INVESTORS COMING OUT OF THE SHADOWS: BANKS’ WORST NIGHTMARE
EDITOR’S ANALYSIS: For those who have followed this Blog for any length of time, this news will come as no surprise. Ultimately, the proof and the relief sought by homeowners will come from investors who demand answers to what happened to their money when they purchased mortgage backed securities and pooled their money to fund mortgages.
The result is a pincer action, to put it military terms, where the creditors and the debtors are making the same allegations against the intermediaries who stole from both sides, “borrowed” the loss to claim Federal bailout money, and left both sides holding the bag.
Lawyers for the investors are clearly smelling blood and are on the hunt. Unlike the foreclosure defense side where the arguments and theories are the same, these lawyers will represent institutional investors whose credibility in court will rival, if not exceed, the credibility normally allowed to anyone with the word “Bank” in their name. These lawyers are going to make a fortune, as will any foreclosure defense lawyer who realizes the true nature of what is going on.
What they already know and they are demanding answers: that the mortgage origination process was defective in multiple ways that created fatal defects in the the quality and quantity of loans as well as the security of the collateral (the homes). The proof that will emerge is that the homes were not subject to a perfected lien because the intermediaries wanted to claim the loans themselves to create “trading profits” before they provided for any accounting to the investors and with no intention of ever providing an accounting to the borrower.
The document trail from the closing with investors, the document trail from the closing with borrowers, the actual money trail and the representations made in court are all at variance with each other. “Transfers” to the pool occurred only after the alleged default by the borrower, which was misrepresented because the default claimed did not match the actual receipt of funds that should have been reported to investors. All of this is in direct violation of the PSA and other securitization documents.
The final result will be the investors disavowing any interest in the loans, absent a broad settlement that allows for modifications of the mortgages based upon realistic values and terms. The investors will see, that the deep pockets here for recovery of their losses are where the money went in the first place — the investment banks.
The money advanced by investors was not used to fund mortgages as advertised but rather was sponged into a complex matrix of fees, trading profits for the investment banks, credit enhancements that inured to the benefit of the banks, and bets that the bonds would fail — a sure thing because the banks reserved the right exclusively to declare the failure.
All of this projects broad similar actions from investors around the world demanding answers on each and every pool. All loans will be thrown into a grey area of ownership and the end result may well be that the “free house” spin by the Banks will come back and bite them. With the creditors disavowing the transaction and making no claim against the homeowners there might be nobody to pay. Short of that, the proof will most likely provide a relatively easy way for homeowners to strip their homes of the liens of record as they relate to loans in which a securitization claim is present — because in most cases, the loan was not made or paid for by the originator who appears on the note and mortgage.
TILA rescission is most probably going to get much easier as a result of these actions. Meanwhile US Bank and Wells Fargo are going to experience the frustration that they have caused homeowners. Their attempts at foreclosure are going to met with stiff resistance as the investors emerge and have their say in foreclosure actions.
HSBC and US Bank to Investigate Ineligible Mortgages in Over $19 Billion of Wells Fargo-Issued RMBS
(Source: Gibbs & Bruns, LLP) – HOUSTON, Jan. 5, 2012 – Gibbs & Bruns LLP announced today that its clients have issued instructions to US Bank and HSBC, as Trustees, to open investigations of ineligible mortgages in pools securing over $19 billion of Residential Mortgage Backed Securities (RMBS) issued by various affiliates of Wells Fargo. Collectively, Gibbs & Bruns’ clients hold over 25% of the Voting Rights in 48 Trusts that issued these RMBS.
“Our clients continue to seek a comprehensive solution to the problems of ineligible mortgages in RMBS pools and deficient servicing of those loans. Today’s action is another step toward achieving that goal,” said Kathy D. Patrick of Gibbs & Bruns LLP, lead counsel for the Holders.
The Holders anticipate that they may provide additional instructions to Trustees, as needed, to further the investigations. The securities that are the subject of these instruction letters include:
|WFALT 2005-1||WFMBS 2005-9||WFMBS 2006-19||WFMBS 2007-13|
|WFALT 2007-PA2||WFMBS 2005-AR11||WFMBS 2006-20||WFMBS 2007-8|
|WFALT 2007-PA3||WFMBS 2005-AR12||WFMBS 2006-6||WFMBS 2007-9|
|WFALT 2007-PA4||WFMBS 2005-AR14||WFMBS 2006-7||WFMBS 2007-AR3|
|WFALT 2007-PA6||WFMBS 2005-AR16||WFMBS 2006-8||WFMBS 2007-AR8|
|WFHET 2005-3||WFMBS 2005-AR3||WFMBS 2006-AR10||WMLT 2005-A|
|WFHET 2006-3||WFMBS 2005-AR5||WFMBS 2006-AR13||WMLT 2005-B|
|WFHET 2007-1||WFMBS 2005-AR8||WFMBS 2006-AR14||WMLT 2006-A|
|WFMBS 2005-12||WFMBS 2005-AR9||WFMBS 2006-AR18||WMLT 2006-ALT1|
|WFMBS 2005-17||WFMBS 2006-11||WFMBS 2006-AR2|
|WFMBS 2005-18||WFMBS 2006-13||WFMBS 2006-AR4|
|WFMBS 2005-3||WFMBS 2006-14||WFMBS 2006-AR8|
|WFMBS 2005-4||WFMBS 2006-17||WFMBS 2007-10|
ABOUT GIBBS & BRUNS LLP
Gibbs & Bruns is a leading boutique law firm engaging in high-stakes business and commercial litigation. The firm is renowned for its representation of both plaintiffs and defendants in complex matters, including significant securities and institutional investor litigation, director and officer liability, contract disputes, fraud and fiduciary claims, energy, oil and gas litigation, construction litigation, insurance litigation, trust & estate litigation, antitrust litigation, legal and professional malpractice, and partnership disputes. Gibbs & Bruns is routinely recognized as a top commercial litigation firm in the US. For more information, visit www.gibbsbruns.com.
Source: Gibbs & Bruns, LLP
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: | bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, TILA, TILA audit, trustee, US BANK, WEISBAND, Wells Fargo, WFALT, WFHET, WFMBS, WMLT