Tonight! Sharks Eating Sharks: a Case Study out of the SDNY from 2016 3PM PST, 6PM EST

Thursdays LIVE! Click in to the WEST COAST Neil Garfield Show

with Charles Marshall and Bill Paatalo

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The legal case of US Bank (trust) v. UBS (United Bank of Switzerland) Real Estate was decided in 2016 in SDNY. The order following decision extends for literally more than 100 pages. The gist of the case is that US Bank went after UBS because of the poor loan quality of the loans making up the pool of investment mortgages in the PSA put together with UBS to memorialize the trust.

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Bill will explain and Charles will frame legal implications for how homeowners can use a lot of the findings and information from the lawsuit in their own cases defending or suing institutional lenders and servicers. While UBS could not meaningfully demonstrate that they deposited the actual mortgage notes per the PSA, into the US Bank trust, US Bank alleged to have never even received the Mortgage Files which make up the source of documentation for the individual loans. Yet US Bank could proffer no meaningful evidence that the US Bank, did not in fact receive the Mortgage Files at issue, so much of the Court Order rejected their claims.

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The overall Court Order is an exemplar in contrived complexity, yet also an exemplar of sound and unfortunately vanishing clear and compelling language when relating complex topics such as this one. The Order noted on page 7, “Remarkably, the overwhelming majority of loans in the Trusts were for the purpose of refinancing a home already owned by the borrower, rather than for the purpose of purchasing new property…Undoubtedly, many of these were for the purpose of monetizing and extracting rising equity for other use.” Hence, of course, the poor loan quality, and the high default rates in these trusts, here leading US Bank to sue through the trust at issue, to try and staunch the bleeding to them, from the bad loans.

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Charles will then discuss how this contrived complexity is one of the reasons homeowners are reluctant to defend themselves and address other reasons for that reality.

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EDITOR’S NOTE:

I find it extremely interesting that the one Warranty that any normal person would think is important is completely absent and never discussed in this case. There is no warranty of title nor any allegation (as far as I can see) that title was conveyed to the underlying obligation, the debt, the note, or the mortgage. This is what is so hard for most people to understand.

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All of the “securitization of debt,” contrary to the original premise, involves securitization about debt and not securitization of debt. And that is why it became necessary to fabricate false documents for every single foreclosure that has ever been subject to claims of “securitization.” And what I am directly saying here is that because the entire process of securitization was misrepresented to everyone, both investors and homeowners should have at least had the opportunity to bargain for better terms — or to recover money that would ordinarily have been paid in arms-length bargaining.

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Since the true nature of the scheme was concealed, a properly formed lawsuit for reformation and unjust enrichment could be shown to be completely valid as the foundation for an action to recover a great deal of money — a share of the seismic profits generated from each so-called “loan” transaction and each so-called sale of a falsely labeled REMIC certificate.

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And likewise, investors have still not grasped the fact that there was a TIER 2 yield spread premium that was pocketed by investment banks. This “premium” was generated by the difference between the amount paid by investors and the amount paid to homeowners. In some cases, the amount of the premium exceeded the amount of the money paid to homeowners.

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So if investors were really getting what they thought they were getting — i.e., some right title or interest in loans — they would’ve had an immediate loss that they should have reported. In plain language, the investor paid $1000 and the investment bank paid the homeowner $500. But since the investors don’t really have any right, title, or interest in any underlying obligation, legal debt, note or mortgage, they can’t complain about the loss. The only reason they can’t complain about the loss is that once again the real nature of the scheme was concealed.

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The bottom line is that retirement funds and home equity became bonuses on Wall Street.

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