OCC Finds 6 Banks Have Not Complied With Consent Orders

see OCC NR 2015-6 Servicers Actions Restricted and 3 Services Released 2015 06 17

The OCC also has determined that EverBank; HSBC Bank USA, N.A.; JPMorgan Chase Bank, N.A.; Santander Bank, National Association; U.S. Bank National Association; and Wells Fargo Bank, N.A., have not met all of the requirements of the consent orders. As a result, the amended orders issued today to these banks restrict certain business activities that they conduct. The restrictions include limitations on:

  • acquisition of residential mortgage servicing or residential mortgage servicing rights (does not apply to servicing associated with new originations or refinancings by the banks or contracts for new originations by the banks);
  •   new contracts for the bank to perform residential mortgage servicing for other parties;
  •   outsourcing or sub-servicing of new residential mortgage servicing activities to otherparties;
  •   off-shoring new residential mortgage servicing activities; and
  •   new appointments of senior officers responsible for residential mortgage servicing orresidential mortgage servicing risk management and compliance.


Related Links


I’ve talked about this before. It is why we offer a Risk Analysis Report to Community Banks and Credit Unions. The report analyzes the potential risk of holding MBS instruments in lieu of Treasury Bonds. And it provides guidance to the bank on making new loans on property where there is a history of assignments, transfers and other indicia of claims of securitization.

The risks include but are not limited to

  1. MBS Instrument issued by New York common law trust that was never funded, and has no assets or expectation of same.
  2. MBS Instrument was issued by NY common law trust on a tranche that appeared safe but was tied by CDS to the most toxic tranche.
  3. Insurance paid to investment bank instead of investors
  4. Credit default swap proceeds paid to investment banks instead of investors
  5. Guarantees paid to investment banks after they have drained all value through excessive fees charged against the investor and the borrowers on loans.
  6. Tier 2 Yield Spread Premiums of as much as 50% of the investment amount.
  7. Intentional low underwriting standards to produce high nominal interest to justify the Tier 2 yield spread premium.
  8. Funding direct from investor funds while creating notes and mortgages that named other parties than the investors or the “trust.”
  9. Forcing foreclosure as the only option on people who could pay far more than the proceeds of foreclosure.
  10. Turning down modifications or settlements on the basis that the investor rejected it when in fact the investor knew nothing about it. This could result in actions against an investor that is charged with violations of federal law.
  11. Making loans on property with a history of “securitization” and realizing later that the intended mortgage lien was junior to other off record transactions in which previous satisfactions of mortgage or even foreclosure sales could be invalidated.

The problem, as these small financial institutions are just beginning to realize, is that the MBS instruments that were supposedly so safe, are not safe and may not be worth anything at all — especially if the trust that issued them was never funded by the investment bank who did the underwriting and sales of the MBS to relatively unsophisticated community banks and credit unions. In a word, these small institutions were sitting ducks and probably, knowing Wall Street the way I do, were lured into the most toxic of the “bonds.”

Unless these small banks get ahead of the curve they face intervention by the FDIC or other regulatory agencies because some part of their assets and required reserves might vanish. These small institutions, unlike the big ones that caused the problem, don’t have agreements with the Federal government to prop them up regardless of whether the bonds were real or worthless.

Most of the small banks and credit unions are carrying these assets at cost, which is to say 100 cents on the dollar when in fact it is doubtful they are worth even half that amount. The question is whether the bank or credit union is at risk and what they can do about it. There are several claims mechanisms that can employed for the bank that finds itself facing a write-off of catastrophic or damaging proportions.

The plain fact is that nearly everyone in government and law enforcement considers what happens to small banks to be “collateral damage,” unworthy of any effort to assist these institutions even though the government was complicit in the fraud that has resulted in jury verdicts, settlements, fines and sanctions totaling into the hundreds of billions of dollars.

This is a ticking time bomb for many institutions that put their money into higher yielding MBS instruments believing they were about as safe as US Treasury bonds. They were wrong but not because of any fault of anyone at the bank. They were lied to by experts who covered their lies with false promises of ratings, insurance, hedges and guarantees.

Those small institutions who have opted to take the bank public, may face even worse problems with the SEC and shareholders if they don’t report properly on the balance sheet as it is effected by the downgrade of MBS securities. The problem is that most auditing firms are not familiar with the actual facts behind these securities and are likely a this point to disclaim any responsibility for the accounting that produces the financial statements of the bank.

I have seen this play out before. The big investment banks are going to throw the small institutions under the bus and call it unavoidable damage that isn’t their problem. despite the hard-headed insistence on autonomy and devotion to customer service at each bank, considerable thought should be given to banding together into associations that are not controlled by regional banks are are part of the problem and will most likely block any solution. Traditional community bank associations and traditional credit unions might not be the best place to go if you are looking to a real solution.

Community Banks and Credit Unions MUST protect themselves and make claims as fast as possible to stay ahead of the curve. They must be proactive in getting a credible report that will stand up in court, if necessary, and make claims for the balance. Current suits by investors are producing large returns for the lawyers and poor returns to the investors. Our entire team stands ready to assist small institutions achieve parity and restitution.


BLK | Thu, Nov 14

BlackRock with ETF push to smaller banks • The roughly 7K regional and community banks in the U.S. have securities portfolios totaling $1.5T, the majority of which is in MBS, putting them at a particularly high interest rate risk, and on the screens of regulators who would like to see banks diversify their holdings. • “This is going to be a multiple-year trend and dialogue,” says BlackRock’s (BLK) Jared Murphy who is overseeing the iSharesBonds ETFs campaign. • The funds come with an expense ratio of 0.1% and the holdings are designed to limit interest rate risk. BlackRock scored its first big sale in Q3 when a west coast regional invested $100M in one of the funds. • At issue are years of bank habits – when they want to reduce mortgage exposure, they typically turn to Treasurys. For more credit exposure, they habitually turn to municipal bonds. “Community bankers feel like they’re going to be the last in the food chain to know if there are any problems with a corporate issuer,” says a community bank consultant.

Full Story: http://seekingalpha.com/currents/post/1412712?source=ipadportfolioapp

OCC Announces EverBank Agrees to Pay $37 Million to Customers, $6.3 Million to Housing Assistance Groups

Internet Store Notice: As requested by customer service, this is to explain the use of the COMBO, Consultation and Expert Declaration. The only reason they are separate is that too many people only wanted or could only afford one or the other — all three should be purchased. The Combo is a road map for the attorney to set up his file and start drafting the appropriate pleadings. It reveals defects in the title chain and inferentially in the money chain and provides the facts relative to making specific allegations concerning securitization issues. The consultation looks at your specific case and gives the benefit of litigation support consultation and advice that I can give to lawyers but I cannot give to pro se litigants. The expert declaration is my explanation to the Court of the findings of the forensic analysis. It is rare that I am actually called as a witness apparently because the cases are settled before a hearing at which evidence is taken.
If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services. Get advice from attorneys licensed in the jurisdiction in which your property is located. We do provide litigation support — but only for licensed attorneys.
See LivingLies Store: Reports and Analysis

In its never-ending quest for putting distance between the Bank and the Homeowners who have been misled into thinking that Bank of America has any servicing or ownership rights over their mortgage, BOA has been transferring any mortgage they can to other entities — perhaps even paying the other entities to “take” the mortgages, which BOA didn’t own in the first place.

One such entity is EverBank which is a small thinly capitalized entity. The gimmick worked. Using the balance sheet of EverBank instead of Bank of America, the fine was probably one tenth or less than the the fine that would have been levied upon Bank of America. EverBank is getting paid to be thrown under the bus. The OCC used the EverBank Balance Sheet as a measuring stick and figured that $37 million fine for wrongful foreclosure processing was enough. If they had looked behind the curtain, which they most certainly had the knowledge about, they would have been fining Bank of America for the wrongful, illegal and immoral foreclosures.

And EverBank continues to file foreclosures that are riddled with obvious defects because they don’t have a real plaintiff, a real lender, a real loan, a real default or any real servicing rights. It is safe to say that they are so far removed from the realities of any actual transaction that it will be impossible to actually respond to discovery requests.

So I figured I would share with you some notes on a few of the cases with EverBank that you might find useful. As stated a thousand times before, do NOT use these forms or notes or anything else unless you ARE an attorney licensed in the jurisdiction in which the property is located or you consult with one.


  1. The Plaintiff is self-identified in its own attachments as a servicer which means that judgment can only be rendered for the real creditor who under Florida Statutes governing credit bids can only be the actual creditor.
  2. The complaint is in rem and does not sue on the note, so there is no basis for the deficiency demanded in the wherefore clause.
  3. The servicing rights actually never existed because they would arise from a pooling and servicing agreement for a REMIC trust that was never funded nor was it able to purchase loans, nor were such loans transferred within the time limits prescribed by the REMIC laws and the terms of the pooling and servicing agreement. Since the REMIC was ignored, the terms of the PSA were ignored, no servicer could exist except with apparent authority. It remains to be seen to whom the the payments were made after receipt of payments from the Homeowner Defendant. despite the lack of any actual legal authority for servicing rights through any enforceable agreement to which the Homeowner defendant was a party  parties variously assigned servicing rights and endorsed the unenforceable note.
  4. Generally they were transferred by BOA as successor to BAC as successor to one of several Countrywide entities none of which were the lenders, servicers, or mortgage brokers for the loan. The reference to succession is false. Countrywide changed its name to BAC for a short while, following which Bank of America falsely claimed ownership, as successor to Countrywide despite the fact that the FDIC records show that a merger of some sort took place between Red Oak merger Corporation and Countrywide, but there is no indication that the agreement in the FDIC records shown in its “Reading Room” on the internet, that Bank of America ever acquired Red Oak or that Red Oak was a wholly owned subsidiary of Bank of America or anything of the sort.
  5. The mortgagee is named as either MERS as a naked nominee with no interest in the loan, or another entity that does not exist in the records of the Florida Secretary of state or anywhere else, and does not even pretend to be an entity organized and existing under the laws of any state. Hence there is no actual payee under the note and there never was, and there is no mortgagee under the mortgage, because the alleged party having an interest int he collateral is a naked nominee without any disclosure as to the true party in interest. This prevents the entire purpose of recording which is to allow for the complete transparency of ownership and encumbrances so that buyers and sellers can be certain that their transaction is valid.
  6. The complaint fails to state any loan or advance of money was ever made to the defendant Homeowner because the Homeowner has learned through hiring professional forensic auditors that none of the parties in the chain leading up to the Plaintiff Evergreen ever had ownership or servicing rights tot he loan. Instead, the loan came from the account of an investment bank that was used as a conduit for the money of investors who thought they were buying mortgage bonds from a REMIC trust organized under the laws of the State of New York. However the trust was never funded and the loan was never transferred into the trust. Accordingly the real creditor, with whom, the Defendant would like to engage in settlement or modification discussions, is a group of investors who might be loosely identified as a general partnership that does not qualify as a bank, lender, or even mortgage broker.
  7. The complaint fails to state any injury to any party in the complaint. his is because the money came from investors and on top of that, the intermediaries in the cloud of false securitization claims, received multiple payouts of the entire loan balance that should have reduced the account receivable of the investors who were the only parties who advanced money, to either zero, less than zero (with money owed back to the borrower) or at least less than the amount demanded  by Evergreen, who had no right to issue a demand letter since the actual owners of the loan had never given such an instruction.


Motion to Dismiss:
a. The pleadings conflict with the attachments. Everbank is named as either servicer or holder but no party is named as creditor. The attachments show a different party as the lender.
b. The complaint fails to allege injury to Evergreen and a short plain statement of how EverBank was financially damaged. Plaintiff fails to attach cancelled check(s) or wire transfer receipt(s) or wire transfer instructions for an actual transaction — which is the essential element and foundation for use of the note and mortgage as evidence of the transaction and the terms of repayment depending upon whether Plaintiff is attempting to enforce the terms of the NOTE, MORTGAGE, DEBT, LOAN OR ASSIGNMENT.
c. Prior communications with Countrywide, BAC and BOA and the borrower indicate alternately that each of those entities was the holder, but then revealed the existence of a loan pool claiming an interest. Plaintiff should be required to attach a copy of the cancelled checks or wire transfer receipts to show which party is actually claiming injury and a short plain statement of why their claim is secured.
d. Plaintiff has failed to allege that it or any affiliate or predecessor or successor has responded to the RESPA 6 (Qualified Written Request) sent by borrower or the Debt Validation Letter sent to the apparent servicer which alternated between Countrywide, BAC and Bank of America.
e. Plaintiff has filed to allege and attach relevant copies of documentation demonstrating proof of ANY POTENTIAL OR ACTUAL LOSS nor any authority to represent the creditor(s) and identifying the creditor who meets the standard of a party qualified to submit a credit bid at foreclosure auction, execute a satisfaction of mortgage upon payment, or a a correct accounting of the loan receivable or bond receivable if the loan is in fact claimed by any of the above stakeholders to be owned by a loan pool, REMIC, Special purpose vehicle or trust.
f. Unless the Plaintiff can allege and attach documents showing financial injury to Plaintiff as of the date that the complaint was filed, it lacks standing in this case.
g. Since the case is essentially in rem with the requested relief being the foreclosure sale of the property owned by the Defendant, Plaintiff has failed to state a cause of action upon which relief could be granted.

h. Even if the court were to rule that the Plaintiff had standing to initiate foreclosure proceedings, the Plaintiff must identify the party in the Judgement who will be  named, and supply the accounting required to show the amount of  financial injury, produce and attach the required documents to the complaint and prove its allegations and exhibits by competent evidence.

i. It is apparent here that Plaintiff lacks standing and certainly has failed to plead and attach required documents demonstrating financial injury since according to its own pleadings and attachments it was neither the lender nor the purchaser of the loan according to the existing allegations and exhibits.

WHEREFORE, Defendant prays that this Honorable Court will dismiss Plaintiff’s complaint with prejudice unless Counsel for Plaintiff can proffer in good faith that it can plead and attach the required exhibits and grant Defendant reasonable attorney fees and costs for defending a patently sham pleading.

OCC Announces EverBank Agrees to Pay $37 Million to Customers

Aug 23, 2013 – EverBank was subject to a cease and desist order for unsafe and unsound practices in mortgage servicing and foreclosure processing.

EXCLUSIVE: EverBank takes flight as regular ‘jumbo’ loan RMBS issuer

Everbank Exits Wholesale Lending to Focus on Correspondent

http://www.mortgagenewsdaily.comNews HeadlinesMND NewsWire Home

Federal Reserve Seeks to Fine HSBC, SunTrust, MetLife, U.S.


Apr 1, 2012 – Last week, a senior Federal Reserve official recommended fines for these Bank, MetLife, U.S. Bancorp, PNC Financial Services, EverBank, OneWest and in residential mortgage loan servicing and foreclosure processing 

OCC: 13 Questions to Answer Before Foreclosure and Eviction

13 Questions Before You Can Foreclose

foreclosure_standards_42013 — this one works for sure

If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.


The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Note: Some banks are slowing foreclosures and evictions. The reason is that the OCC issued a directive or letter of guidance that lays out in brief simplistic language what a party must do before they can foreclose. There can be little doubt that none of the banks are in compliance with this directive although Bank of America is clearly taking the position that they are in compliance or that it doesn’t matter whether they are in compliance or not.

In April the OCC, responding to pressure from virtually everyone, issued a guidance letter to financial institutions who are part of the foreclosure process. While not a rule a regulation, it is an interpretation of the Agency’s own rules and regulation and therefore, in my opinion, is both persuasive and authoritative.

These 13 questions published by OCC should be used defensively if you suspect violation and they are rightfully the subject of discovery. Use the wording from the letter rather than your own — since the attorneys for the banks will pounce on any nuance that appears to be different than this guidance issued to the banks.

The first question relates to whether there is a real default and what steps the foreclosing party has taken to assure itself and the court that the default is real. Remember that the fact that the borrower stopped paying is not a default if no payment was due. And there is no default if it is cured by payment from ANYONE after the declaration of default. Thus when the subservicer continues making payments to the “Creditor” the borrower’s default is cured although a new liability could arise (unsecured) as a result of the sub servicer making those payments without receiving payment from the borrower.

The point here is the money. Either there is a balance or there is not. Either the balance is as stated by the forecloser or it is not. Either there is money due from the borrower to the servicer and the real creditor or there is not. This takes an accounting that goes much further than merely a printout of the borrower’s payment history.

It takes an in depth accounting to determine where the money came from continue the payments when the borrower was not making payments. It takes an in depth accounting to determine if the creditor still exists or whether there is an successor. And it takes an in depth accounting to determine how much money was received from insurance and credit default swaps that should have been applied properly thus reducing both the loan receivable and loan payable.

This means getting all the information from the “trustee” of the REMIC, copies of the trust account and distribution reports, copies of canceled checks and wire transfer receipts to determine payment, risk of loss and the reality of whether there was a loss.

It also means getting the same information from the investment banker who did the underwriting of the bogus mortgage bonds, the Master Servicer, and anyone else in the securitization chain that might have disbursed or received funds in connection with the subject loan or the asset pool claiming an interest in the subject loan, or the owners of mortgage bonds issued by that asset pool.

If the OCC wants it then you should want it for your clients. Get the answers and don’t assume that because the borrower stopped making payments that any default occurred or that it wasn’t cured. Then go on to the other questions with the same careful analysis.




If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

EDITOR’S COMMENT: FINALLY! A law firm in Washington DC has filed a lawsuit against the OCC to reveal the documents, disclosures and findings of the agency relating to the banks, the OCC Foreclosure Review and related matters. These are the kind of actions that should be filed in my opinion against state and Federal agencies that are enabling the securitization myth, foreclosures, defective auction bid, corrupted title and severe economic damages to people who don’t even realize they are victims of a scam and instead feel guilty about not paying their fair share.

The principal is simple: in any case where an agency fails to do its duty, or in case where someone wants to know what the agency is doing the Freedom of Information Act and other laws can be invoked to force the agency to comply with its statutory duty to regulate, commerce, banks, recording or whatever the case might be. Generally it is called an action in mandamus, which an action against an agency to perform its duties as set forth in the enabling statutes.

Note that the law firm filed the complaint in its own name and not the name of any client. The case is pure and simple. OCC is supposed to do its job and we have right to know whether they a re doing it. Having failed to respond, they are sued and the court will make them reveal whatever is in their files, which in this case is likely to be very damaging to both the agency and the banks it allegedly regulates.

See also Yves Smith on this subject generally:

Wells Fargo’s “Reprehensible” Foreclosure Abuses Prove Incompetence and Collusion of OCC

I have been pushing lawyers to bring actions against agencies and even the courts — going to the Supreme Court of each state demanding that they set procedures and standards of proof that a re consistent with existing law and consistently applied in all lower tribunals.

Actions against the FDIC, Federal Reserve that are similar in nature are already in the pipeline. Give your support to these actions any way you can. Follow the cases carefully because it is probably these cases that are going to crack the TBTF myth wide open along with dismantling the theory that loans were securitized when in most cases the loans were not securitized, and the creditor — the real creditor — is left with an unsecured receivable subject to set off for payments made to the agents of the investors (insurance, credit default swaps etc paid to the investment banks and other participants in the fake securitization chain).



Regulators Ask Banks to Re-check their Foreclosures


What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Comments: There are two ways of looking at this development. One is that the regulators are setting up the banks for failing to comply with the requirements of their regulators — and potentially extending the statute of limitations on Fed action against the banks.

The other is that the regulators are either politically motivated or so incredibly stupid that they are outsourcing the investigation of wrongful behavior of the banks to the potential defendants and respondents.

I can see a rationale in the first scenario but I am concerned that it is the second rationale that is at play here. The Paulson-Geithner doctrine of keeping the banks safe from collapse still appears to be guiding the regulators and law enforcement.

This isn’t really so difficult: first you ask those already in litigation to send in their papers. Second you ask the banks to show proof of payment and the entire money trail to show proof of loss. If the banks are able to show the actual proof of loss then the paperwork problems become less severe in terms of twisting the outcome. If the banks are not able to show they had any losses then it is true, all hell will break loose.

If the banks were in fact not using their own money on the loans that were originated, transferred and eventually offered for assignment into the loan pools, then their claims of loss to insurance companies and counter-parties to credit default swaps and other hedge products (and of course TARP) are subject to repayment to the insurers because the banks had no insurance interest and received the money anyway — not as agent for the investors who are the real losers, but for themselves. Having lied to the insurers, the ratings companies, and the investors, they were forced to lie to the government who gave them the TARP money to save the banks from going under as a result of huge losses in the credit markets.

A quick look at the 10K annual reports filed with the SEC will show that the banks were not showing any exposure to a risk of loss on the residential mortgage loans that were funded with investor money. Simple arithmetic would establish whether or not the total money given by investors was even close to the money used to fund actual loans.

One of two outcomes is possible if the banks were in fact lying to everyone. Either they owe back the insurance dollars they received and kept instead of passing it on to investor/lenders; or they owe the investor/lenders the money from insurance, credit default swaps etc. And THAT would reduce the loan receivable on the books of the investor/lenders. This in turn would reduce the amount due under the loan to homeowners, which in turn would flip the situation from homeowners being underwater to homeowners having equity.

Insurers and counter-parties in credit default swaps might have an unsecured claim for contribution from homeowners, but more likely they would be blocked by their own waiver of subrogation or extinguished in bankruptcy. The rest would be subject to negotiations on a level playing field whereby the investors could mitigate their damages while they recover the balance stolen from them by the banks.

It is difficult to imagine the banks reporting themselves for mistakes or criminal misbehavior. The regulators must know that. So there must be some plan working whereby the banks get further umbrella coverage from the Feds or where the Feds go into action against the banks. Only time will tell.

Feds to Banks: Double-Check Your Foreclosures for Errors

Independent review not working, so comptrollers go straight to banks

By Mark Russell,  Newser Staff

(Newser) – In the quest to right wrongful foreclosures, government regulators are turning to the last people on Earth one might expect—the unscrupulous lenders who did the foreclosing in the first place. An attempt to distribute billions of dollars in aid by independent consultants was shut down after it was found to be rife with delays and inefficiencies—consultants charged the government $2 billion in fees for 14 months of review, despite examining only a small number of the 500,000 complaints filed. So instead the Office of the Comptroller of the Currency is tapping the banks to re-evaluate their own foreclosures for errors, reports the New York Times.

Banks are to sort improper foreclosures according to degree of error, with the seriousness of the foreclosure error determining how much aid a homeowner might get. But critics say the new process is full of conflicts of interest and many loan files are in disarray. “The whole process has been a slap in the face to homeowners and a slap on the wrist to banks,” said one homeowner advocate. On the other hand, the federal comptroller’s office has asked the banks to self-regulate their foreclosure practices before.

Deny and Discover — Where the Rubber Meets the Road


What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Analysis: The banks are broke and this rule properly applied will reveal exactly how badly they fall short of capital requirements. It can be found at Volume 77, No. 169 of the Federal Register dated, Thursday, August 30, 2012 2012-16759 Capital Risk Disclosure Requirements Under Dodd Frank.

Admittedly this is not for the feint of heart or those with limited literacy in economics, accounting and finance; but if you find yourself in the position of not understanding, then go to any economist or banker or finance specialist or accountant  and they will explain it to you.

Lewtan which produces ABSnet is offering a service to banks that will give the banks and plausible deniability when the figures come up all rosy for the banks. Lewtan should be careful in view of the action being taken against the ratings companies, which is the start of an assault on the citadel of evil intent on Wall Street.

The fundamental aspect of these new rules are that the bank must report on the degree of risk it has taken on in any activity or holding. They must also  show how they arrived at that assessment and under the Freedom of Information Act (FOIA) you might be able to get copies of their filing whether they do it themselves (doubtful) or hire someone like Lewtan which is obviously going to do the bidding of its paying clients.

The main problem for the banks is that they are holding overvalued assets and some non-existent assets on their balance sheet. A review to assess risk if properly conducted, will definitely turn up both kinds of assets reported on the balance sheet of the banks, which in turn will reduce their reported capital reserves, which in turn will result in changing the ratio between capital and risk.

This might sound like gumbo to you. But here is the bottom line: the banks were using investor money. We all know that. In baby language, the question is if they were using someone else’s money how did the banks lose any money?

They did receive the money from investors like pension funds, and other managed funds for retirement or contingencies. But they diverted the money and the documents to make it appear that the bank owned the assets that were intended to be purchased for the REMIC trusts. The Banks then purchased and claimed to be an insured or a party who had sustained a loss when in fact the loss was incurred by the investors and the mortgage bonds and loans were owned collectively by the investors.

By doing that the insurance proceeds were paid to the banks creating an instant liability to the investors to whom they owed a common law and contractual duty to provide an accounting and distribution based upon the insurance recovery. At no time did the banks ever have a risk of loss nor an insurable interest in their own name. And at not time were they bound by the REMIC documents because they ignored the REMICs and conducted transactions through an entirely different superstructure.

As agents of the investors they should have followed the REMIC documents and purchased the insurance and CDS protection for the benefit of the investors. But they didn’t do that. They kept the money for the bank who never had any proof of loss, proof of payment and was a mere intermediary claiming the rights of the principal. The same thing happened with Credit Default Swaps and Federal bailouts.

That is why the definition of toxic assets changed over a weekend when TARP was started. It was thought that the mortgages had gone bad for the banks.

Then they realized that the mortgages weren’t going bad to the extent reported and that the bank was suffering no loss because they were using investor money to create the funding of loans and the funding of proprietary trading in which they masked the theft of trillions from investors.

So the government quietly changed the definition of toxic assets to mortgage bonds — but that ran into the same problem, to wit: the mortgage bonds were underwritten by the banks but purchased by the investors (pension funds etc.).

Now the rubber meets the road. The claim that somehow the banks got stuck with mortgage bonds is patently absurd. If they have mortgage bonds it is not because they bought them, it is because they created them but were unable to sell them because the market collapsed and the PONZI scheme fails whenever the suckers stop buying.

The actual proceeds from theft from the investors and the borrowers is parked off shore around the world. The Banks having been feeding the money back in very slowly because they want to create the appearance of an increasingly profitable bank, when in fact, their revenues sand earnings are slipping away quickly — except for the bolstering they get from repatriating stolen money from investors and borrowers and calling them “proprietary trades.”

Nobody on Wall Street is making that kind of money on trades, proprietary or otherwise, but the banks are claiming ever increasing profits, raising their stock price, defrauding their stockholders. So against each overvalued and non-existent asset claimed by the mega banks on their balance sheet is a liability of far exceeding the assets or even the combined assets of the banks. Treasury knows, this, the Fed knows this and central bankers around the world know it. But they have been drinking the Kool-Aid believing that if they call out the mega banks on this fake accounting, the entire financial system will collapse.

So yes there is a consensus between those who pull the levers of power that they will allow the banks to pretend to have assets, that their liabilities are fairly low, and that the risks associated with their business activities, assets and liabilities are minimal even while knowing the converse is true. The system’s foundation is a loose amalgamation of lies that will eventually collapse anyway but everyone likes to kick the can down the road.

You are getting in this article a sneak peek into why the banks all rushed to foreclose rather than modify or settle on better terms. What is important from the practice point of view is that (1) the “Consideration” mandated by HAMP is not happening and you can prove it with the right allegations and discovery and (2) the reports tendered to OCC and the Fed under this rule will reveal that the issue of proof of loss, risk of loss, proof of payment and ownership is completely muddled — unless you follow the money trail (see yesterday’s article). You can subpoena the reports given by the banks from both the bank itself or the agency. My opinion is that you fill find a treasure trove of information very damaging to the banks and the Treasury Department.

There will be caveats in the notes that express the risk of inaccuracy and which reveal the possibility that the banks neither own nor control the mortgages except as agents for the investors, that the liability to the investors is equal to the money received from insurance, CDS, and bailouts, and that the borrower’s loan payable balance was corresponding reduced as to the investor and increased to entities that are not or cannot press any claims against the borrowers. Educate yourself and persist — the tide is turning.

Excerpt from attached section of Federal Register:

The bank’s primary federal supervisor may rescind its approval, in whole or in part, of the use of any internal model and determine an appropriate regulatory capital requirement for the covered positions to which the model would apply, if it determines that the model no longer

complies with the market risk capital rule or fails to reflect accurately the risks of the bank’s covered positions. For example, if adverse market events or other developments reveal that a material assumption in an approved model is flawed, the bank’s primary federal supervisor may require the bank to revise its model assumptions and resubmit the model specifications for review. In the final rule, the agencies made minor modifications to this provision in section 3(c)(3) to improve clarity and correct a cross-reference.

Financial markets evolve rapidly, and internal models that were state-of-the- art at the time they were approved for use in risk-based capital calculations can become less effective as the risks of covered positions evolve and as the industry develops more sophisticated modeling techniques that better capture material risks. Therefore, under the final rule, as under the January 2011 proposal, a bank must review its internal models periodically, but no less frequently than annually, in light of developments in financial markets and modeling technologies, and to enhance those models as appropriate to ensure that they continue to meet the agencies’ standards for model approval and employ risk measurement methodologies that are, in the bank’s judgment, most appropriate for the bank’s covered positions. It is essential that a bank continually review, and as appropriate, make adjustments to its models to help ensure that its market risk capital requirement reflects the risk of the bank’s covered positions. A bank’s primary federal supervisor will closely review the bank’s model review practices as a matter of safety and soundness. The agencies are adopting these requirements in the final rule.

Risks Reflected in Models. The final rule requires a bank to incorporate its internal models into its risk management process and integrate the internal models used for calculating its VaR-based measure into its daily risk management process. The level of sophistication of a bank’s models must be commensurate with the complexity and amount of its covered positions.

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