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FULL DEPOSITION TRANSCRIPT OF HOLLAN FINTEL FORMER FLORIDA DEFAULT LAW GROUP ATTORNEY
Posted on04 November 2010. Tags: AS TRUSTEE FOR WFALT2007-PA03, attorney in fact, CHRISTOPHER T. IMMEL, CULVER “SKIP” SMITH, deposition, ESQUIRE, ESQUIRE Culver Smith III, florida, florida default law group, foreclosure fraud, former employee, Hollan Fintel, HSBC BANK USA, ice legal, III, JEFFERY M. GANO, Kirk & Caldwell, MERS, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., NATIONAL ASSOCIATION, P.A., pa, robo signer, Rumberger, SUZANNE BARTO HILL, tom ice, transcript, wells fargo
Excerpts:
Q. Okay. And did it actually grant you
14 authority to sign as vice president anywhere in there?
15 A. The listing capacity on that assignment was
16 — is a clerical error. It needed to state “attorney in
17 fact.” This document grants the power as attorney in
18 fact.
19 Q. Okay. So –
20 A. But it does grant the authority to execute
21 the assignment of mortgage.
22 Q. Okay. So you are not vice president of
23 Wells Fargo Bank N.A.?
24 A. No.
25 Q. Okay. During your employment at Florida
1 Default Law Group, were there other companies that you
2 would execute assignments of mortgages on behalf of?
3 A. Yes. I believe there were others.
4 Q. And would you execute those assignments of
5 mortgages as attorney in fact or vice president?
6 A. I believe it varied. I do believe there were
7 other corporate resolutions that it did vary, the
8 capacity in which I signed.
9 Q. Okay. Do you recall specifically any of the
10 other entities that you would execute assignments of
11 mortgages on behalf of?
12 A. Mortgage Electronic Registration Systems,
13 known as MERS.
14 Q. MERS?
15 A. Yes.
16 Q. And what was your capacity as — what was
17 your signing authority on behalf of MERS?
18 A. I believe it was as vice president and
19 assistant secretary. I’m not positive, but I believe it
20 was as vice president.
21 Q. All right. Are you currently — this grants
22 you authority to act as attorney in fact for Wells Fargo
23 Bank until December 31st, 2010.
24 Do you still then execute documents as
25 attorney in fact for Wells Fargo Bank?
1 A. No, I don’t.
2 Q. Okay. And when did you stop doing that?
3 A. It would have been when I left Florida
4 Default in October of 2008.
5 Q. Okay. So was the sole basis of your actions
6 to sign documents as attorney in fact for Wells Fargo
7 Bank out of your employment for Florida Default Law
8 Group?
9 MS. HILL: Object to form.
10 MR. GANO: Objection to the form.
11 A. I’m sorry. Can you rephrase it?
12 Q. Outside of working as an attorney for Florida
13 Default Law Group, did you execute assignments of
14 mortgages for Wells Fargo Bank pursuant to this for any
15 other types of actions not related to Florida Default
16 Law Group?
17 A. No.
18 MS. HILL: When you say “this,” you pointed.
19 For record, you are referring to?
20 MR. IMMEL: This Limited Power of Attorney.
21 MR. GANO: Exhibit A.
22 MR. IMMEL: Exhibit A.
23 Q. And have you ever been to Wells Fargo Bank’s
24 headquarters or any of their offices?
25 A. No. I don’t believe I have.
1 Q. Okay. Are you aware — did you have to apply
2 for the limited power of attorney status with Wells
3 Fargo?
4 A. No.
5 Q. Are you aware of how you were chosen as a
6 limited — to be appointed the limited power of
7 attorney?
8 A. No, I don’t.
9 Q. Okay. Did Wells Fargo Bank provide you any
10 formal training or, I guess, any sort of detailed job
11 responsibilities, or was just this limited power of
12 attorney provided to you?
13 MR. GANO: I’m going to object as far as that
14 going into any specific instructions regarding
15 particular files that she was working while at
16 Florida Default on behalf of the Plaintiff.
17 Q. Without divulging privileged information, if
18 you would limit the answer to that.
19 A. Instruction from Wells Fargo, no.
20 Q. Okay. Did you receive any compensation from
21 Wells Fargo Bank for your duties as an attorney in fact,
22 limited power of attorney?
23 MR. SMITH: You’re asking about her
24 personally?
25 MR. IMMEL: Yes, her personally.
1 A. No.
2 Q. No. Okay. Did you ever attend any board
3 meetings or executive meetings for Wells Fargo Bank?
4 A. No.
5 Q. For that matter, with regard to your signing
6 authority on behalf of MERS, was there any difference
7 between how you carried out your authority with being
8 able to sign documents on behalf of MERS versus Wells
9 Fargo Bank?
10 MS. HILL: I’m going to object to the form.
11 A. I’m sorry. Rephrase, please.
12 Q. Okay. In executing an assignment of mortgage
13 on behalf of Wells Fargo Bank pursuant to the Limited
14 Power of Attorney, when you would do that, did that
15 differ in any way from when you would execute them and
16 an assignment of mortgage on behalf of MERS?
17 A. No.
18 MS. HILL: Object to the form.
19 Q. Okay. Are you still — do you still have
20 signing authority on behalf of MERS?
21 A. I don’t know.
22 Q. You don’t know?
23 A. No, sir.
24 Q. Okay. Did MERS pay you for executing
25 assignments of mortgages?
1 A. No.
2 Q. Okay. Approximately, how many assignments of
3 mortgages would you execute on behalf of Wells Fargo
4 Bank?
5 A. I have no –
6 MS. HILL: Object to the form.
7 A. I don’t know.
8 Q. Okay. Going back to Exhibit A, it says that
9 Mark Wooton, Vice President of Loan Documentation,
10 granted this Limited Power of Attorney.
11 Did you ever meet Mark Wooton?
12 MS. HILL: I’m going to object to the form
13 only to the extent that Mark Wooton signed the
14 Limited Power of Attorney, I don’t know if signing
15 it is the same thing as granting it or if there is
16 a distinction. But to that extent, I’m objecting
17 to the question.
18 Q. Mark Wooton signed the Limited Power of
19 Attorney. Did you ever meet Mark Wooton?
20 A. Not that I recall.
21 Q. Okay. Are you aware of whether he was
22 authorized to sign this Limited Power of Attorney?
23 A. No. I don’t know.
24 Q. Okay. Did you report to anyone directly at
25 Wells Fargo Bank?
1 A. No.
2 Q. Did you receive directions to execute an
3 assignment of mortgage directly from Wells Fargo Bank?
4 MR. GANO: I’m going to object base upon
5 attorney-client privilege, any specific
6 instruction she obtained regarding this case or
7 any other cases.
8 Q. Without divulging privileged information.
9 A. We did have a procedure that under certain
10 circumstances, yes, we were directed to prepare the
11 assignments.
12 Q. Okay. Could you, I guess, describe the
13 procedure for when you would be directed, without
14 divulging attorney-client privileges?
15 A. Yes. When our client referred in the
16 mortgage referral.
17 Q. Okay.
18 A. It could be the owner or it could be the
19 servicer. In this particular case with Wells Fargo,
20 they sent in the referral. They indicated that they
21 were the servicer for the new owner, which I believe was
22 HSBC, and indicated that HSBC was the proper owner and
23 holder of the note.
24 In that event of record, Wells was the last
25 of-record owner and holder of the note; therefore, we
1 were to effectuate the assignment of mortgage prepared
2 and executed on behalf of Wells Fargo.
3 Q. Okay. What type of documents would you rely
4 upon to determine that aside from just the referral
5 stating that HSBC Bank was, I guess, the owner of the
6 note; what other documents would you rely upon to
7 ascertain that?
8 A. That HSBC was the owner?
9 Q. Yes.
10 A. We relied on our client’s referral indicating
11 that they had sold it to HSBC.
12 Q. Okay. Was there any other information that
13 you can recall?
14 A. Not that I recall.
15 Q. Okay. So going back to the referral, the
16 determination to execute an assignment of mortgage then
17 would be sent to you by Wells Fargo in a case like this
18 — in this case?
19 MR. GANO: Object to the form.
20 A. I’m sorry. I don’t quite understand that
21 question.
22 Q. Okay. Wells Fargo directed you to execute
23 the assignment of mortgage in this case?
24 MR. GANO: Again, I’m going to object based
25 upon any specific information given as
1 attorney-client privilege.
2 Q. Without divulging attorney-client privilege.
3 A. Under the procedure we had, yes.
4 Q. Okay.
5 A. Correct.
6 Q. Okay. And how would the referral — how was
7 the referral sent?
8 A. I’m not positive. It varied. I believe it
9 was electronic.
10 Q. Okay. And in situations where the — would
11 you ever rely upon the note to determine who to execute
12 an assignment of mortgage to?
13 A. Rely upon the note?
14 Q. The note, the promissory note.
15 A. A copy or the original?
16 Q. Copy, original, any fashion, the promissory
17 note?
18 A. No.
19 Q. Okay. So whether or not the note was lost at
20 the time of the referral would not impact your execution
21 of the assignment of mortgage?
22 A. No.
23 Q. Okay. How would you receive a promissory
24 note then from the plaintiff or whoever referred the
25 case to you?
1 A. Typically, they would mail the original
2 documents to our office.
3 Q. Do you recall if it would be mailed by any
4 sort of certified mail or return receipt; would you sign
5 for anything?
6 A. I don’t know. It didn’t come to me directly.
7 Q. And in cases such as this where Wells Fargo
8 would send the referral to you and state that they were
9 the servicer, what type of information would you review
10 to ascertain that they were, in fact, the servicer?
11 MR. GANO: Object to the form, and object to
12 any specific information, again, on this
13 particular referral.
14 Q. Without divulging privileged information.
15 A. We just relied on them indicating that they
16 were the servicer –
17 Q. Okay.
18 A. — who the plaintiff was to be.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud |
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If the actual trust (ex: ?????2007-HE2) was not captioned in the foreclosing complaint and 18 months later in discovery phase, they claim scrivnors error. Can I get them dismissed or is that what they want me to do because their authority to assign mortgage was questioned, since the assignment was made in 2009 by mers/servicer as nominee for a defunct/bankrupt lender still in bankruptcy proceedings, and no attachments of authority have been produced.
Trust closing date???
State MORATORIUMS on foreclosures – for time to investigate through the frauds.
Don’t wait for the FEDS, they are covering it up.
Many of the states are too.
Asking your Governor to do a MORATORIUM, will show which ones.
A few good governors will stand out.
The rest, impeach and recall.
Foreclosure system ripe for errors in Virginia
The state has one of the fastest-moving systems in the country, and one lawyer said flaws are likely common.
By Laurence Hammack
981-3239
M.T. Warden’s home in Salem was sold in a foreclosure two years ago, but he sued the mortgage company and won back his house when the company wasn’t able to produce proper documents.
JEANNA DUERSCHERL The Roanoke Times
M.T. Warden’s home in Salem was sold in a foreclosure two years ago, but he sued the mortgage company and won back his house when the company wasn’t able to produce proper documents.
The day his house was sold at an auction on the steps of the Salem courthouse, M.T. Warden said he didn’t even know he was facing foreclosure.
He knew he was several months behind on his mortgage. When he called American Home Mortgage Servicing to make a payment, Warden recalled recently, “they said my home had been sold, and I didn’t live there.”
That was news to Warden, 30, who, at the time, was sitting in the kitchen of his Valleydale Road home. The next week, he found an eviction notice taped to his front door.
Rather than move, Warden filed a lawsuit challenging the foreclosure. After his attorneys found flaws in the paperwork leading up to the Dec. 2, 2008, auction, the case was settled last year and Warden was allowed to keep his house.
It was a rare win for a homeowner in Virginia, which has one of the fastest-moving foreclosure systems in the nation, according to consumer advocates. Foreclosures can be carried out in as little as 15 days — less time than it can take to evict a renter.
“There’s no doubt that Virginia is one of the leaders in getting people out of their homes quickly,” said Ira Rheingold, executive director of the National Association of Consumer Advocates. “Its laws are designed to help the banking industry, not the homeowners.”
In recent weeks, foreclosures in Virginia and across the country have fallen under increased scrutiny in the wake of revelations that some mortgage lenders cut corners and falsified documents in their rush to take houses from struggling borrowers.
Attorney General Ken Cuccinelli joined his counterparts in the other 49 states in a national investigation into foreclosure practices.
It’s unknown just how many forced home sales in Virginia might have been affected, and to what degree. Tom Domonoske, a Harrisonburg attorney who represented Warden in the disputed Salem foreclosure, said he believes the flaws uncovered in that case are common.
After Warden fell behind in his payments in fall of 2008, an official with Dallas-based American Home Mortgage Servicing signed a document initiating the foreclosure, asserting she had power of attorney to act for the lender, U.S. Bank.
The foreclosure fell apart when the mortgage company could not produce the power of attorney — a document that Warden’s lawsuit claimed never existed.
“It was just part of a shortcut they were taking,” Domonoske said of the missing document.
“Virginia allows the quickest, easiest foreclosure practice in the country, and it’s still not quick enough for them,” he said, speaking in general about the practices of mortgage service firms and others involved in the foreclosure process.
“It’s cheaper to cheat,” Domonoske said. “If you cheat, you can get more money in your pocket.”
“Please be advised …”
Nine years ago, Warden took out a loan to buy a modest, white frame house that sits amid shade trees on a quiet street in West Salem. Assessed at $105,000, the house and two-acre plot seemed like the perfect starter home.
“I thought I was doing pretty good,” Warden said. “There aren’t that many 21-year-olds who go out and buy a house.”
Warden, a home improvement contractor, didn’t have any problems with his monthly mortgage payments of about $700. But after his daughter was born in 2005, he decided he needed a car.
To get some extra cash, he refinanced his home. The arrangement gave him $5,000 up front, but left him with an adjustable interest rate that in a couple of years nearly doubled his mortgage payments.
“Looking back, I should have found another way to get five grand, but I was just 25 years old,” he said.
About the same time, Warden decided to form his own home improvement business. Times were tough, and it wasn’t long before he started to have trouble paying bills.
On Oct. 29, 2008, a law firm that had been appointed the substitute trustee by the mortgage company — which in Virginia is usually a sign that foreclosure is imminent — sent Warden a certified letter.
“Please be advised that this firm has been requested … to institute foreclosure proceedings,” read the letter from Bierman, Geesing & Ward, of Bethesda, Md.
Warden never got the letter because his mailbox had been knocked down during a traffic accident, he said. But that doesn’t matter, according to Domonoske. Virginia law requires that notice be sent to a homeowner within 14 days of a sale — a burden the law firm met — but failure of delivery does not necessarily invalidate a foreclosure, he said.
State law also requires that a foreclosure be advertised in a local newspaper at least twice in the 14 days before a sale. Had Warden known to scour the fine print of legal advertisements in The Roanoke Times, he would have seen two ads in November for a trustee’s sale the afternoon of Dec. 2 on the steps of the Salem courthouse.
Warden said he never saw the ads. At the auction, his home was purchased by the lender, Minneapolis-based U.S. Bank.
About that time, Warden said, he contacted American Home Mortgage Servicing and offered to make good on his payments. “It was odd,” he said, “because I was trying to give the people money, but they were refusing the money, saying it was too far gone.”
It was only after Warden went to Roanoke lawyer Roy Creasy, and later Domonoske, that the two attorneys were able to set the sale aside by filing a complaint in Salem Circuit Court.
The lawsuit claimed that American Home Mortgage Servicing lacked the power of attorney it claimed to have from the bank when it appointed the Maryland law firm substitute trustee.
Three months later, the case was settled. Warden was allowed the keep his house, and the foreclosure did not affect his credit rating.
An attorney with Bierman, Geesing & Ward declined to comment. A call to U.S. Bank, which was named as a defendant in the lawsuit along with American Home Mortgage Servicing, was not returned. Equity Trustees, a branch of Bierman, Geesing & Ward, was also named as a defendant.
A spokeswoman for American Home Mortgage Servicing declined to comment on Warden’s case but defended the company’s general practices.
“We have spent an enormous amount of time over the last few weeks reviewing our foreclosure practices,” Philippa Brown said.
“We have very strong processes and procedures in place to ensure that our officers who sign affidavits and similar documents are appropriately reviewing those documents and validating the material.”
The foreclosure mill
Although Warden fought the system and won, many homeowners in the midst of foreclosure don’t have the money, time or fortitude to follow his example.
Unlike when renters are evicted, there is no judicial oversight of foreclosures in Virginia, unless the homeowner files a challenge. Virginia is one of 27 states that does not require judicial approval. In the states that do, the process can take much longer — six months or more.
“The lack of protection for homeowners is just amazing to me,” said Jay Speer, executive director of the Virginia Poverty Law Center.
In Virginia, the process can be completed in as little as 15 days, after the 14-day requirements for notification to the homeowner and legal ad are satisfied, Domonoske said. The normal time in Virginia is 45 days, according to RealtyTrac, which tracks foreclosures.
For years, foreclosures were relegated to the fine print of legal ads and the sparsely attended auctions outside courthouses, where, often, the only bidder was a bank taking a home back to recoup its loss.
But after the housing market crashed in 2008 as subprime borrowers defaulted, attention eventually turned to the foreclosure fallout.
As the number of forced sales soared, attorneys for some homeowners began to question the paperwork from mortgage lenders and their law firms, dubbed “foreclosure mills” for their large-volume specialty.
In depositions, bank officials admitted that they had not read the affidavits and other documents they signed en masse, a practice known as “robo-signing.” Some of the lenders — including Bank of America, GMAC Mortgage and JPMorgan Chase & Co. — suspended foreclosures while investigating their practices.
Banks have argued that any mistakes were technical and that the people being foreclosed on were in fact delinquent.
“Our ongoing assessment shows the basis for our past foreclosure decisions is accurate,” Bank of America said in a statement.
Although many foreclosures have resumed, the investigation continues by the coalition of all of the nation’s attorneys general.
In the end, Warden admits he was late paying his mortgage and that he shares some of the blame. But he’s troubled by the way delinquent homeowners are treated by a banking industry that received a bailout from the United States government.
“As far as the foreclosure goes, banks are going to do whatever they want to do. They always have,” Warden said.
“What irritates me is they get all the money from the bailout because they were going to go under. But everybody who is being foreclosed on — we don’t get squat.”
As Ambac Files For Chapter 11, Fed Is On The Hook With $10MM In Short CDS Exposure
Submitted by Tyler Durden on 11/08/2010 18:15 -0500
* Bear Stearns
* Creditors
* Jamie Dimon
* Maiden Lane I
* New York Fed
Ambac Financial Group has just filed for Chapter 11, using a filing which is so fresh it even forgot to lock the input forms (see attached). The case is 10-15973 in Southern District of New York. The actual filing is not surprising, as we noted earlier that Ambac was likely going to file imminently. What is also not surprising is that the form 1, erroneously, lists assets of between 0 and $50,000 and liabilities of over $1 billion, even as Exhibit A clarifies assets as $394.5 million and liabilities of $1.6824 billion. Obviously someone was in a rush. Keep in mind this is a stock that Cramer was previously pitching to his very few viewers. Ambac’s bankruptcy lawyers are Dewey and LeBoeuf, and Blackstone gets the coveted role of financial advisor. None of the relevant unsecured creditors have been disclosed as most are in DTC form, with BNY listed as custodian. Yet one definitive loser in the Ambac bankruptcy is none other than ‘our’ own New York Fed. As the Maiden Lane I holdings list as of June 30, when the Fed consumed Bear Stearns most toxic ‘assets’ and gave Jamie Dimon a clean sheet to buy the clean stripped bank for $10/share, it also adopted a bunch of Ambac CDS. And as of June 30, the Fed held $10 million in ABC CDS. Now that there is a credit event, it will be impossible for the Fed to continue claiming that its rescue portfolios are doing just swimmingly (or so we hope, for BlackRock’s sake). Furthermore, the Fed will be forced to payout on the CDS which will likely end up pricing in the settlement auction somewhere very close to zero, implying a near total wipe out on the entire $10 million in short CDS. And lucky Fed: as of March 31, the Fed had actually held a net $50 million in ABC short protection, so in Q2 it covered $40MM worth of short protection. So now all eyes turn to Ambac soulmate MBIA… where the Fed is short $84 million worth of CDS.
Joseph Stiglitz…US mortgage debacle raises questions about ‘rule of law’
Posted on November 8, 2010 by Foreclosureblues
8 Nov, 2010, 04.11AM IST, Joseph E Stiglitz,
US mortgage debacle raises questions about ‘rule of law’
The mortgage debacle in the US has raised deep questions about ‘the rule of law’ , the universally-accepted hallmark of an advanced , civilised society . The rule of law is supposed to protect the weak against the strong, and ensure that everyone is treated fairly. In US in the wake of the subprime mortgage crisis, it has done neither.
Part of the rule of law is security of property rights: if you owe money on your house, for example , the bank can’t take it away without following the prescribed legal process. But in recent weeks and months, Americans have seen several instances in which individuals have been dispossessed of their houses even when they have no debt.
To some banks, this is just collateral damage: millions of Americans — in addition to the estimated four million in 2008 and 2009 — still have to be thrown out of their homes. Indeed, the pace of foreclosures would be set to increase — were it not for government intervention. The procedural shortcuts, incomplete documentation and rampant fraud that accompanied banks’ rush to generate millions of bad loans during the housing bubble has, however, complicated the process of cleaning up the ensuing mess.
To many bankers, these are just details to be overlooked. Most people evicted from their homes have not been paying their mortgages, and, in most cases, those who are throwing them out have rightful claims. But Americans are not supposed to believe in justice on average. We don’t say that most people imprisoned for life committed a crime worthy of that sentence. The US justice system demands more, and we have imposed procedural safeguards to meet these demands.
But banks want to short-circuit these procedural safeguards. They should not be allowed to do so.
To some, all of this is reminiscent of what happened in Russia, where the rule of law — bankruptcy legislation, in particular — was used as a legal mechanism to replace one group of owners with another. Courts were bought, documents forged, and the process went smoothly.
In the US, the venality is at a higher level. It is not particular judges that are bought, but the laws themselves, through campaign contributions and lobbying, in what has come to be called ‘corruption , American-style’ .
It was widely known that banks and mortgage companies were engaged in predatory lending practices, taking advantage of the least educated and most financially-uninformed to make loans that maximised fees and imposed enormous risks on the borrowers. (To be fair, the banks tried to take advantage of the more financially-sophisticated as well, as with securities created by Goldman Sachs that were designed to fail.) But banks used all their political muscle to stop states from enacting laws to curtail predatory lending.
When it became clear that people could not pay back what was owed, the rules of the game changed . Bankruptcy laws were amended to introduce a system of ‘partial indentured servitude’ . An individual with, say, debt equal to 100% of his income could be forced to hand over to the bank 25% of his gross, pre-tax income for the rest of his life, because , the bank could add on, say, 30% interest each year to what a person owed. In the end, a mortgage holder would owe far more than the bank ever received , even though the debtor had worked, in effect , one-quarter time for the bank.
When this new bankruptcy law was passed, no one complained that it interfered with the sanctity of contracts: at the time, borrowers incurred their debt, a more humane — and economically rational — bankruptcy law gave them a chance for a fresh start if the burden of debt repayment became too onerous.
That knowledge should have given lenders incentives to make loans only to those who could repay . But lenders perhaps knew that, with the Republicans in control of government, they could make bad loans and then change the law to ensure that they could squeeze the poor.
With one out of four mortgages in the US under water — more owed than the house is worth — there is a growing consensus that the only way to deal with the mess is to write down the value of the principal (what is owed).
The US has a special procedure for corporate bankruptcy, called Chapter 11, which allows a speedy restructuring by writing-down debt, and converting some of it to equity.
It is important to keep enterprises alive as going concerns, in order to preserve jobs and growth. But it is also important to keep families and communities intact. So, the US needs a ‘homeowners’ Chapter 11’. Lenders complain that such a law would violate their property rights. But almost all changes in laws and regulations benefit some at the expense of others.
When the 2005 bankruptcy law was passed, lenders were the beneficiaries; they didn’t worry about how the law affected the rights of debtors.
Growing inequality, combined with a flawed system of campaign finance, risks turning US’ legal system into a travesty of justice. Some may still call it the ‘rule of law’ , but it would not be one that protects the weak against the powerful. Rather, it would enable the powerful to exploit the weak.
In today’s US, the proud claim of ‘justice for all’ is being replaced by the more-modest claim of ‘justice for those who can afford it’ . And the number of people who can afford it is rapidly diminishing.
(The author, a Nobel laureate in economics, is University Professor at Columbia University) © Project Syndicate, 2010
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William Black – Lenders Put the Lies in Liar’s Loans
Posted by Foreclosure Fraud on November 8, 2010 · 2 Comments
William K. Black William K. Black
Lenders Put the Lies in Liar’s Loans
I have noted before a family maxim — one cannot compete with unintended self-parody. Andrew Kahr has recently written a column in the American Banker entitled “Spread the Word: Lying to Banks is Illegal.” Mr. Kahr is one of the architects of subprime lending. He warns:
Federal law provides that anyone who knowingly makes a false statement to a[n] … insured institution … shall be fined not more than $1,000,000 or imprisoned for not more than thirty years, or both.
To say the least, this criminal law, intended to protect banks and hence the deposit insurance fund, is very, very rarely enforced against consumers. Why?
How is a U.S. attorney to know that a customer has defrauded a bank by giving false information, unless the case is referred to him or her by the bank? And we’re not doing that, at least not for mortgages, credit cards or other everyday consumer lending.
Hence, the plethora of consumers giving willfully and materially false information to banks on applications and during loan servicing has mushroomed. With “liar’s loans,” this went from a cottage industry to an epidemic.
Mr. Kahr neglects to mention that “insured institution[s]” are required to file Suspicious Activity Reports (SARs) (criminal referrals). As the FDIC explains:
The U.S. Department of the Treasury’s financial recordkeeping regulations (31 CFR 103.18) require federally supervised banking organizations to file a SAR when they detect a known or suspected violation of federal law meeting applicable reporting criteria.
Collectively, banks make massive numbers of SARS filings with regard to mortgage fraud, over 67,000 annually, but a mere 10 institutions file 72% of those referrals. The typical nonprime lender deliberately violates its legal requirement to file a criminal referral when it discovers mortgage fraud even though that practice would be irrational for an honest lender. The federal regulatory agencies have not taken any effective action against these pervasive violation of their rules despite an “epidemic” of mortgage fraud that drove the ongoing financial crises.
Mr. Kahr continues by complaining that
[T]he news often encourages consumers to believe that you can lie to get a loan, or to forestall collection action, and that this is perfectly normal, common and acceptable. After all, “he told me that my income would not be verified.” Nonverification, even if advertised in advance, is not an invitation to lie, and it does not exempt the liar from criminal consequences.
Occasionally you can see a newspaper story about a tattoo parlor operator who managed to buy six houses with nothing down and false applications. But the multiple and professional fraudsters are relatively few. Surely the great bulk of the fraudulent applications come from individuals who just want to buy and live in the house, or to do so on better terms.
Mr. Kahr sees only two sources of mortgage fraud — and both are by the borrowers. He correctly states that there appear to be “relatively few” “professional fraudsters” among borrowers. To him, that leaves only one alternative — “surely” millions of homeowners have defrauded the banks. The FBI, however, reports that 80% of mortgage fraud losses occur when “industry insiders” are involved in the fraud (FBI 2007).
Mr. Kahr then returns to his primary theme — nonprime lenders acted irrationally by recurrently taking actions that were certain to increase mortgage fraud.
In days gone by, some loan application forms included, in bold type at the bottom, an excerpt from the criminal law … defining fraud and specifying the penalties for it. Even before “the class of 2006,” we stopped doing that. After all, it reduced loan volume — both by discouraging bad applications and by increasing the decline rate based on less inflated claims by applicants.
Let’s now do a thought experiment with “the bank where I work.” Suppose you let it be known to applicants and loan customers that your policy is to detect and to refer for prosecution cases in which a knowingly false statement is made by an applicant or borrower. What would happen then?
“Well, then they would all go across the street, to my competitor.”
We can certainly hope that the fraudsters would do so! And that your loan losses would correspondingly decline, giving you a dramatic edge over that competitor. You could charge lower rates and still earn a higher return.
But why would the honest customer have any fear of doing business with you? He knows what his income, occupation and phone number are.
Mr. Kahr is explaining the concept of “adverse selection.” If an honest bank does not underwrite effectively its controlling officers know that the bank will inevitably attract the worst borrowers and suffer severe losses. No honest bank would operate in the fashion Mr. Kahr described as being characteristic of nonprime mortgage lenders. An honest, competent lender would gain a “dramatic edge” in “return” over any lender that permitted adverse selection. Mr. Kahr explains that nonprime lenders invariably “made bad loans because [they] knew [they] could sell them [to Fannie and Freddie] and make taxpayers cover the losses….” Again, Mr. Kahr is blind to the implications of the strategy he suggests nonprime lenders followed. We need to review the bidding. Mr. Kahr has explained that nonprime lenders characteristically:
* Cared solely about maximizing loan volume and (nominal) yield
* Deliberately removed underwriting procedures and anti-fraud warnings in order to increase volume and (nominal) short-term yield even though they knew this would produce an epidemic of fraud and substantially reduce (real) yield (because it would cause massive losses)
* Were aware that these steps led to endemic mortgage fraud, yet the nonprime industry norm was to fund loans known to be fraudulent and to violate the law requiring that the lender file criminal referrals on the endemic frauds
* And, though they knew the loans they were selling were commonly fraudulent and would produce enormous net losses, the banks followed this strategy because they intended to sell the loans to Fannie and Freddie and transfer the catastrophic losses to the taxpayers
The obvious point, ignored by Mr. Kahr, is that the banks could not lawfully sell endemically fraudulent loans to Fannie and Freddie. If they had disclosed the endemic fraud they would have been unable to sell toxic waste to Fannie and Freddie (and the private label secondary participants — who also bought hundreds of billions of dollars of fraudulent nonprime loans). The lenders had to make false “reps and warranties” to be able to sell fraudulent loans to Fannie and Freddie. The strategy that Mr. Kahr suggests the nonprime lenders followed required fraudulent representations by the lenders as to millions of loans. Mr. Kahr is describing the largest and most destructive financial fraud in human history. Recall that Mr. Kahr makes clear that the nonprime lenders knew two things they needed to deceive Fannie and Freddie about — the fact that the loans were endemically fraudulent and the fact that the lenders identified many fraudulent loans and characteristically failed to file criminal referrals and instead sold loans they knew to be fraudulent to Fannie and Freddie. Note also that Mr. Kahr asserts that the lenders knew that their strategy would cause hundreds of billions of dollars in losses to the American people — who were innocent, but would have to pay the cost of the frauds.
Note something else implicit in Mr. Kahr’s analysis — the banks could have prevented virtually all serious mortgage fraud and prevented the entire crisis by using traditional underwriting practices — and doing so was certain to produce superior bank profits. It was the epidemic of mortgage fraud that hyper-inflated the bubble and caused the catastrophic losses. The combination of the hyper-inflated bubble and catastrophic losses is what drove the economic crisis in the U.S. and produced extreme unemployment.
Mr. Kahr does not consider the interplay of the practices he ascribes to the nonprime industry. It is perfectly sensible for a bank that originates fraudulent loans not to file criminal referrals about the frauds if its strategy is to sell the loans to Fannie and Freddie and transfer the losses to the taxpayers. Consider four reasons why nonprime mortgage lenders typically do not file criminal referrals. One, if the lender files a referral alerting the FBI that it believes the loan may be fraudulent it cannot sell the loan to Fannie and Freddie without exposing itself to massive punitive damages for fraudulent sales.
Two, the fraud incidence on liar’s loans that have been studied by independent reviewers is 80% and above. The regulatory agency gets a copy of the criminal referral. Even Bush’s crew of anti-regulators would have found it impossible to allow Indymac, WaMu, Countrywide to make hundreds of thousands of liar’s loans if they were also filing hundreds of thousands of criminal referrals.
Three, Mr. Kahl’s arguments mean that the typical nonprime lenders was violating the rules requiring that they make criminal referrals and engaged in widespread fraud in selling the fraudulent loans to private label securitizers and Fannie and Freddie. When you are running a massive fraud you are reluctant to file adequate criminal referrals that might attract the FBI to investigate tens of thousands of fraudulent loans.
Four, it was overwhelmingly the lenders that put the “lie” in “liar’s” loans. The “recipe” for a fraudulent lender to maximize its short-term (fictional) accounting income has four parts.
You can check out the rest here…
~
4closureFraud.org
I sure could use some…
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Filed under Foreclosure Fraud
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Comments
2 Responses to “William Black – Lenders Put the Lies in Liar’s Loans”
1.
Pelucheven says:
November 8, 2010 at 6:15 PM
Most sub prime No Doc, Low Doc or whatever they wanted to call them had a 4506 Tax transcript request form that the borrower signed at the time of Loan Application and also at the settlement table.
If I as a borrower wanted to cheat, it was quite easy to do. However, it would generally take some one with the actual expertise and inside knowledge to know all the ins and outs. how to set the proper Front and back ratios, how to generate the deposit verifications (some realtors and loan officers had bank accounts where they placed their clients and or used other clients accounts without their knowledge and approval to do deposit verifications), as far as the income, some loan officers had call centers and companies where they paid the individual verifying the income or employment reference, taking advantage of the fact that no income or low doc meant the verification of income would not include the tax form 4605 since they knew the warehouse lender would not run the 4506 because the account reps were making sure all the brokers and their loan officers knew that fact. They did not care, they all made money at different levels but the juiciest commissions came from the volume and the yields generated by the upselling of the interest rates (Yield Spread premiums), on top of that they brokers and lenders made money in the securitization or structuring
of the loans in packages to be sold to the banksters such as Goldman, Lehman, Merrill, etc.
the kick backs and gifts were the rule of the day, underwriting standards came in second.
The fact that most people used all their savings and hard earned money to pay the mortgage did not matter, as it still does not. After reading the transcripts of the testimony given by the Head Underwriter of Citi under oath in which he states the large degree of fraud present in all their loans and whatever they acquired, only reaffirms this fact.
It only surprises me to see that most people still believe that we the borrowers are at fault. Well We never designed the loan products, we never lowered the underwriting guidelines, we were not given kick backs, nor did we were fully informed of all the hands that were in the pot.
When are the regulators going to stop all foreclosures and start forcing the real crook fix the problem, their toxic mortgages and now the fraudulent foreclosures.
Reply
2.
Michael from Legalprise says:
November 8, 2010 at 4:31 PM
Both forgot that systemic sub-prime origination fraud increased housing prices for all home buyers and renters; anybody who was not locked into a long-term mortgage before the fraud became rampant.
By allowing too much money into the system prices swelled for both home buyers, but also for renters: for anybody who hadn’t purchased a home before the bubble which, not coincidentally, is when the fraud became rampant.
Obviously the overwhelming majority of origination fraud came from mortgage lenders. Even if borrowers wanted to defraud banks in such large numbers bank underwriting systems could, would, and should have prevented that. The only way fraud on this scale could exist is if banks were engaged either explicitly, by perpetrating it, or implicitly, via defective fraud-screening products and processes. Hint, hint lawyers: quantifiable, enormous damages caused by defective products.
Reply
Bert maybe huffingtonpost.com can help you get into the media.
Deposition of Bryan Bly of Nationwide Title Clearing
http://4closurefraud.org/2010/11/08/full-deposition-of-bryan-bly-of-nationwide-title-clearing/
Crystal Moore also of Nationwide Title Clearing
http://4closurefraud.org/2010/11/07/kaboooooooom-full-video-deposition-of-crystal-moore-of-nationwide-title-clearing/
ALSO I HAVE A SIGNING AUTHORITY AGREEMENT
FROM MERS TO WELLS FARGO AND THERE ATTORNEY MILLS WITH**** MARK WOODEN****
SIGNITURE STATING THAT STEPHEN POTTER HAD SIGNING AUTHORITY EFFECTIVE 9/15/2009 WHEN THE FRAUD ASSIGNMENT WAS SIGNED 5/12/2008
FRAUD**FRAUD**FRAUD**FRAUD**FRAUD**FRAUD
Here in California Mers stated they are Nominee for New Century Mortgage in 2008 However new Century Mortgage sold all it loans and then filed BK in 2007. ASC/Wells Fargo stated to the BK court under Penulty of Perjury American Servicing Company Acquired servicing rights
to my note and deed of trust 6/30/2006 Lie Lie Lie The house was not completed and my deed of trust was not printed until nov-14-2006. Also 6/30/2006 The house was stix in the builder name. They did not file a notice of completion until oct 2006.2009 Wells Fargo Attorney Foreclosure Mills Pite Duncon LLC in San Diego california submitted a proof of claim to the federal bk court in 2009 a OG copy of a note. The 2009 note was certified and had a bar code and a mers min number. However my original loan number was erased you could see the lines. The 2010 motion for relief from automatic stay The note did not have the Mers Min Number and no bar code not evan certified.We also notice they erase the min number and my OG loan number from my Deed Of Trust. This Is a Clear Case Of Fraud On The Courts.PLEASE CONTACT ME I WOULD LIKE MY CASE TO BE IN THE MEDIA AND INVESTIGATED