Foreclosure Offense: Write A Letter Even if You are Not (Yet) in Trouble

It is my opinion that the victims of the enormous fraud includes even those who are not yet delinquent in their mortgages or even those who will never be delinquent. In any event, the following applies to those in trouble, not yet in trouble or who want to make trouble.

  • The players in the fraud knowingly entered into a scheme that would result in a generalized increase in “fair market value” for targeted geographical areas. This increase was artificially inflated to support a program creating excitement and sizzle amongst prospective home buyers and prospective investors in asset backed securities. It was only apparent if a very sophisticated economist appraised the fundamentals in view of the larger geographical areas and over a larger period of history that the spike emerges as artificial.
  • The loss to the more than 15 million people directly affected can be measured by the difference between the appraised value at time of the loan closing(s) and the actual value which is now apparent for anyone to see. Generally speaking the difference is around 25%-40% in the targeted geographical areas.
  • Add this loss as a cost of the loan and you get a startling result: not only is the good faith estimate and other disclosure documents wrong on the “APR”, the actual APR moves into usury territory, entitling the victim (in many states) to extinguish the note in its entirety, remove the security instrument (mortgage), collect treble damages and attorneys fees and costs. The parties involved might even be liable for criminal prosecution.

Based upon the figures we think are reliable there are at least 2 million more foreclosures that willl be filed, in addition to the 1.3 million that are in progress right now. Then we have another 12 million homes that are either upside down (more loan than equity) or very close to it. If you include the cost of a realtor and other expenses in selling the figure might be closer to 15 million homes.

There are of course many reasons for this but the principal reason is fraud: all the players in the securitization chain, a sub-part of which is the sale of real estate, knew for sure that the security (asset backed security) sold to investors was overrated and over-priced and knew that the security (residence) sold to home-buyers was overrated and over-priced. Neither the loan documents, the “prospectus” offered investors, nor any rating or appraisal or lending practice followed normal underwriting standards.

Thus the “fair market value” was artificially inflated on both ends of the spectrum — to investors and homebuyers. This created an orgy of feeding on fees, profits, etc. So using this theory, we are recommending that you write a letter right now to whomever you direct your payments to, to the originating loan company, the mortgage broker, and the bank the handled the transactions for the title/escrow agent, instructing them to forward the letter to their errors and omissions carrier.

The letter, in my opinion, should state that you are aware that some documents exist regarding the loan(s) which have not yet been disclosed to you and you would like to see them. These documents are dated before, during and immediately following the closing and relate to the funding source, transfer of certain rights or obligations under the note and mortgage you executed, and payments of fees to the mortgage originator, the mortgage broker and appraiser that were not disclosed at the time of closing.

This letter should also state that it has become apparent that the appraised value was vastly over-stated, that the “lender” stated on the loan was not the the actual ultimate funding source, and that neither the lender nor the mortgage broker were acting in accordance with their fiduciary duty to represent and protect you from predatory practices. Instead, it appears that they themselves not only did not protect you but actually participated in such practices and deceived you as to the value of the property, which dropped in the real world within a few days, weeks or months after the closing.

You should ask for the documents used that were “off balance sheet” for the named lender, the amounts paid to the “lender” and the mortgage broker and any other third parties, and the names of the auditors and attorneys for the lender, the mortgage broker, the title agent, and the appraiser.

You should also state that you need these documents because it appears as though you are paying parties who have no interest in the mortgage or note, and who do not have a relationship with anyone who does have such an interest. This places you in the untenable position of making payments and facing potential liability to a third party, to whom the note and mortgage may have been rightfully assigned, even though not re corded in the property records.

Lastly, you should state that you reserve the right to demand attorney fees and auditors fees if the facts are as you have recited them as well as all rights under all applicable rules, regulations and laws of the City, County, State or Federal Government.

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