Where is the Lender? Where is the Counterparty?

EDITOR’S NOTE: usedkarguy gets it pretty well. He submitted the following comment which I have edited into this post, but I retain all his basic observations. This one deserves a re-read.

Essentially he  is proving a major point: You can’t pick up one end of the stick without picking up the other.

If the pretender lenders are claiming that the loan obligations are in the “trust” (REMIC) then the securities must have been sold. But then how can they say they stuck with unsold MBS for which they needed TARP relief? That is why discovery on the TARP funds is so important. Somewhre there is a document that says we are holding the following TOXIC ASSETS. And in that list are thousands of mortgages in hundreds of pools that never made it or which have vanished into thin air.

So the representation for example that U.S. Bank is the holder of the note as Trustee for Asset backed Security Pool 1234 must be tested by discovery and an evidentiary hearing if possible. That is where the rubber meets the road.

The arrogance of the pretender lenders fades when they are requred to move from spurious attorney representations in court to production of actual evidence — documents that can be authenticated by people with personal knowledge. And remember that would be people who are COMPETENT WITNESSES.

  The legal argument is that even if the loan DID make it through the trust, it therefore was sold to the investors who purchased the Mortgage Backed Securities which were hybrids, containing the language of a bond and the conveyance of a percentage equity in the pool AS OWNERS THEREOF. Thus without naming them as LENDERS and proving that the LENDERS are foreclosing with the assistance of the pretender lender, the pretender lender is simply stealing the property from a LENDER who knows nothing about the existence of the foreclosure proceedings.

The factual argument is that in many cases the loan never made it in any form, on any document, to the Trustee, the Trust, the REMIC or the investors.

THAT is why you win in discovery — unless they account for all aspects of this transaction, they have no accounting at all. A creditor’s burden of proof is simple: here are the records and our witnesses that show that you took value from us and here is all the money anyone ever paid on this obligation. So here is your balance. This is done in small claims court every day.

Without an accounting they cannot positively state whether the obligation is in default, and if so, to whom the obligation is actually owed (i.e., who lost money on the allegedly defaulted loan).


Where’s the counterparty? Who wrote the default swap?

In my trust, it was Bear Stearns (Now JPMChase), and the Securities administrator (seller) was Citigroup Global Markets. Trustee HSBC for the Wells Fargo Trust. Wells Fargo wore all the other hats.

Now, the vintage deals WFHome Equity Asset Backed Securities 2005-1/2/3/4 were all “left on dealers shelves” like the same vintage SASCO Deals. Anyway, if CitiGroup Global got stuck holding the bag ($62Billion writedown, anyone remember?) and the securities remained unsold, how did they (the mortgage pools) end up in the 1999 Wells Fargo/Norwest Assets 1999 Trust? It’s the “extinguishment of the liability” (140-3) wherein the problem lies (reverse-repo). It’s a modern-day version of “hot-potato”. It’s hot because they used the loan to borrow more money after dispersing the investor money. They don’t have the money to pay back the loan that constituted the proceeds of YOUR loan (it was borrowed from the investor). The AB1122 is where they defraud the investors by not reporting the actual failure of the trust (receivership). And, the REMIC trust is taking in more money in foreclosure and sheriff’s sale/liquidation (not a true open market transaction as perpetrated with fraudulent representation on the part of the foreclosing entity) than in interest pass through (the key to tax-exempt flow through (conduit) status) (more than 20%?), if the defaulted loans are indicative of 20% of the total number of loans in the pool, the mathematical consequences are supposed to trigger receivership (liquidation). The WFHEABS05-2 are running at 40% delinquent/foreclosed/bankrupt/REO. These default rates are common throughout meltdown-era MBSs.

My question, Mr. E, is who is the counterparty? They are the one who got stuck with loss on your note, but they have no note, and no claim to the collateral. They got paid a premium to perform on a contract, and lost. They don’t have any assigned interest in the house, only a receipt for paying the claim. The loan is extinguished on one set of books, but is continuously carried as an asset (money still a receivable) on another set of books (ABS) even though no such obligation exists.

Now, back to True Sale. This is the “surrender of control” issue that violates the true sale status. The loan was to be assigned “without recourse” when the Depositor agreed to deposit it with the Trust. I don’t think any of this was done other than with a passing of dollar values over a wire. There was never any “arms-length” transaction, the pretender lender stayed on immediately to “service” the loan and make sure you defaulted, they directed the appraisal of the collateral to cover the loan. Then they end up recovering the collateral at sheriffs sale to sell at a later date directing proceeds into their own pockets (the sponsor usually holds the equity tranches and the Z tranche, which receives non-regular cash flows).

12 Responses

  1. Has anyone actually found out whether their loan went into the trust, and if so, were AIG/insurance funds or TARP monies or other gov monies applied to offset the loss??? I’ve asked a hundred different ways in my litigation but they are stonewalling for the time being claiming a protective order until their motion for dismiss is decided which is totally bogus (they claim I can’t attack their application of HAMP to my loan mod request because I am not the one who set up HAMP and am only a third party beneficiary to HAMP). Of course I claim they don’t have standing to make this argument among other things because they don’t even prove yet whether they own the note nor have they produced it–that is why I am seeking quiet title, to get answers on my note, whether it has been paid off in whole or in part, and whether the chain of title was broken by false and fraululent filings by MERS (I have at least three facial indications the filings by MERS were false and done merely to foreclose). What is anyone getting in discovery on this issue? The SEC says it does not have info on whether the trusts are bankrupt or were paid off in whole or in part.

  2. H Gosh,
    Each assignment has to be verified. Remember also that each time it was “assigned” to a pool it was probably “pledged” … So you have many companies and/or people (and “holders of certificates”) who are real parties in interest (for each pool). According to FAS 140-3 the only true way they can sell it is in an open market transaction (did they?) If they did how did EMC get it back? If I sold my car and it was sold 3 times and I “found” the car and started driving it (I still had the keys), I could tell the police that I owned it at one time so I still own it. Anyway, at the very least you have JOINDER issues – all of the real parties in interest have to join together in order to properly adjudicate the issue. Are you in a judicial state or non-judicial? Of course there are many other issues, these are just the ones that jumped out.

    Prove each assignment with a competent witness. Challange everything.

    Disclaimer: I am not an attorney and this is not legal advice. Consult with a competent local attorney.

    Dan Edstrom

  3. Hey Nye Lavalle why don’t you tell your great prezident to uphold this rule of law he keeps talking about instead of giving the pretender lenders more money… THIS IS NOT THE UNITED BANKS OF AMERICA. A question that everyone in court deserves an answer to, DOES THE ATTORNEY REPRESENTING THE LENDER NEED TO SHOW THAT HE IS DULY AUTHORIZED BY THE LENDER TO REPRESENT THEM?

  4. First, it points out the fact that a lot depends on the court that hears a case — at least until the appeal. Second, this ruling emphasizes what compliance experts have known for a long time — “when it comes to TILA, ‘hypertechnicality reigns.'”

    This is from: http://www.bankersonline.com/infovault/courtwatch_hamm_jones_til_101707.pdf

    Dan Edstrom

  5. In regards to the below 2002 ruling article – the title is:

    Two Bad Loans Don’t Equal One Good Loan

    This seems to apply today with loan mods …

    Dan Edstrom

  6. Case from 2002 regarding fiduciary relationship, disclosure of material information and blanket waivers.

    From http://www.bankersonline.com/lending/so_salleecase.html

    The Court held that a lender absent special circumstances is not in a fiduciary relationship with its borrowers. A lender however does have any obligation to disclose known facts regarding the appraisal value of real property and may be liable for fraudulent misrepresentation if such disclosures are not made. In addition the existence in an extension agreement of a blanket waiver of all claims against the bank may be held unenforceable if the bank induces the debtor to execute the agreement with the promise of future financing.

    Dan Edstrom

  7. Fair Debt collection practices – check out this ruling where the creditor was actually found to be a debt collector. This may apply to many foreclosure actions, inter alia, because the attorneys are NOT reviewing the actual files … Plus the actual creditor is NOT who they say it is …

    This is from: http://www.bankersonline.com/lending/mbg_fdcpacase.html#

    The Court’s Ruling
    The District Court ruled
    that Dickerson and Household each qualified as a “debt collector” that could be held liable under the FDCPA for misleading communications with debtors;

    although Household would not normally constitute a debt collector under the Act, it qualified as one under what is known as the “false name” exception to this rule. A creditor or an affiliate of a creditor who uses someone else’s name so as to suggest to the debtor that a third party is involved in the debt collection process, when in fact that party is not involved, can be treated as a “debt collector” for FDCPA purposes;

    Dickerson played no genuine role as an attorney in Household’s debt collection efforts;

    Dickerson’s letter to Nielsen and the other class members was in reality from Household and Household was simply using Dickerson’s name to suggest that he and his firm were involved in the attempt to collect the debts;

    Household should be treated as a debt collector and held liable to the extent the letter was false or misleading;

    in order for the letter not to mislead the recipient as to the nature of the attorney’s involvement with the debt, the attorney must have direct and personal involvement in the mailing of the letter — e.g., by reviewing the file to determine whether the letter should be sent, or by approving the mailing based on recommendations by others;

    the firm’s “review” was no more than a deceptive “veneer of compliance” with FDCPA.

    Dan Edstrom

  8. This is exactly what I am fighting. My note was securitized in a 1998 Trust, which disappeared into an EMC Trust, which disappeared into a SACO CDO.

    In 2001, note was placed into foreclosure by Fairbanks. Federal complaint filed, and Fairbanks entered into a settlement agreement to correct. Chase reassigned note back to BFP, which has been “dead” since 1999 in 2007, effective 2001, prior to Fairbanks fradulent foreclosure. Settlement declared null and void since Fairbanks never had servicing rights based on ante-dating of assignment. Note assigned in 2004 by “Dead” corporation and resecuritized into EMC Trust. EMC Trust sold to SACO swap fund. EMC seeking to foreclose, and produced a “copy” of an allonge (not entire note) dated 1999 assigned in blank “without recourse”. Judge claims since it appears that EMC “USED” to hold the note, they can take house in rem!! What is wrong with these Judges – Willfull Blindness?

  9. Thanks for the thought Nye,

    and greetings from Virginia, DC and MD

  10. Here is a request for dismissal by GMAC on a case I just found involving TILA, RESPA, HOEPA, etc.


    GMAC’s SEC filings state that they are a party to lawsuits from time to time. If ANY law was broken in connection with the origination or servicing of a loan, they will have to repurchase it from the Trust …

    It seems to me that this repurchase obligation (if identified in your lawsuit as ANY law broken) would take precedent over and invalidate your foreclosure. At the very least it now adds them (GMAC in this case) as a real an indispensible party.

    Would you have to win summary judgment for them (GMAC in this case) to add them as a real party in interest? Or merely the allegation that a law was broken? Of course they should be added (through Joinder) anyway because of other reasons (pledging, advances, credit default swaps, etc).

    Dan Edstrom

  11. Actually, that’s about how it works with different gestations and variations of the common theme. FRAUD!

    I go back to the equation I wrote in 1998 when I was trying to get everyone on board and the Dems and Republications would trade off blame. It’s as simple as this:

    Borrower Fraud/Deceit = Investor/Shareholder Fraud & Deceit

    If you are cheating the borrower at origination and/or servicing, you are simply “cooking the books” creating income you are not entitled to; a debt you do not own; an inflated balance where investors are paying a higher servicing fee that rightful; a share price and book value inflated by vapor assets etc…

    Get to the bottom of the accounting and show how they are defrauding the investor, shareholder and/or government and that’s when you get your cases settled!

  12. WOW that is powerful stuff.

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