Banks Keep Winning, But Borrowers Are Picking Up the Pace

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

Editors’ Analysis: Based upon reports coming from around the country, and especially in Florida, Nevada, New York, and other states, it seems that while the tide hasn’t turned, borrowers are finally mounting a meaningful challenge to the improper, illegal and fraudulent practices used at loan originations , assignments and foreclosures. As I have discussed with dozens of attorneys now, the strategies I suggested 6 years ago, once thought of as “fringe” are now becoming mainstream and the banks are feeling the pinch if not the bite of homeowners’ wrath.

The expression I like to use is that “At the end of the day everyone knows everything.” By using DENY and Discover tactics or strategies like that, borrowers are shifting the urden of persuasion onto the would-be foreclosers who in most cases do not have “the goods.” They are not a creditor, they didn’t fund the loan, they didn’t buy the loan and they don’t have any legal authorization to pursue foreclosure, submit a credit bid or otherwise trade in houses that were never subject to a perfected lien, and never owned by them.

It is becoming perfectly clear that something wrong is happening when the foreclosure strategies of the Wall Street puppets results in tens of thousands of homes being abandoned, blighting entire neighborhoods, towns and even cities. The banks are not stupid, although arrogance is not far from stupidity.

In ordinary times in any ordinary recession, the banks would do almost anything to avoid foreclose. They simply don’t have the money or the desire to acquire a portfolio of properties and they certainly don’t want to foreclose where the the end result is that the value of the collateral is diminished BELOW ZERO. And they certainly would not pursue policies that they knew would tank housing prices because it would only decrease the value of the loan and the likelihood of getting repaid for the loans they made.

But these are not ordinary times. Banks DO want price declines, so they can create REITS and other vehicles to pick up cheap properties. They DO want foreclosures even where the value of a blighted neighborhood is not worth the taxes, maintenance and insurance to keep the properties.

The reason is simple: if the loan is a total failure and under applicable state law they are able to create the appearance of a valid foreclosure, then the case is closed. Investors have not questioned the foreclosure process, mostly because they think that the basic problem was in the low underwriting standards which  certainly did contribute to the mortgage meltdown. If you look at most of the mortgages they have fatal flaws which increase the likelihood that the loan will fail — especially with blacks and other minorities who have been deprived of decent education and couldn’t possibly understand the deals they were signing.

Disclosure was required — but never made in terms that the borrowers understood — that the loans were being priced too high for the income of the household, and priced higher that the rates for which the household qualified. Blacks were 3.5x more likelihood to be steered into subprime loans when they qualified for conventional loans. People of Latin decent were treated like trash too being presented with documents that not only went above their education or sophistication in real estate transactions but also used words they never learned in English.

But the real reason I learned in my interviews was unrelated to the defective foreclosures. It goes back to the study made by Katherine Ann Porter when she was at the University of Iowa. Her study of thousands of mortgages and foreclosures came to the inescapable conclusion that at least 40% of all the origination documents were intentionally destroyed or claimed as lost. Other studies have shown the figure to be higher than 65%.

In ordinary times the  promissory note executed by the borrower in a conventional residential loan is a negotiable document supported by consideration from the payee who loaned money to the borrower. These notes were given to a custodian of records whose job was to preserve and protect these papers because they were considered by all accounting standards as CASH EQUIVALENT.

So on the balance sheet of the lender the cash was added to cash equivalents as total liquidity of the lender or bank. [What you are looking for on the balance sheet of the "lenders" are "loans receivable" and corresponding entry on the liability side of a reserve for bad debt. You won't find it in the "new mortgages" because they never had the real stake or risk of loss on that loan and therefore was excluded entirely from the balance sheet or placed in a category in loans held for sale along with a footnote or entry that zeroed out the asset of loans for sale because they were committed to third parties who had table funded the loan contrary to the express rules of TILA and Reg Z which state that the loans are presumptively predatory loans if the pattern of lending was  table funded loans.] See My workbooks on www.livinglies-store.com

The notes were considered liquid because there was always a secondary market in which to sell the notes and mortgages. And there, the proper chain of authorized signatures, resolutions, and endorsements was carefully followed, same as they would require from any borrower claiming an asset as proof of their credit-worthiness.

So why would any bank or any reasonable person intentionally destroy the original documents that constituted by definition the origination of the loan collateralize by a supposedly perfected lien? In my seminars and workbooks I answer this question with an example: “If you tell someone you have a hundred dollar bill and that they can have it if they buy to from you for $100, but that you will hold onto it because you will make some more money for them by lending it out, then the fraud is complete. And there you have the beginning of a PONZI scheme.

As long as you are paying them as though they had $100 invested, they are happy. But what if you were holding a $10 bill and not a $100 bill. What if they took your word for it that you were holding a $100 bill. AND what if now they want to see the $100 bill? Now you have a problem. You have no $100 bill to show them. You never did. For a while you could take incoming investor money and then show the original investor the money but when investors stop buying new deals, then you don’t have the $100 bills to show everyone you dealt with because all you ever had was a $10 bill.

So better to say that you destroyed it under the premise that the digitized copy would suffice or lost it because of the complexity of the securitization process than to admit that you never had it to begin with. If you admit it, you go to jail and you are ordered to pay restitution, your assets seized and marshaled to return as much money as possible to the victims of the PONZI scam.

If you don’t admit it, then there is the possibility that after probing why the investors didn’t get their money back, they start discovering how you were using their money, and what you were doing as business plan. The only way to shut that off and make it least likely that investors would ever question whether you had represented the deal correctly at the beginning, to avoid criminal prosecution, is to COMPLETE the FORECLOSURE Process which gives the further appearance that there is an official state government seal of approval on a perfectly illegal foreclosure and probably an economic crime.

See below for the suffering and light and lives lost because of this incredible crime that nobody seems to want to prosecute. A crime, by the way, they has corrupted title records that will haunt us for decades to come.

wall-street-kept-winning-on-mortgages-upending-homeowners.html

Az Statute on Mortgage Fraud Not Enforced (except against homeowners)

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Editor’s Comment:

With a statute like this on the books in Arizona and elsewhere, it is difficult to see why the Chief Law Enforcement of each state, the Attorney General, has not brought claims and prosecutions against all those entities and people up and down the fraudulent securitization chain that brought us the mortgage meltdown, foreclosures of more than 5 million people, suicides, evictions and claims of profits based upon the fact that the free house went to the pretender lender.

Practically every act described in this statute was committed by the investment banks and all their affiliates and partners from the seller of the bogus mortgage bond (sold forward, which means that the loans did not yet exist) all the way down to the people at the closing table with the homeowner borrower.

I’d like to see a script from attorneys who confront the free house concept head on. The San Francisco study and other studies clearly show that many if not most foreclosures resulted in a “sale” of property without any cash offered by the buyer who submitted a credit bid when they had not established themselves as creditors nor had they established the amount due. And we now know that they failed to establish themselves as creditors because they neither loaned the money nor purchased the loan in any transaction in which they parted with money. So the consideration for the sale was not present or if you want to put it in legalese that would effect those states that allow review of the adequacy of consideration at the auction.

I’d like to see a lawyer go to court and say “Judge, you already know it would be wrong for my client to get a free house. I am here to agree with you and state further that whether you rule for the borrower or this pretender lender here, you are going to give a free house to somebody.

“Because this party initiated a foreclosure proceeding without being the creditor, without spending a dime on the loan or purchase of the loan, and without any right to represent the multitude of people and entities that should be paid on this loan. This pretender, this stranger to this transaction stands in the way of a mediated settlement or HAMP modification in which the borrower is more than happy to do a traditional workout based upon the economic realities.

“And they they maintain themselves as obstacles to mediation or modification because they have too much to hide about the origination of this loan.

“All I seek is that you recognize that we deny the loan on which this party is pursuing its claims, we deny the default and we deny the balance. That puts the matter at issue in which there are relevant and material facts that are in dispute.

“I say to you that as a Judge you are here to call balls and strikes and that your ruling can only be that with issues in dispute, the case must proceed.”

“The pretender should be required to state its claim with a complaint, attach the relevant documents and the homeowner should be able to respond to the complaint and confront the witnesses and documents being used. And that means the pretender here must be subject to the requirements of the rules of civil procedure that include discovery.

“Experience shows that there have been no trials on the evidence in all the foreclosures ever brought during this period and that the moment a judge rules on discovery in favor of the borrower, the pretender offers settlement. Why do you think that is?”

“If they had a good reason to foreclose and they had the authority to allege the required the elements of foreclosure and they had the proof to back it up they would and should be more than willing to put a stop to all these motions and petitions from borrowers. But they don’t allow any case to go to trial. They are winning on procedure because of the assumption that the legitimate debt is unpaid and that the borrower owes it to the party making the claim even if there never was transaction with the pretender in which the borrower was a party, directly or indirectly.”

“Neither the non-judicial powers of sale statutes nor the rules of civil procedure based upon constitutional requirements of due process can be used to thwart a claim that has merit or raises issues that have merit. You should not allow the statute and rules to be applied in a manner in which a stranger to the transaction who could not even plead a case in good faith would win a foreclosed house at auction without court review and a hearing on the merits.”

Residential mortgage fraud; classification; definitions in Arizona

Section 1. Title 13, chapter 23, Arizona Revised Statutes, is amended by adding section 13-2320, to read:
13-2320.

A. A PERSON COMMITS RESIDENTIAL MORTGAGE FRAUD IF, WITH THE INTENT TO DEFRAUD, THE PERSON DOES ANY OF THE FOLLOWING:

  1. KNOWINGLY MAKES ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
  2. KNOWINGLY USES OR FACILITATES THE USE OF ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
  3. RECEIVES ANY PROCEEDS OR OTHER MONIES IN CONNECTION WITH A RESIDENTIAL MORTGAGE LOAN THAT THE PERSON KNOWS RESULTED FROM A VIOLATION OF PARAGRAPH 1 OR 2 OF THIS SUBSECTION.
  4. FILES OR CAUSES TO BE FILED WITH THE OFFICE OF THE COUNTY RECORDER OF ANY COUNTY OF THIS STATE ANY RESIDENTIAL MORTGAGE LOAN DOCUMENT THAT THE PERSON KNOWS TO CONTAIN A DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION.

Those convicted of one count of mortgage fraud face punishment in accordance with a Class 4 felony.  Anyone convicted of engaging in a pattern of mortgage fraud could be convicted of a Class 2 felony


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

AP Fannie, Freddie and BOA set to Reduce Principal and Payments

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Editor’s Comment:

Partly as a result of the recent settlement with the Attorneys General and partly because they have run out of options and excuses, the banks are reducing principal and offering to reduce payments as well. What happened to the argument that we can’t reduce principal because it would be unfair to homeowners who are not in distress? Flush. It was never true. These loans were based on fake appraisals at the outset, the liens were never perfected and the banks are staring down a double barreled shotgun: demands for repurchase from investors who correctly allege and can easily prove that the loans were underwritten to fail PLUS the coming rash of decisions showing that the mortgage lien never attached to the land. The banks have nothing left. BY offering principal reductions they get new paperwork that allows them to correct the defects in documentation and they retain the claim of plausible deniability regarding origination documents that were false, predatory, deceptive and fraudulent. 

Fannie, Freddie are set to reduce mortgage balances in California

The mortgage giants sign on to Keep Your Home California, a $2-billion foreclosure prevention program, after state drops a requirement that lenders match taxpayer funds used for principal reductions.

By Alejandro Lazo

As California pushes to get more homeowners into a $2-billion foreclosure prevention program, some Fannie Mae and Freddie Mac borrowers may see their mortgages shrunk through principal reduction.

State officials are making a significant change to the Keep Your Home California program. They are dropping a requirement that banks match taxpayers funds when homeowners receive mortgage reductions through the program.

The initiative, which uses federal funds from the 2008 Wall Street bailout to help borrowers at risk of foreclosure, has faced lackluster participation and lender resistance since it was rolled out last year. By eliminating the requirement that banks provide matching funds, state officials hope to make it easier for homeowners to get principal reductions.

The participation by Fannie Mae and Freddie Mac, confirmed Monday, could provide a major boost to Keep Your Home California.

Fannie Mae and Freddie Mac own about 62% of outstanding mortgages in the Golden State, according to the state attorney general’s office. But since the program was unveiled last year, neither has elected to participate in principal reduction because of concerns about additional costs to taxpayers.

Only a small number of California homeowners — 8,500 to 9,000 — would be able to get mortgage write-downs with the current level of funds available. But given the previous opposition to these types of modifications by the two mortgage giants, housing advocates who want to make principal reduction more widespread hailed their involvement.

“Having Fannie and Freddie participate in the state Keep Your Home principal reduction program would be a really important step forward,” said Paul Leonard, California director of the Center for Responsible Lending. “Fannie and Freddie are at some level the market leaders; they represent a large share of all existing mortgages.”

The two mortgage giants were seized by the federal government in 2008 as they bordered on bankruptcy, and taxpayers have provided $188 billion to keep them afloat.

Edward J. DeMarco, head of the federal agency that oversees Fannie and Freddie, has argued that principal reduction would not be in the best interest of taxpayers and that other types of loan modifications are more effective.

But pressure has mounted on DeMarco to alter his position. In a recent letter to DeMarco, congressional Democrats cited Fannie Mae documents that they say showed a 2009 pilot program by Fannie would have cost only $1.7 million to implement but could have provided more than $410 million worth of benefits. They decried the scuttling of that program as ideological in nature.

Fannie and Freddie last year made it their policy to participate in state-run principal reduction programs such as Keep Your Home California as long as they or the mortgage companies that work for them don’t have to contribute funds.

Banks and other financial institutions have been reluctant to participate in widespread principal reductions. Lenders argue that such reductions aren’t worth the cost and would create a “moral hazard” by rewarding delinquent borrowers.

As part of a historic $25-billion mortgage settlement reached this year, the nation’s five largest banks agreed to reduce the principal on some of the loans they own.

Since then Fannie and Freddie have been a major focus of housing advocates who argue that shrinking the mortgages of underwater borrowers would boost the housing market by giving homeowners a clear incentive to keep paying off their loans. They also say that principal reduction would reduce foreclosures by lowering the monthly payments for underwater homeowners and giving them hope they would one day have more equity in their homes.

“In places that are deeply underwater, ultimately those loans where you are not reducing principal, they are going to fail anyway,” said Richard Green of USC’s Lusk Center for Real Estate. “So you are putting off the day of reckoning.”

The state will allocate the federal money, resulting in help for fewer California borrowers than the 25,135 that was originally proposed. The $2-billion program is run by the California Housing Finance Agency, with $790 million available for principal reductions.

Financial institutions will be required to make other modifications to loans such as reducing the interest rate or changing the terms of the loans.

The changes to the program will roll out in early June, officials with the California agency said. The agency will increase to $100,000 from $50,000 the amount of aid borrowers can receive.

Spokespeople for the nation’s three largest banks — Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. — said they were evaluating the changes. BofA has been the only major servicer participating in the principal reduction component of the program.

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

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?


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


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.

How the Goldman Vampire Squid Just Captured Europe

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Editor’s Comment:

Guest Writer:  Ellen Brown

Ellen is an attorney and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com.  She is also chairman of the Public Banking Institute.

How the Goldman Vampire Squid Just Captured Europe

By Ellen Brown, Truthout | News Analysis

The Goldman Sachs coup that failed in America has nearly succeeded in Europe – a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers.

In September 2008, Henry Paulson, former CEO of Goldman Sachs, managed to extort a $700 billion bank bailout from Congress. But to pull it off, he had to fall on his knees and threaten the collapse of the entire global financial system and the imposition of martial law; and the bailout was a one-time affair. Paulson’s plea for a permanent bailout fund – the Troubled Asset Relief Program or TARP – was opposed by Congress and ultimately rejected.

By December 2011, European Central Bank President Mario Draghi, former vice president of Goldman Sachs Europe, was able to approve a 500 billion euro bailout for European banks without asking anyone’s permission. And in January 2012, a permanent rescue funding program called the European Stability Mechanism (ESM) was passed in the dead of night with barely even a mention in the press. The ESM imposes an open-ended debt on EU member governments, putting taxpayers on the hook for whatever the ESM’s eurocrat overseers demand.

The bankers’ coup has triumphed in Europe seemingly without a fight. The ESM is cheered by euro zone governments, their creditors and “the market” alike, because it means investors will keep buying sovereign debt. All is sacrificed to the demands of the creditors, because where else can the money be had to float the crippling debts of the euro zone governments?

There is another alternative to debt slavery to the banks. But first, a closer look at the nefarious underbelly of the ESM and Goldman’s silent takeover of the ECB….

The Dark Side of the ESM

The ESM is a permanent rescue facility slated to replace the temporary European Financial Stability Facility and European Financial Stabilization Mechanism as soon as member states representing 90 percent of the capital commitments have ratified it, something that is expected to happen in July 2012. A December 2011 YouTube video titled “The shocking truth of the pending EU collapse!” originally posted in German, gives such a revealing look at the ESM that it is worth quoting here at length. It states:

The EU is planning a new treaty called the European Stability Mechanism, or ESM: a treaty of debt…. The authorized capital stock shall be 700 billion euros. Question: why 700 billion?… [Probable answer: it simply mimicked the $700 billion the US Congress bought into in 2008.][Article 9]: “,,, ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them … within seven days of receipt of such demand.” … If the ESM needs money, we have seven days to pay…. But what does “irrevocably and unconditionally” mean? What if we have a new parliament, one that does not want to transfer money to the ESM?…

[Article 10]: “The Board of Governors may decide to change the authorized capital and amend Article 8 … accordingly.” Question: … 700 billion is just the beginning? The ESM can stock up the fund as much as it wants to, any time it wants to? And we would then be required under Article 9 to irrevocably and unconditionally pay up?

[Article 27, lines 2-3]: “The ESM, its property, funding and assets … shall enjoy immunity from every form of judicial process…. ” Question: So the ESM program can sue us, but we can’t challenge it in court?

[Article 27, line 4]: “The property, funding and assets of the ESM shall … be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.” Question: … [T]his means that neither our governments, nor our legislatures, nor any of our democratic laws have any effect on the ESM organization? That’s a pretty powerful treaty!

[Article 30]: “Governors, alternate Governors, Directors, alternate Directors, the Managing Director and staff members shall be immune from legal process with respect to acts performed by them … and shall enjoy inviolability in respect of their official papers and documents.” Question: So anyone involved in the ESM is off the hook? They can’t be held accountable for anything? … The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply? Governments cannot take action against it? Europe’s national budgets in the hands of one single unelected intergovernmental organization? Is that the future of Europe? Is that the new EU – a Europe devoid of sovereign democracies?

The Goldman Squid Captures the ECB

Last November, without fanfare and barely noticed in the press, former Goldman executive Mario Draghi replaced Jean-Claude Trichet as head of the ECB. Draghi wasted no time doing for the banks what the ECB has refused to do for its member governments – lavish money on them at very cheap rates. French blogger Simon Thorpe reports:

On the 21st of December, the ECB “lent” 489 billion euros to European Banks at the extremely generous rate of just 1% over 3 years. I say “lent,” but in reality, they just ran the printing presses. The ECB doesn’t have the money to lend. It’s Quantitative Easing again.The money was gobbled up virtually instantaneously by a total of 523 banks. It’s complete madness. The ECB hopes that the banks will do something useful with it – like lending the money to the Greeks, who are currently paying 18% to the bond markets to get money. But there are absolutely no strings attached. If the banks decide to pay bonuses with the money, that’s fine. Or they might just shift all the money to tax havens.

At 18 percent interest, debt doublesin just four years. It is this onerous interest burden – not the debt itself – that is crippling Greece and other debtor nations. Thorpe proposes the obvious solution:

Why not lend the money to the Greek government directly? Or to the Portuguese government, currently having to borrow money at 11.9%? Or the Hungarian government, currently paying 8.53%. Or the Irish government, currently paying 8.51%? Or the Italian government, who are having to pay 7.06%?

The stock objection to that alternative is that Article 123 of the Lisbon Treaty prevents the ECB from lending to governments. But Thorpe reasons:

My understanding is that Article 123 is there to prevent elected governments from abusing Central Banks by ordering them to print money to finance excessive spending. That, we are told, is why the ECB has to be independent from governments. OK. But what we have now is a million times worse. The ECB is now completely in the hands of the banking sector. “We want half a billion of really cheap money!!” they say. OK, no problem. Mario is here to fix that. And no need to consult anyone. By the time the ECB makes the announcement, the money has already disappeared.

At least if the ECB was working under the supervision of elected governments, we would have some influence when we elect those governments. But the bunch that now has their grubby hands on the instruments of power are now totally out of control.

Goldman Sachs and the financial technocrats have taken over the European ship. Democracy has gone out the window, all in the name of keeping the central bank independent from the “abuses” of government. Yet, the government is the people – or it should be. A democratically elected government represents the people. Europeans are being hoodwinked into relinquishing their cherished democracy to a rogue band of financial pirates, and the rest of the world is not far behind.

Rather than ratifying the draconian ESM treaty, Europeans would be better advised to reverse Article 123 of the Lisbon treaty. Then, the ECB could issue credit directly to its member governments. Alternatively, euro zone governments could re-establish their economic sovereignty by reviving their publicly owned central banks and using them to issue the credit of the nation for the benefit of the nation, effectively interest free. This is not a new idea, but has been used historically to very good effect, e.g. in Australia through the Commonwealth Bank of Australia and in Canada through the Bank of Canada.

Today, the issuance of money and credit has become the private right of vampire rentiers, who are using it to squeeze the lifeblood out of economies. This right needs to be returned to sovereign governments. Credit should be a public utility, dispensed and managed for the benefit of the people.

To add your signature to a letter to parliamentarians blocking ratification of the ESM, click here.

National Notary Association Takes Up Robosigning

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Editor’s Comment: 

National Notary Association to take Up Issue of  Forgery, Robosigning and attesting to authority in corporate capacity.  Arizona’s Ken Bennett, Secretary of State, is among the officials leading the charge on this issue.

Notary Trade Group: Foreclosure Fraud Crisis Highlights Need For Legal, Trusted, Ethical Notarizations

Posted: 21 Apr 2012 09:07 PM PDT

The National Notary Association recently announced:

§ With the foreclosure ‘robo-signing’ crisis and the National Mortgage Settlement sending shockwaves through America’s mortgage industry, three nationally prominent Secretaries of State will convene a special Keynote Panel at the National Notary Association’s 34th Annual Conference this June to discuss the growing demand for trusted, legal notarizations, and what Notaries need to do to increase public protections and reduce liability risks.

§ Secretaries of State Elaine Marshall of North Carolina, Beth Chapman of Alabama, and Ken Bennett of Arizona are at the forefront of developments transforming the role of Notaries Public. Their insights will be a highlight of Conference 2012 — especially in light of mounting nationwide concerns over notarial compliance and risk management.

§ We are pleased that these three influential Secretaries — all of whom are among the top minds in notarial issues — will join us to address the nation’s Notaries and their employers during this critical time,” said NNA President and Chief Executive Officer Thomas A. Heymann.

§ The foreclosure crisis put the spotlight squarely on the high value of legal and ethical notarizations. These Secretaries will provide their perspectives on what needs to be done to strengthen the notarial process and avoid these types of financial crises.”

For more, see Secretaries of State to Address Notary Compliance, Liability, Consumer Protection Following National Mortgage Settlement(Distinguished State Leaders Will Convene Keynote Panel at the National Notary Association’s 2012 Conference in San Diego).

Don’t leave or enter short sale home without quiet title and adequate title insurance.

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U.S. home short sales surpass foreclosure deals for first time

Editor’s Comment: 

Well of course short sales will be higher than REO sales. REO sales of foreclosed property where the bank or its agent owns the property presents a virtually impossible situation with respect to title. The odds are rising every day that a homeowner is going to sue, reverse the eviction, reverse the foreclosure, get title free of the mortgage and note and have the right to exclusive possession. We are getting reports of this across the country. While the banks are trying to keep a stiff upper lip about it all they are in a state of panic (!) because of the loss of ill-gotten gains they thought they had in the bag and (2) because this loss must now be written down on their balance sheet which means that their capital reserves must be correspondingly increased. Where will they get the money?

 SO REO sales are going to be increasingly problematic.

But in a short sale it is the actual homeowner who signs the deed. That eliminates a wild card that is totally out of the control of the banks. The balance of the problem is that the satisfaction of the old mortgage is being executed by parties who have no ownership of the loan nor any agency authority to represent the true creditors (in most cases). But if the short-sale goes thorugh the new buyer can file a quiet title action for a few hundred dollars in fees and a couple of hundred dollars in court costs, and get a judge to sign off on all title claims. To paraphrase American Express’ “don’t leave home without it” It is the best interest of both the old homeowner who could be subject to liability a second time if the real creditor wakes up and in the interest of the new buyer who doesn’t want to lose his home to the claims of some creditor who can actually prove a case. So don’t leave or enter a short-sale home with quiet title — and a REAL title insurance policy that does not exclude claims arising from supposed securitization of the loan.

U.S. home short sales surpass foreclosure deals for first time                                        New Mexico Business Weekly

In a sign that banks are becoming more willing to sell houses for less than the amount that is owed on them, the number of U.S. home short sales surpassed foreclosure deals for the first time, Bloomberg reports, citing Lender Processing Services Inc.

Short sales accounted for 23.9 percent of home purchases in January, the most recent month available, compared with 19.7 percent for sales of foreclosed homes, data compiled by the company show. A year earlier, 16.3 percent of transactions were short sales and 24.9 percent involved foreclosures.

The three largest banks in New Mexico are Wells Fargo, Bank of America and U.S. Bancorp    , respectively.

Foreclosure Strategists: Meeting in Phx: Learn about QWRs

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Editor’s Comment: 

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

Meeting: Tuesday, April 24, 2012, 7pm to 9pm

Qualified Written Requests (QWRs)

10-day Owner / Assignee Requests

Payoff Demand Requests

The goal of this meeting is to build an effective set of requests that operate within the law get us real answers from our loan servicers.

We will be discussing recent updates to Qualified Written Requests laws.  We will look at what the appropriate contents of the QWR should be.

Many people are blindly sending bloated letters demanding every possible bit of discovery.  A QWR loaded with arbitrary demands diminishes the effectiveness of your effort.  We will focus on drafting a succinct, laser-focused QWR that gets you the results you want.

Well also be studying the key points for effective 10-day Owner / Assignee and Payoff Request Letters.

**** PLEASE SEND ME ANY QUALIFIED WRITTEN REQUESTS (or 10-day assignee or payoff demand requests) THAT YOU HAVE ACCESS TO.  I WILL USE THESE AS A BASIS FOR THIS MEETING. ****

Tuesday, May 08, 2012

Special guest speaker:  Arizona Attorney General Tom Horne

We will be discussing among other things:

Arizona v Countrywide / Bank of America lawsuit
National Attorneys General Mortgage Settlement
Attorney General Legislative Efforts (Vasquez?)
OCC Complaints notarizations and all that is associated with that.

Please send me your thoughts and questions you’d like to ask Tom Horne.  More details for this meeting will follow.

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


How Wall Street Perverted the 4 Cs of Mortgage Underwriting

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Editor’s Comment: 

For thousands of years since the dawn of money credit has been an integral part of the equation.  Anytime a person, company or institution takes your money or valuables in exchange for a promise that it will return your money or property or pay it to someone else (like in a check) credit is involved.  Most bank customers do not realize that they are creditors of the bank in which they deposit their money.  But all of them recognize that on some level they need to know or believe that the bank will be able to make good on its promise to honor the check or pay the money as instructed. 

Most people who use banks to hold their money do so in the belief that the bank has a history of being financially stable and always honoring withdrawals.  Some depositors may look a little further to see what the balance sheet of the bank looks like.   Of course the first thing they look at is the amount of cash shown on the balance sheet so that a perspective depositor can make an intelligent decision about the liquidity or availability of the funds they deposit. 

So the depositor is in essence lending money to the bank upon the assumption of repayment based upon the operating history of the bank, the cash in the bank and any other collateral (like FDIC guarantees).

As it turns out these are the 4 Cs of loan underwriting which has been followed since the first person was given money to hold and issued a paper certificate in exchange. The paper certificate was intended to be used as either a negotiable instrument for payment in a far away land or for withdrawal when directly presented to the person who took the money and issued the promise on paper to return it.

Eventually some people developed good reputations for safe keeping the money.  Those that developed good reputations were allowed by the depositors to keep the money for longer and longer periods.  After a while, the persons holding the money (now called banks) realized that in addition to charging a fee to the depositor they could use the depositor’s money to lend out to other people.  The good banks correctly calculated the probable amount of time for the original depositor to ask for his money back and adjusted loan terms to third parties that would be due before the depositor demanded his money.

The banks adopted the exact same strategy as the depositors.  The 4 Cs of underwriting a loan—Capacity, Credit, Cash and Collateral—are the keystones of conventional loan underwriting. 

The capacity of a borrower is determined by their ability to repay the debt without reference to any other source or collateral.  For the most part, banks successfully followed this model until the late 1990s when they discovered that losing money could be more profitable than making money.  In order to lose money they obviously had to invert the ratios they used to determine the capacity of the borrower to repay the money.  To accomplish this, they needed to trick or deceive the borrower into believing that he was getting a loan that he could repay, when in fact the bank knew that he could not repay it.  To create maximum confusion for borrowers the number of home loan products grew from a total of 5 different types of loans in 1974 to a total of 456 types of loans in 2006.  Thus the bank was assured that a loss could be claimed on the loan and that the borrower would be too confused to understand how the loss had occurred.  As it turned out the regulators had the same problem as the borrowers and completely missed the obscure way in which the banks sought to declare losses on residential loans.

Like the depositor who is trusting the bank based upon its operating history, the bank normally places its trust in the borrower to repay the loan based upon the borrowers operating history which is commonly referred to as their credit worthiness, credit score or credit history.  Like the capacity of the borrower this model was used effectively until the late 1990s when it too was inverted.  The banks discovered that a higher risk of non-payment was directly related to the “reasonableness” of charging a much higher interest rate than prevailing rates.  This created profits, fees and premiums of previously unimaginable proportions.  The bank’s depositors were expecting a very low rate of interest in exchange for what appeared as a very low risk of nonpayment from the bank.  By lending the depositor’s money to high risk borrowers whose interest rate was often expressed in multiples of the rate paid to depositors, the banks realized they could loan much less in principal than the amount given to them by the depositor leaving an enormous profit for the bank.  The only way the bank could lose money under this scenario would be if the loan was actually repaid.  Since some loans would be repaid, the banks instituted a power in the master servicer to declare a pool of loans to be in default even if many of the individual loans were not in default.  This declaration of default was passed along to investors (depositors) and borrowers alike where eventually both would in many, if not most cases, perceive the investment as a total loss without any knowledge that the banks had succeeded in grabbing “profits” that were illegal and improper regardless if one referred to common law or statutory law.

Capacity and credit are usually intertwined with the actual or stated income of the borrower.  Most borrowers and unfortunately most attorneys are under the mistaken belief that an inflated income shown on the application for the loan, subjects the borrower to potential liability for fraud.  In fact, the reverse is true.  Because of the complexity of real estate transactions, a history of common law dating back hundreds of years together with modern statutory law, requires the lender to perform due diligence in verifying the ability of the borrower to repay the loan and in assessing the viability of the loan.  Some loans had a teaser rate of a few hundred dollars per month.  The bank had full knowledge that the amount of the monthly payment would change to an amount exceeding the gross income of the borrower.   In actuality the loan had a lifespan that could only be computed by reference to the date of closing and the date that payments reset.  The illusion of a 30-year loan along with empty promises of refinancing in a market that would always increase in value, led borrowers to accept prices that were at times a multiple of the value of the property or the value of the loan.  Banks have at their fingertips numerous websites in which they can confirm the likelihood of a perspective borrower to repay the loan simply by knowing the borrower’s occupation and geographical location.  Instead, they allowed mortgage brokers to insert absurd income amounts in occupations which never generate those levels of income.  In fact, we have seen acceptance and funding of loans based upon projected income from investments that had not yet occurred where the perspective investment was part of a scam in which the mortgage broker was intimately involved.  See Merendon Mining scandal.

The Cash component of the 4 Cs.  Either you have cash or you don’t have cash.  If you don’t have cash, it’s highly unlikely that anyone would consider a substantial loan much less a deposit into a bank that was obviously about to go out of business.   This rule again was followed for centuries until the 1990s when the banks replaced the requirement of cash from the borrower with a second loan or even a third loan in order to “seal the deal”.  In short, the cash requirement was similarily inverted from past practices.  The parties involved at the closing table were all strawmen performing fees for service.  The borrower believed that a loan underwriting was taking place wherein a party was named on the note as the lender and also named in the security instrument as the secured party. The borrower believed that the closing could never have occurred but for the finding by the “underwriting lender” that the loan was proper and viable.  The people at the closing table other than the borrower, all knew that the loan was neither proper nor viable.  In many cases the borrower had just enough cash to move into a new house and perhaps purchase some window treatments.  Since the same credit game was being played at furniture stores and on credit cards, more money was given to the borrower to create fictitious transactions in which furniture, appliances, and home improvements were made at the encouragement of retailers and loan brokers.  Hence the cash requirement was also inverted from a positive to a negative with full knowledge by the alleged bank who didn’t bother to pass this knowledge on to its “depositors” (actually, investors in bogus mortgage bonds). 

Collateral is the last of the 4 Cs in conventional loan underwriting.  Collateral is used in the event that the party responsible for repayment fails to make the repayment and is unable to cure it or work out the difference with the bank.  In the case of depositors, the collateral is often viewed as the full faith and credit of the United States government as expressed by the bank’s membership in the Federal Deposit Insurance Corporation (FDIC).  For borrowers collateral refers to property which they pledge can be used or sold to satisfy obligation to repay the loan.  Normally banks send one or even two or three appraisers to visit real estate which is intended to be used as collateral.  The standard practice lenders used was to apply the lower appraisals as the basis for the maximum amount that they would lend.  The banks understood that the higher appraisals represented a higher risk that they would lose money in the event that the borrower failed to repay the loan and property values declined.  This principal was also used for hundreds of years until the 1990s when the banks, operating under the new business model described above, started to run out of people who could serve as borrowers.  Since the deposits (purchases of mortgage bonds) were pouring in, the banks either had to return the deposits or use a portion of the deposits to fund mortgages regardless of the quality of the mortgage, the cash, the collateral, the capacity or any other indicator that a normal reasonable business person would use.  The solution was to inflate the appraisals of the real estate by presenting appraisers with “an offer they couldn’t refuse”.  Either the appraiser came in with an appraisal of the real property at least $20,000 above the price being used in the contract or the appraiser would never work again.  By inflating the appraisals the banks were able to move more money and of course “earn” more fees and profits. 

The appraisals were the weakest link in the false scheme of securitization launched by the banks and still barely understood by regulators.  As the number of potential borrowers dwindled and even with the help of developers raising their prices by as much as 20% per month the appearance of a rising market collapsed in the absence of any more buyers.

Since all the banks involved were holding an Ace High Straight Flush, they were able to place bets using insurance, credit default swaps and other credit enhancements wherein a movement of as little as 8% in the value of a pool would result in the collapse of the entire pool.  This created the appearance of losses to the banks which they falsely presented to the U.S. government as a threat to the financial system and the financial security of the United States.  Having succeeded in terrorizing the executive and legislative branches and the Federal Reserve system, the banks realized that they still had a new revenue generator.  By manufacturing additional losses the government or the Federal Reserve would fund those losses under the mistaken belief that the losses were real and that the country’s future was at stake.  In fact, the country’s future is now at stake because of the perversion of the basic rules of commerce and lending stated above.  The assumption that the economy or the housing market can recover without undoing the fraud perpetrated by the banks is dangerous and false.  It is dangerous because more than 17 trillion dollars in “relief” to the banks has been provided to cover mortgage defaults which are at most estimated at 2.6 trillion.  The advantage given to the megabanks who accepted this surplus “aid” has made it difficult for community banks and credit unions to operate or compete.   The assumption is false because there is literally not enough money in the world to accomplish the dual objectives of allowing the banks to keep their ill gotten gains and providing the necessary stimulus and rebuilding of our physical and educational infrastructure.  

The simple solution that is growing more and more complex is the only way that the U.S. can recover.  With the same effort that it took in 1941 to convert an isolationist largely unarmed United States to the most formidable military power on the planet, the banks who perpetrated this fraud should be treated as terrorists with nothing less than unconditional surrender as the outcome.  The remaining 7,000 community banks and credit unions together with the existing infrastructure for electronic funds transfer will easily allow the rest of the banking community to resume normal activity and provide the capital needed for a starving economy. 

See article:  www.kcmblog.com/2012/04/05/the-4-cs-of-mortgage-underwriting-2

A USEFUL PRIMER OF TERMS FROM O. MAX GARDNER AND RICHARD D. SHEPARD

Your Client’s Securitized Mortgage: a Basic Roadmap Part 1 [2009-11-19]

Your Client’s Securitized Mortgage: A Basic Roadmap

PART 1: The Parties and Their Roles

The first issue in reviewing a structured residential mortgage transaction is to differentiate between a private-label deal and an “Agency” (or “GSE”) deal. An Agency (or GSE) deal is one involving Fannie Mae, Freddie Mac, or Ginnie Mae, the three Government Sponsored Enterprises (also known as the GSEs). This paper will review the parties, documents, and laws involved in a typical private-label securitization. We also address frequently-occurring practical considerations for counsel dealing with securitized mortgage loans that are applicable across-the-board to mortgages into both private-label and Agency securitizations.
The parties, in the order of their appearance are:

Originator.
The “originator” is the lender that provided the funds to the borrower at the loan closing or close of escrow. Usually the originator is the lender named as “Lender” in the mortgage Note. Many originators securitize loans; many do not. The decision not to securitize loans may be due to lack of access to Wall Street capital markets, or this may simply reflect a business decision not to run the risks associated with future performance that necessarily go with sponsoring a securitization, or the originator obtains better return through another loan disposition strategy such as whole loan sales for cash.

Warehouse Lender. The Originator probably borrowed the funds on a line of credit from a short-term revolving warehouse credit facility (commonly referred to as a “warehouse lender”); nevertheless the money used to close the loan were technically and legally the Originator’s funds. Warehouse lenders are either “wet” funders or “dry” funders. A wet funder will advance the funds to close the loan upon the receipt of an electronic request from the originator. A dry funder, on the other hand, will not advance funds until it actually receives the original loan documents duly executed by the borrower.

Responsible Party.
Sometimes you may see another intermediate entity called a “Responsible Party,” often a sister company to the lender. Loans appear to be transferred to this entity, typically named XXX Asset Corporation.

Sponsor. The Sponsor is the lender that securitizes the pool of mortgage loans. This means that it was the final aggregator of the loan pool and then sold the loans directly to the Depositor, which it turn sold them to the securitization Trust. In order to obtain the desired ratings from the ratings agencies such as Moody’s, Fitch and S&P, the Sponsor normally is required to retain some exposure to the future value and performance of the loans in the form of purchase of the most deeply subordinated classes of the securities issued by the Trust, i.e. the classes last in line for distributions and first in line to absorb losses (commonly referred to as the “first loss pieces” of the deal).

Depositor. The Depositor exists for the sole purpose of enabling the transaction to have the key elements that make it a securitization in the first place: a “true sale” of the mortgage loans to a “bankruptcy-remote” and “FDIC-remote” purchaser. The Depositor purchases the loans from the Sponsor, sells the loans to the Trustee of the securitization Trust, and uses the proceeds received from the Trust to pay the Sponsor for the Depositor’s own purchase of the loans. It all happens simultaneously, or as nearly so as theoretically possible. The length of time that the Depositor owns the loans has been described as “one nanosecond.”

The Depositor has no other functions, so it needs no more than a handful of employees and officers. Nevertheless, it is essential for the “true sale” and “bankruptcy-remote”/“FDIC-remote” analysis that the Depositor maintains its own corporate existence separate from the Sponsor and the Trust and observes the formalities of this corporate separateness at all times. The “Elephant in the Room” in all structured financial transactions is the mandatory requirement to create at least two “true sales” of the notes and mortgages between the Originator and the Trustee for the Trust so as to make the assets of the Trust both “bankruptcy” and “FDIC” remote from the originator. And, these “true sales” will be documented by representations and attestations signed by the parties; by attorney opinion letters; by asset purchase and sale agreements; by proof of adequate and reasonably equivalent consideration for each purchase; by “true sale” reports from the three major “ratings agencies” (Standard & Poors, Moody’s, and Fitch) and by transfer and delivery receipts for mortgage notes endorsed in blank.

Trustee. The Trustee is the owner of the loans on behalf of the certificate holders at the end of the securitization transaction. Like any trust, the Trustee’s powers, rights, and duties are defined by the terms of the transactional documents that create the trust, and are subject to the terms of the trust laws of some particular state, as specified by the “Governing Law” provisions of the transaction document that created the trust. The vast majority of the residential mortgage backed securitized trusts are subject to the applicable trust laws of Delaware or New York. The “Pooling and Servicing Agreement” (or, in “Owner Trust” transactions as described below, the “Trust Indenture”) is the legal document that creates these common law trusts and the rights and legal authority granted to the Trustee is no greater than the rights and duties specified in this Agreement. The Trustee is paid based on the terms of each structure. For example, the Trustee may be paid out of interest collections at a specified rate based on the outstanding balance of mortgage loans in the securitized pool; the Master Servicer may pay the Trustee out of funds designated for the Master Servicer; the Trustee may receive some on the interest earned on collections invested each month before the investor remittance date; or the Securities Administrator may pay the Trustee out of their fee with no charges assessed against the Trust earnings. Fee amounts ranger for as low as .0025% to as high as .009%.

Indenture Trustee and Owner Trustee. Most private-label securitizations are structured to meet the Internal Revenue Code requirements for tax treatment as a “Real Estate Mortgage Investment Conduit (“REMIC”). However some securitizations (both private-label and GSE) have a different, non-REMIC structure usually called an “Owner Trust.” In an Owner Trust structure the Trustee roles are divided between an Owner Trustee and an Indenture Trustee. As the names suggest, the Owner Trustee owns the loans; the Indenture Trustee has the responsibility of making sure that all of the funds received by the Trust are properly disbursed to the investors (bond holders) and all other parties who have a financial interest in the securitized structure. These are usually Delaware statutory trusts, in which case the Owner Trustee must be domiciled in Delaware.

Primary Servicer. The Primary Servicer services the loans on behalf of the Trust. Its rights and obligations are defined by a loan servicing contract, usually located in the Pooling and Servicing Agreement in a private-label (non-GSE) deal. The trust may have more than one servicer servicing portions of the total pool, or there may be “Secondary Servicers,” “Default Servicers,” and/or “Sub-Servicers” that service loans in particular categories (e.g., loans in default). Any or all of the Primary, Secondary, or Sub-Servicers may be a division or affiliate of the Sponsor; however under the servicing contract the Servicer is solely responsible to the Trust and the Master Servicer (see next paragraph). The Servicers are the legal entities that do all the day-to-day “heavy lifting” for the Trustee such as sending monthly bills to borrowers, collecting payments, keeping records of payments, liquidating assets for the Trustee, and remitting net payments to the Trustee.

The Servicers are normally paid based on the type of loans in the Trust. For example, a typical annual servicing fee structure may be: .25% annually for a prime mortgage; .375% for an Alt-A or Option ARM; and .5% for a subprime loan. In this example, a subprime loan with an average balance over a given year of $120,000 would generate a servicing fee of $600.00 for that year. The Servicers are normally permitted to retain all “ancillary fees” such as late charges, check by phone fees, and the interest earned from investing all funds on hand in overnight US Treasury certificates (sometimes called “interest earned on the float”).

Master Servicer. The Master Servicer is the Trustee’s representative for assuring that the Servicer(s) abide by the terms of the servicing contracts. For trusts with more than one servicer, the Master Servicer has an important administrative role in consolidating the monthly reports and remittances of funds from the individual servicers into a single data package for the Trustee. If a Servicer fails to perform or goes out of business or suffers a major downgrade in its servicer rating, then the Master Servicer must step in, find a replacement and assure that no interruption of essential servicing functions occurs. Like all servicers, the Master Servicer may be a division or affiliate of the Sponsor but is solely responsible to the Trustee. The Master Servicer receives a fee, small compared to the Primary Servicer’s fee, based on the average balance of all loans in the Trust.

Custodian. The Master Document Custodian takes and maintains physical possession of the original hard-copy Mortgage Notes, Mortgages, Deeds of Trust and certain other “key loan documents” that the parties deem essential for the enforcement of the mortgage loan in the event of default.

  • This is done for safekeeping and also to accomplish the transfer and due negotiation of possession of the Notes that is essential under the Uniform Commercial Code for a valid transfer to the Trustee to occur.
  • Like the Master Servicer, the Master Document Custodian is responsible by contract solely to the Trustee (e.g., the Master Document Custodial Agreement). However unlike the Master Servicer, the Master Document Custodian is an institution wholly independent from the Servicer and the Sponsor.
  • There are exceptions to this rule in the world of Fannie Mae/Freddie Mac (“GSE”) securitizations. The GSE’s may allow selected large originators with great secure storage capabilities (in other words, large banks) to act as their own Master Document Custodians. But even in those cases, contracts make clear that the GSE Trustee, not the originator, is the owner of the Note and the mortgage loan.
  • The Master Document Custodian must review all original documents submitted into its custody for strict compliance with the specifications set forth in the Custodial Agreement, and deliver exception reports to the Trustee and/or Master Servicer as to any required documents that are missing or fail to comply with those specifications.
  • In so doing the Custodian must in effect confirm that for each loan in the Trust there is a “complete and unbroken chain of transfers and assignments of the Notes and Mortgages.”
  • This does not necessarily require the Custodian to find assignments or endorsements naming the Depositor or the Trustee. The wording in the Master Document Custodial Agreement must be read closely. Defined terms such as “Last Endorsee” may technically allow the Custodian to approve files in which the last endorsement is from the Sponsor in blank, and no assignment to either the Depositor or the Trustee has been recorded in the local land records.
  • In many private-label securitizations a single institution fulfills all of the functions related to document custody for the entire pool of loans. In these cases, the institution might be referred to simply as the “Custodian” and the governing document as the “Custodial Agreement.”

O Max Gardner, III and Richard D. Shepherd
October, 2009

BOA FUNDS MORTGAGE ON STOLEN HOUSE AND BLAMES BORROWER — FIRST AMERICAN TITLE DENIES LIABILITY

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SEE VIDEO: HOW COULD THE TITLE COMPANY AND BOA CLOSE ON A LOAN WHERE THE BUYER DID NOT GET TITLE?

At first blush this story seems like a standard scam story and an unfortunate couple who bought the house, spent money on upgrades, paid all their mortgage payments and are now told they are faced with eviction from a home this is not theirs. But where is the title insurance protection that should be present? It is exactly where I told you it would be. The title companies, this one is First American, are denying coverage. The thief in this case is not a securitization party but the effect is the same. BOA is telling the couple that if they don’t pay the mortgage their credit will be ruined.

So they have a mortgage without a house. How is that possible? I’ll tell you how. The old owner abandoned the house allowing a scam artist to pretend to be the owner because the old owner was not around and didn’t care. Hmmmm. Wait that sounds familiar.

In the securitized mortgages, the investor has abandoned their claim against the “borrowers” and they are suing the investment bankers instead. That creates the same void as this scam. Only in “securitized” loans the scam artist that pretends to own the loan is a bank or some “bankruptcy-remote entity” that was created to serve the bank. Did you even wonder why the Banks went to all the trouble of inserting “bankruptcy remote” straw-men at loan closings? I think it is because they knew from the start this was eventually going to blow up and collapse.

The title company didn’t give a damn as long as they got their fee for the closing so they never did the work they were supposed to do. BOA didn’t care because they were not using their own money or had changed their habits because they usually don’t use their own money or credit. So these people got screwed by the title company and the “lender” who by the way does not have a perfected lien on the property (just like the “securitized” crap they sold to borrowers and investors).

Isn’t this interesting? Now BOA must figure out a way to resolve this without conceding that if the documentation was not in the chain of title as recorded in the title registry, there is no mortgage and thus nothing to foreclose. If this goes to court, BOA has a real problem, doesn’t it. They want to say that the borrower still owes them the money that was in fact funded AND they want to have a lien, but they can’t so they can’t foreclose. Thus this is exactly the same as ALL securitized loans.

The defects in the chain of title and the obvious shell game of names is not merely a technicality — it is the bedrock of a stable marketplace where if you buy something you should be getting clear title to it. The title company now says they are not liable for misrepresenting title. That the contract for insurance merely represents the risks they were willing to take and that if there was fraud in the title chain they are not liable. So what we have here is that no matter how many precautions the buyer-borrower takes he can still get screwed by the big guys. This isn’t caveat emptor (buyer beware) this is buyer be screwed.

And THAT is why the corrupted title mess extending to more than 80 million real estate transactions involving residential swellings cannot be solved — the players don’t want to solve it.

NY APPELLATE COURT: MERS IS A FICTIONAL CHARACTER — LIKE DONALD DUCK

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EDITOR’S NOTE: OK they never mentioned Donald Duck. But the point is the same. The appellate and trial courts, on virtually a daily basis are eviscerating not only the current foreclosure cases but casting a long shadow over the ones that have already been “completed.” It is clear that the designation of MERS was the designation of anon-entity. They might have well as not entered any name. Thus MERS could not foreclose and MERS could not not transfer what it did not have. The strategy of crating paper trails to give life to a fictional character and the illusion of securitization has been shattered in three states in about as many days.

 

KABOOM | NY Appellate Division | Bank of NY v Silverberg – MERS Does NOT Have The Right to Foreclose on a Mortgage in Default or Assign That Right to Anyone Else

4closureFraud's picture

Submitted by 4closureFraud on 06/13/2011 13:04 -0400

Appeals Court Clarifies MERS Role in Foreclosures

The ubiquitous Mortgage Electronic Registration Systems, nominal holder of millions of mortgages, does not have the right to foreclose on a mortgage in default or assign that right to anyone else if it does not hold the underlying promissory note, the Appellate Division, Second Department, ruled Friday. “This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation,” Justice John M. Leventhal wrote for a unanimous panel in Bank of New York v. Silverberg, 17464/08. “Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property.” The opinion noted that MERS is involved in about 60 percent of the mortgages originated in the United States.

From the ruling…

(Emphasis added by 4F)

Decided on June 7, 2011

SUPREME COURT OF THE STATE OF NEW YORK
APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT

ANITA R. FLORIO, J.P.
THOMAS A. DICKERSON
JOHN M. LEVENTHAL
ARIEL E. BELEN, JJ.
2010-00131
(Index No. 17464-08)

[*1]Bank of New York, etc., respondent,
v
Stephen Silverberg, et al., appellants, et al., defendants.

LEVENTHAL, J.This matter involves the enforcement of the rules that govern real property and whether such rules should be bent to accommodate a system that has taken on a life of its own. The issue presented on this appeal is whether a party has standing to commence a foreclosure action when that party’s assignor—in this case, Mortgage Electronic Registration Systems, Inc. (hereinafter MERS) —was listed in the underlying mortgage instruments as a nominee and mortgagee for the purpose of recording, but was never the actual holder or assignee of the underlying notes. We answer this question in the negative.

On appeal, the defendants argue that the plaintiff lacks standing to sue because it did not own the notes and mortgages at the time it commenced the foreclosure action. Specifically, the defendants contend that neither MERS nor Countrywide ever transferred or endorsed the notes described in the consolidation agreement to the plaintiff, as required by the Uniform Commercial Code. Moreover, the defendants assert that the mortgages were never properly assigned to the plaintiff because MERS, as nominee for Countrywide, did not have the authority to effectuate an assignment of the mortgages. The defendants further assert that the mortgages and notes were bifurcated, rendering the mortgages unenforceable and foreclosure impossible, and that because of such bifurcation, MERS never had an assignable interest in the notes. The defendants also contend [*3]that the Supreme Court erred in considering the corrected assignment of mortgage because it was not authenticated by someone with personal knowledge of how and when it was created, and was improperly submitted in opposition to the motion.

Here, the consolidation agreement purported to merge the two prior notes and mortgages into one loan obligation. Countrywide, as noted above, was not a party to the consolidation agreement. ” Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident'”

Therefore, assuming that the consolidation agreement transformed MERS into a mortgagee for the purpose of recording—even though it never loaned any money, never had a right to receive payment of the loan, and never had a right to foreclose on the property upon a default in payment—the consolidation agreement did not give MERS title to the note, nor does the record show that the note was physically delivered to MERS. Indeed, the consolidation agreement defines “Note Holder,” rather than the mortgagee, as the “Lender or anyone who succeeds to Lender’s right under the Agreement and who is entitled to receive the payments under the Agreement.” Hence, the plaintiff, which merely stepped into the shoes of MERS, its assignor, and gained only that to which its assignor was entitled (see Matter of International Ribbon Mills [Arjan Ribbons], 36 NY2d 121, 126; see also UCC 3-201 ["(t)ransfer of an instrument vests in the transferee such rights as the transferor has therein"]), did not acquire the power to foreclose by way of the corrected assignment.

In sum, because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that it had standing to foreclose. MERS purportedly holds approximately 60 million mortgage loans (see Michael Powell & Gretchen Morgenson, MERS? It May Have Swallowed Your Loan, New York Times, March 5, 2011), and is involved in the origination of approximately 60% of all mortgage loans in the United States (see Peterson at 1362; Kate Berry, Foreclosures Turn Up Heat on MERS, Am. [*6]Banker, July 10, 2007, at 1). This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation. Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property. Accordingly, the Supreme Court should have granted the defendants’ motion pursuant to CPLR 3211(a) (3) to dismiss the complaint insofar as asserted against them for lack of standing. Thus, the order is reversed, on the law, and the motion of the defendants Stephen Silverberg and Fredrica Silverberg pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing is granted.

FLORIO, J.P., DICKERSON, and BELEN, JJ., concur.

ORDERED that the order is reversed, on the law, with costs, and the motion of the defendants Stephen Silverberg and Fredrica Silverberg pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing is granted.

Full opinion below…

It is well worth the read…

www.4closureFraud.org

NY and DE Examine Trust Documentation: Pandora’s Box Open

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WHY YOU NEED TO ATTEND GARFIELD CONTINUUM SEMINAR

If you don’t understand why the bundling of mortgages at the level of the investment banks is important to your case(s) involving securitized mortgages, then you don’t “get it” yet. It isn’t that you need to be an expert in securitization to win cases at the loan level and foreclosures, it is that you need to know key factors that affect the title, liability and ownership of the home, the obligation, note and mortgage. The inquiry referred to below runs to the heart of this issue.

WRONG QUESTION: People are asking where is my loan? What is the name of the Trust in which my loan is located? They should be asking what trust(s) or pools CLAIM to have an interest in your loan and do they really have it. That’s why the COMBO Title and Securitization Analysis, the Forensic Analysis and the Loan Level Accounting is so important. People ask “how do I prove which trust owns the pool?” Wrong question. The party seeking foreclosure needs to prove up ownership, not you. The real question is how do you turn the Judges head to see that your denial of the default, your denial of the mortgage, note and obligation is anything more than a delay tactic?

The banks and many “experts” are busy explaining securitization as though the loans were actually securitized. They were not. And THAT is of key relevance as to who can declare a default, whether they even know if there is a default, and the identity of the party(ies) who can enforce the obligation. It isn’t that you are required to prove THEIR case, it is all about knowing when to raise objections, what evidence to demand (knowing what the result will be) and creating insurmountable obstacles to the pretender lenders who don’t have a dime in the deal but want to foreclose anyway.

If you know the securitization scheme, because you have a report and analysis in your had, and you know how to use it because you have attended our seminar, you are standing in a much stronger position than simply quoting the blog. Knowing the truth is one thing, knowing what to do with the truth is another.

Here was have a story about how the only two states under whose laws these so-called trusts were created, are investigating to see if the trusts exists, and if so, what is in them. What they are going to find is that there is no trust because there is nothing in them. Your loan, although claimed by the trust, never made it into the pool. It never made it into the pool because (a) the mortgages, notes and closing documentation were defective in the first instance and (b) they never even made the attempt to cover their mess up with paperwork until they were challenged in court — years after the deadlines when they might have claimed any such right.

But they are also going to find that the money trail tells a a whole different story. The loan transaction wasn’t between the homeowner and the payee on the note. It was between the homeowner and the investor-lender. But the investor lender got an entirely different set of paperwork than the paperwork given to the homeowner at the closing of the loan. And the paperwork given to the investor-lender was rife with errors, lies and misleading statements. These offices of Attorney general in New York and Delaware are going to find that the entire chain is corrupted, that the only document in the registry of title in the County in which the property is located is a mortgage securing an obligation that does not exist — because it secures an obligation as described on a note signed by the homeowner containing the wrong parties and the wrong terms.

And so they are going to find out that there could be some type of enforcement of the undocumented obligation (not the note), but there won’t be because the investor-lenders are not interested in getting into pitched battle with homeowners, nor do they want to take a position in court that would be construed as an admission against their own interest. The admission would be that the mortgage documents were legal, valid and enforceable. The investors are saying that the mortgages were garbage and unenforceable when they sue the investment bankers for 100 cents on the dollar. The pretenders are trying to bootstrap their own intentional scrambling of the documentation into a right to claim property and take the homeowner out from his dwelling on the strength of defective documents — not on the strength of a case where the homeowner borrower money from them, owes them any money or even knew of their existence when the loan was closed.

Two States Ask if Paperwork in Mortgage Bundling Was Complete

By

Opening a new line of inquiry into the problems that have beset the mortgage loan process, two state attorneys general are investigating Wall Street’s bundling of these loans into securities to determine whether they were properly documented and valid.

The investigation is being led by Eric T. Schneiderman, the attorney general of New York, who has teamed with Joseph R. Biden III, his counterpart from Delaware. Their effort centers on the back end of the mortgage assembly lines — where big banks serve as trustees overseeing the securities for investors — according to two people briefed on the inquiry but who were not authorized to speak publicly about it.

The attorneys general have requested information from Bank of New York Mellon and Deutsche Bank, the two largest firms acting as trustees. Trustee banks have not been a focus of other investigations because they are administrators of the securities and did not originate the loans or service them. But as administrators they were required to ensure that the documentation was proper and complete.

Both attorneys general are investigating other practices that fueled the mortgage boom and subsequent bust. The latest inquiry represents another avenue of scrutiny of the inner workings of Wall Street’s mortgage securitization machine, which transformed individual home loans into bundles of loans that were then sold to investors.

It follows months of sharp criticism of the mortgage foreclosure process, which produced an uproar last year over shoddy paperwork and possible forgeries of legal documents by banks, other lenders or their representatives.

The slipshod practices in foreclosures led to further questions about whether all the necessary documents were delivered to the trusts and properly administered by them.

Some of the nation’s biggest mortgage servicers are currently in negotiations with a group of state attorneys general to settle an investigation into foreclosure abuses. The new inquiry by New York and Delaware indicates the big banks’ troubles may not end even if a settlement is reached in the foreclosure matter.

The stakes are potentially high. If the trustees did not follow the rules set out in the prospectus, they may be liable for breaching their duties to investors who bought the securities. That could expose the banks to costly civil litigation.

Spokesmen from Bank of New York and Deutsche Bank declined to comment about the investigation, as did representatives from the offices of both attorneys general.

A complex process that produced hundreds of billions of dollars in securities during the lending boom, the issuance of mortgage securities began with home loans, which were then bundled into investments and sold to pension funds, mutual funds, big banks and other investors. The bundles were created as trusts overseen by institutions such as Bank of New York and Deutsche Bank; they were supposed to make sure the complete mortgage files for each loan were delivered within a specified time and with the proper documentation.

After the securities were sold, the trustees disbursed interest and principal payments to investors over the life of the trusts.

The trusts were governed by the laws of the states in which they were set up. Roughly 80 percent of the trusts are governed by New York law with the rest by Delaware law.

The rules governing the securitization process are labyrinthine, and there are steps required if the investment is to comply with tax laws and promises made by the issuer in its offering document. If the trusts did not comply with tax laws, for example, the beneficial treatment given to investors could be rescinded, causing taxes to be levied on the transactions.

The terms of these mortgage deals varied, but many of them required that the trustee examine each of the loan files as soon as they came in from the Wall Street firm or bank issuing the security. For a file to be complete, it would typically have to include all of the information necessary to establish a chain of ownership through the various steps of the bundling process, as when the originator transferred it to the issuer of the security who then moved it to the trustee.

Complete loan files were supposed to be delivered to the trusts within 90 days in most cases. If the trustee found any missing or defective documents, it was supposed to notify the loan originator so that it could either cure the deficiency or replace the loan. Such substitutions are typically allowed only in the early years of the trust.

By asking for documents relating to this process, investigators are trying to determine if the trustees fulfilled their obligations to the investors who bought the mortgage deals, according to the people briefed on the inquiry.

GAME OVER? VEAL CASE VINDICATES EVERY POINT REPORTED ON LIVINGLIES

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NO MERIT TO FORECLOSURE ACTIONS, PAST PRESENT OR FUTURE UNLESS THE REAL CREDITOR IS PRESENT.

BURDEN OF PROOF SHIFTS TO PRETENDERS

57568003-IN-RE-VEAL-w

  1. “IN THIS CASE, ONE COMPONENT OF PRUDENTIAL STANDING IS PARTICULARLY APPLICABLE. IT IS THE DOCTRINE THAT A PLAINTIFF MUST ASSERT ITS OWN LEGAL RIGHTS AND MAY NOT ASSERT THE LEGAL RIGHTS OF OTHERS. SPRINT, 554 U.S. AT 589; WARTH, 422 AT 499; OREGON V LEGAL SERVS. CORP, 552 F. 3D 965, 971 (9TH CIR., 2009).

  2. “Civil Rule 17(a)(1) starts simply: “An action must be prosecuted in the name of the real party in interest… The modern function  of the rule… is simply to protect the defendant against a subsequent action by the party actually entitled to recover, and to insure generally that the Judgement will have its proper effect as res judicata.”

  3. “The party asserting it has standing bears the burden of proof to establish standing. Sumers v Earth Island Inst., 555 U.S. 488 (2009)

  4. “Real party in interest analysis requires a determination of the applicable substantive law, since it is that law which defines and specifies the wrong, those aggrieved, and the redress they may receive. 6A Federal practice and Procedure sec 1543 at 480-481

ILLUSION OF SECURITIZATION IS FALLING APART

COLLATERAL BENEFIT TO HOMEOWNER

RESULTING FROM DEFECTS IN PRETENDER LENDER CASE

IS NOT A REASON TO RULE AGAINST THE HOMEOWNER-BORROWER

In a decision filed June 10, 2011 — one year after oral argument — the BAP carefully analyzed the position of the borrower and the alleged creditor and came up with nothing to support the allegations that there was a creditor in the room. Standing being a jurisdictional issue wiped out AHMSI and Wells Fargo.

This one is for publication, which means it is controlling precedent for all bankruptcy Judges in the Ninth Circuit. In a nutshells, the claim of “holder” is not enough, even for a motion to lift stay where the burden is extremely light. Thanks to a growing number of bankruptcy lawyers who understand these issues and thanks to their skill in presenting it, Bankruptcy Judges are realizing two things (1) lifting the stay is misused by the movant by creating the appearance that the merits of the case have already been heard and decided and therefore are engraved in stone under the doctrine of collateral estoppel and the Rooker-Feldman doctrine and (2) nipping abuse of process in the bud is the proper way for the courts to handle the pretender lenders.

It is very clear that this represents a sea change in the judicial attitude toward the pretender lenders. The documents don’t add up. So if anyone wants to come in to a court alleging that they can foreclose on the property or collect on the debt, they need to have real evidence which means live witnesses testifying under oath that they have personal knowledge and can authenticate the documents and other evidence proffered by the pretenders. These people don’t exist.

The bottom line is that there is no claim, an objection to the proof of claim will obviously be upheld in view of this ruling, and the homeowner is going to get their home free and clear of any encumbrances or debts unless the real creditor shows up — which is unlikely since the investors are busy suing the investment banks that sold them the bogus mortgage bonds.

LAWYERS ARE SHARPENING UP THEIR PENCILS GETTING READY TO FILE MOTIONS FOR REHEARING AND RECONSIDERATION IN AND OUT OF BANKRUPTCY COURT.

QUOTES FROM THE CASE:

“We hold that that a party has standing to seek relief from stay if it has a property interest in, or is entitled to enforce or pursue remedies related thereto, teh secured obligation that forms the basis of its motion.”

“We hold that a party has standing to prosecute a proof of claim involving a negotiable promissory note secured by real property if, under applicable law, it is a “person entitled to enforce the note” as defined by the Uniform Commercial Code.”

“The Dorchuck letter is just that; a letter, and nothing more. Mr. Dorchuck does not declare that his statements are made under penalty of perjury, nor does the document bear any other traditional elements of admissible evidence.”

“No basis was laid for authenticating or otherwise admitting the Dorchuck letter into evidence at any of the hearings in this matter.”

“Wells Fargo presented no evidence as to who possessed the note and no evidence regarding any property interest it held in the Note.”

“the purported assignment from Option One to Wells Fargo does not contain language affecting the assignment of the note. While the Note is referred to, that reference serves only to identify the mortgage. Moreover, the record is devoid of any indorsement of the Note from Option One to Wells Fargo. As a consequence, even had the second assignment been considered as evidence, it would not have provided any proof of the transfer of the note to Wells Fargo. At most, it would have been proof that only the mortgage, and all associated rights arising from it, had been assigned.”

“given the carve out of the Note at the beginning… the relative pronouns “therein”, “thereto” and thereon” more naturally refer back to the obligations contained in the mortgage, such as the the obligation to insure the property, and not to an external obligation such as the Note…. Although the clauses might be sufficiently vague to permit parol evidence to clarify their intended meaning, no such evidence was offered or requested.”
“STANDING  is a threshold question in every federal case, determining the power of the court to entertain the suit.”

“Prudential standing ” ‘embodies judicially self-imposed limits on the exercise of federal jurisdiction.'” Spring, 554 U.S. at 289 (quoting Elk Grove, 542 U.S. at 11); County of Kern F. 3d at 845.

“IN THIS CASE, ONE COMPONENT OF PRUDENTIAL STANDING IS PARTICULARLY APPLICABLE. IT IS THE DOCTRINE THAT A PLAINTIFF MUST ASSERT ITS OWN LEGAL RIGHTS AND MAY NOT ASSERT THE LEGAL RIGHTS OF OTHERS. SPRINT, 554 U.S. AT 589; WARTH, 422 AT 499; OREGON V LEGAL SERVS. CORP, 552 F. 3D 965, 971 (9TH CIR., 2009).

“Civil Rule 17(a)(1) starts simply: “An action must be prosecuted in the name of the real party in interest… The modern function  of the rule… is simply to protect the defendant against a subsequent action by the party actually entitled to recover, and to insure generally that the Judgement will have its proper effect as res judicata.”

“The party asserting it has standing bears the burden of proof to establish standing. Sumers v Earth Island Inst., 555 U.S. 488 (2009)

“Real party in interest analysis requires a determination of the applicable substantive law, since it is that law which defines and specifies the wrong, those aggrieved, and the redress they may receive. 6A Federal practice and Procedure sec 1543 at 480-481

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