Appraisal Fraud Changes the Real Terms of Borrowing: Black Knight Controls VA Appraisals

Arithmetic of False Appraisals

Bad appraisals lie at the heart of the profit seeking bank plan which they called securitization. Since they were making money not from interest, but from fees and other trading profit and bonuses, the basic premise behind each loan “agreement” was changed without the lender (investors) or the borrower (homeowner) knowing anything about it.

Part of that undisclosed revenue came directly from granting a loan funded with only part of the dollars advanced by investors, while keeping the rest. It makes sense then that if the “intermediary” banks were making a trading profit of $300 on each $1,000 loaned that they would want to inflate the the amount of dollars being loaned without regard to the potential for repayment — since they were not retaining any risk of loss. (see end of this article for detailed explanation of how this works).

It wasn’t hard to do that. By keeping “in house” appraisal services and making them de facto mandatory, the appraisals were all coming in around $20,000 over the price of the house in a purchase or over the amount of the loan. All that was needed was to break from the centuries old tradition of analyzing sales of real property from comparable geography and time. So for example, if the developer raised prices 10% every two months then the appraisals would reflect a higher valuation than what would ordinarily apply.

In 2005 there were 8,000 certified real estate appraisers who petitioned Congress to stop the pressure on them to either comply with bank pressure or lose their business. These appraisers were certain that the appraisals being sought were fraudulent and could never be sustained — i.e., they were predicting the crash that eventually occurred in 2008. Of Course Congress did nothing and this chapter in history is mostly forgotten.

But the effect was that borrowers were relying upon appraisals that before this era of so-called securitization were reliable. The borrowers were relying upon the premise that the banks were making loans that were viable, as required by the truth in lending act. But the banks were relying upon their control of the marketplace instead of on the borrower’s ability to repay the loan.

They even made loans that appeared to comply with the laws  concerning     viability by simply allowing the borrower to NOT pay for actual interest and amortized principal for a period of time. These “teaser” rates resulted in a “reset” that increased the monthly payment to beyond the entire household income.

Such loans were doomed to fail and when a few borrowers spotted this anomaly they were assured, never in writing, that the pattern of increasing prices of homes would continue and that their ability to repay was tied to the ability to refinance the home for a higher amount thus freeing up more money with which they could pay the monthly payments.

Believing in such false representations of the current market and in the false representation that the lenders would not make a loan that could not be repaid, the borrowers entered into doomed transactions, causing them to lose homes that often had been in the family for generations. In losing their homes they also lost their credit reputations and suffered from vast consequences to their homelife, emotional stress, suicide, divorce etc.

For the banks the false appraisals resulted in pure profit and an opportunity for more profit. By disguising the fatally defective loans, they were able to obtain additional investments in which even more investors were assuming the risk of loss and would pay the banks (not the investors who advanced the original sums that covered the origination of the loan and the hefty profits of the banks in loaning out less than what they had received) if the loan portfolios presented went down in value. Hence the banks made more money as the loans failed. This also presented yet another opportunity for increased profit and revenue.

When the loans were deemed in “default” by parties who had no interest in the loan, the loans moved into foreclosure. Investors whose money was at risk received nothing from foreclosure. The banks received everything. And since the banks were not the owners of the debt and had no risk of loss from “non-payment” they took the money in as revenue and did not maintain the loans on their balance sheets as assets, because they were not assets of the bank.

None of this could have occurred without false appraisals. If the appraisals discarded evidence of higher demands from developers and such, the appraisals would have stayed in line with true valuation, to wit: using median income as the base line, the price runup that occurred because of false appraisals would never have happened. The incentives to push impossible loans would have vanished and the crash if it happend at all would have found people with property that was still worth something much closer to the amount owed.

No bailout would have been necessary because there would have been no excess.

Investors and borrowers alike would have found themselves in a better position.

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Hat tip to Summer chic.

So false appraisals were part of the reason for the 2008-2009 crash. And while statutes of limitations have run on collateral claims for damages in most instances, they can still be brought as affirmative defenses corroborating and supporting affirmative defenses for assumption of risk and recoupment. Defenses are not generally barred by the statute of limitations but there are limited to the amount that is claimed from the borrowers.

Summer chic in her never ending quest to dig up the truth of how this was all done writes as follows:

This Mafia is grown  around us like a black plague…

DocX became ServiceLink, they even have the same address in 3220 El Camino Real Irvine CA.

LPS became Black Knight, Inc. ALL use the SAME business address 601 Riverside Jacksonville, FL as Fidelity National Financial

ALL Appraisals are done by CoreLogic who owns Countyrwide’s LandSafe. Before that it was done by BOA who owned LandSafe.

From 2015 LandSafe is a mandatory appraisal service (fox in the hen house)  for  VA Appraisals….At the same time CoreLogic sells Veterans’ personal data to predatory lenders to push  vets into adjustable rate loans with huge cash outs…
I reviewed my Appraisal Report by Michigan Realty Counseling (MRC) which was done on June 30, 2016.

MRC incorporation date with the State of Michigan is July 15, 2016, or two weeks LATER.

All signatures of Mr. Smith who purportedly prepared Appraisal via A La Mode (now CoreLogic) are robo-signed signatures.

My original loan application was electronically signed by me and the lender, Alex,  on June 15, 2016 at around 10AM PACIFIC time (means California) while we both were in Chicago….

The Flood Map was ordered the SAME day, June 15, 2016 and completed around 20:00 PM…. FEMA’s offices are closed at this time. But CoreLogic owns Flood Zone Mapping company, Middletown, CT-based CDS Business mapping.
My Closing disclosures are different that Closing Disclosures sent to me by PennyMac…

In PM Closing Disclosures I electronically signed on 07 26 2016 at 14:16 PACIFIC Time.

HOW THE LENDING WORKED:

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It’s actually simple arithmetic. Investors are enticed to invest $1,000 for a “5% return. The investment bank promises (through its fictitious name “REMIC Trust”) to pay them $50 per year. $50 is the 5% the investor wanted, but the promise they are receiving does not come with any interest, right, or title to the debt, note or mortgage of any borrower. However if certain borrowers stop paying then the obligation of the investment bank to make payments to the investors is correspondingly reduced (actually by more than the decline in payments).
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Thus the  risk of loss is completely on the investors. The money from investors is taken by the investment bank as payment for “certificates” issued in the name of Trust which is falsely claimed to be a REMIC trust  but which bears no resemblance to an actual trust in which the debt is owned. Instead the trustee is given bare legal title to the mortgages without ownership of the note or the debt.
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The magic happens when the investment bank uses the money from investors to originate or acquire a loan. The investment bank makes more money on riskier loans. Impossible loans are unparalleled opportunities to make incredible sums of money.
Higher interest rates mean higher risk. While investors believed that they were funding 5% loans their money was actually used to fund loans with much higher interest rates. But they were only receiving the 5% that they wanted (along with the safety in a low risk 5% loan). Here is what happens:
  • Example 1: Investment bank originates or acquires a 7% loan. Using $1,000 from investors they lend $1000 to a borrower or buy the borrowers 7% loan for $1,000. The investment bank “books” an “expected” money return of $70 but only need to pay $50 to satisfy its promise to pay investors. The $70 income stream can then be “sold” to investors for $1400 because $70 is 5% of $1400. But there is no actual sale of the loan. The sale is a fiction at the trading desk of the investment bank where it pretends to sell the loan to the trust in a transaction in which no money exchanges hands. No money exchanges hands because the the investors already advanced the money and neither the investment bank nor the “trust” have advanced anything. Bottom Line: The investment bank pays $1,000 and sells the loan for $1400. Profit from the loan origination or acquisition is $400. Such profit did not exist before the era of claims of securitization. It is equal to 40% of the entire loan.
  • Example 2: Investment bank originates or acquires a 10% loan. Using $1,000 from investors they lend $1000 to a borrower or buy the borrowers 10% loan for $1,000. The investment bank “books” an “expected” money return of $100 but only need to pay $50 to satisfy its promise to pay investors. The $100 income stream can then be “sold” to investors for $2000 because $100 is 5% of $2000. But there is no actual sale of the loan. The sale is a fiction at the trading desk of the investment bank where it pretends to sell the loan to the trust in a transaction in which no money exchanges hands. No money exchanges hands because the the investors already advanced the money and neither the investment bank nor the “trust” have advanced anything. Bottom Line: The investment bank pays $1,000 and sells the loan for $2000. Profit from the loan origination or acquisition is $1000. Such profit did not exist before the era of claims of securitization. It is equal to the entire amount of the loan.
  • Example 3: Investment bank originates or acquires a 15% loan. Using $1,000 from investors they lend $1000 to a borrower or buy the borrowers 15% loan for $1,000. The investment bank “books” an “expected” money return of $150 but only need to pay $50 to satisfy its promise to pay investors. The $150 income stream can then be “sold” to investors for $3000 because $150 is 5% of $3000. But there is no actual sale of the loan. The sale is a fiction at the trading desk of the investment bank where it pretends to sell the loan to the trust in a transaction in which no money exchanges hands. No money exchanges hands because the the investors already advanced the money and neither the investment bank nor the “trust” have advanced anything. Bottom Line: The investment bank pays $1,000 and sells the loan for $3000. Profit from the loan origination or acquisition is $2000. Such profit did not exist before the era of claims of securitization. It is equal to twice the entire amount of the loan.

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As a result of this simple arithmetic analysis, in most cases the investment bank has already sold the risk of loss on the debt for more than the debt itself. But it retains bare naked legal title to the debt and the loan agreement even though it has no financial interest in the debt, the note or mortgage. Upon foreclosure the typical distribution of the $1,000 loan is based on a recovery of about 50% of the loan in a distressed sale. 70% of that is received by the investment bank as additional revenue while 30% is distributed to servicers and other parties who helped in the foreclosures and subsequent sales process. All of the distributions are made through layers or ladders of companies each of whom is paid a fee.

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Legal Note: A document purporting to transfer ownership of the mortgage is a nullity if it is not accompanied with by an actual purchase of the debt for real value (money). Only a party who owns the debt by reason of having paid value for it and retaining that interest may initiate foreclosure proceedings. Under Article 9 §203 UCC adopted by all 50 states a condition precedent to starting foreclosure is that the claimant be the current owner of the debt, having paid and retained value in the debt.

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Such actual financial interest is often subject to certain legal presumptions all of which can be easily rebutted by simple questions directed at when the claimant asserts that is was party to a transaction in which it paid value for the debt (or in which the settlor or trustor of a trust paid value for the debt. In most instances the answer will not be forthcoming and that in turn is what turns the tables  through motions to compel, motions for sanctions, motions in limine and objections at trial.

4 Responses

  1. “Florida-based Black Knight, Inc. announced that Fannie Mae has signed an agreement to continue its use of the Default Management Reporting System (DMRS). Developed by Fannie Mae and Black Knight, DMRS provides an online tool where servicers and the attorney firms they work with can report foreclosure and bankruptcy milestone events that occur on Fannie Mae loans.

    DMRS is integrated with Black Knight’s industry-leading LoanSphere MSP servicing system as well as the company’s LoanSphere Bankruptcy and LoanSphere Foreclosure applications, which leverage workflow, automation and servicer-defined rules to streamline default servicing processes. DMRS also supports other loan servicing platforms, providing all servicers with easy access to the tool.”

    Since 2008 Fannie & Freddie have been held under conservatorship. “Lorraine Brown, Former Head of DOCX (LPS), Plead(s) GUILTY to CRIMINAL Conspiracy to Commit Mail and Wire Fraud
    Over 1 Million Documents Prepared and Filed with Forged and False Signatures, Fraudulent Notarizations” (Zero Hedge, 11 20 2012)
    LPS advertised its services originally as able to ‘cure’ faulty collateral files.

    This progression indicates that LPS, creator of “cures for flawed collateral files”, sold its wares as Black Knight, to “cure flawed collateral files” for Ocwen and Fannie Mae to ‘cure flawed collateral mortgage files’ under U.S. Government Conservatorship since 2008.

    Apr 16, 2019 – “We are honored to receive the STAR award from Fannie Mae and … a testament to the exceptional work of our team members – at Ocwen and …

  2. @Summer:

    “Fidelity Financial ‘s Mr. Foley who owns Black Knight aka LPS and ServiceLink aka DocX also owns many major Title companies…”

    “Ocwen Financial unit Ocwen Loan Servicing has signed a long-term contract under which it will use Black Knight’s LoanSphere MSP servicing system.

    The announcement follows a series of settlements entered by Ocwen with certain states over alleged servicing abuses. Terms of the settlements include a provision under which the company will transition from its proprietary REALServicing servicing system to an alternate system and not board any new loans on REALServicing.

    Ocwen will use the Black Knight platform for both residential mortgages and home equity loans and lines of credit.”
    https://www.mpamag.com/news/ocwen-selects-black-knight-to-provide-servicing-platform-83788.aspx

    “Fannie Mae Renews Agreement on Black Knight’s DMRS Tool …

  3. CoreLogic who now owns Countyrwide’s LandSafe Appraisal which BOA dumped on CoreLogic on June 12, 2014 for $122 million pushed it to VA on June 2, 2014 . A text-book example how RICO enterprise laundering money through the Government’s office.

    Basically, BOA sold LandSafe to VA for $122 million via CoreLogic as intermediary and obtained a full control over ALL VA appraisals.

    Now it is MANDATORY for VA to use the most criminal appraisal services which collapsed America in 2002-2008.And PAY Mafia of course.

    CoreLogic owns nearly ALL Appraisal programs, one of the last one was A La Moda which CoreLogic purchased in 2018, thus created a full monopoly . It caused a huge outrage among smaller Appraisals.

    The Government does not care about glaring violation of Sherman/Clayton Acts and all applicable Anti-Trust laws

    Fidelity Financial ‘s Mr. Foley who owns Black Knight aka LPS and ServiceLink aka DocX also owns many major Title companies and wants MORE,

    The Sherman Antitrust Act

    Passed in 1890, the Sherman Antitrust Act was the first major legislation passed to address oppressive business practices associated with cartels and oppressive monopolies. The Sherman Antitrust Act is a federal law prohibiting any contract, trust, or conspiracy in restraint of interstate or foreign trade.

    The Clayton Act

    The purpose of the Clayton Act was to give more enforcement teeth to the Sherman Antitrust Act. Passed in 1914, the Clayton Act regulates general practices that may be detrimental to fair competition. Some of these general practices regulated by the Clayton Act are: price discrimination, exclusive dealing contracts, tying agreements, or requirement contracts; mergers and acquisitions; and interlocking directorates.

  4. Thank you Summer and Neil. All the appraisals were deliberately inflated. Loans were granted on inflated home appraisals and not income. How could any valid mortgage be granted on those terms? The fact that it was also done to our honorable veterans is appalling.

    Yet, our government took the position that these loans should never have been granted and they abandoned the victims. For, the government claimed – the good of others and the economy as a whole.

    We had, and have, no voice. .

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