Levitin and Yves Smith – TRUST=EMPTY PAPER BAG

Living Lies Narrative Corroborated by Increasing Number of Respected Economists

It has taken over 7 years, but finally my description of the securitization process has taken hold. Levitin calls it “securitization fail.” Yves Smith agrees.

Bottom line: there was no securitization, the trusts were merely empty sham nominees for the investment banks and the “assignments,” transfers, and endorsements of the fabricated paper from illegal closings were worthless, fraudulent and caused incomprehensible damage to everyone except the perpetrators of the crime. They call it “infinite rehypothecation” on Wall Street. That makes it seem infinitely complex. Call it what you want, it was civil and perhaps criminal theft. Courts enforcing this fraudulent worthless paper will be left with egg on their faces as the truth unravels now.

There cannot be a valid foreclosure because there is no valid mortgage. I know. This makes no sense when you approach it from a conventional point of view. But if you watch closely you can see that the “loan closing” was a shell game. Money from a non disclosed third party (the investors) was sent through conduits to hide the origination of the funds for the loan. The closing agent used that money not for the originator of the funds (the investors) but for a sham nominee entity with no rights to the loan — all as specified in the assignment and assumption agreement. The note and and mortgage were a sham. And the reason the foreclosing parties do not allege they are holders in due course, is that they must prove purchase and delivery for value, as set forth in the PSA within the 90 day period during which the Trust could operate. None of the loans made it.

But on Main street it was at its root a combination pyramid scheme and PONZI scheme. All branches of government are complicit in continuing the fraud and allowing these merchants of “death” to continue selling what they call bonds deriving their value from homeowner or student loans. Having made a “deal with the devil” both the Bush and Obama administrations conscripted themselves into the servitude of the banks and actively assisted in the coverup. — Neil F Garfield, livinglies.me

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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John Lindeman in Miami asked me years ago when he first starting out in foreclosure defense, how I would describe the REMIC Trust. My reply was “a holographic image of an empty paper bag.” Using that as the basis of his defense of homeowners, he went on to do very well in foreclosure defense. He did well because he kept asking questions in discovery about the actual transactions, he demanded the PSA, he cornered the opposition into admitting that their authority had to come from the PSA when they didn’t want to admit that. They didn’t want to admit it because they knew the Trust had no ownership interest in the loan and would never have it.

While the narrative regarding “securitization fail” (see Adam Levitin) seems esoteric and even pointless from the homeowner’s point of view, I assure you that it is the direct answer to the alleged complaint that the borrower breached a duty to the foreclosing party. That is because the foreclosing party has no interest in the loan and has no legal authority to even represent the owner of the debt.

And THAT is because the owner of the debt is a group of investors and NOT the REMIC Trust that funded the loan. Thus the Trust, unfunded had no resources to buy or fund the origination of loans. So they didn’t buy it and it wasn’t delivered. Hence they can’t claim Holder in Due Course status because “purchase for value” is one of the elements of the prima facie case for a Holder in Due Course. There was no purchase and there was no transaction. Hence the suing parties could not possibly be authorized to represent the owner of the debt unless they got it from the investors who do own it, not from the Trust that doesn’t own it.

This of course raises many questions about the sudden arrival of “assignments” when the wave of foreclosures began. If you asked for the assignment on any loan that was NOT in foreclosure you couldn’t get it because their fabrication system was not geared to produce it. Why would anyone assign a valuable loan with security to a trust or anyone else without getting paid for it? Only one answer is possible — the party making the assignment was acting out a part and made money in fees pretending to convey an interest the assignor did not have. And so it goes all the way down the chain. The emptiness of the REMIC Trust is merely a mirror reflection of the empty closing with homeowners. The investors and the homeowners were screwed the same way.

BOTTOM LINE: The investors are stuck with ownership of a debt or claim against the borrowers for what was loaned to the borrower (which is only a fraction of the money given to the broker for lending to homeowners). They also have claims against the brokers who took their money and instead of delivering the proceeds of the sale of bonds to the Trust, they used it for their own benefit. Those claims are unsecured and virtually undocumented (except for wire transfer receipts and wire transfer instructions). The closing agent was probably duped the same way as the borrower at the loan closing which was the same as the way the investors were duped in settlement of the IPO of RMBS from the Trust.

In short, neither the note nor the mortgage are valid documents even though they appear facially valid. They are not valid because they are subject to borrower’s defenses. And the main borrower defense is that (a) the originator did not loan them money and (b) all the parties that took payments from the homeowner owe that money back to the homeowner plus interest, attorney fees and perhaps punitive damages. Suing on a fictitious transaction can only be successful if the homeowner defaults (fails to defend) or the suing party is a holder in due course.

Trusts Are Empty Paper Bags — Naked Capitalism

student-loan-debt-home-buying

Just as with homeowner loans, student loans have a series of defenses created by the same chicanery as the false “securitization” of homeowner loans. LivingLies is opening a new division to assist people with student loan problems if they are prepared to fight the enforcement on the merits. Student loan debt, now over $1 Trillion is dragging down housing, and the economy. Call 520-405-1688 and 954-495-9867)

The Banks Are Leveraged: Too Big Not to Fail

When I was working with Brad Keiser (formerly a top executive at Fifth Third Bank), he formulated, based upon my narrative, a way to measure the risk of bank collapse. Using a “leverage” ration he and I were able to accurately define the exact order of the collapse of the investment banks before it happened. In September, 2008 based upon the leverage ratios we published our findings and used them at a seminar in California. The power Point presentation is still available for purchase. (Call 520-405-1688 or 954-495-9867). You can see it yourself. The only thing Brad got wrong was the timing. He said 6 months. It turned out to be 6 weeks.

First on his list was Bear Stearns with leverage at 42:1. With the “shadow banking market” sitting at close to $1 quadrillion (about 17 times the total amount of all money authorized by all governments of the world) it is easy to see how there are 5 major banks that are leveraged in excess of the ratio at Bear Stearns, Lehman, Merrill Lynch et al.

The point of the article that I don’t agree with at all is the presumption that if these banks fail the economy will collapse. There is no reason for it to collapse and the dependence the author cites is an illusion. The fall of these banks will be a psychological shock world wide, and I agree it will obviously happen soon. We have 7,000 community banks and credit unions that use the exact same electronic funds transfer backbone as the major banks. There are multiple regional associations of these institutions who can easily enter into the same agreements with government, giving access at the Fed window and other benefits given to the big 5, and who will purchase the bonds of government to keep federal and state governments running. Credit markets will momentarily freeze but then relax.

Broward County Court Delays Are Actually A PR Program to Assure Investors Buying RMBS

The truth is that the banks don’t want to manage the properties, they don’t need the house and in tens of thousands of cases (probably in the hundreds of thousands since the last report), they simply walk away from the house and let it be foreclosed for non payment of taxes, HOA assessments etc. In some of the largest cities in the nation, tens of thousands of abandoned homes (where the homeowner applied for modification and was denied because the servicer had no intention or authority to give it them) were BULL-DOZED  and the neighborhoods converted into parks.

The banks don’t want the money and they don’t want the house. If you offer them the money they back peddle and use every trick in the book to get to foreclosure. This is clearly not your usual loan situation. Why would anyone not accept payment in full?

What they DO want is a judgment that transfers ownership of the debt from the true owners (the investors) to the banks. This creates the illusion of ratification of prior transactions where the same loan was effectively sold for 100 cents on the dollar not by the investors who made the loan, but by the banks who sold the investors on the illusion that they were buying secured loans, Triple AAA rated, and insured. None of it was true because the intended beneficiary of the paper, the insurance money, the multiple sales, and proceeds of hedge products and guarantees were all pocketed by the banks who had sold worthless bogus mortgage bonds without expending a dime or assuming one cent of risk.

Delaying the prosecution of foreclosures is simply an opportunity to spread out the pain over time and thus keep investors buying these bonds. And they ARE buying the new bonds even though the people they are buying from already defrauded them by NOT delivering the proceeds fro the sale of the bonds to the Trust that issued them.

Why make “bad” loans? Because they make money for the bank especially when they fail

The brokers are back at it, as though they haven’t caused enough damage. The bigger the “risk” on the loan the higher the interest rate to compensate for that risk of loss. The higher interest rates result in less money being loaned out to achieve the dollar return promised to investors who think they are buying RMBS issued by a REMIC Trust. So the investor pays out $100 Million, expects $5 million per year return, and the broker sells them a complex multi-tranche web of worthless paper. In that basket of “loans” (that were never made by the originator) are 10% and higher loans being sold as though they were conventional 5% loans. So the actual loan is $50 Million, with the broker pocketing the difference. It is called a yield spread premium. It is achieved through identity theft of the borrower’s reputation and credit.

Banks don’t want the house or the money. They want the Foreclosure Judgment for “protection”

 

ALERT: COMMUNITY BANKS AND CREDIT UNIONS AT GRAVE RISK HOLDING $1.5 TRILLION IN MBS

I’ve talked about this before. It is why we offer a Risk Analysis Report to Community Banks and Credit Unions. The report analyzes the potential risk of holding MBS instruments in lieu of Treasury Bonds. And it provides guidance to the bank on making new loans on property where there is a history of assignments, transfers and other indicia of claims of securitization.

The risks include but are not limited to

  1. MBS Instrument issued by New York common law trust that was never funded, and has no assets or expectation of same.
  2. MBS Instrument was issued by NY common law trust on a tranche that appeared safe but was tied by CDS to the most toxic tranche.
  3. Insurance paid to investment bank instead of investors
  4. Credit default swap proceeds paid to investment banks instead of investors
  5. Guarantees paid to investment banks after they have drained all value through excessive fees charged against the investor and the borrowers on loans.
  6. Tier 2 Yield Spread Premiums of as much as 50% of the investment amount.
  7. Intentional low underwriting standards to produce high nominal interest to justify the Tier 2 yield spread premium.
  8. Funding direct from investor funds while creating notes and mortgages that named other parties than the investors or the “trust.”
  9. Forcing foreclosure as the only option on people who could pay far more than the proceeds of foreclosure.
  10. Turning down modifications or settlements on the basis that the investor rejected it when in fact the investor knew nothing about it. This could result in actions against an investor that is charged with violations of federal law.
  11. Making loans on property with a history of “securitization” and realizing later that the intended mortgage lien was junior to other off record transactions in which previous satisfactions of mortgage or even foreclosure sales could be invalidated.

The problem, as these small financial institutions are just beginning to realize, is that the MBS instruments that were supposedly so safe, are not safe and may not be worth anything at all — especially if the trust that issued them was never funded by the investment bank who did the underwriting and sales of the MBS to relatively unsophisticated community banks and credit unions. In a word, these small institutions were sitting ducks and probably, knowing Wall Street the way I do, were lured into the most toxic of the “bonds.”

Unless these small banks get ahead of the curve they face intervention by the FDIC or other regulatory agencies because some part of their assets and required reserves might vanish. These small institutions, unlike the big ones that caused the problem, don’t have agreements with the Federal government to prop them up regardless of whether the bonds were real or worthless.

Most of the small banks and credit unions are carrying these assets at cost, which is to say 100 cents on the dollar when in fact it is doubtful they are worth even half that amount. The question is whether the bank or credit union is at risk and what they can do about it. There are several claims mechanisms that can employed for the bank that finds itself facing a write-off of catastrophic or damaging proportions.

The plain fact is that nearly everyone in government and law enforcement considers what happens to small banks to be “collateral damage,” unworthy of any effort to assist these institutions even though the government was complicit in the fraud that has resulted in jury verdicts, settlements, fines and sanctions totaling into the hundreds of billions of dollars.

This is a ticking time bomb for many institutions that put their money into higher yielding MBS instruments believing they were about as safe as US Treasury bonds. They were wrong but not because of any fault of anyone at the bank. They were lied to by experts who covered their lies with false promises of ratings, insurance, hedges and guarantees.

Those small institutions who have opted to take the bank public, may face even worse problems with the SEC and shareholders if they don’t report properly on the balance sheet as it is effected by the downgrade of MBS securities. The problem is that most auditing firms are not familiar with the actual facts behind these securities and are likely a this point to disclaim any responsibility for the accounting that produces the financial statements of the bank.

I have seen this play out before. The big investment banks are going to throw the small institutions under the bus and call it unavoidable damage that isn’t their problem. despite the hard-headed insistence on autonomy and devotion to customer service at each bank, considerable thought should be given to banding together into associations that are not controlled by regional banks are are part of the problem and will most likely block any solution. Traditional community bank associations and traditional credit unions might not be the best place to go if you are looking to a real solution.

Community Banks and Credit Unions MUST protect themselves and make claims as fast as possible to stay ahead of the curve. They must be proactive in getting a credible report that will stand up in court, if necessary, and make claims for the balance. Current suits by investors are producing large returns for the lawyers and poor returns to the investors. Our entire team stands ready to assist small institutions achieve parity and restitution.

FOR MORE INFORMATION OR TO SCHEDULE CONSULTATIONS BETWEEN NEIL GARFIELD AND THE BANK OFFICERS (WITH THE BANK’S LAWYER) ON THE LINE, EXECUTIVES FOR SMALL COMMUNITY BANKS AND CREDIT UNIONS SHOULD CALL OUR TALLAHASSEE NUMBER 850-765-1236 or OUR WEST COAST NUMBER AT 520-405-1688.

BLK | Thu, Nov 14

BlackRock with ETF push to smaller banks • The roughly 7K regional and community banks in the U.S. have securities portfolios totaling $1.5T, the majority of which is in MBS, putting them at a particularly high interest rate risk, and on the screens of regulators who would like to see banks diversify their holdings. • “This is going to be a multiple-year trend and dialogue,” says BlackRock’s (BLK) Jared Murphy who is overseeing the iSharesBonds ETFs campaign. • The funds come with an expense ratio of 0.1% and the holdings are designed to limit interest rate risk. BlackRock scored its first big sale in Q3 when a west coast regional invested $100M in one of the funds. • At issue are years of bank habits – when they want to reduce mortgage exposure, they typically turn to Treasurys. For more credit exposure, they habitually turn to municipal bonds. “Community bankers feel like they’re going to be the last in the food chain to know if there are any problems with a corporate issuer,” says a community bank consultant.

Full Story: http://seekingalpha.com/currents/post/1412712?source=ipadportfolioapp

Reuters: Credit Unions Fail As a Result of Buying Mortgage Bonds

As regulators conclude their long investigation into the cloud of companies and the maze of paths of paperwork and money the real victims are being revealed. We know Pension funds got hit hard and are now underfunded strictly as a result of buying worthless mortgage bonds from investment bankers who promised them protection and transparency but instead proved to be the predator. Now regulators are suing Morgan Stanley for defrauding two credit unions that failed as a result of taking a loss on those bonds — a loss that was a gain to the investment banker.

But they still don’t have it exactly right. The regulators are now freely describing mortgages that were “faulty”, “defective”‘ or “non-conforming”. They are describing bonds whose indentures were violated. Yet the government still stands on the sidelines when we look at the damage caused to millions of homeowners who have been forced from their homes and lost everything. The guise is “personal responsibility” — meaning that homeowners are to blame for what happened to them. Meanwhile the question of ownership of who owns the loan and the balance of the loan are being circumvented through destructive litigation, led by judges who are ill-informed mostly because lawyers have failed to learn securitization of debt.

Thus the government has failed to lead the way to stopping Foreclosures. It is still a basic axiom in the offices of regulators, the courtrooms of the judiciary and in mainstream media that individual borrowers are the people who must take responsibility and pay for the fraud. They should have known better. They should have read the documents. But this “logic” flies in the face that two branches of government have already recognized is that the one party who is at a disadvantage in a mortgage loan transaction and credit generally is the borrower — not the lender.

This issue was officially decided by the Federal Government in The Federal Truth in Lending Act was enacted for just that purpose and reason. The Federal Real Estate Settlement Procedures Act was enacted for just that purpose. And the many states that have enacted deceptive lending statutes that freely borrow from TILA and RESPA. Lawyers need to include this in their pleadings, memorandums and oral arguments to start where we should start — at the beginning. If those mortgages are being settled with the creditors who loaned the money because the loans were defective, and they are being settled with shared risk of loss, then why should our attitude toward borrowers be any different as to the same defective mortgages?

A good starting point would be to find the list of defective mortgages to see if your mortgage is in the
list of mortgages claimed to have been securitized, where the mortgages were described as defective, and where the mortgage bonds were described as fraudulent. Fraudulent appraisals are being ignored in the courtroom despite the clear provisions TILA that makes the appraisal and the viability of the loan the responsibility of the lender. Foreclosure defense attorneys are missing an important part of their argument when they fail to start with the responsibilities of the lender, the reasons why those standards were not applied, and the fact that the real lenders in millions of table-funded (predatory per se– I.e. Presumptively predatory) were being defrauded in two ways — non-conforming defective loans and mortgage bonds.

Of course the agencies could make thing easy by forcing publication of a list of REMIC trusts that have been subject to settlements relating to fraudulent and deceptive lending, and fraudulent and deceptive sale of mortgage bonds. But the truth is that the false axioms of the cloud of companies acting under cover of false claims of securitization are settling in the minds of judges, lawyers and regulators that somehow tens of millions of mostly unsophisticated people conspired to defraud the system. How likely is that? Or is it more likely that mortgage companies were pushing, coercing, lying, and deceiving the borrowers — just as the the lawsuits against the investment banks state? And just as they have done in the past?

Those lawsuits frequently allege that the underlying mortgages were non-compliant and unenforceable. If the investment bankers and investors, insurers and government agencies can agree that those mortgages were not enforceable, why is it that lawyers have not brought that message with them into the courtroom? And when they do, why are judges ignoring the argument. It has already been decided at the highest levels of government that the homeowner is hopelessly outgunned at closing. Why assume anything different? When those laws were passed , the number of loan options was 4 or 5. During this period of mortgage madness and meltdown, the number of mortgage products climbed to over 400 options. Borrowers didn’t do that. It was the mortgage originator who had no risk of loss because the money of the investor was what ended up on the table at closing.

Morgan Stanley
http://www.reuters.com/article/2013/09/24/us-morganstanley-creditunion-lawsuit-idUSBRE98N02E20130924

ELIZABETH WARREN AND JOHN MCCAIN TEAM UP TO REIGN IN BANKS

Go to www.msnbc.com. CONTACT YOUR SENATORS AND CONGRESSMEN AND WOMEN. LET THEM KNOW THEY ALREADY HAVE YOUR SUPPORT FOR THIS LAW AND THAT THEY DON’T NEED TO SELL THEMSELVES TO GET SUPPORT FROM THEIR CONSTITUENCY.

MSNBC had a segment today in which they interviewed Elizabeth Warren about a new set of laws reinstating the old style of Chinese walls. There are probably similar interviews on other channels with Senator Warren or Senator McCain and others. Just go to your favorite news channel and look it up. Their approach has bi partisan support because of its simplicity and its history. Historically it is merely a tune-up of the old laws to include definitions of new financial products that did not exist and were not adequately considered in the 1930’s when EVERYONE AGREED THE RESTRICTIONS WERE NEEDED.

Bottom Line: RETURN TO THE BORING BANK SAFETY WITHOUT BOOMS AND BUSTS FROM 1930’s into the 1990’s: leading republicans and democrats are stepping out of gridlock into agreement. They want to stop Wall Street from access to checking and savings accounts for use in high risk investment banking because that is what brought us to the brink and some say brought us Into the abyss. And it would stop commercial banks that are depository institutions for your checking and savings accounts from using your money on deposit in ways where there is a substantial risk of loss that would require FDIC ((taxpayer) intervention.

Banking should be boring. In the years when restrictions were in place we only had one serious breach of banking practices — the S&L Scandal in the 1980’s. But it didn’t threaten the viability of our entire economy and more than 800 people were serving prison terms when the dust cleared. Of course Bankers saw prison terms as an invasion of their business practices and regulation as unnecessary.

But the simple reason for bipartisan support is that the public is enraged that the mega banks (too big to fail) have GROWN 30% SINCE THE 2007-2008 while the people on Main Street are losing jobs, homes, businesses, families (divorce), thus stifling an already grievously injured economy because credit and cash are now scarce — unless you are a mega bank that made hundreds of billions or even trillions of dollars because they were able to create an illusion (securitization) and at the same time, knowing it was an illusion, they bet heavily using extreme leverage on the illusion being popped.

They made it so complex as to be intimidating to even bank regulators. So no wonder borrowers could not realize or even contemplate that their mortgage was not a perfected lien, so they admitted it. Foreclosure defense attorneys made the same mistake and added to it by admitting the default without knowing who had paid what money that should have been allocated to the loan receivable account of the borrower that was supposedly converted for a note receivable from the borrower to a bond receivable from an asset pool that supposedly owned the note receivable account.

The complexity made it challenging to enforce regulations and laws. The complexity was hidden behind curtains for reasons of “privacy”. The real reason is that as long as bankers know they are acting behind a curtain, they are subject to moral hazard. In this case it erupted into the largest PONZI scheme in human history.

And the proof of that just beginning to come out in the courts as judges are confronted with an absurd position — where the banks “foreclosing” on homes and businesses want delays and the borrower wants to move the case alone; and where those same banks want a resolution (FORECLOSURE OR BUST) that ALWAYS yields the least possible mitigation damages, the least coverage for the alleged loss on the note because they would be liable for all the money they made on the bond. Just yesterday I was in Court asking for expedited discovery and the Judge’s demeanor changed visibly when the Plaintiff seeking Foreclosure refused to agree to such terms. The Judge wanted to know why the defendant borrower wanted to speed the case up while the Plaintiff bank wanted to slow it down.

And because of all the multiple sales, the insurance funds, the proceeds of credit default swaps, because the initial money funding mortgages came from depositors (“investors”), and all the money from the Federal Reserve who is still paying off these bond receivables 100 cents to the dollar — all that money amounting to far more than the loans to borrowers — because it related to the bond receivable, the banks think they can withhold allocation of that money to the receivable until after foreclosure and avoid refunding all the excess payments to the borrower the investor and everyone else who paid money in this scheme. And the system is letting them because it is difficult to distinguish between the note receivable and the bond receivable and the asset pool that issued the bond to the actual lender/depositor.

Senators Warren and McCain and others want to put an end to even the illusion that such an argument would even be entertained. Support them now if not for yourselves then for your children and grandchildren.

Fannie and Freddie Platinum Sponsors with (MERS and LPS) of Upscale Event for Bankers

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COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE

UNDERLYING THEME: HOW TO GET THE SIGNATURE OF HOMEOWNER WITHOUT ALERTING ALL HOMEOWNERS THAT THEIR SIGNATURE IS NOW A VALUABLE COMMODITY

AHC AND LIVINGLIES ANNOUNCE LAUNCH OF AMGAR

EDITOR’S COMMENT: Are they really that tone deaf? It appears the answer is yes as Fannie and Freddie Joined Hands with MERS and LPS to become Platinum Sponsors of this Bankers Convention. If they had the slightest notion of the mayhem caused by these two culprits, neither Fannie nor Freddie should have avoided the event altogether and certainly not underwritten the expenses.

MERS was the vehicle used to hide the real parties in interest, allow trading behind the scenes and leave clouds on title compounded by frivolous and heart-breaking actions taken by the Banks to foreclose on properties based upon alleged mortgages that were never perfected as liens for debts that were not owed to the Banks and never acquired by them. The paper shuffle to give the appearance of a real party in interest was accomplished by a document fabrication mill — LPS.

Fannie and Freddie are now effectively nationalized, which means that in addition to the bailout, they are still underwriting costs for the banking industry. Small wonder that protests are taking to the streets.

Well, they had a lot to talk about — especially the growing acknowledgment and recognition that the signatures of evicted homeowners on fresh documents were necessary to clear title whether or not they were successful in pushing or bullying through their bogus foreclosure. The market is growing for for programs that entice homeowners to sign documents under one pretense that are being used for the secret agenda of the banks to simply get a waiver that they can waive in front of a Judge and say the homeowner waived any defenses.

The principal weapon of choice now is the offer of a modification plan that will later be rejected. But in the meanwhile, the homeowners signs an application in which he or she has waived all rights to contest the foreclosure — even if the the party initiating the foreclosure doesn’t have a dime in the deal and even if that subjects the homeowner to double or multiple financial jeopardy. The second line of defense is the new BOA pilot in which it is offering a “cash for keys” program in which they offer up to $20,000, as long as the homeowner signs a waiver and release of all claims.

Livinglies and www.AmericanHomeownersCoop.com (site still under construction) have come together in a joint venture called American Mortgage Guarantee and Resolution (AMGAR) to provide an open auction in which those homeowners who choose to take a little money rather than go for the brass ring in litigation can exchange their signatures on a package of waivers, releases, assignments and conveyances to anyone who wants to buy them. BOA has set the price range, but the market will dictate the rest.

AMGAR is outcome-neutral. No guarantees are expressed or implied as to the success of litigation or the value of the package. It’s purpose is to provide a vehicle where the homeowners who have decided to step away from fighting can provide the signatures necessary to clear title.

Junior or previous putative lienors may purchase the homeowner package and offer a value added package of the entire securitization chain. For those homeowners confused by this and the previous paragraph, it is not for you — it is directed at highly sophisticated qualified BUYERS, traders and alleged pretender lenders that wish to clear up entire chains of title. The risk of loss is entirely on the BUYER with no warranty or representations by the SELLER, except their identification.The BUYER assumes the risk of loss or further litigation without any representation from anyone upon which BUYER can reasonably rely.

There is a fee charged to the BUYER equal to $250 for the first $5,000 and $500 for any transaction that exceeds $5,000. This supports the trading desk and auction site at which the SELLERS and BUYERS “meet” electronically.

We would rather the homeowners stand and fight but if they are going to walk away, it might as well be with $20,000 (more or less, depending upon what the market will bear) in their pocket. The vehicle is named a Reverse Credit Default Swap which is sold by the homeowner or previous lienor and bought by hedge funds, Banks, CURRENT AND FORMER LENDERS, title companies and other qualified speculators. Until the auction site on the AHC site is fully functional, inquiries should be directed to amgar.livinglies@gmail.com.

The service is free to homeowners who are members of livinglies or members of the new cooperative American Homeowners Cooperative. However, it is strongly recommended that you purchase the COMBO before making the decision as to whether to fight or sell and that you seek the services of competent legal counsel licensed in the jurisdiction in which your property is located. In addition to providing the prospective SELLER (homeowner) with vital information with which to make a decision to fight or sell, the link to the COMBO results will provide a prospective Buyer easy access to information needed to assess the value proposition (prices are set by the SELLER, i.e., homeowners).

Fannie and Freddie, Still the Socialites

By

THE mortgage business is moribund. New loans are down. New foreclosures are up.

But why let a little sorry news get in the way of a good party? Last week, almost 3,000 people descended on the Hyatt Regency in Chicago for the 98th annual convention of the Mortgage Bankers Association.

The price of admission: about $1,000 a head. But for that grand, you got to hear the band Chicago play hits from the ’70s. And David Axelrod and Jeb Bush give speeches. And experts discuss things like demographics, the politics of housing and the future of the mortgage industry, according to a flier for the event.

“Gather the information you need to help your business and our industry drive change,” the pitch went.

The city of Chicago was no doubt grateful for the conventioneers’ dollars. Besides, Mayor Rahm Emanuel knows something about this industry: he used to be a director at the mortgage giant Freddie Mac.

Nothing wrong with a bit of schmoozing. But it might seem jarring that Freddie, which was rescued by Washington and today exists at the pleasure of taxpayers, paid $80,000 to become a “platinum” sponsor of this shindig. Fannie Mae, that other ward of the state, paid $60,000 to become a “gold” sponsor.

Keep in mind that taxpayers bailed out Fannie and Freddie to the tune of about $150 billion.

Today, Fannie and Freddie are about the only games in mortgage town. Yes, banks make loans, but more often than not they hand them off to one of the two. So it’s a mystery why Fannie and Freddie needed to help foot the bill for the gathering.

Freddie’s companions in the platinum sponsor list make for interesting reading. One was the Mortgage Electronic Registration System, or MERS, which has repeatedly foreclosed on troubled homeowners and made a hash of the nation’s real estate records. Another was Lender Processing Services of Florida, which made robo-signing a household word.

MERS and Lender Processing Services are at the center of the foreclosure crisis. Why would Freddie keep such company?

Perhaps more disturbing is that Fannie and Freddie sent an army of their own to Chicago: 87 people in all. According to a list of registrants, that’s more than hailed from the Mortgage Bankers Association (60 people), Bank of America (58), Wells Fargo (54) and JPMorgan Chase (24).

Only Lender Processing Services had more — 91 — than Fannie and Freddie. (Perhaps they robo-signed their registrations.)

The C.E.O.’s of Fannie and Freddie were conference headliners and gave presentations. But Freddie also sent 15 vice presidents and 14 directors from various units. Fannie’s list included 12 vice presidents, 12 unit directors and three events managers.

I asked Fannie and Freddie what they got out of sending all of these people to Chicago. Representatives of both said participation was an efficient use of taxpayer dollars because it allowed their employees to hold crucial meetings with hundreds of customers to discuss ways to address the housing crisis.

Fannie Mae’s spokeswoman, Amy Bonitatibus, added that it has “significantly reduced sponsorship and support of events and industry-related conferences.”

Representative Randy Neugebauer, the Texas Republican who heads the oversight and investigations subcommittee of the House Financial Services Committee, said he was disturbed by the turnout from Fannie and Freddie. It reflected a troubling “business as usual” approach by the mortgage giants, he said.

“They don’t act like companies that have had a huge infusion of taxpayer money,” he told me. “Why do they feel the need to go out and spend the money for networking when they have all of the mortgage market in its entirety?”

Trying to tally the costs borne by the taxpayers for the four-day event in Chicago, Mr. Neugebauer sent a letter last week to the Federal Housing Finance Agency, conservator for Fannie and Freddie. “I am concerned that the expenditures that Freddie and Fannie made in connection with the conference bear no relation to furthering the actual purposes of the conservatorship,”he wrote.

He requested a rundown of amounts paid by the companies to cover travel, lodging, entertainment and sponsorship. He also asked for details about whether Fannie and Freddie had consulted with the agency beforehand about sponsoring and attending the conference. The agency was asked to respond within a week.

”We’re going to really look through their entire budget and see if we can see signs where they are tightening their belt,” Mr. Neugebauer said, referring to Fannie and Freddie. “The American people are tightening their belts, businesses all over the country are tightening their belts. These entities can certainly do the same.”

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Lakeside Bank, St. Charles, La — The Way Banking Should Be

Editor’s Comment: Only one Bank has failed in Louisiana since the financial crisis began. And only one bank in the United States has commenced operations in the year 2010 — this one in Louisiana. Despite an unofficial moratorium on new bank charters of 70-year-old retiree, Hartie Spence, managed to navigate the regulations and got the only new start-up bank to open in the country, operating out of a secondhand double wide trailer.

The probable reason for the apparent safety of banks in the state of Louisiana is the rampant poverty. But it shows that even where people have very little money the financial system can be stable as long as outsiders don’t meddle in their financial affairs. Louisiana was a bad target all Wall Street and thus avoided the absurd fraudulent increases in appraisal values that lie at the core of the financial crisis. Landing was based upon the actual value of the property, the willingness of a lender to take the risk, and the ability of the borrower to repay.

For hundreds of years that was the lending model and obviously the only one that makes any sense. For 10 years that model was turned on its head in places other than Louisiana where lenders were not lenders, where inflated appraisal values were a good thing, and where the ability of borrowers to repay a loan was obstructed by layers of unknown entities never disclosed at the time of closing and obstructed by exotic terms and presumptions that were plainly wrong but which work to the benefit of the intermediaries who had arranged for the funding of the loan from investors and the buying of the loan product by unwitting borrowers.

I don’t know anything about this particular bank other than what I have read. I don’t know the people in it and I don’t know their business model. But in an economy where new bank charters are being discouraged, and new start-ups of any kind of business are made increasingly difficult while the government aids the large corporations and financial institutions that got us into this mess, I think this bank deserves the support not only of its own community but anyone who is looking for a new banking relationship. Between the Postal Service, the Internet and the telephone your bank can be anywhere.

August 28, 2010

In Hard Times, One New Bank (Double-Wide)

By ANDREW MARTIN

LAKE CHARLES, La. — The only new start-up bank to open in the United States this year operates out of a secondhand double-wide trailer, on a bare lot in front of the cavernous Trinity Baptist Church. A blue awning covers the makeshift drive-through window.

Called Lakeside Bank, it is run by a burly and balding former tackle for Louisiana State’s football team named Hartie Spence, who doles out countrified humor along with deposit slips and the occasional loan.

“This is the one place where the cause of death is mildew,” he quipped, standing outside the trailer in withering heat.

Asked how his bank in this steaming town of oil refineries and oversize casinos managed to win over federal regulators, Mr. Spence, 70, said, “I’m still thinking it’s my looks that did it.”

The dearth of new banks follows a particularly wrenching period for the industry. As the financial crisis deepened, hundreds of banks and thrifts closed and thousands more were saddled with bad loans and credit card defaults, costing the industry billions of dollars.

As a result, the number of investor groups applying to start a new bank from scratch has dropped precipitously. And for the intrepid few who have tried, regulators — sharply criticized for lax oversight in recent years — are being particularly stingy in granting approval.

So far this year, Mr. Spence holds the privilege of opening the only truly new federally insured bank. (In seven other instances, investors received regulatory approval to buy an existing bank, usually one that had failed, and reopen it).

Of course, many of the nation’s biggest banks were bailed out by the government, and have since rebounded. But since January 2008, more than 280 smaller banks and thrifts have been closed, and many community banks are struggling to recover from the real estate collapse.

Those bank failures have cost the Federal Deposit Insurance Corporation’s fund roughly $70 billion, and not surprisingly, the agency’s regulators are now giving greater scrutiny to new bank applications, according to bankers and industry officials.

Technically, banks obtain charters from their primary regulatory agency, either state banking regulators or, for national banks, the Office of the Comptroller of the Currency. But the charters are contingent on the applicants’ obtaining deposit insurance from the F.D.I.C.

The F.D.I.C. said the reduction in charters simply reflects the effects of the recession on new businesses. “There was considerable interest in forming banks before the economy deteriorated,” said an agency spokesman, David Barr. “In today’s climate we are seeing very little interest.”

However, last year the agency toughened its oversight of new banks, saying banks that had been open for fewer than seven years were “over represented” among failed banks in 2008 and 2009.

The reason, the agency said in a public release, is that many new banks strayed from their approved business plans and ran into problems because of “weak risk management practices,” among other problems.

Ralph F. “Chip” MacDonald III, a lawyer in Atlanta who advises banks on regulatory matters, said he believed the F.D.I.C. had imposed an “unofficial moratorium” on new bank charters, a charge that the agency denies.

Adam Taylor, president of the Bank Capital Group, an Atlanta company that helps investors set up new banks, said he had several recent clients, whom he declined to name, withdraw applications for new banks after it became clear that the F.D.I.C. would not approve them. He said the agency rarely denies charters — a fact confirmed by agency records — but that it places the applications in “purgatory” until the applicants give up.

The number of banks and thrifts — also known as savings and loans — in the United States has been declining steadily for 25 years, because of consolidation in the industry and deregulation in the 1990s that reduced barriers to interstate banking. There were 6,840 banks and 1,173 thrifts last year, down from 14,507 banks and 3,566 thrifts in 1984.

The number of charters has generally declined too, though there have been periodic swings. The lowest number of bank charters granted in any one year was 15, in 1942.

How, then, did Lakeside Bank win this year’s regulatory lottery?

Mr. Spence’s looks aside, he said that regulators were not ready to grant approval until Lakeside had raised enough capital, created a sufficiently conservative business plan and hired an experienced management team.

The initial idea for Lakeside Bank came from a local real estate developer, Andrew Vanchiere, who was dissatisfied with his existing bank. In 2007, he rounded up a group of local businessmen who set about raising $13 million in start-up capital and began looking for someone to run the bank.

The initial candidates were deemed too inexperienced by regulators. When the group contacted Mr. Spence in 2008, he was a few months into retirement and coming to the realization that fishing for trout and redfish just wasn’t enough to keep him occupied.

“I was bored absolutely stiff,” said Mr. Spence, who had successfully run several Louisiana banks during his career. “My response was, ‘Let’s do it!’

“You can manage a good bank in a bad economy, particularly when you are at the bottom,” he said. Noting that he has a clean balance sheet and can be selective about making loans, he added, “I thought it was a perfect time to be starting.”

Lakeside’s application was also helped by the surprising vitality of Lake Charles, a city of 72,000 roughly 30 miles from the Texas border. Lake Charles has gotten a boost from casino gambling and the oil and gas industry, as well as an infusion of new businesses, including liquefied natural gas terminals and a new plant that builds parts for nuclear reactors.

Louisiana, meanwhile, has fared better than many states during the economic downturn because of the petroleum industry and the infusion of government and insurance money to pay for damages from Hurricanes Katrina, Rita and Ike.

Only one bank has failed in Louisiana since the financial crisis began.

Regulators made it clear that Lakeside would not be approved if other banks in town were struggling to stay afloat, Mr. Spence said. But Lakeside, which opened on July 26, sits on a busy boulevard lined with about a dozen or more banks or credit unions, all of which appear to be thriving.

“There’s enough for all of us, and we are no threat to them for many, many years,” Mr. Spence said of his competitors.

Lakeside Bank is promoting itself as an old-fashioned community bank that focuses on customer service and bread-and-butter banking products, even though it also makes them available online.

Whereas loan decisions for many big banks are made in distant cities, Mr. Spence said that Lakeside will make them right there in the double-wide trailer, at least until the bank moves into a more permanent structure in a year or two.

“That’s our motto, ‘The Way Banking Should Be,’ ” he said, adding later, “It got rushed enough yesterday that I had to answer the phones and work the switchboard.”

Foreclosure Prevention 1.1

Nobody ever thought that returning a lady’s purse to her after a purse snatcher ran away with it was a gift. So why is anyone contesting returning the purse to homeowners who had their lives snatched from them?

The baby steps of the Obama administration are frustrating. Larry Summers, Tim Geithner and those who walk with Wall Street are using ideology and assumptions instead of reality and facts.

First they started with the idea of modifications. That would do it. Just change the terms a little, have the homeowner release rights and defenses to what was a completely fraudulent and deceptive loan transaction (and a violation of securities regulations) and the foreclosure mess would end. No, it doesn’t work that way.

The reality is that these homeowners are being drained every day and displaced from their lives and homes by the consequences of a scheme that depended upon fooling people into signing mortgages under the false assumption that the appraisal had been verified and that the loan product was viable. All sorts of tricks were used to make borrowers think that an underwriting process was under way when in fact, it was only a checklist, they were even doing title checks (using credit reports instead), and the viability of the loan was antithetical to their goals, to wit: to have the loans fail, collect on the insurance and get the house too without ever reporting a loss.

Then it went to modification through interest rate reduction and adding the unpaid monthly payments to the end of the mortgage. Brilliant idea. The experts decided that an interest rate reduction was the equivalent of a principal reduction and that everything would even out over time.

Adding ANYTHING to principal due on the note only put these people further under water and reduced any incentive they had to maintain their payments or the property. Reducing the interest was only the equivalent of principal reduction when you looked at the monthly payments; the homeowner was still buried forever, without hope of recovery, under a mountain of debt based upon a false value associated with the property and a false rating of the loan product.

Adding insult to injury, the Obama administration gave $10 billion to servicing companies to do modifications — not even realizing that servicers have no authority to modify and might not even have the authority to service. Anyone who received such a modification (a) got a temporary modification called a “trial” (b) ended up back in foreclosure anyway (c) was used once again for unworthy unauthorized companies to collect even more illegal fees and (d) was part of a gift to servicers who were getting a house on which they had invested nothing, while the real source of funds was already paid in whole or in part by insurance, credit default swaps or federal bailout.

Now the Obama administration is “encouraging” modifications with reductions in principal of perhaps 30%. But the industry is pushing back because they don’t want to report the loss that would appear on their books now, if a modification occurred, when they could delay reporting the “loss” indefinitely by continuing the foreclosure process. The “loss” is fictitious and the push-back is an illusion. There is no loss from non-performance of these mortgages on the part of lending banks because they never lent any money other than the money of investors who purchased mortgage-backed bonds.

You want to stop the foreclosures. It really is very simple. Stop lying to the American people whether it is intentional or not. Admit that the homes they bought were not worth the amount set forth in the appraisal and not worth what the “lender” (who was no lender) “verified.” Through criminal, civil and/or administrative proceedings, get the facts and change the deals like any other fraud case. Nobody ever thought that returning a lady’s purse to her after a purse snatcher ran away with it was a gift. So why is anyone contesting returning the purse to homeowners who had their lives snatched from them?

Regulation: Big Government or Big Business

“the banks should not be allowed to be larger than the government’s ability to regulate them”

If you ask someone about big government, they will probably tell you they don’t want government meddling in their personal business. What they really mean is that they don’t want ANYONE meddling in their lives. In reality, that opened the door to the finance sector to meddle, control and alter our lives. Banks, insurance companies and non-bank financial institutions have co-opted governmental decision making, and forced us all to pay dearly — far more than those taxes that everyone is worried about. Just look at the Wall Street bailout or our ridiculous health-care system.

We have let our aversion to big government get in the way of GOOD government. When government is doing the job of protecting us, they do pretty well — better than we could ourselves. When they don’t, we get screwed.

So now we have a financial system with a death grip on virtually every American, present and future, while we pay ever higher fees, costs and other private taxes for services that are provided in other countries at a fraction of the cost we pay here. Today’s article in the New York Times about our $48 billion credit card bill is just an example of how we pay more in fees to use credit and debit cards than anyone else.

The current debate over “too big to fail” is an example of how we end up talking about the wrong things which in turn leads to the wrong regulation and the usual bad result: Americans have less money at the end of the month while financial institutions have more money at the end of the month.

Nobody will argue about our desire for convenience of having ATM access and branch access wherever we might happen to find ourselves. But there is no reason to allow a monopolistic control over the industry rather than impose reasonable regulation so that consumer costs go down with some healthy competition. The industry backbone is already in place for electronic payments and transfers. Every bank, credit union and others could have equal access to it if we required those who control it to be regulated as utilities instead of private enterprise for the sole benefit of its officers and shareholders.

When AT&T was broken up it did eventually lead to much lower costs for voice communication and other forms of communication. So the argument for breaking up the big banks is based upon solid history and good sense. If AT&T had undertaken actions that put the entire country at peril and caused problems with our foreign relations, that would have been another reason to do it. But our government didn’t wait for something bad to happen, it acted in anticipation of the inevitable result of arrogance that comes with total control.

This time, we have the consequences of arrogance and total control and it did in fact put our entire country in peril and caused disruption in our influence and standing around the globe. But now, with the finance sector pouring $1 million per day into lobbying,  we have a debate about whether we should let that happen again. A debate?

We now have half the number of large financial institutions controlling virtually 100% of the finance system of our country than the number of such firms existing in 2007.  This increases the risk to our country, our lives and our world. So we have already ended up with a net loss and a much higher likelihood that we will see disaster, larger than before. How bad do things have to be for the outrage and consequences of Big Business to be confronted?

In my opinion, the banks should not be allowed to be larger than the government’s ability to regulate them. That simple proposition is the only satisfactory answer. Break them down, increase the size and resources of regulatory agencies and make sure there is real oversight of those agencies and we won’t have this problem again. It won’t solve the recovery issues that confront us today but it will at least take the future consequences of a repeat performance off the table for tomorrow.

No Loss to OneWest on FDIC IndyMac deal

Here is an interesting article from Tadly

Here is an interesting article
Harder Part

American Banker | Wednesday, February 24, 2010

By Jeff Horwitz

* IndyMac Buyers Pick Up Another Failed Bank – February 22, 2010
* FDIC Rebukes Internet Video – February 16, 2010

In less than a year, the private-equity buyers of IndyMac Bank — the $32 billion-asset California thrift seized in July 2008 and run by regulators for six months — have turned a $1.6 billion profit.

Now called OneWest Bank, the company is outperforming rivals on various fronts, including working out troubled assets, and it should have plenty more opportunities: It has acquired two more failed banks in the past three months, and it’s one of the few banks in the region with ample capital to do more deals.

Yet thriving on a mess that has already cost tens of thousands of IndyMac borrowers their homes is an awkward situation, and not just for the team of billionaire backers including George Soros, John Paulson and Christopher Flowers.

Shortly before OneWest’s latest acquisition, the FDIC was forced to take the unusual step of publicly defending OneWest’s loss-sharing agreement from a pair of video bloggers. For a bank with aspirations to become a sizable regional player, weathering the criticism may be as crucial as its ability to cobble together the assets of busted banks.

The franchise the Federal Deposit Insurance Corp. inherited featured terrible geography, reverse mortgages, securitized option adjustable-rate mortgages and the highest cost funding of any bank in the country. By paying off IndyMac’s high-cost depositors, the FDIC immediately shrank the bank’s deposits to $6.5 billion from $19 billion.

Under its new team, led by Chief Executive Terry Laughlin, the bank has made a limited return to lending. In the fourth quarter it originated about $1 billion of mortgages, selling half and keeping half on its balance sheet. It also built up its deposit base to more than $11 billion by yearend, filling the gap with Federal Home Loan bank advances.

But it’s the terms of the FDIC deal that have yielded the bank’s outsize earnings. OneWest paid $13.9 billion for IndyMac’s assets — a 23% discount to their face value that more than covered OneWest’s $2.5 billion “first loss” obligation. Should the amount ever be reached, and it hasn’t yet, the FDIC would absorb first 80% and then 95% of further losses. In return, OneWest committed to modifying all of the IndyMac mortgages it serviced — so long as doing so would save investors money. According to the agency, none of the more than 80 potential buyers it solicited produced a better offer than OneWest’s, which it estimated will cost the insurance fund more than $11 billion.

OneWest’s accounting suggests that the bank believes that every penny of the losses its portfolio took this year was covered by the initial discount it got on IndyMac — it neither made provisions nor booked losses on the loans. What interest payments did roll off the portfolio were pure profit, amounting to $210 million in net income in the fourth quarter alone. On top of that, the bank earned $900 million in additional noninterest income. That total would presumably include gains in the net value of its servicing portfolio — — most servicers did well last quarter — but covering all of the difference would be a stretch, said Bert Ely of Ely & Co., suggesting that much of it may be the result of amortizing the gap between what OneWest paid and the actual value of the portfolio.

Even if the deal provided for a lot of easy money for the private-equity firm, OneWest’s duties over the past year have hardly been a matter of sitting back and letting the checks roll in. It’s also responsible for addressing the very cause of IndyMac’s failure — a massive portfolio of terribly performing loans. Doing that has required administering the FDIC loan mod program that launched the Home Affordable Modification Program.

When the FDIC took over IndyMac, it created an ambitious effort to rehabilitate the mortgages the bank serviced, 60,000 of which were 60 or more days past due. Because securitized loans made up 90% of IndyMac’s servicing portfolio, John Bovenzi, the former FDIC deputy chairman who was IndyMac’s CEO during receivership, said that for most borrowers a straight principal writedown was out of the question. What the bank could do, however, was permanently drop interest rates, lowering total payments over the life of the mortgage.

Investors who owned the mortgages were initially worried that the FDIC would seek to lower payments indiscriminately. But Bovenzi said none ultimately protested after they understood that mods would only occur when they could be expected to save all parties money.

“If foreclosure made more economic sense, we weren’t going to do the loan modification,” he said, and this rule still applies to OneWest’s current modifications done under Hamp. “When we’re managing the receivership, we still have that statutory obligation to maximize value for the creditors of the failed bank,” Bovenzi said.

IndyMac worked through a backlog of best candidates for mods first, Bovenzi said — the minority whose loans had solid documentation. And even getting those through the program required significant effort.

“We used Federal Express instead of regular mail because people actually open Federal Express,” he recalled. When the pool of the most eligible borrowers was exhausted after a few months, the FDIC started offering conditional modifications. All together, out of 46,500 loans deemed eligible at the time of IndyMac’s sale to OneWest, the FDIC had completed 8,512 mods and mailed out more than 32,000 offers. But in that same period it initiated almost 28,000 foreclosures in California alone.

Since the handoff from the FDIC, OneWest has frequently come under suspicion of “systemically working to push home loan borrowers into foreclosure,” as The Sacramento Bee reported this week in describing a string of local consumer lawsuits. Indeed, OneWest’s and the FDIC’s IndyMac agreement has drawn howls for producing too much profit and too few loan mods. Yet while it’s true that the bank’s mod program was slow to yield results — the bank barely managed 1,000 permanent modifications in the first six months it was in charge — its statistics have recently jumped, with the bank modifying 3,087 and making official offers to modify 5,048 more. And though Internet critics and others have frequently said that OneWest has been eager to foreclose on homes in order to trigger its loss-sharing agreement with the FDIC, to date the opposite appears to be true.

Foreclosure Radar data for IndyMac’s home market of California shows that the number of foreclosure proceedings initiated on loans OneWest services has been cut in half since the bank took over from the FDIC — a decline that far exceeds the general slowdown in foreclosures in the state. OneWest’s notices of trustee sales, which immediately precede the seizure of a home, have similarly dropped.

“They are not foreclosing at a pace that makes them stand out,” said Sean O’Toole, Foreclosure Radar’s founder.

And while a theoretical case could be made that it would be profitable for OneWest to foreclose rapidly in order to trigger its FDIC loss-sharing agreement, the bank is contractually obligated to the FDIC not to do so. Moreover, said Michael Krimminger, FDIC special adviser for policy, “the incentives are designed to get more loans past the net present value test” required to qualify for a modification. The FDIC is monitoring OneWest’s performance.

Foreclosure Radar’s data shows that OneWest appears to be far better at dealing with the process than far more established lenders in the state. In instances where third-party investors buy a property in foreclosure, they pay on average 10% more of the property’s market value. And when OneWest takes properties back in trustee sales, it pays less to do so.

In California, O’Toole said, OneWest seems to run a far more organized operation. It is the only lender he is aware of, he said, that regularly announces its initial bid at trustee sales a week in advance, giving third-party investors the chance to do due diligence.

“By that simple act, they get much more aggressive bidding on their properties,” O’Toole said.

Those results should benefit the FDIC whenever it does start paying out on its loss-sharing agreement with OneWest. (According to the agency, it still hasn’t.) Yet given the bank’s massive earnings this year, observers like Ely question whether the FDIC didn’t overpay for the performance.

By comparison, the purchasers of BankUnited Corp., the only other FDIC private-equity deal similar in size to OneWest, have received a 25% return on equity in the seven months since taking control of the bank. The FDIC and OneWest declined to discuss the bank’s performance.

Tax Apocalypse for States and Federal Government Can be Reversed: Show Me the Money!

SEE states-look-beyond-borders-to-collect-owed-taxes

states-ignore-obvious-remedy-to-fiscal-meltdown

tax-impact-of-principal-reduction

accounting-for-damages-madoff-ruling-may-affect-homeowner-claims

taxing-wall-street-down-to-size-litigation-guidelines

taking-aim-at-bonuses-based-on-23-7-trillion-in-taxpayer-gifts

payback-timemany-see-the-vat-option-as-a-cure-for-deficits

As we have repeatedly stated on this blog, the trigger for the huge deficits was the housing nightmare conjured up for us by Wall Street. Banks made trillions of dollars in profits that were never taxed. The tax laws are already in place. Everyone is paying taxes, why are they not paying taxes? If they did, a substantial portion of the deficits would vanish. Each day we let the bankers control our state executives and legislators, we fall deeper and deeper in debt, we lose more social services and it endangers our ability to maintain strong military and law enforcement.

The argument that these unregulated transactions are somehow exempt from state taxation is bogus. There is also the prospect of collecting huge damage awards similar to the tobacco litigation. I’ve done my part, contacting the State Treasurers and Legislators all over the country, it is time for you to do the same. It’s time for you to look up your governor, State Treasurer, Commissioner of Banking, Commissioner of Insurance, State Commerce Commission, Secretary of State and write tot hem demanding that they pursue registration fees, taxes, fines, and penalties from the parties who say they conducted “out-of-state” transactions relating to real property within our borders. If that doesn’t work, march in the streets.

The tax, fee, penalty and other revenue due from Wall Street is easily collectible against their alleged “holding” of mortgages in each state. One fell swoop: collect the revenue, stabilize the state budget, renew social services, revitalize community banks within the state, settle the foreclosure mess, stabilize the housing market and return homeowners to something close to the position they were in before they were defrauded by fraud, predatory lending and illegal practices securitizing loans that were too bad to ever succeed, even if the homeowner could afford the house.

Man Sends Message to Banks-Bulldozes $350k House

 Sending Banks a Message – Cincinnati OH  – Click Here to View Video

“The average homeowner that can’t afford an attorney or can fight as long as we have, they don’t stand a chance,” he said. Hoskins said he’d gotten a $170,000 offer from someone to pay off the house, but the bank refused, saying they could get more from selling it in foreclosure.  

Hoskins told News 5’s Courtis Fuller that he issued the bank an ultimatum.  “I’ll tear it down before I let you take it,” Hoskins told them. And that’s exactly what Hoskins did.

Editors Note – The borrower actually had equity in his home. The house was apparently worth $350k in today’s market and the bank was only owed about $170k.

Kansas S Ct Decision Annotation 2: Reversing Default

The point must be made, and the evidence must be allowed, that the pretender lenders are gaming the system every day and literally stealing homes from both homeowners and investors who thought they had an interest in those homes when they bought mortgage backed securities. This leaves the borrower in a position of financial double jeopardy wherein the true owner of the loan can still make a claim and the investor is simply out of luck — usually have been misinformed about the payments or status of the pool of assets the investor bought into.

From Landmark v Kesler — see entire decision: kansas-supreme-court-sets-precedent-key-decision-confirming-livinglies-strategies

“6. It is appropriate for a trial court to consider evidence beyond the bare pleadings to determine whether it should set aside a default judgment. In a motion to set aside default, a trial court should consider a variety of factors to determine whether the defendant or would-be defendant had a meritorious defense, and the burden of establishing a meritorious defense rests with the moving party.
7. Relief under K.S.A. 60-255(b) is appropriate only upon a showing that if relief is granted the outcome of the suit may be different than if the entry of default or the default judgment is allowed to stand; the showing should underscore the potential injustice of allowing the case to be disposed of by default. In most cases the court will require the party in default to demonstrate a meritorious defense to the action as a prerequisite to vacating the default entry or judgment. The nature and extent of the showing that will be necessary lie within the trial court’s discretion.”

A highly important finding in this decision and affecting those whose homes have already been subject to a foreclosure sale, judgment or eviction (unlawful detainer) proceeding. In most cases these proceedings have resulted in actions taken by the parties upon the default of the alleged borrower. The default occurs when the borrower fails to answer in a judicial state or fails to file a lawsuit in a non-judicial state. The first time the matter comes before a court is when the foreclosing party files something in court — like an eviction action or petition for writ of possession. The mistake that courts are making at the trial court level is that they are treating the matter as though it has been judicially concluded, as if there was a hearing or trial where the parties were heard on the merits. This is simply not the case.

Judges must come to the realization that this is not the end of the matter — it is the beginning. And they should consider any motion directed to the merits of the would-be forecloser’s claim and the defenses of the homeowner. And unlike a motion to dismiss, where there will be plenty of time to consider factual matters later, the motion to set aside the sale, foreclosure judgment, notice of default, notice of sale, or judgment of unlawful detainer or eviction is a final determination of the merits — most often without hearing one shred of evidence offered or proffered by the homeowner. In fact, there are numerous cases where the trial judge abruptly and even rudely silenced the lawyer or pro se litigant saying that this was a simple matter of eviction (or whatever the motion was pending) and this is not an evidentiary hearing. Other Judges see the inherent unfairness and the denial of due process when the homeowner raises objections that the pretender lender had no right to foreclose, did so improperly and essentially stole the title abusing state process and creating a fraud upon the court and everyone else. But the application of this approach has been inconsistent and uneven.

While we have seen numerous cases turned on their head where a homeowner has been restored to possession of the house, and even clear title awarded to the homeowner thus blocking any future foreclosure, we have seen many other cases where Judges are still viewing these cases as dead beat borrowers trying to game the system.

The point must be made, and the evidence must be allowed, that the pretender lenders are gaming the system every day and literally stealing homes from both homeowners and investors who thought they had an interest in those homes when they bought mortgage backed securities. This leaves the borrower in a position of financial double jeopardy wherein the true owner of the loan can still make a claim and the investor is simply out of luck — usually have been misinformed about the payments or status of the pool of assets the investor bought into.

“How do I prove that?” is the usual question. You don’t prove it you ask it. After performing a forensic review, hopefully by an independent expert, you present allegations and evidence that upon the best information you have, you believe the loan was securitized and that the owner of the loan is not the party who brought the action. You offer further your belief that the loan might have been paid or transferred by reason of federal bailout or insurance or credit default swaps, and that this pretender lender refuses to answer the questions put to them in the qualified written request and debt validation letter.

Since the QWR and DVL are statutory letters giving rise to an obligation to answer and resolve the issue, and the pretender lender is already in violation, the only answer the pretender lender could have to avoid sanction for failing to conform to statute is to say they are not a lender and therefore they don’t have any obligation to answer. This of course knocks them out of the position of would-be forecloser. If the pretender lender simply fails to comply, then your position is that no creditor can seek to collect on a debt without proving the debt is due. Since you have asked for a full accounting of the chain of title on the loan and the money received from all parties, not just the borrower, it is impossible to state how much of the obligation is due and to whom it is owed.

Thus the answer is that you allege the facts, you present probable cause (forensic review) for your allegations and then enter the discovery phase in which you press the pretender lender into eventually taking the position that they don’t need care, custody or control over the note or loan. They will take the position that they have the bare right to enforce the note and mortgage with or without the proper documentation. Most judges won’t buy that.

By the way, a simple and deadly question to ask the pretender lender in litigation is whether they have complete decision-making authority to modify the loan. You’ll be killing several birds with one stone when answer or refuse to answer that question — especially in California where there is an obligation on the part of the lender to have a modification program in place. The current programs in place are from servicers, not lenders.


Give me a little help here: Trusts, REMICs, and the Authority of the Trustee or Trustee’s Attorney to Represent

When U.S. Bank comes in as Trustee for the the holders of series xyz etc., the use of the words Trustee and series certificates give it an air of legitimacy. But this is probably just another bluff. Reading the indenture on the bond (mortgage backed security) and the prospectus, you will see that the “Trust” may or may not be the the Special Purpose Vehicle that issued the bonds.

And of course I remind you that the “borrower” (whom I call an “issuer” for reason explained in other posts) signed a note with one set of terms and the source of funding, the investor received a bond with another set of terms (and parties) who in turn received some sort of transmittal delivery or conveyance of a pool of “assets” from a pool trustee or other third party who obtained the “assets” under an entirely different set of terms (and parties) including a buy back provision which would appear to negate the entire concept of any unconditional “assignment” (a primary condition for negotiability being the absence of conditions and the certainty that the instrument sets forth all obligations without any “off-record” activity creating a condition on payment).

In short, we have a series of independent contracts that are part of a common scheme to issue unregulated securities under false pretenses making the “borrower” and the “investor” both victims and making the “borrower” an unknowing issuer of an instrument that was intended to be used as a negotiable instrument and sold as as a security.

One of the more interesting questions raised by another reader is this issue of trusts. care to comment on the following? I’ll make it an article and post it. Send it to me at ngarfield@msn.com. Want to be a guest on the podcast show? Submit an article that gets posted.

1. What is a trust? How is it defined? How is it established for legal existence? Does it need to be registered or recorded anywhere?
2. Can a trust legally exist if it is unfunded? (If there is nothing in the trust to administer, is there a trust?)
3. What are the powers of the Trustee of an unfunded trust? Can a Trustee claim apparent or actual authority to represent the holders of bonds (mortgage backed securities) issued by a Special Purpose Vehicle — as an agent? as a trustee? Again what are the “Trustee’s” (agent?) powers?
4. Who can be a Trustee.
5. Can a financial services entity otherwise qualified to do business in the state claim to be an institutional trustee?
6. Can a financial services entity that does not qualify to do business in the state, not chartered or licensed do business as a bank? a lender? a securities issuer? a trustee? a trust company?
7. If the mortgage backed securities (bonds) are sold to investors what asset or res can be arguably in the trust?
8. If the mortgage backed securities (bonds) contain an indenture that purports to convey a pro rata share of the mortgages and notes in a pool to the owner of the certificate of mortgage backed security (bond) what asset or res can be arguably in the trust?
9. If the Special Purpose Vehicle has filed with the IRS as a REMIC conduit (see below) then how it own anything since by definition it is a conduit and must act as a conduit or else it loses tax exempt status and subjects itself to income and capital gains taxes?

FROM WIKOPEDIA:

Real Estate Mortgage Investment Conduits, or “REMICs,” are a type of special purpose vehicle used for the pooling of mortgage loans and issuance of mortgage-backed securities. They are defined under the United States Internal Revenue Code (Tax Reform Act of 1986), and are the typical vehicle of choice for the securitization of residential mortgages in the US.

REMIC usage

REMICs are investment vehicles that hold commercial and residential mortgages in trust and issue securities representing an undivided interest in these mortgages. A REMIC assembles mortgages into pools and issues pass-through certificates, multiclass bonds similar to a collateralized mortgage obligation (CMO), or other securities to investors in the secondary mortgage market. Mortgage-backed securities issued through a REMIC can be debt financings of the issuer or a sale of assets. Legal form is irrelevant to REMICs: trusts, corporations, and partnerships may all elect to have REMIC status, and even pools of assets that are not legal entities may qualify as REMICs.[2]

The Tax Reform Act eliminated the double taxation of income earned at the corporate level by an issuer and dividends paid to securities holders, thereby allowing a REMIC to structure a mortgage-backed securities offering as a sale of assets, effectively removing the loans from the originating lender’s balance sheet, rather than a debt financing in which the loans remain as balance sheet assets. A REMIC itself is exempt from federal taxes, although income earned by investors is fully taxable. As REMICs are typically exempt from tax at the entity level, they may invest only in qualified mortgages and permitted investments, including single family or multifamily mortgages, commercial mortgages, second mortgages, mortgage participations, and federal agency pass-through securities. Nonmortgage assets, such as credit card receivables, leases, and auto loans are ineligible investments. The Tax Reform Act made it easier for savings institutions and real estate investment trusts to hold mortgage securities as qualified portfolio investments. A savings institution, for instance, can include REMIC-issued mortgage-backed securities as qualifying assets in meeting federal requirements for treatment as a savings and loan for tax purposes.

To qualify as a REMIC, an entity or pool of assets must make a REMIC election, follow certain rules as to composition of assets (by holding qualified mortgages and permitted investments), adopt reasonable methods to prevent disqualified organizations from holding its residual interests, and structure investors’ interests as any number of classes of regular interests and one –- and only one -– class of residual interests.[3] The Internal Revenue Code does not appear to require REMICs to have a class of regular interests.[4]

Qualified mortgages

Qualified mortgages encompass several types of obligations and interests. Qualified mortgages are defined as “(1) any obligation (including any participation or certificate of beneficial ownership therein) which is principally secured by an interest in real property, and is either transferred to the REMIC on the startup day in exchange for regular or residual interests, or purchased within three months after the startup day pursuant to a fixed-price contract in effect on the startup day, (2) any regular interest in another REMIC which is transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC, (3) any qualified replacement mortgage, or (4) certain FASIT regular interests.”[5] In (1), “obligation” is ambiguous; a broad reading would include contract claims but a narrower reading would involve only what would qualify as “debt obligations” under the Code.[6] The IRC defines “principally secured” as either having “substantially all of the proceeds of the obligation . . . used to acquire or to improve or protect an interest in real property that, at the origination date, is the only security for the obligation” or having a fair market value of the interest that secures the obligation be at least 80% of the adjusted issue price (usually the amount that is loaned to the mortgagor)[7] or be at least that amount when contributed to the REMIC.[8]

Permitted investments

Permitted investments include cash flow investments, qualified reserve assets, and foreclosure property.

Cash flow investments are temporary investments in passive assets that earn interest (as opposed to accruing dividends, for example) of the payments on qualified mortgages that occur between the time that the REMIC receives the payments and the REMIC’s distribution of that money to its holders.[9] Qualifying payments include mortgage payments of principal or interest, payments on credit enhancement contracts, profits from disposing of mortgages, funds from foreclosure properties, payments for warranty breaches on mortgages, and prepayment penalties.[10]

Qualified reserve assets are forms of intangible property other than residual interests in REMICs that are held as investments as part of a qualified reserve fund, which “is any reasonably required reserve to provide for full payment of” a REMIC’s costs or payments to interest holders due to default, unexpectedly low returns, or deficits in interest from prepayments.[11] REMICs usually opt for safe, short term investments with low yields, so it is typically desirable to minimize the reserve fund while maintaining “the desired credit quality for the REMIC interests.”[12]

Foreclosure property is real property that REMICs obtain upon defaults. After obtaining foreclosure properties, REMICs have until the end of the third year to dispose of them, although the IRS sometimes grants extensions.[13] Foreclosure property loses its status if a lease creates certain kinds of rent income, if construction activities that did not begin before the REMIC acquired the property are undertaken, or if the REMIC uses the property in a trade or business without the use of an independent contractor and over 90 days after acquiring it.[14]

Regular interests

It is useful to think of regular interests as resembling debt; they tend to have lower risk with a corresponding lower yield. Regular interests are taxed as debt.[15] A regular interest must be designated as such, be issued on the startup day, contain fixed terms, provide for interest payments and how they are payable, and unconditionally entitle the holder of the interest to receive a specific amount of the principal.[16] Profits are taxed to holders.

Residual interests

Residual interests tend to involve ownership and resemble equity more than debt. However, residual interests may be neither debt nor equity. “For example, if a REMIC is a segregated pool of assets within a legal entity, the residual interest could consist of (1) the rights of ownership of the REMIC’s assets, subject to the claims of regular interest holders, or (2) if the regular interests take the form of debt secured under an indenture, a contractual right to receive distributions released from the lien of the indenture.”[17] The risk is greater, as residual interest holders are the last to be paid, but the potential gains are greater. Residual interests must be designated as such, be issued on the startup day, and not be a regular interest (which it can effortlessly avoid by not being designated as a regular interest). If the REMIC makes a distribution to residual interest holders, it must be pro rata; the pro rata requirement simplifies matters because it usually prevents a residual class from being treated as multiple classes, which could disqualify the REMIC.[18]

Forms

A REMIC can issue mortgage securities in a wide variety of forms: securities collateralized by Government National Mortgage Association (Ginnie Mae) pass-through certificates, whole loans, single class participation certificates and multiclass mortgage-backed securities; multiple class pass-through securities and multiclass mortgage-backed securities; multiple class pass-through securities with fast-pay or slow-pay features; securities with a subordinated debt tranche that assumes most of the default risk, allowing the issuer to get a better credit rating; and Collateralized Mortgage Obligations with monthly pass-through of bond interest, eliminating reinvestment risk by giving investors call protection against early repayment.

The advantages of REMICs

REMICs abolish many of the inefficiencies of collateralized mortgage obligations (CMOs) and offer issuers more options and greater flexibility..[19] REMICs have no minimum equity requirements, so REMICs can sell all of their assets rather than retain some to meet collateralization requirements. Since regular interests automatically qualify as debt, REMICs also avoid the awkward reinvestment risk that CMO issuers bear to indicate debt. REMICs also may make monthly distributions to investors where CMOs make quarterly payments. REMIC residual interests enjoy more liquidity than owner’s trusts, which restrict equity interest and personal liability transfers. REMICs offer more flexibility than CMOs, as issuers can choose any legal entity and type of securities. The REMIC’s multiple-class capabilities also permit issuers to offer different servicing priorities along with varying maturity dates, lowering default risks and reducing the need for credit enhancement.[20] REMICs are also fairly user-friendly, as the REMIC election is not difficult, and the extensive guidance in the Code and in the regulations offers “a high degree of certainty with respect to tax treatment that may not be available for other types of MBSs.”[21]

The limitations of REMICs

Though REMICs provide relief from entity-level taxation, their allowable activities are quite limited “to holding a fixed pool of mortgages and distributing payments currently to investors.”[22] A REMIC has some freedom to substitute qualified mortgages, declare bankruptcy, deal with foreclosures and defaults, dispose of and substitute defunct mortgages, prevent defaults on regular interests, prepay regular interests when the costs exceed the value of maintaining those interests,[23] and undergo a qualified liquidation,[24] in which the REMIC has 90 days to sell its assets and distribute cash to its holders.[25] All other transactions are considered to be prohibited activities and are subject to a penalty tax of 100%,[26] as are all nonqualifying contributions.

To avoid the 100% contributions tax, contributions to REMICs must be made on the startup day. However, cash contributions avoid this tax if they are given three months after the startup day, involve a clean-up call or qualified liquidation, are made as a guarantee, or are contributed by a residual interest holder to a qualified reserve fund.[27] Additionally, states may tax REMICs under state tax laws.[28] “Many states have adopted whole or partial tax exemptions for entities that qualify as REMICs under federal law.”[29]

REMICs are subject to federal income taxes at the highest corporate rate for foreclosure income and must file returns through Form 1066.[30] The foreclosure income that is taxable is the same as that for a real estate investment trust (REIT)[31] and may include rents contingent on making a profit, rents paid by a related party, rents from property to which the REMIC offers atypical services, and income from foreclosed property when the REMIC serves as dealer.[32]

The REMIC rules in some ways exacerbate problems of phantom income for residual interest holders, which occurs when taxable gain must be realized without a corresponding economic gain with which to pay the tax.[33] Phantom income arises by virtue of the way that the tax rules are written. There are penalties for transferring income to non-taxpayers, so REMIC interest holders must pay taxes on gains that they do not yet have.

Securitization in A Nutshell

According to the terms of any note I ever read, any payment from you or any third party that is intended to be a payment against interest, principal or both must be applied as such. You have hit the nail on the head with your question. When they pooled your note, the deal you signed was ended and a new one began — one to which you were NOT a party. You were mentioned but they never got your signature in the pooling and servicing stage, the securitization stage or the terms of the bond (mortgage backed indenture stage).

Question: I was served with a complaint to foreclose and of course they lost the note as well as saying I hadn’t paid since November 08. I in fact have paid up until March 31, 09, but it seems they have alloted my mortgage payment (at least 3/4) of them to suspense and fees.

I’ve asked for months to no avail and all the other questions, like who holds my mortgage. I

Are Mortgage servicers allowed to take my payments and apply them to wherever they want, even though I have never seen a notice regarding suspense???

ANSWER: Mary: According to the terms of any note I ever read, any payment from you or any third party that is intended to be a payment against interest, principal or both must be applied as such. You have hit the nail on the head with your question. When they pooled your note, the deal you signed was ended and a new one began — one to which you were NOT a party. You were mentioned but they never got your signature in the pooling and servicing stage, the securitization stage or the terms of the bond (mortgage backed indenture stage).

The “pooling” resulted in giving themselves authority to pledge your payments and third party payments (AIG insurance, credit default swaps, Federal bailouts etc.) to cover the obligation of OTHER BORROWERS. This is a direct breach of the express terms of the note which describes how the payments will be applied.

Follow me here. The “lender” who appeared on the papers at your closing was already prepaid on your obligation by third party investors. So one of two things are true: either the note is paid in full and there is no obligation nor is there anything for the mortgage to secure, or the note you signed was properly assigned to a third party who put up the money. But the note cannot be properly assigned and enforced against you if the terms are changed without your knowledge or consent. So it wasn’t properly assigned. That means it is paid.

Where does that leave the investor who put up the money that was used to fund your mortgage? The investor has received a bond (which is the same as a note) which includes all kinds of terms that you knew nothing about where the money was owed and guaranteed from several entities that you knew nothing about. The bond indenture says the bond holder gets a pro rata title to the mortgages and notes in the pool.

So the “trust” is holding nothing — but so is the investor because the note you signed was not properly assigned — conditions were added to payment and risk, making it a different deal.

So the investor has claims and may have been paid from the government, an insurer, cross collateralization, over collateralization or some other source including you. The investors claims against you are NOT on the note and mortgage because the note was paid never assigned in the legal sense.
The investor’s claims are at common law or in equity since you did get a loan and some of the money the investor injected into the pool was used to fund your loan. But as soon as the investor sues you for unjust enrichment, constructive or resulting trust or whatever, you have counterclaims for all the TILA violation, predatory lending, appraisal fraud, slander of title, usury, etc. that could lead to a counterclaim for treble damages against the investor for things the investor never did — at least not directly.

One thing seems certain — that any claim by the investor is unsecured and the ONLY party with legal standing to assert any claim against you is the one who lost money. The net value of the investor’s claim is unknown but dubious at best. And so far the investors are suing only the servicers and investment banks for sticking them with deals made up of pure vapor.

AIG Mystery: Where’s the Money?

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3/2/09

Bailouts are going to the perpetrators rather than the victims. The mystery deepens as to where all this money went and where it is going. Something like a trillion dollars (a number with a lot of zeroes) has gone into a black whole called “the financial system.” AIG just received another $30 billion to cover losses from “write-downs.” But is that money actually going to investors who were supposedly insured or is it being pocketed? Like the bank holding companies who took federal bailout money and the never passed it on to the actual banks they were holding, no money seems to come out of this black whole. NO investor gets saved, nor borrower is helped, no foreclosure is stopped even though they were the victims of the largest PONZI scheme in history. (Mortgage backed securities, that is, not Madoff whose scheme was dwarfed by the scope of the Wall Street madness that produced illusory profits, illusory stock prices, and huge bonuses to corporate leaders who were driving hte bus into a ditch).

Here is a reply I entered to a squabble amongst two of our readers:

Glenn and Lynne: Weighing in here just a little. Lynne expresses the frustration a lot of people feel about the legal profession. Some of it is well-founded. Most of the bad results though comes from the usual 80-20 rule — 80% of the people in any profession are suspect at a minimum — not just for integrity but for competence. Glenn expresses frustration because he takes his profession seriously, putting him in the 20% category. So he took homage at being included, along with colleagues he respects, a barrel of monkeys.

To put things in perspective let’s agree that the current mortgage mess was created by a grand PONZI scheme that HAD to fail. The scheme was so large it was beyond the comprehension of even many bright people in law, government and finance. It was enabled by disinterested, unskilled “regulators” at the SEC and other state and Federal agencies. Like the “auditors” who look for TILA violations by comparing a good faith estimate with the settlement statement and a few other papers, the regulators left 99% of the problem on the table.

Most regulators, judges and lawyers left the big problem alone because they didn’t see it. You can’t ask a blind man to see and react with anger when he fails to comply.

Our job is to get mad — not at each other — and get even or even ahead.

In this crisis lies the opportunity for homeowners to reverse in a matter of weeks or months the transfer of wealth that has been boiling to the top of the financial services industry creating illusory profits that were falsely reported as real. Investors in those companies have been hurt badly as have the investors who bought those bogus mortgage-backed securities.

The bailouts of AIG et al have been extended to prevent collapse and to buttress trust and confidence in the financial system. But that can’t happen, and credit won’t start to flow in the private sector until we address the real issue of bailout the victims rather than perpetrators. Investors have been left with nothing, wiped out to actual or near financial extinction. Homeowners have been left with LESS than nothing, leaving them with a liability and no way to pay it off and no asset to provide security to anyone. On these mortgage deals everyone lost including the innocent holder of currency, the pensioner, and the homeowner who has no mortgage but is watching his property value plummet. Let’s work together on righting the wrong because government is too slow to do it. Get the wealth transferred back to where it came from — the consumer. Work out something where investors can recover some part of their investment without begging AIG for their money after the company received hundreds of billions of dollars.

The Game Goes On: Market Headed Down, Foreclosure Game Puts Property in the Wrong Hands

U.S. Housing Slump Has ‘Just Begun,’ Says Forecaster Talbott

Review by James Pressley

Feb. 5 (Bloomberg) — Let’s say you own a $1 million home in Santa Barbara, California.

The house seemed like a steal when you bought it with that adjustable-rate mortgage in 2005. You still love the white beaches and those yachts bobbing up and down in the harbor.

Then you awaken early one morning, troubled that your monthly payments will soon double. You go out to pick up your newspaper and see for-sale signs on five houses on the street. One identical to yours just sold for $500,000.

Are you going to pay the bank $1 million plus interest for your place? John R. Talbott, a former investment banker for Goldman Sachs, poses that hypothetical question in his latest book of financial prophesy, “Contagion.”

His answer: “I don’t think so,” he says. “If I’m right, then this housing decline has only just begun.”

Talbott is an oracle with a track record: His previous books predicted the collapse of both the housing bubble and the tech-stock binge before it. A friend who runs a New York steak house introduces him as Johnny Nostradamus, he says.

What sets him apart from other doomsayers is his relentless emphasis on simple arithmetic. He walks you through the numbers to show how U.S. house prices got so out of kilter with wages, rental prices and replacement values — the cost of buying a property and building a home. (“Homes in California by 2006 were selling at three to five times what it would cost to build a similar home from scratch,” he writes.)

Five More Years

Talbott’s latest predictions are sobering. The U.S. is only halfway through the total potential decline in housing prices, he says. Home values will continue to deteriorate for four to five years, he forecasts. Adjustable-rate mortgages issued in 2004 and 2005, for example, are only now resetting for the first time, he notes.

Bankers may “try to blame the crisis on poor Americans with bad credit histories, but that is not the real cause of the housing crisis,” he says. “The greatest home-price appreciations and the homes most subject to price readjustment are in America’s wealthiest cities and its glitziest neighborhoods.”

At the end of 2008, a record 19 million U.S. homes stood empty and homeownership sank to an eight-year low as banks seized homes faster than they could sell them, the U.S. Census Bureau said this week. Almost one in six owners with mortgages owed more than their homes were worth, Zillow.com said the same day.

By the time the crash ends, Talbott predicts, homeowners will have lost as much as $10 trillion, with investors and banks worldwide losing almost $2 trillion. And just as the U.S. starts getting over a prolonged recession, the first big wave of baby boomers will retire, depriving the economy of their productivity (and high consumption), he says.

Back to 1997

So how far will the price of your home on the range fall? Citing historical data and trends, Talbott concludes that real prices should return to their average 1997 levels, adjusted for inflation. Why 1997? A 120-year historical graph shows that real home prices in the U.S. stayed relatively flat for 100 years, then began rising in 1981 and surged from 1997 to 2006.

A return to 1997 prices “would get us out of the heady, crazy days from 1997 to 2006 in which banks were lending large amounts of money under poor supervision and aggressive terms.”

How did we get into this mess? Talbott blames everyone from average Americans who caught “the greed bug” to hedge funds and credit-default swaps. The single biggest error, he says, was for U.S. citizens to allow their national politicians to take large campaign contributions from big business and Wall Street — a theme Kevin Phillips developed in “Bad Money.”

‘No Accident’

“This crisis was no accident,” he says. It began, in Talbot’s view, because the U.S. government was “co-opted” into deregulating the financial industry. Politicians were “paid to deregulate industry,” taking billions of dollars each year in campaign contributions.

His investment advice for this prolonged recession: Hang on to cash and invest in gold or Treasury Inflation-Protected Securities, or TIPS. If he had to invest in stocks, he would put his money in China.

Living in smaller houses with their savings gutted, U.S. baby boomers will face yet another big challenge, Talbott says:

“The toughest job to get in the future will be the elderly person greeting you as you enter the local Wal-Mart.”

Contagion: The Financial Epidemic That Is Sweeping the Global Economy . . . and How to Protect Yourself From It” is from Wiley (256 pages, $24.95, 15.99 pounds, 19.20 euros).

(James Pressley writes for Bloomberg News. The opinions expressed are his own.)

To contact the writer on the story: James Pressley in Brussels at jpressley@bloomberg.net.

Last Updated: February 4, 2009 19:00 EST

Let’s Hear It For Sherriff Evans: Federal bailout act protections preempt State foreclosure

The only thing necessary for evil to triumph is for good men to do nothing

-Edmund Burke

Release Date: February 2, 2009
Contact: Ofc. John Roach, 313-224-0615
Evans halts sale of foreclosed homes
o Sheriff says move is necessary to ensure homeowners´ rights
o Federal bailout act protections preempt State foreclosure law, Evans says
DETROIT, MichiganSheriff Warren Evans announced today that he
is stopping all mortgage foreclosure sales handled through his
office and urged other Michigan sheriffs to take similar action.
Evans said a thorough review of federal law has determined that
to continue foreclosure sales would conflict with recently
enacted federal laws that provide protections for homeowners
facing foreclosure and which supercede Michigan foreclosure laws.

Evans said the Troubled Asset Relief Program (TARP) approved by
Congress last fall requires the Secretary of the Treasury to
implement a plan to mitigate foreclosures and to encourage
servicers of mortgages to modify loans to enable homeowners to
stay in their homes. Because federal law preempts state law, the
TARP provision preempts Michigan´s foreclosure law,
meaning foreclosures cannot move forward until efforts to modify
the mortgages of homes covered by TARP have been exhausted.
“After a great deal of research, I have determined there
is sufficient legal grounds for me – and for other
sheriffs – to halt mortgage foreclosure sales,”
Evans said. “I cannot in clear conscience allow one more
family to be put out of their home until I am satisfied they have
been afforded every option they are entitled to under the law to
avoid foreclosure. ”
As a result, Evans said, the foreclosure sales that have been
held every Wednesday and Thursday are being halted until further
notice. He said an average of 300-400 sales per week have been
held in recent weeks.
Wayne County has been in many ways, the epicenter of the
nation´s foreclosure and housing market crisis. In 1998,
the Sheriff´s Office processed 2,417 foreclosure sales.
That number increased significantly each year, reaching a peak of
26,314 in 2007, up 32 percent from the year before. Foreclosures
dipped somewhat in 2008 to just20under 20,000, due in part to a
temporary foreclosures moratorium by lenders Fannie Mae and
Freddie Mac that ended on Saturday.
Federal Bailout & Mortgage modifications
On October 3, 2008, the U.S. Congress enacted the
“Emergency Economic Stabilization Act of 2008” into
law, which is more commonly known as the $700 billion federal
bailout program. Its purpose is to provide authority to the
Treasury Secretary to restore liquidity to the U.S. Financial
system.
Created as part of that Act, TARP was designed to purchase
troubled assets from financial institutions. In most case s, this
refers to bank foreclosed homes. This is particularly the case
when the money the lender should expect to recover is greater
than it would be under a foreclosure. That is the case for most
foreclosed homes in Wayne County.
Sheriffs don´t know who is covered by TARP
Evans said since he has no way of knowing which of the
approximately 300-400 homes that come up for sale each week in
Wayne County are covered by TARP protections and which are not,
his only course of action is to halt the foreclosure sales. Since
homeowners lose their rights to a property once a foreclosure
sale is complete, Evans said he and other sheriffs could be
allowing – under state law – the sale of some homes whose
purchasers have overriding protections under federal law to
obtain a mortgage modification.
Mortgage modifications could include the acquisition of a lower
interest rate, the forgiveness of past defaulted payments,
reduction of the monthly loan payment or perhaps the lowering of
the loan principle by ways of example. Any of the above actions
could mean the difference between families keeping their homes or
being forced out of them.
“For most people, their home is the greatest investment
they will make in life,” Evans said. “They have
taken a big risk on behalf of their families and our economy. As
a public official, I have both a legal and moral obligation to
make sure that all of their legal remedies have been exhausted
before they lose their home.”
Over the past several weeks, Evans has spoken to advocacy groups
who represent foreclosed homeowners, such as ACORN and Moratorium
Now, as well as mortgage lenders as he developed his strategy to
address the foreclosure crisis in Wayne County. Evans said his
office will work with lenders and with homeowners facing the
threat of foreclosure to make sure that homeowners are being
provided every option they are entitled to under the law to avoid
foreclosure.
“The federal law is very clear,” Evans said.
“I am urging all Michigan sheriffs to join me in
implementing this moratorium on foreclosure sales to assure that
Michigan homeowners have every opportunity to renegotiate their
mortgages before they are subjected to foreclosure
proceedings. “

Livinglies site is not only for the skeptics enjoyment and those seeking sources of underground legal entertainment. Damn it people it works.

Comment: 
www.foreclosureinforsearch.com 
By Maher Soliman 

Living lies recently posted an outstanding (according to our counsel) well prepared Motion to set aside judgment which we used to file after entry of judgment for a UD hearing that did not end up favorable. We filed six motions total to date and we are five for six when filed.

LA SALLE NATIONAL BANK COUNTY OF SAN JOAQUIN; 
TRACY JUDICIAL DISTRIC   V.  O. MUNOZ CASE NO 39-2008-00196254-CL-UD-TRA

The most recent effort to bring life back into a wrongful foreclosure was a late filing on Friday January 31th 2009. The trustor now holdover was prepared to meet her fate on the following Monday as the sheriffs order to vacate the subject dwelling was scheduled and likely to occour early in the am.  We typically come back to court now no later than one month subsequent to the last court date with the motion. I understand in some circumstances you can file it years after the case has been closed by the courts. 
We filed this one after two weeks subsequent to the courts ruling against. 

The documents were filed with a half hour to go before the court closed. The trustor called to tell us she got the documents filed as were prepared and signed off by counsel last minute.

While driving home the party was calling to inform us of her apprehensions of moving and concerns for coming to grips the party was over. Brenda Michelson from our office  took the livinglies opportunity and chance to the client and was on the phone with the party as she pulled up to the home to find the order to stay the matter was already posted to her door. IT HIT! Needless to say we are going back to court in a few weeks’ and the order to stay is good through February. 

Livinglies site is not only for the skeptics enjoyment and those seeking sources of underground legal entertainment. 

Damn it people it works. 

Respect the courts as lay persons and follow procedures. If this is all new to you get an attorney to just over see you and one like Susan Rabin Esq who is willing to cooperate. That’s all and the rest should fall into place. 

Maher Soliman
admin@borrowerhotline.com

Closed: Utah’s MagnetBank, Florida’s Ocala National Bank, Maryland’s Suburban Federal Savings Bank — 6 so far in 2009

Utah’s MagnetBank closed without an acquirer

FDIC shuts down three banks in one day amid ongoing credit crisis

By John Letzing, MarketWatch
Last update: 6:42 p.m. EST Jan. 30, 2009
SAN FRANCISCO (MarketWatch) — Federal regulators closed three banks in a single day Friday, as the ongoing credit crisis showed no signs of abating.
Utah’s MagnetBank became the fourth bank failure of the year, and the Federal Deposit Insurance Corp. was forced to directly refund depositors after being unable to find another institution willing to take over its operations.
That marked the first time the FDIC has been unable to find an acquirer for a failed bank in nearly five years, according to FDIC spokesman David Barr. “This bank did not have an attractive franchise value, and not many retail deposits or core deposits,” Barr said. The FDIC had conducted an extensive marketing process for the bank’s assets, he said.
Salt Lake City-based MagnetBank had total assets of $292.9 million as of Dec. 2, and $282.8 million in total deposits. “It is estimated that the bank did not have any uninsured funds,” the FDIC said in a statement.
The FDIC later said it has also closed Maryland-based Suburban Federal Savings Bank, and Florida’s Ocala National Bank.
Suburban Federal had total assets of roughly $360 million as of Sep. 30, and total deposits of $302 million, the FDIC said in a statement. Tappahannock, Va.-based Bank of Essex agreed to assume all of the failed bank’s deposits, the FDIC said.
Ocala National had $223.5 million in total assets as of Dec. 31, and $205.2 million in total deposits, the FDIC said. Winter Haven, Fla.-based CenterState Bank has agreed to assume all of the failed bank’s deposits.
The closures mark the fourth, fifth and sixth bank failures of 2009, bringing the total to 31 since the start of the credit crisis. End of Story
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