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Editor’s comment: In a classic Abbott and Costello routine (look it up for those who are too young) the banks are playing “who’s on First” and winning because of the dizzying pace with which they move the goalpost.
I wrote the following comments (see below) on a case I was assisting in which Quicken Loans purportedly originated the loan but immediately informed the borrower to start paying Countrywide. Countrywide in turn disappeared into what now appears as RED OAK MERGER CORP and the borrower was told to start making the payments to BAC. BAC claimed ownership of the loan until they didn’t at which point they admitted that the loan belonged to some REMIC trust. The REMIC trust turned out not to exist and was never funded.
Then Bank of America informed the borrower that it was BofA that owned the loan despite all evidence and admissions to the contrary. Then BAC disappeared and a little drilling gave up the name Red Oak Merger Corporation which was planned to be the entity that would take over Countrywide. But apparently, like the REMICS, it was set up but never used.
Now the borrower is seeking a short-sale. BofA has performed its usual circus of “errors”in which it loses or purges files for important sounding reasons but which have not one grain of truth. During this time the borrower has lost sales because BofA tried to pawn off the loan servicing to another entity which produced conflicting notices to the borrower that the loan had been transferred for servicing and that the loan had NOT been transferred for servicing.
The borrower has property that is easily salable. BofA came back with a counter-offer for the short-sale. The HUD counselor located in Phoenix and who is extremely savvy about these loans and the legalities of the false moves by the banks finally asked “Who’s on First” by asking who was making decisions and what guidelines they were using.
BofA responded that the trustee BNY Mellon was the only one with that information. So the HUD counselor asked the same questions to BNY Mellon as trustee or the supposedly fully funded trust that included the borrower’s loan. BNY Mellon responded with the same answer Reynaldo Reyes at Deutsch Bank did — we are the trustee in name only. All decisions regarding short-sales, modification and foreclosure are made by “the servicer.” Of course they didn’t distinguish between the subservicer and the Master Servicer.
The question asked of me was whether this was meaningless double talk and my answer is that it is very meaningful doubletalk providing admissions that the real loan is undocumented, unsecured and leaves the investors (pension funds) holding the bag, while the investment banks were rolling in a redaction of 1/3 of the world’s wealth. Borrowers don’t matter because they are deadbeats anyway and don’t deserve discussion.
Here is my response to the information we had at hand:
How could it be the responsibility of the servicer unless it was the servicer that was acting not as a bookkeeping and collection agent but as the trustee for the investors? If BNY Mellon claims to be the trustee then by definition (look it up) they ARE the investors and they would be the only ones who had the power to make the decision. If they are saying (just like DeutschBank does) that the servicer makes the decisions then they are saying that they have delegated(?) the trustee function to the subservicer (usually just referred to as the “servicer”). So like Reynaldo Reyes at Deutsch bank admitted, he is not a trustee for anything and the whole thing is, as he put it, very “Counter-intuitive.”
None of this makes sense until you consider the possibility that nobody ever started a trust, a trust account or gave any powers to a trustee, established beneficiaries of the trust or funded the trust. It makes perfect sense if you consider the alternative: that the investment banks sold bogus mortgage bonds to investors pretending that REMIC trusts were funded and issued the bonds. Read carefully: they are attempting avoid criminal liability and civil liability for the insurance, Federal bailouts and hedge proceeds the banks received on behalf of the investors but which they never reported much less paid the investors. The amount is in the trillions.
By telling you that the trustee has no power they are telling you that the trustee is not a trustee. By telling you that the power to make decisions is in the hands of the servicer, the correct question is which servicer? — the subservicer who dealt only with the borrower or the Master Servicer that dealt with ALL transactions directly or indirectly on behalf of the investment bank that did the selling and underwriting of the bogus mortgage bonds? Assuming either one actually has that power, the next question is how the “servicer” was appointed the manager and why, since they already had a trustee? The answer is what they are avoiding, so far successfully, but which at the end of the day will come out:
NO REMIC trust was used and none of the parties with whom we are dealing ever spent one penny of their own money, capital or deposits (if they were a depository institution) on funding or buying a loan. The true money trail generally looks like this: Investor—> Investment banker- who sold the bonds–> aggregator or intermediary affiliate of investment banker—> closing agent —> payoff seller and prior mortgage (probably paying a non-creditor in exchange for a fabricated release of lien and satisfaction of note which is never given back to borrower marked “PAID).”
The important thing is not who is in the money trail but who is not in the money trail. If you track the wire transfer receipts and wire transfer instructions and are able to track any compensation after closing that was not disclosed but nonetheless paid to undisclosed parties you will NOT find the loan originator whose name, as nominee (but they never said so) was used as the lender and the possessor of the loan receivable.
That is, you won’t find the originator as a funding source but you will find the originator as a paid servicer for the undisclosed aggregator in an illegal and predatory pattern of table-funded loans. In Discovery: PRACTICE TIP: Demand copies of the bookkeeping records that shows that the originator booked the transaction with the borrower as a loan receivable.
You will find that most of the loans were not booked at all on the balance sheet of the originator which means that their own records contain an admission against interest, to wit: that they were not the lender because they did not add the loan receivable to their assets, nor a reserve for bad debt to their liabilities, because they had not funded the loan and were not exposed to any risk of loss. The originator, especially those originators without any financial charter as a depository institution, was merely a paid nominee to ACT as though it was the lender and take the blame if there were findings in court that the closing was illegal or irregular. But there again the originator has no risk because of the corporate veil which shields the operators of the nominee pretender lender leaving the borrower with an empty shell possibly declaring bankruptcy like First Magnus or Century.
The money came from the investors through the investment banker through the aggregator in which the investors’ money was used to create the appearance of an asset consisting of only part of the investor’s money and then sold back to the investor “pool” which turns out not to exist because it was neither funded nor were the conditions of the pool ever followed. This sale was booked by the investment banker as a “trading profit.” In other words, they took the money of the investor into one pocket and while transferring it from pocket to pocket took out their trading profit on transactions that were a complete illusion.
The documents use the nominee originator (like Quicken Loans) for the note to create “evidence” of an obligation that does not exist because Quicken Loans and its aggregator never funded the loan or the purchase of the loan — but that didn’t stop them from selling the loan several times, insuring it for the benefit of the investment banker and aggregator, and getting paid Federal bailout money and proceeds from credit default swaps all without deducting the amount promised as repayment to the investor, which is why the investors are suing.
The investors are saying there was a false closing based upon no underwriting standards and a fake bond based upon the backing of a mortgage and note that didn’t exist or was never enforceable.
When you boil it all down there was nobody at closing on the lender side. The named payee was a nominee for an undisclosed party and the named secured party was the nominee of an undisclosed party and the consideration came neither from the nominee nor the undisclosed principal. This is what leaves investors holding the bag.
The foreclosures are a grand scheme of cover-up for what was a simple PONZI scheme whose survival depended not upon borrower payments on legitimate loans but rather on the sale of more bogus mortgage bonds. There were no funded REMIC trusts, there were no active trustees, and the job of managing the flood of money fell to the Master Servicer who instructed the subservicer and all other parties what to do with their new found wealth.
The investors are saying they are left with a pile of money owed to them, documented by fake bonds, and no documentation on what was actually done with their money.
That leaves them in a position where they can NEVER claim that the loan money they advanced (and which was commingled beyond recognition) was never secured with a perfected lien or mortgage. The foreclosures that have taken place are based upon an illusion of a transaction that was never consummated — namely that the named payee on the note would loan the borrower money. They didn’t loan the money so the transaction lacks consideration.
Lacking consideration they have nonetheless fabricated, used, executed and recorded papers procured under false pretenses and they are taking the position in court that the borrower may not inquire as to the internal workings of the scheme that defrauded him and which the investors (Pension funds) corroborated with their lawsuits.
If you went to the originator and asked to payoff or rescind they would have had to go to the investment banker or aggregator to find out what to do instead of simply following the federal statute (TILA) and returning the documents in exchange for the money. By contract the originator agrees and the wire transfer instructions the originator agrees, just like MERS, to not take, claim or keep any money from the transaction.
PRACTICE TIP: Getting the cancelled check of the borrower to see who cashed the check in which account owned by which party might be helpful in determining the truth about the so-called closing. A good question to ask in discovery is how the”servicer” accounted for each payment it received or disbursed and what notes or notations were used. Then the next question to the subservicer, Master Servicer and investment banker is to whom did you disburse money and why?
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Abbott and Costello, BAC, Bank of America, BNY Mellon, BofA, countrywide, Quicken Loans, RED OAK MERGER CORP, REMIC, trustee, Who's on First | 101 Comments »