Borrowers are Assessed Undisclosed Risk by Most Courts

Self-denial and cascading economic pandemics

The purpose of this article is to piggy back on the recent articles from dozens of economists who are yelling at the top of their lungs that we are deluding ourselves if we think acceptance of the status quo is self deluding and will lead to economic and societal chaos. The focus of my writing is on legal, moral, economic and accounting reasons for denying foreclosure as a remedy BEFORE assessment of the transaction and the risks that were withheld and with intentional misrepresentation (fraud) of the risk factors with inflated appraisals, and failure to disclose the real lenders, the fees earned and the parties involved.

This continues the discussion about whether we should be saying that borrowers should pay the debts AS CLAIMED or whether we should be asserting that borrowers are liable only for the risks they assumed and accepted. I again remind the reader that this issue has already been decided under Federal law. The Truth in lending Act and the State deceptive lending acts spell it out quite clearly — the borrower is to be informed, with enough time to process the information and seek professional advice about the terms, parties and details of their loan transaction. Most important amongst the disclosures is the requirement of disclosing the true lender; transactions by lenders with a pattern of engaging in such withheld disclosure are branded “predatory per se.”

The horrid state of self delusion in our society is chronicled in Naked Capitalism. The basic thrust of a deep and broad analysis of our economy and the effect of major shocks is presented, documented and proven. The bottom line is that the deeper the shock and the longer it is allowed to persist, the harder it is for society to recover. Applying the principles enunciated in this article which expresses irreversible damage that occurs over weeks, the seven years of economic collapse endured thus far presents a high probability that the economy and our society will never be able to restart without widespread acceptance of changes in deeply held beliefs and presumptions. Pervasive self-delusion is clearly documented here as the major impediment of starting to repair, regroup, and take us from what is actually a continuing net decline to an actual positive growth curve.

Interpolating the data, it is obvious is that the state of our society and economy is improperly reported (self-delusion) in a vain attempt to maintain consumer confidence while those same consumers are short on cash, short on income, short on savings, suffering shrinking income, increasing costs, and are short on available credit. The current model, developed over 40 years, was to replace earnings with credit. This was a going out of business strategy. And that is what happened.

We now live with an unsustainable anomaly — the financial and data intermediaries are thriving while the real parties in interest (buyer and seller of products or services) are not reaching sufficient levels of income and growth. This has led to an economy which shows that roughly half (46%) of “economic activity” comes from financial services, that supposedly intermediates capital and payments but now accounts for an out-sized share of GDP. If the reported figures are even close to being truthful from the financial services sector, our GDP should be at least $50 Trillion, based upon long-trusted ratios in which financial services typically account for about 16% of GDP, intermediating in commerce.

Only two conclusions are possible. One is self-denial in which we act as though the economy was in fact operating at a $50 Trillion level — an obvious run for the edge of a cliff. The other is addressing reality, which is that the growth of the financial services sector from 16% of GDP standard to 46% of GDP as reported is fictitious and based upon false reports based upon fictitious transactions. This would mean that as a minimum the $17 Trillion in GDP would be adjusted downward removing 30% as mere smoke and mirrors.

With the real GDP thus set at around $10 Trillion and removing the veil from fictitious transactions, fictitious assets and fictitious liabilities, the too big to fail conglomerates would either sink or swim on actual water rather than the appearance of water.

Nowhere are these transactions more pandemic actions of self-denial than in the alleged mortgage bonds that are neither mortgages nor bonds. Nor are they owned by the intermediaries. The fictitious transactions in which ownership of those non instruments are booked as sales, commerce and part of GDP, once removed would necessarily cause compensating adjustments elsewhere in the economy. Profits reported by companies providing financial services would be reduced and past reports would be adjusted downward, resulting in lower stock prices for their stock and higher rates for them to borrow.

The corresponding credit entry would fall to homeowners who were punished by a system that had blamed them for taking on more risk than they could afford. In fact, the adjustment would recognize that the assumption and acceptance of excess risk was hidden under deceptive underwriting and lending processes — thus created by the Wall Street banks who are the sole parties against whom the excess risk would be assessed. But first it must be acknowledged that in cases of widespread systemic fraud that neither the lender investors nor the homeowner borrowers were given any reasonable opportunity to assess or accept the excess risk and that therefore their contracts must be reconstructed from the totality of the circumstances rather than the recitations in instruments prepared by the Wall Street banks.

We do have enough information to know that neither the lenders nor the borrowers would have signed up for the highly complex deals being offered to them under the guise owing offered FOR them. Since that is axiomatically true based upon formal a studies and the 50 states Attorneys General and the myriad of state and federal agencies that have concluded that lending and servicing practices were wrong at origination and continue to be wrong.

Continuation of Foreclosures based upon an untrue assumption of risk sharing as expressed by instruments based upon false pretenses will only continue the pattern of self deception and the resulting pandemic of economic decay and decline.

From Cascading Complexity To Systemic Collapse: A Walk Thru “Society’s Equivalent Of A Heart Attack”

21 Responses

  1. US Bank and SN Servicing has submitted Forged documents in our federal bankruptcy case too and we will never stop perusing them in court for damages. We are also asking our Federal judge to prosecute their current attorney out of Jacksonville Florida who continued to defend this case knowing that forged document are before a federal court. All the offending parties at SN Servicing and their attorneys are committing a serious crime against our country. We have filed a formal complaint with the FBI and the US attorney general and many great Judges all across this nation are finally stopping them from this kind of fraud on American families. US Bank and SN servicing and their attorneys are also violating a serious consent order that was to protect the people from these crimes but they could care less. Please feel free to have your clients join a class action suit so that we can end their behavior with a multi billion dollar punitive damage suit. Join us, call Ray Shelton in Florida at 352 274 8467


  3. Here is the docket…notice that the bank attorneys are applying to have an oral argument…and this is not even an appeal….

    we need individuals and lawyers to write and mail tomorrow…monday is court holiday…so these need to be in by Tuesday the 15th

  4. if you have not read the Glaski decision from appeal court…..

    it is critically important

  5. all–monday is a court holiday….so letters to support Glaski continued publication need to be in by 15th.

  6. all—we need some help—the banks’ attorneys have gone nuts in last two days in writing letters to the CA supreme court to get the Glaski case decertified. the letters are due in there by Monday Oct. 14th.

    we need more attorneys and folks to write letters in support of keeping Glaski certified for publication

    this is critical

    I hope you can all help and contact every attorney you know to assist.

    here are a couple to use as templates and you can see the gist of the last letter as to written by the bank to depublish the decision

  7. Rob Harrington,

    Isn’t that an old piece dating back to 2012?

  8. I Love My Country! … But I Am Ashamed of My Government!

    Enough Said:

    Many Blessing To All!

  9. About time…

    We have governors of states, brave veterans, and average people defying the federal government. What does this all of this mean? It means that the worm has turned and America is finally beginning to stand up and say no to the tyrants who comprise the minions which serve the central bankers who have hijacked our government. It means that America has just entered a major shift in its attitude towards its government. The events of civil disobedience, occurring over the past week cannot be overstated.

    Part two of this series will explore this new found level of civil disobedience, which is beginning to touch many of us from our statehouses to the houses that we live in, and what it means for our collective futures. And like with most change Part two will reveal that there is both an upside and a downside to any change and this is no different. America, we live in historic times.

  10. JP again??? Teri Buhl: “Well it looks like Abmac wants the public to know more of the dirt they have on Bear/JP Morgan because in exhibits with the motion they filed there’s some nasty whistleblower sworn testimony.

    Clayton Holdings along with a firm called Watterson Prime were the main third-party firms Bear hired to do re-underwriting due diligence. According to the monoline suits this extra level of inspection was designed to prevent defective loans getting packed into the security in the first place. In the heyday of the mortgage boom there was so much competition to get the RMBS bonds insured and sold Bear came up with a novel ideal of paying for ‘independent reviews’ that the monolines use to do themselves before they got so busy picking which bonds to insure. It was a process Bear claimed would add a level of integrity. But new sworn testimony by whistleblowers from Clayton and Watterson Prime shows this was just a ‘veneer of control’ instead of a practiced method to fret out defective loans. “

  11. E. ToLLe,

    Actually, I do stand by my statement: humanity as we know it has not gone backwards. However, casualties have existed. Even serious ones. But since we are in the process of recreating a Tower of Babel on different bases and with an expansion toward the universe (which, as far as we know, hasn’t been done by humanity in recorded history), I don’t believe that it will end and, even if it did, i don’t believe it will be under the same circumstances and conditions.

  12. Found this link within a jdsupra legal news article titled
    Fannie Mae Announces Requirements For Foreclosure Sale Eliminations And Rescissions

    Servicing Guide Announcement
    SVC -2013-19
    September 18, 2013
    (*With Corrections on Page 2)
    Eliminations and Foreclosure Rescissions Servicing Guide
    Part VIII, Section 116: Notice of Property Acquisition
    Effective immediately, Fannie Mae is establishing requirements for eliminations and rescissions of foreclosure sales, as defined below:

    The process of removing a property from Fannie Mae’s real estate owned (REO) inventory system of record.

    Foreclosure Sale Rescission
    The legal process of reversing a foreclosure sale and removing
    Fannie Mae as titleholder to the property.

    (More at the link)

    Trespass Unwanted

  13. It is amazing how a multi billion or trillion dollar company (banksters) can claim Victim and pretty much stupidity. And the Borrower and Investors are supposed to be smart enough not to be conned.

    I used to write it along time ago. It is like blaming the Rape victim.


  14. To me what Neil talking about give more reason why the Fed made the $16 Trillion of so in zero to .5% interest rates. What was needed was some type of financial chaos to to inject funds into the chosen bank and all the other failed banks are cleared out the way various reason that fit whatever blame is needed, and probably why no one been prosecuted because the State does not want there to be all these bank employees turning over, telling the truth about the different schemes.

  15. Not fretting Christine, but to dismiss the implications of a systemic collapse of the nature written about above is foolhardy. It’s a humpty-dumpty setup, no putting it back together again. We’re not discussing rebuilding “what once was”, as you say. We’re talking about going back a couple of hundred years, only without the capability to fashion anything even remotely civilized. Mule and plow, if you’re lucky. I don’t fear this any more than I fear catching a cold. But I do understand the harsh implications being discussed. I’ve studied it, and it ain’t a pretty concept.

    You’ve said on several occasions, that “Humanity has NEVER gone backwards”, and that’s just not so. There are clear signs of genetic “bottlenecks” having occurred in our “distant” past, resulting in a near die-off of us homos. The Toba catastrophe theory suggests that a bottleneck of the human population occurred sometime around 70,000 years ago, reducing the total human population to 15,000 people. That was a close call for us folks.

    I’m not saying that that’s in the offing just yet, but it’s entirely possible when the science is studied, not just bandied about in a thread such as this. Pandemic flu has the capability of easily halting not only business as usual, but even possibly business ever again. Few people realize, as it’s not discussed much in history books for some strange reason, that upwards of 80 to 100 million people died during the 1918 flu pandemic, and many of those deaths were due to lack of food and medicine by those ravaged by the “breakback” illness, a reference to the incredible pain associated with a hard-core flu strain, of which we have several avian strains vying for our attention as we speak. It could happen, and that’s what this well written article suggests.

  16. “Translation….we’re all totally fooked, or very nearly so.”

    Yes, if the idea is to rebuild what once WAS. Can’t be done. Most people can’t visualize a future without referring to the past: either we return to cave men when apocalypse takes place (comet, catastrophic natural cataclysms, whatever) or the Middle-ages with slavery, warlords, famines and epidemics. Or John Wayne and Colts.

    The future is nothing like what we’ve experienced yet. Or, maybe, something similar to the Tower of Babel (with the ending it had, good, bad or indifferent) except that humanity does not, ever, “reproduce history”. Ever. Progress is always made in between eras. Humanity has NEVER gone backwards. Can’t see how we would start now… So, whatever we’re currently building and which, as everything ever build by humanity, will be transient and temporary, it is something we haven’t seen yet.

    Stop fretting over the unknown.

  17. Not to say that Neil’s not a hard worker this or any weekend, but that was simply a cut and paste from a very good article at Zerohedge….a must read, but not for the feint of heart. It explains, in gory detail how various complex systems (here….financial and societal) that were built on an evolutionary platform, cannot be systematically restarted when severely damaged. And thus the correlation to the heart attack victim…. too far gone to revive.

    This has been discussed in pandemic planning for decades….the just in time distribution model lends itself easily to a collapse of services when small parts of the puzzle disappear…. syringes from Asia, antivirals from Europe, and so on. This exact same formula can be shifted to trying to maintain, or in a worst case but very possible scenario, attempting to restart complex financial and social relationships that were built one brick at a time.

    Translation….we’re all totally fooked, or very nearly so.

    Have a nice weekend.

  18. Gut feelings are good. The gut is the center of the individual. It is where the ancient Greeks placed the soul. That’s also why they killed birds and analyzed the guts for any kind of omen or prediction. The gut is where the intuition comes from as well as courage. The gut is where we get stabbed when we feel fear.

    It is only centuries later that the church decided to place the soul inside the head. In the brain. Even Jesus and Gandhi don’t agree with the soul residing in the brain and don’t get me started on animists and Budhists. And today’s science reveals that the soul is, in fact, in every cell of one’s body.

    Gut feelings are accurate and should be heeded to. In this country, given that 1/2 the population is chronically constipated and suffering from gut problems, it can no longer feel any intuition and it can’t analyze any situation. All it can do is run around flapping aimlessly its chicken wings. Pathetic bunch…

  19. Christine. It’s just a gut feeling. As long as we have been following NG never seen many weekend threads. I don’t want to spread any false hopes. But like you, I just noticed and thought it was interesting.

  20. Java,

    I noticed and had the same reaction… Hoping whatever that something “big” is, it is good!


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