Why the banks did not mitigate losses in 2008 and why they won’t in the next wave of foreclosures. See Michael Olenick Article in Harvard Business Review

The HBR article is excellent — but it starts from the wrong premise. The people in charge have no losses so they have no incentive to mitigate.

Nearly all foreclosures are business ventures for profit — not remedies for unpaid debt. 

see https://hbr.org/2020/07/how-banks-can-avoid-a-repeat-of-the-2008-foreclosure-crisis

The problem that everyone seems to be actively avoiding is that no investor ever paid money in exchange for a document that conveyed ownership or any right, title or interest to any debt, note or mortgage of any homeowner.

Bottom Line: Despite all documents, arguments assumptions, presumptions to the contrary, there was no securitization. Securitization of residential debt is a legal nullity because nobody ever acquired the debt. Nobody acquired the debt because nobody wanted to be a lender under the lending laws. So they left us with a “loan” that has no lender, no creditor and nobody authorized to make a claim. But that hasn’t stopped them.

All claims arising from the existence of securitization of residential loans are void. If the debt was not sold, it wasn’t securitized by definition. Everything filed in court or in official property records to the contrary is a false utterance. Assignments of mortgage based upon claims arising from claimed securitization are legal nullities because there is never a conveyance of the debt concurrent with the assignment or even before or after the assignment.

As Olenick’s article points out it makes sense to mitigate damages. It is to everyone’s advantage — if the transaction was really a loan. The fact that the investment banks didn’t mitigate is evidence of their lack of incentive to do so. The fact that they aggressively pursued foreclosures is evidence of their incentive to foreclose. Since they didn’t own the debt there would only be one incentive —PROFIT!

The entire reason why “modifications” have been so random is that they were only done as a PR stunt to hide the fact that there was no authority or ownership of any claim against any homeowner arising out of claims of securitization. They are also a handy tool to create the illusion that the subsericer like Ocwen et al is now the new lender, thus cutting off all rights to assert claims or defenses related to the fraudulent organization of the loan.

In fact, if you read what they file in court, foreclosure mills specifically do not allege that the loan was securitized, sold or even owned by any party much less the party (sometimes nonexistent party) that they claim to represent. All of their allegations relate to possession of the note, not ownership of the mortgage which under Article 9 §203 UCC requires the claimant to have paid value for the underlying debt.

PRACTICE NOTE: The Uniform Commercial Code is not a guideline or a suggestion. It is statutory law, confirming and ratifying previous statutes and common law in all U.S. jurisdictions. It is the law, adopted by every legislature. And even if you slept through UCC two semesters in law school, it is still the law.

If you are defending a foreclosure start with the premise that the named claimant did not pay value for the underlying debt and therefore can’t own it. As such it could not have suffered any injury — financial or otherwise — as a direct or proximate result of any action or inaction of the homeowner.

Be ready to counter, directly and indirectly, any sub silentio assumptions that even if there are deficiencies in the paperwork the proceeds are going to someone who paid value for the debt. That is not what is happening. Nearly all foreclosures are business ventures for profit — not remedies for unpaid debt.

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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. 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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4 Responses

  1. Originated with BOA NA in 2008. We Found out Countrywide was paying the property taxes 2009-2012. We Never had Any transactions with Countrywide anywhere or anytime ever !!!

  2. Summer — you are correct. And, correct as to BOA control of Countrywide going way back to 1999. Used to be called “Corridor Agreements,” and you could get them online. Today, they are gone. I never saved them years ago.

    New names, but not new faces as you explain.

    Black Knight knows all.

  3. Nice article….But totally missed the truth.

    Since 2015 62 % of ALL loans are originated by Black Knight who signed an Agreement with Investment Bank who provide BK lines of credit from their operating pools which are “lent” to borrowers by sham conduits who pose as “Lenders”

    Before that Big Banks provided similar lines of credit to “originators” like Countrywide Financial.

    It is all done to remove money trail leading to Investment Banks who were exposed in 2008 by connections with Servicers.

    Servicers do not do anything except pose as the real parties.

    Money are collected by Transcentra who has lockbox agreement with Stockbrokers, to eliminate money trail to Big Banks.

    BOA did not “purchase” Countrywide or its loans. BOA controlled Countrywide since at least 1999 and controls them as of today, under names Caliber and PennyMac. BOA was the one who originated these loans via Countrywide by providing them lines of credit and directed them to act as “originators.

    They tried to do the same with renamed Countrywide/PennyMac eventually making PennyMac appear as a “Biggest Lender” and “servicer – which is all fake.

    Look at PennyMac’s finances. In May 2019 PennyMAc “offered” $198 million securities – which is nothing comparing to their “lending portfolio” of $ 368 Billion worth of loans purportedly “lent” and “serviced” by Pennymac.

    $198 million could allow PennyMac to lend money maximum to 200 borrowers in CA price $500K per house , not 2 million as they pose.

    The underwriters/investors who “purchased” PM securities were Investment Banks such as BOA, GS, Deutsche bank, ect.

    They left PM with about $29 million fees and the rest was likely a line of credit barely to operate. If any.

    This “purchase” of “securities” looks more like a masqueraded payment from Big Banks to PennyMac to serve as a sham conduit and whom Big Banks want to remove from the picture as soon as they don’t need them – after a bailout to “poor Servicers” who struggle to “pay investors SERvicers’ advances.

    This is how BOA used Countrywide – pose them as “originators”, put them in bankruptcy, took all money and pretended that they “purchased ” something from Countrywide which CWF never had. CREDIT AND GUARANTY AGREEMENT
    dated as of May 27, 2015 among

    BLACK KNIGHT INFOSERV, LLC,
    as Borrower,
    BLACK KNIGHT FINANCIAL SERVICES, LLC,
    as Holdings
    THE SUBSIDIARIES OF THE BORROWER FROM TIME TO TIME PARTY HERETO
    The LENDERS FROM TIME TO TIME PARTY HERETO, JPMORGAN CHASE BANK, N.A.,
    as Administrative Agent, Swing Line Lender and L/C Issuer
    and
    BANK OF AMERICA, N.A.,
    as a Swing Line Lender and L/C Issuer
    _______________________________

    J.P. MORGAN SECURITIES LLC,
    MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
    U.S. BANK NATIONAL ASSOCIATION, and WELLS FARGO SECURITIES, LLC,
    as Joint Lead Arrangers and Joint Bookrunners,

    BANK OF AMERICA, N.A.
    U.S. BANK NATIONAL ASSOCIATION, and WELLS FARGO BANK,
    NATIONAL ASSOCIATION,
    as Co-Syndication Agents,

    SUNTRUST BANK, BANK OF MONTREAL, REGIONS BANK,
    CREDIT SUISSE SECURITIES (USA) LLC, GOLDMAN SACHS BANK USA, and CITIBANK, N.A.,
    as Co-Documentation Agents, and

    FIFTH THIRD BANK, CITIZENS BANK, N.A.,
    PNC CAPITAL MARKETS LLC, and BBVA COMPASS,
    as Senior Managing Agents

  4. Article attached says — “In 2013, the bank paid $10.3 billion to Fannie Mae for poor loans Countrywide sold to the agency.”

    How could the loans be sold to Fannie (and also Freddie) when the loans originally came from Fannie and (Freddie)?

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