Grayson Sends Letter To Geithner, Bernanke Demanding Foreclosure Freeze, Warns Of Systemic Bank Failure Risk

EDITOR’S NOTE: Probably the most important thing that the release of this letter accomplishes is that all federal and state agencies are now put on notice that there is an allegation of foreclosure fraud, a tacit admission to which is evident in the voluntary suspension of foreclosures by some companies and the involuntary suspension of foreclosures, like in Connecticut. What is needed now a special touch in leadership that navigates the very challenging issues that lie just beneath the surface of these rippling waters. Those that can act right now and who can assert authority of a kind that transcends technical construction can, if they choose to do so, prevent the logical consequences of the systemic risk posed by prior conduct and channel the energy of that authority and the capacity of players at the table to diversify the risk, maintain the arguable value of certain securities, and release the market from its current state. An equilibrium is possible but only if that action is taken now before other plans are refined and executed.
Today, October 07, 2010, 1 hour ago | Tyler Durden  

Alan Grayson is back on the scene, having sent a letter to Financial Stability Oversight Council which includes pretty much all of Wall Street’s pawns, including Bernanke, Geithner, Bair, Gensler, Walsh, and DeMarco, in which he asks the FSOC to “suspend foreclosures until this problem is understood and its ramifications dealt with.” And the ramifications, per Grayson, Zero Hedge and everyone else, will be dire for the banking sector: “So far, banks are claiming that the many forged documents uncovered by courts and attorneys represent a simple ‘technical problem’ with foreclosure processes.  This is not true.  What is happening is fraud to cover up fraud… The banks didn’t keep good records, and there is good reason to believe in many if not virtually all cases during this period, failed to transfer the notes, which is the borrower IOUs in accordance with the requirements of their own pooling and servicing agreements. As a result, the notes may be put out of eligibility for the trust under New York law, which governs these securitizations. Potential cures for the note may, according to certain legal experts, be contrary to IRS rules governing REMICs. As a result, loan servicers and trusts simply lack standing to foreclose. The remedy has been foreclosure fraud, including the widespread fabrication of documents.  There are now trillions of dollars of securitizations of these loans in the hands of investors. The trusts holding these loans are in a legal gray area, as the mortgage titles were never officially transferred to the trusts… The liability here for the major banks is potentially enormous, and can lead to a systemic risk.”

So now that Obama has declined to halt the foreclosure halt process, TARP 2 anyone?

8 Responses


    BofA halts foreclosure sales in 50 states
    ALAN ZIBEL – AP – 1 min ago

    FILE – In this July 13, 2010 file photo, Bank of America’s headquarters are shown in Charlotte, N.C. Bank of America Corp., the nation’s largest bank, is stopping sales of foreclosed homes in all…
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    WASHINGTON (AP) — Potential flaws in foreclosure documents are threatening to throw the real estate industry into a full-blown crisis, as Bank of America on Friday became the first bank to stop sales of foreclosed homes in all 50 states.

    The move, along with another decision on foreclosures by PNC Financial Services Inc., adds to growing concerns that mortgage lenders have been evicting homeowners using flawed court papers.

    Charlotte, N.C.-based Bank of America Corp., the nation’s largest bank, said Friday it would stop sales of foreclosed homes in all 50 states as it reviews documents used to process foreclosures. A week earlier, the company had said it would only stop such sales in the 23 states where foreclosures must be approved by a judge.

    “We will stop foreclosure sales until our assessment has been satisfactorily completed,” company spokesman Dan Frahm said in a statement. “Our ongoing assessment shows the basis for our past foreclosure decisions is accurate.”

    Bank of America did not disclose how many homeowners would be affected.

    State and federal officials have been ramping up pressure on the mortgage industry over worries about potential legal violations amid growing evidence that mortgage company employees or their lawyers signed documents in foreclosure cases without verifying the information in them. Also Friday, Sen. Christopher Dodd, D-Conn, the chairman of the Senate Banking Committee, said he would hold a hearing on the issue next month.

    “American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud,” Dodd said. “Regulators at the federal, state, and local levels have a responsibility to uphold the law and protect consumers from unfair foreclosure, and lenders have a duty to not cut corners around the law.”

    A document obtained last week by the Associated Press showed a Bank of America official acknowledging in a legal proceeding that she signed thousands of foreclosure documents a month and typically didn’t read them. The official, Renee Hertzler, said in a February deposition that she signed 7,000 to 8,000 foreclosure documents a month.

    Earlier in the week, Senate Majority Leader Harry Reid, D-Nev., urged five large mortgage lenders to suspend foreclosures in Nevada until they have set up systems to make sure homeowners aren’t “improperly directed into foreclosure proceedings.” Nevada is not among the states where banks had suspended foreclosures.

    Also Friday, PNC Financial Services Group Inc. said it is halting most foreclosures and evictions in 23 states for a month so it can review whether documents it submitted to courts complied with state laws. An official at the Pittsburgh-based bank confirmed the decision on Friday, which was reported earlier by the New York Times. The official requested anonymity because the decision hasn’t been publicly announced.

    PNC becomes the fourth major U.S. lender to halt some foreclosures amid evidence that mortgage company employees or their lawyers signed documents in foreclosure cases without verifying the information in them.

    In addition to PNC and Bank of America, Ally Financial’s GMAC Mortgage unit and JPMorgan Chase & Co. have announced similar moves in the past two weeks.

    In some states, lenders can foreclose quickly on delinquent mortgage borrowers. By contrast, the 23 states use a lengthy court process. They require documents to verify information on the mortgage, including who owns it.


    They all need to pay attention!

    The Fraud they have been doing in the foreclosing is just the tip of the iceberg, becuase the reason they did all this, was not just to Rocket-Docket your home away from you, but to HIDE all the underlying FRAUD.

    If the LOANS were good in the first place, they would not have needed to go to such lengths to cover this up

  3. Yes, LisaMarie, there is a special note place, it’s called a Shredder.

  4. Question.
    If what is being said is true, that the Federal Reserve, aka. fannie/aka THE FDIC, is the Real Party of Interest in all US mortgages, or at least 90%, then is not every single SHORT SALE fruadulent?

    How can CHASE, BOFA,WELLS… take the sale $ in this short-sale transaction, then have the FDIC turn around and claim a 100% loss?

    See Brian Davies links to the FDIC v. Hovnanian complaint.

  5. I know I’ve asked this before and it may be a stupid question, but where exactly are our mortgage notes? HSBC filed in the holmes county court house a document that stated “Filed: ORIGINAL NOTE AND MORTGAGE” Then there was nothing. Nothing. Is there a special NOTE place???

  6. There is always this discussion about “produce the Note” in a foreclosure.

    Why not just make them produce it now? Here is what I am doing.

    First, I’m lucky – I know the deal that my note sits in. In fact, I may have more data than I’m supposed to, because I have the actual mortgage pool data (names, addresses of the borrowers).

    I also know the name of the trust manager at the bank who is the trustee, I’ve even spoken to him.

    I know the guy at the depositing bank who ran the deal, I have spoken to him too.

    (the above took months of time and patience)

    So I know where to go (i.e. who) with the “can you show me the Note” conversation.

    But before I do that, I wanted to know the facts. I went to the county, they said the Note is not part of the public record, just the Deed.

    Next, went to the loan originator (loan broker), they sent an email back “we sold your note”. They promise to send me any documentation they have of the sale of the Note.

    Next, went to the title company that is the Trustee on the Deed. Told them that the originator sold the Note, as Trustee, I would assume they would know who now holds the Note now. They looked in their system and said “that’s funny, our records show this Note as no assigns”.

    The next conversation will be with MERS, but I don’t expect much to come of that, they do show in their public facing search tool the current Investor is the bank that is the mortgage pool trustee – so in MERS, it seems to be correct.

    The central question will be – is MERS good enough? I don’t think so, and I hope not, because if that’s the case, then all these MBS’s are about to implode.

    Imagine if every one of us, who sits in a non-agency MBS, asked the trustee to produce the Note. As the article above states, they would be in trouble. They are supposed to be passive, so if they need to “correct” or “cure” the fact that they don’t have the Note at this minute, that’s an active management role. I think this does violate the REMIC rules.

    Also, in my case, the collateral underlying the Note is worth at best, 50% of the Note (I was hurt pretty bad in the meltdown). Forget whether they could cure the lack of Note and still meet the test of passive management – SHOULD they?

    Wouldn’t the right answer for a trustee who is supposed to consider the investor’s best interest actually tell the depositing bank to repurchase this Note? Could the trustee really accept into the trust a distressed asset?

    In my mortgage pool (about 1000 loans), I was able to use to establish an estimated value on every home in the pool. About 40% are clearly underwater (LTV’s above 100%).

    So imagine now the chaos if everyone whose loan is in an MBS sent the trustee and servicer a note to say “produce the Note”, and they are NOT in default? The bank could not accelerate a foreclosure, there is no default. The bank could not just dismiss the request as “noise” from a defaulting borrower – they would have to deal with us. And if the stats on my loan pool are indicative of the market in general, depositing banks would be looking at billions in repurchases.

    No wonder Grayson is worried.

  7. The risks that Grayson has brought up are real. As are the ramifications to our titles… one is stating how vast the issue of title fraud will be for the next 50-100 years. This could literally shut down the real estate industry….more than it already is.

    This cover-up is where the unwind is happening. You see, when you build your house of cards on fraud, lies and deception, you have to remember to cover up the fraud, lies and deception. Someone from the banking industry should have talked to Nixon prior to devising this massive fraud. Pretty sure could tell them how it would turn out.

  8. This is great to see that Alan Grayson has not let up on the pressure, when all we see is a small Congressional Gang in the House and Senate making “noise” and Not DOING A DAMN THING to stop this foreclosure Train Wreck! Political posturing and acting aside…..ACT on something besides making it “easier”, as in 3808, for the people of this country to retain their footing against blaytent fraud.

    Keep up the good work Alan.

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