COVID19 Recession Will Be Bonanza for Wall Street Banks, Servicers

stop thinking you are getting away with something if you win in foreclosure. When you win you’re only getting part of what would be due to you in a fair open market full disclosure trading environment. Release from the debt, note and mortgage is only partial payment of what is owed to you — not the other way around.

This is the time to get things right. And the unfolding developments arising out of what might be the greatest recession in history is frightening. But it is also an opportunity to see in real time how Wall Street securities brokerage firms (“investment banks”) are operating in the realm of mortgage loans and foreclosures.

For one thing, we will see many large and small companies suffer grievously from loss of business. The Wall Street banks that were permitted in 2008 to call themselves commercial banks will see no such losses because they made trillions of dollars in undisclosed profits in so-called securitization schemes that effectively bankrupted central banks all over the world and undermined both society and financial systems.

The mega banks have those profits parked in offshore investments. So they will “repatriate” (launder) that money back in to report higher earnings to prop up the value of their common stocks trading on the open market.

In addition the current spate of announcements of forbearance and moratoriums does something that the banks love: they no longer need to say to borrowers “you must be behind 3 months before we can consider a modification.” Now the government is doing it for them, so they don’t even need to lie or cover up anything.

Most people continue to look at mortgage loans through the lens of conventional banking. Someone loaned money and they need to be repaid. The law requires it. The reality is that the law does not require any payment if the facts were known and accepted.

The reality is that payment from a borrower is simply added profit to an already pornographic and illegal scheme to generate profits that are hundreds if not thousands of times the ordinary revenue from making and servicing loans. The scheme is not to make loans but to sell data labelled as loan data. The investment banks sell the falsely labelled loan data many times over in a variety of complex “derivative” instruments and then they sell “hedge” products in which buyers and sellers can bet on the performance of the loan data without ever owning a single “loan.”

The end result is that investors buy certificates without buying any loans, debts, notes or mortgages. Investment banks fund payments to homeowners falsely labelled as “loans” without ever being the lender.

And nobody is carrying the borrower’s obligation as an asset on their books — which means nobody is claiming ownership of the obligation. Wall Street banks figured out a way to use foreclosure process to increase profits — even though nobody is financially injured from alleged nonpayment from “borrowers.” When the property is sold the money proceeds are distributed to the foreclosure players, the lion’s share of which goes to the investment bank that started the “Securitization” scheme.

In other words foreclosures=profit. They are never used to pay down a debt on the books of any entity anywhere because nobody has paid for the debt. Thus every “loan” represents a profit opportunity for investment banks, foreclosure mills, companies claiming to be servicers, and other vendors like real estate agents, and intermediaries who conduct or arrange for sales sand evictions. It’s a shark fest.

So now people are going to be applying for and getting forbearance. every time they do that they are tacitly admitting the existence of a “loan” without realizing the true nature of their transaction.

This fits nicely into the Wall Street business plan because they know that payments subject to forbearance are most likely never going to be paid by the homeowner.

This enables them to create the illusion of a default (which cannot exist unless someone has been financially injured by nonpayment).  The announcement of  “default” enables the foreclosure players to get into high gear as they pursue ever higher profits.

Now you know why the servicers would say (only over the phone, never in writing) stop paying for three months. It was a game. They wanted you to stop paying because they wanted to use the foreclosure process to sell your home and take the proceeds as pure profit.

All of this sounds counter-intuitive. How can there be a loan that doesn’t need to be repaid? The answer is that it was not a loan. It was a disguised payment to homeowners in exchange for a signature that made it possible to sell their loan data and personal financial reputation dozens of times.

Contemporaneously with the original transaction, the players were all made whole so that there was no debt to record as owing to anyone on any accounting system for any company or bank. The “loan” was a disguised payment in exchange for the right to sell the loan data and personal information of the homeowner who was labeled a “borrower.”

Homeowners did not know anything about the true nature of the transaction. It was a breach of every law, rule and regulation relating to issuance of securities, lending money and even recording statutes (recording a lien when there is no debt is illegal).

The agreement of homeowners to pay money was based upon a false premise, to wit: that there was a lender who was loaning money and who had a stake in the success of the transaction that was labelled as a “loan.”

The truth was that there was no lender. There was a broker issuing securities and contracts in a private unregulated market.

Contrary to what was known to homeowners, the investment bank, acting through sham conduits (“Originators”) had a stake in the failure of the “loan” and was acting on that stake by betting against the success of the “loan” at the same time it was recording and reporting the existence of the “loan agreement.”

And by forcing each loan into “foreclosure” they are reaping additional profits and not ever crediting the proceeds against any account for any company that was carrying or reporting the “debt” as an asset.

All the foreclosure players know this. That’s why they fabricate documents that say nothing but look like they say something. The documents must all be fabricated because nobody is involved in any financial transactions except the issuance and trading of securities that derive their value from “loan” data and not from the principal or interest or fees allegedly owed on any loan. 

If the homeowners knew about the true nature of the transaction to which they had affixed their signature they would have had an opportunity to bargain for more than a payment from investment banks in the form and label of a “loan.” 

That’s why disclosure laws are so important. No homeowner agreed to this setup. Nobody in their right mind would sign a document that allowed some remote entity to designate a future claimant who would force the sale of their property solely for profit.

Nobody would be willing to “borrow” money from an undisclosed group of conspirators who were making so much money from their  signatures — without including the homeowner in getting a piece of the pie that was considerably larger than the falsely labelled “loan.”

So stop thinking you are getting away with something if you win in foreclosure. When you win you’re only getting part of what would be due to you in a fair open  market full disclosure trading environment. Release from the debt, note and mortgage is only partial payment of what is owed to you — not the other way around.

PRACTICE HINT: Direct all inquiries toward the existence of any accounting report and documents proving the entry on the books of any entity that claims to hold the alleged debt on its balance sheet as nan account receivable. It doesn’t exist. foreclosure without ownership of the “debt” is not foreclosure, it is fraud. Use Qualified Written Requests (RESPA), Debt Validation Letters (FDCPA), Demand letters, and discovery (and motions to enforce discovery) during litigation or bankruptcy. If you pursue it in a timely and proper manner, your chances of success are quite high.

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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. IN FACT, STATISTICS SHOW THAT MOST HOMEOWNERS FAIL TO PRESENT THEIR DEFENSE PROPERLY. EVEN THOSE THAT PRESENT THE DEFENSES PROPERLY LOSE, AT LEAST AT THE TRIAL COURT LEVEL, AT LEAST 1/3 OF THE TIME. IN ADDITION IT IS NOT A SHORT PROCESS IF YOU PREVAIL. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
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4 Responses

  1. And Brian Tracy — absolutely. No one told the homeowner a darn thing. They thought all was kosher. NOT.

  2. I have been here a very long time. I have not seen a better post by Neil than this one.

    I have argued with Neil over time on some issues. I cannot argue this article by Neil.at all.

    This is correct.

    Thank you.

  3. Exactly. The windfall proceeds must go to the signature.

  4. I have to agree with everything here except for the homeowner demanding “more” if they knew about the deception. The scam would have collapsed if the homeowner knew and no certificates would ever have been sold.

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