Modification Minefields as Foreclosures Resume Upward Volume

Posted on February 17, 2015 by Neil Garfield

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see http://www.njspotlight.com/stories/15/02/02/new-foreclosure-procedures-put-to-test-as-number-of-cases-climbs-in-nj/

New Jersey now has an upsurge of Foreclosure activity. It is on track to become first in the nation in the number of foreclosures. What is clear is that the level of foreclosure activity is being carefully managed to avoid attention in the media. Right now, foreclosure articles and the infamous acts of the banks in pursuing foreclosures is staying off Page 1 and usually not  anywhere in newspapers and other media outlets online and and in distributed media. The pattern is obvious. After one area becomes saturated with foreclosures, the banks switch off the flow and then move to another geographical area. This effectively manages the news. And it keeps foreclosures from becoming a hot political issue despite the fact that millions of Americans are being displaced by illegal foreclosures based upon invalid mortgage documents and the complete absence of any real creditor in the mix.

As foreclosures rise, the number of attempts at modification also rise. This is a game used by “servicers” to assure what appears to be an inescapable default because their marching orders are to get the foreclosure sales, not to resolve the issue. The investment banks need foreclosures; they don’t need the money and they don’t need the house —- as the hundreds of thousands of zombie foreclosures attest where the bank forecloses and abandons property where the borrower could and would have continued paying.

The problem with modifications is the same as the problem with foreclosures. It constitutes another layer of mortgage fraud perpetrated by the Wall Street banks, who are now facing increasingly successful challenges to their attempts to complete the cycle of fraud with a foreclosure.

The “servicer” whom nearly everyone takes for granted as having some authority to move forward is in actuality just as much a stranger to the transaction as the alleged Trust or “Holder”. The so-called servicer alleged authority depends upon powers conferred on it by the Pooling and Servicing Agreement of an unfunded Trust that never completed its mission to originate or acquire loans. If the REMIC trust doesn’t own the loans, the servicer claiming authority from the PSA is claiming vapor. If the Trust doesn’t own the loan then the PSA is irrelevant and the powers conferred in the PSA are pure vapor.

This brings us full circle to where we were in 2007-2008 when it was the banks themselves that claimed that there were no trusts and that there was no securitization. They were, as it turns out, telling the truth. The Trusts were drafted but never funded, never used as conduits and never engaged in ANY transaction in which the Trust had funded the origination or acquisition of loans. So anyone claiming authority from the trust was claiming authority from a fictional character — like Donald Duck.

Complicating matters further is the issue of who owns the loan when there is a claim by Freddie or Fannie. Both of them say they “have” the mortgage online when they neither “have it” nor “own it.” Fannie and Freddie were one of two things in this mess: (1) guarantors, which means they have no interest until after a creditor liquidates the property and claims an actual money loss and Fannie and Freddie actually pays off the loss or (2) Master trustee (and probably guarantor as well) for a REMIC Trust that probably has no greater value than the unfunded REMIC Trusts that are unused conduits.

Further complicating the issue with the former Government Sponsored Entities (Fannie and Freddie) is the fact that many banks have been forced to buy back or pay damages for violating underwriting standards and other types of fraud.

So how do you get or sign a modification with a servicer that has no authority and represents a Trust that has no interest in the loan? The answer is that there is no legal way to do it — BUT there is a way that would allow a legal fiction to be created if a Court issued an order approving the modification and declaring the rights of the parties. The order would say that XYZ is the servicer and ABC is the creditor or owner of the loan and that the homeowner is the borrower and that the modification agreement is approved. If proper notice (including publication) is given it would have the same effect as a foreclosure and would eliminate all questions of title. Without that, you will have continuing title problems. You should also request that the “Servicer” or “Trustee” arrange for a “Guarantee of Title” from a title company.

For the tricks and craziness of what is happening in modifications and the issues presented in New Jersey and other states click the link above.

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Forensic Analysis: Unions Amass Armory of Research on Foreclosures of Securitized Mortgages

Posted on March 30, 2010 by Neil Garfield
“We did not service the loan,” Mr. Dale said. “We did not originate the loan, and we were not the financial entity that placed it into foreclosure. Do you understand what a trustee does?”
Editor’s Note: Well, Yes Mr. Dale, we do understand what a trustee does and can do —- nothing. So why are you initiating foreclosures if you say that a trustee doesn’t do that?
Mr. Dale is reading from the end of the enabling documents instead of the first page where it looks like Trustee is really a trustee and that there really is a trust and that the trust holds assets. But by the time you read to the end of the document, the trustee is not a trustee, there is no trust and even if there was, there is nothing in the trust.
It is all an illusion. The “Trustee” is a “contingent agent” for a “conduit” (REMIC) that holds nothing. The enabling document is nothing more than the equivalent of an operating agreement in an LLC.
The “pool of loans” is owned by the investors who, as creditors, purchased mortgage backed derivative securities whose value is derived SOLELY from the promise to pay executed by the homeowners.
March 24, 2010

Unions Make Strides as They Attack Banks

By STEVEN GREENHOUSE and LOUISE STORY

When the city of Los Angeles started looking into its complex financial contracts with banks earlier this year, some council members turned to an unusual corner for financial advice: labor unions.

Turns out that union leaders had amassed an armory of research on derivatives, mortgage foreclosures and even Wall Street pay as part of their effort to hold bankers accountable for the economic pain they helped cause in Los Angeles and across the country.

Unions have criticized Wall Street before. But their attacks have taken on a new shape, both in ferocity and style, over the last 18 months, ever since the federal government doled out billions of dollars in bank bailouts.

Why? Labor leaders say the fortunes of banks and unions are linked more than people realize. Wall Street manages union pension portfolios worth hundreds of billions of dollars. Much of that is invested in financial institutions, giving unions a loud voice as shareholders.

Then there are all the unionized workers whose fates are indirectly shaped by the world of high finance. The jobs of hundreds of thousands of union members, like police officers and teachers, have been threatened by municipal budget cuts, made worse in some cases by exotic investments gone bad.

More abstractly, union leaders are framing their fight against Wall Street as a symbolic one, underscoring America’s large disparities in wealth and wages.

“Many unions see that they need to be responsible for not just members’ needs at the bargaining table, but other hardships in their lives, like foreclosures and high mortgage costs,” said Peter Dreier, a political science professor at Occidental College in Los Angeles.

Unions are holding up many of their own members as victims of the banks’ bad bets, like subprime mortgages, and are providing a steady stream of research in an effort to demystify the exotic financial products that they say are harming dozens of cities. Unions have also helped underwrite Americans for Financial Reform, a prominent group pushing for further bank regulation.

Labor leaders were among the first to call for the resignation of Bank of America’s chief executive, who did retire months later. Unions issued a scathing report on bank bonuses, months before the federal pay czar presented his findings, and they criticized Goldman Sachs’s bonus pool just before the bank said its chief would receive only stock.

This month, the A.F.L.-C.I.O., the nation’s main labor federation, has organized 200 protests nationwide to publicly shame bankers, calling for new taxes on bankers’ bonuses and on speculative short-term financial transactions — in the hope of collecting tens of billions of dollars to finance a job creation program.

“They played Russian roulette with our economy, and while Wall Street cashed in, they left Main Street holding the bag,” Richard L. Trumka, the A.F.L.-C.I.O.’s president, said last Friday at a rally in Philadelphia. “They gorge themselves in a trough of taxpayers’ dollars, while we struggle to make ends meet.”

Labor is directly at odds with Wall Street on unionization drives and many other matters. Banks and private equity firms own stakes in many businesses that unions would like to unionize, like nursing home chains and food service companies. Labor groups like the Service Employees International Union and the A.F.L.-C.I.O. are pressuring financial companies not to oppose union membership drives.

It is hard to know for certain whether the unions’ efforts have affected decisions made by Wall Street firms. But for cities like Los Angeles, feeling the squeeze of lower tax receipts, the service employees’ pressure campaign seemed to have had an impact.

“They knew more about our own water deal than I knew,” said Richard Alarcón, a Los Angeles councilman, referring to an interest-rate swap between the city’s water system and the Bank of New York Mellon that converted the system’s variable-rate bonds into bonds with a fixed rate. “They also knew the dynamics of swap deals, and they were very helpful.”

As the city faces a deficit of nearly $500 million, the council was unhappy that Los Angeles would have to pay Bank of New York millions of dollars a year.

“Our members don’t like it any more than other Americans when cities have less firefighters, less teachers or less police officers,” said Andy Stern, president of the service employees’ union.

The labor protests against the banks sometimes have murky targets. This month, service employees joined community leaders on the City Hall steps in Oakland, Calif., to denounce Goldman Sachs for arranging interest-rate swaps that have the city paying the bank millions a year.

After that rally, union leaders led a march to a local Citigroup branch. Goldman declined to comment, but a Citigroup representative scoffed.

“We weren’t even involved in those deals,” said Alex Samuelson, a Citigroup spokesman. “We were just a symbolic place to go and rail against Wall Street. You can’t go to a Goldman Sachs branch.”

Many bankers criticize the protests, saying they make lots of noise but often accomplish little. Steve Bartlett, president of the industry’s Financial Services Roundtable, who has been the target of several union-led protests, including one outside his home on a Sunday morning, said, “Protests can be misguided or even damaging to your cause.”

While union leaders say they are championing the concerns of Main Street, their antibank campaign has certainly advanced some of labor’s longtime objectives, like unionizing workers.

For instance, the S.E.I.U. has pressed several banks and private equity firms to agree to allow card check — a process that makes unionization easier — at companies in which they own stakes.

Service employees officials say they urged Goldman Sachs, which owns part of the food service company Aramark, to get Aramark to accept card check and not oppose an organizing drive. In December, the union’s president, Mr. Stern, even met with Goldman’s chief executive, Lloyd C. Blankfein, about universal health care and other labor-related issues.

Labor unions are using some of their members’ hard-luck stories to frame their battle as one between the haves and the have-nots, and in some cases that tactic is advancing the unions’ traditional goals in contract talks.

In February, for example, the service employees’ union publicized that one of its members cleaned the office of U.S. Bank’s chief in Minneapolis. That janitor, Rosalina Gomez, was facing foreclosure, and the union publicized that U.S. Bank had purchased her home in the foreclosure.

Steve Dale, a spokesman for the bank, said the union was attacking U.S. Bank even though JPMorgan Chase was the bank servicing Ms. Gomez’s mortgage. U.S. Bank, he said, was just the trustee, holding the loan for a mortgage bond.

“We did not service the loan,” Mr. Dale said. “We did not originate the loan, and we were not the financial entity that placed it into foreclosure. Do you understand what a trustee does?”

That aside, when the union threatened to have Ms. Gomez approach U.S. Bank’s chief, Richard K. Davis, at an awards luncheon, the bank rushed to set up a meeting between Ms. Gomez and JPMorgan. Fifty union supporters were at the site of the luncheon to conduct a silent vigil, with several reporters on hand.

Also at that time, the union was in contract negotiations with Ms. Gomez’s employer, the janitorial company that cleans U.S. Bank’s headquarters. Javier Morillo-Alicea, a leader of the union’s Minneapolis local, said its effort to embarrass the bank helped persuade the cleaning company to reach a contract that raised wages and provided better health insurance for the janitors.

“We put a lot of pressure on the bank,” he said, “and that led to a really good contract settlement in a tough economy.”

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TRUE SALE and ASSIGNMENTS: The Nature of REMIC

Posted on January 25, 2010 by Neil Garfield

From “Anonymous”

Editor’s Post: It’s always a pleasure to read something where someone actually knows what they are talking about. The following post was picked up from the comments. The key points that are relevant to the Qualified Written Request and Discovery are

1. In the shuffling of paperwork, where was a “true sale” of the pool , a portion of the pool or any of the alleged loan obligations?

2. This material doesn’t come from someone’s head. It comes from established rules from the Financial Accounting Standards Board, statutes and administrative rules.

3. If the “loan” doesn’t show up on the balance sheet of the entity making a claim it is an admission that they are not a creditor. This takes some digging. Individual loans are a rarely shown on any balance sheet. They are shown on the worksheets or the equivalent of the bookkeeping department and the accountant who prepared the financial statements. Deposing the accountant for the company in question might get you the information you need and make the other side pretty nervous that you are zeroing in on their game. Deposing the Treasurer or CFO might get you even more. In many cases these entities NEVER booked any loans. They ONLY showed fees on their income statement which means that they admit they only provided a service (to whom?) in passing the “loan” through as a conduit.

4. Timing of the “assignments.” Besides the obvious fabrications that have been discussed in these pages, if you actually demand and get the enabling documents you will find, most of the time, that the requirements have NOT been met for acceptance of the assignment. The author points out that there is usually a 90-day rule, after which the the assignment is by definition not accepted. But there are other requirements as well, especially the one that says that the assignment must be recorded or in recordable form, which generally speaking it is not.

5. The sale, according to the paperwork, is to the underwriter, not the “Trust” (SPV). So you have a right to challenge the assertion that the “Trustee” is a Trustee, that the “Trust” is a trust and that there is anything in the trust. But I would add that the PRACTICE here was the selling forward of the mortgage backed security which means they were selling something they didn’t have. So the LEGAL title to the paper MIGHT not inure to the benefit of the holder of the mortgage backed bond; but it is equally true that they already “promised” the investor that they WOULD own the “loans”, and the investor is the only one who advanced money (and thus the only one meeting the definition of creditor). Hence there MUST be an equitable right by MBS holders to make a claim — the question being against whom — the homeowner, the investment banker or someone else? Your point in Court should NOT be to try to cover this abstractly with the Judge but only to have an expert witness that would make the assertion backing up your allegations. Your strategy is simply to say that according to the information you have there is a question of fact before the court as to what entity, if any, has this loan on their balance sheet? That is a question for discovery. And once that entity has been identified then you would want to discover the claims of third parties who could or would make a claim on that “asset.”

6. The author’s statement that the investor does not show the loan on its balance sheet is therefore both right and wrong. The investor bought a bond that is payable by an entity that issued the bond. That entity is not the homeowner and therefore it could be argued that the homeowner, who was not party to that transaction, does not have any obligation to the investor and that therefore the entry on the balance sheet of the pension fund investor would not account for the “loan.” BUT, the bond contains a conveyance of a percentage interest in a pool (which as we have seen might not exist), which purportedly includes “loans” of which the Homeowner’s deal was one. Thus effectively the ONLY party who could make an accounting entry for the loan in compliance with generally accepted accounting practices, is the investor. It comes down to the most basic of double entry bookkeeping practice. A debit from cash and a credit to receivables.

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The “true sale” concept was the focus of FASB 166 and 167. Once the market crisis hit, intervention to support the SPVs rendered any “true sale” negated because there can be no intervention under a true sale.

Also, Mike H. is right regarding REMICs and ninety-day rule. A REMIC is a static fund and no mortgages can be added after 90 days (very limited exception). Many assignments are long after the 90 days and some are not even effectuated to the cutoff date (or 90 day rule) of the REMIC. Even if effectuated, and due to the dissolution of REMIC (violation of “true sale” by intervention), assignments are not valid. The problem is that if the loan is in default, it is no longer a pass-through security held by any trust. It has been removed.

As a result, assignments presented by foreclosure attorneys in court is probably not the LAST assignment. As discussed, collection rights are sold after the swap is paid.

Although courts view assignment and sale as the same thing for collection rights. It is not the same thing. In the process of securitization the mortgage loans are SOLD to security underwriters (we never see this sale in the chain), and the cash flows passed-through are assigned. The security underwriter still has the loan on their books (even if concealed by off-balance sheet conduit). Once in default, the loan is charged-off, and is no longer an asset, and the assignment of cash flows is also extinguished..

Again, the Federal Reserve, in Interim Opinion for TILA Amendment, has emphasized that the creditor is the one who must account for the loan on their balance sheet. It is not investors that have beneficial interests in REMICS, Pass-throughs, or any other security. Question is – who now is accounting for collection rights on it’s balance sheet. Who was accounting for rights at time of foreclosure initiation. How much did they pay for those rights??

There seems to be much confusion regarding the word “investor.” For beneficial interest in securities one may be called an “investor”. But this investor does not account for mortgage loan on its books. In terms of mortgage loan ownership, “investor” may also be used instead of “creditor.” But this investor accounts for mortgage loan (or collection rights) on its books – that is the investor you want to know.

Any last assignment recorded is likely NOT the actual last assignment executed. Foreclosure attorneys ignore this because they reason that the default derivatives attach the current owner/investor to the original trust. This is false – as derivatives are not certificates and not securities – and not part of the trust. The default loan is gone from the trust – gone from banks books – and in the hands of some “investor” who saw profit potential in the collection rights to the default loan. This what the government not only concealed, but also promoted to help the banks “clear” their off/on balance sheets of “toxic assets.”

Finally, Neil is right about sentiment in courts. Going in and asking for a “free house” will harm you. Sentiment in country in not on our side due to media propaganda. I have a long time friend in a prestigious private equity firm. Sentiment is that if anyone gets a principal reduction it is unfair because everyone should then get a principal reduction. People not affected by foreclosure fraud just do not get it. It is always all about “me” – even if they have not been harmed. I do not know how we are going to change this thinking – but if we do not – we will continue to get no help from government and lose in courts. Need a big case, with a judge that grants and enforces full discovery, in order to change the sentiment.

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Semantics: What a difference a word makes — Creditor — Trustee

Posted on January 13, 2010 by Neil Garfield

Using the voluminous amount of feedback to Livinglies.wordpress.com, some observations about the words you use in litigation and in your correspondence, QWR and DVL might well be of some assistance.

  1. CREDITOR: It seems that using the word creditor has much more power than lender, pretender lender or even holder in due course. I’ve been told that the word “creditor” conveys a relationship of business vs. consumer that is a lot closer to the truth than “lender” which implies that the party who initiated the foreclosure was a bank and that the homeowner is trying to get out of a legitimate debt. A creditor is one who has advanced money, goods or services with the intention of getting it back through the payment of money, the delivery of services or goods or the return of what was extended by the creditor. The simple statement is that the Plaintiff (in judicial states) or party initiating foreclosure proceedings is NOT the creditor and that the obligation you signed for calls for you to pay money to the creditor, not the opposing party in your foreclosure. The party you are up against has advanced no funds, goods or services. Thus they are not the creditor. Ask them in open court if you need to do so. Yet they want the court to pretend that they are a creditor anyway — or phrased another way, they want to assert that they have the right to collect on the obligation and foreclose on the home even though they are NOT the creditor. If their position is that they are foreclosing on behalf of the creditor, your answer would be that they must then disclose the creditor and name them as nominal plaintiffs, and show how they, as non-creditors, have the right to sue on behalf of the creditor. You must be given the chance to inquire in discovery whether this revelation is in fact the creditor and if so, you must be given a chance under Federal Law to attempt modification or mediation with the real decision-maker — i.e., the creditor. BEWARE: Attorney representations in or out of court are not evidence and should be objected to, pointing out that such representations raise an issue of fact that you deny and therefore you have a right to at least inquire through discovery the truth or falsehood of those representations.
  2. SPV MBS POOL: There are at least two pools of assets in every securitization scheme involving home mortgages — the aggregator’s pool which is made up of multiple assets usually all home mortgages, and the SPV or MBS Pool which receives an assignment from the aggregator. Don’t use the word “TRUST” to describe the second pool (the one that goes into the pool of assets that is then fractionally sold to buyers of certificates in which the ownership is conveyed in fractional interests and the promise to pay comes from the SPV in the form of a note or bond). Since the SPV or MBS pool is part of a REMIC transaction, it may be fairly assumed and argued that the equitable and legal owners of the assets in the pool are actually the certificate holders. In addition, the holders of a certificate are not described as beneficiaries, which would be the words associated with a trust. Since the SPV pool is a REMIC (Real Estate Mortgage Investment Conduit)under the Internal Revenue Code the reference to the existence of a trust is a reference in name only. In fact, there is no trust and there are no beneficiaries. The owners of the pool are quite clearly the certificate holders of mortgage backed securities (MBS). The pool is owned by those owners of the certificates not by some non-existent trust.
  3. AGENT With Limited Power of Attorney: Examination of the enabling documents in their totality clearly shows that the party named as “Trustee” is not a trustee and has no trustee powers. This was done intentionally by the investment banks so that they could avoid the implication of a fiduciary duty of a Trustee, which would have included telling the investors the truth about the crap they were buying. So you might want to say that (a) there is no trust, there is just a pool owned by investors. (b) You might want to say the Conduit status of the SPV (Special Purpose Vehicle) mandates that no actual transactions are occurring in the name of the REMIC (SPV) or else it loses its “tax-exempt” status, something that would be contrary to the interests of the investors. (c) you might want to say that therefore there is nothing in any trust, so even if it DID exist, it has no assets. And (d) you might want to say that the party designated as “TRUSTEE is in reality merely an agent for the certificate holders and that the indentures or enabling documents simply appoint the Agent to act with limited power of attorney under certain circumstances. Remember that neither the “TRUSTEE” nor the “TRUST” ever physically receives the notes, mortgages or assignment or any other pieces of paper except for the mortgage backed security. The paper is held elsewhere, which is where the investment banks actually had the opportunity to trade and bet on those securities, since they were the ones (directly or indirectly) who always controlled the possession and distribution of the actual notes, mortgages, assignments or other paper documents.

More to come

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