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There ought to be a law against that! Oops, there is a law, in fact many of them. The thief gets your credit card information etc. buys a TV and you get the bill. Nobody would argue that the thief should go to jail. Sometimes the thief simply sells your information to others who will use it to obtain something for value and lay the bill at your doorstep. Nobody would argue that both the thief and the buyer of your identity should go to jail. What happens if the thief is a Bank?

In securitization of debt that is exactly what happens. It’s not that securitization of debt is a bad thing. What was bad was the way the banks handled it. They took your signature and without your knowledge or consent used it to obtain credit, money and undisclosed profits and loss mitigation money (insurance) to reduce the balance owed to the investor creditors. What they didn’t do was tell you they received that money, nor did they tell you that the investor creditor had been paid down on the balance due. They kept the money — which they were able to get because of your signature on some loan agreement that was either a credit card, student loan, auto loan, mortgage loan, or some other debt.

Sometimes the investor creditor actually received the money and sometimes they didn’t. But in all cases either they received the money or their agent received the money and if the investor didn’t get it, that is a matter between them and their agents. If you pay the bill, you are paying the same obligation twice — but because of the asymmetry of information, you only know about one payment — the one you made.

Lending laws vary from state to state but the underlying theme is that borrowers are customers just like any product and as such they have a right to choose with whom they do business. They also have a right to know the details of the deal — what the fees are and what compensation is being received by the various players that participated in advancing credit to you. So for example, if you knew that the fees and profits from your signature was going to produce large amounts of money to the participants in one deal offered to you, you could shop around and see if there is someone who doesn’t work that way and by eliminating some of the middlemen and hedge products, your rate or other terms might be more favorable.

Now the industry has laid the bill at your doorstep, no matter what type of loan you have. They have received money they have not disclosed and they haven’t done the accounting: how much of the money they received should have been credited against the amount owed to the investor creditor and how much of that reduction in the amount owed to the creditor should be allocated to your loan? We don’t know because the Banks are not talking. The reason is that they have concealed this money under the label of trading profits when in fact it is just plain theft. You are being told to pay a bill that has already been paid. The investor also might be deprived of money that has been paid toward the obligation owed to the investor creditor.

In the mortgage industry, where these issues have received the most attention, it has been obvious that the Banks were playing fast and loose with the money and the documentation. The trail of money and the trail documents are two different paths each having little similarity — when they should obviously be identical. Those paths lead to different places with one “creditor” showing up as the holder of the paper and the other real creditor merely holding a right to an obligation that has been obscured by the middlemen.

The interesting thing about all this is that the paperwork does matter and so does the law. Title to real property can only be “clear” if the title registry shows an unbroken chain and there are no facts known that would lead anyone to believe otherwise. It is now apparent, thanks to MERS and other diversions of paperwork, that title to the property, the documents and the money obligation are all different and cannot be corrected without some new instrument(s).

That’s where you come into the picture. In order to straighten out the problem, the investors must be  given credit and money for what was received on behalf of the loan they made to a “Trust” or other special purpose vehicle. And if the creditors want a claim that is enforceable by reference to a document, then they need your signature — again, this time with feeling —- i.e., after full disclosure of what they did and negotiating with you for the value of your signature instead of merely stealing it for their own purposes. This is the reason that BOA is experimenting with the cash for keys program where they pay as much as $20,000. What they are really purchasing is not just your keys, but your signature so now they can claim that what they said is at least now true even if it wasn’t true when they said it.

What is the value of your signature? I would argue that you could use several possible indices. If you have already been foreclosed and evicted then perhaps the value is at least the value of the house at the time of the new transaction. Perhaps the value would be computed based upon participation in those “trading profits” in which they pocketed money belonging to the investor and which should have been credited to your loan account. Or possibly the value is tied to the total value of your claims and counterclaims whether filed or not — for slander of title, predatory lending, deceptive lending, quiet title etc. Whatever the value might be it must be worth a fair amount of money if BOA is offering up to $20,000.

This isn’t theoretical. At my suggestion American Homeowners Cooperative is going to launch a service where borrowers (past and present) can offer their signatures for sale on current or previous loans. Hedge fund managers see this as a way of betting against the validity of mortgages and betting against the validity of the paper being used to enforce the obligation. We’ll find out soon enough whether the buyers of these signatures will pay enough for the borrowers to sign yet another group of documents that assigns and releases their claims and either clears title or starts a new claim without any of the dirty laundry that is currently attached to securitized debt. Stay tuned. This should be interesting.


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