Yield Spread Premiums Prove Appraisal Fraud: The Key to Understanding The Mortgage Mess

OK I’m upping the ante here with some techno-speak. But I’ll try to make it as simple as possible.

YIELD is the percentage or dollar return on investment. For example,

  1. if you buy a bond for $1,000 and the interest rate is 5%, the yield is 5%.
  2. You are expecting to receive $50 per year in interest, which is your yield, assuming the bond is repaid in full when it is due.
  3. Another example is if you buy the same bond for $900.
  4. The interest rate is still 5% which means it still pays $50 per year in interest. But instead of investing $1,000, you have invested $900 and you are still getting $50 per year in interest.
  5. Your yield has increased because $50 is more than 5% of $900.
  6. In fact, it is a yield of 5.55% (yield base). You compute it by dividing the dollar amount of the interest paid ($50) by the dollar amount of the investment ($900). $50/$900=5.55%.
  7. But you are also getting repaid the full $1,000 when the bond comes due so adding to the money you get in interest is the gain you made on the bond (assuming you hold it to maturity). That difference in our example is $100, which is the difference between $900 and $1,000.
  8. If the bond is a ten year bond, for simplicity sake we will divide the extra $100 you are going to make by 10 years which means you will be getting an extra $10 per year.
  9. If you divide that extra $10 by your investment of $900 you are getting an average annual gain of 1.1%. Adding the base yield of 5.5% to the extra yield on gain of 1.1%, you get a total yield of 6.6%.
  10. The difference between the interest rate on the bond (5%) and the real yield to you as the investor (6.6%) is 1.6%, which could be expressed as a yield spread.

YIELD SPREAD can be expressed in either principal dollar terms or in interest rate. In the above example the dollar value of the yield spread is $100, being the difference between the par value of the bond (the amount that you hope will be repaid in full) and the amount you actually invested.

For decades there has been an illegal trick played between originating lenders using yield spread that resutled in an additional commission or kickback paid to the mortgage broker, commonly referred to as a yield spread premium. This occurs when the broker, with full consent of the “lender” steers the homeowner into a loan product that is more expensive than the one the homeowner would get from another more honest broker and lender.

  1. So for example, if you qualify for a 5% (interest) thirty year fixed loan, but the broker convinces you that a different loan is the only one you can qualify for or that the different loan is “better” than the other one, we shall say in our example that he steers you into a loan for 7%.
  2. The yield spread is 2% which may not sound like much, but it means everything to your loan broker and originating lender.
  3. The kickback to the broker is often several hundred or evens several thousand dollars — which is the very thing consumers were intended to be protected against in TILA (Truth in Lending Act).
  4. By not disclosing the yield spread premium he deprived you of the knowledge that you get get better terms elsewhere and he didn’t bother tell you that instead of working for you he was working for himself.
  5. Sometimes this is discovered right on the HUD statement disguised amongst the myriad of numbers that you didn’t understand when you signed the closing papers. They were required by federal law to disclose this to you and they are required to send you back the money that was paid as the kickback and for a variety of reasons it is grounds to rescind the transaction, making the Deed of Trust or mortgage unenforceable or void.
  6. The kickback is called a yield spread premium in the language of the industry. On this phase of the transaction we’ll call it Yield Spread Premium #1 or YSP1.

Now we get to the securitization part of the “loan.” If you will go back to the beginning of this article you will see that the investor was seeking and expecting $50 per year in interest. Buying the deal for $1,000 gives the investor the 5% YIELD he was seeking.

What Wall Street did was work backwards from the $50, and asked the following stupid and illegal question: What is the least amount of money we could fund in mortgages and still show the $50 in income? Answer: Anything we can get homeowners to sign.

  1. In our simple example, if they get a homeowner to sign a note calling for 10% interest, then all Wall Street needs to come up with is $500. Because 10% of $500 is $50 and $50 is what the investor was expecting.
  2. Wall Street sells the bond for $1,000 and funds $500 leaving themselves with a YIELD SPREAD PREMIUM of 5%+ or a value of $500, which is just as illegal as the kickbacks described above. We will call this YIELD SPREAD PREMIUM #2.
  3. They take $50 out of this $500 YIELD SPREAD PREMIUM and put into a reserve fund so they can pay the interest whether the homeowner pays or not. That is why they don’t want homeowners and investors to get together, because they will discover that the investor was paid the first year out of the reserve and payments from homeowners and then stopped receiving payment even though there was continued revenue.
  4. But Wall Street also had another problem. Since they had siphoned off $450 and probably sent most of it off-shore in an off balance sheet transaction (to a Structured Investment vehicle [SIV]). the time would eventually come when the investor would want his $1,000 repaid in full just like they said it would. That would leave them $450 short and possibly criminally liable for taking $1,000 to fund a $500 mortgage.
  5. So you can see that if the homeowner pays every cent owed, this is bad news to the people on Wall Street. They would be required to give the investor $1,000 when all they received from the homeowner was $500. Therefore they had to make certain that they (a) had a method of covering the difference that would give them “cover” when demand was made for the $1,000 and (b) a method of triggering that coverage.
  6. They also needed to make it as difficult as possible for investors to get together to fire the agent of the partnership (SPV) formed to issue the bonds they bought, which they did in the express terms of the bond indenture. So logistically they needed to keep investors away from investors and to keep investors away from borrowers so that none of them could compare notes.
  7. To cover the money they took from the investor they purchased insurance contracts (credit default swaps is one form). They wrote the terms themselves so that when a certain percentage of the pool failed they could declare it a failure and stop paying the ivnestors anything. The failure of the pool would trigger the insurance contracts.
  8. Under normal circumstances if you buy a car, you can insure it once and if it is wrecked you get the money for it. Imagine if you could buy insurance on it thirty times over at discounted rates. So you smash the car up and instead of receiving $30,000 for the car you receive $900,000. That is what Wall Street did with your mortgage. This was not risk taking much less excessive risk taking. It was fraud.
  9. So IF THE LOAN FAILED or was declared a failure as being part of a pool that went into failure, the insurance paid off.
  10. Hence the only way they could cover themselves for taking $1,000 on a $500 loan was by making absolutely certain the loan would fail.
  11. It wasn’t enough to use predatory loan tactics to trick people into loans that resulted in resets that were higher than their annual income. Wall Street still had the problem of people somehow making the payments anyway or getting bailed out by parents or even the government.
  12. They had to make sure the homeowner didn’t want the loan anymore and the only way to do that was to make certain that the homeowner would end up in a position wherein far more was owed on the loan than the house ever was worth and far more than it would ever be worth in the foreseeable future.
  13. They had to make sure that the federal government didn’t step in and help the homeowners, so they created a scheme wherein the federal government used all its resources to bail out Wall Street which had created the myth of losses on loan defaults for notes and mortgages they never owned. It would then become politically and economically impossible for the government to bail out the homeowners.
  14. This is why principal reduction is off the table. If these loans become performing again, insurance might not be triggered and the investors might demand the full $1,000. With insurance on the $500 loan they stand to collect $15,000. without it, they stand to lose $1000. There is no middle ground.
  15. So they needed a method to get the “market” to rise in values as much as possible to levels they were sure would be unsustainable. That was easy. They blacklisted the appraisers who wanted to practice honestly and paid appraisers, mortgage brokers and “originating lenders” (often owned by Wall Street firms) 3-10 times their normal fees to get these loans closed. They created “lenders” that were not banks or funding the loans that had no assets and then bankrupted them.
  16. With the demand for the AAA rated and insured MBS at an all-time high the demand went out to mortgage brokers not to bring them a certain number of mortgages but to bring in a certain dollar amount of obligations because Wall Street had already sold the bonds “forward” (meaning they didn’t have the underlying loans yet).
  17. With demand for loans exceeding the supply of houses, they successfully created the “market”conditions to inflate the market values on a broad scale thus giving them plausible deniability as to the appraisal fraud on any one particular house.

Whether you call it appraisal fraud or simply an undisclosed yield spread premium, the result is the same. That money is due back to the homeowner and there is a liability to the investors that they don’t know about. Why are the fund managers so timid about pressing the claims? Perhaps because they were not fooled.

17 Responses

  1. […] Yield Spread Premiums Prove Appraisal Fraud: The Key to Understanding The Mortgage Mess […]

  2. I am also working on a case involving Marti Noriega. Found some docs by Google but if you have any docs signed by Marti, please email them to me. I will also share what I have. Thank you.

  3. I have Marti Noriega Signing as V President fremont investment and Loan & Suntrust alternative loan trust 2006-1F AND suntrust Mortgage inc i also have Denise Bailey Signing for Fremont investment & loan as Assis Secretary & Suntrust alternative loan trust 2006-1F assis Secretary & Suntrust Mortgage Vice president Does anyone have any information regarding them?? Please email to exchange info VIa email ipastllc@gmx.com thank you

  4. and the odd news is mortgage rates is expected to rise in 2010…


  6. This comment is not made to defend the actions of any appraiser, or the appraisal industry itself, but to add some dimension of what was going on transactionally.

    Sadly, appraisers were Conditioned to Anchor on Sales Price. This, even though their USPAP Certifications state that they do not do that.

    Those who would not play the game of committing to being able to support the Sales Price, were routinely put on exclusionary lists at the larger mortgage banking firms or departments.

    Some of the best appraisers went hungry during the boom. Some choose not to play the game as lender work is the greatest source of client pressures and the cheapest fees in the world of appraisal.

    When Licensing of appraisers was eminent, in 1988, my personal choice was to get away from lender work as a way to make a living. At that time, appraisers were making $250 for a house report on FNMA forms.

    Rather than work fast and cheap, cutting out the due diligence that compliance with good appraisal procedures requires; my choice was not to play the game.

    Unfortunately, Licensing ushered in the world of businesses who taught the Prep Courses, cramming test answers into students who became licensed, with out really understanding much more than they had been told they could make huge money, knocking off 3+- reports per day.

    Even Money Magazine included Appraisal as one of the best high paying jobs in the world for several years. This was largely due to their interviews with some that had gotten on the gravy train and who had no idea of their responsibilities or liabilities. No, of course, Money does not include appraisal..

    Ease of entry was a key in the jump from 11,000+- in CA in 1990, to over 21,000 by 2007.

    It is easy to create a fake appraisal using Templates in a Forms program with the majority of the Fields filled in, and the Adjustments automated.

    Keen minds entered appraisal and hired Trainees, often by the dozens. Larger minds opened Appraisal Management Companies, and took their rake off the top, cracking open reports when they did not come in, and changing them, etc.

    Nowhere along the way has it been shown that the appraiser was the originator of the bubble, but they certainly were the enablers, and many still do not know it.

  7. @Mary:

    I have a case involving Marti Noriega also, signing as Asst Secy MERS o/b/o LaSalle Bank NA, TTEE for Ownit 2006-6 & Litton. Case also involves Matthew Martin signing as VP of LaSalle, and I have another assmt that he signed as Asst Secy of MERS.

    Please email me at — rick at r0r.org and we’ll compare notes.

  8. Unfortunately, there are lenders/brokers out there that conduct themselves in less than honorable fashion. However, there are those out there that do operate ethically and morally and are looking out for the borrowers best interest.

    The one thing that the article failed to address was that in most cases, the YSP is used to pay loan fees. The majority of honest brokers out there make the same commission whether paid by the borrower in origination points or by the rebate.

    When it comes to YSP or Rebate, this function not only allows brokers to compete with the retail banks, it provides an option for the borrower to pay less fess by increasing the interest rate accordingly. By doing this, they can save thousands out of pocket costs for the loan or prevent an increase in the loan balance by not adding those loan fees to the new loan amount.

    By offering slightly higher rates, this allows the borrower to reduce the amount of loan fees charged, either by reducing the out-of-pocket costs or by adding those fees to the new loan amount thereby keeping their balance the same and lowering their payment. When making these decisions you have to look at many factors: Time in home, Time in Loan, costs vs. payment savings, are they taking cashout, paying off debt, etc.

    When the interest rate is increased, so is the rebate. That rebate in turn is used to pay for the loan fees. Essentially the lender is paying out some of their profit in exchange for receiving a higher interest rate on the loan.

    For example: If the loan is $500,000 and the cost is 1 point (1% of loan) plus $2500 in fees, the borrower can either pay the $7500 out of pocket, add $7500 to the loan balance or raise the interest rate to a % that pays the lender/broker the 1.5% YSP/rebate which would pay for those costs.

    Here’s how this could play out:

    5% – $7500 fees or 5.5% – No Fees.
    5% = $2684 and 5.5% = $2839.
    That’s a $155/mth difference. Dollar for dollar, the recoup time for those costs is 4yrs ($7500 / $155). So one has to take those questions mentioned above into consideration when deciding what would be the best option. If you are moving within a year or two, then it would not pay to pay for those costs. You would be better off with the higher rate option.

    Depending on the borrowers goals for that home and loan, this higher rate option was often a better financial choice due to the shorter term of having that loan, such in the case of a predicted sale within a short period of time that would not otherwise allow the borrower to recoup those fees. This is especially true when interest rates are in a down trend like they were in early 2000s.

    Banks are not required to disclose the YSP but Brokers are. If brokers were unable to receive YSP, they would not be able to offer the variety of loan options as they do now. In order to maintain a competitive market, broker and banks needs to compete on a fair playing field and YSP is one of those fields. If YSP was taken away from the brokers and banks alike, then that would be a fair playing field for them, however the borrower would be stripped of those options allowing them the choice to paying or not paying for fees.

    This is by no means a support of the system as I am as pissed off as the next guy. However, its not a blanket war on all. as I started this reply, there are those that conduct themselves and their business in an ethical, honest and fair manner. My hope is as all of your I am sure, and that is that this industry gets cleaned up, fair and balanced. Unlikely, as long as we have the bank and fed bureaucracy leading the way and writing the checks to those that are giving the reach arounds, we are all doomed. But one can dream!

    Power to the People!

  9. Does anyone have any info on whether of not I can Appeal a Denial of a Motion for Sanctions for Fraud, based on the above cases of AVP making fraudulent statements.

    The Judge just informed me after several months, that the Motion was denied, I asked if there was any reason, he refused to state why. He said the Clerk must have not have sent out the Denial that was made in November.

    Feel like I got screwed here, the Plaintiff’s counsel removed themselves and now a new Counsel is picking up the pieces, and asking for more time to file Discovery responses and another chance to File a Motion for Summary Judgment.

  10. These 3 Federal Statutes can deal quickly and forcibly with the unpleasant situation described above:

    18 U.S.C. § 1001 False Statements (The Martha Stewart Act)


    18 U.S.C. § 1346 : Definition of “scheme or artifice to defraud” (The Lord Conrad Black Act)


    RICO 18 USC § 1962(c) “association in fact” (The anti-insurance company act)


  11. Good Morning, Neil –

    Your articles get better each day, Thanks. We all need your expertise and clear perspectives, on this website.

    I encourage everyone to tell ten friends, who will tell ten friends, who will tell ten friends… and we’re on our way. I have called my Senator, local State Reps and my Congressman … I encourage everyone (and their ten friends, and their ten friends) to do the same. Further, I wrote email to President Barack Obama informing him that once government-funding-backed-financial inst’s begin a forelcosure they are acting as co-condemnors (with the US Gov’t) acting against a property owner’s primary (Title Holder in Bundle-of-Rights, fee simple): Uniform Act 1970 law is VERY rich with case setting precedent in which the owner’s interests must always come first. The larger public need for such Eminent Domain condemnation must first be researched and proved to be the best for the greater public good, and necessary need for each of our properties must be proved in the platted project. There is none in the case of ‘lenders’ and/or MERS (where our tax dollars are not being paid thus being illegally evaded, and set up to undermine 234-yrs of PAPER recorded and fee paid transfers to local county and state governments) so we may be seeing FCIC really focusing on this devil called MERS designed to save $30-$60/transfer (per MERS website). Also powerful for our defensives, and offensives against them before they file on us, is a close look at their Rules 8 & 9 … evidencing they’ve a preset plan to avoid Title or Foreclosure made in the MERS name visa vie unrecorded shuffling just prior to their foreclosure actions either judicial or nonjudicial. When we inform our ten friends, our legilsature as to the massive tax losses NEVER approved by our State governors and/or taxpayer, then the MERS-naive (i.e. BUSY) local judiciates will not also be scammed by this fraud any longer as their knowledge base grows with ours, adn they will realize they are acting against their own neighbors and community’s integrity of homeowners.

    Also, any phone call threats or deceptions, which result in fear or preceived threat against our property being taken illegally is called extortion under HOBBS ACT 18 USC 1951 …& calls violating TCPA Telephone Consumer Protection Act. Everyone put a notebook by their phone & write down time/date of ANY such calls or if you’re strung along with ‘servicer/pretender-lender’ empty promises. PS – Still no QWR reply from servicer
    + no billing past 3-months (no Special Forebearance signed & I kept original so none can be forged later to be illegally used against me. Our local and State taxes
    from transfers and recordings is essential to getting a leg-up on Govt forcing these players hiding behind the StrawMan Shell-Game fraud from undermining our sovereign rights as citizens; real people, not just a corporation given rights via a FEIN tax number. Before MERS, for 234-yrs PAPER recording worked and there were none of these problems. Now condemning w/Gov
    fund-backing they are violating antitrust & tax laws … it is the Banks/Lenders credit which should’ve been damaged by We The American People & they should need to pay it all back plus reinforce our credit lines not further damage the individual after taking our tax money & now bold-faced lying or making false media perception that their solvency will help our insolvency caused by their MERS Bait-&-Switch fraud scam.

    I’ll continue to email President Obama and have asked for a meeting with him and my State politicians in February, at his convenience: I hope he joins in now!
    MERS and the lenders/servicers/etc are not respecting
    his authority as our President & Commander in Chief.
    I want him to realize the scope of how our Eminent Domain security has been so violated … this financial meltdown was the ONE thing 9/11 pretold, so why is MERS allowed to thwart and usurp State tax laws and act on behalf of the US Govt as condemnor (called foreclosure by them) since the US Govt is now majority owner of these large banks?! One thing powerful people don’t like is someone usurping their authority! See you in Phoenix …

  12. John,
    Thanks for posting that. It’s VERY interesting and it’s that very chicanery–of the same person acting as “assistant secretary” or “vice president” of multiple companies–that gave me confidence to challenge the attempted foreclosure of my pretender lender.

    I have always known that this practice was fraudulent but didn’t know of, or how to find, any rules or laws against it–until I read this post. Very helpful…


    I found when I viewed the assignment of mortgage that was filed 07/272009 at the court house in Saint Petersburg FL.
    I had been to court on 07/14/2009 and at the hearing for Summary Judgement, I asked the judge how I was being foreclosed on by Liquidation Properties Inc, when my mortgage is from Quick Loan Funding.
    At the end, he ordered the plaintiffs to file there assignments. Thirteen days later they filed backdated assignments as officers of MERs and Quick Loan Funding.
    Assignments of my Mortgage http://www.box.net/shared/dcdt8yfm6z

    The Assignment PDF http://www.box.net/shared/42etxt14je

    The examples of fraud signatures

    She is in contact with federal prosecutors, urging them to investigate DOCX and bring charges against these fraudsters.

    John Anderson

  14. I have found the same for Marti Noriega signing for Litton Loan/mers, Suntrust, and other entities within a week span and one year span.

  15. Yes all the fraud is there and is coming out, bit by bit, in unrelated reports of activity, of the perpetrators of the scam of unbelievable scope.

    The question is can you get a prosecutor, to go after fraud on such a issue? I mean what will be the result of finding out about Assignment Fraud in particular fraud found coming out of DOCX of Georgia.

    I have been corresponding with Lynn E Szymoniak concerning assignment fraud. She has uncovered thousands of assignments from docx that are signed by about 8 players using many different titles of various office’s and it appears that as many as six different people signing as the various players.
    Here is a article posted at Fraud Digest

    Lynn E. Szymoniak, Esq., January 14, 2010

    In a few foreclosure cases, judges have noticed that the same individual
    appears as an officer of various banks. In several of these cases, the
    judges have dismissed the foreclosure actions and ordered that such
    actions cannot be refiled unless the foreclosing party presents an Affidavit
    with the three-year employment history of the bank “officer.”
    In most of these cases, the Bank has never refiled – presumably unable to
    explain the issue of the same individual appearing as an officer of many
    The following cases address this issue:
    Bank of NY v. Mulligan, 2008 NY Slip Op 31501 (U)(June 3, 2008):
    “…Additionally, plaintiff BNY must address a third matter if it renews its
    application for an order of reference. In the instant action, as noted above,
    Ely Harless, as Vice President of MERS, assigned the instant mortgage to
    BNY on October 9, 2007. Then, as Vice President of COUNTRYWIDE, on
    March 20, 2008, he executed the affidavit in this action. Is Mr. Harless the
    Vice President of MERS or the Vice President of COUNTRYWIDE? Did he
    change his employment between October 9, 2007 and March 20, 2008?
    The Court is concerned that Mr. Harless might be engaged in a
    subterfuge, wearing various corporate hats. Before granting an application
    for an order of reference, the Court requires an affidavit from Mr. Harless
    describing his employment history for the past three years…”
    Bank of NY v. Orosco, 2007 NY Slip Op 33818(U)
    “Plaintiff must address a second matter before it applies for an order of
    reference after demonstrating that the alleged assignment was recorded.
    Plaintiffs application is the third application for an order of reference
    received by me in the past several days that contain an affidavit from Keri
    Selman. In the instant action, she alleges to be an Assistant Vice-president
    of the Bank of New York. On November 16,2007, I denied an application
    for an order of reference (BANK OF NY AS TRUSTEE FOR
    CERTIFICATES, SERIES 2006-8 v JOSE NUNEZ, INDEX No. 10457/07), in
    which Keri Selman, in her affidavit of merit claims to be “Vice President of
    The Court is concerned that Ms. Selman might be engaged in a
    subterfuge, wearing various corporate hats. Before granting an application
    for an order of reference, the Court requires an affidavit
    from Ms. Selman describing her employment history for the past three
    Deutsche Bank National Trust Co. v. Castellanos, 2008 NY Slip Op 50033
    …Two additional matters plaintiff needs to address in a renewed motion.
    In my recent review of the moving papers in the renewed motion, I
    noticed that the July 21, 2006 “affidavit of merit” was executed by Jeff
    Rivas, who claims to be Deutsche Bank’s Vice President Default Timeline
    Management. On the same day, Mr. Rivas executed, before the same
    notary public, M. Reveles, a mortgage assignment from Argent Mortgage
    Company, LLC, claiming to be Argent’s Vice President Default Timeline
    Management. Did Mr. Rivas somehow change employers on July 21, 2006
    or is he concurrently a Vice President of both assignor Argent Mortgage
    Company, LLC and assignee Deutsche Bank? If he is a Vice President of
    both the assignor and the assignee, this would create a conflict of interest
    and render the July 21, 2006 assignment void.
    Also, Mr. Rivas claims that Argent Mortgage Company, LLC is located at
    1100 Town and County Road, Suite 200, orange, California. Did Mr. Rivas
    execute the assignment at 100 Town and County Road, Suite 200, and
    then travel to One City Boulevard West, with the same notary public, M.
    Reveles, in tow? The court is concerned that there may be fraud on the
    part of Deutsche Bank, Argent Mortgage Company, LLC and/or MTGLQ
    Investors, L.P., or at least malfeasance. If plaintiff renews its motion for a
    judgment of foreclosure and sale, the Court requires a satisfactory
    explanation by Mr. Rivas of his recent employment history…
    HSBC Bank, N.A. v. Cherry, 2007 NY Slip Op 52378 (U), 18 Misc 3d 1102
    “…Additionally, plaintiff HSBC must address a second matter if it renews its
    application for an order of reference upon compliance with CPLR § 3215
    (f). In the instant action, as noted above, Scott Anderson, in his affidavit,
    executed on June 15, 2007, states he is Vice President of OCWEN. Yet, the
    June 13, 2007 assignment from MERS to HSBC is signed by the same Scott
    Anderson as Vice President of MERS. Did Mr. Anderson change his
    employer between June 13, 2007 and June 15, 2007. The Court is
    concerned that there may be fraud on the part of HSBC, or at least
    malfeasance. Before granting an application for an order of reference, the
    Court requires an affidavit from Mr. Anderson describing his employment
    history for the past three years…
    In the instant action, with HSBC, OCWEN and MERS, joining with Deutsche
    Bank and Goldman Sachs at Suite 100, the Court is now concerned as to
    why so many financial goliaths are in the same space. The Court ponders
    if Suite 100 is the size of Madison Square Garden to house all of these
    financial behemoths or if there is a more nefarious reason for this
    corporate togetherness. If HSBC seeks to renew its application for an order
    to reference, the Court needs to know, in the from of an affidavit, why
    Suite 100 is such a popular venue for these corporations.”
    Deutsche Bank National Trust Company v. Rose Harris, Index No.
    35549/07, Supreme Court of NY (Brooklyn), February 5, 2008:
    “…Plaintiff’s affidavit, submitted in support of the instant application for a
    default judgment, was executed by Erica Johnson-Seck, who claims to be
    a Vice President of plaintiff DEUTSCHE BANK. The affidavit was executed
    in the state of Texas, County of Williamson… The Court is perplexed as to
    why the Assignment was not executed in Pasadena, California, at 460
    Sierra Madre Village, the alleged “principal place of business” for both the
    assignor and the assignee. In my January 31, 2008 decision (Deutsche
    Bank National Trust Company v. Maraj [citation omitted]), I noted that
    Erica Johnson-Seck claimed that she was a Vice President of MERS in her
    July 3, 2007 INDYMAC to DEUTSCHE BANK assignment, and then in her
    July 31, 2007 affidavit claimed to be a DEUTSCHE BANK Vice President.
    Just as in Deutsche Bank National Trust Company v. Maraj, at 2, the
    Court, in the instant action, before granting an application for an order of
    reference, requires an affidavit from Ms. Johnson-Seck, describing her
    employment history for the past three years.
    Further, the Court requires an explanation from an officer of plaintiff
    DEUTSCHE BANK as to why, in the middle of our national subprime
    mortgage financial crisis, DEUTSCHE BANK would purchase a nonperforming
    loan from INDYMAC, and why DEUTSCHE BANK, INDYMAC,
    and MERS all share office space at 460 Sierra Madre Villa, Pasadena, CA
    HSBC Bank USA v. Perboo, 2008 NY Slip Op 51385 (U), 20 Misc 3d
    “Further, plaintiff must address a second matter if it renews its application
    for an order of reference upon compliance with CPLR § 3215 (f). In the
    instant action, as noted above, Victor F. Parisi, in his affidavit, dated
    December 14, 2007, states he is Vice President of EQUITY ONE. Yet, the
    September 28, 2007 assignment from MERS as nominee for PEOPLE’S
    CHOICE to HSBC is signed by the same Victor F. Parisi, as Vice President
    of MERS. In my November 20, 2007 decision and order in HSBC BANK
    SANDOVAL, Index Number 8758/07, the same Victor F. Parisi assigned the
    underlying mortgage and note as Vice President of MERS to HSBC on
    March 13, 2007, and then signed the affidavit of merit as Vice President of
    EQUITY ONE, authorized servicer for HSBC, the next day, March 14, 2007.
    Did Mr. Parisi change his employment from March 13, 2007 to March 14,
    2007, and again from September 28, 2007 to December 14, 2007? The
    Court is concerned that Mr. Parisi might be engaged in a subterfuge,
    wearing various corporate hats. Before granting an application for an order
    of reference, the Court requires an affidavit from Mr. Parisi describing his
    employment history for the past three years.”
    An individual who falsely claims to be a bank officer – that is, who acts
    without the authorization of the bank – commits fraud. Because mortgage
    assignments are sent repeatedly through the U.S. Mail, the fraud becomes
    the federal offense of mail fraud. If a bank has actually authorized nonemployees
    to use the title of Vice President of the bank on mortgage
    assignments, other issues arise. Banks are highly regulated, as are bank
    relations with affiliated companies.
    Sections 23A and 23B of the Federal Reserve Act (FR Act), as applied by
    the Federal banking agencies under various Federal banking statutes,
    govern transactions between banks and affiliated business organizations.
    The Gramm-Leach-Bliley Act (GLBA) amended many laws governing the
    affiliation of banks and other financial service providers. Among other
    laws, the GLBA amended the Banking Act of 1933, the Bank Holding
    Company Act of 1956, (BHC Act), the Interstate Banking and Branching
    Efficiency Act of 1994, the Investment Company Act of 1940, the
    Investment Advisers Act of 1940, the Securities Exchange Act of 1934, the
    International Banking Act of 1978, the FR Act, the Federal Deposit
    Insurance Act (FDI Act), and the Home Owners’ Loan Act.
    Section 18(j) of the FDI Act extends the provisions of Sections 23A and
    23B of the FR Act to state nonmember banks. Section 23A regulates
    transactions between a bank and its “affiliates,” as that term is specifically
    defined in Section 23A. Section 23B of the FR Act was enacted as part of
    the Competitive Equality Banking Act of 1987 to expand the range of
    restrictions on transactions with affiliates. Section 10(b)(4) of the FDI Act
    authorizes FDIC examiners in the course of examining insured banks “to
    make such examinations of the affairs of any affiliate of any depository
    institution as may be necessary to disclose fully — (i) the relationship
    between such depository institution and any such affiliate; and (ii) the
    effect of such relationship on the depository institution.” “Affiliate” is
    defined in Section 3(w)(6) of the FDI Act as having the same meaning as
    the definition of that term in Section 2(k) of the BHC Act.
    According to the FDIC Risk Management Manual of Examination Policies,
    all bank activities, including those performed by dual employees, should be
    subject to the authority of an independent board of directors. Bank officers
    (whether they are dual employees or direct employees) must have
    sufficient expertise, authority, and information to act in the best interests
    of the insured institution at all times, under the direction of the board. A
    comprehensive framework of policies, procedures, legal agreements,
    controls, and audit must be established to govern the activities of dual
    officers and employees. A formal written employee sharing agreement
    should be established to define the employment relationship between the
    banking entity and affiliate. The following factors should be addressed:
    1. The agreement needs to be independently reviewed by the bank’s board
    of directors to ensure that it is fair and in the best interest of the
    insured bank.
    2. Compensation arrangements need to be clearly delineated to ensure
    they are equitable for both the bank and affiliated entity.
    3. The location where the dual employee is to perform duties needs to be
    established and detailed, along with reporting and authority.
    4. The agreement should require dual employees to avoid conflicts of
    interest. Additionally, the agreement should state that dual
    employees or officers must act in the best interest of the bank while
    performing any activities on behalf of the bank.
    5. Sanctions for noncompliance should be contained in the bank’s
    6. The agreement should provide for a periodic determination concerning
    the status of a dual-employee and the factors to be considered for
    terminating the dual-employee relationship in favor of either fulltime
    bank or affiliated entity employment.
    7. Authority for managing the dual-employee relationships should be clearly
    8. Lines of authority for dual employees should be established. While dual
    employees may have other responsibilities, they must also report
    through appropriate lines of authority within the banking institution.
    The dual employee’s bank responsibilities and decision-making
    should take precedence over any affiliate responsibilities. All
    activities conducted on behalf of the bank must be subject to
    appropriate review and authorization by bank officers, and ultimately
    the bank’s board of directors.
    Affiliate officers and employees who conduct activities on behalf of the
    bank (even if not formally designated as dual employees) are subject to
    the same level of legal and corporate duties and liabilities as a direct
    officer or employee of the bank. Additionally, examiners should have
    reasonable access to dual employees and any other affiliate employees
    who perform services on behalf of the bank.
    The insured banking institution utilizing a dual-employee needs to have
    policies and procedures in place covering account settlement for dualemployees
    that stipulate the manner and timing for payment in order to
    ensure an unanticipated affiliated loan does not occur in contravention of
    Sections 23A & 23B of the FR Act.
    Policies and procedures dealing with dual-employee relationships should
    include a mechanism to ensure compliance with 12 U.S.C 1831g (Adverse
    Contracts). Under that statute, an institution may not enter into a written
    or oral contract with any person to provide goods, products, or services to,
    or for the benefit of, a depository institution if the performance of such
    contract would adversely affect the safety and soundness of the insured

    In thousands of foreclosure cases, key documents may have been
    fabricated by employees of mortgage servicing companies who have
    falsely held themselves out as bank officers. Because most foreclosures
    are the result of defaults, the validity of these assignments has most often
    gone unchallenged. Almost three million U.S. properties were involved in
    some form of foreclosure action in 2009, a 44% increase from the end of
    2008 to the end of 2009. In 2010, the issue of the validity of Assignment
    is likely to finally come under examination by regulators, courts, lawyers
    and distressed homeowners.

    I have exaimples that I will post later
    John Anderson

  16. When you say “Wall Street” did this, do you think the GSE’s were also doing all this? (IMO, they did it all, in COMPLETE darkness, except perhaps for insurance, which it seems they didn’t rely on as much, because they privately, with a wink, counted on the federal government to backstop them if the Ponzi scheme ever unraveled, which it surely has.)

    I think the GSE’s were in some ways WORSE than an unregulated Wall Street, because the GSE’s operated from the sanctimonious position of “providing needed affordable housing” while collaborating with many of the same Wall Street co-conspirators in facilitating predatory loans against vulnerable borrowers. The GSEs’ “investors” had/have no ability to determine what is really going on with MBS pools that supposedly support their “certificates.” And the AAA “reliability” of GSE securitizations came from an “implied backing of the US Government,” which was in flagrant disregard for advertised warnings that they were absolutely NOT guaranteed by the federal government.

    Investors / borrowers caught up in Wall Street securitizations may end up cooperating in litigation to determine what was actually going on. And the courts MAY help determine what was going on and truly confirm your writings.

    Investors in GSE securitizations (including the big bailed out banks and foreign governments) are being supported/paid off by the US Government to prevent them from becoming disatisfied and litigious. The borrowers in this scheme appear to be SOL. I do not believe that we will ever know what the GSE’s were getting on with in their accounting departments, as there isn’t the political will to investigate them and there is immunity from private actions against these (now government-owned) entities.

  17. Predatory Lending is a major contributor to the economic turmoil we are currently experiencing.

    Here is an example of what I am talking about:
    Scott Veerkamp / Predatory Lending (Franklin Township School Board Member.)

    Please review this information from U.S. Senator Jeff Merkley regarding deceptive lending practices:
    “Steering payments were made to brokers who enticed unsuspecting homeowners into deceptive and expensive mortgages. These secret bonus payments, often called Yield Spread Premiums, turned home mortgages into a SCAM.”

    The Center for Responsible Lending says YSP “steals equity from struggling families.”
    1. Scott collected nearly $10,000 on two separate mortgages using YSP and junk fees. 2. This is an average of $5,000 per loan. 3. The median value of the properties was $135,000. 4. Clearly, this type of lending represents a major ripoff for consumers.


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