Livinglies's Weblog

The banks are once again caught in a double dipping scheme which could be multiple dipping if they entered into multiple insurance contracts for the same loan or group of loans. They are making a profit on the foreclosure (and most likely only if there is a foreclosure) PLUS the windfall of getting a free house.

No good deed goes unpunished.

See https://www.nytimes.com/2017/04/28/business/30gretchen-morgenson-whistleblowers-radian.html?smprod=nytcore-iphone&smid=nytcore-iphone-share

Also see https://www.wsj.com/articles/the-93-words-that-could-unlock-more-than-200-billion-in-trapped-bank-capital-1493553602

What happens to the “loan” when Radian (or some other loan insurer) pays all or part of the loan? This runs to the nub of the fraudulent scheme based on false claims of securitization. If Radian paid off whoever is claiming the right to foreclose on your property then NORMALLY your liability would remain the same, now due to Radian (or Radian and the forecloser, in the event of partial payment).

But there is no normal. The insurers agreed to pay out AND waive subrogation; so the homeowner does not owe Radian anything. Thus the “damage” claimed by the forecloser, even if it was initially real, is reduced or eliminated. The amount of the payoff is changed as it the amount for reinstatement and redemption.The reason for the waiver of subrogation is that subrogation would result in the insurer discovering the massive fraud — i.e., that they were not insuring against a loss, but were rather guarantor on a bet. The insurer thus became the unwilling buyer of loan from banks that never owned the loans. Hence the insurers had liability but no way to offset it.

But the scheme gets deeper and more convoluted. To whom did Radian direct the payments? If Radian paid the actual creditor, then the scenario painted above would apply. But Radian does not pay the creditor nor does Radian even know the identity of the creditor. We can be 100% sure that neither a “trust” or foreclosing party received any part of the Radian payout. But if Radian paid the insured identified as one of the banks, then that payoff has no effect on the homeowner’s liability under the putative loan — because the payment was NOT received, directly or indirectly by the actual creditor in the alleged loan transaction.

Thus the bank strategy is revealed. Like organized crime figures, they have other legal persons (entities allowed to exist by law) that are controlled by other legal persons who are controlled by the banks acting as Master Servicers and Underwriters on Trusts that were never funded but whose name was used only in connection with enforcement of the alleged loan. They engaged multiple insurers to insure portfolios of loans that the banks knew would fail. The banks got paid multiple times on the same loans and the investors were left to settling their claims, sometimes for pennies on the dollar.

And finally if Radian paid off the “insured” who had no insurable interest and no loss, does Radian have the right to refuse payment and to simply refund the premium? This would make their balance sheet just fine since the risk portfolio would be virtually zero as to the allegedly securitized loans. That would make the Whistle-blower at Radian wrong for reasons he never imagined.

PRACTICE NOTE: Ask for discovery on whether the presumed foreclosing party (e.g., a trust with a rent-a-name trustee) or any of the other parties in the “securitization package” received insurance payments relating to the subject alleged loan. Ask for the insurance contracts. Subpoena them because it is virtually unheard of for the real party — the underwriter/master servicer — to be a named or even identified party in a foreclosure action — except for the stray “Power of Attorney” or “Assignment of Mortgage.” They will fight like hell to prevent you from getting that discovery. But we have seen hundreds of cases where upon rendering an order granting the homeowner that kind of discovery, the case is settled in as little a few hours.

Filed under: foreclosure |