Bank Fraud From the Top Down

MERS is not, as its proponents claim, a device for eliminating the recording charges on legitimate purchases and sales of mortgage loans; instead it is a “layering” device (another Wall Street term) for creating the illusion of such transfers even though no transaction actually took place.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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I recently had the occasion to ghost write something for a customer in relation to claims based upon fraud, MERS, and “Successors.” Here is what I drafted, with references to actual people and entities deleted:

  •  MERS was created in 1996 as a means for private traders to create the illusion of loan transfers. On its website MERS states emphatically that it specifically disclaims any interest in any debt and disclaims any interest in any documentation of debt (i.e., a promissory note) and specifically disclaims any interest in any agreement for collateralizing the obligations stated on the note.
  • There is no agreement in which MERS is authorized as an agent of any creditor. The statement on the note and/or mortgage that it is named as nominee for a “lender” is false. No agreement exists that sets forth the terms or standards of agency relationship between the Payee on the subject “note” or the mortgagee on the subject mortgage. MERS is merely named on instruments without any powers to exercise on behalf of any party who would qualify as a bona fide mortgagee or beneficiary.
  • No person in MERS actually performs ANY action in connection with loans and no officer or employee of MERS did perform any banking activity in relation tot he subject loan. MERS is a passive database for which access is freely given to anyone who wants to make an entry, regardless of the truth or falsity of that entry. It is a platform where the person accessing the MERS IT system appoints themselves as “assistant secretary” or some other false status in relation to MERS. MERS is not, as its proponents claim, a device for eliminating the recording charges on legitimate purchases and sales of mortgage loans; instead it is a “layering” device (another wall Street term) for creating the illusion of such transfers even though no transaction actually took place.
  • Hence there is no basis under existing law under which MERS, in this case, was either a nominee for a real creditor and no basis under existing law under which MERS, in this case, could possibly claim that it was either a mortgagee or beneficiary under a deed of trust.
  • MERS has not claimed and never will claim that it is a mortgagee or beneficiary.
  • The lender, under the alleged “closing documents” was also a sham nominee. None of the parties in the alleged “chain” were at any times a creditor, lender, purchaser, mortgagee, beneficiary, or holder of any note. None of them have any financial interest or risk of loss in the performance of the alleged “loan” obligations.
  • Plaintiff reasonably relied upon the representations at the “Closing” that the originator who was named as Payee on the note was lending her money. But in fact the originator was merely acting as a broker, conduit or sales agent whose job was to get the Plaintiff to sign papers — an event that triggered windfall compensation to all the participants (except the Plaintiff), equal to or even greater than the amount of principal supposedly due from the “loan.”
  • In fact, the originator and multiple other parties had entered into a scheme that was memorialized in an illegal contract violating public policy regarding the disclosure of the identity of the “lender” and the compensation by all parties who received any remuneration of any type arising out the “Closing of the transaction.” The name of the contract is probably a “Purchase and Assumption Agreement” — a standard agreement that is used in the banking industry after the loan has been underwritten, approved and funded. In the case at bar those parties entered into the Purchase and Assumption Agreement before the subject “loan” was closed”, before the Plaintiff even applied for a loan.
  • The source of the money for the alleged “loan” was a “dark pool” (a term used by investment bankers) consisting of the money advanced by investors who thought they were buying mortgage bonds issued by a Trust, in which their money would be managed by the Trustee. In fact, the Trust is either nonexistent or inchoate having never been funded with the investors’ money. The dark pool contains money commingled from hundreds of investors in thousands of trusts.
  • The investors were generally stable managed funds including pension, retirement, 401K money for people relying upon said money for their living expenses after retirement. They are the unwitting, unknowing source of funds for the transaction described as a “closing.” Hence the loan contract upon which the Defendants rely is based upon fraudulent representations designed to mislead the court and mislead the Plaintiff and the byproduct of a broader scheme to defraud investors in “Mortgage backed securities” that were issued by a nonexistent trust that never owned the assets supposedly “backing” the “security” often described as a mortgage bond.
  • Thus the fraud starts with the misrepresentation to investors that the managed funds would be managed by a trustee and would be used to acquire existing loans rather than originate new loans. Instead their funds were used directly on the “closing” table by presumably unwitting “Closing agents.” The fact that the funds arrived created the illusion that the party named on the note and mortgage was actually funding the loan to the “borrower.” This was a lie. But it explains why the Defendants have continually refused to provide any evidence of the “purchase” of the loan by the parties they claim to form a “Chain.”
  • In the alleged “transfer” of the loan, there was no purchase and no payment of money because at the base of their chain, the originator, there was no right to receive the money that would ordinarily be a requirement for purchase of the loan. There also was no Purchase and Assumption Agreement, which is basic standard banking practice in the acquisition of loans, particularly in pools.
  • As Plaintiff as recently learned, the originator was not entitled to receive any payment from “successors” and not entitled to receive any money from the Plaintiff who was described as a “borrower.” In simple accounting terms there was no debit and so there could be no “corresponding” credit. And in fact, the originator never did receive any money for purchasing the loan nor any payments that were credited to a loan receivable account in its accounting records. Yet the originator executed or allowed instruments to be executed in which the completely fraudulent assertion that the originator had sold the loan was memorialized.
  • The “closing” was completely improper in which Plaintiff was fraudulently induced to execute a promissory note as maker and fraudulently induced to execute a mortgage as collateral for the performance under the note. Plaintiff was unaware that she had just created a second liability because the debt could not be legally merged into an instrument that named a party who was not the lender, not a creditor, and not a proper payee for a note memorializing a loan of money from the “lender” to the Plaintiff.
  • The purpose of the merger rule is to prevent a borrower from creating two liabilities for one transaction. The debt is merged into the note upon execution such that no claim can be made on the debt. None of these fine points of law were known to Plaintiff until recently. The reason she did not know is that the originator and the rest of the parties making claims based upon the fraudulent “loan” memorialized in the note all conspired to withhold information that was required to be disclosed to “borrowers” under Federal and State Law.
  • In the case at bar, the debt arises from the fact that Plaintiff did in fact receive money or the benefit of payments on her behalf — from third parties who have no contractual, constructive or other relationship with the source of funds for the transaction. The note is based upon a transaction that never existed — a loan from the originator to the Plaintiff. The debt is based upon the receipt of money from a party who was clearly not intending to make a gift to Plaintiff. The debt and the note are two different liabilities.
  • Assuming the original note exists, Plaintiff is entitled to its its cancellation and return, along with release and satisfaction of the mortgage that collateralizes the obligation set forth on the sham promissory note.
  • In the interim, as this case clearly shows, the Plaintiff is at risk of a second liability even if she prevails in her claim that the note was a sham, to wit: Under UCC Article 3, if an innocent third party actually purchases the mortgage or deed of trust, the statute shifts the risk of loss onto the maker of the instrument regardless of how serious and egregious the practices of the originator and the background “players” who engineered this scheme.
  • Further the financial identity and reputation of the Plaintiff was fraudulently used without her knowledge and consent to conduct “trades” based upon her execution of the above referenced false instruments in which many undisclosed players were reaping what they called “trading profits” arising from the “closing” and the illegal and unwanted misuse of her signatures on instruments in which she was induced to sign by fraudulent misrepresentations as to the nature and content of the documents.
  • Plaintiff suffered damages in that her title was slandered and emotional distress damages and damage to her financial identity and reputation. Further damages arising from violation of her right to quiet enjoyment of the property was violated by this insidious scheme.

Freddie Mac Selling Toxic Loans: Do they really own those loans?

The resulting case law is opening up Pandora’s box as the law of these foreclosure cases spills over into hundreds of other situations.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see http://4closurefraud.org/2016/10/05/freddie-mac-sells-1-billion-of-seriously-delinquent-loans/

So I have two questions that should be sufficiently annoying to the banksters: (1) what makes Freddie think it owns the loans? and (2) if the loans are in default doesn’t that make the notes non-negotiable paper?

As to the first, my guess is that Freddie paid somebody something. What they used as currency was MBS issued by private label trusts. The MBS were worthless because they were issued by an unfunded paper trust. Freddie paid somebody using those bonds. But that somebody didn’t own the loans because the money had already been advanced by ANOTHER party (the investors) under a false deposit scheme with the investment/commercial banks.

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So the debt was at all times owned by an unidentified and perhaps unidentifiable  group of investors/victims who to this day may not know that their money was hijacked to make toxic loans. That makes any sale or assignment to anyone void, including Freddie Mac. And whoever is getting paper executed by Freddie Mac is getting exactly what Freddie owns: NOTHING.

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As to the second, if the loans in default are not negotiable paper, then the presumptions attendant to negotiable paper under Article 3 of the UCC do not apply. And if THAT is the case, the party in possession is not a holder, not a holder in due course and possibly not a possessor with rights to enforce. They would need to prove that they paid for the “loan” and they would need to show that there was a loan [not just from anyone. It must be an actual loan of money from the party identified as Payee on the note]. They would need to show that they not only bought the note but they also bought the debt.

As it turns out the note and the debt are owned by two different parties. The debt normally merges into the note so that when someone signs it they don’t have two liabilities. But what if the debt was owned by a third party at the time the maker signed the note? Assuming the maker did not know that a third party was involved, the maker is back in the position of two debts — the very problem that the merger rule was intended to prevent.

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So far the courts have endeavored to deal with this tricky problem by pretending it does not exist. The resulting case law is opening up Pandora’s box as the law of these foreclosure cases spills over into hundreds of other situations.

 

Deutsch Bank on Verge of Collapse?

there is no such thing as a soft landing in a cornered marketplace

Despite claiming $52 TRILLION “notional” value in derivatives (nearly all the money in the world) DB has posted a shattering loss and according to the IMF poses the most serious systemic loss to the financial system. Reports indicate that 29 DB employees were at the root of manipulating the LIBOR index which is used as the primary index for variable rate loans. Nobody has addressed the issue of whether adjusted payments should be scrutinized even while knowing that the index was rigged.

 

see http://www.visualcapitalist.com/chart-epic-collapse-deutsche-bank/

Nothing equals nothing. The fact is that DeutschBank allowed itself to be window dressing on bogus REMIC Trusts as though the DB trust department was managing the money for investors. Other than ink on paper, the trusts did not exist and neither did any assets of the purported trusts. DB led the way as a principal party in creating the illusion of “something” when in fact there was nothing at all.

Then DB executives took highly leveraged risks in betting on the bogus mortgage bonds (and other “asset-backed” securities) issued by those bogus REMIC Trusts. Then they papered it over with all kinds of complex derivative products — all of which were based upon the nonexistent ownership of the primary asset — loans. DB claims over $52 Trillion in “value” for those derivatives as a tier 3 asset (i.e., it is worth what management says it is worth). The current leverage ratio for DB is reported at 40x, which is just 2 points lower than Bear Stearns before it toppled over. The leverage is disguised as “sales” for which DB has subsequent liability. All of this was predicted and described by Abraham Briloff  in Unaccountable Accounting published by Harper and Rowe in 1972. Nearly all of these “trades” are merely devices to kick the can down the road, covering over losses that DB would rather not admit.

This situation reminds me of a scene long ago when I was working on Wall Street as a Trainee security analyst in the research department of a medium sized brokerage firm. One of the family partners came into our research department and told us confidently that despite all rumors to the contrary there would be no layoffs in our department. I think I had another job before he returned to his office just ahead of the layoff of the entire department 2 weeks later. My intuition told me that he was lying. On Wall Street it’s not the lying that is frowned upon, it is getting caught. My experience has taught me that the bigger the entity the bigger the lies and the more serious the systemic risk to the whole of society. That was in 1968-9.

At that time the crisis was the “paper crash” — meaning that Wall Street firms had “lost track” of the location and ownership of stock and bond certificates. Now they are filing “lost note” complaints like confetti. When you send a Qualified Written Request or Debt Validation Request, you get nothing unless you are already in litigation where suddenly “original” documentation pops up.

This time it is far more serious as the fortunes of many investors, banks and other institutions rely on the value of DB stock and promises to pay. The problem in 1968-1969 was addressed by “best guesses” and converting from a system where investors received actual certificates to a system where trades were recorded privately on the books and records of the brokerage houses and investors had to rely on the statements from their broker as evidence of their asset holdings.

But the systemic problem is the same. Today it is the notes and loan documents that are lost. The conversion to using a private record of transactions sounds like MERS today. And the claim to $52 Trillion in “notional value” is pure obfuscation. The total of all real money in the world is probably under $70 Trillion. So does DB own most or all of it? I don’t think so and neither does anyone else, which is why DB is in trouble. They got caught.

The report in the link above says that DB is in full crisis mode as DB tries to escape the death spiral that took down Lehman, Bear Stearns, Merrill Lynch and others.

The importance of these events goes far beyond the significance of DB itself. DB, whose stock is selling at 8% of what it was selling at in 2007, is unfortunately only a symbol of an epic disaster that is slowly unfolding. The fundamentals have changed. Nearly all “debt” that was created over the past 15 years is fatally defective — leaving enforcement only to the good graces of judges who are willing to overlook centuries of law governing the purchase and sale of negotiable paper.

The reason for the continuing weakness in economic systems around the world is that most of the money was sucked out of those systems. The method of the banks in achieving this non-heroic status is responsible for the continuing recession that is creating so much disturbance around the world. Leaders of those countries have been sucking it up in order to create a soft landing.

But here is what we know from history — there is no such thing as a soft landing in a cornered marketplace. The banks converted our economies from 85% reliance on manufacturing and services to an economy where half of the economic activity consists of trading securities back and forth — i.e., trading the same securities over and over again. That means that actual economic activity in the production and delivery of goods and services has declined from 85% to 50% and it is still dropping. The rest is smoke and mirrors. It is the belief or entanglements with the banks that keeps us from moving on, clawing back, and restoring household wealth to the only place that will actually generate real economic activity — the middle class and lower economic tiers.

Henry Ford proved the point spectacularly about 100 years ago when he doubled the wages of his workers — to the astonishment and dismay of his competitors. It was clear to everyone but Ford that he had obviously lost his mind. Despite that clarity that everyone agreed was the true way of looking at things, Ford’s move created the middle class and thus created a stable demographic who continue to buy what he was selling. In a short time, Ford was the dominant player in the marketplace selling automobiles and the “realists” were gone.

Until the middle class is restored (i.e., it gets back the money that was distributed away from them into the hands of a handful of men who had used their positions of influence to corner the market on money), the “recovery” will continue to be smoke and mirrors, the society will be disrupted and eventually companies that do rely on people to purchase their goods and services won’t have anyone to sell them to. And creating debt to cover the shortfall doesn’t work anymore. The middle class must have a pathway to financial security, not to financial ruin.

Ocwen: Investors and Borrowers Move toward Unity of Purpose!

For further information please call 954-495-9867 or 520-405-1688

Please consult an attorney who is licensed in your jurisdiction before acting upon anything you read on this blog.

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Anyone following this blog knows that I have been saying that unity of investors and borrowers is the ultimate solution to the falsely dubbed “Foreclosure crisis” (a term that avoids Wall Street corruption). Many have asked what i have based that on and the answer was my own analysis and interviews with Wall Street insiders who have insisted on remaining anonymous. But it was only a matter of time where the creditors (investors who bought mortgage backed securities) came to realize that nobody acting in the capacity of underwriter, servicer or Master Servicer was acting in the best interests of the investors or the borrowers.

The only thing they have tentatively held back on is an outright allegation that their money was NOT used by the Trustee for the Trust and their money never made it into the Trust and that the loans never made it into the Trust. That too will come because when investors realize that homeowners are not going to walk away, investors as creditors will come to agreements to salvage far more of the debts created during the mortgage meltdown than the money salvaged by pushing cases to foreclosure instead of the centuries’ proven method of resolving troubled loans — workouts. Nearly all homeowners would execute a new clean mortgage and note in a heartbeat to give investors the benefits of a workout that reflects economic reality.

Practice hint: If you are dealing with Ocwen Discovery should include information about Altisource and Home Loan Servicing Solutions, investors, and borrowers as it relates to the subject loan.

Investors announced complaints against Ocwen for mishandling the initial money, the paperwork and the subsequent money and servicing on loans created and a acquired with their money. The investors, who are the actual creditors (albeit unsecured) are getting close to the point where they state outright what everyone already knows: there is no collateral for these loans and every disclosure statement involving nearly all the loans violated disclosure requirements under TILA, RESPA, and Federal and state regulations.
The fact that (1) the loan was not funded by the payee on the note and mortgagee on the mortgage and (2) that the money from creditors were never properly channeled through the REMIC trusts because the trusts never received the proceeds of sale of mortgage backed securities is getting closer and closer to the surface.
What was unthinkable and the subject of ridicule 8 years ago has become the REAL reality. The plain truth is that the Trust never owned the loans even as a pass through because they never had had the money to originate or acquire loans. That leaves an uncalculated unsecured debt that is being diminished every day that servicers continue to push foreclosure for the protection of the broker dealers who created worthless mortgage bonds which have been purchased by the Federal reserve under the guise of propping up the banks’ balance sheets.

“HOUSTON, January 23, 2015 – Today, the Holders of 25% Voting Rights in 119 Residential Mortgage Backed Securities Trusts (RMBS) with an original balance of more than $82 billion issued a Notice of Non-Performance (Notice) to BNY Mellon, Citibank, Deutsche Bank, HSBC, US Bank, and Wells Fargo, as Trustees, Securities Administrators, and/or Master Servicers, regarding the material failures of Ocwen Financial Corporation (Ocwen) as Servicer and/or Master Servicer, to comply with its covenants and agreements under governing Pooling and Servicing Agreements (PSAs).”
  • Use of Trust funds to “pay” Ocwen’s required “borrower relief” obligations under a regulatory settlement, through implementation of modifications on Trust- owned mortgages that have shifted the costs of the settlement to the Trusts and enriched Ocwen unjustly;
  • Employing conflicted servicing practices that enriched Ocwen’s corporate affiliates, including Altisource and Home Loan Servicing Solutions, to the detriment of the Trusts, investors, and borrowers;
  • Engaging in imprudent and wholly improper loan modification, advancing, and advance recovery practices;
  • Failure to maintain adequate records,  communicate effectively with borrowers, or comply with applicable laws, including consumer protection and foreclosure laws; and,

 

  • Failure to account for and remit accurately to the Trusts cash flows from, and amounts realized on, Trust-owned mortgages.

As a result of the imprudent and improper servicing practices alleged in the Notice, the Holders further allege that their experts’ analyses demonstrate that Trusts serviced by Ocwen have performed materially worse than Trusts serviced by other servicers.  The Holders further allege that these claimed defaults and deficiencies in Ocwen’s performance have materially affected the rights of the Holders and constitute an ongoing Event of Default under the applicable PSAs.  The Holders intend to take further action to recover these losses and protect the Trusts’ assets and mortgages.

The Notice was issued on behalf of Holders in the following Ocwen-serviced RMBS: see link The fact that the investors — who by all accounts are the real parties in interest disavow the actions of Ocwen gives rise to an issue of fact as to whether Ocwen was or is operating under the scope of services supposedly to be performed by the servicer or Master Servicer.
I would argue that the fact that the apparent real creditors are stating that Ocwen is misbehaving with respect to adequate records means that they are not entitled to the presumption of a business records exception under the hearsay rule.
The fact that the creditors are saying that servicing practices damaged not only the investors but also borrowers gives rise to a factual issue which denies Ocwen the presumption of validity on any record including the original loan documents that have been shown in many cases to have been mechanically reproduced.
The fact that the creditors are alleging imprudent and wholly improper loan modification practices, servicer advances (which are not properly credited to the account of either the creditor or the borrower), and the recovery of advances means that the creditors are saying that Ocwen was acting on its own behalf instead of the creditors. This puts Ocwen in the position of being either outside the scope of its authority or more likely simply an interloper claiming to be a servicer for trusts that were never actually used to acquire or originate loans, this negating the effect of the Pooling and Servicing Agreement.  Hence the “servicer” for the trust is NOT the servicer for the subject loan because the loan never arrived in the trust portfolio.
The fact that the creditors admit against interest that Ocwen was pursuing practices and goals that violate laws and proper procedure means that no foreclosure can be supported by “clean hands.” The underlying theme here being that contrary to centuries of practice, instead of producing workouts in which the loan is saved and thus the investment of the creditors, Ocwen pursued foreclosure which was in its interest and not the creditors. The creditors are saying they don’t want the foreclosures but Ocwen did them anyway.
The fact that the creditors are saying they didn’t get the money that was supposed to go to them means that the money received from lost sharing with FDIC, guarantees, insurance, credit default swaps that should have paid off the creditors were not paid to them and would have reduced the damage to the creditors. By reducing the amount of damages to the creditors the borrower would have owed less, making the principal amounts claimed in foreclosures all wrong. The parties who paid such amounts either have or do not have separate unsecured actions against the borrower. In most cases they have no such claim because they explicitly waived it.
This is the first time investors have even partially aligned themselves with Borrowers. I hope it will lead to a stampede, because the salvation of investors and borrowers alike requires a pincer like attack on the intermediaries who have been pretending to be the principal parties in interest but who lacked the authority from the start and violated every fiduciary duty and contractual duty in dealing with creditors and borrowers. Peal the onion: the reason that their initial money is at stake is that these servicers are either acting as Master Servicers who are actually the underwriters and sellers of the mortgage backed securities,
I would argue that the fact that the apparent real creditors are stating the Ocwen is misbehaving with respect to adequate records means that they are not entitled to the presumption of a business records exception under the hearsay rule.
The fact that the creditors are saying that servicing practices damaged not only the investors but also borrowers gives rise to a factual issue which denies Ocwen the presumption of validity on any record including the original loan documents that have been shown in many cases to have been mechanically reproduced.
The fact that the creditors are alleging imprudent and wholly improper loan modification practices, servicer advances (which are not properly credited to the account of either the creditor or the borrower), and the recovery of advances means that the creditors are saying that Ocwen was acting on tis own behalf instead of the creditors. This puts Ocwen in the position of being either outside the scope of its authority or more likely simply an interloper claiming to be a servicer for trusts that were never actually used to acquire or originate loans, this negating the effect of the Pooling and Servicing Agreement.
The fact that the creditors admit against interest that Ocwen was pursuing practices and goals that violate laws and proper procedure means that no foreclosure can be supported by “clean hands.” The underlying theme here being that contrary to centuries of practice, instead of producing workouts in which the loan is saved and thus the investment of the creditors, Ocwen pursued foreclosure which was in its interest and not the creditors. The creditors are saying they don’t want the foreclosures but Ocwen did them anyway.
The fact that the creditors are saying they didn’t get the money that was supposed to go to them means that the money received from lost sharing with FDIC, guarantees, insurance, credit default swaps that should have paid off the creditors were not paid to them and would have reduced the damage to the creditors. By reducing the amount of damages to the creditors the borrower would have owed less, making the principals claimed in foreclosures all wrong. The parties who paid such amounts either have or do not have separate unsecured actions against eh borrower. In most cases they have no such claim because they explicitly waived it.
This is the first time investors have even partially aligned themselves with Borrowers. I hope it will lead to a stampede, because the salvation of investors and borrowers alike requires a pincer like attack on the intermediaries who have been pretending to be the principal parties in interest but who lacked the authority from the start and violated every fiduciary duty and contractual duty in dealing with creditors and borrowers.

Rockwell P. Ludden, Esq. — A Lawyer who gets it on Securitization and Mortgages

see FORECLOSURE, SECURITIZATION DON’T MIX ROCKY&#39S+ARTICLE+in+the+CAPE+COD+TIMES+February+21,+2015

As I write this, I have no recall of Mr. Ludden before today. BUT his article in of all places, the Cape Cod Times, struck me as astonishing in its concise description of the illegal foreclosures that are skimming past Judges desks with hardly a look much less the usually required judicial scrutiny. He says

No one should have the legal right to take your home merely by winking and nodding their way around a significant flaw in the securitization model and whatever burrs it may leave on the industry’s saddle. …

Is there anyone with a present contractual connection to you or the loan who has actually suffered a default? If not, any… foreclosure begins to bear an uncanny resemblance to double dipping.

It is time for Judges to dust off the principle of fundamental fairness that lies at the heart of our legal system, demand a level playing field, and stand behind alternatives to foreclosure that serve the legitimate interests of homeowner and industry alike.

His article is both insightful and concise, which is more than I can say for some of the things that I have written at length. And I guess if you are in the Cape Cod area it probably would be a good idea to contact him at rpl@luddenkramerlaw.com. He pierces through layers upon layers of subterfuge by the financial industry and comes up with the right conclusion — separation not just of note and mortgage — but more importantly the separation between the note and the ultimate certificate that spells out the rights of a creditor to repayment and the rights of anonymous individuals and entities to foreclose. In securitization practice the note ceases to exist.

He correctly concludes that the assignments (and I would add endorsements and powers of attorney) are a sham, designed to conceal basic flaws in the entire securitization model. The only thing I would add is something that has not quite made it to the surface of these chaotic waters — that the money from the investors never made it into the trust — something that is perfectly consistent with ignoring the securitization model and the securitization documents.

The ‘assignment’ creates the appearance of [the] missing connection. But it is all hogwash, the only discernible purpose of which is to grease the skids for an illegal foreclosure. It is done long after the Trust has closed its doors. [referring to both the cutoff date and the fact that the trust actually does not ever get to own the debt, loan, note or mortgage]

The banks kept the money and assigned the losses to the investors. Then they bet on the losses and kept the profits from their intentionally watered down underwriting practices. Then they stole the identity of the borrowers and the investors and bought insurance that covered “losses” that were never incurred by the named insured — the Banks. The family resemblance to Ponzi scheme seems closer than mere double dipping in an infinite scheme of dipping into the funds of thousands of institutional investors and into the lives of millions of homeowners.

see also A 21st Century Trust Indenture Act?

posted by Adam Levitin

Why Are the Banks Abandoning Homes? Hundreds of Thousands of Homes Bulldozed After Foreclosure

For More Information and assistance please call 954-495-9867 or 520-405-1688

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No reasonable person would abandon this many homes after taking the trouble to foreclose on them. There is an obvious preference for foreclosure over workouts, modifications, short sales, resales, and other tools. This shows clearly that loss mitigation is not one of the factors in the minds of those who say they represent investors or REMIC trusts.

So they must have a reason to force the sale of a home other than loss mitigation. The people initiating these foreclosures and subsequent abandonment are acting against the interest of the investors who actually put up the money for the “securitization fail” that I identified and Adam Levitin named.

Thus it must be concluded that those who control the foreclosure process at the big investment banks benefit in some way other than loss mitigation. That can only mean one of two things:

  • The people making the decision make more money foreclosing than in pursuing workouts, modifications, or other settlements and/or
  • The people making the decision are using the foreclosing process to institutionalize “securitization fail” and thus avoid trillions of dollars in liability owed to the investors, insurers, guarantors, counterparties on hedge products, the borrowers and local, state and federal government.

This can only mean that the purpose of the foreclosure is not to mitigate damages to the actual lender or creditor. They don’t want performing loans even if it means that the homeowner is paying off the entire balance of the loan. And they make it difficult if not impossible to get a correct figure for a payoff.

So if the money is not the issue, and the house is not really in issue why do they pursue foreclosures, fabricate documents to do it and use robo-signers and robo witnesses to force through foreclosures on homes they will only abandon at the end of the process?

Should we not be asking whether good faith and clean hands have been established to justify the equitable remedy of forfeiture of the home?

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In South Florida news this morning, local Sheriffs are banding together to board up more than 1,000 homes in Lake Worth. In each case the home was foreclosed. In most cases, the homeowner applied for a modification and was told they could not apply until they were 90 days in arrears. In most cases, all efforts at modification were turned down under the guise that the investors refused to modify or workout the loan. That was most probably a lie. Neither the servicer nor the Trustee or other “enforcer” ever went to the investors with a single workout plan.

Continuous allegations of fraudulent foreclosures on predatory and fraudulent loans have been “settled” but not with the effected homeowners nor with local governments and homeowner associations who are deeply effected by this tragic fraud on the courts, the borrowers, the governments, and the society at large — as millions of jobs were lost and hundreds of thousands of businesses closed down as their customers were displaced from their homes (around 16 Million people directly displaced by fraudulent foreclosures thus far).

As foreclosures continue to increase in number (despite news reports to the contrary) more homeowners are being forced out of their homes, including many that were in the family for generations. The houses, now empty, lay dormant sometimes for 6 years or more before the actual “auction” sale takes place. During that time, miscreants move in creating meth labs, crack houses, safe houses for gangs etc. In the end the property is abandoned, and it leads to more foreclosures and more abandonment. Eventually entire neighborhoods are converted to ghost towns reducing the property values to zero — perfect for an intermediary who wants to cheat investors. The foreclosure sale and abandonment show the recovery at zero. Investors are even told that they should be happy that they didn’t incur further liability than their investment in the property.

In most states, effort to reclaim the homes have failed because they were stripped of the vital mechanical systems and even building materials — a new industry resulting from this process of foreclosure and abandonment. The local property taxes are unpaid for years — leading to forever where the homes are completely abandoned and demolished. But the local government is stuck with the bill because with the new construction from the false boom created by the banks they expanded infrastructure and social services (police, fire, medical etc.).

Meanwhile the same local government is being told that their investment in mortgage bonds have produced losses. So they are stuck with the double whammy of non-payment of property and other taxes plus a direct loss incurred from the “securitization fail” scheme. I believe that attorneys ought to take cases on contingency where local government files suit against the banks. The allegation should be made that not only did the banks NOT act in good faith, they acted in BAD faith because they had no right to foreclose on false papers created at the closing of a loan wherein the borrower and investors were unaware of the true nature of the transaction.

A Foreclosure Judgment and Sale is a Forced Assignment Against the Interests of Investors and For the Interests of the Bank Intermediaries

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Successfully hoodwinking a Judge into entering a Judgment of Foreclosure and forcing the sale of a homeowner’s property has the effect of transferring the loss on that loan from the securities broker and its co-venturers to the Pension Fund that gave the money to the securities broker. Up until the moment of the foreclosure, the loss will fall on the securities brokers for damages, refunds etc. Once foreclosure is entered it sets in motion a legal cascade that protects the securities broker from further claims for fraud against the investors, insurers, and guarantors.

The securities broker was thought to be turning over the proceeds to the Trust which issued bonds in an IPO. Instead the securities broker used the money for purposes and in ways that were — according to the pleadings of the investors, the government, guarantors, and insurers — FRAUDULENT. Besides raising the issue of unclean hands, these facts eviscerate the legal enforcement of loan documents that were, according to those same parties, fraudulent, unenforceable and subject to claims for damages and punitive damages from borrowers.

There is a difference between documents that talk about a transaction and the transaction documents themselves. That is the essence of the fraud perpetrated by the banks in most of the foreclosure actions that I have reviewed. The documents that talk about a transaction are referring to a transaction that never existed. Documents that “talk about” a transaction include a note, mortgage, assignment, power of attorney etc. Documents that ARE the transaction documents include the actual evidence of actual payments like a wire transfer or canceled check and the actual evidence of delivery of the loan documents — like Fedex receipts or other form of correspondence showing that the recipient was (a) the right recipient and (b) actually received the documents.

The actual movement of the actual money and actual Transaction Documents has been shrouded in secrecy since this mortgage mess began. It is time to come clean.

THE REAL DEBT: The real debt does NOT arise unless someone gets something from someone else that is legally recognized as “value” or consideration. Upon receipt of that, the recipient now owes a duty to the party who gave that “something” to him or her. In this case, it is simple. If you give money to someone, it is presumed that a debt arises to pay it back — to the person who loaned it to you. What has happened here is that the real debt arose by operation of common law (and in some cases statutory law) when the borrower received the money or the money was used, with his consent, for his benefit. Now he owes the money back. And he owes it to the party whose money was used to fund the loan transaction — not the party on paperwork that “talks about” the transaction.

The implied ratification that is being used in the courts is wrong. The investors not only deny the validity of the loan transactions with homeowners, but they have sued the securities brokers for fraud (not just breach of contract) and they have received considerable sums of money in settlement of their claims. How those settlement effect the balance owed by the debtor is unclear — but it certainly introduces the concept that damages have been mitigated, and the predatory loan practices and appraisal fraud at closing might entitle the borrowers to a piece of those settlements — probably in the form of a credit against the amount owed.

Thus when demand is made to see the actual transaction documents, like a canceled check or wire transfer receipt, the banks fight it tooth and nail. When I represented banks and foreclosures, if the defendant challenged whether or not there was a transaction and if it was properly done, I would immediately submit the affidavits real witnesses with real knowledge of the transaction and absolute proof with a copy of a canceled check, wire transfer receipt or deposit into the borrowers account. The dispute would be over. There would be nothing to litigate.

There is no question in my mind that the banks are afraid of the question of payment and delivery. With increasing frequency, I am advised of confidential settlements where the homeowner’s attorney was relentless in pursuing the truth about the loan, the ownership (of the DEBT, not the “note” which is supposed to be ONLY evidence of the debt) and the balance. The problem is that none of the parties in the “chain” ever paid a dime (except in fees) and none of them ever received delivery of closing documents. This is corroborated by the absence of the Depositor and Custodian in the “chain”.

The plain truth is that the securities broker took money from the investor/lender and instead of of delivering the proceeds to the Trust (I.e, lending the money to the Trust), the securities broker set up an elaborate scheme of loaning the money directly to borrowers. So they diverted money from the Trust to the borrower’s closing table. Then they diverted title to the loan from the investor/lenders to a controlled entity of the securities broker.

The actual lender is left with virtually no proof of the loan. The note and mortgage is been made out in favor of an entity that was never disclosed to the investor and would never have been approved by the investor is the fund manager of the pension fund had been advised of the actual way in which the money of the pension fund had been channeled into mortgage originations and mortgage acquisitions.

Since the prospectus and the pooling and servicing agreement both rule out the right of the investors and the Trustee from inquiring into the status of the loans or the the “portfolio” (which is nonexistent),  it is a perfect storm for moral hazard.  The securities broker is left with unbridled ability to do anything it wants with the money received from the investor without the investor ever knowing what happened.

Hence the focal point for our purposes is the negligence or intentional act of the closing agent in receiving money from one actual lender who was undisclosed and then applying it to closing documents with a pretender lender who was a controlled entity of the securities broker.  So what you have here is an undisclosed lender who is involuntarily lending money directly a homeowner purchase or refinance a home. The trust is ignored  an obviously the terms of the trust are avoided and ignored. The REMIC Trust is unfunded and essentially without a trustee —  and none of the transactions contemplated in the prospectus and pooling and servicing agreement ever occurred.

The final judgment of foreclosure forces the “assignment” into a “trust” that was unfunded, didn’t have a Trustee with any real powers, and didn’t ever get delivery of the closing documents to the Depositor or Custodian. This results in forcing a bad loan into the trust, which presumably enables the broker to force the loss from the bad loans onto the investors. They also lose their REMIC status which means that the Trust is operating outside the 90 day cutoff period. So the Trust now has a taxable event instead of being treated as a conduit like a Subchapter S corporation. This creates double taxation for the investor/lenders.

The forced “purchase” of the REMIC Trust takes place without notice to the investors or the Trust as to the conflict of interest between the Servicers, securities brokers and other co-venturers. The foreclosure is pushed through even when there is a credible offer of modification from the borrower that would allow the investor to recover perhaps as much as 1000% of the amount reported as final proceeds on liquidation of the REO property.

So one of the big questions that goes unanswered as yet, is why are the investor/lenders not given notice and an opportunity to be heard when the real impact of the foreclosure only effects them and does not effect the intermediaries, whose interests are separate and apart from the debt that arose when the borrower received the money from the investor/lender?

The only parties that benefit from a foreclosure sale are the ones actively pursuing the foreclosure who of course receive fees that are disproportional to the effort, but more importantly the securities broker closes the door on potential liability for refunds, repurchases, damages to be paid from fraud claims from investors, guarantors and other parties and even punitive damages arising out of the multiple sales of the same asset to different parties.

If the current servicers were removed, since they have no actual authority anyway (The trust was ignored so the authority arising from the trust must be ignored), foreclosures would virtually end. Nearly all cases would be settled on one set of terms or another, enabling the investors to recover far more money (even though they are legally unsecured) than what the current “intermediaries” are giving them.

If this narrative gets out into the mainstream, the foreclosing parties would be screwed. It would show that they have no right to foreclosure based upon a voidable mortgage securing a void promissory note. I received many calls last week applauding the articles I wrote last week explaining the securitization process — in concept, as it was written and how it operated in the real world ignoring the REMIC Trust entity. This is an attack on any claim the forecloser makes to having the rights to enforce — which can only come from a party who does have the right to enforce.

see https://livinglies.wordpress.com/2014/09/10/securitization-for-lawyers-conflicts-between-reality-the-documents-and-the-concept/

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