Hearsay on Hearsay: Bank Professional Witnesses Using Business Records Exception as Shield from Truth

Wells Fargo Manual “Blueprint for Fraud”

Hat tip to my law partner, Danielle Kelley, Esq., for sending me the manual and the reports on it. Anyone desirous of a consultation on the application of what is on this blog, must either be a lawyer or have a lawyer who is licensed in the jurisdiction in which the property is located. For scheduling call 954-495-9867 (South Florida Office), 850-765-1236 (North Florida Office), and 520-405-1688 (Western United States). International callers: The same rules apply.

Well that didn’t take long. Like the revelations concerning Urban Lending Solutions and Bank of America, it is becoming increasingly apparent that the the intermediary banks were hell bent for foreclosure regardless of what was best for the investors or the borrowers. This included, fraud, fabrication, unauthorized documents and signatures, perjury and outright theft of money and identities. I understand the agreement between the Bush administration and the large banks. And I understand the reason why the Obama administration continued to honor the agreements reached between the Bush administration and the large banks. They didn’t have a clue. And they were relying on Wall Street to report on its own behavior. But I’m sure the agreement did not even contemplate the actual crimes committed. I think it is time for US attorneys and the Atty. Gen. of each state to revisit the issue of prosecution of the major Wall Street banks.

With the passage of time we have all had an opportunity to examine the theory of “too big to fail.” As applied, this theory has prevented prosecutions for criminal acts. But more importantly it is allowing and promoting those crimes to be covered up and new crimes to be committed in and out of the court system. A quick review of the current strategy utilized in foreclosure reveals that nearly all foreclosures are based on false assumptions, no facts,  and a blind desire for expediency that  sacrifices access to the courts and due process. The losers are the pension funds that mistakenly invested into this scheme and the borrowers who were used as pawns in a gargantuan Ponzi scheme that literally exceeded all the money in the world.

Let’s look at one of the fundamental strategies of the banks. Remember that the investment banks were merely intermediaries who were supposedly functioning as broker-dealers. As in any securities transaction, the investor places in order and is responsible for payment to the broker-dealer. The broker-dealer tenders payment to the seller. The seller either issues the securities (if it is an issuer) or delivers the securities. The bank takes the money from the investors and doesn’t deliver it to an issuer or seller, but instead uses the money for its own purposes, this is not merely breach of contract —  it is fraud.

And that is exactly what the investors, insurers, government guarantors and other parties have alleged in dozens of lawsuits and hundreds of claims. Large banks have avoided judgment based on these allegations by settling the cases and claims for hundreds of billions of dollars because that is only a fraction of the money they diverted from investors and continue to divert. This continued  diversion is accomplished, among other ways, through the process of foreclosure. I would argue that the lawsuits filed by government-sponsored entities are evidence of an administrative finding of fact that causes the burden of proof to be shifted to the cloud of participants who assert that they are part of a scheme of securitization when in fact they were part of a Ponzi scheme.

This cloud of participants is managed in part by LPS in Jacksonville. If you are really looking for the source of documentation and the choice of plaintiff or forecloser, this would be a good place to start. You will notice that in both judicial and non-judicial settings, there is a single party designated as the apparent creditor. But where the homeowner is proactive and brings suit against multiple entities each of whom have made a claim relating to the alleged loan, the banks stick with presenting a single witness who is “familiar with the business records.” That phrase has been specifically rejected in most jurisdictions as proving the personal knowledge necessary for a finding that the witness is competent to testify or to authenticate documents that will be introduced in evidence. Those records are hearsay and they lack the legal foundation for introduction and acceptance into evidence in the record.

So even where the lawsuit is initiated by “the cloud” and even where they allege that the plaintiff is the servicer and even where they allege that the plaintiff is a trust, the witness presented at trial is a professional witness hired by the servicer. Except for very recent cases, lawyers for the homeowner have ignored the issue of whether the professional witness is truly competent,  and especially why the court should even be listening to a professional witness from the servicer when it is hearing nothing from the creditor. The business records which are proffered to the court as being complete are nothing of the sort. They are documents prepared for trial which is specifically excluded from evidence under the hearsay rule and an exception to the business records exception. And the easy proof is that they are missing payments to the investor. That is why discovery should be aggressive.

Lately Chase has been dancing around these issues by first asserting that it is the owner of a loan by virtue of the merger with Washington Mutual. As the case progresses Chase admits that it is a servicer. Later they often state that the investor is Fannie Mae. This is an interesting assertion which depends upon complete ignorance by opposing counsel for the homeowner and the same ignorance on the part of the judge. Fannie Mae is not and never has been a lender. It is a guarantor, whose liability arises after the loss has been completely established following the foreclosure sale and liquidation to a third-party. It is also a master trustee for securitized trusts. To say that Fannie Mae is the owner of the alleged loan is most likely an admission that the originator never loaned any money and that therefore the note and mortgage are invalid. It is also intentional obfuscation of the rights of the investors and trusts.

The multiple positions of Chase is representative of most other cases regardless of the name used for the identification of the alleged plaintiff, who probably doesn’t even know the action exists. That is why I suggested some years ago that a challenge to the right to represent the alleged plaintiff would be both appropriate and desirable. The usual answer is that the attorney represents all interested parties. This cannot be true because there is an obvious conflict of interest between the servicer, the trust, the guarantor, the trustee, and the broker-dealer that so far has never been named. Lawsuits filed by trust beneficiaries, guarantors, FDIC and insurers demonstrate this conflict of interest with great clarity.

I wonder if you should point out that if Chase was the Servicer, how could they not know who they were paying? As Servicer their role was to collect payments and send them to the creditor. If the witness or nonexistent verifier was truly familiar with the records, the account would show a debit to the account for payment to Fannie Mae or the securitized trust that was the actual source of funds for either the origination or acquisition of loans. And why would they not have shown that?  The reason is that no such payment was made. If any payment was made it was to the investors in the trust that lies behind the Fannie Mae curtain.

And if the “investor” had in fact received loss sharing payment from the FDIC, insurance or other sources how would the witness have known about that? Of course they don’t know because they have nothing to do with observing the accounts of the actual creditor. And while I agree that only actual payments as opposed to hypothetical payments should be taken into account when computing the principal balance and applicable interest on the loan, the existence of terms and conditions that might allow or require those hypothetical payments are sufficient to guarantee the right to discovery as to whether or not they were paid or if the right to payment has already accrued.

I think the argument about personal knowledge of the witness can be strengthened. The witness is an employee of Chase — not WAMU and not Fannie Mae. The PAA is completely silent about  the loans. Most of the loans were subjected to securitization anyway so WAMU couldn’t have “owned” them at any point in the false trail of securitization. If Chase is alleging that Fannie Mae in the “investor” then you have a second reason to say that both the servicing rights and the right to payment of principal, interest or monthly payments in doubt as to the intermediary banks in the cloud. So her testimony was hearsay on hearsay without any recognizable exception. She didn’t say she was custodian of records for anyone. She didn’t say how she had personal knowledge of Chase records, and she made no effort to even suggest she had any personal knowledge of the records of Fannie and WAMU — which is exactly the point of your lawsuit or defense.

If the Defendant/Appellee’s argument were to be accepted, any one of several defendants could deny allegations made against all the defendants individually just by producing a professional witness who would submit self-serving sworn affidavits from only one of the defendants. The result would thus benefit some of the “represented parties” at the expense of others.

Their position is absurd and the court should not be used and abused in furtherance of what is at best a shady history of the loan. The homeowner challenges them to give her the accurate information concerning ownership and balance, failing which there was no basis for a claim of encumbrance against her property. The court, using improper reasoning and assumptions, essentially concludes that since someone was the “lender” the Plaintiff had no cause of action and could not prove her case even if she had a cause of action. If the trial court is affirmed, Pandora’s box will be opened using this pattern of court conduct and Judge rulings as precedent not only in foreclosure actions, disputes over all types of loans, but virtually all tort actions and most contract actions.

Specifically it will open up a new area of moral hazard that is already filled with debris, to wit: debt collectors will attempt to insert themselves in the collection of money that is actually due to an existing creditor who has not sold the debt to the collector. As long as the debt collector moves quickly, and the debtor is unsophisticated, the case with the debt collector will be settled at the expense of the actual creditor. This will lead to protracted litigation as to the authority of the debt collector and the liability of the debtor as well as the validity of any settlement.

47 Responses

  1. Unless a third party (NOT the seller who cannot it appears) may make a guarantee and still call the sale a true sale, there wasn’t one…..on gse loans…. even if there had otherwise been one, looks to me.

  2. John Gault- glad I have for you thinking along the right lines. In my own warped method of thinking about anything,
    I mix things up into a ball and as it rotates I see odd things. (My work is an artistic pursuit masquerading as a business, so I think differently)
    But now we are getting somewhere, hopefully someone else can weigh in.
    If the only reason on earth that the servicer is in court is due to the PSA, then they cannot pick and choose. I like that. Neil has said as much in his posts but not so clearly. Thanks

  3. Hey! This is easy – is the prospectus admissable as evidence of a third party’s liability / guarantee / suretyship? I can’t think of one reason it wouldn’t be. As to non-gse loans, like sub-prime, to ponder if those are similarly subject to the liability of third parties, have to again question why the gse’s guraranteed the payments. I think. The reason they did so may be applicable to any MBS, not just those based on gse loans.
    It could be just a sales inducement, but I doubt it.

  4. Ian – it’s all so convoluted, it’s hard to know up from down. But I think the take-away is that on all gse loans, there are other contracts in play here with material terms which inescapably impact the party to f/c or cry default and even the fact of default, actually. Since either the issuer or f or f are compelled to pay the trusts* when a borrower doesn’t and both appear to also be compelled to repurchase to end their guarantees, I don’t know how a trust could ever properly call a default (since it’s getting paid) and its loan is not in default on a gse loan. I can think of some reasonable questions:

    1) If the payment to the trust isn’t in default, how is the trust claiming
    a default and a right to acceleration?

    Generally, A isn’t a party to a contract between B and C, but if that contract obligates one of them to pay A’s payments, I don’t think A can’t argue that contract.

    2) What does it change, if necesssary, as to the general premise that the contract between B and C is just that if A is (unknowingly) paying for C to guarantee his payments? In other words, I guess, can A compel the performance agreed to in that contract?

    How is it appropriate for C (issuer, f or f) to avoid its contractual obligation to repurchase? C took on a responsibility it seems to want to avoid. Imo, those payments are due and payable until the repurchase occurs, so until the repurchase occurs, the loan shouldn’t be in default. If, as an inducement to buy something (the MBS’s) or for any reason, here the MBS’s, or for any reason, here the MBS’s,
    B guaranteed the buyer’s payments, shouldn’t the buyer have to barrel thru B before he goes after the note maker? Looks to me like these
    people have made themselves sureties, in which case, the party not being paid (as and if applicable) would in fact have to barrel thru those guys before going after the note maker and his collateral. This is likely up for debate and beyond my ken on securities. But, even acknowledging that, as to F & F, the payments are guaranteed to the TRUST specifically on the loan payments. Since the law says that to be a true sale, the buyer must assume the risk along with the reward of ownership, I’m still perplexed by the guarantees; it appears that as to gse loans, no risk was actually assumed.

  5. FDCPA lawsuits number in the thousands, about 10,000 to be more accurate. File in federal court. Excellent case law. Check it out.

  6. John Gault- thanks for the response. I have been trying to visualize the various GSE insurances. This has always confused me, and I am not sure that whoever is calling the default or breach or insurable event has any right to do so. If the homeowner/borrower misses one payment, the loan is in default. While the homeowner thinks that they are ” working things out” with their loan servicer/debt collector on their F/F loan. But their loan has gone Into default unbeknownst to them, as nowhere on any doc is this fact in evidence. So behind the scene, the servicer advances have begun, F/F is paying the issuer, the issuer has to repurchase the loan, PMI kicks in to the originator, the trust has to remove the non performing loan. Something is wrong here.

  7. Ian:
    “if the issuer has to cover the losses to the cert holders first, is there any mechanism in the f/f guidelines whereby the cert holders are first TOLD about the losses, and at some point paid?”

    The issuer having to pay first is a gnma deal only. With fnma, whose guarantee is different, the servicer, not the issuer, has to pay and fnma reimburses pretty much on demand (by invoice). As to gnma, I think the issuer doesn’t get repaid by gnma til after the foreclosure (but I don’t KNOW), way I’ve gotten it. The cert holders likely aren’t told because they’re not impacted – the issuer is paying what borrowers don’t – or is supposed to (the cert holders are told in the prospectus that they’re payments are guaranteed). The gnma guarantee is a bit of a mystery to me. Fha already ‘insures’ the post-f/c loss and VA already ‘guarantees’ the post-f/c loss. On fha and va loans, the borrower pays for that – fha m.i.p and the va guarantee fee (and as I’ve said, turns out the borrower pays for the fnma guarantee by way of the “g-fee” in the note rate). Why, since fha and va handle bottom line loss, is gnma also guaranteeing the MBS’s – and charging someone
    .06 per year to do so? (That’s supposedly how gnma makes moolah.)
    Have to think about this and wouldn’t mind anyone else’s thoughts.

    ” I mean F/F don’t call each of the certholders and tell them “yeah one of your loan pools just had 3000 of the 5000 loans go south, we’ll pop a check in the mail real soon”.

    Right, f and f don’t do that. They make up the short to the trust (well, the servicer does and gets reimbursed)

    “And from what I read, when a loan goes one day over 30 past due, it’s in default. So haven’t 70% of the loans defaulted the past five years?”

    I don’t have any idea.

  8. @ Johngault ,

    In FL the Condo Ass. gets an automatic lien on the property at the closing with the lender and buyer named as joint and severally liable for any fees!! In the FC the Condo Ass wasn’t named but are an assumed party and did collect max allowable from buyer (bank) at the court sale. Buyer at FC sale has liability limited to 1% of original mortgage amount and I argued that since the Condo Ass. was being paid through the FC sale and my brother-in-law was jointly liable per FL statute that his liability was also extinguished… furthermore the new 95.11(5)(b) 1 year SOL killed the associations case.

    This is a junior judge who doesn’t handle FC’s ,, probably doesn’t have the “foreclosure bench book 2013” handy ,, spells out how the new SOL applies… my assertion is a stretch but not unreasonable and fulfills the mission of the SOL … doesn’t clog the courts with multiple cases years after a FC is done ,, the court wants it to go away too..

    They cannot produce a valid ledger or a signed association agreement ,, copy I have is unsigned ,, theirs will be also.. I just want this to go away ,, my brother/sister in laws have 2 small kids , half the income they had in 2007 and are struggling… I would like to be able to sue the condo ass under FDCPA and get them $3/4,000 ,, they need a new HVAC system ,, it’s Florida and they’re cooling a 2,500′ house with 2 small window units.

  9. johngault I think your a little off course on who Gimmie Mae is insuring, because it is the investors that are purchasing and the lenders who are transformed to issuer who are selling the MBS. The issuer draws money like a construction low draw from the line of credited created by the sale of the MBS. So the issuer/lender already been paid monies, and it is the investors who insured at 100% of principal investment that needs the protection because the monies have already been received.

    The not actually a repurchase as Ginnie Mae does take the blank mortgage as the underlying collateral because Ginnie Mae does not purchase a home mortgage loan at all of sell them also.

    I know it does say repurchase in the Ginnie Mae regulation but in order for a resale there must be a sale. The investors are not purchasing home mortgage loan but the by-product in the securities that the lenders have created out of already closed home mortgage loans.

    Now I am not saying that the money for the claim don’t go to the issuer, but the reason to have securities is to get investors to invest their monies into the securities which provide additional funds to write more loans. The lenders/issuers are selling the product and the investors are insured by Ginnie Mae to get at least they full return of their initial principal investment.

    The investors are not buying the riskier home mortgage loans and its does not matter to them that any payment by the homeowner is paying the payment because Ginnie Mae guaranteed the initial investment. Now the servicer who is servicing the loan does agree to make the monthly payment that is to investor until the end of the cycle or that that securities fails and then the settlement is handled.

    The lenders/issuers have already received monies through the sales, and after the foreclosure and at some point the lenders/issuers settle up with investors through Ginnie Mae who is holding the Notes and the exchange is made for the amount remaining of the securities balance in exchange of the blank Notes.

    However this is the fatal flaw in the program as Ginnie cannot purchase these Notes and cannot re-endorse the Notes and that why Wells Fargo had this manual how to handle the cases when blank Notes are involve. I know how they handle it when it not one of their titled loans as with WaMu they have MERS create forged assignment and have then recorded, but if the loan was one of the lenders originated loans and was in title as the lender as the lien holder they never inform the local county land recorder there was even this relinquishing of the Notes because the recorder never ask for the Note to view the endorsement if any!

  10. John Gault- if the issuer has to cover the losses to the cert holders first, is there any mechanism in the f/f guidelines whereby the cert holders are first TOLD about the losses, and at some point paid? I mean F/F don’t call each of the certholders and tell them “yeah one of your loan pools just had 3000 of the 5000 loans go south, we’ll pop a check in the mail real soon”. And from what I read, when a loan goes one day over 30 past due, it’s in default. So haven’t 70% of the loans defaulted the past five years?

  11. Ian, re your question to charles: I can’t answer the last question, but I see that GNMA, on its MBS guarantee, pays the Issuer (who has to repurchase for foreclosure). When gnma says it puts the Issuers on the front line, it’s because contractually, the issuer has to cover the loss to the cert holders FIRST. After the issuer does so and repurchases and forecloses, then gnma will mol reimburse the issuer. BUT, gnma will not reimburse the issuer if it finds the loans were not underwritten, etc. to the proper standards. In this way, gnma is ‘encouraging’ lenders / issuers to only make appropriate loans. That’s the theory, anyway. In practice, does gnma reject reimbursement on garbage loans?* Do issuers thru / with the help of servicers avoid the contractual obligation to keep the investors whole and repurchase and foreclose? Or do they simply forego the gnma guarantee on the MBS’s? I guess the only way for us to know is by the identity of the claimant. If it’s a trust on an fha or va loan, seems like that’s what they’re doing (ditto on fnma loans where fnma must repurchase to f/c and end its guarantee). That gang may be ‘borrowing’ the alleged credit bid of the trust and skipping the repurchase. I wouldn’t pay a trust for a loan it never got.

    *The only rejection I’ve heard of was on a group of loans where the servicer, in violation of the deal, was not an approved servicer. But we wouldn’t generally hear about a claim denial here and there.

  12. Chas Reed-
    They guarantee the investors 100% but who do they actually pay? If I bought GNMA MBS from or thru a Bear Stearns account, didn’t Bear Stearns buy them first, in bulk, because they were a dealer in such things? Or if I had an investment portfolio holding mixed investments and I see that since my last statement, the fund manager has included MBS as part of his investment startegy, in whose name would the certs be?

  13. Two SPEs …..

  14. Corporate Hats … Depositions


  15. N, my E-mail is Burmese8@yahoo.com.

  16. johngault Ginnie guarantees the the securities and the product is 100% guaranteed, and they guaranty 100% of the principle invested amount by the “investors” who have purchase the loan not the “issuer” who is the lender that created the Ginnie Mae MBS.

    Now what they are saying is that these loan are free of other debts/loans the lender has with another. So this prevent the same loan being in another securities or some other instrument.

  17. For the more advanced eggheads among us, that last link also touched on “off-balance sheet” stuff.

  18. I do my best to figure out things I may be suited to – agency, r.p. laws, and like that. I have zero background in securities and do well just to spell the word. Unfortunately, that describes most of us. We need someone here who can help us out there. The more I read, the more confused and concerned I get about that lack of expertise by most if not all of us. I just learned a new rule. Apparently, when the regulators say these must be “true sales”, one thing it means is the buyer of these loans must be a true buyer, that is, he must take on the RISK along with the rewards of ownership:
    “So, for example, if the sale is coupled with guarantees from the seller concerning performance of the financial assets being transferred, the risks are not really being transferred.”

    What about guarantees from third parties, any third party?! GNMA, for instance, makes its guarantee payable to the Issuer (way I got what I’ve read). Does that mean GNMA is guaranteeing the certificates, not so much the loans (unlike FNMA which makes its guarantee on the MBS’s, but it’s payable to the trust for non-payment of the LOAN)? FNMA buys the loans that are then securitized. If FNMA is the seller to the trust, then seems to me, fnma shouldn’t be guaranteeing payment to the TRUST because of the true-sale req’t (but for all I know, fnma’s loans go thru an un-guaranteeing intermediary to sec’n) We need to know this stuff and work backwards to figure out what wasn’t done imo (besides the loans being transferred!). I personally would be starting MBS’s from damm near scratch. This is a fairly easy and at least somewhat informative read for us novices:


  19. RE: ” It is important to note that Ginnie Mae does not have a financial obligation to MBS investors unless the Issuer becomes insolvent. ”

    BOOM! Yeah … I hate to be a taxpayer to, but what can I do?

    Do you understand why HUD is assigning POA?

  20. johngault thank for setting KC straight as she said she told about fraud of Ginnie Mae pooled loan but she got no clue that Ginnie Mae does not and never has purchase home mortgage loan nor any Ginnie Mae securities.

    JPMorgan has copped to bad underwriting and falsifying document to approve the loans and illegally obtain FHA & VA insurance. However this is not what cause the Federal Government a dime of losses, because the servicer make the payments until the loan is liquidated. Ginnie Mae is the insurer for the investors as the are guarantying the securities.

    What these lender are preventing from calling the crime what it is are the forgeries they committed and the resell of the properties to the current purchasers of the homes plus the ex-homeowners. You got the courts that have been duped because these Notes have been already relinquished and the change of ownership should have been reported as to any transfers of ownership.

  21. Ginnie Mae & the GSEs

    Ginnie Mae and Fannie Mae began as one organization more than 70 years ago, known as the Federal National Mortgage Association (FNMA). In 1968, Congress partitioned FNMA into two entities: Fannie Mae and Ginnie Mae. Fannie Mae was charged with supporting the conventional mortgage market and Ginnie Mae was charged with supporting the market for FHA, VA, RD, and PIH loans. Freddie Mac was later created in 1970 and also supports the conventional mortgage market.

    The key differences between Ginnie Mae and the Government-Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, include:

    •Only Ginnie Mae securities are explicitly backed by the full faith and credit of the U.S. Government. Ginnie Mae, Fannie Mae, and Freddie Mac guarantee mortgage-backed securities (MBS) for timely payment of principal and interest.

    •Ginnie Mae is a self-sustaining, profitable and wholly-owned government corporation located within the U.S. Department of Housing and Urban Development (HUD), while the GSEs are public corporations chartered by Congress, but owned by shareholders*. As a wholly-owned government corporation, Ginnie Mae is not required to make decisions to increase value for shareholders; rather, it can remain soley focused on its mission of providing support for affordable housing.

    •Ginnie Mae’s conservative and stable business model significantly mitigates taxpayers’ exposure to risk associated with mortgage securitization. Unlike the GSEs, Ginnie Mae acts only as the guarantor on the pools of federally-insured or guaranteed loans. Fannie Mae and Freddie Mac, however, guarantee the loans themselves. Another differentiating factor is that Ginnie Mae does not purchase mortgage loans for generating profit, nor does it actively buy, sell, or hold securities for investment purposes. Rather, approved private lending institutions issue the MBS for which Ginnie Mae provides the guaranty.

    •In the Ginnie Mae program, Issuers are financially responsible for their securities, even if the underlying mortgage collateral becomes delinquent. While the GSEs are responsible for the financial losses related to the loans in their investment portfolios and MBS, the Ginnie Mae Issuer must make principal and interest pass-through payments to investors for delinquent loans, as well as provide the funds to re-purchase loans to foreclose on a home or modify a loan. Ginnie Mae Issuers are responsible for any unreimbursed costs associated with either violating insurers’ servicing guidelines or for inadequate insurance coverage. This requirement provides a strong incentive for private institutions to make better quality mortgage loans. It is important to note that Ginnie Mae does not have a financial obligation to MBS investors unless the Issuer becomes insolvent.


  22. RE:Yes, it’s GNMA (from investopedia):

    “Unlike its cousins Freddie Mac, Fannie Mae and Sallie Mae, Ginnie Mae is not a publicly-traded company. An investor in a GNMA security will not know who the underlying issuer of the mortgages is, but merely that the security is guaranteed by GNMA, which is backed by the full faith and credit of the U.S government, just like U.S. Treasuries.”

    So if you know the info from their site is Questionable at best,
    why do you post from the site?

    Question comes Straight from KCs mouth.

    Pay Who? The issuers or the securities investors?

  23. “1. Ginnie Mae places the issuers of the MBS on the front line
    to make the timely payments to investors.

    As homeowners make their mortgage payments each
    month, investors in the MBS receive regular payments
    of principal and interest. While Ginnie Mae provides
    the ultimate guarantee that investors will receive these
    payments without disruption, the issuers of the securities
    bear primary responsibility for covering any losses resulting
    from borrower defaults. Besides creating a buffer to absorb
    losses, this approach encourages issuers to ensure proper
    underwriting, originating, servicing, and securitization, thus
    maintaining an alignment of interests between the issuers
    and Ginnie Mae.”

    suggested reading for those interested in the gnma m.o. (part of a primer on gnma):


    I’m getting dizzy. The gnma guarantee on the “gnma MBS’s” are in addition to the fha ins and va guar on the LOANS the MBS’s are supposedly backed by. Way I got it, gnma charges the issuer 6 basis points “during the year” for it’s guarantee on the certs.

  24. From the horse’s mouth:


  25. By Investopedia Staff on February 26, 2009

    A A A

    Filed Under: Mortgage

    What is a Ginnie Mae security?

    A Ginnie Mae, or Government National Mortgage Association security, functions similarly to the process of lending someone money to purchase a house or business. Ginnie Mae buys home mortgages from banks and financial institutions, bundles them together, and then markets portions of these bundles to investors.

    For example, if you invest $100,000 in a Ginnie Mae, you are essentially lending someone money to buy a house or business with the help and the guarantee of a government organization. You would receive monthly payments consisting of interest on the loan and perhaps also a portion of the principal. These are similar to the payments a bank receives when it lends money to a home or business buyer. If it isn’t included in the monthly payment, the principal is paid back at the end of a specified time period.

    Ginnie Maes are the most popular type of mortgage backed securities because they are guaranteed by the U.S. government. They are not impervious to risk, but the government will step in to prevent the collapse of Ginnie Mae and its securities.

    To learn more, see Profit From Mortgage Debt With MBS.


  26. Chas Reed- I sure was wrong lumping Gnma in w the other two. I know better because I’ve been reading your posts for two years………..

  27. neidermeyer – don’t know much about fdcpa + hoa associations + debt collectors for HOA’s. But, I think states have laws on the books peculiar to hoa assocs fees and if so, I don’t think the one you cited is the one(s) you need to consider first. Those laws might indicate any relevance of the 4+ years ago of the f/c. If the condo were f/c’d, chances are (you know – we don’t) the association already filed a general lien (if the law allows) by that time (the time of the f/c) and that may matter, also. They may have implemented rules for HOA’s so they don’t become sold-out jr lienholders, but I don’t know. generic lay opinions of course

  28. Ian, I say my memory stinks! full faith and credit – seems to me I read and knew why only one of them had that – must have been gnma (?) since f & f are on a parity with each other pretty much. I don’t remember the IIllinois law suit (like to read the decision). Looks like the only ones around here with the full faith and credit of the United States of America is the banksters! Last night I decided Anything Goes (Cole Porter) should just be our new nat’l anthem:

    “Anything goes.
    The world has gone mad today
    And good’s bad today,
    And black’s white today,
    And day’s night today….
    anything goes. ”

    Yes, it’s GNMA (from investopedia):

    “Unlike its cousins Freddie Mac, Fannie Mae and Sallie Mae, Ginnie Mae is not a publicly-traded company. An investor in a GNMA security will not know who the underlying issuer of the mortgages is, but merely that the security is guaranteed by GNMA, which is backed by the full faith and credit of the U.S government, just like U.S. Treasuries.”

    Well, that’s interesting, since way I got it, the guarantee is only payable to the Issuer and only if the issuer repurchases (unless the issuer is insolvent. Guess the MBS’ holders who wants the ben of that guar and hasn’t gotten it would have to name GNMA and John Doe…?!

  29. RE: ” if MERS were authorized to release / reconvey, did it have the DUTY to do so (on any dot)? Or is MERS saying it has the right but no duty?

    KC: Did you ask them … to Just Do It ? …

    RE: (where can I get some of that?)”

    KC: LOL!!

  30. Question for anyone ,,

    I’m helping a relative with a debt collector ,, a condo ass. 4+ years after a FC is coming for back condo fees … My (his) first motion was a demand to verify debt and produce a signed association contract for FDCPA compliance ,, and a motion for dismissal on the statute of limitations

    FL 95.11 (5) WITHIN ONE YEAR.—
    (a) An action for specific performance of a contract.
    (b) An action to enforce an equitable lien arising from the furnishing of labor, services, or material for the improvement of real property.

    Judges flunkee assistant rubber stamped a “denied” letter with no indication of what portion was denied… I don’t see the judge having the power to deny a demand from defendant on the plaintiff to comply with Federal law… soooo the denial is probably on the statute of limitations ..

    Do I appeal or do ask for a clarification?? I have a second motion to dismiss submitted which is probably more to the judges liking (evidence submitted is no good, self defeating due to conflicting numbers … etc. etc.) but I want to make sure I can sue the debt collector over the FDCPA request when the time runs on it… I don’t want them weaseling out of this.

    Thanks in Advance..

  31. Foreclosure Defense Coalition asked, the other day, a pretty good question. When a court granted the borrower a judgment to 86 the
    dot following a rescission (way I got it), should “MERS” have reconveyed the interest in the dot? I haven’t had time to read the case, so I still don’t know why, if the court granted that judgment, it didn’t also issue an order to the county recorder expunging the dot. (Imo, that’s how one gets the right to enforce a note with a dot in the absence of a voluntary assgt of the dot from an assignee – by court order, not by voodoo because one has the note and wants the dot).
    First thing I might have done (depending on anything/everything in the record of the case) is record the judgment under “Notice”, but that’s ME, not advice. But I mention that question because it needs an answer. My own opinion is that since MERS wasn’t authorized to assign dot’s, it wouldn’t be the party to have reconveyed this one*. But, playing the game, i.e., mers is an agent who may defy the law and itself define the scope and terms of this alleged agency to include releasing / reconveying, then yes, it should have. Again playing along on “agency”, if MERS were authorized to release / reconvey, did it have the DUTY to do so (on any dot)? Or is MERS saying it has the right but no duty? (where can I get some of that?)

    *Unless as I say, MERS is thee ben and not an agent, in which case, notice to MERS of the suit may be required. But if mers is an agent, then notice to the principal is notice to the agent and vice-versa, so if duty came with the right, shouldn’t mers have reconveyed? Is the acceptance of and notice of that acceptance of right by mers, as is alleged to be created in and by the dot (bs, bs, bs), also an acceptance of duty? if the acceptance were a matter of fact instead of what I see as bs parol evidence (of the scope and terms of the alleged agency) and that from the mouth of the alleged agent, v the alleged principal, then I would think duty came with the right. The answer to this particular question from FDC would probably make the answer to a lot of other questions clear to many of us and the judiciary.

  32. ……. and especially why the court should even be listening to a professional witness from the servicer when it is hearing nothing from the creditor. The business records which are proffered to the court as being complete are nothing of the sort.
    BINGO Neil ,, that’s my starting point.

    But do you really think they’ll allow discovery? They will dismiss and run away.

  33. @elexquisitor – Yes, imo, fnma is precluded from issuing a credit bid any time it’s not the creditor!! Is your question because fnma is a gov’t agency or for some other reason?! I’m with you on the second set of books – it’s time, it’s past time. Is it appropriate to have a servicer employee (wearing a mers’ hat) execute an assgt to FNMA if fnma hasn’t really repurchased the loan, but the law firm, who may or may not have gotten a COPY of the note, is alleging to represent FNMA as the note’s “holder” (also)?
    The other day, I cited some state-specific statutes. One from CA says one thing an agent (gag as usual) may never do is itself define the
    scope / terms of the agency. Courts have been allowing MERS to do just that. Courts further allow and have allowed MERS, the agent, to ‘establish’ the agency by its own testimony, testimony which should come, if from anyone as a matter of parol evidence (not lawful with real property agency in the fist place imo), from the principal. There is no agency created in and by the dot imo, but even if there were, there is no authority to assign the ben interest in the dot by “MERS” granted
    Ever wonder why MERS call these straw officers “officers”? One biggie is because there are legal implications to calling anyone a sub-agent, and certainly calling anyone with a potential conflict of interest with the principal or even agent the “sub-agent”. If the servicer’s employee were called MERS’ agent, mol, that would make that person the principal’s sub-agent. Briefly and generally, agents may not appt others to do anything other than administrative tasks. These particular persons are generally employed by those who have a conflict of interest with the creditor when it’s allegedly a trust, if not with anyone else deemed the creditor (and potentially even with MERS).
    lay opinions – ask a lawyer

  34. Is FNMA prevented from issuing a credit bid at a foreclosure auction in any of the states?

  35. I’m planning on pointing out in my CA appeal the time is ripe for trial courts to acknowledge the 2 sets of ‘books’, just like Al Capone had; one for the ‘servicer’ and the other for the ‘investor’.

  36. Ian Ginnie Mae is 100% owed by the Federal Government and the Ginnie MBS are 100% principal investment guaranteed. Ginnie Mae is not a quasi government owned county like the other two. I don’t remember any lawsuit that Ginnie Mae said they did not want to foreclose in their name as they don’t purchase any home mortgage loan at all. You maybe right on Fannie & Freddie but your dead wrong on Ginnie Mae!

  37. John Gault-
    Good counterpoint to Neil’s contentions, and quoted right from the FNMA prospectus and operating manual,
    You may recall that when this whole fraud started, there were legal issues as to the meaning of the GSEs “implicit guarantee, and the meaning of the GSE handle. For awhile it seems as though the GSE investors were simply told that Fannie/Freddie/Ginnie etc were backed by “the full faith and credit of the US Govt”, when legally there was no such guarantee at all but the regulators caved in order to justify the bailouts. Then there was a press release which stated that F/F and Ginnie didn’t want to foreclose in their name because as a taxpayer funded bailout recipient it “wouldn’t look good”. (Chas Reed ponder that).
    Also, you may remember the lawsuit in Illinois where F F &G were found to be responsible for all back fees a d taxes becAuse they were public companies with no affiliation with the US Govt. as they claimed. Just the ability to borrow at lower rates than their non-GSE competitors. So…….. What say you?

  38. Neil, you said:
    “Fannie Mae is not and never has been a lender. It is a guarantor, whose liability arises after the loss has been completely established following the foreclosure sale and liquidation to a third-party. ”

    Your description more closely resembles GNMA (fha and va), not FNMA. FNMA has been purchasing loans since its inception and still does. I have cited chapter and verse of FNMA’s prospectus and m.o., demonstrating that FNMA’s guarantee kicks in and is paid to the trust* with borrower-missed payment 1, a liability for a guarantee which hardly arises “after the loss has been completely established following the f/c sale and liquidation”, as with FHA and VA. I have cited and linked material regarding the “g-fee”, who pays for it (the borrower), and how it benefits the trusts. FNMA is obligated to make the guarantee payments and may only end that guarantee by repurchase, and if it does so, FNMA once again becomes the creditor and the party entitled to foreclose, which it appears to want someone else to do as if in that someone else’s own right (like the servicer). Consequently, no loan which went thru FNMA should ever be showing any trust as the foreclosing party. I’m pretty frustrated and disheartened that you would say this (and the other day you errantly imo posited that FNMA’s guarantee as a matter of law creates an obligation between FNMA and the borrower, just not under the note). The bottom line of this peculiar misinformation, also imo, is it makes a borrower think ‘well, why bother. I’ll just owe someone for those payments’.

    *FNMA makes a point in the prospectus of stating that its guarantee payment(s) will be made to the trust, not the cert holders directly.

    Is FNMA skipping its repurchase obligation and simply showing a trust or the servicer as the foreclosing party, the rpii? Looks like it. Besides violating its commitment to repurchase,* this imo helps that gang avoid the application of FNMA’s guarantee payment(s) to the note balance.
    What the name of the crime of a failure of a party to honor the terms of its prospectus? Got me, but imo as to the borrower, it’s fraud to avoid the application of those payments to the note. It doesn’t strike me as ‘mere’ negligence, because it’s done as rote and the avoidance is done by concerted effort.

  39. MERS is a paperless company that does not enter any of the data into there system, and once the bank is “failed” MERS has no claim even under their phony registry that it stand in place of the defunct company. This is why the WaMu deal is so critical to this fraud because under normal default rates there should be 52,000 foreclosed WaMu government insured loan from the 1.3 that needed forgeries to foreclose because the Notes are blank and the titles are either in WaMu name or another they purchase the loan from!

  40. How about assignments in the name of bankrupt, defunct entities like American Brokers Conduit? The MERS agency relationship goes poof when the so-called original lender files bankruptcy. As to the affiant of business records: did they see me sign the note? No. They did not.

  41. Neil does not read these post because for over 1 1/2ys I stated that Wells Fargo Bank was and is servicing what left of the 1.3 million government insured loan of WaMu from the Jul 31, 2006 mortgage servicing agreement out of Milwaukee WI.

    You have 1.3 million FHA & VA loans that are in the Ginnie Mae MBS that have currently WaMu signed in blank endorsed blank Notes, which it is after Sept 25, 2008 impossible to have WaMu foreclose or authorize foreclosures or modification because the bank is a “fail bank”.

    What Wells Fargo does in some of these cases is to have MERS act as if they are the beneficial for these loans and assign the loan to the servicer in Wells Fargo as if they are the “holder in due course”!

    Wells Fargo nor Ginnie Mae purchases these loan and I am saying the Wells Fargo cannot be the servicer also because they are actually servicing the loan for Ginnie Mae who cannot accept payment and they no way to credit the homeowners accounts because the payment pass through and no amount is pass back from the “investors” who purchase the MBS.

    The foreclosures sale proceeds and the False Claims are collected by Wells Fargo and handed to Ginnie Mae to pay the investors of the MBS as Ginnie Mae is only the insurer of the MBS and not the owner of any home mortgage loans nor do they purchase any Ginnie Mae MBS or sell them!

    This has been my SEC claim since 2011 and Wells Fargo really shows a blueprint to the entire Ginnie Mae MBS fatal flaw of relinquishing all the Notes blank to them in exchange for the lenders transferred into issuers!

  42. Check out Judge Eric Aarseths verbal nonsense ,validating OneWests foreclosure in IndyMacs name:
    “The question of “why” the foreclosure was initiated initially in the name of IndyMac is not relevant to this Court’s determination of the legality of the transaction.”
    “Again, OneWest has not explained what it was thinking with this, but its irrelevant. OneWest had the authority to foreclose in its own name, but chose to use the name of its immediate predecessor.”

    How about the substitute trustee Richard Ullstrom, caught in discovery building fake Note endorsements and assignments of the Deed of Trust:
    “The note that has been uploaded is to E-Loan, I need one that has been endorsed to Indymac (and ideally, further endorsed to OneWest).”
    “Other 2 endorsements are needed, please open a copy of allonge process for each endorsmentneeded making sure to fill in the from and to entities.”
    “Borrower is questioning validity of assignment to IndyMac Federal Bank, FSB, that was executed after the date IndyMac was closed by the FDIC.”

    When presented with this evidence of fraud in a 60B motion, Judge Aarseth held no hearing:
    “These communications made no request or suggestion to generate fraudulent documents and alter existing documents.”

    “Why set aside a sale based on defects in the foreclosure process if the borrower has failed to perform, and the foreclosure must be held in any event?”

    “Even if this Court did find some legal issue with the sequencing of events prior to the non-judicial foreclosure and sale, there is no evidence that an “unjust extreme” would result by upholding the foreclosure.”
    “No Alaskan Court has ever required the original Note to proceed with foreclosure, but nonetheless,OneWest indicates Deutsche provided the original Note and a color copy is attached.”

    Neil Garfield:
    “To the highest degree of certainty, the change of title was a sham, the errors, fabrications and forgeries have exceeded anything I’ve encountered before”.

    Judge Aarseth:

    Denied the Application for Preliminary Injunction without a hearing.

    Appointed a receiver to take the Espelands rental income.

    Evicted the Espelands and their tenants on Christmas.
    Granted possession to OneWest Bank.
    Levied $140k judgment on the Espelands.
    Left claims against the trustee(AKT)Richard Ullstrom unaddressed. Excused himself of jurisdiction concerning the QWR RESPA violations. Denied the Espelands Motion for Reconsideration.
    Denied their 60(b) Motion alleging fraud (without a hearing).
    Denied their Motion to Stay pending appeal.
    Discredited both Espelands Expert witnesses.
    Ignored jury trial demands
    Ruled around property law
    Failed to conduct evidentiary hearing at any stage
    Discredited evidence.
    Expunged the Espelands Lis Pendens so the property could sell.

    Espeland v. IndyMac Draft circulating before AK Supreme Ct

    Max Espeland espeland55@gmail.com

  43. what about TILA violations. I thought these laws were set up to protect us instead they have been violated. not telling us who the true lender is and who owns our mortgages. Not providng us with detailed statements when in modification

  44. a fine, replete analysis Neil. As a victim of same … the clarity of their lies and scam has taken years to unravel because it was deliberately setup by them (rico act conspiracy) to be ‘a riddle, wrapped in an enigma, surrounded by a mystery’ ala Winston Churchill post-WW2 analysis of Russia. And we all now see where Putin stands on ethics and morals re: Ukraine’s identity, rights, sovereignty and self determination … he doesn’t care, as these TBTF entities also do not!

  45. Neil said ” I think it is time for US attorneys and the Atty. Gen. of each state to revisit the issue of prosecution of the major Wall Street banks.”

    Absolutely AMEN to that.
    Each State must claw back the money transferred away by fraud. It will take time but each journey of a thousand miles begins with a single step ( in the RIGHT direction)

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