Ratings, Appraisal Fraud Unraveling: Testimony Reveals Cover-up

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“According to testimony last week, from January 2006 to June 2007, Clayton reviewed 911,000 loans for 23 investment or commercial banks, including Citigroup, Deutsche Bank, Goldman Sachs, UBS, Merrill Lynch, Bear Stearns and Morgan Stanley.”

It’s like slapping some paint on a 30 year old Chevy and selling it as a Rolls Royce. As long as the buyer never sees the car, you can get away with it. Well now they are seeing it and not liking it. Investor lawsuits are piling in. Government agencies are “discovering” what borrowers, honest appraisers and economists have been telling them for years. This was gross negligence and probably outright fraud. The rating agencies knew the loans were not meeting industry standards and ignored the information. Why? Because it was not in their economic interest to do their job. In other words, they were being paid to look the other way.

If rating agencies on Wall Street were familiar enough with underwriting standards and the thus the standards set forth in the securitization documents for the loans that would be funded with the lender’s (investor’s) money, then just how likely is it, do you think, that the actually industry that has been doing underwriting of loans, appraisal of property and assessing the viability of loan repayment did NOT know what the people on Wall Street DID know.

I remind again that the ultimate responsibility for the appraisal and the viability of the loan and the borrower’s ability to pay it back is on the lender, as per Federal Law — see the Truth in Lending Act. The statement that it was the borrower’s responsibility is a nice theory if you are into the whole “personal responsibility” thing, but it isn’t the law. So either you are are for law and order or you are for ignoring the law and allowing disorder and chaos to rule the markets and the courts.

The bottom line, whether you feel it just or unjust, is that under the law these loans are unsecured and largely (if not totally) offset by affirmative defenses of third party payments, damages for fraud, and damages for payments they DID make. Why should big business be the only ones that get to feed at the trough?

The only way to get the trillions of dollars back into the marketplace that was stolen and diverted by the intermediary parties in the securitization infrastructure is to give back the wealth that was illicitly obtained. The laws and rules requiring that have been in place for decades, even centuries if you look to the common law. It’s time for the legal profession to rise to the occasion, force the pretender lenders to their knees and make them pay for what they have done. And by the way, lawyers, there are tens of millions to be made for any enterprising lawyer who gets involved — just look at the private jets and $60 millions dollar off-shore deals that the foreclosure mills got when they were on the winning side. Now it’s YOUR turn.

September 26, 2010

Raters Ignored Proof of Unsafe Loans, Panel Is Told

By GRETCHEN MORGENSON

As the mortgage market grew frothy in 2006 — leading to a housing bubble that nearly brought down the banking system two years later — ratings agencies charged with assessing risk in mortgage pools dismissed conclusive evidence that many of the loans were dubious, according to testimony given last week to the Financial Crisis Inquiry Commission.

The commission, a bipartisan Congressional panel, has been holding hearings on the origins of the financial crisis. D. Keith Johnson, a former president of Clayton Holdings, a company that analyzed mortgage pools for the Wall Street firms that sold them, told the commission on Thursday that almost half the mortgages Clayton sampled from the beginning of 2006 through June 2007 failed to meet crucial quality benchmarks that banks had promised to investors.

Yet, Clayton found, Wall Street was placing many of the troubled loans into bundles known as mortgage securities.

Mr. Johnson said he took this data to officials at Standard & Poor’s, Fitch Ratings and to the executive team at Moody’s Investors Service.

“We went to the ratings agencies and said, ‘Wouldn’t this information be great for you to have as you assign tranche levels of risk?’ ” Mr. Johnson testified last week. But none of the agencies took him up on his offer, he said, indicating that it was against their business interests to be too critical of Wall Street.

“If any one of them would have adopted it,” he testified, “they would have lost market share.”

In the aftermath of the financial crisis, which has required billions of dollars in taxpayer money to bail out Wall Street, ratings agencies have been sharply criticized for failing to properly assess the securities they were reviewing, and federal regulators are investigating the agencies for the role they played in the credit crisis.

The agencies have said that they had closely watched the mortgage market but had not anticipated how quickly it would deteriorate.

Moody’s aggressively monitored market conditions as the crisis continued to unfold to assess the impact of how the various market participants — including the borrowers, the mortgage servicers, the mortgage originators and the federal government — might respond to the extremely fast-changing conditions,” Raymond W. McDaniel, the chief executive of Moody’s, said in Congressional testimony in April.

Mr. Johnson’s testimony last week, however, cast a new light on that assertion.

Asked about the testimony, officials at Standard & Poor’s and Moody’s said they had worked hard to assess an array of data on the mortgage market in 2006 and 2007. Michael Adler, a spokesman for Moody’s, said the company “considers a range of information from various market participants about factors that could affect the credit quality of the transactions we rate.”

“During this period, Moody’s did in fact observe the trend of loosening underwriting standards, reported on it repeatedly in our research and commentary, and incorporated it into our credit analysis,” Mr. Adler said.

Fitch said it was not aware of a meeting with Clayton.

It has been more than four years since Mr. Johnson and his colleagues at Clayton Holdings started noting that disturbing numbers of mortgages did not meet the lending criteria promised to investors in prospectuses used to market the securities.

Details of what Wall Street firms knew about the loans they were selling to investors, and when they knew it, are still trickling out in regulatory actions and private lawsuits.

The Massachusetts attorney general recently accused Morgan Stanley of deceptive practices in its financing of mortgage lenders during this period, saying that the firm had knowingly placed dubious mortgages into securitized pools. Morgan Stanley settled with the attorney general in June and paid $102 million. The facts in that case relied on Clayton reports of loan quality commissioned by Morgan Stanley.

But until Mr. Johnson’s testimony last week, it was largely unknown that the ratings agencies had been told that vast numbers of loans were being packaged as securities even though they failed to meet underwriting standards.

Before assembling mortgage pools, brokerage firms hired independent analytical companies like Clayton to sample loans and flag any that were problematic. Clayton was one of two large due diligence companies that watched for loans that did not meet specifications like geographic diversity and the loan-to-value ratios between a mortgage and the home that secured it, as well as the credit scores and incomes of borrowers.

It was a trust-but-verify approach to a lucrative business, a way for Wall Street to look over the shoulders of lenders whose operations they did not control but whose mortgages they were buying nonetheless.

According to testimony last week, from January 2006 to June 2007, Clayton reviewed 911,000 loans for 23 investment or commercial banks, including Citigroup, Deutsche Bank, Goldman Sachs, UBS, Merrill Lynch, Bear Stearns and Morgan Stanley.

The statistics provided by these samples, according to Mr. Johnson and Vicki Beal, a senior vice president at Clayton who also testified before the inquiry commission, indicated that only 54 percent of the loans met the lenders’ underwriting standards, regardless of how stringent or weak they were.

Some 28 percent of the loans sampled over the period were outright failures — that is, they were unable to meet numerous underwriting standards and did not have positive factors that compensated for their failings. And yet, 39 percent of these troubled loans still went into mortgage pools sold to investors during the period, Clayton’s figures showed.

The results varied from firm to firm. At Citigroup, for example, 29 percent of the sample failed to meet underwriting standards over the period, but almost a third of those substandard loans made it into securities pools.

At Goldman Sachs, 19 percent of loans failed to make the grade in the final quarter of 2006 and the first half of 2007, but 34 percent of those loans were still sold by the firm. Throughout this period, Goldman Sachs was also betting against the mortgage market for its own account, according to documents provided to government investigators.

About 17 percent of the loans financed by Deutsche Bank did not make the grade, but the firm still put 50 percent of them into the securities sold to investors, the Clayton report showed.

Deutsche Bank and Citigroup declined to comment.

A Goldman Sachs spokesman said the percentage of deficient loans that went into its pools was smaller than Clayton’s average, indicating that the firm had done a better job than its peers.

Because these loan samples were provided to the Wall Street investment banks that commissioned them, they could see throughout 2006 and into 2007 that the mortgages they were financing and selling to investors were becoming increasingly sketchy.

The results of the Clayton analyses were not disclosed to investors buying the loan pools. Instead, Wall Street firms used the information to pressure the lenders issuing the most troubled loans to accept a lower price for them, according to prosecutors who have investigated these cases.

A more proper procedure, analysts said, would have been for lenders like these — New Century Financial and Fremont Investment and Loan among them — to buy back the problem loans and replace them with higher-quality mortgages. But because these companies did not have enough capital to do that, they were happy to sell the troubled mortgages cheaply to the brokerage firms.

Since Wall Street firms were paying lower prices for the troubled loans, they could have passed along those discounts to customers, reducing investor risk. But Wall Street charged investors the same high prices associated with better-quality loans, thereby increasing their own profits on the problematic securities, according to a law enforcement official and executives with Wall Street companies. To be sure, the prospectuses detailing the types of loans in these pools contained brief warnings that some of the mortgages might not meet stated underwriting standards. But few investors probably realized that huge portions of the pools had failed to meet the benchmarks.

The Clayton figures took into account only small samples of the loan pools that were sold to investors. The 911,000 loans Clayton analyzed over the 18-month period were roughly 10 percent of the total number of mortgages in the securities it was contracted to review.

As a result, it is very likely that many of the loans that were not sampled also failed to meet underwriting standards but were packaged into the securities anyway.

25 Responses

  1. As far as transferring the note “properly”…this is from Yves Smith:

    One of my colleagues had a long conversation with the CEO of a major subprime lender that was later acquired by a larger bank that was a major residential mortgage player. This buddy went through his explanation of why he thought mortgage trusts were in trouble if more people wised up to how they had messed up with making sure they got the note. The former CEO was initially resistant, arguing that they had gotten opinions from top law firms. My contact was very familiar with those opinions, and told him how qualified they were, and did not cover the little problem of not complying with the terms of the pooling and servicing agreement. He also rebutted other objections of the CEO. They guy then laughed nervously and said, “Well, if you’re right, we’re f****d. We never transferred the paper. No one in the industry transferred the paper.”

  2. Bill McAuliffe

    Maybe – but that person needs to be in possession of the note – which means the note had to have been legally and validly conveyed to the Trust – for the whom the trustee claims to act on behalf of. And, if removed from the Trust – the same applies.

  3. Is THIS how they’re doing “it”?
    skip navigation Search Law SchoolSearch CornellLII / Legal Information Institutehomesearchfind a lawyerdonate

    UCC: uniform commercial codemain pageaboutsearch

    U.C.C. – ARTICLE 3 – NEGOTIABLE INSTRUMENTS
    ..PART 3. ENFORCEMENT OF INSTRUMENTS

    ——————————————————————————–

    § 3-301. PERSON ENTITLED TO ENFORCE INSTRUMENT.
    “Person entitled to enforce” an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3-309 or 3-418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

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  4. Back in the day, the horse thieves were hung to death in public view located in the local town square. These days they hide under the skirts of Capital Hill and are only told not to do the dirty deed ever again.

    I say hang everyone of these dirty bastards and do it quickly !

  5. If you and I make a serious mistake at our jobs, we get fired, and if we make a really serious error, our company could perish. But when bankers screw up, and leave a lot of collateral damage in their wake, they are confident that their sugar daddies in DC will clean up the mess for them

  6. I just noticed that article is written by the 14th banker.

    http://thefourteenthbanker.wordpress.com/

    He writes:

    You see, the cost of such errors in judgment (false affidavits) is less than the ill-gotten gains. Such costs are a ‘cost of doing business’. The profits that were generated by this activity dwarf the potential cost. Executives incentives are to produce gains today and they do not pay for the risks that are left for tomorrow. The decision to have individual employees sit and sign affidavits that are false was made consciously. Someone decided to save the expense of doing it right. Or someone figured out that the chain of title had already been broken and it is better to whistle past the graveyard and defraud a court, a debtor, an investor, or a shareholder, than it is to do the right thing.

  7. What a great feeling to see articles that sound like they were written by Neil Garfield (was it?) published in the MSM, over @ Huff Post. The shit is hitting the fan, and it’s only going to get nastier for the banksters. They will not be able to hide their crimes much longer. I’m ready for suits behind bars.

    http://www.huffingtonpost.com/the-fourteenth-banker/colossal-failures-in-judg_b_740839.html

  8. pelucheven,

    Thank you for you post. Very informative. Allonges have been a new focus of mine.

    And, I would suggest that anyone who paid off a mortgage – prior to a subsequent refinance – try to obtain the note and allonge stamped PAID – as required, to the prior mortgage.. Finding many do not have this. And, if you try to get it – allonges – even though they exist – will NOT be provided. Allonges magically disappear.

  9. Q Do you know about a requirement that allonges be permanently affixed to notes?
    ~
    A That’s– I believe that was a Fannie Mae requirement that was eliminated several years ago.

    ~
    Link -AutoPen…

    This deposition, originally posted last March, reveals another form of “Robo Signer”, a computer generated document, complete with a “real” signature scanned in…

    The rabbit hole just gets deeper and deeper and deeper and deeper…

    Mind blowing, isn’t it???

    First some background on allonges.

    From Yves Smith Naked Capitalism.

    An allonge is a separate sheet of paper which is attached to a note to allow for more signatures, in this case, endorsements, to be added. Allonges have had a way of magically appearing in collateral files while trails are in progress (I’ve seen it happen in cases I was tracking; it’s gotten so common that some attorneys warn judges to be on the alert for “ta dah” moments).

    The wee problem with an allonge miraculously being discovered is that the allonges that show up are inherently in violation of UCC (Uniform Commercial Code) provisions (UCC has been adopted by all states, a few states have minor quirks, but the broad provisions are very similar).

    An allonge is NOT to be used unless all the space on the original note, including the margins and the back side of pages, has been used up. This is never the case. Second, an allonge has to be so firmly attached to the original document as to be inseparable. Thus an allonge suddenly being discovered is an impossibility (well impossible if it were legit), yet it seems to happen all the time.

    Make sense? Good.

    Now lets pull out some excerpts from the deposition of Ms. Angela Nolan of JP Morgan Chase…

    It is a long one so I pulled out the best parts…

    These issues go far beyond simple errors. These documents are created by employees that work for the entity they are endorsing the the note TO process the foreclosure.

    In other words, the note was never endorsed to them by someone who had the authority to do so, so they create an allonged endorsed to themselves.

    To top it off, they are only relying on copies of the note in most cases. How do you attach an allonge to a copy of a note?

    There is noting linking these shadow plaintiff’s to the ownership of the loan except for the documents they create…

    Why?

    In my opinion, it is because they never owned the loan, have no “skin in the game” and are not damaged by the nonpayment of the homeowner.

    They are no better than bottom feeder debt collectors.

    These people are now taking advantage of millions Americans across this country as a result of a situation that they created.

    All we ask is a full accounting of the loan, how did they acquire it, how much did they pay, how much was already satisfied by third party payments and are they the real party that has the standing to foreclose.

    Why is that too much to ask?

    Anyway, check it out…

    DEUTSCHE BANK NATIONAL TRUST COMPANY,
    AS TRUSTEE FOR JPMAC 2007-CH5 – J.P.
    MORGAN CHASE BANK NATIONAL ASSOCIATION,
    Plaintiff,

    VERSUS

    ROBERT H. OBRIEN

    CASE NO. 50 2008 CA 018964XXXX MB
    General Jurisdiction Division
    Division: A W

    Q And if you could say your name for the record, please.
    A Angela Nolan with J.P. Morgan Chase.

    Q Now, how long have you been at your current position as vice president of J.P. Morgan Chase?
    A Approximately two years.

    Q Okay. In regards to allonges on notes, can you tell me how many allonges you have signed?
    A No.
    Q Can you tell me how many you sign in a given week?
    A I mean, it can vary from zero to a couple hundred.
    Q Okay.
    A Just depends on what loans Chase is selling or securitizing during a given time frame.
    Q Do you always sign as assistant vice-president?
    A In the past I have. Now it would be vice-president.
    Q Do you sign as any other title?
    A No.
    Q Okay. And have you ever signed for other companies?
    A No.
    Q If I could have you flip forward. I’m sorry, I don’t have them numbered, but–
    A That’s fine.
    Q –after the note, obviously, is the–
    A The rider? Okay.
    Q –allonge. There’s the rider, then there’s the allonge. Do you recognize this allonge?
    A Yes.
    Q Okay. And when did you see this allonge?
    A When our attorneys forwarded it to me.
    Q Okay. What? Your attorneys forwarded it to you, you said?
    A Yes.
    Q Okay. Did you see it before that?
    A Not to my knowledge.
    Q Okay. And is that your signature?
    A It is.
    Q Okay. On this particular allonge that we’re looking at, do you recall signing this?
    A I do not. Let me explain the process. This is an electronic signature, so there’s certain states that allow electronic signatures. And I believe I sent you documentation on that where we sign our name, it’s scanned into a database, then the signatures are applied electronically.
    Q Okay. Who– Did someone direct you to sign this allonge?
    A No.
    Q Can you tell me, why did it go first to Chase Home Finance and then from Chase Home Finance to blank?
    A I cannot. It is something to do with the legal entities and the way the loans are sold and securitized.
    Q Okay.
    A I could not answer that specifically, though.
    Q Now, on this allonge you’re not swearing–or, in other words, you didn’t take an oath that this is the actual date that the transfer occurred. Correct?
    A This is not the date the transfer occurred. This should be the date the allonge was printed.
    Q Okay. When you endorse in blank, is that always when it’s in a trust, or do you ever endorse in blank in other circumstances?
    A Typically, all endorsements are in blank.
    Q Okay. And would you say that all the allonges you do are because the loans have been securitized? Or, I should say, all the allonges that you do are because the loans have been securitized?
    A Either that, or a lender that Chase purchased a loan from failed to endorse the note and we don’t want to risk sending the note to them to endorse and not getting it back, so there will be an allonge created in that instance.
    Q Do you ever take any independent steps to verify that your endorsement is correct, that it’s endorsed by the right party, whether it’s in blank or not?
    A We have a quality assurance team that does a sample of all–every individual’s work and all the allonges to make sure that that is correct and accurate.
    Q Okay. And you, yourself, don’t actually go through each allonge to see–
    A No.
    Q –that everything is correct? So do you ever verify that there is a complete chain of endorsements prior to your signing an allonge?
    A No.
    Q Do you ever endorse right on the note?
    A What set of circumstances would that happen? In other words, what’s the difference? Why in one case would you do an allonge as opposed to another case where you would endorse. Typically, we do allonges. That is ninety-nine percent of what we do because the vault–the note is in our vault. We don’t want to risk taking that note out and it being misplaced. If it’s endorsed on the spot, it’s usually an audit finding that an auditor has the live note and realizes it’s missing an endorsement. “Can you correct it now while we’re on site?” And then in those instances we would typically endorse the note versus creating an allonge.
    Q So when these allonges are created, the note typically has not been taken from the vault?
    A That is correct.

    Q Do you know about a requirement that allonges be permanently affixed to notes?
    A That’s– I believe that was a Fannie Mae requirement that was eliminated several years ago.

    15 MR. ZACKS TO MR. MANCILLA: This is the
    16 document called “Creating Allonges,” Joe.

    Q Okay. And I’ll ask you if you recognize this document?
    A I do.
    Q And can you tell me what it is?
    A It is the custodial shop’s procedures for creating allonges.

    Q Okay. How is it determine whose person’s–or which person’s signature will get on the allonge?
    A I believe it’s just a random process of making sure you have the individuals. There are certain titles that are required, assistant vice-president, vice-president, assistant treasurer. I believe they just go in and randomly select those individuals.
    Q Okay.
    A And it is an approved list that the authenticity of those signatures were validated prior to them being scanned into the database.

    Q Okay. Auto sign. I’m sorry. On the second page we’re looking at, step ten. It says, “Make sure auto signboxes are checked.” What’s that?
    A That actually makes sure the signature gets applied to the document.
    Q Okay. So you stated, I think, depending on if you’re securitizing a loan, it could be anywhere from zero to two hundred that gets your signature on them each week?
    A Right.
    Q Okay. Now, let me ask you about your actual viewing of the allonge. Have you– Before they send it to the sort team to start filing them, do you actually go through and look at the allonges or not?
    A I do not.

  10. See, I Told You So (Deliberate Destruction Of Documents)
    The Market Ticker ® – Commentary on The Capital Markets
    Posted 2010-09-27 08:35
    by Karl Denninger
    in Housing
    See, I Told You So (Deliberate Destruction Of Documents)

    Yves over at Naked Capitalism has dug up confirmation of what I’ve been saying now for more than two years and have had on “background” and could not “out” the sources of – the practice of not complying with both MBS securitization offering circulars and black-letter state law was both pervasive and intentional.

    One of my colleagues had a long conversation with the CEO of a major subprime lender that was later acquired by a larger bank that was a major residential mortgage player. This buddy went through his explanation of why he thought mortgage trusts were in trouble if more people wised up to how they had messed up with making sure they got the note. The former CEO was initially resistant, arguing that they had gotten opinions from top law firms. My contact was very familiar with those opinions, and told him how qualified they were, and did not cover the little problem of not complying with the terms of the pooling and servicing agreement. He also rebutted other objections of the CEO. They guy then laughed nervously and said, “Well, if you’re right, we’re ****ed. We never transferred the paper. No one in the industry transferred the paper.”

    WE NEVER TRANSFERRED THE PAPER. NO ONE IN THE INDUSTRY TRANSFERRED THE PAPER.

    Got it folks?

    This was not an accident and the dog didn’t eat anyone’s homework.

    THE MAJOR BANKS AND LENDERS ALL INTENTIONALLY FAILED TO COMPLY WITH BOTH THEIR OWN OFFERING DOCUMENTS AND BLACK-LETTER STATE LAW.

    Even better – in 2009 The Florida Banker’s Association ADMITTED that they have been intentionally destroying the original “wet ink” signatures and documents:

    The reason “many firms file lost note counts as a standard alternative pleading in the complaint” is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file. See State Street Bank and Trust Company v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003). Electronic storage is almost universally acknowledged as safer, more efficient and less expensive than maintaining the originals in hard copy, which bears the concomitant costs of physical indexing, archiving and maintaining security. It is a standard in the industry and becoming the benchmark of modern efficiency across the spectrum of commerce—including the court system.

    I don’t care what’s a “standard” if it does not comport with the law!

    This is like saying that “dealing crack is a standard in the gang industry, therefore, we can sell it even though Federal Law says that we should go to prison for doing so.”

    Incidentally, for those who will chime in that “electronic copies are just as good”, no they’re not. They’re not secured, they’re not cryptographically signed and verified by the originator, and they are trivially easy to tamper with.

    I’d accept that an electronic copy is ok provided that the original is scanned, encoded, and digitally signed by the consumer at the point of origination, and that consumer then takes the original and a copy of the electronic document with him, with all of this being disclosed and approved by the consumer. If I PGP-sign a document or file it is extremely difficult to tamper with it in a way that cannot be detected. But without that sort of signature and encoding in the presence of the consumer, along with the consumer being the one that gets the paper copy, it is essentially impossible to prove that the document was not tampered with. “Wet signatures” and originals are required for exactly this reason – it makes tampering dangerous as it can usually be detected quite easily.

    This is massive, pernicious and OUTRAGEOUS fraud folks.

    *
    It is fraud upon the county governments who were deprived of their recording and transfer fees (e.g. “doc stamps.”)

    *
    It is fraud upon all of the MBS buyers, who purchased these securities with a representation and warranty that these notes WERE transferred and properly endorsed.

    *
    And it is fraud upon the courts when the “lost note” affidavits are filed asserting that the documents were LOST, when in fact THEY WERE INTENTIONALLY DESTROYED.

    If you hold private-label MBS wake the hell up and get your lawsuits going, because these big banks that put this stuff together will not survive this and the only way you get anything back is to be first in line.

    Folks, this is not small potatoes or something we can overlook.

    We are talking about intentional, pernicious, industry-wide fraud perpetrated upon the public, upon the government, upon homeowners and upon investors to the tune of trillions of dollars.

    We MUST NOT tolerate this.

    Each and every institution involved must be held to criminal account for their willful and intentional acts in this regard.

    Bail these people out? Hell no. They deserve a speedy and public trial, to be immediately followed by the proper sanction imposed for intentional acts taken to destroy this nation and it’s financial stability. This is terrorism, exactly as Bin Laden intended (destruction of our economy) and should be met with an identical punishment.
    Discussion below (registration required to post)

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    User Info See, I Told You So (Deliberate Destruction Of Documents) in forum [Market-Ticker]
    Throxxofvron
    Posts: 6091
    Incept: 2009-02-17
    Gold
    Running Unleashed in the Street with Kanellos
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    Unnamed Subprime Lender CEO wrote..

    “Well, if you’re right, we’re ****ed. We never transferred the paper. No one in the industry transferred the paper.”

    Karl wrote..

    THE MAJOR BANKS AND LENDERS ALL INTENTIONALLY FAILED TO COMPLY WITH BOTH THEIR OWN OFFERING DOCUMENTS AND BLACK-LETTER STATE LAW.

    ALL the Big Banks involved: JPM Chase, Wells Fargo, BofA, GM/Ally, etc.; are all ****ed; -or should be.

    Where are hell are ALL the Regulators, the State AGs, the Congress, President Obama; the Department of Justice?

    Everybody should be suing: the Insurers, the Counties that didn’t receive filings, the Bank Stockholders, the MBS holders including Pensions and Annuities, the GSEs; -even the FED Itself which holds Tens of Billions of Dollars of this paper!

    ———-
    DIONYSUS: ” Thou hast no knowledge of the life thou art leading; thy very existence is now a mystery to thee. ” -from ‘The Bacchantes’ By Euripides“During times of universal deceit, telling the truth becomes a revolutionary act.” -George Orwell
    2010-09-27 08:59:58
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    Bohemian
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    And this today in California, from the Sacramento Bee:

    http://www.sacbee.com/2010/09/25/3054814….

    Quote:

    “This admitted misconduct raises serious doubts about whether Ally Financial’s practices provide California borrowers facing foreclosure the protections guaranteed by law,” said a statement by Attorney General Jerry Brown.

    Formerly known as GMAC, Ally is one of the top mortgage lenders in the state. Brown’s office said California accounted for one fourth of the $26 billion in home loans the company made the first six months of this year.

    Ally declined comment on California

    ———-
    “The main obstacle to a stable and just world order is the United States.”— George Soros
    2010-09-27 09:02:22
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    Mikek31
    Posts: 1776
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    Hey Throxx, you’re back!

    Let’s hope we finally throw these ****ers under the bus. For Christ’s sake what’s it going to take?

    ———-
    This report is, unfortunately, a whole bottle of “Round Up” dumped on the top of the previous month’s “Green Shoot.”
    -Genesis
    2010-09-27 09:07:45
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    Truthseeker
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    The settled “solution” to this mess will be highly instructive.

    ———-
    “Sometimes I wonder if the world is being run by smart people who are putting us on, or by imbeciles who really mean it.” ~ Mark Twain
    2010-09-27 09:13:07
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    Etz
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    Quote:

    Electronic storage is almost universally acknowledged as safer, more efficient and less expensive than maintaining the originals in hard copy

    If they can come up with with the electronic version of the note, why wouldn’t it be as valid as the original?

    ———-
    The carry trade enhancement from ZIRP is a subsidy for credit losses by banks that comes out of the pockets of savers.
    2010-09-27 09:15:12
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    Genesis
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    Wet-ink signautres are required becasue paper is quite a bit harder to tamper with than an electronic document.

    I’d accept an electronic copy IF, and only IF, it was generated at the time I sat at the closing table, and was signed with my personal PGP key.

    THAT is hard to tamper with – about as hard as paper, without detection.

    ———-
    “The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow.” – Me
    2010-09-27 09:17:38
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    Etz
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    Ok, I see where you’re going.
    Quote:

    An electronic signature is any electronic means that indicates that a person adopts the contents of an electronic message. The U.S. Code defines an electronic signature for the purpose of US law as “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”

    http://en.wikipedia.org/wiki/Electronic_….

    ———-
    The carry trade enhancement from ZIRP is a subsidy for credit losses by banks that comes out of the pockets of savers.
    2010-09-27 09:25:49
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    Curbyourrisk
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    Sound slike retro-active revisions are about to come to the surface. In this country…money makes the laws. Who has the money? Who makes the law?? I think that is all we need to know. Remember in the morning it is the blue pill folks, we take the red pill before bed. During the day it’s the kool-aid at lunch and dinner. After dinner we continue to bend over for those who like to wield all the power and swing thier big stick.

    That’s what makes America so great.

    ———-
    Inflation: a sustainable rise in prices brought upon by rising wages that leads to consumers ability and willingness to pay higher prices.
    Gold is a hedge against deflation; it is a store of value against inflation.
    “We saved the world from disaster” – Ben Bernanke – Jackson Hol
    2010-09-27 09:28:59
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    Throxxofvron
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    Quote:

    I’d accept an electronic copy IF, and only IF, it was generated at the time I sat at the closing table, and was signed with my personal PGP key.

    Maybe this is a way to avoid such a mess as the present situation going forward; but, irrelevant to the situation as it stands with respect to previous transactions.

    Wouldn’t the Law would have to be changed to accommodate such practices as this as it is presently forbidden in the generation of Mortgages?

    The electronic filing of these Mortgages are not possible to validate with a post-facto E-sig…

    ———-
    DIONYSUS: ” Thou hast no knowledge of the life thou art leading; thy very existence is now a mystery to thee. ” -from ‘The Bacchantes’ By Euripides“During times of universal deceit, telling the truth becomes a revolutionary act.” -George Orwell
    2010-09-27 09:32:31
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    Genesis
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    Correct Throx. The law would have to be changed. It is not possible to fix it after the fact.

    These folks are in deep **** whether they realize it or not.

    ———-
    “The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow.” – Me
    2010-09-27 09:33:17
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    Blackswan
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    Could a blackswan event be the enforcement of the law? That would be crazy and go agaisnt ponzism.
    2010-09-27 09:38:09
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    2dogs
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    Genesis wrote..

    These folks are in deep **** whether they realize it or not.

    …unless they’re powerful enough to have the laws changed to accommodate what they’ve done. Laws are written/changed frequently to favor the powerful. Keep your eye on that.

    Does anyone really think they’ll acquiesce to that much of a loss without changing the rules of the game? [wearing my cynical hat]

    ———-
    WORK HARDER! Millions on welfare depend on you!
    2010-09-27 10:05:27
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    Mikek31
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    2dogs, we’re not just talking about changing a signature law; dozens of laws would have to be retroactively changed to “cure” this mess…

    ———-
    This report is, unfortunately, a whole bottle of “Round Up” dumped on the top of the previous month’s “Green Shoot.”
    -Genesis
    2010-09-27 10:09:03
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    Mikek31
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    From Neil Garfield today: http://foreclosureblues.wordpress.com/20….

    Quote:

    ALL the foreclosures and notices of sale, motions to lift stay, motions for summary judgment start the same way. Some party picked at random from the securitization chain comes in and starts a foreclosure sale (non-judicial) or a foreclosure lawsuit after documents are fabricated showing a chain of title that never happened and doesn’t exist.

    MOST of the time borrowers and the Courts are intimidated by the presence of a “Bank” (which is neither acting as a bank nor was it the lender, creditor, or payee at any point in the process of the closing of the transaction between the homeowner as borrower and the investor as lender).

    SOME of the time, borrowers are successful in their challenges to the foreclosure. The reason is not that the rest of the foreclosures are proper, right, legal or equitable. The reason is that in those cases where the borrower is successful they managed to get the Judge to pause long enough to actually look at the documents being presented and to allow the borrower to inquire as to their authenticity and authority. If there is such an inquiry the borrower wins. If there is no such inquiry, the borrower loses.

    ALL of the proceedings in which foreclosures were initiated in both non-judicial and judicial states are fatally defective and has resulted in a pile of debris called “title” when in fact no title has been transferred, no credit bid was ever submitted and no deed was issued with authority from a party who possessed the right to convey title.

    Each day an angry judge realizes he/she has been duped for years by these antics of people he knew and trusted. Criminal acts, contemptuous of the law and the Courts have been committed in millions of foreclosures.

    None of the agencies that are charged with responsibility to regulate the activities of these banks, institutions or companies has lifted a finger to impose existing rules and regulations that were designed to prevent this behavior and punish it when it occurs. None of the Courts want to apply clear Federal law on the subject in the Truth in Lending Act and the Real Estate Settlement and Procedures Act. Because when it comes right down to it, the facts unfolding in the lead news stories and in the court orders being entered are downright unthinkable.

    We have now come to that fork in the road where we must stop anyone who asks ”why would they lie?” and simply admit that it has ALL been a BIG LIE and we have been living this lie for 10 years, hence the name of this blog.

    So there is no mistake about it I am stating the opinion that NONE of the foreclosure sales on residential property in which the loan was originated as part of a securitization scheme are valid. They are void. If you think you lost your home you’re wrong no matter what anyone tells you. Any lawyer who studies this instead of responding from a knee-jerk “I remember that issue from law school” will come to the same conclusion — the title chain is not just clouded, it is fatally defective. That means the foreclosures were void according to existing law. It is the same effect as if I signed a warranty deed conveying title to YOUR home now. Such a document might LOOK good, but it is fraudulent, because I don’t have the title to convey much less warrant that it is good title. But if Judge won’t let you speak or won’t even consider the possibility that I would flat out lie and file a totally fraudulent deed, I’ll win and you’ll lose. That’s what is happening.

    ———-
    This report is, unfortunately, a whole bottle of “Round Up” dumped on the top of the previous month’s “Green Shoot.”
    -Genesis

    Last modified: 2010-09-27 10:16:48 by mikek31
    2010-09-27 10:14:40
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    2dogs
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    Quote:

    …we’re not just talking about changing a signature law; dozens of laws would have to be retroactively changed to “cure” this mess…

    I realize that, but desperation is a strong motivator. Federal law could jump in the game on an interstate/foreign commerce rationale.

    Keep your eyes open… that’s all I’m suggesting.

    ———-
    WORK HARDER! Millions on welfare depend on you!

    Last modified: 2010-09-27 10:18:08 by 2dogs
    2010-09-27 10:17:17
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    Halfbrite
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    Gen said, paraphrased:
    Quote:

    It is fraud upon the county governments, mbs buyers, and courts.

    Agreed. But take it one step further. Why? Why was the fraud done?

    MERS was invented to facilitate securitizing.

    Securitizing was created to facilitate bankers on both the buy and sell sides, stealing a “slice” of commission every time an mbs, cds, or siv was sold or transferred between the small group of “elites” who trade “paper” in 100M + lots. Bankers got paid commission each time of transfer, so they “churned” it incessantly, took their bonus, and the money is gone.

    That’s the story I’ve believed for 2 years, that’s just beginning to come out. That’s how our banking/financial industry stole the savings of the world.

    That’s why I have a hard time “blaming” someone who lost their job and cannot pay their mortgage, or any of the small players for that matter – it was a “setup” from the start of securitization, created and conceived at the highest elite levels of banking/government in America.

    It’s too late to “fix” it – the money is long gone. The only hope for our country and financial system is a reset, a restart, and a rebuild.

    ———-
    “The Second Amendment is in place in case they ignore the others” “Go Galt,and Go Now!”
    2010-09-27 10:19:20
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    Genesis
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    The people who were robbed – the MBS buyers – are entitled to whatever is left off the carcass of these banks.

    Fraud voids all contracts. That requires that the transaction be unwound. If the person so obligated is unable to cover it, that’s their problem.

    ———-
    “The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow.” – Me
    2010-09-27 10:23:03
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    Icanhasbailout
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    Even with digital signatures, there’s so much money in that industry that they would IMO forge those as well, if there were profit in it.

    ———-
    “Give me control of a nation’s money and I care not who makes her laws.”
    – Mayer Amschel Rothschild
    2010-09-27 10:23:19
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    Genesis
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    Damn near impossible Ican if the consumer has the key.

    To the best of my knowledge PGP has not been broken. If I send you a file that I have signed, and you tamper with it, the validation of the signature will fail.

    I refuse to accept digital documents as equivalent to paper ones with wet signatures unless there is security for the alleged signer that is at least as good as that on a piece of paper, which can be forensically examined for evidence of tampering.

    ———-
    “The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow.” – Me
    2010-09-27 10:25:29
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    Vegasradar
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    I’m trying to grasp this

    is this right?

    Bank makes loan-> scans in the loan docs and Deed then destroys original-> sells electronic file to an MBS pooler

    the Bank is in violation because the electronic document is not valid— ie it sold an empty box
    and will be responsible to refund the purchaser

    the Bank can’t foreclose because the electronic document is not valid without the hard copies -> ie the paper shredder literally ate the assets

    if the above it true then according to the law— all the homedebtors whose loans were securitized in this fashion actually own their home free and clear right now?

    ———-
    Remember, all Bennie has is dollars. He destroys the currency, he destroys himself. —Karl
    Filling in the Pieces- an economic overview:
    http://storage.denninger.net/ppt/teapart….
    2010-09-27 10:26:35
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    Peterm99
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    Halfbrite wrote..

    That’s why I have a hard time “blaming” . . . any of the small players . . .

    If the law is not enforced on ALL players, big and little, it is just continuation of the “lawless activity is OK, if you are (insert description here)” philosophy that is in the process of bringing the country down. Just like one can’t be almost a virgin, a society can’t be almost subject to the rule of law.

    Yes, in order of priority, the system should prosecute (and execute, IMO) the most egregious, blatant offenders first, but in order to re-establish credibility in the rule of law, all violators must be pursued and dealt with.

    Last modified: 2010-09-27 10:34:36 by peterm99
    2010-09-27 10:30:50
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    Genesis
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    No Vegas.

    The bank that “sold” the paper never transferred it at all.

    But they were paid for it, which means they can’t foreclose (no standing.)

    The MBS trust can’t foreclose either, as it doesn’t hold the paper (it was never transferred), despite paying for it.

    The fraud was at the level of the securitization. The transfers never took place and the originals were intentionally destroyed. This covered up the lack of assignments and paperwork that is legally required.

    The MBS holder has an empty box for which he paid good money. He has every right to demand the bank take it back and give him his money, since he was sold that box with a formal, legal representation that it contained – at the time – good recordable paper. He was defrauded – intentionally so – and thus can unwind the deal.

    The bank’s standing is thus restored, because it now, having refunded the MBS buyer’s money, now has both the note and has paid good money for it. They can thus sue to foreclose.

    However, they get to eat the loss, which is enough to detonate them.

    ———-
    “The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow.” – Me
    2010-09-27 10:31:01
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    Abn0rmal
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    Genesis wrote..

    To the best of my knowledge PGP has not been broken.

    It’s not necessary to break public key cryptography in order to forge a signed document.

    PGP signs the hash of the message, so if the hash function is broken later on it becomes possible to create a hash collision, making the signature on the original document also valid for the altered document.

    Did early versions of PGP use MD5 hashes for signing?
    2010-09-27 10:32:15
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    Medicdan
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    I remember hearing that Countrywide was having a massive shredding party.

    Gen you are correct about PGP.

    ———-
    Arizona & desert gardening
    http://azediblegarden.com/

    I spoke to my broker a few weeks ago. He assured me that there will not be a triple dip.

  11. See, I Told You So (Deliberate Destruction Of Documents)
    The Market Ticker ® – Commentary on The Capital Markets
    Posted 2010-09-27 08:35
    by Karl Denninger
    in Housing
    See, I Told You So (Deliberate Destruction Of Documents)

    Yves over at Naked Capitalism has dug up confirmation of what I’ve been saying now for more than two years and have had on “background” and could not “out” the sources of – the practice of not complying with both MBS securitization offering circulars and black-letter state law was both pervasive and intentional.

    One of my colleagues had a long conversation with the CEO of a major subprime lender that was later acquired by a larger bank that was a major residential mortgage player. This buddy went through his explanation of why he thought mortgage trusts were in trouble if more people wised up to how they had messed up with making sure they got the note. The former CEO was initially resistant, arguing that they had gotten opinions from top law firms. My contact was very familiar with those opinions, and told him how qualified they were, and did not cover the little problem of not complying with the terms of the pooling and servicing agreement. He also rebutted other objections of the CEO. They guy then laughed nervously and said, “Well, if you’re right, we’re ****ed. We never transferred the paper. No one in the industry transferred the paper.”

    WE NEVER TRANSFERRED THE PAPER. NO ONE IN THE INDUSTRY TRANSFERRED THE PAPER.

    Got it folks?

    This was not an accident and the dog didn’t eat anyone’s homework.

    THE MAJOR BANKS AND LENDERS ALL INTENTIONALLY FAILED TO COMPLY WITH BOTH THEIR OWN OFFERING DOCUMENTS AND BLACK-LETTER STATE LAW.

    Even better – in 2009 The Florida Banker’s Association ADMITTED that they have been intentionally destroying the original “wet ink” signatures and documents:

    The reason “many firms file lost note counts as a standard alternative pleading in the complaint” is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file. See State Street Bank and Trust Company v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003). Electronic storage is almost universally acknowledged as safer, more efficient and less expensive than maintaining the originals in hard copy, which bears the concomitant costs of physical indexing, archiving and maintaining security. It is a standard in the industry and becoming the benchmark of modern efficiency across the spectrum of commerce—including the court system.

    I don’t care what’s a “standard” if it does not comport with the law!

    This is like saying that “dealing crack is a standard in the gang industry, therefore, we can sell it even though Federal Law says that we should go to prison for doing so.”

    Incidentally, for those who will chime in that “electronic copies are just as good”, no they’re not. They’re not secured, they’re not cryptographically signed and verified by the originator, and they are trivially easy to tamper with.

    I’d accept that an electronic copy is ok provided that the original is scanned, encoded, and digitally signed by the consumer at the point of origination, and that consumer then takes the original and a copy of the electronic document with him, with all of this being disclosed and approved by the consumer. If I PGP-sign a document or file it is extremely difficult to tamper with it in a way that cannot be detected. But without that sort of signature and encoding in the presence of the consumer, along with the consumer being the one that gets the paper copy, it is essentially impossible to prove that the document was not tampered with. “Wet signatures” and originals are required for exactly this reason – it makes tampering dangerous as it can usually be detected quite easily.

    This is massive, pernicious and OUTRAGEOUS fraud folks.

    *
    It is fraud upon the county governments who were deprived of their recording and transfer fees (e.g. “doc stamps.”)

    *
    It is fraud upon all of the MBS buyers, who purchased these securities with a representation and warranty that these notes WERE transferred and properly endorsed.

    *
    And it is fraud upon the courts when the “lost note” affidavits are filed asserting that the documents were LOST, when in fact THEY WERE INTENTIONALLY DESTROYED.

    If you hold private-label MBS wake the hell up and get your lawsuits going, because these big banks that put this stuff together will not survive this and the only way you get anything back is to be first in line.

    Folks, this is not small potatoes or something we can overlook.

    We are talking about intentional, pernicious, industry-wide fraud perpetrated upon the public, upon the government, upon homeowners and upon investors to the tune of trillions of dollars.

    We MUST NOT tolerate this.

    Each and every institution involved must be held to criminal account for their willful and intentional acts in this regard.

    Bail these people out? Hell no. They deserve a speedy and public trial, to be immediately followed by the proper sanction imposed for intentional acts taken to destroy this nation and it’s financial stability. This is terrorism, exactly as Bin Laden intended (destruction of our economy) and should be met with an identical punishment.

  12. FUBAR Mortgage Behavior: Florida Banks Destroyed Notes; Others Never Transferred Them

    Before we get to the meat of the post, I have a fun project for readers. Just as “whocoulddanode” has become inextricably linked to the excuses for the failure to see the housing crisis coming, we need a new tag phase for the hopeless tangled mess that the folks who screwed up mortgage securitizations have foisted on Americans. Conceptually, FUBAR (Fucked Up Beyond All Recognition) is accurate, but it is pretty antique as far as slang goes, so we need a new term. Ideas encouraged.

    But to give readers the latest report of modern FUBAR, mortgage edition, let us continue with the sorry saga of “Where’s My Note?” For the benefit of newbies, what everyone calls a mortgage actually has two components: the note, which is the borrower IOU, and the mortgage (in some states, it’s called a deed of trust) which is the lien on the property. In 45 states, the mortgage is a mere accessory to the note; you must be the real party of interest in the note in order to foreclose.

    The pooling and servicing agreement, which governs who does what when in a mortgage securitization, requires the note to be endorsed (just like a check, signed by one party over to the next), showing the full chain of title, and the minimum conveyance chain is A (originator) => B (sponsor) => C (depositor) => D (trust). The endorsements also have to be wet ink; no electronic signatures permitted.

    I’ve had a lot of anecdotal evidence to support the idea that these procedures, which were created in the early days of mortgage securitizations, were simply not observed on a widespread, if not a universal basis. My sense is that the breakdown in practice was well underway by 2004, but it may have taken place earlier. For instance, a group of over 100 lawyers in a loose network around Max Garndner, a North Carolina bankruptcy lawyer who has taken a serious interest in this area, now has a standing joke that the first one that finds a deal where the note was correctly endorsed must bronze it and hang it on their wall. In other words, in none of the cases this large group has seen were the notes transferred to the trust properly.

    I’ve been reluctant to take as strong a stand as their collective experience suggests, but independent evidence confirms their report. One little stunner came courtesy Alan Grayson’s office. In 2009, the Florida Bankers Association wrote a letter to the Florida Supreme Court objecting to some proposed rule changes for foreclosure cases. The full text of the letter is here. The critical section:

    The reason “many firms file lost note counts as a standard alternative pleading in the complaint” is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file. See State Street Bank and Trust Company v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003). Electronic storage is almost universally acknowledged as safer, more efficient and less expensive than maintaining the originals in hard copy, which bears the concomitant costs of physical indexing, archiving and maintaining security. It is a standard in the industry and becoming the benchmark of modern efficiency across the spectrum of commerce—including the court system.

    This is highly entertaining, because the excuse is “oh we destroyed the note, so our standard practice is to use a lost note affidavit.” If this was really as widespread as the Florida Bankers Association suggests, they are in a whole heap of trouble, because in most (if not all) jurisdictions, original notes with proper wet ink endorsements are required. And in states that are serious about proper procedure (South Carolina, for instance), judges are not going to have much sympathy with the use of a lost note affidavit when the note was destroyed.

    But while it is clear the notes weren’t handled properly, I’m not certain that this electronic scanning story is accurate either (meaning it isn’t standard practice in mortgage land). In plenty of cases, plaintiffs come up with collateral files with hard copies of documents in them, albeit including suspiciously helpful ones that appear miraculously at the last minute.

    At least in private label deals (meaning non Freddie and Fannie), it appears instead that the notes are back with the originator, never endorsed as required in the pooling and servicing agreement, and are transferred out when needed. We provided a report that suggests all the notes from Countrywide deals are still with Countrywide, even though it securitized 96% of the mortgages it originated. We got even stronger confirmation over the weekend.

    One of my colleagues had a long conversation with the CEO of a major subprime lender that was later acquired by a larger bank that was a major residential mortgage player. This buddy went through his explanation of why he thought mortgage trusts were in trouble if more people wised up to how they had messed up with making sure they got the note. The former CEO was initially resistant, arguing that they had gotten opinions from top law firms. My contact was very familiar with those opinions, and told him how qualified they were, and did not cover the little problem of not complying with the terms of the pooling and servicing agreement. He also rebutted other objections of the CEO. They guy then laughed nervously and said, “Well, if you’re right, we’re fucked. We never transferred the paper. No one in the industry transferred the paper.”

    This creates a lot of problems. If the originator is bankrupt (New Century, IndyMac), the bankruptcy trustee is supposed to approve any assets leaving the BK’d estate. I’m told bankruptcy judges who have been asked were not happy to hear this sort of thing might be taking place, which strongly suggests this activity is going on without the requisite approvals. And who from the BK’d entity can endorse it over? It doesn’t have any more officers or employees. Similarly, a lot of the intermediary entities (the B and C in the A-B-C-D chain earlier) are long dead. How do you obtain their endorsements?

    Now you understand why everyone is resorting to fabricated documents and bogus affidavits. There is no simple way to fix this mess. The cure for the mortgage documents puts the loan out of eligibility for the trust. In order to cure, on a current basis, they have to argue that the loan goes retroactively back into the trust. This is the cure that the banks have been unwilling to do, because it is a big problem for the MBS.

    The former subprime lender CEO still refused this to consider this a problem: “Oh, Congress will pass a law.” My colleague pointed out that this was a state law matter, Congress had no authority, and even the Supine Court was unlikely to intervene in well settled real estate law. The arguments from the CEO were distressingly familiar, bank industry incumbents seem to resort to the same script: any borrower friendly solution will wreck the economy, the banks will have to get another bailout to get themselves out of this mess.

    So here we are back to 2007-8. If you and I make a serious mistake at our jobs, we get fired, and if we make a really serious error, our company could perish. But when bankers screw up, and leave a lot of collateral damage in their wake, they are confident that their sugar daddies in DC will clean up the mess for them.

    And the worse is they might even be correct if we let them get away with it this time.

  13. based on this cant we ask for all the judges in california to be reclused?

    JERRY BROWN SHOULD PUT A STATEWIDE END TO FORECLOSURES.

  14. THE A MAN

    Absolutely!!! As the song says in Dinsfla’s video – “Wish I were special!!”

  15. this is probably why we are not Slam Dunking them in California

    http://latimesblogs.latimes.com/money_co/2010/09/california-lockyer-borrow-from-banks-budget-deal-wall-street.html

    MONEY TALKS

    FACEBOOK PAGE WE NEED ONE NEIL GARFIELD FACEBOOK

  16. An Archive I thought might be interesting for some of you to”peruse”:
    Bulletin

    NUMBER: 2009-16

    TO: All Freddie Mac Seller/Servicers June 30, 2009

    SUBJECTS

    Both selling and Servicing requirements are amended with this Single-Family Seller/Servicer
    Guide (“Guide”) Bulletin.

    With this Bulletin, we are announcing that beginning October 1, 2009, Freddie Mac will no longer
    directly provide Note certification and custody services, and has selected The Bank of New York Mellon
    Trust Company, N.A. (BNYM) to perform such services for its Mortgages as Freddie Mac’s Designated
    Custodian (Designated Custodian). Among other things, this Bulletin describes the transition of
    certification responsibilities and custody of Notes to BNYM. The transition period begins
    October 1, 2009, and will extend to the effective date of the custodial relationship the Seller/Servicer must
    establish with either the Designated Custodian or another third-party Custodian. The effective date of
    either such arrangement is referred to in this Bulletin as the “Custodial Agreement Effective Date.”

    The following topics related to this change are addressed in this Bulletin:

    .. Seller and Servicer responsibilities related to Note delivery, certification and custody during the
    transition period

    .. The process and requirements with respect to contracting with the Designated Custodian or, at the
    Seller/Servicer’s option, another third-party Custodian

    .. The announcement of a new Form 1035DC, Designated Custodial Agreement: Single-Family
    Mortgages, that must be used to establish a custodian relationship with BNYM

    .. Document custody fees and charges

    .. Other miscellaneous matters

    As a result of this change, we are also announcing the following:

    .. Sellers selling Mortgages to Freddie Mac through the Freddie Mac Selling System (Selling System)
    Servicing Released Sales Process (SRSP) must establish a custodial relationship with the Designated
    Custodian and deliver Notes for such Mortgages to the Designated Custodian for certification

    .. Sellers must deliver the Intervening Assignments when delivering Notes for certification to the
    Document Custodian, including BNYM, in its capacity as vendor/agent for Freddie Mac or as
    Designated Custodian

    .. In connection with Transfers of Servicing or transfers of custody, Servicers must deliver the
    Intervening Assignments to the Document Custodian, including BNYM, in its capacity as
    vendor/agent for Freddie Mac or as Designated Custodian

    Page 1

    Key Date – October 1, 2009

    As noted above, the transition period begins October 1, 2009, and:

    .. The Notes and related documents currently held by Freddie Mac at its Document Custodial
    Operations (DCO) facility will be moved to a BNYM vault on or before this date

    .. Beginning on this date, Sellers that use DCO to certify Notes and Sellers selling Mortgages under the
    Selling System SRSP must deliver the Notes and Intervening Assignments for certification to DCO,
    in care of BNYM at a new address. In addition, for Mortgages sold through MIDANET® Sellers must
    also deliver a separate data file (see “Certification – sale of Mortgages” below for additional
    information).

    .. BNYM, in its capacity as vendor/agent for Freddie Mac, will perform Note certification and
    custodial services for the Notes delivered or transferred to it beginning on this date and through the
    Custodial Agreement Effective Date

    In addition, on or before October 1, 2009, each Seller/Servicer currently using DCO must submit either
    of the following:

    .. Form 1035DC and related forms to BNYM to establish a relationship with BNYM, as Designated
    Custodian (see “Contracting with the Designated Custodian” below for additional information); or

    .. Form 1035, Custodial Agreement: Single-Family Mortgages, executed by the Seller/Servicer and
    another Freddie-Mac approved third-party Custodian, to Freddie Mac requesting approval to enter
    into a custodial relationship with a third-party Custodian (see “Contracting with another third-party
    Custodian” below for additional information)

    SELLER AND SERVICER RESPONSIBILITIES DURING THE TRANSITION PERIOD

    Through September 30, 2009

    For Sellers and Servicers currently using DCO, the Notes for Mortgages being sold to Freddie Mac or for
    which the Servicer acquires the Servicing, should continue to be delivered to DCO in accordance with
    existing Guide requirements.

    Servicers should continue to deliver supplemental documents, return previously released documents to
    and request release of documents from DCO in accordance with existing instructions. Because Notes may
    be in transit to BNYM between the date of this announcement and early October, Servicers should
    provide as much notice as possible when requesting release of Notes to enable processing in a timely
    manner.

    Between October 1, 2009 and the Custodial Agreement Effective Date

    Between October 1, 2009 and the Custodial Agreement Effective Date, BNYM, as Freddie Mac’s
    vendor/agent, will certify the Notes for Mortgages delivered to Freddie Mac (in care of BNYM) and
    provide other custodial services for Notes in its custody. Seller/Servicers should direct questions related
    to Note certification and other custodial matters to BNYM during this period by calling the BNYM
    Document Custody Support Line at (800) 211-2677.

    Sellers and Servicers are advised that there may be delays in certification, funding and other services if
    documents and/or requests are not delivered in accordance with the following instructions.

    Between October 1, 2009 and the Custodial Agreement Effective Date, Sellers and Servicers must use the
    following address when delivering Notes for certification to DCO, delivering supplemental documents or
    returning previously released documents:

    Freddie Mac – Document Custodial Operations
    c/o The Bank of New York Mellon Trust Company, N.A.
    2220 Chemsearch Blvd., Suite 150
    Irving, TX 75062

    Page 2

    Certification – sale of Mortgages

    In connection with the delivery of Notes to Freddie Mac, beginning October 1, 2009:

    .. Sellers must also deliver the Intervening Assignments to BNYM for such Mortgages, unless the
    Mortgage is registered with MERS and the Seller elects to retain the assignments in its files, as
    provided in Guide Section 22.14(e).

    .. For Mortgages sold through the Selling System, Sellers will continue to assign the Note to DCO
    (“Custodian 9999999”) for certification

    For Mortgages sold through MIDANET, the Seller must also provide a separate data file containing all of
    the data that must be certified for each Mortgage in the delivery. The data file must be in the form of an
    Excel spreadsheet and should be sent to the Designated Custodian via secure email or by emailing the file
    using a WinZip advanced encryption or 128-bit Advanced Encryption Standard (AES) with password
    protection. Please contact the Designated Custodian for further information and/or assistance.

    The data file must include the following data elements in the order specified below:

    Freddie Mac Form 1034/1034A Term
    1. Freddie Mac Loan Number FHLMC Ln #
    2. Seller/Servicer Number Seller/Servicer number
    3. Seller Loan Number Seller Ln #
    4. Date of Note Note Date
    5. Property Address Property Street
    6. City Property City
    7. State St
    8. ZIP Zip code
    9. Original Loan Amount Loan Amt
    10. Original Interest Rate Interest Rate
    11. Original P&I P&I Amount
    12. Date of First P&I Payment 1st P&I
    13. Original Maturity Date Maturity Date
    14. Original P&I Payment P&I Amount
    15. Borrower Name Borrower Name
    16. Co Borrower Name Co-Borrower Name
    17. Modification/Conversion Date Mod/Conv date
    For ARMs, include the following additional data elements
    18. Convertible Convrt
    19. First Rate Adjust Date 1st Rate Adj
    20. Index Source Index
    21. Index Lookback Days Lookback
    22. Note Margin Mtg Margin
    23. Interest Rate Rounded % Round
    24. First Rate Adjustment MAX 1st Adj Max Initial Rate
    25. First Rate Adjustment MIN 1st Adj Min Initial Rate
    26. Periodic Interest Rate Cap Period Cap
    27. Life of Loan Max Rate Life Cap

    Page 3

    In addition to the above, Sellers must comply with all other Guide requirements in connection with the
    delivery of Notes for certification, including:

    .. For Mortgages sold through MIDANET, the delivery of Form 1034, Fixed-Rate Custodial
    Certification Schedule, or Form 1034A, ARM Custodial Certification Schedule, as applicable

    .. For Mortgages sold through the Selling System, the delivery of Form 1034E, Custodial Certification
    Schedule, or Note Delivery Cover Sheet

    Release of documents/Transfer of Servicing or transfer of custody

    During the transition period, for Notes held by DCO and transferred to BNYM, Servicers must continue
    to submit requests for release of documents to DCO directly, in accordance with existing requirements. In
    addition, for Notes transferred to BNYM as a result of a Transfer of Servicing or transfer of custody,
    Servicers must deliver the Intervening Assignments in accordance with the requirements for Transfers of
    Servicing when utilizing a third-party Custodian, pursuant to Guide Sections 18.6, 18.7 and 56.9.

    Contracting with the Designated Custodian

    Beginning on July 17, 2009, Freddie Mac will email to Servicers currently using DCO to hold the Notes
    for Mortgages they service for Freddie Mac the materials necessary to enter into an agreement with
    BNYM as Designated Custodian (the Designated Custodian Registration Forms). The email will be
    addressed to the Primary Freddie Mac Business Contact as indicated on the Form 16SF, Annual
    Eligibility Recertification Report. The Designated Custodian Registration Forms consist of the following
    documents:

    .. Form 1035DC

    .. Additional documents required by BNYM, including

    .. Customer Verification Form (“Know Your Customer” form)

    .. W-9, Request for Taxpayer Identification Number and Certification

    .. Electronic Funds Transfer Authorization

    .. Web Access/Release Request Authorization

    .. Designated Custodian Fee Schedule

    If you are an impacted Servicer and do not receive this email package by July 24, 2009, please contact
    Counterparty Credit Risk Management (CCRM) by email to institutional_eligibility@freddiemac.com
    or by calling the CCRM customer service line at (571) 382-3434, Opt. 2.

    In addition, Sellers electing to sell Mortgages to Freddie Mac through the Selling System SRSP must
    complete the Designated Custodian Registration Forms to establish a relationship with the Designated
    Custodian. Such Sellers must contact CCRM directly to arrange to receive the registration forms.

    As indicated, documents in the Designated Custodian Registration Forms must be completed and signed
    as appropriate, and received by BNYM at the following address by October 1, 2009:

    The Bank of New York Mellon Trust Company, N.A.
    ATTN: New Agreement Execution
    2220 Chemsearch Blvd., Suite 150
    Irving, TX 75062

    Any questions regarding the Designated Custodian Registration Forms should be directed to BNYM via
    email at FreddiemacCustodian@bnymellon.com, or by calling the BNYM Document Custody Support
    Line at (800) 211-2677.

    Page 4

    When review of the Designated Custodian Registration Forms is completed, Seller/Servicers will be
    notified of their Custodial Agreement Effective Date.

    Contracting with another third-party Custodian

    A Seller/Servicer currently using DCO that elects to use a third-party Custodian other than BNYM should
    follow the procedures set forth in Guide Chapter 18 with respect to contracting with a Document
    Custodian and transfers of custody. These procedures include, but are not limited to, submitting Form
    1035, executed by the Seller/Servicer and the Document Custodian, to Freddie Mac.

    After reviewing the Form 1035 and any other required documentation and approving the request,
    Freddie Mac will execute the Form 1035 and communicate the Custodial Agreement Effective Date to
    each Seller/Servicer electing to establish another third-party Custodian relationship.

    Any questions regarding the Form 1035 should be directed to Freddie Mac via email to
    institutional_eligibility@freddiemac.com, or by calling the CCRM customer service line at

    (571) 382-3434, Opt. 2.
    As noted above, the option to deliver Notes to another Document Custodian is not available for
    Mortgages being sold to Freddie Mac under the Selling System SRSP. These Notes must be sent to the
    Designated Custodian for certification and custody.

    Document custody fees and service charges

    Prior to the Custodial Agreement Effective Date, Freddie Mac will continue to bill the Seller/Servicer for
    document custody fees and related charges pursuant to Guide Section 18.8.

    Using the Designated Custodian

    Beginning with the Custodial Agreement Effective Date, BNYM, as the Designated Custodian, will bill
    the Seller/Servicer directly for custodial fees associated with certification and custody services occurring
    on or after that date. BNYM has agreed that it will not increase fees beyond the fee schedule set forth in
    Guide Section 18.8 or impose additional charges prior to September 1, 2010, provided, however, that any
    request for expedited release of files or documents will be billed to the Seller/Servicer’s courier account.
    Seller/Servicers completing Designated Custodian Registration Forms and submitting them to BNYM by
    October 1, 2009 will not incur on-boarding (e.g., transportation or recertification) fees due to the transfer
    of Notes to the Designated Custodian.

    Using a third-party Custodian

    Seller/Servicers choosing to transfer custody to another Document Custodian must negotiate their fee
    structure directly with that Custodian, and should consult with that Custodian as to any on-boarding,
    recertification and other costs that might be associated with the transfer of custody. Seller/Servicers will
    be charged release fees, will incur expenses for shipping, and must have transit insurance for any Notes
    being shipped.

    Compensation for custodial services

    As a reminder, compensation for the custodial services is the sole responsibility of the Seller/Servicer.
    Failure to remit payments to the Document Custodian as required by the Guide is a breach of the
    Seller/Servicer’s agreement with Freddie Mac and may be cause for termination or other adverse action.

    Timing of data in selling system, receipt of Notes, timing of certification and settlement

    As always, to ensure timely funding, the Seller should submit the Notes and related data to the Document
    Custodian in sufficient time to permit certification, in accordance with the instructions in Guide Section

    16.8 and the Document Custody Procedures Handbook, available in AllRegs. For service standards for
    the Designated Custodian, please refer to the Service Levels attached to Form 1035DC as Exhibit A.
    Page 5

    Sellers delivering Notes to BNYM after October 1, 2009 must provide BNYM no less than two business
    days’ notice for deliveries involving more than 500 Notes in order for the Notes to be certified by the
    desired funding date. It is the Seller’s responsibility to inform the Designated Custodian in advance of any
    deliveries in excess of 500 Notes and to deliver such Notes to the Designated Custodian within the time
    frames indicated by the Service Levels attached to Form 1035DC as Exhibit A. Seller/Servicers choosing
    to use the services of another Document Custodian must negotiate their service level agreement directly
    with that Custodian.

    Form 16SF – Identity of Document Custodians that hold Notes on behalf of Freddie Mac

    Form 16SF automatically populates with information Freddie Mac has on record. The Seller/Servicer
    must verify the accuracy of the information and correct it as necessary. For Seller/Servicers currently
    using DCO, until the Custodial Agreement Effective Date, the Form 16SF should indicate that
    Freddie Mac holds the Notes.

    Inquiries on the Form 16SF should be directed to CCRM by either email to institutional_eligibility@
    freddiemac.com, or by calling the CCRM customer service line at (571) 382-3434, Opt. 2.

    Special Provisions

    Seller/Servicers with special provisions in their Purchase Documents related to custodial matters must
    inform their new Document Custodian (either the Designated Custodian or other third-party Document
    Custodian, as applicable) as to the content of those provisions. Seller/Servicers should provide the special
    provision(s) to the Designated Custodian by email to FreddiemacCustodian@bnymellon.com.

    Functions that will remain at Freddie Mac

    Freddie Mac will continue to perform oversight of document custody program requirements and overall
    management of the certification processes and requirements. As such, all Document Custodians will
    continue to submit to Freddie Mac the following completed and executed forms, as applicable:

    .. In connection with the sale of Mortgages to Freddie Mac through MIDANET, Forms 1034S,
    Custodian Certification Schedule Summary, and 1034SM, Custodian Certification Summary for
    Multiple Purchase Contracts, upon verifying the documents and performing the certifications
    required in accordance with Guide Section 18.6

    .. Form 1034B, Custodian Certification Schedule – Balloon Loan Modification, upon certifying the

    information contained in a Balloon Loan Modification, in accordance with the requirements of Guide

    Section 83.103

    .. Form 1034T, Subsequent Transfer Custodial Certification Schedule, upon performing the
    verifications and certifications in connection with a Transfer of Servicing/transfer of custody

    DCO will continue to:

    .. Process requests for assistance with Mortgage discharges, satisfactions, releases of lien or similar and
    other matters related to the chain of title for Mortgages owned by Freddie Mac when we are
    identified as the lien holder in the land records. Please use the Request for Assistance form found on
    our web page at http://www.freddiemac.com/cim/docex.html.

    .. Process MERS Transfer of Beneficial Rights and resolve issues concerning transactions affecting
    Freddie Mac on the MERS residential system

    Page 6

    REVISIONS TO THE GUIDE

    We will be updating applicable Guide chapters with a future Bulletin to reflect these changes.

    CONCLUSION

    If you have any questions about the matters addressed in this Bulletin, please contact your Freddie Mac
    representative or call (800) FREDDIE.

    Sincerely,

    Patricia J. McClung
    Vice President
    Offerings Management

    Page 7

  17. Please let’s sign the petition for a FORECLOSURE MORATORIUM.

    http://www.change.org/petitions/view/usa_national_foreclosure_moratorium_now

  18. I agree with THE A MAN. Neil needs a Facebook. It would more than double the readership.

  19. BSE RIGHT ON. THE JUDGES DO WHAT THEY ARE TOLD. WHAT THE JUDGES DONT KNOW IS THAT THE BANKSTERS WILL TURN ON THEM VERY SOON.

  20. The A Man

    I had my home appraised when I signed with builder. But unknown to me the builder signed a joint Venture with Wells Fargo. The home was appraised twice before I closed. Of course the builder and Wells Fago ordered the appraisal and show’d I had an equity position at the time of closing the loan. “Hey we are to trust our government, the appraiser, the title company and the banks because they are promoted as ethical entities that serve to our best interest”. Now it has been 6 years and my house is $ 250 K upside down plus I am out of pocket over $150k …Twenty two foreclosures later, my street is lined with empty homes that hold an open door for wide spread meth production. Wells Fargo does not build dreams but rat infested ghetto’s (It’s a wonderful life Mr Potter!) Better yet US Bank supports these bastards as the servicer.

    Furhter, the judges within the system state the borrower must pay for the crime committed by
    these dirty usurious bastards.

    Be a patriot stop your mortgage payment!

  21. ALL THE INVESTORS HAD TO DO IS SEE WHAT THE AVERAGE INCOME IN THE UNITED STATES WAS AND IS AND LEND ACCORDINGLY.

    DONT FORGET THEY WERE LENDING $3K A MONTHS PAYMENT MORTGAGES TO PEOPLE THAT WERE MAKING $3k A MONTHS

  22. THE INVESTORS SHOULD HAVE KNOWN BETTER THEY ARE SOPHISTICATED AND HAVE DEEP POCKETS. NOT LIKE US. THEY SHOULD HAVE DONE THEIR OWN APPRAISALS.

    NEIL GREAT ARTICLE. I AM BEING REDUNDENT BUT A NEIL GARFIELD OR LIVINGLIES FACEBOOK PAGE WOULD BE GREAT.

    DEUTSCHE BANK UBS CITIGROUG ARE JUST AS GUILTY OR THEY PROBABLY SENT BANK OF AMERICA USBANK ETC… TO DO THEIR DIRTY WORK.

    NOW THEY ARE DOING US A FAVOR WHICH IS GREAT BUT THEY ARE JUST AS GUILTY.

  23. Clayton Holdings cut a civil and criminal immunity deal with NY AG Cuomo more than two years ago. Maybe the question should be whether their FCIC testimony was any different from that obtained by the NY AG…

    NYT covered Clayton back in 2008 as well…
    http://query.nytimes.com/gst/fullpage.html?res=9A02E0DE133AF934A15752C0A96E9C8B63

  24. Good work Neil !. You have been way ahead of the game. Glad you are on our side !

  25. Dear Honorable George H. Wu,
    You have a case before you that is very important to the American People. It might not seem so, but it is. The case is FDIC v. K.Hovnanian American Mortgage. I have no idea what your stand and personal ideology is in this issue of mortgage fraud that Americans face, but I write to you in the hopes that you might be a Hero.
    Do not doubt this.

    You could ask for two pieces of evidence, and the fraud will be apparent to your eyes. Do you believe in honesty, in what is right? I hope you do.

    In this case before you, FDIC v. K.Hovnanian, 2:10-cv-01561-GW-JC on Exhibit C there is a list of loans. Look down and find the Bernie name. (It’s not me, but they were my neighbors) Ask the Plaintiff this simple question:

    After you provided the original funding, did KHAM assign the deed to you within three days?

    (This is not an issue, but it was required procedure, and the Plaintiff is saying the assignment did occur, it’s just the Defendants failed to repurchase it right away)
    Then, ask to see this Deed of Trust, with this first assignment.

    Then compare the notary signature with the recorded document that would have been recorded after it was “sold.” The notaries will be different. If they are not, then they have not provided the actual Deed Indymac received within three days of the original funding to Hovnanian. (no money ever went to the borrower)

    You see what has happened, is that Indymac provided the funding, then KHAM had the borrower sign, then KHAM sent that paperwork to Indymac within the three days, as required. After this KHAM was supposed to use the pre-funding to “buy back” the loan, and then resell it on the secondary market. They did not (as Plaintiffs allege.)

    What KHAM did was create a complete new set of documents, usually telling the borrower some story of “mistake” about 3-6 days later, and then KHAM took that signature, with a new notary usually, and attached it to pages that showed the date the first Deed of Trust was signed, then they recorded that New Deed of Trust..

    And they sold it.

    They sold a non-existent loan. Non-existent in more ways than one, as they did not “lend the borrower any money” at any point, as no money was transferred to the borrower’s escrow.

    KHAM calls part of this illegally procured money, “Interest Income Recognition.”

    This means you now have two entities that think they have a valid Deed of Trust. This means that on over 90% of the new homes, the loans were doubled. This means roughly 50% of the pools do not in truth have real loans. 50% of the money is illusionary.

    The FDIC is talking about re-packaging these bad loans and selling them at a deep discount? Is this good for us? More selling of doubled loans to investors?

    Now about the Bernie’s. The FDIC is saying they suffered a “Loss” on the Bernie loan in the amount of $548,700. They want KHAM to buy it back, or indemnify them on that loss. Sounds reasonable right?
    The thing is, is that the Bernie’s were presented with an offer to short-sell and for the amount of $520,000 the loan would be forgiven.

    The Bernie’s sold the property for $520,000. The $520,000 was supposed to be given to Indymac, but it was not. Where did this money go? The money belonged to INDYMAC did it not?

    This action of “Trustees” (who are not truthfully due to the fraud) making these deals, and taking money from the borrowers, or forcing them out of their homes is illegal, immoral, and is what amounts to “Phishing.”

    The Bernie’s were fraudulently induced to short-sell on the premise it would pay off that loan, but the loan did not get paid off did it? The Bernie’s were defrauded a second time when they were induced to sign over there home.

    Of course they were, as the FDIC has the loan listed right there. The loan is still outstanding is it not?
    The Bernie’s are not the ones who defrauded anyone, it was KHAM, do not doubt this.

    It gets even deeper, as KHAM in its answer to the complaint on 9/13/2010 “admits it did not repurchase the loans” but alleges that Indymac sold some if not all of them.

    This means no only double selling, but triple-selling has most definitly occurred.

    If KHAM did not buy back the loan, they had NOTHING to Sell. Could this be any clearer?

    The FDIC states that the Bernie’s still owe $548,700, as the money from the “buyer” went to some unknown account that had no true legal right to it.

    That’s what Exhibit C states does it not? (of course they were defrauded though, so they really owe nothing, and no loan was even given to them at any point. They never got a loan. And what of the damages they have now? They suffered so much over those months. They were in so much pain, and they put over $100,000 into that homes interior. I saw it; I drank coffee in that home.

    The Bernie’s lost it all.

    If you have any Hovnanian stock, I would suggest you sell it.

    This is where the Mortgage fraud sleeps, your Honor. It’s such a simple thing to see what the industry did. Fraud is Fraud, and no amount of lies can cover up this massive double-loan writing and triple loan selling that was allowed to ruin our economy, and of which fraud started in the New Home Building industry.

    The FDIC should not re-sell these loans.

    The truth must come out to the American public.

    We need some Heroes right about now.

    Martha Nali Raysik
    Nali v. K. Hovnanian
    Los Angeles Superior PC 048289

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