How the Servicers and Investment Banks Cheat Investors and Homeowners

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Master Servicers and Subservicers Maintain Fictitious Obligations

Editor’s Comment: 

This article really is about why discovery and access to the information held by the Master Servicer and subservicer, investment bank and Trustee for the REMIC (“Trust”) is so important. Without an actual accounting, you could be paying on a debt that does not exist or has been extinguished in bankruptcy because it was unsecured. In fact, if it was extinguished in bankruptcy, giving them the house or payment might even be improper. Pressing on the points made in this article in order to get full rights in discovery (interrogatories, admissions and production) will yield the most beneficial results.

Michael Olenick (creator of FindtheFraud) on Naked Capitalism gets a lot of things right in the article below. The most right is that servicers are lying and cheating investors in addition to cheating homeowners.

The subservicer is the one the public knows. They are the ones that collect payments from the “borrower” who is the homeowner. In reality, they have no right to collect anything from the homeowner because they were appointed as servicer by a party who is not a creditor and has no authority to act as agent for the creditor. They COULD have had that authority if the securitization chain was real, but it isn’t.

Then you have the Master Servicers who are and should be called the Master of Ceremonies. But the Master Servicer is basically a controlled entity of the investment bank, which is why everyone is so pissed — these banks are making money and getting credit while the rest of us can’t operate businesses, can’t get a job, and can’t get credit for small and medium sized businesses.

Cheating at the subservicer level, even if they were authorized to take payments, starts with the fees they charge against the account, especially if it becomes (delinquent” or in “default” or “Nonperforming.” At the same time they are telling the investors that the loan is a performing loan and they are making payments somewhere in the direction of the investors (we don’t actually know how much of that payment actually gets received by investors), they are also declaring defaults and initiating a foreclosure.

What they are not reporting is that they don’t have the paperwork on the loan, and that the value of the portfolio is either simply over-stated, which is bad enough, or that the portfolio is worthless, which of course is worse. Meanwhile the pension fund managers do not realize that they are sitting on assets that may well have a negative value and if they don’t handle the situation properly, they might be assessed for the negative value.

It gets even worse. Since the money and the loans were not handled, paid or otherwise organized in the manner provided in the pooling and servicing agreement and prospectus, the SPV (“Trust”) does not exist and has no assets in it — but it might have some teeth that could bite the hand that fed the banks. If the REMIC was not created and the trust was not created or funded, then the investors who in fact DID put up money are in a common law general partnership. And since the Credit Default Swaps were traded using the name of  entities that identified groups of investors, the investors might be hit with an assessment to cover a loss that the “pool” can’t cover because they only have a general partnership created under common law. Their intention to enter into a deal where there was (a) preferential tax status (REMIC) and (b) limited liability would both fall apart. And that is exactly what happened.

The flip side is that the credit default swaps, insurance, credit enhancements, and so forth could have and in most cases did produce a surplus, which the banks claimed as solely their own, but which in fact should have at least been allocated to the investors up to the point of the liability to them (i.e., the money taken from them by the investment bank).

AND THAT is why borrowers should be very interested in having the investors get their money back from the trading, wheeling and dealing made with the use of the investors’ money. Think about it. The investors gave up their money for funding mortgages and yours was one of the mortgages funded. But the vehicle that was used was not a simple  one. The money taken from the investors was owed by the REMIC in whose name the trading in the secret derivative market occurred.

Now think a little bit more. If the investors get their rightful share of the money made from the swaps and insurance and credit enhancements, then the liability is satisfied — i.e., the investor got their money back with interest just like they were expecting.

But, and here is the big one, if the investor did get paid (as many have been under the table or as part of more complex deals) then the obligation to them has been satisfied in full. That would mean by definition that the obligation from anyone else on repayment to the investor was extinguished or transferred to another party. Since the money was funded from investor to homeowner, the homeowner therefore does not owe the investor any money (not any more, anyway, because the investor has been paid in full). The only valid transfer would be FROM the REMIC partnership not TO it. But the fabricated, forged and fraudulent documents are all about transferring the loan TO the REMIC that was never formed and never funded.

It is possible that another party may be a successor to the homeowner’s obligation to the investor. But there are prerequisites to that happening. First of all we know that the obligation of the homeowner to the investor was not secured because there was no agreement or written instrument of any kind in which the investor and the borrower both signed and which set forth terms that were disclosed to both parties and were the subject of an agreement, much less a mortgage naming the investor. That is why the MERS trick was played with stating the servicer as the investor. That implies agency (which doesn’t really exist).

Second we know that the SWAPS and the insurance were specifically written with expressly worded such that AIG, MBIA etc. each waived their right to get payment from the borrower homeowner even though they were paying the bill.

Third we know that most payments were made by SWAPS, insurance and the Federal Reserve deals, in which the Fed also did not want to get involved in enforcing debts against homeowners and that is why the Federal Reserve has never been named as the creditor even though they in fact, would be the creditor because they have paid 100 cents on the dollar to the investment bank who did NOT allocate that money to the investors.

Since they did not allocate that money to the investors, as servicers (subservicer and Master Servicer), they also did not allocate the payment against the homeowner borrower’s debt. If they did that, they would be admitting what we already know — that the debt from homeowner to investor has been extinguished, which means that all those other credit swaps, insurance and enhancements that are STILL IN PLAY, would collapse. That is what is happening in our own cities, towns, counties and states and what is happening in Europe. It is only by keeping what is now only a virtual debt alive in appearance that the banks continue to make money on the Swaps and other exotic instruments. But it is like a tree without the main trunk. We have only branches left. Eventually in must fall, like any other Ponzi scheme or House of Cards.

So by cheating the investors, and thus cheating the borrowers, they also cheated the Federal Reserve, the taxpayers and European banks based upon a debt that once existed but has long since been extinguished. If you waded through the above (you might need to read it more than once), then you can see that your  feeling, deep down inside that you owe this money, is wrong. You can see that the perception that the obligation was tied to a perfected mortgage lien on the property was equally wrong. And that we now have $700 trillion in nominal value of derivatives that has at least one-third in need of mark-down to zero. The admission of this inescapable point would immediately produce the result that Simon Johnson and others so desperately want for economic reasons and that the rest of us want for political reasons — the break-up of banks that are broken. Only then will the market begin to function as a more or less free trading market.

How Servicers Lie to Mortgage Investors About Losses

By Michael Olenick

A post last week reviewed a botched foreclosure for a mortgage loan in Ace Securities Home Equity Loan Trust 2007-HE4 dismissed with prejudice, meaning that the foreclosure cannot be refilled; a total loss for investors. Next, we reviewed why the trust has not yet recorded the loss despite the six month old verdict.

As an experiment, I gave my six year-old daughter four quarters. She just learned how to add coins so this pleased her. Then I told her I would take some number of quarters back, and asked her how many I should take. Her first response was one – smart kid – then she changed her mind to two, because we’d each have two and that’s the most “fair.” Having mastered the notion of loss mitigation and fairness, and because it’s not nice to torture six year-old children with experiments in economics, I allowed her to keep all four.

When presented with a similar question – whether to take a partial loss via a short-sale or principal reduction, or whether to take a larger loss through foreclosure – the servicers of ACE2007-HE4 repeatedly opt for the larger losses. While the dismissal with prejudice for the Guerrero house is an unusual, the enormous write-off it comes with through failure to mitigate a breach – to keep overall damages as low as possible – is common. When we look more closely at the trust, we see the servicer again and again, either through self-dealing or laziness, taking actions that increase losses to investors. And this occurs even though the contract that created the securitization, a pooling and servicing agreement, requires the servicer to service the loans in the best interest of the investors.

Let’s examine some recent loss statistics from ACE2007-HE4. In May, 2012 there were 15 houses written-off, with an average loss severity of 77%. Exactly one was below 50% and one, in Gary, IN, was 145%; the ACE investors lent $65,100 to a borrower with a FICO score of 568 then predictably managed to lose $94,096. In April, there were 23 homes lost, with an average loss severity of 82%, three below 50%, though one at 132%, money lent to a borrower with an original FICO score of 588.

Of course, those are the loans with finished foreclosures. There are 65 loans where borrowers missed at least four consecutive payments in the last year with yet there is no active foreclosure. Among those are a loan for $593,600 in Allendale, NJ, where the borrower has not made a payment in about four years, though they have been in and out of foreclosure a few times during that period. It’s not just the judicial foreclosure states; a $350,001 loan in Compton, CA also hasn’t made a payment in over a year and there is no pending foreclosure.

There is every reason to think the losses will be higher for these zombie borrowers than on the recent foreclosures. First, every month a borrower does not pay the servicer pays the trust anyway, though the servicer is then reimbursed the next month, mainly from payments of other borrowers still paying. This depletes the good loans in the trust, so that the trust will eventually run out of money leaving investors holding an empty bag. And on top of that, when the foreclosure eventually occurs, the servicer also reimburses himself for all sorts of fees, late fees, the regular servicing fee, broker price opinions, etc. Longer times in foreclosure mean more fees to servicers. Second, the odds are decent that the servicers are holding off on foreclosing on these homes because the losses are expected to be particularly high. Why would servicers delay in these cases? Perhaps because they own a portfolio of second mortgages. More sales of real estate that wipe out second liens would make it harder for them to justify the marks on those loans that they are reporting to investors and regulators. Revealing how depressed certain real estate markets were if shadow inventory were released would have the same effect.

These loans will eventually end up either modified or foreclosed upon, but either way there will be substantial losses to the trust that have not been accounted for. Of course, this assumes that the codes and status fields are accurate; in the case of the Guerreros’ loan the write-off – with legal fees for the fancy lawyers who can’t figure out why assignments are needed to the trust – is likely to be enormous. How much? Nobody except Ocwen knows, and they’re not saying.

Knowing that an estimated loss of 77%, is if anything an optimistic figure, even before we get to the unreported losses on the Guerrero loan, it seems difficult to understand why Ocwen wouldn’t first try loss mitigation that results in a lower loss severity. If they wrote-off half the principal of the loan, and decreased interest payments to nothing, they’d come out ahead.

Servicers give lip service to the notion that foreclosure is an option of last resort but, only when recognizing losses, do their words seem to sync with their behavior. But it’s all about the incentives: servicers get paid to foreclose and they heap fees on zombie borrowers, but even with all sorts of HAMP incentives, they don’t feel they get paid enough to do the work to do modifications. Servicers are reimbursed for the principal and interest they advance, the over-priced “forced placed insurance” that costs much more and pays out much less than regular insurance, “inspections” that sometimes involve goons kicking in doors before a person can answer, high-priced lawyers who can’t figure out why an assignment is needed to bind a property to a trust, and a plethora of other garbage fees. They’re like a frat-boy with dad’s credit-card, and a determination to make the best of it while dad is still solvent.

Despite the Obama campaign promise to bring transparency to government and financial markets, the investors in trusts remain largely unknown, so we’re not sure who bears the brunt of the cost of Ocwen’s incompetence in loss mitigation (to be fair Ocwen is not atypical; most servicers are atrocious). But, ACE2007-HE4 has a few unique attributes allowing us to guess who is affected.

ACE2007-HE4 is named in a lawsuit filed by the Federal Housing Finance Agency (FHFA), which has sued ACE, trustee Deutsche Bank, and a few others citing material misrepresentations in the prospectus of this trust. As pointed out in the prior article, both the Guerreros’ first and second loans were bundled into the same trust – so there were definitely problems – though the FHFA does not seem to address that in their lawsuit.

With respect to ACE2007-HE4, the FHFA highlights an investigation by the Financial Industry Regulatory Authority (FINRA), which found that Deutsche Bank “‘continued to refer customers to its prospectus materials to the erroneous [delinquency] data’”even after it ‘became aware that the static pool information underreported historical delinquency rates.”

The verbiage within the July 16, 2010 FINRA action is more succinct: “… investors in these 16 subsequent RMBS securitizations were, and continue to be, unaware that some of the static pool information .. contains inaccurate historical data which underreported delinquencies.” FINRA allowed Deutsche Bank to pay a $7.5 million fine without either admitting or denying the findings, and agreed never to bring another action “based on the same factual findings described herein.”

Despite the finding and the fine, FINRA apparently forgot to order Deutsche Bank to knock off the conduct, and since FINRA did not reserve the right to circle back for a compliance check maybe Deutsche Bank has the right to produce loss reports showing whatever they wish to.

It is unlikely that Deutsche Bank had trouble paying their $7.5 million fine since the trust included an interest swap agreement that worked out pretty well for them. Note that these swap agreements were a common feature of post 2004 RMBS. Originators used to retain the equity tranche, which was unrated. When a deal worked out, that was nicely profitable because the equity tranche would get the benefit of loss cushions (overcollateralization and excess spread). Deal packagers got clever and devised so-called “net interest margin” bonds which allowed investors to get the benefit of the entire excess spread for a loan pool. The swaps were structured to provide a minimum amount of excess spread under the most likely scenarios. But no one anticipated 0% interest rates.

From May, 2007, when the trust was issued, to Oct., 2007, neither party paid one another. In Nov., 2007, Deutsche Bank paid the trust $175,759.04. Over the next 53 months that the swap agreement remained in effect the trust paid Deutsche Bank $65,122,194.92, a net profit of $64,946,435.88. Given that Deutsche traders were handing out t-shirts reading “I’m Short Your House” when this trust was created, I can see why they’d bet against steep interest rates over the next five years, as the Federal Reserve moved to mitigate the economic fallout of their mischievousness with low interest rates.

In any event, getting back to Fannie Mae and Freddie Mac (the FHFA does not disclose which), one of the GSEs purchased $224,129,000 of tranche A1 at par; they paid full freight for this fiasco. Since this trust is structured so that losses are born equally by all A-level tranches once the mezzanine level tranches are destroyed by losses, which they have been, to find the party taking the inflated losses you just need to look in the nearest mirror. Fannie and Freddie are, of course, wards of the state so it is the American taxpayer that gets to pay out the windfall to the Germans. In this we’re like Greece, albeit with lousier beaches and the ability to print more money.

If the mess with the FHFA and FINRA were not enough, ACE2007-HE4 is also an element in the second 2007 Markit index, ABX.HE.AAA.07-2, a basket of tranches of subprime trusts that – taken as a whole – show the overall health of all similar securities. This is akin to being one of the Dow-Jones companies, where a company has its own stock price but that price also affects an overall index that people place bets on. Tranche A-2D, the lowest A-tranche, is one of the twenty trusts in the index. Since ACE2007-HE4 is structured so that all A-tranches wither and die together once the mezzanine level tranches are destroyed it has the potential to weigh in on the rest of the index. Therefore, the reporting mess – already known to both the FHFA and FINRA – stands to be greatly magnified.

The problems with this trust are numerous, and at every turn, the parties that could have intervened to ameliorate the situation failed to take adequate measures.

First there is the botched securitization, where a first and second lien ended up in the same trust. Then, there is failure to engage in loss mitigation, with the result that refusing to accept the Guerrero’s short-sale offers or pleas for a modification, resulting in a more than 100% loss. Next, there is defective record-keeping related to that deficiency and others like it. And the bad practices ensnarled Fannie /Freddie when they purchased almost a quarter billion dollars of exposure to these loans. Then there’s the mismanaged prosecution by FINRA, where they did not require ongoing compliance, monitoring, or increasing fines for non-compliance. There’s the muffed FHFA lawsuit, where the FHFA did not notice either the depth of the fraud, namely two loans for the same property in the same trust, and that the reporting fraud they cited continues. I’m not sure if the swap agreement was botched, but you’d think FINRA and the FHFA would and should do almost anything to dissolve it while it was paying out massive checks every month. Finally, returning full circle, there’s the fouled up foreclosure that the borrowers fought only because negotiations failed that resulted in a the trust taking a total loss on the mortgage plus paying serious legal fees.

It is an understatement to say this does not inspire confidence in any public official, except Judge Williams, the only government official with the common sense to lose patience with scoundrels. We’d almost be better off without regulators than with the batch we’ve seen at work.

US taxpayers would have received more benefit by burning dollar bills in the Capitol’s furnace to heat the building than we received from bailing out Fannie, Freddie, Deutsche Bank, Ocwen, and the various other smaller leaches attached to the udder of public funds. We could and should have allowed the “free market” they worship to work its magic, sending them to their doom years ago. That would have left investors in a world-o-hurt but, in hindsight, that’s where they’re ending up anyway with no money left to fix the fallout. It is long past time public policy makers did something substantive to rein in these charlatans.

My six year-old daughter understands the concept of limiting losses to the minimum, and apportionment of those losses in the name of fairness. Maybe Tim Geithner should take a lesson from her about this “unfortunate” series of events, quoting Judge Williams, before wasting any more money that my daughter will eventually have to repay.





75 Responses

  1. This info is worth everyone’s attention. Where can I find out more?

  2. […] Read more… Posted in Banks, MERS, News Around The Country, States « Information vs. Evidence: Challenge to Affidavit in Support of Summary Judgment Arizona Supreme Court Ends the Argument – No Note Needed to Foreclose » You can leave a response, or trackback from your own site. […]

  3. Nice article. Nice information for all people and specially for those who want to know more about banking services. I like this post. Thanks for sharing.
    Adrian J Katke The Financial Corp

  4. Anyone want to volunteer to read this and report?

    UCC Article 8: Will the Indirect Holding of Securities Survive the Light of Day? Author is Richard A. Hakes and it won’t link.
    It’s referenced in a lengthy dissertation by Alan White I am reading because reading educational material is surely my heart’s fondest desire for what to do of a summer’s eve.

  5. @john

    if i have a contract that says you agree to pay me and i use my paymenf right in that contract to capitalize a bungee jumping business and sell stock to investors, i no longer control the payment rights in that contract – the investors do. if my payment rights in that contract have expired because i no longer control them, the contract with you is no longer an asset to me. if you decide to quit paying on that contract, the payments rights used as business capital become obsolete and i can dispose of them and take a capital loss against any other revenue. if a debt collector wants to buy the payment rights so he can harrass you for some money, i may dispose of it that way. in no way did i transfer the contract to him as it wasn’t an asset i could transfer. if it wasn’t an asset i could transfer, then it can’t be reported as an asset on his balance sheet. since assets and liabilities must always balance on the books, it would be impossible to say the liability was transferred with delivery of the contract. hope this helps.

  6. Ҥ55. Liability of accommodation party. РAn accommodation party is one who has signed the instrument as maker, drawer, acceptor or indorser, without receiving value therefor, and for the purpose of lending his name to some other person.

    Such a person is LIABLE on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party.”

    We need to know what this means, too. Puhlease don’t go away as if you have no dog in this hunt! Every one here has access to google, google scholar, yahoo, any number of research avenues, including some case law freebie sites, the names of which escape me just now.

    I get discouraged when I feel I am working alone in this area. I want to learn the UCC like I want a hole in my head. Maybe that’s you, too. Well, don’t work alone. Don’t make ME. I can’t quit; it just makes it 10 times harder for me to get it going on. Go dig and report back here! “Holder v holder in due course” “Affirmative defenses”,
    “value of affirmative defenses” , “request for more definitive statement”…..
    Well, I guess I’ll get ready for the sh&t to hit the fan. Carie, love you, feel your angst, it’s palpable, but did you even read the deal I linked
    on “securitization of subprime loans” at scribd. I dug it up and linked it for you and anon. Did you read it? Did it stink? Is it false? Why? Does it support what you say at all? It’s YOUR big trip – what about it?

    Here’s the one I linked:

    Here’s another:

    There are more out there and more at scribd.

  7. @Patrick – I didn’t go on fwiw about something else to undermine your valuable information and hope it continues. We have a lot of catching up to do with that info and in the meantime, we need roadblocks and other areas to shut them down. This holder v hidc stuff is imo black letter law which any court understands, whether admitted or not (!) and also which imo a court, once the issue is introduced, cannot

  8. When wanting to know if a party is claiming under holder v hidc, it might be appropriate to simply ask for a ‘more definitive statement’ by way of motion (I think), before answering at all. “Homeowner pleads for a more definitive statement to, for one, determine if the bankster is claiming under holder or hidc, in order to determine any appropriate, available defenses of right.” You can tell I’m not a lawyer! Caution: I don’t know if this (req for more def statement) would toll your response time or not if you’re the defendant. But, btw, courts have held that an action of non-j foreclosure is actually a complaint, with one’s response in court just that – a response, making the bankster the plaintiff. I think.

  9. I talked about 50 cents v 5.00 actually paid for a note. Here’s a starting place:
    “UCC Article III
    §54. Effect of want of consideration. – Absence or failure of consideration is matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense protanto, whether the failure is an ascertained and liquidated amount or otherwise.” (not sure on from ‘whether….)

    So, I might have had it partly right and partly wrong: if only paid 50 cents of 5.00 agreed on, that may not be one of the defenses against a hidc (vrs holder), but is good against a mere holder.
    I also talk about the very significant diff between a holder and a hidc.
    This, above, as stated, is a(n) (affirmative) defense against a ‘mere’ holder v a hidc. A sustained (one that survives a mtn to defeat it) affirmative defense on info and belief will shut down a mtn to dismiss, “as justiciable issues” remain and that is what we want (better than nothing when can’t prove our case from the get-go. Actually, it’s more that as yet we don’t have the tools to do so, though I believe they’re there).
    I think it was enraged who mentioned two others the other day, though they weren’t called ‘affirmative defenses’, which is what they
    were. I forget what they were, but they were two of many, like this one.
    I am going to keep this up, I’m afraid: A person who took a note with notice of its dishonor (it’s in default, it’s overdue) can NEVER be a hidc and will always be subject to a homeowner’s affirmative defenses. Now, does ‘took a note’ as used here mean negotiated (consideration, transfer, delivery) for a note, or merely has possession of any note, including one in default? I would think the former, but don’t know. What is the status – holder v hidc – of one merely in possession of a bearer note? Does it depend on if the note is in default or when that occurred compared to possession?And isn’t it so that one in mere possession is not a holder, but has the rights
    (to enforce) of a holder? fwiw, not sure what.

    So to defend ourselves by asserting affirmative defenses, among other stuff: we must know the diff between holder and hidc and the ramifications in our favor. Understand and be able to explain that we MUST know if a party is claiming under holder or hidc: must evidence that status for the court to make an educated assessment and of course, we must know to assert any available defenses. Doesn’t end: WHAT evidences whether one is a holder or hidc? Date of endorsement, date of possession / delivery, what else?
    If one wanted to cut to the chase, I guess one could assert the affirmative defenses from the get-go which are available against a
    mere holder. Then it would be up to the bankster to deny their
    availability by saying they are claiming under hidc (which they may have the cheek to do). Then you say, not so fast, Tonto; there is no evidence before this court of that status and I deny it. Never done or almost if we want to prevail…deny it on info and belief or……?
    Feel free to jump in here……

  10. Patrick said:
    “…expired payment rights means the liability is extinguished under that particular instrument.” I need to get why the payment right has expired: I get it , I think, that the right was extinguished because some accounting principle says that a capitalized asset (and I say this believing what you’ve said) which is no longer performing must be taken off balance sheet (?) One place where I get confused is that the party taking it off balance sheet is not the party with the right to payment, correct? because it has sold that right, and that to me complicates this mess. It isn’t like the party with the balance sheet
    owns those rights, like some normal stinking deal or what I think of as normal, anyway.

    “When payments cease, those rights become worthless which means the capital is obsolete and must be disposed of. ” I take it Patrick literally means “must”. I am still struggling with why those rights become worthless. Let’s see…..he must means “must”, no option, so then the asset disappears from the balance sheet. The payment rights were sold to the investors, but are wholley dependent – yes? -on the existence of the note-turned-into capitalized-asset-which-MUST-be-taken-off-balance-sheet-because-of-non-performance. So, the right to payment has disappeared with the capitalized asset accounting entry (rather, its disappearance)
    So what of the collateral instrument both before and after the taking-off the balance sheet?

    I think for those of us who find this all very hard to get, it might be useful to take out the investors momentarily and approach this
    accounting matter as if they don’t exist. Figure it out as if the entity with the balance sheet (starting with the very salient issue of whom that is) also owns the right to payment (or would we not be talking about this if the right to payment had not been sold independently of the note itself? – which I see stars about and not pretty ones), then put the sale of the right to payment back in the formula and see where that finds us compared to where we are without the sec’n investors being in the act……? (which, I just cannot help noting, is what needs to be done with the dots re: MERS and sec’n)
    Maybe you will start us off in that direction, Patrick, if you would be so kind?

  11. @ John

    a note is considered evidence of a debt. a note fhat lost its economic value doesn’t evidence a debt. economic value equals payment rights. expired payment rights means the liability is extinguished under that particular instrument. It has been retired as evidence of a debt. Moving the liability off balance sheet for capital destroys the instrument. Payment rights are now evidenced by what instrument? When payments cease, those rights become worthless which means the capital is obsolete and must be disposed of. If you were to buy those rights for one dollar that is the new liability amount. If you could convince the note maker to continue paying or conduct an illigitimate foreclosure, you’ve made a killing. Don’t know how else to say it but people should always deny the forecloser has payment rights in the note and that the note is reported as an asset on its balance sheet ledger right up front at the beginning of the proceedings.

  12. Patrick & john

    Good stuff, keep it coming.

  13. What Patrick is saying may be gathering some steam in liltigation of which I’m not aware or the crooks see it coming. This would explain why some of the banksters are opining for enforcement of the collateral instrument without much (or any) reference to the note, as if the colllateral instrument has a life of its own without the evidence or existence for that matter of the actual debt obligation, a situation which must be debunked yesterday if we’re to have any chance of
    keeping our homes or keeping what is left of our sanity.

  14. @Patrick – thanks yet again. Trying really hard to get my head around the accounting principles you cite. And throwing in provisions of the UCC, whichseems unavoidable. I think you said that the note itself has been turned into something else by the securitization process, which I am taking to mean actually destroyed as a neg instrument. If so, these facts should be capable of articulation in pleadings when necessary. If I got this right, the note is dead-ended somewhere here, and only payment rights remain, a concept foreign to most of us. I have tried to attack from another angle – ish – in that I thought a note in default, or any asset, written off has been the recipient of an election of remedies (of which we only get one), the remedy being a write-off for the tax benefit. To then sell the asset, if that’s even possible, is a taxable event. It sounds like this is not possible with these notes for the reasons you cited. Sort of thinking on paper here.

    Isn’t it a critical point – that the note, by its treatment in this sec’n process, is ‘dead-ended’ and by that I mean it can never be a note again, capable of being transferred, which is critical to the investor, as well? I think that’s what you’re saying. An investor bought an interest in something which form had already or would change, and probably did not do so knowingly fwiw. In fact, hasn’t the note been re-catogorized as something else, and that’s what you’re saying and there are principles at play here other than the UCC (holder, bearer, etc.) because the UCC no longer applies because of the treatment of the note in the sec’n process.
    You said remics may only contain performing assets. Assuming a loan made it (but then, is that a misnomer itself if only payment rights “made it” to the trust or that’s what was sold?) and at the time, it were performing, and now isn’t performing, game over? You said the note is no longer a note, I think, which is what I have always thought but couldn’t support. But surely someone has the right to enforce payment, but under what dynamic, what schematic would that be if the note is no longer a note, but a fixed asset, a concept I still struggle with (so will re-read your comments and hopefully, some light bulb will go off or someone who gets what you say will explain for the rest of us).

    If I got ANY of this right, the investors really got it, in that their actual rights are truncated, and or they did not purchase what they thought. And none of my thinking on this issue has approached the collateral instrument.
    As to the homeowner, what would one say to a court? “The note no longer exists for its treatment in securitization and reliance on possession of a bearer note is worthless?” “Somewhere in this sorry story, someone by its act changed the nature of this (alleged)instrument before you?” And how does a note that is not a note be modified? How can a servicer even ‘purchase a note’ to modify it (never minding all the other bs re: modification)?
    Patrick, you’ve been great at offering your explanations here and I do appreciate it, as I’m sure do others. I once asked you if you could put this stuff in the format for a court and you said ‘not!’, essentially, which is understandable. But until someone does, I see no choice but to beg your indulgence til someone whose forte it might be is able to.

    The reason I asked if default servicers, for instance, pay for whatever the heck it is they purchase with an iou or cash goes beyond mere curiosity. If I pay you 5.00 for a 100.00 note, if the note is a true negotiable instrument, I may collect the 100.00, but if I only give you 50 cents of the 5.00 I have agreed to pay for the 100.00 note, and the rest ($4.50) is an iou, I am limited in collecting on the note to my 50 cents, the actual amt of consideration I have paid. At least I think, pretty sure, that’s true, and if so, it is way not
    insignificant. If true, it is an unassailable avenue for discovery (disregarding for the moment your facts regarding these ‘notes’ and all the implications). The fact that a party may have only paid 5.00 for a hundred dollar note is telling, also, (in that it might support your contentions) if one has the savvy to articulate the reason(s) that is true.

  15. @john

    The book entry is the addition of the capital gain or the subtraction of the capital loss from its basis in the year the FIXED ASSET was disposed of. its an electronic world anymore and commerce is permitted to be conducted electronically with electronic records, e signatures, and what not so I doubt you’ll find a bill of sale floating around.

    No we are not talking about the instrument because its been retired and is non negotiable. Put another way, the loan level file, including perhaps the genuine note, can be physically moved amongst different entities but the loan liability itself was the capital, not the note. The loan liability, once moved off balance sheet and capitalized, BECOMES A FIXED ASSET. The note movement can’t transfer a fixed asset because its static. The payment rights, booked as the loan liability, must be static in order to back another asset offering thats out there otherwise the investors bought worthless paper without payment rights in the loan.

    A delivery of the note cannot transfer another distinct fixed asset can it? Likewise, two competing assets cannot both claim payment rights to same debt. Thats why the note must be retired as a competing asset to the securities. Once retired and derecognized as an asset on the books, all the kings horses and all the kings men, cannot put the asset back together again. So what are all these guys doing coming to court and waving the note as if it still has economic value on the books? And what are they doing assigning a lien when a lien is only perfected so long as the note retains some economic value?

    That is why when the loan liability is moved off balance sheet during securitization of the debt and used as capital, it cannot be transferred along with a promissory note delivery because it is itself a distinct fixed asset backing securities. It is a distinct capital asset that must be disposed of or abandoned in its own right when it no longer serves a purpose. But it may serve a purpose to the junkman who can purchase payment rights to a non performing loan for pennies and attempt to collect as if it took the full debt amount on its balance sheet by delivery and endorsement of the note (which has been previously retired). The loan liability, or payment rights, was tendered for pennies because it was impaired and useless as capital when the loan became non performing. A REMIC can only have performing assets in its capital inventory thus a legitimate servicer can only service current performing loans on behalf of the REMIC. A default servicer by definition is collecting on a non-performing loan and if servicing was transferred to it after default it is nothing more than a two bit debt collector disguised as a legitimate servicer working under a reconstituted servicing agreement for the junkman. (or is the junkman itself)

  16. @Patrick, yes, thanks for the further info. It’s caused me, tho, to have more questions, since we’re not talking about washing machines, which have no rules. We’re talking about allegedly negotiable instruments subject to a particular set of rules, yes? In order for Party A to ‘sell’ the residual value, as you call it, to Party B,(which by my limited understanding of accounting is still, or should be, a book entry of some sort) is the UCC being ignored, yes, no, not in play? A sale of a washing machine, for instance, would be evidenced by a bill of sale. Is Select Portfolio Servicing a co. which amasses defaulted loans, i.e., residual values(?) and goes for it against the homeowner?

  17. Patrick: Thank you for that.

  18. @ John

    If you own a laudromat and your washers are worn out or quit performing for you, you’d likely try to see what kind of value you could get for them from the local scrap yard or junkman. Maybe there is one particular part made from aluminum or something that is of value to the junkman and you’ve already made an agreement long ago that the junkman gets first dibs to your worn out stuff. That’s the residual value found in a discarded business asset.

    Likewise, a junk debt buyer is exactly that. A buyer of a note that has been discarded because it no longer can provide cash flow to the operation. The value to the junk debt buyer is the spread between the amount he can convince you to pay and what the junkman actually paid to take the junk off the seller’s hands. (typically pennies on the dollar). Who else in their right mind would take a non-performing asset?

    The debt wasn’t transferred off one balance sheet and unto another’s with the passing of the note because a capital gain (or loss) must be reported on the books of the outfit that dispossessed itself of the obligation. Disposition of capitalized debt isn’t a transfer. Therefore, a purposeful delivery of the note with the intent to pass enforcement rights to a debt amount unto a successor hasn’t transpired.

    A REMIC can only maintain performing assets in its capital inventory. A legitimate servicer can only service the performing assets in the REMIC capital pool. Now think about why they tell you to stop paying for three months if you want to qualify for a loan mod. They want the washer to stop performing so it will be disposed of. For the benefit of whom? The larded up default insurance owner and the junkman of course. Or maybe its simply a case where the capital pool has diminished so much that its not worth the legitimate servicers time and cost to service those assets any more. (sweeps) So why not become an illigitimate servicer for a huge pool of illigitimate junk debt.

    (cough… debt collector…cough… reconstituted servicing agreement…cough… unsecured… cough.. hedge funds… cough)

  19. And while I’m at it, didn’t I read that FHA recently told a non-approved servicer to take a hike on a large portfolio of (alleged) defaults? I don’t know, but it strikes me that VA guaranteed loans would have the same caveat re: servicing – must be a VA approved servicer, at least if anyone is expecting the VA to act on its guarantee. I wonder at what point the FHA and VA insurance kicks in and is paid out. Seems like it should be post-foreclosure when the “losses” are known. So many things we don’t know and need to know. How does it impact the borrower, if at all, when a non-approved servicer’s FHA and VA claims are denied for a situation out of the control of the borrower? FNMA and FHLMC, I think, unlike the FHA and VA who insured and guaranteed loans, actually purchased them from the party who originated or from the aggregator, mol, who may or may not have been the originator. You can eliminate the poss of your loan having gone thru FNMA or FHLMC if your loan amt exceeded their max loan amts in the year you got your loan (unless they screwed that up, too). Those loans would have gone thru an RFC or similar co.
    It all sounds to me like all those loans “in trusts” (maybe not FHA insured or VA guaranteed?) were insured with cds or something, so I understand somewhat why an AIG would need propping up, but I
    don’t understand the rest of the numbers that were posted here yesterday re: billions, with one figure damn near a trillion. UNless it were all in fact a ponzi scheme based deal and the brakes went on.
    Seems to me that would be the reason those bailout figures were
    thru the roof and were in the aggregate a noticeable percentage
    compared to the national debt run up over many, many years. And it seems like the best thing we produce economically is war.

    Still, that – the money listed yesterday – is a damned whole lot of money. I don’t understand the creation of money by debt and don’t really want to. But is it that one loan for 350k created obligations far exceeding that amt? I only read a tad of Dimon’s bull yesterday and was appalled by the hearing’s kid-glove approach, which suggests to me one of two things: he is feared or he has ‘good connections’ / is too powerful, both of which stink.

  20. @Patrick who said:
    “If we assume the REMIC was formed and funded, your capitalized loan was sold off for any residual value to a junk buyer, exchanged ……”, more specifically interested in “sold off for any
    residual value”. I don’t understand that stuff, generally, but would like to. You said, I think, that the note can’t be negotiated from the trust to anyone. Then how was anything 1) “sold off for any 2) residual value” to a junk buyer or anyone else? Further, if that is in fact possible, is the junk buyer paying with cash or an i.o.u., to your knowledge, generally?
    Do you know why servicers transfer servicing to ‘default servicers’?
    (And here I remember, for instance, that as to FHA loans, only
    approved FHA servicers may service a loan insured by the FHA)

  21. From the editor “The only valid transfer would be FROM the REMIC partnership not TO it. But the fabricated, forged and fraudulent documents are all about transferring the loan TO the REMIC that was never formed and never funded.”

    Let’s assume the REMIC was formed and funded with loan capital. A loan used as capital backing a securities offering has become a fixed asset. The loan has been capitalized. A capital asset cannot be transferred FROM the REMIC capital pool by a purposeful and intended delivery and endorsement so as to give the transferee enforcement rights.. Capital assets must be disposed of or abandoned when their shelf life has expired or have become obsolete for their intended purpose and non-performing and a capital gain (or loss) must be reported for tax purposes.

    So again I ask if the would be forecloser gained possession of the note from a garage sale or the lost and found box because it certainly wasn’t transferred to them. Don’t let the blank endorsement fool you. If we assume the REMIC was formed and funded, your capitalized loan was sold off for any residual value to a junk buyer, exchanged out of inventory for a like kind asset, or was abandoned by the side of the road.

  22. In response to the follow the money theory in the truth that there are no docs that support the true investors as the other path is the falsified, servicer of record. It seems that even if you find your original true parties of interest and cut that deal, the false continuation of claims to title can set up the deal for failure if not put into check. It is unfortunate that the claim to title can be be anyone and seems to be a growth on any type of resolution for both sides.

  23. @Well Kathie,

    I have come to a very serious but freeing conclusion: when you have nothing, you have nothing to lose. Which really means that can go anywhere, you can turn anyway, you really can recreate yourself from scratch without the baggage. Some people in that situation will grab a gun and start shooting. I find the idea of having nothing so attractive, i can’t wait to get rid of everything and move on. There is a whole wide world I still haven’t seen yet.

    I’m keeping the house for right now (and paying my attorney in lieu of a mortgage payment: can’t do both, you see…) and working in the yard until my case is resolved but if I have a choice, they can have the damn house. I’ll take the money and go create something in an African country. With all those Chinese moving there and creating infrastructures everywhere, that’s where it will soon be happening.

    The kicker though, is that in my part of the world, I’m not allowed chickens or rabbits on my property: they attract racoons. So, for the time being, I can’t grow tomatoes (assuming I can find non-Monsanto seeds…) or other edible things either. Big Brother keeps his thumb right on my tail. Who needs that?

  24. @ Enraged. You should be warned “My Business” is not profitable. No Stamp … No Paycheck. hehe …he. And yes you are right about AIG also, but there are more to come. Hold on to your silver and gold, get your garden seeds and rakes ready, build your chicken coops now ……Most importantly, keep your shovels handy, my bobcat is to big for small places … I know where they buried the bodies….

  25. @enraged – if your book does well and you make a gazillion, remember I liked you when you were poor!

  26. @Kathy,

    So, because there never was enough money to cover all the loans in one bank, the musical chairs between Banks A to B to C was started (transfer/assignment/sale) to cover up for the lack of money in bank A, then B, then C. Since Bank A, B and C (and ongoing) were insured, at every step of the musical chair game, each bank was covered. So, technically, every one of those banks has every accounting right to… accuse the insurance companies of having created the crisis. Hence the rush to bailout AIG (an otherwise very good company I worked for for 20 years…)

    The only ones who were not covered were investors and homeowners.

    Elementary, my dear Watson! Why didn’t we think of that? Kathy, want to go in business together?

    Oh darn! That damn conscience our parents instilled in us! I want to. I can’t…!

  27. Thats ok Enraged .. it was damaged anyway. LOL! You just about have it all figured out …. except there was Never enough pension funds to cover all the loans (there is not enough money in the world to do that). Thats when they started creating money out of a bag of air (Federal Reserve). Most importantly is they created all these false defaults(forclosures) to collect the insurance (up to 30X the principal loan amount). Profit! Profit! meant Big Bonuses! But the investor got left holding an empty bag, the homeowners got left with trashed titles & lost equity, and the taxpayer got left holding the bill.

  28. JG,

    The way I see it makes a lot of sense after all.

    Remember: homeowners never dealth with Aurora at inception. They never dealt with LBB either. They dealt with Originator. BUT LBB was the depository for investors’ money. LBB was going to make investors’ money grow. Actually, some broker for LBB might have been the point of contact for investors but LBB was where the actuasl money landed. So, broker got his cut in the form of Handling fees.

    Originator worked for LBB. So did Aurora. Fees were paid by LBB via investors’ money. Originator may have listed Aurora as the payee (or it may have listed LBB, or MERS, who knows).

    After that, your sober guess is as good as mine. Wine starting to kick in. I’m brilliant until the third glass… 🙂 Than, i have to stop writing.

  29. No, enraged—WE have the burden of proof…THEY commit whatever fraud they want…and WE have to prove the fraud…it’s all on us…WE have to prove that the loans were never pooled…WE have to PROVE there is no M in MBS…WE have to prove that all of their lies are lies..that the recorded deeds are invalid….how do we prove those things to the courts? And would it even matter?

    @bijaya kumara das brian d grover,

    A GSE is Government Sponsored Enterprise…Fannie/Freddie. Unfortunately calling the truth “ramblings” is the reason why we aren’t seeing any progress…sigh.

  30. @Kathy,

    I think I was sitting on it for a while. At first, it was pretty well cushioned. When it started to deflate, i threw it away. So sorry! I didn’t know it was yours!!! I thought it was mine!

    How can i make it up to you?

  31. I think I have somewhat of an understanding of how that worked.

    1) Investor had money to invest and put it into the bank. It may have been 20 different investors’ funds, some very large, not yet established as trusts.
    2) Bank went out to get some mortgage loans, either directly (rare) or through a warehouse or loan originator.
    3) Since the investors’ money was already in the hands of the banks but not necessarily yet into a trusts, that’s what it used to either front the loan ( the seller) by giving access to it to the warehouse or to the loan originator. That’s also what paid the originator’s fees and whatever closing costs if they were included in the mortgagor’s monthly payment.
    4) Once enough mortgages were written, the bank created the “trusts”, in which it placed the notes (IOUs) in lieu of the money that it had actually taken and used. The trust became only the depository of so many mortgage notes but the actual money was long gone to allow the banks to use it for more loans fronting. I suspect oinvestors never knew the ins and outs until fairly recently.

    So, all those trusts contained only IOUs while the real green stuff was long gone. As long as the monthly payments for the IOUs were made on time, investors got the dividends on the “trust”. When the mortgagors started to default, all there was left in those trusts were empty IOUs no one could cash. Also, in order to protect itself against that eventuality, the banks used investors’ money to insure those loans. That allowed it to keep on paying dividends… for a while. There was absolutely no money expanded by the banks. As loans were starting to default, they started to be “assigned’ or transferred (and i am not completely clear on that aspect). But what i really believe is that the banks had the green stuff, it misappropriated it right of the bat, replaced it with shoddy IOUs it knew would default, insured the transactions and stiffed investors. When homeowners defaulted, it was easy for banks to tell investors: “Jeez, sorry about that. The market has become lousy. people don’t pay anymore. The trust is not worth much anymore because we have to incur all those legal costs of foreclosing. Going, going, gone! Oops!”

    I think that trying to figure out much more than what meets the eyes (and what meet the eyes is right away shoddy), we, homeowners, are hurting ourselves. Telling the story as clearly and simply as we can is the best way we can reach people, be it attorneys, judges, homeowners, etc. The fact that Kathy had to ask “What’s a GSE”, or we ask ‘What’s a PSA” is very revealing. We are making it way too complicated to reach judges.

    My simple-minded take on it.

  32. LOL @ Enraged! If I find it, I will send it home right away. And if you come across my sanity, just entertain it for a while. I need to rescue another cork from a wine bottle. ~ *grins*~ No Stamp .. No Check. I really need to find a paying job.

  33. They will have the purden of proof which is actually their’s as enraged points out when we have learned enough of procedure and evidence to make that burden inescapable.

  34. I must have phrased that poorly. NG is most insistant that the investors and no one else, for instance, funded the loans, a schematic I have never been able to follow. I wanted, and still do, to know if NG (or I guess anyone here who follows that line of thinking) would find this statement in the agreement by LBB to be an admission that at least ALS, the payee on some of the notes, did not in fact fund the loan. He must or may think that LBB’s funds came from the investors prior to the wet ink notes’ executions. Not to misquote NG, but I think he routinely says the paper did not reflect the true transaction(s) because the payee did not provide the funds. That whole line of thinking is not my thrust, was curious.

  35. @JG,


    Does it really matter what “we” would call it? Shouldn’t you ask LBB to define what “it” calls itself and force it to define what it means by it? If LBB is the one who entered into the relationship with Aurora, shouldn’t be incumbent to LBB to actually spell out how, when, why, where?

    Why are we so intent on doping the work for those banks? Why aren’t we insisting that they clearly define their role in this imbroglio? They do have the burden of proof, after all, no?

    Dated as of November 1, 2006
    Structured Adjustable Rate Mortgage Loan Trust
    (Mortgage Pass-Through Certificates, Series 2006-11)


    WHEREAS, Lehman Brothers Bank, FSB (the “Bank”), pursuant to the following specified agreements…
    WHEREAS, in addition to the Bank Transferred Mortgage Loans,
    the Bank has
    certain mortgage loans originated by Aurora Loan Services LLC identified on the Mortgage Loan Schedule attached hereto as Schedule A-2 (each, a “Bank Originated Mortgage Loan” and
    together with the Bank Transferred Mortgage Loans, the “Bank Mortgage Loans” or the “Mortgage Loans”);…”

    If ALS is identified as the payee and lender on the note, but the bank, Lehman Bros Bank, FSB, provided the funds as indicated here, NG, do you call LBB the true lender? Anyone? Is this admission that LBB funded ALS’ loans or is it more likely some misleading verbage for the investors for some reason?

  37. Dear Carie: Your ramblings would prove their is no secularization, (swap of credit line) how cute, what is a GSE?, we are a country of Laws (written language)and I signed which obligated me the individual and them the ? (the language made them first the lender(loan originator) and anyone there after the note holder) in our transaction, my rights have been ignored as well as the investor (s) since I had a real person in 3rd position with a lawful Deed of Trust trashed by the big machine as I

    We have not given up yet. Filed a lien and now trying to find a lawyer and going to court to validate it and quiet title. LOL we hope

  38. Great analysis. How to get this information in the IRS’s hands. May be the tax payer will get their fair share back.

  39. In order for there to be a contract … there first must be a meeting of the minds.

    Mind? What’s that? I haven’t seen one since I’ve lost mine…

  40. In order for there to be a contract … there first must be a meeting of the minds.

  41. Look into the Mirror and what do you see? I see a homeowner, a taxpayer and an investor looking back at me. United We Stand and Divided We Fall. It Works for me! Saving Children and Americans one at a time. Speaking of time ….. Duty Calls! I must save another from the almighty pen and put the phone in their hand. Appears these retirees need some protection to …. If you could only see the garbage I am reading. My Famous Line … Read It before you Sign It! I am not an Attorney and I can not give you Legal Advise. If you have questions … Please contact your Attorney immediatly. I’m a semi retired grandma and have plenty of time, here is the phone lets call him now. I need to inform you that I have a fiducary duty and I can not legalize these docs unless you are fully compentent and understand what you are signing. What was that? You do not understand?
    Danged gone annoying little things like fiducary duty get in the way … No Stamp for you. Blessings and Best Wishes to All!

  42. Arizona Supreme Court Ends the Argument – No Note Needed to Foreclose

    Read the rest here. It will get worse before nit gets better…

  43. @Jeff,

    They’re still rewarding it because they’re still under the misguided impression that those who destroyed the system know how they did it and, therefore, have what it takes to repair it.

    Dimon is making a ton of money because he’s managed to sell them on the idea that he can fix it. He is, after all, a Harvard guy, right? According to Obama and Geithner, that’s all that matters. Because is their world, Harvard can do no wrong. It used to be Yale. Now, it’s Harvard… Same mold, different faces, arrogance and incompetence.

  44. The United Ostriches of American. The good thing is: with all that Monsanto, we’re turning good, cultivable soil into sand at such a pace that there will soon be enough sand for everyone of us to burry our head deep into it.

  45. “The problem is that it is so engrained, so widespread and so deep that no one knows what to do about it.”

    Actually, they reward it.

  46. My question is, what happens when the master servicer is out of business? Do the now have to re-write the PSA with a new master servicer or does the sub-servicer now take the place of the master servicer?

  47. @Carie,

    Bill Black testified to it before Congress. Counties recorders testified to it. AGs spelled it out in a formal complaint everyone has access to. Lynn Szymoniak went public with it. None of it made a dent.

    The problem is not that no one knows. Everybody does, nowadays. Including China and Japan (hence their decision to completely bypass the dollar and transact directly in yen and yuan, starting July first) The problem is that it is so engrained, so widespread and so deep that no one knows what to do about it. Everyone, from Congress to government, hopes that by ignoring it, it will simply go away on its own.

  48. @KC
    “If you took the time to study and educate yourself with Nancy Drews “ramblings” as you call them, you would get it! ”

    Hmm…and if you took the time to study what I just posted—YOU would “get it”!

  49. “Their thing is law, not securitization.”

    Well…when the “law” is broken—somebody better figure out how and make the criminals pay. If we keep putting our heads in the sand and saying “it’s over my head! I don’t want to figure it out!” then we will surely lose.
    Dr Lan Pham lost her job because the CBO wants to ignore the truth also. Nothing will get fixed if we ignore the truth.

  50. @Tolle,

    Ready or not, here I come! No kidding. Been working on a book. Almost done. My outsider’s take on the whole undoing of this country. Down-to-earth. My observations, starting with the idea of making money for the sake of making money. Planting little, green rectangle of paper and spending a lifetime standing by, watering them just to see them grow… while not having vacations (2 weeks at most when all the other developped countries have 4 or 5…), not having health insurance, not having decent food (fast food doesn’t cut it for me), in short not having ANYTHING to show for a lifetime!!!

    God: “So, what did you do with that life I gave you?”
    Deceased: “Well, I fought in a war I still don’t know why we got engaged into… I worked in a business i didn’t understand: my job was to make money for my boss. I was good at it too! I called people and scared them silly into sending me money they didn’t have and i watched them get further and further into debt. My house was nicer, bigger, better located than my best friend’s. I got a bigger car. I was SUCCESSFUL!!!”
    – How many lives did you positively impact?
    – Come again?
    – How many lives did you make more tolerable or pleasant?
    – Hmmm. Let me chew on that one a little while… Can I get back to you?”

  51. Carie,

    Thank you for the explanation. Personally, all that hanky panky flies way above my head and I kinda want to keep it that way: it’s not where I get my kicks out of. It’s been made intentionally complex, undigestible, unpalatable, incomprehensible by a team of greedy experts trying to circumvent every accounting and legal law without my having one bit of a say in it. They created. They’ll have to fix it. They wanted to drown the fish and they succeeded so well that no sane mind can grasp the extent of this purposeful imbroglio.

    What I do know is this: way back then, I purchased a house. More precisely, I contracted with a financial entity to purchase a house. The guy who sold the house to me had money coming to him in exchange for my getting the right to move in. At closing, the guy got a check (money). I sure a hell didn’t write it (I didn’t have any money at the time and I was one of the millions who got sold on the mortgage without down payment). However way we look at it, money DID exchange hands, meaning that someone advanced the funds.

    Parallely, some people had money to invest. 401K, savings, stocks, money in whatever form. They were sold on the idea that, if they invested that money into real estate, it would grow exponentially until the cows came home and could even double its value within a couple of years. The relationship between the first and second group is where most of the blur is for both groups because in between, there were so mony fingers in the post that no one knows who’s who anymore. The cows came home empty handed. Not my doing. Not my problem.

    The (primitive) way I see it is also the (primitive) way judges see it, still to this day: homeowner had no money. Homeowner signed a contract. Homeowner stopped paying. Homeowner should not keep the object of the contract. Except that, in the meantime, some catastrophe happened: banks (the many fingers in the pot between group 1 and group 2) started going belly up and, without my having any say in this matter, government said: “Let’s take all that tax money earmarked for roadways, bridges, social services, education, research, etc. and let’s give it, no question asked, to the banks.” So my take is simple: I already paid that god damn house three times over. Doesn’t matter who got/didn’t get paid back, as far as I am concerned, I already paid the house by mortgaging my retirement, my future, kid’s future and her kids’ future.

    The same way that I don’t have in me to learn the entire securitizatyion system, first in the order and fashion where it should have been applied and then, in the disordely, illegal, fraudulent and whatever-else fashion it was, in fact, applied, nor do the judges. Their thing is law, not securitization.

    My theory is that many people shot themselves in the foot by going way too deep into a field they did not master and in which judges (rightfully) did not recognize that they had any expertise allowing them to even approach the subject. On the other hand, keeping it simple: “Where did the money come from? Where did Lender get that money? What is the relation between Trust/trustee and my house? Where is the paper trail? How come Servicer XYZ is foreclosing when it is nowhere to be seen on any of my documents? How did he get involved and by which operation of the holy spirit? What does the law say about that and was it followed? And by the way, why have I had 5 servicers in 5 years and why did they all bilk me out of fees over fees over fees when i was never late in my payments?” is where, in my views, people have the greater chance of making headways in their own defense. Giving a lengthy, indigestible lecture to a judge about securitization is counterproductive and has been the downfall of many a homeowner. Asking the right questions that will make him/her go: “Good question. Where is the connection? What am i missing? Where do I get the feeling that I am being lied to?” is what, so far, seems to work the best, starting with Boyko in 2007.

    Some people are determined to understand the whole fraudulent process from A to Z. it is all to their honor. So far, though, guys such as Bill Black have talked about it until they got blue in the face. Didn’t change anything. Attorneys have talked about it in court; didn’t change anything. Dimon is going to testify to it today; it won’t change a damn thing until congress is good and ready to act. (Won’t happen anytime soon…)

    Carie, people want simple explanations they can grasp and, in turn, explain to a judge. They want how-to. Thjey want to hera what works. not what keeps failing. Losing one’s self into a field one has not fully absorbed and rehashing over and over a few key phrases doesn’t make a defense.

  52. @ Enraged, I assure you they do not make enough duct tape for two of me. hahaha Lucky for me my babysitter was in a rush and cut corners this week and bought me designer duck tape instead of duct tape. It looks great … but it does not stick well. I assume my babysitter will not admit to this and will deny it for years to come. *grins* @ E Tolle, the answer to your question is NO! LOL! @ Carie, Repeat.. I am NOT in forclosure, .. What Motive? Pay off the mortgage and get a Good Title as I was promised is not motive …. it is enforcing a contract. If you took the time to study and educate yourself with Nancy Drews “ramblings” as you call them, you would get it! I have two contracts with the pretenders … one as a security investor who was promised the lien and the Note for the advance of a mortgage with my retirement money and got neither! And one as a homeowner who gave Good Title for collateral and was promised in the contract to recieve Good Title back after I paid the indebtedness. They breeched Both contracts! And in the process of doing it they commited willful criminal offences for monatary gain . The AG settlement does not bar the rights of a individual consumer to go after them for that! If they had … there would no longer be a middle class here in America but instead a Cival War, the Pretender Lenders and Greedy Congressmen vs the People.

  53. @Kathy C (and her twin)

    Maybe you will be able to understand the “investor issue” if it is explained this way—please read very carefully:

    “No funding” applies to subprime refinances. There are prime loans (meet market standards) that are legitimate GSE loans. Subprime, however, is what caused the near financial meltdown.

    All that had to be funded in subprime refinances was any “cash out” that borrower received by the subprime refinance. This is because the subprime refinances were a transfer of collection rights on already classified default/non-compliant debt by the GSEs. But, a subprime new purchase may have gone through the same GSE path. GSEs have mortgage limits on both new purchases and subprime refinances. Thus, a ‘money purchase” loan (subprime) would often be split into 2 loans — one loan that qualified for GSE approval — and another loan that was privately funded. The loan that passed through the GSE would be found as non-compliant and, therefore, rejected – often by also assessing a (false) early payment default against the borrower. Thus, the collection rights to the GSE loan would pass to the investor who was funding the second loan (and with insurance collected on the GSE loan.) Subprime new purchases that were structured to pass through the GSEs (by at least one loan), were not immune to the fraud.

    KC—What you do not understand is the difference between an “investor” and a “security investor.” Yes, a new purchase would ALWAYS require funding — regardless of whether or not the seller of home is paid all cash — or the sale price minus any mortgage owed. The seller has to be paid off. There are 3 types of investors — 1) GSE 2) financial institution 3) private investor. In KC’s case — it appears there may have been a private investor who indirectly funded the new purchase. But, these private investors did not KEEP the loans, they did not have to capital to keep the loans. Thus, loans were sold immediately to the GSEs or to financial institutions. If sold to financial institutions — loan was not GSE compliant. (or as stated above — one loan can pass through the GSEs first — by which non-compliance removes the loan immediately). In either case, someone is directly funding the private investor. The second part of the process involves “security investors.” Once the subprime loan is deemed default/non-compliant, the collection rights (from default/non-compliant loans) — are sold to Depositor to Trust, whose parent then “securitizes” the cash flows to collection rights — and the security certificates are sold to Depositor’s (usually) parent (some exceptions here) — the security underwriter. Security underwriter then repackages “securities” into CDOs. At no point in subprime refinances, subprime purchases — and also prime refinances/purchases, do the security investors fund the loans. The security investors only purchase a stream of pass-through cash payments to the subprime collection rights (or prime pass-throughs). .

    Not all mortgages were subprime. If yours was not a subprime — your loan would likely still be with Freddie/Fannie — unless you have defaulted. But, it appears your loan may have been privately funded by whoever funded the “investor.” In this case, good luck finding where it is now. And, Kathy, you will likely never know if the loan ever first passed through GSE.

  54. Is the world ready for Enraged in stereo? ;-(

  55. On the closing documents, was the true and correct “Lender” disclosed? Or was it a strawman…

  56. @Kathy,

    I found my twin! I found my twin!

  57. The Majority of all Refinances were cash-out loans. Almost 99% of all closings the lender gave each borrower a few bucks cash back on the Final HUD at closing,.. to the borrowers surprise of course. It’s usually around one hundred or so $. The lenders have other motives to give those borrowers that small amount of change and call it a Cash Out Loan. … And as far as who I work for …. I was never the conforming type, I’ve been accused of not being a team player. I do have my Beliefs and Values and will not lower my self to their level on the playing field for a fat paycheck. So your answer is …. I’m self-employed and run my own business. Did I mention my friends ( those Lawyers and Law Enforcement Officials you deem all Bad, not to mention the Marine we just buried on Sunday who gave his life for his country, and of course the Teachers ) say I’m bossy to …. hahaha. I’ve never asked for or taken anything I have not earned honestly and fairly. I am a child advocate and a consumer advocate …. I dispise Greedy people! And stupid people really annoy me. That about covers it……

  58. “If you do not like his advise and views …. then stay off his site!”

    Well, okay—I guess a lot of people will have to leave then, if they don’t agree with everything Neil says…
    FYI—I respect Neil immensely—I just keep waiting for the WHOLE truth to come out here—and it’s just not happening…and it’s very frustrating. And for the record—I don’t want a “free house”—I just don’t like it when criminals get away with screwing over millions of people…can you understand that? So don’t judge me and the decisions I’ve made—check your OWN motives.

  59. The “title companies” are part of the criminal enterprise.

  60. The investors are NOT the real creditors—this lie is being perpetuated to the detriment of all the people scammed by this giant ponzi. Some were cash out—but the majority were not…wake up.

    Who do YOU work for?

  61. Check it out for yourself. Call up Any title company, tell them you want to pay off your mortgage and would like a homeowners policy to insure that title is yours. I think you will be surprised by the answer. This appears to be a issue with respect to the authority of the signatory on the reconveyance documents, and the title companies reluctance to take on any more risk than they already have with respect to secularized mortgages. This is why they NEED you to sign something…( loan mod, refinance, shortsale) because they need you to release them from any liability and assume it yourself. No Title Insurance means no ownership and no selling the house you paid for …. because you paid the wrong party. The banks and title insurers are banking on getting you to sign before you find out. Put your pens away and make the Call!

  62. Ding! Ding! Ding! The investors are the REAL CREDITORS! When I purchased my home their was NO Mortgage on it by the seller! The title was free and clear of any liens. The seller recieved CASH! CASH is not a computer transaction! The investors funded our mortgage for us to buy this home and paid the seller CASH! Their is a Huge differance between a Purchase Loan and a Refinance. You should read up on it … I’ve read your sob stories from beginng to end, … you had good advise and you choose not to take it! Now you run around like a hen with her feather stuck up her carcus whining because you think you lost a chance for a free house. And Stop insulting Neil! He is here offering his time and advise to you. If you do not like his advise and views …. then stay off his site!

  63. No they weren’t! No they weren’t! No they weren’t! If that were true, then they would be the REAL CREDITOR—and they are NOT…for the reasons I posted.

  64. All purchase loans were funded with Investor money! All purchase loans were funded with Investor money! All purchase loans were funded with Investor money! Those refinances were and continue to be a smoke screen (like the loan mods) … to get your signiture and get you to admit to a debt, and get a new lien on your title. BUT most of all they are for the purpose to get you to release them ( the new lender) from any liability from your previous lender( the defunct one).

  65. Glad to see your repost of this article Neil, and as always, Thank You for sharing your views. Seems we both have the same prescription in our QQ.
    We ( Investors) put money into our pensions and 401Ks for years to prepare for our retirement. We (Investors) put money (equity) into our homes. We (Investors) lost 18yrs of our savings. We investors are the homeowners and we investors are the tax payers. We Investors want the banks dismantled. We investors want families back in their homes. We investors can no longer afford to retire, and must work til we are 80. We Investors were and continue to be SCREWED, .. just like the homeowner(me) and taxpayer(me). After 30yrs of marriage, I never thought I would have to keep records just to see who screwed me the most. Just sayin… haha

  66. “…gave up their money for funding mortgages and yours was one of the mortgages funded.”

    NEIL—THEY WERE NOT “FUNDED”—WHY DO YOU KEEP LYING? No matter how many times you say it, it doesn’t make it so…

    Come on Neil—PLEASE speak the truth:

    “…since the “loan” refinances (subprime/alt-a), and jumbo new purchases were non-compliant and non-performing manufactured defaults, no funding at all was necessary (except for the cash-out for the loans). The warehouse lines of credit never actually transferred any actual cash for funding. These lines of credit were simply “credit lines” that the “Depositor” would provide to their correspondent lenders. Once the “loan” refinance origination was completed the Depositor would then reverse the “credit” owed by the correspondent (originator). This never involved any actual deposit of cash proceeds —- the “funding” payoff check is never “deposited” into any bank account. The check is routed to a security derivative clearing house — who then simply cancels the credit-line transaction.”
    “DERIVATIVES —- It goes through an automated clearing house — no actual cash exchanged.
    Derivative clearing house — just “cancels” “ownership” by the exchange— all in the name of the trustee — who refuses to disclose the “derivative” holder. “Funding” –is not funding at all. It is a “SWAP” — “swap out” of collection rights. The SEC explained this…quite some time ago….The SEC confirmed. There is no CASH exchange in the “funding.” It is simply a “Swap-out” of collection rights. And, all in the name of a false “creditor” — a trustee —for undisclosed, deregulated, creditor entity.
    SWAP OUT DERIVATIVE. NO cash funding.”

  67. Suppose you drive an unregistered car. You have no license either and, of course, no insurance. You run over two pedestrians while intoxicated. And… you can’t be charged in your state because… well… you didn’t have a license. That’s what’s going on with FM Global. No one will go to jail, no one will be charged. Everything is just peachy!

    Most MF Global Senior Execs Not Registered With CFTC, Can’t Be Charged With Failure To Supervise
    The Huffington Post | By Alexander Eichler

    And from the National Futures Assoc. site:

    Who Has to Register

    With certain exceptions, all persons and organizations that intend to do business as futures professionals must register under the Commodity Exchange Act (Act). The primary purposes of registration are to screen an applicant’s fitness to engage in business as a futures professional and to identify those individuals and organizations whose activities are subject to federal regulation. In addition, all individuals and firms that wish to conduct futures-related business with the public must apply for NFA Membership or Associate status.

    So, under the circumstances, does it really matter if there are any trusts? Trustees? No one is going to jail.

    Pisses me off!

  68. This is true, just trying to cover every base, that’s all.

    Appreciate your feedback. Just have a habit of picking multiple brains.

  69. Seems as though any conflict you inquired about would only arise if the trust exists and is governed by its operating documents. No trust. No conflict. Right?

  70. Bank of America Home Loans Servicing and Bank of America NA…….so what is the real TRUTH behind these 2 ??

  71. Jim: I don’t believe so. It filed a form 15 d January 29, 2008. Still researching all of that now. Had my suspicions for awhile about it’s status.

  72. Does the trust even exist

  73. Has anyone come across a situation where::

    In a foreclosure proceeding,

    Party Plaintiff substitution of trustee:

    The custodian of a securitization trust also gets appointed the trustee of the securization trust?? Due to resignation of alleged original trustee.

    Is there a conflict that should be challenged, if it can be?

  74. Those of us who have lost everything don’t care what happens to the banks Doesn’t help us. Let them take every home in the U S and choke on it

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