Not even the Federal Government Can Determine Who owns Your Loan

It was impossible to trace the majority of the mortgage loans on the over 300 homes sold by DSI that were the subject of the FBI investigation; it would have been harder yet to identify individual victims of the fraud given that the mortgages were securitized and traded. (Emphasis added.)

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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Originally posted at http://mortgageflimflam.com
With additional edits by http://4closurefraud.org

“Counter-intuitive” is the way Reynaldo Reyes (Deutschbank VP Asset Management) described it in a taped telephone interview with a borrower who lived in Arizona.  “we only look like the Trustee. The real power lies with the servicers.”

And THAT has been the problem since the beginning. That means “what you think you know is wrong.” This message has been delivered in thousands of courtrooms in millions of cases but Judges refuse to accept it. In fact most lawyers, even those doing foreclosure defense, and even their clients — the so-called borrowers — can’t peel themselves away from what they think they know.

In the quote above it is obvious that the sentencing document reveals at least two things: (1) nobody can trace the loans themselves which in plain English means that nobody can know who loaned the money to begin with in the so-called loan origination” and (2) nobody can trace the ownership of the loans — i.e., the party who is actually losing money due to nonpayment of the loan. Of course this latter point was been creatively obscured by the banks who set up a scheme in which the victims (investors, managed funds, etc.) continue to get payments long after the “borrower” has ceased making payments.

If nobody knows who loaned the money then the presumption that the loan was consummated when the “borrower”signed documents placed in front of them is wrong for two reasons: (1) all borrowers sign loan documents before funding is approved which means that no loan is consummated when the documents are signed. and (2) there is no evidence that the “originator” funded the loans (regardless of whether it is a bank or some fly by night operation that went bust years ago) loaned any money to the “borrower.” (read the articles contained in the link above).

The reason why I put quotation marks around the word borrower is this: if I don’t lend you money then how are you a borrower, even if you sign loan papers? The courts have nearly universally got this wrong in virtually all of their pretrial rulings and trial rulings. Their attitude is that there must have been a loan and the homeowner must be a borrower because obviously there was a loan. What they means is that since money hit the closing table or the last “lender” received a payoff there must have been a loan. What else would you call it?

Certainly the homeowner meant for it to be a loan. The problem is that the originator did not intend for it to be a loan because they were not lending any money. The originator played the traditional part of a conduit (see American Brokers CONDUIT for example). The originator was paid a fee for the use of their name and traditionally sold the homeowner on taking a loan through the friendly people at XYZ Speedy No Fault Lending, Inc. (a corporation that often does not exist).

Somebody else sent money but it wasn’t a loan to the homeowner. It was the underwriter who was masquerading as the Master Servicer for a Trust that also does not exist. Where did the underwriter get the money? Certainly not from its own pockets. It took money from a dynamic dark pool that should not exist, according to the false “securitization” documents (Prospectus and Pooling and Servicing Agreement).

Who deposited the money into the dark pool? The sellers of fake “mortgage-backed securities”who took money from pension funds and other managed funds under the false pretense that the money would be under management of a specific REMIC Trust that in actuality does not exist, never conducted business under any name, never had a bank account, and for which the Trustee had no duties except window dressing to make it look good to investors. How is that possible? NY law allows for the documentation of a trust without any registration. The Trust does not exist in the eyes of the law unless there is something in it. This like a stick figure is not a person.

None of the money from investors went into any Trust account or any account of any trustee to be held and managed for a REMIC Trust. Sound crazy? It is crazy, but it is also true which is why it is impossible for even the Federal Government with virtually limitless resources cannot tell you who loaned you any money nor who owns any debt from you.

The money was surreptitiously deposited into hundreds of dark pools in institutions around the world. The actual business of the dark pols was to create the illusion of profits for the banks and a huge dark reserve that siphoned some $5 trillion out of the U.S. economy and more out of other economies around the world.

To cover their tracks, the banks took some of the money from the dark pool and started a chain reaction of offering what appeared to be loans but which in most cases were financial death sentences.

The investors, for sure, have a potential claim against the homeowners who received actual benefit from a flow of funds, but without being named in the loan documents, they have no direct right of foreclosure. And then there is the problem of coming up with the correct list of investors whose money was commingled with hundreds of fake trusts. The investors know that collectively, as a group they are owed money from homeowners as a group. But NOBODY KNOWS which investors match up with what alleged loan. The homeowner can ONLY be a “borrower” if they executed a loan contract and the contract became enforceable because there was offer, acceptance and consideration flowing both ways. Without all four legs of the stool it collapses.

Judges resist this “gift” to homeowners while ignoring and accepting the consequence of a gift of enormous proportions to the few banks at the top who started all this. Somehow word has spread that the middle and lower class is the right place to put the burden of this illegal bank behavior.

The homeowner’s offer of consideration is the promise to pay principal sometimes with interest. The originator’s offer of consideration is not to the homeowner. The originator has offered services for a fee to the conduits and sham corporations that put the originator up to selling bad loans from undisclosed third parties to people who lacked the financial knowledge to understand what was happening. So no contract there. No contract? No borrower. No contract? No lender. Hence the term I used back in 2007, “pretender lender.” I should have also coined the term “mock borrower.”

Sound impossible? Here is the finding from the sentencing document:

During the time of the information, DSI worked with two “preferred lenders,” Wells Fargo Bank and J.P. Morgan Chase. Certain employees and managers of those two preferred lenders knew about the incentive programs offered by DSI and the builders, and knew that the incentives were not being disclosed in the loan files. (Emphasis added.)

And that is what we mean by “counter-intuitive.” It is a lie, a cover-up and a fraudulent scheme directed at multiple  victims. Under existing law, foreclosure is not an option for persons who lack standing and have unclean hands. Nearly all loan transactions were table funded and that means, according to TILA, that they are and were predatory loans. And that means, according to me, that it is impossible to allow any equitable relief be had by those who have unclean hands — especially those who seek foreclosure, which is an equitable remedy.

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More Lawsuits, Still No Real Progress and No Coverage by Media

Jon Stewart committed his entire show to the mortgage crisis last Wednesday night. Go watch it. It wasn’t funny although they added some comedic aspects. The bottom line is the question “why aren’t these people in jail?” And the media was scorched with the fact that despite a constant culture of continuing corruption and absurd “transactions” in which paper goes back and forth, and calling that economic activity with”profit,” and stories of the human tragedy of Foreclosures all based on what are now obviously fraudulent schemes, the media is silent. The number of stories on the illegal Foreclosures, the charges of FRAUD by everyone involved from lenders (investors) to insurers to guarantors to borrowers, the verdicts and judgments decided against the banks, and the analysis that the assets of the banks are fictional, the total is ZERO.

My question is why the displacement of more than 15 million people in a single scheme is not the main question in American discourse, media and politics — especially since the banks have admitted by conduct or expressly their wrongdoing? We already know it was a total fraudulent scheme. The banks are settling their ill gotten gains for pennies on the dollar while the victims absorb most of the loss. We already know that the requirements of Federal law were routinely ignored in disclosing the real terms and lenders to borrowers. And if they had made the disclosure, the deals would not have occurred, because if they were disclosed neither the lenders (investors) nor the borrowers (homeowners) would have done the deal.

One particular story was singled out by Jon Stewart to provide an example of what Gretchen Morgenson called “just another day on Wall Street” was the recent transaction between Blackrock and Corere. Blackrock loaned Corere $100 million. Blackrock purchased a credit default swap worth $15 million if there was any default for any reason. Blackrock made a deal with Corere for Corere to default. So Corere defaulted. Blackrock collected the $15 million on the credit default swap PLUS the full repayment from Corere of $100 million, plus interest. Somehow this is considered legal. I call it FRAUD.

When applied to the mortgage market you can easily see how the agent banks (investment banks or broker dealers) made a fortune by creating deals that failed on paper when in fact the loan was already covered in multiple ways. Only in the mortgage situation the lenders got screwed out of repayment and the borrowers got screwed on their deal by either losing their home or getting a deal where they would be underwater for the rest of their lives. As I have been detailing over the last week, I have a currently pending case in which the “successor” trustee with a new aggressive law firm is pursuing foreclosure and collection of rents on loans that they know have been paid, they admit have been paid, but they say it doesn’t matter. Using this theory, if the payment doesn’t come from the named Payor on the note to the now unnamed payee on exhibit note, anyone can collect multiple times on a single debt. This is crazy.

The bastion of our security — judiciary — is succumbing to expediency over truth and justice. Instead of applying the requirements of law and procedure strictly against the same entities that are repeatedly cited for FRAUD AND NON COMPLIANCE by government and lawsuits from investors, insurers and guarantors, the judiciary is ignoring the requirements or applying liberal standards to allow the foreclosure to proceed. What Judges don’t understand yet is that they can clear their docket more quickly if they demand proof of payment by the party seeking foreclosure and proof of authority to represent the real creditors, who must be identified.

If the party pursuing foreclosure has no skin in the game and doesn’t represent anyone who does, the foreclosure fails jurisdictionally. If we apply any other standard, then the courts are opening the door for uninjured people to sue for a slip and fall that happened to someone else.

These Foreclosures would disappear entirely if judges applied the law with or without a proper presentation by defense counsel. In the old days, Judges carefully reviewed the basic documents. If they found a gap, they refused to apply the most extreme remedy of foreclosure until the the creditor could comply. That is all I ask. Instead most lawyers are told to stop arguing because the Judge is uncomfortable with what he is hearing and most lawyers do not have the guts to say to the judge that the purpose of having a lawyer is to “argue” cases. Is the Judge throwing out the right to be heard altogether? That violation of undue process is something that should be taken to task.

At the end of the day, it will be accepted fact that the mortgages were fraudulent unenforceable devices that never should have been recorded, much less used for foreclosure or collection of rents, the note is a fraudulent unenforceable paper designed to mislead the borrower, the lenders, the insurers, the government guarantors, credit default counterparties, and the courts as to the lender’s identity, and the debt was always between the investors who received no documentation for their investment that was real, and the homeowners who were duped into signing papers that made them unwitting participants in a fraudulent scheme.

In the end the intermediary agent banks got paid but the lenders only get their money if they sue the investment banker because the lenders were denied the right to appear on closing paperwork as the lender or on assignments. In other words, the parties who loaned the money got pennies on the dollar. The Banks got paid multiple times on the same debt by selling it multiple times, insuring it multiple times and getting it guaranteed multiple times, and then foreclosing as if they were the lender.

My final question is this: “if we know the mortgage mess was a fraudulent scheme, why are we allowing its continuation in the courts?”

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DOJ plans more MBS fraud cases in New Year

The Department of Justice intends to bring cases against several financial institutions next year for what it says is mortgage-bond fraud, Attorney General Eric Holder told Reuters yesterday.
While Holder said that the DOJ would use JPMorgan’s $13B agreement as a template, he didn’t provide details about which banks are in his crosshairs.
Firms that have acknowledged that they are under investigation include Bank of America (BAC), Citigroup (C) and Goldman Sachs (GS).

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DOJ Probes Wells Fargo: Unravelling the Scam Piece by Piece

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Editor’s Comment and Analysis: For those, like myself, frustrated with the pace of the investigation, we must remember that the convoluted manner in which money and documents were handled was intended to obscure the PONZI scheme at the root of the securitization scam and false claims based upon securitization.

None of us saw anything this complex and after devoting 6 years of life to unraveling this mess I am still learning more each day , even with an extensive background on Wall Street and even with my experience with bond trading, investment banking and related matters.

So first they are going after the low-hanging fruit, which is the obvious misrepresentations to the investors who actually comprise most of the same people who were foreclosed. It was pension funds and retirement accounts managed directly or indirectly by the Wall Street banks that bought these bogus “mortgage-backed” bonds. Those same funds are now underfunded and headed for another bailout fight with the Congress.

The problem is that DOJ is still looking at documents and representations when they should be probing the actual movement of money. It is there that they will find the holy grail of prosecutable crimes. The money just didn’t go the way the banks said it would. The banks took trading profits out of the money before it even landed in an account which incidentally was never titled in the name of the REMIC that issued the fake mortgage bonds backed by loans that did not exist in the “the pool.”

Nonetheless I am encouraged that DOJ is chipping away at this, and getting their feet wet, as they get to understand what was really happening, to wit: a simple PONZI scheme in which the deal would fold as soon as there were no more investments by investors.

This simple core was covered by multiple layers of false documentation, robo-signed documents and other transmissions with disclaimers, such that there would be plausible deniability. In the end it is nothing different than Madoff, Drier or other schemes that have landed many titans in prison for the rest of their lives — unless they died before serving their sentence.

I’m an optimist: I still believe that in the end, these banksters will be brought to  justice for real crimes they committed or were directing through their position in the institutions they supposedly represented. The end result is going to be an overhaul of banking like we have not seen before perhaps in all of U.S. history.

The fact remains that the assets on the balance sheets of these banks are (a) overstated by assets that are either non existent or overvalued and (b) understated by the amount of money they parked off-shore in “off balance sheet transactions.”

In the end, which I predict could still be five years away or more, the large banks will have disappeared and the banking industry will return to the usual marketplace of large, medium and small banks, each easily subject to regulation and audits.

How the staggering toll exacted from the middle class will be handled is another story. Nobody in power wants to give the ordinary guy money even if he was defrauded. But unless they give restitution to the pension funds and homeowners, the economy will continue to drag and lag behind where it should be.

Wells Fargo Wachovia Unit Faces Probe Over Mortgage Practices

Reuters

Nov 6 (Reuters) – The government’s investigation of mortgage-related practices at Wells Fargo & Co includes the making and packaging of home loans by its Wachovia unit, the bank said in a filing Tuesday.

The No. 4 U.S. bank by assets disclosed in February that it may face federal enforcement action related to mortgage-backed securities deals leading to the financial crisis.

In Tuesday’s quarterly securities filing, Wells Fargo reiterated that it’s being investigated for whether it properly disclosed in offering documents the risks associated with its mortgage-backed securities.

The bank also said the government is investigating whether Wells Fargo complied with applicable laws, regulations and documentation requirements relating to mortgage originations and securitizations, including those at Wachovia.

San Francisco-based Wells Fargo acquired Wachovia at the peak of the financial crisis in 2008 as losses in the Charlotte, North Carolina-based bank’s mortgage portfolio ballooned.

Mortgages packaged into securities for investors during the housing boom still haunt big banks years later. Banks have been accused of failing to ensure the quality of the loans and for misrepresenting their risk to investors.

In January, the Obama administration set up a special task force to investigate practices related to mortgage-backed securities at banks.

In the group’s first action, New York State Attorney General Eric Schneiderman last month filed a civil suit against JPMorgan Chase & Co for alleged fraud at Bear Stearns, which JPMorgan bought at the government’s request in 2008.

Florida Wrongful Foreclosure Victims Get $2k, Banks get $2,000k

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Editor’s Note: For those who have given, up, moved on and don’t want to fight about it, the $2,000 check they are about to receive is like found money. But it is a surrender to greed, bullying and criminal behavior. The banks are giving the paltry sum of $2,000 in exchange for an average loan of $200,000 which they neither funded nor purchased, but which they sold multiple times, 1000 cents on the dollar.

As I understand it, you can take the $2,000 and also sue for wrongful foreclosure, but you can be sure that despite that, most people will not sue and those who do are going to be met with the argument that we already settled that.

For those interested in getting their check, read the article below or go to the Sun Sentinel or WPTV.com. You’ll get the information you need.

From WPTV.Com by Donna Gehrke-White, Sun Sentinel

Some 167,398 Floridians who lost homes to foreclosure may each get about $2,000 as part of the nation’s largest consumer financial protection settlement.

The checks will be sent out in early 2013, with more than a third going to people who lost homes in Broward, Palm Beach and Miami-Dade counties, estimated Jack McCabe, a housing analyst based in Deerfield Beach.

People need to send in forms to receive the money by Jan. 18. How much people will receive depends on how many borrowers participate.

Already, Minneapolis-based Rust Consulting has “sent out notification postcards to eligible borrowers nationwide,” said John Lucas, a spokesman for the Florida Attorney General’s Office that is helping administer the historic federal, 49-state settlement.

“A low percentage of those postcards were returned, and Rust is conducting further research to locate those borrowers,” Lucas added in an e-mail. People can call toll-free 866-430-8358 to see if they qualify to be part of the settlement.

A former Pompano Beach homeowner who would only give his first name, Mike, said he called and found that he was on the list to get a check. He said he hired too late an attorney to fight his foreclosure. “I was in denial,” he said. “Divorce, job and house — I lost all three.”

In all, about $1.5 billion will be given nationwide to people who lost homes to foreclosure, with Floridians getting about $334 million.

The agreement covers borrowers who lost their homes to foreclosure from 2008 to 2011 and whose mortgage were serviced by Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo.

The five lenders agreed to a massive $25 billion national settlement earlier this year. By August more than 23,000 struggling Floridians had received $1.7 billion in mortgage relief, including principal forgiveness, loan modifications and the suspension of mortgage payments until a later date, according to an interim report by the independent National Mortgage Settlement Administrator. Floridians will ultimately receive about $8 billion in relief.

Part of that includes money to owners who already have lost homes to foreclosure, including those Floridians served fraudulent “robo-signing” foreclosure notices by the five lenders. State and federal investigations found that the banks had routinely signed foreclosure-related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct.

Roy Oppenheim, a foreclosure defense lawyer in Weston, said the projected $2,000 settlement to each foreclosed homeowner doesn’t go far enough in helping those South Floridians who were tossed out of their homes with such fraudulent paperwork.

“They should have been given more money,” Oppenheim said. “Those were criminal acts.”

But the settlement makes no distinction and gives the same amount, regardless of the circumstances of how people were foreclosed on, Oppenheim said.

Other foreclosure victims have been given much more money, he added. Another unrelated foreclosure settlement, for example, gave $25,000 to each soldier who was foreclosed on while fighting overseas, Oppenheim said.

Real estate analyst Jack McCabe agreed that the estimated $2,000 settlement doesn’t fully resolve the pain of foreclosure. “It’s like pocket change,” he said. Some homeowners, for example, lost tens of thousands of dollars in home equity when they were foreclosed on, McCabe said.

Still, it’s some cash: Most Floridians who lost homes to foreclosure won’t get anything, McCabe added. About 400,000 Floridians were foreclosed on between 2008 and 2011 but the settlement affects only 167,398 of them, he said. About 233,000 others had lenders who aren’t part of the agreement.

In addition, there are now about 339,000 more Floridians fighting foreclosure in court. More than a third — or 38 percent— live in Broward, Palm Beach or Miami-Dade counties, McCabe estimated.

In addition another 530,000 Floridians are more than 90 days late in paying their mortgage and face losing their home, he said.

“We’ve still got a full ways to go before we resolve this foreclosure crisis — another two to three years,” McCabe said.

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If you believe that you are eligible for relief and have not received a Claim Form, please contact the National Mortgage Settlement Administrator at 1-866-430-8358, Monday through Friday 7 a.m. – 7 p.m. Central Time

Dimon Threatens Obama: Investigate and Lose Settlement

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Editor’s Comment: If there was any doubt in your mind about who thinks they run the government, it was dispelled yesterday when Reuters reported that Jamie Dimon, CEO of JPMorgan Chase warned Obama that if the new investigation team actually does anything, there won’t be any settlement.

The sheer arrogance of a possible criminal demanding that the government stop investigating him or else the too big too fail bank won’t participate in settlement talks is unfathomable. It demands a response from Obama and it demands a re-thinking at the White House about its relationships with the big banks.

The real investigations are just getting started, with considerable support from already published instances of robo-signing, surrogate signing, forgery, fabrication and fraud in the foreclosure process.

Dimon reacted because of one major risk: the entire securitization scheme will be revealed as a scam from beginning to end. This would mean that the banks would have enormous liability to virtually all MBS investors, enormous tax liability for the REMICs and potentially to the investors, and enormous liability to homeowners who were duped into thinking that they had been through conventional loan underwriting when in fact it was jsut a marketing scheme to justify the movement of money.

As stated on these pages before, the result will be

  • (1) that investors, as creditors in these transactions are owed 100 cents on the dollar not by the homeowners, but by the Banks, who took investor money and either didn’t invest it all in loans, or invested in loans that they knew ( and were betting on) would fail
  • (2) that potentially trillions of dollars in unreported income went untaxed amounting more than any bailout
  • (3) that the mortgage documentation was so defective as to defy reformation or correction, leaving the loans unsecured and possibly non-existent and
  • (4) that the homeowners who have been foreclosed and dispossessed still own their properties with an unclear debt or obligation that is unsecured.

Dimon is trying to block reality from entering into the picture. Selling the loans multiple times through exotic instruments that looked like hedge products has its consequences. It leaves the creditor or its agents filled with money obtained through multiple payments on the same debt. All this seems counter-intuitive, I know. And it sure puts a crimp on the foreclosure plan that takes homes to satisfy a debt that has already been satisfied multiple times.

Beyond that, it provides a blueprint for correcting the corruption of the title registries across the country. Once the loans are shown to be defective beyond recognition, and once securitization is shown to be a word and a plan that was never actually executed, the whole thing boils down to one simple fact: there were loans but there were no mortgages. Papers was signed that meant nothing, disclosed nothing and violated every industry practice in place for hundreds of years.

There is no greater fiscal stimulus to the economy than returning ill-gotten gains to the investors and homeowners who were victims of this scheme. It will save pensions and allow people to recover the wealth that was siphoned out of the economy instead of the job Wall Street was meant to fulfill — pumping liquidity into the economy for expansion, innovation and prosperity. The answer is right there in front of us. The Banks have attempted to place false ideology in front of the requirements of law. The only question is whether the government will let that happen.

See Full Story on Reuters

JPMorgan Chase & Co Chief Executive Jamie Dimon said President Barack Obama’s decision to expand investigations into home lending and sales of mortgage securities could stop settlement talks with the states over foreclosure practices.

“It has a pretty good chance of derailing it,” Dimon said in a televised interview with CNBC from Davos, Switzerland on Thursday.

Obama, in his State of the Union address Tuesday, said he has asked his attorney general to create a special unit of prosecutors to expand investigations into home lending and packaging of mortgage-backed securities. It is not clear how the new unit will be different from earlier investigations.

JPMorgan is the largest U.S. bank and one of the larger servicers of mortgage loans. JPMorgan, Bank of America, Wells Fargo & Co, Citigroup and Ally Financial Inc have been in talks with state attorneys general for months about settling allegations of foreclosure abuses.

The banks and states have been discussing a plan that would have the banks pay $25 billion to homeowners through reductions in principal on mortgage loans.

“I think it would be better for America if that settlement took place,” Dimon said. “If this thing derails that, so be it.”

(Reporting by David Henry; editing by John Wallace)

 

JPMorgan Chase & Co. Sued by John Hancock For MBS Fraud

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Editor’s Comment: If the financial institutions were lying to each other, committing civil and criminal fraud, how much of a stretch is it to think that they are lying to the Courts, lying to homeowners, and that they lied to homeowners who bought bogus loan products just like they lied to John Hancock who insured the bogus mortgage bonds based upon lies to the fund managers (investors) who served as the real lenders?

Why would ANYONE presume that the mortgages are valid liens, or that anyone other than the defrauded investors is entitled to any money from the borrowers, from the bailout, from insurance contracts, from CDS, and other credit “enhancements” all procured by fraud?

See Full Article on Bloomberg

JPMorgan Chase & Co. was sued by Manulife Financial Corp.’s John Hancock Life Insurance unit, which accused the bank of fraud in connection with the sale of residential mortgage-backed securities.

The lawsuit, filed today in New York state Supreme Court in Manhattan, seeks unspecified damages for losses of market value and principal and interest payments, as well as rescission and recovery of payment for the investments.

John Hancock bought the securities “in reliance on the false and misleading” statements made by the defendants, which include Bear Stearns & Co. and Washington Mutual Inc. (WAMUQ), both of which were acquired by JPMorgan, lawyers for the Boston-based insurer said in the lawsuit.

“Based on these material misrepresentations and omissions, plaintiffs purchased securities that were far riskier than had been represented, backed by mortgage loans worth significantly less than had been represented, and that had been made to borrowers who were much less creditworthy than had been represented,” attorneys for John Hancock said in the lawsuit.

Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.

Jennifer Zuccarelli, a spokeswoman for JPMorgan, didn’t immediately return a telephone message left at her office seeking comment on the lawsuit.

The case is John Hancock Life Insurance Co. v. JPMorgan Chase & Co. (JPM), 650195/2012, New York state Supreme Court (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

 

Here is How JPMorgan Posts $19B Annual Profit Despite Housing Hangover

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EDITOR’S ANALYSIS: You might ask how any bank could post such huge profits while the economy is in the toilet, Europe is falling apart and Asia is having problems. The answer lies — yes here it is again — in the level 2 yield spread premium they stole from investors. The way I add it up, the Banks collectively stole nearly 3 Trillion dollars from the investors before they even started funding loans out of investor money. According to some documentation that I received anonymously and a some documentation I received accidentally, that money was whisked off-shore through Bermuda, who asserted tax jurisdiction over the money and then waived the tax.
  1. The yield spread premium was achieved through the use of smoke and mirrors, which is to say business as usual on Wall Street. By making loans at higher interest interest rates or higher stated interest rates on stated asset and subprime loans, Wall Street reduced the amount that was needed to fund loans — and pocketed the difference without telling investors or disclosing to borrowers as required by the Federal Truth in Lending Act. On the one hand they say they are lenders so they can foreclose, and on the other they say they are not subject to the TILA disclosure requirements.
  2. The spread was enormous — each one as much as 100 times the yield spread premium that brokers were paid for steering hapless borrowers into more expensive loans.
  3. In a frequent example, the investor was expecting a return of 5% based upon loans of only the highest quality which of course would carry an interest rate that was the lowest the market had to offer — at around 5% average. If that had actually been done, Wall Street wouldn’t have been interested because the fees were too low. Instead, the Wall Street Banks sought out loans that carried a stated interest rate of 10% — obviously to borrowers who were either less credit worthy than the borrowers that the investors were expecting or borrowers who were convinced they were less credit  worthy, or they were convinced that the loan in front of them was a better deal even though they qualified for a lower interest rate.
  4. By doubling the interest rate the banks halved the principal funded by investors, pocketing the rest which they booked, for the most part as trading profits. They simply sold the 10% loan for the value of the 5% loan and doubled their money without using any of their own money to begin with.They kept the profit and didn’t report it while putting the investors at far greater risk than they were led to expect.
  5. So now, when the recession is gripping the world, Banks are reporting higher profits because they are able to feed the off-shore off-balance sheet transactions back in as needed to maintain the appearance of profitability. It is a living lie.
  6. Besides the obvious fact that these were ill-gotten gains from the past and not profits from current operations and the banks’ auditors will pay for this one day when shareholders wake up, there is a much more insidious and dangerous aspect to this shell game. If the law is applied as many scholars and writers, including myself, believe it should be, there is no doubt that the result would be a reversal of most foreclosures and an obligation that is unsecured or secured with some modified deal or settlement.
  7. It is highly likely that the the most dreaded result would occur — homeowners would actually pay the full balance of their debts after deductions for payments by third parties and set-off for TILA and other lending violations.
  8. This would result in a requirement of full accounting to the investors who would quickly find out that although the loans were paid in full, the amount they advanced was still not covered — because of the theft by the banks and reported as trading profits. It would also lead those who advanced money on the premise that the pools were insolvent to demand their money back because the loss they were covering in the insurance contract or contract for credit default swap never materialized — except for the intentional act of theft by the Banks.
  9. The resulting effect would be unraveling and reversing a lot of the profit made by selling the loans multiple times through exotic instruments that obscured the fact that they were in essence just selling the same loan over and over again — as much as 40 times the original loan. The consequences are by no means assured, but it seems logical that the Tier 2 YSP would be required to be disgorged. And then, it is possible they would be required to disgorge the money they received from Federal Bailout, insurance, credit default swaps and other derivatives and credit enhancement tools.
  10. Which means that loan you had that was $200,000 in principal is a liability to the Wall Street banks IF YOU PAY IT OFF — and that liability could be in excess of $8 million. When you reverse engineer the Wall Street process that led us into the mortgage meltdown and recession you see several things — false securitization, a fake default rate, fake losses, fraudulent foreclosures and a recession that only happened because the banks sucked the money out of the system. Just follow the money — everyone including government is a loser except the banks. The conclusion is inescapable.
By: Carrie Bay 01/13/2012
JPMorgan Chase kicked off the earnings reporting season for major U.S. lenders on Friday with its announcement that the company earned a record profit of $19 billion for the 2011 fiscal year. That compares with $17.4 billion in net income for the prior year. Earnings per share were $4.48 for 2011.
The company reported net income of $3.7 billion for the fourth quarter of 2011, compared with $4.8 billion for the fourth quarter of 2010.
Although the numbers paint a picture of a company in full recovery mode from the financial crisis and recession, JPMorgan’s latest results missed analysts’ expectations as
the company continues to struggle with legacy issues stemming from the housing downturn.
Mortgage net charge-offs and delinquencies modestly improved over the final quarter of 2011, but both remained at elevated levels, the New York-based lender noted in its earnings report.
JPMorgan’s total nonperforming assets declined by 33 percent compared to a year earlier, but legal wranglings involving mortgages and investors’ repurchase demands cut heavily into the company’s profits.
The company doled out more than $3 billion in 2011 to cover legal proceedings related to its mortgage business. That tally marks a decline from the $5.7 billion that was laid down in 2010 but still represents a hefty sum of what could have gone to boosting the bottom line.
CEO Jamie Dimon says the company set aside $528 million in the final quarter of last year alone to address mortgage-related legal issues.
The handling of foreclosures and defaulted mortgages also carried a steep price tag. In the fourth quarter, JPMorgan’s cost related to this part of the business added up to $925 million.
“There’s still a huge drag [from housing issues],” CEO Jamie Dimon told investors. “You’re talking about several billion dollars a year in mortgage [operations] alone.”
©2012 DS News. All Rights Reserved.

Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.comwww.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax
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