WELLS/WACHOVIA: NO CONSCIENCE, NO MORALS, NO REGULATION —- FRAUD

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WELLS FARGO KNEW THE MORTGAGE BONDS WERE WORTH LESS,

MARKED THEM DOWN THEN SOLD THEM FOR MORE

SEE RELATED STORIES: 60 MINUTES: TITLE PROBLEMS ARISING FROM SECURITIZATION A \”TRAIN WRECK\”

60 MINUTES; SECOND CRISIS IN THE MAKING

60 MINUTES OVERTIME: WHO OWNS YOUR MORTGAGE

EDITOR’S COMMENT: Again, no surprise. Artificial inflation of asset prices lies at the heart of the entire securitization illusion. Reading this story, any Wall Street insider with a long history on the street, would tell you that this would be grounds for discipline when  the industry was self regulated. Now with regulation imposed by the government, and then deregulation passed, they got away with it. It’s fraud.

They knew the mortgages were toxic, they knew the value of the mortgage bonds was questionable at best and marked it down to 52 cents on the dollar and then sold it to some unsuspecting investor for 95 cents, with the investor thinking he was getting a bargain. It is one thing to act as as broker, but this was sold from their own proprietary account. After marking the asset down, they then sold the securities and showed a “profit.” Then management took a bonus for producing this “profit.” What is wrong with this picture?

Inflating the apparent value of mortgage bonds, inflation of the apparent value of the the property, inflating the importance of the documents signed at closing, or inflating the appearance of compliance with industry standard underwriting, recording, transfers and assignments, the story is always the same. It is all based on deception and there is no way out. Except for the occasional trade with an unsuspecting Indian tribe which in this case blew up in their face, they can’t escape the consequences of their misdeeds.

And again I ask: If all this trading was or is going on, how can anyone in Court state with a straight face that they are the holder of the note and have the right to enforce it? The party the attorney is  purporting to represent probably doesn’t even know he is in court, and the note describes a transaction that never was consummated. The real transaction was a lender-investor who has since given up on the claim to the note and is pursuing claims against the investment bankers for selling empty mortgage bonds that had no loans in them. The lender agrees with the borrowers: the parties who would foreclose have no right to be in court.

The counterargument is that all this “technical” stuff is holding up commerce in the housing market. That might be true. But it isn’t technical if you are fraudulently representing yourself to be the creditor. The courts have consistently disregarded political arguments as an excuse for not applying law which has been cemented by precedents dating back for centuries. The recognition that the grantee on the deed is the homeowner and that the fraudulent creditor has no right to slander that title would free up the housing market a lot easier than the current spurious arguments offered by the banks.

Wells Fargo Settles Case Originating At Wachovia

By EDWARD WYATT

WASHINGTON — Even as Wall Street churned out mortgage-backed securities and derivatives in 2006, the sellers of the often-convoluted packages sometimes knew that parts of the deals — namely those that they could not sell — were worth far less than face value.

So it seemed reasonable in October 2006, when Wachovia Capital Markets, after failing to find a buyer for a tranche of a collateralized debt obligations known as Grand Avenue II, listed the securities on its books at 52.7 cents on the dollar.

Four months later, with the mortgage market starting to collapse, Wachovia sold those same securities to the Zuni Indian Tribe for 90 to 95 cents on the dollar. A year later, the deal went into default, and the tribe and other investors lost millions.

The Securities and Exchange Commission said Tuesday that it had approved an $11 million settlement for a securities fraud complaint related to the Grand Avenue II deal and a second derivatives transaction with a subsidiary of Wells Fargo, which bought Wachovia in 2008 as the troubled bank neared collapse.

“Wachovia caused significant losses to the Zuni Indians and other investors by violating basic investor protection rules,” Robert Khuzami, the director of the S.E.C.’s enforcement division, said in a statement. The rules, he added, include “don’t charge secret excessive markups, and don’t use stale prices when telling buyers that assets are priced at fair market value.”

Without admitting wrongdoing, Wells Fargo Securities agreed to pay a disgorgement of $6.75 million and a civil penalty of $4.45 million, the S.E.C. said, with $7.4 million going to a fund to be distributed to investors who had lost money on the two transactions.

In a second deal involving a C.D.O., called Longshore 3, Wachovia Capital Markets falsely told investors that it had acquired some of the assets “on an arm’s-length basis,” and at “fair market prices.” In fact, the S.E.C. said, Wachovia “transferred these assets at stale prices in order to avoid losses on its own books.”

In a statement, Well Fargo said: “The settlement relates to actions taken by Wachovia in 2007 in the early days of the credit crisis. The issues presented here were complex, and Wells Fargo is pleased to have resolved this matter with the S.E.C.”

In its order outlining the case, the S.E.C. documents numerous instances of conduct that could only have been performed by individuals who worked for Wachovia — marking up the value of the Grand Avenue securities by 70 percent, or approving the false and misleading disclosure that the Longshore securities were acquired “on an arms-length basis” and “at fair market prices.”

But no individuals were included in the complaint, or even named, in the S.E.C.’s cease and desist order or the settlement.

Both the Zuni Indian Tribe, whose reservation is in Arizona and western New Mexico, and an individual investor who bought a substantial share of the transaction, bought the Grand Avenue securities at an inflated price through a Wachovia broker in El Paso, Tex., the S.E.C. said

A spokeswoman for Wells Fargo, Mary Eshet, declined to comment on whether any of the people involved in the C.D.O. sales still worked for Wells Fargo. Regarding the lack of charges against individuals, she pointed to a footnote in the S.E.C.’s order that says C.D.O.’s trade infrequently and are not listed on an exchange, making current prices “not readily discoverable.”

Lorin L. Reisner, deputy director of the S.E.C.’s enforcement division, said that “it’s reasonable to assume that we look very carefully at the involvement of individuals” in cases like this. He said the S.E.C. had filed complaints against individuals in several cases related to the financial crisis, including senior executives of Countrywide Financial, New Century Financial and IndyMac Bancorp.

The S.E.C. complaints were brought by the enforcement division’s structured and new products unit, one of four new enforcement offices created by Mr. Khuzami after he took over as agency’s top enforcer in February 2009.

9 Responses

  1. Mike H.

    I agree that that is likely what happened … if you “oversubscribe” the sale of an asset 3x over then you not only have a pile of cash to fake payments as servicer for the (used to be average) 7 year life of a mortgage loan … but you can reasonably assume (if you’re an “A” type Wall Street gambler) that you can keep the game rolling along for a VERY long time, especially if you build a substantial number of failure prone loans into the equation where you pay off nobody and just bank the sale cash or collect on insurance.

    We need to fund a private investigator ,, check FAA logs for corporate Lehman/WF/GS jets going to destinations like the Bahamas or Caymens between 2003 and 2008… find the money .. These sums are far too big to hide, the cash was not likely physical but I don’t know anybody that doesn’t visit their stash in a situation like this.. there may be laws against disclosing depositor info but I’d sure like to see the regulatory filings for the Caymen banks…

    I believe that the Chinese that bankrolled DJSP were Caymen based..

  2. “The A Man”

    YOUTUBE – is the answer right now …

    Get one of these and make some recordings.. http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=150544692697

  3. Dan O
    It is true MERS avoided filing fees, but that was
    just a side issue to the real fraud.
    The purpose of recording each assignment of the
    mortgage is so that everyone knows who the Note
    owner is and that there is only ONE NOTE HOLDER!
    It is to prevent the originators from selling the
    same Note multiple times to different investors on
    the secondary market.
    In other words, the purpose of recording the
    assignments is to prevent crooks from running
    exactly the kind of Ponzi scheme we see happened.

  4. How is it that this type of fraud is going on and no one seems to be going to jail or even being charged with fraud. I sell cars and if did similar things that the bank is doing I would loss my lincense. be fined and go to jail and never allowed to sell cars again.

  5. how come no talk on john obrien in massachusetts? hes the registrar of deeds in one of our counties and pulled $25-50 million out of bank of america because of their affiliation with mers. he also has forensic auditors pouring over mers related transactions that werent recorded in the regiistry, as they should have been, and is seeking millions, possibly 100’s of millions statewide, in unpaid recording fees. theres not one bit of news coverage on this, at least in the local media. you would think a fraud of this magnitude would be all over the papers every single day until it was resolved, like a celebrity murder trial. i guess massive fraud on a scale weve never seen before doesnt sell papers.

  6. That’s 10.2 million viewers

  7. Televised by maybe CBS or NBC or ABC a major media outlet. Maybe the timing is great. Since the 60 Minutes foreclosure segment got 10.2 viewers

    Brian Davies case could be starters. I am willing to work at it.

    NEVER AGAIN

  8. How do we get the court cases in California Televised?
    Just like the Scott Peterson and OJ Simpson Case

    I think that is the best way to go.

  9. Wachovia used Amnet to originate many of the
    loans it used in its Ponzi scheme. Mers was named
    on the mortgages so the investors would not realize
    that the original Notes were being counterfeited and
    sold to multiple different gullible investors in the Note pools.
    Interestingly, Wachovia used Wells Fargo as the
    servicer on many of these fabricated Ponzi Notes.
    That means that Wells Fargo purchased the servicing rights on these Ponzi Notes, which in “real
    speak” means the right to foreclose on them after
    they default. Thus it is highly likely that Wells Fargo
    controlled the “reserve accounts” from the partial
    proceeds of the Ponzi Notes that was used to make monthly payments to the investors who believed they owned the original and only Notes.
    This explains why Wells Fargo is presenting fabricated, counterfeit, color photo copies of the
    notes in its foreclosure cases. Unless challenged
    for lack of standing, WF obtains a “free house” each
    time it exerts its “servicing rights” which works 95%
    of the time.

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