Legal Research Society Uncovering the CUSIP Applications: Converting Notes into Bonds


COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

Editor’s Note: I’m not sure about the submission below and I invite comments. The point missing, I think, is that the notes themselves were not EACH converted into bonds. The securitization structure appears to me to be the intermingling of notes (which are probably invalid because they do not accurately reflect the loan obligation). The notes are thrown into a pool by a wave of a magic wand (i.e., just by entering them on a proprietary spreadsheet instead of actually transferring the documents legally). The principal amount of the notes, according to Charles Koppa who has researched this thoroughly, exceeds the principal amount of the bonds issued from the pool (i.e., the trust or SPV) by a factor of 20%. That’s called overcollateralization.

The interesting question which I think Koppa and the LRS are beginning to hone in on is this: how could the bond payable to investors be overcollateralized? If the investors advanced $1,000,000 and they have receivables from loans to homeowners totaling $1,200,000. But if you think about it, that is not possible. The receivables would either have to be overstated (fraud) or something else is working here. If the nominal value of the receivables is $1,200,000 that means that $1.2 million was FUNDED. Since the pretender lenders are not funding the loans except by use of investor money who thought they were buying bonds (that in many cases might not have ever existed in reality, something that the CUSIP research might reveal), where did the extra $200,000 of FUNDING come from?

Once you eliminate all possibilities except one, that ONE regardless of how improbable or counter-intuitive, must be the answer. So my answer three years ago and now is the same: the pretender lenders entered data on the same loan obligation with minor differences in dates or other index on more than one spreadsheet for more than one pool and issued bonds including the same loan obligation in multiple pools. The investor buying the bond under the mistaken belief that he has the protection of the property values and the protection of the receivables turns out to have neither.

The concept of overcollateralization was probably accepted because of the essential LIE at the base of the securitization scheme and which has yet to be completely absorbed by the courts or mainstream media: investors thought they were buying loans that had already been funded by originating banks. Hence the question of where did the money come from was solved. It appeared to come from the funds of the originators who were then selling them upstream into securitization chains. It made perfect sense. It just wasn’t true. The TRUTH was that the all the money came from the investors not the loan originators. The TRUTH is that the sale of “bonds” to investors took place first, before the loans were funded, exactly the converse of what the investors thought.

Thus the illusion of overcollateralization could only be created by literally selling the same asset (receivables from a funded loan) several times. It was an illusion because at the time of the purchase of the bond there were no loans and thus there were no receivables. Like the foreclosure procedures that have landed the pretenders in hot water, the method of operation was to back-fill where necessary. All eyes were on the flow of money and cutting up the money pie as it came down from the investors and then as it came up from the homeowners. The investors were never meant to be paid in full, like every Ponzi scheme. They were intended to be lulled into thinking it was working long enough for them to be “reloaded” (i.e., to sell them more garbage).


Sent: 11/11/2010 11:16:35 P.M. Central Standard Time
Subj: VERY VERY IMPORTANT// from the desk of John Stuart

This just in:
I attended a weekly meeting of legal researchers in AZ, I have not attended in a while. They have started meeting at our workshop, every Thursday 7pm to 9pm. The Legal Research Society,, (I think)

Terry, the group leader and old friend brought up a concept, I will tell you what happened, how I think we should use, and then why I think it might work.

1. Terry had a friend being sued by a credit card company. The friend, just for the hell of it, asked the cc company for the CUSIP number for the APPLICATION. The banks dismissed the case and has not come back. So Terry, after going thru RFAs and interroitories to no avail, decided to try it. On his next document he asked the bank for the CUSIP number for the APLLICATION. They have since disappeared.

2. I think we should ask the banks for CURRENT COMPLETE copies of the ORIGINAL APPLICATION:
Inclusive of: legible copy of the stamping that states:

This applies whether it is a mortgage or a deed of trust.

3. Why I think this may work:
a. Notes are converted to bonds all the time, that is what CUSIP numbers are for. You can buy a bond with any note or instrument. Promissory note, Federal Reserve Note, any note can be used to buy a bond.
b. Applications are NOT instruments and CANNOT be converted to instruments.
c. If the bank obtained a CUSIP number for an application that means they illegally converted an application to an instrument to purchase a bond that they then used to obtain a loan from the government to pass thru money to convert real property.

If they really do get CUSIP numbers for applications the whole game is over with. No case, no foreclosure, no payments, no contest of ownership. Its done.

Thinking about it makes my head spin because of the simplicity. If that is what they have to do to get the loan from the feds so they don’t risk their own money everything makes sense. That would be why they can claim there is a loan and we are in on it, its our application. Then really, the ONLY law broken was that of unlawfully converting an application to an instrument. Which would then cause the instrument to be invalid, the bond invalid, the loan have to be repaid by the bank IF they foreclose, but NOT if they don’t and just drop the case. That’s one hell of a barganing chip.

Could it be this simple? Its possible. It sure would answer the question why are the judges ruling against Notes and accepting the other documents as evidence of the deal.

I do not know if this will work. The idea is less than two hours old. But I think everyone should start trying to figure it out. If no one comes up with a good argument I think we should go for it.

33 Responses

  1. why did this thread die out? are cusips issued on applications?

  2. The remedy is the counterclaim. You have to claim the money. That is what the banks are claiming. The house is the bonus. After you do an AR, and they don’t give the documents, you can cancel for breach of fiduciary duty for failure to disclose. Then you have the right – see UCC-8.
    They are supposed to file a 1099OID with the IRS for original issue. They will never give this to you because it will show the borrower as the issuer.
    Loook up 1099OID on IRS. Also, when they foreclose they issue a 1099A, for abandoned funds. For the amount of the judgement. Freddie, etc. is paying 100% of the loan amount WHEN they foreclose. I would say that is bribery!

  3. The US Treasury buys the notes and bonds and converts them to US savings bonds that are sold as Treasuries. These are all securities for “public funds” WE are the investors + overseas (China, etc.) through the merry-go-round of securitization.
    The whole thing is a ponzi scheme and it is insured through the re-insurrers, and on and on.
    The owners of the prison system get their cut too, as everything in this country is a “commercial crime.” No offense to the lawyers, but they went overboard with writing laws, as every one is written to figure out how to get more money. Our system has gotten waaay out of control and the US Federal Goverment, by way of the politicians, has sold us all out to the international banksters that we are indebted to through their reckless and endless spending. So the banksters have enticed the entire country to mortgage our homes, so they can get the money and the house too when they foreclose. Look up the TT&L Program. You will see all the collateral they accept. We only have a debt society. Debt is money here in the US. Our applications are the “money order” and the promissory note is the “money”. The mortgage (not necessary as the note paid for the house) is attached to lien for confiscation of assets. They have already taken all the gold, back in 1933, so what is left? The property. Sad, but true. The Federal reserve debt system of money has destroyed this country and indebeted us to the tune of over $60 trillion+++ to a handful of private bankers. How much in debt was the government at the time, that we are still paying to this day? Our wealth has been illegally siphoned to the bankers. It is all only just a piece of paper they are using to get the substance – the house! It is all electronically being done, the treasury is converting everything to electronicaly issued instruments. Then we will really be in a mess to “prove” anything! Scary! We truly need a new system of currency, based on substance and not air. Especially when the banksters get to put up nothing, and we give the asset. We have been duped for the last 100 years! Do the AR process and ask to inspect the original application and note, front AND back.

    Also, most people don’t ask for their original note back when they refinance. You need to. With the satisfaction of mortgage. They will send it back and it says -“paid and cancelled on the front and on the signature page , it says- “Pay to the order of (banks name) without recourse.” _This means it was paid. They all say this, that’s why they don’t want to show the note.

  4. problem is not that we should have to educate the judges, they should already know, how can you not. A few weeks with books, and research, tada! What are they being paid for if they are not professionals at the law. Meaning to know how to handle not knowing.

  5. Bob G.

    Some states are covering this up; but the US Supreme Court in Carpenter, states that possibility exists; that a Note can be separated from the Deed of Trust/Mortgage, and that it is a nullity when it happens. I am going to argue that back to the US Supreme Court if I have to.

    If it can happen, then it does happen; particularly in the age of securitization and the ‘Madoffing’ of 95% of mortgages and pools and phony allonges.


    I suspect both strategies for defense, simultaneous, are our answer:

    1. Fight the pretender foreclosures now.

    2. Do the actions that Bob M talks about to keep it
    from coming back ever again.

    Ignoring #2 is how we got here in the first place; and why Congressman Charles Lindbergh SR was offered a multi-million bribe to vote for it, circa 1907.

    Someday, we have to ask: just how is it that most of our politicians are bought off today? The answer is in his fight.


    Charles Lindbergh Sr. Bio:

    P.S. The Federal Reserve’s bribe offer [which Congressman Lindbergh, as a real American gallantly refused] was described in a “New American” magazine article about him, circa 12-years-ago.

  6. Bill

    Some of us have discussed Carpenter v. Longan here. There seems to be some disagreement by state courts as to its applicability particularly post default. In any event, Carpenter seems to be saying that the mortgage is incidental to the note, and travels with the note wherever it goes regardless of formal assignment docs.

    As for Bob M’s proposed bill, it’s a commendable effort but unfortunately it’s of no practical use for anyone presently a defendant in a foreclosure action and trying to save their home. Right now, I only have time for practical stuff that has a reasonable probability of achieving my immediate goals.

  7. This may explain Neil’s long time ‘undisclosed lender’ on applications controversy.

  8. To Bob G:

    I respectfully don’t agree with your statement below – “…if the real lender comes up with the original wet ink note, properly endorsed and assigned, you’re toast”.

    If the original wet-ink Note and the original wet-ink Deed of Trust were separated in ownership from each other it is still a Null transaction.

    Banks decoupled the note from the Deed of Trust = Nullity* = Quiet Title.

    *Carpenter v. Longan, 83 U.S. 271, at 274 – “…while an assignment of the latter alone is a nullity”.

    ….Whether the bank has the original wet-ink paperwork or not.

    Because of the shortness of time in non-judicial states, I personally would fight the security instrument (Mortgage or Deed of Trust) in a prompt quiet title FIRST.

    Then you have the time to fight these Note arguments with discovery. These Note chains-of-title stink, and the banks are aggressively hiding something regarding them, from us all.

    The wet-ink paperwork is a SECOND line of defense (Best Evidence Rules) (proving whom is the alleged real party in interest; & and if they separated ownership by moving the Deed of Trust/Mortgage through a different chain of title?

    Bob M. below has the solution below. His post if long, but when we’re finally tired of political counterfeiting, and the lack of rest it gives us; we have to rebuild and return to a economic time, when only one spouse HAD to work, because he or she wasn’t paying every politician’s friends’ bills through endless ‘Quantitative Easing’, and the Ponzi games that naturally surround and diffuse its wrongs.

    The mortgages are Null.

    End the Fed.

  9. Bob G,

    I was talking about them being sold to more than one pool “AT THE SAME TIME”.

    Also, the mortgage that had more than one lender named, was at the same time, in the same mortgage.

  10. The notes and mortgages can be resold many times. That’s not against the law. It’s only illegal if the same note/mortgage is resold to different parties at the same time.

  11. The bottom line is that I know an attorney who was claiming the audits for some of his clients had shown the loan was sold into more that one pool.

    In fact, he claimed that one mortgage, deep in its many pages, even gave the name of a second creditor or lender.

    Another source showed a mortgage that was sold MANY times over. That was even posted somewhere on LL as I recall.

  12. WAMU issued me a HELOC for $109k and sold it into a Trust. A year later, during the market collapse, WAMU solicited me over the phone and asked if I wanted a $45k increase to my HELOC. No new application or paperwork required, just sign a new note for the increase.

    Later, in litigation discovery, I learned that the internal bank notes revealed an increase to my income and appraisal without my knowledge. They fabricated my info to make the DTI’s and LTV’s match without my knowledge.

    So…Did they re-sell the same loan to another pool? How do they show an increase to a loan amount after the loan has been in a pool for over a year?

  13. CDO-squared. I believe this is the equivalent of a mutual fund buying up another mutual fund’s shares. I will defer to ANONYMOUS on this one.

  14. Bob G.
    Well if a mortgage was initially securitized in a pool of one thousand, and all the certificates were sold, how then could they re-securitize those loans again? How could they create new certificates for sale to the sucker investor? Just thinking out loud.
    This is the first sentence in this Re-securitization trust-“This free writing prospectus is being delivered to you solely to provide you with information about the offering of the securities referred to in this free writing prospectus and to solicit an offer to purchase the securities”
    I believe this sentence says it all, don’t you?

  15. bob g. ‘if’ ‘ mighty big word

  16. Think some of the confusion here is in the concept of funding of the loans. As I have said before (and I know Neil does not like) investors do not directly fund individual mortgage loans. They indirectly fund the securitization of a “POOL” of securitized receivables. Thereafter, the pools are combined with other pools and multiple tranches, thus, forming CDOs – which are derived from the securities – which are derived from the receivables – which are derived from individual loans. There is no funding by investors for individual loans – and, therefore, investors can never be considered your “creditor” or “lender.”

    Overcollateralization is not the “yield spread premium.” YTP is the “bonus” paid to mortgage brokers to deliver higher interest rate loans to the purchasing bank.

    Overcollateralization is when the face value of the underlying loan PORTFOLIO (Pool) is larger than the security it backs. Banks were able to overcollaterize due to credit enhancement in the pool tranche structure. That is, they were able to sell the securities for less than the value of the pool of receivables the bank owned because the risk to security investors of default was supposedly mitigated by a trance structure in which the higher risk (lower tier) tranches protected the lower risk (higher tier ) tranches. Further, the risk was supposedly mitigated by combining many pools and tranches into CDOs. By not removing loans from pools – when the loan was actually not securitized into that pool or sold upon default- allowed for multiple inclusion of individual loans in separate pools.

    You have to go the TILA and definitions of Creditor (and the TILA Amendment in May 2009) to understand who is considered a lender/creditor to an individual loan borrower.

    How the creditor/lender pools loans to pass through income streams is bank’s business – but those derivative securities investors are never individually funding any loan – those derivative investors are only interested in a pool -in which your loan may or may not be very fractionally represented.

    Overcollateraliztion was to supposed to protect CDO investors from loans that went into default. Thus, providing enough money to cover those defaults. The derivative securities, therefore, could be purchased for much less than the face value of the “pool” and multiple “pools”. But, the defaults came so fast that the the pool and pool’s value collapsed – causing the CDO’s value to fall to zero.

    Individual loans were funded by warehouse lines of credit that the purchasing banks provided to originators. This is the missing link in chain of securitization that is never disclosed – making any conveyance of individual loans to any trust – false. That is, the banks purchased the individual loans before they securitize their “pools” of receivables. Only who funds individual loan is relevant to the borrower according to TILA.

  17. Guys … show me where a mortgagor’s LOAN APPLICATION was given a CUSIP. If this is what is being posited here, it is a ridiculous notion.

  18. Bob M

    All this looks like to me is a CDO-squared. So where’s the beef?

  19. Bob G
    I am going to pull one up right now. See you in a minute.

  20. Ok, I understand both arguments here, but who and how can it be explained that the same pretender is foreclosing on the same loan,on the same home, with two different law firms at the same time In VA, TAKING ADVANTAGE OF OUR NON JUDICIAL FORECLOSURE SYSTEM.


    assuming these Wall street guys did everything by the book, why did originators engaged systematically in the selling forward of their production?

    IHave read several BK filings of large and medium size originators such as First Magnus Financial of AZ,and they did pre sell their loans.

    how can you sell notes you do not have?

  21. FYI ..

    I heard from an attorney yesterday that the floors at the Miami courthouse are sagging and buckling ,, LITERALLY , under the weight of all the current foreclosure filings on file…

  22. This should get some people fired up!

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    Further, I am a charitable person, but to an extent, our charity has been taken as a sign of weakness and people have been taking advantage of our good nature far too long. Charity begins at home and right now our Home needs our attention. The plight of the American people is most important right now, nothing else. When this country is healthy again, surely we can resume our charitable roll around the globe; but I will be dammed if while American Citizens are going hungry, cannot pay their bills because of unemployment, millions of Americans are losing their homes to the carpet baggers of old, the Banks, the jobs have all dried up because corporate America has sent all the jobs oversees while Americans are starving in the streets, then something drastic has to be done, and in my opinion, this is a good start.
    The FED does not benefit middle class America nor has it since its ill-conceived beginning in 1913. The Bankers have destroyed our nation, and they were responsible for the destruction of this nation in the 20’s. The same Ponzi scheme that destroyed our country then has destroyed it once again. The Securitizations of loans was a driving force which collapsed our economy then and now. Read your history. The Glass Steagall Act of 1934 was a preventive measure to protect the populous from these same bloodsuckers.
    To understand this scheme you have to understand that MERS, the abolishment of the Glass Act 1934, and the enactment of the Gramm, Leach, Bliley 1999 Act all took place contemporaneously, had it not, these criminals would not have been able to steal as much money as they have nor would they have been allowed to destroy this Country . And if these steps were thwarted, we would not be where we are right now.
    We are being financially drained and destroyed by the elements listed above, this has to stop, and here is a way to do that.
    When in the History of America did we ever have to import wheat or anything else for that matter? We have been sold out Americans and it is time to make a serious change. This is not about any one person; this is about the preservation of our country and a way of life for our children of which I have five.


  23. Bob M… Please provide the exact link that you are discussing so that there is no misunderstanding. Thanx.

  24. I meant re- securitization

  25. BOB G.
    They have and they do. Look on the SEC website for Free writing prospectuses of securitization of MBS pools.

  26. I can see that my loan was sold three days before the closing,on the “lock” date. That was why there were pre-dated forms in the closing package. Hmmmm.

  27. Bob, if the security was transferred to the trust while the loan was still an application and not yet a note, then I can see that the transfer is either invalid or reflects that the trust possesses ownership rights to an application. The application would be worthless and certainly unsecured.

    The trust would not possess ownership rights to a note. The note was yet to be created at the time of the transfer.

  28. The question is ‘did they securitize mortgage loan applications’ and not just the actual note? Notes are produced at the end of the loan process, while applications are created at the very beginning. So, the post simply asks that question.

    Things were moving fast and furious before the crash. Seems to me that some whiz kid on Wall Street could have figured out the advantages of slapping a CUSIP on a liar’s loan application, then selling it as if it were an actual note. Probably save two to six weeks of time. That was an eternity during the mortgage orgy.

  29. By the way…if the real lender comes up with the original wet ink note, properly endorsed and assigned, you’re toast. Under those circumstances, this APPLICATION/CUSIP argument is found to be meritless at best, and frivolous and potentially sanctionable at worst, to include having to pay for the lender’s legal fees when you lose.

  30. see below

  31. I have absolutely no idea what this guy is talking about. Nothing he says makes any sense whatsoever. If u think that you have had difficulty getting a judge to understand what’s been going on heretofore, just try using this argument on him. The way he presents it, it sounds like super psychobabble to me. I challenge any two readers here to come up with an identical explanation of what this guy just said, and how it makes any legal sense or has any legal consequence whatsoever in the context of a foreclosure proceeding.

    Now, as for Neil’s contentions. I don’t believe that the same notes were sold multiple times to different investors (“Springtime for Hitler?”). Nobody on Wall Street is so stupid as to risk that kind of fraud up front. Too auditable. Would they buy naked CDS on the tranches that they owned? Yes, and they made a fortune doing so. No need to sell the same notes to multiple parties. I thought that the overcollateralization was the yield spread account. What happened to that pony that has been trotted out many times to explain the overcollateralization? If the investor puts up $1.2MM he gets bonds worth $1.2MM nominal amount. But he’s told he’s getting a 6% return, or $72K per year. But the mortgage notes carry an interest rate of 9% a year, so the borrower is paying $108k a year. Nice spread that can be used for many purposes including the amortization on the borrower’s principal. Alternatively, the borrower might have only borrowed $1MM, so at 9% he’s paying $90k per year. Still a nice interest spread and the bankster has the extra $200k to play with. This makes much more sense than the multiple note theory. And it is easier and more plausible in a legal, financial and logistical sense.

    As for the prefunding, so what? When a company does an initial public stock offering, the banker does its DD and agrees to fund the deal. The stock certificates are printed up, the brokers presell the deal to investors. If all goes well and the markets don’t get soft in the interim, the closing is scheduled. Prior to the closing, the investors send in their money to an escrow agent. The officers of the company sign the stock certs, and at closing the stock certs are turned over to the escrow agent and the escrow agent wires the the funds to the company’s bank account less the underwriter’s fees of !%-2%. Now the underwriter may or may not have had a bridge funder (warehouse lender) between it and the investors (most likely not). So that’s how deals get funded.

  32. Illusions like you expect to see performed in Las Vegas shows, only this time with the usage of attorneys and the final act is in our court systems.

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