Letter to Zywicki and the Banks from Non-Subprime Borrower


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EDITOR’S NOTE: I like this letter so I am posting it as its own article. I think the writer points out something that is very true — the Banks would have us believe that the “problem” is just with subprime mortgages. They like to do that because they figure people will have less sympathy and even some anger toward deadbeats who took out mortgages they couldn’t afford. First most of the mortgages affected by the various antics of the Banks — robo-signing, surrogate signing, forgery, fabrication and fraud, are NOT subprime mortgages.

Second, nobody who misses a payment for any reason is a deadbeat. When a company misses a payment it is called a distressed borrower and it is followed by a workout even when there are investor lenders in the mix. I know, I went to a seminar for lawyers that was ONLY about workouts for real estate foreclosures and the new requirements for TILA and RESPA. But that only seems to apply when you borrow millions instead of hundreds of thousands.

Third, nobody is hurt by helping people in distress. Somehow American generosity of spirit and ideology has been turned on its head by these banks who call themselves banks when in fact all they really are is marketing organizations more closely resembling MLM (multilevel marketing) pyramids than any financial institution I knew when I was growing up. They don’t use the basic principles of accounting, finance or economics to make, receive or process loans or deposits. Contrary to the implied injury to “honest” Americans who pay their bills (however misguided they might be as to whom they direct their payments), helping distressed homeowners — or all homeowners for that matter — simply makes sense.

The closest analogy that comes to mind is unfortunately a third rail with enough voltage to kill the casual traveler. In our society it is unacceptable to let someone die on the street when they could receive at least palliative care before death inside a hospital or doctor’s office. And if they die penniless we even bury them at no cost to anyone but the taxpayer. We don’t just leave them rotting on the pavement.

We all know this. If there is something we can do set a broken leg, we do it regardless of insurance, financial ability to pay or anything else. It is a basic instinct that we have followed as long as this country has been in existence and nothing has changed. By changing the way we think about it, Banks and insurance companies have convinced us to spend more caring for those who need help, with the “more” going into their pockets.  In the process it is now tens times more expensive to do what we do anyway. The reason it is more expensive is that we have let banks and their crony insurance companies become intermediaries in the process.

Instead of directly paying for these services through tax dollars like we used to do, we pay with tax dollars PLUS a very large premium because the cost of medical insurance supposedly includes these services even though they are already covered with tax dollars. And those costs, are then multiplied again by the profit that any company is entitled to claim. The more layers, the more profit. So what cost $1,000 becomes a $10,000 bill or more. The catch is that the banks and insurance companies market the political idea that if people can’t afford health insurance they shouldn’t get it. And they don’t. But they still get the medical care, because it is the only practical thing to do in a society like our society. As a practical matter we should only be paying for medical care — not medical care PLUS insurance profit PLUS bank profit.

Where am I going with this? If you assume that the distressed homeowner, worker or job-seeker has run out of options, then these people will end up on the streets requiring social services which they will get from tax dollars — police, fire, water, food, shelter etc. Like the man dying or injured on the sidewalk, they are going to get the help one way or the other and the expense of doing so through layers of ideology producing new industries whose sole business is to ACT (pretend) to be intermediaries and then ACT (pretend) that they are principals in transactions is absurd, expensive and impractical.

Securitization may seem unrelated but it is a natural outgrowth of this manner of thinking that the more layers of companies you insert into a simple process, the more complicated you make it, and the more companies you have demanding a profit even if they are all controlled by the same small group of titans on Wall Street. So we pay a mortgage tens times over and then demand more because after all someone got a benefit from the funding of the mortgage and THEY have not paid yet, even though there is no longer any obligation due because the real creditor (a group of investors and investment banks) have already been paid 10 times over.

So who pays the premium? In every case it is the taxpayer and those who are subjected to “private” taxation, which I define as anything you pay for a service that would be there anyway.

So the person who is paying their mortgage is paying taxes as well. Either way he or she is going to pay to help their neighbor — the only question is how much it will cost. Going the so-called conservative route costs more because it interposes businesses between a government function and the distressed citizen.The true conservative would seek to conserve tax dollars and thus reduce taxes. The neo conservatives spend like drunken sailors so their corporate friends can make even more money while the drain capital, resources and opportunities from our economy. 

We are putting millions of families out on the street, out of work, or under employed or forcing them to move in with relatives in homes already too small for the original tenants, creating stress, medical problems, suicides, crime and a myriad of other problems that are costing us money every time we say no to helping our neighbors. And the theory that saying Yes will encourage people to live in flop houses and half way shelters is utterly absurd. In fact, the facts prove it.

Either way it happens, and there is no flood of applicants to be homeless. There is however a flood of people in emergency rooms seeking medical care at 10 times the ordinary costs, because of the way the payment industry has created the infrastructure. We are heading for the same thing with housing. We empty houses and create a large homeless population whose upkeep is more expensive than leaving them in their houses until a better solution can be found.

So if you think it is unfair to pay $1 to help the helpless, how do you feel about paying $10 for the same thing?

Dear Professor Zywicki:
With all due respect, please do not publish any more “opinions” regarding the mortgage securitization scam.  Your article is misleading and minimizes the issues.  Not only do I have a MERS loan on my personal residence, I am a probate paralegal that deals with the mortgage securitization aftermath in my cases on a daily basis.  The attorneys in my office (with a combined experience of 80 years practicing law) and I are unable to come up with a solution because each set of facts are similar but unique to the specific loan.  However, we have concluded that the bottom line is that as a result of the variety and sometimes contradictory rulings coming from the Nation’s Judiciary, it falls on the homeowners to fork over the cash to clear the issues up if they want to keep their property and clear the chain of title.  The media has done a horrible injustice reporting the problem and I suspect that it is due to the fact that the fraud is so complex that even the media doesn’t “get it.”

Professor Zywicki, even though I am one of the lucky homeowners that has the ability to pay my month mortgage payment, I stopped paying as soon as I discovered the chain of fraudulent assignments that had been recorded.  Who do I owe the money too?  I have no idea but I am not going to continue paying until I see proof with my own eyes as to who or whom owns my promissory note.  If it takes me filing bankruptcy to find out, then so be it.  I have the documentation to fend off any servicer that attempts to foreclose on my home and will report any law firm that assists the servicer in an attempt to foreclose to the State Bar for discipline.

So, please do not make the situation worse by writing opinions that are misleading or that fail to address the real causes and results of the massive mortgage securitization fraud that was committed against our Nation’s homeowners.


Jennifer Harwood

P.S.  I do not have a sub-prime mortgage.


39 Responses

  1. @Chris or anyone else who can respond:

    How does one go about obtaining the relevant PSA information when the servicer fails to comply with multiple QWR requests and OCC correspondence? I am really trying to get at what documentation I need to have in place to counter whatever actions US Bank will attempt once I cease payments.

    I feel really violated by all this “your investor” and “debt collection” nomenclature the servicer is now using. I did not sign up for this arrangement and want to legally put an end to these violations. As I have previously mentioned I am, and have been, current with my payments for the life of my loan (7-plus years).

    Is there a template or methodology that can help me navigate what to do from this point on? I spoke to an attorney some time ago about ceasing payments and diverting that money to pay the legal costs associated with Quiet Title and any other legal actions I might choose to pursue. The attorney’s response was to give me an overview of the “Clean Hands” doctrine.

    Please advise on how I should proceed with engaging my servicer going forward? I have previously informed them that they are considered to be complicit in this ongoing fraud to which they have yet to offer a full-throated denial.

    Thanks in advance!!

    A 99percenter

  2. There seems to be a new game in play for non-sub-prime mortgagees who are current on payments, “Servicers” not paying school/property taxes held in escrow. Most contacting me about this have low L2V mortgage’s with ARMS that reset on average of 2 points above the TBill.

  3. ANONYMOUS: Thanks, got it. Now to actually provide evidence.

  4. I was watchng Cnbc around 1AM: it was about the repackagind of CDO’s and the great export they are, also stated that the issue in the mortgage origination and Kyle Vance who note the historic crash we are undergoing now …. I guess there are transcripts, set the stage from beginning to where we are now on Wall Street

    Also, following in researchng HSBC:

    How maths killed Lehman Brothers
    by Horatio Boedihardjo
    Submitted by plusadmin on June 1, 2009
    • credit crunch
    • finance
    • financial mathematics
    • financial modelling
    • Plus new writers award 2009

    This article is the winner in the university category of the Plus new writers award 2009.
    On a sunny morning in 2001, a piece of investment plan landed on the desk of Dick Fuld, the then Chief Executive of Lehman Brothers. The document, compiled by a team of maths and physics PhDs, included a calculation to show how the bank will always end up with a profit if they invest on the real estate markets. Fuld was impressed. The next five years saw the bank borrowing billions of dollars to invest in the housing market. It worked. The housing market boom had turned Lehman Brothers from a modest firm into the world’s fourth largest investment bank.

    The Lehman Brothers headquarters, Rockefeller Center, New York, before the collapse. Image: David Shankbone.
    But as the housing market started to shrink, the assumptions that the PhDs made began to break down one by one. The investment now became a mistake, resulting in a stunning loss of $613 billion. On September 15 2008 Lehman Brothers collapsed — “The largest bankruptcy in the US history,” as described by Wikipedia.
    The money making model
    Imagine that you are working for Lehman Brothers and one morning you receive a phone call from HSBC.
    “Hi! A hundred customers have each borrowed $1 million from us for a year. We would like to buy an insurance from you which will cover us in the case of any of them defaulting. From their application forms we reckon they each have a 3% chance of default. How much will the insurance cost?”
    You can in fact calculate it, easily. The 100 customers each have a 3% chance of defaulting, so you expect three customers to default next year. That is, you will need to pay $3 million next year. Assuming the interest rate is about 3% each year, next year’s $3 million would be worth 3/(3/100+1)=3/1.03=2.91 million now.
    Therefore HSBC will have to pay you at least $2.91 million for the insurance. Obviously Lehman Brothers wasn’t a charity and so, to make money, they would double the price to $5.82 million and expect to make $2.91 million out of each of these deals on average. This kind of insurance is called a credit default swap (CDS).
    The legendary CDO
    After putting down the phone, you might be quite worried about what would happen if ten of the borrowers defaulted, because then you would have to pay $10 million back! In this case, consider this deal: how about paying me a certain premium, and if more than ten defaults occur, you will only need to pay for ten of them and I will pay for the rest. If less than ten defaults occur, you will have to pay for all the defaults and I won’t pay anything. The type of deal that I am offering is called the senior tranche of a collateralised debt obligation (CDO) contract, while the one you are getting is called the junior tranche of the CDO.

    Looks like a safe investment? Better think twice!
    The attractiveness of the senior tranche is that almost all of the time I don’t have to pay anything, just pocketing my premium. Imagine how unlikely it is to have more than ten borrowers defaulting together! Senior tranches were generally considered to be almost as safe as borrowing money from the government. Since the senior tranche offers a better return than, but seems to be just as safe as, putting the money in the bank, the investors just loved it. In 2004 there were only $157.4 billion of CDO being issued, but by 2007 the amount grew to $481.6 billion.
    But don’t you find it a bit unfair that you can have something as safe as bank deposits, that offers a higher return?

    The pitfalls
    Yes, it is unfair! In fact, CDO is a lot riskier than bank deposits, but Lehman Brothers, like many investors, didn’t seem to know that. Let’s go back to our original model. The first source of error is that we have assumed that each investor has a 3% chance of defaulting. How do we know that? It must be from historical data. The problem is, there hasn’t been a national drop of housing price since the great depression in the 1920s, so the chance that a borrower defaults was calculated on the basis of a good period when the housing prices surged. However, the housing market crashed in 2007. Many borrowers’ properties are now worth even less than the loan they have to pay in the future, so many of them refuse to pay. To worsen the situation, 22% of these borrowers are the so-called subprime borrowers — those who had little income and had little hope of returning money. Banks were not afraid of lending money to them because even if they defaulted, the insurance would pay them back. The participation of the subprime borrowers makes lending much riskier than before.
    In fact, the default probability in the US has quadrupled from the 3% as assumed in the model to 12% since 2007, making it four times riskier. This means that investors like Lehman Brothers will be hit four times harder than they have anticipated.
    Actually it is worse than that. The profitability, or lack of it, of financial products more complicated than CDS and CDO may depend on the square of the default probability, rather than the probability itself. Now as the default probability rises from 0.03 to 0.12, the square of the probability increased from 0.0009 to 0.0144 — that’s an increase by a factor of 16!

    The Lehman Brothers headquarters on the night of September 15, 2008. Image: Robert Scoble.
    There is also a second and more subtle source of error. Whether you can make money from selling the CDO insurance for the bank depends on whether the borrowers return the money, which in turns depends on the economy. So if the economy goes down, you are a lot more likely to lose money. If you are an active investor, then you probably have invested in the stock market as well. Now if the market crashes you lose both the money invested in the stock market and in the CDO. Suppose, on the other hand, that instead of spending the money on CDO, you bet on whether Manchester United will win the European Champion League. This time in order to lose all your money you need both the market to go down and Manchester United to lose their match — this is less likely than just having the market go down. Therefore, investing on CDO is a riskier choice than betting for Manchester United. The error in our model is that we have not taken into account this extra risk due to its dependence of CDO on the market.
    These two errors were sufficient to mask the risk in CDO. In fact, the errors are so serious that 27 out of 30 of the CDOs issued by Merril Lynch were downgraded from AAA (the safest investment) to “junk” when the errors were spotted.
    The fall of Lehman Brothers
    Lehman Brothers, unaware of the hidden risks, decided to invest big on CDO. It even had a 35 to 1 debt to equity ratio, that is, it only owned $1 out of every $36 in its bank account — the other $35 were borrowed from somewhere. This meant that a loss of just 3% of the money on its balance sheet, would have meant the loss of all the money it owned. After suffering heavy losses (more than 3% of the money in its balance) from CDO, borrowers began to lose confidence and called back the loans. As Lehman had always relied on short-term loans, its lenders were able to pull their cash back quickly. Now the bank was in trouble. It borrowed much more than it was able to return and soon found itself unable to pay back. On 15th September 2008, the world’s fourth biggest investment bank wa

  5. chris,

    Servicer is never a party in foreclosure — they are a servicer — TILA Amendment trumps state law — servicer never the creditor.

    And, – servicers cease advancing payments very quickly —even though PSA says they must — but say must until servicer deems not collectible.

  6. Earful — they would get.

  7. Victim of the Fraud,

    OCC and Congressmen will not act unless they are bombarded with complaints — as you have individually done. Many have given up up on government and Congress helping — but, this is wrong. Must continue to demand that OCC and government and Congress act — that they investigate. Even better — form a coalition to jointly demand action.

    Then ask to speak before Congress —let me know if anyone has success — I will volunteer as first speaker.

  8. Word Jen!

  9. To: Victim of the Fraud

    i Checked my PSA agreements for my mortgage and they say “the servicer is responsible for all payments, interest and buybacks (defaulted, bad title issues)” to the certificate holder or the investor. So, in essence even if you are not paying, they have to, or they are in default of their contract. It means, if I am not paying I am not in default, as they are paying the mortgage and have no right of foreclosure, as I do not have a contract with them, hence the servicer is not a party in the foreclosure, period.

  10. @Jennifer or anyone else who knows:

    What is the documentation to fend off any servicer that you refer to? US Bank is my servicer. I have a lengthy paper trail with them including multiple QWR requests, formal OCC Complaint and correspondence with my Congressman.

    My account is current and has been for the pretty much the entire seven plus years since the account first originated with Wells Fargo. Freddie Mac is listed as our “investor” and we have documents from the forgery mill LPS bearing the infamous Linda Green’s signature.

    I do not feel in good conscience I should continue paying. It is has been very difficult trying to find competent legal representation here in the Atlanta area.

    Please advise or put me in touch with a reputable party who can. Thanks!

    A 99percenter

  11. Carie, you hit the nail on the head, “scum” is right.

    Zywicki thinks there are no damages, or victims? How about the “borrowers” loss of the use of the property when he is evicted?
    What about the thousands of dollars it costs to relocate? The total sum of payments paid over the life of the loan, the taxes and hazard insurance, the down payment boosted by the thieving bankers? Why does he not recognize that parents have bought a house based on a good school district, and now their child has to go elsewhere? There are emotional dues to losing a place you put a lot of work and money into, that met your family’s needs. What about the fact that with a clouded title, there will be thousands of dollars spent to repair the defect, if it in fact can be, and no profit from a sale can be realized without the expense and time involved? The loss of supportive relationships in the neighborhoods like babysitters and caregivers is disrupted by those displaced by foreclosure. The stress involved causes real health issues, that are financially devastating under the current medical system, for those who’ve lost their income. Mothers need to know there is a safe and clean place for their children to lay their heads at night, and having that yanked away ought to be illegal.

    Yes, Zywicki will be under attack for some time for his callous and insensitive statement that there are no damages or victims.

  12. @Carie and E.Toile,

    What have you done to tnharry? I kinda miss the old chap…

  13. Alessandro is DEFINITELY not up to speed on the fraud…typical…

  14. Alessandro,

    Correction: my mortgage nowadays largely exceed whatever value the house has. See, because the title is so clouded and for so many years, it is simply not insurable. Hence not sellable. Why should i pay on something that has artificially been forced to lose in value, through no fault of mine?

    I figure I’d pay an attorney in lieu of mortgage: at least i have a solid chance to get something out of it.

    Who are you anyway?

  15. Alessandra,

    Who said anything about value?

    I’m talking about clouded title. Title clouded for failure to properly transfer/assign MERS. That one thing the ENTIRE state of Ohio is going after all the banks. MERS and the Who’s Who of mortgages.


    Alessandro: my mortage is appropriate for the value of the house. I live in the house too. I ain’t gona pay until I get back all the money banks stole from me. End of discussion.

  16. Professor Zywicki’s academic career is admirable, but having been in academia am painfully aware of how lacking in street savvy and practical experience many of these folks are. Many of them just are not sophisticated enough to understand the logistics of the real world.

    As far as Jennifer goes; I applaud her efforts and sincerely hope she has a good outcome, as many of the judges are not sophisticated in the law to give a relevant or proper decision either.

    I have BOA and have stopped making payments as they have taken my timely payments and put them in an escrow account, which I have a waiver for (all taxes and insurance paid annually, on time) and have made the payments on time (Receipts submitted), and have made a partial account also taking more of my payments and allotting them to this account, charging me $183.00 per month for late fees, plus interest, put me in default and sent me a letter of intent to trespass. I have filed a breach of contract suit against them and have an attorney, adviser(different than retention) helps with the complaints and filings (I have a paralegal background), as I do much of the leg work myself. This started over a year ago and in April of 2011 it had to stop. The point is; these banks are OUT OF CONTROL. I am beginning to wonder if they are specifically targeting some markets for themselves and their investors. This behavior serves no one but them. The incidents of bank fraud and cheating is just too high. IO have done a lot of research and keep coming back to the same place, which is, this banking fiasco has been done with malice, forethought and intent to defraud…I know it sounds crazy, but I’ve looked at case after case, been through the SEC files, Sec. of stat, etc…and I cannot figure out how no one has been able to connect the dots. The documents are right there!

  17. Carie, not all mortgages are unfair. Even if there is faulty paperwork, if you have a record of making all of your payments, you are far better off than someone who stopped making payments but kept living in the home.

    The court system will presumably protect and prioritize everybody making payments even if they are part of a reckless chain of paperwork, however, if the home has already been foreclosed and it’s a new owner paying a much lower mortgage, hopefully they won’t be prioritized over the prior owner who probably did get screwed over.

    So it kind of depends where a homeowner falls in the chain of ownership over the past several years in terms of how the court may view their situation.

  18. “Enraged”,

    If the mortgage is well beyond the value of home, that is a separate issue and not one brought up in the original letter.

  19. anonymous – besides my comment somewhere around here about the lying, s for brains Aurora employee, mccann, in that toledo case, there’s something else noteworthy for anyone whose loan had anything to do with Lehman (which would likely involve other similarly lying aurora employees). The court noted that Lehman filed bk in 2008 and says anyone looking to use a MERS’ assignment (read member-self-assignment-in-this-case-Aurora ) must provide evidence that the Lehman bk trustee ratified MERS as Lehman’s nominee. This rocks. Take that, Aurora, and stuff it. Interesting that even Aurora appears to have referred to MERS as a nominee instead of the usual made-up “agent” status of MERS.
    Does anyone know if estoppel may be imposed by one court based on
    recitations by the same party in another court?

  20. joann – ‘buyer beware’ has never been more relevant.

  21. Unleash Bill Black !

  22. Let’s leave PeeWee Zywicki alone (he can’t run very far, we know where to find him and we’ll catch him if need be) and let’s concentrate instead on the issue at hand:

    The state of Ohio is suing MERS for intentionally and purposely failing to transfer mortgage assignment and/or failing to record the transactions in order to defraud it of $30-$40 per transaction, thereby screwing up 200 years of state law and real estate records.


    The actual complaint can be found there…

    And the entire Who’s Who of mortgage is listed.

    Everyone, on your knees; start praying that Judge Forrest Burt gives that case a chance. It could very well become the one case that breaks MERS and starts lawsuits in every county in America. Fannie and Freddie are not named (for those of you who would like to see them gone for good, since we own them by now and we know they’re useless and costly…) BUT there is plenty of room to add them to the list of defendants.

    Boy o boy! It’s better than Christmas.

  23. I was compelled to respond to a similar article from the CalWatchDog.com website. That article titled <a href="http://www.calwatchdog.com/2011/10/12/a-g-harris-manipulating-foreclosure-crisis/&quot;
    A.G. Harris Manipulating Foreclosure Crisis blames the entire crisis on European Investors and goes on the same type of rants about deadbeat borrowers.

    This is governmental extortion without due process. While banks were a reluctant participant in the mortgage meltdown, they were hardly unilateral perpetrators. There were so many house “flippers,” homeowners using equity loans like bank ATMs, and buyers filling in fraudulent loan applications coached by ACORN, that it would be a stretch to call them victims. And what about all those minority homeowners who sold their homes for wild profits and moved to the suburbs? They didn’t suffer from redlining, but reaped a windfall from lining their pockets with green cash. Former Bank of America fixed income analyst David P. Goldman calls this “The People’s Ponzi Scheme.”

    Mortgage Meltdown Began in Europe, Not Wall Street

    By late 2007, the United States found itself in a financial mess because of a gigantic flood of trillions of dollars of foreign capital into our country from all over the world starting in the early 2000s. Globally, the welfare state in Europe was no longer sustainable because of low birth rates and insufficient family formations. Thus, European investors were desperately looking for speculative double-digit returns on investments to bail out the welfare state.

    Prof. Rawl Abdelal wrote a book, “Capital Rules: The Construction of Global Finance,” two years before the meltdown. He told how French socialists — not Wall Street, the U.S. Treasury, or credit rating firms such as Standard & Poors — liberalized global finance to flood the United States with money. Abdelal could find no evidence of “American leadership, Wall Street enthusiasm, the U.S. Treasury’s guidance, Rightist politicians, or neo-liberal economists” in making up the new deregulated rules of global finance.

    Well apparently Abdelal did not look very hard, here is my response!!

    Wayne, you are wrong for several reasons on your analysis. The reason why this huge inflow of money came into the US at that time was because congress and Clinton opened the flood doors by repealing the GLASS-STEAGALL ACT which had been in place to protect our financial system from creating another Great Depression as had occurred previously.

    The repeal of the GLASS-STEAGALL ACT combined with the creation of MERS created a pandora’s box that was too tempting for the crooks in the banking industry. The borrowers did not all lie on their loan applications but rather, their brokers inflated their incomes to get their loans approved. Every loan underwriting requires authorization to release your tax returns, but the bank and the broker didn’t bother to get them because they did not care if the loan went into default.

    Why did they not care if the loan went into default? Simple, the bank packaged up your loan with 1,000 other loans and sold them as mortgaged back securities. In other words, the bank got paid in full for your loan. Then if you go into default, that same bank that does not own your loan forecloses on your house and the investor has no way of knowing that their security is gone because of MERS. So the bank got paid for the loan in full, probably collected mortgage insurance, and gets a free house, meanwhile the borrower and the investor both end up as losers.

    Here is my supporting information for the above statements:

    Bill Text
    106th Congress (1999-2000)


    Organizational structure

    The bank holding company

    The Committee carefully analyzed whether the holding company or the operating subsidiary approach is the appropriate organizational structure for new activities conducted by an insured bank. Some have characterized this debate as solely one of jurisdiction between the Board and the Treasury. The Committee disagrees. This is a fundamental issue which must be handled carefully in the context of the significant reforms in activities that we are considering.

    Congress must be careful to provide sufficient safeguards for our new financial framework. The Committee does not want to see a repeat of the savings and loan crisis where the taxpayer had to bail out federally insured institutions that assumed excessive risks and operated without effective management, internal controls, and supervision. The deposit insurance funds must be adequately insulated from paying the losses of firms which are affiliated with insured banks. The Committee believes that the holding company structure best achieves this purpose. The Committee took into consideration Federal Reserve Board Chairman Greenspan’s views on this topic. Many distinguished former regulators share his views. In a recent editorial, former Federal Reserve Board Chairman Paul Volcker wrote:

    The commercial bank must be a separate organization, insulated legally from its sister entities providing financial services. Moreover, that arrangement is more easily compatible with continued `functional’ supervision of the component parts * * * 6
    The bill also expands the activities in which banks may engage. Section 121 of the bill authorizes national banks to underwrite municipal revenue bonds. Section 123 of the bill allows national bank subsidiaries to engage in any type of financial activity in an agency capacity. With respect to agency activities other than the sale of insurance products, the bill would prohibit States from preventing or restricting bank activities in these areas.

    The Committee felt strongly that language should be added to the bill to address the `too-big-to-fail’ concerns. Accordingly, the bill amends the Federal Deposit Insurance Act to prevent the use of Federal deposit insurance funds to assist affiliates or subsidiaries of insured depository institutions. The intent of this provision is to ensure that the FDIC’s deposit insurance funds not be used to protect uninsured affiliates of financial conglomerates.

    Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System
    University of Cincinnati Law Review, Vol. 78, No. 4, 2010
    Christopher Lewis Peterson


    In a front page article covering the Moody’s opinion
    Mortgage Banking reported that “the most significant finding in the report specified that in transactions where the securitizer used MERS,there would be no need for new assignments of mortgages to the trustee of MBS transactions.”74

    With the rating agencies’ stamp of approval, the use of MERS exploded in the early 2000s. By late 2002, MERS had recorded its name, instead of the actual assignee or mortgagee, in ten million residential home mortgages. 75 As the subprime mortgage refinancing boom took off, MERS registered an average of 21,000 loans on its system per day.76 Only a year later, the total number of loans recorded in MERS’s name doubled to twenty million. 77 By May of 2007, this number had tripled again to sixty million loans. 78 Sixty percent of all new mortgage loan originations are recorded under MERS’s name, and more than half of the nation’s existing residential loans are recorded under MERS’s name. 79 Not satisfied, MERS’s CEO insists that “[o]ur mission is to capture every mortgage loan in the country.”80

    When MERS (or more accurately servicers or foreclosure specialists acting in MERS’s name) brings foreclosure actions, it justifies this entitlement based on a claim of legal ownership of mortgage liens. But when borrowers attempt to assert counterclaims challenging the legality of mortgage brokers, lenders, trusts, or servicers, MERS hides behind its claim of nominee status.

    One former mortgage lender has estimated that in the mid-2000s approximately 70% of brokered loan applications submitted to mortgage lenders involved some form of broker encouraged fraud. 207 Similarly, Professor Porter’s study of mortgage loans in Chapter 13 bankruptcy found that residential mortgage creditors did not supply a promissory note in 41.1% of cases involving a home mortgage.208 Because promissory notes are not recorded, nor where MERS is involved, is the actual identity of the note holder revealed, consumers and their counsel can verify neither the identity of the parties involved, nor even the amount of the debt in question. In an ordinary foreclosure, using MERS’s name erects a tactical barrier to judicial resolution of these types of problems. MERS confuses and pacifies borrowers (and sometimes courts) at precisely the crucial moment: on the eve of foreclosure.

    For example, in loans where MERS is listed as the mortgagee, virtually any company can show up, claim to own the note, and proceed to foreclose on a family that is in arrears. Because MERS has so many “certifying officers,” a court cannot easily verify whether the individual acting in MERS’s name is actually representing the real party in interest, given that the public records do not reveal who that party is. One can imagine an original mortgagee, either through error or fraud, foreclosing on a
    defaulting family despite having assigned the loan in a structured
    finance deal. In a MERS as original mortgagee transaction, the
    assignment would not be recorded, and the only name on the public
    records would be MERS’s. Neither the courts nor a purchaser at a judicial or nonjudicial foreclosure sale could use the public records to discover that someone other than the company or individual bringing foreclosure action actually owns the proceeds of the sale.
    Moreover, given the empirical and anecdotal evidence of shoddy recordkeeping in this industry, it is entirely possible that an originator or servicer could unintentionally foreclose on a loan
    that it does not actually own.

  24. A social studies ex-teacher gets it much, much better than that Zywicki loone…

    Mandelman for president?


  25. Neil states above and I quote below:

    “Third, nobody is hurt by helping people in distress. Somehow American generosity of spirit and ideology has been turned on its head by these banks who call themselves banks when in fact all they really are is marketing organizations more closely resembling MLM (multilevel marketing) pyramids than any financial institution I knew when I was growing up. They don’t use the basic principles of accounting, finance or economics to make, receive or process loans or deposits. Contrary to the implied injury to “honest” Americans who pay their bills (however misguided they might be as to whom they direct their payments), helping distressed homeowners — or all homeowners for that matter — simply makes sense.”


    I have pointed this out many times on this post. Credit Card companies such as Cap 1 (and all the major banks such as Chase, BofA, Citi) and all the banks that issue credit cards are just marketing companies that solicit for customers under the name of a bank or financial institution and supposedly issue credit in a credit card agreement. But in actuality, they get customers who agree to receive credit for an interest rate and then turn around and bundle all the accounts into a trust called ABS and MBS. And sell those trusts to “investors” who are pension funds, king of Suadia Aribia, king of South Korea, king of England, you name name it whoever has bucks to buy a trust for 10 million or 100 million and gets a 10% return.

    But Cap 1 or whatever bank or financial institution has no outlay of money or outlay of depositor money which depositor thinks he is lending or keeping his money safe.

    It is all a ponzi game as is the Federal Reserve System of banks, THEY all must have new borrowers appear, whether consumer or business, must keep the borrowering going, must keep getting new borrowers or the system collapses. IE, cash for clunkers, low interest rate credit cards, low interest rate home loans, low interest rate student loans…………on and on……………what is the fed tool, increase or decrease interest rates,,,,,,,,,,,which means borrowing,,,,,,,,,,,,,,,,it is low,,,,,,,,,,,why no increase in interest rates? Fed chairman says he will keep interest rates low for an extended period of time, and the stock market goes up…………..more easy credit or borrowing of credit or money,,,,,,,,,,,,must keep the game going,,,,,,,,,,,must keep people borrowing…………….

    Must keep getting new borrowers or rolling over the debt………….same thing……….home mods are just new loans or rolling over the debt…………to keep the system going……………

    The bug in the system…………….is tooooooo stop borrowing………….quit using credit cards, quit getting car loans, quit getting home mortgages……………and the when society does so,,,,,,,,,,,,why the 1% looses big time…………but if you are all cash paying,,,,,,,,,,,,,,,you don;t lose, but the 1% loose big time because they are so leveraged……….and will speak all manner to get you to borrow…………ie cash for clunkers, home mods,,,credit cards with teaser rates to open an account or transfer,,,loans to business’s to make payroll,,,,,on and on…..all loans. all credit………where’s the beef, where’s the real money?

    Here is the evidence. Go to Cap 1 wbsite:


    Check it out, investor relations.

    cap one master trust:



    That is simply factoring, simply marketing of accounts that cap 1 got via marketing and selling via trusts to INVESTORS….It’s all BS. It’s a ponzi. All the while the leaders make big bucks and employ people for peanuts on the return of investment which is little,,,,,,,,,,,,the rich get richer…………….

  26. Check out this case MA Supreme Court ruling today – follows up on Ibanez- invalid foreclosure – new buyer no ownership.

    Bevilacqua v. Rodriquez

    US Bank got an assignment from MERS after the foreclosure sale

    Man who bought invalid foreclosure from US Bank doesn’t have title, doesn’t own it and cannot sue the previous homeowner (can’t find him anyway). What I want to know is – who owns it now? Can Mr. Rodriquez come back and sell the property? MA non judicial – thinking he still has title. Point of sale never enforced. Never happened. Null and Void. The new owner built condos I think.

    Judge said:

    U.S. Bank’s lack of authority to foreclose at the time it purported to foreclose – is fatal to Bevilacqua’s claim to “own” the property.


    “I have great sympathy for Mr. Bevilacqua’s situation — he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title — but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied,” Long wrote.

  27. http://www.larouchepac.com/node/19881


    Glass-Steagall Debate Stirs Up Political Establishment in Germany

    October 18, 2011 • 9:59AM

    The German Social Democrats’ national party chairman Sigmar Gabriel told the weekly Der Spiegel over the weekend, “I want there to be a big sign on the door to the investment banking sector that reads, ‘State Guarantees End Here.'” He explained that he does not want the banks to be crushed, but only to make sure that if a bank gets into deep trouble because of investment banking, then the taxpayer and the Mittelstand looking for credit should not suffer.

    He encouraged people to take to the streets in protest against the banks and financial traders. “The worship of the unconditional freedom of markets has brought the world to the edge of ruin,” he said.

    And listen to this: Gabriel even admitted that the SPD itself had contributed to liberalizing financial markets in the past. “Of course we’ve made mistakes too,” he said. “We let ourselves be cowed by the idea that Germany would fall behind if we didn’t deregulate the financial markets too.”

    Also former Linkspartei leader Oskar Lafontaine got on the case: in an interview with the Passauer Neue Presse daily he called for a separation of banks, saying that what is needed is savings banks and not wild traders shops (zockerbuden).

    A spokesman for the German Ministry of Finance early this afternoon told the press in Berlin that the government considers the Gabriel proposal “an interesting idea,” which “should be discussed intensely on an international level.” He added that “an interesting step in this direction has already been made by Britain.” The Vickers Commission’s ring-fencing approach, which is however not a Glass-Steagall approach, has been referenced by Gabriel before. He acts as though he were unaware that Vickers was savagely attacked by such British proponents of a true Glass-Steagall reform as Lord Myners, for totally selling out to City of London speculators on this issue.

    All of this looks, naturally, like the notorious “Wendehals” phenomenon, the “Wrynecks,” describing someone who suddenly makes an about-face, and pretends his views have radically changed, whereas he is only overly opportunistic. The “Wendehals” image refers to a variety of woodpecker, which when threatened or under extreme stress can turn its head nearly 180 degrees around, thereby trying to appear to its enemy that it is not what it is; and when the stress or threat has gone, it continues to turn its head in the same direction, so that it can almost make a turn of 360 degrees.

    But naturally, nobody will prevent even Gabriel and the German Finance Minister from returning to reason, in this crisis. They just have to make the tiny step of endorsing Glass-Steagall, and the world would look a bit more promising.

  28. And, from Peter Siris — frequent “investor” contributor to the Daily News — NY — see below link. Mr. Siris is often a pro-investor journalist, but this time — Mr. Siris shows elements of a different side – no matter how small.

    Note Mr. Siris’ comment in second paragraph — “It should have taken action earlier to control home mortgages and derivatives, but when the financial crisis hit, it had little choice” (referring to the government).

    First, it has “choice” now — and had choice then — to fix the fraud perpetrated upon American homeowners. If not for ridiculous “moral hazard” consensus — fixing the fraud could have been easily addressed. Second, note that Mr. Siris refers to “derivatives” — ah — the source of fraud. Derivatives — not securities — but, rather, contracts — deregulated and NOT disclosed to the public.

    link — http://www.nydailynews.com/money/2011/10/18/2011-10-18_occupy_wall_street_protesters_will_likely_have_big_impact_on_stock_market_follow.html

    Also see new case from NJ — Aurora Loan Services, Inc vs Toledo

    Courts catching on — thank you NJ!!


  29. Although the author of the letter states that she does not have a subprime mortgage, that is really unlikely known to the author. I have seen answers to interrogatories in which foreclosure attorneys ask for a definition of subprime. Subprime often attributed to “poor credit” — but all is not what it appears to be. And, that my friends, is where many problems lie. Most subprime refinances were presented as conventional mortgages — but they were not. That is a major issue of the mortgage fraud that is NOT being investigated.

    Mr. Zywicki responded to me —
    “Do you think that all the ag’s who reportedly have agreed to the settlement in on the fraud too?”

    My response -to his response to me — “No — they have just not investigated — they want a settlement before investigation. They want everything to just “go away” — it is NOT going away — with or without a settlement.”

    And, that is because robo-signing is the not the cause of the fraud — it is the “symptom” of the fraud. It is the “red flag” that something is/was — VERY WRONG.

  30. Why would I chose to pay a “debt” (NOT a “mortgage”), that was obtained fraudulently at the start? The papers I signed were not a real “loan” with real “funding”. The original contract is void. MAKE THEM PAY FOR THEIR FRAUD by not giving them your money…and, actually, THEY OWE YOU MONEY..all the money you paid them…and then some…scumbags.

  31. Alessandro,

    I need to question your post and answer it at the same time.

    Why would anyone who CAN pay stop doing so? Let me try to explain: I bought a house a few years ago. The previous owner (seller) had a Wells Fargo mortgage in which MERS was involved.

    Wells Fargo got its money at closing time from my lender. However, there never was any satisfaction of mortgage issued/recorded. MERS records clearly show an active WF on my house, dating back several years. Inother words, WF could try to foreclose anything if they decided to do so and there is nothing I could do to stop it. Since I have boughyt the house, my loan was transferred no less than 8 times (meaning that I paid to different servicers along the years). Except for one, none of the transfers was ever recorded in my county. I QWR’d every entity involved from day one to figure out who was whom and was ignored.

    The title on my house is permanently clouded. To top it off, the bank(s) lost payments, tacked on fees I should never have been assessed, threatened foreclosure when I had not committed any fault and the list goes on. I can pay but there comes a times when enough is enough!

    I hired an attorney and went on the attack to get all my stolen money back, including the lost payments I made. Since I am forced to pay for an attorney, I refuse to pay for my mortgage until everything (including asttorney’s fees and damages for having stolen years of my life) has been recovered.

    I hope you understand that people don’t just get up thinking: “Today is the day I shall stop paying my mortgage, just for kicks.” They are pushed to make the decision after years of abuse and fraud and until our justice system starts looking into it seriously, servicers will continue to force people into that decision.

    Servicers constitute the only “moral hazard” worthy of that name.

  32. OK , here’s something from MSFraud that needs explaining…

    “The Mass.Supreme Court BEVILACQUA DECISION is in!”


  33. Mr. Zywicki has written on this subject before ,, this link is to an article denouncing the possibility of cramdowns ..


    It’s plain that he doesn’t look too deep into any subject … on this subject he is just a bank shill. The possibility that there was any wrongdoing on the banks part is unthinkable.

  34. Allessandro Machi- ” a person who CAN pay their mortgage decides not to?”. If the person is current, and paying on their $450,000 mortgage for their home, which is now worth $180,000 and sinking still lower, they may have come to the conclusion that maybe the appraisal was fraudulent. And if they look into that and find that the appraisal was fraudulent because the appraisers were paid to “hit the number”, in contravention of standards to which they are legally bound, they may further learn that the fraudulent appraisals were performed in order to enable the mortgage originators,securitizers and investment banks to reap a massive windfall. And then continue on with the scam in various ways and avenues, while sticking the taxpayers (you and your family) with the bill while pocketing trillions in profits. So, they decide to quit paying and walk. Can’t say as I blame them. If they would ALL walk, then we might see some results from the gubmint.

  35. i came up with a short cut that Neil you seem to be tap dancing around in your editorial prior to the letter.

    Banks follow a rule of law that….”Any restructuring of a debt first requires a default”.

    This foul banking law needs to be changed to “Any restructuring of a debt DOES NOT first require a default.”

    Change this one banking law and the negotiating field between bank and main street is equalized.

  36. The letter you posted makes no sense to me. A person who CAN pay their monthly mortgage chooses not to? All that does is accelerate banking actions on those who are struggling to pay.

  37. The letter you posted makes no sense to me. A person who CAN pay their monthly mortgage chooses not to? All that does is accelerate banking actions on those who are struggling to pay.

  38. Dear editor

    No offense but I find this response to the Prof to be quite disjointed, superficial and naive. Who cares if the Attys have 80 years experience. They probably don’t know diddle about this fraud

    This response while full of bravado, made no substantive contribution to the controversy the prof proposes to settlevin the banks’ favor

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