The US BANK-BOA-LaSalle-CitiGroup Shell Game

‘The bottom line is that the notice of substitution of Plaintiff in judicial states, or notice of substitution of Trustee in non-judicial states should be the first line of battle. Neither one of them is valid and in both cases you have a stranger to the transaction being allowed to name itself as creditor, name its own controlled entity or subsidiary as trustee, and then ignore the realities of the money paid to the real creditor. They are claiming damages from the borrower — all for a debt that in the ordinary course of things has already been paid several times over. But it is true that it wasn’t paid to THEM because THEY were never and are not now the creditor fulfilling the definition of a creditor who could bid at the foreclosure auction. It is not that the borrower doesn’t owe money when he borrows it, it is that he doesn’t owe it to any of the people who are claiming it. And that is what gives rise to liability of law firms to borrowers.” Neil F Garfield, http://www.livinglies.me

If our information can be corroborated through discovery with a corporate representative of US BANK or Chase Bank as the servicer, it is possible that a solid cause of action can be filed against the law firm that brought the action, particularly if the law firm took its instructions from the Desktop system of LPS.

In that system law firms are instructed to file foreclosures without contact with the actual client. We saw several cases where sanctions were levied against lawyers and their alleged clients, but none so stark as the one in Florida where the lawyer for US Bank as Trustee for XXX, when faced with questions he couldn’t answer admitted that he had never spoken with anyone from U.S> Bank and didn’t know who had retained his firm.

The law firm that brought the foreclosure action and especially the law firm that is demanding an assignment of rent to protect a creditor who has already been paid through non stop servicer advances was most likely not authorized to demand the assignment of rents which might be why there was no written demand as required by statute. I am considering the possibility of an actual lawsuit against one such law firm for interference with contract on both the foreclosure and the assignment of rents issue.

The Banks are being very cagey about this system — one which they would never use for their own portfolio loans, which begs the question of why they would have two entirely different system of accounting and legal process. But the long and the short of it is that LPS in Jacksonville, Florida is used much the same way as MERS. It maintains a database service that requires a user name and password and that gives unlimited access to the client folders. Anyone can go in and authorize the foreclosure based upon a default that is invested by the person entering the data. They leave out any servicer advances or other third party payments and arrive at an amount to reinstate that is just plain wrong. So virtually all notices of default are wrong which means that the required notice is defective.

You should know that many judges appear unimpressed that there was no valid assignment of the mortgage. I think that it is clearly reversible error. The assignment frequently is clearly fabricated and back-dated because of references to events that happened a year after the assignment was executed. The assignment clearly did not exist at the time of the lawsuit and the standing issue is clear under Florida law although some courts are balking at the idea that standing cannot be cured after the lawsuit. The reasoning is quite simple — if it were otherwise, you could file suit against a grocery store for a slip and fall, and the go over to the store to have your slip and fall.

In one of my cases involving multiple properties, they have an assignment that was prepared and executed by Shapiro and Fishman supposedly dated in 2007 —- but it refers to Bank of America as successor by merger to LaSalle. it is backdated, fabricated and fictional, which is to say, fraudulent.

The assignment has two problems -– FACIALLY DEFECTIVE FABRICATION OF ASSIGNMENT:  the first problem is that the alleged BOA merger with LaSalle could not have happened before 2008 — one year after the assignment was executed. So the 2007 assignment refers to a future event that was not reported by BOA until 2008, and was not approved by the Federal Reserve until 2008. On its face, then, based upon public record, the assignment is void as a total fabrication.

The second problem is that it is unclear as to how the merger could have occurred between BOA and La Salle, to wit:. you might need to read this a few times to understand the complexity of the issues involved — issues that few judges or lawyers are interested enough to master.

LASALLE ABN AMRO ACQUISITION:
Since neither entity vanished in the deal it is an acquisition and not a merger. LaSalle and ABN AMRO did a reverse merger in 2007.

That means that while LASalle was technically the acquirer, because it “bought” ABN AMRO, and ABN AMRO became a subsidiary — the reality is that LaSalle issued so many shares for the acquisition of ABN AMRO that the ABN AMRO shareholders received the overwhelming majority of LaSalle Shares compared to the former owners of LaSalle shares.

Hence in substance LaSalle Bank was a subsidiary of ABN AMRO and the consolidated financial statements show it. But in form it appears as the parent.

So if someone, like BOA, was to say they merged with or acquired LaSalle, they would also be saying that included its subsidiary ABN AMRO — and they would have to do the deal with the shareholders of ABN AMRO because those shareholders control LaSalle Bank, which brings us to CitiGroup —-

CITIGROUP MERGER WITH ABN AMRO: Also in 2007, CitiGroup announced and continues to file sworn statements with the SEC that it had merged with ABN AMRO, which means, if you followed the above, that CitiGroup actually owned LaSalle. It looks more like an acquisition than a merger to me but the wording makes it unclear. This would mean that LaSalle still technically exists as a subsidiary of  CitiGroup.

ALLEGED BOA MERGER WITH LASALLE: In 2008 the Federal Reserve issued an order approving the merger of BOA and LaSalle, in which case LaSalle vanishes — but ABN AMRO is the one with all the assets. BUT LaSalle is named as Trustee of the asset pool. And the only other allowable trustee would be another bank that merged with LaSalle as a successor without the requirement of filing more papers to be a Trustee and BOA clearly qualifies on all counts for that. Section 8.09 of PSA.

But the Federal Reserve order states that the identities of ABN AMRO and LaSalle are the same and the acquisition of one is the acquisition of the other — thus unintentionally ratifying CitiGroup’s apparent position that it owns ABN AMRO and thus LaSalle.

Findings of fact by an administrative agency are presumptively true although subject to rebuttal.

Here is the kicker: there is no further mention in any SEC filings of a merger between BOA and LaSalle, unless I missed it. There is no reference to the fact that CitiGroup controlled LaSalle and ABN AMRO at the time of the Federal Reserve order approving the BOA merger with LaSalle Bank in 2008.

CitiGroup has not, to my knowledge ever reported the sale or loss or merger of LaSalle. Since Citi made the acquisition before BOA, and since BOA apparently did not buy LaSalle from Citi, how could BOA claim to be a successor by merger with LaSalle?

Hence there are questions of fact as to whether BOA ever consummated any transaction in which it acquired or Merged with LaSalle, which while technically possible, makes no business sense. UNLESS the OBJECTIVE was to transfer the interest of LaSalle as trustee to BOA, as a precursor to a much wider deal in which BOA then sold its position as Trustee to US Bank as a  commodity and then filed in the Kalam cases a notice of substitution of Plaintiff without amending the pleadings.

US BANK Notice of Substitution of Plaintiff without Any Motion to Amend Pleadings: The reason they filed it as a notice was that they obviously did not want to allege the purchase of “being a trustee”, which would have been a contested issue in the pleadings. But the amendment is required in my opinion and there should be a motion to strike the notice of substitution of Plaintiff without amendment. The motion to strike should state that no objection to granting the order to amend, but that the circumstances should be pled and we should be able to respond with a denial and affirmative defenses if you choose.

ALERT: COMMUNITY BANKS AND CREDIT UNIONS AT GRAVE RISK HOLDING $1.5 TRILLION IN MBS

I’ve talked about this before. It is why we offer a Risk Analysis Report to Community Banks and Credit Unions. The report analyzes the potential risk of holding MBS instruments in lieu of Treasury Bonds. And it provides guidance to the bank on making new loans on property where there is a history of assignments, transfers and other indicia of claims of securitization.

The risks include but are not limited to

  1. MBS Instrument issued by New York common law trust that was never funded, and has no assets or expectation of same.
  2. MBS Instrument was issued by NY common law trust on a tranche that appeared safe but was tied by CDS to the most toxic tranche.
  3. Insurance paid to investment bank instead of investors
  4. Credit default swap proceeds paid to investment banks instead of investors
  5. Guarantees paid to investment banks after they have drained all value through excessive fees charged against the investor and the borrowers on loans.
  6. Tier 2 Yield Spread Premiums of as much as 50% of the investment amount.
  7. Intentional low underwriting standards to produce high nominal interest to justify the Tier 2 yield spread premium.
  8. Funding direct from investor funds while creating notes and mortgages that named other parties than the investors or the “trust.”
  9. Forcing foreclosure as the only option on people who could pay far more than the proceeds of foreclosure.
  10. Turning down modifications or settlements on the basis that the investor rejected it when in fact the investor knew nothing about it. This could result in actions against an investor that is charged with violations of federal law.
  11. Making loans on property with a history of “securitization” and realizing later that the intended mortgage lien was junior to other off record transactions in which previous satisfactions of mortgage or even foreclosure sales could be invalidated.

The problem, as these small financial institutions are just beginning to realize, is that the MBS instruments that were supposedly so safe, are not safe and may not be worth anything at all — especially if the trust that issued them was never funded by the investment bank who did the underwriting and sales of the MBS to relatively unsophisticated community banks and credit unions. In a word, these small institutions were sitting ducks and probably, knowing Wall Street the way I do, were lured into the most toxic of the “bonds.”

Unless these small banks get ahead of the curve they face intervention by the FDIC or other regulatory agencies because some part of their assets and required reserves might vanish. These small institutions, unlike the big ones that caused the problem, don’t have agreements with the Federal government to prop them up regardless of whether the bonds were real or worthless.

Most of the small banks and credit unions are carrying these assets at cost, which is to say 100 cents on the dollar when in fact it is doubtful they are worth even half that amount. The question is whether the bank or credit union is at risk and what they can do about it. There are several claims mechanisms that can employed for the bank that finds itself facing a write-off of catastrophic or damaging proportions.

The plain fact is that nearly everyone in government and law enforcement considers what happens to small banks to be “collateral damage,” unworthy of any effort to assist these institutions even though the government was complicit in the fraud that has resulted in jury verdicts, settlements, fines and sanctions totaling into the hundreds of billions of dollars.

This is a ticking time bomb for many institutions that put their money into higher yielding MBS instruments believing they were about as safe as US Treasury bonds. They were wrong but not because of any fault of anyone at the bank. They were lied to by experts who covered their lies with false promises of ratings, insurance, hedges and guarantees.

Those small institutions who have opted to take the bank public, may face even worse problems with the SEC and shareholders if they don’t report properly on the balance sheet as it is effected by the downgrade of MBS securities. The problem is that most auditing firms are not familiar with the actual facts behind these securities and are likely a this point to disclaim any responsibility for the accounting that produces the financial statements of the bank.

I have seen this play out before. The big investment banks are going to throw the small institutions under the bus and call it unavoidable damage that isn’t their problem. despite the hard-headed insistence on autonomy and devotion to customer service at each bank, considerable thought should be given to banding together into associations that are not controlled by regional banks are are part of the problem and will most likely block any solution. Traditional community bank associations and traditional credit unions might not be the best place to go if you are looking to a real solution.

Community Banks and Credit Unions MUST protect themselves and make claims as fast as possible to stay ahead of the curve. They must be proactive in getting a credible report that will stand up in court, if necessary, and make claims for the balance. Current suits by investors are producing large returns for the lawyers and poor returns to the investors. Our entire team stands ready to assist small institutions achieve parity and restitution.

FOR MORE INFORMATION OR TO SCHEDULE CONSULTATIONS BETWEEN NEIL GARFIELD AND THE BANK OFFICERS (WITH THE BANK’S LAWYER) ON THE LINE, EXECUTIVES FOR SMALL COMMUNITY BANKS AND CREDIT UNIONS SHOULD CALL OUR TALLAHASSEE NUMBER 850-765-1236 or OUR WEST COAST NUMBER AT 520-405-1688.

BLK | Thu, Nov 14

BlackRock with ETF push to smaller banks • The roughly 7K regional and community banks in the U.S. have securities portfolios totaling $1.5T, the majority of which is in MBS, putting them at a particularly high interest rate risk, and on the screens of regulators who would like to see banks diversify their holdings. • “This is going to be a multiple-year trend and dialogue,” says BlackRock’s (BLK) Jared Murphy who is overseeing the iSharesBonds ETFs campaign. • The funds come with an expense ratio of 0.1% and the holdings are designed to limit interest rate risk. BlackRock scored its first big sale in Q3 when a west coast regional invested $100M in one of the funds. • At issue are years of bank habits – when they want to reduce mortgage exposure, they typically turn to Treasurys. For more credit exposure, they habitually turn to municipal bonds. “Community bankers feel like they’re going to be the last in the food chain to know if there are any problems with a corporate issuer,” says a community bank consultant.

Full Story: http://seekingalpha.com/currents/post/1412712?source=ipadportfolioapp

Bailout Treachery Sequel?

BUSINESS DAY | Five Years Later, Poll Finds Disapproval of Bailout

The simple answer is yes, there will be another bailout attempt and it appears likely that the Banks will continue to confuse things enough so that it again happens only “this time” there will be some “stern regulations”. The reason is not some esoteric financial mumbo jumbo, nor does it take brilliant economic insight — and shame on Democrats who “concede” the bailout was necessary. A little realism from my fellow Democrats in joining with Republicans on this pervasive issue might just be the stepping stone to loosening the idiotic gridlock being engineered by Republicans, who are dead right about the last bailout, and dead right about the next one.

The reason the attempt will be made is because the last one worked. The banks got trillions of dollars as compensation for creating the illusion that they had lost the entire economy. It was a lie then, it is a lie now and it will be a lie when they try it again. I agree that magicians as entertainers are worth whatever the market will bear. But I don’t agree that Wall Street bankers are entertainers and I agree with the vast majority of Americans who say the bankers or gangsters. They belong in jail. They won’t go to jail because of agreements made by law enforcement under Political pressure.

The last bailout worked because nobody understood securitization other than the investment bank collateral debt obligation (CDO) managers. If your sole source of information, analysis and interpretation is the perpetrator, it should come as no surprise that they lead you down a path that belongs in fiction, not reality. The result was we turned over the control of our currency to the bankers and we have never retrieved it. We gave them the country and indeed the world because our leaders were ignorant of the true facts and failed to ferret out the real ones, and therefore never had a chance to refute or corroborate the narrative from Wall Street.

Things haven’t changed much. Even the witnesses and lawyers for the banks in Foreclosures don’t understand securitization. When they say this is a Fannie Mae loan, everyone but me thinks that is the end of it. Nobody can answer my questions because they don’t understand them. Fannie is not a lender. If the statement is that “this is a Fannie Mae loan”, the question is how did it get that way? There are only one of two possibilities: (1) it was guaranteed by Fannie and then sold into the secondary market to a REMIC pool where in the master Trustee is Fannie and the individual trustee is the manager of the asset pool or (2) Fannie paid the loan or the loss off and is considered to own the loan even though the documents are absent showing the transfer. Either way you want to see reality — the movement of money to determine who is the lender, and to determine the real balance owed rather than the fabricated story of the subservicer.

So as long as ignorance prevails in government, there will be yet another bailout for losses that never happened on fictional transactions. Regulators will see no choice because they see no facts and have learned nothing from the last round of securitization. The new round is already underway and the stealing, lying, and treachery continues while pensioners’ money is flushed down the toilet for processing at the Wall Street money conversion plant where losses are turned into pure profit.

Will the Findings from the Brief “Foreclosure Review” Process Be Released?

“The truth is that they stopped the review process and “Settled” because the regulators were under a mandate to protect the banks. They were finding far too many wrongful and illegal foreclosures. The investigator testified that the small sampling they used was not random but rather designed to show how few foreclosures were illegal. But even that showed that at least 6500 homeowners had been illegally foreclosed and evicted. The banks and regulators were sitting on a time bomb so they swept it under the rug with “settlements” to cover up the widespread pandemic rush to illegal, wrongful foreclosures where strangers to the transaction took title to property at a foreclosure sale by submitting a “Credit bid” in which they had absolutely no interest or authority.”  —- Neil F Garfield Livinglies.me

Not long ago, if someone told you that the government would review the foreclosure process, find that many people were foreclosed illegally and wrongfully — perhaps up to 90% — and then step in to protect the banks with a pennies on the dollar settlement WITHOUT TELLING THE FAMILIES THAT WERE WRONGFULLY FORECLOSED THAT IT HAD BEEN DETERMINED THAT THEY WERE ILLEGALLY AND WRONGFULLY FORECLOSED — you might have said, it can’t be true — things are not that bad.

Besides, you might say, how could the foreclosures have been illegal and wrongful to the point that the banks would agree to pay any settlement, even if it was pennies on the dollar. After all, as Judges are want to say “You took the loan, you didn’t pay, you lose your house.”

But in open session sworn testimony before the Senate Committee on banking and finance, under questioning from Senator Warren (see recent post for the video) that is exactly what the investigator admitted. In fact, it gets worse — they entered into the settlement to get this out of the way fast and sweep it under the rug.  And, the investigator admitted that they had not yet notified those whom the agency had already found had definitely been illegally and wrongfully foreclosed and evicted from their homes. Worse, the investigator admitted that no decision had been made when or if those families would be notified.

So here we have the government withholding information of civil and perhaps criminal wrongdoing, not informing the victims that they not only have a cause of action for damages, but that the proof is already in the hands of the regulatory agencies. And perhaps worse, this admission comes AFTER Bernanke assured Senator Warren that the victims would be notified.

So Judges, lawyers, borrowers and investors across the land and indeed across the world are still laboring under the misapprehension that when the dust settles the home will still be foreclosed. Not so.

If the real creditor has not stepped up to enforce the debt there can only be one reason — they have already been paid. And if they have already been paid, then the balance due from the borrower to that creditor is zero. And if someone else paid it, the most they COULD have is an action in contribution or unjust enrichment against the borrower; but they don’t have that right because they expressly waived it. Nonetheless, the Federal reserve is “buying” these mortgage bonds, supposedly backed by mortgage loans that we have now seen were paid or unenforceable at the rate of $85 Billion per month.

The presumption ought to be, based upon the filings of the regulatory agencies, the settlements and the sworn testimony before Congress, that the foreclosure is suspect and Judges should stop ramming these wrongful foreclosures down the throat of lawyers whose objections and arguments are dismissed without a thought. We don’t have to wait for the evidence before we decide. The time to decide is now because the evidence IS in.

And even if you can’t get the information from the regulatory agencies who claim the results to be confidential even though they admit what is in them, aggressive lawsuits against the pretender lenders should lead to huge awards to borrowers and their attorneys. What are you waiting for? Stop wasting time by delaying the cases so that the client gets another month of free rent and start being the aggressor in discovery, pleading and litigating.

Watch Elizabeth Warren Grill Regulators Over Illegal Foreclosures

A Brief Refresher on Glass Stegal From Barry Ritholtz

http://www.housingwire.com/fastnews/2013/07/18/bernanke-regulators-will-release-some-details-foreclosure-reviews

The Notice Letters and Legal Strategies

Now that I am actively practicing law I see the reasons for the anger and recriminations regarding the conduct of proceedings involving foreclosure. But whether the judge likes it or not the law is very clear regarding a condition precedent to the filing of foreclosure action. The borrower must receive notice. The notice must state that the borrower is in default and must also state the conditions for reinstatement to cure the default. The law is very clear that failure to give proper notice is reason enough to deny the foreclosure. It doesn’t stop the bank from coming back later after giving proper notice, but it does stop the current foreclosure proceeding.

Generally speaking you’ll find the required language in the mortgage in paragraph 22. There are other paragraphs that speak to default have the right to reinstatement —  usually in the preceding paragraphs to the paragraph 22.

Notwithstanding the law, I am finding that there are many judges who consider it to be their political mandate to push the foreclosures through to sale. They may be right as to the political mandate but they are wrong to use it in a court of law. Failure to give proper notice or any other material fact that might be in issue is sufficient to defeat a motion for summary judgment as long as it is clearly in the record at the time the order on summary judgment is entered. In Florida at least I detect an attitude from the bench which disregards the facts of the case in favor of entering judgment for the banks.

Having the facts and law on your side does not mean that you will be able to stop the foreclosure. This does not stop judges from blaming borrowers for delays in the proceedings despite the fact that it is the obligation of the foreclosing party to prosecute the action. And yesterday I saw a judge enter an order granting summary judgment despite the fact that there were dozens of facts in dispute. His reason appeared to be that the case had been hanging around for four or five years —  during which time the homeowner could have filed a motion to dismiss for failure to prosecute the action at least twice.

Of course homeowners do not know the Rules of Civil Procedure which is why I have stated so strongly and so often why they should retain counsel if they really want to keep their home.

In the course of my research on a related topic I uncovered the information shown below. It is obvious that under federal and Florida law the notice must contain information concerning the right to reinstate the loan and a demand for a specific amount of money required for reinstatement. Some banks have chosen to ignore the right to reinstatement because of their enthusiasm for obtaining a foreclosure judgment. And there are judges that will ignore the issue of notice and enter judgment for the bank. But on appeal there seems to be little doubt that the judges order will be reversed, the sale will be reversed, and the foreclosure action will be dismissed (without prejudice to refile).

Most judges appeared to approach a foreclosure case as a fairly simple matter that is very annoying to them. Instead of asking the attorney for the bank to present his/her case there are several judges who are announcing that everything seems to be in order and so judgment will be entered. While this is wrong I would caution the reader not to draw the  further conclusion that the judge is corrupt or has an agenda designed to hurt homeowners. In the eyes of the judge, based upon actual experience for several years, most defenses that have been presented to judges have been for the purposes of delay. In part this was allowed and even encouraged by the banks who were unready to fully prosecute the foreclosure action because of the potential liability for taxes, insurance and maintenance.

In my firm we generally refer clients who are simply looking for delays to other attorneys whose down payment and monthly payment is far less than what we charge. After years of writing about it I have reentered the practice of law and I am attempting to set a standard of vigorous and aggressive prosecution of the case against the bank. This of course is only possible if the bank has done something wrong. But you are not going to know that without someone going through the entire process starting with the application for mortgage and going through the present time. It also requires discovery in the form of interrogatories, requests for admission, requests to produce, and subpoenas issued to appropriate witnesses requiring them to bring documents with them.

In my opinion the more lawyers that aggressively pursue the case, the more judges will start questioning why the bank is backpedaling. Once you get a judge thinking that you are the aggressor, you have succeeded in taking control of the narrative. Once you have taken control of the narrative you can raise questions in the judge’s mind as to whether or not there might actually be something wrong with this particular foreclosure action.

I don’t deny that there is a value to any homeowner in getting free rent or no mortgage payment and that an attorney might be useful in maximizing the length of time in which the homeowner is not required to pay anything. It might be the only way that the homeowner can recover part of his or her investment. But delay tactics seem to dominate the litigation landscape. So it should come as no surprise that any judge would approach a foreclosure case with the assumption that the debt is valid and that the documents are in order; the only question left is when will the sale take place.

My mission, as I conceive it, is to make some changes in the litigation landscape. Specifically, I think that with proper pleading and discovery, it may be revealed that the party seeking the foreclosure lacks any ownership interest in the loan and lacks any authority to represent anyone with an ownership interest in the loan. I also think that the amount demanded for reinstatement or redemption is also misstated in that the borrower is not getting the benefit of offset from third-party payments that should be credited to the account in which the loan receivable is held. In short, I still believe what I said six years ago, to wit: as crazy as it might seem, the loan was prepaid at the time of origination and then repaid several times over after which it was then sold to the Federal Reserve probably multiple times  and sold two government-sponsored entities multiple times. If the loan is paid (several times over, no less) then there can be action to collect on it, least of all foreclosure.

While the presumption is on preventing a homeowner from getting a free ride, courts have been giving the financial industry the equivalent of corporate welfare with each  foreclosure sale. And in doing so they have actually stripped the true creditor from any collateralized claim and further stripped the true creditor from making any claim at all. The beneficiaries of this idiotic system are obviously the banks. The victims include everyone else including the investors, insurers, taxpayers, borrowers, and the Federal Reserve. Of course in the case of the Federal Reserve, it knows that it is a victim and that it is buying completely worthless paper from the banks who have previously sold the same paper to others. That doesn’t seem to matter to the federal reserve and so far it doesn’t seem to matter to any of the judges sitting on the bench.

http://www.credit.com/credit_information/credit_law/Understanding-Your-Foreclosure-Rights.jsp

http://floridaforeclosurefraud.com/2010/03/notice-of-default-prior-to-acceleration-whats-in-your-mortgage/

http://stopforeclosurefraud.com/2011/06/09/fl-2dca-reverses-sj-acceleration-letter-failed-to-state-the-default-as-required-by-the-mortgage-terms-konsulian-v-busey-bank-na/

BOA Seeks to Seal Damaging Testimony from Urban Lending

HAPPY INDEPENDENCE DAY!

WHY ARE THE BANKS FIGHTING TO GET AS LITTLE AS POSSIBLE FROM EACH “FAILED” LOAN?

A drama is playing out in the state of Massachusetts. Bank of America is pretending to be the lender or the authorized servicer or both. But it outsourced the task of dealing with borrowers seeking modification. The company that was used is Urban Lending Solutions (ULS).  A deposition was taken from a knowledgeable source from within ULS.  The attorney  taking the deposition was merely looking for evidence of a script prepared by Bank of America that ULS employees were to follow. Not only was the script uncovered but considerable other evidence suggested institutional policies at Bank of America that were in direct conflict with the requirements of law, and in direct violation of the settlements with the Department of Justice and the banking regulators.

The transcript of the deposition was sealed at the request of Bank of America, which the borrower did not interpose any objection. Now there are a lot of people who want to see that deposition and who want to take the deposition of the same witness and other witnesses at ULS who might reveal the real intent of Bank of America. The question which is sought to be answered is why the mega banks are fighting so hard to take less money in a foreclosure sale then they would get in a modification or even a short sale. The policy is obvious. Borrowers are lured into a hole that gets deeper and deeper so that foreclosure seems inevitable and indefensible. Even after a successful trial modification the banks are turning down the permanent modification, as though they had the power to do so.

Now a number of attorneys are preparing motions to the trial court in Massachusetts to unseal the transcript of the ULS employee. Bank of America is opposing these efforts on the grounds of “confidentiality” which from my perspective makes absolutely no sense. Why would Bank of America share confidential information or trade secrets with a vendor whose only purpose was to interfere with the modification process? My opinion is that the only information that Bank of America wishes to keep secret is that the instructions they gave to ULS clearly show that Bank of America was not interested in anything other than achieving a foreclosure sale in as many cases as possible.

In nearly all cases the modification of the loan more than doubles the prospect of proceeds from the loan and in some cases approaches 100%. Thus the full-court press from the megabanks to go to foreclosure is a mystery that will be solved. My sources from inside the industry together with my own analysis indicates that the reason is very simple. The banks took in money from investors, insurers, counterparties in credit default swaps, the Federal Reserve, the Department of the Treasury and other parties based on the representation of the banks that (A) the banks owned the mortgage bonds and therefore on the loans and (B) there was a loss resulting from widespread defaults on mortgages. Under the terms of the various contracts within the false chain of securitization and the Master servicer had sole discretion as to whether or not the value of the mortgage bonds and the asset pools had declined and had sole discretion as to the amount of the loss caused by the defaults. Both representations were false — the Banks did not own the bonds or the loans and the loss was not even close to what was represented to insurers and other third parties.

As a general rule of thumb, the banks computed value of the collateral at around 25% and therefore received payment to compensate the banks for a 75% loss. They received the payment several times over and then sold the mortgage bonds to the Federal Reserve for 100% of the face value of the bonds. It can be fairly estimated that they received no less than 250% of the principal amount due on each of the loans contained within the asset pool that had issued each mortgage bond. While they had to create the appearance of objectivity by showing a number of the loans as performing, they intentionally overestimated the number of loans that were in default or were in the process of going into default.

Let us not forget that while nobody was looking the Federal Reserve has been “purchasing” the worthless mortgage bonds at the rate of $85 billion per month for a long time and doesn’t appear to have any intention of stopping that flow of money to banks that have already received more than 100% of the principal due on the notes. And lest you be confused, the money the banks received should have gone to the investors and should never have been kept by the banks. The purchases by the Federal Reserve at 100% of face value despite a market value of zero is merely a way for the Federal Reserve to keep the mega banks floating on an illusion.

Since the banks received 250% of the principal amount due on the loan, an actual recovery from the borrower of 100% (for example) on the loan would leave the banks with a liability to all of the third parties that paid the banks. The refund liability would obviously be 150% of the principal amount due on the loan and the banks would be required to turn over the hundred percent recovery from the borrower to the investors adding to their liability. THIS IS WHY I SAY CALL THEIR BLUFF AND OFFER THEM ALL THE MONEY DEMANDED ON CONDITION THAT THEY PROVE OWNERSHIP AND PROVE THE LOSS IS ACTUALLY THE LOSS OF THE BANK AND NOT OF THE INVESTORS.

But if the case goes through a foreclosure sale, the banks can take a comfortable position that the number of defaults and the depth of the loss was as great as they represented when they took payment from insurers and other third parties. The liability of 250% is completely eliminated. Thus while it might appear to be in the bank’s interest to take a 60% recovery from the borrower instead of a 25% recovery from a foreclosure sale, the liability that would be created each time alone was modified or settled would dwarf the apparent savings to the pretender lender or actual creditor.

The net result is that on a $100,000 loan, the investor takes an extra $35,000 loss over and above what would normally apply in a workout and the bank avoids $250,000 in liabilities to third parties who paid based upon false representations of losses.

The mere fact that they went to great lengths to seal the transcript indicates how vulnerable they feel.

PRACTICE MEMO TO FORECLOSURE DEFENSE LAWYERS

As a condition precedent I would suggest that in all cases where we feel the deposition transcript would be helpful I think it would create more credibility if you issued a subpoena duces tecum directed at Urban to produce the witness whose deposition was sealed in the existing case and to bring those records that were requested or demanded at that deposition. One of the questions that needs to be answered is whether the witness witness is still working for Urban, whether the witness has “disappeared”, and whether his testimony has changed — thus we would need the other deposition to test credibility and perhaps get exhibits that BANA either didn’t object to, which means they waived confidentiality. If they do not move to quash the subpoena then they might also be arguably waiving the confidentiality objection.
If they do object, you have two bites of the apple — if they move to quash they must state the grounds other than than it will damage their chances in litigation. The trial court would then hear the objections and of course each if the cases that could benefit from unsealing the deposition results in a hearing, then several judges would hear the same objection. The likelihood is that the objection would attempt to bootstrap the order sealing the deposition as reason enough to quash the subpoena. That in turn puts pressure on the Massachusetts judge to release the transcript.
The more Motions filed the better. So I would suggest that we reach out through media to get as many people as possible with separate motions saying that sealing the deposition is causing a disruption in due process. Since Urban reached out on behalf of BANA — an allegation that should be made in opposition test the motion to quash the subpoena in each case — exactly what confidential information needs to be protected? Has the Massachusetts court heard a motion in liming preventing the use of the deposition at trial? If not, then the objection is waived since the Plaintiff will clearly use the deposition at trial, if there is one.
The other issue is that BOA can’t simply allege confidentiality rather than strategy in litigation. They must state with particularity what could be possibly confidential. There is no attorney-client privilege, there is no attorney work product privilege.  At first Bank of America disclaimed any knowledge or relationship with ULS.  When it became obvious that the relationship existed and that ULS was using Bank of America letterhead to communicate with borrowers they finally admitted that the relationship existed and then went one step further by alleging confidentiality and trade secrets so that the contract and instructions between Bank of America and ULS would never see the light of day., For a company that BOA disclaimed any knowledge but who used BOA stationery they were clearly an agent of BANA. What exactly could Urban have other than information about modification and foreclosure? I would also notice or subpoena BANA to produce the person who signed the contract with Urban and to bring the contract with him or her. Who received instructions from BOA? Where are those instructions? Were they produced at the sealed deposition.
 If the Massachusetts court does not unseal the transcript, doesn’t this give BOA an opportunity for a do-over where they fabricate documents that are different from those produced in the sealed deposition?
What were the instructions to Urban? What was the goal of the relationship between BOA and URban? Where are the scripts now that we’re produced in the sealed deposition?
Were the instructions to Urban the same as the instructions to all vendors assisting in the foreclosure process? Why did BOA even need Urban if it had proof of payment, proof of loss,  proof of ownership of the loan? We want to know what scripts were used by Urban and whether the same scripts were distributed to other vendors whose behavior could be plausibly denied. Discovery is a process by which the party seeking it must only show that it might lead to the discovery of admissible evidence. THE POINT MUST BE MADE THAT THE DEFENSE FOR WHICH WE ARE LOOKING FOR SUPPORT AND CORROBORATION IS THAT THE DELIBERATE POLICY AND PRACTICE OF BOA WAS TO MOVE PEOPLE INTO DEFAULT BY TELLING THEM TO STOP MAKING PAYMENTS. WE WANT TO SHOW THAT THEIR GOAL WAS FORECLOSURE NOT MODIFICATION CONTRARY TO THE REQUIREMENTS UNDER HAMP AND HARP AND THAT RATHER THAN PROCESS MODIFICATION OR SETTLEMENTS THE POLICY WAS TO DERAIL AS MANY AS POSSIBLE TO GET THE FORECLOSURE EVEN IF IT MEANT THAT THE INVESTORS WOULD GET LESS MONEY? Why?
The instruction was to use the promise or carrot of modification to trick the homeowner into (a) acknowledging BOA as the right party (b) stop making payments causing an apparent default and causing an escrow shortage (c) thus assuring the foreclosure sale despite the fact that BOA never acquired and (d) thus assuring that claims against them from investors (see dozens of law suits against BOA) and from insurers and counter parties on credit default swaps and payments from co-obligors based on the “default” that BOA fabricated — payments that involved more than the loan itself in multiples of the supposed loan balance.

This is an important battle. Let’s win it. There is strength in numbers. We might find the scripts were prepared by someone who used scripts from other banks and that the banks were in agreement that despite the obligations under HAMP and HARP and despite their ,rinses in the AG and OCC settlement, their goal is to foreclose at all costs because if the general pattern of conduct is to settle these loans and make them “performing” loans again it is highly probable that for each dollar of principal that gets taken of the table there is a liability or claim for $10. This would establish that the requirements of HAMP and HARP has resulted in negotiating with the fox while the fox is in the henhouse getting fat.

Wells Fargo and Chase Quietly Prepare to Take Over BOA and Citi as They Collapse

Major banks [WELLS AND CITI] have reportedly made proposals to the Fed on how to pay for the restructuring of large financial institutions that collapse, with the idea being to avoid the chaos that followed Lehman’s bankruptcy. Among the suggestions, the largest financial-services holding companies would maintain combined debt and equity equal to 14% of their risk-weighted assets, which would be used to support any failed bank unit seized by regulators. Full Story: http://seekingalpha.com/currents/post/1100632?source=ipadportfolioapp

Editor’s Analysis: This is why I keep insisting on following the money trail rather than the paper trail. The paper trail is full of lies. The money trail cannot be faked. Or to put it more succinctly anyone who tries to fake the money trail will probably end up in jail. Checks, wire transfers, ACH transfers leave footprints throughout the electronic funds transfer infrastructure.  In the paper trail there are documents that describe transactions as if they had occurred. It is the money trail that will tell you whether or not any transaction in fact did occur and if so,  when and under what terms.

PRACTICE HINT:  the money trail (Canceled checks, wire transfer receipts) is the main point. The paper trail should only be used to corroborate your allegations concerning the reality of the transactions after you have shown that the money trail reveals an entirely different story —  or that the banks are stonewalling access to the money trail because it will prove beyond a reasonable doubt that everything they have said in the creation of the mortgage, transfers of the mortgage, defaults and the mortgage, foreclosures, auction sales, credit bids and attempts for modification is a complete lie.

Bank of America has approximately $300 billion on its balance sheet which are composed mainly of mortgage bonds (unsupported by any transaction in which money exchanged hands or any other consideration; and not backed by any loans which never made it into the asset pools that issued the mortgage bonds). It is one thing when people like me saying that the bonds are worthless and that Bank of America is broke. It is quite another when investors and traders arrive at the same conclusion. Recent trading activity indicates that a number of investors and traders are betting that Bank of America will collapse. They have arrived at the conclusion that the mortgage bonds are either worthless or not worth anything near what is reported by Bank of America. As rates go up the treasury bonds bought by Bank of America in exchange for free money at the Federal Reserve window, will drop like stones. This will leave Bank of America with insufficient capital to operate at its current levels.

What is interesting is that two banks submitted a proposal for resolution of a bank that had been too big to fail. The two banks that submitted the proposal were Wells Fargo and Chase. Notably absent was Bank of America and Citibank. I take that to mean that the government and the financial community are expecting Bank of America and possibly Citibank to collapse and that it might be very soon. The timing of the Wells Fargo and Chase proposal might well be their assessment that the time is near and that if their proposal is the only one on the table it will be the one that is used by the government.

FALLING BOND PRICES AND RISING YIELDS ARE THREATENING THE RECOVERY IN THE BALANCE SHEETS OF GLOBAL BANKS: Falling bond prices and rising yields are threatening the recovery in the balance sheets of global banks, which have built up huge portfolios of liquid securities to comply with regulatory requirements and due to a lack of better investments. For example, 90% of Bank of America’s (BAC) $315B portfolio comprises mortgage bonds and Treasurys. Some analysts, though, believe that QE tapering should increase interest margins and offset the one-time hit to book values because of rising bond yields. Full Story: http://seekingalpha.com/currents/post/1105882?source=ipadportfolioapp

THE FUTILITY OF OF BANKS FIGHTING REPRESENTATION AND WARRANTIES LAWSUITS OVER MORTGAGE BACKED SECURITIES: Flagstar Bancorp’s (FBC +2.7%) weekend settlement with Assured Guaranty (AGO -3.3%) for $105M (vs. the $106.5M court verdict) shows the futility of banks fighting representation and warranties lawsuits over MBS, writes Mark Palmer. Next up is BofA (BAC) which has already settled with Assured and MBIA (MBI), but is still tussling with Ambac (AMBC). Credit Suisse (CS) and JPMorgan (JPM) have also been reluctant to settle with the monolines. Flagstar is sharply higher in a bright red market as the settlement removes a big overhang on the stock. Full Story: http://seekingalpha.com/currents/post/1101932?source=ipadportfolioapp

[Editor: If the loans were real and the bonds were real, why would this be necessary?) BOA Caught Gesturing to Witness Coaching Answers: Bank of America’s (BAC) Article 77 hearing is on hiatus until July 8 to allow the presiding judge time on other cases. Day 8 of the hearing was an uneventful one, reports Mark Palmer, notable mostly for the judge admonishing an attorney representing the supporters to quit coaching (through gestures) a witness on the stand. Full Story: http://seekingalpha.com/currents/post/1087682?source=ipadportfolioapp

One way to profit from the false values of loans and the false representations of ownership is to buy them up as though they were real. The buyers have real bargaining power with the mere threat of revealing the bonds to be worthless and the ownership unknown. [I propose to put together a fund that offers the payment if ownership can be proven beyond a reasonable doubt]: Deutsche Bank (DB) is leading a wave of big banks ramping up exposure to single-family housing by extending credit to Wall Street firms so they can buy up homes to turn them into rentals. The bank reportedly just lent another $1.5B to Blackstone (BX) after an earlier $2.1B line got used up. Wayne Hughes’ American Homes 4 Rent has as much as a $1B line from Wells Fargo (WFC), and SilverBay Realty (SBY) just inked a $200M facility from Bank of America (BAC) and JPMorgan (JPM) Full Story: http://seekingalpha.com/currents/post/1087962?source=ipadportfolioapp

Traders betting big on BOA collapse: The purchase of 50K January $11 puts on Bank of America (BAC) yesterday was indeed a the initiation of a position, writes Steven Sears, noting this morning’s open interest shows a 50K rise to 116,958 contracts. Rather than an outright bearish position, the purchase could just as easily be a BofA long hedging his/her bet (though the recent uptick in volatility has made this a more expensive move).
Full Story: http://seekingalpha.com/currents/post/1111972?source=ipadportfolioapp

JPMorgan Looks Like A Winner to Traders — probably because the U.S. government will look to Chase and Wells Fargo when BOA and Citi collapse: Full Story: http://seekingalpha.com/article/1526362?source=ipadportfolioapp

BOND MARKET LIQUIDATION: Bond Funds Hit With Biggest Outflows Ever This Week
http://www.businessinsider.com/weekly-epfr-fund-flows-data-june-26-2013-6

[Editor: When mortgage rates rise the price of older bonds with lower interest falls. Most people agree rate increases are inevitable which means that the value of Treasuries and other bonds offering tiny returns are going to fall like stones. The ripple effect is going to be on going for years] Mortgage rates jump to highest in 2 years [Some novices are trying to make the case that if rates double bond prices will fall by half. That is not true and never has been true. Despite the value of the bond on the market the face value remains the same so the GAIN between the purchase price and the Face Amount (Principal) of the Bond must be factored in by using the present value of the that gain over the remaining term of the loan]
http://www.bizjournals.com/dayton/blog/morning_call/2013/06/mortgage-rates-jump-highest-in-2-years.html

[Editor: This is a disaster waiting to happen for the banks. When those modifications are done they will face trillions in liability for insurance and credit default swap proceeds and probably claims from the Federal Reserve because the true value of the bonds will be marked down to market contrary to the representations of the banks when they sell the bonds to the FED] Regulations are now in effect that will prohibit Mass. foreclosures if loan modifications cost less
http://www.boston.com/businessupdates/2013/06/26/regulations-are-now-effect-that-will-prohibit-mass-foreclosures-loan-modifications-cost-less/4W2NEXiN7w9xvNruGBxpXL/story.html

Foreclosure documentation issues trap investors, creating litigation risk
http://www.housingwire.com/fastnews/2013/06/21/foreclosure-documentation-issues-trap-investors-creating-litigation-risk

Must See Video: Arizona Homeowners Losing their Homes to Foreclosure Through Forged Documents
http://4closurefraud.org/2013/06/21/must-see-video-arizona-homeowners-losing-their-homes-to-foreclosure-through-forged-documents/

Lawsuit: Bank of America Gave Employees Gift Cards for Hitting Foreclosure Quotas
http://www.breitbart.com/Big-Government/2013/06/24/Lawsuit-Bank-of-America-Gave-Employees-Gift-Cards-For-Foreclosures

[Editor: This is BOA putting distance between itself and policies and procedures that produce an illegal result] Bank of America Said to Send Property Reviews to India
http://www.bloomberg.com/news/2013-06-27/bank-of-america-said-to-send-property-reviews-to-india.html

[Editor: I doubt if this tactic applies to most people] Illinois Attorney Saves Homes from Foreclosure Using Reverse Mortgages
http://mandelman.ml-implode.com/2013/06/illinois-attorney-saves-homes-from-foreclosure-using-reverse-mortgages/

 

Federal Reserve Continues Welfare Payments to Banks

If the bond buying program had been directed at direct assistance to investors and homeowners, the crisis would already be over and GDP would be rising by at least 3.5%, unemployment at 5% or less, and the deficit would be eliminated on an annual basis and vastly reduced long term. Debt would cease to be a problem which means that Banks would lose their position of complete dominance.

As Iceland shows all day and all month and all year, even the banks would be prospering and litigation would be virtually eliminated with respect to the validity and enforcement of mortgages and assignments. The cleanup would become the cure. The corruption of title is not problem in several countries because the county recorders wouldn’t accept the garbage that the banks were filing here. We have toxic title and the illusion of a healthy economy. Others do not have toxic title and are dealing with reality, warts and all.

Fed Announces Continued Bond Purchases, Mortgage Rates Fall
http://realtytimes.com/rtpages/20130626_bondpurchases.htm

It’s Official: Bank of America Has the Worst Reputation in the Banking Industry
http://www.fool.com/investing/general/2013/06/25/its-official-bank-of-america-has-the-worst-reputat.aspx

17 Signs That Most Americans Will Be Wiped Out By The Coming Economic Collapse
http://www.zerohedge.com/node/475692

Meet the Nation’s Toughest New Foreclosure Protection Law
http://www.theatlanticcities.com/housing/2013/06/meet-nations-toughest-new-foreclosure-protection-law/5952/

BUYING A HOUSE, BUYER BEWARE! Foreclosure documentation issues trap investors, creating litigation risk
http://www.housingwire.com/fastnews/2013/06/21/foreclosure-documentation-issues-trap-investors-creating-litigation-risk

Bank Of America Allegedly Gave Cash Bonuses To Workers Pushing Homeowners Into Foreclosure
http://www.businessinsider.com/bofa-sued-over-foreclosure-practices-2013-6

WHY WOULD A BANK BE SO ANXIOUS TO FORECLOSE IF IT WAS GOING TO ABANDON THE PROPERTY? Nearly 3 in 10 Oregon homes in foreclosure vacant
http://www.oregonlive.com/front-porch/index.ssf/2013/06/28_of_oregon_homes_in_foreclos.html

Foreclosures Are Still a Concern
http://online.wsj.com/article/SB10001424127887324520904578553660440428142.html

Florida puts a limit on deficiency Judgments but what happens when the real creditor shows up? Banks Go after Homeowners Years after Foreclosure
http://www.allgov.com/news/top-stories/banks-go-after-homeowners-years-after-foreclosure-130623?news=850369

Conflict for the big accounting firms? They did the audits and certified the balance sheets of both the investment banking companies and the ratings companies. A bad report card would put them at risk: Another Conflicted Foreclosure Review: PricewaterhouseCoopers and Ally/ResCap
http://www.forbes.com/sites/francinemckenna/2013/06/25/another-conflicted-foreclosure-review-pricewaterhousecoopers-and-allyrescap/

Regulatory Looting, Promontory-Style: Botched Foreclosure Reviews Alone Generate More than Double Goldman’s Revenues per Employee
http://www.nakedcapitalism.com/2013/06/regulatory-looting-promontory-style-botched-foreclosure-reviews-alone-generate-more-than-double-goldmans-revenues-per-employees.html

Promontory Financial Group Paid More Than $900 Million for Independent Foreclosure Review
http://4closurefraud.org/2013/06/24/promontory-financial-group-paid-more-than-900-million-for-independent-foreclosure-review/

 

Monday Livinglies Magazine: Crime and Punishment

Steal this Massachusetts Town’s Toughest New Foreclosure Prevention Ideas
http://www.keystonepolitics.com/2013/06/steal-this-massachusetts-towns-toughest-new-foreclosure-prevention-ideas/

Florida leads nation in vacated foreclosures — and it’s not even close http://www.thefloridacurrent.com/article.cfm?id=33330748

Editor’s Note:  it is only common sense. There are several things that are known with complete certainty in connection with the mortgage mess.

  • We know that the banks found it necessary to forge, fabricate and alter legal documents illegally in order to create the illusion that foreclosure was proper.
  • We know that the banks manipulated the published rates on which adjustable mortgages changed their payments.
  • We know that the banks typically abandon any property that the bank has deemed to be undesirable (then why did they foreclose, when they had a perfectly good homeowner who was willing to pay something including the maintenance and insurance of the house?).
  • And we can conclude that it is far more important to the banks that they be able to foreclose and have the deed issued then to actually take possession of the property for sale or rental.
  • And so we know that the mortgage and foreclosure markets have been turned on their heads. Lynn, Massachusetts has adopted a series of regulations which appeared to be constitutional and which make it very difficult for the banks to turn neighborhoods that were thriving into blight.  The actions of this city and others who are taking similar actions will continue to reveal the true nature of the mortgage encumbrances (the lanes were never perfected because the loan was never made by the party that is claiming to be secured) and the true nature of foreclosures (the cover-up to a Ponzi scheme and an illegal securities scam that does not and never did fall within the exemptions of the 1998 law claimed by the banks).

The Bank Of International Settlements Warns The Monetary Kool-Aid Party Is Over
http://www.zerohedge.com/news/2013-06-23/bank-international-settlements-warns-monetary-kool-aid-party-over

Wells Fargo Sells Woman’s House In Foreclosure After She Reinstates Loan for $141,441.81
http://4closurefraud.org/2013/06/20/wells-fargo-sells-womans-house-in-foreclosure-after-she-reinstates-loan-for-141441-81/

Editor’s Note: In all of these cases you need to start with the premise that the bank has a gargantuan liability in the event that it took insurance, credit default swap proceeds, federal bailouts, or the proceeds of sales of mortgage bonds to the Federal Reserve. Most experts in finance and economics agree that if the Federal Reserve stops making payments on the “purchase” of mortgage bonds the entire housing market will collapse. I don’t agree.

It is the banks that will collapse in the housing market will finally recover bringing the economy back up with it. The problem for the Federal Reserve and the economy is that most likely they are buying worthless paper issued by a trust that was never funded and that therefore could never have purchased any loan. Thus the income and the collateral of the mortgage bond is nonexistent.

Many people in the financial world completely understand this and are terrified at the prospect of the largest banks being required to mark down their reserve capital;  if this happens, and it should, these banks will lack the capital to continue functioning as a mega-bank.

So why would a bank foreclose on house on which there was no mortgage and/or no default? The answer lies in the fact that they have accepted money from third parties on the premise that they lost money on these mortgages. If that turns out not to be true (which it isn’t) then they most probably owe a lot of money back to those third parties.

My estimate is that in the average case they owe anywhere from 7 to 40 times the amount of the mortgage loan.  It is simply cheaper to settle with the aggrieved homeowner even if they pay damages for emotional distress (which is permitted in California and perhaps some other states); it is even cheaper and far more effective for the bank to give the house back without any encumbrance to the homeowner. Without the foreclosure becoming final or worse yet, as the recent revelations from Bank of America clearly show, if the loan is modified and becomes a performing loan all of that money is due back to all of those third parties.

“Deed-In-Lieu” of Foreclosure and Other Things
http://www.fxstreet.com/education/related-markets/lessons-from-the-pros-real-estate/2013/06/20/

Editor’s Note: This has come up many times in  questions and discussions regarding dealing with the Wall Street banks. It seems that the banks have borrowers thinking that in order to file a deed in lieu of foreclosure they need the permission of the bank. I know of no such provision in the law of any state preventing the owner of the property from deeding the property to anyone.  Several lawyers are seeing an opportunity, to wit: once the homeowner deeds the properties to the party pretending to foreclose on the property, the foreclosure action against the homeowner must be dismissed. That leaves the question of a deficiency judgment.

The advantages to the homeowner appears to be that any lawsuit seeking to recover a deficiency judgment would be strictly about money and would require the allegation of a monetary loss and proof of the monetary loss which would enable the homeowner, for the first time, to pursue discovery on the money trail because there is no other issue in dispute.

In the course of that litigation the discovery may reveal the fact that the party who filed the foreclosure and misrepresented their right to the collateral would be subject to various causes of action for damages as a counterclaim; but the counterclaim would not be filed until after discovery revealed the problem for the “lender.” Therefore several lawyers are advising their clients to simply file the deed in favor of the party seeking foreclosure based upon the representation that they are in fact the right party to obtain a sale of the property.

The lawyers who are using this tactic obviously caution their clients against using it unless they are already out of the house or are planning to move. Homeowners who are looking to employ this tactic should check with a licensed attorney in the jurisdiction in which their property is located.

Must See Video: Arizona Homeowners Losing their Homes to Foreclosure Through Forged Documents
http://4closurefraud.org/2013/06/21/must-see-video-arizona-homeowners-losing-their-homes-to-foreclosure-through-forged-documents/

Monitor Finds Mortgage Lenders Still Falling Short of Settlement’s Terms

By SHAILA DEWAN

The biggest mortgage lenders in the United States have not met all of the terms of the $25 billion settlement over abuses, an independent monitor found.

British Commission Calls for New Laws to Prosecute Bankers for Fraud

By MARK SCOTT

As part of a 600-page report, the British parliamentary commission on banking standards is urging new laws that would make it a criminal offense to recklessly mismanage local financial institutions.

A Fit of Pique on Wall Street

By PETER EAVIS

Perhaps more than at any time since the financial crisis, Wall Street knows it must prepare for a world without the Federal Reserve’s largess.

S.E.C. Has a Message for Firms Not Used to Admitting Guilt

By JAMES B. STEWART

By requiring an admission of guilt in some cases, the S.E.C.’s new chairwoman is pressing for more accountability at financial firms.

Bank of America’s Foreclosure Frenzy
http://ml-implode.com/staticnews/2013-06-24_BankofAmericasForeclosureFrenzy.html

U.S. v BofA: Countrywide Eliminated Underwriting Standards

EDITOR’S NOTE:  The complaint below is from the United States Atty. for the Southern District of New York gives us a clear picture of the processing of loans without any underwriting standards at Countrywide and other aggregators across the country. The complaint is not authority, but it is a guide for what you can allege and what you can ask about in discovery.

It is time to ask the nuclear question, to wit: in light of the revelations that are already in the public domain with dozens of whistleblowers, is it not reasonable to assume that the aggregators not only knew about fabricated, forged and inaccurate loan applications, but actually intended that result. I ask that question because of the number of attempted prosecutions of people for mortgage fraud, when mortgage fraud was exactly what Countrywide wanted.  They clearly wanted the highest possible volume of loans approved under circumstances where it can only be assumed that they wanted those loans to fail, in order to be paid by insurers, counterparties on credit default swaps, the federal government in bailouts and now the Federal Reserve which appears to be  buying $85 billion in worthless mortgage bonds from the financial industry every month.

  Thus Wall Street collected money from the investors (and took a share of that and put it in their pocket), collected money from borrowers (and took a share of that and put it in their pocket), collected money from insurers which went only into their pockets, collected money from the proceeds of credit default swaps which went only into their pockets,  collected money from the government in the bank bailouts, collected money from the government sponsored entities who guarantee the loans, and are collecting money from the Federal Reserve who are buying worthless mortgage bonds which have little or no interest in any secured loan, residential or otherwise. On top of all of that Wall Street has taken the homes of more than 5 million families and is expected to take the homes of another 5 million families —  supposedly to cover the “loss”  on mortgage bonds they never owned and mortgage loans they never owned.

And then you have the real question, to wit: why would banks create a scheme that originated loans, most of which were destined to fail in one fashion or another? And the answer is unavoidable and incontestable: they did it because that was the way they could make the most money.

And then the second real question, to wit: why would banks want foreclosures but not want the property?  And the related question is why would they want a foreclosure under circumstances where a modification would produce far greater proceeds to mitigate the loss on a loan that a foreclosure? And the related question to that is why would the largest bank in the world adopt a policy of fraud in order to guide people into foreclosure deceiving them into thinking that they were getting a modification? And the final question related to all of that is why with the modification not become permanent after the borrower has done everything correctly during the trial period?  The answer is extremely simple: the foreclosure process is the largest cover-up in history for the largest economic crime in history; it provides cover for all of the defects, multiple payments that were already received and never disclosed, and the diversion of money and property from investors and homeowners.

Here are some relevant allegations in the complaint:

HUSTLE: A PLAN TO DESTROY HOMEOWNERS AND DEFRAUD INVESTORS: The U.S. Government in its complaint filed against Bank of America details the specific ways in which Countrywide was operating when loans were originated.

“Countrywide rolled out a new streamlined loan origination model is called the “hustle.”

In order to increase the speed at which it originated and sold loans to the GSES,  countrywide eliminated every significant checkpoint on loan quality and compensated its employees solely based on the volume of loans originated, leading to rampant instances of fraud and other serious lung defects all while countrywide was informing the GSES that it had tightened its underwriting guidelines.”

Countrywide eliminated underwriter review even from many high risk loans. In lieu of underwriter review, countrywide assigned critical underwriting tasks to loan processors who were previously considered unqualified even to answer borrower questions. At the same time, countrywide or eliminated previously mandatory checklists that provided instructions on how to perform these underwriting tasks. Under the Hustle, such instructions on proper underwriting were considered nothing more than unnecessary forms that would slow the swim lane down.

Countrywide also eliminated the position of compliance specialist, an individual previously responsible for conducting a final, independent check on alone to ensure that all conditions on the loans approval were satisfied prior to funding.

The Hustle began in full force in approximately August 2007.

Countrywide also concealed the quality control reports on Hustle loans demonstrating that instances of fraud and other material defects (i.e. defects making the loans in eligible for investors sell) were legion. Countrywide’s own quality control reports identified material defect rate of nearly 40% in certain months, rates that were nearly 10 times the industry-standard defect rate of approximately 4%.

U.S. v. BOA False Claims Act complaint, SDNY 10-25-2012

ENCORE BANK v. BOA, NA (2013) Effective as of July 1, 2008, the parent company of BofA, Bank of America Corporation, acquired the parent corporation of Countrywide, Countrywide Financial Corporatio

 

Elizabeth Warren Has It Right

Carmen Reinhart: “No Doubt. Our Pensions Are Screwed.”
http://www.zerohedge.com/news/2013-04-11/carmen-reinhart-no-doubt-our-pensions-are-screwed

Editor’s Comment: It is nothing less than an insult to our intelligence. As the walls crumble around the myth of securitization, the banks are stepping up efforts — in concert with the agencies that are supposed to regulate them — to prevent people from doing simple math. The truth is out. The attempt to sweep illegal mortgages under the t able failed with the foreclosure reviews and now they are trying to do it with a settlement that says if you lost your house and possessions and it was taken illegally you can have an average of $1,000 in damages.

In appearing before Congressional committees the Federal Reserve and the OCC admitted that most of the foreclosures were illegal — which means they never should have happened. Elizabeth Warren asked a simple question. If you found all this illegal activity and you have an actual list with actual homes and actual names on them why won’t you notify the homeowners of your findings. After all you are a public agency. And the AGENCY invoked claims of privacy on behalf of the banks.

If that doesn’t turn everything we know about our constitution and our laws on its head, I don’t know what would. We have a right to this information especially if we are the homeowners who were victims of the false scheme of securitization. But even even if we didn’t lose a home and we “only” paid TARP and other bailout dollars giving banks 100 cents on the dollar despite their obvious culpability in selling crap to institutional investors, undermining our pension and retirement system, and sticking the homeowners with homes worth less than half of the appraised value used at the so-called loan closing.

I think lawyers should file an action under FOIA (Freedom of Information Act) and get those reports and contact the homeowners to tell them that their lives were turned upside down by a foreclosure that was illegal, performed by an actor who merely pretended to be the creditor on a debt that no longer existed, in which the pretender received a free house on a false”Credit bid” without ever investing a penny into the house or the loan.

The damage claims from the existing list, which was cut short by the “Settlement” for $1,000 for each homeowner, are not curtailed at all by the actions of the OCC and the Federal Reserve. It is like a vein of gold miles wide and hundreds of feet thick sitting on the surface of the earth. Any PI or malpractice attorney would make ten times their current income if they investigated this opportunity. This is easy money once you start digging — which is exactly what stopped the OCC review and other programs like it.

Fed Argues that Mortgage Abuses are Trade Secrets, Meaning Institutionalized Fraud
http://www.nakedcapitalism.com/2013/04/fed-argues-that-mortgage-abuses-are-trade-secrets-meaning-institutionalized-fraud.html

Foreclosure Review Program’s Regulators Take Pounding From Elizabeth Warren, Sherrod Brown
http://www.huffingtonpost.com/2013/04/11/foreclosure-review-program-warren-brown_n_3062126.html

Warren grills bank regulators over bungled foreclosure review
http://money.cnn.com/2013/04/11/news/economy/warren-foreclosure-hearing/

Foreclosure Review Report Shows That the OCC Continues to Bury Wall Street’s Bodies
http://www.thenation.com/article/173749/foreclosure-review-report-shows-occ-continues-bury-wall-streets-bodies

1 in 3 Foreclosures Have Bank Errors to Blame — AOL Real Estate
http://realestate.aol.com/blog/2013/04/11/bank-errors-foreclosures/

14 American Cities Getting Buried By Foreclosures
http://www.businessinsider.com/us-cities-with-most-foreclosures-2013-4

WHAT IS THE FED BUYING?

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:

WHAT IS THE FED BUYING? IF THE LOANS WERE ORIGINATED CONTRARY TO INDUSTRY PRACTICE, IF THE MONEY USED TO FUND THE LOANS CAME FROM INVESTORS, WHAT COULD THE FED BE BUYING FROM THE BANKS WHO ARE ONLY INTERMEDIARIES. AND IF THE FED IS BUYING THESE SECURITIES THEN WHY ARE THEY NOT THE PRINCIPAL NAMED IN FORECLOSURES? ANSWER: THE FEDS BOUGHT NOTHING AND THEY KNOW IT. IT IS MERELY A RUSE TO GIVE THE BANKS MORE MONEY.

AND let’s assume that the Fed is really buying bona fide mortgage backed securities (MBS) issued from a well-funded pool into which investor money was contributed and used to purchase loans. Which loans? Where is the transparency here? Are these actual purchase with schedules of loans attached? Why can’t we see all the loans that are “owned” by investment pools that issued mortgage backed securities.

One more question: If the mortgage bonds were issued to investors in exchange for money, then how the investment bank become the seller? Are the investors joining in on the sale? If so, what happens to the SPV, REMIC, Trust or whatever you want to call the investment pool?

Does the transfer of an invalid note issued without consideration and a mortgage securing the note give anything more to the Fed than the banks which is nothing on top of nothing?

The obvious scenario here is a shell game designed to confuse investors, borrowers, regulators, lawyers and judges. And it is working — except in those cases where we employ the Deny and Discover strategy.

Fed likely to continue MBS purchases to secure housing recovery
http://www.housingwire.com/news/2013/01/30/fed-likely-continue-mbs-purchases-secure-housing-recovery

Deny and Discover — Where the Rubber Meets the Road

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 Analysis: The banks are broke and this rule properly applied will reveal exactly how badly they fall short of capital requirements. It can be found at Volume 77, No. 169 of the Federal Register dated, Thursday, August 30, 2012 2012-16759 Capital Risk Disclosure Requirements Under Dodd Frank.

Admittedly this is not for the feint of heart or those with limited literacy in economics, accounting and finance; but if you find yourself in the position of not understanding, then go to any economist or banker or finance specialist or accountant  and they will explain it to you.

Lewtan which produces ABSnet is offering a service to banks that will give the banks and plausible deniability when the figures come up all rosy for the banks. Lewtan should be careful in view of the action being taken against the ratings companies, which is the start of an assault on the citadel of evil intent on Wall Street.

The fundamental aspect of these new rules are that the bank must report on the degree of risk it has taken on in any activity or holding. They must also  show how they arrived at that assessment and under the Freedom of Information Act (FOIA) you might be able to get copies of their filing whether they do it themselves (doubtful) or hire someone like Lewtan which is obviously going to do the bidding of its paying clients.

The main problem for the banks is that they are holding overvalued assets and some non-existent assets on their balance sheet. A review to assess risk if properly conducted, will definitely turn up both kinds of assets reported on the balance sheet of the banks, which in turn will reduce their reported capital reserves, which in turn will result in changing the ratio between capital and risk.

This might sound like gumbo to you. But here is the bottom line: the banks were using investor money. We all know that. In baby language, the question is if they were using someone else’s money how did the banks lose any money?

They did receive the money from investors like pension funds, and other managed funds for retirement or contingencies. But they diverted the money and the documents to make it appear that the bank owned the assets that were intended to be purchased for the REMIC trusts. The Banks then purchased and claimed to be an insured or a party who had sustained a loss when in fact the loss was incurred by the investors and the mortgage bonds and loans were owned collectively by the investors.

By doing that the insurance proceeds were paid to the banks creating an instant liability to the investors to whom they owed a common law and contractual duty to provide an accounting and distribution based upon the insurance recovery. At no time did the banks ever have a risk of loss nor an insurable interest in their own name. And at not time were they bound by the REMIC documents because they ignored the REMICs and conducted transactions through an entirely different superstructure.

As agents of the investors they should have followed the REMIC documents and purchased the insurance and CDS protection for the benefit of the investors. But they didn’t do that. They kept the money for the bank who never had any proof of loss, proof of payment and was a mere intermediary claiming the rights of the principal. The same thing happened with Credit Default Swaps and Federal bailouts.

That is why the definition of toxic assets changed over a weekend when TARP was started. It was thought that the mortgages had gone bad for the banks.

Then they realized that the mortgages weren’t going bad to the extent reported and that the bank was suffering no loss because they were using investor money to create the funding of loans and the funding of proprietary trading in which they masked the theft of trillions from investors.

So the government quietly changed the definition of toxic assets to mortgage bonds — but that ran into the same problem, to wit: the mortgage bonds were underwritten by the banks but purchased by the investors (pension funds etc.).

Now the rubber meets the road. The claim that somehow the banks got stuck with mortgage bonds is patently absurd. If they have mortgage bonds it is not because they bought them, it is because they created them but were unable to sell them because the market collapsed and the PONZI scheme fails whenever the suckers stop buying.

The actual proceeds from theft from the investors and the borrowers is parked off shore around the world. The Banks having been feeding the money back in very slowly because they want to create the appearance of an increasingly profitable bank, when in fact, their revenues sand earnings are slipping away quickly — except for the bolstering they get from repatriating stolen money from investors and borrowers and calling them “proprietary trades.”

Nobody on Wall Street is making that kind of money on trades, proprietary or otherwise, but the banks are claiming ever increasing profits, raising their stock price, defrauding their stockholders. So against each overvalued and non-existent asset claimed by the mega banks on their balance sheet is a liability of far exceeding the assets or even the combined assets of the banks. Treasury knows, this, the Fed knows this and central bankers around the world know it. But they have been drinking the Kool-Aid believing that if they call out the mega banks on this fake accounting, the entire financial system will collapse.

So yes there is a consensus between those who pull the levers of power that they will allow the banks to pretend to have assets, that their liabilities are fairly low, and that the risks associated with their business activities, assets and liabilities are minimal even while knowing the converse is true. The system’s foundation is a loose amalgamation of lies that will eventually collapse anyway but everyone likes to kick the can down the road.

You are getting in this article a sneak peek into why the banks all rushed to foreclose rather than modify or settle on better terms. What is important from the practice point of view is that (1) the “Consideration” mandated by HAMP is not happening and you can prove it with the right allegations and discovery and (2) the reports tendered to OCC and the Fed under this rule will reveal that the issue of proof of loss, risk of loss, proof of payment and ownership is completely muddled — unless you follow the money trail (see yesterday’s article). You can subpoena the reports given by the banks from both the bank itself or the agency. My opinion is that you fill find a treasure trove of information very damaging to the banks and the Treasury Department.

There will be caveats in the notes that express the risk of inaccuracy and which reveal the possibility that the banks neither own nor control the mortgages except as agents for the investors, that the liability to the investors is equal to the money received from insurance, CDS, and bailouts, and that the borrower’s loan payable balance was corresponding reduced as to the investor and increased to entities that are not or cannot press any claims against the borrowers. Educate yourself and persist — the tide is turning.

Excerpt from attached section of Federal Register:

The bank’s primary federal supervisor may rescind its approval, in whole or in part, of the use of any internal model and determine an appropriate regulatory capital requirement for the covered positions to which the model would apply, if it determines that the model no longer

complies with the market risk capital rule or fails to reflect accurately the risks of the bank’s covered positions. For example, if adverse market events or other developments reveal that a material assumption in an approved model is flawed, the bank’s primary federal supervisor may require the bank to revise its model assumptions and resubmit the model specifications for review. In the final rule, the agencies made minor modifications to this provision in section 3(c)(3) to improve clarity and correct a cross-reference.

Financial markets evolve rapidly, and internal models that were state-of-the- art at the time they were approved for use in risk-based capital calculations can become less effective as the risks of covered positions evolve and as the industry develops more sophisticated modeling techniques that better capture material risks. Therefore, under the final rule, as under the January 2011 proposal, a bank must review its internal models periodically, but no less frequently than annually, in light of developments in financial markets and modeling technologies, and to enhance those models as appropriate to ensure that they continue to meet the agencies’ standards for model approval and employ risk measurement methodologies that are, in the bank’s judgment, most appropriate for the bank’s covered positions. It is essential that a bank continually review, and as appropriate, make adjustments to its models to help ensure that its market risk capital requirement reflects the risk of the bank’s covered positions. A bank’s primary federal supervisor will closely review the bank’s model review practices as a matter of safety and soundness. The agencies are adopting these requirements in the final rule.

Risks Reflected in Models. The final rule requires a bank to incorporate its internal models into its risk management process and integrate the internal models used for calculating its VaR-based measure into its daily risk management process. The level of sophistication of a bank’s models must be commensurate with the complexity and amount of its covered positions.

Foreclosure Review Process Handed Over to 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: Along with members of Congress and millions of homeowners I remain deeply disappointed in the failure of the Obama administration to grapple with the mortgage meltdown. The current path will lead to more of the same and it never does anything but escalate when somebody gets away with theft, fraud and PONZI schemes.

The prior so-called “review” process involved people who were neither independent nor skilled nor trained to find wrongful practices and the damage caused by those wrongful practices. They were given inadequate information by the banks who continue to hide the fake securitization scheme and PONZI scheme.

The agencies are complaining that it takes too long to process the review. Let’s see. If John Jones was foreclosed by somebody who had no right to do so on a loan that was unsecured and paid down to zero, and then he was evicted, just how long is too long for the agency to slam the offending bank? Are you kidding? What kind of double-standard are we setting up here? If I do it, I go to jail. But if a bank does it then it is an error and here is $2,000 for your trouble. Now under the new settlement agreement, if I do it, the agency is telling me to determine whether I committed a crime or civil theft. Yeah, I’ll get right back to you on that.

Obama and his administration continue to buy into the bank myth that these were bad lending practices instead of being intentional acts of fraud, theft, forgery and fabrication. They still think the loan receivables are “out there” somewhere but they have no evidence to substantiate that belief because there isn’t any. Those loan balances were paid down long ago.

The plain truth is right in front of them and there is no good reason to say that this task is too onerous for the regulators so we are just going to turn it over to the banks that were guilty of the wrong-doing. Does ANYONE really think that a bank is going to review its files and declare that a terrible injustice has been done?

Everything is tied to this mortgage mess. Consumers have been slammed with most of their wealth siphoned off by banks who were acting intentionally to screw the pension funds and the people who rely on those pension funds. The loan balances, if adjusted to reflect payments by insurance, credit default swaps and bailouts — all promised to the investors — are far less than anything demanded and in many cases are zero.

Nobody wants to give a windfall to the homeowner and nobody wants to give a windfall to the banks. But our government has decided that between the two, the banks ought to get it in order to preserve stability in the financial system. The stability of the financial system is, in my opinion, secondary to the stability of our economy. Our debt and deficits collectively and individually are all tied to the wrongdoing of about 2 dozen banks.

And I strongly disagree with the notion that the break-up of the mega banks will destabilize the financial system. When the dust clears, we simply won’t have banks that are too big to regulate, as shown in this review process. There is no evidence that clawing back the money for the pension funds that invested in fake mortgage bonds issued by fake investment pools will destabilize anything except the lives of some people who really need to go to jail.

Quite the contrary, putting the money back where it belongs with the pension funds and doing an accounting for the money in and the money out related to these mortgages will produce mortgage balances, without “forgiveness” that are far lower than demanded in foreclosure or end of month statements. Underwater homes will be a thing of the past, and mortgage payments can be adjusted to the real balances enabling the consumers in a consumer driven economy to spend.

Justice is more in this case than simply doing the right thing. It is a fiscal stimulus that does not cost one dime. If we can spend a trillion dollars on a war for the security interests of our country, then why can’t we spend 1/10 of 1% of that amount on following the money trail and determining the identity of the stakeholders, the amount of their stake and the terms of repayment?

The precedent here is dangerous. If “I am too important to go to jail” actually works as a defense, then we have changed the rule of law in ways that will haunt us for hundreds of years.

Agencies Give Up and hand the Mortgage Mess Over to the Banks to Resolve

Why the Fed Can’t Get it Right

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 Analysis and Comments: Bloomberg reports this morning that “Fed Flummoxed by Mortgage Yield Gap Refusing to Shrink.” (see link below)

In normal times lowering the Fed Funds rate and providing other incentives to banks always produced more lending and more economic activity. Bernanke doesn’t seem to understand the answer: these are not normal times and the cancerous fake securitization scheme that served as the platform for the largest PONZI scheme in human history is still metastasizing.

Why wouldn’t banks take advantage of a larger spread in the Fed funds rate versus the mortgage lending rates. Under the old school times that would automatically go to the bottom line of lending banks as increased profits. If we put aside the conspiracy theories that the banks are attempting to take down the country we are left with one inevitable conclusion: in the “new financial system” (sounds like the “new economy” of the 1990’s) the banks have concluded there would be no increase in profit. In fact one would be left to the probable conclusion that somehow they would face a loss or risk of loss that wasn’t present in the good old days.

Using conventional economic theory Bernanke is arriving at the conclusion that the spread is not large enough for banks to take on the business of lending in a dubious economic environment. But that is the point — conventional economic theory doesn’t work in the current financial environment. With housing prices at very low levels and the probability that they probably won’t decline much more, conventional risk management would provide more than enough profit for lending to be robust.

When Bernanke takes off the blinders, he will see that the markets are so interwoven with the false assumptions that the mortgage loans were securitized, that there is nothing the Fed can do in terms of fiscal policy that would even make a dent in our problems. $700 trillion+ in nominal derivatives are “out there” probably having no value at all if one were the legally trace the transactions. The real money in the U.S. (as opposed to these “cash equivalent” derivatives) is less than 5% of the total nominal value of the shadow banking system which out of sheer apparent size dwarfs the world banks including  the Fed.

As early as October of 2007 I said on these pages that this was outside the control of Fed fiscal policy because the amount of money affected by the Fed is a tiny fraction of the amount of apparent money generated by shadow banking.

Oddly the only place where this is going to be addressed is in the court system where people bear down on Deny and Discover and demand an accounting from the Master Servicer, Trustee and all related parties for all transactions affecting the loan receivable due to the investors (pension funds). The banks know full well that many or most of the assets they are reporting for reserve and capital requirements or completely false.

Just look at any investor lawsuit that says you promised us a mortgage backed bond that was triple A rated and insured. What you have given us are lies. We have no bonds that are worth anything because the bonds are not truly mortgage backed. The insurance and hedges you purchased with our money were made payable to you, Mr. Wall Street banker, instead of us. The market values and loan viability were completely false as reported, and even if you gave us the mortgages they are unenforceable.

The Banks are responding with “we are enforcing them, what are you talking about.” But the lawyers for most of the investors and some of the borrowers are beginning to see through this morass of lies. They know the notes and mortgages are not enforceable except by brute force and intimidation in and out of the courtroom.

If the deals were done straight up, the investor would have received a mortgage backed bond. The bond, issued by a pool of assets usually organized into a “trust” would have been the payee on the notes at origination and the secured party in the mortgages and deeds of trust. If the loan was acquired after origination by a real lender (not a table funded loan) then an assignment would have been immediately recorded with notice to the borrower that the pool owned his loan.

In a real securitization deal, the transaction in which the pool funded the origination or purchase of the loan would be able to to show proof of payment very easily — but in court, we find that when the Judge enters an order requiring the Banks to open up their books the cases settle “confidentially” for pennies on the dollar.

The entire TBTF (Too Big to Fail) doctrine is a false doctrine but nonetheless driving fiscal and economic policy in this country. Those banks are only too big if they are continued to be allowed to falsely report their assets as if they owned the bonds or loans.

Reinstate generally accepted accounting principles and the shadow banking assets deflate like a balloon with the air let out of it. $700 trillion becomes more like $13 trillion — and then the crap hits the fan for the big banks who are inundated with claims. 7,000 community banks, savings banks and credit union with the same access to electronic funds transfer and internet banking as any other bank, large or small, stand ready to pick up the pieces.

Homeowner relief through reduction of household debt would provide a gigantic financial stimulus to the economy bring back tax revenue that would completely alter the landscape of the deficit debate. The financial markets would return to free trading markets freed from the corner on “money” and corner on banking that the mega banks achieved only through lies, smoke and mirrors.

The fallout from the great recession will be with us for years to come no matter what we do. But the recovery will be far more robust if we dealt with the truth about the shadow banking system created out of exotic instruments based upon consumer debt that was falsified, illegally closed, deftly covered up with false assignments and endorsements.

While we wait for the shoe to drop when Bernanke and his associates can no longer ignore the short plain facts of this monster storm, we have no choice but to save homes, one home at a time, still fighting a battle in which the borrower is more often the losing party because of bad pleading, bad lawyering and bad judging. If you admit the debt, the note and the mortgage and then admit the default, no  amount of crafty arguments are going to give you the relief you need and to which you are entitled.

Fed Confused by Lack of Response from Banks on Yield Spread Offered

Appraisal Fraud and Facts: Essential to Securitization Scam

The REMICS are mirror images of the NINJA loans — no income, no assets, no job

the borrower did not realize that the false appraisal and other deficiencies in underwriting had shifted the risk of loss to the homeowner and the investors

Editor’s Notes: Our economy and the economic structure in other countries is stuck because of the false appraisal reports that supported funding of at least $13 trillion (U.S. only) of loans that were so complex that the Chairman of the Federal Reserve, Alan Greenspan didn’t understand them nor his staff of more than 100 PhDs. They were intentionally opaque because complexity is the way you get the other side of the “deal” (the buyer) to accept your explanation of the transaction. It also is designed to avoid criminal penalties even when the scheme unravels. Getting a Judge or Jury to understand what really happened is a challenge that has been insurmountable in both civil and criminal cases and investigations.

As stated in the 2005 petition to Congress from 8,000 appraisers who did not want to “play ball” with the banks, the appraisers were faced with a choice: either they submit appraisal reports $20,000 higher than contract and earn more money for each appraisal and earn  more money through volume, OR they won’t work at all.

Developers, mortgage brokers, and the “originators” (sales organization that pretended to be the lender), sellers and homeowners needing cash in an economy where there wages and earnings were not keeping up with the cost of living —- all reacted with glee when this system went into action. As “prices” rose by leaps and bounds — fed by a flood of money and demands for more mortgages — everyone except the banks ended up crashing when the money stopped flowing. That is how we know that it was the money that made prices rise, rather than demand.

So most appraisers were both stuck and pleasantly enjoying incomes 4-10 times what they had previously received, and obediently submitted appraisal reports that were in fact unsupportable by industry standards or any other standards that a reasonable and rational lender would use — if they were lending their own money. By lending money from investors the risk of loss was entirely removed. The originators got paid regardless of whether the mortgage was paid, or went underwater or caused the homeowner to execute a strategic default.

By using the originators as surrogates at the closing, the appraisal report was accepted without the required due diligence and confirmation that would be present if you went to the old style community bank loan department. The fact is that there was NO UNDERWRITING involved as we knew it before the securitization scam. The “extra” interest charged to No DOC loans (usually 3/4%-1.5%) and the premium interest charged on NINJA (No income, no assets, no job) loans was sold to borrowers on the premise that the “lender” was taking a higher risk. But the truth is they didn’t do any due diligence or underwriting of the loans regardless of whether or not the borrower was submitting information that confirmed their income, assets and ability to pay.  Thus the premium for the “extra risk” was based upon a false premise (like all the other premises of the securitization PONZI scheme).

The normal way of judging the price of a loan (the interest rate) was the perceived risk composed of two elements: ability to repay the loan, and the value of the property if the loan is not repaid. The banks that foisted the securitization scam upon the world got rid of both: they did nothing to confirm the ability to repay because they didn’t care if the borrower could repay. And they intentionally hyped the “value” of the property far above any supportable level as is easily shown in the Case Schiller index.

This is where PRICE and VALUE became entirely different concepts. By confusing the homeowner and hoodwinking the investors with false appraisals, they were able to move more money into the PONZI Scheme, as long as investors were buying the bogus mortgage bonds issued by fictitious entities that had no assets, no income and no prospects of either one. The REMICS are a mirror image of NINJA loans.

The value of the property was not the same as the prices supported by the false appraisal reports. The prices were going up because of the sales efforts of the banks to get homeowners giddy over the the numbers, making them feel, for a few moments as though they were more wealthy than they were in reality. But median income was flat or declining, which means that the value was flat or declining.

Thus prices went up while values of the homes were going down not only because of the median income factor but because of the oversold crash that was coming. Thus the PONZI scheme left the homeowner with property that would most likely be valued at less than any value that was known during the time the homeowner owned the property, while the contract price and appraisal report “valued” the property at 2-4 times the actual value.

The outcome was obvious: when all was said and done, the banks would be holding all the money and property while the investors, taxpayers, and homeowners were all dispensable pawns whose losses came under the category of “tough luck.”

While this might seem complex, the proof of appraisal fraud is not nearly as difficult as the explanation of why the banks wanted false appraisals. In the civil actions for wrongful lending or wrongful foreclosure, the homeowner need only show that the lender intentionally deceived the borrower as to the value of the property.

And the lack of actual underwriting committees and confirmations is essentially the proof, but you would be wise to have an appraiser who can testify as an expert as to what standards apply in issuing an appraisal report, to whom the appraisal report is addressed (i.e., the “originator”). Then using the foundation for the standards apply it to the property at hand at the time the original appraisal report was issued. It might also help if you catch the “originator” getting a part of the appraisal fee (like Cornerstone Appraisals, owned by Quicken Loans).

The borrower testifies that they were relying upon the “lender” representation that the loan had been carefully reviewed, underwritten, confirmed and approved based upon market conditions, ability of the borrower to repay and the value of the property. After all it was the “lender” who was taking the risk.

Thus the borrower did not realize that the false appraisal and other deficiencies in underwriting had shifted the risk of loss to the homeowner and the investors whose money was used to fund the loan — albeit not in the way it was presented in the prospectus where the REMIC was the supposed vehicle for the funding of the loans or the purchase of the loans.

Everyone in the securitization PONZI Scheme got paid. When you look at it from the perspective described above then you probably arrive at the same conclusion I did — all that money that was made and paid and not disclosed to the borrower changes the dynamics of the deal and the undisclosed compensation and profits should be paid to the borrower who was the party with the real risk of loss.

And in fact, if you look at the Truth in Lending Act, THAT is exactly what it says — all undisclosed compensation (which is broadly defined by the Act) is refundable with treble damages. Why lawyers have not taken action on this highly lucrative and relatively easy case to prosecute is a mystery to me.

Because of the statute of limitations applied in TILA cases, the TILA cause of action might not survive, especially in today’s climate, although more and more  judges are starting to see just how badly the banks acted. I therefore recommend to attorneys to use alternative pleading and add counts under other federal statutes (RICO, etc) and state statutes of deceptive lending, and common law fraud. The action for common law fraud, is the easiest to prosecute as I see it.

The interesting aspect of this that will lead to early settlement is that the pleading is simple as to the elements of the cause of action and can easily survive a motion to dismiss, the facts are clearly going to be in dispute which makes survival on a motion for summary judgment a much higher probability, and in discovery you have a nuclear option: since your cause of action is for return or sharing of the unlawful booty that was paid, plus treble, punitive or exemplary damages, discovery into all the different parties who made money in the chain is far easier to argue than the usual defensive foreclosure case.

The other thing you have is the possibility of stating a cause of action to force the retention of the property, to protect the homeowner in the collection of damages rendered by the final verdict. A lis pendens might be appropriate, and the bond need not be much more than nominal because unless the bank or servicer has a BFP to buy the property, you can easily show that your client is already posting bond every month they pay the utilities and maintain the property.

The compensatory damages would be a measure of the difference between the actual value of the deal and the deal that was offered to the homeowner. In simple terms, it could be that the appraisal report was $250,000 higher than the actual value of the property. As a result, the damages include the $250,000 plus the interest paid on that $250,000 and where appropriate, the loss of the house in foreclosure, plus interest from the date of the fraud (i.e. the closing), attorney fees, and costs of the action.

This action might also have special applications in commercial property cases where the appraisals are known to have come in much higher than the owner or buyer had ever expected. In some cases the “appraisal” actually changed the terms of the contract on the assumption that the property was worth much more than the original offer.

Federal Reserve Money Laundering For Dirty Banks

Since the Fed can create unlimited money, why not pay off every mortgage in the land? That’s only $9.7 trillion, and if the Fed wanted to unleash an orgy of spending, that would certainly do it. Trillions in losses would be filled with “free money,” since the Fed would pay the full value of all mortgages. —- Charles Hugh Smith, Of Two Minds

It is really up to each of us to demand, require and force an accounting for the money that has been taken out of the system and stolen from creditors and borrowers BEFORE we allow another foreclosure. — Neil F Garfield, www.livinglies.me

Editor’s Note: The article below by Charles Hugh Smith from Of Two Minds, strikes with great clarity at the heart of the nonsense we are calling “foreclosure”, and which is corrupting title for decades, taking the confidence in the U.S. economy and the U.S. dollar down with it.

This is the first article I have received that actually addressed the issue that the mortgages, especially the worst ones, were paid off in full. They were paid in full because the supposed mortgage bonds that included shares of the mortgage loans were sold to the Federal Reserve 100 cents on the dollar. Now either those mortgage bonds were real or they were not real. There is nothing in between. What we know for a fact is that the entire financial industry is treating them as real.

The ownership of the bonds was transferred from the trusts, therefore, to the Federal Reserve. While there is little documentation we can see that reveals this, there is no other logical way for the Federal reserve to even claim that it was “buying” the mortgage bonds and the loans.

Either each trust became a trust solely for the Federal Reserve, or the Federal Reserve, bought the bonds directly from the investors.  But since everyone is treating the trusts as valid REMIC entities that do not exist for tax or other business purposes, then the trust did not own the bonds, and only the investors owned the bonds. But they were not paid. The Banks were paid and still allowed to foreclose — but for who?

If the banks took payments on behalf of the REMICs, then they owe a distribution to the investors whose losses, contrary to the reports from the banks become fully cured. That means the creditor on on the mortgage bond has been paid off in whole or in part. That in turn means, since a creditor can only be paid once on a debt, that the amount that SHOULD have been credited to the investors  SHOULD have reduced the receivable. The reduction in the receivable to the creditor should correspondingly reduce the payable due from the borrower. Thus no “principal reduction” should be required because the loan is already PAID.

Why then, is anyone allowing foreclosure of the mortgage loans except in the name of the Federal Reserve? This article explains it. For the full article go to Smith Article on Rule of Law

From the Smith Article:
In a nation in which rule of law existed in more than name, here’s what should have happened:

1. The scam known as MERS, the mortgage industry’s placeholder of fictitious mortgage notes, would be summarily shut down.

2. All mortgages in all instruments and portfolios, and all derivatives based on mortgages, would be instantly marked-to-market.

3. All losses would be declared immediately, and any institution that was deemed insolvent would be shuttered and its assets auctioned off in an orderly fashion.

4. Regardless of the cost to owners of mortgages, every deed, lien and note would be painstakingly delineated or reconstructed on every mortgage in the U.S., and the deed and note properly filed in each county as per U.S. law.

That none of this has happened is proof-positive that the rule of law no longer exists in America. The term is phony, a travesty of a mockery of a sham, nothing but pure propaganda. Anyone claiming otherwise: get the above done. If you can’t or won’t, then the rule of law is merely a useful illusion of a rapacious, corrupt, extractive, predatory neofeudal Status Quo.

The essence of money-laundering is that fraudulent or illegally derived assets and income are recycled into legitimate enterprises. That is the entire Federal Reserve project in a nutshell. Dodgy mortgages, phantom claims and phantom assets, are recycled via Fed purchase and “retired” to its opaque balance sheet. In exchange, the Fed gives cash to the owners of the phantom assets, cash which is fundamentally a claim on the future earnings and productivity of American citizens.

Some might argue that the global drug mafia are the largest money-launderers in the world, and this might be correct. But $1.1 trillion is seriously monumental laundering, and now the Fed will be laundering another $480 billion a year in perpetuity, until it has laundered the entire portfolio of phantom mortgages and claims.

The rule of law is dead in the U.S. It “cost too much” to the financial sector that rules the State, the Central Bank and thus the nation. Once the Fed has laundered all the phantom assets into cash assets and driven wages down another notch, then the process of transforming a nation of owners into a nation of serfs can be completed.

Here’s the Fed’s policy in plain English: Debt-serfdom is good because it enriches the banks. All hail debt-serfdom, our goal and our god!

In case you missed this:

The Royal Scam (August 9, 2009):

Once all the assets in the country had been discounted, the insiders then repatriated their money and bought their neighbor’s fortunes for pennies on the dollar, finding cheap, hungry, competitive labor, ready to compete with even 3rd world wages. The prudent, hard-working, and savers (the wrong people) were wiped out, and the money was transferred to the speculators and insiders (the right people). Massive capital like land and factories can not be expatriated, but are always worth their USE value and did not fall as much, or even rose afterwards as with falling debt ratios and low wages these working assets became competitive again. It’s not so much a “collapse” as a redistribution, from the middle class and the working to the capital class and the connected. …And the genius is, they could blame it all on foreigners, “incompetent” leaders, and careless, debt-happy citizens themselves.

But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. Frederic Bastiat, 1850

BULK SALES OF MORTGAGE LOANS: WHAT ARE THEY BUYING?

Wall Street is gearing up to buy properties en masse from Fannie, Freddie and other holders (including the Federal Reserve. The question for these investors is what are they buying and what are they doing?

I think these sales represent an attempt to create a filler for an empty hole in the title chain. we already know that strangers to the transaction were submitting credit bids at rigged auctions of these properties. The auctions were based upon declarations of default and instructions from a “beneficiary” that popped up out of nowhere. The borrowers frequently contested the sale with a simple denial that they ever did business with the forecloser and that the chain of “assignments” were fabricated, forged, robo-signed, surrogate signed and executed by unauthroized people on behalf of unauthroized entities.

The reason the banks and servicers resorted to such illegal tactics was that they understood full well that the origination documents were fatally defective and they were papering over the defects that continually recited the validity of the preceding documents. That is putting lipstick on a pig. It is still a pig.

While apparently complex, the transaction in a mortgage loan is quite simple — money is loaned, a note is made payable to the lender and a separate agreement collateralizes the loan as guarantee for faithful performance of repayment in accordance with the terms of the note. An examination of the money trail shows that this procedure was not followed and that the practices followed and which have become institutionalized industry standards lead to grave moral hazard, fabrication, forgery and fraud. The entire matter can be easily resolved if the forecloser is required to produce original documentation and appropriate witnesses to lay the foundation of the introduction of documents starting with the funding of the loan through the present, including all receipts and disbursements relating to the loan.

Since the receipts and disbursements clearly involve third parties whose existence was not contemplated or known at the time of origination of the loan, it would probably be wise to appoint an independent receiver with subpoena powers to obtain full records from the subservicer, Master Servicer, trustee, other co-obligors or co-venturers including the investment bank that sold mortgage bonds and investors with the sole restriction that it relate to the accounting and correspondence, agreements and other media relating to the subject loan and the subject pool claiming to own the loan.

Starting from that point, (knowing all receipts and disbursements, sources and recipients, the rest is relatively uncomplicated. Either the documents follow the money trail or they don’t. If they do, then the foreclosure should proceed. If they don’t then there are discretionary decisions of the court as well as mandatory applications of law that are required to determine whether or not the discrepancies are material.

The chain of documents relied upon by the foreclosing party is neither supported by consideration nor do the origination documents recite the terms of the transaction authorized by the lender. Hence there was no meeting of the minds. At a minimum, the recorded lien is a wild deed or should otherwise be subject to invalidation or removal from county records, and the note should be excluded as evidence of the obligation. The actual obligation runs through a different chain the terms of which were never documented between the lenders and the borrower. Hence at common law, it is a demand loan, unsecured.

But the sale from a GSE or other entity creates yet another layer of paper giving the appearance that the origination documented were valid, even though the evidence strongly points in the opposite direction. The purchase of such loans or properties would thus lead to the inevitable wrongful foreclosure suits in which the property is sought to be returned to its rightful owner, and/or compensatory and punitive damages including damages for emotional distress in California.

So my answer is that these buyers did not buy property or loans. They bought themselves into lawsuits that they will lose once discovery is opened up on the underlying transactions, all of which were faked. Is the government colluding with these “buyers” to fix an fixable title problem?

Follow

Get every new post delivered to your Inbox.

Join 3,308 other followers

%d bloggers like this: