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The above link has an excellent info-graphic about the mortgage crisis and the changing nature of our society. What is perplexing is that people who oppose what the banks were allowed to hijack the loans are still saying that the problem is that the paperwork wasn’t done right. That is true of course but it isn’t the point. The point is that the banks did the unthinkable and then continued to profit and leverage off of a business model which consisted of getting away with pure theft. That the paperwork was wrong is a natural consequence of that behavior. This reality continues to escape most Judges, lay people and their lawyers.
If you or I defrauded someone into thinking that they were investing in a real company and instead went out and spent the money on groceries and did a few things to make it look like the “business” was operating, we would be prosecuted and jailed. And that is what happened in the S&L crisis in the 1980’s where more than 800 bankers ended up in jail within 3 years.
In this case the banks had a plan. First they got the government to deregulate the securities issued by a REMIC trust, credit default swaps and insurance contracts. Second they created the appearance of an IPO — the sale of mortgage backed securities from a REMIC Trust. But the Trust never operated, never received any money from the sale of the securities, never purchased any loans, and sits as the passive party where third parties are allowed to use the name of the trust in Court and non-judicial foreclosures as the owner of the loan. It never happened. But the banks need the courts to assume the trust does own the loan. And the reason for that is so the “servicers” can claim the right to service the loan, which derives from the trust instrument — the Pooling and Servicing Agreement. And that enables these robo-witnesses to testify what is on the books of that servicer — but never what is on the books of the alleged creditor (Trust). Are the books of the “servicer” the same as the books of the creditor? We never find out even in contested actions because the Judges are confused.
The truth is hard for the judicial system to swallow — the Trust doesn’t own the loan, thus the trust instrument is irrelevant by its own terms, hence the “servicer” (appointed in the PSA) has no authority to service the loan and the “trustee” has no power or right to assert anything about a default, collection or enforcement. Patrick Giunta and I have both — individually and together — settled or won cases outright on exactly that point and thousands of other cases are being won or settled based upon that essential truth. And those powers of attorney are meaningless – conveying power to the recipient that the originating party doesn’t have.
But the even harder truth to swallow is that the homeowners got their “free house” at closing. Sorry, but it is true. It doesn’t mean they don’t owe any money, but it is completely true that in most cases there is no valid security for the loan — i.e., the mortgage is void from the start because there was no valid enforceable loan contract for one simple reason — the “lender” was not the lender. The money DID come from investors but not through the REMIC trust. The note was also void from the start.
Somehow the Banks have succeeded in convincing Judges that despite the facts — that the homeowner had no deal with the payee on the note, the mortgagee on the mortgage, the beneficiary on the deed of trust — the Court should enforce the illegal transaction. Despite the plain misrepresentations at closing and the pattern of table funded loans (predatory per se under Reg Z) the courts are enforcing nonexistent deals where sham entities and bankruptcy remote vehicles were used to defraud both the borrower and the investors whose money was used in ways they never imagined. And ultimately these sham entities and sham relationships were used to “foreclose” on over 7 million Americans.
At the root of the problem is that in most cases the borrower should not have been presented with documents that plainly misrepresented the truth about the deal right down to who the lender was. That the borrower signed the papers in reliance on the misrepresentations at the “closing” should not be reason to enforce the false documents. Those false documents at “closing” should never have left the closing table. They should never have been signed. They should never have been released from the closing table and if the closing agent was aware of the facts, that agent should be held accountable. And if that is the case the documents should never have been recorded. That is the reason the mortgage was legally void when recorded despite the presumptions (rebuttable) of authenticity for a recorded instrument. And THAT is why the the great majority of foreclosures are and were all fraudulent.
Most people don’t like the result — that the homeowner owns the house free and clear of any mortgage encumbrance. But the alternative is worse — that the banks who stole the money from investors get to act like THEY were the lenders when they never had one cent in the deal. And the Banks get to have a literally free house without expending one cent — except by using the money from investors in ways they never imagined. When the homeowner gets the “free house” it isn’t free. They still owe money to the investors under the doctrine of unjust enrichment. And the investors, if they would finally get the message, could get a judgment against the borrower for not paying. And that judgment in most states is enforceable against the borrower except for statutory exemptions for homestead. But we all know from the actual figures that nearly all homeowners would enter into a new mortgage and note or modification in which the investors were named based upon reasonable, legal terms and conditions. So there is no free house for homeowners but there is a free house for the banks.
Filed under: foreclosure |