Banks Use Trial Modifications as a Pathway to Foreclosure — Neil Garfield Show 6 P.M. EDT Thursdays

Banks Use Modifications Against Homeowners

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It is bad enough that they outright lie to homeowners and tell them they MUST be 90 days behind in payments to get a modification. That isn’t true and it is a ruse to get the homeowner to stop paying and get into a default situation. But the reports from across the country show that the banks are using a variety of tricks and scams to dishonor modification agreements. First they say that just because they did the underwriting and approved the trial modification doesn’t mean that they are bound to make the modification permanent. Most courts disagree. If you make a deal with offer, acceptance and consideration, and one side performs (the homeowner made the trial payments) then the other side must perform (the Bank).

What is really happening is that the bank is converting the loan from a loan funded by investors to a loan NOT funded by the bank. They are steering people into “in house” loans. The hubris of these people is incredible. Why are the investors sitting on their hands? Do they STILL not get it?
Regardless of whether the modification is enforced or forced into foreclosure or converted to an in house loan, the investor loses with the stamp of approval from the court. And the borrower is now paying a party that already collected his loan principal several times over while the real lender is getting birdseed. The investors lose no matter how the case is decided. And the Courts are failing to realize that the fate of the money from a Pension Fund is being decided without any opportunity for the investors to have notice, much less be heard.
Why is this important? Because the banks converted one debt from the borrower into many debts — all secured by the same mortgage. It doesn’t work that way in real life — except now, when courts still refuse to educate themselves on the theory and reality of securitization of debt.
——————————-FROM RECENTSHOWHOW DO YOU KNOW THAT? — Introducing two upcomingCLE Seminars from the Garfield Continuum onVoir Dire of corporate representatives in foreclosure litigation. The first is atwo hour telephone conference devoted exclusively tovoir dire examination and the second is a full day on onlyvoir dire pluscross examination. The show is free. Topreregister for the mini seminar onvoir dire or the full seminar onvoir dire andcross examination (at a discount) call 954-495-9867.

  • Overview of Foreclosure Litigation in Florida and Other States
  • The need for copies of actual case law and even memoranda supporting your line of questioning
  • The Three Rules for Questioning
  • —– (1) Know why you want to inquire
  • —– (2) Listen to the Answer
  • —– (3) Follow up and comment
  • What to ask, and when to ask it
  • The difference between voir dire and cross examination
  • Getting traction with the presiding Judge
  • Developing your goals and strategies
  • Developing a narrative
  • Impeaching the witness before he or she gets started
  • Preparing your own witnesses for voir dire questions


IF YOU MISSED IT: Go to blog radio link and click on the Neil Garfield Show — past shows include—-

News abounds as we hear of purchases of loans and bonds. Some of these are repurchases. Some are in litigation, like $1.1 Billion worth in suit brought by Trustees against the broker dealer Merrill Lynch, which was purchased by Bank of America. What do these purchases mean for people in litigation. If the loan was repurchased or all the loan claims were settled, does the trust still exist? Did it ever exist? Was it ever funded? Did it ever own the loans? Why are lawyers unwilling to make representations that the Trust is a holder in due course? Wouldn’t that settle everything? And what is the significance of the $3 trillion in bonds purchased by the Federal Reserve, mostly mortgage backed bonds? This and more tonight with questions and answers:

Adding the list of questions I posted last week (see below), I put these questions ahead of all others:

  1. If the party on the note and mortgage is NOT REALLY the lender, why should they be allowed to have their name on the note or mortgage, why are those documents distributed instead of returned to the borrower because he signed in anticipation of receiving a loan from the party disclosed, as per Federal and state law. Hint: think of your loan as a used car. Where is the contract (offer, acceptance and consideration).
  2. If the party receiving an assignment from the false payee on the note does NOT pay for it, why are we treating the assignment as a cure for documents that were worthless in the first place. Hint: Paper Chase — the more paper you throw at a worthless transaction the more real it appears in the eyes of others.
  3. If the party receiving the assignment from the false payee has no relationship with the real lender, and neither does the false payee on the note, why are we allowing their successors to force people out of their homes on a debt the “bank” never owned? Hint: POLITICS: What is the position of the Federal reserve that has now purchased trillions of dollars of the “mortgage bonds” from banks who never owned the bonds that were issued by REMIC trusts that never received the proceeds of sale of the bonds.
  4. If the lenders (investors) are receiving payments from settlements with the institutions that created this mess, why is the balance owed by the borrower the same after the settlement, when the lender’s balance has been reduced? Hint: Arithmetic. John owes Sally 5 bananas. Hank gives Sally 3 bananas and says this is for John. How many bananas does John owe Sally now?
  5. And for extra credit: are the broker dealers who said they were brokering and underwriting the issuance of mortgage bonds from REMIC trusts guilty of anything when they don’t give the proceeds from the sale of the bonds to the Trusts that issued those bonds? What is the effect on the contractual relationship between the lenders and the borrowers? Hint: VANISHING MONEY replaced by volumes of paper — the same at both ends of the transaction, to wit: the borrower and the investor/lender.

1. What is a holder in due course? When can an HDC enforce a note even when there are problems with the original loan? What does it mean to be a purchaser for value, in good faith, without notice of borrower’s defenses?

2. What is a holder and how is that different from a holder with rights to enforce? What does it mean to be a holder subject to all the maker’s defenses including lack of consideration (i.e. no loan from the Payee).

3. What is a possessor of a note?

4. What is a bailee of a note?

5. If the note cannot be enforced, can the mortgage still be foreclosed? It seems that many people don’t know the answer to this question.

6. The question confronting us is FORECLOSURE (ENFORCEMENT) OF A MORTGAGE. If the status of a holder of a note is in Article III of the UCC, why are we even discussing “holder” when enforcement of mortgages is governed by Article IV of the UCC?

7. Does the question of “holder” or holder in due course or any of that even apply in the original loan transaction? Hint: NO.

8. Homework assignment: Google “Infinite rehypothecation”

For more information call 954-495-9867 or 520-405-1688.


25 Responses

  1. I like Neil’s words ” intentional interference”. I think I would call it perverting the course of justice.

  2. Anybody having experience with the law firm of Schneid, Robertson, Anschutz & Schneid in Boca Raton, FL? Same category as the former Watson Law Firm in Ft. Lauderdale?

  3. I’m so tired of searching for justice that doesn’t exist . Truly, I am. Why fight something that is so corrupt, so evil, why? If everything is stacked against you. Why? Does it matter if the lawyers for Fannie Mae are forging documents and getting away with it? DOES IT? Well apparently, they covered their dirty asses with Rule 1.6. In every state no less. Just discovered that one. And I couldn’t understand why every lawyer I spoke to didn’t think much of a forged mortgage note. Now I do. I might just walk away because what these sickos are engaged in is something I want no parts of. One day, there will be justice and that will be eternal so knowing that is enough for me to go on and leave behind what they feel they need to steal.

  4. A typical American Credit Crime Cycle (a/k/a: Economic Cycle) is explained in this short documentary:

    ‪Who Controls the Money Controls the World‬

    I think that the worst of the American Credit Crime Industry (ACCI) is yet to hit this country, much harder than it already has.
    Remember that in my 2004 lawsuit 04CC11080 in Orange County (a/k/a: World Capital of Fraud) I unveiled the U.S. pump and dump operation explained in this video, and I calculated that it was arranged to collapse in 2007 and continue to do so for a long time, dwarfing the notorious S & L crisis which sent over 3000 top banking executives to prisons.
    I was correct on both of the above counts.
    Now, I reveal to you here that I think the biggest ACCI damage is yet to come!

  5. Produce the Note or shut up.

  6. Is there any index of the millions of people who died after losing homes?

    Death of the American Dream? – USA

  7. I asked the local credit union who underwrote their home loans the answer ” we do”.

  8. Check link – like where it says calling politicians prostitutes us too kind they are ” pimp” pimping out the American people-
    And that IS the truth of the matter. There’s a legal name for it and I know you all know what it is.

  9. a MUST read. Why is stuff like this not in general circulation

  10. I really detest it that the name of organized criminal activity doing unprecedented damage is still referred to as “the housing crisis”, which implies anything but the truth. Predatory lending is a crime; it’s not a civil issue, though it’s led to a few. It’s a criminal matter and those rat-b’s will never be prosecuted.
    And they now have a history to rely on. It’s taken up to or over 10 years to nail B of A civilly, for instance. Now they can just compute the future value of money and pad their profits to cover any future monetary hits. Or, heck, AIG will keep gambling and then when the next “S” hits the fan, the govt will just bail them out again.


  11. james simth – that’s actually imo a very good question. I think it might be helpful if people start with “this is contract law”, not mortgage law,
    tho laws peculiar to mtg lending are in play. The dot (I believe without looking) says the beneficiary may change the trustee. It doesn’t say the (alleged) servicer may. Maybe the servicer contractually may – okay. Just show us the contract authorizing this. (But, as i recall, there are certain duties which as a matter of law may not be delegated, almost for sure – my memory – those of a trustee. A trustee can’t delegate his obligations to a grunt, so if a ben authorizes a change of trustee which would result in the duties being carried out by a grunt, this is not hoyle)
    1) where is the a) evidence and b) notice of the identity of the beneficiary who is contractually allowed to change the trustee?
    If the ben is allegedly US Bank, where is the borrower (and the public) given notice? In an alleged assgt executed by the alleged servicer’s
    employee calling himself an officer of MERS? Of the many resumes and searches at linked (for example) of these alleged mers’ officers, I’ve yet to find ONE who identifies himself as a MERS’ officer. One such failure is not dispositive, but ALL of them???

    2) Where is the evidence the servicer is authorized by anyone (the
    ben) to substitute a trustee? Since it involves real property, this
    authority must be in writing and accepted by the servicer.

    3) Since the law firm represents US Bank, the party the law firm
    alleges is the ben, appointing one of its own employees as trustee
    imo is a patent conflict of interest (as is appointing an employee
    of a business owned by the law firm). The trustee is to be a neutral
    party, and that’s not possible when he/it legally represents one party to the dot, the ben.
    lay opinions – find a lawyer who gets contract law

  12. Who is Authorized to change the trustee in a securitized loan. US Bank National Association was the Trustee before we went into the Bankruptcy Process. Once the Bankruptcy proceedings started, Wells Fargo’s (Servicer)’s Attorneys created documents to appoint individuals within thier lawfirm as trustees. Im no attorney, but something just does not seem right about that. James 443 677 2799

  13. By Richard Smith

    Readers of ECONned will be very familiar with the name of Gary Gorton, author of ‘Slapped in The Face by the Invisible Hand’, which explores the relation of the so-called shadow banking system to the financial crisis. His work is pretty fundamental to understanding some of the mechanisms which made the crisis so acute. Now he’s done an interview, which I would like to have a growl at; but first, he has some basic points about shadow banking, useful later in this rather long post. Gorton explains repo thus:

    You take your $200 million to the bank, to Lehman Brothers, say. You deposit it, so to speak, overnight so you can have access to it the next morning if you want to. They pay you 3 percent. And you want it to be safe, so they give you a bond as collateral. But Lehman earns the interest on the bond, say, 6 percent.

    ..and then “haircuts” (an extra margin of security in case that bond isn’t so safe after all):

    There may be a haircut. If you deposit $100 million and they give you bonds worth $100 million, there’s no haircut. If you deposit $90 million and they give you bonds worth $100 million, then there’s a 10 percent haircut.

    …and then “rehypothecation”:

    If you put a dollar in your checking account and the bank has to keep 10 percent of it on reserve, they lend out 90 cents. Somebody deposits that 90 cents, the bank can lend out 81 cents (because of the 10 percent reserve requirement) and so on. So you end up creating $10 of checking accounts for $1 of demand deposits, assuming there’s a demand for loans…And that can happen in repo as well because if you’re Lehman and I’m the depositor, and you give me a bond as collateral, I can use that bond somewhere else. So there is a similar money multiplier process.

    …and finally the link to regulated banking:

    And shadow banking very importantly is not a separate system from traditional banking. These are all one banking system.

    So much for the preamble. The other point you need to know: we are talking about an unregulated banking system that at its height was just as big as the regulated banking system, yet coupled to it, and apparently more profitable, though, as we now know, much riskier. Now we get to the part of Gorton’s interview that I’m not so happy with:

    In summary, I would describe shadow banking as the rise to a significant extent of a very old form of bank money called repo, which largely uses securitized product as collateral and meets the needs of institutional investors, states and municipalities, nonfinancial firms for a short-term, safe banking product.…It’s a valuable innovation.

    The bit in bold is where I raised my eyebrows. The truth of the bolded claims depends on the yet-to-be-discovered solutions to repo’s core problem, formulated thus by Gorton:

    Of course, the problem with repo and shadow banking is that they have the same vulnerability that other forms of bank money have. We can talk at great length about what that vulnerability is, but loosely speaking, it’s prone to panic. Looking back at history, think about how long it took to devise a solution to the first banking panic, related mostly to demand deposits. That was in 1857. It wasn’t until 1934 that deposit insurance was enacted. That’s 77 years where we’re trying to understand demand deposits and figure out what to do.

    The situation that we’re in now, seriously, is one where we are back in about 1860: We’ve just had a big crisis, and we’re trying to figure out what to do. We can only hope that it doesn’t take 77 years to figure it out this time.

    That doesn’t sound like a safe banking product to me. Next comes some irritating pussyfooting:

    Nobody wants to be given collateral that they have to worry about. And the mechanics of how repo works is exactly consistent with this. Firms that trade repo work in the following way: The repo traders come in in the morning, they have some coffee, they go to their desks, they start making calls, and in a large firm they’ve rolled $40 to $50 billion of repo in an hour and a half. Now, you can only do that if the depositors believe that the collateral has the feature that nobody has any private information about it. We can all just believe that it’s all AAA.

    Gorton is polite, and that can mislead. Impolitely: for “private information”, read “knowledge that the collateral is wildly overvalued”, or ”aware that the collateral is backed by assets with massive gearing to fraudulent loans”. The system’s gatekeepers (originators, ratings agencies and credit insurers) had an “agency problem”, (impolitely: issued cows, or rated cows, or insured cows, for money), so the fraud-backed collateral got past them.

    Gorton is vague about how this “information insensitive” collateral is to be created. Presumably the options are to have reliable ratings agencies, or some other gatekeeper on the collateral, or a very deep-pocketed credit guarantor (that’s you, dear reader), or all three. But he doesn’t quite spell it out; perhaps that’s just the interview format. What we get instead is this:

    We want all securitized product to be sold through this new category of banks: narrow-funding banks. The NFBs can only do one thing: just buy securitized products and issue liabilities. The goal is to bring that part of the banking system under the regulatory umbrella and to have these guys be collateral creators.

    Well, I don’t immediately see why a narrow funding bank, thus described, is a more reliable generator of quality collateral than a narrow rating agency, or a narrow monoline insurer, or for that matter, Gorton’s old client, AIG. Why would an NFB be any better than any of those organizations in filtering out low quality collateral, given the demand for collateral? The NFB has exactly the same agency problem.

    And are we really sure we know what ‘good collateral’ is? Gorton’s formulation of the problem isn’t quite accurate: it’s the stability of the haircuts that matters, not the reliability of the ratings. In truth, the ’08 crisis in repo was ended by explicit and implicit government backstops. By that time: haircuts on pristine US treasuries had gone from ¼% pre crisis to 3% mid crisis; on investment grade bonds, from 1.5% or so to 10% plus. As we will see later, when there is lots of rehypothecation, those moves would matter just as much as the annihilation of triple-A CDOs. More on this later: identifying a different problem with repo is the meat of this post.

    Also missing from Gorton’s picture: how much of the need for repo collateral is simply driven by the increase in OTC derivatives. According to another of Gorton’s papers, there was $2Trillion of derivatives collateral in 2007; $4Trillion in 2008. So is that why Gorton simply assumes that repo “has” to grow: to provide collateral for the OTC derivatives market? So why, then, does the OTC derivatives market have to grow? One would like to see the connection between ETFs and repo worked out by someone, somewhere, too.

    Despite my whining, do have a read of the interview: here it is again. There’s plenty more, and plenty of it is good – why Dodd-Frank is a big miss, how few data are available on the enormous shadow banking system. That’s what happens when you don’t supervise financial innovations: you don’t know what they do, you don’t know how they work, and you don’t know what went wrong. If you are in full geek mode, you can download the papers that underlie the interview here and here (I must get round to that). Metrick and Gorton write about haircuts here. That lot should keep you going…

    JPMorgan Seen Facing Bigger Fight Over Mortgage Investor Claims

    Bloomberg News

    JUL 24, 2014 11:23am ET
    JPMorgan Chase may need to pay more than the $4.5 billion it offered to settle investor claims over faulty mortgages packaged into securities before the U.S. housing crash, a report prepared for bond trustees shows.

    Trustees should reject the accord struck last November with a group of bondholders for 16 of the 330 deals included, and it’s a “close call” for three others, according to the report posted online this week by Daniel Fischel, president of Compass Lexecon, which is among firms hired by the securities administrators to help evaluate the offer.

    “Based on the reports by the expert advisors, there exists a meaningful possibility that trustees may not accept the proposed settlement offer for all 330 trusts,” Nomura Holdings Inc. analysts including Paul Nikodem and Pratik K. Gupta wrote yesterday in a research note.

    JPMorgan negotiated the proposed settlement with 21 institutional investors including BlackRock Inc. and Pacific Investment Management Co. in a bid to move past legal troubles tied in part to the housing crisis. The accord was announced the week before the largest U.S. bank agreed to a record $13 billion settlement with government agencies over faulty mortgage securities.

    Trustees including Deutsche Bank AG, Wells Fargo & Co. and Bank of New York Mellon Corp. must decide whether to accept JPMorgan’s proposal by Aug. 1. The deadline has been pushed back at least twice from an original date of March 16.

    Brian Marchiony, a spokesman for New York-based JPMorgan, declined to comment, as did Jen Hibbard of Wells Fargo. Kathy Patrick, a lawyer at Gibbs & Bruns LLP representing the investors who negotiated the deal, didn’t immediately respond to an e-mail seeking comment, nor did Kevin Heine, a spokesman for Bank of New York, and Renee Calabro of Deutsche Bank.

  14. Kareem this is a little extreme but also a must read


  15. This is probably why at least in California “A must read”


  16. The Greatest Economic Crime in Human History Indeed:

    The failure of the “American Legal System” in protecting America’s 99%, and the sellout of its 99% to its 1%, is evident in this court decision in favor of Fidelity Title, an institutionalized organized crime network of gangster lawyers, forgers, Robo-Signers, and public offices, including county recorders, courts and law-enforcements:

    In these cases Fidelity had forged, and recorded, the forged loan papers of a Lopez cashing out (stealing) an illegal loan of $75,000 on the home of Sanchez.
    Fidelity even sold a “Title Policy” to the fraudulent lender who was most probably involved in the fraud.
    Once Sanchez discovered the bogus loan he contacted the lender who passed him on to Fidelity Title Insurance which told him not to worry. But instead, Fidelity Title instructed the fraudulent lender to foreclose on the house ASAP in order to claim a loss under its purchased title policy!
    The above appellate case blessed everybody’s crimes and even admonished Sanchez for daring to sue the criminals!

    Does anyone believe this is a legitimate California Court of Appeal decision?

  17. Judges and lawyers have no business adjudicating anything where they have no comprehension of the transaction or agreement or lack thereof of an agreement.

  18. They tell me it had become all but impossible to sell that garbage in the USA around 04-05. Apparently the exchange rate at the time contributed to the marketability for overseas investors. Namely the Germans.

    The ground was definitely shaking at my office. Mortgage’s I would not touch with a 10 foot pole were being funded right down the street: You guessed it, at a major bank.

    And they were not the only one’s.

    Absolute gorilla’s in suits – I would not have trusted those cats to mow my grass.

    I finally called one of the kings @ Stifel Nicolaus and asked if the world is coming to an end .. or what the hell is going on. ‘Mortgages, we don’t play that game”.

    Make it a Great Day.

  19. I am trying to find out if RASC Series 2006-EMX1 Trust is still active. I got as far as the SEC Website which states on 1/12/07 a Notice of Suspension of Duty to File Reports form 15 was filed under Rule 15d-6. I called the SEC to find out what that meant and all they could tell me was that after that date they have no idea what happened to the trust or if it even still exists. I need to find out if this Trust is still active. I am currently in an active Bankruptcy and this could help me greatly if I can find out if the trust still exists. I can be reached at 443 677 2799 or James Smith

  20. (Author unknown) First what is re-hypothecation’. As usual it is not complicated, just stupid. And as always it is defended on the grounds that it ‘provides liquidity’ to the markets. Sadly it is supremely unstable liquidity which when it goes wrong does so massively. Hypothecation is very like repo agreements when an assets it ‘sold’ but with the guarantee to be ‘sold’ back for a given price on a given date. Leading to the obvious conclusion that it was not actually a sale at all – just a loan. But a loan disguised in ways that allow banks to lie . Which leads to the further question why invent Hypothecation if you already have repo? And the answer is Hypothecation is far worse. Here is a good description of it from the Reuter’s article,

    …hypothecation is when a borrower pledges collateral to secure a debt. The borrower retains ownership of the collateral but is “hypothetically” controlled by the creditor, who has a right to seize possession if the borrower defaults.

    Why do this? It’s in part about who gets to show what assets as still being on their books while others get to use said assets as collateral for their own loans. Which brings us to ‘re-hypothecation“. Who says an asset that has been “hypothecated” once can’t be “re-hypothecated”? Well actually no one. The UK and the US authorities have spent a decade removing any restraint of Hypothecation to bring us to where we are now.

    So, Bank 1 has an asset. It badly needs cash because it’s nearly broke. It hypothecates its asset to bank 2. Bank 2 also needs/wants a loan. So it turns to bank 3 and says, I happen to have a lovely asset which I hypothetically control, would you like it? Bank 3 says great. So bank 2 gets its loan which it probably uses to make other loans, while the asset it got from bank 1 is re-hypothecated to bank 3. Now bank 3 hypothetically controls the asset. Bank 3 turns to bank 4 and does the same. We now have 4 banks three of whom hypothetically control the original asset which is in fact still where it started, in bank 1 – a bank which was in such trouble it had to hypothecate its assets. Along the way, however, three banks have used the asset to get themselves loans and all of those loans rest on hypothetical control of the original asset. A pyramid of loans and obligations rest on a single asset whose control is now not at all clear should any one along the chain need to assert their control or need it bank to pay off their debts – should anything go wrong in the ventures into which they put the money they borrowed on the strength of the ‘asset’. And THAT my fellow citizens is why the bankers insist they get paid so much.

  21. The greatest human crime indeed, as documented in the ongoing reported atrocities in this page, in which my related comment is linked:

    If your home is in California, and it is “UNDERWATER”, I might be able to help you. In which case you can contact me by phone and leave a detailed message. DO NOT EMAIL.

  22. Indeed it is The biggest inhumane plunder in human history for generations to come, as reported here:

    The $1.5 Quadrillion Dollar Derivatives Crisis, & Growing

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