Wells Fargo is under investigation for a lot of things these days, just as we find in Bank of America and other major “institutions.” The bottom line is that they haven’t been acting very institutional and their culture is one that has led to fraud, identity theft and outright fabrication of accounts and documents.
There can be little doubt about it. Documents that a real bank acting like a bank would have in its possession appear to be completely absent in most if not all loans that are “performing” (i.e., the homeowner is paying, even if the party they are paying isn’t the right and even if the loan has already been paid off). But as soon as the file becomes subject to foreclosure proceedings, documents miraculously appear showing endorsements, allonges, powers of attorney and assignments. According to a report from The Real Deal (New York Real Estate News), these are frequently referred to as “ta-da endorsements” a reference from magic acts where rabbits are pulled from the hat.
Such endorsements and other fabricated documents have been taken at face value by many judges across the country, despite vigorous protests from homeowners who were complaining about everything from “they didn’t have the documents before, so where did they get them?” to luring homeowners into false modifications that were designed to trap homeowners into foreclosure.
After 7 years of my reporting on the fact that the documents do not exist, including a report from Katherine Anne Porter at what was then the University of Iowa that the documents were intentionally destroyed and “lost” it has finally dawned on regulators and law enforcement that something is wrong. They could have done the same thing that I did. I had inquiries from hundreds (back then, now thousands) of homeowners looking for help.
So the first thing I did was I sent qualified written requests to the parties who were claiming to be the “lenders.” After sending out hundreds of these the conclusion was inescapable. Any loan where the homeowner was continuing to make their payments have no documentation. Any loan where the homeowner was in the process of foreclosure had documentation of appear piece by piece as it seemed to be needed in court. This pattern of fabrication of documents was pandemic by 2007 and 2008. They were making this stuff up as they went along.
It has taken seven years for mainstream media and regulators to ask the next obvious question, to wit: why would the participants in an industry based on trust and highly complex legal instruments created by them fall into patterns of conduct in which nobody trusted them and where the legal instruments were lost, destroyed and then fabricated? In my seminars I phrased the question differently. The question I posed is that if you had a $10 bill in your hand, why would you stick it in a shredder? The promissory note and the other documents from the alleged loan closings were the equivalent of cash, according to all legal and common sense standards. Why would you destroy it?
As I said in 2008 and continue saying in 2014, the only reason you would destroy the $10 bill is that you had told somebody you were holding something other than a $10 bill. Perhaps you told them it was a $100 bill. Now they want to see it. Better to “lose” the original bill then admit that you were lying in the first place. One is simple negligence (losing it) and the other is criminal fraud (lying about it). The banking industry practically invented all of the procedures and legal papers associated with virtually every type of loan. The processing of loans has been the backbone of the banking industry for hundreds of years. Did they forget how to do it?
The answers to these questions are both inconvenient and grotesque. I know from my past experience on Wall Street that bankers did not deserve the trust that everyone seemed to repose in them. But this conduct went far beyond anything I ever saw on Wall Street. The answer is simply that the bankers traded trust for money. They defrauded the investors, most of whom were stable managed funds guarding the pensions of millions of people. Then they defrauded homeowners creating a pressure cooker of sales culture in which banking evolved simply into marketing and sales. Risk analysis and risk control were lost in the chaos.
The very purpose for which banks came into existence was to have a place of safety in which you could deposit your money with the knowledge that it would still be there when you came back. Investors were lured into a scheme in which they thought their money was being used to fund trusts; those trusts issued mortgage bonds that in most cases were never certificated. In most cases the trust received no money, no assets and no income. The fund managers who were the investors never had a chance.
The money from the investors was instead kept by the broker-dealers who then traded with it like drunken sailors. They pumped up real estate PRICES far above real estate VALUES, based on any reasonable appraisal standards. The crash would come, and they knew it. So after lying to the investor lenders and lying to the homeowner borrowers they lied to the insurers, guarantors, co-obligors and counterparties to credit default swaps that had evolved from intelligent hedge products to high flying overly complicated contracts that spelled out “heads I win, tails you lose.”
In order to do all of that they needed to claim the loans and the bonds as though they were owned by the broker-dealers when in fact the broker-dealers were merely the investment banks that had taken the money from investors and instead of using it in the way that the investors were told, they created the illusion (by lying) of the scheme that was called securitization when in fact it was basically common fraud, identity theft of both the lenders and borrowers, in a Ponzi scheme. When Marc Dreier was convicted of similar behavior the amount was only $400 million but it was the larger scheme of its kind ever recorded.
When Bernard Madoff was convicted of similar behavior the amount was only $60 billion, but the general consensus was that this was the largest fraud in history and would maintain that status for generations. But when the Madoff scandal was revealed it was obvious that members of the banking industry had to be involved; what was not so obvious is that the banking industry itself had already committed a combination of identity theft, fraud and corruption that was probably 300 times the size of the Madoff scandal.
The assumption that these are just loans that were to be enforced just like any other loans is naïve. The lending process described in the paperwork at the closings of these loans was a complete lie. The actual lender did not know the closing had occurred, never received the note and mortgage, nor any other instrument that protected the investor lenders. The borrower did not know the actual lender existed. Closing agent was at best negligent and at worst part of the scheme. Closing agent applied money from the investors to the closing of the “loan” and gave the paperwork that should’ve gone to the investors to third parties who didn’t have a dime invested in the deal. Later the investment banks would claim that they were suffering losses, but it was a lie, this time to the taxpayers and the government.
The reason the investment banks need to fabricate documentation is simply because their scheme required multiple sales of the same loan to multiple parties. They had to wait until they couldn’t wait any longer in order to pick a plaintiff to file a foreclosure lawsuit or pick a beneficiary who would appear out of nowhere to start the nonjudicial sale of property in which they were a complete stranger to the transaction.
The reason that homeowners should win in any reasonable challenge to a foreclosure action is that neither the forecloser nor the balance has been correctly stated. In many cases the balance “owed” by the borrower is negative! Yes that means that money is owed back to the borrower even know they stopped making payments. This is so counter intuitive that it is virtually impossible for most people to wrap their brains around this concept and that is exactly what Wall Street banks have been counting on and using against us for years.
Filed under: bubble, CORRUPTION, evidence, expert witness, Fannie MAe, foreclosure, foreclosure defenses, foreclosure mill, GARFIELD KELLEY AND WHITE, GTC | Honor, investment banking, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, Neil Garfield Show, originator, Pleading, securities fraud, Servicer, Title, TRUST BENEFICIARIES, trustee | Tagged: Bank of America, fabrication manual, fabrication of foreclosure documents, fraud, identity theft, Investigation, trust, Wells Fargo | 43 Comments »