Investors and Borrowers Unite!

if you peal away the apparent differences you find that there is an inherent joinder of interest investors and borrowers: both were deceived and both lost nearly everything they had by purchasing a financial product that was misrepresented — artificially inflated as to quality and value. And both were subject to the same MO — using third parties to create the appearance of propriety and conformity with the applicable laws, while the real purpose was simply to take the money and run.

Thanks to Dan Edstrom: This is a comment bringing to our attention the lawsuit of the real lenders (the investors) against the intermediaries, pretender lenders and conduits in the securitization process. It of course looks very familiar. They are saying that they were misinformed, led astray and lost money. What is not stated is that they were “qualified investors” who because of their size and sophistication are deemed to have greater access to information and a greater ability to assess risk on their own. And even they got duped. So our point is that the homeowner is the LEAST sophisticated player as a party in interest. Thus the homeowner should be the one to suffer the least amount of damage. As is usually the case with American politics, the current situation is standing on its head. The homeowner generally doesn’t have a clue as to what is really going on with his “loan product,” and even if he had some idea, wouldn’t know what to do with the information. And Yet the brunt of this crisis is falling on the people who were MOST vulnerable.

My solution is for attorneys, particularly class action attorneys, to put their differences aside. One might argue that the investors, as real lenders have an interest that conflicts with the interest of borrowers of their money. Conversely one might argue that borrowers might have claims against the real lenders whose money set this whole process in motion, and counterclaims and affirmative defenses in foreclosure or mortgage litigation (whether the loan is in distress, non-performing, or otherwise). But if you peal away the apparent differences you find that there is an inherent joinder of interest investors and borrowers: both were deceived and both lost nearly everything they had by purchasing a financial product that was misrepresented — artificially inflated as to quality and value. And both were subject to the same MO — using third parties to create the appearance of propriety and conformity with the applicable laws, while the real purpose was simply to take the money and run.

Only the real lenders can actually re-structure these loans. It is true, when all is said and done, that the restructuring alone will only provide them with cover on 10%-35% of their investment. But that is geometrically more than the write-downs currently being imposed by Wall Street and they lay off the risk onto the investors and the taxpayer. But the solution doesn’t end there. A joint claim for damages against the intermediaries who obviously knew they were creating loans to fail so that they could collect on credit default swaps and higher service, fees, would net both the investor and the borrower a hefty judgment. The judgment would either be paid or it would levied against assets of the the losing party(ies). Those assets would include mortgages claimed to be owned by the pretender lenders, unopposed by other borrowers. Hence the early bird here would be able to recover as much as 100% or more of the investment in mortgage backed securities and play a societal role in re-structuring loan products that were brainless and predatory in their conception and execution.

So take a look at the entry below and go looking for other lawsuits from investors against the underwriters who sold mortgage backed securities. They probably have done a lot of your discovery for you. And you might end up with a deal in which the borrowers and the investors come into the same courtroom crying foul against the players in the middle. Then, and only then will they have no place to hide.

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From Dan Edstrom: Things are changing indeed! Check out this investor lawsuit that is the other side of the coin to the borrowers lawsuits against the “pretender lenders”. This is huge and goes to the heart of everything Neil Garfield has been saying. Notice they are not going after the borrowers, but the REAL cause of the failed mortgages.

Excerpt:
The complaint alleges that the Registration Statements omitted and/or misrepresented the fact that the sellers of the underlying mortgages to JP Morgan Acceptance were issuing many of the mortgage loans to borrowers who: (i) did not meet the prudent or maximum debt-to-income ratio purportedly required by the lender; (ii) did not provide adequate documentation to support the income and assets required for the lenders to approve and fund the mortgage loans pursuant to the lenders’ own guidelines; (iii) were steered to stated income/asset and low documentation mortgage loans by lenders, lenders’ correspondents or lenders’ agents, such as mortgage brokers, because the borrowers could not qualify for mortgage loans that required full documentation; and (iv) did not have the income required by the lenders’ own guidelines to afford the required mortgage payments which resulted in a mismatch between the amount loaned to the borrower and the capacity of the borrower.

According to the complaint, by the summer of 2007, the amount of uncollectible mortgage loans securing the Certificates began to be revealed to the public. To avoid scrutiny for their own involvement in the sale of the Certificates, the Rating Agencies began to put negative watch labels on many Certificate classes, ultimately downgrading many. The delinquency and foreclosure rates of the mortgage loans securing the Certificates has grown both faster and in greater quantity than what would be expected for mortgage loans of the types described in the Prospectus Supplements. As an additional result, the Certificates are no longer marketable at prices anywhere near the price paid by plaintiffs and the Class and the holders of the Certificates are exposed to much more risk with respect to both the timing and absolute cash flow to be received than the Registration Statements/Prospectus Supplements represented. [Editor’s Note: Same as the houses]

http://www.csgrr.com/csgrr-cgi-bin/mil?case=jpmorgan&templ=cases/case-pr-print.html

23 Responses

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  2. My complaint against Wells Fargo / Crown Northcorp as servicers in Alameda Superior court, California.

    http://www.scribd.com/doc/22035668/Narraway-v-Wells-Fargo-Complaint-Alameda-Superior-Court-11-02-09

  3. Wells Fargo originator, Wells Fargo employee. Wells Fargo Asset Securities Corp Sponsor, Custodian, Depositor,Securities Administrator Citigroup Global Markets, Bear Stearns as counterparty,HSBC Bank U.S.A. as trustee, Wells Fargo Home Equity Asset-Backed Securities 2005-2

  4. usedkarguy

    Is your complaint against Wells Fargo as originator or sponsor? My email is belrad@gmail.com

  5. ————————————————————————-
    “………Kara, on October 28th, 2009 at 8:09 pm Said:

    Deontos,
    It is actually against the top management and underwriters and a trial date is set for May 2011. Have not been able to search out the docs yet – anyone that wants to help would be great………….”
    ————————————————————————-

    Kara,

    OK, I found the Case File. It is on the website you posted earlier:
    This could be a RICH datamine for others. The file is 360 pages,
    it takes awhile to load. I am going to see if I can get it posted to
    scribd.

    Link: June 15, 2009 – Amended Consolidated Class Action Complaint
    http://www.blbglaw.com/cases/00067_data/WaMu-AmendedComplaint-6.15.09.pdf

    ___________________________________________

    In re Washington Mutual, Inc., Securities Litigation
    Court: United States District Court, Western District of Washington
    Case Number: 07-cv-1809
    Judge: Hon. Marsha J. Pechman
    Case Contacts: Chad Johnson, Hannah Greenwald Ross, Jerald Bien-Willner, Katherine McCracken Sinderson

    Securities class action filed on behalf of investors in Washington Mutual, Inc. (“Washington Mutual” or the “Company”) against the Company, certain of its directors and executive officers, its auditor Deloitte & Touche LLP (“Deloitte”), and several major financial institutions (the “Underwriters”) that underwrote the Company’s securities offerings during the Class Period.

    Until it was forced to declare bankruptcy on September 26, 2008 after its banking subsidiary was seized by federal regulators, Washington Mutual was one of the nation’s largest originators and servicers of residential mortgages. The Company had long represented itself to be a traditional low-risk depository institution and mortgage lender. In reality, in recent times and particularly in 2006 and 2007, it is alleged that Washington Mutual increasingly focused on high-risk and experimental mortgage products, while secretly abandoning proper standards of managing, conducting and accounting for its business. For example, as alleged in a recent complaint filed by the Attorney General of the State of New York concerning First American Corporation’s eAppraiseIT subsidiary, Washington Mutual elicited fraudulent appraisals from eAppraiseIT in order to increase its loan volume and further grow its mortgage lending business. As alleged, this wrongful practice, among others, including the improper accounting for the Company’s mortgage loans and deficient internal controls, caused the Company to defraud the investing public by issuing false and misleading financial statements and misrepresenting the nature of the Company’s lending business.

    In 2006 and 2007, with the direct participation of the Underwriters and Deloitte, the Company was able to raise nearly $5 billion through four securities offerings. Each participant in Washington Mutual’s securities offerings, including the Underwriters and Deloitte, were obligated by law to ensure that the statements made to investors in the offering materials were not false. However, in offering these securities, neither the Company, its officers, its Board of Directors, Deloitte, nor the Underwriters disclosed the hidden weaknesses in the Company’s lending practices and accounting policies. Rather, as alleged in the Amended Consolidated Class Action Complaint, each of those securities offerings incorporated materially untrue information about the Company.

    Ultimately, the Company’s misconduct began to come to light in late 2007, when in a series of disclosures Washington Mutual announced a shocking 72% decline in the Company’s earnings and the need to set aside more than $2 billion additional funds to cover expected loan losses. Upon the disclosure of this news and other revelations about Washington Mutual’s improper lending practices, the Company’s stock price and the value of the securities made pursuant to the Company’s offerings plummeted, and Washington Mutual’s investors suffered billions of dollars of losses.

    On May 7, 2008, the Honorable Marsha J. Pechman of the United States District Court for the Western District of Washington appointed Ontario Teachers’ Pension Plan board (“Ontario Teachers”) Lead Plaintiff and BLB&G Lead Counsel for the Class.

    On August 5, 2008, BLB&G filed on behalf of Ontario Teachers and other investors a class action complaint detailing allegations of fraud in Washington Mutual’s home loan business. The complaint includes a discussion of just under ninety (90) statements from former Washington Mutual insiders and others obtained in the course of BLB&G’s investigation, as well as previously undisclosed Washington Mutual documents, and expert analysis all supporting the allegations of wrongdoing in the complaint, including the misconduct of the Underwriters and Deloitte. On May 15, 2009, Judge Pechman sustained certain of the claims in the complaint while asking plaintiffs to replead the remaining claims. On June 15, 2009, BLB&G filed an Amended Consolidated Class Action Complaint incorporating additional evidence obtained in the wake of WaMu’s bankruptcy.

    BLB&G continues to investigate the misconduct at Washington Mutual, including the activities of the Underwriters and Deloitte. If you wish to discuss the investigation, please contact us at: 212-554-1400.

  6. Depositions from Wells Fargo servicer Crown showing what they actually do and how they get compensated and how much they pay the original lender:

    http://www.scribd.com/doc/21788091/Wells-Fargo-v-Lasalle-depositions

  7. And the same Wells Fargo v LaSalle in Oklahoma.

    http://www.scribd.com/doc/21787855/Wells

  8. Here is proof that Wells Fargo THEMSELVES know that these securitizations were riddled with fraud and misrepresentations:

    (this case in Nevada)

    http://www.scribd.com/doc/21787655/Wells-Fargo-v-Lasalle-re-securitization-fraud

  9. Kara,

    Yes, I read a few articles.
    I will check into the case
    number and see what I can find.
    Thank you!

  10. Deontos,

    Here is the case numebr and some more info from the firm representing the Plaintiffs.

    http://www.blbglaw.com/cases/00067

    Hope it helps.

  11. Deontos,
    It is actually against the top management and underwriters and a trial date is set for May 2011. Have not been able to search out the docs yet – anyone that wants to help would be great.

    Did you read the article?

  12. Kara,

    I’d sure like to see that ERISA Class action lawsuit
    regarding WAMU employees. I’d like to datamine
    that one.

    Do you have access to actual court filing?

  13. It looks like some ex employees of WAMU also want to see justice.

    Check this out:

    http://www.businessweek.com/ap/financialnews/D9BKD85G0.htm

    I have not gone and checked out the lawsuit yet but this could help those with WAMU now Chase as thier servicer.

  14. I believe it is related to my OCC complaint.

  15. Let be said loud and clear!! the crap is about the hit the fan!!!, one of the benefits i see in getting the investors involved is that they obviously will have more money to prosecute the thieves and SCAM-MERS, hence setting precedent for the rest of us, not so rich, i sincerely believe that this time the damn thieves simply went waaaaaaaaaaaayyy too far and they have shot themselves no in the foot but on their own )(*&^% !!, yes they can go on trying to play the pathetic, deceptive and completely disgusting game they are currently going for, but the end is near, the end is eminent! . I wish their time would get here much sooner than later, but i am patient, i will wait but proactively. Ladies and gentlemen let the end of the game begin!!! to victory America!!!!!

  16. Now I understand why 2012 is the apocalypse. Maybe the Mayans know all long about securitization and have been trying to warn everyone… it is written in stone.

  17. USEDCARGUY

    What kind of a letter did yousend to HSBC that prompted them to tell you they only have a nominal interest .

    Thanks
    Jeff

  18. Hmmm…….why does this look so familiar? Oh yeah

    http://securities.stanford.edu/1043/MS09_01/

    According to the complaint the plaintiff alleges that Morgan Stanley Capital I Inc. and certain of its officers and directors, the issuers and underwriters of the above stated certificates and the rating agencies that rated these Certificates violated the Securities Act of 1933. The complaint alleges that on December 23, 2005 (with amendments on February 17, 2006 and March 14, 2006), Morgan Stanley Capital and the defendant issuers caused the Registration Statement to be filed with the SEC in connection with the issuance of billions of dollars of Certificates. And the Registration Statement omitted and/or misrepresented the fact that the sellers of the underlying mortgages to Morgan Stanley Capital were issuing many of the mortgage loans to borrowers who did not meet the prudent or maximum debt-to-income ratio purportedly required by the lender, did not provide adequate documentation to support the income and assets required for the lenders to approve and fund the mortgage loans pursuant to the lenders’ own guidelines, were steered to stated income/asset and low documentation mortgage loans by lenders, lenders’ correspondents or lenders’ agents, such as mortgage brokers, because the borrowers could not qualify for mortgage loans that required full documentation, and did not have the income required by the lenders’ own guidelines to afford the required mortgage payments which resulted in a mismatch between the amount loaned to the borrower and the capacity of the borrower, so the lawsuit.

  19. OH! I FORGOT TO TELL YOU! I DID get a nice letter the other day from HSBC Bank, wherein they claim they hold only a NOMINAL interest as a trustee to the securitization , and they have nothing to do with the handling of the loan or servicing, etc. They kindly referred me BACK to Wells Fargo, as they claim they had no interest in the foreclosure. I wonder how the judge will take that. Motion for Reconsideration, anyone?

  20. I have made my case available to several law firms pursuing class actions against Wells Fargo on behalf of investors. Funny though, no one has taken me up on my offer to provide evidence.

  21. Identity Theft (California):

    California Penal Code Section 530.5
    (a) Every person who willfully obtains personal identifying information, as defined in subdivision (b) of Section 530.55, of another person, and uses that information for ANY UNLAWFUL PURPOSE, including to obtain, or attempt to obtain, credit, goods, services,
    real property, or medical information without the consent of that person, is guilty of a public offense, and upon conviction therefor, shall be punished by a fine, by imprisonment in a county jail not to exceed one year, or by both a fine and imprisonment, or by
    imprisonment in the state prison.

    By the way, AB 245 (Wyland) – Chapter 478, Statutes of 2001 (California) changes identity theft from a misdemeanor to a felony, and removes the requirement that the persons identity was acquired without consent

    So we have “any unlawful purpose”, even if a person originally gave consent for the lawful use of their identity …

    Comments:
    – Is it unlawful for a law firm to file a lawsuit against somebody if they have lack of standing (isn’t this committing fraud upon the court and/or fraud upon the defendant)?
    – Is it unlawful for a law firm to file a request for release from stay in a bankruptcy proceeding using a document that is fraudulent?
    – Is it unlawful for a sub-servicer acting as Attorney-In-Fact for the Trustee (of the loan pool) to file a bankruptcy claim using a document that is fraudulent?
    – Is it unlawful for anyone (especialy a lawyer) to create an assignment of real property that contains the phrase “for value received” when the aforementioned party knows that no value or consideration was actually transferred, and that specifically no value was directly transferred between the two parties?
    – Is it unlawful for anyone (especially a lawyer) to create an assignment of real property that is putatively transferring money to a company in bankruptcy that does not actually own the loan?

    I can keep going but you probably get the idea. Does your state have a law similar to this California law? Is there a Federal law similar to this California law?

    Believe you me, if you are an attorney, you do NOT want to be convicted of a felony. Does this law apply to attorneys?

    Disclaimer: I am not an attorney and this is not legal advice.

    Thanks,
    Dan Edstrom
    dmedstrom@hotmail.com

  22. Well, the investors may be “players”. I’m not so sure.

    “The investor” gamut runs from teacher & firemen’s retirement fund managers through investment managers for countries the world over. Perhaps not all of them were grifters scamming the system.

    DAN! Thank you for alerting me to this information!

    Anyway, my Plaintiff’s trust isn’t one of the one’s listed in the class action suit, but it’s darn close (off by only one digit).

    I called the law office who filed the suit, talked to two different staff who are working on this case. Explained my position and my potential (questionable?) value to their case, and left my phone number in case any of their attorneys might find interest in my information.

    Lisa E (Pro Se, Florida)
    http://www.ForeclosureHamlet.org
    Lisa Bep @ gmail . com (remove spaces to email)

  23. The “GSE Business Model” makes the investor a “player”. As such, the investors are just as responsible for the meltdown as the other “players” in the Model, i.e., what you call the “pretend lender”.

    The investors threw their common sense out the window years ago, failed to do due diligence, etc. The government guarantee of the GSE MBSs lulled all the players involved, because after all, they were promised in the unlikely event of an implosion…..the taxpayers will bail them out.

    The investors should beg the borrowers to ally with them, however, that will not happen as all the players in the Model know full well that there aren’t enough dollars in the drawer. Now the whole world fears our government’s “guarantee”.

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