Livinglies's Weblog

The general point of law here is that no amount of paperwork will make a transaction real if there was no money paid. And no amount of arguing to the contrary is legally recognizable or acceptable — unless one simply presumes the transaction was real regardless of whether it happened or not.

The corollary is that the transaction documents need to be reformed if the consideration is less than what was reported. Without reformation, they cannot be enforced. Nobody can enforce a “loan” for more than they loaned.

The consideration is less than the amount reported on closing statements when the transaction is labeled as a “refinancing” transaction.

Many or most of the existing transactions floating out there in the marketplace are designated as “refinancing.” In most such cases, there is a common underlying investment bank, and thus there is no consideration paid to pay off the “prior lender.”

And that in turn is because the investment bank retained control of the transactions but not any attribute of ownership of any unpaid loan account receivable.

This happens when a company that has been designated as a lender is supposedly lending money to the homeowner in a  refinancing wherein the homeowner is “cashing out” on equity (a practice I don’t recommend, as it interrupts both retirement plans and transfer of intergenerational wealth).

The money that is reportedly paid to the “prior lender” is never paid because none is due. And the money paid to the homeowner from his/her equity is the only real cash that flows from the transaction.

In plain language, the homeowner is agreeing to pay back a “loan” that does not exist — i.e., the part devoted to paying off the prior nonexistent lender. In truth, of course, these cash payments that actually are paid to the homeowner are merely incentives to execute new paperwork that enables the investment bank to start a new securitization structure based upon the new paperwork for the old transction.

Homeowners get easily confused by these shenanigans. They make references to more than one loan. I need to know that I am working on the correct transaction – which of course, is not a loan.

So I generally ask for title searches that go back at least two (2) owners and maybe four (4). What I am looking for are the transaction documents for the origination of both transactions (or multiple transactions). Some properties are “Refinanced” multiple times. The issue gets increasingly sophisticated for Wall Street because they are steering would-be borrowers in the direction of companies that serve as sham conduits to “feeders” or fronts for a common investment bank.

 In such cases, the homeowner is merely cooperating with a Ponzi scheme. The transaction that is labeled as “refinancing” is merely an excuse for issuing a new series of unregulated securities. In effect, this multiplies the exorbitant revenues and profits earned by the investment bank by a factor of two. You might think of it as selling your transaction twice and still coming after you for a nonexistent “balance.” But it is more complex than that. 

[It is hard to remember that in 1983, the size of the “shadow banking market” was not $1.4  quadrillion dollars. By all accounts, it was zero. The estimates of the real currency in the world vary but are generally around $100 trillion, give or take 10%-15%. So the “shadow banking market has “nominal values” equal to more than 12x fiat money (i.e., all the money in the world)]

Filed under: foreclosure |