Livinglies's Weblog

Can you enforce a debt, the amount of which is unknown?

The fact remains that foreclosures involving Deutsch Bank were predicated on a a specific claim for a specific amount of money. There has been no effort to publish an index that corrects for the manipulation. Deutsch Bank has admitted the manipulation, so no speculation is required.

With respect to adjustable rate mortgages tied to LIBOR, the fact that LIBOR manipulation occurred shows two things: (a) the amount demanded from homeowners and other consumers was wrong if it was based upon the incorrect publishing of the Libor index caused by manipulation and (b) the foreclosure, auto repossession or other remedies enforced in the name of Deutsch Bank (or any other manipulator) is based upon false numbers, which could be higher or lower than the rate used to adjust the alleged loan.

And YES Judges are going to hate this.

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see Deutsch Pays $220 Million to Sweep LIBOR manipulation under the rug

Many loans totaling $350 Trillion all over the world have an interest rate that adjusts based upon changes in the London InterBank Offered rate (LIBOR). In fact other indexes are either based upon LIBOR or use LIBOR as a factor in publishing their own index. Changes in this index, if so stated in the alleged loan documents, cause changes in the amount of interest to be paid by borrowers and thus the amount of the total monthly payment from the borrower to be in compliance with the terms of the loan contract.

Deutsch Bank, among others, conspired to manipulate the index for its own advantage. Apparently this enabled Deutsch Bank to make more money than it otherwise would have made from trading and other activities. That is not hard to imagine: a rate change of .01% would create a spread of $35 billion on any given day.  So far the conspirators have only paid $9 billion to settle Libor rigging.

Now DB has entered into a 45 state settlement calling for the payment of $220 million for the manipulation. Once again, nobody goes to jail. The amount of the settlement is a small fraction of the profits DB made in trading. It is even a smaller fraction of the value of foreclosed homes and cars etc. that were based upon a notice of default that set forth an incorrect amount for reinstating the loan or for redemption. In fact the consumer borrowers are not even mentioned — and have never been given the necessary information to know if they have been harmed.

A little warning here. Because DB was trading, it was in their interest to move the index up or down. Hence it is possible that some borrowers theoretically received a benefit, to wit: the amount demanded from them was lower than the amount that might have been demanded if the index was republished as a correction.

This raises an interesting question: if the amount due is actually unknown, how can anyone enforce the debt until it is known?

Causes of action by borrowers against the banks MIGHT include wire fraud and RICO. The falsification of the index is a leg up on defending the non-origination of the actual loan, to wit: that the note and mortgage were faked in favor of entities that had no interest or money or risk in the alleged debt created by the borrower’s receipt of money at the alleged time of “Consummation.”

It might also cut these banks off at the knees when they rely on legal presumptions regarding self-serving documents since the party proffering those documents has a history of fraud. Hence actual proof is required and the benefits of legal presumption do not apply. They don’t have the proof. Without the legal presumption they have no case or standing.

Filed under: foreclosure |