LAWYER BONANZA!: Wells Fargo Foreclosing on Homeowner Who Made all Payments and Paid Extra

WELLS FARGO MAKES HUGE ERROR ADMITTING LACK OF POWER TO BIND CREDITOR TO MODIFICATIONS OR SETTLEMENTS

The simple truth is that the banks are not nearly as interested in the property as they are in the foreclosure. It is the foreclosure sale that creates the illusion of a stamp of approval from the state government that the entire securitization scheme was valid and it creates the reality of a presumption of the validity of the deed issued at the so-called auction of the property upon submission of  false credit bid from a non-creditor who is a stranger (not in privity) to the transaction alleged. — Neil F Garfield, livinglies.me

see also http://livinglies.wordpress.com/2013/05/16/estoppel-when-the-bank-tells-you-to-stop-making-payments/

Editor’s Comment and Analysis: Wells Fargo is foreclosing on a man who has made his payments early and made extra payments to pay down the principal allegedly due on his mortgage. In response to media questions as to their authority to foreclose, the response was curious and very revealing. Wells Fargo said that the reason was that the securitization documents contain restrictions and prohibitions that prevent modifications of mortgage.

The fact that Wells Fargo offered a particular payment plan and the homeowner accepted it together with the fact that the homeowner made the required payments and even added extra payments, all of which was accepted by Wells Fargo and cashed  doesn’t seem to bother Wells Fargo but it probably will bother a judge who sees both the doctrine of estoppel and a simple contract in which Wells Fargo had the apparent authority to make the offer, accept the payments, and bind the actual creditors (whoever they might be).

It also corroborates our continuing opinion that when Wells Fargo and similar banks received insurance and creditable swap payments, they should have been applied to the receivable account of the investors which in turn would have resulted by definition in a reduction of the amount owed. The reduction in the amount owed would obviously decrease the amount payable by the borrower. If we follow the terms of the only contract that was signed by the borrower then any overpayments to the creditor beyond account receivable held by the creditor would be due and payable to the borrower. It is a violation of the spirit and content of the federal bailout to allow the banks to keep the money that is so desperately needed by the investors who supplied the money and the homeowners whose loans were paid in whole or in part by insurance and credit default swaps.

The reason I am interested in this particular case and the reason why I think it is of ultimate importance to understand the significance of the Wells Fargo response to the media is that it corroborates the facts and theories presented here and elsewhere that the original promissory note vanished and was replaced by a mortgage bond, the terms of which were vastly different than the terms of the promissory note signed by the homeowner.

Wells Fargo seeks to impose the terms, provisions, conditions and restrictions of the securitization documents onto the buyer without realizing that they have admitted that the original promissory note signed by the homeowner and therefore the original mortgage lien or deed of trust were never presented to the actual lenders for acceptance or approval of the loan.

CONVERSION OF PROMISSORY NOTE TO MORTGAGE BOND WITHOUT NOTICE

In fact, Wells Fargo has now admitted that the terms of the loan are governed strictly by the securitization documents. How they intend to enforce securitization documents whose existence was actively hidden from the borrower is going to be an interesting question.  If the position of the banks were to be accepted, then any creditor could change the essential terms of the debt or the essential terms of repayment without notice or consent from the borrower despite the absence of any reference to such power in the documents presented to the borrower for the borrower’s signature.

 But one thing is certain, to wit: the closing documents presented to the borrower  were incomplete and failed to disclose both the real parties in table funded loans (making the loans predatory per se as per TILA and Reg Z) and the existence and compensation of intermediaries, the disclosure of which is absolutely mandatory under federal law. Each borrower who was deprived of knowledge of multiple other parties and intermediaries and their compensation has a clear right of action for recovery of all undisclosed fees, interest, payments, attorney fees and probably treble damages.

This case also clearly shows that despite the representations by counsel and “witnesses” Wells Fargo has now admitted the basic fact behind its pattern of conduct wherein they claim to be the authorized sub servicer fully empowered by the real creditors and then claim to have no responsibility or powers with respect to the loan or the real creditors (which appears to include the Federal Reserve if their purchase of mortgage bonds had any substance).

Wells Fargo, US Bank, Bank of New York and of course Bank of America have all been sanctioned with substantial fines of up to seven figures so far in individual cases where they clearly took inconsistent positions and the judge found them to be in contempt of court because of the lies they told and levied those sanctions on both the attorneys and the banks.

It was only a matter of time before this entire false foreclosure mess blew up in the face of the banks. You can be sure that Wells Fargo will attempt to bury this case by paying off the homeowner and any other people that have been involved who could blow the whistle on their illegal, fraudulent and probably criminal behavior.

This is not the end of the game for Wells Fargo or any other bank, but it is one more concrete step toward revealing basic truth behind the mortgage mess, to it: the Wall Street banks stole the money from the investors, stole the ownership of the loans from the “trusts” and have been stealing houses despite the absence of any monetary or other consideration in the origination or acquisition of any loan. This absence of consideration removes the paperwork offered by the banks from the category of a negotiable instrument. None of the presumptions applicable to negotiable instruments apply.

Once again I emphasize that in practice lawyers should immediately take control of the narrative and the case by showing that the party seeking foreclosure possesses no records of any actual or real transaction in which money exchanged hands. This means, in my opinion, that the allegations of investors in lawsuits against the investment banks on Wall Street are true, to wit: they were entitled to an forcible notes and enforceable mortgages but they didn’t get it. That is an admission in the public record by the real parties in interest that the notes and mortgages are fabricated because they referred to commercial transactions that never occurred.

Going back to my original articles when I started this blog in 2007, the solution to the current mortgage mess which includes the corruption of title records across the country is that the intermediaries should be cut out of the process of modification and settlement. A different agency should be given the power to match up investors and borrowers and facilitate the execution of new promissory notes new mortgages or deeds of trust that are in fact enforceable but based in reality as to both the value of the property and the viability of the loan. It is the intermediaries including the Wall Street banks, sub servicers, Master servicers, and so-called trustees that are abusing the court process and clogging the court calendars with false claims. Get rid of them and you get rid of the problem.

http://4closurefraud.org/2013/05/16/wells-fargo-forecloses-on-florida-man-who-paid-on-time-early/

BOA, Urban Lending Sued in Qui Tam by WHistleblower: They never intended to modify the loans

Just a quick note as follow up to my article this morning. Read this qui tam complaint and see how it corroborates the facts and theories presented on this blog. Note the following quote: ” these mechanisms of fraud were and are interconnected and directly observed by Relator Mackler, who worked with various BOA executives while at Urban Lending Solutions beginning in April 2010. BOA outsources various HAMP obligations to Urban. Upon witnessing the unlawful, fraudulent practices listed above, among others, Mackler brought his concerns to the highest levels of Urban and to executives at Bank of America. Eventually, his objections to these practices led to his termination on March 17, 2011.”

US ATTORNEY GOT THIS DISMISSED BUT ANOTHER ONE IS PENDING IN MASSACHUSETTS UNDER SEAL.

Read, plagiarize This, and use it: http://www.documentcloud.org/documents/324428-greg-mackler-complaint.html

http://thinkprogress.org/economy/2012/03/08/440628/whistleblower-claims-bofa-blocked-help/?mobile=nc

New York Getting Ready to Prosecute Banks for Violations of Settlement

At the end of the day everyone knows everything. If you start with the premise that the securitization of debt was a farce and that the necessary element of the false securitization of mortgage loans was the foreclosure of those loans, then you move one step closer to understanding the mortgage and foreclosure mess and a giant step forward to understanding and implementing a solution. All the actions, statements and myths promulgated by the Wall Street banks become clear, including their violation of every consent decree,order and settlement they ever made with respect to mortgage loans.

Attorney General Schneiderman of New York seems to understand this and he is taking the mega banks to task for violating a settlement that looks like pennies on the dollar. He doesn’t care why they violated the $26 Billion settlement but he is taking action for their consistent violation of the settlement. But I care about the reason and so should you. The reason is nothing less than the obvious: the mega banks expose themselves to liability that far exceeds the terms of the settlement.

In any normal circumstances when a big company enters into a settlement that amounts to pennies on the dollar, the company rushes to make the settlement final by paying the money and performing the actions required in the agreement. Thus they commit illegal acts and get away with it by entering into an agreement that looks big but doesn’t put them out of business. They are nothing but anxious to put the settlement behind them.

So why are the mega banks refusing to abide by a $26 billion settlement on a multi- trillion theft? The answer by pure logic and my sources is that if the banks actually performed on the material portions of the agreement they risk going out of business. Why?

The answer is arithmetic. The purpose of the settlement was to stop illegal foreclosure practices and compensate those who lost their homes in illegal Foreclosures (as opposed to simply reversing the Foreclosures and starting over again which is what any court of law would require if there was an admission that the documents and claims in foreclosure were false).

Arithmetic is the answer. Without Foreclosures, the banks cannot support their claim of failure of the mortgages. If the loans are reinstated then the “sales” of loans and mortgage bonds become immediately subject to an accounting and to payback to investors who bought empty bogus bonds issued by a trust that existed in name only. If the loans must be considered performing loans because of any of the reasons contained in those multistage settlements, consent decrees,orders and agency settlements, then the banks must reimburse the insurers, buyers and counter-parties on hedge products like credit default swaps.

Thus satisfactions the settlement agreement exposes the banks to a reduction in their tier 1, tier 2, and tier 3 capital such that the reality and empty underbelly of the banksia displayed for all to see. Those banks and are not nearly as big as they say they are and must be resolved by the FDIC because they actually do not have the minimum capital requirements that all banks must have to continue operations. That is why the Brown bill in the U.S. Senate is dead on right.

If the Foreclosures were invalid there is only one way to correct them, just like any title problem. Correct the defect In Title by reversing the foreclosure or get an affidavit from the homeowner joining in some correction of the corrupted title resulting from fake Foreclosures.

With trillions in liability at stake of course the banks are violating the settlement agreements and consent decrees. All they can do is try to control state and federal action by providing photo opportunities and planted articles around the media to make people feel good. But neither the housing market nor the economy will get the stimulus necessary for a full recovery until the truth is addressed instead of pretending you can fix this mortgage and foreclosure mess with Tiny settlements and promises that nobody intends to keep.

Wells Fargo, BofA threatened with lawsuit over mortgage allegations
http://www.bizjournals.com/dallas/blog/morning_call/2013/05/wells-fargo-bofa-threatened-with.html

Eric Schneiderman: Banks Have ‘Confidence’ That Law Enforcement Is Not Taking Violations ‘Seriously’
http://www.huffingtonpost.com/2013/05/07/eric-schneiderman-banks_n_3226992.html

Right of Redemption: Going After the Money Trail

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Comment and Analysis: Most people and lawyers I talk to think there is no life after sale of the property. This is not the case in my opinion and I encourage lawyers to start getting up to speed on the causes of actions and remedies that are available for attacking a foreclosure judgment and separately the foreclosure sale or “auction.”

Of course we know that a cause of action for wrongful foreclosure, slander of title and quiet title, to name a few, are available to attack the foreclosure judgment or the final order in non-judicial states that allows the foreclosure sale to go through. There is also the semi-final order from the bankruptcy court which lifts the stay to allow for the foreclosure wherein the court frequently inserts that the movant is the owner of the loan. (When a different entity than the movant initiates the foreclosure and bids in the property as a creditor without getting leave of court to amend judgment or the motion to lift stay there are some very weighty issues raised that have been covered in earlier posts).

And as pointed out by one reader, the “opportunity to Cure” is another attack that is available before Judgment if you properly challenge the amount demanded. Proof of loss and Proof of Payment is NOT the note and Mortgage. It is a showing that the a party actually paid value for the debt and stands to lose money (economic loss) if it isn’t paid by the homeowner. If they can’t prove the loss, the court has one of two options, one of which is ridiculous: (1) it can order the foreclosure and prohibit the initiator of the foreclosure from submitting a credit bid (they must pay cash at auction) or (2) it can dismiss the foreclosure with prejudice because no injured party is present which is jurisdictional — i.e., STANDING.

In Florida and many other states (pro se litigants: check with local licensed counsel to make sure you know what the procedure is and what is available) there is both a statutory and equitable right of redemption. In some states the sale can be attacked during the redemption period because the consideration was faked or insufficient.

Florida Statute 45.0315 allows for redemption at the amount set forth in the final judgment. The common law equitable right of redemption in Florida has a short window — 10 days — in which you can challenge the sale based on the violation of court ordered procedures (which opens the door to wrongful foreclosure by a non-creditor), bid rigging, unfair practices which are loosely defined, or anything else that leads to a determination of a deficiency.

The deficiency is in Florida a judgment which the bank can pursue after the sale based upon the difference between the amount of the judgment and the amount of the sale which of course the bank fully controls and the cases are replete with references to the obvious fact that the sale price is more often than not governed by an arbitrary decision of the lender.In non-judicial states the deficiency is waived but there could be and usually are tax consequences arising from the “forgiven principal and interest” that cannot be offset by the loss taken on the house.

Some people, at my suggestion are starting funds in which the homeowner is given the means to exercise the right of redemption on one condition: that the forecloser prove loss and prove payment so the new lender can be assured that there are no claims on or off record.

This is leading to some interesting settlements and high profit margin for those people with money who can put up the full amount of the judgment but end up not laying out any money or very little and getting a mortgage from the homeowner that is valid and enforceable and in an amount far less than the original debt — when the pretender lender fails to produce evidence of loss (canceled check, wire transfer receipt etc.).

Frankly I am looking for investors and a manager who can handle that business which is very lucrative. An off shoot of the same idea is to buy the HOA’s lien, and foreclose on it, which is cheaper and messier. Either way the homeowner gets to stay in the home, creditors are paid what theyshould be paid, and the equity in the home is restored.

Procedurally, lawyers should pay close attention to the time limits lest they miss it and commit malpractice. A homeowner can come back at a foreclosure defense attorney alleging that the redemption period was not used properly. My suggestion is that immediately after sale the motion is filed to have the court set the proper amount of redemption based upon evidence of actual loss. You might be met with res judicata arguments or collateral estoppel, because you should have challenged the forecloser to prove their loss before judgment, but I think the period of redemption raises the issue again, or at least does so within the scope of reasonable argument.

It might well be that the pretender lender, now faced with a final judgment they procured, or a final order they procured will be estopped from maintaining the shell game they were able to conduct before judgment and finally pinned down to show that XYZ Bank actually has a receipt showing they paid for the loan either at origination or in a transfer.

At the risk of repeating myself, if you lead with an attack on the documents you are tacitly admitting that the underlying monetary transaction was real. If you lead with an attack on the monetary transactions (the money trail) then the deficiencies in the documents are abundantly clear. The documents should reflect the realities of the monetary transactions. If they don’t, the documents are either invalid or at least lose most of their credibility and all of their presumptions.

Think it through, do the research and don’t do anything until you are satisfied that what I am saying here applies to whatever case you are working on. In the end, you will most likely come tot he same conclusion I did — denial of the debt, note, mortgage and default is not only proper, it is the only truthful thing to do.

In discovery you will prove that the debt did not arise from any transaction between the borrower and the forecloser or any predecessor or successor. The documents, which point to the pretender, are therefore invalid as naming the wrong (and usually a strawman) party as payee and secured party. Add to that the conversion of the promissory note to a mortgage backed bond where the repayment terms offered the lender are different than the repayment terms offered the buyer, and you have a pretty strong argument to set the pretender back on its heels and draw some blood.

Bank of America is desperately trying to rid itself of these mortgages and mortgage bonds almost at any cost or price. They understand that every mortgage carries a potential huge liability. Taking my previous (see yesterday’s post) article, there could be a zero balance owed to the “creditor” after offset for mitigation payments, and the fabrication and forgery of documents, together with general application of TILA provisions might entitle you to recover treble damages plus attorneys fees and costs. In a wrongful foreclosure action the money really piles up, especially where the homeowner was evicted.

And it all can start in motions directed at setting the correct amount of the redemption.

Below is the oddly worded Florida Statutory right of redemption. remember, if you are not an attorney licensed in the state in which the property is located, you are far more likely to make procedural mistakes than the pretender lender and lose a case you might otherwise win. Advice, counsel and preferably representation by competent counsel is in my opinion an absolute requirement. If local counsel disagrees with the application of these principles to the situation presented his or her opinion should be taken as authoritative rather than this blog which is meant to be only informative.

45.0315 Right of redemption.—At any time before the later of the filing of a certificate of sale by the clerk of the court or the time specified in the judgment, order, or decree of foreclosure, the mortgagor or the holder of any subordinate interest may cure the mortgagor’s indebtedness and prevent a foreclosure sale by paying the amount of moneys specified in the judgment, order, or decree of foreclosure, or if no judgment, order, or decree of foreclosure has been rendered, by tendering the performance due under the security agreement, including any amounts due because of the exercise of a right to accelerate, plus the reasonable expenses of proceeding to foreclosure incurred to the time of tender, including reasonable attorney’s fees of the creditor. Otherwise, there is no right of redemption.

Big Banks Headed For Break-Up

“What policy makers are starting to realize is that the absence of prosecutions and regulatory action against these banks has produced a profound loss of confidence not only in the financial markets but in the leader of the financial markets (the United States) to control itself and its own participants in finance. It’s not just fair to enforce existing laws and regulations against the banks who so flagrantly violated them and nearly destroyed all the economies of the world, it’s the only practical thing to do.” — Neil F Garfield, livinglies.me

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 (East Coast) and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Comment: There is an old expression that says “At the end of the day, everybody knows everything.” The question of course is how long is the “day.” In this case the day for the bank appears to be about 10-12 years. The foibles of their masters, the conduct of their policies, and the arrogance of their behavior has led them into the position where the once unthinkable break-up of the bank oligopoly and their control, over our government is coming to a close.

The titans of Wall Street have thus far avoided criminal prosecution because of the misguided assumption — promulgated by Wall Street itself — that such prosecutions would destroy the economic systems all over the world (remember when Detroit arrogance reached its peak with “what’s good for GM is good for the country?”). But the Dallas Fed are joining the ranks of of once lone voices like Simon Johnson stating that Too Big to Fail is not a sustainable model and that it distorts the markets, the marketplace and our society.

It is virtually certain now that the mega banks are going to literally be cut down to size and that some form of Glass-Steagel will be revived. As that day nears, the images and facts pouring out onto the public and the danger to the American taxpayer facing deficits caused by the banks in part because they siphoned out the life-blood of liquidity from the American marketplace will overwhelm the last vestiges of resistance and the same lobbyists who were the king makers will be the kiss of death for re-election of any public official.

As they are cut down, the accounting and auditing will start and it will take years to complete. What will emerge is a pattern of theft, deceit, fraud, forgery, perjury and other crimes that are most easily seen in the residential foreclosures that now appear to be mostly illusions that have caused nightmare scenarios for millions of Americans and people in other countries. Those illusions though are still with us and they are still taken as real by many in all branches of government. The thought that the borrower should never have been foreclosed and that the amount demanded of them was wrong is not accepted yet. But it will be because of arithmetic.

Investment banks sold worthless bonds issued by empty creatures that existed only on paper without any assets, money or value of any kind. The banks then funded mortgages of increasingly obvious toxicity to people who might have been able to afford a normal mortgage or who couldn’t afford a mortgage at all but were assured by the banks that the deal was solid. Both investors and homeowners were taken to the cleaners. Neither of them has been addressed in any bailout or restitution.

It is the bailout or restitution to the investors and homeowners that is the key to rejuvenating our economy. Trust in the system and wealth in the middle class is the only historical reference point for a successful society. All the rest crumbled. As the banks are taken apart, the privilege of using “off-balance sheet” transactions will be revealed as a free pass to steal money from investors. The banks took the money from investors and used a large part of it to gamble. Then they covered their tracks with lies about the quality of loans whose nominal rates of interest were skyrocketing through previous laws against usury.

For those who worry about the deficit while at the same time remain loyal to their largest banking contributors, they are standing with one foot upon the other. They can’t move and eventually they will fall. The American public may not be filled with PhD economists, but they know theft when it is revealed and they know what should happen to the thief and the compatriots of the thief.

For the moment we are still rocketing along the path of assuming the home loans, student loans, credit cards, auto loans, furniture loans et al were valid loans wherein the lenders had a risk of loss and actually suffered a loss resulting from the non payment by the borrower. As the information spreads about what really happened with all consumer debt, housing included, the people will understand that their debts were paid off by the investment banks, the insurance, companies and the counterparties on hedge products like credit default swaps.

A creditor is entitled to be repaid the money loaned. But if they have been repaid, the fact that the borrower didn’t pay it does not create a fact pattern under which the current law allows the creditor to seek additional payment from the borrower when their receivable account is zero. Yet it is possible that the parties who paid off the debt might be entitled to contribution from the borrower — if they didn’t waive that right when they entered into the insurance or hedge contract with the investment banks. Even so, the mortgage lien would be eviscerated. And the debt open to discussion because the insurers and counterparties did in fact agree not to pursue any remedies against the borrowers. It’s all part of the cover-up so the transactions look like civil matters instead of criminal matters.

Thus far, we have allowed windfall after windfall to the banks who never had any risk of loss and who received federal bailouts, insurance, and proceeds of credit default swaps and multiple sales of the same loan — all without crediting the investors who advanced all the money that was used in the mortgage maelstrom.

The practical significance of this is simple: the money given to the banks went into a black hole and may never be seen again. The money given BACK to (restitution) investors will result in fixing at least partly the imbalance caused by the bank theft. It will also decrease the loss suffered by the lenders in the loans marked as home loans, auto loans, student loans etc. This in turn reduces the amount owed by the borrower. Their is no “reduction” of principal there is merely a “deduction” or “correction” to reflect payments received by the investors or their agents.

The practical significance of this is that money, wealth and income will be  channeled back to the those who are in the middle class or who belong there but for the trickery of the banks and the economy starts to hum a little better than before.

It all starts with abandoning the Too Big To Fail hypothesis. What policy makers are starting to realize is that the absence of prosecutions and regulatory action against these banks has produced a profound loss of confidence not only in the financial markets but in the leader of the financial markets to control itself and its own participants in finance. It’s not just fair to enforce existing laws and regulations against the banks who so flagrantly violated them and nearly destroyed all the economies of the world, it’s the only practical thing to do.

Big Banks Have a Big Problem
http://economix.blogs.nytimes.com/2013/03/14/big-banks-have-a-big-problem/

We The Taxpayers Are On The Hook For Mortgages, Student Loans, Banks
http://lonelyconservative.com/2013/03/we-the-taxpayers-are-on-the-hook-for-mortgages-student-loans-banks/

Documentary Co-Produced by Broker Exposes Foreclosure Devastation, Housing System Flaws, in Low-Income Hispanic Neighborhood of Phoenix
http://rismedia.com/2013-03-13/documentary-co-produced-by-broker-exposes-foreclosure-devastation-housing-system-flaws-in-low-income-hispanic-neighborhood-of-phoenix/

Housing advocates accuse Wells Fargo of damaging communities through foreclosures
http://www.scpr.org/blogs/economy/2013/03/13/12908/housing-advocates-accuse-well-fargo-damaging-commu/

 

Curious and Shocking Failure to Follow the Law: BofA, Chase and OneWest

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.

The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Announcement: Based upon current information and direct interviews with participants I have come to three broad conclusions:

1. Bank of America never acquired any loans from Countrywide.
2. Chase never acquired any loans from Washington Mutual
3. OneWest never acquired the Indy Mac loans but instead entered into a loss sharing arrangement wherein the FDIC would absorb 80% of the loss and OneWest would receive the proceeds from foreclosure.

BofA never merged with BAC home Loans and the entity created to merge with Countrywide was Red Oak Merger Corp. which like the REMIC trusts was completely ignored. Neither Countrywide, red Oak BAC nor Bank of America ever paid one cent to acquire the loan balances. Hence the paperwork showing “for value received” is a lie.

Chase Bank acquired the banking operations of WAMU for  consideration that is expressly stated as zero. No assignment of WAMU loans exist, according to the FDIC receiver for WAMU. In most cases neither  WAMU nor  Chase ever spent one nickle funding or acquiring loans.

OneWest was capitalized with less than $2 billion and even that is not confirmed inasmuch as there doesn’t seem to be any transaction in which money was moved into a OneWest bank account. Like the above, neither Indy Mac nor One West ever paid for the loans.

All of that means is that they are not injured parties if the borrower doesn’t pay nor are they responsible parties if the investor is not paid. Their claim of agency just doesn’t cut it. For purposes of collecting insurance and proceeds from credit default swaps and federal bailouts, they claim ownership and then after payment, they claim agency so they can chase the foreclosure too, in addition to being paid several times over. But for purposes of sharing in the bounty of betting against the same mortgage bonds as they were selling to the investors the banks consider that proprietary trading and insist on the investors (lenders) taking the loss.

Practice hint: dig deeper and follow the money trail and don’t think that the note is part of the money trail. It isn’t. Only a cancelled check or wire transfer receipt, or ACH confirmation or check 21 confirmation would be proof of ownership (proof of payment) and proof of loss (entitling them to submit a credit bid at the auction of the property). Stick with this strategy and you won’t be sorry. The failure to come up with evidence of an actual injury to an actual party is deadly not only on the facts but for jurisdictional purses of standing.

The banks have cleverly steered the conversation in court to why they should not be required to produce the actual records of actual transactions affecting the loan or the loan pool claiming an interest in the pool. They only want the  court to look at the note and mortgage and the fabricated “allonges”, endorsements, transfers, sales, assignments, all of which are evidence and carry certain presumptions. But he story told by those documents turns out to be a fiary tale when you look at where and when money exchanged hands and between what parties.

The banks are avoiding the obvious: that they claim a REMIC trust exists and was funded (both of which are probably untrue), and that the REMIC trust acquired the loan by buying it (without any evidence of a money exchange) backdated to when the loan was “closed” [note it is our position that none of these loans were closed, since they have yet to be completed].

If the Trust DID own the loan, then what effect does a fabricated assignment have from the originator, aggregator or anyone else other than the trust? The pretender lenders can’t have it both ways. They can’t say they transferred the loan into the trust in 2006 and then claim that an assignment in 2011 from Countrywide to Bank of America conveyed anything.

Warren, Cummings and Waters to Banks and Regulators: Not So Fast!!!

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Analysis: As we move into the fifth inning of a nine inning game, it looks like we are going into overtime. Just as the GOP failed to read the census and lost the national elections, the Banks have failed to read the Congressional Census and are finding that the “deals” they made with regulators and law enforcement are not the end of the story. There are people in office now who do actually give a damn and who want to do something about Wall Street grifting.

Elizabeth Warren is leading the charge: They want full disclosure of the failed review process, and full disclosure of the deal that was reached. This could be a problem for banks who are holding worthless mortgage bonds and for entities claiming that they own loans that either never existed at all or were misstated in every meaningful way.

Warren and others want oversight of the deal this time and they are likely to get it, one way or another. It would be nice is the President took some time out of his schedule, albeit precious little free time exists, and decide for himself the direction that should be taken now that Geithner is leaving. Maybe he already has.

The questions that remain in the context of doing what is best for the country remain unresolved:

1. Knowing that the title chain is corrupted in all 50 states and that the amount of chaos ranges all the way up to 80%, what are the remedial steps required to boost confidence in the title registries around the country? At present it is a leap of faith to even buy a plot of empty land.
2. Knowing now that the investors put up the money and borrowers put down payments on homes and refinancing, how will the victims of Wall Street chicanery be compensated by a appointment of a receiver? Restitution is a fundamental bedrock for fraudulent deals. What economic, legal or financial reason would there be to allow the Wall Street banks that took and kept the loss mitigating payments from insurance, credit default swaps, and bailouts for the U.S. Treasury and Federal Reserve.
3. Knowing that the quantitative easing and Federal bailouts, insurance and credit default swaps were supposed to mitigate damages and most importantly re-start lending and commerce, how do we move those trillions (estimates run as high as $17+ trillion) back to the economy which remains gasping for air.
4. Knowing that the Wall Street frequently diverted documents and money from investors, this leaving borrowers with no authorized party with whom they could negotiate a modification based upon the true balance owed on the loans, how will the government announce its conclusions without starting a run on the big banks that may bleed over to the small banks.
5. Knowing that some 14 banks have grown to a size with cross border relationships that there is no one regulatory agency to watch and correct them, how will the banks be brought down to a size that can be regulated? And in a related matter, how do we level the playing field such that the mega banks no longer control the size, growth, and business plans of smaller banks.
6. AND knowing the criminal acts performed by or on behalf of the mega banks by specially created corporations, law offices and other vendors, how will the government bring these people to justice in a way that is meaningful — i.e., that will deter Wall Street titans from doing it again?
7. How will the government take the reigns of regulation such that settlements for pennies on the dollar avoids civil and criminal prosecution by the government that is supposed to protect those who cannot adequately protect themselves, and avoids administrative complaints against the bank charter.
8. How will the administration demonstrate to every American that the Government is running the show, not the Banks.
9. Knowing that the vast majority of foreclosures were completed” by strangers to the transactions, what do we do the displaced homeowners and the homes that were put in distress as a result of a ball of lies?
10. If the review process was revealing damages to homeowners (and indirectly to investors) that were vastly understated, as alleged by numerous whistle-blowers, then what will be installed as a watchdog over that process and what resources will be applied to get to the truth rather than a PR result?

Warren Demands Transparency On Failed Foreclosures
http://www.huffingtonpost.com/2013/01/31/elizabeth-warren-foreclosure-reviews_n_2592551.html

Elizabeth Warren Demands Mortgage Settlement Documents From Regulators
http://news.firedoglake.com/2013/01/31/elizabeth-warren-demands-mortgage-settlement-documents-from-regulators/

Yves Smith Revelas Cover-Up at BofA in Review Process

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Note: We are still following a national policy of allowing the mega banks to self-police, regardless of appearances. The intentional effort to suppress findings of harm, and the amount of harm to borrowers was systemic during the review process.

A real review would be team of people who would audit the transactions and assignments from one end to the other. The argument that the borrower might get a windfall if the foreclosures were not seen as inevitable regardless of the fatal defects in origination, assignment and foreclosure would be disregarded for what it is — trash. If we allow BofA to get away with this, then we should let Madoff, Dreier and Stanford out of jail.

It is only the scale of the fraud that separates the fake securitization of loans covering up a PONZI scheme that separates Wall Street titans from people who are languishing in jail. The increase in the number of such fraudulent schemes, mostly PONZI by their very nature, testifies to the effect on our society where bullying your way out of anything goes society becomes the norm.

Bank of America Foreclosure Reviews: How the Cover-Up Happened (Part IV)

As we described in earlier posts in this series (Executive Summary, Part II, Part IIIA and Part IIIB), OCC/Federal Reserve foreclosure reviews meant to provide compensation to abused homeowners were abruptly shut down at the beginning of January as the result of a settlement with ten major servicers. Whistleblowers from the biggest, Bank of America, provide compelling evidence that the bank and its independent consultant, Promontory Financial Group, went to considerable lengths to suppress any findings of borrower harm.

These whistleblowers, who reviewed over 1600 files and tested hundreds more in the attenuated start up period, saw abundant evidence of serious damage to borrowers. Their estimates vary because they performed different tests and thus focused on different records and issues. When asked to estimate the percentage of harm and serious harm they found, the lowest estimate of harm was 30% and the majority estimated harm at or over 90%. Their estimates of serious harm ranged from 10% to 80%.

We found four basic problems:

The reviews showed that Bank of America engaged in certain types of abuses systematically

The review process itself lacked integrity due to Promontory delegating most of its work to Bank of America, and that work in turn depended on records that were often incomplete and unreliable. Chaotic implementation of the project itself only made a bad situation worse

Bank of America strove to suppress and minimize evidence of damage to borrowers

Promontory had multiple conflicts of interest and little to no relevant expertise

We discuss the third major finding below.

Concerted Efforts to Suppress Findings of Harm

Both Bank of America and Promontory suppressed and ignored both broad categories and specific examples of borrower harm. We’ll discuss how this occurred from two vantages. The first was organizational: that the reviews were structured and managed so as to make it hard for particular cases of borrower harm to get through the gauntlet. The second was substantive: that the bank and Promontory excluded some types of harm entirely and insisted other aspects of the review be focused as narrowly as possible, which served to minimize and exclude evidence of borrower abuses.

Read more at http://www.nakedcapitalism.com/2013/01/bank-of-america-foreclosure-reviews-part-iv.html#z3SRwfAa7ZkxhDB4.99

MERSCORP Shell Game Attacked by Kentucky Attorney General Jack Conway

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

EDITOR’S NOTES AND COMMENTS: My congratulations to Kentucky Attorney General Jack Conway and his staff. They nailed one of the key issues that cut revenues on transfers of interests in real property AND they nailed one of the key issues in perfecting the mortgage lien.

As we all know now MERSCORP has been playing a shell game with multiple corporate identities, the purpose of which, as explained in Conway’s complaint, was to add mud to the waters already polluted by predatory loan practices and outright fraud in the appraisal and identification of the lender. This of course is in addition to the very gnarly issue of using a nominee that explicitly disclaims any interest in the property or loan.

The use of MERS, just like the use of fabricated, forged, robo-signed documents doesn’t necessarily wipe out the debt. The debt is created when the borrower accepts the money, regardless of what the paperwork says — unless the state’s usury laws penalize the lender by eliminating the debt entirely and adding treble damages.

But the use of a nominee that has no interest in the loan or the property creates a problem in the perfection of the mortgage lien. The use of TWO nominees doubles the problem. It eliminates the most basic disclosure required by Federal and state lending laws — who is the creditor?

By intentionally naming the originator as the lender when it was merely a nominee and by using MERS, as nominee to have the rights under the security interest, the Banks created layers of bankruptcy remote protection as they intended, as well as the moral hazard of stealing or “borrowing” the loan to create fictitious transactions in which the bank kept part of the money intended for mortgage funding. Since the mortgage or deed of trust contains no stakeholders other than the homeowner and the note fails to name any actual creditor with a loan receivable account, the mortgage lien is fatally defective rendering the loan unsecured.

When you take into consideration that the funding of the loan came from a source unrelated (stranger tot he transaction) then the debt doesn’t exist either — as it relates to any of the parties named at the “closing” of the mortgage loan. So you end up with no debt, no note, and no mortgage. You also end up with a debt that is undocumented wherein the homeowner is the debtor and the source of funds is the creditor — in a transaction that neither of them knew took place and neither of them had agreed.

The lender/investors were expecting to participate in a REMIC trust which was routinely ignored as the money was diverted by the banks to their own pockets before they made increasingly toxic over-priced loans on over-valued property. The borrower ended up in limbo with no place to go to settle, modify or even litigate their loan, mortgage or foreclosure. This is not the statutory scheme in any state and Conway in Kentucky spotted it. Besides the usual “dark side” rhetoric, the plan as executed by the banks creates fatal uncertainty that cannot be cured as to who owns the loan or the lien or the debt, note or mortgage. The answer clearly does not lie in the documents presented to the borrower.

Now Conway has added the hidden issue of the MERS shell game. Confirming what we have been saying for years, the Banks, using the MERS model, have made it nearly impossible for ANY borrower to know the identity of the actual lender/creditor before during and even one day after the “closing” of the loan (which I have postulated may never have been completed because the money didn’t come from MERS nor the other nominee identified as the “lender”).

The Banks are trying to run the clock on the statute of limitations with these settlements, like the the last one in which Bank of America would have owed tens of millions of dollars had the review process continued, and instead they cancelled the program with a minor settlement in which homeowners will get some pocket change while BofA walks off with the a mouthful of ill-gotten gains.

The plain truth is that in most cases BofA never paid a dime for the funding or purchase of the loan. That is called lack of consideration and in order for the rules of negotiable paper to apply, there must be transfer for value. There was no value, there was no cancelled check and there was no wire transfer receipt in which BofA was the lender or acquirer of the loan. Now add this ingredient: more than 50% of the REMIC trusts BofA says it “represents no longer exist, having been long since dissolved and settled.

The same holds true  for US Bank, Mellon, Chase, Deutsch and others. Applying basic black letter law, the only possible conclusion here is that the mortgages cannot be foreclosed, the notes cannot be enforced, the debt can be collected ONLY upon proof of payment and proof of loss. This is how it always was, for obvious reasons, and this is what we should re turn to, providing a degree of certainty to the marketplace that does not and will never exist without the massive correction in title corruption and the wrongful foreclosures conducted by what the reviewers in the San Francisco audit called “strangers to the transaction.”

See Louisville Morning Call here

See Bloomberg Article here

Fear of Unraveling the Truth: Is the Fed Running Interference for the Banks

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Comment and Analysis: AIG correctly decided not to try to bite the hand that saved it when it refused the demand of Hank Greenberg to join in his lawsuit against the government. Greenberg, some will recall, was forced out of AIG in a scandal in 2005.

Now AIG is attempting to open the door to suing banks besides the suit it already filed against Bank of America for selling them worthless trash instead of high rated bonds that were safe and verified. But the Fed created Maiden Lane II stands in the way even though it has already wound down its affairs.

The argument is that AIG transferred its litigation right to Maiden Lane. So the question is whether that was standard procedure and did the maiden Lane entities get such a transfer of litigation rights on ALL the debts that were  “contributed” to the Maiden Lane entities. While this particular suit has more to do with life insurance than mortgages, it has far reaching implications.

The questions raised by all these “transfers” is who transferred what to whom, when and what did the Maiden Lane entities actually get in terms of legal title to something. If they did get legal title to either the bogus mortgage bonds or the loans themselves, then why are there foreclosures in the name of other entities?

And if these entities were given the opportunity to dump the bad bonds or loans onto the Fed and be bailed out 100 cents on the dollar, then why is there any balance in any loan receivable account relating to the origination of ANY loan involved in the Fed transfers?

The can of worms covered over by the Maiden Lane transactions is deep and ugly. Similar transactions occurred all over Wall Street as some parties received 100 cents while others were left out in the cold — especially investors who put up the money to originate the financial transactions in the first place.

As a practice hint, I would say that you should inquire as to whether the subject loan is claimed to be part of an alleged investment pool that issued mortgage-backed bonds and which delivered ownership in indivisible shares in the underlying mortgages.

If yes, then you should inquire as to whether any or all of the bonds were the subject of a transfer to any of the Maiden Lane entities or some other party. This would jive with what I am told is the fact that more than 50% of the REMIC trusts have long since ceased existence in any way, manner, shape or form.

Then you should inquire as to whether the subject loan was included in said transfer and if so, the how? Assignment, indorsement, etc. And you should inquire about the amount of money received for the transfer, how and when it was paid and production of copies of said payment.

The point here is that the parties who are initiating the foreclosures are (a) complete strangers to the transaction having neither funded nor purchased the receivable or loan and (b) that even if they were at some point owners of the loan, they transferred it out for payment which mitigates the loss and the balance due on the loan receivable account. If Maiden Lane II is winding down as reported, where did the loans go from there? The answer from inside Wall Street was they were “re-securitized” into new trusts, all private label away from the sight of investors, borrowers and regulators.

In the end, the result I am after here is that the loan was paid down in whole or in part and the complexity of the way the banks were bailed out is not a license to receive yet another windfall. The parties who paid have a right of contribution and perhaps a right to foreclose the mortgages.

But without the identity of the current real creditor, compliance with HAMP and other programs is impossible because you need the injured party at the table.

A party who once held the receivable but was paid should not be receiving a second payment or a free house through foreclosure just because they have presented part of the deal. Discovery should include ALL of the deal, which is why the Master Servicer should be the target of your investigations including the parent investment banking firm.

Goldman and other banks are reporting record profits resulting not from lending but from trading activity, which is the way I have said from the beginning that they would repatriate the money they stole is increments so that the value of their stock would appear to be worth more and more.

But think about it. What other managed fund is getting such bountiful results? Answer: NONE. That indicates to me that the proprietary trading is a ruse in which the banks are claiming profits derived from trading with funds obtained illegally and parked off shore. By controlling the transactions end to end, they can simply set the amount of profits they want to report and continue on for a long time considering estimates of anywhere from $3-$10 trillion that has been siphoned out of the world economy and for which there has been no accounting or accountability.

These are funds that SHOULD be credited to investors and the loan receivable accounts of borrowers.

A.I.G. Seeks Approval to File More Bank Suits

By MARY WILLIAMS WALSH, NY Times

Since the summer of 2011, the insurance giant American International Group has been battling Bank of America over claims that the bank packaged and sold it defective mortgages that dealt A.I.G. billions of dollars in losses.

Now A.I.G. wants to be able to sue other banks that sold it mortgage-backed securities that plunged in value during the financial crisis. It has not said which banks, but possibilities include Deutsche Bank, Goldman Sachs and JPMorgan Chase.

But to sue, A.I.G. first must win a court fight with an entity controlled by the Federal Reserve Bank of New York, which the insurer says is blocking its efforts to pursue the banks that caused it financial harm.

The dispute illustrates the web of financial instruments that A.I.G. and the federal government became tangled in as the insurer nearly collapsed in 2008 and required a vast taxpayer bailout. It also shows the complexity of apportioning blame, five years after the financial crisis, and making wrongdoers pay for their share of the harm.

According to a lawsuit filed Friday, A.I.G. is seeking a declaration from a New York state judge that it has the right to pursue “billions of dollars of fraud and other tort claims that exist against numerous financial institutions,” even though Fed officials have said A.I.G. gave up that right.

“If I were the general counsel of A.I.G., I would seek this kind of declaratory judgment,” said Henry T. C. Hu, a former regulator who is now a professor at the University of Texas School of Law. “I don’t know whether I’d win, but it’s certainly worth trying.”

Much of A.I.G.’s rescue was needed because it didn’t have money in 2008 to cover guarantees that it sold banks in case the complex securities in their portfolios defaulted. But the latest dispute centers on a less familiar part of the bailout — the part in which reserves were removed from A.I.G.’s life insurance units and replaced with what turned out to be troubled mortgage securities.

The securitized housing loans lost value so fast when the bubble burst that some of A.I.G.’s life insurers risked being shut down by state insurance regulators. The Fed stepped in instead, and A.I.G.’s current lawsuit centers on the relationship that formed between the insurer and its rescuer as a result.

The Fed paid about $44 billion to extricate A.I.G.’s life insurance units from soured trades, and set up a special entity, Maiden Lane II, to buy the plunging mortgage securities for $20.8 billion. Those securities had an original face value of $39.3 billion.

Maiden Lane II is the sole defendant in A.I.G.’s lawsuit. The complaint says that at the moment Maiden Lane II bought the securities, it locked the insurance units into an $18 billion loss — the difference between the securities’ face value and their price in late 2008, arguably the bottom of the market. A.I.G. attributes a large chunk of its losses to the mortgage securities that it bought from Bank of America. It sued the bank for $10 billion in August 2011.

But one of Bank of America’s defenses is that A.I.G. lacks standing, having given its litigation rights to Maiden Lane II.

Last month, for instance, two senior Fed officials submitted declarations saying they believed that as part of the sale of assets to Maiden Lane II, A.I.G. had agreed not to go after any of the banks.

That prompted A.I.G. to file its suit, arguing that when it sold the tainted assets to Maiden Lane II, it did yield some litigation rights, but not the ones giving it the right to bring fraud complaints against the banks that put the securities together.

A.I.G. said those banks had misled its life insurance and money management businesses regarding the quality of the securities, and “obtained artificially high credit ratings” so the securities would pass the life insurers’ investment rules.

A.I.G.’s lawsuit is separate from one that until late last week it considered joining, which argued that the New York Fed acted unconstitutionally during the bailout, harming the insurer’s shareholders.

That lawsuit was filed in 2011 by Maurice R. Greenberg, a former chief executive of A.I.G. and a major shareholder. Mr. Greenberg had hoped the company would join the lawsuit, but the possibility that A.I.G. would sue its rescuer drew sharp criticism and A.I.G.’s board decided against it.

The new suit isn’t seeking financial compensation from the Fed.

The New York Fed, which has sole control of Maiden Lane II, declined to discuss the matter and has not yet responded to the complaint. A hearing on the arguments in the Bank of America case is scheduled for Jan. 29 in U.S. District Court for the Central District of California.

A.I.G. did not name other banks it would take action against, but it bought mortgage-backed securities from banks that included Deutsche Bank, Goldman Sachs and Bear Stearns, which was acquired during the financial crisis by JPMorgan. Much of the securities were sold to A.I.G. by Lehman Brothers, which collapsed in September 2008.

A.I.G. watchers are intrigued by the newest chapter of the story.

“A.I.G. has a credible claim that they’re pursuing aggressively,” said Michael J. Aguirre, a San Diego lawyer who is representing a California couple who argue the Fed was bilked when it bailed out A.I.G. “The question now is how aggressive the Fed is going to be on pushing back.”

“Is the government going to say, ‘We’re not pursuing these claims, but we’re not going to let anybody else pursue them either — we’re just going to let the banks walk away with fraud profits?’ ” he added.

Although it received relatively little scrutiny, the life insurance part of A.I.G.’s bailout was costlier than the better-known part involving A.I.G.’s Financial Products unit, which sold the notorious guarantees, known as credit-default swaps.

In 2011, A.I.G. tried to buy back the entire pool of mortgage securities from Maiden Lane II, but its offer, about $15 billion, was rejected.

Subsequently other bidders acquired all the assets, and last February the New York Fed announced it had made a $2.8 billion profit on its roughly $20 billion investment in the rescue entity. Terms of the bailout called for it to give one-sixth of any profit to A.I.G.

Maiden Lane II no longer holds any of the mortgage securities and is winding down its affairs.

U.S. Attorney Continues to Prosecute Despite Settlements

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Note: Preet Bharara, the U.S. Attorney for the Southern District of New York. He is unfazed by the tangle of “settlements” and will not let up on prosecuting Bank of America for fraud. He gets it and is methodically working his way through the maze set up by the mega banks.

BofA settled a civil claim that it had lied when they “sold” mortgages advertised as meeting government standards. We all know by now that the loans “lacked documentation and underwriting.” But what is still to come out is WHY they lacked documentation and WHY the loans lacked underwriting.

The documentation was absent simply to hide the fact that the bank was pretending to have ownership or an insurable interest in the loans and mortgage bonds. The true transaction was between the investor/lenders and the homeowner/borrowers. BofA stole or misused the identities of both the lender and the borrowers so that it could sell the loans many times under guise of exotic derivative instruments called mortgage backed bonds.

If fully documented, the lender would have shown up as the investors, which is as it should have been. BofA never put up a dime for the funding or acquisition of any of the loans. Its claim of ownership and an insurable interest was a blatant lie, inasmuch as they actually had no risk of loss, which is why there was no underwriting standards applied either.

I would suggest you track the pleadings of this U.S. Attorney and pick up some pointers along the way. He is definitely on the right track. As for now, the focus is on the bad mortgage bonds, bad loans, and lack of documentation up at the lender level.

Once that veil is penetrated it will be revealed that the borrower was defrauded using the same misdirected documentation using appraisal fraud as the principal leverage point.

But the real stuff is going to hit the fan as more and more people realize that this standard practice in the industry allegedly to “protect” the investors, invalidated the chain of title and there has been no effort to correct the problem. When it is revealed that the investors were cheated out of their money by a use of proceeds that crosses the borders of fraud, and that the terms of the bonds were never intended to be satisfied, just as the terms of the loan were never meant to be satisfied or secured, then we will have justice peeking its head out over the mess.

In the end, legally, there will be privity or a relationship only between the investor/lenders and the borrowers and that there transaction was supposed to be documented and recorded. Instead the banks documented and recorded a different transaction in which the intermediaries looked like the principals and were therefore able to do “proprietary trading” in which they took investor money from one pocket and put it into another.

That is what opened the door to huge “profits” (actually theft proceeds) on the way up and on the way down. These banks are now buying the same houses from themselves (using another affiliate entity) and then reporting the results to the investors so they can write off the loss. They are going to be the largest landowners in history as a result of this PONZI scheme.

The investors were duped into thinking that all the intermediary entities were being used to protect them from liability from claims of deceptive and predatory lending practices. In actuality the investors were already protected because their agents committed intentional acts of malfeasance and crimes that were specifically prohibited in the documents and other representations the investors received.

Just like the Too Big to Fail Myth, the investors are operating under the myth that if they assert themselves as lenders, they are going to get sued. That too is untrue. If they assert themselves as lenders, then they are going to show proof of payment, something the megabanks can’t do because they used investor money instead of their own.

If the investors assert themselves as lenders they will see that money is missing from the investment pools and that in fact the investment pools were never funded at all. They will realize that they have a legitimate claim for repayment of loans, and a legitimate claim for civil or criminal theft against the banks who intentionally diverted the documentation and the money from the investors and from the borrowers.

That will leave the investors and borrowers with (1) an obligation that is mostly undocumented and (2) unsecured. But the borrowers are more than happy to allow a mortgage if it reflects fair market value. This is what will give the investors far more than the current process in which the banks have a stranglehold on the mortgage modification process (for mortgages that are invalid from the start).

If you pierce through the veil of PR and utter nonsense flowing out of the banks and their planted articles in every periodical around the country, you will find your lender and you will find out the balance due because both of you (homeowner and investor) are going to want to know what happened to all the insurance money, credit default swaps and Federal bailouts that were promised, paid, but not delivered.

Because the mega banks were mere intermediaries pretending to be lenders the entire current scenario is going to turn upside down. Ultimately, the insurance, CDS and bailouts were in fact bailouts of the homeowners and investors. When they are applied correctly according to common sense and the contracts that were executed, practically none of the mortgages will have the balance demanded by the intermediary banks who claim but do not own the mortgages or rights to foreclose. Thus practically no foreclosure was correct by any standard, no credit bid was valid at auction, and no eviction was legal.

As these facts are revealed and accepted by a critical mass of people, the Too Big to Fail Myth will be put to the test. The nonexistent assets on their balance sheets will be reduced to zero. What will really happen is simply that the mega banks will collapse inward and the thousands of other banks that are unfairly under the thumb of the bank oligarchy will be able to pick up the pieces that are left and return to normal banking, with normal profits and normal bonuses.

Allowing the mega bank to retain the money they stole is like throwing a steak to a dog. Now that they have a taste of unlawful profits driving their profitability upward, they will only want more. Our job is to make sure they don’t get it. The Obama administration was surprised by the quick recovery by the banks. The truth, as it will be revealed in the coming months and years, is that there was no bank recovery because there were no bank losses. THAT is why the banks grew while the rest of the economy tanked.

Theoretically it is impossible for the bank profits to go up while the stock market and the economy is going down the drain. Their profits are supposed to come from being intermediaries in commerce, not principals.

Thus the higher the commercial activity, the better it is for the banks. But here, the relationship was twisted. The banks sucked the money out of the economy in “off balance sheet” transactions, secreted the money around the world, and are now able to report higher and higher profits every year simply because that is the way that they can repatriate their ill-gotten gains. By doing that they drive up the apparent value of their stocks and their stockholders are happy. What the stockholders do not realize is that this is a powder keg that will, at some point, implode. Yes, Warren Buffet is wrong.

See the story and Links Here

Despite a settlement with an alleged victim, U.S. District Attorney Preet Bharara will continue to prosecute Bank of America for selling allegedly fraudulent loans to Fannie Mae and other government-sponsored enterprises, his office told the Charlotte Business Journal.

Bharara, U.S. attorney in the Southern District of New York, charged BofA with fraud in a $1 billion federal lawsuit in October. He alleged in court documents that BofA had sold government agencies such as Fannie Mae billions of dollars in mortgages that were advertised as meeting government standards. However, the suit contends the loans actually lacked proper documentation and underwriting.

Who’s on First?

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s comment: In a classic Abbott and Costello routine (look it up for those who are too young) the banks are playing “who’s on First” and winning because of the dizzying pace with which they move the goalpost.

I wrote the following comments (see below) on a case I was assisting in which Quicken Loans  purportedly originated the loan but immediately informed the borrower to start paying Countrywide. Countrywide in turn disappeared into what now appears as RED OAK MERGER CORP and the borrower was told to start making the payments to BAC. BAC claimed ownership of the loan until they didn’t at which point they admitted that the loan belonged to some REMIC trust. The REMIC trust turned out not to exist and was never funded.

Then Bank of America informed the borrower that it was BofA that owned the loan despite all evidence and admissions to the contrary. Then BAC disappeared and a little drilling gave up the name Red Oak Merger Corporation which was planned to be the entity that would take over Countrywide. But apparently, like the REMICS, it was set up but never used.

Now the borrower is seeking a short-sale. BofA has performed its usual circus of “errors”in which it loses or purges files for important sounding reasons but which have not one grain of truth. During this time the borrower has lost sales because BofA tried to pawn off the loan servicing to another entity which produced conflicting notices to the borrower that the loan had been transferred for servicing and that the loan had NOT been transferred for servicing.

The borrower has property that is easily salable. BofA came back with a counter-offer for the short-sale. The HUD counselor located in Phoenix and who is extremely savvy about these loans and the legalities of the false moves by the banks finally asked “Who’s on First” by asking who was making decisions and what guidelines they were using.

BofA responded that the trustee BNY Mellon was the only one with that information. So the HUD counselor asked the same questions to BNY Mellon as trustee or the supposedly fully funded trust that included the borrower’s loan. BNY Mellon responded with the same answer Reynaldo Reyes at Deutsch Bank did — we are the trustee in name only.  All decisions regarding short-sales, modification and foreclosure are made by “the servicer.” Of course they didn’t distinguish between the subservicer and the Master Servicer.

The question asked of me was whether this was meaningless double talk and my answer is that it is very meaningful doubletalk providing admissions that the real loan is undocumented, unsecured and leaves the investors (pension funds) holding the bag, while the investment banks were rolling in a redaction of 1/3 of the world’s wealth. Borrowers don’t matter because they are deadbeats anyway and don’t deserve discussion.

Here is my response to the information we had at hand:

How could it be the responsibility of the servicer unless it was the servicer that was acting not as a bookkeeping and collection agent but as the trustee for the investors? If BNY Mellon claims to be the trustee then by definition (look it up) they ARE the investors and they would be the only ones who had the power to make the decision. If they are saying (just like DeutschBank does) that the servicer  makes the decisions then they are saying that  they have delegated(?) the trustee function to the subservicer (usually just referred to as the “servicer”). So like Reynaldo Reyes at Deutsch bank admitted, he is not a trustee for anything and the whole thing is, as he put it, very “Counter-intuitive.”

None of this makes sense until you consider the possibility that nobody ever started a trust, a trust account or gave any powers to a trustee, established beneficiaries of the trust or funded the trust. It makes perfect sense if you consider the alternative: that the investment banks sold bogus mortgage bonds to investors pretending that REMIC trusts were funded and issued the bonds. Read carefully: they are attempting avoid criminal liability and civil liability for the insurance, Federal bailouts and hedge proceeds the banks received on behalf of the investors but which they never reported much less paid the investors. The amount is in the trillions.

By telling you that the trustee has no power they are telling you that the trustee is not a trustee. By telling you that the power to make decisions is in the hands of the servicer, the correct question is which servicer? — the subservicer who dealt only with the borrower or the Master Servicer that dealt with ALL transactions directly or indirectly on behalf of the investment bank that did the selling and underwriting of the bogus mortgage bonds? Assuming either one actually has that power, the next question is how the “servicer” was appointed the manager and why, since they already had a trustee? The answer is what they are avoiding, so far successfully, but which at the end of the day will come out:

NO REMIC trust was used and none of the parties with whom we are dealing ever spent one penny of their own money, capital or deposits (if they were a depository institution) on funding or buying a loan. The true money trail generally looks like this: Investor—> Investment banker- who sold the bonds–> aggregator or intermediary affiliate of investment banker—> closing agent —> payoff seller and prior mortgage (probably paying a non-creditor in exchange for a fabricated release of lien and satisfaction of note which is never given back to borrower marked “PAID).”

The important thing is not who is in the money trail but who is not in the money trail. If you track the wire transfer receipts and wire transfer instructions and are able to track any compensation after closing that was not disclosed but nonetheless paid to undisclosed parties you will NOT find the loan originator whose name, as nominee (but they never said so) was used as the lender and the possessor of the loan receivable.

That is, you won’t find the originator as a funding source but you will find the originator as a paid servicer for the undisclosed aggregator in an illegal and predatory pattern of table-funded loans. In Discovery: PRACTICE TIP: Demand copies of the bookkeeping records that shows that the originator booked the transaction with the borrower as a loan receivable.

You will find that most of the loans were not booked at all on the balance sheet of the originator which means that their own records contain an admission against interest, to wit: that they were not the lender because they did not add the loan receivable to their assets, nor a reserve for bad debt to their liabilities, because they had not funded the loan and were not exposed to any risk of loss. The originator, especially those originators without any financial charter as a depository institution, was merely a paid nominee to ACT as though it was the lender and take the blame if there were findings in court that the closing was illegal or irregular. But there again the originator has no risk because of the corporate veil which shields the operators of the nominee pretender lender leaving the borrower with an empty shell possibly declaring bankruptcy like First Magnus or Century.

The money came from the investors through the investment banker through the aggregator in which the investors’ money was used to create the appearance of an asset consisting of only part of the investor’s money and then sold back to the investor “pool” which turns out not to exist because it was neither funded nor were the conditions of the pool ever followed.  This sale was booked by the investment banker as a “trading profit.” In other words, they took the money of the investor into one pocket and while transferring it from pocket to pocket took out their trading profit on transactions that were a complete illusion.

The documents use the nominee originator (like Quicken Loans) for the note to create “evidence” of an obligation that does not exist because Quicken Loans and its aggregator never funded the loan or the purchase of the loan — but that didn’t stop them from selling the loan several times, insuring it for the benefit of the investment banker and aggregator, and getting paid Federal bailout money and proceeds from credit default swaps all without deducting the amount promised as repayment to the investor, which is why the investors are suing.

The investors are saying there was a false closing based upon no underwriting standards and a fake bond based upon the backing of a mortgage and note that didn’t exist or was never enforceable.

When you boil it all down there was nobody at closing on the lender side. The named payee was a nominee for an undisclosed party and the named secured party was the nominee of an undisclosed party and the consideration came neither from the nominee nor the undisclosed principal. This is what leaves investors holding the bag.

The foreclosures are a grand scheme of cover-up for what was a simple PONZI scheme whose survival depended not upon borrower payments on legitimate loans but rather on the sale of more bogus mortgage bonds. There were no funded REMIC trusts, there were no active trustees, and the job of managing the flood of money fell to the Master Servicer who instructed the subservicer and all other parties what to do with their new found wealth.

The investors are saying they are left with a pile of money owed to them, documented by fake bonds, and no documentation on what was actually done with their money.

That leaves them in a position where they can NEVER claim that the loan money they advanced (and which was commingled beyond recognition) was never secured with a perfected lien or mortgage. The foreclosures that have taken place are based upon an illusion of a transaction that was never consummated — namely that the named payee on the note would loan the borrower money. They didn’t loan the money so the transaction lacks consideration.

Lacking consideration they have nonetheless fabricated, used, executed and recorded papers procured under false pretenses and they are taking the position in court that the borrower may not inquire as to the internal workings of the scheme that defrauded him  and which the investors  (Pension funds) corroborated with their lawsuits.

If you went to the originator and asked to payoff or rescind they would have had to go to the investment banker or aggregator to find out what to do instead of simply following the federal statute (TILA) and returning the documents in exchange for the money. By contract the originator agrees and the wire transfer instructions the originator agrees, just like MERS, to not take, claim or keep any money from the transaction.

PRACTICE TIP: Getting the cancelled check of the borrower to see who cashed the check in which account owned by which party might be helpful in determining the truth about the so-called closing. A good question to ask in discovery is how the”servicer” accounted for each payment it received or disbursed and what notes or notations were used. Then the next question to the subservicer, Master Servicer and investment banker is to whom did you disburse money and why?

BOA Facing Fraud Suit from FHFA

CHECK OUT OUR NOVEMBER SPECIAL

Consult with Neil F Garfield, MBA. JD

For Representation by a Licensed Attorney in Florida, Ohio, or California, please call our customer service number at 520-405-1688

BOA lost in a bid to dismiss a lawsuit based upon the lies it told the Fannie and Freddie about the loans it was seeking guarantees for sale into the secondary securitization market. This follows closely my prior post about why the obligations, notes and mortgages should all be considered a nullity — worthless.

Unfortunately, Judge Cote said that the FHFA (Federal Housing Finance Agency) failed to state a strong enough case about loan to value ratios. Perhaps the agency will take another crack at that because appraisal fraud was an essential ingredient in this PONZI scheme.

If you read the complaint, it will give you a few ideas on how to frame your own complaints. Obviously it would be wise to beef up the allegations regarding loan to value ratios and the relationship of those to appraisal fraud. FHFA_v_BoA_Other

BOA Sued for ONLY $1 Billion by NY Federal Prosecutor

Editor’s Note: OK I’m glad they sued and I am glad they are alleging “brazen fraud.” But considering the trillions that were lost from this fraud why are the suits for only $1 billion and the settlements for only $25 billion? Why are we not clawing back the ill-gotten money from the brazen fraud they are alleging, giving relief to the victims (investors and homeowners) and restoring the country’s financial system to sound footing?

BOA stands accused, again and again, for “carrying out a scheme, started by its Countrywide Financial unit, that defrauded government-backed mortgage agencies by churning out loans at a rapid pace without proper controls. In a civil suit, prosecutors seek to collect at least $1 billion in penalties from the bank as compensation for the behavior that they say forced taxpayers to guarantee billions in bad loans.”

I ask you. Are there two sets of rules. Who amongst us would not have criminal charges brought against us for this behavior?

But the main concern I have is that both prosecutors and the media have not considered the fact that this was not “Slipshod” as the article reports or negligence or even gross negligence. It was intentional.

The mega banks made mega money in two main ways: (1) they pretended to own the loans and declare defaults or write downs on pools that were insured or covered by credit default swaps, keeping the money for themselves instead of the investors. (2) The crappy loans made the most money for the banks — because they were able to put a higher rate on the mortgage and thus lend out less money to achieve the same dollar return projected to the investors. The rest of the money they kept.

That is called a PONZI scheme because there is no way to payback the money without more investors buying into the bogus mortgage bonds. Dreier is serving a long sentence, Madoff is serving a long sentence but Dimon and other Mega bank executives are serving terms on bank boards of directors and on the Board at the New York Federal Reserve. Does that sound right to anyone’s ears?

U.S. Accuses Bank of America of a ‘Brazen’ Mortgage Fraud

By BEN PROTESS, www.nytimes.com

9:34 p.m. | Updated

Five years after the housing market crumbled, government officials are still trying to assign blame for the problems that fueled the mortgage boom and bust.

On Wednesday, federal prosecutors in New York took aim at Bank of America. They accused it of carrying out a scheme, started by its Countrywide Financial unit, that defrauded government-backed mortgage agencies by churning out loans at a rapid pace without proper controls. In a civil suit, prosecutors seek to collect at least $1 billion in penalties from the bank as compensation for the behavior that they say forced taxpayers to guarantee billions in bad loans.

Financial firms have been battling chaotic – and at times redundant – litigation related to the mortgage mess. The cases have come from a patchwork of federal agencies, state officials and shareholder suits, some of which have been resolved in multibillion-dollar settlements.

“They never know who’s going to be coming after them next,” said Dan Hurson, a former federal prosecutor who now defends securities cases. “There’s no central traffic cop.”

Still, the public has been frustrated with the limited number of criminal actions that have been filed since the financial crisis. Few cases have taken aim at top executives. Even in the latest case against Bank of America, no company officials were sued as part of the complaint. Angelo R. Mozilo, the former chief executive of Countrywide Financial, never faced criminal charges but did agree in 2010 to pay $67.5 million to settle a civil fraud case brought by the Securities and Exchange Commission.

Mr. Hurson said that the government had yet to overcome the notion that federal authorities were reluctant to pursue the top rungs of Wall Street. The criminal actions to come from the crisis, he noted, have focused on “small-time operators.”

The government, however, has contended that it has aggressively pursued mortgage fraud. As the legal deadline approaches for filing crisis-related cases, President Obama formed a mortgage task force to investigate wrongdoing. The unit recently announced its first case, taking action against JPMorgan Chase over mortgage deals created by Bear Stearns, the firm that JPMorgan bought during the crisis.

The legal problems for Bank of America, however, have taken a deeper financial toll, costing the bank billions in write-downs and settlements. Much of its problems stem from its takeover of Countrywide Financial, once the nation’s largest mortgage lender. The bank also struck a $2.4 billion deal in September to settle a class-action lawsuit over shareholder claims that it misled investors about the 2009 purchase of Merrill Lynch.

In the lawsuit on Wednesday, the Justice Department attacked a home loan program known as the “hustle,” which the bank inherited from Countrywide in 2008 and kept alive through 2009.

Prosecutors say the venture was a symbol of Wall Street’s slipshod standards during the mortgage bubble. According to the lawsuit, Countrywide rubber-stamped mortgage loans to risky borrowers and passed them on to Fannie Mae and Freddie Mac, the two government-controlled mortgage financial giants that guaranteed the loans. The two entities were ultimately stuck with heavy losses and a glut of foreclosed properties.

“The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope,” Preet Bharara, the United States attorney in Manhattan, said in a statement. “This lawsuit should send another clear message that reckless lending practices will not be tolerated.”

Mr. Bharara filed the civil suit along with the inspector general of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. The government watchdog for the bank bailout program, the special inspector general for the Troubled Asset Relief Program, or TARP, also joined the complaint.

In a statement, a Bank of America spokesman said the bank “has stepped up and acted responsibly to resolve legacy mortgage matters; the claim that we have failed to repurchase loans from Fannie Mae is simply false.” The spokesman, Lawrence Grayson, added, “At some point, Bank of America can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”

The case builds on a broader federal crackdown of Wall Street that continues years after the onset of the crisis. In a last-ditch effort to hold financial firms accountable, Mr. Bharara this month sued Wells Fargo over questionable mortgage deals.

The assertions in the Bank of America suit, however, do not shed much new light on the mortgage mess. The Federal Housing Finance Agency last year sued 17 big banks over losses sustained by Fannie Mae and Freddie Mac over different mortgage-related products. The twin mortgage finance companies, also bailed out by taxpayers in 2008 and still controlled by the government, continue to push firms like Bank of America to repurchase billions of dollars in bad loans.

The flurry of litigation, which comes on the cusp of the presidential election, has caused some on Wall Street to question whether the effort is rooted in political motivations.

Other white-collar lawyers say the complaints rehash old claims put forth by private investors. JPMorgan says that the government urged it to buy Bear Stearns, a defense that does not apply to Bank of America, which acquired Countrywide as part of an aggressive expansion effort.

Still, a lawyer close to the Bank of America case, who spoke on the condition of anonymity because the case was continuing, argued that the bank had already repaid Fannie Mae for some of the soured loans in question. Other loans, this person argued, were never before disputed by Fannie Mae.

The lawsuit threatens to impose steep fines on the bank. The Justice Department filed the case under the False Claims Act, which could provide for triple the damages suffered by Fannie and Freddie, a penalty that could reach more than $3 billion.

The act also provides an avenue for a Countrywide whistle-blower, Edward J. O’Donnell, to cash in. Under the act, the government can piggyback on accusations he filed in a lawsuit that was kept under seal until now.

Mr. O’Donnell, who lives in Pennsylvania, was an executive vice president for Countrywide before leaving the company in 2009. The government’s case in part hinges on the credibility of his claims.

In the 46-page lawsuit, prosecutors contend that Countrywide abandoned its lending standards in 2007 with the creation of the “hustle” program. Short for “HSSL,” or “High-Speed Swim Lane,” the program adopted the motto “move forward, never backward,” prosecutors said, citing Countrywide documents.

With the goal of generating a high number of loans, Countrywide tore down internal controls known as tollgates that were in place to slow the mortgage process and root out risky borrowers. The firm at one point removed trained underwriters from the loan process, opting instead to rely on “unqualified and inexperienced” loan processors.

At times, prosecutors claim, loan processors crossed a legal line. Some “repeatedly did manipulate” loan forms, jotting down higher incomes for borrowers so they would qualify for Fannie Mae’s standards.

By early 2008, the lax standards started to show. More than a third of the unit’s loans were defective, a significant jump over the industry standard of about 5 percent.

Despite the poor performance, prosecutors said, the bank sold the loans to Fannie Mae and Freddie Mac and “concealed the defect rates and continued the hustle.”

Florida Wrongful Foreclosure Victims Get $2k, Banks get $2,000k

If you are looking for legal representation in S Florida, please call 520-405-1688 where Neil has established an office again after 30 years of practicing trial law in S. Florida.

Editor’s Note: For those who have given, up, moved on and don’t want to fight about it, the $2,000 check they are about to receive is like found money. But it is a surrender to greed, bullying and criminal behavior. The banks are giving the paltry sum of $2,000 in exchange for an average loan of $200,000 which they neither funded nor purchased, but which they sold multiple times, 1000 cents on the dollar.

As I understand it, you can take the $2,000 and also sue for wrongful foreclosure, but you can be sure that despite that, most people will not sue and those who do are going to be met with the argument that we already settled that.

For those interested in getting their check, read the article below or go to the Sun Sentinel or WPTV.com. You’ll get the information you need.

From WPTV.Com by Donna Gehrke-White, Sun Sentinel

Some 167,398 Floridians who lost homes to foreclosure may each get about $2,000 as part of the nation’s largest consumer financial protection settlement.

The checks will be sent out in early 2013, with more than a third going to people who lost homes in Broward, Palm Beach and Miami-Dade counties, estimated Jack McCabe, a housing analyst based in Deerfield Beach.

People need to send in forms to receive the money by Jan. 18. How much people will receive depends on how many borrowers participate.

Already, Minneapolis-based Rust Consulting has “sent out notification postcards to eligible borrowers nationwide,” said John Lucas, a spokesman for the Florida Attorney General’s Office that is helping administer the historic federal, 49-state settlement.

“A low percentage of those postcards were returned, and Rust is conducting further research to locate those borrowers,” Lucas added in an e-mail. People can call toll-free 866-430-8358 to see if they qualify to be part of the settlement.

A former Pompano Beach homeowner who would only give his first name, Mike, said he called and found that he was on the list to get a check. He said he hired too late an attorney to fight his foreclosure. “I was in denial,” he said. “Divorce, job and house — I lost all three.”

In all, about $1.5 billion will be given nationwide to people who lost homes to foreclosure, with Floridians getting about $334 million.

The agreement covers borrowers who lost their homes to foreclosure from 2008 to 2011 and whose mortgage were serviced by Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo.

The five lenders agreed to a massive $25 billion national settlement earlier this year. By August more than 23,000 struggling Floridians had received $1.7 billion in mortgage relief, including principal forgiveness, loan modifications and the suspension of mortgage payments until a later date, according to an interim report by the independent National Mortgage Settlement Administrator. Floridians will ultimately receive about $8 billion in relief.

Part of that includes money to owners who already have lost homes to foreclosure, including those Floridians served fraudulent “robo-signing” foreclosure notices by the five lenders. State and federal investigations found that the banks had routinely signed foreclosure-related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct.

Roy Oppenheim, a foreclosure defense lawyer in Weston, said the projected $2,000 settlement to each foreclosed homeowner doesn’t go far enough in helping those South Floridians who were tossed out of their homes with such fraudulent paperwork.

“They should have been given more money,” Oppenheim said. “Those were criminal acts.”

But the settlement makes no distinction and gives the same amount, regardless of the circumstances of how people were foreclosed on, Oppenheim said.

Other foreclosure victims have been given much more money, he added. Another unrelated foreclosure settlement, for example, gave $25,000 to each soldier who was foreclosed on while fighting overseas, Oppenheim said.

Real estate analyst Jack McCabe agreed that the estimated $2,000 settlement doesn’t fully resolve the pain of foreclosure. “It’s like pocket change,” he said. Some homeowners, for example, lost tens of thousands of dollars in home equity when they were foreclosed on, McCabe said.

Still, it’s some cash: Most Floridians who lost homes to foreclosure won’t get anything, McCabe added. About 400,000 Floridians were foreclosed on between 2008 and 2011 but the settlement affects only 167,398 of them, he said. About 233,000 others had lenders who aren’t part of the agreement.

In addition, there are now about 339,000 more Floridians fighting foreclosure in court. More than a third — or 38 percent— live in Broward, Palm Beach or Miami-Dade counties, McCabe estimated.

In addition another 530,000 Floridians are more than 90 days late in paying their mortgage and face losing their home, he said.

“We’ve still got a full ways to go before we resolve this foreclosure crisis — another two to three years,” McCabe said.

—————————–

If you believe that you are eligible for relief and have not received a Claim Form, please contact the National Mortgage Settlement Administrator at 1-866-430-8358, Monday through Friday 7 a.m. – 7 p.m. Central Time

Read more: http://www.wptv.com/dpp/news/state/south-florida-foreclosure-settlement-thousands-to-get-about-2k-after-losing-homes-to-foreclosure#ixzz29aIqE4FF

BOA Preparing For Something? 150,000 second liens are released.

150,000 people are receiving letters now telling them that their second tier mortgages are “eliminated.” Whether BOA has the authority to do this depends upon whether they are the creditor in those loans. They may be the creditor in some of them but I suspect that the loans cannot be proven in any chain of title, chain of documents or chain of money transfers.

It eliminates, the possibility that the second tier mortgage holder could move into first position — if this is really effective — in the event that the first tier mortgage is shown to have been defective —- i.e., that the mortgage lien was never perfected. It also clears the way for short-sales that might leave the short-seller handing with one lender saying yes and the other saying no.

The announcement says that the entire unpaid principal balance will be eliminated from their BofA owned OR SERVICED second tier mortgage. It is a strange announcement. If they are only the servicer, and they do not reference getting authority from the creditor, there is the probability that this is an admission that at least the second tier mortgages were somehow satisfied through other means — insurance, credit default swaps or federal bailouts.

The second strange thing is the statement from BofA that if the first mortgage is in foreclosure, then the foreclosure activities MAY continue. This should put all 150,000 homeowners on notice that BofA has some doubts about whether they can prove up a foreclosure using any means or the names of any parties.

We already know that there are tens of thousands of mortgages, notes and obligations that the megabanks cannot track. They have no idea who owns the loans. This is one of the steps taken to try to clean up the mess and stay ahead of regulators who might force a write-down of all mortgage related “assets” on their balance sheet.

And the third thing about this is the argument that only “deserving” homeowners should be getting relief. The preliminary estimate is that this amounts to more than $4.5 billion in mortgages being extinguished. This attempt to potentially ward off a tidal wave of strategic defaults may work in part, but it puts the homeowners on notice that the bank doubts that they can hold into the obligation given the facts that are now in the public domain. Strategic defaulters might just turn into strategic fighters smelling blood. And maybe lawyers will finally get the notion that these cases are winnable if presented correctly and by strictly adhering to the rules of evidence.

“Bank of America to Extinguish up to 150,000 Second Liens,” HousingWire (Oct. 1, 2012)

BOA Deathwatch: $2.43 Billion Settlement — Tip of the Iceberg

“If we know with certainty that misrepresentation to investors lies at the heart of the so-called securitization scheme, why is it so hard for Judges and lawyers to believe that misrepresentation to homeowners lies at the heart of the origination of the loans that were the most important part of the securitization scheme? In fact, why is it so hard for Judges and Lawmakers and Regulators to conceive and believe that Wall Street didn’t securitize the loans at all and only pretended to do so?” — Neil F Garfield, livinglies.me

EDITOR’S ANALYSIS: The settlement sounds big, but Bank of America has already announced that it had “put aside” another $42 billion for the defective acquisitions of Merrill Lynch, an underwriter in the fake securitization scheme, and Countrywide, a sham aggregator of residential mortgage loans.

The facts keep getting reported, but nobody seems to question the meaning of those facts or their consequences. The Wall Street Journal reports that dozens of lawsuits are still pending against BOA from insurers, credit default swap counter-parties and investor-lenders, each alleging that “countrywide wasn’t honest about the quality of mortgage backed securities it issued before the financial crisis. While it is true that pressure was exerted from Hank Paulson to make sure that BOA acquired Merrill and Countrywide to prevent a general financial collapse (you won’t have an economy by Monday if we don’t step in” (quote from Paulson and Bernanke to President George W Bush, it is equally true that BOA management pronounced the deals as the “deal of a lifetime.”

The very fact that BOA failed to peak under the hood before buying the car is ample corroboration of the handshake mentality being leveraged against each other as Banks scrambled to the top of the heap without concern for either their own companies or the country. Their lack of concern for their companies comes from the fact that they were receiving cash bonuses of pornographic size while those acquisitions went sour. Back in the days when management of the investment banks required general partnerships in which the partners could be personally liable, none of this could have happened. If the Bank fell, management didn’t care because they would still be rich whereas in the old days they would have been wiped out.

The settlement announced on Friday gives a very small percentage of money back to investor lenders and shareholders in the bank, both of which consist of groups of people who were largely investing for retirement. Next year, the writing on the wall is clear as a bell: either pension benefits are going to be slashed or there will be another major government bailout of the pension funds, some of which is already provided by law in government guarantees.

Either way, the people are going to be screaming at a continuation of an endless financial crisis that could be stopped on a dime by one simple magic bullet: admitting that the mortgage bonds were pure trash backed by no loans, and thus paving the way for the removal of the “mortgages” or Deeds of trust” that were recorded to secure the loans. But nobody wants to do that because ideology is still controlling the policies and the practical consequences of those policies is that more undeserving banks will be getting free homes for which they neither funded the origination nor the acquisition of the loans because the “originator” was never the lender.

Politically, the Banks are losing traction as representatives of both major political parties step away from the Banks, even while accepting huge donations from them. It is clear that the candidates who are receiving huge donations are probably bound by promises to back the banking industry as they desperate try to avoid the correct legal conclusion that virtually none of the loans were made payable to the lender, and none of the mortgages or deeds of trust were secured by a perfected lien.

It isn’t just that the the loan losses will fall on the Banks that were pulling the strings on the puppets at closings with the investors and closings with the homeowners; their real problems stem from the false claim that they were are holding valuable paper (mortgage backed bonds) whose value would not survive the worksheet of a first year auditor.

With only nominees on the note and mortgage and the obligation being owed to an as yet undefined group of investors whose money was used, contrary to written agreement and oral assurances, to be place bets at the window of the banks and hedge funds around the world and fund managers who were supposedly investing in triple A rated “Stable” securities that were “insured”, the investor lawsuits corroborate what we have been saying for 6 years: if the existing laws of property and contract are applied, neither the promissory note (at least 40% of which were intentionally destroyed) nor the mortgages (deeds of trust) are enforceable for collection or foreclosure.

The homeowner owes money to an undefined group of creditors, the balance of which is unknown because the Banks control the accounting and the accounting leaves out significant insurance proceeds, payments from credit default swap counter-parties, and federal buyouts and bailouts. The Banks are fighting to retain control of that accounting because if some third party starts auditing the money trail they are going to find that the “assets”  claimed by the banks are actually liabilities owed back to the parties that paid 100 cents on the dollar for the entire pool of mortgage bonds, none of which were actually backed by a legal obligation or an enforceable lien.

In short, if borrowers litigate they are fighting to get to the point where the banks and servicers are over a barrel and must settle — but only after making it as difficult as possible. Hence the strategy described in my seminars called “Deny and Discover”.

Because at the end of the day when  the number of cases won by borrowers exceeds the number of successful foreclosures (or perhaps far before that time) the assets are going to disappear and the liabilities are going to pop up in the banks. The consequence is that these banks will either have greatly diminished equity or negative equity — i.e., the BANKS will be Underwater! The FDIC and Federal reserve will thus be required to step in an “resolve these behemoth banks selling off the salable parts to smaller, manageable banks that are not so big they can’t be regulated.

As I survey the landscape, I see no hope for BOA, Citi, Chase or even Wells Fargo to survive the bloodbath that is coming, nor should they. The value of their stock will drop to worthless, which it is now anyway but not recognized, and the value of those regional or community banks and credit unions that pick up the pieces will correspondingly rise. The loans will vanish because the investors have no practical way of determining whose money went into any particular loan; the reason for that is that the money trail avoids the document trail like the plague. There were not trust accounts or other financial accounts in the name of the empty pools that issued the worthless mortgage bonds.

This is where ideology, law and practicality clash because of a lack of understanding of the consequences. The homeowners are getting a house not “free” but unencumbered by the originators who faked them out with false payees, false lenders and false secured parties. But the tax code already takes care of that. This isn’t forgiveness of debt. This reduction, in fact possibly overpayment of the debt was caused by the banks trading with investor money as though the money and the loans were the property of the banks, which they were not.

The effect on homeowners is that they will be required to recognize “income” from the elimination of the obligation, which is taxable and subject to Federal tax liens. The amount of that lien or obligation will be far less than the amount of the original loan, but the government will receive a portion of the savings through taxes, the investor-lenders will be compensated as the megabanks are resolved, and the crisis caused by a disappearing middle class will be over.

That will give us time to devote our attention to student loans and those “Defaults” which were also subject to false claims of securitization and in which the government guarantee was supposedly divided up without government consent as the originator, not caring about loan repayment, pushed students into larger and larger loans. What the participants in THAT fake securitization chain don’t realize is that under existing applicable law, it is my opinion that an election was made: either they had a loan receivable on the books for which there could be government guarantee, or they could reduce the risk by splitting the loans up into pieces and get paid handsomely for simply originating the loan. Simple logic says that the banks could not have both the guarantee from the government PLUS the elimination for risk through securitization in table funded loans that most probably also ignored the closing documents with investor lenders who advanced money for pools in which student loans were supposedly “assigned.”

Vacate the Substitution of Trustee

“The Bottom Line is that if the REMIC transactions were real, they would have been named on the note and mortgage. The fact that they never were named or disclosed demonstrates clearly that something else was going on besides funding mortgages with REMIC money from investors. Nobody would loan money without putting their name as payee on the note, their name as lender on the note and mortgage and their name as beneficiary. The Wall Street explanation that MERS and other obscurities were necessary to securitize the loans is in fact directly contrary to the fact that the loans were never securitized, that the mortgage bonds were bogus obligations from empty REMICs with no bank account and no active manager or trustee.” Neil F Garfield, livinglies.me

A recent case I reviewed, resulted in a full analysis, and my suggestions for strategy, tactics, pleading and oral argument. It involved Bank of America,  Recontrust and BONY/Mellon.

What is again so interesting is that we are dealing with BOA in SImi Valley, CA (supposedly) with Reconstrust in in in Richardson, TX. What is interesting is that the response to my letter which was addressed only to Recontrust came from BOA. This is evidence of the fact that Recontrust are one and the same entity. It doesn’t prove it but it is evidence of it. Thus the challenge to the substitution of trustee comes under the heading that a beneficiary cannot name itself as the trustee. The statute says the TRUSTOR names the trustee on the deed of trust not the beneficiary. And while the beneficiary may change the trustee there is nothing in the statute that even suggests that a beneficiary could name itself as the new trustee. The statute says that the trustee is to substitute for a court of law and that it is to exercise (See Hogan decision and others) a fiduciary duty toward both the Trustor and the beneficiary.

In most cases, the appearance of Bank of America as a beneficiary is via “merger with BAC” which was created to take the servicing rights from Countrywide (not the ownership of the loan). Yet the debt validation letter causes a response to show that the creditor is Bank of America while the Notice of Default shows as having a REMIC as the creditor, which would make the REMIC the beneficiary. So we have a conflict of creditors that comes from the same source.

Since the REMIC is required by law and contract to be closed out within 90 days with the loans in it, and since we know they didn’t do that, the money from the investors was beyond any reasonable doubt channeled through  conduits controlled by the investment banker and not the account of the REMIC because there was no trust account, bank account or any account through which the investor money was channeled and then sued to fund or buy loans. This leads to the inevitable conclusion that the entire scheme is a smoke screen for what really occurred.

Based upon what we know, the REMIC structure was actually ignored when it came to the movement of money. Based upon what we know, Quicken Loans and others acted as “originators”, which is a word that is not really defined legally but it would imply that it was the sales entity to reel in borrowers for a deal. While Quicken Loans was shown as payee on the note and lender on the note and mortgage (deed of trust), Quicken had neither loaned any money nor secured the loan through any legal nexus between Quicken and the investors. MERS was inserted as a placeholder for title purposes. Quicken was thus inserted as a placeholder for payment purposes — all without ad  equate disclosure of the compensation received by MERS or QUICKEN in the deal (a clear violation of TILA and RESPA).

Immediately after the closing of the loan the borrower was informed that the servicing rights had been transferred to Countrywide, and thereafter BAC emerged as the servicer. BAC was formed as a wholly owned subsidiary of bank of America and then merged with Bank of America for unknown reasons, and thus the servicing of the loan was assumed to be the right of Bank of America. But what was there to service?

If Quicken did not advance the funds for the loan nor did Quicken or any of its “successors” advance money for the purchase of a perfectly performing loan, then who did? The answer comes from irrefutable logic. We know the REMIC was ignored so the money didn’t come from the REMIC. If there was an intermediary who was acting as agent for the REMIC it had to be the Trustee for the REMIC who has no trust account or bank account to show for it. Thus the money came from another source and the money taken from investors may or may not have been used to fund the borrower’s loan in this case or more likely, a larger pool of investor funds was used as the source of funding but was NOT documented with the usual promissory note and mortgage (deed of trust) signed by the borrower.

The legal conclusion I reach is that the mountain of paperwork starting with the “origination” of the loan is worthless paper unsupported by either consideration (funding the loan) and whose recitations of facts are at variance with (1) the actual trail of money and (2) the provisions of the documents upon which Bank of America now relies requiring assignment of the loan in recordable form into the REMIC within 90 days while it was still performing. But they couldn’t assign it into the trust because (1) the trust had no money or account with which to pay for the loan and (2) this would have prevented the investment bank from trading the loan and the loan portfolios as if it were the property of the investment bank.

Thus Bank of America is attempting to appear as the new beneficiary based upon a complete lack of any chain of transactions that would make it so. And they are using the cover of BONY as “trustee” as cover for their false and fraudulent representations knowing full well that neither BONY nor the REMIC ever received a dime from investors, borrowers or anyone else and that instead the flow of money was entirely outside the sham paper transactions upon which BOA now relies.

Having covered up an incomplete unexecuted contract without funding the loan, the securitization participants proceeded to act as though the loan transaction with Quicken was real. If they relied upon the original trustee, the original trustee would have required sufficient title and other information from BOA before taking any action against the Trustor borrower.

Thus Bank of America names Reconstrust as the substitute trustee, that will “play ball” with them because Recontrust is owned and controlled by Bank of America. The challenge, as we have said, should be to the substitution of trustee as not having named an objective third party and instead being the equivalent of the beneficiary naming itself as trustee. BY definition, the new trustee is neither likely nor able to exercise due diligence and act in a responsible manner with a  fiduciary duty to the trustor and beneficiary, if they can determine the  identity of the beneficiary.

Thus any TRO or other action should be directed against the substitution of trustee as being outside the intent of the statute and violative of due process since it provides the beneficiary with unfettered ability to sell property merely on a whim.  In order to demonstrate compliance with the requirements of constitutional dude process the legislature had to show that there was a different procedure in place that would allow for the claims of all stakeholders to be heard. Even if the substitution of trustee was valid, the mere denial of the claims of the beneficiary and accusations of fraud, false assignments, and a closing at which the mortgage lien was not perfected, on a note that did not  name the proper payee nor state the same terms of repayment that the investors received when they “bought” the bogus mortgage bonds.

Bottom Line: The Pile of paperwork is worthless and does not create nor provide evidence of an actual transaction that took place wherein the named payee and lender ever fulfilled its part of the bargain — lending money to the borrower. Nor does it present even the possibility of a perfected mortgage lien. Thus foreclosure is impossible. The trustee was and is under an obligation in contested cases to file an interpleader action where the stakeholders’ claims may be heard on the merits. The primary trustee on the deed of trust may have violated its fiduciary duties by allowing the practice that it, of all entities, would or should have known was both illegal and improper. For both procedural and substantive reasons, the notice of default and notice of sale should be vacated and purged from the county records.

FDIC ($677.4 Billion) Charges Banks With Fraud, Illegal Underwriting Practices

Has Obama Awakened?

Appraisal Fraud Alleged by this Blog

is found to be Centerpiece of this Action

Editor’s Note: The FDIC claims it studied a rough sampling of the securitized loans and alleges more than 60% of the loans packed into each deal contain material untrue or misleading statements.

In a resounding acceptance of the principles enunciated first on this blog, the FDIC, being the best regulator to file the charges, has moved against the big banks and servicers in the false scheme of securitization resulting in trillions in losses to the government, investors and homeowners.

Central to the allegations are that “defendants made untrue statements or omitted important information about such material facts as the loan-to-value ratios of the mortgage loans, the extent to which appraisals of the properties that secured the loans were performed in compliance with professional appraisal standards, the number of borrowers who did not live in the houses that secured their loans (that is, the number of properties that were not primary residences), and the extent to which the entities that made the loans disregarded their own standards in doing so.”

The allegations are so serious that it is unlikely that there will be any slap on the wrist coming out of this. The result of this lawsuit will have a profound impact on the housing market, the financial community and best of all, homeowners who have been using these allegations as defenses for years. It is apparent that the false premises upon which the bogus mortgage bonds were sold, combined with the complete avoidance of the supposed securitization scheme that was “in place,” has prompted this huge lawsuit. It is the tip of an iceberg where the administration is finally bringing the war to the door of the banks and will most likely lead to criminal charges as the cases progress.

 

The Federal Deposit Insurance Corp. filed three lawsuits against big banks, alleging the lenders misrepresented the quality of securitized loans sold to the now defunct Texas firm, Guaranty Bank.

The FDIC took Austin, Texas-based Guaranty Bank into receivership back in Aug. 2009.

This week, the regulator filed multiple lawsuits in Austin, Texas, suggesting Guaranty suffered major losses from toxic RMBS loans sold and packaged by mega banks and other financial institutions.

Defendants named in the multibillion-dollar lawsuits includeCountrywide, JPMorgan Chase ($38.04 0%), Ally Financial,Deutsche Bank Securities ($34.07 0%), Bank of America ($8.190%) and Goldman Sachs ($105.32 0%) among others.

FDIC, on behalf of Guaranty, claims the banks misrepresented loan-to-value ratios, underwriting criteria and appraisal amounts when selling, packaging and underwriting home loans that became collateral for mortgage securities sold to Guaranty.

Specifically, the FDIC alleges the financial firms violated federal and Texas securities laws by failing to fully disclose or truthfully represent the quality of mortgages backing the security certificates.

In the first case, the FDIC accuses Countrywide Securities, Bank of America, Deutsche Bank and Goldman Sachs of playing a role in the packaging, selling or securitization of mortgages sold off to Guaranty Bank for $1.5 billion. The suit says Guaranty Bank acquired 8 certificates in the transaction.

The FDIC claims it studied a rough sampling of the securitized loans and alleges more than 60% of the loans packed into each deal contain material untrue or misleading statements.

The FDIC is suing for an undetermined amount that is no less than $559.7 million in damages.

The bank regulator also sued Ally Securities, Goldman Sachs, Deutsche Bank Securities and JPMorgan Securities among others. In that suit, the regulator claims, the firms were involved in the packaging, underwriting and sale of eight RMBS certificates valued at $1.8 billion.

The FDIC alleged in court records that the “defendants made untrue statements or omitted important information about such material facts as the loan-to-value ratios of the mortgage loans, the extent to which appraisals of the properties that secured the loans were performed in compliance with professional appraisal standards, the number of borrowers who did not live in the houses that secured their loans (that is, the number of properties that were not primary residences), and the extent to which the entities that made the loans disregarded their own standards in doing so.”

In that complaint, the FDIC is asking for at least $900.6 million in damages.

The regulator also sued JPMorgan Securities, Merrill Lynch, RBS Securities and WaMu Asset Acceptance Corp., making similar claims about 20 RMBS certificates that Guaranty paid $2.1 billion to acquire. The FDIC is requesting at least $677.4 billion in damages.

Local Governments on Rampage Against Banks’ Manipulation of Credit Markets

Featured Products and Services by The Garfield Firm NEW! 1/2 Day CLE Workshop for Paralegals and Lawyers with Neil Garfield: Building a case book for each client that saves time rather than takes time. NEW! 2nd Edition Paralegal-Attorney Workbook,Treatise & Practice Manual ——–>SEE TABLE OF CONTENTS: WHOSE LIEN IS IT ANYWAY TOC LivingLies Membership – If you are not already a member, this is the time to do it, when things are changing.

For Customer Service call 1-520-405-1688

“When both government and the citizens start acting together, things are likely to change in a big way. There appears to be a unity of interests — the investors who thought they were buying bonds from a REMIC pool, the homeowners who thought they were buying a properly verified and underwritten loan from a pretender lender, and the local governments who were tricked into believing that their loans were viable and trustworthy based upon the gold standard of rate indexes. In many cases, the only reason for the municipal loan, was the illusion of growing demographics requiring greater infrastructure, instead of repairing the existing the infrastructure. As a result, the cities ended up with loans on unneeded products just like homeowners ended up with loans on houses that were always worth far less than the appraisal used.” — Neil F Garfield, www.livinglies.me

Editors Note: Hundreds of government agencies and local governments are on the rampage realizing that they were duped by Wall Street into buying into defective loan products. This puts them in the same class as homeowners who bought such loan products, investors who believed they were buying Mortgage Bonds to fund the loans, and dozens of other institutions who relied upon the lies told by the banks who were having a merry old time creating “trading profits” that were the direct result of stealing money and homes, and misleading the financial world on the status of the interest rates in the financial world. All loans tied to Libor (London Interbank Offered Rate), which was the gold standard,  are now in question as to whether the reset on those loans was true, correct or simply faked.

The repercussions of this will grow as the realization hits the victims of this gigantic fraud broadens into a general inquiry about most of the major practices in use — especially those in which claims of securitization were offered. It is now obvious that the deal proposed to pension funds and other investors was simply ignored by the banks who used the money to create faked trading profits, removing from the pool of investments money intended for funding loans that were properly originated and dutifully underwritten.

Cities, Counties, Homeowners and Investors are all victims of being tricked into loans that were simply unsustainable and were being manipulated to the advantage of the banks they trusted to act responsibly and who instead acted reprehensibly.

The ramifications for the mortgage and foreclosure markets could not be larger. If the banks were lying about the basics of the rate and the terms then what else did they do? As the Governor or of the Bank of England said, the business model of the banks appears to have been “lie More” rather than living up to the trust reposed in them by those who dealt with them as “customers.” Specifically, the evidence suggests that while the funding of the loan and the closing documents were coincidentally related in time, they specifically excluded any reference to each other, which means that the financial transaction as it actually occurred is undocumented and the document trail refers to financial transactions that did not involve money exchanging hands.

The natural conclusion created by the coincidence of the funding and the documents was to conclude that the two were related. But the actual instructions and wire transfers tell another story. This debunks the myth of securitization and more particularly the mortgage lien. How can the mortgage apply to a transaction described in the note that never took place and where the terms of the loan were different than what was expected by the creditors (investors, like pension and other managed funds) in the mortgage bond. The parties are different too. The wires funding the transaction are devoid of any reference to the supposed lender in the closing documents presented to borrowers. Thus you have different parties and different terms — one in the money trail, which was undocumented, and the other in the document trail which refers to transactions in which no money exchanged hands.

When the municipalities like Baltimore start digging they are going to find that manipulation of Libor was only one of several issues about which the Banks lied.

Rate Scandal Stirs Scramble for Damages

BY NATHANIEL POPPER

As unemployment climbed and tax revenue fell, the city of Baltimore laid off employees and cut services in the midst of the financial crisis. Its leaders now say the city’s troubles were aggravated by bankers’ manipulation of a key interest rate linked to hundreds of millions of dollars the city had borrowed.

Baltimore has been leading a battle in Manhattan federal court against the banks that determine the interest rate, the London interbank offered rate, or Libor, which serves as a benchmark for global borrowing and stands at the center of the latest banking scandal. Now cities, states and municipal agencies nationwide, including Massachusetts, Nassau County on Long Island, and California’s public pension system, are looking at whether they suffered similar losses and are weighing legal action.

Dozens of lawsuits filed by municipalities, pension funds and hedge funds have been consolidated into a few related cases against more than a dozen banks that are involved in setting Libor each day, including Bank of America, JPMorgan Chase, Deutsche Bank and Barclays. Last month, Barclays admitted to regulators that it tried to manipulate Libor before and during the financial crisis in 2008, and paid $450 million to settle the charges. It said other banks were doing the same, but none of them have been accused of wrongdoing. Libor, a measure of how much banks must pay to borrow money from one another in the short term, is set through a daily poll of the banks.

The rate influences what consumers, businesses and investors pay on a wide range of financial contracts, as varied as mortgages and interest rate swaps. Barclays has said it and other banks understated the rate during the financial crisis to make themselves look healthier to the public, rather than to make more money from clients. As regulators and lawmakers in Washington and Europe assess the depth of the Libor abuse and the failure to address it, economists and analysts are already predicting it could be one of the most expensive scandals to hit Wall Street since the financial crisis.

Governments and other investors may face many hurdles in proving damages. But Darrell Duffie, a professor of finance at Stanford, said he expected that their lawsuits alone could lead to the banks’ paying out tens of billions of dollars, echoing numbers from a recent report by analysts at Nomura Equity Research.

American municipalities have been among the first to claim losses from the supposed rate-rigging, because many of them borrow money through investment vehicles that directly derive their value from Libor. Peter Shapiro, who advises Baltimore and other cities on their use of these investments, said that “about 75 percent of major cities have contracts linked to this.”

If the banks submitted artificially low Libor rates during the financial crisis in 2008, as Barclays has admitted, it would have led cities and states to receive smaller payments from financial contracts they had entered with their banks, Mr. Shapiro said.

“Unambiguously, state and local government agencies lost money because of the manipulation of Libor,” said Mr. Shapiro, who is managing director of the Swap Financial Group and is not involved in any of the lawsuits. “The number is likely to be very, very big.”

The banks have declined to comment on the lawsuits, but their lawyers have asked for the cases to be dismissed in court filings, pointing to the many unusual factors that influenced Libor during the crisis.

The efforts to calculate potential losses are complicated by the fact that Libor is used to determine the cost of thousands of financial products around the globe each day. If Libor was artificially pushed down on a particular day, it would help people involved in some types of contracts and hurt people involved in others.

Securities lawyers say the lawsuits will not be easy to win because the investors will first have to prove that the banks successfully pushed down Libor for an extended period during the crisis, and then will have to demonstrate that it was down on the day when the bank calculated particular payments. In addition, investors may have to prove that the specific bank from which they were receiving their payment was involved in the manipulation. Before it even reaches the point of proving such subtleties, however, the banks could be compelled to settle the cases.

One of the major complaints was filed by several traders and hedge funds that entered into futures contracts that are traded through the Chicago Mercantile Exchange and that pay out based on Libor. These contracts were a popular way to protect against spikes in interest rates, but they would not have paid off as expected if Libor had been artificially lowered.

A 2010 study cited in the suit — conducted by professors at the University of California, Los Angeles and the University of Minnesota — indicated that Libor was significantly lower than it should have been throughout 2008 and was particularly skewed around the bankruptcy of Lehman Brothers.

A separate complaint filed in 2010 by the investment firm Charles Schwab asserts that some of its mutual funds, including popular ones like the Schwab Total Bond Market Fund, lost money on similar investments.

The complaints being voiced by municipalities are mostly related to their use of a popular financial contract known as an interest rate swap. States and cities generally enter into these swaps with specific banks so that they can borrow money in the bond market. They pay bondholders based on a floating interest rate — like an adjustable-rate mortgage — but end up paying their bankers a fixed rate through a swap. If Libor is artificially lowered, the municipality is stuck paying the same fixed rate, but it receives a smaller variable payment from its bank.

Even before the current controversy, some municipal activists have said that banks took advantage of the financial inexperience of municipal officials to sell them billions of dollars of interest rate swaps. Experts in municipal finance say that because of the particular way that cities and states borrow money, they are especially liable to lose out on their swaps if Libor drops.

Mr. Shapiro, who helps cities, states and companies negotiate these contracts, said that if a city had interest rate swaps on bonds worth $1 billion and Libor was artificially pushed down by 0.30 percent, which is what the lawsuits contend, that city would have lost $3 million a year. The lawsuit claims the manipulation occurred over three years. Barclays’ settlement with regulators did not specify how much the banks’ actions may have moved Libor.

In Nassau County, the comptroller, George Maragos, said in a statement that according to his own calculations, Libor manipulation may have cost the county $13 million on swaps related to $600 million of outstanding bonds.

A Massachusetts state official who spoke on the condition of anonymity because of potential future legal actions, said the state was calculating its potential losses.

“We are deeply concerned and we are carefully analyzing all of our options,” the official said.

Anne Simpson, a portfolio manager at the California Public Employees’ Retirement System — the nation’s largest pension fund — said that the fund’s officials “are sifting through the impact, but there certainly is an impact.”

In Baltimore, the city had Libor-based interest rate swaps on about $550 million of bonds, according to the city’s financial report from 2008, the central year discussed in the lawsuit. The city’s lawyers have declined to specify what they think Baltimore’s losses were.

The city solicitor, George Nilson, said that the rate manipulation claims meant that the city lost out on money when it needed it the most.

“The injury we suffered during the time we suffered it hurt more because we were challenged budgetarily,” Mr. Nilson said. “Every dollar we lost due to illegal conduct was a dollar we couldn’t pay to keep open recreation centers or to pay police officers.”

BUY THE BOOK! CLICK HERE!

BUY WORKSHOP COMPANION WORKBOOK AND 2D EDITION PRACTICE MANUAL

GET TWO HOURS OF CONSULTATION WITH NEIL DIRECTLY, USE AS NEEDED

COME TO THE 1/2 DAY PHOENIX WORKSHOP: CLICK HERE FOR PRE-REGISTRATION DISCOUNTS