Lawsuit in Virgin Islands (U.S. Territory) Exposes the Underbelly of Forced Foreclosures that Harmed Investors and Borrowers

I almost stopped reading this lawsuit because I thought they were casting Ocwen and Altisource as victims. And to a limited extent that is true. But upon close reading this lawsuit is about what the investors lost to the unrelenting full court press to foreclose at the expense of investors and obvious huge harm to homeowners who were ready willing and able to pay for modified loans.

The culprits, according to the lawsuit, were Blackrock and PIMCO.

“This case is about a covert criminal conspiracy perpetrated by two of the largest, most powerful financial firms in the world known as “Blackrock” and “PIMCO” (“Defendants”, as further defined below) – with the specific intent and purpose of gouging enormous profits from the forced foreclosures and confiscation of the homes of hundreds of thousands of struggling families all across the United States”

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Perhaps the most interesting allegation is as follows:

Defendants relentlessly sought to discredit, undermine and ultimately destroy those companies so that Ocwen would be cast aside and replaced with mortgage servicers that were unwilling or unable to perform loan modifications but instead would immediately execute foreclosures as Defendants wanted. This strategy financially benefited Defendants, who positioned themselves first in line to receive the proceeds when homes were sold in foreclosure, while seriously damaging other MBS investors, who stood to suffer greater losses than they would have if the loans were modified. Defendants were well aware that their ruthless strategy was contrary to the laws, regulations and policy of the United States, well-established industry standards and contractual obligations explicitly provided for in the governing MBS and mortgage servicing documents.

So this suit seems to be on behalf of investors. They have awakened to find that the homes were sold in foreclosure and that the intermediaries collected the proceeds. And they find that that the applications for modification were blocked, just as many of us have said, by parties who were pulling the strings. The factual basis for the suit is the proposition that homeowners could have paid a modified mortgage that would have resulted in far fewer losses to investors — something that everyone seems to know except the courts the legislatures and the executive branches of government.

Ocwen USVI and Altisource USVI are cast as victims but not Plaintiffs. The Plaintiffs are companies that you most likely never heard about. They were investors not just in RMBS Certificates but in OCwen USVI and Altisource USVI whom they say were nearly put out of business by egregious greed and overreaching by giants managing more assets than the full budget of the United States government.

If we believe the allegations, Ocwen VI and ALtisource VI were all about legally managing the loans that were being serviced and embarked upon an ambitious program to get as many of the loans modified, where they would remain in the performing category.  But Blackrock and PIMCO wanted foreclosures instead of modifications. As was said in a BofA office in Massachusetts some years back by a manager of the “servicing” department — “we are not in the modification business, we are in the foreclosure business.”

There are several reason why foreclosures are the goal, even if it destroys investors and homeowners alike.

  1. A foreclosure sale conducted by the correct people raises the almost unrebuttable presumption that everything that preceded the foreclosure was legal, having been reviewed by a judge and approved. This is essential to keeping up the pretense that the RMBS certificates actually derived their value from the loans when in fact the situation was quite the reverse.
  2. Maintaining the illusion of value for RMBS enables the “trading” market to continue where the real players are dumping all of the paper they acquired with OPM (other people’s money) and issuing ever climbing levels of synthetic derivatives supposedly deriving their value from “underlying” loans.
  3. Maintaining the illusion of REMIC Trusts that properly issued RMBS certificates deflects from the fact that the only thing the investor received was am IOU certificate from an entity that (a) did not legally exist and (b) owned no loans; hecen there were no loans “underlying” or anywhere else. By using the illusion the intermediaries received all the profit from “trading” with assets that were supposed to be in a trust, but which were never purchased by the trust. Hecne the money that was made was never applied to investor accounts because on paper it was neither the trusts nor the investors who owned the loans and the RMBS certificates held in “street name.”
  4. Maintaining the illusion enabled the intermediaries to report that investors had lost money and the borrowers lost their homes without anyone being the wiser because that is what happens when you have a foreclosure. It all made sense except that the reality was quite the reverse — the intermediaries owed their profits to the investors less fees. With the foreclosure it doesn’t appear that the investors are entitled to anything other than the ent proceeds of sale. But the reality is that the investors were not entitled to any proceeds of a foreclosure sale but were entitled to the windfall “profits” created by the intermediaries trading on what should have been in the investors accounts but wasn’t because the appearance of a certificate being mortgage-backed is sufficient to escape regulation.
  5. In many cases the entire proceeds were collected straight off the top of the foreclosure sale in the category of “servicer advances.” Servicer advances were nonexistent. First, the certificate holders were not ever receiving mortgage payments; they were receiving unsecured bond payments made by third parties on behalf of the illusion of the trust. Hence since mortgage payments were not going to the trust and since the investor payments were not made by the trust, no advances were required nor paid by third parties, who were propping up an enormous PONZI scheme. Instead a book entry was made off the record as though a servicer was making payments on behalf of a homeowner who was not paying on the loan. It’s true that investors kept getting payments for a time even when the income from a purported pool of loans was insufficient, but not because the servicer was paying them as advances. When the property is sold, all or most of the proceeds goes to the servicer as a credit against nonexistent advances. The real party in interest in such circumstances is the servicer claiming recovery of servicer advances that accrue only when the property is liquidated. This leaves the investor with no business reason to foreclose since there is no injury — either way it is going to be a loss for the investor but one that won’t be revealed until far down the road. But the investor’s loss comes not from the loss of the mortgage loan, but from the loss on the certificates issued by the nonexistent trust. In all events title to the property or the proceeds of sale does not go to the investors in RMBS or the investment vehicle REMIC Trust. The reality is far down the road (at least another 10 years) when the losses catch up with investors who thought their investments were relatively safe with the risk strictly controlled.


15 Responses

  1. Ian — will email you. Perhaps you and Jan could discuss.

  2. Addendum- I would imagine there is an enormous number of CDS or other insurance on my “loan”. I went from Equicredit ( BOA) to New Century to Ocwen to Option One, to AHMSI, to SPS. That in itself is telling.
    Meanwhile I have three kids- one in private liberal arts college (72k) after 2 years in boarding school (55k) , next son final year of boarding school (57k), 3rd son in 3rd year boarding school (55k) through this whole illegal chain of mortgage services.
    As an extremely patient individual, now I find myself becoming angry.
    I’m going to do something, not sure what. Now that I’ve been current on my nonexistent mortgage for some time, it should be a bit easier . Looking for suggestions.

  3. Jan van eck and ANON- thanks for verifying my recollection. Am current on an SPS – serviced “mortgage loan” , from a Trust which doesn’t exist. Won’t go into details. Would like to come up with a scheme/plot to turn the tables on the lying, forging, fraudulent, perjorious bastards. Am mulling over my course of action.
    Jan nice to hear from you- you’ve been here since 08 09 or so. I miss your erudite comments. ANON we have spoken several times, glad to see you don’t respond to threats.
    Me? I’ve never played well with others, am as skeptical and cynical as they come. Carry on!

  4. Ian’s recitation of Select Portfolio and Credit Suisse is correct.

    Anyone tangling with Credit Suisse is invited to review the case of IN re Yellowstone Mountain Club, and the bankruptcy court’s Interim Order in the adversary proceeding, where Credit Suisse is denounced as “an international predator bank”and their #232 million loan gets canned. The Court opined, “their conduct shocks the conscience of the Court.” Yea, well, guess what, that is all in a day’s work for Credit Suisse and Select Portfolio. Sue them all, folks.

    IN re Yellowstone Mountain Club v Blixeth, bankr Ct Montana, 08-61570-11, Adv. Proc. 09-00014, Document 289, find it on Google Scholar. Happy reading. And be sure to cite it in your Filings.

  5. Wow – -Ian and corruptionpedia2, — how the crisis was handled was on the Dems Clock. The fraud and corruption you describe is outrageous.
    Will anyone ever have the courage to take it on?

  6. First Boston merged w Credit Suisse years ago. CS owns SPS, Select Portfolio Servicing in Salt Lake City, which is the renamed Fairbanks Capital, the firm hit with a 42 million dollar fine by federal regulators in 2008 for , fraudulent servicing practices.
    At the time, I checked the Utah layoffs on the state website, and as far as Incould tell, not 1 person from Fairbanks was let go who subsequently collected unemployment compensation. So SPS is the same as Fairbanks.
    They were part of the Doc X settlement, they received $920 million under TARP, and the list goes on.

  7. One wont be surprised to find out that most of the illegal foreclosures are forced foreclosures.

  8. Breaking news: Stephen Shapiro, the founder of Mayer Brown‘s U.S. Supreme Court practice, was shot and killed at his home in a northern Chicago suburb on Monday night, .

    Chicago is a war zone. With totally destroyed public confidence in Courts people prefer to find their personal justice on a spot, specially when dealing with Firms like Mayer Brown who are in bed with most politicians and judges.

    Mayer Brown is one of the most corrupt law Firms in Illinois. Their lawyers donated millions to various judicial and political campaigns, specially to IL Appeal and Supreme Court Justices.

    Mayer Brown LLP usually represents Wells Fargo bank in all Appeal Court cases and cases filed against Wells Fargo bank by homeowners – and of course win them without any problems.

    In my case at least six (6) Judges and Justices received substantial amounts of money from Mayer Brown in whose favor they ruled in a text-book fraudulent foreclosure case.

    The judge who criminally concealed evidence from my case, Robert E. Senechalle, Jr. was a brother-in-law to Mayer Brown top partner Julian D’Esposito.

    Justice James Epstein, who granted possession of my property to Wells Fargo because he observed “notation” how MERS (not a mortgagee) transferred its interest to Fremont Home Loan Trust 2006-1 while my case was filed by Trust GSAMP 2006FM1, received at least $1,750.00 from Mayer Brown.

    Justice David Ellis, a trusted crony to IL Democratic party Speaker Madigan (yes, father of IL Attorney General Lisa Madigan) received at least $300.00 from Mayer Brown and ruled in favor of Wells Fargo bank, without seeing evidence still missing from my case

    Judge Patricia Spratt, wife of well-connected William Bauer, Senior Judge for Federal Court of Appeals, received at least $5,200+ from Mayer Brown and ruled in favor of Wells Fargo bank with whom she had glaring conflict of interests; and so on.

  9. First – not a single forced foreclosure can proceed without Court Orders approved by JUDGES. Servicers merely take advantages provided them by judiciary and use Courts as a weapon of mass destruction and their money laundering machines. I think its time to start hold judges personally liable for supporting fraud upon the Court and enabling banks’ Ponzi scam.

    Second, the Blackrock has very particular people, who actually started destruction of US economy with mortgage derivatives and who orchestrated this gigantic Ponzi scam.

    Bernie Madoff got 150 years in jail for $50 billion scam. None of Blackrock executives was included in this lawsuit or even investigated.

    Blackrock officials walked away from theft of Trillions from investors and millions of stolen homes, thanks to enormous corruption.

    Laurence D. Fink – Founder, Chairman & CEO (Democrat, now adviser for Trump)
    Blake Grossman, former Vice Chairman
    Robert S. Kapito – Founder & Co-President
    Susan Wagner – Founder, member of the Board of Directors

    Fink started his career in 1976 at First Boston, a large New York-based investment bank. Eventually taking charge of First Boston’s bond department, Fink was instrumental in the creation and development of the mortgage-backed security market in the United States.[8] At First Boston, Fink was a member of the Management Committee, a Managing Director, and co-head of the Taxable Fixed Income Division; he also started the Financial Futures and Options Department, and headed the Mortgage and Real Estate Products Group.[9]

    Fink added as much as $1 billion to First Boston’s bottom line. He was successful at the bank until 1986, when his department lost $100 million due to his incorrect prediction about where interest rates were headed.[4] The experience influenced his decision to start a company that would invest clients’ money while also incorporating comprehensive risk management.[4]

    n 2006 Fink led the merger with Merrill Lynch Investment Managers, which doubled BlackRock’s asset management portfolio.[2] That same year, BlackRock’s $5.4 billion purchase of Stuyvesant Town–Peter Cooper Village, a Manhattan housing complex, became the largest residential-real-estate deal in U.S. history.

    When the project ended in default, BlackRock clients lost their money, including the California Pension and Retirement System, which lost about $500 million.[4]

    The U.S. government contracted with BlackRock to help clean up after the financial meltdown of 2008.

    Although BlackRock is widely believed to have been the best choice for the cleanup job, Fink’s longstanding relationships with senior government officials have led to questions about potential conflict of interest regarding government contracts awarded without competitive bidding.

    In December 2009, BlackRock purchased Barclays Global Investors, at which point the company became the largest money-management firm in the world.[4] Despite his great influence, Fink is not widely known publicly, apart from his regular appearances on CNBC.

    In December 2016, Fink joined a business forum assembled by then president-elect Donald Trump to provide strategic and policy advice on economic issues.

  10. Holy Canoli — This is so true.

    And, other intermediaries Louise!!!

    Ian — keep it coming!!!.

  11. Corelogic related to servicers.

  12. Nice post Neil- a little more background on foreclosures in the US Virgin Islands would be illustrative. Also how about foreclosures in Puerto Rico?
    And of course some of us are familiar with Blackrock, and of course PIMCO-
    Any word on HSBC lately? They were laundering drug money and using it to advance mortgage originations- while James Comey was on the board. You know, the usual suspects.

  13. But who is paying the property taxes on houses that are in “default” ???

  14. The servicers are stealing the money that should be going to the creditor/investor.

  15. Cut out the middleman, pretender lender, debt collector servicers !!!!!

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