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CHAIN OF TITLE by David Dayen. Available on Amazon

LISTEN LIBERALS! by Thomas Frank. Available on Amazon and Kindle.

Pretender Lenders: How Tablefunding and Securitization Go Hand in Hand” By William Paatalo and Kimberly Cromwell. CLICK:


the Golden Rule of Mortgage Foreclosure: the Uniform Commercial Code forbids foreclosure of the mortgage unless the creditor possesses the properly-negotiated original promissory note. If this can’t be done the foreclosure must
stop. — Douglas Whaley, Professor Emeritus, The Ohio State University Moritz College of Law.
“By saying yes, the homeowner admits that the paper is original which it is not, he admits that it is his signature, which it is not, and he admits that the possession of the original note is unquestionable which is completely wrong because the actual original was “lost” many years earlier.” — Neil F Garfield


The problem with the great tidal wave of foreclosures has been that everyone (lawyers, judges and homeowners) have made great leaps of faith in accepting nonexistent facts. And the other problem is that all foreclosures are governed by the UCC which has been adopted in all 50 states as State Law. It is the source of all governing law as to the ability to negotiate the note, enforce the note and to enforce the foreclosure provisions contained in the mortgage.
All law schools provide two semesters of instruction on the Uniform Commercial Code. Most law students, including those who become judges, can barely stay awake during the lectures and barely comprehend the content of the instructional material. I was the exception. I received the American Jurisprudence Book Award for the best performance in that class. Others in my class paid close attention but the majority struggled to stay awake. And nearly everyone forgot practically everything they learned about the UCC immediately after taking the Bar Exam that contained few questions about the UCC. So for most people in American jurisprudence, the UCC is regarded as a quaint irrelevancy.
Those who created the current infrastructure of what is erroneously referred to as securitization understood that nearly all lawyers — on or off the bench — retained practically nothing about the Uniform Commercial Code. They correctly predicted that the Judge would accept whatever the lawyer for the Bank said was in the UCC. The result was a startling array of decisions twisting and undulating in confusion about exactly who should be paid by the “borrower”, who could modify the obligation, who could enforce the note and who could foreclose.
I found study of the UCC to be enjoyable because it follows a certain logic in the real world. In an increasingly complex world it would slow down commerce to a snail’s pace if the note were not negotiable, transferable and deliverable. Otherwise one would need to go back to the maker of the note and get payment, most of the time before it was due. That would stop the new transaction in its tracks. Or one would need to get the signature of the maker (borrower) on anew instrument in order to use the note as the basis for a new transaction of any kind. Something was needed to create “cash equivalency” of paper with or without the knowledge or consent of the maker. Both the maker and the possessor of the note would need certain protections so that no inequities would arise, hopefully.
So the best minds in the judicial world came together and created a uniform code that everyone everywhere in the country would follow. It was originally a “National Code.” Like all new endeavors there were defects in the structure of laws in the first national code which was based upon centuries of common law decisions from trial and appellate courts. So the next generation of brilliant legal minds came together to fix the defects and create certainty in the marketplace for negotiable instruments and ancillary instruments like mortgages.
As a general rule one must physically possess the note in order to negotiate it or enforce it. Possession was determined by thousands of judges and lawyers to be essential to enforcement and thus also negotiation of any note; this was so because if a party claimed rights to enforce a note but admitted that the note did not exist, was in the possession of someone else or even lost, the maker might be liable multiple times. So POSSESSION became the gold standard. As a brief example of how this applies to the many issues we have discussed on this blog, let’s begin with the “closing.”
The “borrower” is required to sign the note before the loan is funded. Hence the loan contract is not commenced or consummated until funding. BUT the signing of the note created a negotiable instrument. After signing the note, the customary practice is for the closing agent to take delivery of the note. The closing agent thus becomes the first possessor, but without any right to enforce the note.
Back when I stared law practice a representative of the lender was frequently present at closing. Once all the papers had been properly signed and money was received by the closing agent to fund the loan, the closing agent would physically deliver the note to the representative of the lender or transmit this valuable document (“cash equivalent”) to the lender or its authorized representative. If the lender was the funding source, the loan contract was complete and the the lender was the possessor of the note with direct rights to enforce — i.e., the lender was named on the note as payee just as one would write out a check.
If the lender sold the loan into the secondary market, the lender would receive a sum of money the amount of which was determined by agreement between the buyer and the lender as seller. The buyer would receive physical possession of the note with an “indorsement” frequently spelled as “endorsement.” The endorsement would generally be made payable to the name of the buyer but it could be endorsed in blank, which would make the loan negotiable or enforceable by anyone who came into possession — even a thief, who could sue but not win once the facts of the theft came out.
The above description is what most people have in mind when they think about loans today. But their thoughts are antiquated.
Today, the “loan closing” starts in the usual way — the “borrower” is required to sign the note thus creating a negotiable instrument before any funding takes place. The party named as lender is never present and thus cannot take possession of the note. The closing agent is the first possessor with no rights to enforce. But theoretically the closing agent, if he or she was dishonest, could bring suit to enforce the note. Like the thief, the closing agent can sue but he cannot win. But I digress.
What happens next depends upon whether the lender is an actual lender who might still be sending a representative to the “closing,” or is an originator who merely sells the loan product to the borrower. 96% of all “loan closings” over the past 15 years were “originator” loans.
In the case of an originator the physical note, best case scenario, is sent to the party who was instructing the funding source, as a conduit. The originator is not generally allowed to touch, much less possess the note nor does it have any right of enforcement — because the originator has already signed an “Assignment and Assumption” Agreement before  the borrower even applied for a loan. Hence the originator lacks both possession and any authority to negotiate the note.
If the originator is still in business (check the, at some time in the future a representative of the originator is called upon to execute an indorsement of the note. Lacking both physical possession of the note and the right to enforce it such an endorsement is void. Someone else possesses it and as it turns out, a party other than the possessor supposedly has (or claims) the right to enforce the note.
The party with possession could theoretically acquire the right to enforce from the party who claims to have the right to enforce — and in today’s market that is exactly what happens. If the originator is not in business the signature nevertheless appears like magic as an officer of an institution that does not exist — but lacking the date on which it was executed. Or, as is usually the case we learned from the robo-signing, robo-witness, robo-officer scandals, we see some signature of a person who either didn’t exist or was not employed by any of the parties in the false paper trail. Neither the lawyer for the homeowner nor the homeowner is able to prove this because the information is in the hands of third parties who are not even parties to the foreclosure litigation.
The problem with that scenario is that the party who claims the right to enforce it does not have those rights, does not have possession, does not have any receipt or proof that it paid for the note, and is essentially a stranger to the entire transaction — but now nonetheless accepted in court by itself or through an agent or power of attorney as the party in possession with rights to enforce. Such representations are untrue and a fraud upon the borrower, the court and anyone else having an interest in the actual events that transpired at the “loan closing.”
Further eviscerating the position of the eventual party who has conducted foreclosure proceedings is the documented fact (see Study by Catherine Ann Porter) that most and perhaps nearly all of the original notes were immediately and intentionally destroyed. Fabrications of the note were created each time the loan was sold. Such sales were often virtually simultaneous so that the party claiming the right to enforce the note and the right to foreclose received multiple payments on the same loan while at the same time retaining the “servicing rights” so that they could foreclose and report to the unhappy buyers that their investment was worthless.
Hapless homeowners with clueless lawyers were asked at trial if the document before them was the original. The homeowner had no idea that the signature he or she was looking at was forged by high tech mechanical means which today actually employs a ball point pen and created variations in the signature as to pressure, lines and swirls. By saying yes, the homeowner admits that the paper is original which it is not, he admits that it is his signature, which it is not, and he admits that the possession of the original note is unquestionable which is completely wrong because the actual original was “lost” many years earlier.

New Jersey Alert: Support Sandy Foreclosure Victims- Bill S2300/A333

sandy sandy 2


It’s likely Thursday the Assembly will vote on a bill to prevent foreclosures and to keep Sandy survivors from losing their homes.

We need you to take just 5 minutes, call your state legislator, and tell them that this is important to you and your community.

Don’t know how to reach them or who they are? No problem. Click this link:  Find your legislator.  Then enter your address and click on the little magnifying glass. You’ll get a list of your State Senator and Assembly members. Then click on one of their names, and you’ll find their office number.  Often your Senators and Assembly members share an office so you may reach both.

Tell them:

  • I’m calling to ask you to support a bill, S2300/A333, that would give Sandy survivors who were out of their homes or still struggle to get back a chance to catch up and not lose the homes they’ve fought for.
  • There are still up to 60% of families in RREM who are not home for good. The process has taken so long that many people have gone broke waiting and had to chose between paying rent and a mortgage.
  • I support this bill because it gives families a forbearance period to catch up and keep their homes, and provides additional transparency measures.
  • Your story! Or anything else you think it’s important for them to hear.

Then, please send us back a quick email to let us know what they said at

Want to read the bill yourself? You can read it here. It’s critical that we show our support today and tomorrow.  Too many families are still struggling, and we have to stand up for our neighborhoods.

Last, the Sandy Memorial Wall Tour will be in Little Egg Harbor tonight at 6:30pm at the Tuckerton Seaport, the restaurant building! Address and info here.

The Chase-WAMU Illusion

In the mortgage world “successor by merger” is simply a living lie that continues as you read this article. Like many other major illusions in our world economy, the Chase-WAMU merger was nothing more than illusion

The reason for the rebellion showing up as votes for Sanders and trump and the impending exit of the UK from the European Union is very simple — every few decades the populace gets a ahead of their elected leaders and yanks their leash so hard that some of them choke.



see FDIC_ Failed Bank Information – WASHINGTON MUTUAL BANK – Receivership Balance Sheet Summary (Unaudited)

see wamu_amended_unsealed_opinion

When Bill Clinton was asked how he balanced the budget and came out with a $5 Trillion surplus when he left office his reply was unusually laconic — “Arithmetic.” And he was right, although it wasn’t just him who had put pencil to paper. Many Republican and Democrats had agreed that with the rising economy, the math looked good and that their job was not to screw it up. THAT was left to the next president.

I’m not endorsing Clinton or Trump nor saying that Democrats or Republicans are better that the other. Indeed BOTH major political parties seem to agree on one egregiously erroneous point — the working man doesn’t matter.

The people who matter are those with advanced degrees and who reach the pinnacle of the economic medal of honor when they are dubbed “innovators.”

The reason for the rebellion showing up as votes for Sanders and Trump and the impending exit of the UK from the European Union is very simple — every few decades the populace gets a ahead of their elected leaders and yanks their leash so hard that some of them choke. To say that the BREXIT vote was surprising is the height of arrogance and stupidity. People round the world are voicing their objection to an establishment that doesn’t give a damn about them and measures success by stock market indexes, money supply and GDP activity that is manipulated at this point that it bare little if any resemblance to the GDP index we had come to rely upon, albeit that index was also arbitrarily and erroneously based on the wrong facts.

The fact that large percentages of the populace of many countries around the world are challenged to put food on the table and a roof over their heads doesn’t matter as long as the economic indices are up. But truth be told even when those indices go down, the attitude is the same — working people don’t matter. They are merely resources like gold, coal and oil from which we draw ever widening gaps between the people who run the society and the economy and those who drive the economy and society with their purchases.

In the mortgage world “successor by merger” is simply a living lie that continues as you read this article. Like many other major illusions in our world economy, the Chase-WAMU merger was nothing more than illusion — just like BOA’s merger with BAC/Countrywide (see Red Oak Merger Corp); Wells Fargo’s merger with Wachovia who had acquired World Savings; OneWest’s acquisition of IndyMac;  CitiMortgage acquisition of ABN AMRO, CPCR-1 Trust;  BOA’s merger with LaSalle; Ditech’s acquisition by multiple entities GMAC, RESCAP, Ally,  Walter investment etc.) when DiTech was dead and the name was the only this being traded, and so much more. All these mergers bear one thing in common — they were cover screen for one simple fact: they had not in one instance acquired any loans but then relied on the illusion of the merger to call themselves “successors by mergers.”

Let’s take the example of WAMU. When they went broke they had less than $3 Billion in assets (see link above). This totally congruent with the $2 billion committed by Chase to acquire the WAMU estate form the FDIC receiver Richard Schoppe (located in Texas) and the US Trustee in bankruptcy — especially when you consider the little known fact that Chase received 1/3 of a tax refund due to WAMU.

That share of the Tax refund was, as you might already have guessed, MORE than the $2 billion committed by Chase. whether Chase ever actually paid the $2 billion is another question.But in any event, pure arithmetic shows that the consideration for the purchase of WAMU by Chase was LESS THAN ZERO, which means we paid Chase to acquire WAMU.

This in turn is completely corroborated by the Purchase and Assumption Agreement between WAMU, the FDIC Receiver, the US Trustee in Bankruptcy and of course Chase. On the first page of that agreement is a express recital that says the consideration for this merger is “-$0-.” But before you look up the “Reading Room on the FDIC FOIA cite, here is one caveat: some time after the original agreement was published on the site, a “different” agreement was posted long after WAMU was dead, the US Trustee had been discharged, and the FDCI receiver was discharged as a receiver. The “new” agreement implies that loans were or may have been acquired but does not state which loans or how much was paid for these loans. The problem with the new agreement of course is that Chase paid nothing and was not entitled to nothing, except the servicing rights on some fo those loans.

The so-called new agreement placed there by nobody knows, also stands in direct contrast of the interview and depositions of Richard Schoppe — that if there were loans to sell the principal amount would have been hundreds of billions of dollars for which Chase need pay nothing. I dare say there are millions of people and companies who would have taken that deal if it was real. But Schoppe states directly that the number of assignments was NONE, zero, zilch.

Schoppe also stated that the total amount of loan originations was just under $1 Trillion. And he said that the loan portfolio might have been, at some time, around 1/3 of the total loans originated. Putting pencil to paper that obviously means that 2/3 of all originated loans were either pre-funded in table funded “loans” or that they were immediately sold into the secondary market for securitization. All evidence points to the fact that WAMU never owned the loans at all — as they were table funded  through multiple layers of conduits none of whom were disclosed as required under the Truth in lending Act.  Because the big asset that WAMU retained were (a) the servicing rights and (b) the right to claim recovery for servicer advances. It could be said that the only way they could perfect their claim for “recovery” of “servicer” “Advances” was by acquiring WAMU since Chase was the Master servicer on nearly all WAMU originations.

The interesting point of legal significance is that Chase emerges as the real party in interest even though it it appeared only as the servicer in the background after subsequent servicers were given “powers” of attorney to prevent the new “servicer” (actually an enforcer) from claiming a recovery  for “servicer” “Advances.,” that are recoverable not from the borrower, not from the investor, and not from the trust but in a foggy chaos in which the property was liquidated.

So the assets of WAMU at the time it went belly up was under $3 Billion which means that after you deduct the brick and mortar locations and the servicing rights Chase still got the deal of a lifetime — but one thing doesn’t add up. If WAMU had less than $3 Billion in assets and 99% of that were conventional bank assets excluding loans, then the “value” of the loan portfolio, using FDIC Schoppe estimates was $3 Million. If the WAMU loan portfolio implied by the a,test antics of Chase was true — then Chase acquired $300 BILLION in loans for $3 MILLION. Even the toxic waste loans were worth more than one tenth of one percent.

Chase continues to assert ownership with impunity on an epic scale of fraud, theft and manipulation of the courts, investors and borrowers. The finding that Chase NOT assumed repurchase obligations in relation to the originated loans goes further to corroborate everything I had written here. There seems to be an oblique reference to attempted changes in the “P&A” Agreement, and the finding that the original deal cannot be changed, but the actual finding of two inconsistent agreements posted on the FDIC site is worth investigating. I can assure the reader that I have found and read both.

And lastly I have already published numerous articles on victories in court (one fo which was mine and Patrick Giunta) for the borrower based upon the exact principles and facts written in this article — where the judge concluded that US Bank had never acquired the loan, that the “servicer” in court testifying through a robo-signer had no power over the loan because their power was  derived from Chase who was named as servicer for a REMIC Trust that never acquired the loan nor any rights to the loan.

The use of powers of attorney were found to be inadequate simply because the party who executed the POA had no rights to the money, the enforcement of the loan nor any collection or foreclosure. If Chase had acquired the loan from WAMU they would have won. Their total reliance on deflective legal presumptions based upon presumed fact that were untrue completely failed.

BOTTOM LINE: CHASE ACQUIRED NO LOANS FROM WAMU. Hence subsequent documents of transfer or powers (Powers of attorney) are void.

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Quicken now offering a 1% Down Mortgage Loan but don’t call it Subprime!

The residential housing bubble is teetering.  Therefore, loan originators are being permitted (encouraged) to once again offer subprime loans to keep buyers in the market, housing prices artificially inflated and investors happy (for now).

This type of program is predatory and leverages borrowers who typically do not have the financial resources to maintain the property, account for any cost of living increases, or have the savings necessary to sustain mortgage payments if they lose their job or their financial situation worsens.  These types of loans create an incentive for homeowners to purchase homes that are overvalued, and when prices adjust, the homeowner is upside down and often abandons the home.

Ultimately, the tax payer is on the hook for any losses, and the investors swoop in and purchase homes for pennies on the dollar.  By now, we know that this is exactly why these loans are offered in the first place- because the game is rigged.


While megabanks like Bank of America, Wells Fargo, and JPMorgan Chase grabbed the headlines earlier this year by separately announcing plans to offer mortgages that only require a 3% down payment from the borrower, there is another major lender that is quietly requiring even less from borrowers.

Unbeknownst to many in the market, Quicken Loans began offering an even better deal for borrowers late last year – a 1% down mortgage.

First, Quicken’s 1% down mortgage program isn’t for everyone, as there are several stipulations and requirements, but a 1% down payment is still a 1% down payment.

It’s still 66% lower than what Bank of America, Wells Fargo, JPMorgan Chase, and many other major lenders are offering.

So why did Quicken Loans decide to break the mold?

After being tipped off to Quicken’s 1% down program by mortgage industry insider Rob Chrisman, who noted Quicken’s program earlier this week, HousingWire contacted Quicken to answer that exact question.

Now, in an exclusive interview, Bill Banfield, Quicken Loans’ vice president of capital markets, provides more details on how this program came about, how it works, and why it’s so important for Quicken.

According to Banfield, the 1% down loan program isn’t quite as shocking as it appears.

The program is actually part of a partnership between Quicken and Freddie Mac that was announced in October 2015.

At the time, the details on the partnership were sparse, with the two organizations stating that the program will feature “unique, co-developed products to meet the needs of emerging markets, including Millennials, first-time homebuyers and middle-class borrowers.”

As it turns out, one of those loan options is a 1% down loan, but as Banfield notes, the loan is actually structured to be part of Freddie Mac’s Home Possible Advantage program, which the government-sponsored enterprise launched in December 2014, and requires a 3% down payment.

So how does Quicken Loans get from 1% down from the buyer to the 3% necessary to take part in Freddie Mac’s program? Quicken grants the extra money to the borrower, Banfield said.

“We require 1% from consumer and we give the consumer a 2% grant, so the client has 3% equity immediately,” Banfield told HousingWire.

But the 1% down program isn’t offered to everyone, Banfield said. There are several rules as to who is eligible…………………………………

Read more:

Ocwen Employee admits she “Creates needed Documents”


Does Ms. Wilson know that fabricating securities is a federal crime?

By the Lending Lies Team

Those of us the foreclosure defense industry don’t experience much laughter. For hours each day we try to provide guidance to people who have been victimized by their servicer, attorney and/or the courts. Often, by the time they come to us, the homeowner is in emergency-mode.

Yesterday, we did have a good laugh. While doing some preliminary research on a “corrective” Assignment of Deed of Trust, we did a little background on an employee at Ocwen who had signed the assignment.  We discovered a profile for the document signer Amber K. Wilson on the Linked-in website.

It appears that Amber K. Wilson has been a Servicing Operations Specialist at Ocwen since May 2015. Located in Iowa, Amber was looking for an, “entry level position that offers internal growth potential” and requires that she, “be able to be a leader as well as follow instructions.” It looks like she may have landed her dream job as a Servicing Operations Specialist at Ocwen Loan Servicing. There is no doubt that she has job security in the burgeoning field of document fabrication, or that she can follow instructions by signing deceptive documents by the thousands.

According to her profile on Linked-in, Ms. Wilson says her current duties include, “Researching Mortgage Documents to verify a full Chain of Title is present. If it is not create the needed Documents (sic). Work from Excel Spread Sheet daily as well as several internal data programs.” Is Amber K. Wilson admitting on a public website that Ocwen Loan Servicing  creates documents to create a “proper Chain of Title” if there are errors?

It is fraudulent to recreate a chain of assignment with fabricated documents to create the appearance the current servicer has standing. As Neil Garfield has repeatedly pointed out- copies of the note and assignment don’t document an actual transaction (sale, transfer)- they are nothing but window dressing to create the illusion an event occurred.  Homeowners and their attorneys MUST obtain proof that a transaction actually occurred- not simply rely on documents that paint a story the service hopes to tell.

Amber began her job at Ocwen during March 2014 as a customer service representative where she “helped” homeowners with service issues. She is likely well versed in Ocwen’s documented practice of providing disinformation to ensure a default. Ocwen was recently forced to pony up $30 million to resolve lawsuits that claimed it didn’t properly include disclosures for loans it was servicing.

Amber operates a side business called Amber Wilson Imagery so she may have an eye for detail. Her background at Grainger (through Manpower), opening boxes at a Target distribution warehouse and assembling bathroom cabinetry likely provided excellent preparation for her current duties analyzing complex securitizations, real estate documentation and verifying they are accurate.

In this case, the Deed of Trust Amber K. Wilson signed is a complete sham and is referred to as a “corrective assignment” in an attempt to perfect two incorrect assignments filed 3 and 5 years before. The document in question lists a bankrupt Taylor, Bean, Whitaker/MERS assigning the Note to US Bank. Amber’s notarized signature witnesses a complete fictitious transaction.

Unfortunately for the homeowner who is a Vietnam Vet and the victim of these sham documents filed in the county records by Ocwen, he may become homeless unless he is able to find an attorney to stop this fraudulent foreclosure from proceeding. He served his country, is in poor health due to a dousing of Agent Orange, and his country does nothing to stop predatory servicers from taking advantage of our nation’s most vulnerable- our veterans, the elderly, and families who were offered predatory loans the lender knew would fail.

I wonder if Ms. Wilson, in pursuit of a glamorous career in the field of document fabrication realizes that she is verifying a legal document in which she has no personal knowledge, engaging in illegal practices, and assisting a corporation in stealing homes they don’t own.

The take away message from this post is that homeowners should research everyone listed on their loan documents. Who did they work for? Who do they work for now, and who did they work for when the note or assignment was signed?  Compare their signatures on different documents- do they match or it likely someone else has signed their name?  Is the signer named in other lawsuits?


I look forward to the judge reviewing Ms. Wilson’s job description on Linked-In. It would be great to depose Ms. Wilson.   It is a federal crime to forge or fabricate assignments, notes and file them in the country records.  Any falsified documents should result in sanctions for servicers and their attorneys.   This little fun fact on Ms. Wilson likely won’t result in a slam-dunk win to defeat foreclosure but it does demonstrate that Ocwen is engaging in fabricating documents and doesn’t bother to educate their employees not to broadcast this crime on a public website.

By the way, shame on you Ms. Wilson and shame on your employer.


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The Fed Plays- the American Taxpayer Pays


While news services proclaim the foreclosure rate is falling drastically and there is no reason for the public to be concerned about the housing market- the New York Federal Reserve is warning investors that the subprime mortgage industry is heating up. House prices peaked in most markets last year and now there is a nationwide decline in home prices as the market corrects.

The problem with the mortgage meltdown this time around is that these worthless loans (with major standing issues) are now guaranteed by the government- and the federal government is continuing this predatory practice by insuring subprime mortgages written by Wells Fargo and Bank of America in order to stimulate the flattening housing market. The federal government relies on illusion to keep people buying into bubbles and the depleted taxpayers to bail out the mega-banks.

Just like those who purchased homes prior to 2008, homeowners who purchased during the “recovery” of 2012 to 2016- will soon find themselves upside down with mortgages they can’t afford. When this occurs, the market correction will leave homeowners with no equity and with payments they can’t afford. The homeowner will typically quit paying until forced to vacate the property- and then large investment funds come in, buy up the distressed properties and rent to those victimized by irresponsible lending practices and their own ignorance. This time around- there is no excuse for homeowners who failed to learn from the mortgage debacle of 2000-2012.

Default rates on subprime mortgages spiked to 25% in 2007, according to the New York Fed report. Those who invested in Mortgage backed securities based on subprime mortgages imploded and the losses are still unknown since the empty trusts have not been audited.

The problem with the federal government is that as long as the wealthy are making money no policy changes occur. The average American cannot influence policy EXCEPT by refusing to engage in commerce with that entity. The federal government deliberately allowed the subprime market to inflate again in order to “fix” the first bubble that burst- creating the appearance of a recovery. Mortgage-backed securities that are imbedded within the tranches of worthless subprime mortgages, are hot commodities because the American taxpayer is on the hook if the securities fail.

From 2000 through 2006 the government mortgage insurance programs insured less than 3% of all subprime mortgage originations, while private mortgage insurers covered over 20%. However, post-bust private-mortgage insurance of subprime mortgages dropped to zero-percent. The all benevolent Federal Housing Administration (FHA), Department of Veterans Affairs (VA), and the USDA’s Rural Housing Service (RHS) stepped in to fill the vacuum created and insured these subprime mortgages. By 2009 government entities insured almost 35% of newly originated subprime mortgages. Recent numbers reflect that almost 22% of new subprime mortgages are insured by a government or quasi-governmental (Fannie/Freddie) housing entity.

The New York Federal Reserve’s chart shows a massive decrease in volume for privately-insured subprime mortgages (red line) post-bubble, and how the government (blue line) entities took over this business:

The issue is, according to the report, that almost all government insured mortgages are securitized by Ginnie Mae who guarantees the principle and interest of all of these loans to the investors who purchase these mortgage-backed securities. Unless the government fail, the investor is completely covered by the American taxpayer who takes on the credit risk of these predatory and designed to fail mortgages.

The increase in subprime mortgage guarantees from 2007 through 2009 when prices were plummeting caused borrowers to carry deep negative equity in their homes. As homeowners became overleveraged, many lost their jobs and the default rates rose astronomically. The Federal Housing Association would have to step in and receive bailouts from the taxpayers in 2013 when the Mutual Mortgage Insurance Fund was exhausted.

The policies of the federal government (QE1, 2, and 3, TARP, and other settlements) soon contributed to another housing bubble that began in 2012. Housing prices rose dramatically, homeowners signed up for overpriced mortgages they couldn’t afford and the market achieved some type of faux-equilibrium.

The loans issued post-bust resulted in the homeowner’s with poor credit scores taking on significant leverage to purchase the “American Dream”. The Federal Housing program allowed mortgages with an original loan-to-value (LTV) ratio of up to 96.5% (3.5 % down which has now dropped to 3% down) and these loans required borrowers to pay a upfront mortgage insurance premium that is/was typically rolled into the loan balance, further raising the initial LTV.

Because the FHA homeowners are highly overleveraged up-front, they present a greater risk of default than conventional mortgage borrowers who normally put at least 20% down at closing.

These highly leveraged government-insured loans can be blamed for the current inflated costs of housing and the rocketship increase in home prices. Borrowers with weak to poor credit scores, and little “skin in the game” are at a higher risk of default and foreclosure. Borrowers with poor credit and few financial resources are vulnerable to even small income upsets. Overpaying for a home and being financially vulnerable creates a high risk of default.

In 2007 these subprime mortgages began defaulting at an astronomical rate during the housing bubble and it doesn’t take a rocket science to realize that the same pattern is already repeating. People with credit scores in the low 600s are able to take out government insured loans on homes that exceed 100% loan to value. What could possibly go wrong?????

Meanwhile the vultures of Wall Street are lining up for another mortgage carnage to occur. The banks aren’t worried about it because they are exempt from prosecution and already sold the note to some other poor sucker. The only party carrying the risk is the American taxpayer who already has 40% of his pay taken by force- and the American people do nothing. A “Brexit” could never occur in the United States because we have become a complacent and passive people.

According to the New York Federal Reserve, the five-year cumulative default rate for subprime mortgages that were originated in 2001 was 5%. For subprime mortgages that were originated in 2007, the default rate was 25%, and for borrowers with FICO scores below 600, it was over 40%! Subprime mortgages originated in 2010 have a five-year default rate of 8.4% despite the booming housing market over the period.

The government plays another little game of illusion because these default rates actually underestimate the number of borrowers in default because the loans that are refinanced with the Federal Housing Administration are, “treated as a successful payoff, even if the refinanced loan that replaces it subsequently defaults.”

As long as housing prices keep going up, and there are buyers to purchase them, the government can keep up this charade indefinitely. However, when housing prices stall and begin to decline- all hell breaks loose. The New York Fed is prepping investors by revealing cloaked issues like “sustainability” of home-ownership and proposing some limitations. However, it is way too late for that to do much good.

This time, the problem of the housing bubble is the government and taxpayers problem, and with that guarantee, institutional investors have invested heavily in subprime, mortgage-backed securities that were never delivered to the trusts because they are immune from the inevitable losses that have appeared on the horizon. It’s good to be one of the wealthy and the government’s protected breathen.

Just another Friday: NY Servicers Dealt Blow- Ocwen’s $30 Million Settlement


NY Servicers Dealt Blow; Ocwen’s $30 Million Settlement; Brexit: Renegotiations and Margin Calls?

At Happy Hour tonight, besides talking about refis, you can throw this one out: the number of homes worth $1 million has doubled in the last 4 years. Of course 2012 was pretty much the bottom of the real estate market, and it has been the big urban areas like San Francisco and Manhattan that have led the charge higher. Heck, in San Francisco, the median home price is over $800k. (One bedroom apartments in San Francisco rent for $3648 a month.) Seems like a little toppy – but rates are helping…


As servicing values continue to slip, and companies question whether or not they want to own a servicing portfolio and who is a natural buyer of servicing if banks stop, New York imposed new requirements yesterday on mortgage lenders to maintain abandoned houses before foreclosure. Viewed as a blow to servicers, the law signed by Gov. Andrew Cuomo threatens banks with civil penalties up to $500 a day for failing to maintain residential properties once they’re aware of vacancies. The new law also establishes an electronic statewide registry of abandoned homes and a state hotline where neighbors can report them, and requires notices to mortgage borrowers emphasizing their right to stay in houses until foreclosure. And a related measure establishes a State of New York Mortgage Agency fund to buy and sell abandoned properties at below-market rates and demolish those beyond repair.


On top of that, the CFPB urged mortgage servicing firms to upgrade their technology to reduce errors and improve efficiency. The CFPB Mortgage Servicing Report is a special edition of its supervisory highlights report focusing exclusively on mortgage servicing. The CFPB found that “some mortgage servicers continue to use failed technology that has already harmed consumers, putting the company in violation of the CFPB’s new servicing rules.” The report did not break new ground but it did serve as a reminder of the structural importance of mortgage technology firms under the new regulatory regime.


“Mortgage servicers have failed to make significant investments in technology and compliance systems, resulting in substantial harm to consumers,” according to the report. It is recent stuff, reflecting a detailed look at supervisory exams of mortgage servicers between January 2014 and April 2016, found that outdated and deficient technology can lead to greater risks for borrowers.


CFPB financial reporter Kate Berry wrote, “The CFPB found that some servicers failed to honor loan modifications after a loan gets transferred. Borrowers also faced substantial delays in receiving permanent modifications because of incompatible systems, the report found.


‘Mortgage servicers can’t hide behind their bad computer systems or outdated technology,’ CFPB Director Richard Cordray said in a press release. ‘Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.’


“The CFPB will be conducting targeted reviews this year of mortgage servicers’ compliance with fair lending laws. The reviews will include looking at servicers that are creditors, such as those that participate in a credit decision about whether to approve a mortgage loan modification… Mortgage servicing has been a top concern for the CFPB since it first began examining financial institutions, but examiners continue to unearth problems. CFPB examiners found problems with loan modification acknowledgement notices, including notices sent too late, with incorrect information or deceptive statements.


“The report cited at least one servicer that failed to send any loss mitigation acknowledgement notices to borrowers due to a ‘processing platform malfunction over a significant period of time.’


‘The magnitude and persistence of compliance challenges since 2014, particularly in the areas of loss mitigation and servicing transfers, show that while the servicing market has made investments in compliance, those investments have not been sufficient across the marketplace,’ the report stated. The agency also updated its mortgage servicing exam manual, which includes a section on how servicers handle complaints and requests by troubled borrowers.”


As servicers wonder if it’s worth it, the government continues to collect fines, contributing to its bottom line, the latest to write a big check is Ocwen – “New Co” spelled backwards. Do you think servicing loans is something you’d really want to do? Ocwen Financial Corp. agreed to pony up $30 million to resolve lawsuits that claimed it didn’t properly include disclosures for loans it was servicing. (After the announcement the stock rose slightly, but is still down over 80% in the last year.) “The lawsuits, which were brought by Michael Fisher and the U.S. Justice Department, alleged that Ocwen didn’t make required disclosures in connection with the Home Affordable Modification Program, a government program introduced after the housing crisis to help struggling homeowners avoid foreclosure.”


Speaking of regulators and mortgages, last week the MBA filed a petition for exemption with the Federal Communications Commission (FCC) seeking an exemption for mortgage servicing calls from the prior express consent requirements of the Telephone Consumer Protection Act (TCPA). The MBA is seeking this limited exception in order to continue to encourage proactive communication with mortgage loan borrowers and early engagement with financially struggling homeowners. “Following the financial crisis, many federal regulators – among them the CFPB, FHFA, FHA and Department of Treasury – have mandated protocols for reaching out to borrowers through outbound communications when a homeowner is delinquent. States have enacted similar requirements. These communications can provide the homeowner with critical information about their options to save their home. In today’s environment, this often means through outbound calls or text messages to a consumer if the outreach is going to be effective.


“Unfortunately, the TCPA can frustrate these communications by imposing the threat of significant liability for making outbound communications to cell phones. Congress recognized this and passed an amendment to the TCPA late last year exempting calls made to collect a debt owed to or guaranteed by the government from the prior express consent requirements. The FCC has promulgated a proposed rule in response to the amendment. MBA appreciates this exemption and filed our comments on the rule.”


This “federal debt” exemption, even if construed as broadly as possible, will not extend to all residential mortgage loans.  FHFA recognized that a mortgage servicing exemption is appropriate and necessary to ensure that all borrowers are able to receive communications they need through a method likely to reach them. The FHFA comments on the FCC’s rule call for just such an exemption. MBA agrees that these communications are vitally important for both borrowers and their communities. Thus, MBA has submitted a petition for a limited exemption from the prior express consent requirements for mortgage servicing calls.”


And, in another PR black eye for the industry, Ben Lane with HousingWire reports that, “According to the FTC, a California-based law firms bilked millions of dollars out of homeowners who were facing foreclosure by telling them that they could join a ‘mass joinder’ lawsuit against their respective mortgage note holders that could discharge their mortgage entirely, provide monetary relief, or both.”


Fannie Mae has made the following updates to the Servicing Guide: Retirement of Delinquency Counseling Requirements for Community Lending Mortgage Loans, Fannie Mae HAMP Modification Termination, Foreclosure Title Costs, Further Reduction of Servicing Requirements for Florida Acquired Properties, Property Insurance Reimbursement Limits, Mortgage Release Policies and Procedures and other Miscellaneous Revisions. Please read the Announcement for details.


Freddie Mac issued a recent servicing bulletin focused on HAMP, lender-placed insurance, and reporting a short sale to the IRS.


In somewhat servicing-related news, Black Knight Financial Services announced that it is continuing its recent expansion efforts with the acquisition of Motivity Solutions, which provides customized mortgage business intelligence analytics to mortgage lenders. The Sherman’s Motivity Solutions offerings will be integrated with Black Knight’s LoanSphere Product Suite, including the LoanSphere Data Hub, which will provide clients with insights into their origination and servicing operations and portfolios.;…………………………….

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