Where Has All the Money Gone – Short Time Passing

The Reno Class Action attorneys and others, including Elizabeth Warren, Chairwomen of the Congressional Oversight Committee, want to know where this money went, whether it satisfied obligations, and whether the obligations satisfied inure to the benefit of homeowners who purchased loan products from a Ponzi securitization scheme or otherwise. $13 trillion in mortgages were issued during the mortgage meltdown period, and $11.3 trillion was paid in by the public sector. During the same period, trillions of dollars in payments, prepayments, payoffs through sales and refi’s also went into the system. These numbers are readily available through dozens of sources on the internet.

Simple addition reveals that more money went into the system in cash and commitments than went out in loans. It would seem that an appropriate question to ask is “were these mortgage debts paid by third parties and what rights does the taxpayer have to recover the payoff to Wall Street firms?” Is the taxpayer a holder in due course or possessed of some claim to collect on the obligations created when homeowners purchased these loan products? If homeowners have claims for fraud, TILA violations, predatory and deceptive lending, usury, etc., whom do they sue? When the homeowner sends a Qualified Written Request or Debt Validation Letter, to whom should the letter be addressed?

Most Lawyers, Layman, Judges, Legislators, and Executive Directors of Administrative Agencies are just simply frightened by the staggering numbers that have been reported. And deep down inside they suspect it only part of the story. They are right. And the astonishing gap between the profits Wall Street is now reporting and the rest of the economy merely underscore the severity of the problem confronting us and the high probability it will happen again. Where did these profit come from when economic activity is obviously sagging. Wall Street makes money when money moves or at least that is the way it is supposed to work. This time it is different. Wall Street made money regardless of movement, and is still doing it. Take a look at the following compilation of the total reported money ($11.3 Trillion) that moved into Wall Street from the U.S. taxpayers and the Federal Reserve.

1. AIG — $183 Billion
2. Guarantees on Bank Debt – $789 Billion
3. FDIC Insuring banks and other large companies – unknown
4. Guarantees on deposit accounts – $736 Billion authorized
5. Citigroup – $249 Billion
6. Bank of America – $98 Billion reported
7. Loans to Financial Firms – $1.34 Trillion
8. TALF (Term Asset Backed Loan facility) – Cheap financing to investors to buy derivatives – $1 Trillion authorized
9. PPIP (Public Private Investment Program) – to buy “non-performing” securities – $1 Trillion authorized
10. Small Business Lending – $15 billion
11. FNMA and Feddie – $5 Trillion
12. Debt and Mortgage Backed Securities Purchase Programs – $1.45 Trillion
13. Incentives to “lenders” to modify and settle – $50 billion
14. Support for Money Markets: $3 Trillion

8 Responses

  1. Neil: Do you have a citation for the facts provided?

  2. Posted by Karl Denninger in Editorial at 08:34
    Has A MERShole Opened Up?

    Ellen Brown penned an article over at HuffPo that sounds much more definitive than it really is, yet outlines a potential major problem for the secutized loan industry:

    In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure.

    Well, kinda. The entire decision is found here and isn’t quite as represented in that article. Nonetheless, it is significant.

    A bit of background is in order.

    A mortgage is a combination of a promissory note (that is, a promise to pay) and a security instrument. That is, there’s a deed of trust and a debt (the promissory note.)

    State law governs foreclosure and most states require as a matter of statute that these two items remain intact. Further, most states require as a matter of statute (that is, law!) that to foreclose you must present proof that you actually have an enforceable interest. In many cases this requires what is known as a “wet signature” – that is, the actual original signed document from the debtor confirming agreement to be bound to the terms. In addition you must establish ownership of that document – that is, you must show an unbroken chain of assignments from the originating bank to your hand.

    This is where the problem comes in – the originating lender has no standing to foreclose once he sells off the mortgage. He was paid in full and thus has no standing to appear in court.

    MERS’ web page says this:

    MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.

    They may as well have said “we have decided that we can abrogate state law with impunity.” Oh wait – they did, didn’t they?

    Sorry folks, life doesn’t work that way.

    If state law requires an unbroken chain of recorded assignments in order to document ownership of a mortgage and thus standing to foreclose, MERS cannot override this state law by fiat.

    Many judges, including some Florida, have held repeatedly that despite the lack of an actual chain of assignments and often despite a lack of actual “wet signatures” on an original promissory note they will evict people from their homes regardless! You have to wonder how many of those judges have been bought, bribed or cajoled by banking interests, given that the purpose of a Judge is to do just that – judge – not write law. If the legislature says you need an unbroken chain of assignments and an original document for it to be enforceable, then it does.

    But in other states banks have run into a problem – judges, rather tired of the “fast and loose” way banks have played with the law for the last decade, have put their foot down and actually done their job – that is, they have judged the facts and enforced the law as written.

    In those locales MERS has run into trouble.

    The underlying issue is that many of these so-called “securities” (MBS, CDOs, etc) were issued “light” of the required legal mandates to keep the chain of assignments and actual consent signatures required for enforcement. Many people charge that the reason behind this was simple volume. I disagree.

    I believe that a large part of the root cause of these “lost” documents is to cover up blatant and in many cases outrageous fraud. It is difficult to prove that a bank or other lender knew and ignored stated-income fraud (or allegedly “investigated” and “underwrote” a file when it did not) when the original file has been turned into ticker-tape confetti courtesy of the closest paper shredder!

    MERS has thus given cover to a tremendous amount of fraudulent conduct – the very conduct that predatory lending statutes, “wet signature” and “chain of title” laws are supposed to prevent.

    The real bottom line here is that securitized bondholders may in fact be holding worthless pieces of paper. My hollering about this began in April of 2007, right when The Ticker began publication, and continued all through 2007.

    The shocker to me is that the bondholders have sat still for this as long as they have. The “delay, extend and pretend” game is all fine and well but all making coupon payments by playing “hot potato” does is hold off on the inevitable. It doesn’t change a thing in terms of the final outcome, because the cash flow to maturity on these notes doesn’t exist!

    There’s liability in silent consent to getting screwed by so-called “technical” legal defects; you can find yourself on the wrong end of a legal principle called “estoppel.” Sucks to be you if that happens, and the “you” in many of these cases are pension funds and others who have a fiduciary responsibility to the final alleged beneficiaries of these “investments.”

    In point of fact all of these fraudulently-securitized instruments – where the inducement to enter into the transaction included representations about credit quality flowing from the alleged original borrowers and security structure are now known to be false – can be “put back” on the originators and securitizers. That bomb winds up coming to rest square on the balance sheet of the big banks as either principals or the “funding and bundling” sources for the gazillions of small “boutique” mortgage shops that have closed over the last two years.

    How long will it be before an enterprising attorney or firm decides to put together a class action with all of the bondholders who are certain to get hosed down the road? Good question. It is in fact one of the mysteries of the present mess that we haven’t seen a significant push in this direction as of yet.

    I still expect that we will, as the potential recovery (and thus the potential legal fees) are literally in the hundreds of billions of dollars.

  3. usedkarguy,
    I think the FDIC is a little preoccupied at the moment. It seems the bank failures are draining their supply of money.


    Dan Edstrom

  4. I fired off an online complaint to the FDIC today. Just for shits and grins I listed all the laws that were violated. I don’t think I’ll hear back, but who knows? I am getting the feeling this all came from somewhere higher up in the food chain. I am also feeling quite powerless as to where to go. If I throw $1000 away filing a bankruptcy and filing an adversarial action, will I win? Probably not. But I’ve decided it’s worth a try. Wells Fargo victims, drop me a line. I need more cases to throw at the FBI agent in charge (Mortgage Fraud Task Force) who interviewed me. He asked me to get him more cases, so here I am. usedkarguy at yahoo dot com.

  5. Utterly unbelievable ….
    But the CRUSHING
    weight is on us all.

  6. We now have NON-JUDICIAL solutions to correct this problem.!?
    like foreclosure..& securities fraud
    these fukers should be burn@the stake!
    got a light?

  7. There’s the rub…

  8. Unfortunately… this should come as no surprise to those of us who have been following this story for years now.

    The TRUTH is… your home was long ago paid off…

    We now have NON-JUDICIAL solutions to correct this problem.

    Keep up the good fight!

    Allan Hennessey
    800-552-9313 Ext. 123

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