amazing. You’d come out of your garage and
    realize, “My house is an illusion.” You’d look at your wife and say, “You’re an
    illusion, honey.” You’d look at your kids and your car in the same way. I mean, it
    would be almost paralyzing. You’d wonder, “Wait a minute—as far as the eye can
    see, it is all an illusion?”
    So, we have compartments, and we say, “Well, this is one of those deep
    thoughts.” And then we move along. We go on our way because we don’t really
    want to change. If it means saying, “Oh, I love changes,” and not having to
    change, we say that, too. And people actually make these declarations, “I love
    changes.” As long as nobody causes them to change, it’s okay. I ask people, “Do
    you have peace in your life?” “Yes.” “Really?” “Oh, yes, yes. I read scriptures, I go jogging every day, I do yoga. I have
    peace. Now, where is the ice cream?” And that’s it.
    Why am I talking to you about illusion and reality? Does it matter that all this is an illusion? Does it matter that there
    is a reality? Yes, it does. Why? Because I see myself in relation to all the things that I am surrounded by. If I didn’t see
    any relationship between those things and me, then it wouldn’t be a problem. But when I see that relationship, I am
    caught.
    The point is that all we consider to be real is not. We have our relatives or
    “relations” and all the people we love. There will be a time when all these
    relationships will come to an end. There will be a time when they can no longer
    reciprocate our love. So, why am I talking to you about this? My point is, if you’re
    going to have a relationship, have a relationship with something inside of you, too.
    If you’re going to have loved ones, find the love that is inside of you as well,
    because this is the one that transcends the limitations of this world.
    I hope you understand what I’m trying to say. When you go to somebody’s house
    for dinner, what do you carry away with you? Well, you still have food in your
    stomach, but you also carry the memory of the enjoyment you had. Learn how to
    truly enjoy, because when you know how to enjoy, you take that with you in a
    heart that is full.
    Wherever you go, whatever you do, whatever situation you go through, you carry a joy with you. But if you have not
    understood and included your true self in this life of yours then, yes, you live in a world of illusion. Somehow, you think
    that this will all be here forever. But it won’t.
    There is something real in you. There is something beautiful in you. If you want to be mesmerized by beauty, be
    mesmerized by the beauty that is within you. If you want to understand something, understand yourself. If you want to
    love, love this beautiful breath that comes into you. If you do this, you will be given a gift of peace, joy, love—not in
    thoughts, not in words, but in feeling. And that is no ordinary gift.

  19. We sometimes forget that we are human beings who have very simple needs. On the top of the list has always been to feel contentment, to feel a heart full of joy, to feel peace within. This is a need we all have.Just like there are so many different cuisines, but they all have food that satisfies hunger. We get caught up in the recipes and forget about the hunger.

    I go around from place to place reminding people of the most important things in their lives. Simple things—not complex things. I see wars in this world. Nobody likes wars, and yet they happen again and again. And every time there is a war, there is a call for peace. It is not a new call, but one that has always been there, for it comes from within us. The quest for peace is within us, and the solution for peace also lies within us. This is who we are.
    We are human beings striving, each in our own way, to reach the same goal. Maybe some people have more resources and others very few, but the driving force is exactly the same for everyone. The same ambition drives us all. Aside from all our accomplishments, a lamp shines in the heart of every human being. This is the lamp that needs to shine. In this time of great darkness where people are fighting with their own kind, that lamp needs to shine as bright as it possibly can.

    What I say to people is that if you are looking for peace, turn within. Look for the other things you want, but also look within. People find that to be a powerful message. I can understand why. Sometimes we forget those simple little things. We go fumbling in the darkness while the solution has always been with us. A little opening of the heart, a little shining of the lamp, and we don’t have to stub our toes on all the obstacles out there.
    Simple it is. Simple it will be. Simple it always has been. Peace, then prosperity. Your own call, your own thirst, your own wisdom you feel within. Let them be true. Let them be real. Peace is not a fiction. Peace is not a work created by someone else. Peace is that one flower that is held by every human being. And that is what peace needs to be.

  20. We are up for a huge ride

    White House philosophy stoked mortgage bonfire

    WASHINGTON : “We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home.” — President George W. Bush, Oct. 15, 2002

    The global financial system was teetering on the edge of collapse when President George W. Bush and his economics team huddled in the Roosevelt Room of the White House for a briefing that, in the words of one participant, “scared the hell out of everybody.”

    It was Sept. 18. Lehman Brothers had just gone belly-up, overwhelmed by toxic mortgages. Bank of America had swallowed Merrill Lynch in a hastily arranged sale. Two days earlier, Bush had agreed to pump $85 billion into the failing insurance giant American International Group.

    The president listened as Ben Bernanke, chairman of the Federal Reserve, laid out the latest terrifying news: The credit markets, gripped by panic, had frozen overnight, and banks were refusing to lend money.

    Then his Treasury secretary, Henry Paulson Jr., told him that to stave off disaster, he would have to sign off on the biggest government bailout in history.

    Today in Business with Reuters
    Toyota expects operating lossGerman economy expected to contract 2.7% in 2009Ireland to invest €5.5 billion in 3 major banksBush, according to several people in the room, paused for a single, stunned moment to take it all in.

    “How,” he wondered aloud, “did we get here?”

    Eight years after arriving in Washington vowing to spread the dream of homeownership, Bush is leaving office, as he himself said recently, “faced with the prospect of a global meltdown” with roots in the housing sector he so ardently championed.

    There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk.

    But the story of how we got here is partly one of Bush’s own making, according to a review of his tenure that included interviews with dozens of current and former administration officials.

    From his earliest days in office, Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.

    He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

    Bush did foresee the danger posed by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants. The president spent years pushing a recalcitrant Congress to toughen regulation of the companies, but was unwilling to compromise when his former Treasury secretary wanted to cut a deal. And the regulator Bush chose to oversee them — an old prep school buddy — pronounced the companies sound even as they headed toward insolvency.

    As early as 2006, top advisers to Bush dismissed warnings from people inside and outside the White House that housing prices were inflated and that a foreclosure crisis was looming. And when the economy deteriorated, Bush and his team misdiagnosed the reasons and scope of the downturn; as recently as February, for example, Bush was still calling it a “rough patch.”

    The result was a series of piecemeal policy prescriptions that lagged behind the escalating crisis.

    “There is no question we did not recognize the severity of the problems,” said Al Hubbard, Bush’s former chief economics adviser, who left the White House in December 2007. “Had we, we would have attacked them.”

    Looking back, Keith Hennessey, Bush’s current chief economics adviser, says he and his colleagues did the best they could “with the information we had at the time.” But Hennessey did say he regretted that the administration did not pay more heed to the dangers of easy lending practices. And both Paulson and his predecessor, John Snow, say the housing push went too far.

    “The Bush administration took a lot of pride that homeownership had reached historic highs,” Snow said in an interview. “But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost.”

    For much of the Bush presidency, the White House was preoccupied by terrorism and war; on the economic front, its pressing concerns were cutting taxes and privatizing Social Security. The housing market was a bright spot: ever-rising home values kept the economy humming, as owners drew down on their equity to buy consumer goods and pack their children off to college.
    Lawrence Lindsay, Bush’s first chief economics adviser, said there was little impetus to raise alarms about the proliferation of easy credit that was helping Bush meet housing goals.

    “No one wanted to stop that bubble,” Lindsay said. “It would have conflicted with the president’s own policies.”

    Today, millions of Americans are facing foreclosure, homeownership rates are virtually no higher than when Bush took office, Fannie and Freddie are in a government conservatorship, and the bailout cost to taxpayers could run in the trillions.

    As the economy has shed jobs — 533,000 last month alone — and his party has been punished by irate voters, the weakened president has granted his Treasury secretary extraordinary leeway in managing the crisis.

    Never once, Paulson said in a recent interview, has Bush overruled him. “I’ve got a boss,” he explained, who “understands that when you’re dealing with something as unprecedented and fast-moving as this we need to have a different operating style.”

    Today in Business with Reuters
    Toyota expects first operating loss in 70 yearsGerman economy expected to contract 2.7% in 2009Ireland to invest €5.5 billion in 3 major banksPaulson and other senior advisers to Bush say the administration has responded well to the turmoil, demonstrating flexibility under difficult circumstances. “There is not any playbook,” Paulson said.

    The president declined to be interviewed for this article. But in recent weeks Bush has shared his views of how the nation came to the brink of economic disaster. He cites corporate greed and market excesses fueled by a flood of foreign cash — “Wall Street got drunk,” he has said — and the policies of past administrations. He blames Congress for failing to reform Fannie and Freddie. Last week, Fox News asked Bush if he was worried about being the Herbert Hoover of the 21st century.

    “No,” Bush replied. “I will be known as somebody who saw a problem and put the chips on the table to prevent the economy from collapsing.”

    But in private moments, aides say, the president is looking inward. During a recent ride aboard Marine One, the presidential helicopter, Bush sounded a reflective note.

    “We absolutely wanted to increase homeownership,” Tony Fratto, his deputy press secretary, recalled him saying. “But we never wanted lenders to make bad decisions.”

    A policy gone awry

    Darrin West could not believe it. The president of the United States was standing in his living room.

    It was June 17, 2002, a day West recalls as “the highlight of my life.” Bush, in Atlanta to unveil a plan to increase the number of minority homeowners by 5.5 million, was touring Park Place South, a development of starter homes in a neighborhood once marked by blight and crime.

    West had patrolled there as a police officer, and now he was the proud owner of a $130,000 town house, bought with an adjustable-rate mortgage and a $20,000 government loan as his down payment — just the sort of creative public-private financing Bush was promoting.

    “Part of economic security,” Bush declared that day, “is owning your own home.”

    A lot has changed since then. West, beset by personal problems, left Atlanta. Unable to sell his home for what he owed, he said, he gave it back to the bank last year. Like other communities across America, Park Place South has been hit with a foreclosure crisis affecting at least 10 percent of its 232 homes, according to Masharn Wilson, a developer who led Bush’s tour.

    “I just don’t think what he envisioned was actually carried out,” she said.

    Park Place South is, in microcosm, the story of a well-intentioned policy gone awry. Advocating homeownership is hardly novel; the Clinton administration did it, too. For Bush, it was part of his vision of an “ownership society,” in which Americans would rely less on the government for health care, retirement and shelter. It was also good politics, a way to court black and Hispanic voters.

    But for much of Bush’s tenure, government statistics show, incomes for most families remained relatively stagnant while housing prices skyrocketed. That put homeownership increasingly out of reach for first-time buyers like West.

    So Bush had to, in his words, “use the mighty muscle of the federal government” to meet his goal. He proposed affordable housing tax incentives. He insisted that Fannie Mae and Freddie Mac meet ambitious new goals for low-income lending.

    Concerned that down payments were a barrier, Bush persuaded Congress to spend up to $200 million a year to help first-time buyers with down payments and closing costs.

    And he pushed to allow first-time buyers to qualify for federally insured mortgages with no money down. Republican congressional leaders and some housing advocates balked, arguing that homeowners with no stake in their investments would be more prone to walk away, as West did. Many economic experts, including some in the White House, now share that view.

    The president also leaned on mortgage brokers and lenders to devise their own innovations. “Corporate America,” he said, “has a responsibility to work to make America a compassionate place.”

    And corporate America, eyeing a lucrative market, delivered in ways Bush might not have expected, with a proliferation of too-good-to-be-true teaser rates and interest-only loans that were sold to investors in a loosely regulated environment.

    “This administration made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight,” said L. William Seidman, who advised Republican presidents and led the savings and loan bailout in the 1990s. “To make the market work well, you have to have a lot of rules.”

    But Bush populated the financial system’s alphabet soup of oversight agencies with people who, like him, wanted fewer rules, not more.

    Like minds on laissez-faire

    Today in Business with Reuters
    Toyota expects first operating loss in 70 yearsGerman economy expected to contract 2.7% in 2009Ireland to invest €5.5 billion in 3 major banksThe president’s first chairman of the Securities and Exchange Commission promised a “kinder, gentler” agency. The second was pushed out amid industry complaints that he was too aggressive. Under its current leader, the agency failed to police the catastrophic decisions that toppled the investment bank Bear Stearns and contributed to the current crisis, according to a recent inspector general’s report.

    As for Bush’s banking regulators, they once brandished a chain saw over a 9,000-page pile of regulations as they promised to ease burdens on the industry. When states tried to use consumer protection laws to crack down on predatory lending, the comptroller of the currency blocked the effort, asserting that states had no authority over national banks.

    The administration won that fight at the Supreme Court. But Roy Cooper, North Carolina’s attorney general, said, “They took 50 sheriffs off the beat at a time when lending was becoming the Wild West.”

    The president did push rules aimed at forcing lenders to more clearly explain loan terms. But the White House shelved them in 2004, after industry-friendly members of Congress threatened to block confirmation of his new housing secretary.

    In the 2004 election cycle, mortgage bankers and brokers poured nearly $847,000 into Bush’s re-election campaign, more than triple their contributions in 2000, according to the nonpartisan Center for Responsive Politics. The administration did not finalize the new rules until last month.

    Among the Republican Party’s top 10 donors in 2004 was Roland Arnall. He founded Ameriquest, then the nation’s largest lender in the subprime market, which focuses on less creditworthy borrowers. In July 2005, the company agreed to set aside $325 million to settle allegations in 30 states that it had preyed on borrowers with hidden fees and ballooning payments. It was an early signal that deceptive lending practices, which would later set off a wave of foreclosures, were widespread.

    Andrew Card Jr., Bush’s former chief of staff, said White House aides discussed Ameriquest’s troubles, though not what they might portend for the economy. Bush had just nominated Arnall as his ambassador to the Netherlands, and the White House was primarily concerned with making sure he would be confirmed.

    “Maybe I was asleep at the switch,” Card said in an interview.

    Brian Montgomery, the Federal Housing Administration commissioner, understood the significance. His agency insures home loans, traditionally for the same low-income minority borrowers Bush wanted to help. When he arrived in June 2005, he was shocked to find those customers had been lured away by the “fool’s gold” of subprime loans. The Ameriquest settlement, he said, reinforced his concern that the industry was exploiting borrowers.

    In December 2005, Montgomery drafted a memo and brought it to the White House. “I don’t think this is what the president had in mind here,” he recalled telling Ryan Streeter, then the president’s chief housing policy analyst.

    It was an opportunity to address the risky subprime lending practices head on. But that was never seriously discussed. More senior aides, like Karl Rove, Bush’s chief political strategist, were wary of overly regulating an industry that, Rove said in an interview, provided “a valuable service to people who could not otherwise get credit.” While he had some concerns about the industry’s practices, he said, “it did provide an opportunity for people, a lot of whom are still in their houses today.”

    The White House pursued a narrower plan offered by Montgomery that would have allowed the FHA to loosen standards so it could lure back subprime borrowers by insuring similar, but safer, loans. It passed the House but died in the Senate, where Republican senators feared that the agency would merely be mimicking the private sector’s risky practices — a view Rove said he shared.

    Looking back at the episode, Montgomery broke down in tears. While he acknowledged that the bill did not get to the root of the problem, he said he would “go to my grave believing” that at least some homeowners might have been spared foreclosure.

    Today, administration officials say it is fair to ask whether Bush’s ownership push backfired. Paulson said the administration, like others before it, “over-incented housing.” Hennessey put it this way: “I would not say too much emphasis on expanding homeownership. I would say not enough early focus on easy lending practices.”

    ‘We told you so’

    Armando Falcon Jr. was preparing to take on a couple of giants.

    A soft-spoken Texan, Falcon ran the Office of Federal Housing Enterprise Oversight, a tiny government agency that oversaw Fannie Mae and Freddie Mac, two pillars of the American housing industry. In February 2003, he was finishing a blockbuster report that warned the pillars could crumble.

    Today in Business with Reuters
    Toyota expects first operating loss in 70 yearsGerman economy expected to contract 2.7% in 2009Ireland to invest €5.5 billion in 3 major banksCreated by Congress, Fannie and Freddie — called GSE’s, for government-sponsored entities — bought trillions of dollars’ worth of mortgages to hold or sell to investors as guaranteed securities. The companies were also Washington powerhouses, stuffing lawmakers’ campaign coffers and hiring bare-knuckled lobbyists.

    Falcon’s report outlined a worst-case situation in which Fannie and Freddie could default on debt, setting off “contagious illiquidity in the market” — in other words, a financial meltdown. He also raised red flags about the companies’ soaring use of derivatives, the complex financial instruments that economic experts now blame for spreading the housing collapse.

    Today, the White House cites that report — and its subsequent effort to better regulate Fannie and Freddie — as evidence that it foresaw the crisis and tried to avert it. Bush officials recently wrote up a talking points memo headlined “GSE’s — We Told You So.”

    But the back story is more complicated. To begin with, on the day Falcon issued his report, the White House tried to fire him.

    At the time, Fannie and Freddie were allies in the president’s quest to drive up homeownership rates; Franklin Raines, then Fannie’s chief executive, has fond memories of visiting Bush in the Oval Office and flying aboard Air Force One to a housing event. “They loved us,” he said.

    So when Falcon refused to deep-six his report, Raines took his complaints to top Treasury officials and the White House. “I’m going to do what I need to do to defend my company and my position,” Raines told Falcon.

    Days later, as Falcon was in New York preparing to deliver a speech about his findings, his cellphone rang. It was the White House personnel office, he said, telling him he was about to be unemployed.

    His warnings were buried in the next day’s news coverage, trumped by the White House announcement that Bush would replace Falcon, a Democrat appointed by Bill Clinton, with Mark Brickell, a leader in the derivatives industry that Falcon’s report had flagged.

    It was not until 2003, when Freddie became embroiled in an accounting scandal, that the White House took on the companies in earnest. Bush decided to quit the long-standing practice of rewarding supporters with high-paying appointments to the companies’ boards — “political plums,” in Rove’s words. He also withdrew Brickell’s nomination and threw his support behind Falcon, beginning an intense effort to give his little regulatory agency more power.

    Falcon lacked explicit authority to limit the size of the companies’ mammoth investment portfolios, or tell them how much capital they needed to guard against losses. White House officials wanted that to change. They also wanted the power to put the companies into receivership, hoping that would end what Card, the former chief of staff, called “the myth of government backing,” which gave the companies a competitive edge because investors assumed the government would not let them fail.

    By the spring of 2005 a deal with Congress seemed within reach, Snow, the former Treasury secretary, said in an interview.

    Michael Oxley, an Ohio Republican and then-chairman of the House Financial Services Committee, had produced what Snow viewed as “a pretty darned good bill,” a watered-down version of what the president sought. But at the urging of Card and the White House economics team, the president decided to hold out for a tougher bill in the Senate.

    Card said he feared that Snow was “more interested in the deal than the result.” When the bill passed the House, the president issued a statement opposing it, effectively killing any chance of compromise. Oxley was furious.

    “The problem with those guys at the White House, they had all the answers and they didn’t think they had to listen to anyone, including the Treasury secretary,” Oxley said in a recent interview. “They were driving the ideological train. He was in the caboose, and they were in the engine room.”

    Card and Hennessey said they had no regrets. They are convinced, Hennessey said, that the Oxley bill would have produced “the worst of all possible outcomes,” the illusion of reform without the substance.

    Still, some former White House and Treasury officials continue to debate whether Bush’s all-or-nothing approach scuttled a measure that, while imperfect, might have given an aggressive regulator enough power to keep the companies from failing.

    Snow, for one, calls Oxley “a hero,” adding, “He saw the need to move. It didn’t get done. And it’s too bad, because I think if it had, I think we could well have avoided a big contributor to the current crisis.”

    Today in Business with Reuters
    Toyota expects first operating loss in 70 yearsGerman economy expected to contract 2.7% in 2009Ireland to invest €5.5 billion in 3 major banksUnheeded warnings

    Jason Thomas had a nagging feeling.

    The New Century Financial Corp., a huge subprime lender whose mortgages were bundled into securities sold around the world, was headed for bankruptcy in March 2007. Thomas, an economic analyst for Bush, was responsible for determining whether it was a hint of things to come.

    At 29, Thomas had followed a fast-track career path that took him from a Buffalo meatpacking plant, where he worked as a statistician, to the White House. He was seen as a whiz kid, “a brilliant guy,” his former boss, Hubbard, says.

    As Thomas began digging into New Century’s failure that spring, he became fixated on a particular statistic, the rent-to-own ratio.

    Typically, as home prices increase, rental costs rise proportionally. But Thomas sent charts to top White House and Treasury officials showing that the monthly cost of owning far outpaced the cost to rent. To Thomas, it was a sign that housing prices were wildly inflated and bound to plunge, a condition that could set off a foreclosure crisis as conventional and subprime borrowers with little equity found they owed more than their houses were worth.

    It was not the Bush team’s first warning. The previous year, Lindsay, the former chief economics adviser, returned to the White House to tell his old colleagues that housing prices were headed for a crash. But housing values are hard to evaluate, and Lindsay had a reputation as a market pessimist, said Hubbard, adding, “I thought, ‘He’s always a bear.’ ”

    In retrospect, Hubbard said, Lindsay was “absolutely right,” and Thomas’s charts “should have been a signal.”

    Instead, the prevailing view at the White House was that the problems in the housing market were limited to subprime borrowers unable to make their payments as their adjustable mortgages reset to higher rates. That belief was shared by Bush’s new Treasury secretary, Paulson.

    Paulson, a former chairman of the Wall Street firm Goldman Sachs, had been given unusual power; he had accepted the job only after the president guaranteed him that Treasury, not the White House, would have the dominant role in shaping economic policy. That shift merely continued an imbalance of power that stifled robust policy debate, several former Bush aides say.

    Throughout the spring of 2007, Paulson declared that “the housing market is at or near the bottom,” with the problem “largely contained.” That position underscored nearly every action the Bush administration took in the ensuing months as it offered one limited response after another.

    By that August, the problems had spread beyond New Century. Credit was tightening, amid questions about how heavily banks were invested in securities linked to mortgages. Still, Bush predicted that the turmoil would resolve itself with a “soft landing.”

    The plan Bush announced on Aug. 31 reflected that belief. Called “FHA Secure,” it aimed to help about 80,000 homeowners refinance their loans. Montgomery, the housing commissioner, said that he knew the modest program was not enough — the White House later expanded the agency’s rescue role — and that he would be “flying the plane and fixing it at the same time.”

    That fall, Representative Rahm Emanuel, a leading Democrat, former investment banker and now the incoming chief of staff to President-elect Barack Obama, warned the White House it was not doing enough. He said he told Joshua Bolten, Bush’s chief of staff, and Paulson in a series of phone calls that the credit crisis would get “deep and serious” and that the only answer was big, internationally coordinated government intervention.

    “You got to strangle this thing and suffocate it,” he recalled saying.

    Instead, Bush developed Hope Now, a voluntary public-private partnership to help struggling homeowners refinance loans. And he worked with Congress to pass a stimulus package that sent taxpayers $150 billion in tax rebates.

    In a speech to the Economic Club of New York in March 2008, he cautioned against Washington’s temptation “to say that anything short of a massive government intervention in the housing market amounts to inaction,” adding that government action could make it harder for the markets to recover.

    Dominoes Start to Fall

    Within days, Bear Sterns collapsed, prompting the Federal Reserve to engineer a hasty sale. Some economic experts, including Timothy Geithner, the president of the New York Federal Reserve Bank (and Obama’s choice for Treasury secretary) feared that Fannie Mae and Freddie Mac could be the next to fall.

    Today in Business with Reuters
    Toyota expects first operating loss in 70 yearsGerman economy expected to contract 2.7% in 2009Ireland to invest €5.5 billion in 3 major banksBush was still leaning on Congress to revamp the tiny agency that oversaw the two companies, and had acceded to Paulson’s request for the negotiating room that he had denied Snow. Still, there was no deal.

    Over the previous two years, the White House had effectively set the agency adrift. Falcon left in 2005 and was replaced by a temporary director, who was in turn replaced by James Lockhart, a friend of Bush from their days at Andover, and a former deputy commissioner of the Social Security Administration who had once run a software company.

    On Lockhart’s watch, both Freddie and Fannie had plunged into the riskiest part of the market, gobbling up more than $400 billion in subprime and other alternative mortgages. With the companies on precarious footing, Geithner had been advocating that the administration seize them or take other steps to reassure the market that the government would back their debt, according to two people with direct knowledge of his views.

    In an Oval Office meeting on March 17, however, Paulson barely mentioned the idea, according to several people present. He wanted to use the troubled companies to unlock the frozen credit market by allowing Fannie and Freddie to buy more mortgage-backed securities from overburdened banks. To that end, Lockhart’s office planned to lift restraints on the companies’ huge portfolios — a decision derided by former White House and Treasury officials who had worked so hard to limit them.

    But Paulson told Bush the companies would shore themselves up later by raising more capital.

    “Can they?” Bush asked.

    “We’re hoping so,” the Treasury secretary replied.

    That turned out to be incorrect, and did not surprise Thomas, the Bush economic adviser. Throughout that spring and summer, he warned the White House and Treasury that, in the stark words of one e-mail message, “Freddie Mac is in trouble.” And Lockhart, he charged, was allowing the company to cover up its insolvency with dubious accounting maneuvers.

    But Lockhart continued to offer reassurances. In a July appearance on CNBC, he declared that the companies were well managed and “worsts were not coming to worst.” An infuriated Thomas sent a fresh round of e-mail messages accusing Lockhart of “pimping for the stock prices of the undercapitalized firms he regulates.”

    Lockhart defended himself, insisting in an interview that he was aware of the companies’ vulnerabilities, but did not want to rattle markets.

    “A regulator,” he said, “does not air dirty laundry in public.”

    Soon afterward, the companies’ stocks lost half their value in a single day, prompting Congress to quickly give Paulson the power to spend $200 billion to prop them up and to finally pass Bush’s long-sought reform bill, but it was too late. In September, the government seized control of Freddie Mac and Fannie Mae.

    In an interview, Paulson said the administration had no justification to take over the companies any sooner. But Falcon disagreed: “They absolutely could have if they had thought there was a real danger.”

    By Sept. 18, when Bush and his team had their fateful meeting in the Roosevelt Room after the failure of Lehman Brothers and the emergency rescue of AIG, Paulson was warning of an economic calamity greater than the Great Depression. Suddenly, historic government intervention seemed the only option. When Paulson spelled out what would become a $700 billion plan to rescue the nation’s banking system, the president did not hesitate.

    Is that enough?” Bush asked.

    “It’s a lot,” the Treasury secretary recalled replying. “It will make a difference.” And in any event, he told Bush, “I don’t think we can get more.”

    As the meeting wrapped up, a handful of aides retreated to the White House Situation Room to call Vice President Dick Cheney in Florida, where he was attending a fund-raiser. Cheney had long played a leading role in economic policy, though housing was not a primary interest, and like Bush he had a deep aversion to government intervention in the market. Nonetheless, he backed the bailout, convinced that too many Americans would suffer if Washington did nothing.

    Bush typically darts out of such meetings quickly. But this time, he lingered, patting people on the back and trying to soothe his downcast staff. “During times of adversity, he bucks everybody up,” Paulson said.

    It was not the end of the failures or government interventions; the administration has since stepped in to rescue Citigroup and, just last week, the Detroit automakers. With 31 days left in office, Bush says he will leave it to historians to analyze “what went right and what went wrong,” as he put it in a speech last week to the American Enterprise Institute.

    Bush said he was too focused on the present to do much looking back.

    “It turns out,” he said, “this isn’t one of the presidencies where you ride off into the sunset, you know, kind of waving goodbye.”

  21. World faces “total” financial meltdown: Bank of Spain chief

    The governor of the Bank of Spain on Sunday issued a bleak assessment of the economic crisis, warning that the world faced a “total” financial meltdown unseen since the Great Depression.
    “The lack of confidence is total,” Miguel Angel Fernandez Ordonez said in an interview with Spain’s El Pais daily.

    “The inter-bank (lending) market is not functioning and this is generating vicious cycles: consumers are not consuming, businessmen are not taking on workers, investors are not investing and the banks are not lending.

    “There is an almost total paralysis from which no-one is escaping,” he said, adding that any recovery — pencilled in by optimists for the end of 2009 and the start of 2010 — could be delayed if confidence is not restored.

    Ordonez recognised that falling oil prices and lower taxes could kick-start a faster-than-anticipated recovery, but warned that a deepening cycle of falling consumer demand, rising unemployment and an ongoing lending squeeze could not be ruled out.

    “This is the worst financial crisis since the Great Depression” of 1929, he added.

    Ordonez said the European Central Bank, of which he is a governing council member, would cut interest rates in January if inflation expectations went much below two percent.

    “If, among other variables, we observe that inflation expectations go much below two percent, it’s logical that we will lower rates.”

    Regarding the dire situation in the United States, Ordonez said he backed the decision by the US Federal Reserve to cut interest rates almost to zero in the face of profound deflation fears.

    Central banks are seeking to jumpstart movements on crucial interbank money markets that froze after the US market for high-risk, or subprime mortgages collapsed in mid 2007, and locked tighter after the US investment bank Lehman Brothers declared bankruptcy in mid September.

    Interbank markets are a key link in the chain which provides credit to businesses and households.

  22. Monday, December 22, 2008

    Ohio AG Files Suit Against Loan Modification Firm For Violations Of State Consumer Statutes; Homeowners Clipped For Upfront Fees Averaging $650
    From the Ohio Attorney General’s Office:

    The Ohio Attorney General filed a lawsuit [last Friday] to stop a foreclosure rescue business from continuing to victimize consumers throughout the state. The lawsuit, filed in the Cuyahoga County Court of Common Pleas, alleges that James R. Van Putten, doing business as “Please Save My Home” in Conneaut, Ohio, violated Ohio’s consumer protection laws by engaging in unfair and deceptive practices. The complaint alleges violations of the Consumer Sales Practices Act, the Telephone Solicitation Sales Act, and Debt Adjusters Act.

    Van Putten obtained the names of homeowners in foreclosure from court records and used direct mail to solicit his services. The mailing stated: “Regardless of your present mortgage or loan situation, we will be able to assist you by arranging a repayment plan to bring your loan current” and “Call Today & Save Your Home.”

    Van Putten then entered into contracts through which he promised to save the consumers’ homes from foreclosure by obtaining and providing loan modifications, legal representation, and forbearance agreements. Consumers paid, on average, $650 for Van Putten’s services. The Attorney General’s investigation found that consumers did not receive the promised services.
    For the press release, the accompanying lawsuit, and copies of the correspondence and contract used by the foreclosure rescue operator (Exhibits A thru D), see Mortgage Rescue Company Sued for Consumer Fraud.

  23. I am have underground.I am also gone nuts

    I am changing my name and the number of my house.

    Here is a case of intrest.

    Plaintiff

    Knuckles & Komosinski, PC

    Tarrytown NY

    Defendants

    No Defendant(s)

    Arthur M. Schack, J.
    Plaintiff’s application for a judgment of foreclosure and sale for the premises located at 78 Van Siclen Avenue, Brooklyn, New York (Block 3932, Lot 45, County of Kings) is denied without prejudice. Plaintiff Deutsche Bank National Trust Company (Deutsche Bank), a financial powerhouse, lacks standing to bring this matter before the Court. Deutsche Bank, after making this application, and prior to the instant application being forwarded to me by court clerks, assigned the instant mortgage to MTGLQ Investor, L.P., a subsidiary of the financial goliath, The Goldman Sachs Group, Inc., (Goldman Sachs). Neither Deutsche Bank nor Goldman Sachs informed the Court of this assignment.

    This mortgage, for a property in the East New York section of Brooklyn, illustrates how a subprime mortgage loan is assigned from one huge firm to another to maximize profits in the securitized mortgage asset market. The Deutsche Bank Group, parent of Deutsche Bank, according to a May 8, 2007 press release at its website, http://www.db.com, had income of 3.2 billion Euros (more than four billion dollars) in the first quarter of 2007, while Goldman Sachs, in its 2006 Annual Report, had 2006 net revenues of $37.62 billion. When these financial giants moved to foreclosure on the defendant’s subprime [*2]mortgage loan, it appears that they neglected to see who actually owned the mortgage loan.

    Many of today’s mortgage borrowers, in their attempt to obtain a piece of the “American dream” no longer deal with local banks, savings and loan associations or credit unions. Instead, they deal with large financial organizations, national and international in scope, motivated primarily by their interest in maximizing profit, and not necessarily by helping people.

    In 1946, Frank Capra directed the film classic, It’s a Wonderful Life, in which George Bailey (James Steward), the head of a local savings and loan in fictional Bedford Falls, New York, fights the evil banker, Mr. Potter (Lionel Barrymore), in attempting to help the people of Bedford Falls secure mortgages. George Bailey, after his father’s death in 1928, is elected as head of the savings and loan at a tumultuous Board meeting, and tells Mr. Potter, according to the screenplay, at http://www.imdb.com:

    Now, hold on, Mr. Potter. You’re right when you say my father was

    no businessman. I know that. Why he ever started this cheap, penny-

    ante Building and Loan, I’ll never know. But neither you nor anyone

    else can say anything against his character . . . But he did help a few

    people get out of your slums, Mr. Potter, and what’s wrong with that?

    Why – here, you’re all businessmen here. Doesn’t it make them better

    citizens? Doesn’t it make them better customers? You – you said –

    what’d you say a minute ago? They had to wait and save their money

    before they even ought to think of a decent home. Wait? Wait for what?

    Until their children grow up and leave them? Until they’re so old and

    broken down that they . . . Do you know how long it takes a working

    man to save five thousand dollars? Just remember this, Mr. Potter, that

    this rabble you’re talking about . . . they do most of the working and

    paying and living and dying in this community. Well, is it too much to

    have them work and pay and live and die in a couple of decent rooms

    and a bath? Anyway, my father didn’t think so. People were human

    beings to him. But to you, a warped, frustrated old man, they’re cattle.In today’s newspapers and magazines we read numerous stories about subprime mortgages and “predatory” lending. Lenders should not lose sight that they are dealing with humanity, not Mr. Potter’s “rabble” and “cattle.” Multibillion dollar corporations must follow the same rules in foreclosure actions as the local banks, savings and loan associations or credit unions, or else they have become the Mr. Potters of the 21st century.

    [*3]Background
    Defendant Castellanos borrowed $412,000.00 from Argent Mortgage Company,

    LLC (Argent), on November 16, 2005. He executed a thirty-year adjustable rate note for this amount and a mortgage to secure the loan for the 78 Van Siclen Avenue premises. I checked the Automated City Register Information System (ACRIS) website of the Office of the City Register, New York City Department of Finance and verified that the Castellanos’ Note and Mortgage were recorded on December 7, 2005.

    The instant mortgage loan is an example of the subprime loan denominated in the mortgage industry as a “2-28″ adjustable rate mortgage (ARM) loan. According to the November 16, 2005 Note, defendant Casetellanos was to initially pay principal and interest of $3,023.12 per month for the initial two years, at 8.00 %. Then on December 1, 2007, and every six months thereafter, the interest rate could change on the “change date,” based upon an “index” that is the average of interbank offered rates for the six-month U.S. dollar-denominated deposits in the London market (LIBOR) as published in the Wall Street Journal. The specific terms of the Castellanos note provided that the new interest rate would be the LIBOR rate, 45-days prior to the “change date,” plus 6.00 %, rounded to the nearest .125%. The interest-rate could increase 1.00% on each “change date” until the LIBOR index plus 6.00% would be reached. The LIBOR rate, according to today’s Wall Street Journal, is approximately 5.3%. Therefore, the LIBOR plus 6.00% rate is now approximately 11.30%. The Note capped the adjusted interest at 14.00% and set 8.00% as the floor, if rates go down. If interest rates stay constant, the defendant, if he hadn’t become delinquent in his payments, would be paying his mortgage loan at the rate of 11.25% on December 1, 2009, and thereafter.

    Gretchen Morgenson, in the April 6, 2007 New York Times, reported in “Fair Game; Home Loans: A Nightmare Grows Darker,” that “with home foreclosures and mortgage delinquencies soaring, it is becoming clear that the innovative loans that lenders championed in what the industry called the democratization of credit’ are turning the American dream into a nightmare for many borrowers.” Ms. Morgenson quotes Thomas A. Lawler, founder of Lawler Economic and Housing Consulting Daily, a newsletter, that

    subprime loans, similar to the one in this action, “are designed to make borrowers refinance and keep the loan production mill churning.” Further, Mr. Morgenson writes that “[w]hile subprime borrowers try to climb out of the holes they fell into, those who sold and packaged the loans are laughing all the way to the bank. Folks who ran these companies are going to walk away not just unscathed but extraordinarily well rewarded,’ Mr. Calhoun [Michael D. Calhoun, President of the Center for Responsible Lending] said.”

    U.S. Senator Christopher Dodd (D-Connecticut), Chairman of the Senate

    Committee on Banking, Housing, and Urban Affairs, in his opening statement at the [*4]March 22, 2007 Committee hearing on “Mortgage Market Turmoil: Causes and Consequences,” noted that “[o]ur mortgage system appears to have been on steroids in recent years giving everyone a false sense of invincibility.” He observed that:

    The subprime market has been dominated in recent years by hybrid

    ARMs, loans with fixed rates for 2 years that adjust upwards every

    6 months thereafter. These adjustments are so steep that many borrowers

    cannot afford to make the payments and are forced to refinance, at great

    cost, sell the house, or default on the loan. No loan should force a

    borrower into this kind of devil’s dilemma. These loans are made on

    the basis of the value of the property, not the ability of the borrower

    to repay. This is the fundamental definition of predatory lending.

    With respect to the instant mortgage loan, according to the July 21, 2006-affidavit of merit by Jeff Rivas, Deutsche Bank Vice-President for Default Timeline Management, “[t]he mortgage was subsequently assigned to the Plaintiff herein by instrument dated July 21, 2006 which is to be recorded with the City Register of the County of Kings [sic].” Mr. Rivas, possibly because he is in Orange, California, is not aware that the City Register is for the City of New York, not the County of Kings. Further, it is curious that he executed his affidavit on the same day that Argent assigned the Casetellanos mortgage loan to Deutsche Bank. My check of ACRIS verified that Argent assigned the mortgage to Deutsche Bank on July 21, 2006. It was recorded in the Office of the City Register on August 16, 2006.
    Plaintiff Deutsche Bank commenced the instant foreclosure action with the filing of the summons, complaint, and notice of pendency with the Kings County Clerk on July 27, 2006. Initial service of the summons and complaint was made on July 29, 2006. Defendant Castellanos defaulted in answering. On November 16, 2006, I signed an order of reference to ascertain and compute the amount due plaintiff. The Referee prepared a report, dated January 4, 2007, finding that in excess of $427,000.00 was due to the plaintiff as of July 21, 2006. Plaintiff’s counsel prepared an affirmation of regularity on January 10, 2007. Subsequently, counsel for Deutsche Bank filed the proposed judgment of foreclosure and sale in Part 72, the special part for ex-parte applications in Civil Term, Kings County Supreme Court. Part 72 forwarded the instant application for a judgment of foreclosure and sale, with all its exhibits, affidavits, affirmations and attachments to me on April 26, 2007.

    My check of ACRIS discovered that while the proposed judgment of foreclosure and sale was in Part 72, for review by court clerks, plaintiff Deutsche Bank assigned the instant mortgage, on January 19, 2007, to MTGLQ Investors, L.P. According to Exhibit 21.1 of the November 25, 2006 Goldman Sachs 10-K filing with the Securities and Exchange Commission, MTGLQ Investors, L.P. is a “significant subsidiary” of Goldman [*5]Sachs. The Deutsche Bank to MTGLQ Investors, L.P. assignment was recorded on February 7, 2007, with City Register File Number 2007000073000. In the July 21, 2006 Argent to Deutsche Bank assignment, Deutsche Bank used an Orange, California address. However, the January 19, 2007 assignment has the same address for both the assignor Deutsche Bank and the assignee MTGLQ Investors, L.P., at 1661 Worthington Road, Suite 100, West Palm Beach, Florida 33409.

    The Court will not speculate about why two major financial behemoths, Deutsche Bank and Goldman Sachs share space in a West Palm Beach, Florida office suite. What is clear to this Court is that Deutsche Bank assigned the mortgage during the pendency of this application, but neglected to move to amend the caption to reflect the assignment or discontinue the foreclosure action. The Court, as will be explained, has no choice but to deny the application for a judgment of foreclosure and sale without prejudice. Plaintiff Deutsche Bank lacks standing to proceed with this action since January 19, 2007.

    Discussion
    The Court of Appeals, in Saratoga County Chamber of Commerce, Inc. v Pataki,

    100 NY2d 81, 812 (2003), cert denied 540 US 1017 (2003), declared that “[s]tanding to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress.” Professor David Siegel, in NY Prac, § 136, at 232 [4th ed] instructs that:

    [i]t is the law’s policy to allow only an aggrieved person to bring a
    lawsuit . . . A want of “standing to sue,” in other words, is just another

    way of saying that this particular plaintiff is not involved in a genuine

    controversy, and a simple syllogism takes us from there to a “jurisdictional”

    dismissal: (1) the courts have jurisdiction only over controversies; (2) a

    plaintiff found to lack “standing” is not involved in a controversy; and

    (3) the courts therefore have no jurisdiction of the case when such a

    plaintiff purports to bring it.

    In Caprer v Nussbaum, 36 AD3d 176, 181 (2d Dept 2006), the Court held that “[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request.” If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. Stark v Goldberg, 297 AD2d 203 (1st Dept 2002).

    It is clear that plaintiff Deutsche Bank lacks standing to sue since January 19, 2007, when it assigned its ownership of the Castellanos’ mortgage loan to the Goldman Sachs subsidiary, MTGLQ Investors, L.P. The Court, in Campaign v Barba, 23 AD3d 327, instructed that “[t]o establish a prima facie case in an action to foreclose a mortgage, the plaintiff must establish the existence of the mortgage and the mortgage note, ownership of the mortgage, and the defendant’s default in payment [Emphasis added].” See Household Finance Realty Corp. Of New York v Wynn, 19 AD3d 545 (2d Dept 2005); Sears Mortgage Corp. v Yahhobi, 19 AD3d 402 (2d Dept 2005); Ocwen Federal [*6]Bank FSB v Miller, 18 AD3d 527 (2d Dept 2005); U.S. Bank Trust Nat. Ass’n Trustee v Butti, 16 AD3d 408 (2d Dept 2005); First Union Mortgage Corp. v Fern, 298 AD2d 490 (2d Dept 2002); Village Bank v Wild Oaks, Holding, Inc., 196 AD2d 812 (2d Dept 1993).

    However, in light of the fact that Deutsche Bank has established the existence of the mortgage and the note, and defendant’s default in payment, the Court is denying the judgment of foreclosure and sale without prejudice. If Deutsche Bank moves to substitute assignee MTGLQ Investors L.P. as plaintiff, pursuant to CPLR § 1021, and no other material facts change, the Court will grant the substitution of plaintiff to MTGLQ Investors L.P., which will allow the proper mortgagee, the one with standing, to receive a judgment of foreclosure and sale. East Coast Properties, v Galang, 308 AD2d 431 (2d Dept 2003); Lincoln Savings Bank, FSB v Wynn, 7 AD3d 760 (2d Dept 2004); CPLR § 1018; GOL § 13-101.

    Conclusion
    Accordingly, it is

    ORDERED that the application of plaintiff Deutsche Bank National Trust

    Company, as Trustee of Argent Mortgage Securities, Inc. Asset-backed Pass Through Certificates Series 2005-W4 under the Pooling and Servicing Agreement, dated as of November 1, 2005, Without Recourse, for a judgment of foreclosure and sale for the premises located at 78 Van Siclen Avenue, Brooklyn, New York (Block 3932, Lot 45, County of Kings) is denied without prejudice.

    This constitutes the Decision and Order of the Court.

    ENTER

    ___________________________

    HON. ARTHUR M. SCHACK,J. S. C.

  24. UNITED STATES
    SECURITIES AND EXCHANGE COMMISSION
    WASHINGTON, D.C. 20549

    FORM 13F

    FORM 13F COVER PAGE

    REPORT FOR THE QUARTER ENDED: 06/30/2007

    INSTITUTIONAL INVESTMENT MANAGER FILING THIS REPORT:

    NAME: BANK OF NEW YORK TRUST COMPANY, N.A.
    STREET: 700 SOUTH FLOWER STREET
    SUITE 200
    LOS ANGELES
    CA
    90017

    13F FILE NUMBER: 028-11850

    THE INSTITUTIONAL INVESTMENT MANAGER FILING THIS REPORT AND THE PERSON BY
    WHOM IT IS SIGNED HEREBY REPRESENT THAT THE PERSON SIGNING THE REPORT IS
    AUTHORIZED TO SUBMIT IT, THAT ALL INFORMATION CONTAINED HEREIN IS TRUE,
    CORRECT AND COMPLETE, AND THAT IT IS UNDERSTOOD THAT ALL REQUIRED ITEMS,
    STATEMENTS, SCHEDULES, LISTS, AND TABLES, ARE CONSIDERED INTEGRAL PARTS OF THIS
    FORM.

    PERSON SIGNING THIS REPORT ON BEHALF OF THE INVESTMENT MANAGER:

    NAME: WILLIAM J. WINKELMANN
    TITLE: VP, TREASURER
    PHONE: 213-630-6406
    SIGNATURE, PLACE, AND DATE OF SIGNING:
    WILLIAM J. WINKELMANN
    LOS ANGELES
    CA
    06/30/2007

    REPORT TYPE: 13F HOLDINGS REPORT

    I AM SIGNING THIS REPORT AS REQUIRED BY THE SECURITIES EXCHANGE ACT OF 1934.

    FORM 13F SUMMARY PAGE

    REPORT SUMMARY:

    NUMBER OF OTHER INCLUDED MANAGERS: 0

    FORM 13F INFORMATION TABLE ENTRY TOTAL: 986

    FORM 13F INFORMATION TABLE VALUE TOTAL: 903753

  25. The Depository Trust & Clearing Corporation (DTCC), based primarily at 55 Water Street in New York City, is the world’s largest post-trade financial services company.

    It was set up to provide an efficient and safe way for buyers and sellers of securities to make their exchange, and thus “clear and settle” transactions. It also provides custody of securities.
    . . .
    In 2007, DTCC settled the vast majority of securities transactions in the United States, more than $1.86 quadrillion in value. DTCC has operating facilities in New York City, and at multiple locations in and outside the U.S.
    WSJ.com

  26. Securities Lawyer’s Deskbook
    published by The University of Cincinnati College of Law

    Securities Exchange Act of 1934

    Section 17A — National System for Clearance and Settlement of Securities Transactions
    ________________________________________

    a. Congressional findings; facilitating establishment of system
    1. The Congress finds that–
    A. The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.
    B. Inefficient procedures for clearance and settlement impose unnecessary costs on investors and persons facilitating transactions by and acting on behalf of investors.
    C. New data processing and communications techniques create the opportunity for more efficient, effective, and safe procedures for clearance and settlement.
    D. The linking of all clearance and settlement facilities and the development of uniform standards and procedures for clearance and settlement will reduce unnecessary costs and increase the protection of investors and persons facilitating transactions by and acting on behalf of investors.
    2.
    A. The Commission is directed, therefore, having due regard for the public interest, the protection of investors, the safeguarding of securities and funds, and maintenance of fair competition among brokers and dealers, clearing agencies, and transfer agents, to use its authority under this title–
    i. to facilitate the establishment of a national system for the prompt and accurate clearance and settlement of transactions in securities (other than exempt securities); and
    ii. to facilitate the establishment of linked or coordinated facilities for clearance and settlement of transactions in securities, securities options, contracts of sale for future delivery and options thereon, and commodity options;
    in accordance with the findings and to carry out the objectives set forth in paragraph (1) of this subsection.
    B. The Commission shall use its authority under this title to assure equal regulation under this title of registered clearing agencies and registered transfer agents. In carrying out its responsibilities set forth in subparagraph (A)(ii) of this paragraph, the Commission shall coordinate with the Commodity Futures Trading Commission and consult with the Board of Governors of the Federal Reserve System.
    b. Registration of clearing agencies; application; determinations by Commission requisite to registration of applicant as clearing agency; denial of participation; discipline; summary proceedings
    1. Except as otherwise provided in this section, it shall be unlawful for any clearing agency, unless registered in accordance with this subsection, directly or indirectly, to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a clearing agency with respect to any security (other than an exempted security). The Commission, by rule or order, upon its own motion or upon application, may conditionally or unconditionally exempt any clearing agency or security or any class of clearing agencies or securities from any provisions of this section or the rules or regulations thereunder, if the Commission finds that such exemption is consistent with the public interest, the protection of investors, and the purposes of this section, including the prompt and accurate clearance and settlement of securities transactions and the safeguarding of securities and funds. A clearing agency or transfer agent shall not perform the functions of both a clearing agency and a transfer agent unless such clearing agency or transfer agent is registered in accordance with this subsection and subsection (c).
    2. A clearing agency may be registered under the terms and conditions hereinafter provided in this subsection and in accordance with the provisions of section 19(a), by filing with the Commission an application for registration in such form as the Commission, by rule, may prescribe containing the rules of the clearing agency and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the prompt and accurate clearance and settlement of securities transactions.
    3. A clearing agency shall not be registered unless the Commission determines that–
    A. Such clearing agency is so organized and has the capacity to be able to facilitate the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts, and transactions for which it is responsible, to safeguard securities and funds in its custody or control or for which it is responsible, to comply with the provisions of this title and the rules and regulations thereunder, to enforce (subject to any rule or order of the Commission pursuant to section 17(d) or 19(g)(2)) compliance by its participants with the rules of the clearing agency, and to carry out the purposes of this section.
    B. Subject to the provisions of paragraph (4) of this subsection, the rules of the clearing agency provide that any (i) registered broker or dealer, (ii) other registered clearing agency, (iii) registered investment company, (iv) bank, (v) insurance company, or (vi) other person or class of persons as the Commission, by rule, may from time to time designate as appropriate to the development of a national system for the prompt and accurate clearance and settlement of securities transactions may become a participant in such clearing agency.
    C. The rules of the clearing agency assure a fair representation of its shareholders (or members) and participants in the selection of its directors and administration of its affairs. (The Commission may determine that the representation of participants is fair if they are afforded a reasonable opportunity to acquire voting stock of the clearing agency, directly or indirectly, in reasonable proportion to their use of such clearing agency.)
    D. The rules of the clearing agency provide for the equitable allocation of reasonable dues, fees, and other charges among its participants.
    E. The rules of the clearing agency do not impose any schedule of prices, or fix rates or other fees, for services rendered by its participants.
    F. The rules of the clearing agency are designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible, to foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions, to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions, and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination in the admission of participants or among participants in the use of the clearing agency, or to regulate by virtue of any authority conferred by this title matters not related to the purposes of this section or the administration of the clearing agency.
    G. The rules of the clearing agency provide that (subject to any rule or order of the Commission pursuant to section 17(d) or 19(g)(2)) its participants shall be appropriately disciplined for violation of any provision of the rules of the clearing agency by expulsion, suspension, limitation of activities, functions, and operations, fine, censure, or any other fitting sanction.
    H. The rules of the clearing agency are in accordance with the provisions of paragraph (5) of this subsection, and, in general, provide a fair procedure with respect to the disciplining of participants, the denial of participation to any person seeking participation therein, and the prohibition or limitation by the clearing agency of any person with respect to access to services offered by the clearing agency.
    I. The rules of the clearing agency do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of this title.
    4.
    A. A registered clearing agency may, and in cases in which the Commission, by order, directs as appropriate in the public interest shall, deny participation to any person subject to a statutory disqualification. A registered clearing agency shall file notice with the Commission not less than thirty days prior to admitting any person to participation, if the clearing agency knew, or in the exercise of reasonable care should have known, that such person was subject to a statutory disqualification. The notice shall be in such form and contain such information as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.
    B. A registered clearing agency may deny participation to, or condition the participation of, any person if such person does not meet such standards of financial responsibility, operational capability, experience, and competence as are prescribed by the rules of the clearing agency. A registered clearing agency may examine and verify the qualifications of an applicant to be a participant in accordance with procedures established by the rules of the clearing agency.
    5.
    A. In any proceeding by a registered clearing agency to determine whether a participant should be disciplined (other than a summary proceeding pursuant to subparagraph (C) of this paragraph), the clearing agency shall bring specific charges, notify such participant of, and give him an opportunity to defend against such charges, and keep a record. A determination by the clearing agency to impose a disciplinary sanction shall be supported by a statement setting forth–
    i. any act or practice in which such participant has been found to have engaged, or which such participant has been found to have omitted;
    ii. the specific provisions of the rules of the clearing agency which any such act or practice, or omission to act, is deemed to violate; and
    iii. the sanction imposed and the reasons therefor.
    B. In any proceeding by a registered clearing agency to determine whether a person shall be denied participation or prohibited or limited with respect to access to services offered by the clearing agency, the clearing agency shall notify such person of, and give him an opportunity to be heard upon, the specific grounds for denial or prohibition or limitation under consideration and keep a record. A determination by the clearing agency to deny participation or prohibit or limit a person with respect to access to services offered by the clearing agency shall be supported by a statement setting forth the specific grounds on which the denial or prohibition or limitation is based.
    C. A registered clearing agency may summarily suspend and close the accounts of a participant who (i) has been and is expelled or suspended from any self- regulatory organization, (ii) is in default of any delivery of funds or securities to the clearing agency, or (iii) is in such financial or operating difficulty that the clearing agency determines and so notifies the appropriate regulatory agency for such participant that such suspension and closing of accounts are necessary for the protection of the clearing agency, its participants, creditors, or investors. A participant so summarily suspended shall be promptly afforded an opportunity for a hearing by the clearing agency in accordance with the provisions of subparagraph (A) of this paragraph. The appropriate regulatory agency for such participant, by order, may stay any such summary suspension on its own motion or upon application by any person aggrieved thereby, if such appropriate regulatory agency determines summarily or after notice and opportunity for hearing (which hearing may consist solely of the submission of affidavits or presentation of oral arguments) that such stay is consistent with the public interest and protection of investors.
    6. No registered clearing agency shall prohibit or limit access by any person to services offered by any participant therein.
    7.
    A. A clearing agency that is regulated directly or indirectly by the Commodity Futures Trading Commission through its association with a designated contract market for security futures products that is a national securities exchange registered pursuant to section 6(g), and that would be required to register pursuant to paragraph (1) only because it performs the functions of a clearing agency with respect to security futures products effected pursuant to the rules of the designated contract market with which such agency is associated, is exempted from the provisions of this section and the rules and regulations thereunder, except that if such a clearing agency performs the functions of a clearing agency with respect to a security futures product that is not cash settled, it must have arrangements in place with a registered clearing agency to effect the payment and delivery of the securities underlying the security futures product.
    B. Any clearing agency that performs the functions of a clearing agency with respect to security futures products must coordinate with and develop fair and reasonable links with any and all other clearing agencies that perform the functions of a clearing agency with respect to security futures products, in order to permit, as of the compliance date (as defined in section 6(h)(7)(C)), security futures products to be purchased on one market and offset on another market that trades such products.
    8. A registered clearing agency shall be permitted to provide facilities for the clearance and settlement of any derivative agreements, contracts, or transactions that are excluded from the Commodity Exchange Act, subject to the requirements of this section and to such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title.
    c. Registration of transfer agents
    1. Except as otherwise provided in this section, it shall be unlawful for any transfer agent, unless registered in accordance with this section, directly or indirectly, to make use of the mails or any means or instrumentality of interstate commerce to perform the function of a transfer agent with respect to any security registered under section 12 or which would be required to be registered except for the exemption from registration provided by subsection (g)(2)(B) or (g)(2)(G) of that section. The appropriate regulatory agency, by rule or order, upon its own motion or upon application, may conditionally or unconditionally exempt any person or security or class of persons or securities from any provision of this section or any rule or regulation prescribed under this section, if the appropriate regulatory agency finds (A) that such exemption is in the public interest and consistent with the protection of investors and the purposes of this section, including the prompt and accurate clearance and settlement of securities transactions and the safeguarding of securities and funds, and (B) the Commission does not object to such exemption.
    2. A transfer agent may be registered by filing with the appropriate regulatory agency for such transfer agent an application for registration in such form and containing such information and documents concerning such transfer agent and any persons associated with the transfer agent as such appropriate regulatory agency may prescribe as necessary or appropriate in furtherance of the purposes of this section. Except as hereinafter provided, such registration shall become effective 45 days after receipt of such application by such appropriate regulatory agency or within such shorter period of time as such appropriate regulatory agency may determine.
    3. The appropriate regulatory agency for a transfer agent, by order, shall deny registration to, censure, place limitations on the activities, functions, or operations of, suspend for a period not exceeding 12 months, or revoke the registration of such transfer agent, if such appropriate regulatory agency finds, on the record after notice and opportunity for hearing, that such denial, censure, placing of limitations, suspension, or revocation is in the public interest and that such transfer agent, whether prior or subsequent to becoming such, or any person associated with such transfer agent, whether prior or subsequent to becoming so associated–
    A. has committed or omitted any act, or is subject to an order or finding, enumerated in subparagraph (A), (D), (E), (H), or (G) of paragraph (4) of section 15(b), has been convicted of any offense specified in subparagraph (B) of such paragraph (4) within ten years of the commencement of the proceedings under this paragraph, or is enjoined from any action, conduct, or practice specified in subparagraph (C) of such paragraph (4); or
    B. is subject to an order entered pursuant to subparagraph (C) of paragraph (4) of this subsection barring or suspending the right of such person to be associated with a transfer agent.
    4.
    A. Pending final determination whether any registration by a transfer agent under this subsection shall be denied, the appropriate regulatory agency for such transfer agent, by order, may postpone the effective date of such registration for a period not to exceed fifteen days, but if, after notice and opportunity for hearing (which may consist solely of affidavits and oral arguments), it shall appear to such appropriate regulatory agency to be necessary or appropriate in the public interest or for the protection of investors to postpone the effective date of such registration until final determination, such appropriate regulatory agency shall so order. Pending final determination whether any registration under this subsection shall be revoked, such appropriate regulatory agency, by order, may suspend such registration, if such suspension appears to such appropriate regulatory agency, after notice and opportunity for hearing, to be necessary or appropriate in the public interest or for the protection of investors.
    B. A registered transfer agent may, upon such terms and conditions as the appropriate regulatory agency for such transfer agent deems necessary or appropriate in the public interest, for the protection of investors, or in furtherance of the purposes of this section, withdraw from registration by filing a written notice of withdrawal with such appropriate regulatory agency. If such appropriate regulatory agency finds that any transfer agent for which it is the appropriate regulatory agency, is no longer in existence or has ceased to do business as a transfer agent, such appropriate regulatory agency, by order, shall cancel or deny the registration.
    C. The appropriate regulatory agency for a transfer agent, by order, shall censure or place limitations on the activities or functions of any person associated, seeking to become associated, or, at the time of the alleged misconduct, associated or seeking to become associated with the transfer agent, or suspend for a period not exceeding twelve months or bar any such person from being associated with the transfer agent, if the appropriate regulatory agency finds, on the record after notice and opportunity for hearing, that such censure, placing of limitations, suspension, or bar is in the public interest and that such person has committed or omitted any act, or is subject to an order or finding, enumerated in subparagraph (A), (D), (E), (H), or (G) of paragraph (4) of section 15(b), has been convicted of any offense specified in subparagraph (B) of such paragraph (4) within ten years of the commencement of the proceedings under this paragraph, or is enjoined from any action, conduct, or practice specified in subparagraph (C) of such paragraph (4). It shall be unlawful for any person as to whom such an order suspending or barring him from being associated with a transfer agent is in effect willfully to become, or to be, associated with a transfer agent without the consent of the appropriate regulatory agency that entered the order and the appropriate regulatory agency for that transfer agent. It shall be unlawful for any transfer agent to permit such a person to become, or remain, a person associated with it without the consent of such appropriate regulatory agencies, if the transfer agent knew, or in the exercise of reasonable care should have known, of such order. The Commission may establish, by rule, procedures by which a transfer agent reasonably can determine whether a person associated or seeking to become associated with it is subject to any such order, and may require, by rule, that any transfer agent comply with such procedures.
    d. Activities of clearing agencies and transfer agents; enforcement by appropriate regulatory agencies
    1. No registered clearing agency or registered transfer agent shall, directly or indirectly, engage in any activity as clearing agency or transfer agent in contravention of such rules and regulations (A) as the Commission may prescribe as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title, or (B) as the appropriate regulatory agency for such clearing agency or transfer agent may prescribe as necessary or appropriate for the safeguarding of securities and funds.
    2. With respect to any clearing agency or transfer agent for which the Commission is not the appropriate regulatory agency, the appropriate regulatory agency for such clearing agency or transfer agent may, in accordance with section 1818 of Title 12, enforce compliance by such clearing agency or transfer agent with the provisions of this section, sections 17 and 19, and the rules and regulations thereunder. For purposes of the preceding sentence, any violation of any such provision shall constitute adequate basis for the issuance of an order under section 1818(b) or 1818(c) of Title 12, and the participants in any such clearing agency and the persons doing business with any such transfer agent shall be deemed to be “depositors” as that term is used in section 1818(c) of Title 12.
    3.
    A. With respect to any clearing agency or transfer agent for which the Commission is not the appropriate regulatory agency, the Commission and the appropriate regulatory agency for such clearing agency or transfer agent shall consult and cooperate with each other, and, as may be appropriate, with State banking authorities having supervision over such clearing agency or transfer agent toward the end that, to the maximum extent practicable, their respective regulatory responsibilities may be fulfilled and the rules and regulations applicable to such clearing agency or transfer agent may be in accord with both sound banking practices and a national system for the prompt and accurate clearance and settlement of securities transactions. In accordance with this objective–
    i. the Commission and such appropriate regulatory agency shall, at least fifteen days prior to the issuance for public comment of any proposed rule or regulation or adoption of any rule or regulation concerning such clearing agency or transfer agent, consult and request the views of the other; and
    ii. such appropriate regulatory agency shall assume primary responsibility to examine and enforce compliance by such clearing agency or transfer agent with the provisions of this section and sections 17 and 19.
    B. Nothing in the preceding subparagraph or elsewhere in this title shall be construed to impair or limit (other than by the requirement of notification) the Commission’s authority to make rules under any provision of this title or to enforce compliance pursuant to any provision of this title by any clearing agency, transfer agent, or person associated with a transfer agent with the provisions of this title and the rules and regulations thereunder.
    4. Nothing in this section shall be construed to impair the authority of any State banking authority or other State or Federal regulatory authority having jurisdiction over a person registered as a clearing agency, transfer agent, or person associated with a transfer agent, to make and enforce rules governing such person which are not inconsistent with this title and the rules and regulations thereunder.
    5. A registered transfer agent may not, directly or indirectly, engage in any activity in connection with the guarantee of a signature of an endorser of a security, including the acceptance or rejection of such guarantee, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest, for the protection of investors, to facilitate the equitable treatment of financial institutions which issue such guarantees, or otherwise in furtherance of the purposes of this title.
    e. Physical movement of securities certificates

    The Commission shall use its authority under this title to end the physical movement of securities certificates in connection with the settlement among brokers and dealers of transactions in securities consummated by means of the mails or any means or instrumentalities of interstate commerce.
    f. Rules concerning transfer of securities and rights and obligations of involved or affected parties
    1. Notwithstanding any provision of State law, except as provided in paragraph (3), if the Commission makes each of the findings described in paragraph (2)(A), the Commission may adopt rules concerning–
    A. the transfer of certificated or uncertificated securities (other than government securities issued pursuant to chapter 31 of title 31, United States Code, or securities otherwise processed within a book-entry system operated by the Federal Reserve banks pursuant to a Federal book entry regulation) or limited interests (including security interests) therein; and
    B. rights and obligations of purchasers, sellers, owners, lenders, borrowers, and financial intermediaries (including brokers, dealers, banks, and clearing agencies) involved in or affected by such transfers, and the rights of third parties whose interests in such securities devolve from such transfers.
    2.
    A. The findings described in this paragraph are findings by the Commission that–
    i. such rule is necessary or appropriate for the protection of investors or in the public interest and is reasonably designed to promote the prompt, accurate, and safe clearance and settlement of securities transactions;
    ii. in the absence of a uniform rule, the safe and efficient operation of the national system for clearance and settlement of securities transactions will be, or is, substantially impeded; and
    iii. to the extent such rule will impair or diminish, directly or indirectly, rights of persons specified in paragraph (1)(B) under State law concerning transfers of securities (or limited interests therein), the benefits of such rule outweigh such impairment or diminution of rights.
    B. In making the findings described in subparagraph (A), the Commission shall give consideration to the recommendations of the Advisory Committee established under paragraph (4), and it shall consult with and consider the views of the Secretary of the Treasury and the Board of Governors of the Federal Reserve System. If the Secretary of the Treasury objects, in writing, to any proposed rule of the Commission on the basis of the Secretary’s view on the issues described in clauses (i), (ii), and (iii) of subparagraph (A), the Commission shall consider all feasible alternatives to the proposed rule, and it shall not adopt any such rule unless the Commission makes an explicit finding that the rule is the most practicable method for achieving safe and efficient operation of the national clearance and settlement system.
    3. Any State may, prior to the expiration of 2 years after the Commission adopts a rule under this subsection, enact a statute that specifically refers to this subsection and the specific rule thereunder and establishes, prospectively from the date of enactment of the State statute, a provision that differs from that applicable under the Commission’s rule.
    4.
    A. Within 90 days after the date of enactment of this subsection [enacted Nov. 16, 1990], the Commission shall (and at such times thereafter as the Commission may determine, the Commission may), after consultation with the Secretary of the Treasury and the Board of Governors of the Federal Reserve System, establish an advisory committee under the Federal Advisory Committee Act (5 U.S.C. App.). The Advisory Committee shall be directed to consider and report to the Commission on such matters as the Commission, after consultation with the Secretary of the Treasury and the Board of Governors of the Federal Reserve System, determines, including the areas, if any, in which State commercial laws and related Federal laws concerning the transfer of certificated or uncertificated securities, limited interests (including security interests) in such securities, or the creation or perfection of security interests in such securities do not provide the necessary certainty, uniformity, and clarity for purchasers, sellers, owners, lenders, borrowers, and financial intermediaries concerning their respective rights and obligations.
    B. The Advisory Committee shall consist of 15 members, of which -
    i. 11 shall be designated by the Commission in accordance with the Federal Advisory Committee Act; and
    ii. 2 each shall be designated by the Board of Governors of the Federal Reserve System and the Secretary of the Treasury.
    C. The Advisory Committee shall conduct its activities in accordance with the Federal Advisory Committee Act. Within 6 months of its designation, or such longer time as the Commission may designate, the Advisory Committee shall issue a report to the Commission, and shall cause copies of that report to be delivered to the Secretary of the Treasury and the Chairman of the Board of Governors of the Federal Reserve System.
    ________________________________________

  27. South Florida has had a 45 day stay on all foreclosures,this period comes to an end I am seeing people who are not in trouble wishing to recind.
    South Florida is going to be in big trouble in the new year.

    The Fed ownes all the promissory notes in this country,they are the holders of intrest,the notes are held by Cede and co.Cede and Co is owned by the fed.

  28. I examined a modified loan doc today the same problems persist in that the party doing the modification are not the owners of the loan, the assignment does not give the servicer the right to do a mod as they are not the authorized party to modify.
    In light of the fact that the homeowner did sign the mod docs,has in my opinion no bearing on this contract, plus usury laws effective as the monthly payment went up and plus the closing cost also went up.

  29. CEDE & CO

    A New Conspiracy Theory? CEDE & Co.

    you follow the stock market you know Wall Street has been a source of massive amusement and song and dance the past month. Wednesday it seems that gas prices fell and inflation disappeared so Wall Street rallied. Uhhhh…..OK, if you say so?

    The lengths the Government will go to in order to keep from giving social security raises to retired Grandmas is pretty sick. On the flip side the lengths they will go to to keep their filthy rich banking buddies bathing in cash and multi-million dollar bonuses is even more sick, I think?
    Here’s one of the headlines explaining Wednesday’s rally:

    “Financial Shares Rally Broadly on Eased Inflation Concerns”
    Midnight Trader 1:28 p.m. 05/14/2008

    Let’s take a look at financial shares. On Tuesday a prominent analyst had this to say about the fetid financial giants:

    “Oppenheimer analyst Whitney slashes brokers’ profit outlooks”
    MarketWatch10:25 a.m. 05/13/2008 By Riley McDermid

    The article tells us that companies like Lehman Bros., Merrill Lynch, Morgan Stanley and Goldman Sachs still have a lot of write downs and toxicity to purge and pretty much warns investors of coming BAD surprises.

    After that news release on Tuesday, financial stocks fell a little, not much. Seems those invisible Plunge Protection Team (PPT) strings are propping them up pretty defiantly. Getting back to Wednesday; Wall street was up and as the headlines declared: “financials lead the way” for a while at least. At one point in the day they were all up.

    At the Close:

    Morgan Stanley: shares up $0.35 Earnings per share (EPS) $1.67. Not bad earnings. They are still managing to cover up the decaying investments.

    Lehman Bros.: shares down $0.72 EPS $6.10. Pretty descent earnings, ditto on the decay.

    Goldman Sachs: down $0.20 EPS $21.30 Wow, still making bank.

    Merrill Lynch: up $0.61 EPS -$15.38. Yep that’s a negative sign before the earnings figure. Even saved from the dead Bear Stearns is only losing $2.36 per share.

    What good news saw Merrill up on the day (up over $1 at one point)? None really. There was no note worthy news on Merrill, at least not while the market was open. After hours has become the time of choice to release those pesky bits of bad news. While researching the Financials Wednesday evening I noticed an interesting news release slipped in at 6:09 p.m. Eastern time. It’s an 8-K disclosure covering among other things, a $500 million dollar loan from CEDE & CO. to Merrill at a hefty 7.75% interest rate? Heck even I can do better than 7.75%.

    Now for the conspiracy fun! Not being familiar with any CEDE company I typed the name into Google and came up with some fun (fun in a UFO, tin foil hat kinda way) information on CEDE:

    http://ming.tv/flemming2.php/__show_article/_a000010-000923.htm

    When time permits I’ll look into CEDE a little deeper. Until then I thought others might like to read about this mysterious entity. Check out the link and Enjoy!

    Disclosure: The author holds a short position in Merrill lynch.

    Posted by Comment America

    1 Comment:
    Anonymous said…
    That’s an interesting article. It is odd that such a big company could be so unknown.

    Today JC Penney’s reported earnings fell by 50%, but they beat analist estimates so it’s good news.

    “Beat estimates” is the new “Higher earnings”

    “Less than expected loss” is the new “Strong earnings”

  30. Naked Short Sellers Hurt Companies With Stock They Don’t Have

    By Bob Drummond
    Bloomberg.com
    August 4, 2006

    This article is also available in .PDF format.

    Movie Gallery Inc. shares fell 20 percent on Feb. 3, their biggest nosedive in almost a decade. At the time, there didn’t seem to be a reason for the jaw-dropping rout.

    Analysts who follow Dothan, Alabama-based Movie Gallery, the second-largest video rental chain in the U.S., speculated that investors were spooked after a large money manager cut its stake or that they were worried sales wouldn’t meet expectations.

    Another possible factor surfaced two weeks later, and it had nothing to do with financial performance. On Feb. 17, the Nasdaq Stock Market added Movie Gallery to a list of stocks considered, under a new U.S. Securities and Exchange Commission regulation, to be at risk for manipulation by naked short sellers.

    In naked shorting, traders who hope to profit from falling prices sell shares without borrowing stock. Using that strategy, naked short sellers can drive down prices by flooding the market with orders to sell shares they don’t have.

    “These people are lying, they’re cheating and they’re stealing,” says Wes Christian, a Houston lawyer who represents Internet discount retailer Overstock.com Inc. and more than a dozen other companies that say their stocks were pummeled by naked shorting. “This is, in our opinion, the biggest commercial fraud in U.S. history.”

    Movie Gallery Chief Financial Officer Thomas Johnson says he has asked the SEC to investigate whether naked short sellers helped undercut the stock.

    `It’s Extremely Frustrating’

    “I’m throwing out the towel, saying `Help me,”’ Johnson, 43, says. “There are rules designed to deal with this, and people are still managing to do these naked short sales. It’s extremely frustrating. It’s like being on the front line and people are shooting you from every direction.”

    In traditional short selling, traders rely on a strategy that’s the mirror opposite of the time-honored adage to buy low and sell high. Short sellers borrow stock through a broker and hope to profit by selling shares high and later buying them back at lower prices to repay the loan.

    Naked short sellers do the same thing, with one difference: They don’t borrow any shares. Naked short selling isn’t illegal in most cases, unless authorities can prove fraud, such as a scheme to manipulate stock prices.

    The threat to investors arises because traders in naked short sales aren’t limited by the number of shares available to borrow. If a naked short seller doesn’t intend to borrow stock, he can pump a theoretically unlimited volume of sales into the market, driving down a company’s shares.

    `They Can Overwhelm’

    Instead of hoping a stock will fall, like a traditional short seller, an unscrupulous naked short seller may be able to help make it happen.

    “If they don’t have to borrow shares, there’s nothing that keeps someone from selling and selling and hammering the market with sell orders,” says Leslie Boni, a former University of New Mexico finance professor who studied naked short selling as a visiting scholar at the SEC in 2003 and 2004.

    “They can overwhelm the number of buyers, and as the buyers dry up, the price keeps dropping,” she says.

    When Movie Gallery’s stock crashed on Feb. 3, short sellers sold almost 750,000 shares, or 11 percent of the shares traded that day, according to short-sale records compiled by Nasdaq.

    Daily short sales averaged almost 370,000 shares over the first eight days of February, up from 70,000 on Jan. 31, while the stock plunged 36 percent to $3.47 from $5.45. As the stock was falling, a growing number of sellers weren’t delivering shares to buyers, a warning sign under SEC rules of possible naked short selling.

    `Warping the Market’

    Nasdaq put Movie Gallery on its list of companies at risk of manipulation because from trades through Feb. 8, those undelivered shares topped 160,000, or 0.5 percent of Movie Gallery’s total shares. When companies surpass that threshold, SEC rules impose restrictions on further short selling.

    Patrick Byrne, chief executive officer of Salt Lake City- based Overstock.com, has been the most vocal executive charging that abusive short-selling schemes are draining the lifeblood from many companies.

    “I’ve been pouring kerosene on myself and setting myself on fire because I think there are global, systematic issues with naked short selling,” Byrne, 43, says. “It’s warping the market price of some small-cap companies and destroying American entrepreneurship.”

    As of July 10, Overstock.com had been on Nasdaq’s list of potential naked-short-selling targets every day since April 22, 2005, and its shares had fallen 45 percent over that period.

    `It’s a Nonissue’

    Investors who specialize in selling short say naked shorting is rare and complaints from supposed victims are overblown. “The phrase I would use would be red herring,” says Jim Chanos, 48, who runs Kynikos Associates Ltd., a New York-based hedge fund firm known for short selling.

    He says he’s never used naked short selling as a technique. “It sounds ominous, it sounds nefarious and, by and large, it’s a nonissue in the marketplace,” he says.

    Wall Street traders have long thought that most complaints about naked short selling come from executives at poorly managed companies looking for a scapegoat when investors sour on their stocks, says Peter Chepucavage, a securities lawyer who has worked for the SEC and is now at Plexus Consulting Group LLC in Washington.

    “The Street’s view is that this never was a real problem, and that these guys are whiners,” he says.

    `Play by the Rules’

    Phillip Marcum, CEO of Denver-based Metretek Technologies Inc., says he doesn’t need excuses for his company’s performance and generally doesn’t give short sellers a second thought. “We’re a real company, with real investors and real revenue,” says Marcum, 62, whose company sells commercial electricity- backup systems and meters to measure gas-well production.

    Metretek shares quintupled in the 12 months through the end of March, when the company announced a $28 million sale of additional stock.

    Still, the American Stock Exchange on April 10 put Metretek on its list of potential naked-shorting targets because of an increase in shares that weren’t delivered to buyers. On March 30, Metretek’s shares fell almost 7 percent as sales rocketed to 169,000 shares from a daily average of 11,000 a week earlier.

    “You can’t control somebody who shorts stock,” Marcum says. “But they’ve got to play by the rules. It seems to me, there ought to be severe penalties if you sell short without borrowing the stock. Can’t they find out who’s doing this and do something about these people?”

    Enforcement Actions Coming

    The short answer is no. The SEC puts most of its restrictions on brokerages, not naked short sellers. In one exception, SEC rules forbid naked short sales in connection with stock offerings. The SEC and exchanges have been investigating possible fraud in those instances.

    “This is an area where we have seen problems, and you can expect enforcement actions,” said Susan Merrill, the New York Stock Exchange’s regulation enforcement chief, speaking to a securities industry conference in June.

    In the past three years, the SEC has imposed a total of just under $24 million in penalties in five cases alleging that traders and investment firms illegally covered naked short sales using shares from stock offerings. Four cases were settled without admissions or denials of wrongdoing; the fifth is pending.

    The reason company executives and short sellers debate the scope of naked short selling is partly because there aren’t statistics that specifically measure such transactions.

    750 Million Shares

    New York-based Depository Trust & Clearing Corp., which processes the vast majority of U.S. trading, does keep track of how much stock has been sold and not delivered on schedule to the purchasers.

    On an average day in March, those unsettled trades amounted to more than 750 million shares in almost 2,700 stocks, exchange- traded funds and other securities, according to Depository Trust & Clearing data obtained from the SEC through Freedom of Information Act requests.

    Because there are innocuous reasons why stock may not get to the purchaser on time, such as paperwork delays, it’s impossible to tell how many of those shares, known as failures to deliver, can be blamed on naked short sales, Depository Trust & Clearing spokesman Stuart Goldstein says. “We’re not in a position to know why trades fail,” he says.

    Failed deliveries of shares to buyers do provide the foundation for an SEC rule designed to blunt potential market manipulation. The measure is part of a broader package of short- selling rules known as Regulation SHO, for Short Sales.

    Single Standard

    The rule, called Reg SHO, was approved unanimously in 2004 after almost five years of consideration under three SEC chairmen. While Reg SHO doesn’t outlaw naked short sales per se, it targets companies with enough failed deliveries to raise concerns about naked short selling, and it restricts further short sales of those stocks.

    Reg SHO’s short-selling restrictions took effect in January 2005.

    The regulation’s naked-shorting provisions were designed to create a single SEC standard to replace individual rules that previously were set by each exchange.

    Supplanting exchange rules with one regulation meant the SEC, and not just market regulators, could police enforcement, says lawyer Chepucavage, 58, who helped draft Reg SHO. “There was a belief that the markets weren’t aggressive enough in enforcing the rules,” he says. “They tended to treat them as traffic ticket-type cases.”

    Under the SEC rule, Nasdaq, the NYSE, the American Stock Exchange and smaller markets must get daily reports from Depository Trust & Clearing about failed deliveries.

    The Restrictions

    When an exchange finds that a company has accumulated unsettled trades equal to at least 10,000 shares and 0.5 percent of outstanding stock for five consecutive trading days, it’s subject to stricter requirements for future short sales.

    Exchanges keep the companies on these lists until failed deliveries fall back below the 0.5 percent level for five straight trading days.

    Once a stock is on a list, Reg SHO requires any new short sales to be settled within 13 trading days. If shares haven’t been delivered by that time, the brokerage involved in the sale must buy stock for delivery to the buyer.

    If it doesn’t, Reg SHO forbids the broker from handling additional short sales of that company’s shares unless it makes binding arrangements to borrow the necessary stock. During June, more than 425 companies were on an exchange list.

    Short Sales Increase

    For the first year after the restrictions took effect in January 2005, the markets’ lists suggest that Reg SHO cut down potential naked shorting. This year, the number of possible naked short sales has increased.

    From February through May, the average lists reported more stocks than in any month since August 2005. The number of new companies that surpassed Reg SHO’s thresholds for the first time also jumped in February, to an average of 18.5 from as few as 15 in October 2005.

    Depository Trust & Clearing’s statistics on total failed deliveries of shares to buyers show a similar trajectory: In February and March, more than 700 million shares that were sold were not delivered to buyers on an average day, the highest levels since December 2004, the month before Reg SHO took effect.

    Shares of Inhibitex Inc., a biotech drug developer in Atlanta’s northern suburb of Alpharetta, plummeted 9.8 percent on Feb. 27, their biggest one-day drop in more than 14 months and the worst showing among more than 160 stocks in the Nasdaq Biotech Index.

    `Manipulating the Stock’

    Nasdaq short sale records show that, during the two days ended on Feb. 27, short sellers traded almost 410,000 shares, up from fewer than 9,500 over the two preceding days. Enough traders failed to deliver stock over Reg SHO’s limit for five straight days, so Nasdaq put Inhibitex on its list on March 8.

    Company executives didn’t return calls seeking comment.

    Audible Inc., which sells audio newspapers and books on the Web, had delivery failures that broke Reg SHO’s threshold from trading on Jan. 4. Over five days, short sales had averaged 309,000 shares, almost triple the level for the preceding week.

    Audible, based in Wayne, New Jersey, ranked last in the 279- member Russell 2000 Technology Index during that stretch, falling 15.5 percent. “When you’re manipulating the stock, you’re taking away from investors, the business itself and our employees,” says David Joseph, 37, an Audible vice president.

    These apparent short sale jumps were allowed by a snag in Reg SHO. Under the rule, delivery deadlines apply only to short sales made after a company appears on one of the markets’ lists. Naked shorting before that point, including the trades that put a company over the rule’s thresholds in the first place, can remain unsettled indefinitely.

    SEC Reviews Rule

    “It’s a loophole which allows an unlimited number of fails against anybody,” says Robert Shapiro, an economist and former U.S. undersecretary of commerce, who is a consultant for Christian and other lawyers representing alleged victims of naked shorting.

    On July 12, the SEC voted unanimously to propose changes to short sale regulations that would remove that clause and set deadlines for settling trades before a stock is added to a threshold list. “There are still persistent failures to deliver in the marketplace, and some of that is undoubtedly attributable to loopholes in our rule,” SEC Chairman Christopher Cox said.

    The hole in the rule helps explain why some companies have stayed on the threshold lists for months or longer.

    As of July 17, New York-based Martha Stewart Living Omnimedia Inc., popular with short sellers since its eponymous founder’s March 2004 trial and prison sentence for lying to federal investigators probing insider trading, had been on the NYSE’s threshold list 383 times, or every day since Reg SHO took effect more than 18 months earlier.

    Krispy Kreme

    Taser International Inc. had a 379-day streak on Nasdaq’s list that ended on July 11. The stun gun manufacturer based in Scottsdale, Arizona, had faced an SEC probe of its accounting and product safety claims, and its shares fell 78 percent in 2005. The SEC ended its inquiry in May without bringing any charges.

    Krispy Kreme Doughnuts Inc., a one-time Wall Street favorite that fell from grace as the SEC investigated its accounting in 2004, was on the NYSE list for almost 18 months. Shares of the Winston-Salem, North Carolina-based company plunged 54 percent in 2005.

    Taser and Krispy Kreme are typical examples of companies pounced on by short sellers after setbacks threaten stock prices. “There’s no doubt some companies have issues other than stock manipulation,” Christian says.

    “But they should be allowed to succeed or fail on their own and not because of manipulative market conditions,” he says. “This is not just attributable to whining companies that couldn’t make it.”

    14 Lawsuits Filed

    The stakes in the debate were raised when an alliance of lawyers, including Christian, 53, and fellow Houston litigator John O’Quinn — a billionaire from fees in a $206 billion tobacco industry settlement — joined forces to represent companies alleging fraud in naked shorting.

    The group has already filed 14 lawsuits against short sellers, brokers and Depository Trust & Clearing and plans at least 20, Christian says.

    A short sale begins, like other trades, when investors tell their brokers they want to sell stock. Reg SHO says a broker must check to make sure a brokerage or institutional investor has stock it’s willing to loan the short seller in time for settlement, which for most U.S. stock transactions takes place three business days after a trade.

    `It’s Demoralizing’

    After confirming the availability of stock loans, brokers send a sell order to the appropriate exchange, where shares are sold to investors who want to buy the stock. There’s no law requiring short sellers to actually borrow shares.

    Last month, NYSE Regulation said it fined four securities firms a total of $1.25 million for Reg SHO-related violations, such as failing to properly confirm and document the availability of stock loans before handling short sales. The brokers, units of Daiwa Securities Group Inc., Goldman Sachs Group Inc., Citigroup Inc., and Credit Suisse Group, accepted the NYSE’s fines without admitting or denying wrongdoing.

    In a traditional short sale, buyers receive actual shares in a company. In a naked short sale, buyers effectively get an IOU promising that stock will be delivered at a later date.

    When naked short sellers target a company, the results can be devastating, says David Vey, chairman of King of Prussia, Pennsylvania-based Sedona Corp., which sells software programs that help banks manage customer databases.

    “It’s demoralizing when you’re working hard and someone else is staying awake at night trying to figure out how to take your money,” Vey says.

    `Prove Staying Power’

    In 2003, the SEC filed a suit alleging that a single naked short seller, Rhino Advisors Inc., a New York-based investment firm, accounted for 40 percent of all Sedona transactions during 21 days in March 2001. The short sales came after the company sold debt securities that could be converted into shares.

    The stock plunged from a high of $1.50 to as little as 72 cents in that period. Rhino settled the case in 2003 for $1 million without admitting or denying wrongdoing.

    That kind of drubbing makes it difficult to attract new investors and capital and leaves potential customers wary, Vey says. “You have to prove credibility and some kind of staying power,” he says. “People don’t want to buy your product if they’re worried you’re not going to be here in two years.”

    On July 10, Sedona shares closed at 21 cents in over-the- counter trading.

    `A Bit Overdone’

    Depository Trust & Clearing’s Goldstein, 55, says failed deliveries represent only a tiny fraction of U.S. stock trading, and naked short selling is one of many explanations for settlement delays.

    At the end of 2005, about 23,000 trades hadn’t settled compared with about 26 million transactions on a typical day last year, Depository Trust & Clearing says. “We’re not saying there is no problem, but to suggest the sky is falling might be a bit overdone,” Goldstein says.

    While there’s more than one reason shares might not be delivered to buyers, Depository Trust & Clearing statistics for the days immediately after the SEC announced it would have new rules show that there could have been hundreds of millions of naked short sales.

    In eight trading days after the SEC released details of the new rule on July 28, 2004, failures to deliver skyrocketed 70 percent to more than 1 billion shares. They kept rising and, within a month, topped 2 billion shares.

    Before the Rule

    The size and suddenness of that surge suggests it was caused by a rush of naked short sales rather than a rash of bookkeeping snags, Chepucavage says. “One might speculate that people were getting their naked short sales in before the rule took effect,” he says.

    The rule’s dependence on threshold lists was aimed at weeding out most of the clerical delays in stock sales that didn’t produce shares at settlement, says Boni, 49, who’s now a managing director at UNX Inc., a brokerage in Burbank, California.

    Short sales and stock price movements for companies added to the SEC’s lists, in some cases, recall an old saying: Just because you’re paranoid doesn’t mean that someone’s not out to get you.

    In April, Z-Trim Holdings Inc., which makes a calorie-free fat substitute for processed foods, hired lawyers Christian and O’Quinn to investigate whether naked short sellers sold shares of the company, which is based in the Chicago suburb of Mundelein.

    `Huge Losses’

    Reg SHO data show that Z-Trim, then known as Circle Group Holdings Inc., was placed on the American Stock Exchange’s threshold list on March 3, 2005, reflecting failed deliveries from trading through Feb. 22.

    Over five trading days, daily short sales climbed to almost 40,000 shares on Feb. 22, from 3,300 a week earlier, while Circle Group’s stock fell 24 percent to 76 cents from $1.

    “Stock manipulators can cause huge losses for real people who invested real money,” Z-Trim CEO Gregory Halpern says. The company retained lawyers to try to protect its investors, he says.

    “We aren’t sitting here complaining that our stock was manipulated, woe is me,” Halpern, 48, says. “But having been thrust into that battle, we’re going to fight like hell, because we have a responsibility to our shareholders.”

    For Dallas-based business software maker I2 Technologies Inc., threshold-busting trades occurred on Sept. 30, 2005, when short sales more than doubled to 51,000 shares from 21,000 the previous day. I2′s shares fell 10.1 percent to $18.64 from $20.73.

    Worst Day

    That was the stock’s worst day in almost eight months and the third-biggest decline in the 575-member Nasdaq Computer Index. Company executives declined to comment.

    Meanwhile, companies continue to see shares tumble under possible pressure from naked short sales. A month after Movie Gallery’s stock collapsed in February, the company’s investors had an even worse day, on March 8, after the company met with lenders about revising restrictions regarding loans.

    Over two days, shares fell more than 34 percent, while short sales averaged 2.5 million shares — up from an average of 300,000 during the previous week. Trading on March 8 created enough failed deliveries that Movie Gallery was again added to Nasdaq’s threshold list.

    Cromwell Coulson, CEO of New York-based Pink Sheets LLC, which runs a market for over-the-counter stocks, says making more information public about short sales is a key to fighting abuses, particularly for investors and executives in small companies.

    For example, under a new NASD rule, Nasdaq’s threshold lists in July started including failures to deliver for shares of some small, over-the-counter companies that weren’t covered by Reg SHO. Nasdaq also began including OTC Bulletin Board and Pink Sheets companies in monthly short-interest reports in July.

    `A Bogeyman’

    “Naked short selling has been a bogeyman; it was like Bigfoot,” Coulson, 40, says. “Everybody thought it was out there, but nobody knew for sure.”

    Sedona’s Vey says regulators at the SEC and each stock market need to hit some abusive traders with multimillion-dollar fines. “They need to make a few examples out of people,” he says. Until penalties are big enough to take the profit out of stock manipulation, he says, all the rules and procedures in the world will make no difference.

    [ RGM Short Selling Home page ]

  31. A CEDE & CO partnered company.

    Depository Trust & Clearing Corporation
    DTC
    From Wikipedia, the free encyclopedia
    Jump to: navigation, search

    Depository Trust & Clearing Corporation
    Type
    Private

    Genre
    Holding company
    Founded DTCC (1999) – holding company for DTC (1973) and NSCC (1976)
    Headquarters New York City, U.S.

    No. of locations 4
    Key people Don F. Donahue Chairman, CEO
    William B. Aimetti President, COO
    Industry
    Finance

    Services
    financial
    Revenue
    ▲ US$706,242,000 (2007)

    Net income
    ▲ US$ 4,375,000 (2007)
    Total assets
    US$30,222,740,000
    Total equity
    US $242,920,000
    Owner
    NYSE, NASD, AMEX, banks, brokers
    Subsidiaries
    NSCC
    DTC
    FICC
    DTCC Deriv/SERV LLC
    DTCC Solutions LLC
    EuroCCP Ltd.
    Website
    http://www.dtcc.com

    The Depository Trust & Clearing Corporation (DTCC), based primarily at 55 Water Street in New York City, is the world’s largest post-trade financial services company. It was set up to provide an efficient and safe way for buyers and sellers of securities to make their exchange, and thus “clear and settle” transactions. It also provides custody of securities.
    User-owned[1] and directed, it automates, centralizes, standardizes, and streamlines processes that are critical to the safety and soundness of the world’s capital markets. Through its subsidiaries, DTCC provides clearance, settlement, and information services for equities, corporate and municipal bonds, unit investment trusts, government and mortgage-backed securities, money market instruments, and over-the-counter derivatives. DTCC is also a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC’s DTC depository provides custody and asset servicing for 3.5 million securities issues, comprised mostly of stocks and bonds, from the United States and 110 other countries and territories, valued at $40 trillion, more than any other depository in the world.
    In 2007, DTCC settled the vast majority of securities transactions in the United States, more than $1.86 quadrillion in value. DTCC has operating facilities in New York City, and at multiple locations in and outside the U.S.
    In 2007 Chief Executive Officer Donald F. Donahue was named to the additional office of Chairman of DTCC and its subsidiaries, and Chief Operating Officer William B. Aimetti was named President.[2]
    In 2008, the Clearing Corporation and the Depository Trust & Clearing Corporation announced a public clearing facility for credit default swap (CDS) [3], which will be linked To DTCC’s Trade Information Warehouse.[4] [5][6]

    Contents
    [hide]
    • 1 History
    • 2 Naked short selling; Litigation & proposed Senate hearings
    • 3 Subsidiaries
    • 4 Competition
    • 5 References
    • 6 External links

    [edit] History
    Established in 1973, The Depository Trust Company (DTC) was created to alleviate the rising volumes of paperwork and the lack of security that developed after rapid growth in the volume of transactions in the U.S. securities industry in the late 1960s.
    Before DTC and NSCC were formed, brokers physically exchanged certificates, employing hundreds of messengers to carry certificates and checks. The mechanisms brokers used to transfer securities and keep records relied heavily on pen and paper. The exchange of physical stock certificates was difficult, inefficient, and increasingly expensive.
    In the late 1960s, with an unprecedented surge in trading leading to volumes of nearly 15 million shares a day on the NYSE in April 1968 (as opposed to 5 million a day just three years earlier, which at the time had been considered overwhelming), the paperwork burden became enormous.[7][8] Stock certificates were left for weeks piled haphazardly on any level surface, including filing cabinets and tables. Stocks were mailed to wrong addresses, or not mailed at all. Overtime and night work became mandatory. Turnover was 60% a year.[9]
    To deal with this large volume, which was overwhelming brokerage firms, the stock exchanges were forced to close every week (they chose every Wednesday), and trading hours were shortened on other days of the week.
    Two methods were used to solve the crisis:
    The first was to hold all paper stock certificates in one centralized location, and automate the process by keeping electronic records of all certificates and securities clearing and settlement (changes of ownership and other securities transactions). The method was first used in Austria by the Vienna Giro and Depository Association in 1872.[10]
    This led the New York Stock Exchange to establish the Central Certificate Service (CCS) in 1968 at 44 Broad Street in New York City.[11] New York Stock Exchange President Robert W. Haack promised: “We are going to automate the stock certificate out of business by substituting a punch card. We just can’t keep up with the flood of business unless we do.”[12] The CCS transferred securities electronically, eliminating their physical handling for settlement purposes, and kept track of the total number of shares held by NYSE members.[13] This relieved brokerage firms of the work of inspecting, counting, and storing certificates. Haack labeled it “top priority,” $5 million was spent on it,[14] and its goal was to eliminate up to 75% of the physical handling of stock certificates traded between brokers.[15] One problem, however, was that it was voluntary, and brokers responsible for 2/3 of all trades refused to use it.[16]
    By January 1969 it was transferring 10,000 shares per day, and plans were for it to be handling broker-to-broker transactions in 1,300 issues by March 1969.[17] In 1970 the CCS service was extended to the American Stock Exchange.[18] This led to the development of the Banking and Securities Industry Committee (BASIC), which represented leading U.S. banks and securities exchanges,[19], and was headed by a banker named Herman Beavis, and finally the development of DTC in 1973,[20] which was headed by Bill Dentzer, the former New York State Banking Superintedent.[21] All the top New York banks were represented on the board, usually by their chairman. BASIC and the SEC saw this indirect holding system as a “temporary measure,” on the way to a “certificateless society.”[22]
    Stocks held by DTC are kept in the name of its partnership nominee, Cede & Co.[23] Not all securities are eligible to be settled through DTC (“DTC-eligible”).
    The second method involves multilateral netting; and led to the formation of the National Securities Clearing Corporation (NSCC) in 1976.
    [edit] Naked short selling; Litigation & proposed Senate hearings
    DTCC has been sued with regard to its alleged participation in naked short selling. Further allegations about DTCC’s possible involvement have been made by Senator Robert Bennett and discussed by the NASAA and in articles — disagreed with by DTCC — in the Wall Street Journal and Euromoney_(magazine).
    While there is no dispute that illegal naked shorting happens, there is a fight as to the extent to which DTCC is responsible. Some blame DTCC as the keeper of the system where it happens, and charge that DTCC turns a blind eye to the problem. DTCC suggests that naked shorting is simply not widespread enough to be a major concern. “We’re not saying there is no problem, but to suggest the sky is falling might be a bit overdone,” DTCC’s chief spokesman Stuart Goldstein said.[1][2] DTCC General Counsel Larry Thompson dismissively calls the claims “pure invention.”[2] The SEC, however, views naked shorting as a serious enough matter to have initiated two separate efforts to restrict the practice.[3] And in July 2007, Senator Bennett suggested on the U.S. Senate floor that the allegations involving DTCC and naked short selling are “serious enough” that there should be a hearing on them — with DTCC officials called before the Senate Banking Committee. The committee’s Chairman, Senator Christopher Dodd, indicated he was willing to hold such a hearing.[4] The North American Securities Administrators Association, representing state stock regulators, filed a brief saying that if the claims were correct, its shareholders “have been the victims of fraud and manipulation at the hands of the very entities that should be serving their interest.”[5][24][25]
    Critics also contend that DTCC has been too secretive with information about where naked shorting is taking place.[3] In 2007, WayPoint Biomedical sued DTCC for DTCC’s refusal to comply with a subpoena request for documents that Waypoint needs to track trades in the company’s shares.[6]
    [edit] Subsidiaries
    The DTCC has several subsidiaries:
    • The Depository Trust Company (DTC) – The original depository clearing corporation.[26][27]
    Established in 1973, it was created to reduce costs and provide efficiencies by immobilizing securities and making “book-entry” changes to show ownership of the securities. DTC provides securities movements for NSCC’s net settlements, and settlement for institutional trades (which typically involve money and securities transfers between custodian banks and broker-dealers), as well as money market instruments. In 2007, DTC settled transactions worth $513 trillion, and processed 325 million book-entry deliveries. In addition to settlement services, DTC retains custody of 3.5 million securities issues, worth about $40 trillion, including securities issued in the US and more than 110 other countries. DTC is a member of the U.S. Federal Reserve System, and a registered clearing agency with the Securities and Exchange Commission.
    • National Securities Clearing Corporation (NSCC) – The original clearing corporation, it provides clearing and serves as the central counterparty for trades in the US securities markets.[28]
    Established in 1976, it provides clearing, settlement, risk management, central counterparty services, and a guarantee of completion for certain transactions for virtually all broker-to-broker trades involving equities, corporate and municipal debt, American depositary receipts, exchange-traded funds, and unit investment trusts. NSCC also nets trades and payments among its participants, reducing the value of securities and payments that need to be exchanged by an average of 98% each day. NSCC generally clears and settles trades on a “T+3″ basis. NSCC has roughly 4,000 participants,[29] and is regulated by the U.S. Securities and Exchange Commission (SEC).
    • Fixed Income Clearing Corporation (FICC) – Provides clearing for fixed income securities, including treasury securities and mortgage backed securities[30][31]
    Created in 2003 to handle fixed income transaction processing, integrating the Government Securities Clearing Corporation and the Mortgage-Backed Securities Clearing Corporation. The Government Securities Division (GSD) provides real-time trade matching, clearing, risk management, and netting for trades in US Government debt issues, including repurchase agreements or repos. Securities transactions processed by FICC’s Government Securities Division include Treasury bills, bonds, notes, zero-coupon securities, government agency securities, and inflation-indexed securities. The Mortgage-Backed Securities Division provides real-time automated and trade matching, trade confirmation, risk management, netting, and electronic pool notification to the mortgage-backed securities market. Participants in this market include mortgage originators, government-sponsored enterprises, registered broker-dealers, institutional investors, investment managers, mutual funds, commercial banks, insurance companies, and other financial institutions.
    • DTCC Solutions – DTCC’s subsidiary delivering information-based and business processing solutions to financial intermediaries globally, such as Global Corporation Action Validation Service (GCA VS) and Managed Accounts Service.[32]
    GCA VS simplifies announcement processing by providing a centralized source of “scrubbed” information about corporate actions, including tender offers, conversions, stock splits, and nearly 100 other types of events for equities and fixed-income instruments traded in Europe, Asia-Pacific, and the Americas. In 2006, GCA VS processed 899,000 corporate actions from 160 countries. Managed Accounts Service, introduced in 2006, standardizes the exchange of account and investment information through a central gateway.
    • DTCC Learning – Provides financial, technology, and career training and educational services to the global financial industry.[33]
    • Loan/SERV – Provides services to loan syndicates and agents.
    • Deriv/SERV – Provides clearing for credit derivatives, such as CDOs.[34]
    It provides automated matching and confirmation services for over-the counter (OTC) derivatives trades, including credit, equity, and interest rate derivatives. It also provides related matching of payment flows and bilateral netting services. Deriv/SERV’s customers include dealers and buy-side firms from 30 countries. In 2006, Deriv/SERV processed 2.6 million transactions.
    • EuroCCP – Will provide clearing on European exchanges.[35]
    • Omgeo – Partnership with Thomson Financial that provides clearing automation solutions.[36][37]
    Omgeo is as a central information management and processing hub for broker-dealers, investment managers, and custodian banks. It provides post-trade, pre-settlement institutional trade management solutions, processes over one million trades per day and serving 6,000 investment managers, broker/dealers, and custodians in 42 countries.
    [edit] Competition
    Euroclear (in Brussels, Belgium) and Clearstream (in Luxembourg) are the second and third largest central securities depositories in the world.
    [edit] References
    1. ^ Drummond, Bob (August 4, 2006). “”Naked Short Sellers Hurt Companies With Stock They Don’t Have””, Bloomberg.com. Retrieved on 25 December 2007.
    2. ^ a b “”DTCC Chief Spokesperson Denies Existence of Lawsuit””, financialwire.net (May 11, 2004). Retrieved on 25 December 2007.
    3. ^ a b Emshwiller, John R., and Kara Scannell (July 5, 2007). “Blame the ‘Stock Vault’?”, The Wall Street Journal.
    4. ^ “Senator Bennett Discusses Naked Short Selling on the Senate Floor,” Website of Senator Bennett, July 20, 2007, accessed 32-2-2008
    5. ^ “Letter from North American Securities Administrators Association to Jonathan Katz, Secretary of the Securities and Exchange Commission,” dated January 5, 2004, accessed 23-2-2008
    6. ^ “”WayPoint Biomedical Holdings, Inc. Files Lawsuit Against The Depository Trust and Clearing Corporation (DTCC)””. GEN (Genetic Engineering and Biotech News (June 25, 2007). Retrieved on 2007-12-25.
    [edit] External links
    • DTCC corporate site
    • Extensive description of DTC and its activities
    • Extensive description of NSCC and its activities
    • DTC corporate site
    • NSCC corporate site
    • Source for History
    • Naked shorts
    • “DTCC Calls Euromoney Article on its Stock Borrow Program and Naked Short Selling ‘Sloppy Journalism,’” DTCC, 31/03/05
    • “Blame the ‘Stock Vault?’; Clearinghouse Faulted On Short-Selling Abuse;Finding the Naked Truth,” Wall Street Journal, by John R. Emshwiller and Kara Scannell, 05//07/07
    • “DTCC Responds to The Wall Street Journal article, ‘Blame the ‘Stock Vault?,’” DTCC, 06/07/07
    • “The Rise and Effects of the Indirect Holding System: How Corporate America Ceded its Shareholders to Intermediaries,” by David C. Donald, Institute for Law and Finance, 18/09/07
    Retrieved from “http://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_Corporation”
    Categories: Financial services companies of the United States | Securities | Self-regulatory organizations | Central Securities Depositories | Companies based in New York | Payment systems | Companies established in 1973 | Companies established in 1976

  32. Understanding Order Execution
    by Investopedia Staff, (Investopedia.com)

    Often investors and traders alike do not fully understand what happens when you click the “enter” button on your online trading account. If you think your order is always filled immediately after you click the button in your account, you are mistaken. In fact, you might be surprised at the variety of possible ways in which an order can be filled and the associated time delays. How and where your order is executed can affect the cost of your transaction and the price you pay for the stock.

    A Broker’s Options
    A common misconception among investors is that an online account connects the investor directly to the securities markets. This is not the case. When an investor places a trade, whether online or over the phone, the order goes to a broker. The broker then looks at the size and availability of the order to decide which path is the best way for it to be executed.

    A broker can attempt to fill your order in a number of ways:

    Order to the Floor – For stocks trading on exchanges such as the New York Stock Exchange (NYSE), the broker can direct your order to the floor of the stock exchange, or to a regional exchange. In some instances regional exchanges will pay a fee for the privilege to execute a broker’s order, known as payment for order flow. Because your order is going through human hands, it can take some time for the floor broker to get to your order and fill it.

    Order to Third Market Maker – For stocks trading on an exchange like the NYSE, your brokerage can direct your order to what is called a third market maker. A third market maker is likely to receive the order if: A) they entice the broker with an incentive to direct the order to them or B) the broker is not a member firm of the exchange in which the order would otherwise be directed.

    Internalization – Internalization occurs when the broker decides to fill your order from the inventory of stocks your brokerage firm owns. This can make for quick execution. This type of execution is accompanied by your broker’s firm making additional money on the spread.

    Electronic Communications Network (ECN) – ECNs automatically match buy and sell orders. These systems are used particularly for limit orders because the ECN can match by price very quickly.

    Order to Market Maker – For over-the-counter markets such as the Nasdaq, your broker can direct your trade to the market maker in charge of the stock you wish to purchase or sell. This is usually timely, and some brokers make additional money by sending orders to certain market makers (payment for order flow). This means your broker may not always be sending your order to the best possible market maker.

    As you can see your broker has different motives for directing orders to specific places. Obviously, they may be more inclined to internalize an order to profit on the spread or send an order to a regional exchange or willing third market maker and receive payment for order flow. The choice the broker makes can affect your bottom line. However, as we explore below we will see some of the safeguards in place to limit any unscrupulous broker activity when executing trades. (For more information, check out The Basics Of Order Entry.)

    Broker’s Obligations
    By law, brokers are obligated to give each of their investors the best possible order execution. There is, however, debate over whether this happens, or if brokers are routing the orders for other reasons, like the additional revenue streams we outlined above.

    Let’s say, for example, you want to buy 1,000 shares of the TSJ Sports Conglomerate, which is selling at the current price of $40. You place the market order and it gets filled at $40.10. That means the order cost you an additional $100. Some brokers state that they always “fight for an extra 1/16th”, but in reality the opportunity for price improvement is simply an opportunity and not a guarantee. Also, when the broker tries for a better price (for a limit order), the speed and the likelihood of execution also diminishes. However the market itself, and not the broker, may be the culprit of an order not being executed at the quoted price, especially in fast moving markets.

    It is somewhat of a high-wire act that brokers walk in trying to execute trades in the best interest of their clients as well as their own. But as we will learn the Securities and Exchange Commission (SEC) has put measures in place to tilt the scale towards the client’s best interests.

    The SEC Steps In
    By invoking a rule made effective April 2001 (SEC Disclosure Rule), the SEC has recently taken steps to ensure that investors get the best execution. This rule forces brokers to report the quality of executions on a stock-by-stock basis, including how market orders are executed and what the execution price is compared to the public quote’s effective spreads. In addition, when a broker, while executing an order from an investor using a limit order, provides the execution at a better price than the public quotes, that broker must report the details of these better prices. With these rules in place it is much easier to determine which brokers actually get the best prices and which ones use them only as a marketing pitch. (To learn more, see What is the difference between a stop and a limit order?)

    Because the rule imposes significant fines and penalties on the brokers failing to provide the best execution service, it is debatable whether this rule will be effective in helping investors because should these fines start occurring, investors will ultimately be the ones to absorb these costs in paying higher commissions. This is something only time will tell.

    Additionally, the SEC requires broker/dealers to notify their customers if their orders are not routed for best execution. Typically, this disclosure is on the trade confirmation slip you receive in the mail a week after placing your order. Unfortunately, this disclaimer almost always goes unnoticed.

    Is Order Execution Important?
    The importance and impact order execution can have really depends on the circumstances, in particular the type of order you submit. For example, if you are placing a limit order, your only risk is the order might not fill. If you are placing a market order, speed and price execution becomes increasingly important.

    When considering an investor with a long-term time horizon, an order for $2,000 of stock the difference of 1/16th is less than $20 – a small extra when entering a stock for the long haul. Contrast this to an active trader who attempts to profit from the small ups and downs in day-to-day or intraday stock prices. The same $20 on a $2,000 order eats into a jump of a few percentage points. Therefore, order execution is much more important to active traders who scratch and claw for every percentage they can get.

    Conclusion
    Remember, the best possible execution is no substitute for a sound investment plan. Fast markets involve substantial risks and can cause execution of orders at prices significantly different than expected. With a long-term horizon, however, these differences are merely a bump on the road to successful investing.

    by Investopedia Staff, (Contact Author | Biography)

    Investopedia.com believes that individuals can excel at managing their financial affairs. As such, we strive to provide free educational content and tools to empower individual investors, including more than 1,200 original and objective articles and tutorials on a wide variety of financial topics.

  33. In almost every instance when you buy or sell securities with a broker, your name is not actually on the stock or bond certificate. The name that appears on the certificate is that of your broker, and this is referred to as being held “in street name”. In fact, the broker usually doesn’t even hold the physical certificates. Rather, the broker holds them in electronic form, in many computers. This is done for many different reasons, but here are the two main ones:

    Convenience – It is much more convenient for brokers to carry securities in their name as the securities can be easily and readily transferred between parties. Imagine the amount of work that would occur if your broker held stocks in your name. Every time you needed to sell stocks, the broker would have to find the exact stocks you own and deliver them to the buying party, who would then have to send the stocks back to the company to have the name on the certificates changed to the new owners’ names. This would take a great deal of time and effort, not to mention the fact that you wouldn’t collect payment until the stocks were physically received by the purchasing party. By holding the securities “in street name”, the broker can avoid most delays associated with the transfer of ownership and quickly settle trades.

    Safety – If brokers were to hold the physical securities, there would be a possibility of physical damage, loss and theft of the certificates. By holding them in street name, brokerages are able to retain the securities electronically, effectively reducing the probability of anything negative occurring. This safety is also extended to the safety of payment. By holding the securities in street name, the broker is ensuring that a security will be delivered promptly when a transaction occurs. This removes any uncertainty that would exist if the customer were responsible for delivering the security every time a transaction occurred.
    To learn more about this subject, see Understanding Order Execution and our Broker and Online Trading tutorial. Get A FREE Options Investing Kit Ask Us A Question!

  34. When you buy securities through a brokerage firm, most firms will automatically put your securities into “street name.” This means your brokerage firm will hold your securities in its name or another nominee and not in your name, but your firm will keep records showing you as the real or “beneficial owner.” You will not get a certificate, but will receive an account statement from your broker on at least a quarterly and annual basis showing your holdings.

    To learn more about the different ways you can have your securities held or registered, please read “Holding Your Securities – Get the Facts.”

    http://www.sec.gov/answers/street.htm

  35. Cede & Co.

    ——————————————————————————–

    Nominee name for The Depository Trust Company, a large clearing house that holds shares in its name for banks, brokers and institutions in order to expedite the sale and transfer of stock

  36. TORONTO — Yesterday, Cede & Co., the nominee of the Depository Trust Company (DTC), issued a “Notice of Defaults” to IMAX Corporation on behalf of Catalyst Fund Limited Partnership II, a significant holder of 9.625% Senior Notes Due 2010 issued by IMAX. This notice states that defaults have occurred and continue to occur under Sections 1019 and 1021 of the Indenture governing those Senior Notes, in that IMAX has failed to comply with financial reporting requirements and failed to deliver timely and accurate Officer Certificates. The defaults under Section 1019 were the subject of a prior Consent Solicitation by IMAX, which IMAX claimed resulted in a waiver of its defaults and an extension of its time to file its required financial reports. Catalyst disputes that the Consent Solicitation was valid or effective. The defaults under Section 1021, which were not the subject of the prior Consent Solicitation, require unanimous consent, which IMAX has not requested or obtained. This is the third notice of default sent to IMAX in the last two months. Separate notices with respect to these defaults were sent to IMAX on May 3, 2007, and June 4, 2007. The July 2, 2007 notice was sent on the first day following the expiration of IMAX’s claimed (though disputed) extension of time to file its financial statements under Section 1019.

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  37. I have come to know a little bit of info about CEDE & CO.

    It is the largest holder or nominee in all the service pools on the SEC filings they own 93 percent of all Doc transfers on the plannet.

    They are a clearing house google the name.No one that I know has ever heard of this company and they are the biggest.EVER

    how can such a huge company hide for so very long?

    I wish you all would help me to discover them and who they are.I think I will use a bullet proof vest from here on.

  38. Soundview Home Loan Trust 2007-1

    Commission file number: 333-130961-38

    Soundview Home Loan Trust 2007-1
    (exact name of issuing entity as specified in its charter)

    Financial Asset Securities Corp. (depositor)
    (exact name of the registrant as specified in its charter)

    Greenwich Capital Financial Products, Inc.
    (exact name of the sponsor as specified in its charter)

    Delaware 06-1442101
    (State or other jurisdiction of (I.R.S. Employer
    incorporation or organization) Identification No.)

    600 Steamboat Road
    Greenwich, CT 06830
    (Address of principal executive (Zip Code)
    offices)

    Registrant’s telephone number, including area code: (203) 625-2700

    THE
    CEDE & CO
    PART OF THE REPORT

    http://www.secinfo.com/$/SEC/Filings.asp?CIK=1386633&Find=CEDE+%26+CO&Page=All&List=Hits&Show=Each#FindResults

    HERE IS A LIST OF HOW MANY TIMES cede $ CO IS MENTIONED IN THE FILING

    TAKE SPECIAL ATTENTION TO CEDE AND CO

    “Depository”: The initial Depository shall be The Depository Trust Company, whose nominee is Cede & Co., or any other organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act. The Depository shall initially be the registered Holder of the Book-Entry Certificates. The Depository shall at all times be a “clearing corporation” as defined in Section 8-102(3) of the Uniform Commercial Code of the State of New York.

    EXHIBIT A-2

    FORM OF CLASS II-A-1 CERTIFICATES

    UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

    PRIOR TO THE TERMINATION OF THE SUPPLEMENTAL INTEREST TRUST, ANY PERSON ACQUIRING A CERTIFICATE SHALL BE DEEMED TO HAVE MADE THE REPRESENTATIONS IN SECTION 5.02(D) OF THE POOLING AND SERVICING AGREEMENT.

    SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A “REGULAR INTEREST” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT,” AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”).

    WHAT GOOGLE HAS ON CEDE & CO?

  39. Soundview Home Loan Trust 2007-1

    Commission file number: 333-130961-38

    Soundview Home Loan Trust 2007-1
    (exact name of issuing entity as specified in its charter)

    Financial Asset Securities Corp. (depositor)
    (exact name of the registrant as specified in its charter)

    Greenwich Capital Financial Products, Inc.
    (exact name of the sponsor as specified in its charter)

    Delaware 06-1442101
    (State or other jurisdiction of (I.R.S. Employer
    incorporation or organization) Identification No.)

    600 Steamboat Road
    Greenwich, CT 06830
    (Address of principal executive (Zip Code)
    offices)

    Registrant’s telephone number, including area code: (203) 625-2700

    THE
    CEDE & CO
    PART OF THE REPORT

    http://www.secinfo.com/$/SEC/Filings.asp?CIK=1386633&Find=CEDE+%26+CO&Page=All&List=Hits&Show=Each#FindResults

    HERE IS A LIST OF HOW MANY TIMES cede $ CO IS MENTIONED IN THE FILING

    TAKE SPECIAL ATTENTION TO CEDE AND CO

    “Depository”: The initial Depository shall be The Depository Trust Company, whose nominee is Cede & Co., or any other organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act. The Depository shall initially be the registered Holder of the Book-Entry Certificates. The Depository shall at all times be a “clearing corporation” as defined in Section 8-102(3) of the Uniform Commercial Code of the State of New York.

    EXHIBIT A-2

    FORM OF CLASS II-A-1 CERTIFICATES

    UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

    PRIOR TO THE TERMINATION OF THE SUPPLEMENTAL INTEREST TRUST, ANY PERSON ACQUIRING A CERTIFICATE SHALL BE DEEMED TO HAVE MADE THE REPRESENTATIONS IN SECTION 5.02(D) OF THE POOLING AND SERVICING AGREEMENT.

    SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A “REGULAR INTEREST” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT,” AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”).

    WHAT GOOGLE HAS ON CEDE & CO

    WTF is the DTCC and Cede & Co.?
    by Aaron on September 22, 2008 •
    A lot of people are going to be looking for information on this.
    Wikipedia:
    The Depository Trust & Clearing Corporation (DTCC), based primarily at 55 Water Street in New York City, is the world’s largest post-trade financial services company. It was set up to provide an efficient and safe way for buyers and sellers of securities to make their exchange, and thus “clear and settle” transactions. It also provides custody of securities.
    . . .
    In 2007, DTCC settled the vast majority of securities transactions in the United States, more than $1.86 quadrillion in value. DTCC has operating facilities in New York City, and at multiple locations in and outside the U.S.
    WSJ.com
    About 99% of the time, trades are completed without incident. But about 1% of the shares — valued at about $2.5 billion on a given a day — aren’t delivered to the buyer within the requisite three days, for one reason or another.
    These “failures to deliver” have put DTCC in the middle of a long-running fight over whether unscrupulous investors are driving down hundreds of small companies’ share prices.
    At issue is a nefarious twist on short-selling, a legitimate practice that involves trying to profit on a stock’s falling price by selling borrowed shares in hopes of later replacing them with cheaper ones. The twist is known as “naked shorting” — selling shares without borrowing them.
    Ming the Mechanic:
    In brief, they process the vast majority of all stock transactions in the United States as well as for many other countries. And – and that’s the real interesting part – 99% of all stocks in the U.S. appear to be legally owned by them.
    In the old days, when you owned stocks you would have the stock certificates lying in your safe. And if you needed to trade them, you needed to get them shipped off to a broker. Nowadays that would be considered very cumbersome, and it would be impractical to invest via computer or over the phone. So the shortcut was invented that the broker would hold your stocks instead of you. And in order for him to legally be able to trade them for you, the stocks were placed under their “street name”. I.e. they’re in the name of the brokerage, but they’re just holding them in trust and trading them for you. And you’re in reality the beneficiary rather than the owner. Which is all fine and dandy if everything goes right. Now, it appears the rules were then changed so the brokers are not allowed any longer to put the stocks in their own name. Instead, what they typically do is to put the stocks into the name of “Cede and Company” or “Cede & Co” or some such variation. And the broker might tell you that it is just a fictitious name, and will explain why it is really more practical to do that than to put it in your name.
    The problem with that is that it appears that Cede isn’t just some dummy name, but an actual corporation that DTCC controls.

    DTCC Responds to The Wall Street Journal article, “Blame the ‘Stock Vault?’”
    New York, NY, July 6, 2007 – The Wall Street Journal (WSJ) article “Blame the ‘Stock Vault?’” (July 5, 2007) contained a number of omissions and factual errors that misinform readers. DTCC is providing the following information, as it did during lengthy meetings with the reporters, to set the record straight.
    1.The WSJ article failed to report DTCC’s response to a core premise, i.e., whether we played a role in naked short selling?
    As DTCC has explained, short-selling and naked short selling are trading strategies. These trading activities are regulated and policed by the marketplaces/exchanges, the self-regulatory organizations and the SEC. DTCC is involved in post-trade processing, which occurs after a trade is completed. DTCC has no regulatory authority over trading activity or to release information related to trading activity. In fact, as we told the WSJ reporters, we have no power to force the closing of an open fail, no matter what the cause, and we do not have the authority to force a buy-in. And we provided information to the reporters from the SEC, which regulates the clearance and settlement system, so they had the highest credible source on this issue.
    While rehashing baseless claims from old lawsuits, the article missed the opportunity to educate readers regarding the role DTCC plays in the capital market system. We process the trading volume from all equity markets in the U.S. (NYSE, Nasdaq, Amex, regional stock exchanges and ECNs), which on a peak trading day can represent over 6 billion shares and $1.5 trillion. Our job is to protect the safety and soundness of the system, by ensuring this trade data is processed, ownership records are changed and financial obligations between trading parties are settled. As for enforcement of the securities laws, however, this is a matter for the governmental regulators and the SROs. DTCC provides the SEC and the markets with data on the results of trading activity, and it is left to them to enforce the law.
    As for delivery failures in particular, there are SEC and SRO rules setting forth the responsibilities of brokers. Contrary to the WSJ article, the regulatory authorities do indeed have “mechanisms” to enforce the delivery rules. From the perspective of DTCC, however, in addition to not having enforcement powers, we do not know whether a sale is long or short — certainly not whether it is “naked.”
    We can understand that some of our critics and legal adversaries have sought to portray DTCC as a contributor to naked short selling, but as the SEC has said repeatedly on its Web site and in legal filings (http://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm and http://www.sec.gov/litigation/briefs/nanopiercesecbrief.pdf), we are not responsible for this issue. The WSJ had this information.
    2. The WSJ article said: “The naked shorting debate is a product of the revolution that has occurred in stock trading over the past 40 years.”
    Not true. The development of automated clearing and settlement processes, while indeed revolutionary and key to the development of the U.S. capital markets, did not create naked short selling. Indeed, failure to deliver shares sold short occurs with paper certificates, and always has.
    While the term “naked short selling” may be new, the practice of abusive shorting by failing to deliver is as old as trading itself.
    DTCC pointed the WSJ to authoritative academic pieces written on short selling by Yale professor Owen Lamont. His extensive research found short sellers were often proved correct in that shorted companies were non-performers with weak balance sheets and growth. Lamont also documented that typical tactics of these companies included citing naked short selling as the cause of the poor stock performance when, in fact, the cause was almost invariably poor business performance. (http://www.mba.yale.edu/faculty/pdf/overpricing.pdf).
    3. The WSJ article said: “Some companies with falling stock prices say it (naked short selling) is rampant and blame DTCC as the keepers of the systems where it happens.”
    This claim that DTCC is responsible for naked short selling has been expressly rejected by the SEC. Further, as we explained to the WSJ, this claim displays a fundamental misunderstanding of our role in the capital markets. It ignores that naked short selling is a trading strategy and has nothing to do with the post-trade clearance and settlement process. It ignores that we do not know the underlying reasons why trades fail, information that is known only to the broker/dealer. It ignores the fact that DTCC is not the “keepers of the systems where it happens,” since this implies DTCC has regulatory authority over trading parties, which by federal statute or federal regulation it does not. It ignores that none of these claims articulated in lawsuits has been successful, and no new case has been filed in more than two years. We think that is adequate evidence to reject any assertion that DTCC is to “blame” for NSS. The fact is the story carried by WSJ on July 5, 2007 is old news presented without proper context, and it grossly underplayed the important steps taken by the SEC this year that have addressed this issue of long-standing fails to deliver.
    4. The WSJ article said: “About 99% of the time, trades are completed without incident. But about 1% of the shares — valued at about $2.5 billion on a given day – aren’t delivered to the buyer within the requisite three days, for one reason or another.”
    The 1% figure represented 1% of the dollar value, not 1% of the trades. In fact, the number of trades that fail (both aged and new fails) amount to about one-tenth of 1% of the daily number of trades, and 80% of the total failed positions (which may include a number of trades) are resolved in two business weeks.
    Moreover, the story fails to make clear that the $2.5 billion estimate is an aggregate number; it does not represent the value of each day’s fails, but the average value of all outstanding fails on any particular day.
    What the WSJ omitted is the sizable amount of daily trading, $350 billion on average in 2006, that does clear and settle in the three-day period.
    The WSJ also omitted that it would be impossible with the high volume of trading (over 5 billion shares daily) across equity markets to force all trades to complete in three days. Those seeking a solution would force a return to an earlier period in history, akin to a time when paper stock certificates and payments were exchanged on a trade-for-trade basis. Were this line of argument to be successful, it would bring the robust equity markets in the U.S. to a screeching halt, and destroy our competitiveness with other capital markets around the world.
    Lastly, the WSJ incorrectly gives equal weight to the reasons for fails, when the SEC in their Q&A on this issue pointed out that trade failures largely occur due to administrative reasons. The SEC states that a failed trade does not automatically mean there is naked short selling. The lack of proper context by the WSJ is misleading to readers.
    5. The WSJ article said: “Critics contend DTCC has turned a blind eye to the naked shorting problem.”
    Untrue. DTCC has met with a variety of groups, including broker / dealers, marketplace regulators, state regulators and academics, and has communicated with concerned companies, the media, as well as plaintiffs and plaintiffs’ counsels on this issue. This effort includes seven hours of meetings and conference calls with the WSJ reporters who wrote this story.
    We have shared insights and information in an effort to educate those who were unfamiliar with DTCC’s role in clearance and settlement and correct misimpressions of our authority and non-involvement in this issue. We have also rightfully called into question excessive claims and the lack of empirical data to support claims, and pointed to the public filings (e.g., 10K documentation) of why many of these companies were losing money and experiencing declining stock prices.
    The WSJ was fully briefed on these issues. We also responded directly to assertions being made by lawyers for companies who have sued DTCC (unsuccessfully), but our response to these accusations were not included in the WSJ article.
    As the article did note, DTCC submitted a comment letter to the SEC last September proposing there be greater transparency in providing fails data o the public. Moreover, the SEC has recently indicated their support for our recommendation and expressed a willingness to look at releasing this data. Since the data is confidential to the brokerage firms, we cannot release it. Only the SEC has this authority. Since the WSJ had this information and understood how this process works, we’re surprised it would repeat such misleading comments.
    6. The WSJ article said: “If the stock in a given transaction isn’t delivered in the three-day period, the buyer, who paid his money, is routinely given electronic credit for the stock. While the SEC calls for delivery in three days, the agency has no mechanism to enforce that guideline.”
    This completely misrepresents how failed trades are handled in DTCC’s clearance and settlement systems. In fact, the broker for the buyer does not pay the contractual value for the trade to the clearing system until the stock is delivered, although the broker’s customer may be given a security entitlement on the broker’s records immediately. That security entitlement is what makes it possible for the markets and investors to buy and sell securities freely throughout the day or over several days. If an investor had to wait until stock was delivered and paid for, they’d have to wait several days to trade that stock again. Imagine an investor buying a stock in the morning, then finding market information being announced mid-day that might adversely impact that stock and then being told you can’t sell out your position to minimize the potential loss. Freedom to trade is a cornerstone of our equity markets and a fundamental principle in the regulatory schemes that govern the markets. The SEC has flatly rejected the argument that there are such things as phantom shares or credits being created in the market.
    A seller’s obligation to deliver securities does not go away. And the broker/dealer who acts as a buyer of securities has a regulatory entitlement and the power — and, in many cases, an affirmative obligation after a period of time — to execute a buy-in on a failed delivery to force the seller to fulfill its obligations. In a buy-in, the broker/dealer failing to receive the securities essentially purchases the undelivered stock from some other broker, with the selling broker/dealer who failed to deliver having to absorb any difference in price or other costs incurred on the buy-in. And the SEC or applicable market regulator also has the power, under existing appropriate regulations, to force a fail to be closed. (We note that DTCC, in contrast, does not have any such authority.) So the WSJ is wrong in suggesting that there aren’t market and regulatory mechanisms available to enforce delivery obligations. Lastly, to include this assertion without talking about the SEC’s elimination of the grandfather clause under Reg SHO is to ignore further steps by our regulators to address concerns about closing long-standing failed trades.
    7. The WSJ article said: “Denver-based Nanopierce Technologies Inc. contended that DTCC allowed “sellers to maintain significant open fail to deliver” positions of millions of shares of the semiconductor company’s stock for extended periods.”
    While the WSJ makes reference to the Nanopierce litigation in the context of naked short selling, it fails to note that plaintiffs in that case insist that the case is not about naked short selling, but about how DTCC processes transactions through systems that have been expressly approved by the SEC. This case was dismissed by the original trial judge, but the plaintiffs have kept it alive by a series of appeals. If the WSJ was going to reference this lawsuit, it was incumbent upon it to look into the company’s business fundamentals and draw its own conclusions as to why it is selling at 40 cents. The WSJ should have simply stuck with the fact that almost all of these naked short selling cases against DTCC have either been dismissed or filed and then not pursued by plaintiffs.
    8. The WSJ article said: “The cost of buying and selling stock has fallen to less than 3.5 cents a share, a tenth of paper-era costs.”
    First, it is the cost of clearing and settling a trade that had fallen to an average of 3.5 cents and it does not, as the article states, represent the cost of trading. This was the cost per transaction, not per share. It doesn’t matter if the trade is for 100 shares or 1,000 shares, each transaction costs the same to clear and settle. In 2007, the average cost of clearing and settling a trade is down to 1.7 cents per side. The earlier figure of 3.5 cents is from 2005. The WSJ did not have access to this latest number, but we did point out that DTCC’s costs were the lowest in the world.
    9. In the DTCC “By the Numbers” section, The WSJ lists the volume of OTC derivatives transactions processed as $2.6 million.
    It is 2.6 million transactions. The notional dollar value of transactions has not been tracked by DTCC, but would probably be in the trillions of dollars. DTCC currently confirms 80%+ of all OTC credit default swap trades in this $18 trillion market.
    Once again, the narrow focus of this WSJ article ignores DTCC’s 30-year track record of bringing automated solutions that have eliminated risk, brought certainty and safety to the equities and fixed income markets, expanded investor choice for a broad array of mutual funds, mitigated potential crises by insulating the clearance and settlement system from the impact of firm failures, and brought certainty to the OTC credit default swap markets by automating and increasing the confirmation of these trades from 15% to 80% in three years, among many other accomplishments that the article chooses to ignore.

    About DTCC
    The Depository Trust & Clearing Corporation (DTCC), through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC’s depository provides custody and asset servicing for 2.8 million securities issues from the United States and 100 other countries and territories, valued at $36 trillion. Last year, DTCC settled more than $1.5 quadrillion in securities transactions. DTCC has operating facilities in multiple locations in the United States and overseas. For more information on DTCC, visit http://www.dtcc.com.

    http://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm

    Division of Market Regulation:
    Responses to Frequently Asked Questions Concerning Regulation SHO
    Responses to these frequently asked questions were prepared by and represent the views of the staff of the Division of Market Regulation (“Staff”). They are not rules, regulations, or statements of the Securities and Exchange Commission (“Commission”). Further, the Commission has neither approved nor disapproved these interpretive answers.
    For Further Information Contact: Any of the following attorneys in the Office of Trading Practices, Division of Market Regulation, Securities and Exchange Commission, 100 F Street, N. E., Washington, D.C. 20549-1001, at (202) 551-5720: James Brigagliano, Assistant Director, Josephine Tao, Branch Chief, Joan Collopy, Lillian Hagen, Elizabeth Sandoe, and Victoria Crane, Special Counsels.
    I. Introduction
    A short sale is the sale of a security that the seller does not own and any sale that is consummated by the delivery of a security borrowed by, or for the account of, the seller. In order to deliver the security to the purchaser, the short seller will borrow the security, typically from a broker-dealer or an institutional investor. The short seller later closes out the position by purchasing equivalent securities on the open market, or by using an equivalent security it already owned, and returning the borrowed security to the lender. In general, short selling is used to profit from an expected downward price movement, to provide liquidity in response to unanticipated demand, or to hedge the risk of a long position in the same security or in a related security.
    Regulation SHO became effective on September 7, 2004. (Securities Exchange Act Release No. 50103 (July 28, 2004), 69 FR 48008 (August 6, 2004) (“Adopting Release”)). The commencement date to comply with the provisions of Regulation SHO is January 3, 2005. Pursuant to the terms of Regulation SHO, the Commission approved an order establishing a one-year pilot program (“Pilot”) suspending the provisions of Rule 10a-1(a) under the Securities Exchange Act of 1934 (“Exchange Act”) and any short sale price test of any exchange or national securities association (“SRO”) for short sales of certain securities for certain time periods. (See Securities Exchange Act Release No. 50104 (July 28, 2004), 69 FR 48032 (August 6, 2004) (“Pilot Order”)). The Adopting Release and the Pilot Order may also be found on the Commission’s Internet web site

    30 Filings • Documents containing “CEDE and CO” with Text matching “CEDE near CO” in Selected Filings
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    3/27/07 Soundview Home Loan Trust 2007-1 8-K/A{2,9} 2/16/07 7:889 Thacher Proffitt..LLP/FA
    1: 8-K/A…………… Financial Asset Securities Corp. — HTML
    2: EX-1.1………….. Underwriting Agreement — HTML
    GRAPHIC…………. logo_rbsgreenwich.jpg — 10K
    3: EX-4.1………….. Pooling and Servicing Agreement — HTML
    EX-4.1 • 1st Page of 673±
    No Page-Breaks
    Line 7,055: The initial Depository shall be The Depository Trust Company, whose nominee is Cede & Co., or any other organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act. The Depository shall initially …
    Line 24,870: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 25,107: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class I-A-1 Certificate (obtained by dividing the Denomination …
    Line 25,605: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 25,840: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class II-A-1 Certificate (obtained by dividing the …
    Line 26,340: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 26,575: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class II-A-2 Certificate (obtained by dividing the …
    Line 27,074: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 27,309: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class II-A-3 Certificate (obtained by dividing the …
    Line 27,807: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 28,042: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class II-A-4 Certificate (obtained by dividing the …
    Line 28,541: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 28,776: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-1 Certificate (obtained by dividing the Denomination …
    Line 29,277: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 29,515: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-2 Certificate (obtained by dividing the Denomination …
    Line 30,014: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 30,250: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-3 Certificate (obtained by dividing the Denomination …
    Line 30,749: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 30,985: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-4 Certificate (obtained by dividing the Denomination …
    Line 31,483: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 31,716: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-5 Certificate (obtained by dividing the Denomination …
    Line 32,215: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 32,450: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-6 Certificate (obtained by dividing the Denomination …
    Line 32,947: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 33,182: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-7 Certificate (obtained by dividing the Denomination …
    Line 33,684: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 33,920: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-8A Certificate (obtained by dividing the Denomination …
    Line 34,416: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 34,653: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-8B Certificate (obtained by dividing the Denomination …
    Line 35,150: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 35,386: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-9 Certificate (obtained by dividing the Denomination …
    Line 35,875: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 36,114: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-10 Certificate (obtained by dividing the Denomination …

    3/22/07 Soundview Home Loan Trust 2007-1 8-K{2} 2/16/07 7:888 Thacher Proffitt..LLP/FA
    1: 8-K…………….. Soundview Home Loan Trust 2007-1 — HTML
    2: EX-1.1………….. Underwriting Agreement — HTML
    GRAPHIC…………. logo_rbsgreenwich.jpg — 10K
    3: EX-4.1………….. Pooling and Servicing Agreement — HTML
    EX-4.1 • 1st Page of 673±
    No Page-Breaks
    Line 7,055: The initial Depository shall be The Depository Trust Company, whose nominee is Cede & Co., or any other organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act. The Depository shall initially …

    Line 24,870: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 25,107: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class I-A-1 Certificate (obtained by dividing the Denomination …
    Line 25,605: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 25,840: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class II-A-1 Certificate (obtained by dividing the …
    Line 26,340: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 26,575: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class II-A-2 Certificate (obtained by dividing the …
    Line 27,074: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 27,309: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class II-A-3 Certificate (obtained by dividing the …
    Line 27,807: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 28,042: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class II-A-4 Certificate (obtained by dividing the …
    Line 28,541: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 28,776: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-1 Certificate (obtained by dividing the Denomination …
    Line 29,277: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 29,515: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-2 Certificate (obtained by dividing the Denomination …
    Line 30,014: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 30,250: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-3 Certificate (obtained by dividing the Denomination …
    Line 30,749: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 30,985: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-4 Certificate (obtained by dividing the Denomination …
    Line 31,483: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 31,716: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-5 Certificate (obtained by dividing the Denomination …
    Line 32,215: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 32,450: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-6 Certificate (obtained by dividing the Denomination …
    Line 32,947: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 33,182: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-7 Certificate (obtained by dividing the Denomination …
    Line 33,684: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 33,920: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-8A Certificate (obtained by dividing the Denomination …
    Line 34,416: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 34,653: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-8B Certificate (obtained by dividing the Denomination …
    Line 35,150: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 35,386: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-9 Certificate (obtained by dividing the Denomination …
    Line 35,875: TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
    Line 36,114: This certifies that Cede & Co. is the registered owner of the Percentage Interest evidenced by this Class M-10 Certificate (obtained by dividing the Denomination …
    GRAPHIC…………. bearlogo.jpg — 3K
    GRAPHIC…………. d6470101.jpg — 2K
    GRAPHIC…………. d6470191.jpg — 2K
    GRAPHIC…………. d6470221.jpg — 2K
    4: EX-99.1…………. Reconstitution Agreement Cmc — HTML
    5: EX-99.2…………. Reconstitution Agreement Ctmac — HTML
    6: EX-99.3…………. Reconstitution Agreement Wells — HTML
    7: EX-99.4…………. Reconstitution Agreement Countrywide — HTML

    3/06/07 Soundview Home Loan Trust 2007-1 424B5 1:1326 Thacher Proffitt..LLP/FA
    1: 424B5…………… Soundview 2007-1 — HTML

    NEW YORK — Fitch rates Soundview Home Loan Trust Asset-Backed certificates, series 2007-1 as follows:

    –$506.2 million classes I-A-1, II-A-1, II-A-2, II-A-3, and II-A-4 (senior certificates) ‘AAA’;

    –$20.5 million class M-1 ‘AA+’;

    –$18.6 million class M-2 ‘AA’;

    –$10.7 million class M-3 ‘AA-’;

    –$9.8 million class M-4 ‘A+’;

    –$9.1 million class M-5 ‘A’;

    –$8.5 million class M-6 ‘A-’;

    –$8.2 million class M-7 ‘BBB+’;

    –$6.3 million classes M-8A and M-8B ‘BBB’;

    –$12.3 million classes M-9 and M-10 ‘BBB-’.

  40. THIS IS SOME sec STUFF PLEASE SCROLL DOWN TO SEE ****** CEDE & CO **** A VERY CURIOUS COMPANY PLUS SONE NOTES ON ****CEDE*** VERY SEADY

    ADJUSTABLE RATE MORTGAGE-BACKED
    PASS-THROUGH CERTIFICATES, SERIES 2007-1

    Registrant’s telephone number,including area code (410) 884-2000

    By:Wells Fargo Bank, N.A. as Master Servicer
    By: /s/ Elisabeth A. Brewster
    By: Elisabeth A. Brewster as Vice President

    The depositor will make available any of the sponsor’s material as required under the SEC’s rules and regulations on a website
    on the world wide web.

    The static pool information material to this offering of
    certificates is located in two hyperlinks labeled “ARMT 2007-1 Original
    Portfolio Summary Characteristics” and “ARMT 2007-1 Performance Data” at
    http://www.credit-suisse.armt.static-pool.com

    Prospectus Supplement (To Prospectus Dated February 28, 2007)

    DLJ MORTGAGE CAPITAL, INC.
    Sponsor and Seller

    CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.
    Depositor

    ADJUSTABLE RATE MORTGAGE TRUST 2007-1
    Issuing Entity

    ADJUSTABLE RATE MORTGAGE-BACKED
    PASS-THROUGH CERTIFICATES, SERIES 2007-1

    Commission File Number of issuing entity: 333-135481-14

    Commission File Number of depositor:

    333-135481

    Static pool information:

    The static pool information material to this offering of certificates is located in two hyperlinks labeled “ARMT 2007-1 Original Portfolio Summary Characteristics” and “ARMT 2007-1 Performance Data”

    At

    http://www.credit-suisse.armt.static-pool.com

    The depositor has been informed by DTC that its nominee will be Cede & Co.
    Accordingly, Cede & Co. is expected to be the holder of record of the DTC
    registered certificates.

    No person acquiring a DTC registered certificate will be entitled to receive a physical certificate representing that certificate, a definitive certificate, except as described under “–Definitive Certificates”.

    Credit Suisse First Boston Mortgage Securities Corp.
    (Exact name of depositor as specified in its charter)

    DLJ Mortgage Capital, Inc.
    (Exact name of sponsor as specified in its charter)

    CERTAIN IMPORTANT DATA IS HERE:

    http://www.countrywidedealsdata.com/?CWDD=01200702.

    $1,406,865,100
    (Approximate)

    IRS information

    New York State or other jurisdiction of
    Incorporation or organization)
    (I.R.S. Employer Identification No.)

    54-2198903, 54-2198904, 54-2198905

    C/o Wells Fargo Bank, N.A.
    9062 Old Annapolis Road
    Columbia, MD 21045

    THE CUSTODIAN

    LaSalle Bank National Association

    (“LaSalle”) will serve as custodian for
    the mortgage loans pursuant to a custodial agreement, dated as of the cut-off
    date, between LaSalle, the trustee and the trust administrator.

    LaSalle will hold the mortgage notes, mortgages and other legal documents in the mortgage files relating to the mortgage loans for which it serves as custodian for the benefit of the certificateholders. LaSalle will maintain the
    related mortgage files in secure and fire-resistant facilities. The mortgage files will not be physically segregated from other mortgage files in LaSalle’s custody but will be kept in shared facilities. However, LaSalle’s proprietary document tracking system will show the location within LaSalle’s facilities of each mortgage file and will show that the mortgage loan documents are held by LaSalle on behalf of the trust. LaSalle will review each related mortgage file in accordance with the review criteria specified in the related custodial
    agreement and deliver a certification to the effect that, except as noted in the certification, all required documents have been executed and received. Additional responsibilities of LaSalle are set forth in the related custodial agreement.

    Assignment of Mortgage Loans

    Pursuant to the pooling and servicing agreement, on the closing date, the
    depositor will sell, transfer, assign, set over and otherwise convey without
    recourse to the trustee in trust for the benefit of the certificateholders all
    right, title and interest of the depositor in and to each mortgage loan,
    including all principal and interest received on or with respect to such
    mortgage loans, exclusive of principal and interest due on or prior to the
    Cut-off Date.

    SUMMARY

    The following summary highlights selected information from this prospectus
    Supplement. It does not contain all of the information.

    Read this entire prospectus supplement and the entire accompanying
    Prospectus carefully.

    Issuing Entity…… Adjustable Rate Mortgage Trust 2007-1

    Title of Series…. Adjustable Rate Mortgage-Backed Pass-Through Certificates, Series 2007-1.

    Depositor … Credit Suisse First Boston Mortgage Securities Corp.

    Sponsor and Seller. DLJ Mortgage Capital, Inc., referred to in this prospectus supplement as DLJ Mortgage Capital.

    Master Servicer … Wells Fargo Bank, N.A., referred to in this prospectus supplement as Wells Fargo Bank. The master servicer will oversee and enforce the servicing of approximately 98.58% of the aggregate cut-off date principal balance of the mortgage loans.

    Trustee … U.S. Bank National Association.

    Trust Administrator…. Wells Fargo Bank.

    Originators … As of the cut-off date, DLJ Mortgage Capital, Countrywide Home Loans, Inc., referred to in this prospectus supplement as Countrywide Home Loans, Credit Suisse Financial Corporation and SunTrust Mortgage Inc., referred to in this prospectus supplement as SunTrust, originated or acquired an aggregate of approximately 24.60%, 20.94%, 12.59% and 11.59%, respectively, of the mortgage loans in loan groups 1-4 and Credit Suisse Financial Corporation and DLJ Mortgage Capital originated or acquired an aggregate of approximately 35.80%, and 32.74%, respectively, of the group 5 mortgage loans. No other originator originated or acquired more than 10% of the mortgage loans in loan groups 1-4 or in loan group 5 (by cut-off date principal balance).

    Servicers … Wells Fargo Bank, Select Portfolio Servicing, Inc., referred to in this prospectus supplement as SPS, Countrywide Home Loans Servicing LP, referred to in this prospectus supplement as Countrywide Servicing, and SunTrust.Countrywide Servicing and SunTrust are servicing certain mortgage loans pursuant to separate servicing agreements, are not a party to the pooling and servicing agreement and are referred to in this prospectus supplement as designated servicers.

    Wells Fargo Bank,SPS,
    Countrywide Servicing and SunTrust are collectively referred to in this prospectus
    Supplement as the servicers.

    No other servicer is Servicing more than 10% of the mortgage loans in Loan groups 1-4 or in loan group 5 (by cut-off Date principal balance).

    Special Servicer……….. SPS.

    Modification Oversight
    Agent……………….. SPS.

    Custodian……LaSalle Bank National Association.

    Cap Counterparty…..Credit Suisse International, referred to in this
    Prospectus supplement as the cap counterparty.

    Mortgage Pool……..Initially, 4,345 adjustable-rate mortgage loans
    With an aggregate principal balance of
    Approximately $1,425,276,048 as of the Cut-off Date, secured by first liens on one- to
    Four-family residential properties.

    Cut-off Date…… February 1, 2007.

    Closing Date….. On or about February 28, 2007.

    Distribution Dates…. On the 25th day of each month, or if the 25th day
    Is not a business day, on the succeeding business? Day, beginning in March 2007.

    Scheduled Final

    Distribution Date…The distribution date in March 2037. The actual Final distribution date could be substantially Earlier.

    Form of Offered Certificates…The offered certificates, other than the Class AR
    And Class AR-L Certificates, will be book-entry Certificates. The Class AR and Class AR-L Certificates will be physical certificates. See “Description of the Certificates–Book-Entry Registration” in this prospectus supplement.

    Minimum Denominations…

    The offered certificates, other than the Class AR
    And Class AR-L Certificates, will be issued in Minimum denominations (by principal balance) of $25,000 and integral multiples of $1 in excess Thereof. The Class AR and Class AR-L Certificates Will be issued in minimum percentage interests of 20%.

    Violation of various federal

    and Applicable state laws generally regulate
    state laws may result in losses on interest rates and other charges, require the mortgage loans certain disclosures, and require licensing of mortgage loan originators. In addition,other state laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination,servicing and collection of the mortgage loans. The mortgage loans are also subject to federal laws, including:

    the Federal Truth-in-Lending Act and
    Regulation Z promulgated thereunder,
    which require certain disclosures to
    the borrowers regarding the terms of
    the mortgage loans;

    o the Equal Credit Opportunity Act and
    Regulation B promulgated thereunder,
    which prohibit discrimination on the
    basis of age, race, color, sex,
    religion, marital status, national
    origin, receipt of public assistance
    or the exercise of any right under the
    Consumer Credit Protection Act, in the
    extension of credit; and

    o the Fair Credit Reporting Act, which
    regulates the use and reporting of
    information related to the borrower’s
    credit experience.

    Violations of certain provisions of these
    state and federal laws may limit the
    ability of the related servicer to collect
    all or part of the principal of or
    interest on the mortgage loans and in
    addition could subject the trust to
    damages, including monetary penalties, and
    administrative enforcement. In particular,
    an originator’s failure to comply with
    certain requirements of the Federal
    Truth-in-Lending Act, as implemented by
    Regulation Z, could subject the related
    trust to monetary penalties, and result in
    the related obligors’ rescinding the
    mortgage loans against that trust.

    The seller will represent that any and all
    requirements of any federal and state law
    (including applicable predatory and
    abusive lending laws) applicable to the
    origination of each mortgage loan sold by
    it have been complied with. In the event
    of a breach of that representation, the
    seller will be obligated to cure such
    breach or repurchase or replace the
    affected mortgage loan in the manner
    described in this prospectus.

    This certifies that Cede & Co. is the registered owner of a Percentage Interest (obtained by dividing the denomination of this Certificate by the aggregate Certificate Principal Balance

    Adjustable Rate Mortgage Trust 2007-1

    February [23]. 2007

    CEDE % co

    TERM SHEET

    Book-Entry Registration

    Except as otherwise set forth in the prospectus supplement, the offered certificates, other than the Residual Certificates, will be book-entry certificates. The book-entry certificates will be issued in one or more certificates which equal the aggregate initial certificate principal balance or notional amount of each of those classes of certificates and which will be held by a nominee of DTC, and are collectively referred to as the DTC registered certificates. Beneficial interests in the DTC registered certificates will be held indirectly by investors through the book-entry facilities of DTC in the United States, or Clearstream, Luxembourg or the Euroclear System, referred to as Euroclear, in
    Europe, if they are participants of these systems, or indirectly through organizations which are participants in these systems. Clearstream, Luxembourg and Euroclear will hold omnibus positions on behalf of their participants through customers’ securities accounts in Clearstream, Luxembourg’s and Euroclear’s names on the books of their respective depositaries which in turn will hold positions in customers’ securities accounts in the depositaries’ names on the books of DTC. Citibank, N.A., referred to as Citibank, will act as depositary for Clearstream, Luxembourg and JPMorgan Chase Bank, N.A., referred to as JPMorgan, will act as depositary for Euroclear. Collectively these entities are referred to as the European depositaries.

    S-34
    ________________________________________

    The depositor has been informed by DTC that its nominee will be Cede & Co. Accordingly, Cede & Co. is expected to be the holder of record of the DTC registered certificates. No person acquiring a DTC registered certificate will be entitled to receive a physical Certificate representing that certificate, a definitive certificate, except as described under “—Definitive Certificates” below.

    Unless and until definitive certificates are issued, it is anticipated that the only “certificateholder” of the DTC registered certificates will be Cede & Co., as nominee of DTC. Beneficial owners of the DTC registered certificates will not be certificateholders, as that term is used in the pooling and servicing agreement. Beneficial owners are only permitted to exercise the rights of certificateholders indirectly through participants and DTC. Monthly and annual reports on the trust provided to Cede & Co., as nominee of DTC, may be made available to beneficial owners on request, in accordance with the rules, regulations and procedures creating and affecting DTC, and to the participants to whose DTC accounts the DTC registered certificates of those beneficial owners are credited.

    WTF is the DTCC and Cede & Co.?
    by Aaron on September 22, 2008 •
    A lot of people are going to be looking for information on this.
    Wikipedia:
    The Depository Trust & Clearing Corporation (DTCC), based primarily at 55 Water Street in New York City, is the world’s largest post-trade financial services company. It was set up to provide an efficient and safe way for buyers and sellers of securities to make their exchange, and thus “clear and settle” transactions. It also provides custody of securities.
    . . .
    In 2007, DTCC settled the vast majority of securities transactions in the United States, more than $1.86 quadrillion in value. DTCC has operating facilities in New York City, and at multiple locations in and outside the U.S.
    WSJ.com
    About 99% of the time, trades are completed without incident. But about 1% of the shares — valued at about $2.5 billion on a given a day — aren’t delivered to the buyer within the requisite three days, for one reason or another.
    These “failures to deliver” have put DTCC in the middle of a long-running fight over whether unscrupulous investors are driving down hundreds of small companies’ share prices.
    At issue is a nefarious twist on short-selling, a legitimate practice that involves trying to profit on a stock’s falling price by selling borrowed shares in hopes of later replacing them with cheaper ones. The twist is known as “naked shorting” — selling shares without borrowing them.
    Ming the Mechanic:
    In brief, they process the vast majority of all stock transactions in the United States as well as for many other countries. And – and that’s the real interesting part – 99% of all stocks in the U.S. appear to be legally owned by them.
    In the old days, when you owned stocks you would have the stock certificates lying in your safe. And if you needed to trade them, you needed to get them shipped off to a broker. Nowadays that would be considered very cumbersome, and it would be impractical to invest via computer or over the phone. So the shortcut was invented that the broker would hold your stocks instead of you. And in order for him to legally be able to trade them for you, the stocks were placed under their “street name”. I.e. they’re in the name of the brokerage, but they’re just holding them in trust and trading them for you. And you’re in reality the beneficiary rather than the owner. Which is all fine and dandy if everything goes right. Now, it appears the rules were then changed so the brokers are not allowed any longer to put the stocks in their own name. Instead, what they typically do is to put the stocks into the name of “Cede and Company” or “Cede & Co” or some such variation. And the broker might tell you that it is just a fictitious name, and will explain why it is really more practical to do that than to put it in your name.
    The problem with that is that it appears that Cede isn’t just some dummy name, but an actual corporation that DTCC controls.

    DTCC Responds to The Wall Street Journal article, “Blame the ‘Stock Vault?’”
    New York, NY, July 6, 2007 – The Wall Street Journal (WSJ) article “Blame the ‘Stock Vault?’” (July 5, 2007) contained a number of omissions and factual errors that misinform readers. DTCC is providing the following information, as it did during lengthy meetings with the reporters, to set the record straight.
    1.The WSJ article failed to report DTCC’s response to a core premise, i.e., whether we played a role in naked short selling?
    As DTCC has explained, short-selling and naked short selling are trading strategies. These trading activities are regulated and policed by the marketplaces/exchanges, the self-regulatory organizations and the SEC. DTCC is involved in post-trade processing, which occurs after a trade is completed. DTCC has no regulatory authority over trading activity or to release information related to trading activity. In fact, as we told the WSJ reporters, we have no power to force the closing of an open fail, no matter what the cause, and we do not have the authority to force a buy-in. And we provided information to the reporters from the SEC, which regulates the clearance and settlement system, so they had the highest credible source on this issue.
    While rehashing baseless claims from old lawsuits, the article missed the opportunity to educate readers regarding the role DTCC plays in the capital market system. We process the trading volume from all equity markets in the U.S. (NYSE, Nasdaq, Amex, regional stock exchanges and ECNs), which on a peak trading day can represent over 6 billion shares and $1.5 trillion. Our job is to protect the safety and soundness of the system, by ensuring this trade data is processed, ownership records are changed and financial obligations between trading parties are settled. As for enforcement of the securities laws, however, this is a matter for the governmental regulators and the SROs. DTCC provides the SEC and the markets with data on the results of trading activity, and it is left to them to enforce the law.
    As for delivery failures in particular, there are SEC and SRO rules setting forth the responsibilities of brokers. Contrary to the WSJ article, the regulatory authorities do indeed have “mechanisms” to enforce the delivery rules. From the perspective of DTCC, however, in addition to not having enforcement powers, we do not know whether a sale is long or short — certainly not whether it is “naked.”
    We can understand that some of our critics and legal adversaries have sought to portray DTCC as a contributor to naked short selling, but as the SEC has said repeatedly on its Web site and in legal filings (http://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm and http://www.sec.gov/litigation/briefs/nanopiercesecbrief.pdf), we are not responsible for this issue. The WSJ had this information.
    2. The WSJ article said: “The naked shorting debate is a product of the revolution that has occurred in stock trading over the past 40 years.”
    Not true. The development of automated clearing and settlement processes, while indeed revolutionary and key to the development of the U.S. capital markets, did not create naked short selling. Indeed, failure to deliver shares sold short occurs with paper certificates, and always has.
    While the term “naked short selling” may be new, the practice of abusive shorting by failing to deliver is as old as trading itself.
    DTCC pointed the WSJ to authoritative academic pieces written on short selling by Yale professor Owen Lamont. His extensive research found short sellers were often proved correct in that shorted companies were non-performers with weak balance sheets and growth. Lamont also documented that typical tactics of these companies included citing naked short selling as the cause of the poor stock performance when, in fact, the cause was almost invariably poor business performance. (http://www.mba.yale.edu/faculty/pdf/overpricing.pdf).
    3. The WSJ article said: “Some companies with falling stock prices say it (naked short selling) is rampant and blame DTCC as the keepers of the systems where it happens.”
    This claim that DTCC is responsible for naked short selling has been expressly rejected by the SEC. Further, as we explained to the WSJ, this claim displays a fundamental misunderstanding of our role in the capital markets. It ignores that naked short selling is a trading strategy and has nothing to do with the post-trade clearance and settlement process. It ignores that we do not know the underlying reasons why trades fail, information that is known only to the broker/dealer. It ignores the fact that DTCC is not the “keepers of the systems where it happens,” since this implies DTCC has regulatory authority over trading parties, which by federal statute or federal regulation it does not. It ignores that none of these claims articulated in lawsuits has been successful, and no new case has been filed in more than two years. We think that is adequate evidence to reject any assertion that DTCC is to “blame” for NSS. The fact is the story carried by WSJ on July 5, 2007 is old news presented without proper context, and it grossly underplayed the important steps taken by the SEC this year that have addressed this issue of long-standing fails to deliver.
    4. The WSJ article said: “About 99% of the time, trades are completed without incident. But about 1% of the shares — valued at about $2.5 billion on a given day – aren’t delivered to the buyer within the requisite three days, for one reason or another.”
    The 1% figure represented 1% of the dollar value, not 1% of the trades. In fact, the number of trades that fail (both aged and new fails) amount to about one-tenth of 1% of the daily number of trades, and 80% of the total failed positions (which may include a number of trades) are resolved in two business weeks.
    Moreover, the story fails to make clear that the $2.5 billion estimate is an aggregate number; it does not represent the value of each day’s fails, but the average value of all outstanding fails on any particular day.
    What the WSJ omitted is the sizable amount of daily trading, $350 billion on average in 2006, that does clear and settle in the three-day period.
    The WSJ also omitted that it would be impossible with the high volume of trading (over 5 billion shares daily) across equity markets to force all trades to complete in three days. Those seeking a solution would force a return to an earlier period in history, akin to a time when paper stock certificates and payments were exchanged on a trade-for-trade basis. Were this line of argument to be successful, it would bring the robust equity markets in the U.S. to a screeching halt, and destroy our competitiveness with other capital markets around the world.
    Lastly, the WSJ incorrectly gives equal weight to the reasons for fails, when the SEC in their Q&A on this issue pointed out that trade failures largely occur due to administrative reasons. The SEC states that a failed trade does not automatically mean there is naked short selling. The lack of proper context by the WSJ is misleading to readers.
    5. The WSJ article said: “Critics contend DTCC has turned a blind eye to the naked shorting problem.”
    Untrue. DTCC has met with a variety of groups, including broker / dealers, marketplace regulators, state regulators and academics, and has communicated with concerned companies, the media, as well as plaintiffs and plaintiffs’ counsels on this issue. This effort includes seven hours of meetings and conference calls with the WSJ reporters who wrote this story.
    We have shared insights and information in an effort to educate those who were unfamiliar with DTCC’s role in clearance and settlement and correct misimpressions of our authority and non-involvement in this issue. We have also rightfully called into question excessive claims and the lack of empirical data to support claims, and pointed to the public filings (e.g., 10K documentation) of why many of these companies were losing money and experiencing declining stock prices.
    The WSJ was fully briefed on these issues. We also responded directly to assertions being made by lawyers for companies who have sued DTCC (unsuccessfully), but our response to these accusations were not included in the WSJ article.
    As the article did note, DTCC submitted a comment letter to the SEC last September proposing there be greater transparency in providing fails data o the public. Moreover, the SEC has recently indicated their support for our recommendation and expressed a willingness to look at releasing this data. Since the data is confidential to the brokerage firms, we cannot release it. Only the SEC has this authority. Since the WSJ had this information and understood how this process works, we’re surprised it would repeat such misleading comments.
    6. The WSJ article said: “If the stock in a given transaction isn’t delivered in the three-day period, the buyer, who paid his money, is routinely given electronic credit for the stock. While the SEC calls for delivery in three days, the agency has no mechanism to enforce that guideline.”
    This completely misrepresents how failed trades are handled in DTCC’s clearance and settlement systems. In fact, the broker for the buyer does not pay the contractual value for the trade to the clearing system until the stock is delivered, although the broker’s customer may be given a security entitlement on the broker’s records immediately. That security entitlement is what makes it possible for the markets and investors to buy and sell securities freely throughout the day or over several days. If an investor had to wait until stock was delivered and paid for, they’d have to wait several days to trade that stock again. Imagine an investor buying a stock in the morning, then finding market information being announced mid-day that might adversely impact that stock and then being told you can’t sell out your position to minimize the potential loss. Freedom to trade is a cornerstone of our equity markets and a fundamental principle in the regulatory schemes that govern the markets. The SEC has flatly rejected the argument that there are such things as phantom shares or credits being created in the market.
    A seller’s obligation to deliver securities does not go away. And the broker/dealer who acts as a buyer of securities has a regulatory entitlement and the power — and, in many cases, an affirmative obligation after a period of time — to execute a buy-in on a failed delivery to force the seller to fulfill its obligations. In a buy-in, the broker/dealer failing to receive the securities essentially purchases the undelivered stock from some other broker, with the selling broker/dealer who failed to deliver having to absorb any difference in price or other costs incurred on the buy-in. And the SEC or applicable market regulator also has the power, under existing appropriate regulations, to force a fail to be closed. (We note that DTCC, in contrast, does not have any such authority.) So the WSJ is wrong in suggesting that there aren’t market and regulatory mechanisms available to enforce delivery obligations. Lastly, to include this assertion without talking about the SEC’s elimination of the grandfather clause under Reg SHO is to ignore further steps by our regulators to address concerns about closing long-standing failed trades.
    7. The WSJ article said: “Denver-based Nanopierce Technologies Inc. contended that DTCC allowed “sellers to maintain significant open fail to deliver” positions of millions of shares of the semiconductor company’s stock for extended periods.”
    While the WSJ makes reference to the Nanopierce litigation in the context of naked short selling, it fails to note that plaintiffs in that case insist that the case is not about naked short selling, but about how DTCC processes transactions through systems that have been expressly approved by the SEC. This case was dismissed by the original trial judge, but the plaintiffs have kept it alive by a series of appeals. If the WSJ was going to reference this lawsuit, it was incumbent upon it to look into the company’s business fundamentals and draw its own conclusions as to why it is selling at 40 cents. The WSJ should have simply stuck with the fact that almost all of these naked short selling cases against DTCC have either been dismissed or filed and then not pursued by plaintiffs.
    8. The WSJ article said: “The cost of buying and selling stock has fallen to less than 3.5 cents a share, a tenth of paper-era costs.”
    First, it is the cost of clearing and settling a trade that had fallen to an average of 3.5 cents and it does not, as the article states, represent the cost of trading. This was the cost per transaction, not per share. It doesn’t matter if the trade is for 100 shares or 1,000 shares, each transaction costs the same to clear and settle. In 2007, the average cost of clearing and settling a trade is down to 1.7 cents per side. The earlier figure of 3.5 cents is from 2005. The WSJ did not have access to this latest number, but we did point out that DTCC’s costs were the lowest in the world.
    9. In the DTCC “By the Numbers” section, The WSJ lists the volume of OTC derivatives transactions processed as $2.6 million.
    It is 2.6 million transactions. The notional dollar value of transactions has not been tracked by DTCC, but would probably be in the trillions of dollars. DTCC currently confirms 80%+ of all OTC credit default swap trades in this $18 trillion market.
    Once again, the narrow focus of this WSJ article ignores DTCC’s 30-year track record of bringing automated solutions that have eliminated risk, brought certainty and safety to the equities and fixed income markets, expanded investor choice for a broad array of mutual funds, mitigated potential crises by insulating the clearance and settlement system from the impact of firm failures, and brought certainty to the OTC credit default swap markets by automating and increasing the confirmation of these trades from 15% to 80% in three years, among many other accomplishments that the article chooses to ignore.

    About DTCC
    The Depository Trust & Clearing Corporation (DTCC), through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC’s depository provides custody and asset servicing for 2.8 million securities issues from the United States and 100 other countries and territories, valued at $36 trillion. Last year, DTCC settled more than $1.5 quadrillion in securities transactions. DTCC has operating facilities in multiple locations in the United States and overseas. For more information on DTCC, visit http://www.dtcc.com.

    http://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm

    Division of Market Regulation:
    Responses to Frequently Asked Questions Concerning Regulation SHO
    Responses to these frequently asked questions were prepared by and represent the views of the staff of the Division of Market Regulation (“Staff”). They are not rules, regulations, or statements of the Securities and Exchange Commission (“Commission”). Further, the Commission has neither approved nor disapproved these interpretive answers.
    For Further Information Contact: Any of the following attorneys in the Office of Trading Practices, Division of Market Regulation, Securities and Exchange Commission, 100 F Street, N. E., Washington, D.C. 20549-1001, at (202) 551-5720: James Brigagliano, Assistant Director, Josephine Tao, Branch Chief, Joan Collopy, Lillian Hagen, Elizabeth Sandoe, and Victoria Crane, Special Counsels.
    I. Introduction
    A short sale is the sale of a security that the seller does not own and any sale that is consummated by the delivery of a security borrowed by, or for the account of, the seller. In order to deliver the security to the purchaser, the short seller will borrow the security, typically from a broker-dealer or an institutional investor. The short seller later closes out the position by purchasing equivalent securities on the open market, or by using an equivalent security it already owned, and returning the borrowed security to the lender. In general, short selling is used to profit from an expected downward price movement, to provide liquidity in response to unanticipated demand, or to hedge the risk of a long position in the same security or in a related security.
    Regulation SHO became effective on September 7, 2004. (Securities Exchange Act Release No. 50103 (July 28, 2004), 69 FR 48008 (August 6, 2004) (“Adopting Release”)). The commencement date to comply with the provisions of Regulation SHO is January 3, 2005. Pursuant to the terms of Regulation SHO, the Commission approved an order establishing a one-year pilot program (“Pilot”) suspending the provisions of Rule 10a-1(a) under the Securities Exchange Act of 1934 (“Exchange Act”) and any short sale price test of any exchange or national securities association (“SRO”) for short sales of certain securities for certain time periods. (See Securities Exchange Act Release No. 50104 (July 28, 2004), 69 FR 48032 (August 6, 2004) (“Pilot Order”)). The Adopting Release and the Pilot Order may also be found on the Commission’s Internet web site

    http://www.sec.gov/litigation/briefs/nanopiercesecbrief.pdf

  41. I’m not sure – but I think Mary is suggesting a Google search box to help monetize the site …

  42. Ok year good idea put the search up top on the right or left of page,but everything else is just fime.

    The site is perfect as it is.

  43. Neil,
    It is not obvious or easy to find. Move it to the top of the page – right above your picture.

    Dan
    dmedstrom@hotmail.com

  44. Search widget is on front page. If you have any other ideas on how to make navigation easier let me know.

  45. Don’t take your business to Jack Ferm aka U.S. JusticeFoundation.org.

    They’ll take your money, $2,500 per house, and you’ll never get anything out of them. I know two people who have lost houses with them. One had her complaint delivered too late to do her any good, the wrong bankruptcy papers delivered and her TRO rejected for being filed too late.

    I had the wrong complaint and lis pendens delivered. They are completely inaccessible. You can call 40 times in a row and get no-one on the phone and no service out of them.

    I’ve asked for my money back three times and they won’t even respond. They’re unprofessional, inept and they will drop you like a hot potato once you’re check is safely in their bank. Consider yourself warned.

  46. You are asking for donations for this site. For God’s sake, man, just put a “Search” widget on the site. It’s free.

  47. December 15, 2008 VIA FAX AND E-MAIL
    XXXXXXXXXXX
    Danielle Spradley, Esq.
    Ben-Ezra & Katz, P.A.
    2901 Stirling Road, Suite 300
    Ft. Lauderdale, Florida 33312

    Re: XXXXXXXXXXXX adv. XXXXXXXXXXXX, Inc.: Your illegal Motion for Default

    Dear Ms. Spradley:

    Your “Ex Parte” Motion for Default, which was filed three (3) days after you received my Notice of Appearance and Motion to Continue Hearing, is fraudulent and illegal on its face. Applicable decisional law provides that a Notice of Appearance of counsel is a “paper” pursuant to Fla.R.Civ.P. 1.500, and thus your affirmative representation to the Court in your Motion that my client “failed to file or serve any paper as required by law” is a material misrepresentation knowingly made by you and attorney Muller when both of you had actual knowledge that my client had in fact served papers upon you through my Firm: to wit, the Notice of Appearance and Motion to Continue Hearing. Further and as you also know, your Motion for Default was not delivered to me on December 11 or at any other time until after the hearing, and only after I requested a copy thereof.

    Pursuant to the case of Rapid Credit Corp. v. Sunset Park Centre, Ltd., 566 So.2d 810 (Fla. 3d DCA 1990), the entry of your default under the circumstances of record was illegal and unlawful. You will note that the 3d DCA not only reversed the entry of the improperly secured defaults, but that Judge Schwartz also referred the offending attorneys, who made application for an ex parte default when on notice that the defendants were represented by counsel and intended to defend, to the Florida Bar due to what Judge Schwartz determined to be “shocking” and “disgraceful” conduct.
    December 15, 2008 letter to Danielle Spradley, Esq. and Mark Muller, Esq. re: Illegal Default, XXXXXXXXXX adv. XXXXXXXXXXXXXXXXXXX, Inc., page 2 of 2

    The opinion is clear as to an attorney’s affirmative duty to disclose information as to the procedural aspects of a case to opposing counsel, and that that pursuant to Fla.R.Civ.P. 1.500(b), if any paper has been filed or served, the party shall be served with notice of any application for default and before seeking a default. It is without dispute and of record that both of you purposefully and intentionally violated Rule 1.500(b).

    You are also directed to the case of Cohen v. Barnett Bank of South Florida, N.A., 433 So.2d 1354 (Fla. 3d DCA 1983) which expressly provides that a Notice of Appearance is a “paper” pursuant to Fla.R.Civ.P. 1.500, and that the filing thereof requires notice of any application for default. In reversing the default, the Court held that “sufficient notice of the default application was not given to the defendant” in a situation where the application was made two days prior to the default. The opinion is also quite clear that notice must be given “in sufficient time to permit some meaningful action to be taken upon it after its receipt”, to wit, the filing of a pleading before the default.

    What makes the present situation even more egregious than in either Cohen or Rapid Credit is the intentional misconduct of both you and attorney Muller where, although having actual knowledge of two papers being served by my client through my Firm upon you on December 8, that you appear for a hearing on December 11 without providing any notice whatsoever of your intent to apply for a default and materially misrepresent in said Motion that you “delivered” the Motion to me. Finally, the making of such an application at the hearing itself is per se insufficient notice, and clearly demonstrates the premeditated intent of both Ben-Ezra & Katz, P.A. and Quarles and Brady to improperly obtain a default without prior notice when said notice is expressly required by both the Florida Rules of Civil Procedure and decisional law.

    We are thus filing a Motion to Vacate and Set Aside the Default and Final Judgment of Mortgage Foreclosure and for Sanctions and Referral of Matter to The Florida Bar. A copy of the subject Motion is faxed to you with the fax copy of this letter and separately e-mailed together with a copy of my letter to Judge Kyle as to scheduling the Motion for a Specially Set hearing.

    This is also to place your respective Firms on express notice, further pursuant to the Rapid Credit decision, that any attempt to defend the improperly obtained default will be considered so frivilous that my client will seek an award of attorneys’ fees pursuant to Fla.Stat. sec. 57.105, just as the Court assessed against the offending attorneys in Rapid Credit.
    Sincerely,

    Jeff Barnes, esq

  48. IN THE CIRCUIT COURT OF THE XXXX JUDICIAL CIRCUIT
    IN AND FOR XXXXXXXXXXX COUNTY, FLORIDA

    XXXXXXXXXXXXXXXXXXXXXX,INC., Case No. XX-XXXX-XX
    [Hon. XXXXXX XXXXXXXX]
    Plaintiff,
    v. XXXXXXXXXXX MOTION TO
    VACATE AND SET ASIDE DEFAULT
    XXXXXXXXXXXXXXXX et al., AND FINAL JUDGMENT OF
    MORTGAGE FORECLOSURE, AND
    Defendants. MOTION FOR SANCTIONS AND FOR
    ________________________________/ REFERRAL OF MATTER TO FLORIDA BAR

    XXXXX XXXXX(defendants name), through undersigned counsel and applicable law, moves for the entry of an Order vacating and setting aside a Default and Final Judgment of Mortgage Foreclosure and Motion for Sanctions and for Referral of matter to The Florida Bar, and as grounds for such relief states:
    1. At a hearing in this matter on December 11, 2008, this Court entered a Default against XXXXXXXXXXXXXXX on an “Ex Parte” Motion for Default which was presented to the Court by counsel for the Plaintiff for the first time on December 11, 2008 with no prior notice thereof to either XXXXXXXXXXX or her counsel, despite the admitted fact, by counsel for Plaintiff on the record at the subject hearing, that said counsel had actual notice of the undersigned’s Notice of Appearance and Motion to Continue Hearing as of December 8, 2008, a full three (3) days prior to the December 11, 2008 hearing.
    2. Applicable decisional law provides that a Notice of Appearance constitutes a “paper” pursuant to Fla.R.Civ.P. 1.500(b), and that a default and final judgment entered without sufficient notice of application for a default after a Notice of Appearance constitutes reversible error. Cohen v. Barnett Bank of South Florida, N.A., 433 So.2d 1354, 1355 (Fla. 3d DCA 1983).
    3. In Cohen, the defendant’s attorney served a Notice of Appearance on the Bank’s attorney. The trial judge thereafter entered an ex parte default on motion of the bank’s attorney which was filed notwithstanding the Notice of Appearance. In reversing both the order of default and final judgment, the Cohen court held that “it is obvious that the ‘notice of application’ provided by 1.500(b) would be purposeless unless given in sufficient time to permit some meaningful action to be taken upon it after its receipt—here, to file a pleading before the default so as to preclude its being entered”. 433 So.2d at 1355.
    4. The Cohen court held that a two-day notice period was insufficient; that it was plain that “the plaintiff did not comply with Fla.R.Civ.P. 1.500(b)”; and that “The result is that the default and consequent judgments it secured must be set aside”. 433 So.2d at 1355, citing, inter alia, Okeechobee Insurance Agency, Inc. v. Barnett Bank of Palm Beach County, 434 So.2d 334 (Fla. 4th DCA 1983).
    5. The factual circumstances surrounding the presentation of Plaintiff’s “Ex Parte” Motion for Default herein are even more offensive than that in Cohen. Here, it is of record that Plaintiff presented its ex parte Motion to the Court for the first time on December 11, 2008, which was never provided to XXXXXXXXXXXX counsel of record at any time before or during the hearing, and was only provided to said counsel after the hearing and only after request for a copy of same by counsel for XXXXXXXXXXXXX.
    6. As such and pursuant to Cohen, Plaintiff herein failed to comply with Fla.R.Civ.P. 1.500(b), requiring the default and final judgment to be vacated.
    7. However, the mere vacation of the default and Final Judgment is only the first step to remedy what is a manifest injustice intentionally perpetrated on XXXXXXXXXXX by counsel for the Plaintiff. Pursuant to later decisional law, the conduct of counsel for the Plaintiff also warrants the imposition of significant sanctions and the referral of their conduct to The Florida Bar for investigation and disposition.
    8. An attorney’s affirmative duty to disclose information regarding the procedural status of a case, both to the court and opposing counsel, prior to a default being entered is clear pursuant to Fla.R.Civ.P. 1.500(b), which provides that if a party has filed or served ANY paper, that party shall be served with notice of the application for default, and such notice must be provided before the seeking of a default. Rapid Credit Corp. v. Sunset Park Centre, Ltd., 566 So.2d 810, 811 (Fla. 3d DCA 1990).
    9. In Rapid Credit, the attorney who sought a default had actual knowledge of opposing counsel’s intent to defend the action. Citing Gulf Maintenance & Supply, Inc. v. Barnett Bank of Tallahassee, 543 So.2d 813 (Fla. 1st DCA 1989), the Rapid Credit court held that “a default is a procedural matter within the control of the attorney, so plaintiff’s counsel should contact the attorney known to be representing a defendant to determine whether the latter intends to proceed in the matter before causing a default to be entered”. 566 So.2d 810, citing 543 So.2d at 816.
    10. Here, both counsel for the Plaintiff were on actual and express notice, as of December 8, 2008, that the undersigned was representing XXXXXXXXXXX and that, pursuant to XXXXXXXXXXX Motion to Continue Hearing of which said counsel were also on express and actual notice, that XXXXXXXXXXX intended to defend the action. Notwithstanding this actual notice and subsequent exchange of e-mails between December 8, 2008 and prior to the December 11, 2008 hearing, Plaintiff’s counsel:
    (a) NEVER made any mention of any application for default;
    (b) never indicated that they intended to seek a default;
    (c) presented the “ex parte” application for default for the first time at the December 11, 2008 hearing; and
    (d) did not even copy the undersigned with any application for default until after the default had been entered at the hearing.
    Pursuant to Rapid Credit, the default must thus be vacated and set aside.
    11. The appellate court’s disdain for the contemptuous conduct of plaintiff’s counsel in intentionally violating Rule 1.500(b) is set forth in Judge Schwartz’ special concurrence in Rapid Credit:
    I believe that the actions of appellees’ attorneys in this case (names
    withheld) were so disgraceful that an inquiry by the Florida Bar into
    the professional misconduct apparently involved is warranted. Their
    implied representations to the clerk, to secure a default without notice,
    that the defendants had made no appearance in the case and, even
    more shocking, their similar representation—no less untrue and no
    less wrongful because they were made by silence—that their
    appearances before the lower court were something more than
    charades, although an unrevealed default had already been taken,
    may involve violations of Florida Bar Rule of Professional Conduct
    4-3.3, which requires “candor toward the tribunal” and of Rule 4-3.4,
    which concerns “fairness of opposing party and counsel.” In any event,
    I believe it my duty, imposed by Florida Bar Rule of Discipline 3-7.7(h),
    to inform the Bar of these events so as to permit it to make its own
    decision. This opinion will serve that purpose.

    566 So.2d at 811.

    12. The conduct of counsel for the Plaintiff in the instant case is even more egregious, heinous, and “slimy” than that of the offending attorneys in Rapid Credit. Here, although admitting on the record at the December 11, 2008 hearing that said counsel were in actual prior receipt of the undersigned’s Notice of Appearance and Motion to Continue Hearing as of December 8, 2008, said counsel consciously, intentionally, and purposefully materially misrepresented to the Court, in their “ex parte” Motion for Default, that “the defendant failed to file or serve any paper as required by law”, and presented this “ex parte” Motion to the Court for the first time on the day of the hearing without any prior notice to the undersigned.
    13. The intentional misconduct of the attorneys of the Ben-Ezra & Katz, P.A. and Quarles & Brady law Firms is in fact far beyond the type of conduct found by Judge Schwartz to be “shocking and disgraceful” in the Rapid Credit opinion, which more than justifies and warrants the referral of such conduct to The Florida Bar for their own inquiry and appropriate discipline.
    14. In view of the abjectly fraudulent conduct on the part of the attorneys of the Ben-Ezra & Katz, P.A. and Quarles & Brady law Firms in materially misrepresenting, in writing in their “Ex Parte” Motion for Default, that XXXXXXXXXXX had not, as of December 11, 2008, filed or served any paper when she in actual fact had, through the undersigned, previously served both a Notice of Appearance and Motion to Continue Hearing as of December 8, 2008 which fact was admitted by Plaintiff’s joint counsel at the December 11, 2008 hearing, significant and deterrent sanctions should be entered against Danielle Spradley, Esq., Mark H. Muller, Esq., and the law Firms of Ben-Ezra & Katz, P. A. and Quarles & Brady, including but not limited to XXXXXXXXXXX attorneys’ fees and costs in defending the fraudulently entered default and final judgment and the seeking of relief through this Motion.
    15. For the foregoing reasons and based on the facts of record and applicable decisional law, XXXXXXXXXXX requests that this Court vacate and set aside the Default and Final Judgment of Foreclosure; to refer the matter of the conduct of Plaintiff’s counsel to The Florida Bar; for the imposition of sanctions against Plaintiff’s counsel including all of XXXXXXXXXXX attorneys’ fees and costs in both defending the improperly entered default and final judgment and the seeking of the relief requested herein; and for any other and further relief which this Court deems just and proper under the circumstances.
    WHEREFORE, XXXXXXXXXXX requests that this Court grant the relief requested herein for the reasons set forth, and for any other and further relief which is just and proper.
    CERTIFICATION OF COMPLIANCE WITH RULE 4-8.3(a) OF THE RULES REGULATING THE FLORIDA BAR

    THE UNDERSIGNED HEREBY CERTIFIES that he has complied with Rule 4-8.3(a) of the Rules of Professional Conduct, Rules Regulating The Florida Bar, by reporting to The Florida Bar (by copy of this Motion thereto) the misconduct of the named attorneys and the Firms of Ben-Ezra & Katz, P.A. and Quarles & Brady set forth above, which conduct raises a substantial question as to said attorneys’ honesty, trustworthiness, or fitness as lawyers and based on the following violations of the following Rules of Professional Conduct of the Rules Regulating the Florida Bar:

    (1) Rule 4-8.4(a): violating the Rules of Professional Conduct and knowingly
    assisting another to do so where attorneys Spradley and Muller assisted each
    other in filing and prosecuting an illegal and fraudulent “Ex Parte Motion for
    default” and improperly securing a default in violation of Fla.R.Civ.P. 1.500(b)
    which Motion was false in fact and thereby violating Rule 4-3.3 (Candor
    Toward the Tribunal) and 4-3.4 (Fairness of Opposing Party and Counsel);

    (2) Rule 4-8.4(c): engaging in conduct involving dishonesty, fraud, deceit, and
    Misrepresentation (as set forth above);

    (3) Rule 4-8.4(d): engaging in conduct in connection with the practice of law
    that is prejudicial to the administration of justice; and

    (4) Rule 4-8.4(f): knowingly assisting a judge in conduct that is a violation of
    applicable law in connection with assisting the court in having the illegal
    ex parte default entered.

    CERTIFICATE OF SERVICE
    THE UNDERSIGNED HEREBY CERTIFIES that a true and correct copy of the
    foregoing has been forwarded, via fax and e-mail, to Danielle Spradley, Esq., Ben-Ezra

    & Katz, P.A. Counsel for Plaintiff, 2901 Stirling Road, Suite 300, Ft. Lauderdale, Florida

    33312 on this 15th day of December, 2008.

    W. J. Barnes, P.A.
    Counsel for XXXXXXXXXXX
    1515 North Federal Highway, Suite 300
    Boca Raton, Florida 33432
    Tel: (561) 864-1067
    Fax: (702) 804-1037
    e-mail: wjbarnes@cox.net

  49. Attorney General Abbott, Sen. Estes Propose Bill To Protect Texans From Foreclosure Rescue Scams

    Foreclosure Rescue Fraud Prevention Act to strengthen penalties for scams

    AUSTIN – Texas Attorney General Greg Abbott and state Sen. Craig Estes (Wichita Falls) announced a legislative initiative that will help protect Texas homeowners from foreclosure rescue scams. If enacted, the proposal would enhance the Attorney General’s enforcement authority, provide new protections for homeowners, and place new restrictions on foreclosure prevention consultants.

    “At a time when regulators, policy makers and stakeholders are working to help struggling families, unscrupulous operators are scheming to profiteer at homeowners’ expense,” Attorney General Abbott said. “Too many scam artists attempt to target homeowners with large fees and the false promise that they could help Texans avoid foreclosure on their homes. The legislation that Senator Estes and I encourage the Legislature to pass would give the Office of the Attorney General increased authority to crack down on these unlawful foreclosure rescue scams.”

    The Foreclosure Rescue Fraud Prevention Act would require foreclosure prevention consultants to provide customers a written, plain language contract memorializing their services agreement. It would also require that these consultants obtain their customers’ written consent, in the form of a signature, before beginning any services or accepting any fees. An additional requirement mandates a written disclosure statement instructing homeowners to contact an attorney or a housing counselor before signing mortgage rescue agreements.

    “While most homeowners may never feel the threat of home foreclosure, it is an issue that can impact all of us when it strikes our neighbors, friends, and family,” Sen. Estes said. “This morning I filed the Foreclosure Rescue Fraud Prevention Act, which was drafted in coordination with the Attorney General’s office. This issue has impacted constituents in my district and across the state, we are here today to send a very clear signal that these actions by unscrupulous mortgage foreclosure consultants will not be tolerated.”

    The written agreements mandated by the proposed law would apply to both foreclosure prevention consulting and equity purchase contracts. Both types of agreements would have to include plain language cancellation procedures.

    In addition to new disclosure requirements, the proposal would place new limits on equity purchase agreements. To protect Texans’ interest in their homes, the law would require equity purchase agreement buyers to pay at least 82 percent of the property’s fair market value.

    The Foreclosure Rescue Fraud Prevention Act would give the OAG expanded authority to crack down on mortgage rescue fraud scams under the Texas Deceptive Trade Practices Act.

    Foreclosure rescue scams prey upon people who have fallen behind on their mortgages and face foreclosure. Using notices that mortgage lenders publish before foreclosing on homes, the scam identifies potential victims who are promised help avoiding foreclosure. These scams are often marketed as “foreclosure consultants” or “mortgage consultants,” and their businesses as a “foreclosure service” or “foreclosure rescue agency.” But, instead of providing the services promised, the scams take homeowners’ money, ruin their credit record, and wipe out the hard-earned equity victims built up in their homes.

    When announcing today’s legislative proposal, Attorney General Abbott revealed the results of a recent enforcement action against a mortgage rescue fraud scheme.

    Arizona-based Abell Mediation, Inc., and its president and vice-president, Elizabeth Cory and Michael Cory, respectively, were charged with fraudulently claiming that their company could save homeowners from imminent foreclosure. Homeowners who were delinquent on mortgage payments responded to the defendants’ solicitation cards and Web site. The defendants’ cards claimed that “Abell Mediation, Inc. has saved over 7,000 homes from foreclosure,” boasted about a “staff of highly trained loss mitigation specialists” with established relationships with mortgage lenders and banks nationwide and promised to “achieve results that no one else can.”

    Under an agreement secured by the Attorney General, the defendants are permanently enjoined from conducting a foreclosure mitigation business in the future. The defendant is also required to pay a total of $1.55 million in fines, restitution and attorneys’ fees.

  50. Awesome work Mario, this is great information.

    Thank you!

    Dan Edstrom
    dmedstrom@hotmail.com

  51. THIS IS VERY IMPORTANT TO UNDERSTAND AND GIVES LET TO MANY OTHER STUDIES.

  52. THIS CLIP EXPLAINS THE ISSUE OF STRUCTURED THEFT.

    I SEE NO REASON WHY ANY PERSON SHOULD LOSE THEIR HOME FROM THIS DAY FORWARD.

    I BELIEVE THE BANKS WILL STOP INVESTING IN HOMES AS A MONEY MAKING SYSTEM.

    http://www.youtube.com/watch?v=Sac-qiZoU_0

  53. I HAVE SEEN THIS BEFORE BUT I AM POSTING THIS FOR YOU TO SEE

  54. Monday, May 5, 2008

    Florida Foreclosure Rescue Conveyances With Buyback Right To Be Treated As Equitable Mortgages Unless Established Otherwise

    The Florida legislature recently passed a statute regulating foreclosure rescue transactions. One key provision is contained in Florida Statute Sec. 501.1377(6) which creates a rebuttable presumption that any foreclosure rescue transaction involving a lease option or other repurchase agreement is an equitable mortgage. Below is the provision in its entirety (begins at line 345 of the bill):

    (6) REBUTTABLE PRESUMPTION.–Any foreclosure-rescue transaction involving a lease option or other repurchase agreement creates a rebuttable presumption, solely between the equity purchaser and the homeowner, that the transaction is a loan transaction and the conveyance from the homeowner to the equity purchaser is a mortgage under s. 697.01. Unless the lease option or other repurchase agreement, or a memorandum of the lease option or other repurchase agreement, is recorded in accordance with s. 695.01, the presumption created under this subsection shall not apply against creditors or subsequent purchasers for a valuable consideration and without notice.
    [Editor's Note: The reference to "creditors or subsequent purchasers for a valuable consideration and without notice" is a reference to bona fide purchasers / encumbrancers.]

    The following comments relate to how this rebuttable presumption could affect the following legal issues involved in foreclosure rescue conveyances: usury, bonafide purchaser, and tenant evictions.

    Usury

    Because the new statute creates the rebuttable presumption that the foreclosure rescue conveyance is a loan, it appears that usury claims by the financially distressed homeowner will be much easier to bring in a lawsuit against a foreclosure rescue operator since the statute clearly places the burden of demonstrating that the so-called “rescue” arrangement was a “true sale” (as opposed to a “financing/refinancing arrangement”) on the foreclosure rescue operator. Put simply, the law treats the deal as a secured loan to the financially strapped homeowner unless established otherwise. Accordingly, the operator is simply treated like any mortgage lender and the financially strapped homeowner is still presumed to be the true owner of the the home, notwithstanding any deed and leaseback agreement executed by the parties to the contrary.

    Florida arguably has among the toughest usury statutes in the country. Florida’s civil usury statute (where interest exceeds 18% per year) generally requires a forfeiture of the right to collect interest on the loan and requires the creditior to pay a penalty of double the amount of interest actualy reserved or collected (Fla. Statute Section 687.04).

    Its criminal usury statutes (where interest exceeds 25% per annum) generally makes the entire amount of money advanced by the operator an unenforceable loan, and triggers those penalties commonly associated with misdemeanor (over 25% but not more than 45%) and felony (over 45%) crimes (Fla. Stat. Section 687.071).

    Based on the Florida case law on equitable mortgages, the foreclosure rescue operator in Florida may be hard-pressed to sucessfully rebut the statute’s presumption.(1)

    ______________

    (1) See Hull v. Burr, 58 Fla. 432; 50 So. 754 (Fla. 1909) – “In case of doubt the transaction will be held a mortgage”; Connor v. Connor, 59 Fla. 467; 52 So. 727 (Fla. 1910) – “A deed absolute on its face may by parol evidence be shown to be a mortgage, and in cases of doubt the instrument should be held to be a mortgage”, citing DeBartlett v. DeWilson, 52 Fla. 497, 42 So. 189; Hull v. Burr, 58 Fla. 432, 50 So. 754; Franklin v. Ayer, 22 Fla. 654; McLendon v. Davis, 131 So. 2d 765; (Fla. App. Ct., 3rd Dist. 1961) – “In applying the rule in doubtful cases, the law will resolve the doubt as to the intent of the parties in the light of the advantage the creditor always has over the debtor whose property he holds, and will give the debtor the benefit of the doubt and hold his equity of redemption to be still existing. Certainly complete justice is done because the creditor’s advances are secured by the debtor’s property and the debtor has the opportunity of full redemption by payment.” (my emphasis added).

    Because these cases instruct the courts to treat the transaction as a mortgage “in the case of doubt”, it is arguable that the standard of proof necessary to overcome the equitable mortgage presumption in the new statute is higher than a mere “preponderance of the evidence”, possibly requiring “proof by clear and convincing evidence.”
    ______________

    Bonafide Purchaser
    .
    The new statute clearly states that the rebuttable presumption is created “solely between the equity purchaser and the homeowner” (at lines 347-348). In addition, the statute goes on to provide that the presumption is not applicable against those who do not have notice of the “rescue” arrangement (“the presumption created under this subsection shall not apply against creditors or subsequent purchasers for a valuable consideration and without notice” – at lines 353 to 355) – the so-called bonafide purchasers / encumbrancers.

    The statute, however, seems to be silent as to how it applies to those (other than the equity purchaser and the homeowner) acquiring an interest in the property who have notice of the “rescue” arrangement, and who consequently would not be entitled to bonafide purchaser / encumbrancer status. Why is this important?
    .

    Actual Possession as “Notice To The World”

    In a typical foreclosure rescue conveyance (one involving a sale with a concurrent leaseback, coupled with a right to reaquire the home in the future), the financially strapped homeowner never relinquishes actual possession of the property. Florida law (and the law of many other states as well) is that actual possession of the property serves as notice to subsequent purchasers and encumbrancers of all rights and equities that the occupant in possession may have.

    The Florida Supreme Court, in the case of Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761 (cited in Florida Land Holding Corp. v. McMillen, 135 Fla. 431, 186 So. 188 (Fla. 1938)), stated the following with respect to possession and notice:

    Actual possession is constructive notice to all the world or anyone having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola G.L. & Dev. Company, 37 Fla. 439, 20 So. 543; McAdams v. Wachab, 45, Fla. 482, 33 So. 702. This court also specifically held in the case of Crozier, et al., v. Ange, 85 Fla. 120, 95 So. 426, that ‘where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.’ 19 R.C.L. 421, Sections 201 and 202.
    The Florida high court reiterated its position in Blackburn v. Venice Inlet Co., 38 So.2d 43, 46 (Fla. 1948) (cited in Waldorff Ins. v. Eglin Nat. Bank, 453 So.2d 1383 (Fla.App. 1 Dist. 1984)), where it stated:

    It is settled law in Florida that actual possession is constructive notice to all the world, or anyone having knowledge of said possession of whatever right the occupants have in the land. Such possession, when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises.
    It appears that the new statute may contain an ambiguity with respect to its apparent silence as to whether it applies to “non-bonafide” purchasers and encumbrancers. Assuming the Florida courts, by applying the appropriate rules of statutory construction, rule that the new statute does, in fact, apply to those “non-bonafide” purchasers / encumbrancers (upon whom notice of the “rescue” arrangement is imputed), and given that actual possession by the occupying homeowners imputes said notice on them, one can reasonably conclude that the rights of those acquiring an ownership or security interest in the home during or subsequent to the foreclosure rescue conveyance (ie. the foreclosure rescue operator, straw buyer, mortgage lender providing financing, etc.) will be inferior to the rights of the occupying homeowner under the statutorily “presumed” equitable mortgage (provided that the subsequent purchasers / encumbrancers fail to make proper dilgent inquiries as to the rights and equities of said occupying homeowner as required by Florida case law).

    If this is the case, the inferior interests of those “non-bonafide” purchasers / encumbrancers would arguably be subject to being voided by the homeowner. (As an aside, it might be a good idea for any homeowner entering into a foreclosure rescue conveyance to record with the county office that handles the recording of deeds and mortgages, at a minimum, an affidavit / memorandum that places the world on notice of the foreclosure rescue conveyance, and the existence of any (purported) lease, occupancy agreement, and/or right or option to reacquire the home in the future.)

    ————————

    Tenant Evictions In Foreclosure Rescue Conveyances
    .
    Given that the new statute creates a rebuttable presumption that the foreclosure rescue conveyance involving a “lease option or other repurchase agreement” is an equitable mortgage, it appears that foreclosure rescue operators will be unable to evict a homeowner who fails to comply with his/her obligations under the “rescue” arrangement (ie. the leaseback or other occupancy agreement) unless and until it can overcome the statute’s presumption by demonstrating that the arrangement was not an equitable mortgage, but rather, a true sale. After all, the presumption that the arrangement is an equitable mortgage means that the homeowner, even after making the foreclosure rescue conveyance, is still the true owner, and the foreclosure rescue operator is only a secured lender and not a landlord, notwithstanding that it may technically be holding the paperwork showing it has legal title to the home.

    In addition, it also appears that those seeking to evict homeowners involved in a foreclosure rescue conveyance will no longer be able to accomplish such evictions through a summary proceeding under Chapter 83 of the Florida Statutes since the Florida County Courts hearing these proceedings are of limited jurisdiction(2) and, accordingly, don’t have the jurisdiction to determine whether the foreclosure rescue operator can overcome the presumption that the “rescue’ arrangement was an equitable mortgage.

    _______________
    (2) see Hewitt v. State, 101 Fla. 807; 135 So. 130; (Fla. 1931) – County Judge to dismiss the cause for want of jurisdiction when, in proceedings in the County Judge’s court to recover the possession of land as from a tenant, the title or boundaries of the land in controversy are at issue.
    _______________

    To get possession in these cases, it appears that the foreclosure rescue operator may first have to seek a declaratory judgment from a Florida Circuit Court declaring that:

    the “rescue” arrangement was a “true sale” and not an equitable mortgage (thereby overcoming the statute’s newly created rebuttable presumption), and
    the operator is, in fact, the true owner of the home and the (now-former) homeowner is only a tenant.
    Failing that, the foreclosure rescue operator, as a lender (equitable mortgagee) may find itself having to proceed ousting the homeowner via a foreclosure action (just like any other mortgage lender).

  55. Brooklyn Trial Judge Nixes “Rubber Stamp Method” Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced
    In a recent article in the National Law Journal, Brooklyn Supreme Court Justice Arthur M. Schack, in connection with his approach to the apparent sloppy paperwork being filed by foreclosing lenders and their attorneys, was quoted as follows:
    • “I deny more foreclosures than I approve,” [...]. “I want to see the servicing agent’s power of attorney, I want to see all the paperwork before I approve it. If the paperwork is garbage, I deny it. If you’re going to take away someone’s home, it should be done properly.”
    After a review of some of his foreclosure cases, it appears that he wasn’t kidding. Certainly, he has opted against using the ever-popular “rubber stamp method” of adjudicating foreclosures that many of his judicial colleagues around the country have found so handy when in a hurry to clear their respective caseloads.

    Further, in most of the cases listed below, the homeowner facing foreclosure either was not represented by an attorney, or didn’t bother to show up to court at all. Inspite of this, Justice Schack took out his fine tooth comb anyway, went through all the documents, and asked a lot of questions that the lenders were going to have a tough time answering.

    Among the issues Justice Schack points to in some of his decisions when denying a foreclosure because the alleged plaintiff did not have legal standing to file the action are:
    1. defective powers of attorney,
    2. faulty affidavits,
    3. failure to file pooling and servicing agreements with the court,
    4. conflicts of interest of individuals signing assignments, affidavits, etc. as officers for various mortgage companies,
    5. defective verified complaint,
    6. assignments of the mortgages being foreclosed subsequent to the commencement of the foreclosure action,
    7. failure to record corporate resolution, and
    8. no evidence of alleged assignments.
    He has also shown no reluctance in admonishing lenders’ attorneys by giving terse warnings of sanctions for filing actions that may be frivolous, in that, by filing foreclosure actions for companies that lacked standing to sue, the actions appear to be a waste of judicial resources, typically discussing the Part 130 Rules of New York law, which give the courts a remedy to deal with frivolous conduct.

    In rendering these decisions, he gives this reminder to the lenders and their attorneys of the requirement that if they don’t have legal standing to sue, they have no business bringing the foreclosure actions and wasting judicial resources:
    • The Court of Appeals (Saratoga County Chamber of Commerce, Inc. v Pataki, 100 NY2d, 901, 812 [2003]), cert denied 540 US 1017 [2003]) held that “[s]tanding to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress.” In Carper v Nussbaum, 36 AD3d 176, 181 (2d Dept 2006), the Court held that “[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request.” If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. (Stark v Goldberg, 297 AD2d 203 [1d Dept 2002]). “Sine [sic] standing is jurisdictional and goes to a court’s authority to resolve litigation [the court] can raise this matter sua sponte.” (Axelrod v New York State Teachers’ Retirement System, 154 AD2D 827, 828 [3d Dept 1989]).
    HSBC Bank USA, N.A. v Yeasmin, 5/02/2008, 2008 NYSlipOp 50924(U) [19 Misc 3d 1127(A)]; Decided May 2, 2008.
    ***
    In Ameriquest Mtge. Co. v Basevich, 6/26/2007, 16 Misc 3d 1104(A), 2007 NYSlipOp 51262(U), (among other cases), Justice Schack writes:
    • Professor David Siegel, in NY Prac, § 136, at 232 [4th ed] instructs that: [i]t is the law’s policy to allow only an aggrieved person to bring a lawsuit . . . A want of “standing to sue,” in other words, is just another way of saying that this particular plaintiff is not involved in a genuine controversy, and a simple syllogism takes us from there to a “jurisdictional” dismissal: (1) the courts have jurisdiction only over controversies; (2) a plaintiff found to lack “standing” is not involved in a controversy; and (3) the courts therefore have no jurisdiction of the case when such a plaintiff purports to bring it.”(1)
    The following is a compilation of links of some of Justice Schack’s decisions over the last year and a half or so in which he has denied foreclosure because of the questionable and/or faulty paperwork submitted in a foreclosure action that led him to the conclusion that the alleged plaintiffs in the following foreclosure actions did not have legal standing to bring suit:
    1. American Brokers Conduit v Zamalloa, 9/11/2007, 2007 NYSlipOp 32806(U);
    2. Ameriquest Mtge. Co. v Basevich, 6/26/2007, 16 Misc 3d 1104(A), 2007 NYSlipOp 51262(U);
    3. Aurora Loan Servs., LLC v Sattar, 10/09/2007, 17 Misc 3d 1109(A), 2007 NYSlipOp 51895(U);
    4. Bank of New York v Mulligan, 6/03/2008, 2008 NYSlipOp 31501(U);
    5. Bank of New York v Orosco, 11/19/2007, 2007 NYSlipOp 33818(U);
    6. Countywide Home Loans, Inc. for the Benefit of DB Structured Products, Inc. v Persaud, 01/15/2008, 2008 NYSlipOp 30076(U);
    7. Deutsche Bank Natl. Trust Co. v Castellanos, 5/11/2007, 15 Misc 3d 1134 (A), 2007 NYSlipOp 50978(U);
    8. Deutsche Bank Natl. Trust Co. v Castellanos, 1/14/2008, 18 Misc 3d 1115(A), 2008 NYSlipOp 50033(U);
    9. Deutsche Bank Natl. Trust Co. v Clouden, 9/18/2007, 16 Misc 3d 1140(A), 2007 NYSlipOp 51767(U);
    10. Deutsche Bank Natl. Trust Co. v Maraj, 1/31/2008, 18 Misc 3d 1123(A), 2008 NYSlipOp 50176(U);
    11. EMC Mtge. Corp. v Batista, 6/05/2007, 15 Misc 3d 1143(A), 2007 NYSlipOp 51133(U);
    12. Fremont Inv. & Loan v McBean, 11/26/2007, 17 Misc 3d 1132(A), 2007 NYSlipOp 52229(U);
    13. GE Capital Mtge. Servs., Inc. v Powell, 11/13/2007, 18 Misc 3d 228, 2007 NYSlipOp 27463;
    14. HSBC Bank USA v Perboo, 7/11/2008, 2008 NYSlipOp 51385(U);
    15. HSBC Bank USA, N.A. v Betts, 4/23/2008, 2008 NYSlipOp 31170(U);
    16. HSBC Bank USA, N.A. v Charlevagne, 11/15/2007, 2007 NYSlipOp 33673(U);
    17. HSBC Bank USA, N.A. v Cherry, 12/17/2007, 18 Misc 3d 1102(A), 2007 NYSlipOp 52378(U);
    18. HSBC Bank USA, N.A. v Valentin, 1/30/2008, 18 Misc 3d 1123(A), 2008 NYSlipOp 50164(U);
    19. HSBC Bank USA, N.A. v Yeasmin, 5/02/2008, 2008 NYSlipOp 50924(U);
    20. NYCTL 2006-A Trust v Kin Kan Wong, 1/09/2008, 2008 NYSlipOp 30037(U);
    21. NYCTL-1 Trust v Cruz, 6/07/2007, 15 Misc 3d 1144(A), 2007 NYSlipOp 51144(U);
    22. NetBank v Vaughan, 6/13/2007, 15 Misc 3d 1147(A), 2007 NYSlipOp 51197(U);
    23. Nomura Credit & Capital, Inc. v Washington, 4/30/2008, 2008 NYSlipOp 50883(U);
    24. Perla v Real Prop. Solutions Corp., 4/28/2008, 2008 NYSlipOp 50846(U);
    25. U.S. Bank National Association v Maynard, 11/26/2007, 2007 NYSlipOp 33766(U);
    26. U.S. Bank National Association, Trustee v Grant, 11/09/2007, 2007 NYSlipOp 33631(U);
    27. U.S. Bank Natl. Assn. v Bernard, 2/14/2008, 18 Misc 3d 1130(A), 2008 NYSlipOp 50247(U);
    28. U.S. Bank v Videjus, 4/29/2008, 2008 NYSlipOp 50851(U);
    29. Wells Fargo Bank, N.A. v Farmer, 2/04/2008, 18 Misc 3d 1124(A); 2008 NYSlipOp 50199(U);
    30. Wells Fargo Bank, N.A. v Farmer, 6/05/2008, 2008 NYSlipOp 51133(U);
    31. Wells Fargo Bank, N.A. v Guy, 5/01/2008, 2008 NYSlipOp 50916(U);
    32. Wells Fargo Bank, Natl. Assn. v Reyes, 6/19/2008, 2008 NYSlipOp 51211(U).
    For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here, and Go Here.
    (1) If a court grants a foreclosure judgment in a case where it is subsequently determined that the plaintiff mortgage lender lacked standing (and accordingly, the court lacked jurisdiction over the case), does this mean that the foreclosure judgment is void? If so, does this mean that everything devolving from that judgment (ie. the subsequent foreclosure sale, and any subsequent private sales or other conveyances of the foreclosed property) is also void? Can anyone imagine the mess that may currently exist with defective real estate titles around the country that have a recent foreclosure in its chain of title where the court lacked jurisdiction because of mortgage lenders and their attorneys who were as sloppy as those described in the list of cases? I can only imagine that this is an issue that title insurance underwriters and agents don’t want anyone thinking or asking about. missing mortgage foreclosure docs beta missing mortgage foreclosure docs gamma SloppyForeclosuresAlpha
    The Secret’s Out: Foreclosing Lenders Around The Country Continue To Get Hammered Over Missing, Inconsistent Mortgage Docs
    The National Law Journal reports:
    • Alarmed by the dramatic rise in housing foreclosures across the nation, judges have taken a variety of actions to slow the pace, ranging from outright dismissals for incomplete work to mandated mediation to threatening attorneys with sanctions.
    ***
    • A number of suits have accused banks of allegedly taking shortcuts to rush foreclosures through, often using so-called “foreclosure mills” — law firms that handle a high volume of foreclosure actions — to handle the cases, according to foreclosure defense lawyers, bankruptcy lawyers and consumer rights groups.
    ***
    • In Ohio, which has been particularly hard hit by foreclosures, a consortium of plaintiffs’ attorneys last month filed a class action against Deutsche Bank A.G. on behalf of Ohio homeowners facing foreclosure. The suit alleges that the bank lacks standing to bring foreclosures throughout Ohio and is missing key mortgage documents. Whittiker v. Deutsche Bank National Trust Co., No. 1:08cv00300 (N.D. Ohio).(1)
    One Brooklyn, New York trial judge’s approach to the apparent sloppy paperwork being filed by foreclosing lenders and their attorneys is described in these excerpts:
    • “I deny more foreclosures than I approve,” said Justice Arthur Schack(2) of Kings County, N.Y., Supreme Court, in Brooklyn. “I want to see the servicing agent’s power of attorney, I want to see all the paperwork before I approve it. If the paperwork is garbage, I deny it. If you’re going to take away someone’s home, it should be done properly.”
    ***
    • In a blistering opinion in June, Schack, the Brooklyn judge, threatened Mary McLoughlin, an attorney at Rosicki, Rosicki & Associates of Carle Place, N.Y., with sanctions for filing a foreclosure on behalf of Wells Fargo. After doing his own research in the [computer-accessible New York City public records], Schack discovered that Wells Fargo never owned the mortgage. Schack denied the foreclosure and further set a hearing for Aug. 1 to afford her a chance to explain why she should not be sanctioned for “frivolous conduct.” Wells Fargo Bank v. Reyes, No. 5516/08 (Kings Co., N.Y., Sup. Ct.) [2008 NY Slip Op 51211(U) [20 Misc 3d 1104(A)]; Decided June 19, 2008].(3)
    For the whole story, see Judges, attorneys work to stanch foreclosures (As actions surge, so do dismissals, mediation orders) (no subscription required).
    For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here, and Go Here.
    (1) The suit alleges that, because Deutsche Bank lacked standing to bring foreclosure actions, its attempt to do so constituted violations of the Federal Fair Debt Collection Practices Act, as well as Ohio RICO, R.C. 2923.32 Engaging in pattern of corrupt activity, both on its part as well as on the part of its attorneys filing the foreclosure actions. In addition to damages and other relief, the homeowners seek the return of their homes lost to foreclosure, and request that the attorneys representing Deutshce Bank fork over all the fees they collected on the foreclosure actions.
    (2) Ina recent case, Deutsche Bank Natl. Trust Co. v Maraj 2008 NY Slip Op 50176 (U); [18 Misc 3d 1123(A)]; January 31, 2008; Justice Schack, in denying a foreclosure, wondered if he was the target of a corporate “Kansas City Shuffle” (a reference to the 2006 film, Lucky Number Slevin, in which the term is explained by a hitman played by Bruce Willis) in that the paperwork filed by the foreclosing mortgage lender raised questions in his mind the answers to which weren’t readily apparent to him, and which created the appearance of possible fraudulent activity, according to his written opinion. See earlier post, Brooklyn Judge Presides Over A Corporate “Kansas City Shuffle” In Foreclosure Action?
    (3) In other gems by Justice Schack in which he denies foreclosure to other foreclosing mortgage lenders for submitting questionable paperwork, see HSBC Bank USA v Perboo, 2008 NY Slip Op 51385(U); Decided last Friday – July 11, 2008; and also a 2007 decision, Deutsche Bank Natl. Trust Co. v Castellanos, 2007 NY Slip Op 50978(U) [15 Misc 3d 1134(A)]; Decided on May 11, 2007, a foreclosure action in which he subsequently again denied foreclosure in the opinion in Deutsche Bank Natl. Trust Co. v Castellanos, 2008 NY Slip Op 50033(U) [18 Misc 3d 1115(A)]; Decided January 14, 2008. missing mortgage foreclosure docs beta missing mortgage foreclosure docs gamma Arthur M. Schack ForeclosureMillAttorneysAlpha SloppyForeclosuresAlpha
    THURSDAY, JUNE 05, 2008
    Summit County Enacts Rule Designed To Eliminate Sloppy Practices By Foreclosing Lenders & Their Attorneys
    The Summit County, Ohio judiciary has recently adopted a local rule in mortgage foreclosure actions requiring the foreclosing lender’s attorney to file a 14-point certification (known as a Certificate of Readiness) along with the lawsuit initiating the foreclosure action. Among the certifications that the lender’s attorney is required to make is the following:
    • The Plaintiff has in its custody and control the original note and mortgage, and said documents are available for inspection upon order of the Court.
    In addition, the foreclosing lender’s attorney no longer has 60 days to file with the court the required property title report (known as the Preliminary Judicial Report – serves as evidence of the state of the record title of the real property in question). The Preliminary Judicial Report is to be filed contemporaneously with the lawsuit and the attorney’s 14-point Certificate of Readiness.
    If the foregoing are not filed together when initiating a foreclosure action, the Summit County Clerk of the Courts has been ordered to reject the action for filing.
    It will be interesting to see how lenders’ counsel deal with the 14-point cerification when promissory notes have been lost, assignments of mortgages have gone unrecorded and that are dated on a date subsequent to the filing of the foreclosure action, and other well reported screw-ups that foreclosing lenders have heretofore been getting away with in foreclosure actions.
    For more on the Summit County, Ohio court rule, effective June 1, 2008, together with the standard form Certificate of Readiness containing all 14 points that lenders’ attorneys are now required to certify to the court when filing foreclosure actions, see Order – In re: Certificate of Readiness For Foreclosure Actions Filed In The Court of Common Pleas – General Division.
    Many thanks to William A. Roper, Jr. for the heads-up on the new rule. missing
    TUESDAY, APRIL 01, 2008
    Evidence Of Countrywide’s Missteps In Servicing Home Mortgages Litter Court Files Around The Country
    A story was run recently in The Atlanta Journal Constitution on a fight Countrywide Home Loans faces with the U.S. Trustee in a Georgia Federal bankruptcy court for alleged mistakes and/or misconduct during the course of one particular consumer bankruptcy case. The story also describes the wrath directed towards Countrywide by judges around the country as a result of its “missteps” committed both in the servicing of home loans and in its conduct in the courts:
    • A Texas judge, Jeff Bohm, rebuked Countrywide, Atlanta-based McCalla Raymer and a Texas law firm in a 72-page ruling [Judge Bohm's two-part ruling - Part I and Part II]. He found fault with each of the three parties’ handling of a case in which Countrywide sought permission to foreclose on a homeowner who was up to date on payments. The Texas law firm hired by McCalla Raymer was singled out by the judge. “Above all else, what kind of culture condones its lawyers lying to the court and then retreating to the office hoping that the Court will forget about the whole matter?” Bohm wrote.
    ***
    • In Ohio and Florida, the U.S. Trustee’s office has filed complaints in the past month seeking sanctions against Countrywide. In Ohio, Countrywide sought payments in bankruptcy court from a homeowner who had already paid off Countrywide. In Florida, Countrywide tried three times to foreclose on a homeowner who no longer owed Countrywide any money on the property.
    • Countrywide has already been sanctioned in other cases. A judge in Pennsylvania sanctioned the lender for trying to foreclose on a couple in that state who had made required payments “like clockwork,” according to the judge.
    • Countrywide’s Texas law firm was hit with a $75,000 sanction for its behavior in a case that included court filings that were “erroneous” and “clearly legal nonsense.”
    • A judge in North Carolina sanctioned Countrywide for twice changing the locks on a house that it had sought to repossess, even though the foreclosure had been stopped by a bankruptcy filing. Countrywide’s agents disposed of the family’s Christmas ornaments, family pictures and a christening dress when it improperly seized the home. “It is difficult to imagine more deliberate, unwarranted and egregious conduct,” Judge Catharine R. Carruthers wrote when sanctioning Countrywide.
    For the article, see Couple lose home in Countrywide dispute, but may yet win (Feds seek sanctions, say lender abused bankruptcy laws).
    For an article examining mortgage companies frequent non-compliance with law in consumer bankruptcy cases, see Misbehavior and Mistake in Bankruptcy Mortgage Claims, by Katherine M. Porter University of Iowa – College of Law.
    THURSDAY, MARCH 20, 2008
    Foreclosing Mortgage Lenders Being Bitten By Carelessness In Securitization Process
    A June, 2007 article in Forbes magazine reminds us how the carelessness in the securitization process by which mortgage loans were packaged and sold off to mortgage pools is now coming back to bite mortgage holders seeking to foreclose loans in default:
    • The financial engineering (ie. mortgage securitization) helped oil the housing boom by making credit more available. But stalled housing prices and rising defaults have revealed a mess: In the rush to flip paper, lots of the new lenders or pools don’t have the proper paperwork to show they even hold the mortgage.
    ***
    • This sloppiness offers glorious reprieves for some defaulted homeowners but just headaches for lenders. One Maryland man, holding documents suggesting his loan was held simultaneously by a pool of loans and a bank, is still in his home–five years after foreclosure was filed.
    Reportedly, lawyers representing homeowners facing foreclosure around the country are making moves that are “often forcing sloppy lenders to offer generous terms to avoid litigation.”
    For more, see Paper Chase (You’re in luck. Your mortgage lender has flipped, sliced and diced your loan–and now no one knows who holds it).
    For related articles, see:
    • Financial Times: Contested foreclosures rise, could increase RMBS losses,
    • Bloomberg News: Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish,
    • The Wall Street Journal Law Blog: Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?
    For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in connection with their mortgage loan documents, Go Here , Go Here , Go Here, and Go Here. undo mortgage loans TILA alpha missing mortgage foreclosure docs alpha SloppyForeclosuresAlpha
    THURSDAY, MARCH 06, 2008
    Countrywide, Law Firms Show Disregard For Professional, Ethical Obligations Of Legal Profession, Judicial System, Says Judge; Declines Sanctions
    The New York Times reports:
    • The Countrywide Financial Corporation, the largest American mortgage lender, did not show “bad faith” in the handling of a Texas homeowner’s mortgage and will not be sanctioned merely for unprofessional and unethical conduct, a federal judge ruled on Wednesday. Countrywide and two law firms it used showed “a disregard for the professional and ethical obligations of the legal profession and judicial system,” Judge Jeff Bohm of Federal District Court said in ruling on a request by a Justice Department official to consider punishing the company for its conduct. But to impose sanctions, Judge Bohm wrote, he would have had to find “clear and convincing evidence of conduct that is in bad faith, vexatious, wanton or undertaken for oppressive reasons.”
    ***
    • “In Texas, homesteads are sacrosanct,” the judge said in a ruling that traced how Countrywide’s corporate culture led to mistakes including a failure to properly record some payments made by [a Texas homeowner]. [...] The judge also found fault with the law firms, saying their flat-fee rate had led to a “corrosive ‘assembly line’ culture of practicing law.”
    For more, see Judge Lectures Countrywide but Decides Not to Punish It in Texas Mortgage Case.
    See also, Reuters: US judge won’t punish Countrywide for botched case.
    To view the court ruling, in which the presiding bankruptcy judge carefully rips apart Countrywide’s attorneys (probably “must reading” for anyone who believes they were screwed over by Countrywide or any other loan servicer), see: In re: William Allen Parsley:
    • Part I,
    • Part II.
    Go here, Go here and Go here for more on recent Countrywide problems with consumers. ForeclosureMillAttorneysAlpha SloppyForeclosuresAlpha
    “Assembly Line” Lawyering, Culture Condoning Lying To The Court In Foreclosure Cases Has Bankruptcy Judge Wondering
    The Wall Street Journal Law Blog reports:
    • Does flat-fee pricing foster assembly-line lawyering? That’s what U.S. bankruptcy judge Jeff Bohm suggested in a decision, entered yesterday, in a consumer bankruptcy case involving Countrywide and a Texas homeowner. While Judge Bohm declined to enter sanctions against Countrywide and its lawyers from two firms — Barrett Burke and McCalla Raymer — he wrote: “This fixed-fee business model appears to have been an overwhelming financial success. . . . Meanwhile, the profession has suffered from the ever decreasing standards that firms like Barrett Burke and McCalla Raymer have heretofore promoted. This demise must stop.”
    • The judge called problems at the firms’ culture “disconcerting” and described what he called the firms lack of care for accuracy and failure to communicate with clients. “[W]hat kind of culture condones its lawyers lying to the court and then retreating to the office hoping that the Court will forget about the whole matter.” While “perfection” he said is “too much to demand, preparedness and candor are not.”
    For more, see Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?
    For an article examining mortgage companies frequent non-compliance with law in consumer bankruptcy cases, see Misbehavior and Mistake in Bankruptcy Mortgage Claims, by Katherine M. Porter University of Iowa – College of Law.
    Go here, Go here and Go here for more on recent Countrywide problems with consumers. ForeclosureMillAttorneysAlpha SloppyForeclosuresAlpha
    SUNDAY, NOVEMBER 18, 2007
    More On “Hijacking” Of Foreclosure Process By Mortgage Lenders
    (original post 11-17-07)
    Cuyahoga County, Ohio (Cleveland and surrounding municipalities) is one area that is reportedly taking a tremendous beating when it comes to its residents losing their homes to foreclosure. So when word got out that Federal Judge Christopher Boyko slammed Deutsche Bank National Trust Co. in a court ruling recently for attempting to foreclose on Cleveland-area homes without being able to provide the legal documentation demonstrating that it actually owned the mortgages, the Cleveland Plain Dealer chimed in with several pieces that ran in its publication. For those interested, see:
    • Federal judge accuses mortgage lenders of hijacking foreclosure system for profits (Criticism joins wave of dismissed cases ),
    • Judge’s order trips up banks trying to foreclose (Judge insists on key document),
    • Excerpts from Judge Boyko’s comments on mortgage lenders,
    • Judges are right to make lenders follow the rules before foreclosing on peoples’ homes (an editorial) (Cleveland federal judge’s ruling puts lenders on notice that the rules apply to them as well as to borrowers).
    Some of the highlights from the Plain Dealer coverage:
    • Boyko’s colleague, Judge Kathleen O’Malley … , threw out 32 foreclosure cases this week for the same reason.
    • Stephen Bucha, chief magistrate of Cuyahoga County Common Pleas Court, has dismissed hundreds of foreclosure cases for not having paperwork. He said it can be time-consuming and expensive for lenders to produce and record the documents, adding, “They wait until they have to do it.” Bucha said judges in his court, which has about 10,000 pending foreclosure cases, are studying ways to adopt the federal court’s rule.
    • In an interview Friday, U.S. District Judge Dan Polster said he expected more foreclosure cases dismissed in federal court, including from his own docket. [...] Polster said the court has become more vigilant in foreclosure cases because they are too one-sided. Many homeowners do not contest the foreclosure, so the lenders face no defense lawyers in court proceedings. “It’s up to us to supervise it,” said Polster. “When you’re taking people’s homes, it falls to the integrity of the court.”
    • It’s true, even now, that the banks are free to refile the cases. But the symbolism of Boyko’s well-reasoned and well-written ruling is huge. It puts investment banks on notice that although many of them suspended careful lending practices and other rules in the rush to buy and pool subprime loans into junky bonds and drive up profits at almost any cost, the courts won’t be taking such holidays from their rules.
    • In the frenzy to underwrite and sell these bonds, lenders got sloppy. It’s inevitable that some won’t be able to hand over the proper documentation showing which mortgages they legally hold. That means thousands of foreclosure suits stand a good chance of getting tossed out or at least delayed.
    Go here to view Judge Boyko’s Court ruling.
    TUESDAY, JUNE 05, 2007
    Defending Consumers In Foreclosure Actions
    A number of articles have recently addressed the use of the Federal Truth In Lending Act by attorneys defending homeowners facing foreclosure as a way to undo subprime mortgages where it is alleged that the loan originator failed to fully comply with Federal law when making the loan. For prior posts on this point, containing links to online media reports, see:
    • Homeowners Facing Foreclosure Suing Lender To Undo Mortgage Loans,
    • Homeowners Invoking “Truth In Lending” Rights To Back Out Of Bad Loans,
    • Option ARMs The Target Of Homeowners’ “Truth In Lending” Lawsuits
    Another approach in defending homeowners facing foreclosure is addressed in a recent article in Forbes magazine. Mortgage loans get sold and resold in the open market and, if they end up in the hands of the Wall Street players who issue mortgage-backed securities, the ownership interests in those mortgages will then get “sliced and diced” among short, medium, and long term “investor pools”. The focus of the Forbes article is the apparent difficulty many foreclosing mortgage lenders are having in maintaining, keeping track of, and presenting in court the required mortgage loan paperwork when they initiate a foreclosure action, given the number of times the mortgage loans are sold, resold, sliced, and diced.
    Stated another way, some attorneys representing homeowners are making an issue of the sloppiness with which foreclosing mortgage lenders maintain their loan paperwork and the sloppiness with which they present their case in court. In one case in Florida, Jacksonville Area Legal Aid lawyer April Charney got a foreclosure filed against her client withdrawn after discovering that the company that filed to foreclose didn’t own the mortgage loan that they were attempting to foreclose. The following excerpt from the article reflects the thinking behind this approach in defending homeowners:
    • “”I buy time, then get lenders to cut interest rates and fees,” says Charney, who claims she’s stopped dozens of foreclosures over ownership issues. Other lawyers are making similar moves in Maryland, New York, Massachusetts, Ohio, Kansas and Washington State–often forcing sloppy lenders to offer generous terms to avoid litigation.”
    The article goes on to report that Charney “stumbled upon the industry’s paperwork problem two years ago after noticing that nearly all lenders seeking to foreclose against clients were filing “affidavits of lost notes.”” These affidavits are filed in court by foreclosing mortgage lenders in an attempt to get the judge to, in effect, waive the legal requirement that they present the required paperwork that proves that they, in fact, own the loan they are trying to foreclose.
    Reference is also made in the article to prominent foreclosure filer–Mortgage Electronic Registration Systems (“MERS”), a Vienna, Virginia company whose name is reportedly on 30% of the mortgages in county clerk offices around the country, and have been known in the industry as a company that files foreclosure actions in connection with mortgage loans that they may service but do not actually own.
    For more, see Paper Chase (You’re in luck. Your mortgage lender has flipped, sliced and diced your loan–and now no one knows who holds it).
    Postscript
    The carelessness and sloppiness in which some foreclosing mortgage lenders and their attorneys often go about their business when initiating forecloure actions has been observed by at least one Federal bankruptcy judge in Massachusetts. In fact, the judge, Judge Joel B. Rosenthal, “has observed instances in which attorneys representing alleged mortgagees or their servicing agents did not know whether the client was a mortgagee or a serving agent, or how their client came to acquire its role.” For more on the apparent cluelessness that some lenders and their attorneys seem to possess as it relates to their legal obligations when initiating a foreclosure action, see Judge Rosenthal’s Memorandum of Decision in In re Shwartz, (Bankr. Ct., Ma. April 19, 2007).
    For a comment on the significance of a foreclosing mortgage lender’s failure to present in court the actual, original promissory note, signed by the borrower / homeowner when bringing a foreclosure action, see “Editorial Note” in my prior post, Dillon Continues Battle Against Alleged Predatory Mortgage Servicer.
    For a copy of a court order from a Pinellas County, Florida trial court ruling that the mortgage servicer mentioned above, Mortgage Electronic Registration Systems, Inc. (“MERS”) “lacked standing” to bring foreclosure actions on behalf of the actual mortgage holders whose loans MERS was servicing, (and, accordingly, dismissed twenty foreclosure actions that MERS brought on their behalf), see in re Mortgage Electronic Registration Systems, Inc. (MERS), available online courtesy of Mortgage Servicing Fraud .org, at msfraud.org.

    (Please note that the Pinellas County, Florida trial court decision, the logic of which might still be found to be persuasive in courts outside Florida, has subsequently been reversed by a Florida appellate court. For more on this point, see Mortgage Servicer “Has Standing” To Bring Foreclosure Actions, Say Three Courts.)

    Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo the bad loans.

    For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures,

  56. Another Brooklyn Trial Judge & His Aversion To Sloppy Paperwork From Foreclosing Mortgage Lenders
    In a recent article in the National Law Journal, Brooklyn Supreme Court Justice Jack Battaglia, in connection with his approach to the apparent sloppy paperwork being filed by foreclosing lenders and their attorneys (and not unlike the approach taken by his colleague on the Brooklyn bench, Justice Arthur Schack), was described as expressing concerns over shortcuts being taken by them in their filings with the court. A review of three of his cases in which he denied foreclosure (with leave to renew in conformity with his decision) reveal a number of the problems Justice Battaglia found and that is apparently the cause for his concern:

    resorting to the improper use of “nail & mail” method of service of process without first exercising due diligence in determining Defendants’ whereabouts; no indication that the process server made any effort to determine defendants’ business address in order to attempt personal service there at pursuant to CPLR 308(2) before resorting to ‘nail and mail’ service – mortgagee would be expected to have a business address for its mortgagor;
    Affirmation of Merit and Amount Due was executed and notarized in outside New York State and not accompanied by a certificate of conformity;
    the submission to the court included numerous documents that purportedly support the relief sought, but many of the documents are not identified by anyone with personal knowledge, and are not authenticated or otherwise rendered admissible as evidence – they are not incorporated in any affidavit or affirmation;
    no proof of service of the notice of default;
    non-military affidavits were based upon information obtained from an underage person,
    affidavit executed by a person who is not an officer or employee of either Plaintiff or the original mortgagee, and who was, therefore, not qualified to testify as to the material facts upon which the action must proceed, particularly since the assignment purportedly giving
    Plaintiff ownership of the note and mortgage was not executed until after commencement of the action;
    Affidavit of Merit made by an “attorney in fact” who does not assert personal knowledge or facts from which personal knowledge might be inferred,
    court noted that a Limited Power of Attorney held by the alleged plaintiff did not confer testimonial competence;
    no explanation for attempted service of Defendants at one location when the default letter was addressed to a different location,
    notice of default from company who is neither the lender or mortgagee;
    notice of default failed to identify the lender, the date of the note and mortgage, or even the property;
    non-military affidavit executed as part of the affidavit of service of the summons and complaint was premature;
    no evidence of compliance with the additional-mailing requirement of CPLR 3215(g)(3)(i);
    in one case, the assignor under the Assignment of Mortgage was Mortgage Electronic Registration Systems, Inc., but there is no evidence of the assignor’s ownership of the
    note and mortgage, or its right or power to make the assignment.

    For more on the three cases, see:

    New Century Mortgage Corporation v Trench, 03/28/2007, 2007 NYSlipOp 30653(U);
    US Bank National Association v Lockridge, 11/27/2007, 2007 NYSlipOp 33886(U);
    Wall Street Mortgage v Lorence, 03/19/2007, 2007 NYSlipOp 30224(U).

  57. Wall Street Journal On Stalled Foreclosures, Legal Standing & Sloppy Paperwork
    The Wall Street Journal reports:

    A cadre of state-court judges scrutinizing foreclosure actions in a string of recent rulings have discovered flaws in documents that borrowers may be able to use to keep their homes. The judges, including a committee from the Kings County Supreme Court in Brooklyn, N.Y., are highlighting shortcuts taken by mortgage companies in court filings, which borrowers might be able to exploit when facing foreclosure.
    ***

    About six judges from the supreme court in Brooklyn, the state’s lowest court, which handles most of the New York City borough’s foreclosure actions, have been digging into the problem and finding new issues that they can use to dismiss cases.

    The work of the Brooklyn court — which formed a committee to discuss foreclosures about five years ago, long before the housing crisis emerged — looks prescient now as it has rejected dozens of foreclosure actions since the crisis began by identifying mistakes or suspicious information. Among the most energetic members of the Brooklyn committee is Justice Arthur Schack,(1) 63 years old. Justice Schack says barely any of the foreclosures he has denied eventually are completed.(2)
    ***

    Elsewhere, in Suffolk County on Long Island, several judges have taken up scrutiny of mortgage documents. Justice Jeffrey Arlen Spinner wrote recently in a ruling that he found “glaring discrepancies and unexplained issues of substance” in a foreclosure lawsuit filed last year by GMAC Mortgage LLC.(3)

  58. Subprime Loans That Lenders Knew Or Should Have Known Were Unsustainable Are Illegal, Says Massachusetts High Court
    The Boston Herald reports:

    The Bay State’s highest court has issued a landmark ruling tentatively declaring whole classes of subprime mortgages unfair under Massachusetts law. “Originating loans with terms that in combination would lead predictably to . . . default and foreclosure (is) within established concepts of unfairness,” state Supreme Judicial Court justices unanimously ruled yesterday. The decision upholds a lower-court injunction issued against subprime-lending giant Fremont Investment & Loan.

    Suffolk Superior Court Judge Ralph Gants handed down the injunction in February, declaring – apparently for the first time in state history – that some subprime-mortgage terms automatically violate Massachusetts law.

    Ruling in a lawsuit brought by state Attorney General Martha Coakley, Gants found that many of Fremont’s Bay State subprime loans seemed “doomed to foreclosure” from the start. The judge ordered Fremont to give Coakley’s office a chance to object before foreclosing on any of 2,700 Massachusetts subprime mortgages with terms Gants deemed “structurally unfair.”

    Last month, the judge issued a similar injunction against Option One Mortgage, which oversees another 8,000 questionable Massachusetts subprime loans. Although Gants’ rulings are preliminary, and subject to change as cases work their way through courts, experts still see yesterday’s SJC move as precedent-setting.

    “We think this is an important milestone not just for Massachusetts, but also for other states that want to use their consumer-protection powers against unfair and deceptive (mortgage) marketing,” Coakley said.

  59. Ohio Homeowner Hits Jackpot; Lender Loses Right To Foreclose On Delinquent Mortgage Due To Violation Of Procedural Rule, Says State High Court

    [Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
    U.S. Bank Natl. Assn. v. Gullotta, Slip Opinion No. 2008-Ohio-6268.]
    NOTICE
    This slip opinion is subject to formal revision before it is published in
    an advance sheet of the Ohio Official Reports. Readers are requested
    to promptly notify the Reporter of Decisions, Supreme Court of Ohio,
    65 South Front Street, Columbus, Ohio 43215, of any typographical or
    other formal errors in the opinion, in order that corrections may be
    made before the opinion is published.
    SLIP OPINION NO. 2008-OHIO-6268
    U.S. BANK NATIONAL ASSOCIATION, TRUSTEE, APPELLEE, v. GULLOTTA,
    APPELLANT, ET AL.
    [Until this opinion appears in the Ohio Official Reports advance sheets,
    it may be cited as U.S. Bank Natl. Assn. v. Gullotta,
    Slip Opinion No. 2008-Ohio-6268.]
    Civ.R. 41(A)(1) — “Two-dismissal rule” — Adjudication on the merits — Res
    judicata — Foreclosure actions.
    (No. 2007-1144 – Submitted March 12, 2008 – Decided December 10, 2008.)
    CERTIFIED by the Court of Appeals for Stark County,
    No. 2006CA00145, 2007-Ohio-2085.
    __________________
    PFEIFER, J.
    {¶ 1} The court below certified to us this question: “Whether or not each
    missed payment under a promissory note and mortgage yields a new claim such
    that any successive actions on the same note and mortgage involve different
    claims and are thus exempt from the ‘two-dismissal rule’ contained in Civ. R.
    41(A)(1).” In this case, under these facts, we answer the question in the negative.
    SUPREME COURT OF OHIO
    2
    Factual and Procedural Background
    {¶ 2} This matter arises from the third foreclosure action filed by
    plaintiff-appellee U.S. Bank National Association against defendant-appellant
    Giuseppe Gullotta. All three foreclosure actions filed against Gullotta by U.S.
    Bank relate to the same note and mortgage. Gullotta argues that since U.S. Bank
    dismissed the first two actions pursuant to Civ.R. 41(A)(1)(a), the second
    dismissal constituted an adjudication upon the merits of U.S. Bank’s claim, and
    res judicata therefore barred the third action. Given the facts of this particular
    case, we agree.
    {¶ 3} In June 2003, Gullotta executed an adjustable rate note and a
    mortgage in the amount of $164,900.00 with MILA, Inc., which subsequently
    assigned the note to U.S. Bank. On April 9, 2004, U.S. Bank filed a complaint for
    money judgment, foreclosure, and relief, declared the entire debt due, and prayed
    for judgment in foreclosure in the entire amount of the principal due on the note,
    $164,390.91, plus interest at the rate of 7.35 percent per year from November 1,
    2003. On June 8, 2004, U.S. Bank voluntarily dismissed that complaint pursuant
    to Civ.R. 41(A).
    {¶ 4} On September 9, 2004, U.S. Bank filed a second complaint for
    money judgment, foreclosure, and relief. Again, the bank alleged a default under
    the note and mortgage, declared the entire debt due, and prayed for judgment in
    foreclosure in the amount of the principal due on the note, $164,390.91, plus
    interest at the rate of 7.35 percent per year from December 1, 2003. On March
    15, 2005, U.S. Bank dismissed that complaint pursuant to Civ.R. 41(A). That
    second dismissal was filed by a different lawyer than the one who previously had
    filed the two earlier complaints and the first dismissal.
    {¶ 5} On October 26, 2005, U.S. Bank filed another complaint for
    money judgment, foreclosure, and relief. Again, the bank alleged a default under
    the note and mortgage, declared the entire debt due, and prayed for judgment in
    January Term, 2008
    3
    foreclosure in the amount of the principal due on the note, $164,390.91, plus
    interest at the rate of 7.35 percent per year from November 1, 2003.
    {¶ 6} On January 4, 2006, Gullotta filed a motion to dismiss the third
    action pursuant to Civ.R. 12(B)(6), arguing that pursuant to Civ.R. 41(A), the
    bank’s second dismissal constituted an adjudication on the merits, rendering the
    third complaint barred by res judicata. On February 6, 2006, U.S. Bank filed a
    response to Gullotta’s motion and also filed a motion for leave to file an amended
    complaint. U.S. Bank wrote in its response:
    {¶ 7} “Defendant in his Motion to Dismiss claims the subject matter of
    the litigation is exactly the same as the first two cases that were filed in the Court
    of Common Pleas, Stark County, Ohio. However, should the Court allow
    Plaintiff to amend its Complaint, Defendant’s Motion to Dismiss would become
    moot. It is true that Plaintiff has brought these proceedings in this Court based
    upon the default of the note and mortgage that were the subject of the previous
    two case[s]. It is also true that the two previous actions were dismissed voluntarily
    under [Civ.R.] 41(A). Nevertheless, the instant proceedings would represent a
    new and different cause of action and, therefore, res judicata would not apply.”
    {¶ 8} On February 10, 2006, the trial court converted Gullotta’s motion
    to dismiss into a motion for summary judgment because the motion was “founded
    on matters outside the pleadings.” The trial court also granted U.S. Bank’s
    motion for leave to file an amended complaint. In its amended complaint, U.S.
    Bank brought alternative claims. First, the bank sought judgment against Gullotta
    in the amount of $164,390.91 plus interest at the rate of 7.35 percent per year
    from December 1, 2003. In the alternative, the bank sought judgment against
    Gullotta in the amount of $164,390.91 plus interest at the rate of 7.35 percent per
    year from April 1, 2005. That April 1, 2005 date moved the start date for the
    collection of interest on the overall debt to a time after U.S. Bank’s second
    dismissal.
    SUPREME COURT OF OHIO
    4
    {¶ 9} The trial court relied on the alternate date raised by the bank in its
    amended complaint in overruling Gullotta’s motion for summary judgment. The
    court held:
    {¶ 10} “The April 1, 2005 default date is after the second dismissal on
    March 13, 2005 and, therefore, could not have been included in either of the first
    two actions. Because the second dismissal is an adjudication on the merits,
    Defendant was at that time no longer in default and the note would be decelerated.
    However, Defendant’s obligation to continue making payments would begin again
    in April of 2005. The current action covers months not litigated in the first two
    foreclosure actions and relates to a later delinquency in payments. Thus, because
    the subsequent action is based upon a demand and cause of action, res judicata
    does not apply.” (Footnote omitted.)
    {¶ 11} On April 18, 2006, U.S. Bank filed a motion for summary
    judgment, which the trial court granted on May 11, 2006. Gullotta appealed. The
    Fifth District Court of Appeals affirmed the trial court, agreeing that res judicata
    did not bar appellee’s third foreclosure complaint because it covered different
    dates of default and months not litigated in the first two complaints.
    {¶ 12} The appellate court noted its disagreement with the decision of
    the Tenth District Court of Appeals in EMC Mtge. Corp. v. Jenkins, 164 Ohio
    App.3d 240, 2005-Ohio-5799, 841 N.E.2d 855. In EMC, the court had held that
    each missed payment under a promissory note and mortgage did not yield a new
    claim that would obviate res judicata concerns upon an application of the twodismissal
    rule. Id. at 26. The court below instead held:
    {¶ 13} “We find that each new missed payment on an installment note is
    a new claim. Two Rule 41(A) dismissals of complaints, which allege the same
    default dates, would not be an adjudication that the note (debt) is no longer in
    existence because it has been paid. Rather, it would be an adjudication that the
    obligor is no longer in default under the terms of the note as of the date alleged
    January Term, 2008
    5
    and that the entire balance of the note is not due and payable immediately. The
    balance would still be due per the installment payment arrangements in the note.”
    Gullotta v. U.S. Bank Natl. Assn., 5th Dist. No. 2006CA00145, 2007-Ohio-2085, ¶
    34.
    {¶ 14} Finally, the court below cited a policy reason behind its decision,
    finding that imposing the two-dismissal rule to foreclosure actions might militate
    against settlement negotiations between lenders and borrowers:
    {¶ 15} “In addition, the application of Rule 41(A) per the EMC case
    would discourage a lender, such as appellant, from working with a borrower, such
    as appellee, when the borrower defaults on a mortgage. Frequently, after filing a
    foreclosure action, a lender will work with the buyer so that the buyer can retain
    his or her property. The lender will then dismiss the foreclosure action. A lender
    would not be inclined to do so if a dismissal precluded a bank from eventually
    foreclosing on a borrower’s property after a default. As a result, the number of
    foreclosures would increase as would the number of individuals losing their
    homes.” Id. at ¶ 35.
    {¶ 16} Gullotta filed a motion to certify a conflict in the court of
    appeals, asserting that the court’s decision directly conflicted with the Tenth
    District’s decision in EMC. The Fifth District granted Gullotta’s motion,
    certifying the following issue:
    {¶ 17} “Whether or not each missed payment under a promissory note
    and mortgage yields a new claim such that any successive actions on the same
    note and mortgage involve different claims and are thus exempt from the ‘twodismissal
    rule’ contained in Civ.R. 41(A)(1).”
    Law and Analysis
    {¶ 18} The question certified to us defies an answer that can apply to all
    cases. In this case, we hold that each missed payment under the promissory note
    SUPREME COURT OF OHIO
    6
    and mortgage did not give rise to a new claim and that Civ.R. 41(A)’s twodismissal
    rule does apply. Thus, res judicata barred U.S. Bank’s third complaint.
    {¶ 19} This case is this case. The significant facts here are that the
    underlying note and mortgage never changed, that upon the initial default the
    bank accelerated the payments owed and demanded the same principal payment
    that it demanded in every complaint, that Gullotta never made another payment
    after the initial default, and that U.S. Bank never reinstated the loan.
    {¶ 20} With those facts as our backdrop, we address the effect of the
    bank’s two voluntary dismissals on its attempt to prosecute its claim against
    Gullotta. Civ.R. 41(A) reads:
    {¶ 21} “(1) * * * [A] plaintiff, without order of court, may dismiss all
    claims asserted by that plaintiff against a defendant by * * *
    {¶ 22} “(a) filing a notice of dismissal at any time before the
    commencement of trial * * *.
    {¶ 23} “Unless otherwise stated in the notice of dismissal or stipulation,
    the dismissal is without prejudice, except that a notice of dismissal operates as an
    adjudication upon the merits of any claim that the plaintiff has once dismissed in
    any court.” (Emphasis added.)
    {¶ 24} In Olynyk v. Scoles, 114 Ohio St.3d 56, 2007-Ohio-2878, 868
    N.E.2d 254, ¶ 10, this court discussed the res judicata effect of two Civ.R. 41(A)
    voluntary dismissals on a third complaint filed by the same plaintiff against the
    same defendant:
    {¶ 25} “It is well established that when a plaintiff files two unilateral
    notices of dismissal under Civ.R. 41(A)(1)(a) regarding the same claim, the
    second notice of dismissal functions as an adjudication of the merits of that claim,
    regardless of any contrary language in the second notice stating that the dismissal
    is meant to be without prejudice. * * * In that situation, the second dismissal is
    with prejudice under the double-dismissal rule, and res judicata applies if the
    January Term, 2008
    7
    plaintiff files a third complaint asserting the same cause of action. See 1970 Staff
    Note to Civ.R. 41 (when a dismissal is with prejudice, ‘the dismissed action in
    effect has been adjudicated upon the merits, and an action based on or including
    the same claim may not be retried’).”
    {¶ 26} Because the second dismissal here functioned as an adjudication
    on the merits, res judicata would bar an action “based upon any claim arising out
    of the transaction or occurrence that was the subject matter of the previous
    action.” Grava v. Parkman Twp. (1995), 73 Ohio St.3d 379, 653 N.E.2d 226,
    syllabus. Our question then is whether the claim in U.S. Bank’s amended
    complaint arose out of the transaction or occurrence that was the subject matter of
    the previously dismissed actions.
    {¶ 27} For purposes of res judicata analysis, a “transaction” is defined
    as a “ ‘common nucleus of operative facts.’ ” Grava, 73 Ohio St.3d at 382, 653
    N.E.2d 226, quoting 1 Restatement of the Law 2d, Judgments (1982) 198-199,
    Section 24, Comment b. That a plaintiff changes the relief sought does not rescue
    the claim from being barred by res judicata: “ ‘The rule * * * applies to extinguish
    a claim by the plaintiff against the defendant even though the plaintiff is prepared
    in the second action * * * [t]o seek remedies * * * not demanded in the first
    action.’ (Emphasis added.)” Grava, 73 Ohio St.3d at 383, 653 N.E.2d 226,
    quoting 1 Restatement of the Law 2d, Judgments (1982) 209, Section 25.
    {¶ 28} Do the claims here arise from a common nucleus of operative
    facts? U.S. Bank argues that its third bite at the apple is different from its first
    two because in its amended complaint it sought interest only from April 1, 2005.
    However, all of the claims in all of the complaints filed by U.S. Bank against
    Gullotta arise from the same note, the same mortgage, and the same default. The
    note and mortgage have not been amended in any way. From the time of
    Gullotta’s original breach, he has owed the entire amount of the principal. The
    SUPREME COURT OF OHIO
    8
    amended third complaint alleged the same amount of principal due as the other
    two complaints.
    {¶ 29} The key here is that the whole note became due upon Gullotta’s
    breach, not just the installment he missed. There is a distinction between an
    action for recovery of installment payments under an installment note where the
    entire principal is accelerated, and an action to recover for nonpayment under an
    installment note where only the amount of the principal to date, and no future
    amount, is sought. The general rule that each missed payment in an installment
    loan gives rise to a separate cause of action does not hold true when there is an
    acceleration clause in the loan agreement:
    {¶ 30} “The general rule regarding loans repayable in installments is
    that each default in payment may give rise to a separate cause of action. Humitsch
    v. Collier (Dec. 29, 2000), Lake App. No. 99-L-099, at 3, citing Eden Realty Co.
    v. Weather Seal, Inc. (1957), 102 Ohio App. 219, 224, 142 N.E.2d 541. Further, a
    recovery for the monthly installments due at the time the action is commenced
    will not bar recovery for installments that subsequently come due. General Dev.
    Corp. v. Wilber Rogers Atlanta Corp. (1971), 28 Ohio App.2d 35, 37, 273 N.E.2d
    908. Thus, a breach of an installment contract by non-payment does not constitute
    a breach of the entire contract. The parties to the note may avoid the operation of
    this rule by including an acceleration clause in the agreement. Humitsch at 3,
    citing Buckeye Fed. S & L Assn. v. Olentangy Motel (Aug. 22, 1991), Franklin
    App. No. 90-AP-1409. An acceleration clause ‘ * * * requires the maker, drawer
    or other obligor to pay part or all of the balance sooner than the date or dates
    specified for payment upon the occurrence of some event or circumstance
    described in the contract * * *[,]’ such as a default by nonpayment. Black’s Law
    Dictionary (7th Ed. Rev.1999) 12.” Citizens Bank of Logan v. Marzano, 4th Dist.
    No. 04CA4, 2005-Ohio-163, 2005 WL 103165, ¶ 16.
    January Term, 2008
    9
    {¶ 31} By agreeing to an acceleration clause, the parties in this case
    have avoided the operation of the general rule that nonpayment on an installment
    loan does not constitute a breach of the entire contract. In a contract with an
    acceleration clause, a breach constitutes a breach of the entire contract. Once
    Gullotta defaulted and U.S. Bank invoked the acceleration clause of the note, the
    contract became indivisible. The obligations to pay each installment merged into
    one obligation to pay the entire balance on the note.
    {¶ 32} Despite the existence of the acceleration clause, the court below
    held that each successive time that Gullotta failed to make a payment, a new
    cause of action arose. We agree with the contrary position adopted by the court in
    EMC. EMC is akin to this case. There, as here, the defendant missed the first
    payment under the note and mortgage and continually remained in default. All
    the complaints against the mortgagor in EMC “sought judgment for the entire
    amount of the principal due under the note, with accrued interest, late charges,
    advances for taxes and insurance, and costs.” EMC, 164 Ohio App.3d 240, 2005-
    Ohio-5799, 891 N.E.2d 855, at ¶ 26. The mortgagor never “cured his default or
    had his loan reinstated.” Id. The EMC court refused to adopt the proposition that
    each missed payment under a promissory note and mortgage yields a new claim,
    such that any successive actions on the same note and mortgage involve different
    claims and are, thus, exempt from the two-dismissal rule. The court wrote that
    “EMC’s position would render the Civ.R. 41(A)(1) two-dismissal rule
    meaningless in the context of foreclosure actions because every successive
    attempt to foreclose a mortgage could be construed as a new claim.” Id. at ¶ 23.
    Nothing in Civ.R. 41(A) indicates that it should not apply to foreclosure actions.
    {¶ 33} Civ.R. 41(A) would not apply to bar a third claim if the third
    claim were different from the dismissed claims. As the court in EMC pointed out,
    there are examples from Ohio courts where successive foreclosure actions were
    indeed considered to be different claims. In those cases, however, the underlying
    SUPREME COURT OF OHIO
    10
    agreement had significantly changed or the mortgage had been reinstated,
    following the earlier default. In Aames Capital Corp. v. Wells (Apr. 3, 2002),
    Summit App. No. 20703, 2002 WL 500320, the mortgagor argued that res
    judicata barred a second foreclosure action on the same note and mortgage. In the
    first foreclosure action, the trial court had ruled against the mortgagee and
    required it to reinstate the note and mortgage. The mortgagee filed its second
    foreclosure action when the mortgagor failed to make payments on the reinstated
    note. The court in Aames held, “As the bases for the two complaints were
    different, the present action is not barred by res judicata.” Aames at *5.
    {¶ 34} In Midfed Sav. Bank v. Martin (July 13, 1992), Butler App. No.
    CA91-12-202, 1992 WL 165143, the court found that res judicata did not prevent
    the mortgagee from bringing a second foreclosure action on the same note
    because the entry in the first foreclosure action stated that the mortgagee’s claim
    related only to the delinquency that had arisen up to the date of judgment. The
    mortgagor had paid the amount of the original delinquency and became current on
    the note, leading to a dismissal with prejudice of the first foreclosure action.
    Midfed Sav. Bank at * 1, 3. Thus, the court found that the second delinquency
    was distinct from the first.
    {¶ 35} In Homecomings Fin. Network, Inc. v. Oliver, Hamilton App.
    No. C-020625, 2003-Ohio-2668, the court found that a second foreclosure action
    differed from the first because the claims involved different acts of default by the
    mortgagors, as well as different rates of interest and different amounts of principal
    owed. This thwarted the mortgagors’ res judicata argument.
    {¶ 36} There are no such differences between U.S. Bank’s claims in this
    case. Here, in an attempt to get around having its claim barred by res judicata,
    U.S. Bank amended its third complaint to include a prayer for interest from April
    1, 2005. That was merely a change to the complaint, not a change in the common
    nucleus of operative facts supporting the claim. The complaint still arose from
    January Term, 2008
    11
    Gullotta’s original default, when the entire principal became due. Gullotta did not
    make a single payment after the debt was first declared due, the parties changed
    none of the terms of the note, and U.S. Bank asked for the same amount of
    principal in each of its complaints.
    {¶ 37} Although U.S. Bank’s complaint changed, the operative facts
    remained the same. Plaintiffs cannot save their claims from the two-dismissal
    rule simply by changing the relief sought in their complaint. Allowing U.S. Bank
    to do so would be like allowing a plaintiff in a personal-injury case to save his
    claim from the two-dismissal rule by amending his complaint to forego a couple
    of months of lost wages.
    {¶ 38} The court below was concerned that an interpretation like the
    court’s in EMC could lead to banks deciding not to negotiate with mortgagors to
    assist them in becoming current on their mortgages. We agree that negotiations
    between a mortgagee and mortgagor to prevent an ultimate foreclosure is
    desirable for all the parties and for the state as a whole. Here, there is nothing in
    the record to indicate that there were any fruitful negotiations between the parties.
    Had there been any change as to the terms of the note or mortgage, had any
    payments been credited, or had the loan been reinstated, then this case would
    concern a different set of operative facts, and res judicata would not be in play.
    Instead, 15 months passed between the date of the alleged default and U.S. Bank’s
    second voluntary dismissal. In that period, nothing changed between the parties.
    It remained within U.S. Bank’s control as to whether it should dismiss its second
    complaint. It did dismiss the complaint a second time, and Civ.R. 41(A) operated
    as it would against any other plaintiff.
    {¶ 39} Accordingly, we reverse the judgment of the appellate court.
    Judgment reversed
    and cause remanded.
    MOYER, C.J., and O’CONNOR, LANZINGER, and CUPP, JJ., concur.
    SUPREME COURT OF OHIO
    12
    LUNDBERG STRATTON and O’DONNELL, JJ., dissent.
    __________________
    O’DONNELL, J., dissenting.
    {¶ 40} I respectfully dissent and would affirm the decision of the court
    of appeals. In my view, the double-dismissal rule set forth in Civ.R. 41(A)(1)(a)
    does not apply in this case because U.S. Bank presented a different cause of
    action in its third complaint.
    {¶ 41} U.S. Bank filed three actions to foreclose on Gullotta’s
    mortgage. In its first and second actions, the bank sought to invoke the
    acceleration clause to recover the full amount of the principal, $164,390.91 at
    7.35 percent interest, alleging that Gullotta had defaulted as of November 1, 2003.
    The bank voluntarily dismissed both actions pursuant to Civ.R. 41(A)(1)(a). In
    the third action, however, the bank alleged that Gullotta was in default as of April
    1, 2005, one payment period after it had dismissed the second foreclosure action.
    Thus, the bank sought the full amount of principal and interest from that date, not
    November 1, 2003.
    {¶ 42} As the majority recognizes, “The general rule regarding loans
    repayable in installments is that each default in payment may give rise to a
    separate cause of action.” Citizens Bank of Logan v. Marzano, 4th Dist. No.
    04CA4, 2005-Ohio-163, 2005 WL 103165, ¶ 16. “Further, a recovery for the
    monthly installments due at the time the action is commenced will not bar
    recovery for installments that subsequently come due. * * * Thus, a breach of an
    installment contract by non-payment does not constitute a breach of the entire
    contract.” Id. However, when the parties have included an acceleration clause in
    the contract, the failure to pay one installment results in a breach of the entire
    contract, with the entire balance becoming due. Id.
    {¶ 43} In this case, Gullotta’s mortgage has an acceleration clause,
    providing that upon his failure to make any monthly payment, the bank has a right
    January Term, 2008
    13
    to demand from him “the full amount of Principal which has not been paid and all
    the interest that [Gullotta] owe[s] on that amount.” Thus, when he defaulted in
    November 2003, U.S. Bank accrued a cause of action that would have entitled it
    to the entire amount of the loan, including interest. The bank, however, failed to
    prosecute this cause of action for this default, twice dismissing its complaints
    pursuant to Civ.R. 41(A)(1)(a).
    {¶ 44} In Olynyk v. Scoles, 114 Ohio St.3d 56, 2007-Ohio-2878, 868
    N.E.2d 254, ¶ 10, we explained that “when a plaintiff files two unilateral notices
    of dismissal under Civ.R. 41(A)(1)(a) regarding the same claim, the second notice
    of dismissal functions as an adjudication of the merits of that claim, * * *. In
    that situation, the second dismissal is with prejudice under the double-dismissal
    rule, and res judicata applies if the plaintiff files a third complaint asserting the
    same cause of action.” (Emphasis added.)
    {¶ 45} Accordingly, U.S. Bank’s voluntary dismissal of its second
    complaint functioned as an adjudication on the merits of the cause of action based
    on Gullotta’s default. In other words, the bank failed to prove, and can never
    again prove, that Gullotta was in default as of November 1, 2003.
    {¶ 46} U.S. Bank’s third complaint, however, asserted that Gullotta had
    defaulted on the loan in April 2005, subsequent to the date that the bank
    voluntarily dismissed its second complaint. The question, therefore, is whether
    the third complaint presented a different cause of action.
    {¶ 47} In concluding that it did not, the majority reasons that “[o]nce
    Gullotta defaulted, and U.S. Bank invoked the acceleration clause of the note, the
    contract became indivisible. The obligations to pay each installment merged into
    one obligation to pay the entire balance on the note.” Moreover, it states, “The
    [third] complaint still arose from Gullotta’s original default, when the entire
    principal became due.” Thus, according to the majority, U.S. Bank’s third
    complaint presented the same claim as the first two complaints because the bank
    SUPREME COURT OF OHIO
    14
    sought the full amount of principal under the acceleration clause, even though
    Gullotta had already defaulted in November 2003.
    {¶ 48} In my view, this conclusion rests on the assumption that “[f]rom
    the time of Gullotta’s original breach, he has owed the entire amount of the
    principal.” This “original breach,” which occurred in November 2003, was the
    subject matter of U.S. Bank’s first two complaints. But, pursuant to Olynyk, the
    voluntary dismissal of the bank’s second complaint for this cause of action
    functioned as an adjudication that Gullotta had not defaulted in November 2003.
    In other words, there was no breach of contract at that time.
    {¶ 49} For this reason, Gullotta’s mortgage payments were not
    accelerated in November 2003. As stated in Marzano, “An acceleration clause ‘ *
    * * requires the maker, drawer or other obligor to pay part or all of the balance
    sooner than the date or dates specified for payment upon the occurrence of some
    event or circumstance described in the contract * * *[,]’ such as a default by
    nonpayment.” (Emphasis added.) 2005-Ohio-163, 2005 WL 103165, ¶ 16,
    quoting Black’s Law Dictionary (7th Ed.1999) 12. Here, the double-dismissal of
    this cause of action functioned as an adjudication on the merits, to the effect that
    there was no default in November 2003. Consequently, the acceleration clause
    was not triggered, and Gullotta had no obligation to make any more than his
    regular monthly payments after U.S. Bank voluntarily dismissed its second
    complaint in March 2005.
    {¶ 50} But Gullotta did not make the next payment after the second
    dismissal. As a result, the bank filed a third complaint, alleging that Gullotta had
    defaulted in April 2005. Although the complaint also alleges a breach of contract,
    the cause of action is based on a different breach than in the first two actions. Res
    judicata and the double-dismissal rule do not apply here because the claim does
    not “aris[e] out of the transaction or occurrence that was the subject matter of the
    January Term, 2008
    15
    previous action.” Grava v. Parkman Twp. (1995), 73 Ohio St.3d 379, 653 N.E.2d
    226, syllabus.
    {¶ 51} The majority also reasons that the causes of action in the three
    complaints are identical because U.S. Bank sought the same amount of principal
    in all three actions. But the double-dismissal rule applies only to identical causes
    of action, not to identical prayers for relief. See Olynyk, 114 Ohio St.3d 56, 2007-
    Ohio-2878, 868 N.E.2d 254; Civ.R. 41(A)(1)(a). Moreover, a claimant may
    demand any amount or type of relief for a cause of action, but this does not mean
    the claimant is entitled to that relief. Thus, the fact that U.S. Bank sought the
    same amount of principal in its third complaint as it did the first and second
    complaints is irrelevant to the determination of whether the claim is barred by the
    double-dismissal rule.
    {¶ 52} Furthermore, the instant matter is distinguishable from EMC
    Mtg. Corp. v. Jenkins, 164 Ohio App.3d 240, 2005-Ohio-5799, 841 N.E.2d 855,
    in which the mortgagee filed three successive complaints, each of which alleged
    the same date of default. And while the majority cites several other appellate
    decisions, these cases are inapposite because they only provide other bases for not
    applying the double-dismissal rule.
    {¶ 53} I am persuaded, rather, by the decision of the Supreme Court of
    Florida in Singleton v. Greymar Assocs. (Fla.2004), 882 So.2d 1004, which
    addressed virtually the same issue we are confronted with here. In that case, the
    mortgagee, Greymar Associates, filed a foreclosure action against the mortgagor,
    Gwendolyn Singleton, based on her alleged failure to make payments from
    September 1, 1999, to February 1, 2000. Greymar also sought acceleration of the
    debt pursuant to the contract. The trial court, however, dismissed the action with
    prejudice after Greymar failed to appear at a case-management conference.
    Greymar then filed a second foreclosure action, but it changed the alleged date of
    default to April 1, 2000. The trial court rejected Singleton’s defense that
    SUPREME COURT OF OHIO
    16
    dismissal of the first action with prejudice barred any successive claim, and the
    appellate court affirmed.
    {¶ 54} On further appeal, the Supreme Court of Florida also affirmed:
    {¶ 55} “While it is true that a foreclosure action and an acceleration of
    the balance due based upon the same default may bar a subsequent action on that
    default, an acceleration and foreclosure predicated upon subsequent and different
    defaults present a separate and distinct issue. * * * For example, a mortgagor may
    prevail in a foreclosure action by demonstrating that she was not in default on the
    payments alleged to be in default, or that the mortgagee had waived reliance on
    the defaults. In those instances, the mortgagor and mortgagee are simply placed
    back in the same contractual relationship with the same continuing obligations.
    Hence, an adjudication denying acceleration and foreclosure under those
    circumstances should not bar a subsequent action a year later if the mortgagor
    ignores her obligations on the mortgage and a valid default can be proven.” Id. at
    1007.
    {¶ 56} The court further stated that “[i]f res judicata prevented a
    mortgagee from acting on a subsequent default even after an earlier claimed
    default could not be established, the mortgagor would have no incentive to make
    future timely payments on the note. The adjudication of the earlier default would
    essentially insulate her from future foreclosure actions on the note – merely
    because she prevailed in the first action. Clearly, justice would not be served if
    the mortgagee was barred from challenging the subsequent default payment solely
    because he failed to prove the earlier alleged default.” Id. at 1007-1008.
    {¶ 57} Other courts have reached similar conclusions. See, e.g., Afolabi
    v. Atlantic Mtge. & Invest. Corp. (Ind.App.2006), 849 N.E.2d 1170, 1175 (“res
    judicata does not bar successive foreclosure claims * * *. Here, the subsequent
    and separate alleged defaults under the note created a new and independent right
    in the mortgagee to accelerate payment on the note in a subsequent foreclosure
    January Term, 2008
    17
    action”); Fairbank’s Capital Corp. v. Milligan (C.A.3, 2007), 234 Fed.Appx. 21,
    24 (a “stipulated dismissal with prejudice * * * cannot bar a subsequent mortgage
    foreclosure action based on defaults occurring after dismissal of the first action *
    * *. If we were to so hold, it would encourage a delinquent mortgagor to come to
    a settlement with a mortgagee on a default in order to later insulate the mortgagor
    from the consequences of a subsequent default. This is plainly nonsensical”).
    {¶ 58} Under today’s holding, the voluntary dismissal of U.S. Bank’s
    second action in effect results in an adjudication that Gullotta has no further
    obligation to make payments toward the mortgage and that the bank will not be
    able to foreclose. While this outcome favors the defaulting homeowner in this
    case, the impact of the majority opinion will work against Ohio homeowners
    because mortgagees will have little incentive to resolve defaults with distressed
    mortgagors.
    {¶ 59} For these reasons, I respectfully dissent.
    LUNDBERG STRATTON, J., concurs in the foregoing opinion.
    __________________
    Shapiro & Felty, L.L.P., and John A. Polinko, for appellee U.S. Bank
    National Association.
    McKinzie & Associates, Timothy D. McKinzie and Kerry G. MacKenzie,
    for appellant.
    ______________________

  60. Well, what have we here, Mario? A Jeremy Clarkson auto review of the Vauxhall Insignia 2.8 V6 that doubles as E. U. commentary, and end times prescription. Clever! Somehow it got driven over to Revolution Radio under the title “Jesus. Can’t they see what’s coming?”

    My first car, it turns out, was a Vauxhall four door saloon sedan I scooped up for $100 in New Orleans. No way was it luxurious. Those were far simpler days. You could hang your laundry out to dry so they’d last forever. Before globalization and global warming. When Wall Street enjoyed some regulation. When education and housing were affordable, mortgages were whole, and one could open office windows to outside air. Before supply side economics.

    Yes, I’ve noticed similar preparations. There was a run on country properties largely on high ground beginning after 9/11, as city dwellers feared they would fry when Osama let loose an encore. Hereabouts I’ve seen a recent run on safes and weapons as well, in anticipation of the social unrest accompanying the financial tsunami headed our way. “Cash is king!”

    When Mercury is in retrograde, that is a good time to hunker down, repair one’s life, and come to a new appreciation of what one has. This coming recession or depression may fill the same function and get us back to those simpler times, when we didn’t overfish, didn’t clearcut rainforests, didn’t cave to corporate domination, didn’t ship all our jobs and manufacturing overseas, etc. Time for a kitchen garden?

    Is this more serious than the tulip bubble? Is it the demise of the American empire, the Second Coming?

    THE SECOND COMING ~ William Butler Yeats

    “Turning and turning in the widening gyre,
    The falcon cannot hear the falconer;
    Things fall apart; the centre cannot hold;
    Mere anarchy is loosed upon the world,
    The blood-dimmed tide is loosed, and everywhere
    The ceremony of innocence is drowned;
    The best lack all conviction, while the worst
    Are full of passionate intensity.
    Surely some revelation is at hand;
    Surely the Second Coming is at hand.
    The Second Coming! Hardly are those words out
    When a vast image out of Spiritus Mundi
    Troubles my sight: somewhere in sands of the desert
    A shape with lion body and the head of a man,
    A gaze blank and pitiless as the sun,
    Is moving its slow thighs, while all about it
    Reel shadows of the indignant desert birds.
    The darkness drops again; but now I know
    That twenty centuries of stony sleep
    Were vexed to nightmare by a rocking cradle,
    And what rough beast, its hour come round at last,
    Slouches towards Bethlehem to be born?”

    Allan
    BeMoved@AOL.com

  61. I was in Dublin last weekend, and had a very real sense I’d been invited to the last days of the Roman empire. As far as I could work out, everyone had a Rolls-Royce Phantom and a coat made from something that’s now extinct. And then there were the women. Wow. Not that long ago every girl on the Emerald Isle had a face the colour of straw and orange hair. Now it’s the other way around.
    Everyone appeared to be drunk on naked hedonism. I’ve never seen so much jus being drizzled onto so many improbable things, none of which was potted herring. It was like Barcelona but with beer. And as I careered from bar to bar all I could think was: “Jesus. Can’t they see what’s coming?”
    Ireland is tiny. Its population is smaller than New Zealand’s, so how could the Irish ever have generated the cash for so many trips to the hairdressers, so many lobsters and so many Rollers? And how, now, as they become the first country in Europe to go officially into recession, can they not see the financial meteorite coming? Why are they not all at home, singing mournful songs?
    It’s the same story on this side of the Irish Sea, of course. We’re all still plunging hither and thither, guzzling wine and wondering what preposterously expensive electronic toys the children will want to smash on Christmas morning this year. We can’t see the meteorite coming either.
    I think mainly this is because the government is not telling us the truth. It’s painting Gordon Brown as a global economic messiah and fiddling about with Vat, pretending that the coming recession will be bad. But that it can deal with it.
    I don’t think it can. I have spoken to a couple of pretty senior bankers in the past couple of weeks and their story is rather different. They don’t refer to the looming problems as being like 1992 or even 1929. They talk about a total financial meltdown. They talk about the End of Days.
    Already we are seeing household names disappearing from the high street and with them will go the suppliers whose names have only ever been visible behind the grime on motorway vans. The job losses will mount. And mount. And mount. And as they climb, the bad debt will put even more pressure on the banks until every single one of them stutters and fails.
    The European banks took one hell of a battering when things went wrong in America. Imagine, then, how life will be when the crisis arrives on this side of the Atlantic. Small wonder one City figure of my acquaintance ordered three safes for his London house just last week.
    Of course, you may imagine the government will simply step in and nationalise everything, but to do that, it will have to borrow. And when every government is doing the same thing, there simply won’t be enough cash in the global pot. You can forget Iceland. From what I gather, Spain has had it. Along with Italy, Ireland and very possibly the UK.
    It is impossible for someone who scored a U in his economics A-level to grapple with the consequences of all this but I’m told that in simple terms money will cease to function as a meaningful commodity. The binary dots and dashes that fuel the entire system will flicker and die. And without money there will be no business. No means of selling goods. No means of transporting them. No means of making them in the first place even. That’s why another friend of mine has recently sold his London house and bought somewhere in the country . . . with a kitchen garden.
    These, as I see them, are the facts. Planet Earth thought it had £10. But it turns out we had only £2. Which means everyone must lose 80% of their wealth. And that’s going to be a problem if you were living on the breadline beforehand.
    Eventually, of course, the system will reboot itself, but for a while there will be absolute chaos: riots, lynchings, starvation. It’ll be a world without power or fuel, and with no fuel there’s no way the modern agricultural system can be maintained. Which means there will be no food either. You might like to stop and think about that for a while.
    I have, and as a result I can see the day when I will have to shoot some of my neighbours – maybe even David Cameron – as we fight for the last bar of Fry’s Turkish Delight in the smoking ruin that was Chipping Norton’s post office.
    I believe the government knows this is a distinct possibility and that it might happen next year, and there is absolutely nothing it can do to stop Cameron getting both barrels from my Beretta. But instead of telling us straight, it calls the crisis the “credit crunch” to make it sound like a breakfast cereal and asks Alistair Darling to smile and big up Gordon when he’s being interviewed.
    I can’t say I blame it, really. If an enormous meteorite was heading our way and the authorities knew it couldn’t be stopped or diverted, why bother telling anyone? Best to let us soldier on in the dark until it all goes dark for real.
    On a more cheery note, Vauxhall has stopped making the Vectra, that dreary, designed-in-a-coffee-break Eurobox that no one wanted. In its place stands the new Insignia, which has been voted European car of the year for 2009.
    This award is made by motoring journalists across Europe, and, with the best will in the world, the Swedes do not want the same thing from a car as the Greeks. That’s why they almost always get it wrong. Past winners have been the Talbot Horizon and the Renault 9.
    They’ve got the Insignia even more wrong than usual because the absolutely last thing anyone wants right now, and I’m including in the list consumption, a severed artery and a massive shark bite, is a four-door saloon car with a bargain-basement badge.
    Oh it’s not a bad car. It’s extremely good-looking, it appears to be very well made, it is spacious and the prices are reasonable. But set against that are seats that are far too hard, the visibility – you can’t see the corners of the car from the driver’s chair – and the solid, inescapable fact that the Ford Mondeo is a more joyful thing to drive.
    In the past, none of this would have mattered. Fleet managers would have bought 100 of whichever was the cheapest, and Jenkins from Pots, Pans and Pyrex would have had no say in the matter. Those days, however, are gone. The travelling salesman is now an internet address, and the mini MPV has bopped the traditional saloon on the head. I cannot think of the question in today’s climate to which the answer is “A Vauxhall Insignia”. And I’m surprised my colleagues on the car of the year jury didn’t notice this as well.
    Then I keep remembering the Renault 9 and I’m not surprised at all.
    I feel, I really do, for the bosses at GM who’ve laboured so hard to make this car. It’s way better than the Vectra. It looks as though they were bothered. But asking their dealerships to sell such a thing in today’s world is a bit like asking men in the first world war trenches to charge the enemy’s machinegun nests with spears.
    Right now, there are two paths you can go down. You can either adopt the Irish attitude to the impending catastrophe and party like it’s 1999. In which case you are better off ignoring the Vauxhall and buying a 24ft Donzi speedboat instead.
    Or you can actually start to make some sensible preparations for the complete breakdown in society. In which case you don’t want a Vauxhall either. Better to spend the money on a pair of shotguns and an allotment.

  62. Mario,
    Thank you for the post on MERS. It looks like it was cut off. Can you post the rest or email me the entire document?

    Thanks,
    Dan Edstrom
    dmedstrom@hotmail.com

  63. above do not represent my personal views it was a cut and paste.I posted it for its legal content only.

  64. Please read the following. this scam dwarfs Madoff
    Madoff’s Ponzi Scheme Dwarfed
    By Illuminati Rubin’s
    By Henry Makow PhD
    12-13-8

    The arrest of financier Bernard Madoff Thursday for operating a “Ponzi scheme” costing investors $50 billion made the TV network news. Curiously, a lawsuit the same day against Clinton Treasury Secretary Robert Rubin for defrauding Citibank shareholders of more than $122 billion, also described as a “Ponzi scheme,” got no airplay whatsoever.

    As we shall see, Rubin, a Director of Citibank, profited from the shady practices that destroyed the financial system and sent the world’s economies into a tailspin. Then, to repair the damage, he and his banker friends put the taxpayer on the hook for trillions.

    Rubin didn’t get the same publicity as Madoff because of his close connection to Barack Obama.

    Robert Rubin’s son Jamie was Obama’s main Wall Street fund raiser and is now one of his principal advisers. More significant, Obama’s economic team consists of Rubin’s proteges including Timothy Geithner, Treasury Secretary, Lawrence Summers, Senior Economic Adviser and Peter Orszag, Budget Director. The Times of London has already dubbed them the “Robert Rubin Memorial All Stars.”

    Clearly, the media don’t want people to see that the candidate of “Change” chose the people responsible for this calamity to be his “economic team.” While in the Clinton White House, Rubin, with Summers, helped tear down the regulatory walls between banks, brokerages and insurance companies and freed them to trade in unregulated and little-understood derivatives worth trillions of dollars.

    THE LAW SUIT

    In an article entitled “Ponzi Scheme at CITI,” the New York Post reported: “A new Citigroup scandal is engulfing Robert Rubin and his former disciple Chuck Prince for their roles in an alleged Ponzi-style scheme that’s now choking world banking.

    Director Rubin and ousted CEO Prince – and their lieutenants over the past five years – are named in a federal lawsuit for an alleged complex cover-up of toxic securities that spread across the globe, wiping out trillions of dollars in their destructive paths.

    Investor-plaintiffs in the suit accuse Citi management of overseeing the repackaging of unmarketable collateralized debt obligations (CDOs) that no one wanted – and then reselling them to Citi and hiding the poisonous exposure off the books in shell entities.

    The lawsuit said that when the bottom fell out of the shaky assets in the past year, Citi’s stock collapsed, wiping out more than $122 billion of shareholder value.

    However, Rubin and other top insiders were able to keep Citi shares afloat until they could cash out more than $150 million for themselves in “suspicious” stock sales” calculated to maximize the personal benefits from undisclosed inside information,” the lawsuit said.

    The latest troubles for Rubin, Prince and others emerged in a 500-page investigation by Citigroup investors represented by law firm Kirby McInerney.

    The probe was used to amend and add new details to a blanket investor lawsuit filed against Citigroup a year ago. The amended suit called the actions of Citi leaders “a quasi-Ponzi scheme” to hide troubles – and keep Citi stock afloat while insiders unloaded about 3 million shares between Jan. 1, 2004 and Feb. 22, 2008 for huge profits.

    In addition to Citigroup, Rubin and Prince, the complaint names Vice Chairman Lewis Kaden, ex-CFO Sallie Krawcheck and her successor CFO Gary Crittenden.

    Rubin cleared $30.6 million on his stock sales, while Prince got $26.5 million, former COO Robert Druskin got nearly $32 million and former Global Wealth Management unit chief Todd Thomson got $25.7 million, the suit said.”

    [link to http://www.nypost.com

    THE PONZI SCHEME

    In an article, "The Great American Ponzi Scheme," Robert Butche writes, "Little did people know that banking and finance had contracted a nasty disease -- one known in the grifter trade as a Ponzi Scheme -- in which sub-prime mortgages were securitized and traded based on an unsustainable promise to pay high returns to investors from monies obtained from subsequent investors."

    [link to newsroom-magazine.com]

    In the commentary to the NY Post article above, a Ph.D. in Physics explained that his fellow graduates all went to work for big banks, brokerages and Fannie May. They were “hired to do complicated calculations (loop level) borrowed from quantum field theory and statistical mechanics. They can take any number(s) as an input and produce any output as desired. Hence the banks hired at a much higher pay these people than they could earn in Universities or research institutes…Their bosses told them to inflate the value of anything to any number and these people did that.”

    “No ordinary derivatives trader can ever understand any formula(e) to calculate the value of anything. These are too complicated but intentionally. But there are some conservation laws for energy, momentum etc in physics. Where every (loop level) calculation has to abide by them. In finance and banking there is no such conserved quantity as credit can be created from thin air and destroyed also to that. Hence the fiasco.”

    BERNARD MADOFF, RAHM EMMANUEL

    Madoff was a pillar of Wall Street, one of the founders of the NASDAQ Exchange and a former Chairman. His private Investment business became known for delivering steady returns year after year and attracted billions. Little did anyone imagine he was using new investments to provide returns on old ones. The house of cards came crashing down last week when he confessed to his sons, who promptly reported him. He had lost their money too. He had cheated family and friends.

    [link to http://www.time.com

    "Madoff's investors included captains of industry, corporations -- some of which are publicly traded -- that used Madoff almost as a high-yielding cash management account, endowments, universities, foundations and, importantly, many high-profile funds of funds," said Douglas Kass, who heads hedge fund Seabreeze Partners Management. "It appears that at least $15 billion of wealth, much of which was concentrated in southern Florida and New York City, has gone to 'money heaven,'" he said.

    [link to finance.yahoo.com]

    Madoff’s $50 billion scam is described as the largest in history. But it pales in comparison with what Robert Rubin and his ilk have done to the world. With the possible exception of Ponzi himself, most of the scamsters mentioned here are Jewish. A consolation to anti-Semites, the biggest victims probably also are Jews. One Jewish Foundation, which gave away $1.5 million to Jewish causes, closed its doors and laid off its employees. All its money was invested with Madoff.

    [link to jta.org]

    “This guy [has] killed more Jews then Hitler,” one wag said in a forum. “Wait till you read the formal complaint from the SEC and FBI.” Then he added facetiously, “Now that the Jew has been thrown down the well, is our country free?”

    [link to dealbreaker.com]

    Thankfully Illinois Governor Rod Blagojevich is not Jewish, but Obama’s Jewish Chief of Staff, Rahm Emanuel is implicated in the Governor’s plan to sell Obama’s Senate Seat. Obama was put in power by Illuminati Jews and Masons and there is going to be plenty of corruption.

    (“implicated” [link to http://www.timesonline.co.uk

    Just as there was collateral damage when Illuminati bankers put Hitler into power, (the loss of 60 million people) Jews today have got to break rank with the bankers and their political puppets. We’re not responsible for their machinations and Jews suffer as much as anyone.

    Moreover, Jews are going to be blamed unless we join in exposing and opposing the Illuminati, (i.e. the highest rank of Freemasonry consisting of Jews and non-Jews.) Organized Jewry and many individual Jews are witting and unwitting instruments of the Illuminati bankers’ plan for totalitarian world government.

    At the same time, we need to ask ourselves whether there is some flaw in Jewish culture that makes so many Jews sacrifice personal integrity for financial success and power.

    Finally, wars and depressions don’t happen by accident. They are planned by the Illuminati years in advance. They are designed to engineer social and political change. See my “Illuminati Bankers Seek “Revolution” by Economic Means” and “Credit Crunch: Occult Colonization of the Developed World?” The media is controlled by the Illuminati and advances their agenda. That’s why the spotlight is on Bernard Madoff and not Robert Rubin.

  65. This is a deposition on MERS that ALLAN gave me from April`s case on mers.It is very long and I do not know what you wish to do with it.

    Download the original attachment
    1

    1 IN THE UNITED STATES DISTRICT COURT

    FOR THE MIDDLE DISTRICT OF FLORIDA

    2 JACKSONVILLE DIVISION

    ————————————-:

    3 SANDY S. TRENT, SARALEY INEZ MEISMER :

    ANDREW TURNER, JABINO TURNER, :

    4 VERONICA TAYLOR, RICO TAYLOR, :

    BRUCE S. TUCKER, MICHELLE TUCKER, :

    5 and FRANCES PULLINS, on behalf of :

    themselves and all others similarly :

    6 situated, :

    Plaintiffs, :

    7 : Case No.:

    v. : 3:06CV-374-

    8 : J-32HTS

    MORTGAGE ELECTRONIC :

    9 REGISTRATION SYSTEMS, INC., :

    Defendant. :

    10 ———————————— :

    McLean, Virginia

    11 Monday, September 25, 2006

    12 VIDEO DEPOSITION OF:

    13 R.K. ARNOLD,

    14 called for oral examination by counsel for the

    15 Plaintiffs, pursuant to notice duces tecum, at the

    16 offices of Capital Reporting Company,

    17 8200 Greensboro Drive, Suite 900, McLean, Virginia,

    18 before Donna L. Linton of Capital Reporting, a

    19 Registered Merit Reporter, Certified Court Reporter

    20 and Notary Public in and for the Commonwealth of

    21 Virginia, scheduled to begin at 10:15 a.m., when

    22 were present on behalf of the respective parties:

    2

    1 A P P E A R A N C E S:

    2

    3 On behalf of Plaintiffs:

    4 BRIAN L. WEAKLAND, ESQUIRE

    5 10015 West Broad Street

    6 Glen Allen, Virginia 23060

    7 (804) 346-2400
    8 – and -

    9 APRIL CARIE CHARNEY, ESQUIRE

    10 Jacksonville Area Legal Aid, Inc.

    11 126 West Adams Street

    12 Jacksonville, Florida 32202

    13 (904) 356-8371
    14

    15 On behalf of Defendant:

    16 ROBERT M. BROCHIN, ESQUIRE

    17 Morgan, Lewis & Bockius, LLP

    18 200 South Biscayne Boulevard, Suite 5300

    19 Miami, Florida 33131

    20 (305) 415-3456
    21 – and -

    22

    3

    1 APPEARANCES: (continued)

    2

    3 SHARON McGANN HORSTKAMP, ESQUIRE

    4 MERS Vice President and General Counsel

    5 1595 Spring Hill Road, Suite 310

    6 Vienna, VA 22182

    7 (703) 761-1280
    8

    9 ALSO PRESENT:

    10 WILLIAM C. HULTMAN, Senior Vice President MERS

    11 Daniel Holmstock, Videographer

    12

    13 * * * * *

    14

    15

    16

    17

    18

    19

    20

    21

    22

    4

    1 C O N T E N T S

    2 EXAMINATION BY: PAGE

    3

    4 Counsel for Plaintiffs 6

    5

    6

    7 DEPOSITION EXHIBITS: PAGE

    8 1 Trent mortgage document 56

    9 2 Taylor documents 83

    10 3 December 3, 2004 document 148

    11

    12

    13

    14 (Exhibits attached by counsel.)

    15

    16

    17

    18

    19

    20

    21

    22

    5

    1 P R O C E E D I N G S

    2 THE VIDEOGRAPHER: This is Tape Number 1

    3 of the videotaped deposition of Mr. R.K. Arnold

    4 taken in the matter of Sandy S. Trent, et al.,

    5 Plaintiffs, v. Mortgage Electronic Registration

    6 Systems, Inc., Defendant, pending in the United

    7 States District Court for the Middle District of

    8 Florida, Jacksonville Division, Case Number

    9 3:06-CV-374-J-32HTS.

    10 This deposition is being held at the

    11 offices of Capital Reporting Company,

    12 8200 Greensboro Drive, McLean, Virginia, on

    13 September 25th, 2006, at approximately 10:17 a.m.

    14 My name is Daniel Holmstock from the firm

    15 of Capital Reporting Company, and I am the

    16 certified legal video specialist. The court

    17 reporter today is Donna Linton, in association with

    18 Capital Reporting Company.

    19 For the record, will counsel please

    20 introduce themselves and whom they represent?

    21 MR. WEAKLAND: My name is Brian Weakland,

    22 and I represent the Plaintiffs in this action.

    6

    1 MS. CHARNEY: April Charney, Jacksonville

    2 Legal Aid, on behalf of the Plaintiffs.

    3 MR. BROCHIN: My name is Bobby Brochin,

    4 Morgan, Lewis & Bockius, and I am counsel for the

    5 Defendant.

    6 MS. HORSTKAMP: Sharon Horstkamp. I am

    7 general counsel with MERS, the Defendant.

    8 MR. HULTMAN: William Hultman, and I’m the

    9 senior vice president of MERS.

    10 THE VIDEOGRAPHER: Okay. Will the court

    11 reporter, please, swear or affirm in the witness?

    12 WHEREUPON,

    13 R.K. ARNOLD,

    14 called as a witness, and having been first duly

    15 sworn, was examined and testified as follows:

    16 EXAMINATION BY COUNSEL FOR THE PLAINTIFFS

    17 BY MR. WEAKLAND:

    18 Q. Good morning, sir.

    19 A. Good morning.

    20 Q. Could you state your name for the record?

    21 A. R.K. Arnold.

    22 Q. And by whom are you employed?

    7

    1 A. MERS Corp., Inc.

    2 Q. In what capacity?

    3 A. I am president and CEO.

    4 Q. Are you affiliated at all with a company

    5 called Mortgage Electronic Registration Systems,

    6 Inc.?

    7 A. Yes, sir.

    8 Q. And how are you affiliated with that

    9 company?

    10 A. I’m president and CEO of that company as

    11 well.

    12 Q. And what is the relationship between

    13 MERS — or rather, can we for the record call

    14 Mortgage Electronic Registration Systems MERS?

    15 A. Yes.

    16 Q. What is the relationship between MERS and

    17 MERS Corp.?

    18 A. MERS is a wholly owned subsidiary of MERS

    19 Corp, Inc.

    20 Q. Is MERS a Delaware corporation?

    21 A. Yes, sir.

    22 Q. Is it a private corporation?

    8

    1 A. Yes, sir.

    2 Q. Is MERS Corp. a public corporation?

    3 A. No, sir.

    4 Q. Is there anyone at MERS that you would

    5 report to, sir?

    6 A. Other than the board of directors, no.

    7 Q. How many members are there on the board of

    8 directors of MERS?

    9 A. Five.

    10 Q. Are they the same members as in the board

    11 of directors of MERS Corp., Inc.?

    12 A. No, sir. That company has 15 directors.

    13 Q. Are there any common directors in the two

    14 companies?

    15 A. There are a few common.

    16 Q. How long have you been president and CEO

    17 of MERS, Inc.?

    18 A. Over eight years.

    19 Q. When was MERS, Inc., incorporated?

    20 A. Which company are you referring to?

    21 Q. MERS.

    22 A. MERS?

    9

    1 Q. Yes.

    2 A. It was in the — in the summer of 1998.

    3 Q. Were you the initial president and CEO of

    4 MERS?

    5 A. Yes, sir.

    6 Q. When was MERS Corp., Inc., incorporated?

    7 A. 1995.

    8 Q. What is the business of MERS Corp., Inc.?

    9 A. MERS Corp., Inc. operates the MERS system.

    10 Q. Can you tell me a little bit generally

    11 what that entails?

    12 A. It’s an electronic system that keeps track

    13 of interest in loans that have been registered.

    14 Q. MERS Corp. does that; is that correct?

    15 A. MERS Corp. does that.

    16 Q. All right. What does MERS do, then?

    17 A. MERS serves as mortgagee of record in the

    18 county land records of the respective loans.

    19 Q. Does MERS have separate financial

    20 accounts?

    21 A. Yes, sir.

    22 Q. Are the assets of MERS also the assets of

    10

    1 MERS Corp., Inc.?

    2 A. Only to the extent that it’s a wholly

    3 owned subsidiary.

    4 Q. Are you here today, sir, in the capacity

    5 of a representative of MERS?

    6 A. Yes, sir.

    7 Q. Have you had an opportunity to view the

    8 notice of your deposition today?

    9 A. Yes, sir.

    10 Q. Are you an individual at MERS who has

    11 knowledge of the general nature of the business of

    12 MERS?

    13 A. Yes, sir.

    14 Q. Do you have knowledge of MERS’s business

    15 relationship with mortgage lenders who have

    16 provided financing for residential real estate

    17 purchases by the named plaintiffs in this case?

    18 A. Yes, sir.

    19 Q. Are you familiar with MERS’s business

    20 operations in the state of Florida including, but

    21 not limited to, its involvement in mortgage

    22 foreclosure actions and suits to collect unpaid

    11

    1 debts in the state of Florida?

    2 A. Yes, sir.

    3 Q. Are you the person at MERS who’s in the

    4 best position to have knowledge of those areas?

    5 MR. BROCHIN: Object to the form of that

    6 question.

    7 THE WITNESS: Considering all the areas

    8 combined, I believe so.

    9 BY MR. WEAKLAND:

    10 Q. Now, have you ever had your deposition

    11 taken before?

    12 A. Yes, sir.

    13 Q. How many times?

    14 A. As in my current capacity?

    15 Q. Yes.

    16 A. Once.

    17 Q. When was that?

    18 A. That was in a — I forget the exact time,

    19 but it was in another lawsuit.

    20 Q. What state was that in?

    21 A. New York.

    22 Q. Can you briefly tell me what the nature of

    12

    1 that litigation was?

    2 A. It was a dispute with the county clerk.

    3 Q. Was MERS a party to that case?

    4 A. Yes, sir.

    5 Q. Did MERS sue the county clerk in that

    6 case?

    7 A. Yes, sir.

    8 Q. Has that case been completed, to your

    9 knowledge?

    10 A. The case has run its course and is now

    11 before the Court of Appeals in New York, which is

    12 the highest court in that state.

    13 Q. Did that case involve MERS trying to get

    14 an order requiring the clerk to file certain MERS

    15 documents?

    16 A. Yes, sir.

    17 Q. What — if you can, briefly — I don’t

    18 want to spend a whole lot of time on this — go

    19 over your educational background.

    20 Did you graduate from college?

    21 A. Yes, sir.

    22 Q. What college and what was your degree?

    13

    1 A. I have a bachelor’s from the University of

    2 Oklahoma in finance, I have an MBA from the

    3 University of Dallas and I have a law degree from

    4 Oklahoma City University.

    5 Q. I’m sorry, Oklahoma University?

    6 A. The bachelor’s is from the University of

    7 Oklahoma.

    8 Q. Right. And your law degree is from?

    9 A. Oklahoma City University.

    10 Q. Are you a practicing attorney?

    11 A. I am licensed in Oklahoma and Texas.

    12 Q. Do you practice law in Oklahoma and Texas?

    13 A. No, I don’t.

    14 Q. Is your license — are your licenses still

    15 current in those states?

    16 A. Yes, sir, both licenses.

    17 Q. Do you reside in the Commonwealth of

    18 Virginia?

    19 A. Yes, sir.

    20 Q. Mr. Arnold, before you became president

    21 and CEO of MERS, did you work in the banking

    22 industry?

    14

    1 A. Yes, sir.

    2 Q. Can you briefly tell me some of the

    3 positions that you’ve held?

    4 A. For the five years immediately prior to

    5 coming to MERS, I was vice president and counsel

    6 for AT&T Universal Card in Jacksonville, Florida.

    7 And prior to that I was counsel for USAA Bank in

    8 San Antonio, Texas.

    9 Prior to that I practiced law with

    10 Holloway Dobson in Oklahoma City. Prior to that I

    11 worked for Johnson & Johnson in Sherman, Texas.

    12 Q. Is that the corporation Johnson & Johnson?

    13 A. Yes, sir.

    14 Q. In what capacity?

    15 A. At that point in my career, I was an

    16 accountant.

    17 Q. That was before law school?

    18 A. Yes, sir.

    19 I’ve also worked for Liberty National

    20 Bank.

    21 Q. Okay. In what capacity?

    22 A. I was banking officer at that point.

    15

    1 Q. That was prior to law school?

    2 A. That was actually during law school. So I

    3 graduated from college with a bachelor’s from OU,

    4 went to the Army for four years.

    5 After that I went to work for

    6 Johnson & Johnson for two years where I got my MBA,

    7 and after that I worked for Liberty National Bank

    8 for three years while I got my law degree.

    9 Then I went to work for Holloway Dobson in

    10 the private practice of law in Oklahoma City. Then

    11 I went — was hired by USAA Bank in San Antonio,

    12 Texas, then I was hired by AT&T in Jacksonville,

    13 Florida, and then MERS hired me.

    14 Q. Did you live in Jacksonville, Florida?

    15 A. Yes, sir.

    16 Q. What time period was that?

    17 A. 1991 through 1995.

    18 Q. And then you came to Virginia as president

    19 and CEO of MERS Corp.?

    20 A. Yes, sir, over the Christmas holidays.

    21 Oh, check that. I came as senior vice

    22 president and general counsel.

    16

    1 Q. Was the company already incorporated at

    2 the time you started?

    3 A. It had been incorporated for a few months

    4 prior to hiring me.

    5 Q. Were you one of the incorporators of MERS

    6 Corp.?

    7 A. I was not one of the incorporators. I was

    8 one of the first officers hired.

    9 Q. Is there any individual that you could

    10 point to who would be the main incorporator of MERS

    11 Corp. or the driving force, or however you would

    12 identify it, the individual who was chief person

    13 behind MERS Corp.?

    14 A. Well, there are many people that deserve

    15 credit for how MERS came about.

    16 To answer that question, I would say that

    17 I was on the original executive team. So it was

    18 basically a corporation to the Secretary of State

    19 until such time as officers were hired, and I was

    20 on one of the original teams that was hired.

    21 Q. Did you generate the idea of MERS as a

    22 corporation serving as mortgagee of record in

    17

    1 various cases and county land records?

    2 A. My — my team was the implementing team

    3 for that concept. That concept I would say really

    4 belongs to no person.

    5 It — it was generated by various

    6 committees in the mortgage industry. It was

    7 germinated by the Mortgage Bankers’ Association.

    8 Fannie Mae, Freddie Mac had a lot to — lot of

    9 input into that, and it was a collective idea that

    10 moved around in the mortgage industry.

    11 And ultimately it was determined that it

    12 made a great deal of sense for both the industry

    13 and consumers, and that’s when the company was

    14 created on paper and that board of directors hired

    15 the first executive team which I was part of.

    16 Q. Thank you. Would it be fair to say that

    17 you were present through the development of the

    18 MERS project or idea?

    19 A. Well, I don’t want to overstate anything

    20 except to say that I was a key player in the entire

    21 process.

    22 Q. Prior to MERS Corp. and MERS, had there

    18

    1 been any entity in the United States that did a

    2 similar business?

    3 A. No, sir.

    4 Q. As we sit here today, is there any

    5 competitor of MERS doing the business that MERS is

    6 doing?

    7 A. Well, we think of our competition as being

    8 the status quo, and so we do not have a 100 percent

    9 market share, for example. So there are mortgage

    10 companies that — that use our system and there are

    11 mortgage companies that don’t. And to that extent,

    12 we — we have to compete for their business.

    13 Q. I see. When you say 100 percent of the

    14 market share, is the market share equal to all of

    15 the residential mortgages in the United States?

    16 A. For the purposes of my answer, I — that’s

    17 what I meant. We don’t have 100 percent of those.

    18 Q. Can you estimate what your market share

    19 is?

    20 A. It would just be an estimate because, as

    21 you may know, their — the mortgage industry flows

    22 almost like a body of water. Sometimes it’s very

    19

    1 hot and sometimes it’s — it’s lower.

    2 We are — I would be very comfortable in

    3 saying that we have a 60 percent market share.

    4 Q. Is that share any different in Florida,

    5 for example?

    6 A. Probably not. If it is, it would be in

    7 that vicinity.

    8 Q. Now, if we — if we can just look at

    9 Florida for a second — and I’m not going to hold

    10 you to that 60 percent number, because I understand

    11 that it’s — it’s somewhat fluid. It is –

    12 A. I appreciate that, because it’s a — it’s

    13 a diff — you know, the government revises its

    14 numbers all the way — 18 months after the end of a

    15 year. So it could look like it’s 60, but in the –

    16 in the final analysis, it could be — it could

    17 be 55. It could even be 50. And on an origination

    18 basis, that’s a different number still.

    19 For example, out of all the loans in the

    20 United States that are currently active, we

    21 probably only have about 25 or maybe 26 percent of

    22 those.

    20

    1 So as far as the number of homeowners in

    2 the United States that we have a relationship with

    3 vis-a-vis MERS, that’s probably only 1 in 4. And

    4 the numbers I was giving you is on an origination

    5 basis, so we’re talking only new ones there.

    6 Q. Okay. So I understand this, would it –

    7 would it be fair to say that — I’m just going to

    8 say 50 percent, because that was the lowest number

    9 you gave me — 50 percent of the new loans — and

    10 we’re talking residential loans, right?

    11 A. (Nodding head.)

    12 Q. Yes?

    13 A. Yes, sir.

    14 Q. Okay. 50 percent of the new residential

    15 loans that are happening in Florida right now are

    16 affiliated with the MERS system?

    17 A. Yes, sir. And I think — the numbers

    18 probably would be — if we could agree on

    19 50 percent on an origination basis and 25 percent

    20 of the existing loans out there in the United

    21 States, I’m very comfortable with that answer.

    22 Q. Okay. I just want to stick with Florida

    21

    1 for a second.

    2 Would you say 25 percent of all loans in

    3 Florida are involved with MERS?

    4 A. Well, Florida is such an important state.

    5 It’s the — it’s the third or fourth largest state

    6 in the United States, and so my educated guess

    7 would be that that footprint would be similar to

    8 what we have nationwide.

    9 Q. I see. Okay. Give me one second.

    10 Now, when this case was moved into federal

    11 court, there was a document called Notice of

    12 Removal and there were some figures in here. Let

    13 me — let me see if I can just ask you to comment

    14 on these.

    15 Well, first, would you agree that there

    16 are more than 100 mortgage foreclosure actions

    17 brought in the name of MERS in the state of Florida

    18 in the last four years?

    19 A. Well, there are none now.

    20 Q. Right. But in the last four years?

    21 A. I — I believe that there would be at

    22 least a hundred.

    22

    1 Q. The notice of removal says, if I may,

    2 between the period of March 17, 2002 through

    3 March 17, 2006, there were a total of 19,646

    4 pending and completed foreclosures that were

    5 brought in the name of MERS as plaintiff in

    6 Florida.

    7 Would you agree with that?

    8 A. That number is taken directly from our

    9 system, so, yes, I would agree with that.

    10 Q. And those are just the cases themselves;

    11 would that be correct?

    12 A. Those are the cases shown on the MERS

    13 system as being foreclosed in Florida.

    14 Q. Can you estimate at the time this document

    15 was filed, which was in April of this year, how

    16 many were pending and how many were completed?

    17 A. No, sir, I can’t estimate that.

    18 Q. Would you — would you agree that the

    19 number of completed foreclosures would be more than

    20 half of the 19,646?

    21 A. Well, I can say that the document you’re

    22 referring to was a document filed with the court

    23

    1 for the purpose of removal. And whatever that

    2 says, that came directly from searches on the MERS

    3 system at the time.

    4 Q. The document also says that this number is

    5 less than the number of individuals who have been

    6 sued by MERS in Florida; would you agree with that?

    7 In other words –

    8 A. The number that have been completed?

    9 Q. No. Let me see if I can rephrase that.

    10 The number of mortgage foreclosure cases

    11 brought by MERS as plaintiff is less than the

    12 number of individuals and entities who have been

    13 sued by MERS in mortgage foreclosure complaints.

    14 A. Well, that — that is a matter of course

    15 because there are multiple borrowers and they would

    16 be sued in the same foreclosure.

    17 Q. So you agree — you would agree that the

    18 number of individuals sued by MERS in foreclosure

    19 actions in Florida in the last four years would be

    20 greater than 19,646?

    21 A. And the document says that 19,646 are the

    22 number of foreclosures?

    24

    1 Q. Yes. And my question is the number of

    2 individuals who have been sued by MERS would be

    3 greater than that number, correct?

    4 A. Yes, sir (handing).

    5 Q. Thank you. I believe you testified a few

    6 minutes ago that there are no cases pending at the

    7 moment in Florida where MERS is named as a

    8 plaintiff; is that what you said?

    9 MR. BROCHIN: Object to the form. I don’t

    10 think that’s what he said, but –

    11 BY MR. WEAKLAND:

    12 Q. I didn’t understand what you said.

    13 A. Well, any foreclosure filed in Florida –

    14 we have a moratorium in Florida on foreclosures, so

    15 all foreclosures were to cease in Florida as of, I

    16 believe, June of 2006.

    17 So it — if there were a foreclosure, it

    18 would be rogue, and I do not believe that there is

    19 one.

    20 Q. When you say moratorium, can you define

    21 what you mean by that?

    22 A. None.

    25

    1 Q. None. Is the moratorium in place to stop

    2 future cases?

    3 A. The moratorium is in place to keep future

    4 cases from being filed by MERS.

    5 Q. What about cases that are pending where

    6 MERS is a plaintiff?

    7 A. Well, pending cases, we have — we have

    8 dealt with them on a case-by-case basis. Depending

    9 on what — what point in the foreclosure process

    10 the case is, we have dealt with that on a

    11 case-by-case basis. Many of them have been

    12 assigned out.

    13 Q. Is there any case that you’re aware of as

    14 we sit here today where MERS is the sole plaintiff

    15 in a foreclosure action in Florida?

    16 A. Currently pending?

    17 Q. Yes.

    18 A. I am not personally aware of that. There

    19 may be one.

    20 Q. Is that what you referred to as a rogue

    21 case?

    22 A. Well, that would be rogue only if it’s

    26

    1 been filed after June. And when I say rogue,

    2 there’s a — there’s a rather harsh penalty

    3 associated with that. There’s a $10,000 penalty if

    4 that is done, which is way more than enough to curb

    5 the activity by our members.

    6 Q. $10,000 penalty imposed by MERS?

    7 A. Yes.

    8 Q. On a member?

    9 A. On a member if he were to file a

    10 foreclosure in our name. That was put in place

    11 until we get all this sorted out.

    12 Q. I see. Now, you just testified that the

    13 pending cases are dealt with on a case-by-case

    14 basis; is that correct?

    15 A. Yes.

    16 Q. Can you enunciate any standards that you

    17 have communicated to servicers or attorneys on how

    18 to handle these cases that are still pending?

    19 A. Well, the moratorium, of course, applies

    20 to all cases going forward. We had con — we had

    21 conducted foreclosures for eight years with no

    22 trouble whatsoever and then encountered some

    27

    1 challenges that seemed to confuse the issue.

    2 So to keep the problem from getting more

    3 confusing, if you will, we decided to go ahead and

    4 put in the moratorium and appeal those cases. So

    5 those cases are on appeal.

    6 And as far as the cases that were pending

    7 at the time, for example, some of those are

    8 undisputed cases where the — the defendant in the

    9 foreclosure action has already voluntarily moved

    10 out, and in that circumstance, we wouldn’t feel

    11 compelled to assign that out of MERS.

    12 On the other hand, if a challenge is

    13 raised in a foreclosure action, we might very well

    14 assign it out. Now, we might also attempt to

    15 convince the court that what we’re doing is fine

    16 because we believe it is fine.

    17 So it’s on — it’s on a case-by-case

    18 basis, just depending on exactly what’s going on in

    19 that case. Every case is different.

    20 Q. I didn’t ask you this. You touched on it

    21 a little bit, but I — let me ask a question and

    22 see if you can give me a more complete answer.

    28

    1 What are the reasons MERS has imposed a

    2 moratorium, as you are testifying?

    3 A. Well, as a general proposition, and that’s

    4 the reason we’re here today, what we do in the

    5 realm of foreclosure has been challenged.

    6 And rather than cause just compounding

    7 issues as far as the numbers that are piling up and

    8 how it’s been done, we’re not interested in

    9 misleading anyone. And so when that question was

    10 raised, really out of the clear blue — again, we

    11 have been conducting business for at least

    12 eight years without a problem at all, and then the

    13 question was raised and — and that became an issue

    14 in the lawsuit.

    15 And really as a matter of guidance to our

    16 members and making sure that we weren’t trying to

    17 mislead anyone and thinking, frankly, in terms of

    18 consumer impact, we just decided that it’s an

    19 incidental part of our business and let’s just put

    20 in a moratorium, appeal the cases, and let’s –

    21 let’s find out.

    22 And once we win those, which we think that

    29

    1 we will, then the problem will be answered with

    2 clarity and — and we can — you know, we can make

    3 the decision at that point. Again, like I said,

    4 it’s an incidental part of our business.

    5 Q. Is the moratorium in effect in states

    6 other than Florida?

    7 A. No, sir.

    8 Q. Florida is the only state?

    9 A. Yes, sir.

    10 Q. Was the decision for a moratorium done by

    11 you? Who decided to do a moratorium?

    12 A. Based upon advice from my team, the

    13 decision was mine.

    14 Q. Did the board of directors determine to do

    15 a moratorium?

    16 A. The board of directors approved a

    17 recommended rule that made it — made it a board

    18 rule, a membership rule. It’s a condition of

    19 membership of MERS.

    20 Q. The lawsuit we’re discussing today is a

    21 class action in federal court in Jacksonville.

    22 Did this lawsuit have any effect in MERS’s

    30

    1 decision to have a moratorium in Florida?

    2 A. No.

    3 Q. Was there a particular lawsuit that had

    4 that effect?

    5 A. Yes, sir. The first one was in Pinellas

    6 County.

    7 Q. Was that the decision by Judge Logan?

    8 A. Yes, sir.

    9 Q. Mr. Arnold, let me ask just a couple

    10 questions about some of the names that appear on

    11 Defendant’s initial disclosures to Plaintiffs.

    12 I don’t know if you have seen this. If I

    13 may show it to the witness (handing).

    14 Do you recognize the name of Donna Glick?

    15 A. I have heard that name.

    16 Q. Do you know if she’s an attorney with the

    17 Law Offices of David Stern?

    18 A. I believe so.

    19 Q. Does Donna Glick have any professional

    20 relationship with MERS?

    21 A. I believe that Donna is one of the

    22 attorneys that files foreclosure actions in the

    31

    1 name of MERS.

    2 Q. Okay. Let me show you the next name,

    3 H. Keith Tommerson. Do you recognize that name?

    4 A. I don’t recognize the name.

    5 Q. Patricia Arango, A-R-A-N-G-O. Do you

    6 recognize that name?

    7 A. I’ve never heard that name.

    8 Q. How about the Law Offices of Marshall

    9 Watson; are you familiar with that –

    10 A. I have heard of those law offices.

    11 Q. Okay. And what do you know about those

    12 law offices?

    13 A. I believe that’s –

    14 MR. BROCHIN: Excuse me. Object to the

    15 form of the question.

    16 THE WITNESS: I believe that’s a law

    17 office that prosecutes foreclosures in the name of

    18 MERS.

    19 BY MR. WEAKLAND:

    20 Q. Barry J. Marcus, have you seen that name

    21 before?

    22 A. No, I haven’t.

    32

    1 Q. William Heller?

    2 A. Yes.

    3 Q. You know that name?

    4 A. Yes, sir.

    5 Q. And Mr. Heller is an attorney with Akerman

    6 Senterfitt?

    7 A. Yes, sir.

    8 Q. That’s A-K-E-R-M-A-N S-E-N-T-E-R-F-I-T-T.

    9 And has the law firm of Akerman Senterfitt

    10 filed foreclosure actions on behalf of MERS?

    11 A. Yes, sir.

    12 Q. Do you know the name Marisa Ajmo, A-J-M-O?

    13 A. I can’t say that I recall that name.

    14 Q. Do you know the law firm of

    15 Shapiro & Fishman?

    16 A. Yes, sir.

    17 Q. Out of Boca Raton?

    18 A. Yes, sir.

    19 Q. And does that law firm prosecute

    20 foreclosure actions in the name of MERS?

    21 A. Yes, sir.

    22 Q. Those law firms that we just discussed,

    33

    1 David Stern, Marshall Watson, Akerman Senterfitt,

    2 Shapiro & Fishman, have they been retained by MERS

    3 to prosecute foreclosure actions in the state of

    4 Florida?

    5 A. Yes.

    6 Q. Do those law firms bill MERS for their

    7 work?

    8 A. No, sir.

    9 Q. Who do they bill; do you know?

    10 A. They bill the servicer responsible for

    11 servicing the loan.

    12 Q. Are you aware of whether these law firms

    13 were the law firms involved in the foreclosure

    14 actions against the named plaintiffs in our case?

    15 A. I believe there are some. I don’t know

    16 whether they’re an exact match or not.

    17 Q. I neglected to ask you about

    18 Henshaw & Culbertson. Is that another law firm

    19 that does foreclosure actions on behalf of MERS?

    20 A. It might be. That — that name doesn’t

    21 hit me as one of our (pause)–

    22 Q. The attorneys who have prosecuted

    34

    1 foreclosure actions against the named plaintiffs in

    2 our case, do they report to anybody at MERS?

    3 A. Well, we have a certifying officer

    4 colocated with each member, and so there’s a dual

    5 reporting responsibility there.

    6 Q. Dual — the attorney reports both to the

    7 servicer and to MERS?

    8 A. Yes.

    9 Q. The certifying officer, is that an

    10 employee of MERS?

    11 A. That’s an officer of MERS.

    12 Q. Is there one person who occupies that

    13 position?

    14 A. There is at least — there are four

    15 executive officers of MERS, and then there are at

    16 least one certifying officer colocated with every

    17 one of our members.

    18 Q. Are you a certifying officer?

    19 A. I think I would be more correctly referred

    20 to as an executive officer.

    21 Q. Do the certifying officers report to you?

    22 A. Yes, sir.

    35

    1 Q. Do the attorneys involved in these

    2 foreclosure actions in Florida ever report directly

    3 to you?

    4 A. There have been times when I’ve had

    5 conversations with them, yes. And, in fact, the

    6 ones that I express personal knowledge of knowing,

    7 in several of those cases that was because I’ve had

    8 conversations with them.

    9 Q. Does MERS direct the attorneys in the

    10 foreclosure actions in Florida?

    11 A. Well, MERS sets guidelines of what they

    12 are doing for us, which is foreclosures, nothing

    13 else. And our guidelines are to be followed, and

    14 that’s an incident of membership.

    15 Q. Are these guidelines published?

    16 A. They are published.

    17 Q. Do the attorneys who do the foreclosure

    18 actions have access to these published guidelines?

    19 A. They are on our website.

    20 Q. Is that something that I could access as a

    21 member of the general public?

    22 A. Yes, sir.

    36

    1 Q. Beyond the website are there any other

    2 resources that these attorneys could look to for

    3 MERS’s policies?

    4 A. Well, the member is another resource. The

    5 member has copies of everything having to do with

    6 their membership in MERS and what the rules and

    7 procedures are.

    8 Q. Are there opportunities for an attorney

    9 who has a question to go online and get their

    10 question answered?

    11 A. There’s an opportunity for that, and they

    12 can also contact us directly by E-mail or

    13 telephone, or they can post a question on the forum

    14 and it would be answered anonymously, if they — if

    15 they would like.

    16 And that’s just for MERS. They can also

    17 get all those — all that information from the

    18 member also.

    19 Q. I see. Is there a closed list of

    20 attorneys that MERS uses in Florida for foreclosure

    21 actions?

    22 A. I wouldn’t describe it as closed because

    37

    1 there’s always the possibility that a — that a new

    2 firm would come in and pass muster. There are law

    3 firms that we would not use.

    4 Q. The law firms that you use, do you feel

    5 confident that those are law firms that are skilled

    6 in foreclosure law?

    7 A. Yes. I believe — I believe I can say

    8 that.

    9 Q. Have you reviewed anything prior to your

    10 coming to the deposition today?

    11 A. Yes, sir.

    12 Q. Did you review the files or individual

    13 foreclosure actions of the named plaintiffs?

    14 A. I don’t think that I went through every

    15 single one of the foreclosure complaints, no.

    16 Q. Is there any foreclosure — I’m talking

    17 about the named plaintiffs now — any of those

    18 foreclosures that were not brought in the name of

    19 MERS?

    20 A. I believe they were all brought in the

    21 name of MERS.

    22 Q. And as we sit here today, do you know

    38

    1 whether all of those foreclosure actions are still

    2 being brought in the name of MERS?

    3 A. I think those of the named plaintiffs have

    4 been assigned out.

    5 Q. Okay. Let’s talk about the assignment,

    6 and I’m going to talk generally and if — I might

    7 get into the individual plaintiffs, but let me ask

    8 you just generally.

    9 When you say assigned out, what is being

    10 assigned?

    11 A. As I said in the beginning, the primary

    12 business of MERS is serving as the mortgagee of

    13 record in the county land records, and that’s

    14 pursuant to either a mortgage that has directed

    15 that we are the mortgagee or by assignment making

    16 us the mortgagee. So in both of those two events,

    17 we are the mortgagee of record in the county land

    18 records.

    19 So when I refer to assigning the loan out,

    20 I’m referring to another assignment generated by a

    21 certifying officer of MERS assigning that mortgagee

    22 interest to the servicer.

    39

    1 Q. Define the mortgagee interest. What is

    2 the mortgagee interest?

    3 A. It’s the legal ownership of the — the

    4 mortgage itself. It is the part of ownership that

    5 has to do with being the one shown in the county

    6 land records, which is really all that we do.

    7 Q. And are those assignments recorded?

    8 A. Well, it’s not a requirement that the

    9 assignment be recorded. The assignment certainly

    10 could be recorded. The assignment would be

    11 available to be recorded.

    12 It might be presented to the judge if the

    13 judge wanted to see it, but I think when I say

    14 assign out, what I mean is MERS is no longer

    15 prosecuting that foreclosure.

    16 Q. Who are taking these assignments from

    17 MERS?

    18 A. The assignment would almost universally be

    19 to the servicer. It could be to another party

    20 directed by the servicer, but it is usually to the

    21 servicer.

    22 Q. Let me back up a little bit, because I

    40

    1 wanted to — you mentioned the term MERS members.

    2 What is — what is a MERS member?

    3 A. Well, in its basic form, it’s someone who

    4 has — someone, typically a corporation, some very

    5 small, some very large, who has filed an

    6 application with us seeking to become a member.

    7 And part of that is that they have agreed to go by

    8 the membership agreement and the rules governing

    9 membership.

    10 Q. Does the MERS member receive stock in the

    11 company?

    12 A. No.

    13 Q. What duties does MERS provide to the

    14 member?

    15 A. We serve as mortgagee of record in the

    16 county land records.

    17 Q. Why would the member want you to do that?

    18 A. Well, we serve as — that’s how we keep

    19 track. That’s how the MERS system keeps track of

    20 the various ownership interest in the month. And

    21 that way we receive service of process and so

    22 there’s no question that we are the correct place

    41

    1 to look when you’re determining what the various

    2 ownership interests are on a loan.

    3 So the MERS system is actually on top of

    4 the county recording system. We give additional

    5 information having to do with, for example, who the

    6 servicer is.

    7 Q. What — what is in the land records of the

    8 county? What could I see if I went to the land

    9 records of the county?

    10 A. You would see one of two things, either a

    11 mortgage naming MERS as the mortgagee or an

    12 assignment naming MERS as the mortgagee. And that

    13 assignment would have been from a mortgage that did

    14 not name MERS as mortgagee probably.

    15 Q. So an initial mortgage could name a MERS

    16 member, and then an assignment from that MERS

    17 member to MERS could appear in the records at some

    18 later point?

    19 A. Yes, sir. And maybe one in 20 come in

    20 that way. At least 18 or 19 out of 20 come in with

    21 MERS’s name on the mortgage.

    22 Q. Does the mortgage that is recorded

    42

    1 identify the lender?

    2 A. On the mortgage?

    3 Q. Yes.

    4 A. Probably in most cases. It’s not a

    5 requirement, but in most cases it would.

    6 Q. On those mortgages, is MERS named as a

    7 nominee for the lender?

    8 A. Yes, although not in every case.

    9 Q. What is a nominee?

    10 A. Well, the nominee is a — I guess you

    11 could describe it several ways. It’s a form of

    12 agency. It’s a placeholder. It’s an attempt to

    13 make it clear that we don’t have all of the

    14 interests, that we’re acting in a representative

    15 capacity. That’s — that’s the meaning of the word

    16 “nominee.”

    17 Q. I didn’t do very well in real estate law

    18 in law school, so you’re going to have to help me

    19 through this.

    20 When there is a mortgage — when a buyer

    21 buys a house, I always thought that you got a

    22 mortgage from the person who loaned you the money.

    43

    1 Is that what happens in these cases, MERS

    2 cases?

    3 A. And that’s common parlance. It’s — and I

    4 would have to disagree with that to the extent that

    5 what you’re getting from the mortgage company is a

    6 mortgage loan. It’s a lot of times referred to as

    7 a mortgage in the journalistic world, but you’re

    8 not getting a mortgage. You’re getting a mortgage

    9 loan or a loan for the purpose of buying real

    10 property.

    11 The borrower is actually giving back a

    12 mortgage in exchange for that loan, so it’s a

    13 secure transaction. So the term getting a mortgage

    14 is actually — everyone knows what that means, and

    15 so it’s not — it’s not piddled with as far as

    16 being incorrect.

    17 But a correct answer to your question

    18 was that — would be that the borrower is not

    19 getting a mortgage. They’re getting a mortgage

    20 loan and they’re giving a mortgage back.

    21 Q. But in this case, they’re giving a

    22 mortgage back not to the person that’s lending them

    44

    1 the money.

    2 A. Well, they’re giving a mortgage back to

    3 the party that’s lending them money. For the

    4 purpose of securing that loan, they’re naming the

    5 party that will be in the county land records.

    6 And so that’s why when I say we’re the

    7 legal owner of the mortgage, all we do is sit there

    8 in the county land records.

    9 All the other parties that are involved in

    10 a standard loan, mortgage loan, as I’ve described,

    11 still do virtually those same jobs. We just now

    12 have the MERS company that has agreed — because of

    13 the membership relationship that we have, we’ve

    14 agreed to be in the county land records to make

    15 sure that it protects the lien interest so no other

    16 instrument can prime that first lien position.

    17 Q. Now, for the Plaintiff Sandy Trent, it

    18 appears that the note shows that she borrowed

    19 $112,730 from a company called United Capital

    20 Mortgage Corporation.

    21 Do you recognize that as a member of MERS?

    22 A. Well, we have 3,000 members and a lot of

    45

    1 them have similar names so I’m — I’m not sure.

    2 Q. Okay. That’s fair.

    3 In this case MERS was named as the

    4 mortgagee, correct?

    5 A. Is that — are you showing me the

    6 mortgage?

    7 Q. I’ll show you the — I’ll show you the

    8 mortgage.

    9 MR. BROCHIN: Maybe we can mark it as an

    10 exhibit.

    11 THE WITNESS: The note typically does not

    12 refer to MERS.

    13 BY MR. WEAKLAND:

    14 Q. This might not be a good example

    15 (handing).

    16 A. This does not appear to be a MERS

    17 mortgage.

    18 Q. Okay.

    19 A. Okay, I’m wrong. It is MERS as nominee

    20 for the loan. It is a MERS mortgage.

    21 Q. All right. So in this case –

    22 MR. BROCHIN: Excuse me. Do you have an

    46

    1 extra copy?

    2 MR. WEAKLAND: Let’s — actually, let’s

    3 mark that as Exhibit 1, which is the — the Sandy

    4 Trent mortgage, and we’ll make a copy at the break,

    5 if you don’t mind.

    6 MR. BROCHIN: Okay.

    7 THE WITNESS: Yes. This is what we call

    8 the MOM, MERS as original mortgagee.

    9 THE REPORTER: I’m sorry –

    10 MR. BROCHIN: Can I just see the –

    11 THE REPORTER: — what did you call it?

    12 THE WITNESS: MOM — M-O-M — MERS as

    13 original mortgagee.

    14 MR. BROCHIN: So what you’re going to mark

    15 is the complaint –

    16 MR. WEAKLAND: No.

    17 MR. BROCHIN: — amended complaint?

    18 MR. WEAKLAND: I’m going to mark the

    19 mortgage.

    20 MR. BROCHIN: Just the mortgage?

    21 MR. WEAKLAND: Yes.

    22 MR. BROCHIN: Okay. Then there’s a note

    47

    1 attached. Are you going to mark — can we just be

    2 clear what we’re going to mark as an exhibit?

    3 MR. WEAKLAND: We’re going to mark this –

    4 I think it’s six pages of a mortgage.

    5 MR. BROCHIN: So the recording

    6 information, you’re going to mark pages 1386

    7 through 1391?

    8 MR. WEAKLAND: You have it. I don’t have

    9 an extra one. Sorry.

    10 MR. BROCHIN: You don’t have it?

    11 MR. WEAKLAND: No. I have a –

    12 MR. BROCHIN: Oh, I’m sorry.

    13 MR. WEAKLAND: — an abstract of it.

    14 MR. BROCHIN: But — I just want the

    15 record to be clear what you’re marking as an

    16 exhibit.

    17 MR. WEAKLAND: Okay.

    18 THE WITNESS: And I’m not that used to

    19 reading those, so, yes, it is a MOM.

    20 MR. WEAKLAND: Well, actually, let’s take

    21 a break now — it’s an hour — and we’ll get this

    22 marked and come back.

    48

    1 MR. BROCHIN: Maybe you can get a copy,

    2 too.

    3 THE VIDEOGRAPHER: The time is 11:14 a.m.

    4 We’re going off the record.

    5 (Recess.)

    6 THE VIDEOGRAPHER: The time is 11:32 a.m.

    7 We’re back on the record.

    8 BY MR. WEAKLAND:

    9 Q. Mr. Arnold, what is the MERS registry?

    10 A. That refers to the MERS system, which is a

    11 registered trademark for the electronic system,

    12 that keeps track of mortgage interest, and that’s

    13 owned and operated by MERS Corp., Inc.

    14 Q. I see. Is that something that I could

    15 have access to?

    16 A. You could have access to find out who the

    17 servicer of the loan is.

    18 Q. So if I have a — if I have a mortgage

    19 that’s registered with MERS as mortgagee, could I

    20 find out who the servicer of my loan is?

    21 A. Yes.

    22 Q. Could I find out who was the current owner

    49

    1 of my mortgage note?

    2 A. You would have to find that out through

    3 the servicer. So the reason that we — that we

    4 give you the servicer is because the servicer is

    5 really the best source for all that information.

    6 The servicer knows where the note is; the

    7 servicer knows what the status of your payments

    8 are; the servicer would be able to tell you, for

    9 example, within 48 hours of receiving a payment

    10 whether the payment was credited to your account.

    11 MERS would be an unnecessary barrier

    12 there. So what our system — what the MERS’s

    13 system does is give you the servicer and the

    14 servicer has all that information.

    15 Q. Does MERS have an 800 number that I could

    16 call and ask questions about my loan?

    17 A. The MERS system has a 1-800 number.

    18 Q. Okay. Is that for –

    19 A. You said — you said MERS.

    20 Q. I’m sorry.

    21 A. Does that — the MERS system is actually

    22 part of MERS Corp., Inc.

    50

    1 Q. Is that something a consumer would call to

    2 get information on their mortgage loan?

    3 A. Yes, sir.

    4 Q. Do you provide consumers with the name of

    5 the most recent or the current mortgage note holder

    6 or owner?

    7 A. No. We provide the servicer, the current

    8 servicer, and that can be updated instantaneously.

    9 So there’s no lag like there would be with the

    10 county land records, for example.

    11 The — the servicer that we give you is

    12 the actual company that has your file, and that is

    13 the proper company to tell you — to answer

    14 whatever kind of question you might have about your

    15 loan.

    16 Q. Now, the servicer and the mortgage note

    17 owner could be one and the same company; is that

    18 correct?

    19 A. Yes, sir.

    20 Q. Is that more often the case than not?

    21 A. It’s often the case. It’s often not the

    22 case. The notes themselves are to be liquid, and

    51

    1 they can move rapidly from party to party. They

    2 wind up in people’s 401(k)s and — and so

    3 it’s — the numbers you hear on the television

    4 about how huge the mortgage industry is, the reason

    5 for that largely is because those notes can be

    6 bought and sold and it drives down the cost of

    7 getting a home loan because those notes are so

    8 liquid.

    9 Q. Does MERS keep track of all of those sales

    10 of the mortgage notes?

    11 A. The servicer keeps track of that.

    12 Q. Not MERS?

    13 A. Not — not MERS. You could use the system

    14 to keep track of it. You could utilize this MERS

    15 system to track some of that for a member. A

    16 member might be able to use the MERS system for

    17 that, but really the party to go to to find out

    18 where the note is is the servicer.

    19 Q. Does the MERS registry list the names of

    20 the borrowers?

    21 A. It’s the MERS system –

    22 Q. Yes.

    52

    1 A. — and yes, sir.

    2 Q. Does the MERS system have a database that

    3 would show the borrowers in Florida?

    4 A. Yes, sir.

    5 Q. If at some point in this litigation we

    6 would ask MERS to give us a list of all the

    7 borrowers in Florida for whom MERS is a mortgagee,

    8 is that something that could be accomplished?

    9 A. It’s not something that we would do.

    10 Q. Could it be done?

    11 A. It could probably be done.

    12 Q. All right. Over the break, we had –

    13 pardon me.

    14 (Discussion off the record.)

    15 BY MR. WEAKLAND:

    16 Q. When you say it probably could be done,

    17 what would be the difficulties with doing that, if

    18 there are any?

    19 A. Well, it would take programming. It would

    20 take man hours. It would be unnecessary. You’ve

    21 got borrowers in Florida. Why — why would we

    22 disclose the name of — of borrowers to anyone?

    53

    1 Those people aren’t involved in foreclosures.

    2 Foreclosures are — make up less than

    3 1 percent of all the loans that we have on the MERS

    4 system. Less than 1 percent of those loans go into

    5 foreclosure, and this lawsuit’s about foreclosures.

    6 Q. I think I asked you at one point the

    7 services that MERS provides to members.

    8 Is foreclosure litigation one of those

    9 services that MERS provides to its lenders — or to

    10 its members?

    11 A. I would say that that’s incidental to our

    12 primary service which is that we agree to serve in

    13 the county land records as the mortgagee of record,

    14 and we receive service of process and all of that

    15 because of that.

    16 So our primary purpose is — dwarfs any

    17 sort of foreclosure that we have. So I think the

    18 proper way to describe our involvement with

    19 foreclosure is that it’s an incident of the fact

    20 that we are the mortgagee of record.

    21 Again, it’s less than 1 percent of all the

    22 loans that we have.

    54

    1 Q. That number that you’ve just provided, is

    2 that something that you’ve done a study of that you

    3 know that’s the percentage?

    4 A. The less than 1 percent?

    5 Q. Yes.

    6 A. Yes, sir. It’s actually .7 percent, so

    7 it’s actually significantly less than 1 percent.

    8 Q. So of all the mortgages wherein MERS is a

    9 mortgagee, less than 1 percent of those end up in a

    10 foreclosure filed by MERS?

    11 A. Go to foreclosures.

    12 Q. Go to foreclosure.

    13 A. That result in foreclosure.

    14 Q. And that’s not — you’re talking

    15 nationally now?

    16 A. Well, I would give the same answer.

    17 That’s a national figure, but Florida is so

    18 significant as a — as a percentage of the national

    19 number that I think you’d find that it’s comparable

    20 in Florida as well.

    21 Q. In the last four years, are there

    22 foreclosures in Florida wherein MERS was the

    55

    1 mortgagee that were not instituted by MERS?

    2 A. Where MERS is the mortgagee?

    3 Q. Yes.

    4 A. Well, the foreclosures are instituted

    5 jointly by MERS and the member. It’s — it’s done

    6 in the name of MERS, because we’re the mortgagee of

    7 record and the mortgage says that we have the right

    8 to foreclose.

    9 But the member is heavily involved in

    10 that. For example, we would not know that a loan

    11 is in default and should go to foreclosure without

    12 the involvement of the member.

    13 Q. A member could be a servicer?

    14 A. Yes, sir.

    15 Q. All right. In your experience in Florida,

    16 have the servicers on their own filed foreclosures

    17 in cases where MERS was the mortgagee?

    18 A. Well, we have a certifying officer

    19 colocated with them, so I think the answer is — is

    20 no. It’s — it proceeds with the involvement of

    21 MERS.

    22 Q. Thank you.

    56

    1 A. Uh-huh.

    2 Q. Before the break, Mr. Arnold, we were

    3 discussing the mortgage loan of Sandy Trent.

    4 Do you remember that conversation?

    5 A. Yes, sir. That is a MERS mortgage.

    6 Q. Let me — let me show you –

    7 MR. WEAKLAND: In fact, I’m going to have

    8 the court reporter mark that as Exhibit 1.

    9 (Plaintiff’s Exhibit Number 1 was marked

    10 for identification.)

    11 BY MR. WEAKLAND:

    12 Q. Now I think this has become a — a

    13 document with more than one — more than one

    14 document enclosed.

    15 This is, I think — for the record, the

    16 first two pages appear to be the Amended Complaint

    17 of Foreclosed Mortgage, the third page is a –

    18 titled Notice Required by the Fair Debt Collection

    19 Practices Act, and the fourth page starts the

    20 mortgage.

    21 So I’m going to ask if you could turn to

    22 the fourth page of that Exhibit 1.

    57

    1 I believe you testified — correct me if

    2 I’m wrong — that this is a M-O-M or MERS original

    3 mortgagee?

    4 A. Yes, sir.

    5 Q. Is that — is that what the term is?

    6 A. (Nodding head.)

    7 Q. And you can see that by the language in

    8 the mortgage; is that correct?

    9 A. Yes, sir.

    10 Q. And you testified that in some cases MERS

    11 would not be named on the mortgage but would become

    12 a mortgagee through a later assignment?

    13 A. Exactly. And that might be one or two out

    14 of 20.

    15 Q. Does the mortgage in this case in

    16 Exhibit 1 indicate that MERS is entitled to collect

    17 money on the underlying debt?

    18 MR. BROCHIN: Objection to the extent the

    19 document speaks for itself.

    20 THE WITNESS: Yes. I don’t — that is not

    21 the case. MERS has the mortgage interest only.

    22 The beneficial owner or the servicer are the ones

    58

    1 that collect the debt.

    2 BY MR. WEAKLAND:

    3 Q. Sir, if you could go to the last two pages

    4 of this document, and if you could identify what

    5 this is.

    6 MR. BROCHIN: Could you identify what

    7 exactly by page number or something you’re

    8 referencing?

    9 MR. WEAKLAND: Well, it would be — in the

    10 upper right-hand part of the page, it would be

    11 page 18 in the fax line, 018 and 019.

    12 BY MR. WEAKLAND:

    13 Q. And what is this, sir?

    14 A. I believe it’s a note, promissory note.

    15 Q. Would this be the mortgage note?

    16 A. Yes, sir, exactly.

    17 Q. And I know the document speaks for itself,

    18 but can you see anything on the document that would

    19 indicate that MERS is a party to this note?

    20 A. We typically are not on notes, so it’s not

    21 on this note, and I don’t think you’ll find it on

    22 other notes either.

    59

    1 Q. And to complete Exhibit 1, if you could go

    2 back to the first page, which has a 007 on the

    3 top — do you see that?

    4 A. Yes.

    5 Q. And what is this document?

    6 A. Its title is Amended Complaint to

    7 Foreclose Mortgage.

    8 Q. And is MERS a plaintiff in this

    9 foreclosure action?

    10 A. Yes, we are.

    11 Q. And on the second page, there is a

    12 signature line for Donna Glick. Do you see that?

    13 A. Yes, sir.

    14 Q. And who does she represent in this action?

    15 A. She would represent both MERS and

    16 CitiMortgage.

    17 Q. And the third page, which is — has a 009

    18 at the top, what is that?

    19 A. The title is notice required by the Fair

    20 Debt Collection Practices Act.

    21 Q. Okay. In the mortgage transactions in

    22 Florida, does the mortgagor or the borrower pay any

    60

    1 money to MERS?

    2 A. The borrower does not pay any money to

    3 MERS.

    4 Q. Does MERS receive any money from the

    5 borrower?

    6 A. No.

    7 Q. Do you know whether the HUD-1 statement on

    8 these transactions would show a payment to MERS as

    9 a closing cost for the buyer?

    10 A. There would not be a payment to MERS from

    11 the borrower regardless of whether it was on the

    12 HUD-1 or not. That money — it could b

  66. Dear Professor Garfield,

    Today is the birthday of a Dear Friend and Great Teacher whom I hold dear. I am in celebration.

    Today also is the anniversary of my answer to the Court in my case I also celebrate. I wish to pledge special thanks to you on behalf of many people and most importantly from my family and I.

    The studies you have published,caused me to sponge up in my cranium and threatens to provide me with premiums on a continuum. I am forever grateful I wish to meet you and spend some time talking to you; I think this would be fun.

    I spent most of today in glee as for the birthdays mentioned and also with some Lawyers who speak very highly of you. All in all it is a wonderful day for me and the bottom of my heart speaks very clear. I have come to know peace and it resides inside of me. I am one of the happiest men on this earth. I also know more than most Lawyers about this meltdown, in so knowing I Endeavour to control my destructive ego and stay close to the humility my handlers have guided me too.

    Life without an assignment of Mortgage is wonderful. I think I may have fallen in love forclosurely and legally with my Lawyer (not to be confused with romance and note, “think”), nothing is for sure in this short life, but internal peace is very possible, I attest with surety.

    My 17 year old daughter wants to study Law and I am assisting her. I wished I could have studied Law, but at this time, my life disallows such aspirations.

    I have helped so many people and it is a very rewarding feeling, you must know this sensation and have understanding of it. The passion of helping people who are up the creek in this unfortunate dilemma is heart filling.

    It is important to remember that upon receipt of a complaint people should be reminded to check the assignment of mortgage first and take the information apart very carefully.

    I am available to help forever just call me 786 274 0527 malibubooks@gmail.com.

    Your friend forever

  67. HERE IS SOME FITCH INFO i AM COLLECTING THIS TO DO THE sec STUDY

    Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, http://www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site.

    Contact:
    Fitch Ratings
    Steven Marks, 212-908-9161
    Taqim Spradley, 212-908-0291 (New York)
    Media Relations:
    Sandro Scenga, 212-908-0278 (New York)
    sandro.scenga@fitchratings.com

  68. Banks, and corrupt politicians
    Published December 9, 2008 by shane.vincent

    While not all politicians might be corrupt, it does seem to that many people are in politics to help themselves. At least that is what is seems like today, as yet another Illinois Governor has been arrested. Amongst the charges against him are shaking down a children’s hospital and trying to sell Obama’s senate seat.

    But what really might have done him in is his recent (the day before he was arrested) move to boycott Bank of America. Much like Eliott Spitzer, who just before his problems had written about how the states were prevented from doing anything about predatory lending, all of the sudden after a very slow moving investigation, the federal government had to act to stop Blagojevich.

    Maybe it’s as Donald Trump has recently alleged, that “the banks engineered the disaster“, because while the manufacturing sector has to grovel and beg for pennies, truckloads of money are being given to the banks which the banks are using to buy roads, parking meters and every other asset that they can get at bargain prices.

    The question is where does the Federal government get the money to loan to the banks? Strange as it seems, from the Banks themselves. The Federal government takes worthless paper from the banks (an attorney has a site where he explains why most people DON’T OWE ANYTHING on their mortgage) and gives the banks bonds which the banks then use to loan the money to the government. Strange, and insane, but people still don’t believe me when I tell them that the Federal Reserve is a private bank. Part of the problem is that while the United States Treasury PRINTS the FEDERAL RESERVE NOTES that people treat as money, the notes are only printed matter (not currency or legal tender) until the FEDERAL RESERVE issues the money at least this was how it was explained to me.

    It’s sad that people are willing to let the banks have buckets of money, and at the same time stick the fork in the American manufacturing base. That said, I have to say that the unions who keep supporting the party whose president signed NAFTA into law are reaping what they sowed. Rather than support the real working man, unions have made backroom deals and cut themselves to elect democrats with blind loyalty. Of course the teacher’s union isn’t included in this, as they are still powerful, with ever more power over the shaping of the minds of children. It’s not that people are better educated today, in fact quite the opposite, as John Taylor Gatto writes:

    Back in 1952 the Army quietly began hiring hundreds of psychologists to find out how 600,000 high school graduates had successfully faked illiteracy. Regna Wood sums up the episode this way:

    After the psychologists told the officers that the graduates weren’t faking, Defense Department administrators knew that something terrible had happened in grade school reading instruction. And they knew it had started in the thirties. Why they remained silent, no one knows. The switch back to reading instruction that worked for everyone should have been made then. But it wasn’t.

    What the schools are doing is not teaching students to read and think for themselves, but rather to be easily led. This is why even though there is considerable doubt about manmade Global Warming (now called Climate Change to cover all bases) you’ll see children write impassioned letters about how the world needs to be saved (and of course to the world also would need a new messiah).

    But there are a lot of parties that are benefiting from having the masses run around. It seems that Ireland might sign on to the rebranded EU constitution because of the decimation of the national economies that the lack of oversight had caused. This destruction of nations is something that many people had predicted for many years, and were called kooks (for example Dr. Ron Paul just last year was called a kook for saying that the U.S. economy was in trouble). I fail to see how the world is going to be a better place if we all use a one world currency, but then again, I used to believe that the constitution meant what it said, but that was before I learned the truth about judges. Judges are just politicians who don’t talk to the public, they are the master of the backroom deals, and while I am sure there are a few who aren’t one of the reasons why I don’t take ads and turn the “crank on the money machine” is because I have read too many cases where advertising has turned what should have been protected speech into commercial speech, which is a sad statement of how little protection speech really has.

    Examples of the loss of the “freedom of speech” abound, with notable examples being Ernst Zundel, and Dr. Toben. Google does control what people can say when they take money from Google, and such is the case when you take advertising, you become dependent on what your advertisers pay you for, so you too can make 100,000 dollars in a day or an hour (just like the Arbitrage Conspiracy System will allegedly help you do).

  69. BORROWERS BETRAYED | I-TEAM SPECIAL REPORT
    Exec had mortgage racket down to an art
    Orson Benn has gone to prison for falsifying applications, but a former associate in Homestead still sells mortgages.
    Borrowers Betrayed Part 4
    Orson Benn’s network of mortgage brokers wrote thousands of subprime loans in Miami-Dade which have gone into foreclosure.
    MIAMI HERALD STAFF
    Borrowers Betrayed Part 4
    Orson Benn’s network of mortgage brokers wrote thousands of subprime loans in Miami-Dade which have gone into foreclosure.
    MIAMI HERALD STAFF

    * Borrowers Betrayed Part 4

    * Photos

    Related Content

    * Legacy of tainted home loans: vacancy, vandalism, foreclosure
    * Read the full Herald investigation Borrowers Betrayed

    BY JACK DOLAN, MATTHEW HAGGMAN AND ROB BARRY
    jdolan@MiamiHerald.com

    Orson Benn, once a vice president at the nation’s largest subprime lender, spent three years during the height of the housing boom tutoring Florida mortgage brokers in the art of fraud.

    From his office in New York, he taught them how to doctor credit reports, coached them to inflate income on loan applications, and helped them invent phantom jobs for borrowers.

    When trouble arose — one broker got caught, another got cold feet — Benn called his trusted fixer in Miami to remove the problem and get the loan approved: Yvette Valdes.

    The 48-year-old Valdes was a key figure in helping Benn tap into one of the country’s most lucrative mortgage markets during his run with Argent Mortgage, The Miami Herald found.

    Benn and several associates were convicted of racketeering this year, but Valdes still sells mortgages from a nondescript storefront in Homestead.

    While prosecutors looked at roughly $100 million in loans written by Benn and a cadre of co-workers, that represents just a portion of the loans they approved during his aggressive expansion into Florida.

    The Miami Herald found that Benn’s network approved more than $550 million in home loans from Tampa to West Palm Beach to Miami, according to an analysis of court records.

    In Miami-Dade County alone, Benn’s office approved more than $349 million in loans on 1,913 homes — more than one in three have since fallen into foreclosure, the analysis shows.

    Valdes brokered at least 100 of those loans worth $22 million — nearly all based on false and misleading financial information, the newspaper found.

    One borrower claimed to work for a company that didn’t exist — and got a $170,000 loan. Another borrower claimed to work a job that didn’t exist — and got enough money to buy four houses.

    In a brief interview with The Miami Herald, Valdes blamed the borrowers, refusing to comment further. Her lawyer, Glenn Kritzer, said she has done nothing illegal.

    With so many of Benn’s loans now in foreclosure, Miami-Dade County is littered with still more empty homes. Squatters inhabit some; crack dens occupy others. At least one has been stripped to the ground, leaving only the foundation.

    ”It’s like a desert,” said Reynaldo Perez, 41, who lives in a Homestead town house financed by Benn three years ago. “Just on my street, there are five or six homes being foreclosed.”

    Although the Office of Financial Regulation — the state agency entrusted with policing the mortgage industry — was alerted to Valdes’s role in Benn’s network at least three years ago, it never launched an investigation, the newspaper found.

    Since 2005, the agency has had copies of some of the same misleading loan applications that The Miami Herald reviewed.

    Terry Straub, the OFR’s director of finance, acknowledged that his agency had evidence against Valdez. ”I don’t have any explanation for why we didn’t pursue it,” he said.

    In fact, state regulators ignored more than a dozen written warnings about brokers in Benn’s network, the agency’s records show.

    Despite a law banning criminals from getting licensed — created after a Miami Herald series was published this summer — two brokers in Benn’s network who pleaded guilty in May to conspiracy charges in the case remain licensed.

    THE BEGINNING

    The path to Valdes and other brokers began in 2002, when Benn was hired by Argent Mortgage, which would become the nation’s largest provider of loans to people with low credit scores.

    Known as ”Big O,” the six-foot three-inch, 280-pound Benn grew up as the son of a subway mechanic in one of Brooklyn’s toughest neighborhoods. Even without a formal banking education, he needed just three years to advance from a clerical job to vice president.

    At first, his job was to trouble-shoot problems that cropped up in loan applications, court records and interviews show.

    Argent made money bundling the mortgages and selling them to investors on Wall Street, not by collecting monthly checks and depending on the borrowers’ ability to pay. The accuracy of loan applications was not a priority, Benn later testified.

    With control over hundreds of millions of dollars in loans, Benn launched a subprime empire that would soon cover most of Florida.

    After four months on the job, Benn flew to Tampa to meet with brokers who courted him with a luxury box at a Tampa Bay Lightning hockey game, football tickets and strip-club outings, court records show.

    He taught one of those brokers, Scott Almeida, a convicted cocaine trafficker, to prepare phony income statements and doctor credit reports.

    A few months later, Almeida introduced Benn to Tampa brokers David Tuggle and Eric Steinhauser.

    After Benn taught them to prepare phony documents, they began to write millions of dollars in loans.

    Along the way, the brokers showed their gratitiude. DHL envelopes stuffed with cash — a total of hundreds of thousands of dollars — routinely arrived at Benn’s million-dollar house in the New York suburbs. In slightly more than two years, Tuggle and Steinhauser alone paid Benn between $70,000 and $100,000, they told police.

    SOUTH FLORIDA LINK

    As the scheme grew riskier, it extended south, almost 300 miles, to Yvette Valdes in Homestead.

    Benn told Steinhauser to create a phony deed to help a borrower get a loan. But Steinhauser said he had trouble finding someone in Tampa willing to help him because the deed would be filed in court.

    So, Benn referred him to Valdes at Sandkick Mortgage.

    For 16 months, Valdes and her co-workers were a mainstay of Benn’s lucrative Miami-Dade operations, writing more than $1 million worth of loans in a typical month.

    The Miami Herald obtained every loan application that Sandkick sent to Argent between May 2004 and September 2005, for mortgages totaling $22 million.

    The documents include the personal and financial information about the borrower supplied by the broker.

    Out of 129 applications, 103 contained red flags: non-existent employers, grossly inflated salaries and sudden, drastic increases in the borrower’s net worth.

    The simplest way for a bank to confirm someone’s income is to call the employer. But in at least two dozen cases, the applications show bogus telephone numbers for work references, the newspaper found.

    On three applications, Valdes provided her own private cellphone number, even though the borrowers did not work for her.

    Another application included a letter from ”Community Bank,” saying the borrower had $63,000 in his account. The phone number on the letter does not belong to a financial institution, however. It belongs to Bill Rieck, a Key West city employee, who told The Miami Herald that he was surprised his number was used.

    ”I ain’t no community bank,” he said, adding that the cell number has been his for six years.

    INCOME AT ISSUE

    When Kendale Lakes couple Monica Gaviria and Stacy Duthely applied for a loan through Sandkick in January 2005, they declared a combined income of $68,000 a year. She was a hair stylist; he, an interpreter.

    When the loan went through a few months later, the documents showed more than a fivefold increase, to $384,000.

    Gaviria said that figure is grossly inflated, but said she knew nothing about the change on her mortgage application until this year when she fell behind on her payments and the bank called her.

    She said the bank representative demanded, “What’s the problem? You make $17,000 a month.”

    As the months went by, Valdes began to write more loans for Benn, records show. She started small with an $87,000 loan in May 2004, but the next month, her numbers rose to $750,650. By that September, she hit $1 million.

    The following year, she went on a tear, breaking the $1 million mark seven times.

    Along the way, some borrowers came back for more.

    One Sandkick customer, Erica Wright, bought her first house in July 2004, when she was 21. Her loan application said she was the office manager at Weldon Industries, a Tampa fence manufacturer, for four years. The job paid $40,000 a year.

    But when reached by The Miami Herald last month, the company’s general manager, Scott Franzen, said, “We’ve never had anyone here by that name.”

    In September 2004, Wright bought three more houses using Weldon as the employer, even claiming a big raise to $78,840.

    Wright could not be reached for comment. All four properties have fallen into foreclosure, leaving $501,677 in unpaid debt.

    While Valdes was flooding Miami-Dade with risky loans, Benn’s network drew the attention of state regulators several times.

    One of the brokerages doing business with Benn — Total Mortgage of Tampa — incurred 10 complaints in just two years.

    In four of those cases, state regulators confirmed that the company provided false and misleading information to get loans. The company owner put false data in her own mortgage application in 2004, regulators found.

    Instead of pressing for disciplinary action, including suspending or revoking the license, the state closed the cases.

    The company kept going, brokering two more loans — later investigated by police — that went directly to Benn’s chief co-conspirator, Argent banker Sam Green.

    Green managed to get two mortgages to buy one home. He used one loan to pay for the property, and illegally pocketed the other — $79,000, he later admitted to police.

    SCHEME UNRAVELS

    While Benn and his co-workers approved more than half a billion dollars’ worth of mortgages during their run at Argent, it was a complaint filed by an elderly Tampa borrower over a disputed loan that drew the attention of police in 2004.

    As other borrowers stepped forward with similar complaints, Benn’s network slowly unraveled.

    Investigators from the humble Hillsborough County Consumer Protection Agency began to review Argent loans and discovered irregularities in the tens of millions of dollars.

    One by one, Tampa area brokers pointed the finger at Orson Benn.

    Last year, statewide prosecutors charged Benn in Polk County with racketeering. At least seven others have been arrested in the same scheme, including the other Tampa area brokers.

    Argent succumbed to the troubles of the subprime market and was bought by Citibank last year.

    Despite a crackdown on Benn’s Tampa brokers, nothing happened to the Miami network where most of the loans were written, The Miami Herald found.

    Benn, who has begun an 18-year prison sentence, did not respond to a request for comment. Neither did Tuggle or Steinhauser, both of whom pleaded guilty in the mortgage scheme and await sentencing.

    Both are still listed with ”approved” licenses on the OFR website, the only place consumers can check the status of brokers.

    Although state regulators have known about Valdes’s involvement for three years, they never took action against her or Sandkick Mortgage.

    The agency identified her as an associated target in a fraud investigation of another broker in the Benn network in 2005, records show.

    In addition, the file contains two Sandkick loan applications with bogus claims: one showing an inflated salary and the other a phony job.

    Terry Straub, director of finance for the OFR, said he can’t explain the lack of action.

    Valdes and her co-workers wrote their last loan with Benn in late 2005. Since then, 40 percent of the properties have slipped into foreclosure, the newspaper found.

    Some have fallen into disrepair, dragging property values down around them. Others are abandoned. One, in Liberty City, has been razed, leaving nothing but a weed-strewn lot.

    Last week, Miami Herald reporters visited Valdes at her Homestead office, now known as Best Mortgage Choice. She refused to discuss the newspaper’s findings.

    When asked about the misleading information in her customers’ loan applications, Valdes said, “That’s their problem.”

  70. Why won’t the lenders try to cut a deal?

    Published: Sunday, December 7, 2008 at 1:00 a.m.
    Last Modified: Saturday, December 6, 2008 at 9:50 p.m.

    Several people told me my recent column on inflexible behavior by lenders handling potential foreclosure cases didn’t mention a key point.

    It is one lawmakers are grappling with as they look to revive housing markets and salvage crashing investments. Oh, and — almost forgot — just maybe keep families from becoming homeless simply because they bought a house at the wrong time.

    Many mortgage servicers aren’t helping, especially with the latter point. Despite federal encouragement, lots of them aren’t negotiating with homeowners who owe far more than their homes are now worth. Those industry execs especially won’t write off even a fraction of the principal owed, though the alternative is taking a bigger loss by foreclosing.

    Why choose to end up with no monthly payments, lots of legal fees, and a house they could only sell at a bigger loss? Well, the factor I didn’t spell out last time is huge: Often, those in the industry don’t dare renegotiate a homeowner’s loan.

    That’s because most lenders sold their mortgages, which were soon packaged with others and the packages sold in shares. Now, ownership and securitized stakes in the expected profits are in the hands of multiple institutions and retirement funds and such.

    According to April Charney, a lawyer who teaches other lawyers about this stuff, some institutions don’t even own what they invested in.

    It is a huge problem for our country that, systemically, a Ponzi scheme was at work as, she said in an e-mail, “originating lenders failed to legally transfer notes and mortgages, leaving the investors in these trusts (us, our states, our schools, our pensions, the Bank of China, etc.) owning air. Sliced and diced air.”

    That ownership web can make it hellish to find anyone who dares restructure a mortgage.

    Often no one is sure who has authority to make a deal, let alone thousands of deals. Mortgage servicers fear being sued by investors if they exceed contractual authority, and the contracts with different investors vary.

    No wonder more people tell me the government needs to be heavy-handed and force the industry to deal with debtors.

    After all, the parties on both sides — the late-real-estate-boom home buyers and the lender/investors — all made the same bad bet that the housing market would keep going up, up, up.

    Some judges suggest passing laws to let mortgages be handled bankruptcy style. A court — or someone — could be empowered to restructure and reduce home loan debt, and so, decide how a homeowner and lenders/investors will share the pain.

  71. Monday, December 8, 2008
    ECONOMIC CATASTROPHY COMING!

    NEW YORK (Fortune) — A billion dollars here, $7 trillion there: How long till Uncle Sam has to cry “uncle?”

    For now, frightened investors worldwide continue to gobble up U.S. Treasury bonds, and they aren’t much concerned about the impact of all the obligations the U.S. government is taking on to try and head off economic catastrophe.

    But the government printing money, lending money to shaky corporations and guaranteeing debt that may never be repaid all could have troubling consequences in the not-too-distant future.

    The No. 1 concern: Even if actions taken by the Federal Reserve and the U.S. Treasury succeeds at stabilizing the global financial system, and an economic recovery takes hold, a brutal inflationary spike will be right around the corner.

    “Inflation is the 8,000-pound gorilla in the room,” said Gary Hager, president of Integrated Wealth Management in New Jersey. “We’re sitting in the room with the coffee cups vibrating.”

    In that environment, long-term interest rates would soar, the value of the U.S. dollar would plummet, policy makers would face a whole new set of challenges.

    “Everyone is going to lose something,” said Will Hepburn, president and chief investment officer of Hepburn Capital Management in Prescott, Ariz. “The winners will be those who end up losing the least.”

    Focus on deflation
    Even those who have backed the blizzard of emergency spending on the grounds that it’s necessary to prevent an economic catastrophe are worried about the size of the tab that will be left to taxpayers.

    Hepburn gives federal officials “bonus points” for concocting innovative responses to the credit crunch. The ongoing collapse of U.S. stock market and real estate values, he said, has slashed U.S. household wealth by at least $10 trillion – and those paper losses could go much higher before the swoon ends.

    So far, given the eye-popping sums being offered up by government officials, the markets have responded with surprising nonchalance. Yields on Treasury securities have tumbled to historic lows as investors fly to the safety and liquidity of U.S. government bond markets. The dollar has benefited from the move away from risky assets as well, trading at levels last seen earlier this decade.

    Hepburn thinks the process of financial institutions and major investors unwinding massive bets may be further along than people believe. But while that could mean less volatility in the markets and a reduced risk of financial calamity, it could also whipsaw people who have moved their money out of stocks and into low-yielding assets like Treasury bonds.

    “The capital preservation strategy will work till the recovery sets in,” Hepburn said. “But we don’t have the resources to pay off all these obligations – so the government’s going to have to try to inflate it away.”

    An inflationary spike may seem unlikely, given that governments around the world are currently doing their best to head off the opposite threat – deflation, with falling price levels that would hamper economic growth by increasing real interest rates. The Bank of England and the European Central Bank slashed interest rates Thursday morning in a bid to bolster economic activity and prevent inflation from turning sharply negative in coming months.

    Fast-changing climate
    But Hager notes that it was only four months ago that oil cost $100 a barrel more than its recent $47, which shows how quickly market dynamics can change.

    What’s more, he said, while people are still struggling to figure out the costs tied to starting up and overseeing the government bailouts, no one seems to have put much thought to an equally important endeavor – how the government withdraws the massive support it has offered the markets in the event its efforts start to bear fruit.

    While efforts to thaw the credit markets are taking effect slowly, Tom Sowanick, chief investment officer at Clearbrook Financial, sees a risk that they could suddenly become much more effective, leading to a jump in prices and a selloff in the dollar.

    “The economy’s in a bit of a slingshot,” said Sowanick. “We are looking at a high probability of inflation issues ahead.”

  72. Mario and Joanne were great and gracious.

  73. Glad I tuned into this AWESOME show through streaming radio all the way up in Boston.

    You three made my weekend! After hearing your great insight and clarity, Neil, and your contagious passion and laudable outreach, Mario, this wintry cold short Boston day of first snows magically became less gray.

    Loved how accessible and ‘with it’ Joann is. May your efforts help more attorneys like her retool so they ‘get it.’

    I imagine this compelling message getting out far and wide through every medium possible before the Archons figure out what we’re up to and block, neuter, or overpower our insurgent nationwide grassroots search for fairness, justice and accountability.

    Your inspiring radio event fresh on my mind, I attended a delightful holiday party this evening, and among the many jolly people were two women who were ready to discuss our nation’s financial straits.

    One, a new hire under Bair at FDIC, couldn’t believe in her travels the poor paper trail and record-keeping mess she’s finding at troubled banks she’s auditing and trying to salvage. I’ll fill you all in on what they’ll propose doing with it.

    The other, retired from the finance industry (big in Boston), expressed honest regrets she didn’t act on what she foresaw as the inevitable destiny and demise of her industry. She recommended Kevin Phillips’ on spot latest book BAD MONEY, which I recently saw discussed on Bill Moyers.
    https://www.kitcomm.com/showthread.php?t=23788 <when there, also check out the other UTube offerings related to the “mortgage meltdown”!

    Keep up the great work and outreach, Mario and Neil!

    Mario, you rock! When this movement takes off, let’s celebrate with a boots on the ground walk together through Queen’s Park Savannah!

    Looking forward to working with you and Neil to spread the word!

    RSVP
    Allan
    BeMoved@AOL.com

  74. I did a radio show today in Florida with a Lawyer
    Joann Hennessey,Neil called in to comment and it was so much fun we addressed the “Mortgage Meltdown”,spoke about the blog and enjoyed every second of the show.

    I hope to do it again.

    We need to help so many people it is so important to guide the people to help,to places to find help.

  75. Chinese property hunters to raid US
    By Geoff Dyer in Beijing

    Chinese bargain hunters are preparing to descend on American cities such as Los Angeles and San Francisco, where homeowners have suffered some of the steepest price falls in the US.

    SouFun, the biggest real estate website in China, is organising a trip next month to look at properties in California and possibly Nevada. Liu Jian, the company’s chief operating officer, said about 300 people had expressed interest in the idea in the three days since it was advertised, though the company would take only a small group on the first trip.

    Dec-03“Given the problems in the Chinese market now, many people have been asking us about taking a look at overseas markets, especially the US,” he said.

    The trip would focus on California, particularly San Francisco and Los Angeles, where big Chinese populations might make his clients more comfortable, but might also include Nevada.

    Restrictions on taking money out of China would be an obstacle, he added, but some potential investors had an overseas connection such as a foreign passport that would make it easier.

    Property professionals say there is considerable interest among wealthy Chinese, who often hold a high proportion of assets in property, in investing abroad.

    “The US market absolutely terrifies me,” said one Shanghai-based real estate executive. “However, there are plenty of people here who think this a great time for bottom-fishing.”

    There is opposition in China to SouFun’s plan. “Unless these people need a house in the US to live in, this is senseless,” said Yi Xianrong, a real estate expert at the Chinese Academy of Social Sciences. “A few years ago there was a lot of talk about investing in German real estate but most of the people who did so lost a lot of money.”

    SouFun, owned by Australia’s Telstra, provides information on property markets in more than 100 cities and has more than 40m registered users.

  76. Alan,

    Thanks yes I will do my best to advise people to enforce their rights. I do not have a plan of action speech articulated. I may do it candidly.

    Everyone is welcomed to call in with questions, comments or statements. Keep it simple please.

    I think the telephone number of the show will be given out as the show airs live, stay tuned for the call in number.

    The show is streaming on http://www.jammin1420.com at 1pm eastern Miami time on Sunday 7th December, 2008 ***stay tuned in****

  77. Allan,

    Yes it streams the address is

    http://www.jammin1420.com

    The program airs at 1pm eastern sunday 7th Dec you can call in while I am on air.It is a question and answer program for one hour.

  78. Allan,

    Yes it streams the address is wwwjammin1420.com it airs at 1pm eastern sunday 7th Dec you can call in while I am on air.It is a question and answer program for one hour.

  79. Mortgage Delinquencies, Foreclosures Rise to Record (Update3)

    By Kathleen M. Howley

    Dec. 5 (Bloomberg) — One in 10 American homeowners fell behind on mortgage payments or were in foreclosure during the third quarter as the world’s largest economy shed jobs and real estate prices tumbled.

    The share of mortgages 30 days or more overdue rose to a seasonally adjusted 6.99 percent while loans already in foreclosure rose to 2.97 percent, both all-time highs in a survey that goes back 29 years, the Mortgage Bankers Association said in a report today. The gain in delinquencies was driven by an increase of loans with payments 90 days or more overdue.

    “Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based bankers group, in an interview. “We’re seeing more loans build up in the 90-days bucket as lenders work to modify loans and states put in place programs that delay foreclosures.”

    The U.S. economy has shed 1.91 million jobs this year, while falling home prices have made it difficult for people who can’t pay their mortgages to sell their property. Payrolls declined in each month of 2008 through November, the Labor Department said today in Washington.

    New foreclosures fell to 1.07 percent from 1.08 percent in the second quarter as some states enacted laws to temporarily stop home repossessions and lenders increased efforts to modify the terms of loans, Brinkmann said.

    “Some servicers keep a loan in a delinquent state until they see customers carrying through on their agreements, and then they’ll switch it to performing,” Brinkmann said.

    U.S. home sales and prices began to tumble in 2006 after a five-year boom, dragging the economy into a recession that began in December 2007, according to the National Bureau of Economic Research.

    The median home price in the fourth quarter probably will be $190,300, down 19 percent from the record $226,800 in 2006’s second quarter, according to a Nov. 24 forecast by Fannie Mae, the world’s largest mortgage buyer.

    Purchases of existing homes in October slid to an annual rate of 4.98 million, lower than forecast, the National Association of Realtors said in a Nov. 24 report. The median price fell 11.3 percent from a year earlier, the most since the group began collecting data in 1968.

    Federal Reserve Chairman Ben S. Bernanke yesterday urged using more taxpayer funds for new efforts to prevent home foreclosures, saying the private sector is incapable of coping with the crisis on its own.

    Bernanke’s Plans

    The Fed chief outlined four possible options, including buying delinquent mortgages and providing bigger incentives for refinancing loans. He called for addressing the “apparent market failure” where lenders aren’t modifying mortgages even in cases where it’s in their own economic interest to do so.

    Bernanke’s proposed changes would go beyond those announced last month by Housing and Urban Development Secretary Steve Preston, who oversees the FHA. The agency will change the amount of the loan a lender must forgive and allow banks to extend the payback time of a mortgage.

    There were 111.7 million occupied housing units in the U.S. in the third quarter, 68 percent used by owners and the remainder leased by renters, according to the Census Bureau. One in three U.S. homes has no mortgage, the bureau said.

    The bankers’ report cites percentages without providing the number of mortgages. The U.S. had $11.3 trillion of outstanding home loans at the end of June, according to Federal Reserve data. Mortgage lending fell to $80.8 billion in the second quarter, down from $764 billion a year earlier, the Fed said.

    The Mortgage Bankers report is based on a survey of 45.5 million loans by mortgage companies, commercial banks, thrifts, credit unions and other financial institutions.

    *****************************
    mario 786 274 0527
    malibubooks@gmail.com

  80. Way to go, Mario! This is exciting and courageous!

    Does the radio station stream, so folks like me in Bean Town can listen and call in? Does the request line (561) 265-2121 get us to Joan Hennessey’s program this Sunday 1-2pm?

    “Property Law Now”! How may sound bites will Joan let you get in? Once you know, maybe prepare talking points and practice your spiel for greater impact.

    Here’s your chance to get the word out to the distressed and embattled that with securitization, homeowners have new rights and defenses EVEN if they are in default or foreclosure.

    Warn them to look closely at and question the motives behind any and all invitations to modify their mortgage, and remind them that with modification, borrowers lose rights, claims and counterclaims (unless somehow they can expressly reserve them).

    If you approach this as your exercising your civil right of free speech as a passionate advocate, every so often sprinkle UPL disclaimers, and recommend listeners consult attorneys “who get it,” the bar ought leave you alone.

    Now that community organizing has new stature, invite the interested to join our groundswell grassroots movement to teach themselves and others the law and their rights, and to become a community of mutual support and action. To be credible, maybe we should dial back a smidge on the ‘kumbaya,’ but not on your infectious passion.

    Invite listeners to surf online ‘foreclosure defense’ resources, and if Neil is agreeable to increases in traffic and a run up of hits, visit his valuable Livinglies blog.

    How can we help?

    RSVP
    Allan
    BeMoved@AOL.com

  81. (corrected spelling)

    URGENT THIS IS URGENT I NEED YOUR HELP

    I have been invited to “sidekick” for Joann Hennessey ESQ on her radio show http://www.jammin1420.com the show airs at 1pm Sunday 7th, 2008

    My understanding is the show is a candid talk with a question and answer, comment sort of a “Gig thing feeling”**I am excited because I can speak with people on this show.

    This is a wonderful thing that helps support homeowners all over the country. People can call the Lawyer with questions and comments for the hour of its duration.

    I need help that you log on to the radio station, listen to the program, and call with questions or just fun comment. (Should your time permit).

    My idea is, I can reach and speak to more people , offer some sort of help, because the meltdown has taken apart many families. The kids are mad, dog is unhappy; everybody’s living with such pressure,tension and are sleep deprived more occasionally, than normal.

    I would like to speak with people, help them understand that they can help themselves, if you just keep trying,” thus far the banksters owns the plunder”, compared to the amount of people staying in their homes.

    The gap is widening, more people are losing their homes than ever before, and there is not sufficient help.

    The movement to save homes has tremendously grown, in so stating, I am not suggesting that more of us are not winning our battles, but the fight is yet to terminate; this process endures years it seems, imagination leads me to think there is need for a harder push , maybe this radio show could help and this is why I am asking your help.

    We can assist in effecting change in so many little ways, helping each other, is one of those ways, and on this occasion I am asking that if, you have the time, log on to the above radio station at 1 pm eastern on Sunday in our support.

    When we help each other we all win.

  82. URGENT THIS IS URGENT I NEED YOUR HELP

    I have been invited to “sidekick” for Joann Hennessey ESQ on her radio show http://www.jammin1420.com the show airs at 1pm Sunday 7th, 2008

    My understanding is the show is a candid talk with a question and answer, comment sort of a “Gig thing feeling”**I am excited because I can speak with people on this show.

    This is a wonderful thing that helps support homeowners all over the country. People can call the Lawyer with questions and comments for the hour of its duration.

    I need help that you log on to the radio station, listen to the program, and call with questions or just fun comment. (Should your time permit).

    My idea is, I can reach more people speak to people, offer some sort of help, because the meltdown has taken apart many families. The kids are mad, dog is unhappy; everybody’s living with such pressure,tension.and are sleep deprived more occasionally, than normal.

    I would like to speak with people, help them understand that they can help themselves, if you just keep trying,” thus far the banisters owns the plunder”, compared to the amount of people staying in their homes.

    The gap is widening, more people are losing their homes than ever before, and there is not sufficient help.

    The movement to save homes has tremendously grown, in so stating, I am not suggesting that more of us are not winning our battles, the fight is yet to terminate; this process endures years it seems, imagination leads me to think we need to push a little harder, maybe this radio show could help and this is why I am asking your help.

    We can assist in effecting change in so many little ways, helping each other, is one of those ways, and on this occasion I am asking that if, you have the time, log on to the above radio station at 1pm eastern on Sunday in our support.

    When we help each other we all win.

  83. Neil,

    I need more help to assist people.I have been helping a lot of people everyday and it is my pleasure to aid the many people I take calls from but I need ghost writers to take the cases I get,these are families who need help.Please help me to help others.
    Thanks in advance.

  84. Home mortgage disclosure act data available

    The Office of Financial and Insurance Regulation (OFIR) announced that the 2007 data compiled under the Federal Home Mortgage Disclosure Act are available from the Federal Financial Institutions Examination Council (FFIEC). The data covers mortgage lending transactions throughout the nation at 8,610 financial institutions covered by the Home Mortgage Disclosure Act (HMDA). Covered institutions include, but are not limited to, banks, savings associations, credit unions, and independent mortgage companies.
    The HMDA data made available cover lending activity – applications for loans, loan originations and denials, and purchases of loans – from 2007. The data include 21.4 million applications and originations and 4.8 million purchases, for a total of 26.2 million actions reported by all covered institutions in 2007. Demographic information for each metropolitan area is also available.
    The HMDA was enacted by Congress in 1975 and is implemented by the Federal Reserve Board’s Regulation C. This regulation provides the public loan data that can be used to assist:
    • in determining whether financial institutions are serving the housing needs of their communities;
    • public officials in distributing public-sector investments so as to attract private investment to areas where it is needed;
    • and in identifying possible discriminatory lending patterns.
    Both summary and institution specific data are available to the public in a variety of media formats from the Federal Financial Institutions Examination Council (FFIEC) and can be accessed at http://www.ffiec.gov/hmda. An order form and ordering instructions are available at http://www.ffiec.gov/hmda/orderform.htm to obtain specific information.

  85. “The Federal Deposit Insurance Corp. is also trying to work with homeowners whose mortgages have become federal property after the collapse of federally insured banks like IndyMac”

    Like millions of his fellow Americans, Francisco Caceres of Bellingham took advantage of an adjustable rate mortgage to help him buy a house with a monthly payment he could afford.

    Caceres said he got his first adjustable mortgage seven years ago and managed to refinance it twice since then, to get out from under the higher interest rates and payments that could kick in after the introductory period. In a market of rising home prices, increased home equity made refinancing relatively easy.

    Then came the collapse. Housing prices faltered. Some mortgage companies, especially those that specialized in adjustables, closed up shop as loans began to go bad. That included two of the companies that had made loans to Caceres: Long Beach Mortgage Co. and Fremont General Corp.

    Falling house prices helping some Whatcom County residents buy homes
    About a year ago, Caceres saw his $1,200-a-month payment adjust to $1,900. Six month later, it was $2,280. And his catering business was a lot less brisk as his customers cut their expenses.

    Caceres knew he couldn’t afford that $2,280 a month for long. He hoped to refinance into a fixed-rate mortgage, but in the new credit environment he found that lenders didn’t want his business, even on another adjustable. Foreclosure loomed.

    But Caceres didn’t panic, he didn’t walk away from his home, and he didn’t bite when he got a call from some kind of “facilitating company” offering to help him in exchange for a $1,800 fee.

    Instead, he contacted the loan servicing company to explain his plight.

    He didn’t get instant results. In fact, it took five months of correspondence with the servicer, and a couple of missed payments, but he eventually got a loan modification that set his payments at an affordable $1,690 a month for the next two years. At the end of that time, Caceres hopes he’ll find it easier to refinance one more time, or else sell the home he shares with his wife and three children.

    “This is a Band-Aid,” he said.

    Caceres’ experience demonstrates that mortgage lenders are willing to work with borrowers to avoid foreclosures that hurt both parties – especially at a time when widespread loan defaults nationwide are threatening to overwhelm the financial system. Both FannieMae and FreddieMac, the mortgage giants that purchase loans made by other lenders, have announced plans to help distressed borrowers avoid foreclosure. The Federal Deposit Insurance Corp. is also trying to work with homeowners whose mortgages have become federal property after the collapse of federally insured banks like IndyMac.

    Kristi Coy, senior sales associate at RE/Max Whatcom County Inc., urges homeowners to do everything they can to avoid a foreclosure. She said it’s a big mistake to walk away from a home and assume nothing can be done.

    Step one, Coy said, is to call the lender or loan servicer to ask for new terms.

    “A lot of times they will work with the homeowner,” Coy said. “I absolutely am seeing situations where the banks are doing a lot more to keep from foreclosing.”

    Lenders may agree to lower interest rates, add missed payments to the back end of a loan or agree to lower payments for a year or two to get a borrower over a rough spot.

    In other cases, banks may agree to a “short sale,” in which the home is sold for less than the outstanding loan. The bank takes a loss but avoids having ownership of a house, while the borrower avoids the stigma of foreclosure.

    That stigma is real, Coy said. While a short sale also hurts a consumer’s credit rating, a foreclosure may make it difficult to get so much as a car loan for a number of years, and the consequences of a foreclosure are likely to worsen as lenders continue to tighten standards.

    Caceres is poorer but wiser for his own experience. And he thinks reforms are needed to keep lenders from taking advantage of people.

    “The whole system from the top to the bottom needs to be fixed,” he said. “People are being greedy, trying to make money off something that should be a secure haven for families.”

  86. WASHINGTON — An Associated Press review of regulatory documents finds that the George W. Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed.

    The review shows the government buckling to pressure from some of the same banks that have now failed and ignoring warnings that foretold the financial meltdown.

    California mortgage lender Paris Welch wrote to U.S. regulators in January 2006 warning of foreclosures and other horror stories. She lost her job about a year later in the housing implosion.

    The aggressive lobbying by banks included assurances that the now troubled mortgages were OK. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone.

  87. AP IMPACT: US diluted loan rules before crash

    – Gov’t rejected tougher mortgage rules in 2005

    WASHINGTON – The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

    “Expect fallout, expect foreclosures, expect horror stories,” California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.

    Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way.

    “These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages,” David Schneider, home loan president of Washington Mutual, told federal regulators in early 2006. Two years later, WaMu became the largest bank failure in U.S. history.

    The administration’s blind eye to the impending crisis is emblematic of its governing philosophy, which trusted market forces and discounted the value of government intervention in the economy. Its belief ironically has ushered in the most massive government intervention since the 1930s.

    Many of the banks that fought to undermine the proposals by some regulators are now either out of business or accepting billions in federal aid to recover from a mortgage crisis they insisted would never come. Many executives remain in high-paying jobs, even after their assurances were proved false.

    In 2005, faced with ominous signs the housing market was in jeopardy, bank regulators proposed new guidelines for banks writing risky loans. Today, in the midst of the worst housing recession in a generation, the proposal reads like a list of what-ifs:

    _Regulators told bankers exotic mortgages were often inappropriate for buyers with bad credit.

    _Banks would have been required to increase efforts to verify that buyers actually had jobs and could afford houses.

    _Regulators proposed a cap on risky mortgages so a string of defaults wouldn’t be crippling.

    _Banks that bundled and sold mortgages were told to be sure investors knew exactly what they were buying.

    _Regulators urged banks to help buyers make responsible decisions and clearly advise them that interest rates might skyrocket and huge payments might be due sooner than expected.

    Those proposals all were stripped from the final rules. None required congressional approval or the president’s signature.

    “In hindsight, it was spot on,” said Jeffrey Brown, a former top official at the Office of Comptroller of the Currency, one of the first agencies to raise concerns about risky lending.

    Federal regulators were especially concerned about mortgages known as “option ARMs,” which allow borrowers to make payments so low that mortgage debt actually increases every month. But banking executives accused the government of overreacting.

    Bankers said such loans might be risky when approved with no money down or without ensuring buyers have jobs but such risk could be managed without government intervention.

    “An open market will mean that different institutions will develop different methodologies for achieving this goal,” Joseph Polizzotto, counsel to now-bankrupt Lehman Brothers, told U.S. regulators in a March 2006.

    Countrywide Financial Corp., at the time the nation’s largest mortgage lender, agreed. The proposal “appears excessive and will inhibit future innovation in the marketplace,” said Mary Jane Seebach, managing director of public affairs.

    One of the most contested rules said that before banks purchase mortgages from brokers, they should verify the process to ensure buyers could afford their homes. Some bankers now blame much of the housing crisis on brokers who wrote fraudulent, predatory loans. But in 2006, banks said they shouldn’t have to double-check the brokers.

    “It is not our role to be the regulator for the third-party lenders,” wrote Ruthann Melbourne, chief risk officer of IndyMac Bank.

    California-based IndyMac also criticized regulators for not recognizing the track record of interest-only loans and option ARMs, which accounted for 70 percent of IndyMac’s 2005 mortgage portfolio. This summer, the government seized IndyMac and will pay an estimated $9 billion to ensure customers don’t lose their deposits.

    Last week, Downey Savings joined the growing list of failed banks. The problem: About 52 percent of its mortgage portfolio was tied up in risky option ARMs, which in 2006 Downey insisted were safe — maybe even safer than traditional 30-year mortgages.

    “To conclude that ‘nontraditional’ equates to higher risk does not appropriately balance risk and compensating factors of these products,” said Lillian Gavin, the bank’s chief credit officer.

    At least some regulators didn’t buy it. The comptroller of the currency, John C. Dugan, was among the first to sound the alarm in mid-2005. Speaking to a consumer advocacy group, Dugan painted a troublesome picture of option-ARM lending. Many buyers, particularly those with bad credit, would soon be unable to afford their payments, he said. And if housing prices declined, homeowners wouldn’t even be able to sell their way out of the mess.

    It sounded simple, but “people kind of looked at us regulators as old-fashioned,” said Brown, the agency’s former deputy comptroller.

    Diane Casey-Landry, of the American Bankers Association, said the industry feared a two-tiered system in which banks had to follow rules that mortgage brokers did not. She said opposition was based on the banks’ best information.

    “You’re looking at a decline in real estate values that was never contemplated,” she said.

    Some saw problems coming. Community groups and even some in the mortgage business, like Welch, warned regulators not to ease their rules.

    “We expect to see a huge increase in defaults, delinquencies and foreclosures as a result of the over selling of these products,” Kevin Stein, associate director of the California Reinvestment Coalition, wrote to regulators in 2006. The group advocates on housing and banking issues for low-income and minority residents.

    The government’s banking agencies spent nearly a year debating the rules, which required unanimous agreement among the OCC, Federal Deposit Insurance Corp., Federal Reserve, and the Office of Thrift Supervision — agencies that sometimes don’t agree.

    The Fed, for instance, was reluctant under Alan Greenspan to heavily regulate lending. Similarly, the Office of Thrift Supervision, an arm of the Treasury Department that regulated many in the subprime mortgage market, worried that restricting certain mortgages would hurt banks and consumers.

    Grovetta Gardineer, OTS managing director for corporate and international activities, said the 2005 proposal “attempted to send an alarm bell that these products are bad.” After hearing from banks, she said, regulators were persuaded that the loans themselves were not problematic as long as banks managed the risk. She disputes the notion that the rules were weakened.

    In the past year, with Congress scrambling to stanch the bleeding in the financial industry, regulators have tightened rules on risky mortgages.

    Congress is considering further tightening, including some of the same proposals abandoned years ago.

  88. Meltdown far from over, new mortgage crisis looms

    The Vanity Fair Outlet stores opened at 12:01 a.m. EST for Black Friday sales has shoppers seeking bargins …

    WASHINGTON – Black Friday’s retail shoppers hunting for holiday bargains won’t be enough to stave off what’s likely to become the next economic crisis. Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market.

    Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.

    That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies’ credit.

    “We’re probably in the first inning of the commercial mortgage problem,” said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

    That’s bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.

    Companies have survived plenty of downturns, but economists see this one playing out like never before. In the past, when businesses hit rough patches, owners negotiated with banks or refinanced their loans.

    But many banks no longer hold the loans they made. Over the past decade, banks have increasingly bundled mortgages and sold them to investors. Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system.

    “It’s a toxic drug and nobody knows how bad it’s going to be,” said Paul Miller, an analyst with Friedman, Billings, Ramsey, who was among the first to sound alarm bells in the residential market.

    Unlike home mortgages, businesses don’t pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year, covering everything from office and condo complexes to hotels and malls.

    The retail outlook is particularly bad. Circuit City and Linens ‘n Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor and Foot Locker are closing stores.

    Those retailers typically were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher — many property owners won’t have the money.

    Some will survive, but those property owners whose loans required little money up front will have less incentive to weather the storm.

    Refinancing formerly was an option, but many properties are worth less than when they were purchased. And since investors no longer want to buy commercial mortgages, banks are reluctant to write new loans to refinance those facing foreclosure.

    California, New York, Texas and Florida — states with a high concentration of mortgages in the securities market, according to Fitch — are particularly vulnerable. Texas and Florida are already seeing increased delinquencies and defaults, as are Michigan, Tennessee and Georgia.

    The worst-case scenario goes something like this: With banks unwilling to refinance, a shopping center goes into foreclosure. Nobody can buy the mall because banks won’t write mortgages as long as investors won’t purchase them.

    “Credit markets have seized up,” corporate securities lawyer Michael Gambro said. “People are not willing to take risks. They’re not buying anything.”

    That drives down investments already on the books. Insurance companies are seeing their stock prices fall on fears they are too invested in commercial mortgages.

    “The system has never been tested for a deep recession,” said Ken Rosen, a real estate hedge fund manager and University of California at Berkeley professor of real estate economics.

    One hope was that the U.S. would use some of the $700 billion financial bailout to buy shaky investments from banks and insurance companies. That was the original plan. But Treasury Secretary Henry Paulson has issued a stunning turnabout, saying the U.S. no longer planned to buy troubled securities. For those watching the wave of commercial defaults about to crest, the announcement was poorly received.

    “He’s created havoc in the marketplace by changing the rules,” Rosen said. “It was the stupidest statement on Earth.”

    The Securities and Exchange Commission is considering another option that might ease the crisis, one that would change accounting rules so banks don’t have to declare huge losses whenever the market declines.

    But the only surefire remedy is for the economy to stabilize, for businesses to start expanding and for investors to trust the market again. Until then, Tross said, “There’s going to be a lot

  89. 1
    August 5, 2008
    Ms. Florence Harmon
    Acting Secretary
    Securities and Exchange Commission
    100 F Street NE
    Washington, DC 20549-1090

    Re: File Number S7-13-08

    Proposed Rules for Nationally Recognized Statistical Rating Organizations

    Dear Ms. Harmon:
    The National Community Reinvestment Coalition (NCRC), on behalf of our 600 member
    organizations, applauds the Securities and Exchange Commission (SEC) for proposing rules that
    would enhance disclosure and provide additional firewalls between Nationally Recognized
    Statistical Rating Organizations (NRSROs), issuers of structured finance products, and other
    participants in asset-backed and mortgage-backed securities transactions.
    On April 7, 2008, NCRC asked the SEC to thoroughly investigate the rating agencies’ issuance
    of unwarranted ratings without first considering relevant information available at the time that
    should have been evaluated. NCRC attaches its April 7 letter to these comments, which more
    fully addresses the ratings agencies’ failures. While the proposed rules’ increased disclosure and
    increased management of conflicts of interest provisions are a step in the right direction in
    addressing NCRC’s concerns, they are not sufficiently robust to address the failures that fueled
    the current mortgage crisis which has damaged communities across the country.
    Credit rating agencies continuously provided inflated ratings to residential mortgage-backed
    securities and collateralized debt obligations, helping to propel the mortgage crisis. In the first
    three months of 2008 alone, 650,000 homes were subject to foreclosure actions. During the
    same time period, credit rating agencies performed a massive downgrading of their residential
    mortgage-backed securities. As of February 2008, Moody’s downgraded 53 percent of its 2006
    subprime residential mortgage-backed securities and 39.2 percent of its 2007 subprime
    residential mortgage-backed securities.1 In March of 2008, S & P downgraded 44.3 percent of
    the subprime tranches it rated between the first quarter of 2005 and the third quarter of 20072. In
    February of 2008, Fitch placed all of the residential mortgage-backed securities that it rated in
    1 Christopher Cox, Securities & Exchange Commission Chairman,Testimony Before the Banking, Housing, and Urban
    Affairs Senate Committee, April 22, 2008
    2 Christopher Cox, Securities & Exchange Commission Chairman,Testimony Before the Banking, Housing, and Urban
    Affairs Senate Committee, April 22, 2008
    2
    2006 and in the first quarter of 2007 backed by subprime first lien mortgages on Ratings Watch
    Negative.3 These downgrades are tacit proof that the NRSROs irresponsibly inflated ratings.
    Credit ratings agencies should be held accountable for their pivotal role in the mortgage crisis
    and guidelines should be put in place to ensure that these abuses cannot happen again. While
    NCRC generally supports the proposed rules, more needs to be done. NCRC is concerned that
    the proposed rules focus too heavily on increased competition as a method to facilitate more
    accountability and transparency in the credit rating industry. For example, the new disclosure
    rules allow many credit rating agencies to rate the same products and thereby expose a rating
    agency whose ratings were unduly influenced by an issuer. While NCRC supports business
    competition, a regulatory approach based upon the theory that the “market will take care of
    itself” is responsible for much of financial crisis we face today. NCRC encourages the SEC to
    strengthen its proposed rules to require more due diligence to verify the accuracy of financial
    data on structured products. Moreover, NCRC urges the SEC to seek lawful penalties from
    credit rating agencies that willfully provided inflated ratings.
    NCRC supports the SEC’s proposed amendment to prohibit an NRSRO from issuing a rating on
    a structured product unless information on the characteristics of the underlying assets is
    available. The rating agencies knowingly issued false and inflated ratings for securities backed
    by problematic high-cost loans that have created a financial nightmare for millions of families
    whose homes are now in foreclosure. Additionally, rating agencies failed to correct erroneous
    ratings, or changed their ratings only after significant damage to the market and to communities
    across the country. Though the proposed amendment takes steps to prevent such abuse in the
    future, rating agencies must be held accountable for their role in the current mortgage crisis.
    NCRC recommends that civil penalties and equitable relief are necessary to address
    violations of the law. Credit rating agencies that engaged in unfair, coercive, or abusive
    practices should be subject to license suspension and penalties. Pursuant to the Sarbanes-
    Oxley Act, civil penalties and profits disgorgement should also be sought from credit rating
    agencies that issued inaccurate and inflated ratings, so that injury to communities, not only
    injury to investors, can be redressed.
    NCRC supports the SEC’s proposed amendment to prohibit an NRSRO from rating a product
    where the NRSRO or a person associated with that NRSRO made recommendations about its
    structure. NCRC also supports the SEC proposed amendment to prohibit anyone who
    participates in determining a credit rating from negotiating the fee that the issuer pays for it.
    Additionally, NCRC supports the Commission’s proposed amendment to prohibit gifts in any
    amount over $25 from those who receive ratings to those who rate them. However, it is clear
    that rating agencies were unduly influenced by those paying for the ratings to give unwarranted
    ratings to structured products contributing to the current mortgage crisis. These additional
    measures do not go far enough to address the inherent conflict of interest in the
    issuer/underwriter pays model. Thus, NCRC recommends that the SEC work with rating
    agencies to adopt a fee-for-service structure, where rating agencies are compensated
    regardless of whether an issuer selects them to rate a structured product consistent with
    the rating agencies’ recent agreement with the New York Attorney General.
    3 Christopher Cox, Securities & Exchange Commission Chairman,Testimony Before the Banking, Housing, and Urban
    Affairs Senate Committee, April 22, 2008
    3
    NCRC supports the SEC proposed amendment to require credit rating agencies to make all of
    their ratings and subsequent rating actions publicly available. NCRC also supports the SEC’s
    proposed amendment to publish performance statistics for one, three, and ten years within each
    rating category. NRSRO’s should also be required to make an annual report of the number of
    rating actions they took in each ratings class and an XBRL database of all rating actions should
    be maintained on each NRSRO’s website. Since public disclosure is a necessary step in
    promoting transparency and accountability, NCRC recommends that a shorter three-month
    delay before publicly disclosing a rating action is sufficiently long to address business
    considerations under the proposed amendment to Rule 17g-2(d).
    NCRC supports the SEC’s proposed amendment requiring disclosure by the NRSROs of whether
    and how information about verification performed on the underlying assets of a structured
    product are relied on in determining credit ratings. NCRC recommends that the SEC expand
    its proposed amendment to Rule 17g-5 to also require the disclosure of the results of any
    steps taken by the NRSRO, issuer or underwriter to verify information about the asset
    underlying or referenced by a structured finance product. Additionally, NCRC
    recommends that rating agencies require a series of representations and warranties from
    financially responsible parties about the loans underlying the structured product.
    NCRC supports the SEC’s proposed amendment requiring documentation of the rationale for
    any material difference between the rating implied by a qualitative model that is a “substantial
    component” of the rating process and the final rating issued. NCRC also supports disclosure of
    how frequently credit ratings are reviewed; whether different models are used for ratings
    surveillance than for initial ratings; and whether changes made to models are applied
    retroactively to existing ratings. As noted in The New York Times by a former Moody’s
    securitization expert, “Every agency has a model available to bankers that allows them to run the
    numbers until they get something they like and send it in for a rating.”4 Therefore, NCRC
    recommends ongoing testing of the credit rating agencies to insure that they are using
    standardized methodologies.
    Generally, NCRC supports the proposed rules as necessary first steps to address the current
    mortgage crisis, caused in part by inflated and inaccurate credit ratings. However, NCRC urges
    the SEC to strengthen its proposal to include more due diligence requirements and ongoing
    testing of the NRSROs.
    If you have any questions, please feel free to contact me at (202) 628-8866 or David Berenbaum,
    Executive Vice-President at (202) 464-2702.
    Sincerely,
    John Taylor
    President and CEO
    National Community Reinvestment Coalition
    4 New York Times, “Triple‐A Failure”, Roger Lowenstein, April 27, 2008.
    4
    The National Community Reinvestment Coalition (NCRC) is a non-profit association
    comprising more than 600 community-based organizations that promote access to basic
    banking services, including credit and savings, to create and sustain affordable housing,
    job development and vibrant communities for America’s working families. Our members
    include community reinvestment organizations, community development corporations,
    local and state government agencies, faith-based institutions, community organizing and
    civil rights groups, minority and women-owned business associations, and local and social
    service providers from across the nation.
    http://www.ncrc.org
    Rrr-MAN & DnNE PLLc
    l2?5 | 9rH Srneer NW SutrE 600
    WasnrrucroN DC 20036-2456
    ret 202-728-1888
    -..r.* ‘*?i13;;l3i i1″.,
    April T,2008
    Christopher Cox
    Chairman
    Securities and Exchange Commission
    lOO F St NE
    Washington, D.C. 20549
    Dear Chairman Cox:
    We represent the National Community Reinvestment Coalition (“NCRC”), which
    is an association of more than 600 community-based orgarizations that promote access to
    basic banking services, including credit and savings, to create and sustain affordable
    housing, job development, and vibrant communities for America’s working families. The
    NCRC has and continues to be a voice for communities around the country damaged by
    the aggressivee xpansiona nd subsequentim plosion of the residential mortgage-backed
    securities (“RMBS”) market. The NCRC is concerned that nationally recognized
    statistical rating organizations (“NRSROs’), more commonly known as credit rating
    agencies (“CRAs”), substantially contributed to the housing and foreclosure crisis by
    making public misrepresentationsa bout the soundnessa nd reliability of RMBS ratings.
    NCRC believes the NRSROs rating system failure has harmed the communities served by
    the NCRC because it fueled imprudent mortgage lending and irresponsible secondary
    market purchases of RMBS, which, in tum, contributed to high default and foreclosure
    rates. In reaction to this market turmoil. access to credit is now severelv restricted in
    these same communities.
    By this letter, the NCRC asks the SEC to thoroughly investigate the NRSROs, in
    particular Fitch, Inc. (“Fitch”), Moody’s Investors Service, Inc. (“Moody’s”) and the
    Standarda nd Poor’s Division of the McGraw Hill CompaniesI,n c. (“S&P”), because
    these institutions gave ratings to RMBS that were unwarranted given information that
    was known or available at the time of the rating and should have been considered under
    these NRSROs’ own procedures. It is NCRC’s position that Fitch, Moody’s and S&P
    dominate the ratings market and all had or should have had access to loan files,
    underwriting standards and loan product information so that they could each conduct
    their own due diligence for fraud and/or poor underwriting. All three NRSROs
    acknowledged they did not review this information:
    R r l v a N & DnNE P L L c
    ChristopheCr ox
    April7,2008
    Page 2
    Fitch:
    Moody’s:
    S&P:
    In a November 28,2007 report entitled The Impact of Poor
    Underwriting Practices and Fraud in Subprime RMBS
    Performance (“Fitch Report”), Fitch determined that based upon a
    review of a loan sample from one of the RMBS pools it had
    previously rated, “poor underwriting and fraud may account for as
    much as one-quarter of the underperfofinance of recent vintage
    RMBS.” Fitch Report at2. Fitch had not previously identified the
    high levels of fraud and poor underwriting in the pools it rated and
    represented that it would “utllize the insights from its review to
    improve the RMBS rating process.” Id. (Copy of Fitch Report
    attached).
    In a March 25,2008 report entitled A Short Guide to Subprime
    (“Moody’s Report”), Moody’s acknowledged that there were
    “indications of a decline in subprime loan standards in the years
    leading up to the present crisis,” but that Moody’s did not
    “anticipate the magnitude of delinquencies and losses on the
    underlying loans.” Moody’s Report at2-3. As a result, Moody’s
    has “updated its methodology for rating subprime RMBS to
    account for this unexpectedly poor loan performance.” Id. at3.
    Among the updates, Moody’s noted its recent increased risk
    assumptions for high risk loan products, including loans with low
    or no documents and high loanto-value (LTV) and combined
    loan-to-value (CLTV) loans. Id. (Copy of Moody’s report
    attached).
    In a February 7,2008 report entitled S&P Steps to Further Manage
    Potential Conflicts of Interest, Strengthen the Ratings Process, and
    Better Serve the Markets (“S&P Report”), S&P representedit
    would “implement procedures to collect more information about
    the processesu sed by issuersa nd originators to assessth e accuracy
    and integrity of their data and their fraud detection measures so
    that we can better understand their data quality capabilities.” S& P
    Report at 2. (Copy of S&P Report attached).
    Thesea dmissionsb y Fitch, Moody’s and S&P demonstrateth at theseN RSROs
    did not consider information that was crucial to ensure the accuracy and integrity of
    ratings which they had representedt o the public were reliable.
    RrLNaaN & DnnE PLLc
    ChristopheCr ox
    April7,2008
    Page 3
    The SEC as well has recognizedthe impact of the flawed NRSRO rating system
    on the RMBS market. In your September2 6,2007 testimonybeforet he U.S. Senate
    Committee on Banking, Housing and Urban Affairs, you stated that the NRSROs
    underestimated the incidence of mortgage delinquencies in 2006 andnoted that the
    NRSROs had identified several factors for their flawed ratings. These factors, including
    fraud in the mortgage origination process and deterioration in loan underwriting
    standards,w ere well known as credit risks long before the NRSROs began large-scale
    downgrades of their ratings in the second half of 2007. More recently, as a member of
    the President’s Working Group on Financial Markets (“PWG”), you, along with the
    Secretary of the Treasury, and the Chairmen of the Federal Reserve Board and the
    Commodity Futures Trading Commission, jointly concluded in a March 13, 2008 Policy
    Statement (the “PWG Policy Statement”) that one of the principal underlying causes of
    the turmoil in financial markets was “flaws in credit rating agencies’ assessmentos f
    subprime residential mortgage-backed securities (RMBS) and other complex credit
    products….” PWG Policy Statement at 1. The PWG found that the turmoil was
    triggered by a “dramatic weakening of underwriting standards for U.S. subprime
    mortgages, beginning in2004 and extending into early 2007.” The PWG also found that
    “[flaulty assumptions underlying rating methodologies and the subsequent re-evaluations
    by the credit rating agencies (CRAs) led to a significant number of downgrades of
    subprime RMBS, even of recently issued securities." Id. at2.
    As the agency charged with oversight of the NRSROs, the SEC is responsible for
    ensuring that a flawed rating system does not continue to harm investors and the public
    interest. In the preamble to the Credit Rating Agency Reform Act of 2006 (the "Act"),
    Congress stated that the purpose of the Act was "to improve ratings quality for the
    protection of investors in the public interest by fostering accountability, transparency, and
    competition in the credit rating industry." The SEC has the authority to determine
    whether the NRSROs' credit ratings were or are "in material contravention" of their
    procedures.1 5 U.S.C. $ 78o-7(c). The NRSROsp ublicly representedb etween2 004 and
    late 2007 that they had procedures in place to ensure that their RMBS ratings were
    accurate and sound. As even the PWG concluded, theywere not. The SEC also has
    authority, as you testified on September 26,2007, to determine whether the NRSROs
    were "unduly influenced by issuers and underwriters of RMBS to divert from their stated
    methodologies and procedures for determining credit ratings in order to publish a higher
    rating." The NCRC believes that a rating system that allows the NRSROs to be paid by
    the same institutions issuing the RMBS ensures a conflict of interest.
    RrlvnN & DnNE PLLc
    ChristopheCr ox
    April7,2008
    Page 4
    In your September 26,2007 testimony, you confirmed that the SEC is conducting
    a non-public examination of the NRSROs as part of its licensing authority. The NCRC
    believes that much more is needed to fix the broken ratings system. To promote the
    purpose of the Act to foster accountability, transparency and competition in the credit
    rating agency, the NCRC asks the SEC to investigate Fitch, Moody's and S&P and the
    other NRSROs currently licensed by the SEC to determine whether:
    1) they materially diverted from their standards, or committed a fraud on
    the market, by misrepresenting that they had sound and accurate
    procedures in place to accurately rate RMBS;
    2) their failure to consider mortgage fraud, decreasing underwriting
    standards and high-risk loan products was a material diversion from
    their standards, or a fraud on the market; and/or
    3) they were unduly influenced by issuers and/or underwriters to give
    unwarranted ratings to RMBS.
    Based on this investigation, the SEC should release the aggregate results so that
    the public, and the lending and investment communities can better understand the
    NRSRO process and any shortcomings that need to be corrected. At the same time, the
    SEC should use its statutory authority under the Act to censure, deny or suspend
    registration of any NRSRO that has not complied with the Act, or any other statute
    enforcedb y the SEC. 15 U.S.C. $ 78o-7(d). The SEC should suspendth e licenseo f any
    NRSRO that cannot demonstrate that it is following its own procedures and is reviewing
    information necessary to ensure that a rating is accurate and reliable. Further, the SEC
    should impose civil penalties and seek appropriate equitable relief where appropriate to
    address NRSRO violations of the Act, and any other statute enforced by the SEC. The
    SEC should also collaborate with the federal banking agencies and the FTC to ensure that
    consumers receive appropriate redress for the harms created as a result of imprudent loan
    ori gination and securit ization.
    The NCRC also asks that the SEC issue additional rules as required by the Act
    that clearly define acts or practices by NRSROs that are unfair, coercive or abusive.
    l5 U.S.C. $ 78o-7(i). The SEC shouldc onsultw ith not only the RMBS issuers,le nders,
    servicers and investors, but with members of the advocacy community, including the
    NCRC, to assist in this process. The rules should, at a minimum, prohibit the NRSROs
    from rating RMBS without adequately evaluating the level of fraud, the sufficiency of
    underwriting standards and concentration of high-risk products in an RMBS pool. The
    RrlvnN & DaNE p r r c
    ChristopheCr ox
    April7,2008
    Page 5
    SECs houlda lsor equiret hat the NRSROsm aintaina ndp rovided ocumentsto the SEC
    sufficientt o demonstratteh at theyh avea dequatelcyo nsideredfr aud,u nderwriting
    standardas ndc oncentratioonf high-riskp roductsa sa part of their rating. l5 U.S.C.
    $ 78o-7(a)(1)(B)(x).
    TheN CRC looksf orwardt o workingw ith the SECo n thesei ssues.B y working
    togethert,h e SECa ndt he NCRC cann ot only ensureth att he purposeo f the Act is
    fulfrlled, but that communities across the country will be better served by the credit rating
    system.W e will be contactingy our office to setu p a meetingt o discussth e NCRC's
    concerns.
    Enclosures
    Cc: John Taylor, President and CEO, NCRC
    David Berenbaum. Executive Vice President. NCRC
    .4 /'t)
    /'/ f- / (, (_ l-r/(--. -
    Jolfn P. Relman
    Bradley H. Blower
    Counsel to the NCRC
    Structured Finance
    November 28, 2007
    http://www.fitchratings.com
    ! Summary
    Residential mortgage-backed securities (RMBS) issued in 2006 and
    2007, backed by pools of subprime mortgages, are substantially
    underperforming initial performance expectations, resulting in ratings
    downgrades and heightened risk of principal loss. As anticipated in
    Fitch’s rating criteria, falling home prices are a fundamental source of
    poor performance. However, the 2006 subprime vintage performance is
    remarkable for the magnitude of early mortgage defaults. Fitch attributes
    a significant portion of this early default performance to the rapid growth
    in high-risk “affordability” features in subprime mortgages. The
    interaction of home price declines and high risk products in 2006 vintage
    subprime performance is analyzed in Fitch’s special report “Drivers of
    2006 Subprime Vintage Performance,” dated Nov. 13, 2007. In addition
    to the inherent risk of these products, evidence is mounting that in many
    instances these risks were not controlled through sound underwriting
    practices. Moreover, in the absence of effective underwriting, products
    such as “no money down” and “stated income” mortgages appear to have
    become vehicles for misrepresentation or fraud by participants
    throughout the origination process.
    Fitch believes that much of the poor underwriting and fraud associated
    with the increases in affordability products was masked by the ability
    of the borrower to refinance or quickly re-sell the property prior to the
    loan defaulting, due to rapidly rising home prices. With home prices
    now falling in many regions of the country, many loans that would
    have paid off in prior years remain in the pool and are more likely to
    default. BasePoint Analytics LLC, a recognized fraud analytics and
    consulting firm, analyzed over 3 million loans originated between 1997
    and 2006 (the majority being 2005–2006 vintage), including 16,000
    examples of non-performing loans that had evidence of fraudulent
    misrepresentation in the original applications. Their research found that
    as much as 70% of early payment default loans contained fraud
    misrepresentations on the application.1 For additional information on
    measuring fraud within the industry, refer to Appendix A on page 9.
    As Fitch sought to explain the poor performance of this vintage, we
    examined the impact of high risk collateral characteristics and rapidly
    declining home values. The underperformance was not fully explained
    by these factors, suggesting that other factors such as fraud might be
    playing a significant role. This was supported by the results of a file
    review conducted by Fitch on a small sample (45 loans) of early
    defaults from 2006 Fitch-rated subprime RMBS, many of which had
    apparently strong credit characteristics such as high FICOs, as outlined
    in the Characterics table on page 2.
    US Residential Mortgage
    Special Report The Impact of Poor
    Underwriting Practices and
    Fraud in Subprime RMBS
    Performance
    Analysts
    M. Diane Pendley
    +1 212 908-0777
    diane.pendley@fitchratings.com
    Glenn Costello
    +1 212 908-0307
    glenn.costello@fitchratings.com
    Mary Kelsch
    +1 212 908 0563
    mary.kelsch@fitchratings.com
    Related Research
    " “Drivers of 2006 Subprime Vintage
    Performance,” dated Nov. 13, 2007.
    " “Resilogic: US Residential Mortgage
    Loss Model — Amended,” dated
    Aug. 14, 2007.
    Structured Finance
    The Impact of Poor Underwriting Practices and Fraud in Subprime RMBS Performance
    2
    Fitch’s review of these files indicated that these loans
    suffered in many instances from poor lending decisions and
    misrepresentations by borrowers, brokers and other parties
    in the origination process. High risk products, which require
    sound underwriting and which are easy targets for fraud,
    account for some of the largest variances to expected default
    rates. It is not possible to confidently make a broad
    statement of how pervasive these problems are across the
    range of originators and issuers in Fitch’s rated portfolio
    based on such a small sample of loans. However, given the
    combination of our review of historical loan performance, the pervasive problems indicated in the file review, and
    the findings of third-party reviews, Fitch believes that poor underwriting quality and fraud may account for as much
    as one-quarter of the underperformance of recent vintage subprime RMBS.
    In order to better understand the nature and impact of poor underwriting and fraud on subprime RMBS performance,
    Fitch analyzed a targeted sample of early defaults from 2006 Fitch-rated subprime RMBS. Fitch’s findings from this
    review include:
    ! Apparent fraud in the form of “occupancy misrepresentation.” The borrower’s stated intent was to occupy
    the property, but there is evidence in the loan files that this did not occur, and that it is likely that
    occupancy was never the true intent of the borrower.
    ! Poor or lack of underwriting relating to suspicious items on credit reports. The loan files of borrowers with
    very high FICO scores showed little evidence of a sound credit history but rather the borrowers appeared as
    “authorized” users of someone else’s credit.
    ! Incorrect calculation of debt-to-income ratios.
    ! Poor underwriting of “stated” income loans for reasonability of the indicated income.
    ! Substantial numbers of first-time homebuyers with questionable credit/income.
    ! In one instance, acknowledgement by the borrower of being the “straw buyer” in a property flipping
    scheme.
    Fitch recognizes that, even in good quality pools, there will be some loans that default. However, when some pools
    of subprime mortgages have very high projected default rates, it is important to understand the impact that loans
    originated with poor underwriting practices and fraud can have. Moreover, Fitch intends to utilize the insights from
    its review to improve the RMBS rating process. Fitch believes that conducting a more extensive originator review
    process, including incorporating a direct review by Fitch of mortgage origination files, can enhance the accuracy of
    ratings and mitigate risk to RMBS investors. Fitch will be publishing its proposed criteria enhancements shortly.
    Additionally, a more robust system of representation and warranty repurchases may be desirable.
    In order to better detect and prevent poor underwriting and fraud, a combination of technology and basic risk
    management is needed before, during and after the origination of the loan. In this report, Fitch discusses some of the
    more obvious examples of evidence of fraud found in loan files, along with some of the steps that could identify the
    fraud at the earliest possible stage, ideally before the loan is funded. There are several effective fraud indication
    tools available today to the originator/issuer and servicer; however, it is important to acknowledge that no process or
    tool can identify all instances of misrepresentation or fraud.
    ! Lack of Disciplined Underwriting Increases Defaults and Allows Fraud
    Increased risk caused by operational weaknesses oftentimes is not apparent in the collateral characteristics, but
    rather, manifests itself in the pool performance. As detailed in Fitch’s criteria report, “ResiLogic: US Residential
    Mortgage Loss Model — Amended” dated Aug. 14, 2007, Fitch derives base frequency of foreclosure and loss
    severity, and therefore expected base case loss amounts, using each loan’s disclosed risk attributes. These attributes
    include loan-to-value (LTV), combined loan-to-value (CLTV) and FICO scores, which are historically the primary
    drivers of default risk, with loan purpose and occupancy as secondary drivers of default risk. However, additional
    risk caused by inaccurate data and/or fraudulent or misrepresented factors could materially affect the performance of
    Characteristics of Small File Sample
    # of Loans 45
    Average FICO 686
    Average Combined LTV Ratio 93
    % California Properties 49
    % Low/No Doc 69
    % 2nd Lien 60
    LTV – Loan-to-value. Source: Fitch.
    Structured Finance
    The Impact of Poor Underwriting Practices and Fraud in Subprime RMBS Performance
    3
    pools. Losses are more likely to be low if the originator consistently applies underwriting policies and guidelines,
    and has adequate quality control procedures, sufficient technology, and/or has risk management processes that are
    well developed and applied. For example, an inadequate appraisal quality review program is a significant risk factor
    since the valuation determines LTV. In most cases, the lack of an appropriate valuation at origination may not be
    evident until the borrower defaults on the loan or attempts to sell/refinance the property.
    There is a distinction between inaccurate data provided by the originator/issuer to investors, and others who rely on
    the data, including Fitch, and data, which is technically accurate, but does not actually reflect the true credit risk due
    to poor underwriting, quality control, or property valuation. Fitch believes that data, which is correct but
    inaccurately reflects the credit risk (e.g., stated income was not reasonable), is a larger component of
    underperformance than data integrity issues (e.g., debt-to-income ratios [DTI] were incorrectly stated on tape).
    Therefore, increasing data reverification on securitized transactions, while potentially beneficial, will not address the
    more material risk and will result in increased costs and reduced efficiencies for consumers and securitizations. Fitch
    believes that the rating agencies could add value by assessing the rigor and integrity of underwriting and valuation
    processes and controls, as part of their originator/issuer reviews.
    0%
    1%
    2%
    3%
    4%
    5%
    6%
    2000 2001 2002 2003 2004 2005 2006 2007
    Percentage of Securitized Pool Balance 90 Days Delinquent Before Age 6 Months (EPDs)
    Source: Fitch Ratings: Loan Performance.
    0%
    5%
    10%
    15%
    20%
    Jan-02
    Apr-02
    Jul-02
    Oct-02
    Jan-03
    Apr-03
    Jul-03
    Oct-03
    Jan-04
    Apr-04
    Jul-04
    Oct-04
    Jan-05
    Apr-05
    Jul-05
    Oct-05
    Jan-06
    Apr-06
    Jul-06
    Oct-06
    Jan-07
    Apr-07
    Jul-07
    Subprime Alt-A Prime
    60+ Delinquency By As Of Date
    (As Percentage of Outstanding Balance)
    Source: Fitch Ratings: Loan Performance.
    Structured Finance
    The Impact of Poor Underwriting Practices and Fraud in Subprime RMBS Performance
    4
    There has been a significant increase in the defaults and EPDs in 2006 and 2007 vintage subprime securitizations as
    outlined in the two charts on page 3. In Fitch’s research to determine the causes for high defaults in recent vintage
    pools, several factors began to emerge which indicated that the underlying loans did not perform consistently with
    their reported risk characteristics. To gain a better understanding of the situation, Fitch selected a sample of 45
    subprime loans, targeting high CLTV, stated documentation loans, including many with early missed payments. In
    particular, we selected loans that were primarily purchase transactions having a higher range of FICO scores (650 to
    770), because high FICO scores and purchase transactions are historically attributes which generally reduce the risk
    of default. Fitch’s analysts conducted an independent analysis of these files with the benefit of the full origination
    and servicing files. The result of the analysis was disconcerting at best, as there was the appearance of fraud or
    misrepresentation in almost every file.
    While we realize this was a very limited sample, Fitch believes that the findings are indicative of the types and
    magnitude of issues, such as poor underwriting and fraud, which are prevalent in the high delinquencies of recent
    subprime vintages. In addition, although the sample was adversely selected based on payment patterns and high risk
    factors, the files indicated that fraud was not only present, but, in most cases, could have been identified with
    adequate underwriting, quality control and fraud prevention tools prior to the loan funding. Fitch believes that this
    targeted sampling of files was sufficient to determine that inadequate underwriting controls and, therefore, fraud is a
    factor in the defaults and losses on recent vintage pools. Additionally, Fitch continues to attempt to expand its loan
    sample to provide further validation of its findings and will provide additional commentary as applicable.
    In light of our findings, Fitch believes that it is important to reassess the risk management processes of originators
    and/or issuers for product being securitized going forward.
    While prime originators are not immune to fraud schemes, the subprime sector has exhibited the most vulnerability
    to them. Undoubtedly, flat or declining home prices and the loosening of program guidelines remain the main
    drivers of defaults and therefore losses within the subprime sector. However, Fitch believes that poor underwriting
    processes did not identify and prevent and, therefore, in effect, allowed willful misrepresentation by parties to the
    transactions, which has exacerbated the effects of declining home prices and lax program guidelines. For example,
    for an origination program that relies on owner occupancy to offset other risk factors, a borrower fraudulently
    stating its intent to occupy will dramatically alter the probability of the loan defaulting. When this scenario happens
    with a borrower who purchased the property as a short-term investment, based on the anticipation that the value
    would increase, the layering of risk is greatly multiplied. If the same borrower also misrepresented his income, and
    cannot afford to pay the loan unless he successfully sells the property, the loan will almost certainly default and
    result in a loss, as there is no type of loss mitigation, including modification, which can rectify these issues.
    ! Research Results
    The files reviewed by Fitch’s analysts contained common features that Fitch believes contributed to default on these
    loans. Although the loan programs under which these loans were underwritten allowed for several high risk features,
    the files indicated a lack of underwriting review for basic reasonableness and credibility. It is important to note that
    while most of these issues could have been noted and investigated at the time of origination, others, such as
    occupancy and property condition, only became obvious as the servicer performed its functions.
    Some general examples of these findings are below.
    ! Borrower balance sheet and assets did not support income as stated
    o No indication in file of reasonableness test or attempt to obtain additional information.
    o Some verbal employment checks provided by borrower (self-employed) or related individual
    (spouse).
    ! DTI ranged from 44%–57%
    o Some exceptions were made to programs, but for many the amounts used for calculation did not
    include other debts and/or tax/insurance/homeowners’ association (HOA) dues which could have
    been determined from information within the files.
    ! Credit Reports
    Structured Finance
    The Impact of Poor Underwriting Practices and Fraud in Subprime RMBS Performance
    5
    o FICO scores based on “authorized” accounts or joint accounts, where the borrower is utilizing
    someone else’s credit.
    o No notation as to research on fraud or other alerts shown on credit reports.
    o No notation as to research on inconsistent social security numbers, date or birth, or AKAs from
    application to credit reports.
    o No research in the files on reported unresolved derogatory credit, including judgments, liens, etc.
    ! Seller concessions and other closing items
    o No indication of review performed on HUD-1 Settlement Statement for consistency with contract
    in file, allowable amounts paid for borrower, or funds to borrower (including purchase
    transactions).
    o No indication in file of review of borrower identification or signature.
    ! No consideration for payment shock, NSFs, or overdrafts
    o No indication in file of review of borrower’s ability to sustain materially higher payments (assets
    or deposits did not indicate borrower had excess liquidity).
    o No notation as to research on NSFs, or overdrafts shown in bank statements.
    ! Incomplete documentation
    o Occupancy form signed by borrower but box declaring occupancy rarely checked.
    o Missing “final” version of closing documents.
    Characteristics by percentage of the 45 files reviewed included (loans may appear in more than one finding):
    66% Occupancy fraud (stated owner occupied — never occupied), based on information
    provided by borrower or field inspector
    51% Property value or condition issues — Materially different from original appraisal,
    or original appraisal contained conflicting information or items outside of typically
    accepted parameters
    48% First Time Homebuyer — Some applications indicated no other property,
    but credit report showed mortgage information
    44% Payment Shock (defined as greater than 100% increase) — Some greater than 200%
    increase
    44% Questionable stated income or employment — Often in conflict with information on
    credit report and indicated to be outside “reasonableness” test
    22% Hawk Alert — Fraud alert noted on credit report
    18% Credit Report — Questionable ownership of accounts (name or social security numbers do
    not match)
    17% Seller Concessions (outside allowed parameters)
    16% Credit Report — Based on “authorized” user accounts
    16% Strawbuyer/Flip scheme indicated based on evidence in servicing file
    16% Identity theft indicated
    10% Signature fraud indicated
    6% Non-arms length transaction indicated
    Fraud has grown significantly over the past few years in volume and complexity. Fitch believes that there are many
    things that originators/issuers could do to prevent misrepresentation and fraud, as discussed below.
    ! Originator’s/Issuer’s Role in Identifying Fraud and High Risk Loans
    As the mortgage lending industry continues to make the mortgage process faster and less expensive, the occurrences
    of fraud continue to grow. For example, advances in personal computer capabilities enable individuals to produce
    documents to support fraudulent data, which are often hard to distinguish from true originals. In addition, access to
    databases has enabled perpetrators to alter pertinent loan documentation and information or create falsified loans
    where there is no borrower or property.
    Structured Finance
    The Impact of Poor Underwriting Practices and Fraud in Subprime RMBS Performance
    6
    In many instances, misrepresentations and altered documentation are evident in the physical files, and most lenders
    provide underwriters and other personnel with training to identify red flags that may indicate fraud. Many lenders
    have an individual or group to research and resolve situations where fraud is suspected. Often, loans containing
    misrepresentations have multiple problems that can be detected through a strong validation and reverification
    process.
    Mortgage fraud has increased in recent years to an extent that The Federal Bureau of Investigation (FBI) has
    reported the cost to the mortgage lending industry is between $946 million and $4.3 billion in 2006 alone.2 Because
    fraud is becoming so prevalent, Fitch expects lenders to aggressively monitor for fraud, research and resolve
    suspected cases, and take appropriate actions against the source(s) of the problem. This includes the repurchase of
    loans by third parties, the removal of these parties from further business dealings, the dismissal of employees
    involved and, where appropriate, legal action.
    Some of the primary areas of mortgage fraud are discussed below, along with the originators’ actions which could
    identity these situations. It is important to keep in mind that for several of the situations mentioned here, there are
    widely available tools that can be purchased which increase the originators’ ability to quickly identify potential
    problem loans.
    Broker-Originated Loans
    Broker-originated loans have consistently shown a higher occurrence of misrepresentation and fraud than direct or
    retail origination. In most instances, the broker will be the only direct contact with the borrower, and often is in the
    position of gathering most, if not all, required information on the borrower, including in some cases the selection of
    the appraiser. In this role, they have the ability, if inclined, to adjust or amend the stated facts, with or without the
    borrower’s knowledge, to allow the loan request to fit within the parameters of lender guidelines.
    Certainly not all brokers would engage in these activities; however, it is imperative that lenders actively research the
    identity and history of individuals applying for inclusion in lending programs, as well as maintain a regular update
    on all brokers. Lenders are expected to actively monitor the approval/reject record, repeat/amended submissions, and
    performance/default record for loans from each broker. In addition, if problems are detected, the lender is expected
    to aggressively research the cause, and if misrepresentation or fraud is indicated, to withdraw the broker’s approval
    and, if appropriate, pursue legal actions. Finally, to prevent a repeat of this activity, the lender can provide the
    broker’s name and identification information to The Mortgage Banker’s Association’s (MBA) Mortgage Asset
    Research Institute (MARI), which maintains a list of reported brokers that may be accessed by other lenders.
    Stated Income
    Stated income programs were initially reserved for high net worth individuals, who were self-employed and did not
    want to disclose all their business dealings but had assets that supported the income stated and strong credit profiles
    and credit scores. As the mortgage industry grew, originators expanded their programs to include salaried borrowers,
    and then on to the subprime sector.
    Lenders who use reasonableness tests for income during the underwriting process, as well as initiate further research
    if the stated amounts appear inflated, can mitigate the risk inherent in stated income products. If the borrower profile
    does not support the income levels indicated, either by assets or liquidity (bank or savings accounts), the reasonable
    assumption would be that the income could be inflated. In addition, if lender guidelines require a verbal statement of
    employment, care should be exercised to determine that the individual providing the statement is an unrelated,
    independent source.
    Originators often use the Internet to help confirm employment and the reasonableness of the income based on job
    title and geographic location. Most lenders know and have the ability to use the various sites and programs which
    provide this type of “reasonableness” check, and when stated income falls outside these parameters by an
    established variance, further research would be warranted.
    Structured Finance
    The Impact of Poor Underwriting Practices and Fraud in Subprime RMBS Performance
    7
    FICO Inflation
    FICOs present a consistent statistical assessment of the borrower’s creditworthiness and risk profile; however, credit
    scoring is limited by the accuracy of the data contained within the credit bureau file. The confidence that originators
    place in FICOs may be diminished, and the perceived risk of the loan may be altered, when information provided
    within the report is not taken into consideration. Therefore, if the credit report provides conflicting information
    regarding Social Security Numbers, birth dates, addresses, indications of the use of multiple names, fraud alerts
    (known as HAWK Alert), etc., the lender should perform additional research.
    Another concern with FICO score accuracy involves companies, typically Internet-based, who sell a means to
    artificially inflate a borrower’s FICO. It has been estimated, as well as claimed by these services, that the use of a
    single “borrowed” account from a good consumer, reflected on the credit report as an “authorized user” account,
    will increase a FICO score by 50 to 75 points. Multiple authorized user accounts have the possibility of inflating a
    poor credit borrower’s FICO by as much as 200 points. While this practice is not technically illegal for the service
    provider, many feel that the borrower who utilizes another person’s good credit to inflate their score for the purpose
    of misleading a lender is committing fraud.
    However, the industry is starting to limit the use of authorized user accounts or “piggyback credit.” For example,
    Fair Isaac Corp. indicated that it was taking steps to ensure credit scores are not artificially enhanced by using
    borrowed credit by modifying the formula for its FICO score. The newest FICO model (version FICO 08) will
    ignore authorized user accounts. In addition, TransUnion LLC expanded its offerings to help the financial industry
    by identifying consumers who may have added authorized user relationships to their credit files to artificially
    enhance their credit standing.
    Because of the effect of authorized users and other credit “improvement” schemes available today, lenders who
    review all information on a proposed borrower’s credit report will be able to better determine the full indication of a
    borrower’s credit risk profile. Specifically, if a lender uses a “high” FICO as a compensating factor for layered risk
    or risk outside stated program guidelines, the need to determine the accuracy of this tool is materially increased.
    Property Valuation Accuracy
    Risks associated with appraisals are varied and costly. Based on the past unprecedented home price appreciation in
    some markets and recent regulatory investigations, there is widespread concern regarding the number and severity of
    inflated valuations used to determine LTV. The availability of stated value refinances, inappropriate use of
    alternative valuations, and high production volume pressures on appraisers contributed to this problem. The effect of
    flat or declining home values, currently evident on a national scale, is most sharply felt in some of the same markets
    affected by the most inflated valuations, making current assessments of appropriate valuations more difficult. As a
    result, lenders are expected to exercise additional caution when determining values, and therefore LTVs to use in
    their risk assessments.
    Fitch believes that a comprehensive valuation program uses a combination of full appraisals, automated valuation
    models (AVMs), and review appraisals. AVMs can be used to check and verify the appropriate valuations of
    appraisals at a relatively low cost. They are especially useful in the selection of properties for re-appraisal or
    appraisal review as part of a comprehensive quality control program. In addition, most lenders have procedures for
    reviewing appraisals referred by underwriting or quality control that use either in-house certified review appraisers
    or adequately monitored third-party review appraisers.
    Lack of Underwriting
    The high volume of mortgage applications over the past few years, coupled with the consumer’s demand for more
    rapid responses to those applications, led to use of automation via Automated Underwriting Systems (AUS) and the
    use of validators to ease heavy underwriter workload. The borrower application information, often provided by the
    broker, is typically subject only to a cursory validation process. The cost savings benefit of using less experienced
    employees must be offset by controls to mitigate the likelihood that critical data points or red flags that could
    materially affect the underwriting decision or pricing may be overlooked.
    Structured Finance
    The Impact of Poor Underwriting Practices and Fraud in Subprime RMBS Performance
    8
    Policies should address how the lender is evaluating risk layering, disposable income and payment shock. In
    addition, compensating factors are often used to override or offset loan characteristics that do not meet stated
    program guidelines. However, typically a single compensating factor would not offset multiple layers of risk.
    Therefore, to determine acceptable and predictive levels of risk, exceptions, upgrades, and overrides to established
    underwriting and loan programs should be carefully documented, monitored and disclosed.
    Audits and Quality Control
    To mitigate and control the extensive risks associated with originations, a lender needs an active, dynamic, and
    systemic quality control and internal audit program. An independent quality control program can provide an
    objective assessment of credit risk and compliance to the company’s loan product and underwriting guidelines, as
    well as identify deteriorating asset quality. Pre- and post-funding quality control programs assess the underwriting
    decision, re-verify documentation, and provide constructive feedback to management.
    ! Representations and Warranties (Reps & Warranties) in RMBS
    In RMBS transactions, reps and warranties are given by the originator, issuer or other appropriate party, covering
    several areas, including the legality of the mortgage loan, the lien status, and condition of the property. In addition,
    some of the reps and warranties address compliance with the originator’s underwriting standards and a smaller
    number of transactions have specific reps and warranties for fraud. However, there are several challenges to relying
    on reps and warranties to remove loans from RMBS deals for a breach due to underwriting or
    misrepresentation/fraud.
    For many subprime loans, the program guidelines allowed the originator to base qualification on features such as
    stated income. Assuming that the originator’s underwriting standards did not require the verification through another
    means, or that a “reasonableness test” be conducted, the failure to perform these steps would not be an exception to
    their underwriting standards. Therefore, if the borrower or broker misrepresented the actual income, it is fraud on
    their part, but is it a breach of the reps and warranties? The same question would apply to borrowers who have
    artificially enhanced their FICO.
    Most pooling and servicing agreements that Fitch reviewed indicate that any party to the transaction (typically, the
    issuer, servicer, master servicer, or trustee) who becomes aware of a suspected breach to the reps and warranties
    should provide notice to the trustee (or in some all other parties). However, unless there is a reason that research is
    conducted to specifically look for a breach, finding potential breach situations typically requires an awareness and
    identification by the servicer while conducting their functions. Directions as to the process after notification are
    somewhat varied, but in general, if a breach is determined, the trustee will facilitate the request for repurchase of the
    loan from the transaction. Fitch believes that risk management firms that track potential repurchase candidates and
    monitor the repurchase process can enhance the effectiveness of representations and warranties. However, in today’s
    environment, one of the situations which could occur would be that the original provider of the reps and warranties
    is no longer in existence or has filed bankruptcy.
    Structured Finance
    The Impact of Poor Underwriting Practices and Fraud in Subprime RMBS Performance
    9
    ! Appendix — Measuring Fraud Within the Industry
    Difficulties in Measuring and Reporting Fraud
    Although most information available today on mortgage fraud indicates a strong increase in the amount and
    complexity of fraud in the industry, there is not a clear mechanism in place today to adequately identity and track
    these instances.
    One source for this information is the US Department of the Treasury, Office of Inspector General’s Financial
    Crimes Enforcement Network (FinCEN), which was established in 2001 to advise and make recommendations on
    matters relating to financial intelligence and criminal activities, including mortgage loan fraud. In the most recent
    Suspicious Activity Report (SAR) dated November 2006, the bureau reported a 14-fold rise in mortgage fraudrelated
    suspicious activity reported between 1997 and 2005.3 However, the first quarter of 2006 is the most recent
    data available currently.
    400
    41 55 33 48
    812
    464
    149
    249
    103 212
    1,200
    0
    200
    400
    600
    800
    1,000
    1,200
    1,400
    1,600
    1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
    Actual Projected
    SAR Narrative Reports of Strawbuyers in Suspected Mortgage Loan Fraud
    Source: Financial Crimes Enforcement Network Regulator Policy and Programs Division: Mortgage Loan Fraud; an Industry Assessment based
    upon Suspicious Activity Report Analysis, November 2006.
    7,093
    9,539
    3,515
    4,696 5,387
    18,391
    25,989
    1,318 1,720 2,269 2,934
    21,279
    0
    5,000
    10,000
    15,000
    20,000
    25,000
    30,000
    1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
    Actual Projected
    Mortgage Loan Fraud Reporting Trend
    Source: Financial Crimes Enforcement Network Regulator Policy and Programs Division: Mortgage Loan Fraud; An Industry Assessment based
    upon Suspicious Activity Report Analysis, November 2006.
    Structured Finance
    The Impact of Poor Underwriting Practices and Fraud in Subprime RMBS Performance
    10
    It is important to realize that the SARa are typically only filed by federally chartered or federally insured
    institutions. Since the majority of the subprime mortgage loans are originated by entities that are not federally
    chartered or insured, the number of potential fraud instances could easily be multiplied two to three times.
    Another widely acknowledged source for mortgage fraud information, MARI provides an annual report on mortgage fraud
    activity. Although the MBA has access to a wider range of information from its membership, the information is provided
    as an index for the states and metropolitan areas, and without access to the raw data behind the indexes, comparison and
    trending is limited. However, MARI has indicated that its records show a 30% increase in loans with suspected mortgage
    fraud in 2006, with the most common type of fraud being employment history and claimed income. The report went on to
    show that while 55% of overall fraud incidents reported to MARI were application fraud, the percentage of subprime loans
    with application fraud was higher at 65%. In addition, for appraisal/valuation fraud the overall was 11%, with subprime at
    14%. The report also makes a projection with regard to the cases of fraud in subprime, indicating that it will likely take
    three to five years to uncover most of the fraud and misrepresentation in the 2006 book of business.4
    The FBI reports the actual number of convictions for mortgage fraud has increased 131% from 2001 to 2006. As
    shown in its report for 2006, the FBI investigated 818 cases and obtained 263 indictments and 204 convictions of
    mortgage fraud criminals. The agency also reports that in 2006, for mortgage fraud, it accomplished $388.9 million
    in restitutions, $1.4 million in recoveries, and $231 million in fines.5
    However, the timing of reported fraud cases must be considered when attempting to determine the increasing trend
    of occurrence within the FBI numbers. While some fraud cases can be identified at the time of origination, most will
    not be noted until later in the servicing process. This may occur when the servicer notes a first or early payment
    default; a borrower cannot be contacted or traced; inspection of the property identifies vacancy, tenants, or
    conditions that are not as noted on the appraisal; or possibly when, during contact with the borrower or other parties
    in the transaction, there is an admission of misrepresentation. Also, with regard to the FBI reported convictions, it
    should be noted that there may be a considerable span of time from the identification and investigation phase of
    these cases to pending and final conviction. This delay, combined with the difficulty in identifying the vintage of
    loan origination, makes specific trending using this data complicated at best.
    There are providers of advanced technology tools to identify fraud or misrepresentation available in the industry
    today. Some of these providers also report their findings in summary or on certain features of fraud. This
    6,936
    1,850
    4,569
    17,127
    1,724
    6,784
    21,994
    2,126
    11,611
    35,617
    2,409
    21,203
    3,711
    1,764
    5,623
    0
    10,000
    20,000
    30,000
    40,000
    Mortgage Fraud Commercial Loan Fraud False Statement
    Number of SARs Received
    FY 2002 FY 2003 FY 2004 FY 2005 FY 2006
    Number of Violations of Mortgage-Related Fraud SARs
    Source: FBI Financial Crimes Report to the Public Fiscal Year 2006
    Structured Finance
    The Impact of Poor Underwriting Practices and Fraud in Subprime RMBS Performance
    11
    information is helpful to the industry; however, the information provided by these vendors will be limited to the data
    provided to them from their clients. Notwithstanding this limitation, because these companies are typically actively
    looking for fraud in new production files, the statistics they provide may well be the most up to date information
    available upon which to monitor trends.
    Endnotes
    1White Paper, “Early Payment Default – Links to Fraud and Impact on Mortgage Lenders and Investment Banks,”
    2007 BasePoint Analytics LLC.
    2Federal Bureau of Investigation, “Mortgage Fraud: New Partnership to Combat Problem: March 9, 2007.”
    3Mortgage Loan Fraud, An Industry Assessment based upon Suspicious Activity Report Analysis, November 2006,
    Financial Crimes Enforcement Network, Regulatory Polity and Programs Division, Office of Regulatory Analysis,
    US Department of the Treasury.
    4Ninth Periodic Mortgage Fraud Case Report to Mortgage Bankers Association, April 2007, Mortgage Asset
    Research Institute, LLC., a ChoicePoint Service.
    5“Financial Crimes Report to the Public Fiscal Year 2006, October 1, 2005 – September 30, 2006,” Federal Bureau
    of Investigation.
    Copyright © 2007 by Fitch, Inc., Fitch Ratings Ltd. and its subsidiaries. One State Street Plaza, NY, NY 10004.
    Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. All of the
    information contained herein is based on information obtained from issuers, other obligors, underwriters, and other sources which Fitch believes to be reliable. Fitch does not audit or verify the
    truth or accuracy of any such information. As a result, the information in this report is provided “as is” without any representation or warranty of any kind. A Fitch rating is an opinion as to the
    creditworthiness of a security. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of
    any security. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection
    with the sale of the securities. Ratings may be changed, suspended, or withdrawn at anytime for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort.
    Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the taxexempt
    nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees
    generally vary from USD1,000 to USD750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured
    or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from USD10,000 to USD1,500,000 (or the applicable currency equivalent). The
    assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the
    United States securities laws, the Financial Services and Markets Act of 2000 of Great Britain, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic
    publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.
    A Short Guide to Subprime
    March 2008 http://www.moodys.com/subprime
    The Subprime Decline – Putting it in Context
    Subprime Residential Mortgages have become a focus of sharp attention in the wake of the unusually
    poor performance of subprime loans originated in 2006 and 2007 (the 2006 and 2007 “vintages”).
    Periodic declines in performance are not uncommon to the residential housing market, but the current
    downturn has been exacerbated by several key sequential factors:
    ■■ From 2005 to early 2007 underwriting standards were exceptionally aggressive.
    ■■ In mid-2006 there began a pronounced and prolonged decline in home prices.
    ■■ Once the length and degree of the downturn became clear, the market responded with a rapid
    tightening of lending standards.
    ■■ Tightened standards made it difficult for subprime borrowers to re-finance, since they lacked the
    advantage of high home price appreciation that favored borrowers in earlier vintages.
    Before examining the particulars of these factors, it pays to place the subprime slump in a wider context.
    The Rise Before the Fall – the Residential Housing Credit Cycle
    The performance of subprime loans follows a pattern that is typical of the residential housing “credit
    cycle.” During periods of growth in housing and mortgage markets, existing lenders expand their business
    and new lenders enter the market, eventually creating overcapacity. Then, as the mortgage market
    cools, competition among lenders heats up and they may lower credit standards (i.e., make riskier
    loans) to maintain origination volume.
    Lending behavior in the subprime mortgage market followed this pattern in 2006, with lenders
    introducing alternative mortgage loans with easier terms – and greater risk of delinquency and default
    – including:
    ■■ Loans for the full price of a home – i.e., no down payment, no equity.
    ■■ Loans with less thorough documentation verifying borrower’s income and assets (“No/Low Doc”).
    ■■ Loans with low initial “teaser” rates that expose borrowers to sudden payment increases (“Hybrid
    ARMS”).
    Such subprime loans formed a steadily increasing proportion of total loan origination by dollar volume
    over the five years 2002 – 2006:
    This marked rise in subprime loans as a percentage of total mortgage origination coincided with
    unusually poor performance in the 2006 vintage of subprime loans (see “Down Years for Subprime
    Loans,” page 2). There has since been considerable concern among market participants about possible
    future losses in RMBS tranches backed by these loans.
    Structured Finance in Focus
    Structured Finance in Focus
    presents a quick, clear read on
    key structured finance topics.
    For the “fine print” on subjects
    discussed herein, or elsewhere,
    please see the additional
    resources and contacts listed at
    the back of this publication.
    Inside:
    Subprime Decline 1
    – Putting it in Context
    Down Years for Subprime 2
    – Why the 2006 and 2007 Vintages
    Soured
    Subprime Timeline
    Not Just a Problem of Problem Loans 3
    – The Role of RMBS
    Measures to Increase Transparency 4
    and Help Restore Market Confidence
    Additional Subprime & 4
    RMBS Resources
    Year Total Mortgage Total Subprime Subprime Origination
    Origination Origination as Percent of Total
    ($ billions)
    2006 2,886 640 22%
    2005 3,201 625 20%
    2004 3,046 560 18%
    2003 4,370 539 12%
    2002 3,038 421 14%
    Down Years for Subprime Loans – Why the 2006 and 2007 Vintages Soured
    The increased number of subprime loans extended, as mortgage originators loosened standards

  90. I found this very intresting hope it works.

  91. NATION’S HOUSING

    Civil rights complaint targets Wall Street rating firms
    Moody’s and Fitch’s high ratings of subprime mortgage bonds disproportionately harmed black and Latino home buyers, the National Community Reinvestment Coalition alleges.
    By Kenneth R. Harney
    November 30, 2008
    In what is apparently the first legal action of its kind, an association of community-based organizations has filed a federal civil rights complaint against two of the three largest Wall Street rating firms, charging that their inflated ratings on subprime mortgage bonds disproportionately caused financial harm to African American and Latino home buyers across the country.

    The complaint, filed by the National Community Reinvestment Coalition, alleges that Moody’s Investors Service and Fitch Ratings enriched themselves by assigning high ratings to bonds backed by mortgages “that were designed to fail” because of “unfair payment terms and insufficient borrower income levels.”

    The firms “knew or should have known” that subprime loans disproportionately were marketed to minority consumers — a process known as “reverse redlining” — and that those borrowers would ultimately default and go into foreclosure at high rates, according to the coalition’s complaint.

    Fitch Managing Director David Weinfurter said the NCRC’s filing “is fully without merit, and Fitch intends to defend itself vigorously.” Moody’s had no immediate comment.

    The filing cites multiple studies that found that African Americans and Latinos received a disproportionate share of subprime loans during the housing boom years. A Federal Reserve study in 2006 estimated that 45% of mortgages extended to Latinos and 55% of loans to African Americans were subprime — a utilization rate “three to four times that of non-Hispanic whites.”

    Because the loans themselves often came with terms that increased borrowers’ probability of default — upfront teaser rates followed by unaffordable reset payment adjustments, no required documentation of applicants’ incomes or assets, plus hefty prepayment penalties — African Americans with subprime mortgages are projected to lose $71 billion to $92 billion through foreclosures, while Latinos are projected to lose $75 billion to $98 billion, according to one study cited in the complaint.

    “Had subprime loans been distributed equitably,” the complaint estimates, “losses for whites would be 44.5% higher and losses for people of color would be about 24% lower.”

    A third rating firm with heavy involvement in the subprime boom, Standard & Poor’s Corp., was not named in the complaint but has been “in discussions” with the NCRC, said David Berenbaum, the group’s executive vice president. If the discussions with S&P prove “unsatisfactory,” he said, the company could be the subject of a separate action.

    The NCRC filed its complaint with the Department of Housing and Urban Development’s fair housing and equal opportunity unit. After a review, HUD could either dismiss the allegations or refer the case to the Justice Department of the incoming Obama administration for litigation next year. If HUD fails to respond adequately, the NCRC says it may file a federal civil lawsuit.

    The civil rights complaint is the latest in a series of lawsuits, regulatory investigations and congressional criticism of the rating firms’ roles and conduct during the mortgage bond heyday years of 2003-05. In dollar terms, subprime and so-called Alt-A no-documentation loans accounted for 32% of all mortgage originations in 2005. Their share had been 10% two years before. Virtually all of those high-risk loans were sold to Wall Street firms for inclusion in complex bond structures that were resold, often in bits and pieces, to pension funds and financial institutions.

    The traditional function of the rating firms has been that of Wall Street’s “gatekeepers,” evaluating the risks involved in the collateral backing bonds. Their assignment of investment-grade ratings to securities based on high-risk mortgages — and their subsequent mass lowering of those ratings as default losses piled up — has earned them scorching criticism from investors, regulators and Congress.

    Much of the criticism focused on the fact that the firms are paid lucrative fees for their ratings by bond issuers themselves — not investors — thereby creating potential conflicts of interest. The firms also competed with one another to rate subprime loan securitizations, creating additional pressure to provide the most favorable possible ratings.

    The Securities and Exchange Commission investigated the rating firms this year and found “serious shortcomings” at Moody’s, Fitch and S&P, including lack of oversight of conflicts of interest. Investigators also turned up evidence that employees apparently knew that some of the mortgage pools they were rating were potentially toxic.

    In one instant-message exchange, an analyst reportedly called a deal “ridiculous. . . . We should not be rating it.” A colleague responded: “We rate every deal. It could be structured by cows and we would rate it.”

    Critics such as Berenbaum contend that without mass securitizations of high-risk mortgages — with stamps of approval from the rating firms — far fewer subprime loans would have been made, and far fewer minority home buyers would have ended up in foreclosure.

  92. LandAmerica Financial Group Seeks Bankruptcy Protection
    November 26, 2008

    Late the night of Nov. 25, LandAmerica Financial Group, Inc. and its subsidiary, LandAmerica 1031 Exchange Services, Inc., filed a Chapter 11 petition in the U.S. Bankruptcy Court for the Eastern District of Virginia (“Bankruptcy Court”), seeking bankruptcy protection for both entities. The action does not cover Commonwealth Land Title Insurance Company or Lawyers Title Insurance Company, two LandAmerica subsidiaries that are each domiciled in the State of Nebraska. Under the federal Bankruptcy Code, these insurance company subsidiaries cannot be debtors in the federal bankruptcy proceeding. The LandAmerica subsidiaries together comprise the country’s third largest underwriter of title insurance.

    By separate agreement, LandAmerica agreed to sell Commonwealth to Chicago Title Insurance Company as well as Lawyers and United Capital Title Insurance Company to Fidelity National Financial Inc. The proposed sales will require approval of the Bankruptcy Court and various state insurance regulators. LandAmerica filed a first day motion in the Chapter 11 proceeding seeking expedited approval of the sales, which could occur as early as late December. The motion to approve the sales is on the agenda of matters to be heard by the Bankruptcy Court beginning at 11 a.m. EST on Nov. 26.

    The Nebraska Department of Insurance (“the Department”) issued a statement on Nov. 24 that, based on the latest statutory accounting reports received by the Department from the insurers, both Commonwealth and Lawyers are solvent and are continuing to write title insurance. However, while the sale agreement is pending, representatives of the Department have confirmed that the Department instituted proceedings the week of Nov. 24 to place both Commonwealth and Lawyers into rehabilitation under state insurance laws. A hearing is expected the afternoon of Nov. 26. A rehabilitation would allow both insurers to continue business as usual, but with enhanced oversight by the Department. At this time, the Department has indicated that it is not pursuing a liquidation of either insurer. Lawyers acquired Transnation Title Insurance Company earlier this year and assumed its obligations by merger. We will provide additional information on the implications of the Nebraska insurance regulatory issues once we confirm what level of oversight the Department obtains.

    LandAmerica and its subsidiaries have reported a decline in financial position in recent weeks. The situation became more tenuous on Friday, Nov. 21, when Fidelity elected not to proceed with an acquisition of LandAmerica after completing its due diligence review. Shares of LandAmerica fell 88 percent in trading the Monday following Fidelity’s announcement. LandAmerica 1031 Exchange Services abruptly issued a press release announcing that it had ceased operations, citing investments in auction rate securities as a reason for being unable to meet all of its obligations as qualified intermediary to taxpayers under exchange agreements. LandAmerica also confirmed that it is not in compliance with loan covenants in its existing credit agreements with its lenders. Fitch Ratings downgraded LandAmerica’s insurance subsidiaries to a BB rating.

    What Does this Mean for Real Estate Owners, Investors and Lenders?

    We recommend that you complete a review of your property files to determine which properties may have title insurance through a LandAmerica insurer to (i) identify any existing cash escrows held by the LandAmerica insurers, (ii) identify any projects with construction funds being disbursed through a LandAmerica company, and (iii) determine any active claims pending against any of the LandAmerica insurers. Those projects with current cash escrows and ongoing needs to disburse funds through a LandAmerica insurer or prosecute claims against a LandAmerica insurer should be closely monitored as the proposed sales move forward. If you are currently a party to an exchange agreement with LandAmerica’s exchange subsidiary that is a debtor in the bankruptcy, we would be happy to discuss a course of action.

    Assuming Commonwealth and Lawyers are placed into rehabilitation in Nebraska, both companies should be able to continue business as usual, subject to enhanced oversight by the Department of Insurance. No assets of the title insurance subsidiaries, including any escrows held by the subsidiaries in a fiduciary capacity, would be captured by the bankruptcy estate of LandAmerica. However, until the sales to Fidelity and Chicago are complete, we recommend that you monitor the progress of the sale agreement closely and carefully consider how funds are being handled in the course of transactions. If the sales do not occur and the title insurers are forced into a liquidation in Nebraska, then cash escrows and funds disbursed through a LandAmerica insurer could be captured through the Nebraska proceedings.

    Even if you have no active projects with a LandAmerica insurer, if you hold a title policy written by a LandAmerica insurer, then you should still monitor the proposed sales. Acquisition of the LandAmerica title insurance obligations by rival Fidelity should alleviate concerns of insureds over a possible failure of the LandAmerica insurers and impact on the value of title policies issued by the LandAmerica companies.

    As more information becomes available on the LandAmerica situation, we will provide updates and more detail on a recommended course of action to address the potential issues. In the meantime, please feel free to contact Jenny Marler ( 314.259.5874 or jmarler@sonnenschein.com) for transactional real estate and lender issues, Robert Millner ( 312.876.7994 or rmillner@sonnenschein.com) for bankruptcy issues, Corinne Carr ( 312.876.7477 or ccarr@sonnenschein.com) for insurance regulatory issues, or your regular Sonnenschein contact for additional information.

  93. ECONOMY-US: Congress Blames Treasury as Foreclosures Mount
    By Adrianne Appel

    PROTECT YOUR HOME 786 274 0527
    MALIBUBOOKS@GMAIL.COM

    BOSTON, Nov 19 (IPS) – A congressional banking leader Tuesday blew hot air and blame at the U.S. treasury secretary about the ongoing home foreclosure crisis, but neither made a commitment to help stressed homeowners.

    Congress is officially out of session, except for this week, and has no plan to address the looming problem of foreclosures until it returns in January, when Pres.-elect Barack Obama takes office.

    Congress would have full authority to do so.

    Instead, Rep. Barney Frank, chair of the House Financial Services Committee, told Treasury Secretary Henry Paulson that he should address the foreclosure problem and direct money from a special 700-billion-dollar fund to homeowners in trouble.

    “It is essential that we do something, that we use some of the [funds] toward foreclosure reduction,” Frank said.

    Paulson, a lame-duck secretary who will leave in January when Pres.-elect Obama appoints a new secretary, said he knows how he is going to spend the remaining funds, and foreclosure assistance and an auto industry bailout is not part of his plan.

    Congress has been apprised of Paulson’s spending, has vast authority over it, and could have directed him to intervene on behalf of homeowners.

    Congress handed the 700 billion dollars to Paulson on Oct. 3, after Paulson said the emergency money was urgently needed to prevent a wholesale collapse of the U.S. banking system and economy. The U.S. public was highly critical of the plan, and called Congress by the thousands, but legislators, led by Frank and other Democrat leaders, authorised the money.

    Without help, five million U.S. homes will be lost to foreclosure in the next two years, according to the Federal Deposit Insurance Corporation. Two million have already been foreclosed on.

    Committee member Maxine Waters expressed anger that she helped win votes for the 700 billion dollars, which she said she thought would be spent on foreclosure assistance.

    “I worked very hard to pass this [bailout] legislation. I was looked at with suspicion when I sold this to the Congressional Black Caucus. I am disappointed you have just divorced yourself from dealing with foreclosures,” Waters told Paulson.

    Paulson, formerly of Goldman Sachs, has spent the funds directly on financial firms, and spent hundreds of millions to hire financial firms to disperse the money, and track it.

    “We are turning the corner. We have stabilised the system and prevented a collapse. We have a lot of work ahead. It’s a lot of work to get the markets going again,” Paulson said.

    Paulson has given 125 billion dollars in cash to nine of Wall Street’s largest firms, in exchange for limited stock, and 148 billion dollars so far to other smaller banks.

    “You, Secretary Paulson, took it upon yourself to ignore the authority and direction that Congress gave you. I couldn’t believe it when I heard that you abandoned the foreclosure effort,” Waters said.

    Paulson expects to spend up to 350 billion dollars before he leaves office, and said the remainder will be directed to credit card companies, and businesses that make auto and education loans.

    None will go toward foreclosure assistance or the auto industry, he said.

    “I feel a great responsibility to stick with the purpose of the [fund], to stabilise and strengthen the financial system. Auto companies fall outside that purpose,” Paulson said.

    “Why are foreclosures still increasing, in light of the 700 billion dollars spent at taxpayers’ expense?” Rep. Nydia Velazquez asked Paulson.

    “It’s hard to imagine we’re not going to have a large number of foreclosures when you look at what we’ve gone through, and the shoddy lending practices,” Paulson said.

    Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, has a plan in hand to help homeowners, and told Frank and Paulson she needs 24 billion dollars to get it started. It appears homeowners may have to wait until January for Congress or the Treasury to consider funding it.

    None of the powerful congressional leaders nor Paulson has stepped forward to propose funding for it.

    Frank told Paulson that he should address the foreclosure problem.

    “The fundamental policy issue is our disappointment that funds are not being used out of the 700 billion dollars to supplement mortgage foreclosure reduction,” Frank said.

    Waters expressed frustration that Paulson has refused so far to fund Bair’s plan, and said it is badly needed. Mortgage holders are not voluntarily trying to re-negotiate their unfair loans, she said.

    Waters’ office is trying to help 26 homeowners to re-negotiate lower interest rates on unfair loans.

    “It is absolutely ridiculous. One of the banks is Wells Fargo. I’ve had to go all the way to the chairman. I stay on the line for one hour just trying to get to a servicer. Then when you talk to the servicer, they don’t even know enough to evaluate the incomes of the owners,” she said.

    The foreclosures are at the centre of the financial meltdown, and unless stemmed, will continue to drag down the U.S. and global economy, economists told the panel.

    “Stopping the financial crisis and getting credit flowing again requires ending the spiral of mortgage foreclosures and the expectation of very deep further house price declines,” said Martin Feldstein, of Harvard University.

    Alan Blinder, an economist at Princeton University, painted a bleak picture of the next year.

    “The hope that we might avoid a serious recession is now gone,” he said.

    Blinder said that if the U.S. takes aggressive action by spending billions on infrastructure and other projects, the country may be able to hold unemployment at 8 percent. It currently stands at 6.5 percent.

  94. Please remember that signatures were forged by use of back office software and imposed on promissory notes with the use of printers in blue ink. When a lender produces a promissory note, the note should be sent to a signature specialist for verification I would use caution with assuming a note is original even if it looks perfect.

    Most of the signature experts have a long history of encountering this trick and it was the rule of thumb.

  95. Hey Steve Nahas,

    But you did not give any contact info?.I have a lawyer for you(maybe depends on where you are).For the least I can get you a ghost writer

    here is my info
    786 274 0527
    malibubooks@gmail.com

  96. The coming Holiday season will be the worst for retail in decades. Most retailers generate 50% to 75% of their profits in November and December. Early in 2009, the avalanche of retail bankruptcies will begin. The big box retailers who built their expansion plans upon demand that was a debt induced fallacy, will experience tremendous losses. They will begin to close stores by 2010. Automakers will continue to see sales decline to levels never thought imaginable. All three major U.S. automakers could go bankrupt by 2010. House prices will continue downward. Two or three major homebuilders will go bankrupt by 2010, while hundreds of small builders will collapse. Mall developers and commercial developers have taken on billions in debt in the last decade. As tenants go bankrupt and the rents dry up, hundreds of large public developers will declare bankruptcy. These losses are not factored into the numbers of the 8,500 banks in the U.S. By the time this crisis is finished, we are likely to be left with 5,000 banks or less. The official unemployment rate will easily surpass 7% and possibly reach 8% by 2010. Based on the unemployment calculation used during the time of the Great Depression, we already have unemployment of 15%. This could conceivably reach 20%. The PE of the market is still above 20. Profits will plunge in 2009 and irrational pessimism could propel the Dow to its 2002 low of 7,200. That would be 28% below today’s levels and almost 50% below the all time high of 14,000.

    Even if we somehow avoid a true depression, the next few years will be extremely painful. The question is whether we come out the other side as a stronger Nation or a weaker declining Nation. The words of Congressman Ron Paul should be the rallying cry for our great country.

    “The issue boils down to this: do we care about freedom? Do we care about responsibility and accountability? Do we care that our government and media have been bought and paid for? Do we care that average Americans are being looted in order to subsidize the fattest of cats on Wall Street and in government? Do we care? When the chips are down, will we stand up and fight, even if it means standing up against every stripe of fashionable opinion in politics and the media? Times like these have a way of telling us what kind of a people we are, and what kind of country we shall be.”

  97. please contact me. I have a few mortgages in trouble and I would like to see if you can help.
    Thank you.

  98. Next year I will start taking classes for a law degree. I cannot wait to fire a candle up the justice system. I witnessed how over 145 families lost their homes in bankruptcy court on the eastern District in Virginia and not a single bankruptcy attorney showed up to fight the foreclosure alligators defrauding the court by lying and stealing peoples homes without having proper legal authority.

    I am so mad about this, I cannot see straight.

  99. MARIO,

    GOOD WORK

    I would love to have a chance to meet you in the future. Keep up the good work.

  100. I blog at a law blog with some lawyers and I beat them every time.I would love to meet these lawyers in the court house gosh NEIL caused me to find a calling here and I am loving it mucho.

  101. Bailout marks Karl Marx’s comeback
    Posted: September 29, 2008, 8:03 PM by Jeff White
    Martin Masse, mortgage crisis
    Marx’s Proposal Number Five seems to be the leading motivation for those backing the Wall Street bailout

    By Martin Masse

    In his Communist Manifesto, published in 1848, Karl Marx proposed 10 measures to be implemented after the proletariat takes power, with the aim of centralizing all instruments of production in the hands of the state. Proposal Number Five was to bring about the “centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.”

    If he were to rise from the dead today, Marx might be delighted to discover that most economists and financial commentators, including many who claim to favour the free market, agree with him.

    Indeed, analysts at the Heritage and Cato Institute, and commentators in The Wall Street Journal and on this very page, have made declarations in favour of the massive “injection of liquidities” engineered by central banks in recent months, the government takeover of giant financial institutions, as well as the still stalled US$700-billion bailout package. Some of the same voices were calling for similar interventions following the burst of the dot-com bubble in 2001.
    “Whatever happened to the modern followers of my free-market opponents?” Marx would likely wonder.

    At first glance, anyone who understands economics can see that there is something wrong with this picture. The taxes that will need to be levied to finance this package may keep some firms alive, but they will siphon off capital, kill jobs and make businesses less productive elsewhere. Increasing the money supply is no different. It is an invisible tax that redistributes resources to debtors and those who made unwise investments.

    So why throw this sound free-market analysis overboard as soon as there is some downturn in the markets?

    The rationale for intervening always seems to centre on the fear of reliving the Great Depression. If we let too many institutions fail because of insolvency, we are being told, there is a risk of a general collapse of financial markets, with the subsequent drying up of credit and the catastrophic effects this would have on all sectors of production. This opinion, shared by Ben Bernanke, Henry Paulson and most of the right-wing political and financial establishments, is based on Milton Friedman’s thesis that the Fed aggravated the Depression by not pumping enough money into the financial system following the market crash of 1929.

    It sounds libertarian enough. The misguided policies of the Fed, a government creature, and bad government regulation are held responsible for the crisis. The need to respond to this emergency and keep markets running overrides concerns about taxing and inflating the money supply. This is supposed to contrast with the left-wing Keynesian approach, whose solutions are strangely very similar despite a different view of the causes.

    But there is another approach that doesn’t compromise with free-market principles and coherently explains why we constantly get into these bubble situations followed by a crash. It is centered on Marx’s Proposal Number Five: government control of capital.

    For decades, Austrian School economists have warned against the dire consequences of having a central banking system based on fiat money, money that is not grounded on any commodity like gold and can easily be manipulated. In addition to its obvious disadvantages (price inflation, debasement of the currency, etc.), easy credit and artificially low interest rates send wrong signals to investors and exacerbate business cycles.

    Not only is the central bank constantly creating money out of thin air, but the fractional reserve system allows financial institutions to increase credit many times over. When money creation is sustained, a financial bubble begins to feed on itself, higher prices allowing the owners of inflated titles to spend and borrow more, leading to more credit creation and to even higher prices.

    As prices get distorted, malinvestments, or investments that should not have been made under normal market conditions, accumulate. Despite this, financial institutions have an incentive to join this frenzy of irresponsible lending, or else they will lose market shares to competitors. With “liquidities” in overabundance, more and more risky decisions are made to increase yields and leveraging reaches dangerous levels.

    During that manic phase, everybody seems to believe that the boom will go on. Only the Austrians warn that it cannot last forever, as Friedrich Hayek and Ludwig von Mises did before the 1929 crash, and as their followers have done for the past several years.

    Now, what should be done when that pyramidal scheme starts crashing to the floor, because of a series of cascading failures or concern from the central bank that inflation is getting out of control? It’s obvious that credit will shrink, because everyone will want to get out of risky businesses, to call back loans and to put their money in safe places. Malinvestments have to be liquidated; prices have to come down to realistic levels; and resources stuck in unproductive uses have to be freed and moved to sectors that have real demand. Only then will capital again become available for productive investments.
    Friedmanites, who have no conception of malinvestments and never raise any issue with the boom, also cannot understand why it inevitably leads to a crash.
    They only see the drying up of credit and blame the Fed for not injecting massive enough amounts of liquidities to prevent it.

    But central banks and governments cannot transform unprofitable investments into profitable ones. They cannot force institutions to increase lending when they are so exposed. This is why calls for throwing more money at the problem are so totally misguided. Injections of liquidities started more than a year ago and have had no effect in preventing the situation from getting worse. Such measures can only delay the market correction and turn what should be a quick recession into a prolonged one.

    Friedman — who, contrary to popular perception, was not a foe of monetary inflation, but simply wanted to keep it under better control in normal circumstances — was wrong about the Fed not intervening during the Depression. It tried repeatedly to inflate but credit still went down for various reasons. This is a key difference in interpretation between the Austrian and Chicago schools.

    As Friedrich Hayek wrote in 1932, “Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion. … To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about …”

    The confusion of Chicago school economics on monetary issues is so profound as to lead its adherents today to support the largest government grab of private capital in world history. By adding their voices to those on the left, these confused free-marketeers are not helping to “save capitalism”, but contributing to its destruction.

  102. WHEN DEALING WITH ARGENT YOU MUST FOLLOW THIS LINK AND READ THE WHOLE AGREEMENT.
    http://www.ameriquestmultistatesettlement.com/

  103. HERE ARE SOME IMPORTAND ADDRESSES OF SOME MAJOR PLAYERS.TAKE NOT THEY ARE ALL IN THE SAME BUILDING,YET THEY ALL CLAIM TO BE INDEPENDENT OF EACH OTHER.MARRAGE OF CONVIENENCE,OR INCESTUAS RELATIONS.
    FARTHER CVOMPANY SLEEPING WITH SIS TER COMPANY ECT

    ARGENT MORTGAGE COMPANY LLC
    ASSET BACKED SECURITIES SERIES 2006-M1
    1100 Town & Country Road #12
    Orange, CA 92868

    ACC Capital Holdings Company
    1100 Town & Country Road
    Orange, CA 92868

    Argent Mortgage Company, LLC
    1100 Town & Country Road
    Orange, CA 92868

    Ameriquest Mortgage Company
    1100 Town & Country Road
    Orange, CA 92868

    AMC Mortgage, LLC
    1100 Town & Country Road
    Orange, CA 92868
    ARGENT MORTGAGE SECURITIES, LLC
    1100 Town & Country Road
    Orange, CA 92868

    CITI RESIDENTIAL LENDING, INC
    1100 TOWN AND COUNTRY ROAD
    ORANGE, CA 92868

    DEUTSCHE BANK NATIONAL TRUST
    1761 EAST STREET
    ANDREW PLACE
    SANTA ANA, CA 92705

  104. If they have the money, and they can print it at will, why not help those who actually need it?

    this is @#$^%&*())__++

    I hope people wake up and rise up.

  105. SO THEY GOT THE MONEY ANYWAYS ON THE SAME DAY AS THE BAILOUT.

    Fed Pumps Further $630 Billion Into Financial System (Update3)

    By Scott Lanman and Craig Torres

    Sept. 29 (Bloomberg) — The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

    The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed’s emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

    The Fed’s expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.

    “Today’s blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. On the other hand, “the Fed’s balance sheet is about to explode.”

    The MSCI World Index of stocks in 23 developed markets sank 6 percent, the most since its creation in 1970. Credit markets deteriorated further as authorities tried to save more financial institutions from collapse.

    European Rescue

    European governments have rescued four banks in two days and the Federal Deposit Insurance Corp. said today it helped Citigroup Inc. buy the banking operations of Wachovia Corp. after its shares collapsed. The Standard & Poor’s 500 Index fell 3.8 percent and the cost of borrowing dollars for three months rose to the highest since January. The rate for euros hit a record.

    “If people think the authorities may give in to fears, they are wrong,” Financial Stability Forum Chairman Mario Draghi said today in Amsterdam, where the international group of regulators and finance officials is meeting. “There is willingness and determination on winning the battle to restore confidence and stability.”

    Banks and brokers have slowed lending as they struggle to restore their capital after $586 billion in credit losses and writedowns since the mortgage crisis began a year ago. The bankruptcy of Lehman Brothers Holdings Inc. also sparked fears among banks they wouldn’t be repaid by counterparties, driving up the cost of short-term loans between banks.

    Funding Risk

    “By committing to provide a very large quantity of term funding, the Federal Reserve actions should reassure financial market participants that financing will be available against good collateral, lessening concerns about funding and rollover risk,” the central bank said.

    The Bank of England and the ECB will each double the size of their dollar swap facilities with the Fed to as much as $80 billion and $240 billion, respectively. The Swiss National Bank and the Bank of Japan will also double their dollar swap lines, while the central banks in Australia, Norway, Sweden, Denmark and Canada tripled theirs.

    All the banks extended their facilities until the end of April 2009.

    The Fed is also increasing the size of its three 84-day TAF sales to $75 billion apiece, from $25 billion. That means the Fed will make a total of $225 billion available in 84-day loans. The central bank will keep the sales of 28-day credit at $75 billion.

    Special Sales

    In addition, the Fed will hold two special TAF sales in November totaling $150 billion so banks can have funding available for one or two weeks over year-end. The exact timing and terms will be determined later, the Fed said. The TAF program began in December, totaling $40 billion.

    The bank-rescue plan being debated by Congress today would give the Fed more power over short-term interest rates by providing authority as of Oct. 1 to pay interest on reserves held at the central bank by financial institutions. That would make it easier for the Fed to pump funds into the banking system.

    Paying interest on reserves puts a “floor” under the traded overnight rate, which would allow a central bank “to provide liquidity during times of stress” without affecting the rate, New York Fed economists said in a paper last month.

  106. John,
    I know that Steve had a Lawyer,she did the work.I hope steve sees this notice and answers you but I think you need a Lawyer fast.

  107. To Mario Kenny or Steve Cisko,

    I have an eviction hearing on my home 09-09-08.
    Would you please let me know what was effective for you in your particular case to halt the eviction.
    Thank You, stewartj110@hotmail.com

  108. Congratulations Steve Cisko,

    I am so happy for you defiled evection. Let this be a lesson for all to see that even after sale of the home you can get out and LIVE TO FIGHT ANOTHER DAY.

    Salutations to NEIL I am so proud to be a part of this wonderful meltdown, we can beat them back and come out smiling.

    In this battle we can win. Steve called me on Sunday last and I put some fire in his Gasoline and cast him on the battlefield to fight and he was victorious.

    The power of knowledge is what we have here please do not despair, just fight on.

    The arrogant, expensive Lawyers will come around in the end.

    Just fight on if you need some fire call me 786 274 0527 I have a lot to give.

    Blessings to NEIL and STEVE we did it again

    I am boots on the ground here in Miami

  109. Hello All… I wanted to post some things to share with the community here, since this is where i received the large majority of my education in Foreclosure defense… I purchased close to 30 homes between 2006-2007 as an investor and have literally watched 1 million in equity DISAPPEAR before my eyes.

    I do not have any results to share as of yet… but will update all as the results come in.

    Keep fighting the good fight!

    Notice of Rescission
    Via Certified Mail, Return Receipt Requested
    Decision One Mortgage Company, LLC
    3023 HSBC Way
    Fort Mill, SC 29715
    August 9, 2008
    RE: Account#’s: 2200061039421, 2200061039422
    With this letter, I hereby exercise my rights under the Federal Truth in Lending Act, 15 U.S.C. § 1635, Regulation Z § 226.23, to rescind the above referenced mortgage loan(s).
    Pursuant to 15 U.S.C. § 1635(f), my right to rescind this loan extends to three-years as a result of a defective Truth in Lending disclosure statement. This rescission notice has been sent to you within that time period therefore, “I WISH TO CANCEL.”
    If these accounts have been paid off, please complete the attached satisfaction of Deed of Trust forms(one for each, of total 2 accounts), reflecting the original Decision One lien that has been satisfied.
    Pursuant to 15 U.S.C. § 125 (b) “When an obligor exercises his right to rescind under subsection (a), Within 20 days after receipt of a notice of rescission, the creditor shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction.”
    (g) “In any action in which it is determined that a creditor has violated this section, in addition to rescission the court may award relief under section 130 for violations of this title…”
    Thank you for your immediate attention to this matter.

    Allan Hennessey
    4031 Alturus St. W.
    University Place, WA 98466

    My plan is to attach the satisfaction of deed of trust form to this notice. After it has been satisfied, I plan to bring suit in state court to bring the Lender burden of showing all documentation to light, and dismissing their case, resulting in a free and clear title. I have been considering using quiet title as well…

    I would really appreciate any input anyone may have on this…

    Sincerely,

    Allan Hennessey

    253-238-3658

  110. I am hoping you can assist me. I am trying to obtain a satisfaction for a home mortgage that was done with American Home Mortgage in 2003. Now that they are bankrupt how do I get a satisfaction? The house can’t sold or refinanced with the mortgage on there and American Home Mortgage never satisfied the mortgage that was paid.

    Is there any way you could give me some guidance what needs to be done.

    Thank you in advance for any information you can give me.

  111. This is where I am at people

    Argent Mortgage Company, LLC
    3 Park Plaza 10 Floor,
    Irvine CA 92614

    August 10th 2008

    CERTIFIED MAIL

    Dear Sir or Madame,

    Please accept this letter on behalf of the above party.

    Please sign and register a Satisfaction of Mortgage for the captioned property as soon as possible, at your cost.

    We are aware you have sold this Promissory Note many times over to parties all over the world yet you have an active filing on the public record in Miami Florida.

    Please provide a bond or affidavit, which absolves us of all future claims, by any and all other parties, who you have sold our interest too in the past, that no party to which you have sold our interest may in the future and forever, be able to make a claim on us to repay the fraudulent Promissory Notes you have issued OR SOLD in our name, forging our signature.

    Within ten (10) days of this notice we expect this to be completed, at your expense.

    Further send me a copy of this Satisfaction of Mortgage in original, at the above subject property address.

    We reserve the right to take any and all other action, as you have defrauded us and the legal system and you are liable to us for damages which we have recognized, and we in part herein state, THAT YOU ARE LIABLE TO US FOR DAMAGES.

    The damages we hereby claim are, but not limited to, three times the face value of the Promissory Note, legal fees, court fees and all other damages.

    Argent Mortgage Company, LLC was sold to CITIBANK NATIONAL ASSOCIOTION in the summer of 2007.

    We received a joint transfer of mortgage service notice from CITI RESIDENTIAL who is situated in the same building as your head office parent Company OCC Holdings, LLC.

    It was a fake.

    We received a filing on our public record signed by xxxxxxxxxx who claims she was or is an agent of AGENT MORTGAGE CO, LLC and a Mortgage Foreclosure facilitator of CITI RESIDENTIAL, LLC.

    It was also a fake.

    Please find this assumption of mortgage enclosed in this package.

    In the near future you will be named party of this fraud as it was perpetrated by you, at inception of the Loan…

    You are involved.

    I reserve the right to Damages in the amount of three times the face value of the said Promissory Note, legal fees, court costs and other damages.

    The Note that you forged and sold many times over, the same Note you have no further interest or authority in.

    Please sign and register a Satisfaction of Mortgage for the captioned property as soon as possible, at your cost.

    Thank you,

  112. One of the main reasons I advertise this site is to create a tactical advantage on my and other peoples`behalf.It was something I did the first day I found this site.

    I understood that it was important to let Lawyers know and get more education to fight and win the cases so that, when the instant comes for my case to be fought,the stage would have already been set.

    I urge all readers to do this,get the word out.Do not hide this knowledge,this river must be allowed to reach to the sea.I hope you all understand this concept.

  113. I have not stopped laughing since I read the above.I thought the bankers were smart people.

  114. ORIGINAL OWNER MAY HAVE PAID MORE

    Foreclosure fallout: Houses go for a $1
    Ron French / The Detroit News
    DETROIT — One dollar can get you a large soda at McDonald’s, a used VHS movie at 7-Eleven or a house in Detroit.

    The fact that a home on the city’s east side was listed for $1 recently shows how depressed the real estate market has become in one of America’s poorest big cities.

    And it still took 19 days to find a buyer.

    The sale price of the home may be an anomaly, but illustrates both the depths of the foreclosure crisis in Detroit and the rapid scuttling of vacant homes in some of the city’s impoverished neighborhoods.

    The home, at 8111 Traverse Street, a few blocks from Detroit City Airport, was the nicest house on the block when it sold for $65,000 in November 2006, said neighbor Carl Upshaw. But the home was foreclosed last summer, and it wasn’t long until “the vultures closed in,” Upshaw said. “The siding was the first to go. Then they took the fence. Then they broke in and took everything else.”

    The company hired to manage the home and sell it, the Bearing Group, boarded up the home only to find the boards stolen and used to board up another abandoned home nearby.

    Scrappers tore out the copper plumbing, the furnace and the light fixtures, taking everything of value, including the kitchen sink.

    “It about doesn’t make sense to put the family out,” Upshaw said. “Once people are gone, you’re gonna lose the house in this neighborhood.”

    Tuesday, the home was wide open. Doors leading into the kitchen and the basement were missing, and the front windows had been smashed. Weeds grew chest-high, and charred remains marked a spot where the garage recently burned.

    Put on the market in January for $1,100, the house had no lookers other than the squatters who sometimes stayed there at night. Facing $4,000 in back taxes and a large unpaid water bill, the bank that owned the property lowered the price to $1.

    $1 sale to cost bank $10,000
    While it’s not unusual for $1 to be exchanged when property is transferred for legal reasons, listing a home in the Multiple Listing Service for $1 was surprising and unsettling to Kent Colpaert, the listing real estate agent for the property.

    “I’ve never seen a home listed for $1,” Colpaert said.

    “But it’s been hit hard: It’s just a shell.”

    On Tuesday, Realtor.com listed one other single-family home, one duplex and one empty lot at $1 in Detroit.

    Dollar property sales are the financial hangover from the foreclosure crisis, said Anthony Viola of Realty Corp. of America in Cleveland.

    Lenders that made loans to unqualified buyers during the height of the subprime market now find themselves the owners of whole neighborhoods of vacant, deteriorating homes.

    “No one has much sympathy for these banks that made subprime loans,” Viola said. “And in some cities like Cleveland, judges aren’t letting them sit on the properties — they’re ordering them to tear them down or sell them.”

    So desperate was the bank owner of 8111 Traverse Street to unload the property that it agreed to pay $2,500 in sales commission and another $1,000 bonus for closing the $1 sale; the bank also will pay $500 of the buyer’s closing costs. Throw in back taxes and a water bill, and unloading the house will cost the bank about $10,000.

    “It doesn’t make sense in some neighborhoods to keep paying costs and costs,” Colpaert said. “It can make more financial sense to give it away.”

    Buyer calls it an investment
    Colpaert declined to provide the name of the prospective purchaser, because the deal had not been through closing. The agent did say that the buyer agreed to pay the full list price of $1, and planned to pay cash.

    The buyer, a local woman, considers the home to be an investment property and will not live there, Colpaert said, though exactly how soon the buyer can expect to recoup her four-quarter investment is questionable. Replacing the guts of the house will costs tens of thousands of dollars, and the owner will have trouble keeping scrappers from stealing the improvements as quickly as they’re installed. Home demolition costs about $5,000, Colpaert said.

    Meanwhile, the new owner will owe $3,900 in property taxes in 2009 on her dollar purchase unless she challenges the tax assessment.

    While selling a home for the amount of change most people could find between their couch cushions is unusual, some abandoned homes in Detroit sell for $100; vacant lots can be purchased for $300.

    “My 14-year-old son could buy a block of Detroit property,” said Ann Laciura, senior servicing specialist for the Bearing Group.

  115. BLOOD

    SADDLE BROOK, N.J. — Authorities said a son held Bergen County sheriff’s officers at gunpoint as they tried to evict his 88-year-old mother from her foreclosed home.

    Slideshow: Celebrity Foreclosures

    Officials said John Brennan threatened two officers with a .22-caliber handgun.

    Officers talked to the 60-year-old, who surrendered after about five minutes when a SWAT team arrived Tuesday.

    Beatrice Brennan had refinanced her two-bedroom, $250,000 home and had fallen behind on payments. The house was sold at a sheriff’s auction in May.

    Real estate agent Donovan Stewart told The Record of Bergen County he’s “never had anything like this happen before.”

    IMAGES IN

  116. At the risk of being totally redundant from my previous comments here … these “lenders” are thieves, plain and simple. They cared not what would become of us after we’d lost our homes and were out on the streets with nowhere to go. After all, they got paid … so why should they? In their eyes, we’re nothing more than collateral damage. Well … it’s about time all of us stood up to them and fought like hell. I think we all owe Neil and his people a debt of gratitude for what he’s done for us all so far.

  117. I am fighting too but for different reasons. the banks are part of the whole money scam “funny money”. Check this video out. I am fighting to try to stiffle the money changers and help restore our constitutional republic.
    http://video.google.com/videoplay?docid=-9050474362583451279

    and check out this case

    http://www.restoretherepublic.org/?p=58

  118. I AM WRITING THIS LETTER TO ALL THE PEOPLE WHO LIVE IN SOUTH FLORIDA YOU MAY CALL ME FOR SOME PERSONAL TALK ABOUT DAWN.

    I AM NOT A LAWYER AND I WILL NOT GIVE YOU ANY LEGAL ADVICE AS A RULE AS IT COULD END ME IN JAIL BUT, I WILL PLEDGE TO YOU THE FAITH I HAVE IN DAWN.

    I AM THINKING THAT MANY PEOPLE ARE FEELING THAT THIS IS TOO GOOD TO BE TRUE BUT IT WORKED FOR ME.

    I CAN ATTEST THAT I HAVE TAKEN THE FIGHT TO THE BANK.

    I HAVE TURNED THE TABLE ON THEM.

    I AM FORECLOSING THEM AS THEY DEFRAUDED ME OR TRIED TO DEFRAUD ME.

    I COUGHT THEM IN THE ACT,AND I DREW BLOOD BUT THEY CAME AFTER ME FIRST WITH FRAUD,IT TURNED MY STOMACH AND HAVE MADE ME VERY FURIOUS.

    THIS IS NOT TO SAY THAT I WILL IN THE END WIN BUT I HAVE LASTED THIS LONG AND I INTEND TO FIGHT ALL THE WAY TO THE VERY END.

    I INTEND TO WIN AND I REALLY DO BELIEVE I WILL.

    NIEL MAY HAVE TO COME HERE TO DELIVER ME FROM THE CRUTCHES OF THIS VILE BANK AND I MAY MAKE THIS DEMAND ON HIM.

    HEY NIEL PLEASE CONSIDER THIS PROPERSITION PLEASE!!!!!!!!!!!!!!!!!.

    I AM AWARE THE JOB IS A LONG HARD FIGHT BUT I HAVE THE TESTICLES TO LAST ME OUT.

    I AM BOOTS ON THE GROUND HERE AND I HAVE COME TO KNOW QUITE A FEW REAL LAWYERS OVER THE TIME.

    IN SOUTH FLORIDA MOST OF THE LAWYERS ARE JUST AFTER THE MONEY THEY REALLY DO NOT QUITE CARE ENOUGH TO WIN THE CASES,BUT TO WIN THE MONEY.

    IT’S THE SAME GREED THAT GOT US HERE IN THE FIRST PLACE.

    YOU SEE, I RECOGNISED THE FRAUD AND HAVE CONFERRED WITH MANY OTHER GREAT LAWYERS,WE ARE ALL ON THE SAME PAGE FOR THE MOST PART BUT I LOVE DAWN A LOT AND I WILL BE HER CHAMPION.

    PLEASE CONTACT ME BUT BE CAREFULL DO NOT TRY TO TRICK ME INTO GIVING YOU ANY LEGAL ADVICE.

    IT IS GOING TO BE A BLOOD BATH BELIEVE ME.

    HEY BUY A BOOK FROM ME WHILE YOU ARE AT IT I NEED MONEY TO PAY MY COUNCIL.

  119. neil ,

    thank you for making this very clear …i only hope others will not give up there homes and fight .

    the tide is turning …..in our favor !

    thanks again for great article !

    alan baron

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