WHY THE PAPERWORK APPEARS “SLOPPY”

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

The essential component of every loan that was never revealed to either the lenders (investors) nor the borrowers (homeowner/investors) was the addition of co-obligors and terms that neither the investor nor the borrower knew anything about. The “insurance” and other enhancements were actually cover for the intermediaries who had no money at risk in the loans, but for the potential liability for having defrauded the lenders and borrowers.

After centuries of lending money and preparing loan documents it seems that the least likely suspect for screwing up the paperwork on tens of millions of “loans” would be the Banks themselves. Yet that is what occurred. The purpose of this article is to show that it was not sloppy, it was intentional. And I will tell you why it was intentional.

The much expected announcement that after a thorough review they have determined the paperwork is in order is a last-ditch desperate effort to block inquiries into the mortgage creation process and the sale of “mortgage bonds” to investors. They attempted to emulate the government’s PR stunt last year with the “stress test” forgetting that they are private companies in litigation subject to discovery. They have now opened the door to discovery, which is the last thing they wanted. Litigants can now question who was involved in this “review”, what they did, from they received information and assurances, and what documents they looked at. They can ask what was the basis upon which they concluded that they could proceed with foreclosures?

The documents were not sloppy and they were not processed sloppily. They were created and treated exactly as planned. They did it because they thought they could get away with it. They had enough money to buy off any legislator or Judge, or so they thought. But it isn’t working out that way. It’s not the first time these mega-banks have stepped on a land mine and it won’t be the last, as long as we allow them to grow into such behemoths such that that ascribe to themselves the qualities of government or God.

The game was to move money under a scheme of deceit and fraud. First sell the bonds and collect the money into a pool. Second take your fees, third take what’s left and get it committed into “loans” (which were in actuality securities) sold to homeowners under the same false pretenses as the bonds were sold to investors. By controlling the flow of funds and documentation, the middlemen were able to sell, pledge and otherwise trade off the flow of receivables several times over — a necessary complexity not only for the profit it generated, but to make it far more difficult for anyone to track the footprints in the sand.

If the loans had actually been securitized, the issue would not arise. They were not securitized. This was a mass illusion or hallucination induced by Wall Street spiking the punch bowl. The gap (second tier yield spread premium) created between the amount of money funded by investors and the amount of money actually deployed into “loans” was so large that it could not be justified as fees. It was profit on sale from the aggregator to the “trust” (special purpose vehicle). It was undisclosed, deceitful and fraudulent.

Thus the “credit enhancement” scenario with tranches, credit default swaps and insurance had to be created so that it appeared that the gap was covered. But that could only work if the parties to those contracts claimed to have the loans. And since multiple parties were making the same claim in these side contracts and guarantees, counter-party agreements etc. the actual documents could not be allowed to appear nor even be created unless and until it was the end of the road in an evidential hearing in court. They used when necessary “copies” that were in fact fabricated (counterfeited) as needed to suit the occasion. You end up with lawyers arriving in court with the “original” note signed in blue (for the desired effect on the Judge) when it was signed in black — but the lawyer didn’t know that. The actual original is either destroyed (see Katherine Porter’s 2007 study) or “lost.” In this case “lost” doesn’t mean really lost. It means that if they really must come up with something they will call an original they will do so.

So the reason why the paperwork is all out of order is that there was no paperwork. There only entries on databases and spreadsheets. The loans were not in actuality assigned to any one particular trust or any one particular bond or any one particular individual or group of investors. They were “allocated” as receivables multiple times to multiple parties usually to an extent in excess of the nominal receivable itself. This is why the servicers keep paying on loans that are being declared in default. The essential component of every loan that was never revealed to either the lenders (investors) nor the borrowers (homeowner/investors) was the addition of co-obligors and terms that neither the investor nor the borrower knew anything about. The “insurance” and other enhancements were actually cover for the intermediaries who had no money at risk in the loans, but for the potential liability for defrauding the lenders and borrowers.

The result, as anyone can plainly see, is that the typical Ponzi outcome — heads I win, tails you lose. With that, Wall Street was allowed to suck trillions out of an economy that could not afford it. That $5 trillion surplus left when Clinton was in office was just too darn tempting for Wall Street. They just had to have it. And they got it. So the paperwork was carefully created and crafted to cover the tracks of theft. Most of the securitization paperwork remains buried such that it takes search services to reach any of them. The documents that were needed to record title and encumbrances was finessed so that they could keep their options open when someone made demand for actual proof. The documents were not messed up and neither was the processing. They were just keeping their options open, so like the salad oil scandal, they could fill the tank that someone wanted to look into.

The Obama administration is making a giant error in relying on the existing finance infrastructure to fix itself. This fraud runs so deep that practically everyone at their kitchen table feels it. The loss should fall on those who created it and the victims should be made whole, not because it is a reward but because that is what we do in a nation laws — take people who were victims of wrong behavior and get as much restitution as can be reasonably accomplished. Quantitative easing is only going to encourage Wall Street, creating yet another pool of cash that they will not be able to resist. Then what?

22 Responses

  1. It’s curious how Neil claims he ‘doesn’t need to do this work’. If so, then why would he ignore three requests to cancel a monthly subscription, and go take $50 from my Social Security funds? I emailed him on Monday, saying ‘I can’t find an unsubscribe button, would you please unsub me and confirm.’ I got no response. On Tuesday I called, and again on Wednesday, asking to cancel my subscription and to give me a confirmation call. The result? $50 taken on 11/12. Thanks, Neil!!!
    Now I have to call the bank to get a refund and cancel my debit card, which as you all know is a pain in the butt. Thanks again.

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  2. One of the oldest business tricks in the book is to leave a muddy trail, so you can slip a few dirty deeds through unnoticed, then claim the “My accountant didn’t tell me” or “We lost the paperwork”, or “Boy is there egg on my face”. Government contractors are masters at this.

    The public’s not stupid. The banks are panicking because they’ve been caught with their pants down, and if the investigations are truly independent, they’ll uncover many, intentional dirty deeds, like intentiontal foreclosure of current mortgages and homes of people who have no mortgage.

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  3. […] why-the-paperwork-appears-sloppy […]

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  4. What a fine site.

    May I quote you at my place, and blogroll you?

    Thanks for all you do to inform us.

    Suzan

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  5. For a Bankrupt country like the USA

    Only leaving all the homes free & clear for fraud & nullity, will preserve the families inside.

    Liquidate the Banks, Goldman Sachs, AIG, and the Federal Reserve and make pro-rata restitution to the Depositors and Pension Funds.

    Then we get to rebuild this country little by little, with a roof over our heads.

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  6. When you get to the bottom, you go back to the top of the slide — and the Giant Vampire Squid takes three percent vigorish off of every time you ride.

    Former World Bank economist Hernando de Soto estimated a Quadrillion US$ in “notional value” of these instruments has been sold around the world. Salesmen make commission. Three percent is a VERY low estimate. What’s three percent of a quadrillion dollars? Where did that money go? Wasn’t it supposed to “trickle down” on the rest of us?

    I’ve been trickled on for thirty years. Tastes like piss.

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  7. […] (former investment banker, trial lawyer and board member of several financial institutions) confirms this, explains that the loans were not actually securitized, and the whole “sloppy […]

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  8. Banks deliberately obfuscate their paperwork to hide all the false foreclosure, i.e., foreclosures on current loans and homes that have no mortgage at all. They’ve been getting away with it for decades. Happened to me.

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  9. […] (former investment banker, trial lawyer and board member of several financial institutions) confirms this, explains that the loans were not actually securitized, and the whole “sloppy paperwork” […]

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  10. Neil I am not sure I understand all your arguments, however, I totally agree that this was not sloppy paperwork, but rather was preplanned. I give some proofs here and I hope you would read it. This proof is from the macro view of this scam but the conclusion is the same, it was planned: http://hubpages.com/hub/Proof-That-Basel-2-Caused-Ponzi-Housing-and-Foreclosuregate

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  11. Ok. I’ve got it.

    We give the banks, the investors, and the borrowers, a deadline to add up their losses.

    We assess the situation and reach an agreement on “losses.” We then require the banks to take out a 30-year amortized, fixed rate loan. Every homeowner and investor involved holds a copy of the PN and the DOT.

    We give the homeowners a choice — Do they want their homes back or do they want to receive a monthly or annual stipend?

    If the banks default, we foreclose on them and collect from the FDIC.

    Well…something like that. LOL

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  12. Doing my best to research this securitization mess over that last year I’ve found it to be one rabbit hole after another. I am amazed how spot-on your conclusions are. Bravo! Even better…Thank You.

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  13. The Obama administration is making a giant error

    Uh. Obama was financed by Wall Street and the Banks. They are pissed that they did not get their money’s worth.

    And Bush and the Rs were not blameless. They did make some feeble attempts to fix this. But they did not put their shoulders into it. Too many Rs getting a cut.

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  14. @Mr. Garfield

    It looks huge but, since I’m not from banking industry, and not english native speaking, I can’t figure out the details. As I’ve been the first- and, for four weeks, the only blogger to cover it in France, I’d like to be able to “catch” this new seemingly huge development.

    Did you mean that the loan was resold to several MBS ? Or is it more complex ? If they sold a loan several times, how could they imagine not beeing caught one of these days ? I can’t get the picture this time.

    (By the way, the misconduct of banks revealed by the foreclosuregate is so amazing, that I guess nothing should amaze me any more…)

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  15. […] (former investment banker, trial lawyer and board member of several financial institutions) confirms this, explains that the loans were not actually securitized, and the whole “sloppy […]

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  16. Mr. Garfield, this article is amazing. You have got to go to the Huff Post with this. People need to see this.

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  17. […] (former investment banker, trial lawyer and board member of several financial institutions) confirms this, explains that the loans were not actually securitized, and the whole "sloppy paperwork" […]

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  18. Quantitative easing, in English, Printing Money out of thin air. More people will realize that they don’t have to pay their mortgage and that we can just print more money. Then the dollar will not only crash, it will burst.

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  19. I have known someone who is in business and shall remain nameless who uses this approach to his business to hide his tax liability–make a mess of your documents and claim you can’t find it or it does not exist.

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