CHECKLIST — FDCPA Damages and Recovery: Revisiting the Montana S Ct Decision in Jacobson v Bayview

Posted on January 20, 2017 by Neil Garfield

What is unique and instructive about this decision from the Montana Supreme Court is that it gives details of each and every fraudulent, wrongful and otherwise illegal acts that were committed by a self-proclaimed servicer and the “defective” trustee on the deed of trust.

You need to read the case to see how many different times the same court in the same case awarded damages, attorney fees and sanctions against Bayview who persisted in their behavior even after the judgment was entered.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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This case overall stands for the proposition that the violations of federal law by self proclaimed servicers, trusts, trustees, substituted trustees, etc. are NOT insignificant or irrelevant. The consequences of merely applying the law in a fair and balanced way could and should be devastating to the TBTF banks, once the veil is pierced from servicers like Bayview, Ocwen et al and the real players are revealed.

I offer the following for legal practitioners as a checklist of issues that are usually present, in one form or another, in virtually all foreclosure cases and the consequences to the bad actors when the law is actually applied. The interesting thing is that this checklist does not just represent my perspective. It comes directly from the Jacobson decision by the high court in Montana. That decision should be read, studied and analyzed several times. You need to read the case to see how many different times the same court in the same case awarded damages, attorney fees and sanctions against Bayview who persisted in their behavior even after the judgment was entered.

One additional note: If you think about it, you can easily see how this case represents the overall infrastructure employed by the super banks. It is obvious that all of Bayview’s actions were at the behest of Citi, who like any other organized crime figure, sought to avoid getting their hands dirty. The self proclamations inevitably employ the name of US Bank whose involvement is shown in this case to be zero. Nonetheless the attorneys for Bayview and Peterson sought to pile up paper documents to create the illusion that they were acting properly.

  1. FDCPA —abusive debt collection practices by debt collectors
  2. FDCPA who is a debt collector — anyone other than the creditor
  3. FDCPA Strict Liability 
  4. FDCPA for LEAST SOPHISTICATED CONSUMER
  5. FDCPA STATUTORY DAMAGES
  6. FDCPA COMPENSATORY DAMAGES
  7. FDCPA PUNITIVE DAMAGES
  8. FDCPA INHERENT COURT AUTHORITY TO LEVY SANCTIONS
  9. CUMULATIVE BAD ACTS TEST — PATTERN OF CONDUCT
  10. HAMP Modifications Scam — initial and incentive payments
  11. Estopped and fraud: 90 day delinquency disinformation — fraud and UPL
  12. Rejected Payment
  13. Default Letter: Not authorized because sender is neither servicer nor interested party.
  14. Default letter naming creditor
  15. Default letter declaring amount due — usually wrong
  16. Default letter with deadline date for reinstatement: CURE DATE
  17. Late charges improper
  18. Extra interest improper
  19. Fees even after they lose added to balance “due.”
  20. Notice of acceleration based upon default letter which contains inaccurate information. [Not authorized because sender is neither servicer nor interested party.]
  21. Damages: Negative credit rating — [How would bank feel if their investment rating dropped? Would their stock drop? would thousands of stockholders lose money as a result?]
  22. damages: emotional stress
  23. Damages: Lost opportunities to save home
  24. Damages: Lost ability to receive incentive payments for modification
  25. FDCPA etc: Use of nonexistent or inactive entities
  26. FDCPA Illegal notarizations
  27. Illegal notarizations on behalf of nonexistent or uninvolved entities.
  28. FDCPA naming self proclaimed servicer as beneficiary (creditor/mortgagee)
  29. Assignments following self proclamation of beneficiary (creditor/mortgagee)
  30. Falsely Informing homeowner they cannot reinstate
  31. Wrongful appointment of Trustee under deed of trust
  32. Wrongful and non existent Power of Attorney
  33. False promises to modify
  34. False representations to the Court
  35. Musical entities
  36. False and fraudulent utterance of a document
  37. False and fraudulent recording of a false document
  38. False representations concerning “US Bank, Trustee” — a whole category unto itself. (the BOA deal and others who “sold” trustee position of REMICs to US Bank.) 

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Rescission is a Test of Persistence

Posted on December 14, 2016 by Neil Garfield
The “free house” mythology will have become reality. That is what happens when you break the laws governing deceptive and predatory lending.
… for those who don’t give up, the reward is substantial when TILA rescission is reluctantly recognized by the Courts as effective upon mailing.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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The current judicial climate regarding TILA Rescission is that it doesn’t count — it means nothign, does nothing and cannot be sued to defeat foreclosure. But the signs are all there showing that the banks are bracing themselves for the real consequences of rescission in which borrowers receive the draconian remedy stated in the statute. For those borrowers who persist, there will ample reward despite the dark clouds that appear in the rear view window.
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On the horizon there are positive signs that the Congressional intent in the Truth in Lending Act will been enforced, to wit: “lenders” and “pretender lenders” will lose both their security interest in residential property and the right to collect any debt. The “free house” mythology will have become reality. That is what happens when you break the laws governing deceptive and predatory lending. And that is what happens when Congress decides what should happen to you when you break those laws.
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The current argument is that if the rescission was sent more than 3 years after consummation, it does not count as anything and the judges can ignore it.
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There is absolutely no doubt that judges want to adopt that  reasoning. But the three year limitation is not the only restriction. The same statute says that if the loan is a purchase money mortgage, TILA rescission is not an option. And there are other restrictions. The whole point of the Supreme Court decision was to say that the rescission WAS effective when it was mailed and not when a court ruled on whether it should have been sent in the first place. And there is a provision in the statute to allow an “injured party” (creditor?) to request a court to adjust the procedures that follow the mailing of the rescission.

So if the court was just saying that it was obvious that this was beyond the three year limitation. Or that it was obvious that this was a purchase money mortgage and that therefore the rescission was void or could be ignored, such a court would be reversing the Supreme Court decision — something no court in our country is empowered to do and is in fact prohibited from doing under the US Constitution. Obviously if the rescission was void there would be no limitation.

But the Supreme Court decision basically says that there is no such thing as a void rescission under the truth in lending act. Whether the borrower is wrong or right, it is effective when mailed and the “lender” (creditor) has 20 days to comply — or, to file an action to vacate the rescission because the borrower has unfairly canceled the loan transaction. The whole point was to make it easy on the borrower who felt that they have been the victim of deceptive or predatory lending. The wording of the statute was carefully crafted.

The obvious intention, which can be seen in many other cases that construe the statute, was to provide a mechanism by which a borrower could throw the burden to justify the practices leading up to the “loan” on to the “lenders.”

Both the statute and the Supreme Court decision make it clear that the borrower does not need any resources (except a pen, paper and a stamp) to trigger the procedures under the rescission statute in the truth in lending act.

The consequence of inaction by the “lenders” are very harsh and even draconian. The idea behind doing this was to force lenders into policing themselves, or upon failing to do that, suffer the loss of the security instrument and even the loss of the right to seek repayment. This legislation was a compromise. Some people wanted the creation of a new agency that would be the size of the Internal Revenue Service to review and police loan transactions. This distrust of the banks goes back to the 19060’s when the TILA legislation was initially enacted.

As I have posted on the blog, even lawyers who represent the banks agree in published articles that ignoring a notice of rescission could come a huge cost. Like me, they do not believe that the current environment will continue wherein Judges ignore the notice of rescission. If the bank lawyers agree with what I have been writing, it would seem that we should take this much more seriously in the expectation that the current climate will change with respect to the sending of a notice of rescission and the recording of that notice in the public records.

I agree that the current climate it is virtually entirely negative. And most people who have sent a notice of rescission and most people who have recorded a notice of rescission will probably never receive the remedy to which they are entitled. This may be because of lack of persistence, ignorance of the change in the judicial climate or because of limitations are upheld in going back in time to the moment of the sending of the notice of rescission. For those people who persist, I still believe that they will prevail in the end. And for those entities who who have identified themselves as creditors or lenders, they will be barred from enforcing the underlying debt for failure to respond to the notice of rescission.

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BOTTOM LINE: For those who persist on the issue of rescission, the ultimate remedy under TILA rescission is coming — mostly too late for those who have had their homes go through forced sales that were void because the loan transaction and the loan documents had been canceled. Many of them have “moved on” albeit hobbled by the bite of the banks in the era of false securitization and fictitious appraisals. But for those who don’t give up, the reward is substantial when TILA rescission is reluctantly recognized by the Courts as effective upon mailing.
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Appraisal Fraud and Facts: Essential to Securitization Scam

Posted on October 15, 2012 by Neil Garfield

The REMICS are mirror images of the NINJA loans — no income, no assets, no job

the borrower did not realize that the false appraisal and other deficiencies in underwriting had shifted the risk of loss to the homeowner and the investors

Editor’s Notes: Our economy and the economic structure in other countries is stuck because of the false appraisal reports that supported funding of at least $13 trillion (U.S. only) of loans that were so complex that the Chairman of the Federal Reserve, Alan Greenspan didn’t understand them nor his staff of more than 100 PhDs. They were intentionally opaque because complexity is the way you get the other side of the “deal” (the buyer) to accept your explanation of the transaction. It also is designed to avoid criminal penalties even when the scheme unravels. Getting a Judge or Jury to understand what really happened is a challenge that has been insurmountable in both civil and criminal cases and investigations.

As stated in the 2005 petition to Congress from 8,000 appraisers who did not want to “play ball” with the banks, the appraisers were faced with a choice: either they submit appraisal reports $20,000 higher than contract and earn more money for each appraisal and earn  more money through volume, OR they won’t work at all.

Developers, mortgage brokers, and the “originators” (sales organization that pretended to be the lender), sellers and homeowners needing cash in an economy where there wages and earnings were not keeping up with the cost of living —- all reacted with glee when this system went into action. As “prices” rose by leaps and bounds — fed by a flood of money and demands for more mortgages — everyone except the banks ended up crashing when the money stopped flowing. That is how we know that it was the money that made prices rise, rather than demand.

So most appraisers were both stuck and pleasantly enjoying incomes 4-10 times what they had previously received, and obediently submitted appraisal reports that were in fact unsupportable by industry standards or any other standards that a reasonable and rational lender would use — if they were lending their own money. By lending money from investors the risk of loss was entirely removed. The originators got paid regardless of whether the mortgage was paid, or went underwater or caused the homeowner to execute a strategic default.

By using the originators as surrogates at the closing, the appraisal report was accepted without the required due diligence and confirmation that would be present if you went to the old style community bank loan department. The fact is that there was NO UNDERWRITING involved as we knew it before the securitization scam. The “extra” interest charged to No DOC loans (usually 3/4%-1.5%) and the premium interest charged on NINJA (No income, no assets, no job) loans was sold to borrowers on the premise that the “lender” was taking a higher risk. But the truth is they didn’t do any due diligence or underwriting of the loans regardless of whether or not the borrower was submitting information that confirmed their income, assets and ability to pay.  Thus the premium for the “extra risk” was based upon a false premise (like all the other premises of the securitization PONZI scheme).

The normal way of judging the price of a loan (the interest rate) was the perceived risk composed of two elements: ability to repay the loan, and the value of the property if the loan is not repaid. The banks that foisted the securitization scam upon the world got rid of both: they did nothing to confirm the ability to repay because they didn’t care if the borrower could repay. And they intentionally hyped the “value” of the property far above any supportable level as is easily shown in the Case Schiller index.

This is where PRICE and VALUE became entirely different concepts. By confusing the homeowner and hoodwinking the investors with false appraisals, they were able to move more money into the PONZI Scheme, as long as investors were buying the bogus mortgage bonds issued by fictitious entities that had no assets, no income and no prospects of either one. The REMICS are a mirror image of NINJA loans.

The value of the property was not the same as the prices supported by the false appraisal reports. The prices were going up because of the sales efforts of the banks to get homeowners giddy over the the numbers, making them feel, for a few moments as though they were more wealthy than they were in reality. But median income was flat or declining, which means that the value was flat or declining.

Thus prices went up while values of the homes were going down not only because of the median income factor but because of the oversold crash that was coming. Thus the PONZI scheme left the homeowner with property that would most likely be valued at less than any value that was known during the time the homeowner owned the property, while the contract price and appraisal report “valued” the property at 2-4 times the actual value.

The outcome was obvious: when all was said and done, the banks would be holding all the money and property while the investors, taxpayers, and homeowners were all dispensable pawns whose losses came under the category of “tough luck.”

While this might seem complex, the proof of appraisal fraud is not nearly as difficult as the explanation of why the banks wanted false appraisals. In the civil actions for wrongful lending or wrongful foreclosure, the homeowner need only show that the lender intentionally deceived the borrower as to the value of the property.

And the lack of actual underwriting committees and confirmations is essentially the proof, but you would be wise to have an appraiser who can testify as an expert as to what standards apply in issuing an appraisal report, to whom the appraisal report is addressed (i.e., the “originator”). Then using the foundation for the standards apply it to the property at hand at the time the original appraisal report was issued. It might also help if you catch the “originator” getting a part of the appraisal fee (like Cornerstone Appraisals, owned by Quicken Loans).

The borrower testifies that they were relying upon the “lender” representation that the loan had been carefully reviewed, underwritten, confirmed and approved based upon market conditions, ability of the borrower to repay and the value of the property. After all it was the “lender” who was taking the risk.

Thus the borrower did not realize that the false appraisal and other deficiencies in underwriting had shifted the risk of loss to the homeowner and the investors whose money was used to fund the loan — albeit not in the way it was presented in the prospectus where the REMIC was the supposed vehicle for the funding of the loans or the purchase of the loans.

Everyone in the securitization PONZI Scheme got paid. When you look at it from the perspective described above then you probably arrive at the same conclusion I did — all that money that was made and paid and not disclosed to the borrower changes the dynamics of the deal and the undisclosed compensation and profits should be paid to the borrower who was the party with the real risk of loss.

And in fact, if you look at the Truth in Lending Act, THAT is exactly what it says — all undisclosed compensation (which is broadly defined by the Act) is refundable with treble damages. Why lawyers have not taken action on this highly lucrative and relatively easy case to prosecute is a mystery to me.

Because of the statute of limitations applied in TILA cases, the TILA cause of action might not survive, especially in today’s climate, although more and more  judges are starting to see just how badly the banks acted. I therefore recommend to attorneys to use alternative pleading and add counts under other federal statutes (RICO, etc) and state statutes of deceptive lending, and common law fraud. The action for common law fraud, is the easiest to prosecute as I see it.

The interesting aspect of this that will lead to early settlement is that the pleading is simple as to the elements of the cause of action and can easily survive a motion to dismiss, the facts are clearly going to be in dispute which makes survival on a motion for summary judgment a much higher probability, and in discovery you have a nuclear option: since your cause of action is for return or sharing of the unlawful booty that was paid, plus treble, punitive or exemplary damages, discovery into all the different parties who made money in the chain is far easier to argue than the usual defensive foreclosure case.

The other thing you have is the possibility of stating a cause of action to force the retention of the property, to protect the homeowner in the collection of damages rendered by the final verdict. A lis pendens might be appropriate, and the bond need not be much more than nominal because unless the bank or servicer has a BFP to buy the property, you can easily show that your client is already posting bond every month they pay the utilities and maintain the property.

The compensatory damages would be a measure of the difference between the actual value of the deal and the deal that was offered to the homeowner. In simple terms, it could be that the appraisal report was $250,000 higher than the actual value of the property. As a result, the damages include the $250,000 plus the interest paid on that $250,000 and where appropriate, the loss of the house in foreclosure, plus interest from the date of the fraud (i.e. the closing), attorney fees, and costs of the action.

This action might also have special applications in commercial property cases where the appraisals are known to have come in much higher than the owner or buyer had ever expected. In some cases the “appraisal” actually changed the terms of the contract on the assumption that the property was worth much more than the original offer.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , , , , , , , | 46 Comments »

Banks Pushing Homeowners Over Foreclosure Cliff

Posted on May 10, 2012 by Neil Garfield

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Editor’s Comment:

Whether it is force-placed insurance or any other device available, banks and servicers are pushing homeowners, luring homeowners and tricking homeowners into foreclosures. It is the only way they can put distance between them and the collosal corruption of title, the fact that strangers are foreclosing on homes, and claims of predatory, deceptive and fraudulent lending practices.

Most of those five million homes belong back in the hands of the people who lost them in fake foreclosures. And that day is coming.

Foreclosures are good but short- sales are better as those in the real estate Market will tell you. Either way it has someone other than the bank or servicer signing the deed to the ” buyer” and eventually it will all come tumbling down. But what Banks and servicers are betting is that the more chaotic and confused the situation the less likely the blame will fall on them.

Watch out Mr. Banker, you haven’t seen our plan to hold you accountable. You might think you have control of the narrative but that is going to change because the real power is held by the people. Go read the constitution — especially the 9th Amendment.

Look Who’s Pushing Homeowners Off the Foreclosure Cliff

By the Editors

One of the more confounding aspects of the U.S. housing crisis has been the reluctance of lenders to do more to assist troubled borrowers. After all, when homes go into foreclosure, banks lose money.

Now it turns out some lenders haven’t merely been unhelpful; their actions have pushed some borrowers over the foreclosure cliff. Lenders have been imposing exorbitant insurance policies on homeowners whose regular coverage lapses or is deemed insufficient. The policies, standard homeowner’s insurance or extra coverage for wind damage, say, for Florida residents, typically cost five to 10 times what owners were previously paying, tipping many into foreclosure.

The situation has caught the attention of state regulators and the Consumer Financial Protection Bureau, which is considering rules to help homeowners avoid unwarranted “force- placed insurance.” The U.S. ought to go further and limit commissions, fine any company that knowingly overcharges a homeowner and require banks to seek competitive bids for force- placed insurance policies. Because insurance is not regulated at the federal level, states also need to play a stronger role in bringing down rates.

All mortgages require homeowners to maintain insurance on their property. Most mortgages also allow the lender to purchase insurance for the home and “force-place” it if a policy lapses or is deemed insufficient. These standard provisions are meant to protect the lender’s collateral — the property — if a calamity occurs.

High-Priced Policies

Here’s how it generally works: Banks and their mortgage servicers strike arrangements — often exclusive — with insurance companies in which the banks agree to buy high-priced policies on behalf of homeowners whose coverage has lapsed. The bank advances the premium to the insurer, and the insurer pays the bank a commission, which is priced into the premium. (Insurers say the commissions compensate banks for expenses like “advancing premiums, billing and collections.”) The homeowner is then billed for the premium, commissions and all.

It’s a lucrative business. Premiums on force-placed insurance exceeded $5.5 billion in 2010, according to the Center for Economic Justice, a group that advocates on behalf of low- income consumers. An investigation by Benjamin Lawsky, who heads New York State’s Department of Financial Services, has found nearly 15 percent of the premiums flow back to the banks.

It doesn’t end there. Lenders often get an additional cut of the profits by reinsuring the force-placed policy through the bank’s insurance subsidiary. That puts the lender in the conflicted position of requiring insurance to protect its collateral but with a financial incentive to never pay out a claim.

Both New York and California regulators have found the loss ratio on these policies — the percentage of premiums paid on claims — to be significantly lower than what insurers told the state they expected to pay out, suggesting that premiums are too high. For instance, most insurers estimate a loss ratio of 55 percent, meaning they’ll have to pay out about 55 cents on the dollar. But actual loss ratios have averaged about 20 percent over the last six years.

It’s worth noting that force-placed policies often provide less protection than cheaper policies available on the open market, a fact often not clearly disclosed. The policies generally protect the lender’s financial interest, not the homeowner’s. If a fire wipes out a house, most force-placed policies would pay only to repair the structure and nothing else.

Lack of Clarity

Homeowners can obviously avoid force-placed insurance by keeping their coverage current. Banks are required to remove the insurance as soon as a homeowner offers proof of other coverage. But the system, as the New York state investigation and countless lawsuits have demonstrated, is defined by a woeful lack of clarity, so much so that Fannie Mae has issued a directive to loan servicers to lower insurance costs and speed up removal times. And it said it would no longer reimburse commissions. The recent settlement with five financial firms over foreclosure abuses also requires banks to limit excessive coverage and ensure policies are purchased “for a commercially reasonable price.”

That’s not enough. Tougher standards should be applied uniformly, regardless of the loan source. Freddie Mac should follow Fannie Mae’s lead and require competitive pricing on the loans it backs. The consumer bureau should require mortgage servicers to reinstate a homeowner’s previous policy whenever possible, or to obtain competitive bids when not.

The bureau should also prevent loan servicers from accepting commissions or, at the very least, prohibit commissions from inflating the premium. It should require servicers to better communicate to borrowers that their policy has lapsed, explain clearly what force-placed insurance will cost and extend a grace period to secure new coverage. Finally, states should follow the example of California, which recently told force-placed insurers to submit lower rates that reflect actual loss ratios.

Many homeowners who experience coverage gaps have severe financial problems that lead them to stop paying their insurance bills. They are already at great risk of foreclosure. Banks and insurers shouldn’t be allowed to add to the likelihood of default by artificially inflating the cost of insurance.

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White Paper Declares Securitization Illegal

Posted on March 14, 2010 by Neil Garfield

Title: SECURITIZATION IS ILLEGAL. see Securitization is Illegal
AUTHOR: MICHAEL NWOGUGU, Certified Public Accountant (Maryland, USA); B.Arch. (City College Of New York). MBA (Columbia University). Attended Suffolk Law School (Boston, USA). Address: P. O. Box 170002, Brooklyn, NY 11217, USA. Phone/Fax: 1-718-638- 6270.

Email: datagh@peoplepc.com; mcn111@juno.com.

Editor’s Note: I find this compelling. On the other hand there seems to be no political appetite, even in the judiciary to accept it as a whole. So it is up to each and every litigant to make their mark on this scheme so that in the end, the full truth is known.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , | 7 Comments »

Obama Moves Closer to Principal Reduction Mandate

Posted on March 10, 2010 by Neil Garfield

Editor’s note: This is red meat for investors and borrowers seeking restitution for losses caused by improper appraisals, ratings and representations concerning loan and property values, loan viability, securities fraud, deceptive lending practices, TILA violations etc.

Obama Bank Policy Signals $1 Trillion in Writedowns

April 3 (Bloomberg) — U.S. regulators may force Bank of America Corp., Citigroup Inc. and at least a dozen of the nation’s biggest financial institutions to write down as much as $1 trillion in loans, twice what they’ve already recorded, based on Federal Deposit Insurance Corp. auction data compiled by Bloomberg.

Banks failing Federal Reserve evaluations of loans this month may be ordered to make sales worth as little as 32 cents on the dollar, according to FDIC data. That would be less than half of the 84 cents on the dollar the Treasury Department suggested was a possible purchase price. Some of the bank- insurance agency’s auctions brought 0.02 cent on the dollar.

Lower valuations would lead to new writedowns and capital injections from the $134.5 billion remaining in the Troubled Asset Relief Program, Nobel Prize-winning economist Joseph Stiglitz said.

“The only way banks will sell is under duress,” the 66- year-old professor at Columbia University in New York said in a phone interview.

Asset sales are the latest step in President Barack Obama’s effort to restart the U.S. economy through the most costly rescue of the financial system in history. Treasury Secretary Timothy Geithner’s Legacy Loan Program and Legacy Securities Program together are targeted to start at $500 billion and may expand to $1 trillion.

Auctioning Assets

Geithner’s plan will purchase loans and be overseen by the FDIC, which will offer debt guarantees while the Treasury invests capital alongside investors.

The FDIC would auction assets after the Office of the Comptroller of the Currency, Office of Thrift Supervision or the Fed signals that a bank is in danger of failing.

“If we thought that was the right decision to address their situation, we would certainly tell an institution to move in that direction,” said William Ruberry, an OTS spokesman in Washington.

Geithner’s plan to buy loans and securities “can be very useful,” Comptroller of the Currency John Dugan said in a Bloomberg Television interview today. “It’s one more arrow in the quiver to address problems with assets on banks’ balance sheets.”

Treasury spokesman Isaac Baker said in an e-mail that the program is voluntary and the government expects banks will want to sell assets to clean their balance sheets and make it easier to raise capital from investors, he said.

Financing Help

“Past auctions cannot reliably predict asset prices in the Public Private Investment Program, as we are creating a new market that has not previously existed to help value these assets, and offering financing to help investors purchase them,” Baker said.

Setting up a facility to purchase distressed loans will allow the FDIC to put a bank into “a silent resolution,” said Joshua Rosner, a managing director at investment-research firm Graham Fisher & Co. in New York.

“This is a way to functionally wind down a bank as big as Citi without the world realizing that they’re essentially in resolution,” he said. “The real value of this is a tool to resolve a too-big-to-fail institution.”

The FDIC is considering allowing banks to share in future profits on loans sold to public-private partnerships to encourage healthier lenders to participate, according to Jim Wigand, the agency’s deputy director for resolutions and receiverships. The regulator is seeking comments through April 10 on the program, said spokesman David Barr.

Assets sold under the Legacy Loans Program may be worth an average of 56.3 cents on the dollar, based on the results of FDIC auctions at failed banks over the past 15 months.

‘Large Amounts’

Writedowns would total $1 trillion if the program buys $500 billion in loans at 32 cents on the dollar, the average for non- performing commercial loans in the FDIC sales.

Geithner said March 29 that some financial institutions will need “large amounts of assistance.” He’s trying to avoid bank nationalizations by wooing investors to purchase loans with taxpayer-guaranteed financing to protect them against loss. The U.S. move to clear away distressed assets contrasts with Japanese financial authorities’ reluctance to do so in a 1990s financial crisis, which led to a decade of economic stagnation.

“This is going to be our Yucca Mountain right here,” said Joseph Mason, an associate professor at Louisiana State University in Baton Rouge and former FDIC visiting scholar, referring to the proposed radioactive-waste storage site in Nevada.

Half-Life

“You can put it in a train car and ship it across the country. The half-life of this stuff is real long, but it has to burn off,” he said.

The FDIC’s average auction value of 56.3 cents on the dollar for residential and commercial loans is based on 312 sales worth $1.1 billion since Jan. 1, 2008, according to the FDIC. The average for 348 commercial loans for which borrowers stopped paying was 32 cents on the dollar. Auction prices ranged from 0.02 cent to 101.2 cents on the dollar, according to the FDIC.

In announcing its loan-sale program last week, the Treasury provided an example of a purchase price of 84 cents on the dollar, with taxpayers putting up 6 cents, investors 6 cents and the FDIC guaranteeing 72 cents in financing.

“Eighty-four cents is just laughable” because the market value for loans is much lower, said Barry Ritholtz, chief executive officer of New York-based FusionIQ, an independent research firm.

The U.S. is structuring the loan purchases to leave the government with most of the risk, while investors stand to gain most of any profit, economist Stiglitz said.

‘Almost No Upside’

“There’s almost no upside for the taxpayer,” he said. “The government is giving a 110 percent bailout.”

How much investors offer for assets is “going to be the key” determinant of Bank of America’s participation in the government’s two asset-purchase programs, CEO Kenneth Lewis said in a Bloomberg Television interview March 27.

“If there’s an issue with the program, it’s going to be trying to get banks to sell assets,” FDIC Chairman Sheila Bair said in a speech the same day at the Isenberg School of Management of the University of Massachusetts in Amherst.

“If I have concern, it’s the pricing may not be where seller and buyer are willing to meet,” she said.

Any standoff between investors and banks over loan prices may scuttle Geithner’s plan to segregate non-performing assets and restart lending, said Bob Eisenbeis, chief monetary economist with Vineland, New Jersey-based Cumberland Advisors and a former Atlanta Federal Reserve Bank research director.

‘Really Bad Stuff’

“It’s hard to believe that the really bad stuff that’s causing all the problems are going to be offered for sale,” Eisenbeis said. “The institutions won’t want to sell them if they get a true price, because their capital would take too much of a hit.”

With preparations for auctions under way, U.S. banks are being put through so-called stress tests, which Geithner said last month are a comprehensive set of standards for the financial system’s most important lenders. The examinations of loans and their collateral and payment histories are scheduled to be completed by April 30.

Banks have almost $4.7 trillion of mortgages and $3 trillion of other loans that aren’t packaged into bonds, according to the Fed. The vast majority are carried at full value because they don’t need to be written down until they default, according to Daniel Alpert, managing director of New York-based investment bank Westwood Capital LLC.

“Just because it’s being held at full value doesn’t mean it’s not bad,” Alpert said.

Obama Effort

While regulators don’t intend to publish the details of their stress tests, the results will effectively become known once banks announce how much capital they need to raise. Regulators will then give lenders six months to obtain funds from investors or taxpayers as a last resort.

The tests are designed to mesh with Obama’s effort to remove banks’ distressed mortgage assets that have hampered lending to consumers and businesses. Officials aim to have the first loan purchases by private investors financed by the government within weeks of the conclusion of the stress tests, according to the Treasury.

Including TARP, the U.S. government and the Fed have spent, lent or guaranteed $12.8 trillion to combat the financial collapse and a recession that began in December 2007. The amount approaches the $14.2 trillion U.S. gross domestic product last year.

‘Constructive Plan’

Obama met with the CEOs of the nation’s 12 biggest banks on March 27 at the White House to enlist their support to thaw a 20-month freeze in bank lending.

Lenders undergoing stress tests include New York-based Citigroup, which has received three rounds of capital infusions valued at $60 billion, including $45 billion from TARP, according to Bloomberg data.

“The administration has put forth a constructive plan to address the critical issues facing the financial services industry, and we are committed to working together with the industry to help achieve the goals of the plan,” CEO Vikram Pandit said in a statement before meeting with Obama.

Citigroup spokesman Stephen Cohen declined to comment.

The U.S. tests also involve Charlotte, North Carolina-based Bank of America, which also received $45 billion from TARP. It bought Merrill Lynch & Co. — the largest underwriter of failed collateralized debt obligations, according to Standard & Poor’s — and home-lender Countrywide Financial Corp.

Bank of America spokesman Scott Silvestri declined to comment.

Option ARMs

San Francisco-based Wells Fargo purchased Wachovia Corp., the nation’s biggest provider of option adjustable-rate mortgages, for $15 billion. In doing so, it took responsibility for about $122 billion of option ARMs sold by the Charlotte bank.

Option ARM loans allow borrowers to defer part of their interest payments and add it to their principal. When housing collapsed, many holders of the mortgages were left owing more than the value of their homes.

Wachovia issued more than half its option ARMs in California, according to bank filings. Wells Fargo was already the biggest lender in the state.

“Wells Fargo supports any plan by the Treasury that helps financial institutions efficiently sell troubled assets while still providing an investment return to the U.S. taxpayer,” spokeswoman Janis Smith said in an e-mail.

Web Distribution

The ability to distribute loan information over the Internet will also support prices by expanding the number of buyers and allowing for sales as small as $100,000, said Stephen Emery, a managing director at New York-based Mission Capital Advisors, which brokered $3 billion of real-estate loan sales last year.

Terms offered under the Legacy Loans Program, including government-backed financing, will also help boost demand and selling prices by as much as 20 percent, he said.

“The leverage will allow buyers to bump their price a little bit,” Emery said. “But that still doesn’t mean that something that was worth 30 is now worth 60. What’s going to happen is now it’s worth 35 or 36 cents.”

To contact the reporter on this story: Mark Pittman in New York at mpittman@bloomberg.net;

marcus@foreclosureProSe.com

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , | 8 Comments »

Keiser’s Forensic Analysis Workshop

Posted on March 4, 2010 by Neil Garfield

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.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , , , , , , , , , , , | 2 Comments »

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