TWO Undisclosed Yield Spread Premiums: Why Securitization Changes the Game



So called “auditors” will miss the fact that there are two yield spread premiums that were not disclosed to either the homeowner or the investor. Failure to account for the movement of money through the securitization chain and failure to account for appraisal fraud, essentially leaves 95% of the money on the table. Those who get paid recovering undisclosed yield spread premiums and profits and treble damages should want to take note. But it is easier to offer the less intensive “audit” (we like to call these forensic analyses because there is no audit in the accounting sense). This leaves most of your bargaining chips for modification or settlement sitting in the pocket of the pretender lender.

And this is why forensic reviewers and lawyers who understand the basics of securitization could go after the entire cruise ship but are walking away with only peanuts from the bar. SIGN UP FOR CLEARWATER, FLORIDA SEMINAR NOW

Let’s take a look at what I’m talking about. Example: You have a $300,000 loan that was “bumped” to a higher priced loan than what you would otherwise have qualified for.

This means the salesmen who sold you the loan product convinced you through misrepresentation of the loan and the marketplace that you will be better off with the worse loan. He knows it is worse but he gets paid for putting you in a worse loan. So he skews the facts and misdirects your attention until you come to “agree” that the worse loan is “better.”

If you would have qualified for a 5% annual interest rate, fully amortized, fixed rate for thirty years and instead you took some alternative flexible “loan” product to reduce your payments initially, the loan originator gets a yield spread premium which is required to be disclosed at your loan closing. Usually it isn’t. The amount of this first yield spread premium would probably be around $3,000. This is what the usual TILA “Audit” reveals. What they don’t reveal is an additional $180,000 undisclosed yield spread premium, plus the profit from payment from credit default swaps. So they are claiming around $10,000 in damages for you but they should be going after $600,000. Oops!

Same example with extra facts: The interest rate on the alternate loan that you signed calls for prepayment penalties and adjustable rates, resets of payments from interest only to fully amortized etc. In other words the risk of you defaulting on a loan that you could otherwise have easily paid, is increased immeasurably — a fact not lost on the securitization intermediaries. They, knowing the loan will probably fail, put your loan in a pool with similar loans that are likely to fail. Then they purchase credit default swaps betting that a substantial number of loans will fail thus receiving payment on the pool perhaps as much as thirty times over, because there were no limits on how many times they could insure the pool, even if they had no interest in it and even though they didn’t lend any money.

So it turns out that your real payment and real interest rate are much higher. Let’s say that it is a modest increase to 8% over some period of time. This interest rate is applied against the loan balance, $300,000 which means that for purposes of selling your loan to an investor, they are selling an “apparent” income of $24,000 per year plus a “guaranteed” return of principal.

What the investor doesn’t know is that you don’t qualify for an 8% loan and you can’t pay it. The investor (pension fund, hedge fund etc.) only knows that they are buying a bond which also gives them ownership in your loan and others in the pool. Since the bond is Triple AAA rated and “insured” (by AIG!), the risk is perceived by the investor as very low. So the investor is willing to accept a rate of return of only 5%, which is 1% higher than similar financial products on the market. The fund manager looks like a genius because the extra 1% translates to a 20% increase in fixed income. All the investor cares about at this point is that he just got an income of $24,000 per year virtually guaranteed, which gives him his 5% return.

Now for the analysis and why lawyers and forensic reviewers need to take note: Just take out a piece of paper, a calculator and try this for yourself. A new yield spread premium appears as a result of this shifty tactic of changing loan terms and it is huge. It turns out that the amount of the purchase price of the bond for a 5% return that equals $24,000 is $480,000. You can do the calculation as many times as you like but it comes out the same every time. They took $480,000 from the investor and gave you $300,000 keeping $180,000 for themselves. That means there is an additional yield spread premium of $180,000 that was undisclosed.

Under the TILA-Respa approach this means you are entitled to the first undisclosed yield yield spread premium of $3,000 (see above) PLUS the second  yield spread premium of $180,000.  And you may be entitled to treble damages. That could be $540,000 or perhaps twice the amount of your loan. That means you have a set off in an amount higher than the loan itself. That means they owe you more than you owe anyone. That means you can’t be in default. It means you are not in default. It means your foreclosure is improper, illegal, and immoral.

The moral of the story is stop looking for the easy cheap way out. Your house and your life are worth far more. Yes you will have to fight harder and longer to resolve the issues. And yes lawyers are slow to realize that this is a gold mine for themselves as well as you. But increasingly, judges, lawyers and homeowners are coming to realize that this was not a case where their eyes were too big for their stomach. This was a simple case of fast talking salesmen getting people into trouble without the slightest twinge of conscience. This wasn’t your fault. You are the victim, not the perpetrator of some great fraud on the financial industry. They knew exactly what they were doing when they cheated you and the investor in exactly the same ways.

97 Responses

  1. That is very important indeed. It is the people who do not take advantage of that who are the ones who normally do not succeed. If you stick with it and learn the ways, this industry can earn you a lot of money!! Good article, nice work .


  2. A fundamental concept with a “mortgage” is that the
    very words in French, MORT= DEATH and GAGER=TO GAMBLE, A GAGE=BET,GAMBLE OR WAGER See 1968 Black’s Law Dictionary definition
    of a GAGE=WAGER!
    If the borrower pays on the loan for twenty years, and suddenly dies, the balance is due immediately,
    even if it is only a small fraction of the original loan.
    If the heirs can’t pay, than the lender forecloses and is
    usually the high bidder on the Court House steps, buying it for much less than it is worth. In this case the
    lender wins the “death gamble”.
    On the other side of the coin, if the lender dies (gets
    dissolved) before assigning the “mortgage” and Note,
    then the borrower wins the “death gamble” and owns
    the property “free and clear”.
    It is rare that the borrowers ever win the “death gamble” but it does happen from time to time, and it
    is happening right now!
    It could be that the “EYE IN THE SKY” is looking after
    his/her children on Earth who were “scammed” by such things as the “Yield Spread Premium”.

  3. Mike H,

    I’ve been working a bit more on my loan and going through details of the prospectus etc. and now I think I can shed some light on this subject as you have described.

    On a reverse Mortgage it is exactly the same as a neg am in the fact that they absolutely know and plan on the balance increasing over the life. As noted on my loan detail report the max original “scheduled” balance is the maximum cap LTV as determined by the program. Mine is 115% of original loan a reverse may be as much as 125%.

    So to answer your question as to the insured amount on title it is supposed to be the amount as noted and here is why:

    The lender does get from the investor the total max amount as they don’t want to have to put their money in over the life of the loan as they know for certain that it will eventually get to that point or beyond. The investor puts in the full 125% percent let’s say and they have to make sure the title matches as that is the total insurable final loan.

    They dump the overage in an escrow account and pull from it when the neg am or balance needs to be increased. This way the lender can tally the total loan in the principle balance of the trust and sell more certificates.

    It may not necessarily show that they skimmed a YSP in that difference but they have hidden ways of getting the money back over the servicing life. If you review some of the monthly servicing fees they are collecting on the trusts it clearly makes up for the rest in short order. They additionally insure the servicing of the loan so that in the event of default, they get the typical insurance and they get the full amount of what the servicing fees would have netted them for the entire(30-40) year life of the loan.

    I can send you a copy of the prospectus I have if you need one to refer to as to the accounting that is set up etc and a few reports that I am working from.

    I hope this helps!

  4. Dear Mortgage Auditer,
    Thank you for challenging my logic on the reverse
    mortgage. If I can’t convince you that this amounts to
    fraud, I probably won’t be able to convince a Judge.
    So here I go again. There is a concept called insurable interest. As far as I know, no insurance company will insure more than what the owner has at
    risk, even in a negative amortization scenario as J in Co theorized.(perhaps I’m wrong about this, maybe they will.)
    The lenders coverage is for $147,000, therefore
    that is the amount that must have been lent! I can’t
    see it any other way. The funded amount of the reverse mortgage was $112,749. It was placed with
    a “servicer” which would send her checks when needed and calculate the earned and accrued interest
    on the advances. The broker got $2,940 in commission on the front end.(2% of $147,000?) No YSP is indicated.
    So what happened to the other $34,251? Why wasn’t it accounted for on the closing documents?
    The warehouse lender appears to have been IndyMac Bank, the corespondent lender is a defunct mort. co. and the servicer is bankrupt. They all went bankrupt! (Including the title company). What kind of scam were they involved in? You tell me.Did they all comply with TILA and RESPA? I don’t think so. Was the equity stolen?Yes if she dies and the house gets foreclosed on and sold for less than what was loaned. Who the actual thief is, we’ll probably never know for sure, but someone, not her estate, got the $34,251.
    To me , that doesn’t seem right, even if it is legal!

  5. House sold in 04 for $141,000. One year later appraised for $168,000 by RELS, Wells appraisal co. Loan amt 164,200. I think the $430,000 original note became $488,895 (funded on a $164,200 principal). Another thing, the 99-EX that lists the loan under the WFHEABCert05-2/WFASC 1999 Trust shows a 35% mortgage insurance benefit amount. Is that 35% of the 30-year Note or the $164,200 principal? Keep in mind, servicer is showing default status since December 06 in one set of records, and claiming non payment since December 07 in court. Last notice of intent to change rate showed on time performance with a loan principal balance around $158,000 (what it should be with all payments applied on time). Last payment made July 08. No foreclosure action until Feb 09.

    but can someone decipher the values represented?

  6. usedkarguy,

    What was the appraised value of the house to begin with?

    The total of 430K may be the total cost of financing including principle and interest for the life. I would assume they are counting the loss against what the loan would have paid to assess what the MBS insurance would cover in the event of default. The Net Recoverable less the Net Loss is close to the mortgage amount.

    Would the value of the house have been the 285K number?

    The MI I would assume should be the payments made in the default period plus fees and interest. How many payments were missed? Does it compute?

    They are probably showing the value much higher as they are with my deal to max the insurance claim. I would assume the net loss is what is being requested. The question is in this instance is do they pass the loss on to the investors and collect the money from the insurance at the same time? Then I would assume the house is a bonus or given to the insurance company.

    The note could have been sold twice as well.

    Very interesting for sure.

  7. This is (was) a $164,200 mortgage that showed an amount around $430,000 for a total of payments on the GFE at closing.

    The “MI 23K” note appears on the 16th of the month after the loan defaulted. I think that’s $23,000 being recovered by the servicer monthly on my $1300 obligation.

    The asset value (real estate) is estimated at $142,000.

    Explain that one for me.

    Winner gets a cookie.

  8. Hey M.A. Servicing notes; decipher please:

    Reported to MI Company (S-23K)

    MODSF DR:0.45, LS CUR -0.12,LS TD:-0.68, LS UPB:0.77, 2008-6-12 TO 2035-06-12
    NPV:$285,322.01, NLOSS:-$319,417.26, NET REC$488,895.10, RP ALL:1.68, RP

  9. You are losing me again. Let’s stay on topic and finish what we had started. How was the borrower’s equity stolen from her? This is what you were alleging. Remember?

    Have you now changed your position on the theft of equity theory? Do you now agree with me that no one stole $34,000 from the borrower?

    Your entire theory is founded upon the assumption that the inflated title policy somehow proves the investor advanced that amount to the originator of the loan, thinking the borrower would receive it. In your mind the investor is the warehouse lender who is defrauded by the originator!!!

    Have you really thought this through? There are so many holes in your theory that I don’t know where to begin.

  10. Actually, the old woman’s equity in her property
    was falsely appropriated for the commission of tax fraud. The crime would not be directly against her.
    but against public order in general.
    Truth in Lending means what it says, all the money
    has to be accounted for. In this case, $34,000 is un-accounted for. If it had been shown as paid outside
    closing on the closing form, than it would have been
    lawful. But if that had been done, the loan might not have closed.

  11. Dear Mike:

    You have failed to explain how the borrower was defrauded out of $34,000. How did the lender steal that money from the borrower? This is what you were alleging before. Has your position changed? Do you now see why no equity was stolen from the borrower? This is the part I could not understand so I want to make sure you agree with me.

    Actually these crooks were in fact rocket scientists and they knew what they were doing. They were not dumb enough to do what you are alleging. Many of the investment bankers are math and physics experts who went to Wall Street to make the big bucks. They are not petty criminals.

  12. Dear Mortgage Auditer,
    To answer your objections: Title Coverage does not directly effect the amount of money owed by the borrower, it is only an indication of the TILA and Respa
    violations that occurred. In the example provided, the
    ysp was reported as about $2,000 whereas the correct amount was $20,000. If the borrower had known, I’m sure he never would have consented to the
    loan. He was offered $112,000 at 6% when he could have had $133,000 at 5% on his appraised value of
    $140,000. (I have removed the mortgage insurance
    premium to keep the numbers simple to understand.)
    As far as what is owed, it is the interest spread that is important, 5% of $133,000=$6650, whereas 6% of
    $112,000= $6720 so they are very close, and it is the
    income, more than the principal that everyone’s attention is focused on.
    i doubt the investors compare the Notes to the Mortgages. Why would they? The Notes are what was used to manufacture the CDO’s. The higher they are,
    the better for the securitizer. Remember, they(the securitizers) would bundle together , let’s say , one
    million dollars of Notes and then sell that same “note pool” ten times over! It was all a gigantic Ponzi scheme where the old investors were paid off with
    new investors money , until the whole scheme collapsed and the government stepped in to pay of f the investors who got scewed, with tax payer money!
    Do you really believe they would hesitate to forge
    the front page of the Notes for small amounts, given
    that these served as the base for the whole Ponzi scheme? They had alot of chutzpah and they would
    not allow this minor detail to stand in their way. That
    is why they used “pretender lenders” to bring them new Notes to securitize. They did not work for free!
    They got their money from the gullible borrowers.
    As long as the interest payments were roughly the
    same, who would know? At least in the short term.
    It was the perfect crime, because the victim would walk away having no clue he/she just got screwed !
    Why else would all these Notes be missing? Common sense gives us the answer. The crooks were not “rocket scientists”. They were looking at a
    quick “score” and the borrowers and investors were
    the “marks”. But hey, “ain’t that America?” Land of the
    gullible sheeple! Wake up America!

  13. It’s just leverage only. There is already a pending class action against them on my specific bundle and those around it that were underwritten by WAMU acceptance Corp. I think they are alleging violations of sections 11, 12 and 15 of the Securities Act of 1933, appraisal fraud, underwriting fraud and demanding rescission on the certificate purchase.

    I would only think that this is going to help with the local judge and dismissing the foreclosure. Hopefully I can ultimately quiet title if they choose to back down.

  14. J in CO,

    Good luck with the securities fraud charge. I have seen great cases dismissed for reasons that you would not believe. What are your pecuniary damages as a direct result of the alleged securities fraud?

  15. I agree and I think the fraud was committed more on the level of how they could use the instruments to leverage more. Lost notes can be certified and duplicated to sell them twice or pledged as an asset on another set of books.

    It really comes down to which side to call the note on and which to hide it and keep making the payments so it doesn’t default on the other.

    They carefully(sort of) covered their tracks by having too many groups involved and only “sampling” the audits up to no more than 20%. Deferring liability pieces across the spectrum gives them plausible deniability. To fight the head you have to fight the rest of the body as well. Very hard to do and lengthy.

    The question is where is the Achilles Heel?

  16. The payoff will tell you everything. I have been in this business a long time and I have yet to come across a payoff that was off by 2% as a result of a forged note. In fact many servicers, including New Century, who was one of the biggest subprime lenders, had a copy of your note online so you could view it at anytime. Why would they display your note if it was forged?

    The fraud is a lot more subtle and not so easy to detect.

    The true way to prove the theory Mike is to get a payoff on the loan to verify what they say is owed. If it is as High as 133 you may have something. The other is to look up the trust the loan is in and see if you can find their investor report that shows the principle balance on the spreadsheet. I am happy to send you a copy of mine so you can see it.

  17. Dan,

    With private label pools they did not formally transfer the notes in to the trusts but that is still no proof that they forged the notes.

    However, with FHA insured loans the rules were more strictly enforced and they did audit the files so I cannot see how anyone would dare forge all the notes to defraud the government. That is just too wild and crazy.

    There was a lot of fraud but not in this fashion.

  18. J in Co,

    Can you e-mail them to me too?

  19. Dan,

    I just emailed the reports. I have one that is the recorded SEC document that along with the supplementary prospectus shows all of the loans in the bundle. The other report is the monthly updated report from the WAMU securities website.

    These are both great as they report the original appraised value as reported to both the investors and SEC while being in possession of 4 appraisal reviews that show the value is 1.6M less than reported.

    I might have a little leverage for securities fraud….maybe?

  20. J in CO,
    You have the investor reports that specifically shows the principal balance of your loan? I would like to see that, can you email it to me? I have the servicing reports sent to the ratings agencies and investors for my loan. These reports show the following (for each class of certificates):

    – Original face value
    – Beginning Notional / Principal balance
    – Pass-through rate
    – Principal distribution
    – Interest distribution
    – Total Distribution
    – Principal loss
    – Interest loss
    – Deferred Interest
    – Ending Notional principal balance

    – The accrual period
    – Acrrual methodology
    – Optimal Interest Amount
    – Interest loss
    – Deferred Interest
    – Interest shortfall amt
    – Other income
    – Accrued certificate interest remaining unpaid

    Other income detail:
    – Certificate class
    – Prepayment charge
    – Remaining excess cash flow and OC release amount
    – other income distribution

    Interest shortfalls, compensation and expenses (per Group)
    – Current prepayment interest shortfall amt
    – Compensating interest
    – net prepayment interest shortfall amount
    – Civil Relief act shortfall count
    – civil relief act shortfall amount
    – Compensation
    – – subservicer
    – – master servicer
    Advances by master servicer
    – Allowable expenses per governing document
    – non-recoverable advances

    Prepayment interest and Basis risk/net WAC shortfall amount (by certificate class)
    – [I will leave out this section)

    Collateral summary
    – original laon count / scheduled principal balance
    – beginning loan count / scheduled principal balance
    – scheduled principal
    – curtailment
    – payoff
    – matured loans
    – repurchases (by the way this is 0 for all months reported)
    – beginning aggregate scheduled principal balance of liquidations (and?) charge-offs
    – ending loan count scheduled principal balance

    there is more, but I will just leave it at that. None of the information is specific to any one loan as I had hoped. But, they have to keep that info somewhere (use discovery) …

    Dan Edstrom

  21. This is interesting.


    I agree with you on the title insurance does not dictate what the enforceable loan is for. The audit situation not so much as I doubt anyone audited anything during the time in question. They were not just too busy but too slick on how things happened.

    I do think that there may be some marginal reasoning behind what Mike is saying although I doubt it is as big of a situation as he thinks.

    I would venture to guess that in the reverse and neg am loans the coverage is dictated by the reset value of the mortgage i.e. 115% or 125% of the original loan as they accrue a balance for lack of full payment for option to pay less than the true monthly payment.

    On the one that usedkarguy is looking at it may be built in mortgage insurance premium above the loan amount but may not constitute a forged note.

    We all have to remember they were for the most part covered by the perceived structure they put together and I would guess that they would not forge anything for 2 points. 20 maybe.

    The true way to prove the theory Mike is to get a payoff on the loan to verify what they say is owed. If it is as High as 133 you may have something. The other is to look up the trust the loan is in and see if you can find their investor report that shows the principle balance on the spreadsheet. I am happy to send you a copy of mine so you can see it.

    I absolutely have no doubt that multiple fraudulent things were taking place but I think the title insurance thing probably has a reasoning behind it such as described.

    Anyone else have thoughts on this?

  22. Mortgage Auditor,
    While I am not an attorney or a subject matter expert, I feel I must make a statement. My understanding is that the loans are NOT put into the pools. I seriously doubt anything is audited as you suggest. You would not know this from reading the pooling and servicing agreements, as they state that this must be done. However, how is it done when the loans are not deposited into the pool UNTIL AFTER THE ALLEGED BORROWER GOES INTO FORECLOSURE? The pool is a registrant only and all that these Trustees really do is issue a check to the investors based on the cash flow (OK so I am over simplifying). They may file reports but these are really done by others (sub-servicers, master servicers, custodians, etc). While I understand the concept of a 2nd YSP, I do understand your concerns regarding it and I have to believe that it would be next to impossible to prove. The Trust exists (in my opinion) to (among other things) fool the Federal government, fool the IRS and fool the investors (and of course give them good feelings so that they believe their investment is based on something real).

    Everybody else failed to underwrite anything, why would the trust or anyone else be any different? Remember that the securitizer (the sponsor and seller in my securitization) wants the asset so they can borrower money to “play the market”. They split the payments from the asset and give the payments to the Trust, not the asset.

    I do think this is a good thread though as if this issue is raised in court the opposition will be fierce.

    Dan Edstrom

  23. Can someone PLEASE explain how title coverage affects the amount of money owed by the borrower? How is a borrower affected if title coverage is more than the amount borrowed? Does he/she have to pay what is on the note or what is on the title policy?

    And do you know every pool audits the underlying notes and compares them with recorded mortgages to validate their authenticity? No one would get away with this alleged scheme and no one would be dumb enough to try it.

    There are plenty of documented fraudulent schemes we can pursue; so why are we chasing after imaginary ones? This makes no sense!

  24. Mike H., send me an e-mail with your fax number. I’d be glad to fax you my HUD-1. I brought all this stuff to an FBI guy, he took a quick look and said, well, nothing. They don’t talk much.

  25. Dear Used car guy,
    So it appears the pretender lender only stole $8,300
    off the table. Did he flip the broker $830 paid outside
    closing as YSP? Look carefully at the top of your closing statement. I’d really like to know so I can
    confirm my theory. I’d appreciate hearing from you!

  26. I pulled the title policy and the difference is $8300 between owner (me) and mortgagee (them). $164,200- $155,900, exactly 2%.

  27. Mike & J in CO, I hve learn so much today about YSP, that I feel realy good. Thank you both of you!

    One comments about Original Note in court, in Florida where I work. The majority of the Note contains fake signatures. One of them it has a Clerck assistant signature, from the Plaintiff Lawyer office, as Vice President from the Depositor company. We have discoverd that by investigating one by one signatures.

    The pretender lender cant reproduce that document because ( the mayority of them), has a broken Chain on the Securitization ladder.

    Remember Original Note with Endorsement, and assigment must reproduce together. Cannot be the Note alone. The Trustee can’t reproduce them. Also you must know if the note in question didn’t get paid from the Pooling insurance policy? by how much ? 35% may be 40% > who knows? By whom? AIG, AMBAC, TARP ? Who knows? There is no restriction on the PSA by how many times they can buy contract Insurance. Who knows? THEY KNOW THAT. Asking the right question in court you will know if that NOTE is original, and had not been satified already.

    Thanks again both of you for sharing your experience with us !!!!

  28. Mike:
    I never said that. I said in 99% of cases the attorney has a copy of the original note. They are missing the original note but the courts can accept a copy most of the time assuming it meets certain guidelines. They must prove they had the original note and explain when and how it was lost.

    Remember they are demanding the actual amount that was borrowed and not some imaginary inflated figure that was allegedly advanced by the investor and stolen by the lender. So far we have no evidence this happens except your theory based entirely on the inflated title coverage.

    If you believe that in 99% of lost note cases, the plaintiff’s attorney has the Note, then why do you believe they say it is lost? You didn’t explain your opinion.

  29. No Mike, I still don’t get it and I am usually not this stupid. It seems that you think the title policy is somehow indicative of what the woman owes to the lender! Whereas the note represents her obligation, not the title policy. She owes what is stated in the note – $112, 749 plus interest. So, how was she defrauded out of $34,251?

    When the lender goes to court to foreclose he produces the note (or a copy) not the title policy. So why are you so hung up on the title policy?

    to: Mortgage auditer,
    To answer your objection with regard to the Reverse
    Mortgage, without being patronizing, it’s simple math!
    The investor put $147,000 on the table as proven by the title insurance. The borrower only got $112,749 as proven by the closing statement and the mortgage.
    So where did the difference go? The $34,251? IT GOT STOLEN BY THE PRETENDER LENDER THAT’S WHERE IT WENT! Whose money was it anyway? It came from the equity the old woman had in her house. The investor turned it into cash, but she
    didn’t get it! THE PRETENDER LENDER GOT IT!
    Sometimes I feel like I’m in a Laurel and Hardy movie.
    No offense intended, its getting late and we’re all tired!

  30. to: Mortgage auditer,
    To answer your objection with regard to the Reverse
    Mortgage, without being patronizing, it’s simple math!
    The investor put $147,000 on the table as proven by the title insurance. The borrower only got $112,749 as proven by the closing statement and the mortgage.
    So where did the difference go? The $34,251? IT GOT STOLEN BY THE PRETENDER LENDER THAT’S WHERE IT WENT! Whose money was it anyway? It came from the equity the old woman had in her house. The investor turned it into cash, but she
    didn’t get it! THE PRETENDER LENDER GOT IT!
    Sometimes I feel like I’m in a Laurel and Hardy movie.
    No offense intended, its getting late and we’re all tired!

  31. Sorry Mike i was typing when I received your email.

    The licensing thing is strange as there were alot of states that didn’t require licensing until it was too late, colorado included.

    I would think FL would have been tough on licensing as were a lot of southern states. The lenders most of the time applied through different avenues to be licensed or exempt for various reasons. Check the FL laws to verify.

    National lenders were hard to reign in as they had some exemptions I think. The supreme court changed a lot of that from what I understand from another of Neil’s posts in June.

    I am anxious to see the reaction to my process on the two mortgages I am fighting to see if the lender stands up with the bulls eye on his chest for all of the violations or whether they will hide.

    Good luck with things.

  32. M.A.

    That’s what I’m asking as well. I think Mike sees that the title insurance was for 147K and worked the numbers back to think that they forged the note. I think the note and loan is still the 112K and that the title insurance was higher(the trigger for him to question why) because it needs to be insured for 125% of the original loan balance as a reverse mortgage.

    I don’t think it was ever 133K but we’ll see when Mike responds.

  33. to: J in Co.
    Thanks for the tip. I intend to be careful about that one since as you say it is a reverse mortgage which
    may follow different rules. In any case the lender had
    no license to make loans in Florida! What do you make of that!
    To Mort Auditor
    Thanks for your thoughtful comments. You are correct Amnet is no longer in business. In fact it
    became unlicensed in Florida in Dec. 2005 yet it
    continued to make loans in Florida until Jan. 2009.
    It was dissolved 5/12/2009. The loan in question was
    made in Jan 2008.
    If you believe that in 99% of lost note cases, the plaintiff’s attorney has the Note, then why do you believe they say it is lost? You didn’t explain your opinion.

  34. I am trying hard to follow this. How did they steal $34,251 in equity from this poor woman? Supposedly this money was stolen from the investor by the lender. The borrower only owes the amount on the original note. When she sells the property she will pay the lender $112,749 for a lien release. So how was her equity stolen?

    If she defaults and they foreclose, the demand will be for the original note amount and not the alleged inflated figure. So why would they be afraid to show the note?

    Is anyone following this? I am beginning to question my own intelligence.
    For example, on a reverse mortgage I have before me, the title insurance was $147,000 but the amount
    of the funded loan was only $112,749. The yield spread premium must have been the difference, ie
    $34,251. The borrowers interest rate was 5.63%.
    The interest =$6348/yr, which on $147000 means
    the true lender was getting 4.32% on his investment in the mortgage. No wonder experts claim reverse
    mortgages are expensive. This pretender lender stold
    $34,251 of the old woman’s equity!

  35. Please don’t get me wrong because I know the system is corrupt but it is much more subtle than this. Judges don’t often take bribes in brown paper bags. They exchange favors at higher levels. These bastards are hard to catch and prosecute.

  36. Mike H,

    I checked your post on the reverse mortgage. The title insurance was for 147K correct? That is just over 125% of the mortgage amount. I’m not completly sure but that may be based upon the reverse total of loan. This is the maximum loan amount needed to be insured over life of loan.

    The MIP on this covers anything over 100% and most everything is based on life expectancy etc for the total before a loan amount is determined.

    If it truly is a reverse you may want to be careful on this one before you make claims as your client may end up responsible for attorney’s fees etc. unless the proof is absolute that the note was forged.

    I have the same thing on my title insurance on my neg am. It is set for 115% of the loan amount to cover the neg am portion.

    Hope this helps, not meant to bust your bubble!

  37. I also thought of something. If the title insurance is for a higher amount and this is a reverse mortgage or option arm they set the title insurance as the max loan amount before reset or the kick in of the MI.

    I believe the lost note is more of a tactic to create certified copies for various pledges such as usedkarguy described not to cover up forgery.

    I agree that anyone that would forge a note and deliver it to HUD would be on a suicide mission.

  38. Mike,

    AMNET is no longer in business.

    I assume this loan is an FHA insured loan. Is that right? What if the broker had sold a higher or lower rate thereby changing the YSP? That would change the entire equation and the alleged 95% LTV would no longer apply.

    So you think AMNET forged every single FHA insured loan and then lied to Ginnie Mae who guaranteed the pass through certificates? That no one bothered to randomly check to make sure the note matched the recorded mortgage? That servicers were sending monthly statements to borrowers showing the original loan amount but lying to investors about the payments? That the payment schedules were all forged to deceive the investors? And so far no one has come up with a single document to expose this wholesale fraud?

    You have no documents to back this up? We have to wait until your case is settled before you will know if these allegations are true?

    At the risk of sounding gullible I must say this sounds too far fetched even for this audience.

    Once again, in 99% of lost note cases the attorney has a copy of the note showing the original note amount. The reason why they claim the note was lost is not what you are suggesting here.

    Let’s keep it real and resist making wild accusations without an ounce of evidence. Alternatively please post the evidence so we can see it with our own eyes. Is this too much to ask?

  39. Dear J in Co.
    Before securitization, very few, less than 1% of Notes got lost. Now, it is approaching 50%. What
    happened to all those Notes? Were they really lost?
    Of course not! The pretender lenders jacked up
    the front page of the Note, which is easy to do, leaving
    the borrowers signature on page 3. Since the ware-
    house lender lent the higher amount, the Note has
    to match the amount of the loan given to the pretender
    lender. No one looks at the mortgages which show
    the lower figure to dupe the homeowners and the
    Judges (who are dupable).
    When the borrower defaults and the pretender lender decides to foreclose, the lawyer for the plaintiff
    has a serious problem, the jacked up, modified Note
    shows a higher principal than the recorded mortgage
    does. To do a foreclosure, the lawyer must attach a
    copy of the Note and the Mortgage to the complaint
    but if the two figures don’t match, he has a big problem! It’s called mortgage fraud. The pretender
    lender took 15% off the table as YSP and didn’t inform
    the borrower who only got 80% of LTV.
    The lawyer, in order to hide the fraud, submits a
    lost note affidavit, (which is perjury) in order to hide the
    TILA/RESPA violation. Many corrupt Judges rubber
    stamp this perjury when the defendant does not defend (ie defaults) which is what happens 97% of the
    time. You can be sure that the “jacked up” Note is well
    hidden from view if not destroyed to hide the evidence.
    This is the only explanation of all the lost notes that
    makes sense in view of the “daisy chain” of securitization.

  40. Mike H,

    Can I ask you a question or two?

    Do you have a copy of the Deed of Trust? and do they record them where you are with the county?

    What is the amount of the Deed of Trust?
    What is the amount listed on the Note?
    How do you know that they higher loan amount i.e the 133K is what the warehouse lender has on the books?
    I can see what you are getting at but I’m still confused as to what documents you are working from.

    Do you know for sure the warehouse lender shows the 133? or is it speculation?
    Is the loan securitized and do you know the actual mortgage backed security it is included in? i.e Series X of Y Trust etc.

    The notes are lost for many reasons but I am wondering what exact factual evidence you would have to back up the difference. If you have the original note from closing showing the 113 and they show up with 133 it is simple but if you speculate that they represented the 133 with no proof it does no good.

    Sorry for the questions but trying to understand the factual standing not theory.

  41. Mike H,
    Wachovia and Amnet – mis-joinder, illegal business combination, failure to disclose business combination, etc.

    Wachovia is now owned by Wells Fargo Bank. That means Amnet must also be (at least partially) owned by Wells Fargo Bank.

    Dan Edstrom

  42. After studying this loan more carefully, and taking into consideration what you all, as insiders have said,
    I see a correction which makes my theory even more
    Actual loan=$113,680-(MIP)$1,680=$112,000
    appraisal = $140,000
    thus exactly 80% ltv
    ysp =$2,064.43/.1=$20,644.30 + $112,000=$132,644.3/$140,000=.95 LTV loaned by
    warehouse lender.
    When you see numbers work out like this, you know
    it is no accident.
    In this case Wachovia was the warehouse lender,
    Amnet was the mortgage lender and Fidelity was the
    broker. It gets better, at the time of the loan, Wachovia
    owned 29% of the stock in Amnet so they had a friendly relationship, and technically, 29% of the Amnet
    profits would go back to Wachovia as dividends! (That is perhaps only anecdotal, they were two separate
    The main point is that this kind of transaction illustrates why so many Notes got lost. Most likely
    the pretender lender changed the first page of the
    Note by increasing the principal to $132,644 and
    lowering the interest rate to 5% to make it more
    palatable to the warehouse lender who used it in
    a securitization scheme. The mortgage shows the
    lower amount, so the Note and mortgage no longer
    match. For a Judge doing a foreclosure, this will
    be a big problem because it proves mortgage fraud,
    ie a TILA/RESPA violation. How does an attorney who
    is foreclosing get around this problem? Simple:
    “Uh Judge, the plaintiff lost the Note, they just can’t
    find it, but you know they had it, RIGHT JUDGE?”
    JUDGE: “Could you step into my office for a moment
    and look up in the law where it says I can except your
    explanation?” Lawyer inserts an envelope with $5,000
    cash into the law book. Judge: I think I understand your argument, Judgement for the plaintiff. Next case!

  43. M.A.

    As to what timeframe in history are you referencing now or pre 2004/5?

    I know for a fact that after 2001-2004/5 it was not difficult to upcharge the rate to make up to 5% as just a broker. This was not difficult to accomplish and the rate was still better than most 2/28 ARMs on an FHA 30 yr fixed.

    National City was a big culprit of this type of pricing.

    The YSP can be made on almost all loans, that is correct but if you have a subprime or neg am loan the lender would not allow YSP to be paid without a PPP. This was not negotiable. They also required one if the refinance was within 12 months of the original purchase or another refi to avoid losing the loan to another flip.

    I have easily seen correspondents beat the rate of a wholesale broker by at least .5% on the rate which could equate to a couple of points in compensation.

    The actions that cause the most concern are those of the securitizing sponsor and if they over subscribed the bundles.

    The biggest nasty area of the subprime world were the Neg Ams. I saw guys that would do 95-97% neg am cashouts with 6% margins on LIBOR or MTAs and they would pull down 5 Points just as brokers. The lenders wouldn’t be doing them for a processing fee so to get to at least a 10% hit would not be unimagineable.

    We are talking about loans that were sold to make money by brokers and banks not the off the shelf super competitive loans. They average out over a complete class of certificates because they had to do alot of good deals to override all the junk that is out there.

    They specifically sold junky subprime arms instead of safe 30yr fixed loans b/c they were easier and faster to UW and close.

    This machine did not run on only making 2 or 3 points, I promise you. It was a greedy feeding frenzy and there were a ton of brokers preying on uneducated consumers that wanted the Escalades and Vacations and Flat Screens just like their neighbors.

    A 2 point broker standard became the norm limit after 04/05 other than the Neg AM era with high exceptions across the board.

    Remember there are alot of loans still performing and they may have been fine it is the really bad ones that are most likely to default and are apparent.

  44. Here is how it works. Let’s say I want to become a mortgage banker. I sign up with Wells and Chase and Citi and BB&T as a correspondent. I apply for a warehouse line from a warehouse lender. I find a borrower who has been shopping around and wants the lowest rate with minimal closing costs. I try to beat the competition by offering a deal so I can make two points in total while remaining competitive. I shop my list of lenders and find that Chase is paying 101 for a 5% coupon so I lock and charge the borrower the remaining 1 point as an origination fee. I underwrite the file and fund it with money from the warehouse lender who is charging me 6%. So I need to ship this loan ASAP since there is no spread to earn while it is warehoused.

    Chase then adds this loan to a pool and sells them to a REMIC for a profit. To see the average gain on sale all you have to do is read their annual report. They have never made anywhere close to 10% so I have no idea where you guys are getting your numbers from. Typical gain on sale is under 2% on conforming and around 5% to 6% for sub-prime.

    Also, there is no need for a PPP to earn YSP. You can earn YSP on a vanilla fannie/freddie conforming loan without a PPP.

    A correspondent lender typically makes an extra 1/4 to 3/8 of a point compared to a wholesale broker. That is it.

    I have never seen the types of fraud Mike is mentioning. It may happen but not on a large scale.

  45. Mike H,

    If I can add some things from a relationship perspective to help with your research there are different ways in which a broker can have his commissions structured.

    The first way is to have a “wholesale” relationship. This is where the broker is truly doing what his name implies. He is simply for a fee brokering the deal to the underwriting lender and the lender allows him to charge an origination fee and will also with limitations a YSP paid outside of closing. This is the most common but typically the YSP paid only once in this situation. All brokers have the ability to sell the higher rate and obtain a YSP unless he fails to sell the prepayment penaly, then he can only charge the origination.

    To interject another TILA issue. The broker/lender is supposed to disclose that the borrower has the option to have or not have the Prepayment Penalty under TILA. In most cases, the lender usually would not accept the file without one and the broker could not make a YSP without it. Usually it became a requirement if the borrower wanted to get the loan. This should be look at more closely.

    The second relationship in a broker capacity would be to get set up as a “correspondent lender” This happens with larger brokers that can prove a decent net worth. This allows the broker to actually underwrite the file and deliver it to the warehouse lender(still a middle man) This relationship allows the broker to buy cheaper rates and sell them at typical market or have the competitive edge over other wholesale brokers. The extra YSP capacity works outs to an extra point or two. The downside for the broker this way is that if the lender does not accept the file they are on the hook for it and may have to look for another source to sell the loan to at a discount. This can ruin a broker if they are sloppy. YSP is still only as disclosed on the HUD as POC.

    The main way alot of larger companies get by with charging big fees is to technically “bank’ the loan. This comes along with FHA deals alot as they then become a banking broker and under the rules do not have to disclose the YSP on the HUD as they are set up to sell the loan in the secondary market rather than have to simply broker it. It usually comes with some level of payment servicing. Brokers working for this type of setup usually can sell the loan with up to 5 points total compensation(1 front, 4 back) The “Bank” typically is also making money on the secondary market sale.

    This is where alot of the big players reside as they can “bank’ the FHA and conforming deals thus making a much larger hit yet still broker what they cannot be responsible for i.e the jumbo stateds and neg ams etc(the real junk)

    Most deals as a broker where limited to maximums from the lenders as follows:

    Early pre 2004-5 up to a total of 5 points especially FHA
    after 04/05 about three max unless perfect
    Banking helped to make it good

    Stated/Neg Ams
    Usually the max was 2 points total with a PPP
    1 point if no PPP
    Escrow waiver usually hurt the back end as well

    broker limited to 5 points and lender still made more
    usually applied to standard 30yr-5/1-3/1 ARMs fannie freddie deals or FHA

    The broker had limits as to what the lenders would allow so that they could still make the major money. In fairness to alot of brokers, some of them took more risk on being correspondent lenders to stay competitive on rate with their peers and still make a living. It was hard to compete with the public perception of no closing cost deals from the CW/Wells/Citi crowd but what people didn’t realize was that the big groups made it up in higher rates rather than the origination which in long term standing was more expensive.

    The thing to watch for are the massive abuses that really started to happen in 04 and on until it fell apart. The Fannie/Freddie and FHA deals had so much more YSP available because they had limited perceived risk. It was however the general concept that even if a borrower would qualify for a full doc(barely) it was easier to underwrite a 2/28 ARM with limited doc to get it done on time.

    A lot of blame can be spread around as the lenders were slammed and slow but Damn a broker if he couldn’t get it closed in less than 30 days for the Realtor or risk losing the business. Everyone wanted the most they could make in the least amount of time and patience was a foreign concept.

    It was however easy to do an FHA making five points especially with Neimiah or similar for a 100% loan and still have a better rate than a 2/28 ARM and it was a better deal overall for the borrower and the broker could make more.

    The government let the majority of the abuses take place more so on the normal safe loans than what was done on the marginal deals.

    This is where you are correct in some instances I could easily imagine the lender making at least 10 points without much effort but it will still fall back on what Mortgage Auditor is saying. There is a difference between broker compensation and lender compensation in what had to be shown on the HUD and even that could be masked to a degree. The broker money shows up as origination or YSP. The rest is going to fall under secondary market profit or is masked by the “banking” relationship.

    It is still all one big transaction and the argument is that it all had to be disclosed in order to make an informed choice. This falls back on regulation and what the regulations allowed. There is no single party to blame but if I had to point to the most grave problem it is the securitization as it did the most damage and grew out of control on every level.

    I think the biggest focus should be proving the single transaction theory as it makes EVERY securitized loan usurious in nature and subject to the largest relief for everyone. This brings with it criminal charges in just about every aspect for those lending the money( i use this term lightly)

    Are the two deals you are working on trying the single transaction theory? Are they Pro Se or is there an actual attorney involved? I would like to see how they are challenging the compensation and under which avenue they are trying to show the single transaction.

    I like the aspect that Neil comes from using the IRS viewpoint on step transactions as there is nothing more telling than tax law and the way it is interpreted by the ultimate in collection authority. If I can help in any way please feel free to contact me via email at

    This gets better every day!

  46. Dear Mortgage auditer,
    I am working on two cases right now where I believe
    I have strong evidence of what I am talking about. One
    is in litigation and the other is on the verge of litigation.
    When the cases are finished, I’ll send you the details.
    One is a reverse mortgage, and the other is a standard 80% loan.
    But in any case the evidence is everywhere. When ever you see a case where the Note got lost, you have
    to suspect what we are talking about. If you have the
    closing documents and you see that the title insurance was more than the loan, that would be a red flag. If you see a yield spread premium to the
    broker, paid outside of closing and a mortgage company as the lender, that’s a red flag.
    Normally, brokers get a front end commission paid
    out of the funds of the borrower. When you see the broker “double dipping” and getting a YSP commission paid outside closing, you need to ask ,
    “out of whose funds was this paid?” The only possible
    answer is “out of the funds of the mortgage company
    that wrote the loan.” Next you ask, where did the mortgage lender get the funds to pay the broker? Answer: from the warehouse lender.
    Next you ask yourself, “how much did the mortgage
    lender get from the warehouse lender which is not ‘
    disclosed on the loan documents?” and what per cent of it would be given to the broker as a commission?
    Having been an insurance broker myself, I would
    estimate 10% would be reasonable. I’m sure it wasn’t
    100% because that is not how it works in business.
    I’m also pretty sure it wasn’t 50%. No lets “plug in”
    10% and work backwards. If the broker got a YSP of
    $2000 poc from the mortgage lender, then I’d estimate
    the mortgage lender got $20,000 from the warehouse
    Let’s add this hypothetical figure to the $113,000
    the borrower got = $133,000. The appraisal was for
    $140,000. It looks very pausible that the warehouse
    lender made a 95% LTV loan.
    Let’s estimate what the interest rate must have been. The borrowers rate was 6%on $113,000 which is $6,780. What would that be on the hypothetical
    $133,000 loan? Answer=5%! How convenient, everything makes sense. The $2,000 YSP to the
    broker paid outside closing fits into the equation beautifully. It is the “smoking gun” which proves the
    crime! There is no other rational explanation of why it is there! What’s missing is the other $18,000 that
    was given to the mortgage company outside closing and which should have been revealed on the closing documents! This is where the TILA and RESPA violations come in, IT SHOULD HAVE BEEN DISCLOSED TO THE HOMEOWNER! iT WAS ALL

  47. Mike,

    I would like to see with my own eyes one example of what you are alleging and if it is as rampant as you claim, it should be easy to come up with such an example. Please post a link to documents supporting these allegations so we can all see them.

  48. MIke H,

    So could this not be proven in the SEC filings and monthly reports as to the amount lent on a specific property? If the lender i.e Wachovia lent 133, 000 on loan number X then the monthly report would state the loan amount included in the MBS bundle as 133, 000 and the status of each loan in default as it is active.

    I understand that the originating lender could forge documents and deliver whatever they wanted as to the forged note, recorded deed etc but would it not still be listed on the report?

    So if the report is available on the SEC website under the attachment to the amended prospectus(at least it was on my loan) it should show the original loan amount included in the MBS. If there is a discrepancy between what the borrower has for a loan amount and what is listed as the loan amount of the MBS loan report you could find the proof could you not?

    I think it would be good for everyone to be able to find this type of discrepancy to help build their case if it truly exists.

    Please let me know if I understand this correctly because this is different than what I am experiencing on my deal but it would be helpful to know how to uncover the proof for others.

  49. to: Mortgage auditer
    To answer your objection to the theory, the mortgage is really just a lein against the property.
    Over time, it is irrelevent to what is actually owed’.
    The investors were probably only looking at the
    Notes. The first page of the Note could be easily forged to show the higher amount ($133,000) because this is exactly what the warehouse lender
    (in this case Wachovia) lent. It can be proved by the
    title insurance issued. Why would Amnet do this?
    To hide from Wachovia what they really took off the
    table. Wachovia knew what they lent and they know the
    value of the property, so they could care less what
    the homeowner actually got. That’s not their department! If the homeowner got screwed, their
    attitude is they need to take that up with Amnet! ie
    file a TILA or Respa claim against Amnet. If subpoenaed, Wachovia will just tell the truth about
    how much they put in the deal and let Amnet take the
    heat. How often is an unknowledgeable homeowner
    going to notice he got screwed? As Neil has stated,
    97% of the time, the foreclosed homeowner defaults
    so no evidentiary hearing is ever held. In the 3% who
    file an answer, most are pro se or have an equally ignorant lawyer who just processes them through the
    system (or may even be getting paid off by the pretender lender to lose the case-this happened to me, but I caught it in time). In the few cases where
    the homeowner figures it out (>1%), they just never
    show up and let the case get dismissed. To lose such a case publicly could cost them alot of bad publicity and possibly lead to a firestorm of protest!

  50. “Did I get that right?”


  51. Usedkarguy,

    I think the one that brought up the scenario was Mike H and M.A. challenged it. You though seem to be on to exactly what I would imagine has been happening as the banks are playing with how the assets are listed on the balance sheet in the transaction in various arenas.

    They separated the note from the Deed of trust using MERS to be able to pledge it across various relationships for maximum leverage. The MERS situation isn’t really for efficiency of tracking the transfer but merely hiding them from plain site.

    They assign the income from the notes but still maintain them in copy for the pledge to both parties i.e the FSB relationship and the Trust. This is why they typically shredded the original and worked from Certified copies so that they could have more than one floating around.

    They use the cash flow from all sources to make up monthly deficiencies while they expand the monster outward in size. They are pushing to foreclose as many as they can while buying back the homes at the total debt to keep real sales from dropping the values any more than they are in an effort to keep the balance sheet looking good. Hell, they were paid twice already so the can float some interest to keep the machine oiled and chugging along.

    Factor in the takeover of CW and WAMU at pennies on the dollar, and you can see now that Chase has inherited the entire thing and plans to continue on with 1/100th of the basis of the original lender.

    It is no wonder when someone gets wise and challenges them they just don’t answer and move on to scam the next guy. Should we feel bad about demanding forgiveness on debt already paid rather than give back the homes that fuel their continuance?

    I think not. Enlightening conversation for sure.

    Thanks for your input Dan!

  52. Hey! M.A.!
    “I’ll see your $133,000” as a “secured borrowing” of the investors’ money, with a promise to buy back the loan if it goes bad. In the meantime, I’m gonna take the “investor’s cash” and distribute it as profit. I’m gonna hold that “note” back and go “give” it to the FSB as collateral, secured with the deed of trust, and get their $133,000 as I “collateralize” this on my balance sheet as an asset. Let me give you a copy of the “note” you can assign to the “Trust” that says “don’t worry, it’s collateralized”, meaning, again, the real estate is pledged. So they pledged the same asset (the house) to borrow money from two different sources on inflated appraisals while consuming the money in fees and commissions while promising the borrowers payment stream to the trust to pay back investors. Borrower default triggers insurance claim (35% of $133,000=$46,550 instantly); combine that with, say 2 and a half years at $1030 yields another $31,000. that’s $77,550(RETURNED) in two and a half years on a $133,000 loan, less the servicing cost of $7760 (that’s the interest only charge they were paying on the $113,000 for 30 months at 5.5%, the interest payment to the investor in the certificate, while the borrower is paying 8.5%) Now, let’s say they take the loan back, like they said they would. They give the trust another “note” that offers the same payment stream, not dollars. BUT, when they take the loan back from the trust, they extinguish the liability for the (investor loan). They erased the debt to the trust, but they made $69790 on the front end after 2 and a half years. And now, they get to go take the house away from the homeowner and channel that money back to themselves via the Trustee sale. The borrowers’ note is still sitting at the FSB as security for the other $133,000 (that’s what’s in the TARP “bag”). But it’s worthless. The house is gone.

    Did I get that right?

  53. Dan,

    Thanks, I just mentioned Wachovia as predecessor for World which was a player in the neg ams. They are actually not involved in my deals as they wouldn’t lend in resort areas at the time….Go figure!

  54. J in CO,
    Wachovia is owned by Wells Fargo.

    Dan Edstrom

  55. usedkarguy,

    It is actually WAMU and the Trusts issued in 2005 and 2006. They are going after the FDIC for the way they handled the events leading up to the takeover and sale as they seem to have leaked the info and caused a run on the bank the week leading up to it before brokering a deal at less than a penny on the dollar if you factor the value prior to the leak.

    I doubt there was ever any value as WAMU and CW bought almost all the junk option arms(which I have two of with WAMU) that had some sort of issue. The other major player from early with the options was World Savings, now Wachovia or anything since.

    I guess the main piece of this entire thread is how to get the major transaction to be classified as one such as Neil describes and it seems his angle is that it is similar to a step transaction per IRS code wherein the basis is adjusted upward in steps through parties of commingled interests.

    If counted that way every loan with the typical Broker, Underwriting/Originating Lender, Warehouse Lender(s) and the Depositor/Sponsor has enough juice in them to classify as usury let alone the rest of the fraud.

    The money only came from one place, the investor who is the lender. The rest just start the process using credit and pass it off once they bundle enough junk together to get it to float.

    I agree the Justice Department needs to be driving the boat on this one. I can’t understand how the politicians can even allow this to keep continuing and they are actually thinking they can bundle more of the total toxic sludge together and insure it themselves with our money while letting the securitization continue.

    I think the securitized mortgages should be dissolved and those that were duped into them set free. Think of the cure for the economy that would spur. Maybe with some limited deed restriction such as cash out only can be used to pay cancelled revolving accounts or secure new business start ups.

    I’m sure the argument will be the poor retirement accounts but that should fall back on the ones above that underwrote them for the investment portfolio to begin with. You know most of them would never read the 500 page prospectus or verify the info in them as we have to cover our behinds.

    This world was too out of hand for far too long. I have friends that never signed loan docs and they were notarized by the broker, you name it the fraud is endless.

  56. J, is that Wells?

  57. What ever happened to “INSURABLE INTEREST”? Where is the Justice Department on this one? Like Neil said earlier, I can’t buy insurance on my neighbors’ house and then go set it on fire to collect a check. I’m also thinking this is the most important thread to ever develop here. M.A., I think you nailed it.

  58. usedkarguy,

    I have found a specific class action suit against my servicer, depositor, trust and the FDIC in which relief is being asked for the repurchase by the lender/depositor of the certificates at face value. The trust I am included in is specifically named and appraisal fraud is alleged which I could help them prove with the documents in my possession.

    Should this be a good thing to address when I file my motion to dismiss the foreclosure since the true owners or a potion thereof are making their presence known counter what the attorney’s certify as the true holder in due course of my note? I would think that if they can commit securities fraud by misrepresenting the true value of my property while being in possession of contradictory appraisal evidence what stops them from misrepresenting anything else in the process.

    I tried to get the class action attorney to call me back but I guess that isn’t something they are interested in.

    Is the bankruptcy court the only way to force them to account for the money they have received?

  59. This theory would be supported by the verified over-capitalization of these trusts ( read “Securitization is Illegal”) and the over-appraisals of the collateral involved. These are tied to the 10(b) violations against the investors. The class-action attorneys representing investor class-actions should be here to talk to us. If they really want to hang these guys, we’ve got the rope. I think it’s now proven the only place to get it out is in Bankruptcy court.

  60. I’m lost on that one as well. The note may or may not be the original but the amount is still the same as what was signed in the beginning not an inflated amount.

    I would think that a balance sheet adjustment as to the real equity or the cost of the financing could be adjusted to gain more cash flow from the investors to a certain degree but as for adjusting the amount of the note that seems far fetched.

    Let’s say that they investors are to receive a 5% return but over the life of the loan with rate increases it would return 8% then an adjusted price could be negotiated i.e. like 103% of face value but I doubt they changed the indebtedness as it would be public record.

    In my situation the loan amount stated is the same as what I signed. The value given for the loan to the originator may have been discounted to let’s say 50% of face due to violations or appraisal issues. It seems that may have been the case but if so they still reflected the value as the original appraisal.

    I just can’t see how they would modify recorded documents to higher amounts. Maybe I am just not understanding where you are coming from.

  61. Mike,

    AMNET gave borrower a $113,000 loan and borrower signed a note and DOT for that amount. This is recorded and public information so no one can claim the borrower received $133,000. How are you arriving at the conclusion that there is a second loan against the borrower? The borrower can pay off the loan by tendering $113,000. Not $133,000 as you suggest. The borrower does not owe anyone $133,000.

    How are you arriving at the conclusion that the note was forged to show $133,000 was given to the borrower when the recorded DOT shows $113,000? This is all in the public domain and investors have access to this information.

    When they try to foreclose they produce a copy of the note signed by the borrower and not the alleged forged note showing a different amount. They claim to have lost the original but they still have a copy attached to the complaint.

    What am I missing here? Please explain because I am a little lost.

    to J in Colorado,
    A Simple example to illustrate the point is this.
    Appraisal $140,000. Warehouse lender Wachovia
    agrees to lend 95% ($133,000) at 5% interest to
    pretender lender Amnet.
    Amnet agrees to lend borrower $113,000 at 6%.
    Amnet keeps $20,000 undisclosed YSP, which is
    really like a second loan against the borrowers
    property but undisclosed. Amnet pays $2,000 to the
    broker as a “backend” commission, which shows
    up as YSP to broker on loan docs.
    Note gets lost! Can you guess why? Amnet stole
    $20,000 off the table. They forged a Note to Wachovia
    to the effect that the borrower borrowed $133,000
    to hide the crime. Attorney for the lender sees the
    crime and to protect his client, claims the Note got
    lost or destroyed, but still wants to foreclose!
    Why else would the Note get lost! Do banks lose
    Federal Reserve Notes? Why would they lose a mortgage Note? Because they don’t want to wind up in jail!

  62. to J in Colorado,
    A Simple example to illustrate the point is this.
    Appraisal $140,000. Warehouse lender Wachovia
    agrees to lend 95% ($133,000) at 5% interest to
    pretender lender Amnet.
    Amnet agrees to lend borrower $113,000 at 6%.
    Amnet keeps $20,000 undisclosed YSP, which is
    really like a second loan against the borrowers
    property but undisclosed. Amnet pays $2,000 to the
    broker as a “backend” commission, which shows
    up as YSP to broker on loan docs.
    Note gets lost! Can you guess why? Amnet stole
    $20,000 off the table. They forged a Note to Wachovia
    to the effect that the borrower borrowed $133,000
    to hide the crime. Attorney for the lender sees the
    crime and to protect his client, claims the Note got
    lost or destroyed, but still wants to foreclose!
    Why else would the Note get lost! Do banks lose
    Federal Reserve Notes? Why would they lose a mortgage Note? Because they don’t want to wind up in jail!

  63. To: Dan
    I must admit that they never responded to discovery.
    I’m not sure what difference that made in their decision not to appear at trial, except that they had no
    objections to what we said/produced. Silence=Affirmation!

    To: Alina
    Judge did not rule on initial motion to dismiss (ie Withheld judgement) but required plaintiff to answer the complaint. I put it in as an affirmative defense under the heading of fraud, TILA and RESPA violation.

  64. Mike H,

    How do you plead the “single transaction theory”? Do you initiate the lawsuit or is it part of your affirmative defenses? Any help on this would be very much appreciated. thanks

  65. Dan,

    The original appraisals for the property were 2.8 and 2.85M and the loan closed with First Magnus(BK chapter 11 in AZ) It was supposed to be sold to CW but they did not accept after having at least one review come back at 1.2(11/05) Three more reviews were done(2/06, 3/06, and 4/06) all coming back between 1M and 1.2M. The loan ended up with WAMU(when I cannot remember) and in one of the WMALT series trusts(I found this from the NED filed)

    The research I’ve done so far includes the Prospectus for WAMU and the Specific addendum for my Trust(WMALT series 2006 AR6) The monthly reports still show the value at 2.8( found through the Washington Mutual Mortgage Securities Corp website) I also have the Seller’s guide and the Servicing guide for WAMU which gives specific info. The SEC filing and loan schedule gives it the same value at 2.8 with the loan at 1.680M.

    The BK info for the originating bank(First MAgnus) shows that WAMU had submitted a stipulations agreement in the BK court but I am having trouble getting a copy online. I would assume there is some agreement as to the loans and the liability as to buy backs etc.

    I also found a class action from the a Louisiana retirement trust against WAMU citing this Series and the others around it. It also names the FDIC as a defendant as well for the activity leading up to the take over.

    I assume that the loan was not accepted, kicked back by CW first then accepted at a deep discount by WAMU but still sold at face value(is that 1.68 or 2.8M?) WAMU was then sold by the FDIC to Chase at less than $.01 on the dollar. The trust was taken over by BofA so somewhere in the mix has to be some TARP money and I would think CDS insurance.

    I got the info from the executive management department that was trying to help me with a mod over the last year. I requested the info by phone and received in a few days. Since then I have submitted two QWRs with no response. I have also rescinded my other loan with them(it was within the 3 yrs)

    I am set to file my answer to them this week for the foreclosure hearing on the 13th. I am still putting it together now.

    Somehow I could assume this loan has been paid a few times over and I hope the judge believes the same. We will see!

  66. Mike H,
    “They never showed up at trial” … Does this mean they answered discovery or did they skip out on that also? At what point did they actually stop responding? Or did the judge let the answers to discovery slide but was still expecting to go to trial? Can you be more specific?

    J in CO,
    Where did you get the info that Countrywide had 4 appraisals? Discovery? QWRs? or?
    And how did you determine that the appraisal to the investors was $2.8 million?

    Dan Edstrom

  67. Mike H,

    Help me with some logic. Is the amount received from investors in the Trust equal to the loan amount or the Appraised Value of the property? It seems that is what is being implied with Neil’s Comment “They took $480,000 from the investor and gave you $300,000 keeping $180,000 for themselves”

    This would prove interesting to my situation as the Depositor(WAMU) was in possession of four review appraisals citing a value of 1-1.2M but shows the appraisal stated to the investors as 2.8M. The reviews were prior to the deposit into the Trust.

    Would the lender have received 2.8 from the investors or just the 1.6M that was part of the loan?

    Aside from all of the other issues(i.e. BK of originating lender, discounted purchase for non compliance, insurance etc) would it not be prudent when I challenge them for lack of standing to also request proof of damage?

    I would think this would not only require them to prove the note and assignments but also account for the monies received or not received to prove the damage and need to recoup from the foreclosure.

  68. Personally, I don’t know of any cases where a true
    evidentiary hearing was held on this “single transaction theory” because when it’s alleged, the
    plaintiff either settles quickly or never shows up at
    I used this argument against US Bank Trustee, and they never showed up at trial. My client won by default!
    Simple logic tells me that this theory is 100% solid
    because TILA and RESPA require a complete accounting of all monies that were lent against the
    equity of a particular property with a particular appraisal. Here in essence, you have a first mortgage
    for 80% to the true borrower, and an “off the books” 15% of equity,second loan to the pretender lender at 0% interest. He then pays the broker 10% of the stolen
    money as a “back end” commission! FOR WHAT?
    The broker already got his “front end” fee for doing the loan. WHAT COULD BE THE JUSTIFICATION FOR THE BACK END FEE? Who was the broker serving, the homeowner or the “pretender lender”?

  69. I agree, Can someone weigh in as to any cases in which this has been challenged? Is anyone currently challenging in court?

    I also agree that it should be treated as one transaction even if the chain is through three parties as it was originally contemplated.

    Could this be challenged under the absolute definition of a “lender”? Unless there is a substantial case that proves otherwise this is no different than a standard bank using typical capital ratios to lend money, i.e. 10 to 1 or selling public stock to raise more capital to loan more money.

    The whole system has been exploited but without the legal backup this is tough for anyone to use.

    If anyone knows to the contrary please chime in.

  70. Mike,

    Where is the legal authority to support this theory?

  71. Dear Mortgage Auditer,
    I agree with Neil Garfield that it has to be treated as
    a single transaction, not multiple transactions. In fact,
    what is it? As Neil stated in his seminar, the Money
    came first and went looking for the victims, not the
    other way around, therefore it was a single transaction, therefore we have to account for all the
    funds from the beginning to end. In the previous example, the investor came to the table and lent $147,000 to someone. Who got what? The borrower
    got about $113,000. So, who got the rest and was it
    accounted for on the closing statement?
    In essence the borrower’s house was used as collateral for two separate loans. One to the owner at the higher interest rate and a second to the pretender
    lender at 0%. The second loan was not reported and should have been. It was not profit from selling some-thing on the secondary market as you suggest. It was
    an unauthorized second loan to an unauthorized,
    unmentioned borrower. It violated TILA and RESPA!

  72. You all keep confusing gain-on-sale with YSP. They are not the same and secondary market profits are not subject to RESPA’s disclosure rules. We may not like it or feel it is unjust for a lender to make a profit without prior to disclosure but that doesn’t make it illegal.

    Frankly I am shocked that people are making such claims without verifying their accuracy.

  73. One way to prove the higher YSP earned by the
    pretender lender is to compare the amount of title
    insurance the lender required to the amount of the
    loan that the borrower received.
    For example, on a reverse mortgage I have before me, the title insurance was $147,000 but the amount
    of the funded loan was only $112,749. The yield spread premium must have been the difference, ie
    $34,251. The borrowers interest rate was 5.63%.
    The interest =$6348/yr, which on $147000 means
    the true lender was getting 4.32% on his investment in the mortgage. No wonder experts claim reverse
    mortgages are expensive. This pretender lender stold
    $34,251 of the old woman’s equity!

  74. So is there anyone out there who can shine light on this new YSP theory and the allegation that secondary market profits must be disclosed on the HUD and failure to disclose is subject to treble damages? Under what rule of law? RESPA?

    It is not too difficult to come up with creative methods in calculating lender liability but unless there is strong supportive authority it tends to confuse people more than anything else.

    I can only imagine how many “auditors” are running around telling borrowers they are entitled to $300,000 in damages because of undisclosed YSP and that they should never agree to a mod offer.

  75. Neil – can you clarified the numbers on this sample please? $ 180,000 (?) $ 480,000 (?) $540,000(?)

    Reading this blog is getting your Master Degree.


  76. I can say for sure that my “originator” failed to disclose the fact that my loan was pre-destined for securitization with GMAC. They had an undisclosed business combination whereby GMAC would provide the originator with a warehouse line of credit and in exchange the originator would provide a loan for GMAC to securitize.

    At the very least they failed to disclose the business combination, they failed to disclose the fee paid to the “originator”, they failed to disclose the monthly servicing fee paid to the servicer (who was originally the “originator” – for about 1.5 years). And of course every other fee charged in the securitization of my loan. Of course there are many other issues raised by this.

    The undisclosed business combination was announced through a press release in 2000, almost 5 years BEFORE I closed my loan. They reveal EVERYTHING in the press release. This information should have been disclosed before (or at least at) closing. (Search the Internet to see if this happened in your case also).

    Here is the press release:

    GMAC-RFC will provide MLN with a committed warehouse lending facility and revolving line of credit, while MLN will deliver subprime mortgages to GMAC-RFC.

    The alliance will allow MLN to participate in GMAC-RFC’s subprime mortgage securitization program while pursuing its business strategy to grow into a
    premiere subprime mortgage originator. In addition, convertible debt issued to GMAC-RFC will provide the company with the ability to participate in MLN’s future success.

    GMAC-RFC, a wholly owned subsidiary of General Motors Acceptance Corporation, is America’s largest non-agency issuer of mortgage-backed securities and number-one warehouse lender.

    Dan Edstrom

  77. Mortgage Auditor,

    Sorry I was typing as you posted.

    I agree the law does not support the disclosure but I would have to say that most “pretender lenders” knew where the loan was going in advance and set up their agreement to deliver a certain amount or risk paying back the discount offered by the warehouse lender.

    The account executives always scrambled at the end of the month to hit a quota and would pass just about any file through. The conforming full doc loans I’m sure were much less in margin and more competitive as they were not specifically created to default like the stated/no doc jumbos.

    The default insurance was also much more prevalent in this class of loans.

    I think the main objective in strategy is more along the lines of keep it simple. The first step is to catch them with no note or authority to foreclose, Rescission is a great key to this as they have to follow the law set forth so finding a TILA violation is a good start. Making them step forward with legal proof of their claim is the first step, then nail them with discovery for a full absolute accounting. Almost all of these loans had fraud, lack of disclosure or incorrect disclosure because they were slamming them out hand over fist.

    The theory has yet to really be tested as most of these cases never reach the end and I’m not sure many of them ever will. The lender is too busy and cannot bring the documentation to court most of the time and we are now seeing the rulings come down to support the homeowners and expose the make believe world the lenders relied upon for so long.

    Sorry to beat a dead horse and thank you for all of your input. I spent many years as a broker(mostly construction loans, no refis) and even being in the business I never really understood the level of the scam going on in the back room of the bank world.

  78. Mike H,

    I think we are on the same page as to how it worked.

    Mortgage Auditor,
    I understand the rate issue and the competitive market but I truly believe it is more as Neil described wherein the investors put up $X and were paid a standard competitive rate on that amount. The non disclosure is more in the background of what they are not telling. The warehouse lender has a forward commitment issued for let’s say 10Million and has to produce that dollar amount in a specific mortgage type(i.e. Stated or No Doc Option ARMs) He agrees to provide that amount at a price less than face value(wholesale) let’s just say it is 95% of X. 1% went to the broker as an origination and the other 1% as YSP(the broker could charge more if the borrower would shallow it on the front=origination side) Conservatively the other 4% would be the discounted wholesale for the stand in lender. This may be high for Fannie Freddie conforming deals but I would venture to guess the high loan amount Jumbos is where most of the money was made(thus the non-existence of that specific class of loans)

    If you add what Neil is getting at the investor is thinking he is lending a certain amount, the lender is passing a lesser amount off for the loan to the borrower keeping the difference. The Depositor lender is typically the one that gets paid to service the loan keeping an additional monthly percentage. The default insurance for what I understand hedged their bets two ways. One to cover the default and the cost of the default plus it paid the Servicer/Depositor the monthly amount it planned on making for the life term of the loan .25%per month over the life of a 30yr term is no small amount.

    They still also get to keep the foreclosed property in the end passing the loss to the certificate holder, collecting the insurance for the loan, the lost servicing fees and the profit from the sale of the property.

    If you add all of this together and call it one transaction from origination to the Sale of the MBS which is the real money(i.e. true lender) the percentage of margin overall is ridiculous.

    The main question is would the law support this interpretation and necessitate the disclosure of all compensation.

    FYI for compliance the Broker YSP typically could be disclosed on the GFE as “YSP paid POC to broker 0-4%” with no dollar amount at least up until 2007 I think. That wasn’t even required until 2005.

    I think this is the main part of why lenders rarely respond to discovery or rescissions because they do not want the true accounting discovered.

    If anyone can chime in with some legal basis I’m sure it will help us all.

  79. Don’t get me wrong because I am on the borrowers’ side but what you guys are saying about secondary market profits having to be disclosed as YSP is not accurate. The law does not require the gain-on-sale profits to be disclosed on the HUD, especially since that amount is not determined until after the loan has been closed, funded and shipped. Many times the funding entity doesn’t know who will end up buying that loan or how much profit they will make on it.

    These are interesting theories but until a court agrees with you, they are just that – theories.

  80. During the height of the subprime lending spree
    all the “fly by night” ,”pretender lenders” were double
    dipping by charging the borrower an “up front” fee on the loan while the broker was getting about 10% of the YSP, paid outside of closing. The other 90% of the
    YSP was hidden and being kept by the “pretender lender” often referred to as the “underwriting lender”. Amnet was a good example of this until they lost their license in Dec. 2005 but kept on lending until put out of business for good on 5/12/2009 in Florida.
    They would show the 10% YSP paid to the broker
    on the closing statement but they never showed the
    90% of YSP being paid to themselves. This had to violate TILA and RESPA! That’s why they took a hike,
    while the getting was good. Wells Fargo wound up
    servicing many of these loans. Often the notes got lost! Can you see why? If the investors found out, they’d be a little angry! Not to mention the borrowers
    who paid a higher interest rate than they should have.
    If the brokers ysp was $2,000, the “pretender lender got about $18,000, all undisclosed and possibly not taxed! Where was the IRS?

  81. Great job on this post, Neil.

    I see the YSP all the time in my clients’ audits and they are never properly disclosed. There’s been one time I saw a broker compensation disclosure but it was not spelled out that the borrower would pay a higher interest rate so that the broker could get paid.

  82. Dear J. in Colorado,
    Keeping it short and simple, it seems to me the
    Truth in Lending statute (TILA) and the Real Estate
    Settlement Procedures Act (RESPA) requires full
    disclosure of who got what in a mortgage transaction,
    especially if it were an FHA loan.
    The total YSP to all parties in the transaction had to
    be revealed, since it was “paid outside closing” POC.
    The concept that only the brokers share of the YSP
    had to be disclosed and not the “pretender lender’s”
    share seems to me to blatantly violate TILA and RESPA and is the heart of the Wall Street fraud perptrated on the borrowers and the investors. If either
    side had known the truth, that party would not have done the deal. Once this fraud becomes widely under-stood, I think alot of borrowers will be owning their homes free and clear. It all depends on how assertive
    the Bar Association allows attorneys to be. Since the
    interest of the Bar Association generally is with the lenders, they may not push this defense and it will have to be done by independent paralegals and pro se’s who are smart enough to understand it.

  83. Very interesting post. But would be ecxellent if we may have more details on this calculation Sample. Where the $ 180,000 is coming from ? and the $ 540,000 ?

  84. Neil- can you weigh in on this issue. This is very interesting and needs to be clarified asap, so everyone can move on to the next piece of the puzzle.

  85. J in Co, your numbers are off by a large margin. This was a very competitive market with many players fighting for a piece of the pie. No one makes 8% on conforming paper. Do the math by comparing the price of a MBS coupon with the prevailing mortgage rate at retail banks. No one is making that kind of money even with margins being higher than it was during the boom years.

    Also, I would love to see a single court opinion in support of the theory that second marketing profits have to be disclosed on the HUD.

  86. Mike H,

    I think you are close to the understanding. The problem lies in what classifies the “lender” It is the same as doing a simultaneous closing wherein you agree to buy a house from me for 150,000 and you know someone that wants the house and is willing to buy it from you at 200,000. You close the deal with me with their money on the same day and keep the rest(50,000) in this case.

    The original broker(especially after 2005) was limited by the underwriting lender(mostly a broker that processed pretending to be a lender) to a maximum of 2% total commission whether front or back if the broker secured a prepayment penalty. The UW lender then had a forward commitment on a warehouse line to produce a certain dollar amount of like kind mortgages in a period of time(typically it was easier to get their approvals at the end of the month to meet the quota) This UW lender stood in the middle of let’s say Countrywide that also had a selling agreement with the larger Depositor/Sponsor lenders to include them at a pre determined price into their securities(par plus a %)

    As things started to slide, the loans were harder to get accepted by the Sponsor so that they could knock the price down of what they accepted i.e. x% on the dollar of the face value but they still charged the trust face value. The process timing between closing and the acceptance into the trust took longer but I would still think that if a court looked at this all as one transaction from closing to acceptance using “real” money not credit, it would have no choice but to accept the fact that it is USURY in the best sense.

    I would assume roughly the limits were 2% to the mortgage broker, 5-8% for the stand in UW lender, 5-10% for the lender that could acquire a much larger warehouse line with the depositor(at a minimum) then there could be all the discount applied to the note between the depositor and the warehouse lender because of appraisal issues or other UW issues(this happened alot with Countrywide and Landsafe appraisals) This discount would have been assumed to end up in the pocket of the Depositor to offset the risk of having to buy the loan back although they simply assigned the warranties and reps from the originating lender to not take the responsibility for the fraud thus leaving it in the hands of the original lender(now mostly bankrupt) or the investors in a loss.

    The undisclosed amount is astronomical but the question is what legally needed to be disclosed given the lack of oversight and protection for the consumers? This is where a good ruling would help but I am unaware of one that has gone that far…Coincidence?

  87. This is incredible! So what you are saying is that the
    broker of the investor had to reveal not only the YSP that he the broker earned by selling you the borrower a higher interest rate, but also the much higher YSP
    the broker of the investor earned by selling him a stream of income based on a much lower interest
    rate than he was actually charging the borrower. To simplify, investor thinks he’s lending $150,000 at 5%=$7,500/year. Borrower thinks he’s getting $107,143 at 7% =$7,500. Broker is keeping a ysp =$42,857! And Tila and Respa require that this be disclosed or
    else the broker is subject to triple damages to the
    borrower because he failed to disclose his full commission, POC, paid outside closing! In other words the YSP, POC shown on the closing documents is fraudulent. It is actually much higher than was disclosed! The only way to prove this is to
    subpoena all the records of the “pretender lender”
    to see how much they took from the investor for your loan and at what interest rate, and how much they actually gave you the borrower and at what interest rate and wether or not they honestly disclosed all this as required by law on the closing documents. I think I got it! If this is true, the magnitude of the fraud is incredible!

  88. As to the YSP, I understand the secondary market aspect but it would seem that if the originating bank is working from a pre-committment selling agreement that they are merely a broker not a true lender. They haven’t advanced their own funds to close the loan but in fact have used the note to create the balance sheet entry or the debt on a warehouse line.

    If you have the Secondary Market exemption that would be interesting reading for me as this is exactly what I am digging into at the moment.

    If the equitable tolling works to back up the process beyond the 3 years the simple reason for rescission would be the disclosure of the true and correct lender/creditor under 1638 § a(1) ” The identity of the creditor required to make disclosure”

    As to the definition of “creditor”

    (f) The term “creditor” refers only to a person who both
    (1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and
    (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement.

    If they never collect a payment are they a true creditor?
    If they never used their funds for the transaction are they a true creditor?
    If not then were the disclosures ever given by the true and correct “creditor”?
    If not the 3 day rescission is still possible, is it not?

    Does anyone have sufficient case law that can be referenced to see what the court system has supported to either side?

    Does anyone have a good tender offer they have submitted to the lender in good faith to tender a fair and equitable tender after rescission? Less damages of course which is what I am trying to determine.

    Thanks to all who keep the fight going!

  89. The only problem I see with the second YSP theory is that secondary market profits are exempt from RESPA disclosure requirements so under what rule can you argue for treble damages on secondary market profits????

  90. Diane,

    Uploaded it to scribd here…

    Thanks for sharing…


  91. Diane,
    Nice find. That is completely crazy. These foreclosure attorneys are out of control. What do you call it when an attorney does the following:

    – Does not provide a sufficiency of pleadings
    – Offers their own written affidavit of proof that a document is valid
    – said affidavit contradicts previous pleadings submitted by said attorney

    Dan Edstrom

  92. Hi,

    I read your recent stories. This is unrelated to this story, but I just found an amazing Bankruptcy Opinion in Idaho regarding standing. It is short and to the point. Please post it somewhere for folks to use:


  93. J in CO,
    Lookup the following to find out why rescission probably does apply even though the statute of limitations has run out:

    contra non valentem agere nulla currit praescriptio

    I believe equitable tolling is only a part of this (although probably the main part, at least for me)…

    Dan Edstrom

  94. Neil,

    This is a timely post. I am in the process if finalizing my rescission where the lender has never given me the three day rescission(UW switched the loan at closing) My next step will be to send a tender offer to them subject to a payoff that includes a full accounting to include YSP1, YSP2?, Service Release Premiums, Resale of the note to the Trust, Failure and subsequent takeover from WAMU to Chase to include the discounted value and any and all TARP payments, CDS insurance and all fees incident to my default.

    I assume they will not respond to the rescission and think it best to send immediately a tender offer to help speed the process of filing for Quiet Title if I have to bring this that far. If included in the tender offer is the request for the full accounting a sufficient way to offset the tender needed if the court forces me to citing the numerous fraudulent actions that have led to this situation?

    I would think that at least if they file a declaratory action that it an be forced by the court as I have the entire history other than amounts paid by the trust, and the discounted value given the takeover of WAMU by Chase and BofA for the trust.

    I think this will be a strong argument and hope my local judge is savy enough to understand where I am coming from. This is only one of two loans that I am fighting against.

    What would you recommend as a course of action for a securitized loan in foreclosure that is over the 3 year mark. Is there another rescission that I can argue given non disclosure of the true Creditor to reset the rescission period?

    I have other arguments such as a deed notarized by the mortgage broker and a blank assignment thus forcing the payable to bearer argument if they can even produce the note but thought Rescission would be best.

    As I understand it the lender not only has to return monies paid by me but also ANY payments paid to ANYONE since the origination of the loan. This would include the insurance, SRP, YSP, Discounts and TARP funds prior to my tender and also includes a chapter 11 of the originating lender.

    I have to thank you for this site and the determination of everyone as I plan to contribute to the cause in many ways after the successful conclusion of the above loans.

    Keep up the fight and thanks in advance for any help!!

  95. For bt,
    M.Soliman is the best , he is helping in our fight , contact him here’s his email , Trust me he is the Best !!
    Discovery Bay, CA

  96. what state are you in?

  97. AUDIT referrals needed: 1) Chain of Securitization for my loan 2) loan doc audit 3) Follow the money for my table funded loan with an audit

    ???any referrals anyone???

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