The Narrative Has Shifted: Take Advantage of it

Your allegations of intentional misdeeds, fabricated documents and forgeries have new life now that the SEC is hot on the trail of the wrongdoers in a very public way. As the news sinks in more and more Judges, lawyers and experts and forensic analysts will see their role more as a commitment to justice than just helping out a homeowner in distress.

It just didn’t make sense that anyone would loan money in a deal where they knew there would be no payback. My allegations rang hollow to many people, who felt that despite the many distractions and defects contained in the paperwork behind the foreclosure glut, it was the borrowers who made the financial crisis happen. Now we see more and more people taking another look.

For those of us who serve the judicial branch of government, it is no longer a dance to delay the inevitable. It is, as it has always been, a confrontation with giant corporations whose reach into the corridors of powers enabled them to suck the life out of an ailing economy.

No society has ever persisted without a vibrant growing middle class. It will be a very long time before we succeed in reversing the damage wreaked by Goldman Sachs and other investment banking houses who acted without any sense of conscience, morality or even compliance with laws that society passed to enable their existence. But now, we have a chance. Let’s not waste this opportunity. Don’t let the pretender lenders get control of the narrative again.

The reality is that many, perhaps most loans were created according to specifications set by Wall Street, not by industry underwriting standards. The reality is that people were hired to lie and cheat and deceive homeowners into investing their homes into this salacious scheme. The reality is that the appraisals were false, and were given greater credibility by the reasonable borrower assumption that no lender would lend money on a bad deal where the property value was intentionally overstated, and that lenders would and did strive to comply with the requirements of the Truth in Lending Law, where the responsibility for appraisal verification, income verification, quality, viability, and affordability are BY LAW the responsibility of the Lender. Little did these hapless homeowners know, TILA was a joke to these players.

So now reality sets in. securities that were rated investment grade were junk and are worth far less than their sale price. Homes that were rated as high value were really still the same value as the market had shown before the flood of money and bird dogs looking for signatures on documents, even if the signatures were forged and even if the borrower was dead.

The finance system depends upon confidence. Confidence is based upon belief in the market values and practices in the marketplace. There is only one correction that is viable now. It is the simple recognition that neither the securities nor the properties they were based upon, had any new “value added.” It is the simple recognition that we had to accept when the NASDAQ that flew near 5,000 is really worth only 2,000, long after the boom and bust of that era. Any attempt to saddle the homeowners, the taxpayers or the investors with anything other than the reality of fair market value will undermine our financial system, and ultimately our future and the future of generations to come.

Securitization and TILA Audits: You Can’t Do One without the Other

Article below submitted From the desk of Brad Keiser:

Editor’s note: This is a perfect example of why ignoring the complexities of securitization leaves all the red meat on the table. The commingling of funds that is cited in the article below is exactly what I have I have been talking about , exactly why the pretender lenders balk at a full accounting, and exactly why a full forensic analysis (like the one Brad will be presenting later this  month) is essential if you are going to battle.

see: Brad Keiser\’s Forensic Analysis Workshop

It is not enough to know about securitization. You must understand what effect it had on the transaction. It sounds counter-intuitive to say that when you know the homeowner has not made a  payment, the obligation might still be considered performing and NOT in default because the payments were made to the creditor.

This does not automatically  mean that you get a free house. But it does mean that the real creditor who has advanced the money, the creditor that the debtor owes money to, is the real party in interest and they might no longer be secured depending upon the nature of the payment and the handling of the accounts — which is why I think that accountants would be ideal candidates for Brad’s workshop.

Securitized loans are not a separate animal from the discrepancies that are revealed in TILA audits. They impact the TILA audit in a way that dwarfs all other factors. Like the fact that the $5,000 yield spread premium paid to the mortgage broker is just a small fraction of the yield spread pocketed by the investment banking crowd behind the curtain.

And what about the very significant impact of those spreads and premiums combined with the impact of a reset on the life of the loan, and the false appraisal? The APR is misstated in virtually every securitized loan not by small amounts or fractions but by multiples of more than 100% of the loan principal in some cases.

Moody’s warns on GMAC mortgage bond servicing
Thu Mar 4, 2010 3:07pm EST
Related News

* Moody’s upgrades GMAC on US Tsy capital infusion
Fri, Feb 5 2010

NEW YORK, March 4 (Reuters) – Moody’s Investors Service on Thursday said it may downgrade portions of 125 residential mortgage bonds based on unusual “cash management arrangements” of GMAC Mortgage LLC, which services loans in the securities.

The rating company said GMAC commingled cash flows from multiple bonds in a single custodial account, Moody’s said in a statement. This allowed GMAC to use cash from loans in one bond for principal and interest payments on another, it said.

By allowing the commingling, it “increases the likelihood that some RMBS deals may not be able to recover the amounts ‘borrowed’ by the servicer to fund advances or another RMBS deal if a servicer bankruptcy were to occur,” Moody’s said.

This could give rise to competing claims in a bankruptcy proceeding, the rater said.

Downgrades based on mortgage servicing, rather than credit, may add to concerns of bond investors who have been long accustomed to harsh rating cuts as delinquencies and foreclosures increase losses.

GMAC Mortgage is a unit of Residential Capital LLC. Residential Capital is owned by GMAC Inc.

For some commentary see this link:
http://market-ticker.denninger.net/

Brad Keiser

(513)289-5353

Keiser’s Forensic Analysis Workshop

You must remember the judiciary moves slowly is assimilating new facts or patterns in the marketplace. In order to break through a Judge’s preconception of the mortgage origination process, you need to have something that is clear in is presentation of facts, and obvious in its impact.

The reasons for having analysis performed by an independent third party is that it transforms empty argument into a question of fact. Anything that leads to a questions of fact gives you leverage in and out of court. In court, it allows you to credibly raise the issues so that discovery and an evidentiary hearing will allow your claims to be heard on the merits. No “audit” or analysis is PROOF or EVIDENCE unto itself. What it should do is give you something to hold in your had while talking to the Court, and which clearly contests the “facts” that the pretender lender is trying to have the Court assume (which is why objections, motion practice, discovery and evidentiary hearings are so important).

Lots of mistakes are being made on both sides of the mortgage crisis. Brad, in hosting this new forensic analysis workshop, seeks to help analysts avoid the usual pitfalls, recognize the issues that an expert or lawyer or homeowner may be required to present, and work toward providing the litigation support required to achieve a successful result.

There are a number of good workshops out there that can help forensic auditors, lawyers, experts and even lay people understand how to proceed when they wish to challenge some company that claims to be your lender or servicer. Max Gardner’s boot-camps are very good venues for understanding securitized loans, applying law and procedure to the challenge and coming out with good results. April Charney, who is giving a workshop soon in California is adding non-judicial states to the scope of her workshops for the first time. And Brad Keiser, who has been doing the survey workshops with me for a year and a half is now offering an important, even essential, workshop that drills down on forensic analysis of mortgages and foreclosure proceedings.

Brad, being a former banker himself with one of the nations largest banks, has performed virtually all of the research I use in connection with TILA, RESPA etc. A long-time friend, he has worked with me to bring LivingLies from two dimensional blog postings to three dimensional live presentations.

The output is what is important in any analysis of your mortgage or foreclosure situation. It doesn’t matter what work a company says they will do, even if they completed their engagement. The question is whether it is useful in producing an actual result. That is where the intersection of what is working in court and what is not comes into play. The issue here is knowing what you have, planning your strategy, and choosing the right procedures, lawyers, experts etc. in achieving a well-defined goal. Brad and I have carefully analyzed the forensic process and found a number of things that rise to the level of prime importance:

  1. Finding out whether there are patent violations of existing federal and state lending laws that can be identified for further action by the homeowner or their attorney. This among other things involves an examination of the Annual Percentage rate disclosed on the Good faith estimate, the timing of the good faith estimate, the presence of the traditional (but illegal) yield spread premium), affordability and other factors including discrepancies between the GFE and the HUD settlement statement. A key component of this part of the analysis often overlooked by “TILA Auditors” is an examination of the settlement transaction where the alleged loan was closed revealing discrepancies between the beneficiaries of the mortgage, the note, the title insurance, the mortgage insurance etc. and the use of “nominees” instead of naming the real parties in interest, which is evidence of a table-funded loan.
  2. Revealing the latent violations of lending laws and regulations caused by securitization of loans. Here is where the second and much larger yield spread premium appears and must be estimated by your expert or analyst using tables prepared by an expert. In addition. it reveals discrepancies in signatures, dates and parties in connection with fabricated or forged assignments used to justify the foreclosure by a party not named as lender or beneficiary.
  3. Determining whether there are refunds or rebates due back to the homeowner/borrower either from the original named lender or some other party in a securitization chain.
  4. Discovering facts that show a pattern of deceptive or predatory lending.
  5. Researching the loan to determine the record title chain, the probable securitization of your loan, and providing you with the right questions to ask as tot he identity of the creditor and demanding an accounting from the creditor, as opposed to simply a servicer that serves as a buffer between the debtor (homeowner) and the creditor (Investor owning mortgage backed securities).
  6. Providing adequate information and forms to the lawyer or client on sending out a Qualified Written Request, Debt Validation Letter or Demand Letter.
  7. Highlighting the most significant issues in your loan for the expert to use in preparing a declaration or the lawyer to use in filing a lawsuit, a petition for temporary injunction, or a bankruptcy petition.

As I have repeatedly stated on these pages, a TILA Audit is a start but it usually won’t produce the result of a modified loan that is acceptable tot he homeowner or the nullification of the obligation, note or mortgage.

Before securitization of mortgage loans, the process of examining loan transactions was fairly straight forward and fairly simple. With securitization the analysis requires a much higher level of sophistication that enables the lawyer or homeowner to present or proffer evidence of wrong-doing or improper procedures accounting or disclosure on the part of the securitization chain that produced your loan from the investment in mortgage backed bonds by investors.

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