FHA Loan Sales Good News and Bad News

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Editor’s Comment:

With the Federal reserve and FHA and soon other agencies selling off their loans it is true that the homeowners will be getting calls inviting them to accept new mortgages at much lower rates and principal owed. But the reason is that the Banks have figured out is that if you can just get a signature from the homeowner who is getting screwed in foreclosure, the Bank’s potential liability for all their illegal activities is greatly diminished.

 

And the fact that the signature of the homeowner does absolutely nothing to clear up title in most cases. The payoff on the old loan was inevitably to a party picked at random from the list of participants in the securitization chains that were created on paper and then totally ignored. When the homeowner gouges to sell or refi his home in a few years, we will have another crisis on our hands because the title won’t be clear by any conventional standards of title analysis.

 

So this “opportunity” is much like the settlements that suddenly appear when the Master Servicer (not the sub-servicer with whom the borrower has transacted business) is ordered to open up its books. The fact is that they used Master Servicer or investment banking escrow accounts where the money from all investors was intermingled in a superFund account where the Wall Street banks kept the money on a tight leash and once again, as they do every 20-30 years or so, totally screw up the paperwork. The difference is that this time the paperwork was screwed up not only between themselves but with the consumers and government agencies.

 

This time, internal sources are telling me independently of one another, that the securitization chain was and is a paper tiger.  There never was  and is not currently anyting in the pools or trusts. In fact, the only thing on paper going into the trusts are bad loans already declared in default and they are going in years after the cutoff date allowed by law and the terms of the pooling and servicing agreement and prospectus. Pension funds are getting a shorter end of the stick than the homeowners, if that is possible. They bought and advanced funds for good loans and all they are getting in return are bad loans that never did conform to the restrictions in the PSA.

 

It isn’t just a technical matter that there was no acceptance of the offer of the assignment. That is a given. who would want a loan that was already declared in default unless they had some other way of satisfying the loan balance in some other way through a co-obligor — like a sub-servicer whose sole action to recover from the homeowner is through a cause of action called “contribution.” That obligation is clearly NOT secured. That action arises out of a contract between the lender and the sub-servicer. There is no contract, note or mortgage between the sub-servicer and the borrower.

 

The question remains in these sales is “what are they really selling.” What is it that the agency “acquired?” What warranties are they giving on the sale of the loans? From whom did they acquire the loans and what due diligence was performed besides taking the bank’s word for it that they owned the loan? Here is the truth: with the REMICs totally disregarded by CDO managers and all the money being in a co-mingled Superfund account it is virtually impossible to determine the indentity of the the “partners” in the loan from the SuperFund because it is impossible to determine the relative amounts of money advanced by pension funds and other investors at the moment the funding took place. What we DO know is that the the loans were sold forward but the loans that were sold forward were based upon paperwork that recited transactions that didn’t exist and never did and never would (thus making the forward sale a civil or criminal fraud). We do know that the claims of ownership from the banks and servicers were at best claims of conveience without substance. So what did the agencies buy and why did they not do their due diligence? Why are we doing the investigation that the FHA and Federal Reserve shold be doing? Why is the burden on the homeowner to discover facts that are readily available to the agencies and law enforcement? When will homeowners stop getting screwed?

 

If none of the elements of a perfected mortgage lien are present, why are we pretending they are there? If removing the illegal mortgage lien and leaving the parties to fight it out or settle the amounts due would revive the economy, why are we not doing that?

 

Why are we substituting new rules of evidence and civil procedure that are created by each judge for the long-standing laws, rules and procedures developed over hundreds of years of common law? How long will we let banks run the system?


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10 Responses

  1. Superb, what a weblog it is! This blog presents useful facts
    to us, keep it up.

  2. […] Read more… Posted in Banks, MERS, News Around The Country, States « Bexar Files Suit over Suit Through a Glass Darkly – The State Bar’s Lack of Transparency On Loan Mod Lawyers » You can leave a response, or trackback from your own site. […]

  3. @dcbreidenbach – thank you

  4. I’d bet there is a correlation between that 90 days behind for modification and the false default of other loans. It appears to this non-accountant that it has to do with, starts with, derecognition of assets. But if that’s true, then someone other than the trust is carrying those loans on its books, I would think. This is something a cursory search turned up:

    http://www.iasb.org/NR/rdonlyres/95CEED68-77DE-42EE-8B92-0C94FC062402/0/Agendapaper5DerecognitionSummaryofproposedderecognitionapproachforfinancialassetsandlia.pdf

    There may also be some entanglement with having to ‘re-purchase’ the loan before modification or at least repurchase or somehow retire someone else’s right to payment, at least that was a clue I thought I got at FNMA’s website. No, I don’t get it, but I really don’t see how not figuring at least the modification part out is an option. I’m not suggesting we’re going to find out anything is being done legitimately, but we can at least try to pull the curtain back on the ‘tricks’ by any other name.

  5. So sick of Bank of America,Pretender lender everytime they call me i tell to serve me with Forclouser,I have a great Attornry,who gets it,I have written MY senator,Freddie Mac,OCC and have Collected several letters From Bank of America admitting to facts and fraud.I WANT BANK OF AMERICA TO BRING IT ON,I stopped paying them a year ago,because they could only provide me with 5 years of payment history,when i have paid for 11 years,All of you out there you must take Neils Advise and,challange everything.Thanks Neil for lighting a fire under my butt to fight for what is right.

  6. They stopped it in Iceland, we can stop it here. When enough people march on our lawless, criminal government and handcuff them, and we collectively revoke the licenses of all corporations doing business on this soil who have participated in the giant transfer of wealth and sovereignty, it will end. Wake up your family members. Wake up your neighbors. Turn off the TV and get serious about saving our nation. You are that much closer to being ushered into a FEMA camp if you’re homeless, so fight to keep what is rightfully yours under the LAW. It’s perfectly legal to establish a currency for your state or community, and the global psychopaths can’t do anything about it. The only way they have any authority over you is if you agree to their authority. Spit in their evil faces and stand up to them. Their goal is to destroy the dollar so that they can implement a global currency, and thereby control everyone. They can’t control you if you have your own money. They also can’t control you if you’re off their utility grid. Build some solar panels or build an eco generator. Start up victory gardens with organic methods and bio-dynamic seeds. Get free of their domination and become self sufficient if you want the evil to stop, and stop buying from big corporations because without a customer base, they’ll dry up. No one has a right to rule. No one can earn it or inherit it, either. They need to get the message. Freedom is an inalienable right given by our Creator, not governments. Bankers and the elite think they run things, but what they’ve done is bring about their own end through power mongering and insatiable greed. We will stop them and return to being a nation of laws…and homeowners, if we get off our collective butts and act.

  7. They are just going to keep changing the laws and printing money…and never let anyone keep their home…because what about all the people (millions) who were kicked out already? The whole global system—materially and spiritually—is fatally flawed…and dying.

  8. @ N. GARFIELD

    WHAT IS A FAILED TRUST AND WHAT ARE SOME INDICIA OF A FAILED “TRUST”?
    There are various means by which a trust’s “existence” may rise or fall under common law. Typical failure to: maintain the legal and administrative-operational trappings. Typically this would likely entail poor or no records. Bad record-keeping is a certain sign of aberrant behavior. Another failure might be to have failed to file mortgage loan schedules with Delaware or NY Secretary of State UCC Division and/or in accordance with SEC filings for the trust. A trustee’s fiduciary duties require regulatory compliance. These filings detail the trust’s assigned mortgage-notes. The trust must be able to identify its initial or altered corpus with reasonable verification. Other failures to follow its own formalities—more defects. This could include everything from failing to keep notes of decision-making, to commingling or misstating accounts and/or REO. One subgroup is the degree to which a “trustee” publishes its declaimers to its MBS investors on the bank-trustee’s website. If the disclaimers are reflective of a an abandonment of fiduciary responsibility for the accuracy of its numbers—then its merely making an “admission” that it is not a “trustee”. Another violation of trustee duty would be acquiescence in systematic diversion of investor monies. Examples would be negligent oversight of fee distributions—failure to negotiate contracts in the best interests of the trust beneficiaries
    The common law trust rules in respect of identification of trust assets as of a snapshot in time are engrained in the boilerplate of the securitization documents to meet IRS REMIC requirements.
    If a “trustee” wants the trustee status—he must act like one.
    WHAT HAPPENS IF THE “TRUST” FAILS?
    Its capacity to act as an entity represented by a immune, absent fraud, or judgment proof “trustee” is removed. The failed trust documents still contractually regulate operation at some level—but the “business activity” is managed by co-operators: of a joint venture pool of passive investors. If any of these investors undertakes a material role in management of the business, then that person becomes a party also. The split of revenue is usually designed to reflect the roles played by the operators. They have a duty of fair dealing with their investors—but most often not the great specifity of entities described by statute: partnerships, LLC, Corporations. Joint investment mineral extraction often involves this form of ownership—there is law. State law will often fall back on a catch all entities engaged in business activities that generate cash flow in the state. Business receipts and franchise and local fees are involved with the entity. The operator is not exempt as a trustee might be. The joint venture is not exempt either. The managing operator—aka common law general partner owes taxes on income, franchises, licensing fees in ever jurisdiction where it possesses real estate. Possession of real assets by a joint venture triggers tax jurisdiction for trust income. Every state, county, municipality, school district and unincorporated township fire department has a shot at the “failed trust”. The situs for determining where taxable services are allocated for purposes of payment of servicing fees for the operator involves whether the service performed occurred at the location of the real estate. Service fees tacked onto a preserver or realtor should be deemed allocable to the location the service was performed by agency. If the agent is there then so is the principal that engages the agent—especially negligent agents negligently selected. Splits with attorneys working at law firms by the joint venture pool and its managing operators would have a situs in that jurisdiction for state and local income taxation and license fees. The purported trustee, the servicer, the preservers all have liability to local tax authorities. For repairmen taxes are usually imposed by the jurisdiction where performed. School districts and other jurisdictions that are owed taxes should file “jeopardy assessments” against the failed trust joint venture entities and file a notice of tax lien against all properties in the jurisdiction –or upon one.
    What must a corporate tax manager and his outside auditor be thinking? How much do I owe? Do I propose a state/local “tax provision” to impair earnings and establish a liability on the balance sheet? If I put a state/local liability sheet, what will happen if my host state franchise tax auditors see it? Are they bound to secrecy, or are they members of some regional data sharing memorandum of understanding? Will my secret get out? Will my placement of the liability on the balance sheet trigger contingent liability to become fixed by assessment? If I know about this problem: Do I have an ethical obligation to disclose it, if I am an attorney? Does the entity or I have exposure to criminal liability or stiff civil penalties if the state/locals discover it of themselves? The answers to these questions should be an emphatic yes—subject to Sarbanes- Oxley disclosure for publicly held banks that are purported trustees, servicers and preservers of every stripe. For the unregulated private hedge fund-controlled that are considered by some to be “slippery” the view likely is: I’ll pay if they catch me, what they don’t know won’t hurt them!
    SHOULD THE FAILED TRUST BE REQUIRED TO DO A NAME CHANGE ON THE DOCKET?
    If the entity is represented before the court as one thing with one set of legal rules, but in fact is another, then it would seem that there is an ethical requirement to acknowledge the change by a statement to the court and affected parties. To do otherwise would be intentionally misleading. A piggyback motion by defendant or plaintiff homeowners should be able to gain some legitimacy if the state and local tax authorities file their tax liens publicly.
    WHAT IF THE NAME CHANGE INVOLVES A SUBSTITUTION OF PARTY?
    When the parties start name changing, it would be most beneficial to the servicer et al to shift the property and liabilities into some subsidiary or otherwise controlled newco –most likely an LLC. LLC’s are designed to isolate the parent-wrongdoer from liability on future judgments. A corporation, joint venture or otherwise cannot cede its liability on past events and taxable income. Lawyers and laymen alike frequently make a fundamental mistake. They confuse assignment of rights-assets with assumption of debt. A corporation is stuck with liabilities. It can enter into an agreement with another to “assume” that liability along with a related assignment or other recordation of asset transfer. The primary obligor is the wrongdoer—not someone else that may have agreed on paper to assume the debt. This area is ripe for abuse.
    This writer was a tax attorney with 3 major companies; two fortune 100 companies with 30 years’ responsibility for the state and local tax compliance function across all states and subdivisions, among other duties..

  9. No kidding! For those of us who paid for YEARS and YEARS on our loans, we very likely paid more than the actual value, which was way less than the state value in the fraudulent appraisals. We should own our houses free and clear by having PAID IN FULL for them.

    Then consider all the ways the banksters profited from our loans: PMI, FDIC Shared Loss agreements, Pool Insurance, Broker Yield Spread Premiums, inflated closing costs and junk fees, & our down payments. Fractional reserve lending alone may have allowed the bank to make over a million dollars in profit on your loan, yet you never hear this mentioned when they file to foreclose on you. I’m sure a lot of people paid those outrageous interest fees that were tacked on to cure their reported “defaults” to catch up after the lying bastards told them they had to be three months or more behind to qualify for modification. Oh, and those deficiency judgements…where the defrauded “borrower” had to pay income tax on the loan balance as if it were income! The answer to the question is, the banks will continue to rig this game until we put a few of their heads on our spears, or they go bust whichever comes first. I’m sharpening my spear as we speak…

  10. Just give the homeowners their houses !!!….. They are NOT Free

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