I am in constant contact with several very supportive readers who, understanding part of the process of securitization, have then launched their own version of what happened. So this article is intended to give those who are interested a peak at reality and facts instead of internet speculation and opinion. If someone hits you over the head with a sledge hammer it is a fact, not an opinion. Not everything is up for discussion when it comes to history.*The primary error most people are making is assuming that some part of what the banks were doing was functioning in conventional mode, to wit: as intermediary in the processing of financial transactions. Nothing could be further from the truth. Just as Bernie Madoff was not acting as an intermediary in real transactions (because they were not real), neither were the Wall Street banks. They were acting as principals under the guise of acting as intermediaries.
So to those who think that the banks are holding loans or securities I say the following:
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Your description is very close to reality, but not quite. Show this to any person with actual knowledge, education and direct experience in investment banking this email and I’m sure he/she will agree with what I am describing. The problem is probably in semantics because each word is a term of art.
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I am functioning not from theory but from actual first hand knowledge of how this works because I was part of it. Like Coronavirus this is no longer a matter of opinion. It is reality.
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So I am giving you a summary of reality as I know it not as I “believe” it. This is not theory.
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Let’s take a pension fund as an example. Some worker is contributing to his retirement plan perhaps with contributions from his employer. This money goes to a bank account. The bank account is controlled by a separate legal entity. The legal entity (Pension Fund X) starts additional financial accounts with securities brokers. In doing so it moves money from the bank account to the bank account of the securities broker. The pension fund has a person in charge of investing the money to gain the greatest possible return with the least amount of risk to protect the retirement benefits for the worker. This is called a “Stable Managed Fund.”
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The worker owns nothing except rights as a vested beneficiary of the pension funds subject to the terms of the pension fund.
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The fund manager places orders for the purchase of securities. The securities that are purchased are generally held in street name which is to say that the broker is named as the owner of the securities, but the legal owner is the pension fund. All rights of the securities are exercised by the broker “on behalf of” the investor. But if there is a loss caused by devaluation of the investment, the investor bears 100% of that loss and any other risk of loss.
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So if the pension fund purchases certificates that are issued in the name of a trust, those certificates are held in the name of the broker, who does not own them and who has no liability in relation to them, except to make good at such time as the Securities are sold or there is a distribution of income to the owner of the securities. That distribution is received by the broker who then passes it on to the pension fund.
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This causes confusion for people who don’t understand practices on Wall Street. They see the broker’s name on securities and assume the broker actually owns those securities and possesses the right to gain from fluctuations in the market or declared value of the certificates or lose money if the investment goes south. This is not true.
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When the pension fund purchases the certificates it pays the broker who represents the pension fund in the purchase transaction. The pension fund broker pays the broker for the seller. This is called the money trail.
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This is where securitization breaks down into a Ponzi scheme.
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The certificates are issued in the name of a trust as “issuer.” The existence of the trust is debatable in terms of legal argument. Since it is not registered anywhere it could be a common law Trust. But it can’t be a common law trust if there are no assets entrusted to a trustee to hold for beneficiaries. Ask any estate planner. If you don’t move assets into the trust name then there is no trust.
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Normally when a selling broker sells the securities of a new entity (i.e., an IPO) it receives the money into the broker’s account. It then deducts selling commissions and other expenses and turns over the balance to the issuer. In this case the issuer is a trust whose existence is debatable. But in all events, the balance of the proceeds of the sales of certificates is never deposited into a trust account anywhere and never conveyed to the named trustee to hold in Trust for anyone. It stays with the selling broker.
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Note that the pension fund is merely a creditor in this transaction. It is not a beneficiary, and the named Trustee of the trust has no fiduciary obligations in favor of the pension fund. [See every unsuccessful lawsuit where pension funds sued the named trustee for not doing something about the deterioration in the value of the certificates].
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Note also let the actual trust agreement (not the pooling and servicing agreement) says that the named trustee is merely a conduit holding bare naked paper title to notes and mortgages on behalf of the master servicer. Of course it turns out that the master servicer is the underwriter who also served as the selling broker.
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If you think about this you’ll see that the offering of the certificates was actually a plan for the underwriter to retain all of the proceeds of the sale of the certificates. So their plan was obviously to sell as many certificates as possible.
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This of course is not what was told to investors. All of the documents contained in the offering to the Pension funds implied but did not actually state that the money was going for the purchase Residential Mortgage Loans. The further implication was that payments from those mortgage loans would be forwarded to owners of the certificates in accordance with formulas set forth in the prospectus and the pooling and servicing agreement.
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But a close reading of both shows clearly that the pension fund simply received a promise of periodic payments from the underwriter and selling broker doing business under the name of the debatable Trust.
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The actual use of the proceeds of the sale of the certificates was completely discretionary on the part of the underwriting and selling broker, since the money of the investors was simply converted to money of the broker by the sale of the certificates, which conveyed no interest in any assets nor any guarantee of payment. And while the pension fund could suffer a loss, it would be caused solely by the unwillingness of the broker, in its sole discretion to make the payments — not from the lack of any payments from any homeowner(s).
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The business of Securities Brokers is to make money on the movement of money. While they may maintain trading accounts, their primary business is to generate fees from transactions involving the purchase and sale of securities. The Securities Brokers are not investment funds. The investment Fund in our example is the pension fund. The securities broker is supposed to be an intermediary. instead it turned out to be something else.
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So the selling broker was issuing a promise to pay based upon an expected rate of return that was advertised in the offering materials for the purchase of the certificates. If that rate of return was 5%, then on each $1,000 invested, the pension fund was expecting a payment of $50 per year. The broker now had an incentive to find assets that would pay more than 5% per year. If they were able to find a transaction in which the counterparty agreed to pay 10%, Then the broker would only need to fund $500 out of the thousand dollars that was invested.
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The broker kept the balance, which is equal to 100% of the amount of the transaction with the homeowner. Thus a broker had no incentive to reduce and a risk of loss and have every incentive to increase the risk of loss by making riskier loans that would pay a higher rate of interest. In fact, the broker could bet that a high interest group of loans would have significant defaults, and have the payments on those bets (insurance, credit default, other hedge products) directed to the broker instead of the pension fund whose money was essential to the entire scheme.
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The selling broker did not want to be considered a lender under the federal truth in Lending Act or any other law. So it uses a series of conduits, the last of which was designated as an “originator” who actually had nothing to do with the loan. The originator was a third party servicer receiving a fee for posing as a lender. In order to protect itself from vicarious liability for Lending violations, the broker made sure that there was absolutely no contractual privity between itself and the originator who was designated to be named as the payee on a promissory note and the mortgagee on a mortgage.
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While the broker was paying for what appeared to be a loan, it did not receive any right, title or interest in any debt, note or mortgage. So at the conclusion of the transaction, the broker had the rights to sell the private data of the homeowner while at the same time making itself invulnerable to liability for lending violations — because the borrower had already agreed that the designated “lender”/originator was the real lender.
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So you can see that while brokers may have been stuck, from time to time, with unsold certificates and may have temporarily recorded an asset receivable for loans that were originated or acquired, they never retained either one since there was no profit in doing so. Instead they sold the Loan Data as many times as they could.
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While on their own books this removed any asset receivable and therefore any exposure to loss, the broker continued to issue instructions on administration, collection, enforcement, and foreclosure of property for two reasons: (1) they had to maintain the illusion that the transactions were loans in order to support the derivative infrastructure they had built upon the premise that loans were somehow owned by someone and (2) foreclosure, enforcement and collection represented an additional profit opportunity, in that the broker could receive the proceeds of foreclosure without ever distributing that money to the pension fund.
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Every transaction that was labeled as a loan in this scheme was actually based upon a single premise: issuing and trading securities — a fact not known by homeowners who accepted the label of “borrowers” and accepted the label of “loan’, “promissory note” and “mortgage” since that was what they asked for but did not actually receive.
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Had homeowners been approached with full disclosure asking for their name, reputation, signature and home as collateral — so that the broker could make exponentially more than the stated amount of the transaction — and if brokers were required to do so, the entire mortgage market would have looked different and been different. Brokers would have been competing to offer incentives, fees and payments to homeowners to sign on for participation in the golden goose.
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So the idea that the brokers who are acting as “investment Banks” are sitting on loans or certificates in their portfolios on which they have a potential risk of loss is complete nonsense. If you look at the history of the TARP program you will see that as the government penetrated all of the layers described above, the definition of “troubled assets” changed repeatedly along with a description of the program.
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First it was to protect the banks from losses attributed to defaults are mortgage loans. Then it became apparent that there were no defaults on mortgage loans that had produced any losses to the banks.
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Second they changed the definition to be toxic assets which included the certificates, which is where many people get hung up believing that the banks were buying the certificates that they were selling.
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When it became obvious that the banks were not losing any money as a result of loss attributed to devaluation of the certificates (they actually made money through insurance contracts with the lies of AIG), they changed the definition again.
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And eventually they simply gave up and simply moved the naked title nonexistent or debatable transactions into the Maiden Lane securitizations which consisted of absolutely nothing.
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The Federal Reserve contributed to this illusion. It announced that it would purchase from the banks trillions of dollars of the certificates at face value. Federal Reserve never asked for and never expected any return on that purchase. The window that was opened for the sale of those certificates was merely an excuse for pumping money into the banks under the erroneous belief that the banks wouldn’t turn pump the money into the economy through loans. When this didn’t happen, the government was forced into a fiscal stimulus in order to get money into the actual economy.
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So if anyone has the requisite amount of knowledge as to finance and economics, and he/she has access to sufficient information in order to comment on my description, I invite comment or correction.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed attorney. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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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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Filed under: foreclosure |
Heard from an attorney – who spoke to another attorney who does foreclosure defense in my state.
What this attorney is getting in Court is — “WHO cares — the money is owed to someone – what difference does it make?
How do you battle that?????? All over my state. This is why judges do not grant discovery — they do not care.
What can we do to change the entire mindset of a judicial body?.
Some states may be better — but not mine.
Just throwing this out here: what if at the application process, [submitted by the broker, who works for the banks, not us] every loan was evaluated for its servicing capacity? Banks knew from day-one many of the loans would fail, hence the reason they were insured.
The entire scam was to maintain a servicing platform. Knowing in advance they would lose money, didn’t care, that was covered. The goal: to get a payout on the insurance, using the commencement of a foreclosure [needing your note for a payout]…unknown to the homeowner.
A default would be used to garner funding from investors, then offer a modification, or a refinance designed to get your signature and a ruse to tie the “original” debt to you, because they no longer had a “valid lien”…definitely using the servicing platform to foreclose.
Doing some research here, thinking out loud, much to know…the goal from the beginning was to steal land-homes.
papergate & friends:
i’m going to repeat this one last time…there is no silver bullet that is going to allow anyone to take down the big banks or wall street.
no politician nor any court is going to make policy or rulings that would tank the national financial sector. and that sector is controlled by very rich individuals and corporations, and has trillions of dollars to buy the politicians, lobbyists, courts, media, etc. to make sure that that never happens. you win your cases quietly and one at a time.
and epstein didn’t kill himself…does that ring a bell?
Thanks Neil , great to have it all spelled out in one post.
Paper — excellent. Bob G — I get it. But there is spillover from those paying and those in false foreclosure. Paying to WHO?? It is trillions of dollars that can never be resolved one “debt” at a time. While that is very helpful, and can be productive, for the most part – many people are left in the dark. They don’t know where to go. In the end, this affects everyone. And, now the pandemic highlights how bad it really is. All anyone can now get (from non-bank servicers – WHO really are they?) is forbearance – and any subsequent relief at the mercy of – what shall we really call them? I don’t really know
Keep doing what you are doing. Keep going. This does not subtract from any individual case, and if you are having success – kudos. And, I know you are having success. We cannot ignore that. Keep going.
This is now unprecedented times. As if the financial crisis was not horrible in itself. To all I urge – keep doing what you are doing. But if we are to survive – must also join together. It is bad.
This is a time to survive – in whatever way we can. UNPRECEDENTED. EVER.
Bob G. Agree 1000% . . . the thing is we are the ‘experts’ of the facts – after all this time we know what went down – how we were victimized – what we really need is to show up in massive numbers in a case as American consumers – which is really black words on paper – we know how we got taken – we have to simply spell it out – in most cases the scenario is the same – especially in most cases the same actors were involved – we gather and simply discuss the actors in each of our cases – someone like myself who is a 30 year legal professional (paralegal, notary, etc.) has the most important skill – processing of words on paper – organizing the players and issues – that is what I did in major law firms – we utilize a ‘legal fund’ to get experts like Neil, etc. to simply – clarify and give us his and other’s absolute honesty and debate – we demand a jury by our peers – because it is the facts that are geniine material issues in these cases – in most cases the actors will probably turn out to be the same in each state – I and others like me have the skill to articulate our arguments – to distill the language down to very bare bones – we’ve been involved with this mess so long – our issues are common – we negotiate perhaps law professors (i.e., credit slip, etc.) to critique our pleadings – if we file a massive complaint as all pro se litigant victims – with common defendants – we can economize – time and typing are something I can donate – funds would be used to retain experts who understand the complex financial issues and things like contract law, bankruptcy, statutory rescissions, etc. we just do it and quit talking about it on blogs – and we discuss amongst each other plans of action – but not complaining or taking up everyone’s energy on each specific case – but simply provide the basic facts – same as what someone like myself would do on ‘intake’ with law firms – no hand holding, no psychology or giving advice – just articulating the facts on paper – the nationalmortgageregistry.com which is not yet up will be a central database where homeowners/victims can deposit their data – and perhaps donate $5 or $1 whatever they can – the data is then compartmentalized and sorted with like info – it is a mass joinder in the making – the illegal actions – facts are known to us all – no one can sell us on something we haven’t already learned is basic bull. We need to do something and to file a massive lawsuit against all of the bad actors – displaying all their victimizing, illegally gotten gains, etc., for the whole country to see – at this worse time in history – will perhaps populate a few settlements with small fish and we use that to fund the bigger undertakings – and as pro se American consumer citizen-litigants – we also name those in power who failed to engage in due diligence in 2008 and now again – and failed to do the right thing with the repeal of Glass-Steagall – basically both parties and all administrations since 1999 – especially those like Paulson, Bernanke, Geithner, even those we highly respect named so they can come forward and while defending themselves give aid to our cause – because we will draft the pleading in a manner that the ‘good guys’ named will understand why they are also being named and will in all probability come forward – defend and hopefully cross-claim against the defendants and allow for discovery – the only way we get those in power, including, i.e., judges who ruled unconstitutionally in state court actions, to pay attention – which is to name them. Attorneys don’t want to do this – but we as pro se litigants could give 2 shts about the politics – we are the government as we are the people they serve us not us serving them – that’s been the mistake all along – we have to hold those accountable who failed to look out for the citizen consumer and put the needs of wall street before us – that’s the heart of all this – that is where our fight burns. Costs to litigate primarily are things like messengering, filing fees, copying, postage, maintaining databases, reproduction (exhibits), what we need to donate is the time and effort which most of us have RIGHT NOW – this is the perfect time to do this while we have to stay home and can communicate via phone, internet, etc. Frankly, I’m old school so I communicate the old-fashioned way – discussions. I’ll donate as many hours as I can – I’m fast and good at what I do – generating (processing) professional pleadings – organizing, that’s what a high caliber legal assistant/paralegal does in the real legal world – reading, researching, general debating is something we can do that won’t cost us – the funds go to ‘second eyes’ and opinions – we handle our own pleadings appear in our own hearings – perhaps filing in Washington to represent us all is a way to go – we fund people going to DC and appearing – what the hell are we afraid of and why make such a big to do about the basics of this dilemma. It is the age of digital and cyberspace – appearances via CourtCall, etc., it’s a logistics issue – anyone that has been an executive staff member of high caliber law firms (Los Angeles) can handle this – I worked on million dollar cases with no internet, digital, .pdf, our digital accounting programs – before the age of internet – anyone with that experience is 50% of the problem resolved . . . spend funds on experts giving professional opinions, etc., $200 an hour to read and critique on our work product . . . times are tough – attorneys will take offers like this because their businesses are almost nonexistent . . . just because we are furloughed in our own spaces doesn’t mean our brain cells and intellects are asleep!!!! Where do you think “Papergate” came from – the 1980’s working in the legal profession in Los Angeles!!!
To Poppy re transparency here is an excellent article out today on Wall Street on Parade https://wallstreetonparade.com/2020/04/instead-of-draining-the-swamp-the-swamp-is-draining-the-u-s-treasury-via-the-new-york-fed/:
Instead of Draining the Swamp, the Swamp Is Draining the U.S. Treasury via the New York Fed
Fed’s Trojan Horse
By Pam Martens and Russ Martens: April 20, 2020 ~
The Federal Reserve’s role under the U.S. law that governs it (the Federal Reserve Act) is to function as the nation’s central bank and lender of last resort to deposit-taking commercial banks in a crisis and to set monetary policy to achieve the dual objectives of stable prices (preventing deflation as well as runaway inflation) while maximizing employment.
But since December 2007, the Federal Reserve has simply written its own playbook, independent of the law that governs it. The Fed has decided to outsource to one of its 12 regional Federal Reserve banks, the New York Fed, the role of propping up the swamp on Wall Street.
The New York Fed’s own playbook involves dangling a shiny object for mainstream media in a “look here but not there” operation. During the 2008 financial collapse on Wall Street that took down the U.S. economy in the worst crisis since the Great Depression, the shiny object was a four-letter acronym called TARP, short for Troubled Asset Relief Program.
TARP was a congressionally-approved taxpayer bailout of the Wall Street banks, including those that had brought on the crisis by turning their federally-insured banking unit into a derivatives casino. Mainstream media was all over TARP as it doled out chunks of $10 billion to $45 billion to the largest banks on Wall Street in the fall of 2008, as well as lesser amounts to smaller banks caught up in the panic.
But while the $700 billion TARP shiny object was all over the front pages of newspapers, the New York Fed, with nary a vote in Congress or even the awareness of Congress, was running a secret $29 trillion Wall Street bailout. The New York Fed was using its unlimited ability to create money out of thin air to ply Wall Street banks and trading houses, as well as global foreign banks and central banks, with the lion’s share of $29 trillion in revolving loans, at a fraction of the interest rate these financial firms would have been charged in the open market. Those revolving loans began secretly in December 2007 and ran through at least July 21, 2010.
So desperate was the Fed to keep that $29 trillion a secret from the American people that it battled in court for more than two years, arguing that the American people had no right to this information. It lost that battle.
This time around, the Fed and New York Fed have brazenly upped their game because they have a much bigger shiny object: a deadly pandemic that is dominating the news and effectively eliminating any network or newspaper coverage of what is happening behind the scenes at the New York Fed.
What is happening at the New York Fed is the same thing that happened during the financial crisis of 2007 to 2010. Average Americans are getting the short-end of the stick in the stimulus bill known as the CARES Act while Wall Street banks are getting astronomical sums from the New York Fed’s unlimited money spigot.
Even worse, in what is beginning to resemble a conspiracy of silence, no mainstream news outlet has reported on the more than $9 trillion in super cheap repo loans the New York Fed has pumped into Wall Street trading houses or the fact that those loans began on September 17, 2019 – four months before the first coronavirus case was reported in the United States and at a time when President Trump was bragging on TV about the unprecedented robustness of the U.S. economy.
Equally alarming, the New York Fed refuses to provide the names of which of these trading houses has received the lion’s share of this $9 trillion in emergency funding. The majority of these trading houses are owned by publicly-traded global banks. Under the law, their shareholders are entitled to know any material fact that pertains to the financial condition of that public company. But that has not happened and the Securities and Exchange Commission, which is in charge of enforcing securities laws, has remained silent.
And this time around, Wall Street’s lackies in Congress are putting a gun to the head of the House and Senate members that are desperate to get relief to the small businesses and unemployed workers in their homes states by demanding, and getting, in exchange a new $4.54 trillion bailout for Wall Street where the taxpayer will eat $454 billion of losses. (When that $454 billion runs out, there is the clear expectation that Congress will be tapped to allocate more taxpayer money to absorb the losses.)
There is nothing in any law governing the Federal Reserve that says that if the taxpayer puts up $454 billion it is allowed to leverage that up by 10 to 1 to $4.54 trillion and use that money to buy up toxic waste from the banks and trading houses on Wall Street. The New York Fed has simply decided that this is what it needs to do to prop up Wall Street and eat their bad bets.
And almost no one in mainstream media is asking any questions about the lopsided playing field set up by the New York Fed.
For example, the largest and most serially fined and prosecuted bank in America, JPMorgan Chase, is borrowing billions from the Fed’s discount window at ¼ of one percent interest. The Fed is offering its repo loans to trading houses on Wall Street at 1/10 of one percent interest. But the loans to small businesses under the CARES Act and Small Business Administration are being made at ten times that amount of interest.
Should a small restaurant owner be paying 10 times the amount of interest as a giant trading house on Wall Street?
And then there is the Primary Dealer Credit Facility (PDCF) which is, of course, being run out of the New York Fed. It is making 90-day loans to Wall Street trading houses at an interest rate of ¼ of one percent and among the collateral it is accepting for these loans, it has decided to include stocks. Yes, stocks, at a time when some stocks are losing as much as 25 percent or more in a week. (This is clearly illegal under the Federal Reserve Act which requires that the Fed make loans against “good” collateral.)
Quite a number of the trading houses to whom the New York Fed is making these loans do not have good credit ratings. But unlike the average American worker, they are able to plunk down plunging stocks and obtain a loan at ¼ of one percent interest.
The trading arm of JPMorgan Chase is one of the trading houses that is eligible to borrow at that ¼ of one percent under the PDCF using plunging stocks as collateral. Compare that to what JPMorgan Chase advised struggling Americans last week: it will no longer be making home equity loans and if you want to obtain a first mortgage from JPMorgan Chase, you will need a 20 percent down payment and a credit score of at least 700. JPMorgan Chase is a 3-count felon borrowing at 1/4 of one percent interest.
The PDCF was the largest of the covert programs that the New York Fed ran during the last financial crisis. According to an audit performed by the Government Accountability Office (GAO) in 2011, the PDCF issued 1,376 loans that cumulatively totaled $8.95 trillion. Of that amount, $5.7 trillion, or 64 percent, went to Citigroup, Morgan Stanley and Merrill Lynch according to the GAO audit.
On March 17 of this year, U.S. Treasury Secretary Steve Mnuchin described the new rollout of the PDCF as a means to “help facilitate the availability of credit to American workers and businesses.”
But the parent banks of the trading houses that are borrowing from the PDCF at ¼ of one percent interest are continuing to charge upwards of 17 percent interest on their credit cards to millions of recently laid off workers.
Americans need to engage rapidly in these critical issues. Call your Senators and Reps in Congress and demand the separation of federally-insured, deposit-taking banks from the casinos on Wall Street and a fair shake for Main Street in these stimulus bills from Congress.
@PAPERGATE & ANON…so you raise money…then what? What lawyer or lawyers are you going to retain? and in what state or states? and there are no lawyers that really know how to win these cases. you could probably count on one hand the number of good foreclosure defense lawyers in this country. Lawyers have never learned foreclosure defense skills set because not enough foreclosure clients have walked through their door, cash in hand, so that the lawyers had both the time and the resources to learn the skill set. And no lawyer wants to end up on a foreclosure client’s unsecured creditor list in a BK proceeding. that’s why i would never contribute to such a fund because there are no realistic ways that such a fund could accomplish what you seek. I had to spend $16K on one of the best trial atty firms in my state capital, because i defeated the bankster’s mtn for sumjudg, and was scheduled for a trial. (i don’t like to do trials.) So $15K of that money went to TRYING to educate the atty about foreclosure defense. He never figured it out. So right now, I make decent money acting as a foreclosure defense consultant…to attys who are being called on by their long established clients.
Oh, and by the way…pension fund NEVER allow brokers to hold title to their securities in broker or street name. Having worked for one of the largest public pension funds in the country, in the investment area, I kinda know what i’m talking about.
Yes – Paper — need to coordinate – one site. Need to stand together as ONE.
I have also set up a litigation funding page as well – and plan to support Poppy’s too – we cannot have too many supporting portals – and must support all of our attempts to raise legal funding. Thanks Poppy – good example – these are not competing pages they are complimentary meant to reach different audiences for the same cause. I also am in the process of setting up a webpage so folks can register for us to move forward getting legal defense funds.
Thank you, Neil. Fills in alot of the blanks.
Thanks Poppy — hope all will go to the site.
Neil — a very informative post, and I don’t think anyone can beat your expertise. . Thank you. A couple of comments, then some questions I hope you will address.
Comments:
1) These crisis “trusts” were set up differently. Louis Ranieri was the grandfather of this unique type of securitization. The bottom tranches served as credit enhancement to the top tranches, in effect, servicing as a “derivative” to absorb losses. The bottom tranches were sold first. The top tranches were sold to the biggest investor – Freddie and Fannie.
By tranches one assumes – certificates. How much did F/F purchase? Bottom tranches were sold in “notional” (not full) amounts. So, when funds (not just pension funds but also bank funds and hedge funds) invested – they only invested in “part” of certificate. So all you say is correct about “street name.” etc. But what about Freddie and Fannie? They placed these PLMBS top tranches into their own REMICs. How did they account for that?
2) The top tranches were paid out by the bail-out. Some, but very few bottom tranches remain, These, I believe, are not traded, but rather held for distribution by foreclosure. I do not think any “current” cash paid is passed through any longer. But I am not sure. We do know the “waterfall” structure is gone. The bottom tranches no longer serve to the purpose to support the upper tranches as they have already been paid out. Purpose is gone.
3) These loans were later described as “subprime” or “Alt-A” – meaning borrowers could not refinance with traditional banks (who could sell to F/F) for various reasons. Well, then — how did F/F come to purchase the top tranches in nearly 95% of these trusts?
4) This was not, as you state normal securitization. There, by your description, were intermediaries, such as servicers, trustees, fake originators, and warehouse lenders, who participated. But none held the loans as an asset on financial balance sheets. I believe that F/F never abandoned actual collateral control of the property.because these loans were already once held by F/F directly, but then, sold back, in whatever “security” form – indirectly. So they could not be taken back onto balance sheet (normal for true securitization) upon default. All, as you say, existed as a “fake security” from the onset. It makes sense that the “collateral” – property itself – never left F/F. How did property become collateral? Because loans were being reported (falsely) as in default to F/F and then restructured in what borrowers were told was a legitimate refinance.
Questions:
1) The fundamental first question is — would the borrower have taken this loan if they knew what was truly happening and what the devastating consequence could be? I don’t think so.
2) It appears from your detailed explanation, and I agree, that these loans were not mortgage loans to begin with, and while people may owe someone- we don’t know who that person is. If I pay Suzie to pay Jim, no one is watching Suzie to make sure she pays Jim who remains behind the curtain. Given the ponzi scheme that you describe — can the “note” be deemed “negotiable?” I have found few case on this. Found one that explains well, that I will send to you and you can explain and share.
3) Obviously, the government knew all as they worked in haste to bail out the banks, and left people like Rick S, and Paulson himself, to blame the people. How can we turn around public perception of this?
4) I think that the terms “mortgage holder,” “beneficial owner,” and investor, are never properly defined. If one does not have a legal “mortgage holder” – one does not have a mortgage. They may have a debt — but not a mortgage. Yet the loans are recorded as mortgages – corrupting title, and confusing courts around the country. How do we fix this., and enforce identification of legal “holder” in courts, so that the courts can see there is none and the “debt” for what it truly is – a farce?
5) How do we get the data that the government, and certain entity has?
5) Are there any loans that should have protected homeowners from this? If so, which laws? If not, why not? Statute of limitations is a problem, but most do not know anything until long after SOL is gone.
Thank you!!!!
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I am attempting to go after legislative regulation and transparency of any loan(s), from mortgages, car loans, student debt, etc…all the same game to these people, crooks. Starting with an approach locally, Senator Burr in NC and then see where I go from there. Any suggestions would be greatly appreciated. All proceeds belong to “us” and will be used accordingly, and I will be transparent.
https://www.gofundme.com/consumers-for-transparencyregulation-in-lending