JP Morgan Settles with Manhattan DA for “Hypothetical” Data reports and Fraudulent Lending Practices

Once consumers and homeowners get it out of their head that they were not paid as part of a loan transaction and instead they were paid for participating in an undisclosed securities scheme, they will easily see that the money paid to them, coupled with a promise to pay it back, was a ruse in which the homeowner got paid only temporarily, offset by an even larger liability (including interest and fees).

Buried in the recent Manhattan DA announcement of a “settlement” with JP Morgan is an admission that hypothetical data was used in a process that was labeled as “lending” and that such data was used repeatedly.

Certain of its employees submitted data to TOTAL that lacked integrity. Specifically, when loans did not receive an “accept/approve” rating from TOTAL, these employees re-submitted the loans through TOTAL multiple times over a short period, each time entering into TOTAL hypothetical data that had not been corroborated by documents or other information possessed by the employees in order to determine data values that would generate an “accept/approve” rating. [e.s.]

In all securitization infrastructures, virtually all data is hypothetical. It is not based on anything real and it is submitted over and over again with slight changes to create new levels of securities sales.

While the data might correlate with “closing statements” offered to consumers or homeowners, it does NOT correlate with the actual movement of money nor the disclosure of the parties to the transaction in which a financial transaction occurred.

The reason is that none of the securitization sales involve the sale of any obligation, debt, note, or mortgage of any consumer or homeowner. So what were they?

Wall Street conjured up an extra-legal (illegal) plan to convert real data into hypothetical data that was 100% controlled by the investment banks. The securities firms then sold securities based upon reports issued by the investment bank, at its sole discretion.

For those with some knowledge of the law, the investment banks went one step further than converting apparent interest intangible property into an apparent interest in intangible property. They were in effect creating hypothetical data which was treated as a proper subject for an interest in what appeared to be intangible property.

Nobody thought that they were buying loans. But everyone thought that they were buying something, without risk of loss, that would pay them or appreciate in value based upon market forces affecting the market in RMBS. They were right in one sense. There was no risk of loss to any investor upon the purchase of any level of securities or hedge products based upon the performance of any series of scheduled payments.

If any consumer or homeowner fails to make a payment, there is not a single loss registered on the books of any person or company. What Wall Street has done is to convert real claims into virtual claims. And to do that they have to commit fraud. The cost of settlements is merely the cost of doing business in a multi-trillion dollar market.

And neither government nor the media is willing to call this out. There were many investigative journalists who were hot on the trail of this, smelling blood in the water. the entire securitizations scheme was illegal or extra-legal and they knew it. Suddenly they went dark and we have never heard from them again.

But in court in thousands of cases, homeowners have forced judges to rule simply that there was insufficient evidence, and/or that the evidence proferred to support the claim was fictitious, suspect, or otherwise not credible. IN plain language

There is no sale of any underlying obligation, legal debt, note, or mortgage in securitization. Every allegation or implication argued by lawyers that presume that securitization is at all relevant to the enforcement of a mortgage is completely false. If there was no such sale, then the lawyers, the servicers, and everyone else from the dark side is lying.

And experience shows that when pushed to come up with any evidence that corroborates the argument they are making they cannot and will not do so —- even under court order.

Homeowners who aggressively enforce such demands, tend to win their cases around 65% of the time. Homeowners who assume the “loan” must exist (“you got the money, didn’t you?”) lose virtually every time.

This is why there is no loss, which is why nobody can respond appropriately to discovery demands, QWRs, DVLs, or even court orders to produce evidence of the existence, status, and ownership of a loan account due from the consumer/ homeowner to the party that has been named as a claimant by a lawyer who has no contractual or other with that claimant.

It’s crazy. But the complexity of what is presented by the investment banks is a cover story for a very simple proposition. There is so much money (cash flow) that is generated by those securities sales that there is nobody who ever suffers any loss resulting from a consumer or homeowner withholding a scheduled payment that is set forth on a promissory note.

My contracts law professor, Sam Bader (RIP), in my first year of law school pounded into our heads “The note is not the debt. The note is evidence of the debt.” He told us that we would win and lose cases simply by remembering that simple fact — or forgetting it.

In its simplest iteration this means that if you sign a promissory note in anticipation of receiving a loan of money, it is completely unenforceable if you never received that loan.

In the context of securitization, your receipt of money in that transaction does not make it a loan, unless the counterparty satisfies all the legal and factual prerequisites for establishing an unpaid loan account receivable on the accounting ledgers of the lender.

This virtually never happens in transactions conducted as securitized or that are conducted in anticipation of “securitization” ( this accounting for virtually all homeowner and consumer “debt” transactions in the U.S.).

Too often lawyers and pro se litigants mistake the note for the debt. It isn’t. The debt exists regardless of what they signed. The note is merely admissible evidence of what was signed by the consumer.

The fact that the law allows enforcement of the note by someone in possession of it does not make the note a debt. Even that law requires that the possessor of the note must have been granted the right to enforce it. Where does that right come from? It comes from someone who owns the underlying debt!

At the risk of berating the legal profession of which I am a very proud member, I think that lawyers and the courts are forgetting this simple proposition. Pro se litigants who have not been to law school obviously miss the point.

Why is this important? Well, the same statutes that make a note enforceable by the “holder” (i.e., possession and right to enforce) prohibit anyone from enforcing a mortgage without paying value for the underlying debt, which obviously exists independently.

Those are two different standards. One for enforcement of a note, which results in a money judgment, and the other for enforcement of a lien, which results in the loss of the homestead.

The adoption of 9-203 of the UCC by every U.S. jurisdiction means that the legislature decided to NOT allow the enforcement of a mortgage without the claimant having paid value in exchange for ownership of the underlying obligation.

That is reflected in case decisions for centuries that basically all say the same thing: the transfer (grant of title) of the mortgage is a legal nullity unless it is accompanied by a transfer of the underlying obligation. This also has been largely ignored by most lawyers and judges — the only exceptions being lawyers for homeowners who vigorously defend.

The tactics of the “dark side” wish to obtain money and property for a nonexistent loan account. They do so by utter reliance on the illusion of enforcement of a note even though every foreclosure is the process of enforcing a mortgage or deed of trust (same thing).

And because homeowners with hundreds of thousands of dollars in direct and hidden equity in their homesteads have a hard time understanding that their “debt” vanished, they refuse to defend in great numbers and sue for more money.

They have a right to sue for more money although there is no guarantee of receiving it. But I think that the odds are fairly high that such an opportunity exists and with enough pressure, the courts will take it seriously.

Once consumers and homeowners get it out of their head that they were not paid as part of a loan transaction and instead they were paid for participating in an undisclosed securities scheme, they will easily see that the money paid to them, coupled with a promise to pay it back, was a ruse in which the homeowner got paid only temporarily, offset by an even larger liability (including interest and fees).

The consideration (compensation) for the homeowner’s participation in the much, much larger securities scheme was literally negative — the homeowner was paying for the right to be the issuer in a securities scheme in which he/she would never see one cent of revenue or profit. Yet without the homeowner’s “cooperation” (obtained by ruse and deceit), no sale of any certificate (“RMBS”) would have ever occurred.

Investment banks and other securities firms have one obvious mission: make money from the creation, issuance, sale, and trading of securities. there is nothing in that statement that includes making money through lending money for interest payments.

From their side, the transaction was always about selling securities — something they failed to disclose despite the express requirements explicitly stated in both Federal and State statutes.

So here is the plain simple proposition that keeps me going since 2006. there are no valid foreclosures primarily because there is no loss that can be attributed to any loan account of any homeowner.

And here are more propositions:

  1. Homeowners are entitled to receive back everything they ever paid to companies purporting to be “lenders,” “successor lenders,” “servicers.” as disgorgement of money received that was illegally and fraudulently obtained.
  2. Virtually all consumers and homeowners are victims of false claims went they receive statements, notices, and charges for administration, collection or enforcement of loan accounts that do not exist.
  3. Homeowners subjected to false claims are entitled to statutory, compensatory, and possibly punitive or exemplary damages.
  4. Homeowners whose transaction was converted into a hypothetical or virtual loan account are entitled to rescind the transaction or to receive, under reformation, a fair share of ther revenues and profits generated by their issuance of a false note and mortgage.
  5. Most homeowners are either entitled to remove the mortgage lien from their chain of title or receive compensation for leaving it there despite the absence of any legal debt.


Nobody paid me to write this. I am self-funded, supported only by donations. My mission is to stop foreclosures and other collection efforts against homeowners and consumers without proof of loss. If you want to support this effort please click on this link and donate as much as you feel you can afford.

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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).

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5 Responses

  1. Hammertime — we need the masses to pressure politicians. It cannot stay concealed. American history is WRONG. Need to change.

  2. To: Javagold

    “Because “the neighbors” were brainwashed into thinking it was the Homeowner who got Free $” The homeowner owned the “equity”.
    Wall St (investment bankers) got free $ from Fannie/Freddie (no reporting, no taxes paid) no losses on Investment Banker’s balance sheet, no Loan Receivable either, no accounting, just free $, No REMIC trusts, hello IRS, disgusting😢

  3. Thank you for the post. Seems like the bookend to the payment history which I challenged from day one and was ignored at every level

    Java -.seems it’s the mindset, the self delusion requirement for Ponzi scheme that hopefully cases like these are breaking down.

    When I talked to state rep staff about the $330 mil legal aid still owed victims in CA he was still saying nothing could be done because they received tons of calls from constituents angry that deadbeats we’re getting bailed out. Who knows if true or banking industry working politicians or bought off but our “neighbors” def go along to feel superior about themselves.

    We don’t need the masses we just need to have a more effective way to pressure politicians and the public

  4. Good Question Java.

  5. So if true. And I have no reason not to believe it’s correct. As it sure seems to be how this Ponzi works.
    Then why have the masses NOT done anything about this the past 15 years ????

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