Don’t Admit the Default

Kudos again to Jim Macklin for sitting in for me last night. Excellent job — but don’t get too comfortable in my chair :). Lots of stuff in another mini-seminar packed into 28 minutes of talk.

A big point made by the attorney guest Charles Marshall, with which I obviously agree, is don’t admit the default in a foreclosure unless that is really what you mean to do. I have been saying for 8 years that lawyers and pro se litigants and Petitioners in bankruptcy proceedings have been cutting their own throats by stating outright or implying that the default exists. It probably doesn’t exist, even though it SEEMS like it MUST exist since the borrower stopped paying.

There is not a default just because a borrower stops paying. The default occurs when the CREDITOR DOESN’T GET PAID. Until the false game of “securitization started” there was no difference between the two — i.e., when the borrower stopped paying the creditor didn’t get paid. But that is not the case in 96% of all residential loan transactions between 2001 and the present. Today there are multiple ways for the creditor to get paid besides the servicer receiving the borrower’s payment. the Courts are applying yesterday’s law without realizing that today’s facts are different.

Whether the creditor got paid and is still being paid is a question of fact that must be determined in a hearing where evidence is presented. All indications from the Pooling and Servicing Agreements, Distribution Reports, existing lawsuits from investors, insurers, counterparties in other hedge contracts like credit default swaps — they all indicate that there were multiple channels for payment that had little if anything to do with an individual borrower making payments to the servicer. Most Trust beneficiaries get paid regardless of whether the borrower makes payment, under provisions of the PSA for servicer advances, Trustee advances or some combination of those two plus the other co-obligors mentioned above.

Why would you admit a default on the part of the creditor’s account when you don’t have access to the money trail to identify the creditor? Why would you implicitly admit that the creditor has even been identified? Why would you admit a payment was due under a note and mortgage (or deed of trust) that were void front the start?

The banks have done a good job of getting courts to infer that the payment was due, to infer that the creditor is identified, to infer that the payment to the creditor wasn’t received by the creditor, and to infer that the balance shown by the servicer and the history of the creditor’s account can be shown by reference only to the servicer’s account. But that isn’t true. So why would you admit to something that isn’t true and why would you admit to something you know nothing about.

You don’t know because only the closing agent, originator and all the other “securitization” parties have any idea about the trail of money — the real transactions — and how the money was handled. And they are all suing the broker dealers and each other stating that fraud was committed and mismanagement of the multiple channels of payments received for, or on behalf of the trust or trust beneficiaries.

In the end it is exactly that point that will reach critical mass in the courts, when judges realize that the creditor has no default in its business records because it got paid — and the foreclosure by intermediaries in the false securitization scheme is a sham.

In California the issue they discussed last night about choice of remedies is also what I have been discussing for the last 8 years, but I must admit they said it better than I ever did. Either go for the money or go for the property — you can’t do both. And if you  elected a remedy or assumed a risk, you can’t back out of it later — which is why the point was made last night that the borrower was a third party beneficiary of the transaction with investors which is why it is a single transaction — if there is no borrower, there wold be no investment. If there was no investment, there would have been no borrower. The transaction could not exist without both the investor and the borrower.

Bravo to Jim Macklin, Dan Edstrom and Charles Marshall, Esq. And remember don’t act on these insights without consulting with a licensed attorney who knows about this area of the law.

Foreclosures on Nonexistent Mortgages

I have frequently commented that one of the first things I learned on Wall Street was the maxim that the more complicated the “product” the more the buyer is forced to rely on the seller for information. Michael Lewis, in his new book, focuses on high frequency trading — a term that is not understood by most people, even if they work on Wall Street. The way it works is that the computers are able to sort out buy or sell orders, aggregate them and very accurately predict an uptick or down-tick in a stock or bond.

Then the same investment bank that is taking your order to buy or sell submits its own order ahead of yours. They are virtually guaranteed a profit, at your expense, although the impact on individual investors is small. Aggregating those profits amounts to a private tax on large and small investors amounting to billions of dollars, according to Lewis and I agree.

As Lewis points out, the trader knows nothing about what happens after they place an order. And it is the complexity of technology and practices that makes Wall Street behavior so opaque — clouded in a veil of secrecy that is virtually impenetrable to even the regulators. That opacity first showed up decades ago as Wall Street started promoting increasing complex investments. Eventually they evolved to collateralized debt obligations (CDO’s) and those evolved into what became known as the mortgage crisis.

in the case of mortgage CDO’s, once again the investors knew nothing about what happened after they placed their order and paid for it. Once again, the Wall Street firms were one step ahead of them, claiming ownership of (1) the money that investors paid, (2) the mortgage bonds the investors thought they were buying and (3) the loans the investors thought were being financed through REMIC trusts that issued the mortgage bonds.

Like high frequency trading, the investor receives a report that is devoid of any of the details of what the investment bank actually did with their money, when they bought or originated a mortgage, through what entity,  for how much and what terms. The blending of millions of mortgages enabled the investment banks to create reports that looked good but completely hid the vulnerability of the investors, who were continuing to buy mortgage bonds based upon those reports.

The truth is that in most cases the investment banks took the investors money and didn’t follow any of the rules set forth in the CDO documents — but used those documents when it suited them to make even more money, creating the illusion that loans had been securitized when in fact the securitization vehicle (REMIC Trust) had been completely ignored.

There were several scenarios under which property and homeowners were made vulnerable to foreclosure even if they had no mortgage on their property. A recent story about an elderly couple coming “home” to find their door padlocked, possessions removed and then the devastating news that their home had been sold at foreclosure auction is an example of the extreme risk of this system to ALL homeowners, whether they have or had a mortgage or not. This particular couple had paid off their mortgage 15 years ago. The bank who foreclosed on the nonexistent mortgage and the recovery company that invaded their home said it was a mistake. Their will be a confidential settlement where once again the veil of secrecy will be raised.

That type of “mistake” was a once in a million possibility before Wall Street directly entered the mortgage loan business. So why have we read so many stories about foreclosures where there was no mortgage, or was no default, or where the mortgage loan was with someone other than the party who foreclosed?

The answer lies in how these properties enter the system. When a bank sells its portfolio of loans into the system of aggregation of loans, they might accidentally or intentionally include loans for which they had already received full payment. Maybe they issued a satisfaction maybe they didn’t. It might also include loans where life insurance or PMI paid off the loan.

Or, as is frequently the case, the “loan” was sold after the homeowner was merely investigating the possibility of a mortgage or reverse mortgage. As soon as they made application, since approval was certain, the “originator” entered the data into a platform maintained by the aggregator, like Countrywide, where it was included in some “securitization package.

If the loan closed then it was frequently sold again with the new dates and data, so it would like like a different loan. Then the investment banks, posing as the lenders, obtained insurance, TARP, guarantee proceeds and other payments from “co-obligors” on each version of the loan that was sold, thus essentially creating the equivalent of new sales on loans that were guaranteed to be foreclosed either because there was no mortgage or because the terms were impossible for the borrower to satisfy.

The LPS roulette wheel in Jacksonville is the hub where it is decided WHO will be the foreclosing party and for HOW MUCH they will claim is owed, without any allowance for the multiple sales, proceeds of insurance, FDIC loss sharing, actual ownership of the loans or anything else. Despite numerous studies by those in charge of property records and academic studies, the beat goes on, foreclosing by entities who are “strangers to the transaction” (San Francisco study), on documents that were intentionally destroyed (Catherine Ann Porter study at University of Iowa), against homeowners who had no idea what was going on, using the money of investors who had no idea what was going on, and all based upon a triple tiered documentary system where the contractual meeting of the minds could never occur.

The first tier was the Prospectus and Pooling and Servicing Agreement that was used to obtain money from investors under false pretenses.

The second tier consisted of a whole subset of agreements, contracts, insurance, guarantees all payable to the investment banks instead of the investors.

And the third tier was the “closing documents” in which the borrower, contrary to Federal (TILA), state and common law was as clueless as the investors as to what was really happening, the compensation to intermediaries and the claims of ownership that would later be revealed despite the borrower’s receipt of “disclosure” of the identity of his lender and the terms of compensation by all people associated with the origination of the loan.

The beauty of this plan for Wall Street is that nobody from any of the tiers could make direct claims to the benefits of any of the contracts. It has also enabled then to foreclose more than once on the same home in the name of different creditors, making double claims for guarantee from Fannie Mae, Freddie Mac, FDIC loss sharing, insurance and credit default swaps.

The ugly side of the plan is still veiled, for the most part in secrecy. even when the homeowner gets close in court, there is a confidential settlement, sometimes for millions of dollars to keep the lawyer and the homeowner from disclosing the terms or the reasons why millions of dollars was paid to a homeowner to keep his mouth shut on a loan that was only $200,000 at origination.

This is exactly why I tell people that most of the time their case will be settled either in discovery where a Judge agrees you are entitled to peak behind the curtain, or at trial where it becomes apparent that the witness who is “familiar” with the corporate records really knows nothing and ahs nothing about the the real history of the loan transaction.

Foreclosure Strategists: Phx. Meet tonight: Make the record in your case

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Editor’s Comment:

Contact: Darrell Blomberg  Darrell@ForeclosureStrategists.com  602-686-7355

Meeting: Tuesday, May 15th, 2012, 7pm to 9pm

Make the Record

It appears the most rulings against homeowners are predicated on some arcane and minute failure of the homeowner to make the record.  We’ll be discussing how to make sure you cover all of those points by Making the Record as your case moves along.  We’ll also look at how the process of Making the Record starts long before you even think of going to court

We meet every week!

Every Tuesday: 7:00pm to 9:00pm. Come early for dinner and socialization. (Food service is also available during meeting.)
Macayo’s Restaurant, 602-264-6141, 4001 N Central Ave, Phoenix, AZ 85012. (east side of Central Ave just south of Indian School Rd.)
COST: $10… and whatever you want to spend on yourself for dinner, helpings are generous so bring an appetite.
Please Bring a Guest!
(NOTE: There is a $2.49 charge for the Happy Hour Buffet unless you at least order a soft drink.)

FACEBOOK PAGE FOR “FORECLOSURE STRATEGIST”

I have set up a Facebook page. (I can’t believe it but it is necessary.) The page can be viewed at www.Facebook.com, look for and “friend” “Foreclosure Strategist.”

I’ll do my best to keep it updated with all of our events.

Please get the word out and send your friends and other homeowners the link.

MEETUP PAGE FOR FORECLOSURE STRATEGISTS:

I have set up a MeetUp page. The page can be viewed at www.MeetUp.com/ForeclosureStrategists. Please get the word out and send your friends and other homeowners the link.

May your opportunities be bountiful and your possibilities unlimited.

“Emissary of Observation”

Darrell Blomberg

602-686-7355

Darrell@ForeclosureStrategists.com

Objections and Preserving Your Rights on Appeal: From, Whose Lien Is It Anyway? by Neil F Garfield

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Editor’s Comment:

Foreclosure cases are won or lost on procedure more than on the merits of the case offered by either side. Lawyer and especially pro se litigants tend to use the right of appeal, as though it was a vehicle for entertaining evidence, objections or motions that should have been made. These make up a large percentage of the 85% of cases that are affirmed on appeal.[1]

The appellate court rarely has even the power to consider affidavits or other evidence that was not proffered and which does not show up on the record on appeal sent by the clerk of the court on the “trial” level. The appellate court is limited to what DID happen and not what SHOULD have happened. If the matter was properly raised in the lower court, then the matter may be considered by the appellate court. If not, then they must simply state that the grounds for appeal were not properly preserved for appeal and affirm the decision of the lower court Judge.

In foreclosure cases, most of the objections that should be made are known in advance and quite probably should be brought or offered as a motion in limine before the actual hearing, so that the complete focus of the court is on the issue that  would be presented by opposing counsel  and the objections raised by the borrower homeowner. In those cases, where the objections are known in advance, you should not only state that you have an objection, but the state the reasons for your objection and include a memorandum of law on the point, complete with copies of the most relevant cases.

Most of the errors that I see on the trial court level amounts to denial of due process in that the Court refuses to hear the merits or to allow the parties to conduct discovery. If that is the case in your case, you should mention it even though it is “fundamental error” that the appellate court could hear even without raising the objection contemporaneously with the subject of your objection.

This assures (along with the transcription from a court reporter) that everything about that objection was stated, presented and denied, if such is the case. It might also alert the Judge that you are ready to make such an appeal. If the objection is procedural relating to whether a proper foundation has been laid for the introduction of evidence, or whether the Court is accepting the proffer of counsel without any evidence in the record to support it, then you must make that point clearly and with support from citations in your own state. If the court refuses to hear the objections in limine then you still have the matters raised as part of the court record but you must raise the objection in the hearing or you might well have waived them unless your main point (ill advised) is that the court abused its discretion in denying the motion in limine without hearing it on the merits.

In every case I have seen reversed on appeal, there was something in the record that contradicted or nothing in the record that supported the position taken on appeal.

There are no magic words or bullets on objections. What is necessary is that you state it, without rambling on tangent subjects, with sufficient specificity so that the appellate court will understand in a flash what your objection related to, and what grounds and what law upon which you were relying. Do not combine objections. If you have more than one then state that you have 2 or more objections and proceed with the first.

The mistake I see in appeals and trial proceedings is that the attorney for the homeowner borrower remains silent while opposing counsel states facts that are not in the record (because there has not been an adversary proceeding and that you deny those facts, as they are in issue between the two sides). In many cases the Judge takes silence as a concession that the facts are true as stated and that your defense relates to something other than contesting the facts being proffered by opposing counsel.

The appellate court might agree, particularly if you are not clear in immediately identifying the fact that there was a real transaction in which money exchanged hands and then another event which involved the signing of papers but in which there was no actual transaction. The fact that the borrower believed the papers to be true while everyone else knew they were not, cannot now be used to further the fraud upon your client.

____________________

[1] It has been pointed out by some bankruptcy court judges that out of the three possibilities for appeal of a bankruptcy court ruling, petitioners and their counsel usually bypass the appeal laterally to the sitting District Court Judge charged with hearing civil cases with Federal jurisdiction and with hearing appeals from decisions made in the bankruptcy court. Sources tell us that the percentage of reversals and remand is possibly as high as 50% when brought to the District Judge rather than the BAP or Circuit Court of Appeals.

The Rain in Spain May Start Falling Here

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It is typical politics. You know the problem and the cause but you do nothing about the cause. You don’t fix it because you view your job in government as justifying the perks you get from private companies rather than reason the government even exists — to provide for the protection and welfare of the citizens of that society. It seems that the government of each country has become an entity itself with an allegiance but to itself leaving the people with no government at all.

And the average man in the streets of Boston or Barcelona cannot be fooled or confused any longer. Hollande in France was elected precisely because the people wanted a change that would align the government with the people, by the people and for the people. The point is not whether the people are right or wrong. The point is that we would rather make our own mistakes than let politicians make them for us in order to line their own pockets with gold.

Understating foreclosures and evictions, over stating recovery of the housing Market, lying about economic prospects is simply not covering it any more. The fact is that housing prices have dropped to all time lows and are continuing to drop. The fact is that we would rather kick people out of their homes on fraudulent pretenses and pay for homeless sheltering than keep people in their homes. We have a government that is more concerned with the profits of banks than the feeding and housing of its population. 

When will it end? Maybe never. But if it changes it will be the result of an outraged populace and like so many times before in history, the new aristocracy will have learned nothing from history. The cycle repeats.

Spain Underplaying Bank Losses Faces Ireland Fate

By Yalman Onaran

Spain is underestimating potential losses by its banks, ignoring the cost of souring residential mortgages, as it seeks to avoid an international rescue like the one Ireland needed to shore up its financial system.

The government has asked lenders to increase provisions for bad debt by 54 billion euros ($70 billion) to 166 billion euros. That’s enough to cover losses of about 50 percent on loans to property developers and construction firms, according to the Bank of Spain. There wouldn’t be anything left for defaults on more than 1.4 trillion euros of home loans and corporate debt. Taking those into account, banks would need to increase provisions by as much as five times what the government says, or 270 billion euros, according to estimates by the Centre for European Policy Studies, a Brussels-based research group. Plugging that hole would increase Spain’s public debt by almost 50 percent or force it to seek a bailout, following in the footsteps of Ireland, Greece and Portugal.

“How can you only talk about one type of real estate lending when more and more loans are going bad everywhere in the economy?” said Patrick Lee, a London-based analyst covering Spanish banks for Royal Bank of Canada. “Ireland managed to turn its situation around after recognizing losses much more aggressively and thus needed a bailout. I don’t see how Spain can do it without outside support.”

Double-Dip Recession

Spain, which yesterday took over Bankia SA, the nation’s third-largest lender, is mired in a double-dip recession that has driven unemployment above 24 percent and government borrowing costs to the highest level since the country adopted the euro. Investors are concerned that the Mediterranean nation, Europe’s fifth-largest economy with a banking system six times bigger than Ireland’s, may be too big to save.

In both countries, loans to real estate developers proved most toxic. Ireland funded a so-called bad bank to take much of that debt off lenders’ books, forcing writedowns of 58 percent. The government also required banks to raise capital to cover what was left behind, assuming expected losses of 7 percent for residential mortgages, 15 percent on the debt of small companies and 4 percent on that of larger corporations.

Spain’s banks face bigger risks than the government has acknowledged, even with lower default rates than Ireland experienced. If losses reach 5 percent of mortgages held by Spanish lenders, 8 percent of loans to small companies, 1.5 percent of those to larger firms and half the debt to developers, the cost will be about 250 billion euros. That’s three times the 86 billion euros Irish domestic banks bailed out by their government have lost as real estate prices tumbled.

Bankia Loans

Moody’s Investors Service, a credit-ratings firm, said it expects Spanish bank losses of as much as 306 billion euros. The Centre for European Policy Studies said the figure could be as high as 380 billion euros.

At the Bankia group, the lender formed in 2010 from a merger of seven savings banks, about half the 38 billion euros of real estate development loans held at the end of last year were classified as “doubtful” or at risk of becoming so, according to the company’s annual report. Bad loans across the Valencia-based group, which has the biggest Spanish asset base, reached 8.7 percent in December, and the firm renegotiated almost 10 billion euros of assets in 2011, about 5 percent of its loan book, to prevent them from defaulting.

The government, which came to power in December, announced yesterday that it will take control of Bankia with a 45 percent stake by converting 4.5 billion euros of preferred shares into ordinary stock. The central bank said the lender needs to present a stronger cleanup plan and “consider the contribution of public funds” to help with that.

Rajoy Measures

The Bank of Spain has lost its prestige for failing to supervise banks sufficiently, said Josep Duran i Lleida, leader of Catalan party Convergencia i Unio, which often backs Prime Minister Mariano Rajoy’s government. Governor Miguel Angel Fernandez Ordonez doesn’t need to resign at this point because his term expires in July, Duran said.

Rajoy has shied away from using public funds to shore up the banks, after his predecessor injected 15 billion euros into the financial system. He softened his position earlier this week following a report by the International Monetary Fund that said the country needs to clean up the balance sheets of “weak institutions quickly and adequately” and may need to use government funds to do so.

“The last thing I want to do is lend public money, as has been done in the past, but if it were necessary to get the credit to save the Spanish banking system, I wouldn’t renounce that,” Rajoy told radio station Onda Cero on May 7.

Santander, BBVA

Rajoy said he would announce new measures to bolster confidence in the banking system tomorrow, without giving details. He might ask banks to boost provisions by 30 billion euros, said a person with knowledge of the situation who asked not to be identified because the decision hadn’t been announced.

Spain’s two largest lenders, Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), earn most of their income outside the country and have assets in Latin America they can sell to raise cash if they need to bolster capital. In addition to Bankia, there are more than a dozen regional banks that are almost exclusively domestic and have few assets outside the country to sell to help plug losses.

In investor presentations, the Bank of Spain has said provisions for bad debt would cover losses of between 53 percent and 80 percent on loans for land, housing under construction and finished developments. An additional 30 billion euros would increase coverage to 56 percent of such loans, leaving nothing to absorb losses on 650 billion euros of home mortgages held by Spanish banks or 800 billion euros of company loans.

Housing Bubble

“Spain is constantly playing catch-up, so it’s always several steps behind,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy, a consulting firm in London specializing in sovereign-credit risk. “They should have gone down the Irish route, bit the bullet and taken on the losses. Every time they announce a small new measure, the goal posts have already moved because of deterioration in the economy.”

Without aggressive writedowns, Spanish banks can’t access market funding and the government can’t convince investors its lenders can survive a contracting economy, said Benjamin Hesse, who manages five financial-stock funds at Fidelity Investments in Boston, which has $1.6 trillion under management.

Spanish banks have “a 1.7 trillion-euro loan book, one of the world’s largest, and they haven’t even started marking it,” Hesse said. “The housing bubble was twice the size of the U.S. in terms of peak prices versus 1990 prices. It’s huge. And there’s no way out for Spain.”

Irish Losses

House prices in Spain more than doubled in a decade and have dropped 30 percent since the first quarter of 2008. U.S. homes, which also doubled in value, have lost 35 percent. Ireland’s have fallen 49 percent after quadrupling.

Ireland injected 63 billion euros into its banks to recapitalize them after shifting property-development loans to the National Asset Management Agency, or NAMA, and requiring other writedowns. That forced the country to seek 68 billion euros in financial aid from the European Union and the IMF.

The losses of bailed-out domestic banks in Ireland have reached 21 percent of their total loans. Spanish banks have reserved for 6 percent of their lending books.

“The upfront loss recognition Ireland forced on the banks helped build confidence,” said Edward Parker, London-based head of European sovereign-credit analysis at Fitch Ratings. “In contrast, Spain has had a constant trickle of bad news about its banks, which doesn’t instill confidence.”

Mortgage Defaults

Spain’s home-loan defaults were 2.7 percent in December, according to the Spanish mortgage association. Home prices are propped up and default rates underreported because banks don’t want to recognize losses, according to Borja Mateo, author of “The Truth About the Spanish Real Estate Market.” Developers are still building new houses around the country, even with 2 million vacant homes.

Ireland’s mortgage-default rate was about 7 percent in 2010, before the government pushed for writedowns, with an additional 5 percent being restructured, according to the Central Bank of Ireland. A year later, overdue and restructured home loans reached 18 percent. At the typical 40 percent recovery rate, Irish banks stand to lose 11 percent of their mortgage portfolios, more than the 7 percent assumed by the central bank in its stress tests. That has led to concern the government may need to inject more capital into the lenders.

‘The New Ireland’

Spain, like Ireland, can’t simply let its financial firms fail. Ireland tried to stick banks’ creditors with losses and was overruled by the EU, which said defaulting on senior debt would raise the specter of contagion and spook investors away from all European banks. Ireland did force subordinated bondholders to take about 15 billion euros of losses.

The EU was protecting German and French banks, among the biggest creditors to Irish lenders, said Marshall Auerback, global portfolio strategist for Madison Street Partners LLC, a Denver-based hedge fund.

“Spain will be the new Ireland,” Auerback said. “Germany is forcing once again the socialization of its banks’ losses in a periphery country and creating sovereign risk, just like it did with Ireland.”

Spanish government officials and bank executives have downplayed potential losses on home loans by pointing to the difference between U.S. and Spanish housing markets. In the U.S., a lender’s only option when a borrower defaults is to seize the house and settle for whatever it can get from a sale. The borrower owes nothing more in this system, called non- recourse lending.

‘More Pressure’

In Spain, a bank can go after other assets of the borrower, who remains on the hook for the debt no matter what the price of the house when sold. Still, the same extended liability didn’t stop the Irish from defaulting on home loans as the economy contracted, incomes fell and unemployment rose to 14 percent.

“As the economy deteriorates, the quality of assets is going to get worse,” said Daragh Quinn, an analyst at Nomura International in Madrid. “Corporate loans are probably going to be a bigger worry than mortgages, but losses will keep rising. Some of the larger banks, in particular BBVA and Santander, will be able to generate enough profits to absorb this deterioration, but other purely domestic ones could come under more pressure.”

Spain’s government has said it wants to find private-sector solutions. Among those being considered are plans to let lenders set up bad banks and to sell toxic assets to outside investors.

Correlation Risk

Those proposals won’t work because third-party investors would require bigger discounts on real estate assets than banks will be willing to offer, RBC’s Lee said.

Spanish banks face another risk, beyond souring loans: They have been buying government bonds in recent months. Holdings of Spanish sovereign debt by lenders based in the country jumped 32 percent to 231 billion euros in the four months ended in February, data from Spain’s treasury show.

That increases the correlation of risk between banks and the government. If Spain rescues its lenders, the public debt increases, threatening the sovereign’s solvency. When Greece restructured its debt, swapping bonds at a 50 percent discount, Greek banks lost billions of euros and had to be recapitalized by the state, which had to borrow more from the EU to do so.

In a scenario where Spain is forced to restructure its debt, even a 20 percent discount could spell almost 50 billion euros of additional losses for the country’s banks.

“Spain will have to turn to the EU for funds to solve its banking problem,” said Madison Street’s Auerback. “But there’s little money left after the other bailouts, so what will Spain get? That’s what worries everybody.”

The Banks, Rushing To Foreclose So They Can Sit On Vacant Homes

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Author: 

These damn judges here in Florida, they really need to wake up, start working harder and grant more foreclosures more quickly.  Hurry up already, and stop whining about budget cuts and staff positions cut, and who cares that the entire state court system is funded by less than one percent of the state budget, and shut up about case loads that have tripled to 3,000 or more cases per judge and frazzled judicial assistant.  Just grant those damn foreclosure judgments….after all, everyone knows the economy cannot recover until these damn slacking judges push through this foreclosure backlog….right?

Oh wait a minute, there’s apparently a bit of a fly in this ointment.  You see, apparently the banks are cancelling foreclosure sales just as quickly as our good judges are able to sign those damn Final Judgments of Foreclosure…yup…apparently, now wait just a dadgummed minute.

You mean to tell me our elected circuit court judges are busy throwing families out into the streets just so the banks can amass ever larger portfolios of vacant and abandoned properties that they are apparently not responsible for taking care of?

Well shut my mouth!  You don’t say?  Really!  No way?  Do you mean to tell me we can’t blame all this on our under-funded judges and this ain’t the fault of those damn ethically-challenged foreclosure defense attorneys what with all their delay tactics and pesky rules and those absurd arguments about THE LAW…blah, blah, blah.

When exactly will this nation wake up and start directing appropriate anger and rage at the real evil that’s hard at work, everyday all across this sleeping nation?

From the Tampa Times:

It’s an oft-repeated pattern.

In the last 12 months, lenders have canceled auctions on 4,204 properties in Pinellas and Hillsborough counties. Sales have been canceled two, three, even nine times on some homes.

In many cases, banks delay seizures to avoid having to pay maintenance bills or homeowner association fees. Meanwhile, neighbors fend off vandals and thieves and worry about property values falling because of the deteriorating houses.

The repeated cancellations burden the court system.

“These never seem to go away,” said Thomas McGrady, chief judge of the Pinellas-Pasco County Circuit. “It’s a nuisance.”

White Paper: Many Causes of Foreclosure Crisis

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Editor’s Comment:

I attended Darrell Blomberg’s Foreclosure Strategists’ meeting last night where Arizona Attorney General Tom Horne defended the relatively small size of the foreclosure settlement compared with the tobacco settlement. To be fair, it should be noted that the multi-state settlement relates only to issues brought by the attorneys general. True they did very little investigation but the settlement sets the guidelines for settling with individual homeowners without waiving anything except that the AG won’t bring the lawsuits to court. Anyone else can and will. It wasn’t a real settlement. But the effect was what the Banks wanted. They want you to think the game is over and move on. The game is far from over, it isn’t a game and I won’t stop until I get those homes back that were ripped from the arms of homeowners who never knew what hit them.

So this is the first full business day after AG Horne promised me he would get back to me on the question of whether the AG would bring criminal actions for racketeering and corruption against the banks and servicers for conducting sham auctions in which “credit bids” were used instead of cash to allow the banks to acquire title. These credit bids came from non-creditors and were used as the basis for issuing deeds on foreclosure, each of which carry a presumption of authenticity.  But the deeds based on credit bids from non-creditors represent outright theft and a ratification of a corrupt title system that was doing just fine before the banks started claiming the loans were securitized.

Those credit bids and the deeds issued upon foreclosure were sham transactions — just as the transactions originated with borrowers were based upon the lies and false pretenses of the acting lenders who were paid for their acting services. By pretending that the loan came from these thinly capitalised sham companies (all closed with no forwarding address), the banks and servicers started the lie that the loan was sold up the tree of securitization. Each transaction we are told was a sale of the loan, but none of them actually involved any money exchanging hands. So much for, “value received.”

The purpose of these loans was to create a process that would cover up the theft of the investor money that the investment bank received in exchange for “mortgage bonds” based upon non-existent transactions and the title equivalent of wild deeds.

So the answer to the question is that borrowers did not make bad decisions. They were tricked into these loans. Had there been full disclosure as required by TILA, the borrowers would never have closed on the papers presented to them. Had there been full disclosure to the investors, they never would have parted with a nickel. No money, no lender, no borrower no transactions. And practically barring lawyers from being hired by borrowers was the first clue that these deals were upside down and bogus. No, they didn’t make bad decisions. There was an asymmetry of information that the banks used to leverage against the borrowers who knew nothing and who understood nothing.  

“Just sign everywhere we marked for your signature” was the closing agent’s way of saying, “You are now totally screwed.” If you ask the wrong question you get the wrong answer. “Moral hazard” in this context is not a term anyone knowledgeable uses in connection with the borrowers. It is a term used to express the context in which unscrupulous Bankers acted without conscience and with reckless disregard to the public, violating every applicable law, rule and regulation in the process.

Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis

Public Policy Discussion Paper No. 12-2


by Christopher L. Foote, Kristopher S. Gerardi, and Paul S. Willen

This paper presents 12 facts about the mortgage market. The authors argue that the facts refute the popular story that the crisis resulted from financial industry insiders deceiving uninformed mortgage borrowers and investors. Instead, they argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. The authors then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of our understanding of asset price bubbles and design policies accordingly.

To ready the entire paper please go to this link: www.bostonfed.org/economic/ppdp/2012/ppdp1202.htm

CFPB Issues Bulletin Removing the Corporate Veils

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Editor’s Comment:

In a recent bulletin, the Consumer Financial Protection Board issued a bulletin that obliterated the “layering” of corporate veils to pierce through and allow homeowner borrowers to press their claims for wrongful foreclosure, slander of title, fraud and other claims against EVERYONE that is a “service provider” within the broad definition contained in the  Dodd-Frank Act. It makes everyone liable. Hat Tip to Darrell Blomberg. Instead of projecting dozens of hours as to discovery, depositions, and other forms of investigation, the CFPB has essentially created a presumption by an administrative finding. This finding, being merely a codification of existing law and doctrine is in my opinion completely retroactive.

The mere fact that a supervised bank or nonbank enters into a business relationship with a service provider does not absolve the supervised bank or nonbank of responsibility for complying with Federal consumer financial law to avoid consumer harm. A service provider that is unfamiliar with the legal requirements applicable to the products or services being offered, or that does not make efforts to implement those requirements carefully and effectively, or that exhibits weak internal controls, can harm consumers and create potential liabilities for both the service provider and the entity with which it has a business relationship. Depending on the circumstances, legal responsibility may lie with the supervised bank or nonbank as well as with the supervised service provider.

B.    The CFPB’s Supervisory Authority Over Service Providers

Title X authorizes the CFPB to examine and obtain reports from supervised banks and nonbanks for compliance with Federal consumer financial law and for other related purposes and also to exercise its enforcement authority when violations of the law are identified. Title X also grants the CFPB supervisory and enforcement authority over supervised service providers, which includes the authority to examine the operations of service providers on site.1 The CFPB will exercise the full extent of its supervision authority over supervised service providers, including its authority to examine for compliance with Title X’s prohibition on unfair, deceptive, or abusive acts or practices. The CFPB will also exercise its enforcement authority against supervised service providers as appropriate.2

C.    The CFPB’s Expectations

The CFPB expects supervised banks and nonbanks to have an effective process for managing the risks of service provider relationships. The CFPB will apply these expectations consistently, regardless of whether it is a supervised bank or nonbank that has the relationship with a service provider.

To limit the potential for statutory or regulatory violations and related consumer harm, supervised banks and nonbanks should take steps to ensure that their business arrangements with service providers do not present unwarranted risks to consumers. These steps should include, but are not limited to:

    Conducting thorough due diligence to verify that the service provider understands and is capable of complying with Federal consumer financial law;

See full article 2012-03 at http://www.consumerfinance.gov/guidance/

The Reporter Who Saw it Coming

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Editor’s Comment:

By Dean Starkman

Mike Hudson thought he was merely exposing injustice, but he also was unearthing the roots of a global financial meltdown.

Mike Hudson began reporting on the subprime mortgage business in the early 1990s when it was still a marginal, if ethically challenged, business. His work on the “poverty industry” (pawnshops, rent-to-own operators, check-cashing operations) led him to what were then known as “second-lien” mortgages. From his street-level perspective, he could see the abuses and asymmetries of the market in a way that the conventional business press could not. But because it ran mostly in small publications, his reporting was largely ignored. Hudson pursued the story nationally, via a muckraking book, Merchants of Misery (Common Courage Press, 1996); in a 10,000-word expose on Citigroup-as-subprime-factory, which won a Polk award in 2004 for the small alternative magazine Southern Exposure; and in a series on the subprime leader, Ameriquest, co-written as a freelancer, for the Los Angeles Times in 2005. He continued to pursue the subject as it metastasized into the trillion-dollar center of the Financial Crisis of 2008—briefly at The Wall Street Journal and now at the Center for Public Integrity. Hudson, 52, is the son of an ex-Marine and legendary local basketball coach. He started out on rural weeklies, covering championship tomatoes and large fish and such, even produced a cooking column. But as a reporter for The Roanoke Times he turned to muckraking and never looked back. CJR’s Dean Starkman interviewed Hudson in the spring of 2011.

Follow the ex-employees

The great thing about The Roanoke Times was that there was an emphasis on investigation but there was also an emphasis on storytelling and writing. And they would bring in lots of people like Roy Peter Clark and William Zinsser, the On Writing Well guy. The Providence Journal book, the How I Wrote the Story, was a bit of a Bible for me.

As I was doing a series on poverty in Roanoke, one of the local legal aid attorneys was like, “It’s not just the lack of money—it’s also what happens when they try to get out of poverty.” He said basically there are three ways out: they bought a house, so they got some equity; they bought a car so they could get some mobility; or they went back to school to get a better job. And in every case, he had example after example of folks, who because they were doing just that, had actually gotten deeper in poverty, trapped in unbelievable debt.

His clients often dealt with for-profit trade schools, truck driving schools that would close down; medical assistant’s schools that no one hired from; and again and again they’d be three, four, five, eight thousand dollars in debt, and unable to repay it, and then of course prevented from ever again going back to school because they couldn’t get another a student loan. So that got me thinking about what I came to know as the poverty industry.

I applied for an Alicia Patterson Fellowship and proposed doing stories on check-cashing outlets, pawn shops, second-mortgage lenders (they didn’t call themselves subprime in those days). This was ’91. We didn’t have access to the Internet, but I came across a wire story about something called the Boston “second-mortgage scandal,” and got somebody to send me a thick stack of clips. It was really impressive. The Boston Globe and other news organizations were taking on the lenders and the mortgage brokers, and the closing attorneys, and on and on.

I was trying to make the story not just local but national. I had some local cases involving Associates [First Capital Corp., then a unit of Ford Motor Corp.]. Basically, it turned out that Ford Motor Company, the old-line carmaker, was the biggest subprime lender in the country. The evidence was pretty clear that they were doing many of the same kinds of bait-and-switch salesmanship and, in some cases, pure fraud, that we later saw take over the mortgage market. I felt like this was a big story; this is the one! Later, investigations and Congressional hearings corroborated what I was finding in ’94, ’95, and ’96. And it seems so self-evident now, but I learned that finding ex-employees often gives you a window into what’s really going on with a company. The problem has always been finding them and getting them to talk.

I spent the better part of the ‘90s writing about the poverty industry and about predatory lending. As a reporter you don’t want to be defined by one subject. So I was actually working on a book about the history of racial integration in sports, interviewing old Negro-league baseball players. I was really trying to change a little bit of how I was moving forward career-wise. But it’s like the old mafia-movie line: every time I think I’m out, they pull me back in.

Subprime goes mainstream

In the fall of 2002, the Federal Trade Commission announced a big settlement with Citigroup, which had bought Associates, and at first I saw it as a positive development, like they had nailed the big bad actor. I’m doing a 1,000-word freelance thing, but of course as I started to report I started hearing from people who were saying that this settlement is basically giving them absolution, and allowed them to move forward with what was, by Citi standards, a pretty modest settlement. And the other thing that struck me was the media was treating this as though Citigroup was cleaning up this legacy problem, when Citi itself had its own problems. There had been a big magazine story about [Citigroup Chief Sanford I.] “Sandy” Weill. It was like “Sandy’s Comeback.” I saw this and said, ‘Whoa, this is an example of the mainstreaming of subprime.’

I pitched a story about how these settlements weren’t what they seemed, and got turned down a lot of places. Eventually I went to Southern Exposure and called the editor there, Gary Ashwill, and he said, “That’s a great story, we’ll put it on the cover.” And I said, “Well how much space can we have?” and he said, “How much do we need?” That was not something you heard in journalism in those days.

I interviewed 150 people, mostly borrowers, attorneys, experts, industry people, but the stuff that really moves the story are the former employees. Many of them had just gotten fired for complaining internally. They were upset about what had gone on—to some degree about how the company treated them, but usually very upset about how the company had pressured them and their co-workers to mistreat their customers.

As a result of the Citigroup stuff, I got a call from a filmmaker [James Scurlock] who was working on what eventually became Maxed Out, about credit cards and student loans and all that kind of stuff. And he asked if I could go visit, and in some cases revisit, some of the people I had interviewed and he would follow me with a camera. So I did sessions in rural Mississippi, Brooklyn and Queens, and Pittsburg. Again and again you would hear people talk about these bad loans they got. But also about stress. I remember a guy in Brooklyn, not too far from where I live now, who paused and said something along the lines of: ‘You know I’m not proud of this, but I have to say I really considered killing myself.’ Again and again people talked about how bad they felt about having gotten into these situations. It was powerful and eye-opening. They didn’t understand, in many cases, that they’d been taken in by very skillful salesmen who manipulated them into taking out loans that were bad for them.

If one person tells you that story, you say okay, well maybe it’s true, but you don’t know. But you’ve got a woman in San Francisco saying, “I was lied to and here’s how they lied to me,” and then you’ve got a loan officer for the same company in suburban Kansas saying, “This is what we did to people.” And then you have another loan officer in Florida and another borrower in another state. You start to see the pattern.

People always want some great statistic [proving systemic fraud], but it’s really, really hard to do that. And statistics data doesn’t always tell us what happened. If you looked at some of the big numbers during the mortgage boom, it would look like everything was fine because of the fact that they refinanced people over and over again. So essentially a lot of what was happening was very Ponzi-like—pushing down the road the problems and hiding what was going on. But I was not talking to analysts. I was not talking to high-level corporate executives. I was not talking to experts. I was talking to the lowest level people in the industry— loan officers, branch managers. I was talking to borrowers. And I was doing it across the country and doing it in large numbers. And when you actually did the shoe-leather reporting, you came up with a very different picture than the PR spin you were getting at the high level.

One day Rich Lord [who had just published the muckraking book, American Nightmare: Predatory Lending and the Foreclosure of the American Dream, Common Courage Press, 2004) and I went to his house. We were sitting in his study. Rich had spent a lot of time writing about Household [International, parent of Household Finance], and I had spent a lot of time writing about Citigroup. Household had been number one in subprime, and then CitiFinancial/Citigroup was number one. This was in the fall of 2004. We asked, well, who’s next? Rich suggested Ameriquest.

I went back home to Roanoke and got on the PACER—computerized court records—system and started looking up Ameriquest cases, and found lots of borrower suits and ex-employee suits. There was one in particular, which basically said that the guy had been fired because he had complained that Ameriquest business ethics were terrible. I just found the guy in the Kansas City phone book and called him up, and he told me a really compelling story. One of the things that really stuck out is, he said to me, “Have you ever seen the movie Boiler Room [2000, about an unethical pump-and-dump brokerage firm]?”

By the time I had roughly ten former employees, most of them willing to be on the record, I thought: this is a really good story, this is important. In a sense I feel like I helped them become whistleblowers because they had no idea how to blow the whistle or what to do. And Ameriquest at that point was on its way to being the largest subprime lender. So, I started trying to pitch the story. While I had a full-time gig at the Roanoke Times, for me the most important thing was finding the right place to place it.

The Los Angeles Times liked the story and teamed me with Scott Reckard, and we worked through much of the fall of 2004 and early 2005. We had thirty or so former employees, almost all of them basically saying that they had seen improper, illegal, fraudulent practices, some of whom acknowledged that they’d done it themselves: bait-and-switch salesmanship, inflating people’s incomes on their loan applications, and inflating appraisals. Or they were cutting and pasting W2s or faking a tax return. It was called the “art department”—blatant forgery, doctoring the documents. You know, it was pretty eye-opening stuff. One of the best details was that many people said they showed Boiler Room—as a training tape! And the other important thing about the story was that Ameriquest was being held up by politicians, and even by the media, as the gold standard—the company cleaning up the industry, reversing age-old bad practices in this market. To me, theirs was partly a story of the triumph of public relations.

Leaving Roanoke

I’d been in Roanoke almost 20 years as a reporter, and so, what’s the next step? I resigned from the Roanoke Times and for most of 2005 I was freelancing fulltime. I made virtually no money that year, but by working on the Ameriquest story, it helped me move to the next thing. I interviewed with The Wall Street Journal [and was hired to cover the bond market]. Of course I came in pitching mortgage-backed securities as a great story. I could have said it with more urgency in the proposal, but I didn’t want to come off as like an advocate, or half-cocked.

Daily bond market coverage is their bread-and-butter, and it’s something that needs to be done. And I tried to do the best I could on it. But I definitely felt a little bit like a point guard playing small forward. I was doing what I could for the team but I was not playing in a position where my talents and my skills were being used to the highest.

I wanted to do a documentary. I wanted to do a book [which would become The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America—and Spawned a Global Crisis, Times Books, 2010]. I felt like I had a lot of information, a lot of stuff that needed to be told, and an understanding that many other reporters didn’t have. And I could see a lot of the writing focused on deadbeat borrowers lying about their income, rather than how things were really happening.

Through my reporting I knew two things: I knew that there were a lot of predatory and fraudulent practices throughout the subprime industry. It wasn’t isolated pockets, it wasn’t rogue lenders, it wasn’t rogue employees. It was really endemic. And I also knew that Wall Street played a big role in this, and that Wall Street was driving or condoning and/or profiting from a lot of these practices. I understood that, basically, the subprime lenders, like Ameriquest and even like Countrywide, were really just creatures of Wall Street. Wall Street loaned these companies money; they then made loans; they off-loaded the loans to Wall Street; Wall Street then sold them [as securities to investors]. And it was just this magic circle of cash flowing. The one thing I didn’t understand was all the fancy financial alchemy—the derivatives, the swaps, that were added on to put them on steroids.

It’s clear that people inside a company, one or two or three people, could commit fraud and get away with it, on occasion, despite the best efforts of a company. But I don’t think it can happen in a widespread way when a company has basic compliance systems in place. The best way to connect the dots from the sleazy practices on the ground to people at high levels was to say, okay, they did have these compliance people in place; they had fraud investigators, loan underwriters, and compliance officers. Did they do their jobs? And if they did, what happened to them?

In late 2010, at the Center for Public Integrity, I got a tip about a whistleblower case involving someone who worked at a high level at Countrywide. This is Eileen Foster, who had been an executive vice president, the top fraud investigator at Countrywide. She was claiming before OSHA that she was fired for reporting widespread fraud, but also for trying to protect other whistleblowers within the company who were also reporting fraud at the branch level and at the regional level, all over the country. The interesting thing is that no one in the government had ever contacted her! [This became “Countrywide Protected Fraudsters by Silencing Whistleblowers, say Former Employees,” September 22 and 23, 2011, one of CPI’s best-read stories of the year; 60 Minutes followed with its own interview of Foster, in a segment called, “Prosecuting Wall Street,” December 14, 2011.] It was very exciting. We worked really hard to do follow-up stories. I did about eight stories afterward, many about General Electric, a big player in the subprime world. We found eight former mortgage unit employees who had tried to warn about abuses and whom management had shunted aside.

I just feel like there needs to be more investigative reporting in the mix, and especially more investigative reporting—of problems that are going on now, rather than post-mortems or tick-tocks about financial disasters or crashes or bankruptcies that have already happened.

And that’s hard to do. It takes a real commitment from a news organization, and it can be a high-wire thing because you’re working on these stories for a long time, and market players you’re writing about yell and scream and do some real pushback. But there needs to be more of the sort of early warning journalism. It’s part of the big tent, what a newspaper is.

Foreclosure Strategists: Phx. Meet tomorrow with AZ AG Tom Horne

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Editor’s Comment:

Contact: Darrell Blomberg  Darrell@ForeclosureStrategists.com  602-686-7355

Meeting: Tuesday, May 8th, 2012, 7pm to 9pm

Special guest speaker:  Arizona Attorney General Tom Horne

We will be discussing among other things:

Brief bio / history

Arizona v Countrywide / Bank of America lawsuit settlement

National Attorneys’ General Mortgage Settlement

Appropriation of National Mortgage Settlement Funds

Attorney General’s Legislative Efforts pertaining to foreclosures

Submitted and submitting complaints to the Attorney General’s office

Joint efforts between the Attorney General’s office and other agencies

Adding effectiveness to homeowner’s OCC Complaints

Please send me your thoughts and questions you’d like to ask Tom Horne.

We meet every week!

Every Tuesday: 7:00pm to 9:00pm. Come early for dinner and socialization. (Food service is also available during meeting.)
Macayo’s Restaurant, 602-264-6141, 4001 N Central Ave, Phoenix, AZ 85012. (east side of Central Ave just south of Indian School Rd.)
COST: $10… and whatever you want to spend on yourself for dinner, helpings are generous so bring an appetite.
Please Bring a Guest!
(NOTE: There is a $2.49 charge for the Happy Hour Buffet unless you at least order a soft drink.)

FACEBOOK PAGE FOR “FORECLOSURE STRATEGIST”

I have set up a Facebook page. (I can’t believe it but it is necessary.) The page can be viewed at www.Facebook.com, look for and “friend” “Foreclosure Strategist.”

I’ll do my best to keep it updated with all of our events.

Please get the word out and send your friends and other homeowners the link.

MEETUP PAGE FOR FORECLOSURE STRATEGISTS:

I have set up a MeetUp page. The page can be viewed at www.MeetUp.com/ForeclosureStrategists. Please get the word out and send your friends and other homeowners the link.

May your opportunities be bountiful and your possibilities unlimited.

“Emissary of Observation”

Darrell Blomberg

602-686-7355

Darrell@ForeclosureStrategists.com

Mortgage Rates in U.S. Decline to Record Lows With 30-Year Loan at 3.84%

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Editor’s Comment:

It appears as though Bloomberg has joined the media club tacit agreement to ignore housing and more particularly Investment Banking or relegate them to just another statistic. The possibilities of a deep, long recession created by the Banks using consumer debt are avoiđed and ignored regardless of the writer or projection based upon reliable indexes.

Why is it that Bloomberg News refuses to tell us the news? The facts are that median income has been flat for more than 30 years. The financial sector convinced the government to allow banks to replace income with consumer debt. The crescendo was reached in the housing market where the Case/Schiller index shows a flash spike in prices of homes while the values of homes remained constant. The culprit is always the same — the lure of lower payments with the result being the oppressive amount of debt burden that can no longer be avoided or ignored. The median consumer has neither the cash nor credit to buy.

Each year we hear predictions of a recovery in the housing market, or that green shoots are appearing. We congratulate ourselves on avoiding the abyss. But the predictions and the congratulations are either premature or they will forever be wrong.

The financial sector is allowed to play in our economy for only one reason— to provide capital to satisfy the needs of business for innovation, growth and operations. Instead, we find ourselves with bloated TBTF myths, the capital drained from our middle and lower classes that would be spent supporting an economy of production and service. That money has been acquired and maintained by the financal sector giants, notwithstanding the reports of layoffs.

From any perspective other than one driven by ideology one must admit that the economy has undergone a change in its foundation — and that these changes are ephemeral and cannot be sustained. With GDP now reliant on figures from the financial sector which for the longest time hovered around 16%, our “economy” would be 50% LESS without the financial sector reporting bloated revenues and profits just as they contributed to the false spike in prices of homes. Bloated incomes inflated the stampede of workers to Wall Street.

Investigative reporting shows that the tier 2 yield spread premium imposed by the investment bankers — taking huge amounts of investment capital and converting the capital into service “income” — forced a structure that could not work, was guaranteed not to work and which ultimately did fail with the TBTF banks reaping profits while the rest of the economy suffered.

The current economic structure is equally unsustainable with income and wealth inequality reaching disturbing levels. What happens when you wake up and realize that the real economy of production of goods and service is actually, according to your own figures, worth 1/3 less than what we are reporting as GDP. How will we explain increasing profits reported by the TBTF banks? where did that money come from? Is it real or is it just what we want to hear want to believe and are afraid to face?


Wall Street Insider Exclusive to Livinglies

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Editor’s Comment:

As I have reported on past occasions I have sources from the securities and more specifically the securitization industry that provide comments and information on the promise that I will keep their identities anonymous. This one in particular caught my attention. The source is from a Southeastern state who packaged and sold pools of loans of all types and qualities.

I believe regardless of whether the note and mortgage / deed of trust was assigned or not, it can be demonstrated they did not move as a unit, unless the price paid was the payoff value of the loan and/or value of property. [Editor's Note: The importance of this fellow's statement cannot be overstated. And his method for determining the true nature of an assignment, allonge or indorsement transaction is extremely helpful. While there are contrary arguments to his contention, they are a stretch to accept]

A different price (which I have hitting on this theme) would indicate the two are not a unit, because the value of the promissory note is not related to the actual security value.  Also how the transaction was booked and valued on the bank’s accounts would reveal the same.  I am guessing that they were valuing notes at a price much higher than the market value of the home. [Editor's Note: Yes and as I have already been seen informed with documentation, the transactions were never booked as accounting transactions because from the standpoint of the assignor or assignee no transaction took place. These were assignments of convenience. They do not show on the balance sheet of the either the assignor or the assignee as a loan receivable. If they come to court claiming ownership or that someone else acquired ownership through them, they are doing so contrary to their own admissions in the own bookkeeping. THIS is where confidence and knowledge in motion practice and confidence and knowledge in discovery will put the homeowner in either extreme jeopardy or in a winning position --- because the loan was never owned by ANY of the intermediaries who acted as conduits]

I believe the key is to assert the note as a ‘financial asset.’  That there is a market or exchange in which it trades.  In fact on many of the bank’s annual reports, they speak that the primary business is originating loans for sale/securitization, i.e. a market exists.  Along with pricing, this will be an easy case to make. [Editor's Note: Read this carefully --- it proves the point by reference to information in the public domain --- and it is not subject to attack as being opinion or questionable fact or standing to raise the issue. What I believe he is telling me here is that even if there was ($10.00, or other valuable consideration), there are only three values that conceivably be used --- the principal due on the note, the value of the collateral or the fair market value of the loan as determined by the freely traded secondary market. In nearly all cases the "traders" never even pretended that this was a real transaction and so there was no exchange of money at all. But if there was an exchange of money, this index could be used to prove that the transaction was a sham because it never met the elements of a reasonable business transaction. Judge Shack in New York asked the question himself --- why and under what terms would anyone buy a loan that is in default? How could a loan declared in default be assigned into an investor pool where the investors were promised that they would at least initially receive performing loans. And how could they receive any loan after the 90 day cutoff period included in the PSA and the REMIC statute? The collateral  question that Judge Shack might have asked is why anyone would pay a price different than the price set on the secondary market regardless of the principal stated on the note or the current fair market value?]

Here is the kicker:  SECTION 36‑8‑406. Obligation to notify issuer of lost, destroyed, or wrongfully taken security certificate.

     If a security certificate has been lost, apparently destroyed, or wrongfully taken, and the owner fails to notify the issuer of that fact within a reasonable time after the owner has notice of it and the issuer registers a transfer of the security before receiving notification, the owner may not assert against the issuer a claim for registering the transfer under Section 36‑8‑404 (wrongful registration) or a claim to a new security certificate under Section 36‑8‑405 (replacement of a lost, destroyed or wrongfully taken security certificate).

I wonder out loud why I should not reregister my note.   Imagine the bank now arguing all the points of having to present an actual note, etc in order to change ownership.

The next big thing I am digging into is whether an owner/purchaser of a security has any authority to electronically register and transfer ownership.  I believe, but cannot find exact wording, that such is only limited to the issuer.  On the entire face, MERs may not even be allowed because the issuer of the note, the homeowner, never authorized them to keep track.

Think of why there are laws that require lenders to notify borrowers when their mortgage is sold, it is because the issuer needs a record.  Worse case is that the bank argues the issuer under Chapter 8 is the one who ‘becomes responsible for, or in place of, another person described as an issuer in this section.’   That is still not the bank, but the county registrar.

DO You Want It To Slow Down or to Stop

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Someone sent me a story about a guy who did one of those “California” stops at a stop sign, rolling through at a slightly slower speed than he had been going. A policeman stops him and informs the driver he had not made a full stop. The driver replied that he had made a rolling stop which is the same thing — after all he had slowed down because of the stop sign. The police officer invites him out of the car whereupon the policeman commences beating the driver around the head and body and then says to to the driver “Do you want me to slow down or do you want me to stop?”

The story is funny —sort of — because it makes a point. And I would make the same point about the foreclosures. Do we want a slow down in stealing of property away from people through foreclosures, even short-sales and other delays, or do we just want them to stop. The answer for me is that I want them to stop — except in those cases where the loan was between a normal borrower and a normal lender whose name is properly on the paperwork and who actually loaned the money.

Slowing down the pace of foreclosures because of the presence of forgeries, fabrications and fraud is not the answer. Stopping them and reversing the ones that occurred is the answer. And giving HAMP an actual chance to work (or some other mediated settlement) is the rest of the answer.

These “loans” are between parties who have no documentation as to their positions (the investor/lenders and the homeowner/borrowers) and whose presence was unknown to the other because of cloaks and subterfuge by investment bankers. The chain of documentation refers to a loan from an originator who never loaned a dime and never booked the loan as a receivable on their balance sheet in most cases. And so the entire chain of documents leading up the “securitization” chain are empty documents referring to transactions that never occurred and thus could never result ina perfected security interest in the property.

The solution is what homeowners are offering — converting an undocumented unsecured interest into a documented, secured interest reflecting current economic realities and that will provide the investor/lenders with far greater benefits than foreclosure which leads to ghost towns, bull dozing neighborhoods and other societal problems all for the single purpose of justifying taking every penny as fees for banks, servicers and other parties in the chain, which now, under the April 12 Bulletin from the CFPB, are to be considered just as responsible as banks and servicers.

It should be noted that the homeowners are in most instances offering MORE than the home is worth as the principal due on the note and waiving all other litigation rights.

So do we want it slowed down or stopped. Do we want speed or justice. Do we want the common man to be given back a chance at happiness and prosperity or do we want theft of wealth from the common man to be rewarded with amnesty and further subsidies?


Hiding Behind Advice of Counsel No Better Than Ratings

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Editor’s Comment:

In an article entitled “Legal Beagles in Cross Hairs” WSJ reports that the SEC and many others in law enforcement have on-going investigations into the role of attorneys not misconduct of their clients. For the most part it is an attorney’s solemn duty to represent and advocate the position of his or her client to the utmost of their ability without violating the law. Everyone is entitled to a lawyer no matter how reprehensible their conduct might have been when they committed the act.

But the SEC seems to be leading the way, starting with indictments and convictions of attorneys that kicks aside the clients’ defense of “I did it on advice of counsel.” in wide ranging probes law enforcement agencies are after the attorneys who said it was OK — upon receiving lavish payments, that what the Banks did in setting the securitization structure for the cash trail and setting up the securitization procedure for the document trail and then setting up the contents of the documents that would provide coverage for intentional acts of theft, forgery, fabrication and a variety of other acts.

The attorneys who gave letters of opinion to the investment banks blessing securitization of home and commercial mortgages as they were presented and launched are in deep hot water. This is especially true since the law firms that engaged in these “blessings” had lawyers quitting their jobs leaving behind memorandums to the partners that the law firm itself was committing crimes. The similarity between the blessing of the law firm and the ratings of Moody’s, S&P, Fitch is surprising to some people.

And the attorneys who suggested severance settlements conditioned on employed lawyers or other witnesses on a sudden onset of amnesia are also in the cross-hairs, getting stiff long-term sentences. These are all potential witnesses in what could be come nationwide probes that were blocked by “advice of counsel” claims and brings to mind those many cases where the lawyer for Wells, US Bank, or BOA was fined and sanctioned for lying to the court about facts which they most certainly knew or should have known — like the name of their client.

As these probes continue it may be seen as scapegoating the attorneys or as chilling the confidentiality of the relationship between lawyer and client. But that rule of confidentiality and the defines of advice of counsel vanishes when the conduct of the attorney or indeed a whole law firm is that of a co-conspirator. It is especially unavailable when you have a foreclosure mill that is forging, fabricating and filing documents on behalf of extremely well paying clients.

It would therefore seem to be an appropriate time to file complaints with law enforcement including police and regulatory authorities that are well-written, honed down to a sharp point and which attach at least some evidence beyond the mere allegation of wrong-doing on the part of the attorney or law firm. If appropriate lay people can file the same complaints as grievances with the state Bar Association that is required to regulate and discipline the behavior of lawyers. And attorneys for homeowners and judges who hear these cases are under an obligation to report evidence of wrongdoing or else face disciplinary charges of their own resulting in suspension or disbarment.

Legal Eagles in Cross Hairs

By JEAN EAGLESHAM

The Securities and Exchange Commission is intensifying its scrutiny of lawyers who gave a green light to certain mortgage-bond deals before the financial crisis or have tried to thwart investigations by the agency, according to people familiar with the matter.

The move is at an early stage and might not result in any enforcement action by the SEC because of the difficulty proving lawyers went beyond their legal duty to clients, these people cautioned. In the past, SEC officials generally have gone after lawyers only when accusing them of active involvement in securities fraud or serious misconduct, such as faking documents in a probe.

In recent months, though, some SEC officials have grown frustrated by what they claim is direct obstruction of a few investigations and a larger number of probes where lawyers coach clients in the art of resisting and rebuffing. The tactics include witnesses “forgetting” what happened and companies conducting internal investigations that scapegoat junior employees and let senior managers off the hook, agency officials say. “The problem of less-than-candid testimony … is a serious one,” Robert Khuzami, the SEC’s director of enforcement, said at a conference last month. The stepped-up scrutiny is aimed at both internal and outside lawyers.

Claudius Modesti, enforcement chief at the Public Company Accounting Oversight Board, an accounting watchdog created by the Sarbanes-Oxley Act, said at the same event: “We’re encountering lawyers who frankly should know better.”

The SEC enforcement staff has recently reported more lawyers to the agency’s general counsel, who can take administrative action against lawyers for alleged professional misconduct.

The SEC hasn’t disclosed the number of referrals. Only one lawyer has ever been banned for life from representing clients before the agency because of professional misconduct.

Earlier this year, Kenneth Lench, head of the SEC’s structured-products enforcement unit, said the agency needed to “seriously consider” charges against lawyers in “appropriate cases.” Mr. Lench said he saw “some factual situations where I seriously question whether the advice that was given was done in good faith.”

In July, the Commodity Futures Trading Commission gained the new power to take civil action against anyone, including lawyers, who makes “any false or misleading statement of a material fact.”

The agency, which oversees the futures and options market, hasn’t taken any action yet under the expanded power, according to a person familiar with the matter. A CFTC spokesman declined to comment.

“Frankly, I wish we had the power the CFTC has,” Mr. Khuzami said.

The SEC’s focus on advice provided by lawyers in mortgage-bond deals is part of the wider push by officials to punish alleged wrongdoing tied to the financial crisis. So far, the SEC has filed crisis-related civil suits against 102 firms and individuals, and more cases are coming, according to people familiar with matter.

Some former government officials say stepping up regulatory scrutiny of lawyers for their work on cases snared in investigations by the SEC could send a chilling message. “The government needs to be careful not to deter lawyers from being zealous advocates for their clients,” says John Wood, a former U.S. Attorney for the Western District of Missouri.

The only lawyer hit with a lifetime ban by the SEC for his work on behalf of a client is Steven Altman of New York. The client was a witness in an SEC investigation, and the agency alleged that Mr. Altman suggested in a recorded phone conversation that the client’s recollection of certain events might “fade” if she got a year of severance pay.

Last year, an appeals court rejected Mr. Altman’s bid to overturn the 2010 ban. Jeffrey Hoffman, a lawyer for Mr. Altman, couldn’t be reached for comment.

In December, a federal grand jury in Los Angeles indicted lawyer David Tamman on 10 criminal counts related to helping a former client cover up an alleged $20 million fraud. Prosecutors claim Mr. Tamman changed and backdating documents, removed incriminating documents from investor files and lied to SEC investigators in sworn testimony.

“The truth is that my client was set up and made a scapegoat,” says Stanley Stone, a lawyer for Mr. Tamman, adding that his client acted under the advice and guidance of senior lawyers at his former law firm, Nixon Peabody LLP. “We’re going to prove at trial that what was done was not criminal,” Mr. Stone says.

A Nixon Peabody spokeswoman says Mr. Tamman was fired in 2009 “as soon as we learned that he was under SEC investigation and he failed to explain his actions to us.” The law firm has asked a judge to throw out a wrongful-termination suit filed by Mr. Tamman.

A criminal trial last year shows how the SEC could face daunting hurdles in bringing enforcement actions against lawyers for providing bad advice.

“A lawyer should never fear prosecution because of advice that he or she has given to a client who consults him or her,” U.S. District Judge Roger Titus in Maryland ruled when dismissing all six charges against Lauren Stevens, a former lawyer at drug maker GlaxoSmithKline PLC. GSK +0.19%

Ms. Stevens was accused by prosecutors of lying to the FDA and concealing and falsifying documents related to an investigation by the U.S. agency. The federal judge refused to let a jury decide the case, saying that would risk a miscarriage of justice.

Reid Weingarten, a lawyer for Ms. Stevens, couldn’t be reached. A spokeswoman for the Justice Department declined to comment.

Despite the government’s defeat, “the mere fact she was charged sends a strong signal to other lawyers about the risks of being seen as less than forthcoming in their representation s to the government,” says Mr. Wood, the former federal prosecutor in Missouri. He now is a partner at law firm Hughes Hubbard & Reed LLP.


Breakthrough Whistleblowers for Sale?

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Editor’s Comment:

Executive departures at Fannie, Freddie and Investment Banks

The Wall Street Journal and the New York Times are all buzzing about the departures and layoffs of high placed investment bankers at Fannie and Freddie and the huge layoffs at BOA, Citi, Chase, and Wells of formerly high-priced (stupidly high salaries and bonuses) of major players in their investment banking divisions. These people have intimate knowledge of the actual flow of money, securities and the alleged  securitization of millions of loans.

If you are looking for fact and expert witnesses, this group of people contains at least a few hundred whistle blowers despite contracts they signed for their benefits package on leaving the GSEs and the Banks. Many of them are waiting to be contacted and believe they can make far more money busting the banks or agencies that hired them than the bloated severance package they received.

If you ask the right questions and follow up with them, you will learn that from the very start the documents used at closing with borrowers were even more misleading than the documents used at closing with the lender investors. They will also tell you names of investors and investor “pools” and the fund manager of each. And of course they will tell you that the pools are either empty, non-existent or hydrogenated so that their existence and contents are a complete mystery even ton those who sold repackaged mini bonds or mortgage bonds using the dissolution of the old “trust” that purportedly claimed ownership over the entire loan.

Most important is that these people can tell you why “bankruptcy remote” thinly capitalised entities were used to originate the loans rather than the lending pools. And they can tell you where to find the money that was received, but not allocated to reduce the loan balances or the balances due on the mortgage bonds.


WSJ: Home Ownership at 15 Year Low

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Editor’s Comment:

If you read what the realtors are putting out these days you would have the impression that the housing Market is at bottom, that this is the time to buy (all realtors say that all the time) and that the Market has nowhere to go but up. Reality Check: that is exactly what they said in 2011, 2010, 2009, etc. Meanwhile the Market keeps going down because the median income (the ability to pay for housing) of the average person is going down each month. Case/Schiller have proven in an analysis and chart that goes back to the 1880′s that home prices and median income are inextricably linked.

The banks also want you to think the Market has hit bottom and they are journalists and other shills to say so. The faster they get rid of the real estate the less likely they think it will be that the old homeowner will come back and reclaim the property.

But the Wall Street Journal reports that home ownership is at a 15 year low while assets and income at the banks are at an all-time high. 1998 was the last year we saw so few people owning their own home. Take a look at the purported balance sheets of banks then and now. You will understand the figures — the degree to which the banks siphoned money out of the economy. Remember the only reason we let Wall Street exist is that it is supposedly the capitalist engine providing liquidity to consumers and small business owners alike who buy the things that are made.

Before we developed amnesia about why Wall Street exists and it’s job, the financial sector contributed 16% of this nation’s Gross Domestic Product. Now it is up near 50% which means we are reporting revenues and profits based upon derivatives whose value is derived from other derivatives and after a while you finally get to a real transaction where somebody made something and somebody bought something.

This is unsustainable and more reminiscent of the total lack of understanding that French aristocracy demonstrated when starving people from the streets chopped their heads off with the collusion of the merging merchant class. The control of our society by the banks will stop because it is impossible to sustain. What is surprising is that the lopsided figures in our economy don’t produce more outcries and predictions of disaster which undoubtedly will come to pass unless the bankers are put back in their place at 16% of GDP. That means someone in power needs to trim back the TBTF banks by 2/3. It’s a tall order, but somebody needs to do it.

 It is not as hard as it seems. Most of the assets reported on the balance sheets of the TBTF banks are fake anyway.

People Have Answers, Will Anyone Listen?

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Editor’s Comment: 

Thanks to Home Preservation Network for alerting us to John Griffith’s Statement before the Congressional Progressive Caucus U.S. House of Representatives.  See his statement below.  

People who know the systemic flaws caused by Wall Street are getting closer to the microphone. The Banks are hoping it is too late — but I don’t think we are even close to the point where the blame shifts solidly to their illegal activities. The testimony is clear, well-balanced, and based on facts. 

On the high costs of foreclosure John Griffith proves the point that there is an “invisible hand” pushing homes into foreclosure when they should be settled modified under HAMP. There can be no doubt nor any need for interpretation — even the smiliest analysis shows that investors would be better off accepting modification proposals to a huge degree. Yet most people, especially those that fail to add tacit procuration language in their proposal and who fail to include an economic analysis, submit proposals that provide proceeds to investors that are at least 50% higher than the projected return from foreclosure. And that is the most liberal estimate. Think about all those tens of thousands of homes being bull-dozed. What return did the investor get on those?

That is why we now include a HAMP analysis in support of proposals as part of our forensic analysis. We were given the idea by Martin Andelman (Mandelman Matters). When we performed the analysis the results were startling and clearly showed, as some judges around the country have pointed out, that the HAMP loan modification proposals were NOT considered. In those cases where the burden if proof was placed on the pretender lender, it was clear that they never had any intention other than foreclosure. Upon findings like that, the cases settled just like every case where the pretender loses the battle on discovery.

Despite clear predictions of increased strategic defaults based upon data that shows that strategic defaults are increasing at an exponential level, the Bank narrative is that if they let homeowners modify mortgages, it will hurt the Market and encourage more deadbeats to do the same. The risk of strategic defaults comes not from people delinquent in their payments but from businesspeople who look at the principal due, see no hope that the value of the home will rise substantially for decades, and see that the home is worth less than half the mortgage claimed. No reasonable business person would maintain the status quo. 

The case for principal reductions (corrections) is made clear by the one simple fact that the homes are not worth and never were worth the value of the used in true loans. The failure of the financial industry to perform simple, long-standing underwriting duties — like verifying the value of the collateral created a risk for the “lenders” (whoever they are) that did not exist and was present without any input from the borrower who was relying on the same appraisals that the Banks intentionally cooked up so they could move the money and earn their fees.

Many people are suggesting paths forward. Those that are serious and not just positioning in an election year, recognize that the station becomes more muddled each day, the false foreclosures on fatally defective documents must stop, but that the buying and selling and refinancing of properties presents still more problems and risks. In the end the solution must hold the perpetrators to account and deliver relief to homeowners who have an opportunity to maintain possession and ownership of their homes and who may have the right to recapture fraudulently foreclosed homes with illegal evictions. The homes have been stolen. It is time to catch the thief, return the purse and seize the property of the thief to recapture ill-gotten gains.

Statement of John Griffith Policy Analyst Center for American Progress Action Fund

Before

The Congressional Progressive Caucus U.S. House of Representatives

Hearing On

Turning the Tide: Preventing More Foreclosures and Holding Wrong-Doers Accountable

Good afternoon Co-Chairman Grijalva, Co-Chairman Ellison, and members of the caucus. I am John Griffith, an Economic Policy Analyst at the Center for American Progress Action Fund, where my work focuses on housing policy.

It is an honor to be here today to discuss ways to soften the blow of the ongoing foreclosure crisis. It’s clear that lenders, investors, and policymakers—particularly the government-controlled mortgage giants Fannie Mae and Freddie Mac—must do all they can to avoid another wave of costly and economy-crushing foreclosures. Today I will discuss why principal reduction—lowering the amount the borrower actually owes on a loan in exchange for a higher likelihood of repayment—is a critical tool in that effort.

Specifically, I will discuss the following:

1      First, the high cost of foreclosure. Foreclosure is typically the worst outcome for every party involved, since it results in extraordinarily high costs to borrowers, lenders, and investors, not to mention the carry-on effects for the surrounding community.

2      Second, the economic case for principal reduction. Research shows that equity is an important predictor of default. Since principal reduction is the only way to permanently improve a struggling borrower’s equity position, it is often the most effective way to help a deeply underwater borrower avoid foreclosure.

3      Third, the business case for Fannie and Freddie to embrace principal reduction. By refusing to offer write-downs on the loans they own or guarantee, Fannie, Freddie, and their regulator, the Federal Housing Finance Agency, or FHFA, are significantly lagging behind the private sector. And FHFA’s own analysis shows that it can be a money-saver: Principal reductions would save the enterprises about $10 billion compared to doing nothing, and $1.7 billion compared to alternative foreclosure mitigation tools, according to data released earlier this month.

4      Fourth, a possible path forward. In a recent report my former colleague Jordan Eizenga and I propose a principal-reduction pilot at Fannie and Freddie that focuses on deeply underwater borrowers facing long-term economic hardships. The pilot would include special rules to maximize returns to Fannie, Freddie, and the taxpayers supporting them without creating skewed incentives for borrowers.

Fifth, a bit of perspective. To adequately meet the challenge before us, any principal-reduction initiative must be part of a multipronged

To read John Griffith’s entire testimony go to: http://www.americanprogressaction.org/issues/2012/04/pdf/griffith_testimony.pdf


Colorado Moves Forward with Legislation to Prevent Fraudulent Foreclosures

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Editor’s Comment: 

Once upon a time it was a simple thing. If you sued someone, you had to say why, plead facts that supported the relief you wanted, and then demand the relief. Today it is considered nearly revolutionary to require foreclosers to prove the loan, prove the facts supporting foreclosures, using real evidence and not suppositions. As Colorado moves closer to Nevada’s law there is ample reason to hope that foreclosures will plummet there too. Isn’t it odd though that mediated settlements are not rising substantially either? 

We can only assume that there is something the Banks and servicers are not telling the pensioners who rely upon funds that were heavily invested in the bogus mortgage bonds. Could it be that if the pensioners collectively and the homeowners collectively got together and compared notes they would discover the problem: that when their fund manager put up the money for loans, there were no loans? Or that the investment bank removed 20%–40% of the funds and converted them to fees and profits leaving only a fraction of the money of the pensioners to fund mortgages?

Pensioners and homeowners have more in common than they might realize. In fact they might even be the same person.  Someone whose pension funds are going down because of losses on mortgage bonds in their pension fund and someone who is losing their house in foreclosure because of the decrease in pension income and trickery used by the Banks in securing their signature in bogus loan deals. Many pensioners are going to hear soon that the benefits they were expecting must be reduced because of chicanery on Wall Street. Some of those same people are angry at the thought of providing relief to homeowners who were also tricked into these bogus loan deals. Now that you see the effect, are still sure that borrowers in distress are deadbeats?

Foreclosure: Initiative 84 changes language, pushes for signatures

By Kelsey Whipple

Initiative 84, a proposed constitutional amendment that would require lenders to prove ownership of property before foreclosing on it, has passed another hurdle in its move toward legalization. On Friday, proponents and opponents met before the state title board to discuss its language, which made it through relatively unchanged. The next step, however, might prove the hardest.

Before the potential amendment makes it to a statewide ballot, the Colorado Progressive Coalition, the body heading up its support, must collect a minimum of 87,000 signatures — which could cost $200,000 or more, CPC economic justice director Corrine Fowler says. Now that the effort’s language has been cemented, the coalition is gathering volunteers and paid representatives to launch its signature drive.

Initiative 84, which was created after House Bill 1156, a similar foreclosure measure, died in committee before making it to the floor, seeks to reverse 2006 legislation that changed the standards for legally processing Colorado foreclosures. Since that year, it has been legal for lawyers to sign a “statement of qualified holder,” which indicates ownership without a pattern of proof, and it is no longer mandatory to show a paperwork chain.

If approved, the amendment would require financial institutions to verify ownership of any property through a county note or a certified copy presented during the court stage of a foreclosure.

So far, the language has come under fire from a handful of financial institutions, and while both sides made arguments regarding the initiative’s appropriateness on Friday, most were rejected because they did not apply to title board proceedings. In the meantime, the board denied efforts to stage a rehearing to slow down the initiative.

Fowler says the CPC is satisfied with the slight change in wording, which now reads, “An amendment to the Colorado Constitution changing the existing evidentiary requirements for foreclosure of real property and in connection there with requiring the evidence be filed to sufficiently establish a party’s right to enforce a valid recorded security interest prior to the foreclosure of any real property.”

The central change here is that now sufficient evidence is required, rather than “complete” evidence. The difference could become a significant one at court in the future.

“Special interests like the Colorado Bankers Association won’t be able to come back and change it in future years,” Fowler told Westword. “This is going to affect the bottom line of the lawyers and the bankers, and we know that and don’t take this lightly. We believe that the foreclosure crisis is the biggest issue our national economy is facing.”


Guest Writer Shares Info on Fraud in CA Foreclosure Cases

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Editor’s Comment: The following information was submitted to the blog by a law firm.  We do not know this law firm.  We are simply passing along information that may be of interest to Californians.  As always, please do your research.

From counsel for Consumer Rights Defenders for our loyal followers, you may be interested in this California information which is not meant to be legal advise, just some information that is public knowledge. Call if you need foreclosure help at 818.453.3585 ask for Steve or Sara.   Ms. Stephens Esq7777@aol.com

___________

Elements of fraud cause of action: A plaintiff seeking a remedy based upon fraud must allege and prove all of the following basic elements:

· Defendant’s false representation or concealment of a ‘material’ fact (see Rest.2d Torts | 538(2)(a); Engalla v. Permanente Med. Group, Inc. (1997) 15 Cal.4th 951, 977, 64 Cal.Rptr.2d 843, 859–misrepresentation deemed ‘material’ if ‘a reasonable (person) would attach importance to its existence or nonexistence in determining his choice of action in the transaction’);

· Defendant made the representation with knowledge of its falsity or without sufficient knowledge of the subject to warrant a representation;

· The representation was made with the intent to induce plaintiff (or a class to which plaintiff belonged) to act upon it (see Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 869, 76 Cal.Rptr.3d 325, 333–fraud by false representations means intent to induce ‘reliance’; fraud by concealment involves intent to induce ‘conduct’);

· Plaintiff entered into the contract in ‘justifiable reliance’ upon the representation (see Ostayan v. Serrano Reconveyance Co. (2000) 77 Cal.App.4th 1411, 1419, 92 Cal.Rptr.2d 577, 583–P’s admission of no reliance on a representation made by D precludes cause of action for intentional or negligent misrepresentation); and

· As a result of reliance upon the false representation, plaintiff has suffered damages. [Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239, 44 Cal.Rptr.2d 352, 359; see Manderville v. PCG & S Group, Inc. (2007) 146 Cal.App.4th 1486, 1498, 55 Cal.Rptr.3d 59, 68; and Auerbach v. Great Western Bank (1999) 74 Cal.App.4th 1172, 1184, 88 Cal.Rptr.2d 718, 727--'Deception without resulting loss is not actionable fraud' (¶ 11:357.1)]

(1) [11:354.1] Particularized pleading required: A fraud cause of action must be pleaded with particularity; i.e., every element of the cause of action must be alleged factually and specifically in full. [Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, 197 Cal.Rptr. 783, 795; see Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73, 269 Cal.Rptr. 337, 345--complaint must plead facts showing 'how, when, where, to whom, and by what means the representations were tendered'; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268-1269, 258 Cal.Rptr. 787, 790--fraud complaint deficient if it neither shows cause and effect relationship between alleged fraud and damages sought nor alleges definite amount of damages suffered]

How Did H & R Block Get into the Subprime Mortgage Business?

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Tax Preparer Slammed with $24 Million in Fines on Toxic Mortgages

Editor’s Comment:  You really have to think about some of these stories and what they mean. 

1. Where is the synergy in a merger between Option One and H&R Block? The answers that they were both performing services for fees and neither one was ever a banker, lender or even investor sourcing the funds that were used to lure borrowers into deals that were so convoluted that even Alan Greenspan admits he didn’t understand them.

2. The charge is that they didn’t reveal that they could not buy back all the bad mortgages — meaning they did buy back some of them. which ones? And were some of those mortgages foreclosed in the name of a stranger to the transaction? WORSE YET — how many satisfactions of mortgages were executed by Ocwen, which was not the creditor, never the lender, and never the successor to any creditor. Follow the money trail. The only trail that exists is the trail leading from the investor’s banks accounts into the escrow agent’s trust account with instructions to refund any excess to parties who were complete strangers to the transaction disclosed to the borrower. The intermediary account in which the investor money was deposited was used to pay pornographic fees and profits to the investment banker and close affiliates as “participants” in a scheme of ” securitization” that never took place.

3. Under what terms were the loans purchased? Was it the note, the mortgage or the obligation? There are differences between all three.

4. Since they didn’t have the money to buy back the loans it might be inferred that they never had that money. In other words, they appeared on the “closing papers” as lender when in fact they never had the money to loan and they merely had performed a fee for service — I.e., acting as though they were the lender when they were not.

5. Who was the lender? If the money came from investors, then we know how to identify the creditor. but if we assume that the loan might have been paid or purchased by Option One, then isn’t the lender’s obligation paid? let’s see those actual repurchase transactions.

6. If that isn’t right then Option One must be correctly identified as the lender on the note and mortgage even though they never loaned any money and may or may not have purchased the entire loan, just the receivable, the right to sell the property — but how does anyone purchase the right to submit a credit bid at the foreclosure auction when everyone knows they were not the creditor?

7. How could any of these entities have any loans on their books when they were never the source of funds and why are they being allowed to claim losses obviously fell on the investors who put up the money on toxic mortgages believing them to be triple A rated. 

8. Why would anyone underwrite a bad deal unless they knew they would not lose any money? These mortgages were bad mortgages that under normal circumstances would never have been  offered by any bank loaning its own money or the it’s depositors. 

9. The terms of the deal MUST have been that nobody except the investors loses money on this deal and the kickers is that the investors appear to have waived their right to foreclose. 

10. So the thieves who cooked up this deal get paid for creating it and then end up with the house because the befuddled borrower doesn’t realise that either the debts are paid (at least the one secured by the mortgage) or that the debt has been paid down under terms of the loan (see PSA et al) that were never disclosed to the borrower — contrary to TILA.

11. The Courts must understand that there is a difference between paying a debt and buying the debt. The Courts must require any “assignment” to be tested b discovery where the money trail can be examined. What they will discover is that there is no money trail and that the assignment was a sham.  

12. And if the origination documents show the wrong creditor and fail disclose the true fees and profits of all parties identified with the transaction, the documents — note, mortgage and settlement statements are fatally defective and cannot create a perfected lien without overturning centuries of common law, statutory law and regulations governing the banking and lending industries.

H&R Block Unit Pays $28.2M to Settle SEC Claims Regarding Sale of Subprime Mortgages

By Kansas City Business Journal

H&R Block Inc. subsidiary Option One Mortgage Corp. agreed to pay $28.2 million to settle Securities and Exchange Commission    charges that it had misled investors, federal officials announced Tuesday.

The SEC alleged that Option One promised to repurchase or replace residential mortgage-backed securities it sold in 2007 that breached representations and warranties. The subsidiary did not disclose that its financial situation had degraded such that it could not fulfill its repurchase promises.

Robert Khuzami, director of the SEC’s Division of Enforcement, said in a release that Option One’s subprime mortgage business was hit hard by the collapse of the housing market.

“The company nonetheless concealed from investors that its perilous finances created risk that it would not be able to fulfill its duties to repurchase or replace faulty mortgages in its (residential mortgage-backed securities) portfolios,” Khuzami said in the release.

The SEC said Option One was one of the nation’s largest subprime mortgage lenders, with originations of $40 billion in its 2006 fiscal year. When the housing market began to decline in 2006, the unit was faced with falling revenue and hundreds of millions of dollars’ worth of margin calls from creditors.

Parent company H&R Block (NYSE: HRB) provided financing for Option One to meet margin calls and repurchase obligations, but Block was not obligated to do so. Option One did not disclose this reliance to investors.

Option One, now Sand Canyon Corp., did not admit or deny the allegations. It agreed to pay disgorgement of $14.25 million, prejudgment interest of nearly $4 million and a penalty of $10 million.

Kansas City-based H&R Block reported that it still had $430.19 million of mortgage loans on its books from Option One as of Jan. 31. That’s down 16.2 percent from the same period the previous year.

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