WEIDNER: Stern Revelations Affect Hundreds of Thousands of Homeowners

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EDITOR’S COMMENT: It is of course important that there was and remains criminal misconduct across the country in the processing of fraudulent foreclosures on behalf of entities who are misrepresenting themselves as creditors, submitting credit bids at auction without any authority, and demanding amounts “due” that do not account for all payments received, or the actual balance due, if any, on the actual creditor’s books.

But that is the point. Our attention is diverted to the presumed paper chase caused by the volume of foreclosures and misguided attempts to push them through faster. What is lost in all this is that these were not misguided attempts. They were all strategic implementation of a cover-up.

By diverting our attention to the paperwork, we are skipping over the question of why the paperwork had to be faked. Tens of millions of mortgages were processed and only a fraction of those were foreclosed. If they were able to process what went into the pipe, why can’t they process a much lesser volume coming out?

The answer is that they could have provided the valid paperwork if there was any valid documentation. That they didn’t and chose instead to fake it shows that the original obligation, note and mortgage are subject to inquiry. The originating “lender” was in most cases not the creditor. Neither was the mortgagee or beneficiary. Instead an undisclosed creditor was the source of funds and the obligation arising from the loan inured to the benefit of the party loaning the money.

The problem for the Banks is that if the focus shifts to the investors who purchased the bogus mortgage bonds, then the accounting shifts with that and then the s–t really hits the fan. The balance claimed as due in nearly all foreclosures is intentionally misstated, omitting any receipt other than the payment by borrower when they were receiving payments and processing payments to the creditor reducing the amount owed owed to the creditor under the original loan.

The high probability is that most loans are undocumented in that the advance of the money by the investor is nowhere to be found in the closing documents with the borrower. The money trail shows  clearly that the investors at this point are holding a mix of money from pools that were paid off, reduced balances from payments received from the servicer and other parties, and closed pools that were dissolved with payment or reconstituted into other pools.

Even this would be easy to provide in Court if the Banks didn’t have a reason to stonewall it. Besides the reason that they want another multiple payment of the same loan for which they have been paid many times, they do not want an accounting for the investor creditors to surface. If that happens, the investor creditors will not only find that payments have been received that were not stated in distribution reports and accounting to investors; they would also see very clearly that a giant chunk of what they thought went into funding mortgages actually went into the pockets of the intermediaries without any disclosure to the investor or the borrower. Thus the amount  owed to the investor creditors was far in excess of what the borrowers owe.

The amount taken from investor funds as a tier 2 yield spread premium and booked as trading profits exceeds the amount of defaulted loans. Thus the investment banks are stuck in the model depicted in the movie “The Producers” in which they sold 10,000% of a show guaranteed to fail. Nobody asks for an accounting for a failed show.

Here the investment banks sold the same loan repeatedly using different names and identifying data, which is bad enough. But in addition, they used the yield spread difference between the usual loan with triple A rated borrowers and all other borrowers to come up with “trading profits.”

These trading profits were extracted by way of a sale of the loans to the pool in which a profit emerged because in order to cover the expected interest income expected by the investors they loaned money at twice the anticipated rate, which reduced the amount they needed to lend. Thus a $200,000 loan could be sold as many as 40 times using exotic instruments that masked the “sale” and the money received from the investor might have been as much as $400,000 to fund the $200,000 loan.

So the revelations of  dirty dealing at the David Stern law office are a mere distraction from the real truth: that not only were the foreclosures faulty for lack of proper documentation, they were unnecessary because the loan had been been paid down far more more than was reported to the court and the investor to whom it was owed had abandoned the claim in favor of going after the investment banker that sold the bogus mortgage bond in the first place.

CONCLUSION: Weidner’s question can be answered like this: All the foreclosures must be reversed and reviewed with the burden on the forecloser to prove that the accounting was right and that the proper parties were included in the foreclosure.

BOMBSHELL, THE DAVID J. STERN ALLEGATIONS, WHO KNOW WHAT…AND WHEN?
January 4th, 2012 | Author: Matthew D. Weidner, Esq.

WITHOUT WAITING FOR THE END, MY BIG QUESTION IS WHAT DOES THIS MEAN FOR THE HUNDREDS OF THOUSANDS OF CONSUMERS THAT WERE VICTIMIZED BY ALL OF THIS?

Just today a massive lawsuit was filed in Broward County that has extraordinarily significant national implications. Now, first things, first. Allegations in lawsuits are not facts…not until a finder of fact confirms that the allegations alleged are true. But having said that, many of the base factual statements in this lawsuit regarding the underlying transaction wherein a lawyer in Florida sold the essential parts of an operation whose purpose was to throw Floridians out into the street are facts that are already part of many filings with the Securities and Exchange Commission. For more about those statements, read what I wrote more than a year ago about it here.

So I read the prospectus a long, long time ago and realized this was bad, bad news. I screamed loud and hard about it. http://mattweidnerlaw.com/blog/2010/06/shocking-mind-numbing-information-about-foreclosure-mill-david-j-stern/
But no one listened. I read the prospectus over and over and it just blew my mind….I recognized that this was not going to end well for my profession or for the court system that I took an oath to defend and protect.

Now, I could care less about investors….my interest was then and is now, the protection of Floridians who were victims of this operation and importantly, I was terribly concerned about the long-term implications for this state’s court system and the dramatically negative impact this transaction was going to have on the profession of law. The public already held lawyers in low regard and this entire operation was set up to give my profession a much bigger black eye than it already had.

I screamed and argued in my cases, and to the credit of a great many good judges…most of them here in the Tampa Bay area, they caught on real quickly….they listened…and my clients were protected. But too many other people would not listen. Who was I after all….just some street fighting consumer lawyer that had developed a passion for sticking up for the little guy. And since then, “our” court system has been choked by the chaos I warned about so long ago.

But enough about then and what should have been. Read carefully the allegations that are being made from the insiders in the transaction where a lawyer essentially sold a law office to a group of investors. But before you do, remember:

1) This lawyer had been the target of a major class action lawsuit filed in Federal Court in 1999.

2) Fannie Mae and Freddie Mac are taxpayer dependent organizations.

3) Fannie Mae and Fredie Mac were aware of the problems with David J. Stern.

4) Fannie/Freddie are misleading the public about how much their malfeasance will cost.

5) Every man, woman and child in the entire USA will pay dearly for Fannie and Freddie’s malfeasance.

So this is all very much every one of our business….after all, we’re all going to be paying for it for our entire lifetimes. And this is not just a Florida problem….every single taxpayer in America will be paying for this so you’re bought into this problem. So the questions we all need to be asking as taxpayers, as voters, as the people who are picking up the tab for all of this are….who knew about all of these allegations and how long did they know about them?

And now for the allegations, taken directly from the complaint:

The instant action arises from fraudulent misrepresentations and omissions made by Defendants, Stern, DSI, PTA andDS Law (the “Seller Defendants”) to induce DJSP to purchase the non-legal mortgage foreclosure processing and support serviceoperations of DS Law

After the real estate market crashed in 2008, the Seller Defendants’ law business boomed with DS Law’s mortgageforeclosure caseload rising from 15,000 in 2006 to 70,400 in 2009. In 2009, DS Law handled approximately 20% of all repossessionsin the State of Florida. The Seller Defendants’ largest clients included Fannie Mae, Freddie Mac, Citibank, Bank of America, GoldmanSachs, GMAC and Wells Fargo. Indeed, the Seller Defendants’ clients included all of the top 10, and 17 of the top 20, mortgageservicers in the U.S

The associated Target Business also enjoyed exponential growth as a result of the real estate market crash, and, in2009, the Target Business reportedly brought in a purported $260 million in revenues. However, as more fully explained below, theSeller Defendants fraudulently and artificially inflated the revenues of the Target Business and concealed material information regardingthe unlawful foreclosure practices of DS Law to induce DJSP and DAL into purchasing the Target Business

The Seller Defendants fraudulently induced Plaintiffs DAL and DJSP into entering into the Transaction by fraudulentlyand artificially inflating the Target Business’ actual revenues, by intentionally failing to disclose that the Target Business and DS Lawwere not, in fact, operating in accordance with all applicable laws, and by concealing that DS Law was in jeopardy of losing its largestclients due to DS Law’s unlawful conduct. Indeed, before entering into the Transaction, the Seller Defendants knew that DS Law and theTarget Business had been systematically falsifying and/or back-dating pertinent legal documents, submitting such documents to thecourts, routinely misplacing and losing original key documents, filing foreclosures with inaccurate and/or incomplete documents,prosecuting foreclosure cases without obtaining proper service of process, and were in jeopardy of losing the Seller Defendants’ largestforeclosure clients due to such conduct.

By cutting corners in the foreclosure process without following the rule of law, the Defendants artificially reduced theexpenses of the Target Business which falsely inflated the profitability of the Target Business.

To summarize, the Seller Defendants failed to disclose to DJSP and DAL that DS Law and the Target Business weresystematically operating in an unlawful manner. In addition, the Seller Defendants failed to disclose to DJSP and DAL that the TargetBusiness’ reported revenues were not accurate, inflated, and improperly calculated and that the expenses of the business were alsodistorted due to the systematic practices designed to “shorten” the legal process. The Seller Defendants falsely led DAL and DJSP tobelieve that they were acquiring a long-term profitable business that operated in accordance with all applicable laws to induce DAL andDJSP to enter into the Transaction.

The Seller Defendants’ fraudulent and illegal foreclosure practices prior to the Transaction, and the subsequent demiseof the Seller Defendants’ law practice, have now been well documented and reported upon in the local and national media.
Prior to the Transaction, the Seller Defendants were at all times well aware that DS Law and the Target Business were intentionally perpetuating a fraud on the courts by, inter alia, systematically filing forged documents, forging signatures on suchdocuments, fraudulently backdating documents, improperly notarizing and witnessing documents, fabricating documents, signingaffidavits without reviewing or verifying the information contained therein, prosecuting foreclosure cases without obtaining properservice of process, and filing foreclosures with inaccurate and/or incomplete documents.
Indeed, the Seller Defendants directed employees of DS Law and the Target Business to purposefully overlook glaringinaccuracies in foreclosure pleadings and to essentially rubber stamp computer generated documents without reviewing or verifying theaccuracy of the documents.

New attorneys at DS Law were not only encouraged, but were even ordered to sign legal filings andpleadings without reading them. As a result, false and inaccurate documents were routinely executed and filed with the courts in aneffort to hasten foreclosure proceedings and illegally obtain final judgments of foreclosure for the Seller Defendants’ clients.
The Seller Defendants even incentivized these unscrupulous and unlawful practices by giving their employees bonusesand extravagant gifts for churning out the highest number of foreclosure cases in the least amount of time. The Seller Defendantsencouraged contests between DS Law attorneys to see who could jam a foreclosure case through the courts the fastest.
Prior to the Transaction, the Seller Defendants also knowingly and systematically inflated their process of servicecosts to the Court. Specifically, Seller Defendants engineered a fraudulent scheme whereby they directed their process servicing work toa process servicing company called ProVest. The Seller Defendants caused each file to generate four or five separate fees for service of process regardless of whether service of process on multiple defendants was necessary or appropriate and regardless of whether serviceof process for multiple defendants could be achieved at the same address.
In exchange for receiving these inflated service of process fees, ProVest, in turn, routinely referred back to PTAservicing requests for “skip tracing” to locate defendants for whom ProVest purportedly did not have accurate street address informationto effect service of process. ProVest “hired” and paid fees to PTA for “skip tracing” services despite the fact that ProVest had theability and resources to perform “skip tracing” itself and routinely did so itself.
The Seller Defendants’ arrangement with ProVest amounted to a kickback scheme. DS Law padded and inflated itsprocess servicing costs which were billed to its clients and added to the court costs assessed to foreclosure defendants. In exchange forfeeding this work to ProVest, PTA earned manufactured “skip tracing” fees which inflated PTA’s revenues and profits and whichrepresented another way in which the Seller Defendants artificially inflated the revenues of the Target Business prior to the Transaction.
In short, prior to the Transaction, the Seller Defendants and the Target Business routinely and systematically engagedin illegal and unfair and deceptive business practices. The Seller Defendants were well aware that such conduct severely threatened theviability of its valuable continuing relationships with their primary revenue generating clients, such as Fannie Mae, Freddie Mac, andCitibank, which, in turn, threatened the continued viability and existence of DJSP.
None of these illegal business practices were known to DJSP or disclosed by Seller Defendants to DJSP prior to theTransaction.

In fact, the Seller Defendants purposefully concealed such deceptive and systematic practices, and made numerousfalse representations regarding the revenues and propriety of the Target Business’ operations with the specific intent to fraudulentlyinduce DJSP into entering into the Transaction.

The Seller Defendants’ unlawful and negligent business practices spawned investigations by the Florida AttorneyGeneral’s Office, which, in August of 2010, announced its investigation of DS Law regarding its handling of foreclosure paperwork andcourt filings. Soon thereafter, DS Law’s largest clients, Fannie Mae, Freddie Mac and Citibank, began pulling their cases from DS Law,resulting in DJSP’s rapid decline.

Moreover, in early March, 2011, DS Law announced that it was ceasing the practice of law with respect to all pendingforeclosure matters in the State of Florida effective March 31, 2011.

DS Law’s demise has directly and necessarily resulted in the destruction of DJSP’s business. It has forced DJSP tolayoff hundreds of employees and has caused its revenues to plummet.

Stern was fully aware of and failed to correct the illegal, unethical, and unfair practices that were a systemic part of DS Law.
Despite his professional obligations as an attorney and member of The Florida Bar, Stern knew that the SellerDefendants engaged in a systematic practice of fraudulently, negligently and unethically prosecuting its clients’ foreclosure cases, andStern failed to implement any preventative or corrective measures to “reasonably ensure” that such conduct no longer took place beforeor after the Transaction.

Stern failed to conduct DS Law’s practice in accordance with the laws of the State of Florida and the regulations of The Florida Bar and failed to ensure that DS Law sufficiently supervised DJS LLC’s performance of its non-legal foreclosure related services.

As such, Stern was professionally reckless and negligent in discharging his duties both as an attorney and as an officerof DAL, DJS LLC and DJSP

DJSP COMPLAINT
http://www.scribd.com/doc/77128349/DjspComplaint

 

 

14 Responses

  1. More people need to read this

  2. There’s certainly a great deal to learn about this topic. I really like all the points you’ve made.

  3. A motivating discussion is worth comment. There’s no doubt that that you should publish more on this issue, it may not be a taboo subject but usually people don’t speak about these topics. To the next! Best wishes!!

  4. You’re so cool! I don’t believe I’ve read anything like that before. So great to discover someone with some original thoughts on this subject matter. Seriously.. thanks for starting this up. This website is something that is needed on the internet, someone with a little originality!

  5. […] Finally, when the mortgage loan is securitized and essentially turned into a stock, it is often sold to MULTIPLE trust funds. ”Here the investment banks sold the same loan repeatedly using different names and identifying data, which is bad enough. But in addition, they used the yield spread difference between the usual loan with triple-A-rated borrowers and all other borrowers to come up with ‘trading profits’. These trading profits were extracted by way of a sale of the loans to the pool in which a profit emerged because in order to cover the expected interest income expected by the investors they loaned money at twice the anticipated rate, which reduced the amount they needed to lend. Thus a $200,000 loan could be sold as many as 40 times using exotic instruments that masked the ‘sale’ and the money received from the investor might have been as much as $400,000 to fund the $200,000 loan. So the revelations of  dirty dealing at the David Stern law office are a mere distraction from the real truth: that not only were the foreclosures faulty for lack of proper documentation, they were unnecessary because the loan had been been paid down far more more than was reported to the court and the investor to whom it was owed had abandoned the claim in favor of going after the investment banker that sold the bogus mortgage bond in the first place.” [4] […]

  6. […] Finally, when the mortgage loan is securitized and essentially turned into a stock, it is often sold to MULTIPLE trust funds. ”Here the investment banks sold the same loan repeatedly using different names and identifying data, which is bad enough. But in addition, they used the yield spread difference between the usual loan with triple-A-rated borrowers and all other borrowers to come up with ‘trading profits’. These trading profits were extracted by way of a sale of the loans to the pool in which a profit emerged because in order to cover the expected interest income expected by the investors they loaned money at twice the anticipated rate, which reduced the amount they needed to lend. Thus a $200,000 loan could be sold as many as 40 times using exotic instruments that masked the ‘sale’ and the money received from the investor might have been as much as $400,000 to fund the $200,000 loan. So the revelations of  dirty dealing at the David Stern law office are a mere distraction from the real truth: that not only were the foreclosures faulty for lack of proper documentation, they were unnecessary because the loan had been been paid down far more more than was reported to the court and the investor to whom it was owed had abandoned the claim in favor of going after the investment banker that sold the bogus mortgage bond in the first place.” [4] […]

  7. @ Enraged

    You go dude 🙂

  8. Enraged…Brilliant truth.Pour me a double,please…

  9. Wow, 2012 is going to be interesting. You guys are right on the cusp. Wait til you see that credit card debt and sovereign debt also have the same characteristics.

    Power to the people.

  10. The forest for the trees!. Even Mathew D. Weidner Esq. has missed the most important part of the why they are trying to cover it up and will always refuse discovery.

    I guess it is a gift to be able to see this from a legal perspective. If you guys knew what a gift it was to view this from the inside out you would be envious, or horrified at what stands before us. Matt, forget the CDO for a second and go look at synthectic swaps. It’s all right there.

  11. It just occured to me that it CANNOT be fixed. It simply cannot… for the very reason that the power that be have had a completely different agenda right from the beginning.

    Which one? Our president (Obama, by his name…) pushed, right from the onset, his “no-paper” thing. It already existed but he made it his legacy. he told us so, didn’t he? The “progressive” president! The I.T. president! In fact, i see it day-in and day-out being implemented at a record pace in every hospital, clinic and medical facility I visit. There is a push everywhere for no-paper files. Entires files with medicaid and medicare are being created with electronic-pad signatures of the recipients. Shaky, scrambly little signatures that in no way ressemble the true thing. Like when we use a bank card to pay for anything.

    We were all sold on the no-paper, which started very strongly around 2003 in insurance companies and financial corporations, allegedly to “save the earth”. What a noble enterprise, right? We all bought it, hook, line and sinker. No paper means no waste, reduction of carbon dioxide emissions, no trees cut down, blablabla. Again, very noble, at face value. Actually, Congress pushed for it as well.

    Except that our entire civilization depends on paper documents. Hard, blue ink documents, with legitimate signatures. The kind of documents that clearly states: “Void if altered or modified”. The kind of document that must be registered, recorded, categorized, sorted, printed, duplicated, delivered, and so on. The kind of document we can pull out to defend ourselves against malfeasance or use to cause malfeasance, whichever rocks our boat.

    Mortgage documents come in 5 lbs, 250 pages stacks. They have to be copies. 2 copies must legally be given to the mortgagor. I expect that mortgages is the most paper-eaters industry of all. I suspect that no one, ever, read those docs from top to bottom. I didn’t: for one thing, i didn’t get the language (purposely nebulous) and they don’t make good nightstand literature. Even short-attention-span attorneys don’t get them! Let alone read them!

    America makes very, very little effort to recycle, compared to Europe. It produces tons of useless let-me-count-the-ways-to-screw-you-and-prevent-you-from-screwing-me contracts, fraught with intense paranoia and very little substance. Rather than enforce solid moral values (thou shall not lie, thou shall no steal, etc…), it compounded its screw-you paranoia with “save the earth” to create the monster we now have.

    We’ll have to get back very fast to a manageable kind of documents. The kind where A buys from B. One page. In writing. No intermediate. No investors or maybe just one, name on that one page document.

    Can it be done? I doubt it. Not with thousands of federal laws regulating everything, plys thousands of laws in each state, some of them completely obsolete but still on the book and still arguable in any court of law.

    Each new law should have allowed the previous, old ones to be abrogated. That would have been the common sense approach. We carry 300 years of old laws to which we’ve kept adding, on city at a time, one state at a time, one session of congress at a time. The whole shabbang no longer means anything. Anyone is able to argue anything and pull out a law to support his position.

    We created 300 years of legal chaos. The lawyers loved it and created documents that would anticipate and refute every possible argument right of the bat, before anyone had an opportunity to raise it.

    We’re doomed. I can’t see how we can go back to the old ways and i don’t think we can come up with new ways. Not with what has transpired in the past 20 years. Chaos will kill America.

    This is simply the symptom of an abject failure on the part of America to stick to a noble constitution (with a few problems, such as slavery… and women’s rights. Other times, other worries…)

    So, what do we have? No documents worthy of that name. Houses stolen via computer records, solid wood houses torn down (so much for “save the earth!” and no one willing to look at it and say: “Jeez, we made a mistake!”

    I need to go and have a drink…

  12. Forget securitization for a moment – if a person buys a mortgage as an investment from an original lender (assume all ownership paperwork is in order and properly endorsed, assigned and recorded and he has clear power to enforce a sale and full lawful secured beneficiary status), he gets paid by the borrower for awhile and then the borrower defaults….say the value of the property plunges below the loan amount during this time…..first can the investor choose to take a tax writeoff on his loss instead of foreclosing on the owner (because he can’t get his money out of the sale of the property anymore)? Second what happens to the lien that is recorded and who does the borrower owe now? If the lein is required to be recorded as paid in full and reconveyed….and have no idea if this is the case or not…. but if….Can the investor then sell or give away the right to keep collecting on a “debt” no longer secured by the real property to anyone else?

  13. The other foreclosure mills should be very concerned right now!

  14. Proper parties included can be impossible since the assignment was skipped according to this. This is written and reported long time ago at ALTA.

    http://www.alta.org/publications/titlenews/01/03_03.cfm

    “Because multiple servicing transfers are common during the life of a loan, opportunities for unrecorded assignments, delays in recording assignments, and even misidentified servicers exist. MERS minimizes those possibilities because it eliminates the need to record assignments when servicing rights are traded between MERS members. The identity of the new servicer is typically updated on the MERS® System within 24 hours of being notified of the transfer.”

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