Cash for keys is an offer from somebody that basically says that you are no longer the owner of the property, we can get an order of eviction, we can get the sheriff to throw you out, or you can accept $1,000 (or whatever the amount is in the offer) and get out on your own.

If you accept such a deal do not sign anything except a document that says you are acknowledging payment and that you will vacate the property. If the offer contains any language that looks like a release of other claims, do not sign it unless you have decided, after consulting local counsel, that you are willing to give up what might be very substantial claims against the lender which can always be brought after the sale. 

Cash for keys is a good option if you are giving up anyway. And nobody can blame you from walking away from a fight that you don’t understand, that you can’t match the resources or power of your adversary, and where you don’t know what to do and have no knowledge of the outcome of fighting this. Being out of money doesn’t help either.

So whatever decision you make is understandable and RIGHT FOR YOU because you made it. There is no right and wrong here except that what the lenders did here in conspiracy with Wall Street was clearly wrong.

ALL THAT SAID —- MY SUGGESTION IS THAT YOU FIGHT ON AND HAVE AN EMERGENCY PLAN B READY IF YOU NEED IT. AND CONSULT WITH COMPETENT COUNSEL BECAUSE THIS IS GENERAL INFORMATION AND NOT LEGAL ADVICE IN YOUR PARTICULAR CASE.

If you delay the eviction through bankruptcy (you can get one of those do it yourself kits) you should probably send a letter registered mail return receipt requested to the lender and file a Chapter 13, along with an adversary proceeding which says basically that the lender committed many violations of the Federal Truth in Lending Act (TILA), that you are entitled to an accounting for all interest paid, all points paid, and a refund of all out-of pocket expenses associated with finance charges or the costs of closing on the loan, and that you hereby rescind the transaction.

Under TILA (see my recent BLOG posts) this eliminates both the security interest and the debt.

You must allege that the lender procured title through trickery and fraud, that they have no security interest, that they have no entitlement to payment, and that they are NOT the owner of the actual security instrument nor the debt which has been sold as a collateralized mortgage obligation to a third party investor who has never been joined in the prior proceedings; thus they failed to join an indispensable party which means that the prior procedures which resulted in transfer of title were not only procured by trickery, fraud on the court, and overreaching, they did so without properly or legally invoking the jurisdiction of the local government that authorizes judicial and non-judicial sale.

Thus the taking of the title was an unconsitutional denial of due process, void ab initio (at inception) and therefore unenforceable by any court.

Hence when they (the lenders) move for relief from stay, you can point to their lack of standing because they did not legally or properly obtain title and you have rescinded (attach copy of your letter) so they don’t have the option of clearing it up.

Now here is the kicker.

Under TILA, when you are NOT REPRESENTED By COUNSEL the Judge, especially if it is in Federal Court (which is the case in all bankruptcies) MUST in essence act as your lawyer and review the facts, the allegations, the case law and the circumstances to determine if there is ANY basis to support the relief you are asking for or to deny the relief the lender is asking for.

In other words you are better off not having a lawyer than having one who barely knows what he or she is doing. The bankruptcy judges are almost universally well-schooled in the law and very sharp. You couldn’t have a better lawyer! Of course if you DO know a very competent attorney who is familiar with these concepts, then you are better off going with the lawyer than without one.

I WANT YOUR STORIES!!!

HERE IS WHAT I JUST RECEIVED FROM A LAWYER I KNOW —

This one who I have been corresponding with sent me an e-mail describing the events of her “closing” where she was told by the Countrywide loan officer that her dad’s life estate did not need to go on the mortgage, and the “closing” took place at a little table in a Barnes & Noble bookstore with a line of people waiting to “close” in a frantic fashion.

 

Jesus! Assembly-line closings in bookstores, forged signatures on loan documents, etc. all obviously railroaded through to get the “bundle” together for resale to Bear Stearns or whoever. This is beyond ugly.

CLINTON — MCCAIN FORECLOSURE FREEZE GETS COLD SHOULDER BUT SOUNDS GOOD

Well here is a version (SEE ARTICLE BELOW) of what we have been pushing for months —- changing the terms of the mortgages so that the homeowner can stay in the house and the mortgage can be modified, sold or recast for capital accounting. This is a lot more sophisticated than the “mortgage freeze” proposed by Clinton and McCain and it is working already so we can’t dispute the success.

• The problem with a “mortgage foreclosure freeze” is that it is a sound bite that doesn’t really mean anything — like the gas tax holiday. It doesn’t address any of the problems but it gives rise to the illusion that the homeonwer is getting some relief.
• The problem for Obama is that he sounds like he is against providing relief because he understands the nuances of how to get that relief — without pandering for votes. People don’t like nuance and don’t have the time for complex answers. So they vote against themselves based on sound bites, hoping gas prices will go down (they won’t) and that their house will be saved by just doing one thing like a freeze on foreclosures that lasts ninety days (that won’t work either).

There is no Clinton-McCain plan for relief because no order, legislation or rule is pending that will freeze anything and nothing is pending. Hillary and John are just blathering. They haven’t ACTUALLY proposed the plan by introducing a bill on the Senate floor. The plan of these pandering politicians is get elected (the people be damned): the method is to make use of time-honored sound bites that consist of misleading statements and outright lies. The truth is that neither McCain nor Clinton has a clue about gas prices or mortgages.

Although this trading of mortgage obligations is obviously providing some relief, it doesn’t address the root cause of the mortgage meltdown. And much as I don’t care for the people or their methods who perpetrated this fraud on the world, there is no REAL solution unless some value is restored to the balance sheet of financial institutions and investors who purchased the collateralized mortgage obligations. Thus combining attributes of this plan with a more comprehensive plan to restore the capital reserves of financial institutions and investors would be preferable.

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HOUSING

Investors move in to save broken mortgages

By E. Scott Reckard
Los Angeles Times Staff Writer

May 1, 2008

Jared Lanning, struggling to pay a home loan on which he owed more than his house was worth, was thinking he might just let the lender take back the property. Then he got a call one evening from an Orange County investor who had bought his mortgage.

“I want out of your loan,” said the investor, Evan Gentry, chief executive of G8 Capital of Ladera Ranch, who offered to lower the balance and the interest rate.

Lanning, a crane operator in Englewood, Colo., was skeptical. A phone pitch, after all, had led to his getting the unaffordable loan in the first place. But Gentry was legit: He helped Lanning get a new Federal Housing Administration-insured mortgage — with a $12,000 lower balance. Gentry also paid $5,000 in closing costs for the new loan. Lanning’s new monthly payment is $200 less than before.

Investors — including big fish like former Countrywide Financial Corp. President Stanford Kurland as well as smaller fry like Gentry — are buying loans on the cheap from lenders who want them off their books. By paying less than face value for the mortgages, the new holders can modify loan terms, including shrinking the amount owed, and still make money.

With some economists projecting 2 million foreclosures this year, legislators and regulators are hoping to encourage wide use of this model. They want lenders and investors in mortgage bonds to mark down what borrowers owe and then provide them with lower-cost loans. It’s a tricky business: No one wants to be seen as bailing out speculative buyers or imprudent lenders, but they also don’t want mass foreclosures to devastate neighborhoods and the economy.

The Federal Deposit Insurance Corp. described the problem Wednesday as “a self-reinforcing cycle of default, foreclosure, home price declines and mortgage credit contraction, the likes of which we have not experienced since the 1930s.” The agency is proposing that the government lend $50 billion to 1 million borrowers to help them replace unaffordable loans.

Sub-prime mortgages with interest rates ratcheting higher have proved less of a problem than once feared, because interest rates overall have dropped. But a “toxic combination” of falling home prices and borrowers who can’t afford even the initial low rates on adjustable loans is now the issue, FDIC Chairwoman Sheila C. Bair said in an interview this week.

“Many more borrowers are under water,” she said. “And many more are just walking away.”

Many people bought homes with nothing-down loans at the peak of the housing boom — 29% of all buyers in 2007 made no down payments, Treasury Secretary Henry S. Paulson Jr. said recently. Others have sucked all their equity out of their properties with refinancings.

According to Moody’s Economy.com, some 8.8 million Americans — more than 10% of all homeowners — owe more than their houses are worth, although a Mortgage Bankers Assn. economist contended the figure was lower, perhaps 8%. In any case, there is wide agreement that many of those troubled borrowers have proved surprisingly ready to abandon their properties, even when lenders offer to modify their loan terms as they were encouraged to do by the Bush administration.

“We are working with borrowers to keep them in their homes, but a lot of them really don’t want to stay,” said Babette Heimbuch, chairwoman of FirstFed Financial Corp. of Los Angeles, a savings and loan operator that specialized in adjustable-rate mortgages, including many that were made without full documentation of borrowers’ incomes.

FirstFed has about $6.3 billion in loans on its books. It said that $667 million of that balance, more than 10%, was delinquent or in foreclosure as of March 31, up from just $46 million a year earlier. FirstFed said Wednesday that it lost $69.8 million, or $5.11 a share, during the first quarter this year compared with a profit of $8.4 million, or 61 cents, a year earlier. It set aside $150.3 million for loan losses during the quarter, up from $3.8 million during the first quarter of 2007.

Because FirstFed kept most of its loans on its books rather than selling them, it should have been easier for the company to work with borrowers to modify the loans. Heimbuch said FirstFed forecloses only after analyzing 10 other options to offer the borrower, including lowering the interest rate; changing to a five-year, fixed-rate loan requiring payment of interest only; and writing down the loan balance.

Still, she said, up to 50% of borrowers who miss payments don’t respond to letters and repeated telephone calls to see if something can be worked out.

Some customers had acquired second mortgages and couldn’t make new arrangements with the other lender, she said. “I think some know they told us the wrong income and are afraid to come clean, though we would still work with them . . . to keep them in their homes if possible.”

For struggling borrowers, it’s a big mistake not to return such calls these days, said Gus A. Altazurra, a veteran mortgage executive who recently raised $10 million from private investors to buy and modify loans for which homeowners are still making payments.

“They’re probably going to help you, given the current situation,” said Altazurra, whose Irvine-based Vertical Fund Group has been negotiating with lenders of all sizes to buy loans. He said “a flood” of mortgages went up for sale in April after lenders closed their books on a horrendous first quarter.

Altazurra, who has paid as little as 31 cents on the dollar for some loans, said the terms of some mortgages made at the peak of the boom were hard to believe. One loan he bought from a Texas bank was to a borrower with a very low credit score — 484 — who refinanced and cashed out 100% of the equity in the property, he said.

Gentry, the other Orange County loan buyer, said he had obtained commitments from investors to provide $100 million in capital for workouts on loans that have stopped paying, current loans that can no longer be sold and foreclosed properties. He has bought nearly $50 million in mortgages and property so far.

Gentry purchased Lanning’s loan in a pool of mortgages from a San Diego lender that was going out of business. He said that on average his private venture was paying 70 cents to 80 cents on the dollar for loans like Lanning’s that were still current, and “less if the loans are nonperforming.”

Lanning had no home equity left — and thus had little incentive to keep sacrificing to make payments — before he got the smaller, cheaper FHA loan. Now his outlook has changed.

“We can’t do anything frivolous now,” he said. “But if we do it right, we have enough. That other loan was just pushing us over the top.”

We the People: Fighting Back

At first the U.S. Constitution was written without the Bill of Rights — 10 Amendments that spelled out the specifics of what the founders were looking for when they established the Republic for which we stand. When you read the whole Constitution, which isn’t long, and the Bill of Rights, which isn’t long either, you see something that isn’t in our social studies. There are FOUR sources of power, checks and balances, not three as everyone keeps saying.

The U.S. Constitution provides for three of them and hints at the fourth. It provides for the Executive Branch, the Legislative Branch, and the Judicial Branch.  Anyone with a passing knowledge of our system of government probably knows that.

But the Constitution starts out with “We the people” indicating, as Thomas Jefferson did, that all government, including the three branches established by the Constitution, derive their power from consent of the governed (the people) and are subject to the power of the people to change it. You might argue that this was a declaration delegating the power of the people to the three branches of government created.

The Bill of RIghts clears up any miscalculation by providing in the 9th Amendment, that all powers not reserved to the Federal Government and the States reside in the people. It also spells out many powers that are NOT allowed to either the Federal or State governments, including freedom of speech, a free press, freedom of assembly, freedom to petition to redress grievances, freedom to keep and bear arms, the right to equal protection, the prohibition of taking life, liberty or property without due process of law and many others.  

So it is not surprising that people are awakening to their power and exercising it as they defend their home, their lives and their property from predatory practices of financial institutions. Foreclosure and repossession are not the only options. People are refusing to go along with the regular business as usual and finding tiny slip-ups the predators made when they had the victims sign documents that were guaranteed to put them in debt for the rest of their lives. 

Make allegations of violations of truth in lending, claim rescission, fraud, treble damages, RICO conspiracy, Securities Fraud,  illegal kickbacks to mortgage brokers etc. Make the creditors work like they never had to work before. Make it sound like a class action. Get help.

I have a publication coming out in 45 days called Garfield’s Handbook for Borrowers in the Mortgage Meltdown including many defense strategies and the forms you can photocopy and send in without a lawyer. The Courts are duty bound to help you if you don’t have a lawyer. If you do get a lawyer, show him the book. If you want an advance copy of the manuscript, contact me at ngarfield@msn.com. The retail price is $19.95, but the pre-publication price is only $24.95. I can send it to you via email or you can order it in hard copy for $24.95 plus $6.00 shipping and handling. And if you want other people joining you in this crusade, it would behoove you to make sure they buy a copy rather than pirate it from you. It is going to take money to set up an infrastructure to get everyone the help they need.

Bankruptcy, state and federal judges are getting the message too. But we all know that nothing effective will come from the executive branch until a few months after the next President is sworn in (January 20, 2009). By then things will have fallen into hell and a hand bag. We also know that the legislative branch won’t be able to do anything meaningful, if they ever do, until new congress convenes after January 1, 2009. And Judges while sympathetic, need something to hang their hat on to justify equitable relief that stops mortgage contracts, notes, loans documents, and other transactions from running their course. 

In short they need you to stand up and say NO!

Start with sending form letters to all your creditors including credit cards, claiming that they have been overcharging you on fees, interest and minimum payments and that you contest the balance due.  Put the burden on them. If you live in a state like Arizona (A “trust deed state”) go down to the clerk’s office and get the forms necessary to contest the filing of the notice of foreclosure and eviction. If you get an order of eviction, don’t leave. They must still go to court and get an order to get you out.

Even after the order is entered, the only way they can get you out is if the sheriff send deputies to take you and your stuff out. If enough of you do this (and the number is already growing) neither the Court nor the Sheriffs will have the manpower to deal with the crisis and neither will they politcially want to be part of that problem. Give them the excuse and they will slow down or even back away.

If you have a choice between paying credit cards, or hospitable bills and paying your mortgage, then pay your mortgage but don’t give up on the attack against these creditors — all of them. The credit card companies generally don’t even sue and even if they do, they can’t take your house. Only the mortgage lender can do that. 

If you have a choice between paying your home equity line of credit and the first mortgage, pay the first mortgage.  If your equity has disappeared or turned negative, the LOC lender will have no choice but to make some deal with you.

Speaking of deals — approach the lenders from a position of strength. Get some help from people are aggressive advocates, whether they are financial advisers, lawyers, or accountants and go after them.  I have a website under construction at GTC-Consulting-Financial-Workout.bizsitepro.com.

Present them with a proposal that minimizes or eliminates the write-off and keeps your payments within bounds that you can afford. The lender and the investors that took the risk off the lender’s hands, will be in a position where they don’t have to write-off huge sums of money that will depreciate the value of their publicly traded stocks. Each deal they save represents $ millions to them in their stock price (and potential liability far in excess of the loan or investment itself). The leverage is on your side now. If these predators don’t cooperate now, they risk jail.

When you make the deal, do NOT accept an increasing mortgage balance. You don’t need to despite their demands that you do.  If the lender forgives part of the mortgage balance it is no longer a tax event to you. No taxes are do from you. The best deal will look something like this:

1. Make certain, in writing, that the mortgage lender agrees to file any report necessary to repair or preserve your credit score. 

2. Mortgage balance is no more than the amount you originally borrowed, less any principal payments made.

3. Future payments are what you can presently afford, so long as you can cover the utilities, taxes, insurance, and maintenance of the house (a vacant house is a tremendous liability to the financial institutions after foreclosure) and something toward the loan even if it doesn’t cover the minimum payment for interest. 

4. A seven year minimum period during which there will be no change of payments, no threat of foreclosure, no threat of eviction as long as you make the minimum payments described above.

5. In the event of refinancing the house within the seven year period, you owe them only what you originally borrowed less any principal payments paid to them, and they waive all costs and accept the cost of any recording, points, fees or other expenses on the refinancing. 

6. In the event of sale of the house, you get everything up to the original purchase price of the house. After that you share with the Financial institution, 50-50 up to 20% over the original price. After that it is all yours.

7. Do NOT accept any payment or amendment that mentions inflation or any index that is tied to inflation. This provision alone will kill you financially.

8. The more trouble you cause, the better the message will travel up the line through the mortgage broker, the lender, the investment banker and the investor that they have liability here, and they could lose not only the loan, but be paying damages as well.

9. Get together in groups. Find other people in the same situations. It does not have to be identical. Get in touch with your state’s attorney general, who is probably already taking action against the perpetrators of this massive fraud. Get in touch with any one or more of the attorneys who have so far filed more than 40 class action suits against the lenders, the investment bankers, the rating companies that said these were triple AAA securities and the retail securities brokerage houses. 

10. DO NOT GIVE UP. People high up in Federal, State and Local government understand full well that unless this monster is stopped in its tracks, the economy could actually fail and the dollar, once king in the international markets, could be worthless. 

11. FORGET ABOUT BLAME: Everyone in this scheme must be saved. You are all to blame to some extent from borrower through investor. We don’t have time for blame or prosecutions or investigations. We need remedies. Everyone is going to be affected by this. Some people will make a lot of money on the decline of the dollar. Some already have. But most people are going to be caught with their pants down and not realize until it is too late that they have been stripped of what they thought was their wealth. 

Yes it is true that you didn’t read the fine print. But how much would you have understood in the mountain of paperwork you signed. I am NOT an attorney licensed to practice in Arizona which gives me some leeway in what I can say and do for you. On the other hand I am an Attorney licensed to practice in Florida, in Federal Courts, Federal Trial Bar, and Federal bankruptcy Bar. So it isn’t like I don’t know what I am talking about. I am 60 years old and would be retired except for one thing — I am outraged at what happened to the two million (minimum) other people who will fall victim to foreclosure and eviction if you don’t fight back.

Not only were you suckered into signing papers you didn’t understand, not only did you invest every last nickel you had in furnishing the house, but you were double slammed if you own any securities of any mutual fund, financial institution or company that bought the “CDO” (collateralized debt obligation) that your signature was used as proof of security. Bet you didn’t know that. In other words through the investments of you and your neighbors and friends and relatives you were twice suckered into creating “free money” which enabled investment banks, lenders, mortgage brokers and even real estate brokers, and mortgage servicing companies are all making money even now! They basically got you, as a group, to lend money to yourselves and then charged for the privilege of doing it.

And they are still making money on your mortgage even though you are not paying anything. You see they are hitting your account even now just to drive by and make sure the house is occupied and for dozens of other fees you know nothing about — fees they know you will never pay as borrower but they are sticking it to the person (like you or your neighbor that has a 401k, Roth IRA, pension or other investment) who pout up the money in the first place. Despite the declining home values there is still value to these homes, and these middlemen are going to clean out the pockets of both the homeowner/borrower and the investors before they give up a nickel.

Stop the raping of the middle class by these predators. I worry not only about you but about my children and grandchildren. So I want you to fight back, with or without my help. And I want you to do it through COLLECTIVE ACTION. Make your comment here. It is merely and expression of support to everyone who has fallen into this predicament through the actions of unscrupulous predators from Wall Street and beyond.

There are proven methods (referred to by Donald Trump on Larry King Live) by which you can recover or prevent the stealing of your home through “legal” means and to maintain the one investment you made in good faith without knowing you were the victim of a huge worldwide scam in which more than $3.5 trillion dollars was generated and kept in the pocket of a select few at the top of the monetary food chain. This is going to be a political battle as well as a legal one. There is no guarantee of success and there is no free ride.

We can game the system too by a variety of means including the slogan “just say no!”. Make them go all the way to get you out. The Sheriff charges them for that. Make it as expensive for them to process these foreclosures as possible and make each case unique. Stop them from mass producing the foreclosure suits, the auctions and the evictions using intimidation and slight of hand (same way they got you  into this mess) to get you to cooperate through despair and giving up the last rights you have. You have more power than you think!

Consider that it is you who should be outraged, that nobody is going to help you unless you help yourself, and that through individual and collective action, anything is possible no matter what the law currently says. The sheriff only has a few people who can deal with the eviction process. We can make that very difficult for them and more expensive for the lenders. State Senators and Legislators want to be re-elected. Nothing is going to hit harder than this house of cards falling on our cities.

Get mad and get even.