Reuters: Credit Unions Fail As a Result of Buying Mortgage Bonds

As regulators conclude their long investigation into the cloud of companies and the maze of paths of paperwork and money the real victims are being revealed. We know Pension funds got hit hard and are now underfunded strictly as a result of buying worthless mortgage bonds from investment bankers who promised them protection and transparency but instead proved to be the predator. Now regulators are suing Morgan Stanley for defrauding two credit unions that failed as a result of taking a loss on those bonds — a loss that was a gain to the investment banker.

But they still don’t have it exactly right. The regulators are now freely describing mortgages that were “faulty”, “defective”‘ or “non-conforming”. They are describing bonds whose indentures were violated. Yet the government still stands on the sidelines when we look at the damage caused to millions of homeowners who have been forced from their homes and lost everything. The guise is “personal responsibility” — meaning that homeowners are to blame for what happened to them. Meanwhile the question of ownership of who owns the loan and the balance of the loan are being circumvented through destructive litigation, led by judges who are ill-informed mostly because lawyers have failed to learn securitization of debt.

Thus the government has failed to lead the way to stopping Foreclosures. It is still a basic axiom in the offices of regulators, the courtrooms of the judiciary and in mainstream media that individual borrowers are the people who must take responsibility and pay for the fraud. They should have known better. They should have read the documents. But this “logic” flies in the face that two branches of government have already recognized is that the one party who is at a disadvantage in a mortgage loan transaction and credit generally is the borrower — not the lender.

This issue was officially decided by the Federal Government in The Federal Truth in Lending Act was enacted for just that purpose and reason. The Federal Real Estate Settlement Procedures Act was enacted for just that purpose. And the many states that have enacted deceptive lending statutes that freely borrow from TILA and RESPA. Lawyers need to include this in their pleadings, memorandums and oral arguments to start where we should start — at the beginning. If those mortgages are being settled with the creditors who loaned the money because the loans were defective, and they are being settled with shared risk of loss, then why should our attitude toward borrowers be any different as to the same defective mortgages?

A good starting point would be to find the list of defective mortgages to see if your mortgage is in the
list of mortgages claimed to have been securitized, where the mortgages were described as defective, and where the mortgage bonds were described as fraudulent. Fraudulent appraisals are being ignored in the courtroom despite the clear provisions TILA that makes the appraisal and the viability of the loan the responsibility of the lender. Foreclosure defense attorneys are missing an important part of their argument when they fail to start with the responsibilities of the lender, the reasons why those standards were not applied, and the fact that the real lenders in millions of table-funded (predatory per se– I.e. Presumptively predatory) were being defrauded in two ways — non-conforming defective loans and mortgage bonds.

Of course the agencies could make thing easy by forcing publication of a list of REMIC trusts that have been subject to settlements relating to fraudulent and deceptive lending, and fraudulent and deceptive sale of mortgage bonds. But the truth is that the false axioms of the cloud of companies acting under cover of false claims of securitization are settling in the minds of judges, lawyers and regulators that somehow tens of millions of mostly unsophisticated people conspired to defraud the system. How likely is that? Or is it more likely that mortgage companies were pushing, coercing, lying, and deceiving the borrowers — just as the the lawsuits against the investment banks state? And just as they have done in the past?

Those lawsuits frequently allege that the underlying mortgages were non-compliant and unenforceable. If the investment bankers and investors, insurers and government agencies can agree that those mortgages were not enforceable, why is it that lawyers have not brought that message with them into the courtroom? And when they do, why are judges ignoring the argument. It has already been decided at the highest levels of government that the homeowner is hopelessly outgunned at closing. Why assume anything different? When those laws were passed , the number of loan options was 4 or 5. During this period of mortgage madness and meltdown, the number of mortgage products climbed to over 400 options. Borrowers didn’t do that. It was the mortgage originator who had no risk of loss because the money of the investor was what ended up on the table at closing.

Morgan Stanley
http://www.reuters.com/article/2013/09/24/us-morganstanley-creditunion-lawsuit-idUSBRE98N02E20130924

13 Responses

  1. I will never buy the argument these frauds were converted legally. Counterfeiting is not legal in the U.S. no matter who you are, and if it is, they need to let us all know. If that is the case, and counterfeiting bank notes is legal, the economic crisis is over and it is a party in the U.S.A…

  2. I am going to post this till I am purple. I respect what Neil says, etc, etc, etc…but there a vast difference between a servicer of a trust and a debt collector.

    They are all servicing something, but only one of these parties “possibly” has rights to your DOT and it is NOT the debt collectors-debt purchasers. Much of this is time-barred and unsecured AND the trust died a long time ago. Much of the info in the SEC filings is fabricated.

    Most of these cats are committing fraud, perjury, theft, RICO violations, accounting fraud, tax fraud…the list is very long.

    Make no mistake, they may well have not done anything wrong, as far as the converting and selling of your note is concerned, but they sure in hell have violated YOUR contract, used you credit and private information to borrow money in YOUR name(in may cases used the money for things other than funding), lied about the perfection of the lien, mislead all of us as to who lent money and to whom and with fractional ownership, you can “never” find the lender….all those assignments mean nothing if you are a bondholder. You are only entitled to payments…why do you think all of the “counterfeit” notes are showing up? The “illusion” of proper lineage and lien perfection.

    And I am sticking to this hard and fast. The paperwork I posses, has it all spelled out, from the originator(whom is listed as the lender BTW) and the POA from 1995, the QWR with a zero balance, a magistrates hearing where my name was scribbled on the paperwork and I wasn’t there, breaking rules of civil procedure by changing the parties like underwear, less than 24 hours to respond, lawyers showing up at my door, BOA N.A. sticking notes in my front door to collect…the sheriff has this on paper too. The insanity of all of it. If they had the paperwork and rights under the law, this would not be happening Neil. PERIOD!

  3. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)
    “I believe that banking institutions are more dangerous to our liberties than standing armies.” – Thomas Jefferson

    Looks like Jefferson foresaw the banksters lending you other peoples money , banks getting rich, and taking our properties for giving us bubkis.

  4. one thing is true- gotta shift that burden of proof.

  5. hman
    talk about payments- to who, how do we know who the record is a MESS

  6. there are a few suits out there where credit unions are suing, remember the shareholders are usually those who bank with them, the community. this is where we should bank and should fight. from a community perspective. strong communities strong states. strong states, strong nations.

  7. the borrower did not lie- the numbers were changed. thing is full doc loan, why would they say that. did they do their due diligence? did they care, mattered not, neither did the hyperinflated appraisal. they just wanted a good number, number bad- they changed it. not their money, other peoples.

  8. fundamentally, how can av Joe be individually responsible for a governments failing to protect via oversight of the industry and allowing lobbyist with special interests and bribed to methodically batter our consumer protection laws.
    reliance- did we not have a right to rely on such protections being firmly in place as a given under the constitution and equal rights, and from a common sense perspective of shared risk. The market was deliberately hyperinflated to accommodate fraud and greed under false securitization derived from a bogus mortgage transaction. how on earth can an av Joe be responsible and make the most important financial decision of his life when the motive is to simply get a signature to – as they say “fund it”. bla bla I know. so old.

  9. HAMP, OBAMACARE, HAMP, OBAMACARE, NEED WE SAY MORE!

  10. Why don’t we start correcting this massive mortgage fraud with
    Article 1, Paragraph 10, Clause 1 of our United States Constitution?.
    Cite the Law that allows any bank charter to bypass this prohibition.

  11. I WILL BE EXCITED TO SEE WHAT HAPPENS WITH OBAMACARE AS IT DID WITH HAMP. JUST ANOTHER THING THAT WILL RAM MORE HEARTACHES DOWN THE THROAT OF THE AMERICAN PEOPLE. THIS PRESIDENT WILL BE REMEMBERED FOR MORE BROKEN HEARTS AND FAMILIES THEN ANY OTHER IN OUR HISTORY. HOW CAN WE STAND BY AND ALLOW THIS CRAP TO HAPPEN AGAIN? NOBODY IN THE NEWS REPORTS WHAT HAMP DID AND TELL AMERICANS TO BE AWARE THAT OBAMACARE WILL PROBABLY BE JUST ANOTHER WAY TO MAKE MORE MONEY FOR BIG BUSINESS. INSURANCE COMPANIES WILL BE RICHER THAN EVER BEFORE. THE COURTS WILL BE BOGGED DOWN WITH SUITS WHEN PEOPLE WILL BE DENIED COVERAGE FOR WHATEVER BULLSHIT THEY WILL BE ABLE TO COME UP WITH AFTER THE FACT. JUST LIKE HAMP, IT’S IN THE DETAILS AND WE WILL FIND OUT A YEAR FROM NOW WHEN IT STARTS TO WORK. THE LITTLE GUY WHO BELIEVES THAT THEY WILL BE COVERED WILL BE IN BIG TROUBLE WHEN THEY FIND OUT THAT SOMETHING INSURANCE COMPANIES CAN COME UP WITH TO NOT PAY FOR THEIR BILLS. YOU KNOW IT’S GONNA HAPPEN! HAMP WAS A GOOD IDEA BUT THE PEOPLE WHO WILL ENFORCE OBAMACARE WILL FIND MORE WAYS TO NOT PAY AND LEAVE AMERICANS ON THE HOOK. IT’S INEVITABLE, AND YOU KNOW IT. AND WE WILL BAIL INSURANCE COMPANIES OUT! YOU CAN BET YOUR LIFE ON IT. THE TAX PAYER WILL LOSE IN THE END AS WE ALWAYS DO. AM I BITTER? YOU BET I AM! WE NEED TO GET THE NEWS TO REPORT MORE ABOUT THE HAMP PROGRAM AND LET MORE PEOPLE KNOW WHAT OBAMA STANDS FOR. I’D LIKE TO SEE CHARLIE ROSE ASK THE PRESIDENT THAT QUESTION? WHAT ABOUT THE 4 MILLION HOMEOWNERS WHO LOST THEIR HOMES AND NO ONE WENT TO JAIL FOR THE FRAUD! PROVEN FRAUD! WHERE IS THAT JUSTICE? WHY SHOULD ANYONE BELIEVE THIS WILL BE BETTER! TELL HIM HE DID NOTHING, NOTHING, TO HELP THE PEOPLE OTHER THAT SETTLE FOR PENNIES. FUCKIN, PENNIES! THAT SCUMBAG GAVE US.AND NO ONE WENT TO JAIL! NO ONE! THE BIGGEST FRAUD IN HISTORY, AND NO ONE WENT TO JAIL.

  12. If there is a debt, a big IF, it’s unsecured !!!

  13. I’ve been trying to follow the “Res Cap” settlement after the BK of GMAC. My limited unterstanding is that many of the mortgage bond holders claim misrepresentation of the quality of the loans. They were mislead.

    GMAC response is basically that the homeowner/borrowers misrepresented themselves to the bank. Yes the greedy homeowners get blamed for the poor quality of the loans.

    If there is some settlement does/should that effect the homeowners debt obligations.

    Also, on 1 hand it seems that the loan servicers want to enforce certain provessions of the trust deed but not others. When they attempt to foreclose they claim you are in breach of contract of the trust deed. Ok for the moment lets assume that is true.

    What would qualify under 3rd party payments? Like the post yesterday most DOT states how 3rd party payments are to be applied to the loan. Therefore the contract as a whole needs to be enforced and not just the parts the debt collectors want. It’s true maybe the debt has not been elimanated but any advances and any settlement would seem to meet the criteria for 3rd party payments?

    Any thoughts?

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