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Many of the alleged mortgage loans have documents that provide for adjustment of the interest rate and the monthly payment — some as early as 30 days and some as far out as 5 years. These adjustments are expressly stated in the note as being based on changes on certain indexes. LIBOR (London Interbank Offered Rate is usually a component of the basis for the adjustment. But, as we have seen on multiple occasions (such as the one in the link above) LIBOR was manipulated and fabricated by the Banks whose reports are used to determine the LIBOR index.
Many Banks have been fined as a result of their illegal activities. My opinion, as an expert, is that the adjustment to rates and payments on notes and mortgages based at least in part on LIBOR are definitely inaccurate. AND there is no way of knowing the true rate without finding out the exact manipulations that occurred and the effect on the index. The note was drafted by the “lender.” So it is to be construed against the party who wrote it — either by or for the originator.
If the actual adjustment cannot be computed because the index upon which it is based was fatally flawed, then the adjustment should not occur unless the parties agree on the amount of adjustment. If I am right, most of the adjustments that have been declared by servicers and banks are (a) wrong and (b) illegal — as a result of their own illegal activities in manipulating LIBOR. Even if they did not participate in such illegal activity, though, the fact remains that the Index is wrong.
This could mean that borrowers who have an adjustable rate mortgage may be able to (a) reduce their payments and (b) seek disgorgement of the amount they paid over the initial monthly payment.
Filed under: foreclosure