Both the class action lawyers and the AG offices are looking for settlements that will cure the “foreclosure” problem. This is based upon the perceived benefit of getting the foreclosures either litigated or settled, SO THE “MARKET” CAN RESUME “FORWARD” MOTION. But what if the basic transaction was so defective as to be incapable of understanding, much less enforcement? We ignore the fact that the basic transaction was a lie, that lies are not enforceable and while they could be modified by agreement into enforceable written instruments (completely absent from the current landscape) the inescapable fact is that in order to do so, you will need the signature of borrowers on loans that are based upon fair market values, reality and set-off for the damages inflicted on the homeowners by the Great Securitization Scam.
So we start with the myth that there was a valid legal contract at origination, an assumption that upon examination by a paralegal, much less a first year law student, is patently untrue. Thus we proceed with the following ten (10) lies that form the foundation of our impotent financial and economic policies in the Great Recession triggered by the housing crisis:
- VALID MORTGAGE TRANSACTION: There was a loan of money, but not by either the payee, the mortgagee, the trustee or anyone else that is mentioned in the closing papers or the foreclosure papers filed anywhere. That is why the pretenders would rather play with the word “holder” than “creditor.”
- LEGAL MORTGAGE TRANSACTION: Even if the right parties were at the table, the transaction was illegal because of appraisal fraud, underwriting fraud, Securities Fraud and Servicing Fraud.
- LEGAL LOAN: Even if the right parties were at two different tables, the transaction was illegal because of ratings fraud, securities fraud, common law fraud, predatory loan practices and servicing fraud.
- KNOWN CREDITOR: Neither the investor who was the source of funds, nor the investment banker who only committed SOME of those funds to loan transactions, nor the borrower (homeowner) even knew of the existence of each other. After the “reconstituted” bogus mortgage pools that never existed in the first place, payments by insurance, credit de fault swaps, and federal bailouts, it is at the very least a question of fact to determine the identity of the creditor at any given point in time — i.e., to whom is an obligation owed and how many parties have liability to pay on that transaction either as borrower, guarantors, insurers, or anything else? The dart board approach currently used in foreclosures and mortgage modifications, prepayments and refinancing has generally been frowned upon by the Courts.
- KNOWN OBLIGATION AMOUNT: The amount advanced by the Lender (investor in bogus mortgage bonds) was far in excess of that amount used by intermediaries to fund mortgages — the rest was used to create synthetic derivative trading devices and charge fees every step of the way. Part of the difference between the funding of the residential loans and the amount advanced by the lender (investor) is easily computed by applying the same formula used to compute a yield spread premium that was paid to mortgage brokers under the table. By obscuring the real nature of the loans in the mix that offered (sold forward without ownership by the investment bank with the intent of acquiring he mortgages later) a 6% return promised to an investor could result in a yield spread premium of perhaps 12% if the loan was toxic waste and the nominal rate was 18%. Thus a $900,000 investment was converted into a $300,000 loan with no hope of repayment based upon a wildly inflated appraisal. Payments by servicers, counterparties, guarantors, insurers and bailout agencies were neither credited to the investor nor to the obligation owed to that investor. Since there was no obligor other than the homeowner according to the documents creating the securitization scam infrastructure, the borrower was part of a transaction where he “borrowed” $900,000 but only received $300,000. Third party payments made under expressly and carefully written waivers of subrogation were not applied to the amount owed to the investor and therefore not applied to the amount owed by the borrower. The absence of this information makes the servicer “accounting” a farce.
- VALID ACCOUNTING BY ALL PARTIES: Continuing with the facts illuminated in the preceding paragraph, both mortgage closing documents and foreclosure documents are devoid of any reference to the dozens of transactions carried out in the name of, or under agency of, or as constructive trustee of the investor who as lender is obliged to account for the balance due after third party payments. So far, because, as so many people have complained, Wall Street is controlling the message and people are believing it. We don’t want to believe our government has changed because that would mean we would be required to do something about it. The fact remains that the mortgage statements, notices of delinquency and notices of default are ALL WRONG. They fail to account for payments made to the creditor. Just because they were stolen from the lender, that doesn’t mean that payments received from other obligors on the liability owed to the investors should not be credited. Those in the Madoff scheme learned that if they received more than they put in, the “profit” they made was NOT theirs to keep — they had to give it back to restore the victims who were still in the position of being the victim of a loss resulting from fraud. The same holds true for the investors in bogus bonds and the same holds true for homeowners. Payments made to the investors (or their agents) who advanced money that was eventually used to fund homeowner loans MUST be credited to those investors and must be allocated to the loans, reducing the balances due. This has never been done in any mortgage, whether the payments are current or not. When it is done, both the investors and the homeowners will be far better off than they were before and the economy will be back on solid footing.
- WINDFALLS TO BORROWERS VS WINDFALLS TO PRETENDERS: MIKEY DID IT! Like 3 year olds trying to get the heat off themselves, the players on Wall Street, the pretenders who faked having mortgages when they sold the mortgage bonds, the pretender lenders who faked the value and terms of the loans and the property, the STORY is that if the homeowners get any relief, the economy will stall further, and the homeowners are suddenly going to become some sort of elite class of wealth conferred by the taxpayer and government policy. As ridiculous a story as that sounds, more people than not actually believe it because they keep hearing it. That story doesn’t survive the first peek under the hood let alone drilling down on an analysis of the the transaction in which they received the “benefit” of a loan that in actuality put them into generations of being enslaved by debt. Every one of those transactions resulted in money in coming out of the pocket of the so-called borrowers, who were in fact unwitting investors in a PONZI scheme. The ONLY parties getting a “FREE HOUSE” are those who are foreclosing without ever having made or purchased a loan. The WINDFALL OCCURS EVERY DAY ANOTHER FORECLOSURE SALE OCCURS WHEN A NON-CREDITOR WITH NO MONEY IN THE DEAL BIDS IN THE HOUSE AT AUCTION WITH A “CREDIT BID” (I.E., NO MONEY). The way Wall Street tells it, 80 million transactions occurred at the sudden behest of scrupulousness greedy borrowers who came up with the most exotic, highly sophisticated economic history. Which sounds real to you, that homeowners understood the mountain of paper they signed at closing or that Wall Street depended on both investors and homeowners NOT reading and NOT understanding the mountain of paperwork, the exotic financial instruments, and the highly sophisticated PONZI scheme operating by control rooms that were under shells being used in a shell game of mammoth proportions? How many times in history did tens of millions of Americans get a windfall from a Wall Street scheme?
- ACTUAL LOSS VS. PAPER LOSS: You’ll notice in the legal cases that the pretenders are careful to talk about words like “holder” and “holder in due course” and possession of the note. They scrupulously avoid the word “creditor” because THAT describes the party who actually is losing money on the “lender” side of the transaction. That turns out to be the investors (pension funds etc.) who advanced trillions of dollars for a couple of extra points on the rate of interest income. NOT ONE CREDITOR IS FORECLOSING OR CLAIMING ANYTHING AGAINST A HOMEOWNER. NOT ONE CREDITOR IS COLLECTING MORTGAGE PAYMENTS FROM A HOMEOWNER. NOT ONE CREDITOR HAS A WRITTEN AGREEMENT WITH ONE HOMEOWNER REGARDING THE LOAN OF MONEY IN WHICH THE CREDITOR GAVE ACTUAL MONEY TO THE BORROWER AND THE BORROWER AGREED TO PAY IT BACK ON SPECIFIED TERMS TO THAT CREDITOR.
- LOSS ON MORTGAGE LOANS: Continuing with the thoughts carried forward from the last paragraph and all of the above, it is obvious that at not time in at least 96% of all foreclosures, and probably with all collections of monthly payments have any of the parties known to the “borrower” ever lost a penny on any transaction relating to the investor/lender or the homeowner/borrower. The courts, the media, lawyers, regulators, and policy makers continue to make this basic mistake. Virtually all “losses” reported were fabricated, and even when true did not result from default on mortgages but rather bad bets on securities RELATED to documentation (notes, mortgages etc.,) that were fabrications and sometimes forgeries that misrepresented the transactions as understood by the investor,lender and borrower/lender. In point of fact, the TARP money, insurance, counter-party payments, guarantor payments SHOULD have been disclosed to investors as lenders and SHOULD have been allocated to whatever part of the investor’s money was used to fund “loans.” The actual loss, if any, is not the the principal value as shown on any promissory note, whether signed or not, but is the amount due AFTER DEDUCTIONS FOR PAYMENTS MADE BY BORROWER AND ALL OTHER PARTIES THAT MADE ACTUAL MONETARY PAYMENTS. To assume otherwise, would be reward the pretenders with ill-gotten gains from fraudulent transactions. The analogy that comes to mind is the theft of money from someone and then going to the horse-track, and making money on the bets because you shot all the horses but one, and then counting the losses on other bets that were much smaller, but used to hedge in case somehow one of the horses that was shot, won anyway. The money given at the betting window is not a loss to the person from the money was stolen and the winnings from the bets at the very least should go toward giving back the money that was stolen.
- KNOWN DECISION-MAKERS: Given the fact that there are no agents whose accountability to the investor puts them at risk, the ONLY true decision-makers for purposes of modification, enforcement or settlement are the investor/lenders and the homeowner/borrower. Using the service companies as intermediaries for modification or settlement of predatory and fraudulent transactions is an absurd strategy using parties without any authority or even the required information to determine the amount due. If the investors elect to pursue claims against individual borrowers it should be done through an authorized receiver whose objective is to make the investor whole and credit the borrowers accordingly to the extent that the recoveries are allocable to the alleged loans. In that sense, the HAMP program and every contested and uncontested foreclosure involves the wrong parties and creates defects in the chain of title throughout the country. The same holds true for mortgages that are NOT in foreclosure and are “current”, which is to say, are being overpaid because of their receipt of payments from third party sources. The failure to require the true decision-makers and all the parties who EVER had an interest in the flow of principal or interest or investment income derived from the advance o funds by investors is a failure of profound importance because it compounds title breaks in the chain of title, and continues to destabilize the marketplace. far from presenting a threat to the housing market and the economy, the settlement of legitimate claims would stabilize the market and re-distribute, to the extent possible ill-gotten gains returning the money and wealth to their rightful owners. This would return a substantial amount of purchasing power to those most likely to use it to stimulate the economy. The mythology spin from Wall Street that it is better to get the foreclosures completed is a fabrication and is leading people, like lemmings, toward the edge of a cliff creating a brand new fall, from which we cannot recover.