Banks stepping on Another Rake —- unless…

Could it be that the banks are ordering their “independent” trustees to alter the wording of the notice of sale and the ensuing deeds or transfers to look as bad as possible so they can get your home for 5 cents on the dollar? see alert-trustees-selling-liens-not-property-and-property-without-title

Unless the bank’s are going to rig the real estate marketplace like they did in the mortgage meltdown,like they did in the foreclosure auctions, like they did in the Libor rates,  like they are doing in the auctions for municipal and other government bonds and notes, they are trying to take advantage of the extremely low prices which their lackeys (“trustees”) are selling properties for “credit bids” to non-creditors and then turning around and coming back in as a “third party to buy the properties at those price levels.

Example: House originally sold for $685,000 with a mortgage of $550,000. Value of house 2 years before was $390,000. Sale at auction proceeds zero because it was a credit bid. Sale to “third party” was at $47,500.

Here is my opinion taking my cue from past behavior. This is part of the continuation of the illusion of the securitization scheme in which it appeared as though loans were sold, traded and sliced up — something that never actually happened. It is also another tool to “attract” (read that “lure”) investors into buying into REITs in which they will make money selling the REIT interests, they will make money if the REIT succeeds (doubtful, once title is addressed and the foreclosures are all overturned), and they will make the MOST money when the REIT fails because they are placing bets that the REIT will fail.

If my opinion is correct, we will suddenly find ourselves on the same side as the banks claiming that the liens are invalid, that the foreclosures were void, and that the REITS got nothing. And suddenly those politicians who march to the drum of the bankers will vote for “relief to homeowners” and provide yet another windfall to Wall Street. BUYER BEWARE!

Take a look at this:

By Stephen Gandel

Your house might be a better investment than you think. At least Wall Street seems to think so.

For a while now the conventional wisdom on real estate has been that while home prices might not fall much more, they aren’t likely to go up anytime soon either. The best personal finance advice, then, when it came to buying a house, was to buy as little as possible.

Apparently, though, on Wall Street that common wisdom about home prices is not held by all, or even many. In the past six months or so, a number of investment firms, hedge funds, private equity partnerships and real estate investors have turned into voracious buyers of single-family homes. And not just any homes, but foreclosures. Investment banks, who also want in on the action, are lining up financing options to keep the purchases going.

Take for instance private equity mega-firm Blackstone Group. About a year ago, when The New York Observer profiled the firm’s head of real estate, Jonathan Gray, there was no mention of single-family homes or even that the firm was looking to profit from a rebound in the residential real estate market.

Last week, Gray said that Blackstone now owns 2,000 single-family homes. At $300 million, that might be small compared to Blackstone’s overall real estate portfolio of about $50 billion. But it’s one of the biggest piles of homes ever intentionally put together by an institutional investor, and it’s likely not the largest portfolio out there these days. (Banks and Fannie and Freddie are sitting on many more foreclosed homes, but that’s a different story.)

Buying up single-family homes as an investment is nothing new. It’s what landlords do all the time. But landlords have always tended to be mom-and-pop outfits often not owning more than a few dozen units confined to one area. Large Real Estate Investment Trusts and private equity funds generally focused on apartment buildings and commercial real estate, like malls and office buildings. That appears to be changing.

Kenneth Rosen, a professor at the University of California, Berkeley, who has a consulting firm that advises real estate investors, says that he knows of two dozen investment funds in the process of buying up single-family homes, a number of which are hoping to own as much as 10,000 homes around the country. He predicts that there could be as many as a dozen public real estate investment trusts, or REITs, in the next few years that are devoted to single family homes.

see entire story at Wall Street Loading Portfolios with Your Homes

19 Responses

  1. @KS: smells as if somehow somewhere you had something to do with this mortgage meltdown long before 2004 but were afraid to blow whistle so you put it in your personal lawsuit instead??? Yes/No???

  2. @Deb: Yes, its just a criminal in LLC disguise (using probably a lawyer as strawman)

  3. @guest
    those homes are sold into a LLC ( purchased for pennies on the dollar) they will rent them and sell back to the guy behind the LLC -Goldman sacks?

  4. @ K.S. : this news confirms your 2004 disclosures with Fannie Mae at center just like you wrote, selling U.S. homes for pennies on the dollar:

  5. “Banks stepping on another rake….”

    ….which causes the regulators great angst, fearing that their client banks may have injured themselves. Congress will call for less rakes, Obama and Romney will talk about anything besides the fraud in gardens across America, and debtors will succumb to the blight and pestilence in courtrooms from sea to sea. Fuck them all. We need to plow this whole bunch under and sow new seeds.

  6. Davies,
    Good stuff on Fannie. I agree with you, they ARE criminals. The only drawback to suing them is that they get to use our money (i.e., our ongoing bailout of Fannie) to fight us.

  7. Off topic: Thought this might be helpful to Floridians:

    Summary Judgment for homeowners

  8. When you say Fannie Mae, do the same apply to Freddie Mac as well… my problems are with Fannie Mae AND Freddie

  9. @DAVIES
    “There is commentary upon Article III of the UCC that a bearer note in the hands of the thief who stole it nevertheless is due and payable to its bearer. ”

    Could you provide the cite on this—iv seen this argued both ways. Cases?

    Secondly–the writeup is impressive in scope. above it is also stated that there is a listing that a person can look to to ascertain if their loan note is held by FM. Is that an accurate re-statement iv made? Is that a defense to a subsequent claimant waiving the original wet ink note?

    Above there is a statement that says that the SEC has a wealth of detail as to listed notes–something to that effect. I take it you refere to the mortgage loan schedules in part? If so I would point out that while that is theoretically true –and in my experience is accurate vis bigbabk originanated loans-tsponsored trusts–it fails in a high percentage of trusts created by the private labels that obtained waivers from electronic filing of the mortgage loan schedules. There is no list anywhere to look to to verfiy the claim of the party bringing the action on the note.




    The FNMA

    FNMA raises an iron curtain of inscrutability. It maintains a web site for the public upon which a search can be conducted to ascertain whether FNMA claims to have acquired the mortgage. There is no way to find out what happened to a specific mortgage after it was allegedly purchased by FNMA. The situation is further complicated by the fact that FNMA issues mortgage backed securities without being required to register the investment with the SEC. Accordingly, the wealth of documentation contained in the SEC data base which is used to conduct a securitization audit for a non-GSE transaction does not exist.
    What does FNMA do?
    FNMA’s principal operation is to purchase mortgages, establish a mortgage backed securities trust (MBST), and sell a multi-mortgage portfolio to the MBST by issuing securities in the form of certificates to investors. Frequently FNMA pays the seller for the mortgages with trust certificates instead of cash. The most likely destination of a purchased mortgage is a FNMA organized and controlled MBST as most mortgages FNMA bought were processed in this way. The FNMA MBST looks exactly like the process for creating a private MBST, but it is not.
    What are the investors buying?
    Without getting into the mechanics, an investor buys a security much like a coupon bond. The investor receives a stated, fixed amount periodically payment, each month, from the mortgage pool proceeds.
    What makes FNMA completely different was that along with each security went the FNMA guaranty of payment?
    It matters little how the income of the trust is obtained because of the guaranty. In the national and international markets, FNMA guaranteed mortgages were seen as equivalent to a debt secured by the full faith and credit of the United States.
    FNMA was not part of the Federal government.
    It was only a federally chartered corporation. The recent housing calamity with failures by necessity obligated the Federal Government to treat the FNMA guarantee as a Federal obligation. FNMA has to make sure all investors get paid. In other words, everyone always believed that so long as certificate holders get paid on time and in full, everything will work out just fine. Many conservative investors bought FNMA guaranteed certificates.
    Legal requirements to conduct foreclosures in the event of a default in payment received little attention and was not a priority in the boom years.
    Given the security of the guaranty, the security of the collateral [property] was a minor factor when the default rate was low. Despite this, FNMA went to the time and trouble to create it tax privileged MBSTS to decrease the effective tax rate on the investment. Thus in turn increased the demand. Each Fannie Mae MBST owned the mortgage portfolio as collateral to secure the certificate holders.
    Why MBST? The explanation can be reduced to one word, TAXES.
    Congress created the “real estate mortgage conduit (”REMIC”) to enable an investor to escape so-called double taxation. Normally, a trust pays taxes on its income. If the income is distributed to a beneficiary, the beneficiary pays income taxes all over again. The REMIC allows a “pass through” of the income without payment of income taxes by the trust. The tax exemption for the pass through transaction substantially increased the net return on investment to an investor.
    To qualify for the pass through treatment for its investors, FNMA had to organize MBST’s which qualified and would be treated as REMICs. A REMIC MBST had to be in compliance with a set of strict rules essentially designed to make the MBST a passive investment vehicle. These trusts were formed using Washington D C trust laws. These chosen laws have strict compliance requirements.
    During the mortgage boom private MBST and FNMA [15 million mortgages worth $ 5 trillion] decided they could cut corners and simplify the process.
    1) FNMA did not have to register the certificates it issued with the SEC.
    2) FNMA, in organizing its MBSTs, [controlled every step without oversight] acting as the Issuer, Depositor, Trustee of the MBST, Master Servicer and Custodian.
    3) FNMA created, supervised, otherwise controlled and audited the financial records. In short FNMA had to disclose nothing and controlled everything.
    4) FNMA became a successful secondary mortgage market titan, essentially autonomous, free of government oversight, flush with money and with a federal guarantee.
    Under these circumstances, FNMA found that it could organize MBSTS to secure its certificate holders pass through tax treatment while simultaneously operating a blind investment.
    The conservatorship [takeover] of Fannie Mae and Freddie Mac.
    The federal takeover of Fannie Mae and Freddie Mac refers to the placing into conservatorship of government sponsored enterprises (GSE) Fannie Mae and Freddie Mac by the U.S. Treasury. On September 6, 2008, the director of the Federal Housing Finance Agency (FHFA), James B. Lockhart III, announced his decision to place two Government sponsored enterprises (GSEs), Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), into conservatorship run by the FHFA.
    The Housing Collapse created and unintended consequences, requiring foreclosure liquidations.
    The housing collapse spoiled the party. FNMA became insolvent. At the same time, loan defaults increased substantially above any level that had been forecast or foreseen. It now behooved FNMA to enforce its mortgages and foreclose; except FNMA was no longer in complete control. Legal requirements have to be met to be complaint with the MBST tax status.
    FNMA has problems [not including political] when it comes to conducting foreclosures.
    FNMA organized REMIC compliant MBSTS.FNMA’s foreclosure procedure is fatally flawed. The MBST collateral agreement does not identify a distinct creditor. FNMA is trustee for either a non-existent secured creditor, an unidentifiable secured creditor or a creditor not legally attached to a mortgage FNMA is left in documentary limbo.
    FNMA’S MBST structure and handling of the collateral [property].
    Typically FNMA purchased mortgages in a bilateral or tripartite contract consisting of FNMA as purchaser, the seller and the subservicer of the loans sold. Very often, the seller also became the subservicer of the loans sold [the bank that participates in the origination]. FNMA immediately became the trustee for the MBST it formed, the Issuer of the certificates of the MBST, the Master Custodian and the Master Servicer. The mortgage notes were to be endorsed in blank by the seller [i.e. originating bank] to be delivered either to FNMA or to MERS [as the originating bank].
    Mortgages received by FNMA were deposited either in FNMA’s vault in Herndon Virginia or in one of 58 sub-custodian depositories [originating bank], each qualified to serve as a sub custodian to FNMA.
    FNMA was required by Washington DC trust law to receive an assignment of the mortgage from the seller [originating bank] to FNMA to be included in the trust.
    By controlling every aspect of securitization, FNMA became a law unto itself. It held all the cards. It could do what it wanted. Concurrently, it raised an iron curtain of inscrutability. It became a toxic cocktail that contributed to FNMA’s undoing. Ironically, by controlling every aspect of the securitization process, FNMA eventually wound up losing control, making mistakes, burying mistakes and compounding error.
    FNMA is not a Federal agency.
    Fannie Mae must be described in the legal proceedings as “Federal National Mortgage Association (Fannie Mae), a corporation organized and existing under the laws of the United States.” The servicer [originating bank or successor], its legal counsel, and foreclosure attorneys (or trustees) involves a Fannie Mae–owned or Fannie Mae–securitized mortgage loan or that will otherwise affect Fannie Mae’s interests—regardless of whether Fannie Mae is also named as a party to the action—the servicer must immediately contact Fannie Mae’s Regional Counsel via e-mail Also any court based on Fannie Mae’s Charter; claims punitive damages from Fannie Mae; or asserts liability against Fannie Mae based on actions of its servicers. Additional examples include ‘show cause orders’ or proceedings and motions for sanctions.” Fannie Mae Single Family 2011 Servicing Guide, June 10, 2011, pp. 801-2-3.

    To foreclose upon the property secured by the mortgage, three requirements must be met:
    1. The debt. The debtor must have incurred the debt and secured the debt with the mortgage.
    2. The default. The debtor must have defaulted under the terms and conditions of the mortgage.
    3. The secured creditor. The creditor on whose behalf foreclosure is taking place must be the party secured by the mortgage.
    Foreclosure is still the exclusive remedy of the secured creditor.
    A mortgage can only be enforced either by the party it secures or the duly authorized representative of such party.A note endorsed in blank is a bearer note payable to whosoever is in possession of the note. If the holder of the mortgage note is likewise a holder in due course, the debtor is not entitled to affirmative defenses relating to the three conditions noted above. There is commentary upon Article III of the UCC that a bearer note in the hands of the thief who stole it nevertheless is due and payable to its bearer. What this argument overlooks is that foreclosure is not collection of a negotiable instrument. If counsel wants to pursue this theory, the case should be dismissed while counsel attempts to collect the debt unsecured by the mortgage as a general creditor.

    First Argument:
    (a) The party seeking to foreclose is not the real party in interest and has no right to foreclose.
    (b) The party seeking to foreclose lacks standing.
    The party seeking to foreclose is not a holder of the note and lacks legal authority to foreclose upon the note. Instead the party is likely a sub servicer [originator or successor] of the loan. The subservicer of the loan has neither an equitable nor a legal interest in the loan.
    FNMA attempts to use a straw party to foreclose a loan on its behalf. FNMA as trustee of the MBST does not own the loan. However FNMA attempts to create a new law.
    FNMA’s notion of constructive possession by the subservicer flouts the law of negotiable instruments by a party to enforce a note endorsed in blank without possession of the note.

    Chapter III of the UCC provides no basis for paying a bearer note absent a bearer. It would allow any pretender to come in and foreclose claiming the pretender held constructive possession of a note held by another. To allow this procedure to affect foreclosure requires a revision of existing law in both judicial and non-judicial jurisdictions. It would permit foreclosure of the interest of a secured creditor by a party neither secured by the mortgage nor authorized to act on behalf of the secured creditor.

    Nowhere does the pleading ever inform the court that the loan has been sold to a MBST and that FNMA acts as issuer, servicer, trustee and custodian for the MBST. The pleading is simply a charade and obfuscation of the many roles of FNMA and the identity of the owner of the secured loan in question. FNMA calls for its servicer to perpetrate deceit and fraud upon the court and upon the debtor.

    Second Argument:
    (a) FNMA is not the real party in interest and has no right to foreclose. FNMA lacks standing.
    1)Upon information and belief, the loan was not assigned to FNMA.

    FNMA requires the seller of a loan to deliver an assignment to FNMA in its corporate capacity. The Trust Indenture which established the MBST contains the language of assignment. It states:

    “2.1(1) Declaration of Trust, Transfer and Conveyance of Mortgage Loans. By delivering at least one Certificate of a Trust in the manner described in Section 3.1, the Issuer unconditionally, absolutely and irrevocably sets aside, transfers, assigns, sets over and otherwise conveys to the Trustee, on behalf of related Holders, all of the Issuer’s right, title and interest in and to the Mortgage Loans in the related Pool, together with any Pool Proceeds. Once Mortgage Loans have been identified as being part of a particular Trust for which at least one Certificate has been issued, they will remain in that Trust unless removed in a manner consistent with the Trust Documents.” Trust Indenture 2008, p. 20.

    The Trust Indenture’s assignment states once the loan has been “identified”, it become part of the mortgage pool of the MBST. How, where and when did the identification take place which included the mortgage being foreclosed in the MBST pool? A trust can be organized without a transfer of property to the trust. It can only come into existence when property actually is transferred to the trust. The issuance of a certificate does not constitute a transfer of property to the trust. Accordingly, there is no evidence from which a court can infer such a transfer was actually made. The fact that MBST certificates were sold to investors who paid for the certificates does not show that the specific mortgage being foreclosed was ever transferred to the MBST.

    2) FNMA failed to transfer the loan to the MBST. The assignment was never performed because FNMA retained the loan it purported to assign.

    The Trust Indenture which formed the trust states that its assigns the loans from FNMA corporate to the trust effective upon issuance and delivery of the first certificate. “2.1(1) Declaration of Trust, Transfer and Conveyance of Mortgage Loans. By delivering at least one Certificate of a Trust in the manner described in Section 3.1, the Issuer unconditionally, absolutely and irrevocably sets aside, transfers, assigns, sets over and otherwise conveys to the Trustee, on behalf of related Holders, all of the Issuer’s right, title and interest in and to the Mortgage Loans in the related Pool, together with any Pool Proceeds.” Id.

    The Trust Indenture Form and Prospectus Form both state that by the issuance of the first certificate FNMA assigns the mortgages to the MBST in its corporate capacity. However, both documents also provide that the mortgages shall remain in the possession of FNMA. THIS LACK OF DELIVERY OF THE NOTE FROM FNMA CORPORATE TO FNMA AS TRUSTEE raises a severe problem.

    This became so confusing, even FNMA could not keep its story straight concerning who holds what. In a letter dated July 31, 2003 from Jonathan Boyles, Vice President for Financial Standards and Corporate Tax Controller Department of FNMA to the Financial Accounting Standards commenting on a proposed revision of an accounting rule said:

    “Under no circumstance does either Fannie Mae in its corporate capacity or the lender retain control of the loans within the trust. Fannie Mae serves as both the guarantor and trustee for the trust… Investors in these securities hold the security on their balance sheets.” Letter of Comment No: :; Z.File Reference: 1200-001. Date Received: 01/31/0 J

    The above quoted document explicitly says FNMA corporate does not control the loan.
    “Each transaction in which mortgage loans and/or participation interests, whether whole loan or for securitization, are delivered to Fannie Mae is expressly intended, by both Fannie Mae and the lender, to be the lender’s true, absolute, and unconditional sale to Fannie Mae of the mortgage loans and/or participation interests, and not the lender’s pledge thereof to secure a debt or other obligation owed to Fannie Mae. (For more information, refer to the Selling Guide, A2-1-02, Nature of Mortgage Transaction which says: ’Every delivery of mortgages and/or participation interests, whether whole loan or for securitization, is expressly intended, by both Fannie Mae and the lender, to be the lender’s true, absolute, and unconditional sale to Fannie Mae of the mortgages and/or participation interests, and not the lender’s pledge thereof to secure a debt or other obligation owed to Fannie Mae.’”). id.

    It was supposed to be an unconditional sale of the Note to the Trust, but FNMA never got around to assigning the Note or delivering the Note to the Trust.
    These two documents, the letter and the Selling Guide, claim an absolute sale of a loan was made to FNMA corporate. The term “true sale” means that the purchase price was paid and the item purchased delivered to the purchaser. The form of assignment used by FNMA makes FNMA corporate the assignee not the MBST.

    The 2006 FNMA Prospectus clearly states:

    “We or our custodian either takes possession of the original note endorsed in blank (or a duplicate copy of the original note along with a lost note affidavit, in the case of notes that have been lost or are missing). If we use a custodian, the custodian must be one of our sellers or their affiliates, a mortgage banker or an institution that is supervised and regulated, or a subsidiary or affiliate of an institution that is supervised and regulated, by the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation or the National Credit Union Administration. Before issuing a series of certificates, we review the mortgage loan schedule for that series, and afterwards we may, from time to time, conduct random spot checks to confirm that the related documents are held by the custodian.

    “We have the right to change these document delivery and custody requirements at any time so long as we determine that the change will not materially and adversely affect certificate holders’ interests. We have set up these requirements to protect certificate holders’ interests in the mortgage loans contained in the related pool. Nevertheless, because the law is unclear regarding a liquidation, reorganization or similar proceeding involving the assets of Fannie Mae, no assurance can be made regarding the status of the certificate holders’ interests in the mortgage loans if a proceeding of that type should occur.” P. 31 emphasis supplied.

    In this document:
    The “We” refers to FNMA in its corporate capacity, Not only does FNMA corporate continue to hold the loans in its own name but it cannot even assure certificate holders that in the event of a FNMA liquidation the loans will be inaccessible from FNMA creditors even though the loans were supposed to belong to the MBST.”

    The ambiguity is not accidental. FNMA’s documents explicitly confound the question who is the real party in interest. The Designated Custodian Master Custodial Agreement (Fannie Mae Form 2010) states:

    (a) All Documents are held solely and exclusively for Fannie Mae. Subject only to that
    limitation, Custodian shall make disposition of Documents solely in accordance with
    instructions furnished by Fannie Mae in the Guides, the Requirements, or otherwise by notice from Fannie Mae. Further:
    [1] Custodian specifically acknowledges that Fannie Mae has the right to require Custodian to release all Documents, or any portion thereof, pursuant to Fannie Mae’s instructions, without payment to Custodian of any fee or charge, or other thing of value.
    [2] Unless otherwise instructed by Fannie Mae, Custodian may release Documents that are related to Mortgage Loans that have been removed from the List of Mortgages before Custodian delivers its Certification. Release in such cases shall be to the party that Custodian determines to be entitled to the Documents.
    [3] If a Mortgage Loan became an MBS trust asset and title to such Mortgage Loan thereafter is transferred to Lender, then Custodian may release the Documents that are related to that Mortgage Loan, provided that Fannie Mae as Trustee (or Fannie Mae’s successor as Trustee, if any) notifies Custodian that such Mortgage Loan is no longer an MBS trust asset.” P. 10.

    The agreement is made in the name of FNMA as “Custodian” and “Lender”. Id at p.3. The term “Lender” is not further defined. The term “FNMA” is defined as “Federal National Mortgage Association. See Section 21.” Id at p.4. Section 21 states:

    (a) The section headings herein are for convenience only and shall not affect the construction of this Agreement.
    (b) References to Fannie Mae are references to Fannie Mae as Trustee (or to the successor Trustee, if applicable) whenever the context involves Fannie Mae’s relationship to a Mortgage Loan that is an MBS trust asset at the time in question, or to the Documents associated with such a Mortgage Loan and to Fannie Mae as owner whenever the context involves Fannie Mae’s relationship to a Portfolio Loan or Early Funding Loan at the time in question, or to the Documents associated with such Portfolio Loan or Early Funding Loan.” Id. at P. 18.

    In short, the loan belongs to the holder du jour which happens to be FNMA in whatever role or capacity it chooses to select for the specific purpose at hand. Assume the Trust Indenture actually assigned the loan to FNMA. Under these circumstances, either the note endorsed in blank was delivered to the MBST by FNMA or it was not. FNMA tries to have it both ways.

    Under this theory FNMA in its corporate capacity does not own the loans. This means it cannot authorize a trustee on a deed of trust to foreclose or agree to substitute a trustee for the current incumbent on the deed of trust. Similarly in a judicial jurisdiction, FNMA in its corporate capacity cannot assign the mortgage to the plaintiff seeking to foreclose or legally transfer possession of the note endorsed in blank since the property does not belong to FNMA in its corporate identity.

    3) The assignment was ineffective under District of Columbia trust law because it was not recorded.
    The problems are further compounded by FNMA’s failure to comply with the trust laws of the District of Columbia. The Trust Indenture provides that the trust is organized under the laws of the District of Columbia. This is noteworthy and unusual. MBSTs not organized by Government Sponsored Enterprises (“GSEs”) like FNMA are normally organized under the laws of Delaware or New York. In this case, D.C. law is controlling. FNMA has failed to comply with DC trust law.
    DC trust law adopted the Uniform Trust Act. The Act is silent about the procedure required to transfer an interest in real estate to a custodial trust. The MBST created by the Trust Indenture is a custodial trust under D.C. trust law. A Mortgage is an interest in real estate. This is so in both judicial and non-judicial jurisdictions. In non-judicial jurisdictions, such as D.C., the deed of trust conveys title to the mortgaged property to the mortgagee because D.C. is a title theory jurisdiction and not a lien theory jurisdiction.
    Under D.C. trust law, an interest in real estate may only be conveyed to a trust such as the MBST by an assignment which is recorded. In this case, the assignment was never recorded. D.C. Official Code § 47-1431(a). D.C. Code Section 47-1431(a) requires that all documents by which legal title to real property, or an estate for life or a lease for a term of at least 30 years is transferred, or by which a security interest in real property is conveyed, be recorded with the Recorder of Deeds within 30 days of its execution. D.C. Code Section 47-1433(c) further provides for a $250 penalty for failure to record within the 30 day period.
    The lack of transparency further hides what FNMA may or may not have done with the loan. The failure to record the loan has serious adverse consequences if one is trying to determine who holds the mortgage note. The Trust Indenture provides FNMA with the right to select the loans for inclusion in the trust. The Trust Indenture allows FNMA to remove loans from the mortgage pool from time to time for different reasons. Once a mortgage is reported by the public search engine as having been allegedly acquired by FNMA, its actually destiny remains a complete secret. FNMA may:
    (a) Hold the note in its portfolio.
    (b) Sell the note.
    (c) Pledge or hypothecate the note.
    (d) Securitize the note in a MBST.
    (e) Securitize the note in more than one MBST.
    (f) Redeem or replace a note it has securitized.

    Third Argument:
    FNMA and the party seeking to foreclose have knowingly, deliberately and intentionally failed to credit the debtor for payments allegedly in default which were paid in fact.

    (a) The party seeking to foreclose has filed an affidavit of indebtedness which intentionally fails to disclose monthly payments of the mortgage which have been collected and paid to the certificate holders of the MBST as required by the Trust Indenture.
    (b) The party seeking to foreclose is the servicer who made the payments on behalf of the debtor and has wrongfully failed to disclose to and withheld this information from the court and the debtor.
    (c) The payments made by the servicer were not credited to the account of the debtor under the express and explicit written rules prescribed by FNMA to its servicers.
    (d) The servicer is wrongfully and falsely attempting to recover advances it made as an unsecured creditor under the false guise of being the secured mortgage creditor.

    According to the Trust Indenture, and 2012 Servicing Guide, the servicer is required to make a monthly payment from its own funds if such payment has not been timely made by the debtor. Section 5.2 of the Prospectus states: “5.2(1) Making and Reimbursement of Servicing Advances. The Direct Servicer will make Servicing Advances as and to the extent provided in the Servicing Contract.” Id. at P. 42. Payments made to certificate holders of a MBST are not recoverable from the MBST but only from payments made by the debtor. “Servicing Advances may not be recovered out of Pool Proceeds except from amounts received with respect to the Mortgage Loan as to which such Servicing Advances were made, or as otherwise permitted under the related Mortgage Documents or Servicing Contract.” Id.
    Section 202.03 (Delinquency Advances) of the FNMA 2012 Servicing Guide states:
    “A servicer of portfolio mortgage loans or MBS mortgage loans that are scheduled/scheduled remittance types—regardless of the applicable servicing option—is required to advance scheduled P&I until a delinquent mortgage loan is removed from Fannie Mae’s active accounting records or the MBS pool. If the funds on deposit in the servicer’s P&I custodial account on the day the monthly remittance is due to Fannie Mae are less than the amount of the required monthly remittance, the servicer must make a delinquency advance by depositing to the P&I custodial account enough of its own funds to make the total on deposit equal the full amount of the remittance Fannie Mae is due. The servicer may reimburse itself for its delinquency advances from borrower collections that are subsequently deposited to the P&I custodial account.” P.75.

    Advances are not treated as loans to certificate holders. Interest payments received in the form of advances are taxable to the certificate holder as interest income. Neither the MBST nor its certificate holders is responsible for repayment of advances made by the servicer. Put another way, once a certificate holder receives the January payments as an advance, the payment has been made. It not in default as far as the mortgage and mortgage note are concerned. Nowhere in real estate law in any state or in federal court is there a decision which states that only the mortgage debtor must make a required payment in person. Instead, any other person can make the required payment on behalf of the debtor.
    The party bringing foreclosure is usually the servicer which made the advances. This means that the servicer conceals from the court information known to the servicer that the payments which the debtor failed to pay to the certificate holders were paid instead by the servicer.
    Even if the Servicer has a claim for repayment against the debtor for the advances, such a claim is not secured by the mortgage.
    The Servicer is not a secured party but a general creditor instead. In short, it is wrongful and a violation of law to foreclose to collect repayment of advances made by the Servicer. It is no different than if the holder of the note foreclosed on a mortgage because the debtor failed to pay a plumbing bill to the creditor’s brother-in-law.
    The debtor is not a third party beneficiary of the PSA. The debtor neither had knowledge of nor agreed to the advances paid by the Servicer. Such advances were not paid by the Servicer for the benefit of the debtor. Such advances were part of the servicing agreement between the Servicer and the Trustee. Advances were a “concession” given by the Servicer as an inducement to persuade the Trustee to employ the Servicer’s services.
    Fourth Argument.
    FNMA’s conduct bars it from an entitlement to an equitable remedy such as equitable assignment or equitable subrogation of the MBST.
    (a) If such relief is provided, it will still require the foreclosure to be brought by the trustee of the MBST or the agent, duly authorized, of the trustee. This is not the case before the court. Awarding such relief at this time would, accordingly, be premature since the correct party has not sought the enforcement of foreclosure.
    (b) FNMAs deliberate and intentional efforts to conceal and obfuscate will not be corrected in the future unless the court declines to provide equitable relief. The certificate holders do not suffer injury if FNMA is required to correct the mess it has created and file proper pleadings to foreclose. The investors are protected by the FNMA guaranty of payment which is now underwritten by the full faith and credit of the United States.
    (c) FNMA repeatedly misstated its income, failed to keep accurate financial records, operated a defective document control system and engaged in financially imprudent transactions resulting in its insolvency. FNMA lacks clean hands.
    (d) Because of the many roles played by FNMA in its securitization of mortgages and its institutionalization of inscrutability, a court cannot ascertain who actually owns what. Under such circumstances a court lacks the ability to identify an appropriate equitable remedy.
    Fifth Argument.
    FNMA unilaterally amended the mortgage by restricting loan modification without the prior written consent of the debtor in breach of the terms and conditions of the mortgage.
    A “modification of a contract” is a change in one or more respects, which introduces new elements into the details of the contract and cancels others but leaves the general purpose and effect undisturbed. International Business Lists, Inc. v. American Tel. & Tel. Co., 147 F.3d 636 (7th Cir. 1998) (applying Illinois law). Modification of a contract normally occurs when the parties agree to alter a contractual provision or to include additional obligations, while leaving intact the overall nature and obligations of the original agreement. Hildreth Consulting Engineers, P.C. v. Larry E. Knight, Inc., 801 A.2d 967 (D.C. 2002)
    Parties to a contract are not forever locked into its terms. Accordingly, parties to an existing contract may, by mutual assent, modify it, Cavalier Mfg., Inc. v. Clarke, 2003 WL 1950029 (Ala. 2003); Rinck v. Association of Reserve City Bankers, 676 A.2d 12 (D.C. 1996; Florey v. Meeker, 194 Or. 257, 240 P.2d 1177 (1952); Friday v. Regent Improvement Co., 330 Pa. 481, 199 A. 914 (1938); provided the modification does not violate the law or public policy. Davenport Osteopathic Hospital Ass’n of Davenport, Iowa v. Hospital Service, Inc., of Iowa, 261 Iowa 247, 154 N.W.2d 153 (1967); and provided that there is consideration for the new agreement or that it satisfies a statute or is made under circumstances making consideration unnecessary.
    Accordingly, it is entirely competent for the parties to a contract to modify or waive their rights under it and engraft new terms upon it. Hawkins v. U.S., 96 U.S. 689, 24 L. Ed. 607 (1877); Frommeyer v. L. & R. Const. Co., 261 F.2d 879, 69 A.L.R.2d 1040 (3d Cir. 1958).
    FNMA as Issuer of the Trust Indenture in its corporate capacity imposes restrictions upon modification of the loan by the trustee and servicer. The Trust Indenture states:
    “Loan Modification.”
    5.3(4) Prohibition of Certain Modifications. For so long as a Mortgage Loan remains in a Trust, the Mortgage Loan may not be modified if the modification has the effect of changing the principal balance (other than as a result of a payment actually received from or on behalf of the Borrower), changing the Mortgage Interest Rate (other than in accordance with any adjustable rate provisions stated in the Mortgage Documents), or delaying the time of payment beyond the last scheduled payment date of that Mortgage Loan; provided, however, that a modification that is required by a Relief Act or a court is not subject to this limitation on modification. A change in the payment amount or amortization schedule of a Mortgage Loan that results from a partial Prepayment under the related Mortgage Documents or permitted by the related Servicing Contract will not be considered a loan modification and will be permitted under this Trust Agreement without regard to whether the Mortgage Loan is in payment default.” P. 42.
    The FNMA Servicing Guide provides:
    “A change in the terms of a mortgage loan may not become effective while it remains in its MBST pool. This applies to all mortgage loans in MBST pools (including all PFP mortgage loans purchased as whole loans for Fannie Mae’s portfolio that Fannie Mae subsequently securitizes). Fannie Mae Single Family 2012 Servicing Guide, March 14, Section 602,Mortgage Loan Modifications (01/01/09) P.706-7.

    Such loan modification relief as the HAMP which FNMA provides first requires FNMA to remove the loan from the mortgage pool of the MBST. Id. This leaves unaffected the restriction noted above which bars the MBST, through its trustee of servicer, from modifying the loan. This flies in the face of state law relating to the amendment of contract.

    A valid modification of a contract must satisfy all the criteria essential for a valid original contract, Carlson, Collins, Gordon and Bold v. Banducci, 257 Cal. App. 2d 212, 64 Cal. Rptr. 915 (1st Dist. 1967); A modification of a contract requires the mutual assent of both parties, Wheeler v. New Brunswick & C. R. Co., 115 U.S. 29, 5 S. Ct. 1061, 29 L. Ed. 341 (1885); Two minds are required to change the terms and conditions of a contract after it is executed. Whiteside v. U.S., 12 Ct. Cl. 10, 93 U.S. 247, 23 L. Ed. 882 (1876); Riverside Rancho Corp. v. Cowan, 88 Cal. App. 2d 197, 198 P.2d 526 (2d Dist. 1948); A modification of a contract requires the mutual assent of both parties, Wheeler v. New Brunswick & C. R. Co., 115 U.S. 29, 5 S. Ct. 1061, 29 L. Ed. 341 (1885); Metro Communications Co. v. Ameritech Mobile Communications, Inc., 984 F.2d 739 (6th Cir. 1993) (applying Illinois law);
    FNMA restricted modification of the loan by the MBST trustee [and servicer] to whom FNMA purportedly assigned the loan in the Trust Deed. It prevents the MBST as holder of the note from amending the loan. This restriction was added without the consent of the debtor and constitutes a breach of contract rendering the mortgage unenforceable. FNMA may also be chargeable with tortuous interference in a contract between debtor and creditor (the MBST).
    Sixth Argument.
    The MBST as creditor on whose behalf foreclosure is sought must qualify to transact business as a foreign trust in the state in which the real property to be foreclosed is situated.
    If the party seeking foreclosure is acting on behalf of a MBST organized by FNMA as the real party in interest, the owner of the loan and the actual holder of the endorsed in blank mortgage note, then the MBST must be registered to qualify to transact business in the state in which the property to be foreclosed is located. Without such registration, the party seeking to foreclose as the agent of the MBST lacks standing.
    If FNMA organized a MBST and issued certificates of the Trust to certificate holders in the United States in accordance with a FNMA prospectus, the MBST must qualify to do business in a state in which it seeks to foreclose upon real property. Foreclosure law typically provides that a mortgage creditor foreclosing upon a loan is not transacting business and does not trigger the qualification compliance requirements. However, offering securities for sale to investors is conducting business. This requires the MBST to pay the fee and follow the state prescribed procedures for qualification to transact business. A foreign trust which fails to be registered lacks standing to foreclose and may have criminal liability as well.
    Seventh Argument.
    FNMA required the consent of the debtor to its securitization of the loan. The failure to obtain the consent renders the mortgage unenforceable.
    There is no doubt that a mortgage can be sold from one creditor to another without the consent of the debtor. The right of alienation for the creditor may result from an explicit term of the mortgage or it will be implied. When a mortgage is securitized, much more is taking place then a sale of the loan.
    As noted specifically above, the terms and conditions of the mortgage are altered unilaterally by the creditor without the consent of the borrower. Securitization effectively severs financial responsibility for losses from the authority to incur or avoid losses. Under the original mortgage, the party deciding to foreclose was the party suffering any loss resulting from foreclosure.
    With securitization the mortgage is converted so the party making the decision to foreclose does not bear the loss resulting from foreclosure. By separating the incidence of loss from the authority to foreclose, the original note has been altered resulting in a change to the mortgage without the consent of the mortgagor.
    The mortgagor was neither informed of nor asked to consent to securitization of the mortgage. Such consent is required. Control of the mortgage is conveyed to a group of managers who adopt a new set of rules which modify the terms and conditions of the mortgage. The group of managers does not control the mortgage on behalf of an extant note holder. Effectively the note is severed from a note holder after being placed under the control of a group of mangers. These managers were not a party to the originating transaction or acting as a nominee or representative of the originating mortgagee or such mortgagee’s successors in interest.
    Eighth Argument.
    Because the mortgage has been used for fraud upon the borrower, the mortgage has been rendered unenforceable as a result of the actions of the Defendants.
    FNMA prescribed the terms and conditions for the loans it bought from its sellers. FNMA knew or had reason to know these loans were predatory upon and unaffordable to the debtor. FNMA caused high risk loans to be made to debtors on the loans it purchased. Enforcement of the mortgages would provide unjust enrichment to FNMA. The lack of enforcement of the remedy of foreclosure will not cause injury to the certificate holders which are innocent of any fraud or misdeed. However the FNMA guaranty of payment insures the certificate holders from loss. This guaranty is now backed by the full faith and credit of the United States. Only FNMA, in its corporate capacity, receives an unmerited windfall from foreclosure.
    The loan mandated by FNMA’s instructions contained in its advance commitment to the seller bank was responsible for creation of a loan originated in bad faith. Failure to inform the borrower that the borrower could not afford the loan worked a fraud upon the borrower.
    9th Argument.
    There is no evidence that an absolute sale has taken place to enable the MBST, as the real party in interest, to enforce foreclosure as the holder of the note.
    The Trust Indenture states:
    2.1(3) Security Interest. The Issuer intends that the conveyance, transfer and setting aside of the Mortgage Loans by the Issuer to the Trustee pursuant to the Trust Documents be a true, absolute and unconditional sale of the Mortgage Loans by the Issuer to the Trust, and not a pledge of the Mortgage Loans to secure a debt or other obligation of the Issuer.” Prospectus at p. 20.
    An absolute sale requires a transfer of title by a seller to a buyer without any restrictions other than payment of an agreed-upon amount of money. There is evidence that such a transfer never took place. The mortgage is never assigned from FNMA to the MBST, and the mortgage note endorsed in blank is in the possession and control of FNMA. Absent delivery and possession of the bearer note or a written assignment from FNMA to the MBST, there is no way legal title has been conveyed to the MBST for the purpose of conducting foreclosure.
    Against FNMA in its corporate capacity, FNMA as trustee of the MBST, the Servicer attempting to foreclose and opposing counsel.

    1. Perpetrating a sham transaction by straw parties upon the debtor and court.
    2. Falsely claiming to own the loan and hold the mortgage note.
    3. Concealing, obfuscating and falsifying documents and information with the intent to deceive the court and the debtor concerning actual ownership of the loan.
    4. Falsely claiming default in payment and falsifying financial records to report that mortgage payment installments collected and received were in default. (i.e. “cooking the books”.)
    5. Slander of title.
    6. Defamation of Credit.
    7. Abuse of Process,
    8. Wrongful Foreclosure by conducting foreclosures, throughout the country, including the instant case, as a fraudulent enterprise.
    9. Fraud and deceit.
    10. Attempted theft and Conversion.
    11. Unfair debt collection practices.
    12. Exemplary damages.
    Items of Damage
    1. Pain and suffering.
    2. Medical care and treatment for emotional distress, sleep disorder, Post traumatic Stress Disorder and (PTSD), Psychosomatic Illnesses.
    3. Loss of Credit.
    4. Reduction in value of real property in foreclosure.
    5. Loss of income.
    6. Loss of consortium.
    Robo-Signing and Document Fraud.
    1. The assignment of the mortgage from the seller to FNMA.
    2. The blue, wet ink original of the promissory note.
    3. A copy of the executed agreement between FNMA and the seller showing by appendix, addendum, exhibit or amendment inclusion of the subject loan in the agreement.
    4. In a judicial jurisdiction, any assignment of the mortgage from FNMA to the plaintiff. Ascertain in what capacity FNMA executed the mortgage. If the assignment is made by FNMA in its corporate capacity it contradicts the Trust Indenture’s assignment of the mortgage to the MBST.
    5. In a non-judicial jurisdiction, any document instructing or authorizing the trustee of the deed of trust top foreclose. Again, identify who gave the instructions and in what capacity and in whose behalf.
    6. A substitution of trustee in which the document identifies who owns the mortgage being foreclosed.
    7. Any custodial receipt showing when the mortgage being foreclosed was deposited and for whom the mortgage notes were being held.
    For each document, ascertain whether:
    1. The signatures are authentic.
    2. The signatory has authority to sign.
    3. The signatory actually occupied and is employed in the capacity stated in the document.
    4. That the notarization is actually signed by the notary and sealed by the notary and that the notary’s license is in good standing and effect upon the date of the notarization.
    5. If the date of the execution of the agreement corresponds with the date of the notarization. (A notary cannot notarize the signature of a party who cannot actually have appeared on the date of the notarization.)
    6. The wet, blue ink is the original instead of a four color photocopy made to appear as an original document.
    Request opposing counsel for an admission that:
    1. FNMA purchased the loan in its corporate capacity.
    2. FNMA received assignment of the note with FNMA as assignee in its corporate capacity.
    3. FNMA in its corporate capacity sold the subject loan note to the MBST.
    4. FBMNA in its corporate capacity retained control of the subject loan note sold to the MBST.
    5. FNMA in its corporate capacity retained possession of the subject loan note.

  11. Ahhhhhh capitalism …..

  12. @BSE,

    We keep being sold lie after lie. For I don’t know how long, we’ve heard and read that DeMarco can’t be ousted. Well, like everything, it appears to be a load of crap. I don’t know what Obama is waiting for if he is really sincere in his desire to see Fannie and Freddie write off principals. i think it’s a political thing again: “I want to do sooooo much for the American people. But Congress won’t let me!”

    Pisses me off!

    Barack Obama can absolutely replace Ed DeMarco

    Posted by Dylan Matthews on July 31, 2012 at 5:34 pm

    I mentioned below that there might be a legal barrier to Barack Obama firing chief Fannie and Freddie regulator Edward DeMarco, as the heads of independent agencies have to be fired for cause. This could frustrate liberals such as Paul Krugman who want DeMarco gone. But Adam Levitin, a professor at Georgetown University Law Center who is an expert on housing finance law, informs me that this worry is misplaced. Obama may not be able to fire DeMarco, but he sure can replace him. Here’s Levitin:

    The FHFA statute provides that the FHFA Director is only removable “for cause”. 12 U.S. Code sec. 4512. That sort of provision usually means that the President can only remove the officer for malfeasance or misconduct, not just a policy disagreement. (See In re Humphrey’s Executor.).

    DeMarco, however, is an Acting Director…This means he can be removed at any time simply by the Presidential appointment of a Director. That would require Senate confirmation (not happening before 2013 under political realities and the ridiculous Strom Thurmond rule) or a recess appointment (possible). Given the way Obama has interpreted the recess appointment power for the CFPB Director and NLRB appointments earlier this year, the ability to do a recess appointment means he can replace DeMarco pretty much whenever he wants.

    There are caveats. DeMarco is civil service, and so can only be moved, not fired outright. And Levitin notes that replacing him means Obama can’t blame DeMarco for the state of the housing sector. But Obama could have a new FHFA director whenever he wants one.

  13. @E.Tolle

    My husband loved your response—thx!

  14. “…Your home for 5 cents on the dollar ?” Yes Neil: in 2004, I disclosed this at Paragraph 99 of my lawsuit: ““Independent financial inteligencia have calculated that FNM, with mufti-trillion dollars of outstanding loans is about to collapse and sell its collateral, that is almost the entire American real estate to the infamous European bankers for pennies on the dollar”” Everything I revealed in 2004 has occurred according to that exact plan! @

  15. Are you kidding carie? Tell him to go for it, and while he’s in there, scramble the matrix code….exchange the blue pills for the red pills and collapse the whole mirage! Bring these sons-a-bitches down!

  16. Somehow somebody is going to take a huge hit

  17. Single family real estate —can be a money pit—investment bankers have no conception what its like to be regulated until they run into the tidal wave of regulation associated with rental housing—-with repairs that have to be made by licensed repairmen –with the hedge thicket of permits—of changing electrical codes, sewer and plumbing, heating codes—of leaky roofs and moldy basements—of frozen waterpipes —-of carpeting and subflooring soaked with pet urine—-of non-discrimination rules—-of handi-capped accessable housing—-replacement of fridges full of filet mignon when the fridge fails—-of pipes pluggesd with kitchen grease poured down the drain—–
    of rents deposited with tenant courts pending repairs of same

    of torn screens—scratched floors—holes in walls–cabinets—-pet-soiled dirty carpets—tenants that dont know what a vacuum cleaner looks like—-of HUD assisted housing and semi-annual inspections–rent withheld pending correction —–of houses siezed by cops because they are used for drug activities—of houses destroyed by cops searching for drugs—-of unmowed yards—of uprooted trees—of neighbors suing lanlords because they permit tenants to have pit buls

    of domestic fights that result in gunfights—of cars mired up to axle in the front yard after a hard night at the local bar—-of garages filled with the last years worth of recycled cans bottles and paper—or beer can collections —–of cat/wildcat hybrids that can spray 3 feet high on the wall with scent that will make a lion envious

    of packrat tenants —-of upstairs converted into marijana greenhouses—of bathrooms set afire by piling used towels on electric heaters–of dryers set afire because nobody ever explained to the tenant whay lint traps need to be cleaned out—-of city zoning rules limiting te number of unrelated persons under a single roof

    of the problems that you encounter when a tenany dies in the house and nobody notices for a couple months—of what a refurbished house looks like after 6 months with 12 cats and 8 dogs locked inside–of a house abandoned at XMAS with the thermostat turned to off

    of licked in front doors because –wife locks hubby out hubby locks wife out—wife locks boyfiend out—-drunk forgets keys—-of cost of changed locks everytime the stripper tenant gets a new boyfriend

    of a house barricaded by police yellow tape-“crime scene-do not cross” –of health dept ” condemned”——

    somehow i do not think that Stephen Schwartzman intends to put Blackstones equity at risk–somehow i think these are going to be resold to pension trusts

  18. Well, this is ironic…my husband just got a job offer to do database work for a title company—he is hesitating because he feels like he would be working for the enemy!! What ever shall we do?

  19. DeMarco continues cover up for Freddie and Fannie. Why fire the bastard. We are better off to Jail the S.O.B !

Leave a Reply

%d bloggers like this: