Appraisal Fraud and Facts: Essential to Securitization Scam

The REMICS are mirror images of the NINJA loans — no income, no assets, no job

the borrower did not realize that the false appraisal and other deficiencies in underwriting had shifted the risk of loss to the homeowner and the investors

Editor’s Notes: Our economy and the economic structure in other countries is stuck because of the false appraisal reports that supported funding of at least $13 trillion (U.S. only) of loans that were so complex that the Chairman of the Federal Reserve, Alan Greenspan didn’t understand them nor his staff of more than 100 PhDs. They were intentionally opaque because complexity is the way you get the other side of the “deal” (the buyer) to accept your explanation of the transaction. It also is designed to avoid criminal penalties even when the scheme unravels. Getting a Judge or Jury to understand what really happened is a challenge that has been insurmountable in both civil and criminal cases and investigations.

As stated in the 2005 petition to Congress from 8,000 appraisers who did not want to “play ball” with the banks, the appraisers were faced with a choice: either they submit appraisal reports $20,000 higher than contract and earn more money for each appraisal and earn  more money through volume, OR they won’t work at all.

Developers, mortgage brokers, and the “originators” (sales organization that pretended to be the lender), sellers and homeowners needing cash in an economy where there wages and earnings were not keeping up with the cost of living —- all reacted with glee when this system went into action. As “prices” rose by leaps and bounds — fed by a flood of money and demands for more mortgages — everyone except the banks ended up crashing when the money stopped flowing. That is how we know that it was the money that made prices rise, rather than demand.

So most appraisers were both stuck and pleasantly enjoying incomes 4-10 times what they had previously received, and obediently submitted appraisal reports that were in fact unsupportable by industry standards or any other standards that a reasonable and rational lender would use — if they were lending their own money. By lending money from investors the risk of loss was entirely removed. The originators got paid regardless of whether the mortgage was paid, or went underwater or caused the homeowner to execute a strategic default.

By using the originators as surrogates at the closing, the appraisal report was accepted without the required due diligence and confirmation that would be present if you went to the old style community bank loan department. The fact is that there was NO UNDERWRITING involved as we knew it before the securitization scam. The “extra” interest charged to No DOC loans (usually 3/4%-1.5%) and the premium interest charged on NINJA (No income, no assets, no job) loans was sold to borrowers on the premise that the “lender” was taking a higher risk. But the truth is they didn’t do any due diligence or underwriting of the loans regardless of whether or not the borrower was submitting information that confirmed their income, assets and ability to pay.  Thus the premium for the “extra risk” was based upon a false premise (like all the other premises of the securitization PONZI scheme).

The normal way of judging the price of a loan (the interest rate) was the perceived risk composed of two elements: ability to repay the loan, and the value of the property if the loan is not repaid. The banks that foisted the securitization scam upon the world got rid of both: they did nothing to confirm the ability to repay because they didn’t care if the borrower could repay. And they intentionally hyped the “value” of the property far above any supportable level as is easily shown in the Case Schiller index.

This is where PRICE and VALUE became entirely different concepts. By confusing the homeowner and hoodwinking the investors with false appraisals, they were able to move more money into the PONZI Scheme, as long as investors were buying the bogus mortgage bonds issued by fictitious entities that had no assets, no income and no prospects of either one. The REMICS are a mirror image of NINJA loans.

The value of the property was not the same as the prices supported by the false appraisal reports. The prices were going up because of the sales efforts of the banks to get homeowners giddy over the the numbers, making them feel, for a few moments as though they were more wealthy than they were in reality. But median income was flat or declining, which means that the value was flat or declining.

Thus prices went up while values of the homes were going down not only because of the median income factor but because of the oversold crash that was coming. Thus the PONZI scheme left the homeowner with property that would most likely be valued at less than any value that was known during the time the homeowner owned the property, while the contract price and appraisal report “valued” the property at 2-4 times the actual value.

The outcome was obvious: when all was said and done, the banks would be holding all the money and property while the investors, taxpayers, and homeowners were all dispensable pawns whose losses came under the category of “tough luck.”

While this might seem complex, the proof of appraisal fraud is not nearly as difficult as the explanation of why the banks wanted false appraisals. In the civil actions for wrongful lending or wrongful foreclosure, the homeowner need only show that the lender intentionally deceived the borrower as to the value of the property.

And the lack of actual underwriting committees and confirmations is essentially the proof, but you would be wise to have an appraiser who can testify as an expert as to what standards apply in issuing an appraisal report, to whom the appraisal report is addressed (i.e., the “originator”). Then using the foundation for the standards apply it to the property at hand at the time the original appraisal report was issued. It might also help if you catch the “originator” getting a part of the appraisal fee (like Cornerstone Appraisals, owned by Quicken Loans).

The borrower testifies that they were relying upon the “lender” representation that the loan had been carefully reviewed, underwritten, confirmed and approved based upon market conditions, ability of the borrower to repay and the value of the property. After all it was the “lender” who was taking the risk.

Thus the borrower did not realize that the false appraisal and other deficiencies in underwriting had shifted the risk of loss to the homeowner and the investors whose money was used to fund the loan — albeit not in the way it was presented in the prospectus where the REMIC was the supposed vehicle for the funding of the loans or the purchase of the loans.

Everyone in the securitization PONZI Scheme got paid. When you look at it from the perspective described above then you probably arrive at the same conclusion I did — all that money that was made and paid and not disclosed to the borrower changes the dynamics of the deal and the undisclosed compensation and profits should be paid to the borrower who was the party with the real risk of loss.

And in fact, if you look at the Truth in Lending Act, THAT is exactly what it says — all undisclosed compensation (which is broadly defined by the Act) is refundable with treble damages. Why lawyers have not taken action on this highly lucrative and relatively easy case to prosecute is a mystery to me.

Because of the statute of limitations applied in TILA cases, the TILA cause of action might not survive, especially in today’s climate, although more and more  judges are starting to see just how badly the banks acted. I therefore recommend to attorneys to use alternative pleading and add counts under other federal statutes (RICO, etc) and state statutes of deceptive lending, and common law fraud. The action for common law fraud, is the easiest to prosecute as I see it.

The interesting aspect of this that will lead to early settlement is that the pleading is simple as to the elements of the cause of action and can easily survive a motion to dismiss, the facts are clearly going to be in dispute which makes survival on a motion for summary judgment a much higher probability, and in discovery you have a nuclear option: since your cause of action is for return or sharing of the unlawful booty that was paid, plus treble, punitive or exemplary damages, discovery into all the different parties who made money in the chain is far easier to argue than the usual defensive foreclosure case.

The other thing you have is the possibility of stating a cause of action to force the retention of the property, to protect the homeowner in the collection of damages rendered by the final verdict. A lis pendens might be appropriate, and the bond need not be much more than nominal because unless the bank or servicer has a BFP to buy the property, you can easily show that your client is already posting bond every month they pay the utilities and maintain the property.

The compensatory damages would be a measure of the difference between the actual value of the deal and the deal that was offered to the homeowner. In simple terms, it could be that the appraisal report was $250,000 higher than the actual value of the property. As a result, the damages include the $250,000 plus the interest paid on that $250,000 and where appropriate, the loss of the house in foreclosure, plus interest from the date of the fraud (i.e. the closing), attorney fees, and costs of the action.

This action might also have special applications in commercial property cases where the appraisals are known to have come in much higher than the owner or buyer had ever expected. In some cases the “appraisal” actually changed the terms of the contract on the assumption that the property was worth much more than the original offer.

46 Responses

  1. Another interesting article that explains the connection to CITI…THE VATICAN & THE JESUITS…
    http://www.bibliotecapleyades.net/vatican/esp_vatican37.htm

  2. Looks like the board of CITI are trying to put lipstick on this pig……Interesting article from Prison Planet entitled…..The Conspiracy To Create A Global Ecological Civilization:
    http://www.prisonplanet.com/the-war-on-mankind-and-the-conspiracy-to-create-a-global-ecological-civilization.html

  3. No coincidence I am sure, that in 2007, the year that Abu Dhabi became the biggest shareholder in CITI……. CITI, who I never got a mortgage from or to my knowledge, I never had a mortgage with, dumped my shitty fake mortgage into “public” in 2007. I asked the clerk at the County recorder of deeds office……Who is public……? The clerk said……It could be ANYBODY…….. The clerk & I reviewed a release of mortgage recorded by CITI….AKA……VERDUGO TRUST……..Our conclusion……there’s ALOT of criminal fraud here by these GLOBALIST Scumbags……

  4. Who are the biggest shareholders in CITI, America’s largest bank…..? The gulf emirate Abu Dhabi…..who bought a $7.5 billion dollar stake in CITI in 2007….CNBC reporting that apparently CITI’s strategy toward including China more in their future ticked off the shareholders….CITI is an American bank……only by robbing U.S. TAXPAYERS via the U.S. TREASURY IMHO….. Read about it here…
    http://m.democracynow.org/stories/9069

  5. Interesting article entitled…. CITIBANK LORDS OF CORRUPTION….
    http://www.iiipublishing.com/citilord.htm

  6. Apparently the word is the board members voted Pandit out be cause the shareholders felt Citi did not do enough to help the little guys and his direction was too Global. Funny because their website states their board is comprised of what they call a GLOBAL CITIZENSHIP….. http://citigroup.com/citi/about/our_leaders.html
    Apparently Citi was also just beginning to write down some of their bad debts…..Looks like maybe the party is not so fun anymore…..?

  7. CNBC reporting, Citibank CEO Vikram Pandit resigns, seemingly out of nowhere..

  8. Well Deb…..the investors in this scam certainly are playing a game of chess with our wealth and we paid for everything. IMPOSTERS -V- U.S.TAXPAYERS….BTW….to heck with proving the appraisers are IMPOSTERS…..they are sending you on another wild goose chase…look up the real goose…..the imposter debt collector at your state department of financial & professional regulations…they have to register who they are if they are “doing business” in your state…..

  9. SC- indeed , thank you

  10. @Deborah, I see where you are going. I’ve not seen it litigated that way before. Very Intresting. I want you to also be aware … check the appraisers license to make sure it was current or if they were even licensed. also make sure they were registered and licensed to do business in your state. We had one here who was hired by the lenders, but he said that he was hired by the lender and he could not give anyone a copy of the appraisels except the party who hired him. Think About It?

  11. I was full doc loan they did not want me to properly qualify they needed to be sure of default that was the intention like carie says. But deb says without that hyper inflated appraisal – no appraisal ummm no ” loan ”
    I’m sorry not sure if I should be blogging but truth is truth

  12. @ Carie
    And yes they induced a signature based on loan to value this is the single most important part of the ( fake) loan transaction andcwe were “simple” targets. did any of us ever wiki “ponzi scheme”. Before signing
    However- who took the home ? Really WHO
    And HOW – under a contract. It’s in how we attack what they did with the instrument that our signature released- criminal yes I believe but under guise of a mortgage/ deed of trust ” loan” transaction
    That is not simple to get a judge to take on.
    Give me judge shack please.

  13. At least with chess you can see their sneaky moves ; )

  14. So ivent like i said
    I bought into a contract that was good will on one end ( mine) and a ponzi scheme on the other with intermediaries aiding and abetting ( misspelled on purpose) so try suing them all. Impossible unless you are the man with the gold so baby steps- isn’t it where you place the blame? Hence all this blogging and carrying on…I know that re loan to value without knowing that the value -the real market value was misrepresented I doubt anyone in their right mind would sign for a loan that did not justify the investment as feasible
    The art of war and law. I would rather play chess.

  15. IT’S VERY SIMPLE, NEIL:

    Ivent said:

    “…They were 10 year bonds sold as conventional mortgages….They sold us junk……period….end of story. Subprime is a fictional story. We weren’t sold mortgages, we were sold junk bonds…”

    my friend’s response:

    “…Yes — the person who wrote this is correct. Subprime is a fictional story. The bonds that were sold were not backed (collateral) by ACTUAL MORTGAGES. They were backed by JUNK — collection rights to already (falsely) charged off debt, which paid a higher rate of return than the bonds that were actually backed by valid mortgages.

    SO SIMPLE, I do not know why some do not get it. If the subprime were actually backed by valid mortgages — the interest rate charged borrowers would not be higher — it would be the SAME. The reason the interest rate was higher on subprime is because these borrowers could not get a valid mortgage. Subprime was nothing more than JUNK DEBT…”

    JUNK DEBT DOES NOT A SECURED MORTGAGE MAKE.

  16. That is right deb..there was no “loan”.and that means there was no financial transaction that occurred between us and the Originator…That is what they are covering up..That no actual financial transactions ever occurred between any of us or any of these parties…The U.S. TAXPAYERS did indeed fund this entire scam…but we had no knowledge of the ORIGINATION FRAUD..the fact they took our money and never paid back the ORIGINAL to the Treasury and therefore, we have no idea where our money went. That is robbery by deception…That is worse than just holding us at gun point and robbing us…because we had no idea we were being robbed or by whom or why… .

  17. The truth is deb…they are intending to deceive us..and that is criminal…the intent to deceive has been used from day one of this scam..Nothing else really matters. They are a nullity..They sold us a big lie by deception…….that we bought a mortgage when the truth is….we did not buy a mortgage……they sold us a junk bond… and that is criminal.

  18. Ivent. It was not a loan
    We gotta get to that
    whatever it was we thought we got the benefit of a house and the rights thereto – our investment but what we got was clouded title and bogus equity
    The opposition tell the court it was a loan under a deed of trust and that someone did not pay their monthly dues – hold on i know theres s barrage of but but -so the art is how you navigate that part you can’t put the horse before the cart, did uou all listen to beth findsen argue infront of 9tj circuit ? Default of a non loan ? Don’t think that claim will hold up you can’t state that absolutely because we need the evidence getting the evidence into court is hard.the court go right along .., they are not stupid
    Something’s up as we all know. But the system – we gotta work it and get the scales tipped under law under god and for the right reasons. No ones an imbecile we are bleeding we want the bleeding to stop.

  19. Proof of Standing is basic property law…These judges learn this in their first year of law school…

  20. UNSECURED DEBT means…there is NO chain of title…PROOF OF CHAIN OF TITLE is the RULE OF LAW that governs foreclosures and so is the recordation of ALL LEGAL DOCUMENTS that are pertinent to the said real estate…….It is called PRUDENTIAL STANDING…..

  21. The State and Federal prosecutions are neccesary. The foreclosure fraud has to stop. Foreclosure attorneys are not criminal defense attorneys, that is what they will not tell you….. The civil judges are there to collect a secured debt, not to take property in exchange for unsecured debts. That is what they will not tell you….There is rampant criminality here…INTENT TO DECEIVE is.being disguised as…… THIS IS AN ATTEMPT TO COLLECT A DEBT..it should read…THIS IS AN ATTEMPT TO STEAL YOUR PROPERTY FOR AN UNSECURED DEBT….

  22. Allow me to correct a sentence in my last comment…It only takes ONE ACT OF FRAUD UPON THE COURT to nullify them……….

  23. There is truly no reason why any of these cases should have to be brought up on appeal. These civil court judges know full well a copy of a note and a copy of a mortgage can only be considered counterfeits . These judges have the power to clear title back to us because the truth of the matter is,, it only takes act of fraud upon the court to nullify them. . Copies of legal documents prove nothing in foreclosure court. Copies of mortgages and notes can only be deemed counterfeits unless there is an actual LEGAL ASSIGNMENT attached or at least a sworn affavit to the verity that these are verifiable legal claims……..’THIS IS AN ATTEMPT TO COLLECT A DEBT.’ should be the first clue…that this is a scam to steal property from you……

  24. Once again, the issue of whether these cases should or could be prosecuted in federal court. Issues over land are in state court, but we have many federal statutes that also address land. We also have the issue of the defendants moving the whole action up to federal or back down to state and getting the matter dismissed. Of course, it would really help if the judges actually understood what had happened. It is still my opinion that they do in most cases understand, but choose not to find for the homeowner no matter what.

  25. Sorry shadowcat……..I read it wrong..I thought you said no criminal prosecutions…yes I do believe that is the only way to deter crime..

  26. I get that…but, how can you be so sure it will never happen again if they are not criminally prosecuted….? What is the deterrent? That they never know if they are being watched? Exposure? Do you really believe that will stop them?

  27. Let’s be honest or I will pull out my umbrella…….ella…ella…ella…

  28. I choose not to sue for damages, I didnt need the stress or the expences of a lawsuit. I choose to seek criminal prosecutions. I am not an expert witness … the evidence speaks for itself without me It does not matter what route you take, there are many … Its always been about making sure it Never happens again. Many Blessing to All

  29. Acid rain is the only way to clean up this mess for the benefit of these crooks….Thankfully, I have a heavy duty umbrella always at the ready….they can’t penetrate it……….

  30. Cue the acid rain….

  31. Imbecile.

  32. It was a full doc junk bond Deb..it was not a loan.

  33. good points enraged

  34. TILA PUTS YOU BACK AT THE CLOSING TABLE..HOW CONVENIENT FOR THEM….MWAHAHA…LET’S JUST FORGET THIS HERE FRAUD EVER HAPPENED…..NOT SO FAST YOU DIRTY CROOKS…!

  35. makes no difference

  36. i was a “full doc ” loan. huge reserve

  37. TILA SCHMILA…. FE FI BO BANANA…TILA…

  38. Oh hell…lets cut to the chase…. THE TRUTH IS…they are all imposters, who will lie and deceive and make it acid rain for the full benefit of these diabolical crooks……

  39. “Because of the statute of limitations applied in TILA cases, the TILA cause of action might not survive, especially in today’s climate, although more and more judges are starting to see just how badly the banks acted. I therefore recommend to attorneys to use alternative pleading and add counts under other federal statutes (RICO, etc) and state statutes of deceptive lending, and common law fraud. The action for common law fraud, is the easiest to prosecute as I see it.”

    One of the dangers of using common law fraud and deceptive lending is that, if you are in federal court, the servicer will try to remand to state court and will argue that those causes of actions depend on state statutes rather federal statutes. Likewise if you add a breach of contract of negligence count. You need to be aware of it.

    Unfortunately, this is where homeowners have the greater chance of a big payoff but, depending on case law and previous rulings in your state, it may make or break your lawsuit.

  40. Deborah, truly it is about proving prudential standing…that is THE RULE OF LAW that govern foreclosures….

    :LOCAL MEDIA IN CHICAGO REPORTING…THE JUSTICE DEPARTMENT “CANNOT” CRIMINALLY INDICT JESSE JACKSON JR. UNTIL AFTER THE NOVEMBER ELECTIONS…….?….!..

  41. why does it all seem so clear (well mostly all clear) to me now 5 years after the fact…..wow they even ripped me off because of pushing me for NO DOC loan

  42. ivent,
    you have to be explicit re how you were harmed, direct and proximal cause, proof. my god when median home price outstrips median incomeby over 40% do you think the market was stable?

  43. I could have a feild day Neil, but im in court, my case now is up on appeal, its been a riduculous carry on in court, one glance at the docket.
    there were some procedural issues but im trying to navigate those issues, AZ district court CIV-09 1587 JAT. there is great caselaw and pleading, procedurally you can decide for yourself, not that i believe the outcome would have been different quite frankly. im holding up so far.

  44. Ah, the judges. If they follow the rule of law, there is no need for explanation of these so called “complex financial structures”.These parties claiming to have a legal right to take your property are either . IMPOSTERS or they are not. There is no middle ground. That is what the law requires them to prove.

  45. thank you neil

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