Bank of Arrogance Claims Insurer Knew What It Was Getting Into


Editor’s Analysis: There are only two choices here: either the insurer knew that the loans were bad or was misled into thinking the loans were good. Or to be more specific, it knew that the mortgage BONDS were bad or it was misled into thinking the BONDS were as GOOD as represented.

It’s not hard to envision a grand conspiracy in which the insurers were paid extra money to issue contracts on pools knowing full well they might fail and that the government would bail them out.

That actually might be the case, but either way they paid and that means the principal and interest due back to the investors should be reduced. If the principal and interest due to the creditor is reduced it is simple logic that the principal and interest due from the debtor would be correspondingly reduced. The creditor is only entitled to repayment, not multiple payments.

Multiple payments would lead to the conclusion that there was an overpayment and they owe the money back to the homeowner; like it or not, if the homeowner’s aunt made the payment there would be no question that the creditor could not still make the claim. It should not be any different if the Aunt turns out to be an insurance company.

But it seems more likely that the convoluted style with which the securitization scheme was drafted and pitched to investors, rating agencies and insurers, as well as Fannie and Freddie pretty much leads to the conclusion that the banks were at least probably consistent: they lied.

BofA attorneys are getting creative and blaming the victims starting with the homeowner right up to the insurance company. Soon they will blame the regulatory agencies and then the government itself for forcing them to underwrite bad loans, divert the paperwork from the REMIC, cheat the investor out of an enforceable loan and then steal the money too. That is in fact more or less the claim when blame is laid at the doorstep of Fannie and Freddie. And there is more truth to that since the executives at the GSE’s were in bed with Wall Street.

Still I find it more likely that Fannie and Freddie did not know how bad this situation was, that the ratings were a complete farce and the insurance was issued under false pretenses.

If the mortgages were really valid liens, if the notes were really valid evidence of the obligation and matched up with the creditor’s expectation of repayment, if the mortgage bonds were real, if the REMICs were actually funded, then there would have been a few actual trials instead of settlements. What bank would settle such cases if it had done everything right? Where are the trials?

The entire foreclosure controversy would be over if there were real trials with real evidence and real witnesses with real personal knowledge providing the foundation for real documents with proof of payment and the current status of the loan.

10-20 such trials would have ended the controversy —– the banks would be right and the borrowers all deadbeats. Instead, when trial approaches the banks all settle every case.

Why would they do that unless they were afraid of losing a very simple case where the facts were not in doubt? The answer is simple: the lawyers won’t go so far as to go to trial because they won’t  subject themselves to discipline and criminal charges for fraud, forgery, and perjury.


Lawyers for Bank of America ($9.32 0.11%) claim insurer MBIA knew what it was getting when it agreed to insure mortgage bonds containing subprime loans originated by Countrywide.

The whole concept behind MBIA’s major suit against Countrywide and BofA, which acquired Countrywide in 2008, is that the lender was fraudulent in representing the quality of loans that the insurer ended up facing losses on by agreeing to insure the mortgages in case of default.

In a motion for the court to rule in favor of Countrywide, BofA alleges that MBIA once had a practice of performing due diligence on mortgage loans, but failed to do so in this case.

“[D]espite its own past practices, and the well-known risks associated with the underlying loans, MBIA made a business decision to stop conducting any loan-level due diligence prior to insuring the securitizations,” Countrywide (BofA) said in its motion.

BofA also claims that MBIA never took note of input from third-party due diligence providers.

MBIA, on the other hand, asked the court for summary judgment in its favor and says the test of whether BofA has to repurchase Countrywide loans is based on whether it can be proven “there was a material and adverse impact on MBIA’s interests.”

MBIA says this should be the standard used whether or not the loans actually defaulted or became delinquent.

“Defendant Countrywide Home Loans breached representations and warranties with respect to at least 56% of the loans in the 15 securitizations of residential mortgages at issue in this action and that such breaches had a material and adverse impact on MBIA’s interests in the affected mortgage loans,” MBIA said in its own motion with the court.

In both motions, the parties are asking the court to rule in their favor on fraud claims, breach of contract and indemnification claims originally filed against Countrywide by MBIA.

10 Responses

  1. Arrogance is evil. Maybe more evil than the crimes themselves. The banks don’t have any loyalty to US because their Corp is being held hostage by our foreign enemies. The enemies of freedom are hidden. They are the investors who have invested in all of our inalienable rights. CNBC’s Rick Santelli said it best….Forget follow the money…Follow the investments. May I add… the CFR & THE TRILATERAL COMMISSION & THE U.N. infilTRAITORS..any group that meets in secret….is our enemy…

  2. America and all its courst enabling the unlawfully (by the rule of law), seized property are a crime scene.

  3. “…There was never a valid note. All you have is a modification of debt that masqueraded as valid “note.” Indeed, with the refinance the prior MORTGAGE was never (validly) discharged/cancelled, and the subprime “loan” just modified it’s terms. I am more concerned about the MORTGAGE — rather than the “fake” note. Too many are assuming that the Note is valid under the UCC. It is not, since the prior note was never paid, and the prior Mortgage never validly discharged. In effect, borrowers not only owe the last “loan” in question, but also the loan prior to the loan in question. A situation that likely destroys borrowers “credit” indefinitely. You do not cancel a “NOTE”, a note is marked “PAID”. You cancel/discharge/satisfy the Mortgage/Deed of Trust. But, again, I think that there are some very important issues here. Homeowners, who have been foreclosed upon, need PROOF, that the foreclosure was valid, by a valid creditor, and that all proper documents have been legally and validly filed in order to make sure that NOTHING remains outstanding. This is especially important as notes were not valid “notes” and instead “debt collections loans”, that MUST be properly disposed of — outside the valid mortgage/loan arena…”

  4. There is much evidence that prior loans to foreclosure in question were never paid and mortgage never discharged. This makes the last “mortgage refinance” you got, and subsequent foreclosure, invalid and illegal.

  5. @johngault

    don’t know if you saw this response the other day:

    johngault, on October 5, 2012 at 9:51 pm said:
    Also, carie, the borrower would not remain in default with the GSE because the scammer used the scammed insurance proceeds to
    buy the loan back from the GSE. Right?

    “WRONG…the borrower does not remain in default with the servicer and/or mortgagee that advanced the payoff funds to the GSE — because the servicer/mortgagee reaffirms/modifies the default debt by the bogus refinance. The borrower REMAINS – as reported to the GSEs —- as in default. GSEs records reflect default —- borrower never told. Will likely never again be eligible for GSE loan. ..”

    “…This is more that GSE rejection. This is fabricated default presented by the servicer to the GSE — just prior to the refinance in question. Oh, yes, THAT is the “refinance foreclosure” people are battling in court. And, no one is bringing up that the prior loan was not paid off — as it should have been — as reported to the GSE — BY THE BORROWER (not by servicer advance or mortgagee)…”

  6. @shadowcat

    It’s not “Why do I have to give it back”—it’s WHOSE COOKIE IS IT REALLY? And the guy who stole the cookie and sold it isn’t being punished…in fact, he is being REWARDED. And what about the money people worked hard for and used to buy the cookie—no, it wasn’t “given” to them.
    Think of all the innocent children affected by this. How long will you stick up for the banksters?

  7. Once in the Belly of the Beast …. there is only one way out. … ceptins its in a regurgarated form. Try to take that cookie to the market and sell it.

  8. Buttt….. Everybody Did It! It was Standerd Practice to Violate the Law. He stole the cookie and gave it to me. Why do I have to give it back? Whaaaa…….

  9. I would be shocked if they were not all in on it! The tax payers were set up as the dupes to back up and support all this crime and be the victims. I am sure the banksters are telling the truth for once. Should be you knew we were stealing from the tax payers at every peel of the onion in organized crime. You are no angle to this!

  10. What a laugh…

    “In a motion for the court to rule in favor of Countrywide, BofA alleges that MBIA once had a practice of performing due diligence on mortgage loans, but failed to do so in this case.”

    I told you so: it is not B of A’s fault! Why is everyone always going after the banks? Why is it always the bank’s fault? Everyone knows that the homeowners bought too much house for their income, the government forced the banks to sell them mortgages they couldn’t afford, the insurance companies slacked off and didn’t perform due diligence, all of it was a conspiracy against the banks!

    Oh well, just for that aggravation, Moynihan should get another $12 million. There.

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