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Latest Bank Amnesty Leaves Consumers Adrift

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Comment: As we travel down the road of misguided policy and judicial decisions, the banks are starting up a major effort to sell more mortgage securities under private label, which means that (a) they are not required to register them with the SEC and (b) they will continue to veil the secret movement of money making it more difficult for any borrower to know the identity of the lender in a residential loan transaction, contrary to the requirements of Federal and State laws.

The whole purpose of the Truth in Lending Act was to give the consumer an opportunity to choose between one vendor of loans and another. The banks obliterated that choice in the first round of the mortgage meltdown and you can be sure that the only reason they are doing it again is because they intend to make the same gargantuan “profits” in this second round, so far, at $25 Billion.

One of the reasons why they feel emboldened to do this is because the basic laws have not been changed regarding the definition of a security, which excludes mortgage bonds and the hedges like insurance and credit default swaps, courtesy of laws passed in 1998. Another reason is that the Wall Street club still has enough strength to sell the mortgage bonds through intermediaries who trumpet higher returns for stable funds, which we have all seen went from stable in the layman sense to completely unstable and underfunded. The pension funds that got hit the hardest will be the first ones to announce that the pensioners are not going to get the full amount of their payments because of losses in the fund, vested or not.

The “qualified mortgage” regulations passed by the Federal Agency, which might lose its head literally if Cordray’s appointment remains rejected by the Courts, still have plenty of daylight in them to push through false appraisals and false data on the ability of the borrower to pay, and the viability of the loan over its entire term. The easily projected fall in prices to the values charted by Case-Schiller together with reset provisions on adjustable mortgages and “teaser” rates that could be paid only if the majority of the required payment was added on to the principal due on the mortgage, made the crash inevitable and remains unaddressed by law or regulations.

So despite the 0.1% contraction of the economy in the last quarter of 2012, we have the banks again ramping up to make trillions more while the economy stagnates from lack of oxygen — the money diverted from the economy by the banks whose officers have escaped prosecution and whose antics in corrupting the title system of the all the states, have created massive uncertainty over the end result.

Wall Street is allowed to exist as the engine of growth, stability and confidence in our economy. As intermediaries, they are required to meet the needs of the times in terms of providing capital in a capitalist society. Instead, they have become principals without anyone noticing. And their motive is not to intermediate but to make a profit, taking advantage of every loophole in laws, rules or the enforcement thereof. A receding economy won’t stop the banks from making money as long as they are permitted to lie.

If the economy is contracting, Wall Street activity should be expected to drop as the need for capital declines. Instead we see that over the last 4 years and we will see over the coming four years and beyond, an increase in profits for Wall Street firms which are owned by shareholders and directed by officers whose main goal is to create and enlarge their own wealth.

A lot of this has been made possible by the average citizen who can’t be expected to understand the complexities of finance or the law. Of paramount importance in the process is the shame heaped upon borrowers who are all seen as deadbeats despite all evidence to the contrary. And lastly, all this is possible because of the general assumption, often mistakenly used as a conclusive presumption in court, that the borrower received a loan, didn’t pay it back, therefore is in default and based upon the terms of their contract, their homes are sold at auction to satisfy as much of the debt as possible.

The idea that the money demanded as the balance of principal and interest due might be totally misstated, and that the repayment provisions loan is NOT represented by the note and mortgage (or deed of trust), seems impossible to both borrowers and judicial participants alike. The banks laid a trap in setting up bad paperwork because there was no real paperwork that would actually track the movement of money in bona fide transactions with money exchanging hands. Lawyers and pro se litigants cried foul and yet the foreclosures kept proceeding because the judge figured that the bad behavior of the banks was a separate matter from the “obvious” fact that the borrower took a loan and didn’t repay it.

It’s true that the money arrived at the closing table, but beyond that, there is nothing but misdirection, lies and fraud. The money arrived at the closing table from a source that was never disclosed to the borrower, preventing the borrower from any choice in the matter.

The nominee used to play the part of “lender” was not even allowed to touch the money — Wall Street having determined that some “originators” might find it too tempting to let the tens of millions going through their own account go by without skimming some of it or even taking all of it. Wall Street thought this way because it was what they were doing when they sold the original mortgage bonds.

The money was never put in a trust, as specifically provided for in the enabling documents which might or might not have legally created a common law trust. The bankers took out as much as 1/2 of the investor money as trading profits when they arranged fictitious sales of actual and fictitious loans to the unfunded trust without consideration. The consideration was passed from investors directly to the investment bank that underwrote the sale of the mortgage bonds.

The balance of the investor money was used for fees and costs that were problematic at their best and then finally the balance was used to fund loans (and bets against the loans) that were completely undocumented in terms of the actual financial transactions that took place. None of the paperwork upon which the banks rely in reporting their assets or enforcing invalid notes and mortgages is supported by any transaction in which the named parties exchanged actual money. Thus none of the paperwork could be considered valid or enforceable (lack of consideration). They can sue but they can’t win if the borrower denies the transaction, the note, the debt, the mortgage and lays claim to false disclosures.

The banks understood this fatal error and thus created massive efforts at robo-signing, surrogate signing, fabrication, forgery, and fraud in supporting the alleged transfer of the loan from a nominee who originated the loan but who never funded the loan, up the false securitization chain. In simple words the mountain of paperwork produced by the banks covers a cup that is empty. There was no money involved in ANY of the transactions from origination through assignments that were offered but could not be accepted because they were specifically prohibited by the PSA and Prospectus.

Lawyers and pro se litigants went down the rabbit hole after the false paperwork leaving the judge with the simple proposition that there was a loan, it wasn’t paid back, and therefore the enforcement provisions apply. Nobody asked WHY there was need for false paperwork. What was the false paperwork hiding?

It was hiding an empty cup in which the borrower signed loan documents and never received a loan pursuant to those documents. The borrower received a loan from other parties whose identity was intentionally concealed, and if the various compensation and profit and fees had been disclosed as required by TILA the borrower would have been alerted tot he fact that half or all of his loan was generating fees, profits and costs either equal to or even more than the loan itself. Even an unsophisticated borrower confronted with these facts would get nervous about a transaction where he knew that the real parties were making excessive profits had this been disclosed as required by law.

Hence our strategy of DENY and DISCOVER, which will be the subject of tonight’s discussion on the member teleconference. If you go after the money first, demanding proof of payment and proof of loss you stand a good chance of knocking out both the filing of the foreclosure and the ability of the forecloser to submit a credit bid — simply because they are not the creditor. By going after the money first, the attack on the paperwork becomes both relevant and corroborative of the principal attack over consideration between the borrower and nominee lender who seemed to be the lender at the closing of the loan.

If you assume all of the above is correct, then it is malpractice for any lawyer to admit the debt, the security, the balance due, the note, the mortgage and the enforceability of the note and mortgage. And it is malpractice for a lawyer doing real estate closings to fail to question title and demand a guarantee of title from a qualified source.

As seen in California this will cause even a non-judicial state to go judicial in practice because the forecloser has a case to prove and in most cases it can’t because it can never show that it ever took the loan in as a loan receivable — which in accounting, is inevitable because there is no place for an entry debiting a cash or other asset account to make the loan.

The entire loan is off balance sheet and solely appears on the income statement as a fee for service transaction in which the apparent lender was really a nominee for undisclosed parties who promised the real lenders one set of terms in the bogus mortgage bonds and an entirely different set of terms in the note signed by the borrower which was unsupported by consideration.

The bottom line is that the discovery should be directed at all parties who have knowledge of the actual transfer of money and documents, including internal documents. The Master servicer, the investment banker, the Trustee of the so-called trust should all be subpoenaed if necessary to determine what records they have and who handled them. And the principal record you want to see is a copy of a canceled check or wire transfer receipt (and wire transfer instructions).

‘Private Label’ Gains Appeal in Mortgage Market
http://blogs.wsj.com/developments/2013/01/29/private-label-gains-appeal-in-mortgage-market/

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Deny and Discover, discovery, investment banker, Masgter servicer, mortgage securities, private label securitization, Trustee of the Pool | 21 Comments »

BANK AMNESTY AGAIN: Leaving Consumers to Fend (Litigate) for Themselves

Posted on January 28, 2013 by Neil Garfield

“To someone who lost his house to mortgage servicer incompetence or malfeasance, that’s not restitution. It’s an insult. “The capped pool of cash payments is wholly inadequate in light of the scale of the harm,” says Alys Cohen, staff attorney for the National Consumer Law Center.” Adam Levin, abcnews.com

Editor’s Analysis: In case after case across the country it is readily apparent that there complete strangers making claims on mortgages, foreclosing, evicting and even collecting “Trial Payments” while they intend to do nothing other than Foreclose — because that is where the money is and because it is only through a foreclosure that they cap the losses and pass them onto investors despite having received large scale payments of insurance and other hedges.

The Banks have it their way despite the obvious unconscionable, illegal, immoral and unethical breach of trust between consumer and bank and between banks.

Whether it is the Chase WAMU deal, or the BOA countrywide deal, or the Indy-mac One West deal, the facts are in — we don’t need to theorize anymore — the banks are NOT the creditors, they cannot shows proof of loss, proof of payment or any financial transaction that would entitle them to enforce an invalid note or foreclose on an invalid, unperfected mortgage lien.

But the institutionalization of hypocrisy and deviant behavior on the part of the Banks has left us with “settlements” that settle nothing, leaving millions of homeowners who lost their homes to entities that received a windfall from the foreclosure process and the windfall from dual tracking “modification” reviews that were a pure sham designed only to get the homeowner in the deepest hole possible so that foreclosure would become inevitable.

At our members conference this Wednesday, we will talk about what is getting traction in the modification of mortgages and what is getting traction in the litigation of mortgage disputes.

The important thing to remember that is that the MONEY never came from ANY of the parties in the sham securitization chain starting with the originator. While there are exceptions — like World Savings — the truth defeats further claims regarding the Wachovia acquisition and then the Wells Fargo acquisition of Wachovia. Either the assignments were missing or they fabricated and forged.

If you ask yourself why they wouldn’t have had the assignments done all nice and proper which is the way the banking world works when BORROWERS must sign documents, you will feel uncomfortable with Wall Street explanations of volume causing the paperwork confusion. It was the exact same volume that produced millions of “originated” mortgages where the i’s were dotted and T’s were crossed —- that is, where the Borrower had to sign. The banks had no trouble then — it was only when the banks had to sign that there was a problem. Where the securitization participants had to sign was neither disclosed nor drafted nor executed.

The simple reason is that there was nothing to sign. There was no financial transaction where money exchanged hands which is why I am pounding on the point that the lawyers should be aiming at the money rather than the documentation. “For value received” means that value was paid or transferred. When you ask for the wire transfer receipt or cancelled check that shows payment and which would establish proof of loss, you are asking to see the transaction upon which the banks place all their reliance.

Their argument that they don’t need to show the actual transaction is a dodge to protect themselves from showing that the transactions in the bogus securitization scheme were all a sham. Your argument should be simple — they say they lost money and that the homeowners owes it. Let’s see the actual proof that they made the loan, lost the money and have not already been paid. The assignments are not accompanies by actual money exchanging hands which means that the assignment lacked consideration and was therefore an executory contract at best, pending payment.

Then you need to ask yourself why there was no consideration when you know that money was funded from somewhere for a loan to the “benefit” of your client (albeit based upon fraud in the execution and fraud in the inducement including appraisal fraud). YOU must tackle the basic issue in the mind of just about every judge — as long as the money was there at the “closing” of the loan, and the borrower signed the papers, and then defaulted on those promises, what difference does it make whether some OTHER papers were fabricated or even forged.

The fact remains, your client, in the eyes of the Judge, got the loan, agreed to the terms and then defaulted. In our world, when you default on a loan, judgment is entered, foreclosure is completed and eviction, if necessary proceeds. The banks have relied upon this perception for years which considerable success. The reason borrowers often lose in litigation is that they arguing about the wrong thing. As soon as they go after the documentation first they are going down a rabbit hole. It is a tacit admission that the loan was valid, the note is evidence of the loan and the mortgage secures the note. DENY and DISCOVER puts that front and center as an issue of fact in dispute.

By going after the money transactions and requiring proof of payment and proof of loss and asking for the accounting data that shows the loan receivable on the books of an entity, you are striking at the heart of the sham transaction.

If you ask me for a loan for $100 and I say “Sure, just sign this note,” and you go ahead and sign the note, what happens when I don’t give you the $100 loan. The answer, which has caused considerable confusion in the foreclosure defense world is that I can nonetheless sue you (on its face the note LOOKS like a negotiable instrument) , but I can’t win. Because if you deny that I ever completed the loan transaction by funding the loan to you, then I have to prove that I gave you the money. I can’t because I didn’t. My argument that you did receive a loan that day and therefore you owe me the money is a lie. You owe the money to whoever actually gave you the money.

At the closing of these loans originated by nominees with no power to touch the money and whose only source of income was fees, not interest on the loan, the borrower was fooled by the fact that the money showed up for the loan. It never occurred to the borrower to ask any questions since the paperwork, and all the disclosures required by law told him a story about the loan. The borrower could not possibly know that the story told by the documents, the documents he or she signed at closing were all a lie.

The Banks will take the position that everyone was authorized to make representations and act for everyone else — except when it comes to paying down the debts with money received from insurance and the proceeds of credit default swaps, federal bailouts etc. In THAT case the bank says it was not the agent of the investors and had no duty to either the investor or the borrower since the banks were the named insureds — made possible only because they purposefully put the name of a nominee on the note, a nominee on the mortgage (or even two nominees on the mortgage) so that the banks could open up a window of time during which they could claim ownership of the loans despite the fact that they had not funded one dime to originate or purchase any loan.

Thus if go for the money first and THEN show the the fabrication, forgery and perjury in documents, the case makes sense and can be presented to the court without giving one inch of admission that the loan, the note or mortgage were real, valid or enforceable. AND by sending a standard QWR and FDCPA letter, the banks have nowhere to hide. In litigation the motion becomes a petition to enforce the RESPA 6 inquiry and the FDCPA inquiry either through direct order or through discovery.

THEN you force the disclosure of the identity of the creditor who actually has a negative account balance on their books for the loan, directly or indirectly, and seek modification or settlement based upon the facts of the case. HAMP modification is impossible, settlement is impossible without first establishing who could submit a credit bid at auction or who could execute a valid satisfaction and release of the debt.

Fraud Is The Biggest Bubble In History
http://www.ritholtz.com/blog/2013/01/fraud-is-the-biggest-bubble-in-history/

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Deny and Discover, FDCPA, modifications, QWR, RESPA 6, settlements | 77 Comments »

Peeling the Onion: Morgan Stanley Forced to Produce Documents Corroborating Illegal Acts

Posted on January 25, 2013 by Neil Garfield

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

NY Times: Morgan Stanley Forced to Reveal Truth

Editor’s Comment and Practice Tips: There are two things you should know going into foreclosure defense. One is that the best decisions on the trial and appellate level came from cases where both sides were institutional in nature. So if the adversaries were both banks, or one was a managed fund, or perhaps a Homeowners or Condominium Association, the Court was a lot more receptive to the same arguments they routinely rejected from Borrowers. That alone suggests some strategies both for investors and homeowners (particularly those hard hit by the mortgage meltdown). The second is that an increasing number of courts are, in the words of one judge who WAS ruling routinely against borrowers, “getting tired of the sloppiness” with which the loan deals were originated, allegedly transferred and claimed as owned by one of a number of parties. They are entering more orders requiring proof of loss, proof of payment and proof that any financial transaction took place in which the forecloser was either the recipient (payee) or the payor of actual money that exchanged hands.

We have seen how the same homeowner with the same property has been assaulted by two completely different “holders”, neither of whom were creditors, each claiming to be producing the original note — and there it was in all its glory, two “original” notes both of which had been printed the previous day on a very good printer. We have seen how the appraisals went further and further off the reservation under pressure from the banks and how the applications were changed under pressure from the banks to close the deal regardless of outcome or viability of the loan.

Strategically I have been encouraging practicing attorneys to pay close attention to the dozens of lawsuits filed against the banks by institutional plaintiffs — pension funds that bought bogus mortgage bonds, government agencies whose findings might be incorporated as fact in your case (especially if the case settled), HOA’s and banks fighting over priority of liens. The facts alleged are fairly uniform — all leading to the conclusion that the loans were neither underwritten in conformity with industry standards (leading to fraud or breach of contract actions) nor supported by documentation that is enforceable (i.e., the mortgage lien was never perfected and the note was incorrectly fabricated and executed without consideration from the named payees or nominees.

The latest rumble over the lack of prosecution on this mortgage mess has produced the resignation of the guy at DOJ who was supposed to be prosecuting these cases. Maybe the change will come. But by this time int he Savings and Loan scandal of the 1980″s there were more than 800 people sitting behind bars with others on probation. The PBS piece “Untouchables” has kicked up a fore storm over the issue of criminal prosecution. Those cases too should be watched carefully and your wording in your pleading ought to be as close to their wording in their lawsuits especially where they have already survived the usual motion to dismiss.

Robert Schiller the economist who created the black letter basis for measuring economic data relating to the housing industry says we are far from done with the damages and debris left by the mortgage meltdown. And out of 105 economists who participated in an independent survey very few had anything good to say about housing or the economy — with the two inextricably entwined. Fixing housing is not merely about stopping foreclosures or increasing modifications. At the heart of the mortgage meltdown was fraud.

And fraud comes in two flavors — civil and criminal. Both require receivers and restitution if prosecuted properly. Investors and homeowners alike are entitled to receive as much restitution as possible that can be clawed back by properly appointed court receivers. Both were decided by appraisal fraud, by deceptive disclosures in which the actual lender was intentionally concealed so that the investment bank could claim ownership and buy insurance payable to the bank instead of the investors, buy credit default swaps with the same result, and apply for Federal bailout with the same result.

Housing won’t be fixed until the corruption of title caused by a nominee on the mortgage and nominee on the note is fixed and settled. The economy won’t be fixed until investors get their share of the insurance and bailouts. The consumer sector won’t be fixed until all that is done, because it is only after the money is allocated to the investors that we can know the actual balance due, if any, on any of the loans.

One thing we know at this point is that most foreclosures (at least 65% according to the San Francisco study) are initiated by “strangers to the transaction” who were not creditors, holders or anything else that would entitle them to enforce the closing documents on a loan that came not from the named payee but from another source entirely. We know that the “credit bid” submitted at auction was pure fiction and fraud and should be corrected in the property records. And we know that the the proceeds of insurance, credit default swaps and federal bailout should be applied to the receivables owed to the investors. Lastly, we know that when those monies are allocated the balance due on those receivables will be far less than what has been or will be demanded from borrowers in past, present and future foreclosures.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Deny and Discover, discovery, HOMEOWNER ASSOCIATIONS, institutional investors, Morgan Stanley, Schiller | 123 Comments »

Are You Kidding? AIG to Join Suit Against Goverment for Bailout Terms

Posted on January 8, 2013 by Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Comment: It is a total farce. Companies that were supposedly saved from the brink of bankruptcy and shame, who played a part in defrauding investors and homeowners across the world are now suing their savior and protector. The people who sit on the Board of Directors of these companies are sitting in a bubble of pure fiction. Yet AIG is now considering the lawsuit as a channel by which they can get even more money from the U.S. Taxpayers and cause even more damage to the U.S. economy.

Greenberg, the head of AIG has had the lawsuit going on for a while now saying, on behalf of himself as a shareholders and on behalf of other shareholders that the onerous terms placed on AIG deprived shareholders of value without due process!

Now AIG itself is thinking of joining the lawsuit because if Greenberg wins then the Board could be liable for failure to act.

“Thank you America” has been advertised by AIG since the bailout. I would now add THANK YOU to Greenberg and AIG for bringing up the one thing that Judges don’t want to hear from investors or shareholders — due process under the 5th and 14th Amendment to the U.S. Constitution.

Besides being spectacularly hypocritical, ungrateful and greedy, Greenberg and AIG have become the new poster boy for Wall Street arrogance. They have also opened the door to consideration of non-judicial foreclosure, as applied, and judicial foreclosure, as applied, in the absence of any proof of payment and standing as a creditor with rights to submit a credit bid at auction.

In the non-judicial states the “private contract” has allowed actions of controlled trustees on deeds of trust appointed by non-creditors in a document common to all loans subject to false claims of securitization (substitution of trustee). The notice of default and notice of sale take the place of a judicial foreclosure — but they are false and we know they are false. The same parties filing a judicial foreclosure would lose.

In both judicial states and all judicial actions the courts have made the assumption that the debt is valid (not true as to the party filing) the default is real (not if the payment isn’t due to the actual creditor who continues receiving payments after notice of default), the note is proper and presumptive evidence of payment or funding of the loan by the payee (almost never true) and that an assignment is presumptive evidence of the sale without proof of payment. The requirement that the party seeking affirmative relief (the forecloser) actually prove a case rather proffer it has been discarded.

There is nothing wrong with the statutes in the judicial states but the non-judicial states have opened a hole of moral hazard the size of the Grand Canyon. And where moral hazard is present, the banks are not far behind. In this case AIG took advantage of the receipt of fees for insurance of bogus mortgage bonds; their failure to perform due diligence and verify the validity of the bonds and the non-existent mortgages that “backed” the bonds was either intentional or negligent. They had insured more than they were worth and that was either intentional or negligent. The government came in, paid off the insurance contracts, and then gave the company back to AIG shareholders when it was “healthy.”

AIG has already sued Goldman on the same facts. The insurance contracts expressly waived any right to go after the borrowers. In most insurance contracts subrogation it is expressly assumed and allowed. The reason for this anomaly was that the banks were able to get 100 cents on the dollar of a loss they never had and they refused to give up a penny of it to the investors they had defrauded or the borrowers whose loan balances would have and should have been correspondingly reduced. What a deal! The investors lose their money, the insurers lose their money, the borrowers don’t get credit for the pay-down of their loans and the bank, claiming the loss to be their own, get the insurance, federal bailout money and the proceeds of credit default swaps.

When I practiced law I learned the hard way that demanding and getting more than your client should get will get you reversed on appeal on the basis that the evidence doesn’t support the verdict or judgment. In lay language, if you are going to be a pig about it, expect to be cooked.

These developments are upside down. AIG should be thanking the American people for the next 100 years and perhaps learning a few things of the due diligence expected of them. Instead, in our litigious society, the lawyers think they have created a long shot of getting billions of dollars more FROM the American taxpayer instead of FOR the American taxpayer.

Many of us were taught as children that there is no free ride. Now we hear there will not be a free house for homeowners whose loan balance has been paid in full. The assumption is that debt is correctly stated and the creditor is correctly identified when neither assumption is true. But the bigger assumption is that all borrowers are either deadbeats or potential deadbeats and that just isn’t true either.

And worst of all, you have AIG et al tying up the government process with a discovery demand of 16 million documents — opening yet another door for those practicing under the rubric of Deny and Discover. Don’t shy away from asking for what you want and nail down the money trail with demands for canceled checks, wire transfer and ACH receipts. And where a judge accepts a proffer instead of proof, call him or her out on it. That’s where due process comes in. Due process doesn’t promise justice but it does promise a hearing in accordance with required notice and an opportunity to be heard. At that hearing the burden is always on the party seeking affirmative relief (foreclosure). Once it comes down to real proof instead of proffers, it is the banks who reveal themselves as pigs to be cooked.

Deny the whole transaction because there was no payment or funding alleged and no payment or funding proven. That is because investors supplied the money thinking that they were buying into REMICs. They didn’t. Investor money was commingled from all investors in accounts that were layered over with false documentation to give the investor the impression he was the owner of a bona fide mortgage backed bond issued by a REMIC trust. In fact the pension fund investor owned nothing and had merely loaned the money to the investment banker who played with it and created the appearance of trading profits and fees and expenses and then funding bad mortgages in REMIC tranches where the investment banker could torpedo the whole thing, collect insurance, CDS proceeds and federal bailouts.

The government has been reluctant to get into the complexity of these fictitious transactions. Now that they are being sued, they might well be forced to do the digging they should have done in the first place. So Thank You again Mr. Greenberg!

Rescued by a Bailout, A.I.G. May Sue Its Savior

By BEN PROTESS and MICHAEL J. DE LA MERCED

NY Times

Fresh from paying back a $182 billion bailout, the American International Group Inc. has been running a nationwide advertising campaign with the tagline “Thank you America.”

Behind the scenes, the restored insurance company is weighing whether to tell the government agencies that rescued it during the financial crisis: thanks, but you cheated our shareholders.

The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal’s high interest rates and the funneling of billions to the insurer’s Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for “public use, without just compensation.”

Maurice R. Greenberg, A.I.G.’s former chief executive, who remains a major investor in the company, filed the lawsuit in 2011 on behalf of fellow shareholders. He has since urged A.I.G. to join the case, a move that could nudge the government into settlement talks.

The choice is not a simple one for the insurer. Its board members, most of whom joined after the bailout, owe a duty to shareholders to consider the lawsuit. If the board does not give careful consideration to the case, Mr. Greenberg could challenge its decision to abstain.

Should Mr. Greenberg snare a major settlement without A.I.G., the company could face additional lawsuits from other shareholders. Suing the government would not only placate the 87-year-old former chief, but would put A.I.G. in line for a potential payout.

Yet such a move would almost certainly be widely seen as an audacious display of ingratitude. The action would also threaten to inflame tensions in Washington, where the company has become a byword for excessive risk-taking on Wall Street.

Some government officials are already upset with the company for even seriously entertaining the lawsuit, people briefed on the matter said. The people, who spoke on the condition of anonymity, noted that without the bailout, A.I.G. shareholders would have fared far worse in bankruptcy.

“On the one hand, from a corporate governance perspective, it appears they’re being extra cautious and careful,” said Frank Partnoy, a former banker who is now a professor of law and finance at the University of San Diego School of Law. “On the other hand, it’s a slap in the face to the taxpayer and the government.”

For its part, A.I.G. has seized on the significance and complexity of the case, which is filed in both New York and Washington. A federal judge in New York dismissed the case, while the Washington court allowed it to proceed.

“The A.I.G. board of directors takes its fiduciary duties and business judgment responsibilities seriously,” said a spokesman, Jon Diat.

On Wednesday, the case will command the spotlight for several hours at A.I.G.’s Lower Manhattan headquarters.

Mr. Greenberg’s company, Starr International, will begin with a 45-minute presentation to the board, according to people briefed on the matter. Mr. Greenberg is expected to attend, they added.

It will be an unusual homecoming of sorts for Mr. Greenberg, who ran A.I.G. for nearly four decades until resigning amid investigations into an accounting scandal in 2005. For some years after his abrupt departure, there was bitterness and litigation between the company and its former chief.

After the Starr briefing on Wednesday, lawyers for the Treasury Department and the Federal Reserve Bank of New York — the architects of the bailout and defendants in the cases — will make their presentations. Each side will have a few minutes to rebut.

While the discussions are part of an already scheduled board meeting, securities lawyers say it is rare for an entire board to meet on a single piece of litigation.

“It makes eminent good sense in this case, but I’ve never heard of this kind of situation,” said Henry Hu, a former regulator who is now a professor at the University of Texas School of Law in Austin.

It is unclear whether the directors are leaning toward joining the case. The board said in a court filing that it would probably decide by the end of January.

Until now, the insurance giant has sat on the sidelines. But its delay in making a decision, some officials say, has drawn out the case, forcing the government to pay significant legal costs.

The presentations on Wednesday come on top of hundreds of pages of submissions that the government prepared last year, a time-consuming and costly process. The Justice Department, which assigned about a dozen lawyers to the case and hired outside experts, told a judge handling the matter that Starr was seeking 16 million pages in documents from the government.

“How many?” the startled judge, Thomas C. Wheeler, asked, according to a transcript.

Struck just days after the collapse of Lehman Brothers in September 2008, the bailout of A.I.G. proved to be among the biggest and thorniest of the financial crisis rescues. The company was on the brink of collapse because of deteriorating mortgage securities that it had insured through credit-default swaps.

Starting in 2010, the insurer embarked on a series of moves aimed at repaying its taxpayer-financed bailout, including selling major divisions. It also held a number of stock offerings for the government to reduce its stake, which eventually generated a roughly $22 billion profit.

Overseeing that comeback was a new chief executive, Robert H. Benmosche, a tough-talking longtime insurance executive. Mr. Benmosche has won plaudits, including from government officials, for his managing of A.I.G.’s public relations even as he helped nurse the company back to financial health.

But he and the rest of A.I.G.’s board must now confront an equally pugnacious predecessor in Mr. Greenberg.

In the case against the government, Mr. Greenberg, through his lead lawyer, David Boies, contends that the bailout plan extracted a “punitive” interest rate of more than 14 percent. The government’s huge stake in the company also diluted the holdings of existing shareholders like Starr, which at the time was A.I.G.’s largest investor.

“The government has been saying, ‘We’re your friend, we owned and controlled you and we let you go.’ But A.I.G. doesn’t owe loyalty to the government,” a person close to Mr. Greenberg said. “It owes loyalty to its shareholders.”

The government, Starr argues, used billions of dollars from A.I.G. to settle credit-default swaps the insurer had with banks like Goldman Sachs. The deal, according to the lawsuit, empowered the government to carry out a “backdoor bailout” of Wall Street.

Starr argued that the actions violated the Fifth Amendment. “The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency,” the Starr complaint says.

The Treasury Department declined to comment. A spokesman for the Federal Reserve Bank of New York, Jack Gutt, said, “There is no merit to these allegations.” He noted that “A.I.G.’s board of directors had an alternative choice to borrowing from the Federal Reserve, and that choice was bankruptcy.”

A federal judge in Manhattan agreed, dismissing the case in November. In an 89-page opinion, Judge Paul A. Engelmayer wrote that while Starr’s complaint “paints a portrait of government treachery worthy of an Oliver Stone movie,” the company “voluntarily accepted the hard terms offered by the one and only rescuer that stood between it and imminent bankruptcy.”

The United States Court of Appeals for the Second Circuit recently agreed to review the case on an expedited timeline. The judge in the United States Court of Federal Claims in Washington, meanwhile, has declined to dismiss the case and continues to await A.I.G.’s decision.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: AIG, Deny and Discover, Federal Bailout, Greenberg | 48 Comments »

Banking Shaping American Minds

Posted on January 3, 2013 by Neil Garfield

“I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence.” — Paul Volcker, former Fed Chairman, 2009

“We have allowed the borrower to get raped and then we have gone to the rapist for a course on sex education. Thus the investors (pension funds who will announce reductions in vested pensions) and the homeowners have been screwed on such a grand scale that the entire economy of our country and indeed the world have been turned upside down.” — Neil F Garfield, livinglies.me 2012

http://www.zerohedge.com/contributed/2013-01-03/banking-elite-are-not-only-stealing-our-wealth-they-are-also-stealing-our-min

Editor’s Comment: The article below is very much like my own recent article on privatized prisons and the inversion of critical thinking in favor of allowing economic crimes to have a special revered status in our society. Kim highlights the rampage allowed to continue to this day in which Banks are ravaging our society and supporting anything that will confuse us or indoctrinate us to accept outright theft from our society, our purses, and our lives.

It is this lack of critical thinking that has made it so difficult for homeowners to get credit on loan balances that are already paid down by parties who expressly waived any right to collect from the borrower. It is the reason Judges are so reluctant to allow homeowner relief because they perceive the fight as one in which the homeowners are only expressing buyer’s remorse on an otherwise valid transaction.

It is the reason why lawyers are reluctant to deny the debt, deny the balance, deny that a payment was due, deny the default, deny the note as evidence of any debt, deny the validity of the mortgage and counter with actions to nullify the instruments signed by confused and befuddled borrowers assured by the banks that they were making a safe and viable investment.

In most civil cases Plaintiff sues Defendant and Defendant denies most of the allegations — forcing the Plaintiff to prove its case. Not so in foreclosure defense. Lawyers, afraid of looking foolish because they have not researched the matter, refuse to deny the falsity of the allegations in mortgage foreclosure complaint, notice of default and notice of sale. Lawyers are afraid to attack sales despite decisions by Supreme Courts of many states, on the grounds that the sale was rigged, the bidder was a non-creditor submitting a credit bid, and the fact that the forecloser never had any privity with the homeowner, never spent a dime funding any mortgage and never spent a dime funding the purchase of a mortgage.

The quote from the independent analysis of the records in San Francisco County concluded that a high percentage of foreclosures were initiated and completed by entities that were complete “strangers to the transaction.” Why this is ignored by members of the judiciary, the media and government agencies is a question of power and politics. Why it MUST be utilized to save millions more from the sting of foreclosure is the reason I keep writing, the reason I consult with dozens of lawyers across the country and why I have moved back to Florida where I am taking on cases.

As a result of the perception of the inevitability of the foreclosure most court actions are decided in favor of the forecloser because of the presumption that the transaction was valid, the default is real, and that no forgery or fabrication of documents changes those facts. The forgeries and fabrications and robo-signed documents are bad things but the “fact” remains in everyone’s mind that the ultimate foreclosure will proceed. That “fact” has been reinforced by inappropriate admissions from the alleged borrower, who never received a nickle from the loan originator or any assignee.

The lawyers are admitting all the elements necessary for a foreclosure and then moving on to attack the paperwork. Theoretically they are right in attacking assignments and endorsements that are falsified, but if they have already admitted all the basic elements for a foreclosure to proceed, then the foreclosure WILL proceed and if they have any real damages they can sue for monetary relief.

But under the current perception carefully orchestrated by the banks, there are no damages because the debt was real, the borrower admitted it, the payments were due, the borrower failed to make the payments, and the mortgage is a valid lien on the property securing a note which is false on its face but which is accepted as true.

Even the borrowers are not seeing the truth because the people with the real information on the ones that are foreclosing on them. So borrowers, knowing they received a loan, do not question where the loan came from and whether the protections required by the truth in lending statute, RESPA and other federal and state lending laws were violated. We have allowed the borrower to get raped and then we have gone to the rapist for a course on sex education. Thus the investors (pension funds who will announce reductions in vested pensions) and the homeowners have been screwed on such a grand scale that the entire economy of our country and indeed the world have been turned upside down.

Deny and Discover is getting traction across the country, with a focus on the actual money trail — which is the trail of real transactions in which there was an offer, acceptance and consideration between the relevant parties. More and more lawyers are trying it out and surprising themselves with the results. Slowly they are starting to realize that neither the origination of the, loan as set forth in the settlement documents at closing nor the assignments and endorsements were real.

The debt described in the note does not exist and never did. Neither was it the same deal that the lender/investors meant to offer through their investment bankers.

The note and the bond have decidedly different terms of repayment. The payment of insurance and credit de fault swaps to the banks was a crime unto itself — a diversion of money that was intended to protect the investors. The balances owed to those investors would have been correspondingly reduced. The balances owed from the borrowers should be correspondingly reduced by payment received by the only real creditor.

Thus millions of homeowners have walked away from homes they owned on the false representation that the balance owed on their homes was more than they could pay. And the messengers of doom were the banks, depriving investors of money due to them and depriving the borrower of the real facts about their loan balances. Lawyers with only a passing familiarity have either told borrowers that they have no real case against the banks or they take a retainer on a case they know they are going to lose because they will admit things that they don’t realize are false. And Judges hearing the admissions, have no choice but to let the foreclosure proceed.

But that doesn’t mean you can’t come back and overturn it, get damages for wrongful foreclosure, and this is where lawyers have turned bad lawyering into bad business. There is a fortune to be made out there pursuing justice for homeowners. And the case far from the complexity brought to the table by the banks is actually quite simple. Like any other civil case or even criminal case, stop admitting facts that you don’t know are are true and which are in actuality false.

In every case I know of, where the lawyer has followed Deny and Discover and presented it in a reasonable way to the Judge, the orders requiring discovery and proof have resulted in nearly instant “confidential” settlements. Some lawyers and waking up and making millions of dollars helping thousands of homeowners —- why not join the crowd?

Banks Stealing Wealth and the Minds of Our Children

by JS Kim

In the past several years, people worldwide are slowly beginning to shed the web of deceit woven by the banking elite and learning that many topics that were mocked by the mainstream media as conspiracy theories of the tin-foil hat community have now been proven to be true beyond a shadow of a doubt. First there was the myth that bankers were upstanding members of the community that contributed positively to society. Then in 2009, one of their own, Paul Volcker, in a rare momentary lapse of sanity, stated “I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence.” He then followed up this declaration by stating that the most positive contribution bankers had produced for society in the past 20 years was the ATM machine. Of course since that time, we have learned that Wachovia Bank laundered $378,400,000,000 of drug cartel money, HSBC Bank failed to monitor £38,000,000,000,000 of money with potentially dirty criminal ties, United Bank of Switzerland illegally manipulated LIBOR interest rates on a regular basis for purposes of profiteering, and though they have yet to be prosecuted, JP Morgan bank, Goldman Sachs bank, & ScotiaMocatta bank are all regularly accused of manipulating gold and silver prices on nearly a daily basis by many veteran gold and silver traders.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: admissions, buyer's remorse, critical thinking, Deny and Discover, Florida, foreclosure defense, Kim, RESPA, TILA, Volcker | 23 Comments »

MIchigan Supreme CT: $3.75 Billion of Chase WAMU Mortgages Are Voidable

Posted on January 2, 2013 by Neil Garfield

Euihyung Kim v. JPMorgan Chase B[1] (1)

MCL 600.3204(3) states:

“If the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage.”

Editor’s Comment and Analysis: We are getting closer and closer as the Judges are seeing past the veil of fabricated paperwork and looking directly into the transactions checking whether there was offer, acceptance and consideration. All three are arguably not present in any of the so-called securitized mortgages because the offer made to the lender/investor is different from the offer made to the homeowner/borrower and the party seeking to assert ownership on the loan never funded the origination nor the purchase of the loan.

In this case the court in Michigan had a specific statute that merely states the obvious: if you are not the original mortgagee, you must prove up chain of title prior to the date of sale. In other words, without that, the “credit bid” is “voidable” which means that it is void if you challenge it. The court didn’t go all the way to saying the foreclosure sale was void, which I would have preferred.

I have personally spoken with the receiver for WAMU and I have read the Purchase and Assumption agreement between Chase, WAMU, the FDIC and the Trustee and noting could be clearer that their was no assignment of loans in that document. The receiver said he was mistaken when he signed the affidavit that Chase is using to say it acquired the WAMU loans “by operation of law.” Nothing could be further from the truth and the behavior of Chase, selecting loans to foreclose, shows that they themselves do not assert ownership over ALL the loans.

The receiver told me in no uncertain terms that if we were looking for an assignment of loans we would not find one because none exists either individually for each loan nor as a group. The purchase and assumption agreement together with other events (sharing in a tax refund) explains why the agreement says the consideration paid by Chase was zero. They “bid” $1.9 Billion but received more than that as their share of a tax refund due WAMU — a tax refund that had nothing to do with mortgages.

The story in the link below is the tip of the iceberg. The final ruling from the Michigan State Supreme Court rested on the specific statute quoted above. But that statute is inherently included in the recording requirement in all the states. Altogether the total of mortgages affected is, according tot he FDIC receiver is around $700 Billion.

While Chase can try to get or fabricate an assignment, the spotlight is on this transaction and it seems unlikely that anyone is going to sign anything from the U.S. Bankruptcy Court or the FDIC. Of course WAMU, now defunct, is unable to execute anything.

Analysis and Practice Tips: This case should definitely be used. But be careful. If it looks like you are knocking out Chase with no other creditor on the scene judges are going to act to prevent a windfall to homeowners. Somehow they will justify their decision unless, as the case progresses, you are able to show (through Deny and Discover) that the money for funding the purchase of $700 Billion in loans was never paid, which would technically mean that the estate of WAMU would need to be reopened to include the loans — which is impossible because of the claim of securitization in which WAMU reportedly sold all of those loans.

To whom and where were the loans sold and in what transaction? What was the consideration paid to WAMU. Answer: Nothing because they didn’t fund the origination of the loans to begin with. They had neither the capital nor available deposits with which they could make those loans.

So educating the Judge means leaving him/her with the notion that there IS a creditor that Chase tried to cheat — the lender/investors whose rights might be equitable or legal, possibly subject to a receiver being appointed and possibly subject to subrogation to prevent Chase from receiving windfall.

The measure of the right to subrogation is whether the claiming party is asserting rights that diminish the value of other claimants. Chase, who received hundreds of billions from insurance and credit default swaps and trillions in Federal bailout programs has no loss on any loan receivable — which is why an accounting from the MASTER SERVICER, Trustee and the other active participants needs to be produced to follow the money trail from investors to all the different places it went, breaking every rule in the book, to the extreme detriment of investors, the financial system, homeowners, workers, and consumers.

Here the investors put up the money, Chase put up nothing, WAMU probably put up nothing, which means the investors are owed the principal due on the loans — if there is any balance due because of payment of insurance, credit default swaps and federal bailouts.

Since the money trail does not lead to the REMIC, there is a high probability of double taxation against the investors because their agents diverted the money and the documents from the investors and their “REMIC” and did the transaction “off record.” That leaves the investors with a claim but no security since the mortgage is not likely to be considered subject to subrogation in favor of the investors — although that is a possibility.

The main point of this and recent articles published in the latest Florida Bar Journal is that in considering subrogation or any other equitable remedy, the claimant must prove “clean hands,” which is going well nigh impossible for nearly all the claimants on these mortgages. The Court is looking for who is REALLY out of the money and who is really going to lose money and how much that loss is going to be because subrogation will not support enhancing the position of the alleged subrogatee.

AND THAT is why Deny and Discover is such a powerful weapon to use against the banks. By challenging the offer, acceptance and consideration starting with the origination and all the way through the assignments you can force them to either fess up to the fact that no money exchanged hands on ANY of their deals. As the proxy for the borrower the investment banks invited investors to advance the money but the offer to the investors was substantially different than the one offered to the prospective borrower. They then named the payee incorrectly which should have been the investors or the REMIC if the money had actually come from a REMIC trust account designating that particular REMIC as the owner of the bank account.

This was done intentionally, fraudulently and improperly for one simple reason. They were going to claim the obvious impending losses as their own, thus depriving the investor of the protection they were promised through insurance and credit default swaps, and enabling the investment bank to retain the difference as “trading profits.”

When all is said and done, Chase can’t prove up any actual loss on these loans because they don’t have any losses. The Michigan court saw the opportunity for moral hazard in Chase’s argument and rejected it. So should the courts in all 50 states.

It is these facts that make the impending “settlements” so insignificant and hopeless for the millions of people who have been foreclosed and evicted on loans whose balances were either non-existent or a small fraction of what was demanded.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Actual Loss, Chase, clean hands, Deny and Discover, equitable remedies, Euihyung Kim v. JPMorgan Chase B[1] (1), Florida Bar Journal, Michigan Supreme Court, receiver, SUBROGATION, WAMU | 60 Comments »

Why the Fed Can’t Get it Right

Posted on December 26, 2012 by Neil Garfield

Fed Confused by Lack of Response from Banks on Yield Spread Offered

Editor’s Analysis and Comments: Bloomberg reports this morning that “Fed Flummoxed by Mortgage Yield Gap Refusing to Shrink.” (see link below)

In normal times lowering the Fed Funds rate and providing other incentives to banks always produced more lending and more economic activity. Bernanke doesn’t seem to understand the answer: these are not normal times and the cancerous fake securitization scheme that served as the platform for the largest PONZI scheme in human history is still metastasizing.

Why wouldn’t banks take advantage of a larger spread in the Fed funds rate versus the mortgage lending rates. Under the old school times that would automatically go to the bottom line of lending banks as increased profits. If we put aside the conspiracy theories that the banks are attempting to take down the country we are left with one inevitable conclusion: in the “new financial system” (sounds like the “new economy” of the 1990’s) the banks have concluded there would be no increase in profit. In fact one would be left to the probable conclusion that somehow they would face a loss or risk of loss that wasn’t present in the good old days.

Using conventional economic theory Bernanke is arriving at the conclusion that the spread is not large enough for banks to take on the business of lending in a dubious economic environment. But that is the point — conventional economic theory doesn’t work in the current financial environment. With housing prices at very low levels and the probability that they probably won’t decline much more, conventional risk management would provide more than enough profit for lending to be robust.

When Bernanke takes off the blinders, he will see that the markets are so interwoven with the false assumptions that the mortgage loans were securitized, that there is nothing the Fed can do in terms of fiscal policy that would even make a dent in our problems. $700 trillion+ in nominal derivatives are “out there” probably having no value at all if one were the legally trace the transactions. The real money in the U.S. (as opposed to these “cash equivalent” derivatives) is less than 5% of the total nominal value of the shadow banking system which out of sheer apparent size dwarfs the world banks including the Fed.

As early as October of 2007 I said on these pages that this was outside the control of Fed fiscal policy because the amount of money affected by the Fed is a tiny fraction of the amount of apparent money generated by shadow banking.

Oddly the only place where this is going to be addressed is in the court system where people bear down on Deny and Discover and demand an accounting from the Master Servicer, Trustee and all related parties for all transactions affecting the loan receivable due to the investors (pension funds). The banks know full well that many or most of the assets they are reporting for reserve and capital requirements or completely false.

Just look at any investor lawsuit that says you promised us a mortgage backed bond that was triple A rated and insured. What you have given us are lies. We have no bonds that are worth anything because the bonds are not truly mortgage backed. The insurance and hedges you purchased with our money were made payable to you, Mr. Wall Street banker, instead of us. The market values and loan viability were completely false as reported, and even if you gave us the mortgages they are unenforceable.

The Banks are responding with “we are enforcing them, what are you talking about.” But the lawyers for most of the investors and some of the borrowers are beginning to see through this morass of lies. They know the notes and mortgages are not enforceable except by brute force and intimidation in and out of the courtroom.

If the deals were done straight up, the investor would have received a mortgage backed bond. The bond, issued by a pool of assets usually organized into a “trust” would have been the payee on the notes at origination and the secured party in the mortgages and deeds of trust. If the loan was acquired after origination by a real lender (not a table funded loan) then an assignment would have been immediately recorded with notice to the borrower that the pool owned his loan.

In a real securitization deal, the transaction in which the pool funded the origination or purchase of the loan would be able to to show proof of payment very easily — but in court, we find that when the Judge enters an order requiring the Banks to open up their books the cases settle “confidentially” for pennies on the dollar.

The entire TBTF (Too Big to Fail) doctrine is a false doctrine but nonetheless driving fiscal and economic policy in this country. Those banks are only too big if they are continued to be allowed to falsely report their assets as if they owned the bonds or loans.

Reinstate generally accepted accounting principles and the shadow banking assets deflate like a balloon with the air let out of it. $700 trillion becomes more like $13 trillion — and then the crap hits the fan for the big banks who are inundated with claims. 7,000 community banks, savings banks and credit union with the same access to electronic funds transfer and internet banking as any other bank, large or small, stand ready to pick up the pieces.

Homeowner relief through reduction of household debt would provide a gigantic financial stimulus to the economy bring back tax revenue that would completely alter the landscape of the deficit debate. The financial markets would return to free trading markets freed from the corner on “money” and corner on banking that the mega banks achieved only through lies, smoke and mirrors.

The fallout from the great recession will be with us for years to come no matter what we do. But the recovery will be far more robust if we dealt with the truth about the shadow banking system created out of exotic instruments based upon consumer debt that was falsified, illegally closed, deftly covered up with false assignments and endorsements.

While we wait for the shoe to drop when Bernanke and his associates can no longer ignore the short plain facts of this monster storm, we have no choice but to save homes, one home at a time, still fighting a battle in which the borrower is more often the losing party because of bad pleading, bad lawyering and bad judging. If you admit the debt, the note and the mortgage and then admit the default, no amount of crafty arguments are going to give you the relief you need and to which you are entitled.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: assiignments, Bernanke, Deny and Discover, endrosements, false securitization, Fed, Federal reserve, mortgage bonds, origination of loans, Payee, SECURED PARTY, shadow banking, TBTF, too big to fail | 64 Comments »

Ron Ryan Takes to the Next Level, Taking the Offensive

Posted on November 23, 2012 by Neil Garfield

COMPLAINT TO DETERMINE EXTENT AND VALIDITY OF LIEN AND ETC Doc 1 Filed 01-16-12

Ron Ryan , Esq. lives and works in Tucson, Az. He has been working, analyzing and writing and representing people whoa re the victims of this huge scam which the banks and media call securitization that never actually happened. He practices almost exclusively in bankruptcy and while he understood the basic elements of what was happening he struggled to put it into wording and allegations that the Court would be hard-pressed to ignore.

I think he succeeded in these two pleadings, and I suggest that you read them carefully. While he admits that a “loan” existed he takes apart the origination, assignment and securitization piece by piece leaving US Bank naked in the wind.

I congratulate him on a job well done.

See

RESPONSE TO MOTION TO DISMISS COMPLAINT CONNELLY VS USB AS MBS TRUSTEE

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Attacking the lien, credit bid, creditor, Deny and Discover, perfected lien, standing, unperfected lien | 73 Comments »

Banks Keep Winning, But Borrowers Are Picking Up the Pace

Posted on November 19, 2012 by Neil Garfield

wall-street-kept-winning-on-mortgages-upending-homeowners.html

Editors’ Analysis: Based upon reports coming from around the country, and especially in Florida, Nevada, New York, and other states, it seems that while the tide hasn’t turned, borrowers are finally mounting a meaningful challenge to the improper, illegal and fraudulent practices used at loan originations , assignments and foreclosures. As I have discussed with dozens of attorneys now, the strategies I suggested 6 years ago, once thought of as “fringe” are now becoming mainstream and the banks are feeling the pinch if not the bite of homeowners’ wrath.

The expression I like to use is that “At the end of the day everyone knows everything.” By using DENY and Discover tactics or strategies like that, borrowers are shifting the urden of persuasion onto the would-be foreclosers who in most cases do not have “the goods.” They are not a creditor, they didn’t fund the loan, they didn’t buy the loan and they don’t have any legal authorization to pursue foreclosure, submit a credit bid or otherwise trade in houses that were never subject to a perfected lien, and never owned by them.

It is becoming perfectly clear that something wrong is happening when the foreclosure strategies of the Wall Street puppets results in tens of thousands of homes being abandoned, blighting entire neighborhoods, towns and even cities. The banks are not stupid, although arrogance is not far from stupidity.

In ordinary times in any ordinary recession, the banks would do almost anything to avoid foreclose. They simply don’t have the money or the desire to acquire a portfolio of properties and they certainly don’t want to foreclose where the the end result is that the value of the collateral is diminished BELOW ZERO. And they certainly would not pursue policies that they knew would tank housing prices because it would only decrease the value of the loan and the likelihood of getting repaid for the loans they made.

But these are not ordinary times. Banks DO want price declines, so they can create REITS and other vehicles to pick up cheap properties. They DO want foreclosures even where the value of a blighted neighborhood is not worth the taxes, maintenance and insurance to keep the properties.

The reason is simple: if the loan is a total failure and under applicable state law they are able to create the appearance of a valid foreclosure, then the case is closed. Investors have not questioned the foreclosure process, mostly because they think that the basic problem was in the low underwriting standards which certainly did contribute to the mortgage meltdown. If you look at most of the mortgages they have fatal flaws which increase the likelihood that the loan will fail — especially with blacks and other minorities who have been deprived of decent education and couldn’t possibly understand the deals they were signing.

Disclosure was required — but never made in terms that the borrowers understood — that the loans were being priced too high for the income of the household, and priced higher that the rates for which the household qualified. Blacks were 3.5x more likelihood to be steered into subprime loans when they qualified for conventional loans. People of Latin decent were treated like trash too being presented with documents that not only went above their education or sophistication in real estate transactions but also used words they never learned in English.

But the real reason I learned in my interviews was unrelated to the defective foreclosures. It goes back to the study made by Katherine Ann Porter when she was at the University of Iowa. Her study of thousands of mortgages and foreclosures came to the inescapable conclusion that at least 40% of all the origination documents were intentionally destroyed or claimed as lost. Other studies have shown the figure to be higher than 65%.

In ordinary times the promissory note executed by the borrower in a conventional residential loan is a negotiable document supported by consideration from the payee who loaned money to the borrower. These notes were given to a custodian of records whose job was to preserve and protect these papers because they were considered by all accounting standards as CASH EQUIVALENT.

So on the balance sheet of the lender the cash was added to cash equivalents as total liquidity of the lender or bank. [What you are looking for on the balance sheet of the “lenders” are “loans receivable” and corresponding entry on the liability side of a reserve for bad debt. You won’t find it in the “new mortgages” because they never had the real stake or risk of loss on that loan and therefore was excluded entirely from the balance sheet or placed in a category in loans held for sale along with a footnote or entry that zeroed out the asset of loans for sale because they were committed to third parties who had table funded the loan contrary to the express rules of TILA and Reg Z which state that the loans are presumptively predatory loans if the pattern of lending was table funded loans.] See My workbooks on www.livinglies-store.com

The notes were considered liquid because there was always a secondary market in which to sell the notes and mortgages. And there, the proper chain of authorized signatures, resolutions, and endorsements was carefully followed, same as they would require from any borrower claiming an asset as proof of their credit-worthiness.

So why would any bank or any reasonable person intentionally destroy the original documents that constituted by definition the origination of the loan collateralize by a supposedly perfected lien? In my seminars and workbooks I answer this question with an example: “If you tell someone you have a hundred dollar bill and that they can have it if they buy to from you for $100, but that you will hold onto it because you will make some more money for them by lending it out, then the fraud is complete. And there you have the beginning of a PONZI scheme.

As long as you are paying them as though they had $100 invested, they are happy. But what if you were holding a $10 bill and not a $100 bill. What if they took your word for it that you were holding a $100 bill. AND what if now they want to see the $100 bill? Now you have a problem. You have no $100 bill to show them. You never did. For a while you could take incoming investor money and then show the original investor the money but when investors stop buying new deals, then you don’t have the $100 bills to show everyone you dealt with because all you ever had was a $10 bill.

So better to say that you destroyed it under the premise that the digitized copy would suffice or lost it because of the complexity of the securitization process than to admit that you never had it to begin with. If you admit it, you go to jail and you are ordered to pay restitution, your assets seized and marshaled to return as much money as possible to the victims of the PONZI scam.

If you don’t admit it, then there is the possibility that after probing why the investors didn’t get their money back, they start discovering how you were using their money, and what you were doing as business plan. The only way to shut that off and make it least likely that investors would ever question whether you had represented the deal correctly at the beginning, to avoid criminal prosecution, is to COMPLETE the FORECLOSURE Process which gives the further appearance that there is an official state government seal of approval on a perfectly illegal foreclosure and probably an economic crime.

See below for the suffering and light and lives lost because of this incredible crime that nobody seems to want to prosecute. A crime, by the way, they has corrupted title records that will haunt us for decades to come.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: blacks, Deny and Discover, destroyed documents, discrimination in lending, evidence, foreclosure process, housing prices, investors, latins, mortgage meltdown, subprime loans, wrongful foreclosures | 36 Comments »

Woman Wins Home and Forecloses on Wells Fargo

Posted on November 15, 2012 by Neil Garfield

Read the full story and see the video at Action News Jax.

Editor’s Comment: We have seen some of these stories before. What is disconcerting is that the press is not getting the point — some homeowners are winning their cases and getting their house free and clear. The reason is simple: if you try to make the case that you should get a free house, then you are going to lose. But if you attack the would-be forecloser where it hurts, then your chances of getting a favorable result are immeasurably increased. Mark Stopa got 14 Judges to (a) deny the forecloser’s motion for summary judgment and (b) grant final summary judgment to the homeowner. It does happen.

In the final analysis the strategy and tactics are the same as in any civil case — deny each and every allegation that you know is absolutely true, like your name. If you don’t know if the note and mortgage are legitimate or if they are showing a copy of the note and mortgage (or deed of trust) that might be fabricated, deny it. The burden is on the party seeking affirmative relief. Too many times, I see homeowners and attorneys give away the store when they are asked whether there is any issue about the obligation, note or mortgage. Their reply is no “but”….

The fact is there is no “but.” You either deny their right to foreclose or you admit it. If you admit it, then all the argument in the world won’t allow you to win. The Judge has no choice but to allow the foreclosure if your admission, tacit or expressed, goes to all the elements required for a foreclosure.

For reasons that I do not understand the same lawyer that will summarily deny virtually all allegations in the complaint for anything other than a foreclosure action, will be very timid and uncertain about denying allegations and validity of the exhibits in a foreclosure. If you attack the foreclosure after admitting that the elements are there based upon UCC or other arguments attacking the documentary trail, you will most likely lose — unless you accidentally stumble upon an argument that deals with the money trail.

That is why I am continually pushing lawyers and pro se litigants to get advice from lawyers that allows them to deny the validity of the allegations of a judicial foreclosure and deny the validity and authenticity of the substitution of trustee, notice of default and notice of sale in the non-judicial states.

Say as little as possible. The more you allege, the more the burden is on you to prove things that only the other side has in the way of information. I have previously posted an article about that.

The judicial doctrine applies that where the information is exclusively in the care, custody and control of the the opposing side then the mere allegation from you will be sufficient to shift the burden of persuasion onto the forecloser — and their case generally will collapse.

Jacksonville Business Journal by Michael Clinton, Web Producer

In a strange twist of events, a St. Augustine woman has filed foreclosure on a local branch of Wells Fargo after a judge ruled she could keep her home.

The bank tried to foreclose on Rebecca Sharp’s home, but a judge ruled she could keep it and the bank owed her nearly $20,000 for attorney’s fees — eight months later, the bank still hasn’t paid, Action News Jax reports.

“Foreclosure cases are based on borrowers not paying bills. Now, Wells Fargo has not paid its bills. There’s an irony there,” Sharp’s attorney Tom Pycraft told Action News.

Wells Fargo (NYSE: WFC) is the third-largest bank in Northeast Florida, with $5.5 billion in area deposits and a market share of 12 percent.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: burden of persuasion, BURDEN OF PROOF, CALIFORNIA, denial, Deny and Discover, documentary trail, Florida, money trail, Nevada, Ohio, summary judgment, Wells Fargo, winning | 18 Comments »

More Bailouts Coming

Posted on November 15, 2012 by Neil Garfield

Editor’s Comment: Ignoring the obvious, Federal Agencies and the Courts are compounding the problems caused by the sham securitization scheme that covered up the largest PONZI scheme in history. And the taxpayers are paying for it. Investors are losing money and homeowners are losing money and their homes as the plain fact of defects in the origination documents are ignored, except when it comes to agencies and institutions suing each other, all alleging the same thing — the documents are unenforceable.

This isn’t just a paperwork problem, which is why I keep saying that while the UCC arguments have merit they are not dispositive of the real issues. The paperwork is bad because banks intentionally created a scheme that they never would have accepted from borrowers — using layers and ladders of corporate veils to hide the real parties in interest.

They diverted the investor money into their own piggy banks and they diverted the origination documents from the investors because they had plans for that paperwork — plans that required them to be able to “prove” they owned the loan and therefore could trade the loans, sell them, hedge them, insure them and even take Federal bailouts because of “defaults” on loans the mega banks never made nor purchased.

Now the FHA is going to need extra money to make good on guarantees on toxic documents that are not necessarily bad loans but were insured at the mortgage bond level. The banks are getting paid over and over again as they laugh all the way to their accounts in the Cayman Islands.

But it doesn’t end there. The investors were mostly managed funds for retirement including vested pension funds that in some cases have reduced the assets held by the fund so drastically that they have already declared themselves “underfunded” which is another way of saying they are insolvent. Some are insured and some are not. But either way, if pensioners and retirees are going to get the income they counted on in retirement the funds are going to need money. And there is no place to get it except from the Federal government.

The accounting for the loans excludes any information from the Master Servicer (the only party with ALL the information about the loan and the money and the documents) and specifically the third party payoffs received by the banks who at all times were, whether they like it or not, acting as agents of the investors. The money the banks made belongs to the investors — the managed retirement funds; but they are not getting it except if they sue for fraudulent representations made at the time of the sale of the bogus “mortgage-backed” bonds.

If the investors did get their share of the money that was paid by insurance, credit default swaps, other hedges and federal bailout, they would not have lost nearly as much as they did in the value of their assets and they probably would not be “underfunded.”

But this creates the politically unacceptable consequence of lowering the amount due on each obligation owed to the investor — a benefit that would inure to the benefit of homeowners who are one of the obligees on those debts.

Somehow we have arrived at the conclusion that it is better to reward the perpetrator of the crime rather than give restitution to the victims. Somehow we have arrived at the conclusion that the windfalls should continue going the way of the banks instead of the investors and borrowers.

Just looking at all the actions filed by agencies and institutions there is a clear consensus that the loans were bad from the start. They named the wrong (strawman) payee, they named the wrong mortgagee/beneficiary (strawman) and they never disclosed or referred to the real obligation to the investors as set forth in the mortgage bond which was the ONLY reason the investors advanced the money.

This is why I am pushing DENY AND DISCOVER as the principal strategy to pursue coupled with discovery aimed not at the document trail but at the money trail where the would-be forecloser must show that the origination documents accurately recited the the true facts of the transaction and where the assignments were transferred for “value received.” When you ask for proof of payment, wire transfer instructions, wire transfer receipts, they are completely absent in assignments and in the origination they clearly show that the loan was never funded by the party “disclosed” as the lender at closing. They never show the terms of repayment as set forth in the bond. And therefore they leave the borrower and all other people or entities with a stake in the property after that transaction in a state of limbo because there is no clear path to clear title.

Too many cases are being lost in all forums because pro se litigants and lawyers and Judges are too willing to take the word of the party in the room that they MUST be the creditor — why else would they be there? It is because in most cases they are getting a free house when they were playing with investor money and they have created the losses to the investors, the homeowners and the taxpayers.

The government should claw back the money paid to the banks and claw back the profits they made using investor money to gamble with. The accounts should be settled with the investors and then allocated to the debts of each borrower to see what balance, if any, is left. The losses will largely vanish just be applying existing law and long-standing standards of accounting and bookkeeping. The resulting balance, if any can easily be paid off by borrowers who will again have some equity in their homes because of the vast amount of over-payments received by the banks which they paid out in bonuses to their employees for their participation and silence in the PONZI scheme. As soon as the investors stopped buying the the bogus mortgage bonds the scheme collapsed — the hallmark of every illicit scheme based not on on real business but rather the appearance of of doing business.

F.H.A. Audit Said to Show Low Reserves

By GRETCHEN MORGENSON, NY Times

The Federal Housing Administration’s annual report is expected to show a sharp deterioration in the agency’s financial condition, including a shortfall in reserves, the result of escalating losses on the $1.1 trillion in mortgages that it insures, according to people with knowledge of the entity’s operations.

The F.H.A., the Department of Housing and Urban Development unit that insures home mortgages, reports on its capital reserves at the end of each fiscal year and makes projections for its financial position in the coming year. If the report, due later this week, showed that the F.H.A.’s capital reserves had fallen deep into negative territory, it would be a stark reversal from projections last year that it would show a positive economic value of $9.4 billion in 2012.

Capital reserves are kept to cover future losses. Outsiders have questioned whether the agency would some day need an infusion from Treasury if its reserves are insufficient.

Alex Wohl, a spokesman for the F.H.A., said, “We’re not going to comment on it until the actuarial report comes out on Friday.”

This year, the F.H.A. has tried to improve its financial position by raising the premiums that it levies on loans and increasing its volume significantly. But those efforts may have been negated by rising loan losses, even on mortgages that it insured long after the credit crisis took hold.

More than one in six F.H.A. loans are delinquent 30 days or more, according to Edward Pinto, a resident fellow at the American Enterprise Institute who specializes in housing. Delinquencies increased by 166,000 from June 30, 2011, to September 2012, he said, a 12 percent increase. Loans insured by the F.H.A. often allow very small down payments of 3.5 percent of the purchase price.

“There’s a fundamental problem with the F.H.A.,” Mr. Pinto said. “Its loans are too risky and that has to be addressed. It’s not the legacy book that’s creating all the problems. It’s beyond that.”

Brian Chappelle, a former F.H.A. official who is now at Potomac Partners, a mortgage consulting firm, said that he had not seen the audit report but that he had been told some of the shortfall resulted from less optimistic projections for home prices than were in last year’s audit.

“In and of itself, it doesn’t mean that they’re going to need a draw from the Treasury,” he said.

At the same time, “there is no question that F.H.A. was going to suffer,” he added. “The amazing thing is that F.H.A. stayed solvent for as long as it did.”

The F.H.A. is subject to a statutory capital requirement of 2 percent of loans, or about $22 billion on its $1.1 trillion portfolio. An economic value of negative $5 billion to $10 billion would leave the F.H.A. $27 billion to $32 billion short of this statutory requirement, Mr. Pinto said. This would be the fourth consecutive year that F.H.A. has failed to meet the requirement, he added.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: 401k, credit default swaps, Deny and Discover, Federal Agencies, Federal bailouts'pension funds, FHA, insurance, IRA, mortgage backed bonds, Ponzi, securitization, taxpayers, underfunded pension funds | 4 Comments »

The Truth About TILA

Posted on November 13, 2012 by Neil Garfield

TILA Summary Part 1 11-13-12

“Victims can receive up to $125,000 in cash or, in some cases, get their homes back. But the review has already been marred by evidence that the banks themselves play a major role in identifying the victims of their own abuses, raising the question of whether the review is compromised by a central conflict of interest.”

Editor’s Comment and Analysis: There have been so many questions and misconceptions about TILA that I thought it would be a good thing to summarize some aspects of it, how it is used in forensic examination and the limitations of TILA. Note that the absence of a prohibition in TILA or the apparent expiration of TILA does not block common law actions based upon the same facts and some states have more liberal statutes of limitations. TILA is a federal law called the Truth in Lending Act. It’s principal purpose according to all accounts and seminars given on the subject is to provide the borrower with a clear choice of lenders with whom he/she wants to do business and clear terms for comparison of terms offered by each lender. It is also designed to smoke out undisclosed parties who are receiving compensation and it has real teeth in clawing back such undisclosed compensation.

Undisclosed compensation is very broadly defined in TILA so it is fairly easy to apply to anyone who made money resulting from the purported loan transaction, and the clawback might include treble damages, attorneys fees and other relief. Note that rescission does NOT mean you must offer up the house (“give it back”) to the lender. The lender, if there was one, gave you money not a house. rescission is a reversal of that transaction which means you must tender (according to the 9th Circuit) money in exchange for cancellation of the transaction. If you follow the rules, a TILA rescission eliminates the note and mortgage by operation of law, so while you have the right to demand and sue for return of the note as paid and satisfaction of the mortgage (release and reconveyance in some states). Unless the “lender” files a Declaratory action (lawsuit) within 20 days of your demand for rescission, the security is gone and can be eliminated in bankruptcy.

Use of the rescission remedy can be employed in bankruptcy actions as well where the Judge has wide discretion as to what constitutes “tender” (including a payment plan). Some Judges have interpreted the statute as it si written which does not require tender. The 9th Circuit disagrees.

As to the statute of limitations, it simply does not apply if the “lender” has intentionally mislead the borrower, committed fraud or otherwise withheld information that is deemed fundamental to the disclosures required by TILA. This is the most common error committed by borrowers and their attorneys. In most cases the table funded loan is “predatory per se” and gives you a leg up on the allegation of fraud or misrepresentation at closing.

Fraud may be fraud in the inducement (they told you that even though your payments would reset to an amount higher than your household income has ever been, you would be refinanced, get even more money and be able to fund the payments through additional equity in the house).

Fraud may be in the execution where you signed papers that you didn’t realize was not the deal you were offered or which contained provisions that were just plain wrong. If you thought that you were getting a loan from BNC and the loan was in fact funded by another entity unrelated and undisclosed, then your legal obligation to repay the money naturally goes back to the the third party. But the presence of the third party indicates a table funded loan, which is predatory per se; and the terms of repayment are different from what was offered or what was agreed to by the lender acting through the investment banker that was creating (but not necessarily using) REMICs or trusts. In plain words the mortgage bond and the prospectus, PSA and other securitization are at substantial variance from what was put on the note, including the name of the payee on the note and the name put on the security instrument (Mortgage or deed of trust).

The office of the controller has published a series of papers describing the meaning and intent of TILA and to whom it applies, even pre Dodd-Frank.

For example, it describes “Conditions Under Which Loan Originators Are Regulated as Loan Underwriters.” Thus the use of a strawman is expressly referred to in the OCC papers (see below) and there are specific indicia of whether an entity is in fact a loan underwriter, which is the basis for my continual statement that a loan originator is not a lender (pretender lender) and the very presence of a loan originator on the paperwork is a violation of TILA tolling any state of limitations.

If the loan originator is not a bank or savings and loan or credit union, then the highest probability is that the name on the note and the name on the mortgage is wrong. They didn’t loan the money. Your signature was procured by both fraud in the inducement and fraud in the execution, because it was predicated upon that payee giving a loan of money. “Arranging” the loan from a third party doesn’t count as being a lender. It counts as being a licensed broker or the more vague term of loan “originator.” The arguments of the banks and servicers to the contrary are completely wrong and bogus.If they were right, for purposes of collection and foreclosure that the origination documents were enforceable then that would mean that there would be a window immediately following closing where you could not actually rescind or even pay off the obligation because the originator has no right, justification,, power or excuse to execute a release and reconveyance. The loan already belonged to someone else and the paperwork was defective, which is why investors are suing the investment bankers alleging principally that they were victims of fraud: they were lied to about what was in the REMIC, lied to about what was going into the REMIC, and then even the claimed paperwork on defaulted and other loans were not properly assigned because they never started with the actual owner of the obligation.

Thus the theory put forward by banks and servicers and other parties in the foreclosure scheme that the origination documents are enforceable falls flat on its face. Those documents, taken on their face were never supported by actual consideration from the named parties. If the investment banks weren’t playing around with investment money deposited with them by managed investment funds, the name of the REMIC or group of investors would be on the origination documents.

In the case where the originator is a bank, one must look more closely at the transaction to see if they ever booked the loan as a loan receivable or if they booked the transaction as a fee for services to the investment bank. This is true even where mega banks appear to be the originators but were not the underwriters of the loan.

If you are looking for the characteristics of a loan underwriter, versus a loan originator the OCC paper provides a list. In the case of banks the presence of some of these characteristics may be irrelevant in the subject transaction if they treated the “securitized” loan differently through different departments than their normal underwriting process. There such a bank would appear to be a loan underwriter, but when you scratch the surface, you can easily see how the bank was merely posing as the lender and was no better than the small-cap originators that sprung up across the country who were used to provide the mega banks with cover and claims to plausible deniability as to the existence of malfeasance at the so-called closing:

Risk Management Officers in Senior Management: In the case of small cap originators it would be rare to find anyone that even had the title much less acted like a risk management officer. In the case of banks, the presence in the bank of such an officer does not mean that he or she was involved in the transaction. They probably were not.

Verification of employment: There are resources on the internet that enable the bank to check the likelihood of employment, as well as the usual checking for pay stubs and calling the employer. In a matter of moments they can tell you if a person who cleans homes for a living is likely to have an income of $15,000 per month. Common sense plays a part in this as well. This was entirely omitted in most loans as shown by operation “hustle” and other similar named projects emphasized that to retain employment and get out-sized bonuses far above previous salaries the originator employee must close the loan, no matter what — which led to changing the applications to say whatever they needed to say, often without the borrower even knowing about the changes or told “not to worry about it” even though the information was wrong.

Employment conforms to income stated. See above. I have seen cases where a massage therapist making $500 per month was given a seven figure loan based upon projected income from speculative investment that turned out to be a scam. She lost two fully paid for homes in that scam. If normal underwriting standards had been employed she would not have been approved for the loan, the scam would never have damaged her and she would still be a wealthy woman.

Verification of value of collateral. Note that this is a responsibility of the lender, not the borrower. Quite the reverse, the borrower is relying reasonably that the appraisal was right because the bank verified it. In fact, the appraiser was paid extra and given explicit instructions to arrive at an appraised value above the amount required, usually by $20,000. By enlarging the apparent value of the collateral, the originators were able to satisfy the insatiable demand from Wall Street for either more loans or more money loaned on property. In 1996 when they ran out of borrowers, they simply took the existing population of borrowers and over-appraised their homes in refinancing that took place sometimes within 3 months of the last loan at 20% or more increase in the appraisal. That was plainly against industry standards for appraisals and obvious to anyone with common sense that the value could never have been verified. If you look at companies like Quicken Loans you will see on some settlements that they were not content to get overpaid for originating bad loans, they even took a piece of the appraisal fee.

Verification of LTV ratios. Once the appraisals were falsified it was easy to make the loan look good. LTV often showed as 20% equity when in fact the value, as could be seen in some cases weeks after the closing was 20% or more lower than the the amount loaned. Many buyers immediately lost their down payment as soon as they thought the deal was complete (it wasn’t really complete as explained above). Because of the false appraisal, at the moment of closing their down payment was devalued to zero and they owed more money than the home was actually worth in real fair market value terms. Normal industry practice is to have a committee that goes through each loan verifying LTV because it is the only real protection in the event of default. In most cases involving loans later subject to claims of securitization, the committee did not exist or did not review the loan, the verification never happened and the only thing the originator was interested in was closing the loan because the compensation of the originator and their own salary and bonuses were based purely on the number or amount of “closed” loans.

Verification of credit-worthiness of buyers. This is an area where many games were played. Besides the verification process described above, the originator was able to receive a yield spread premium that was not disclosed to the borrower and the investment bank that “sold” the loan was able to obtain an even larger yield spread premium that was not disclosed to the borrower. It is these fees that I believe are subject to clawback under TILA and RESPA. In the Deny and Discover strategy that I have been pushing, once the order is entered requiring the forecloser to produce the entire accounting from all parties associated with the loan, the foreclosure collapses and a settlement is reached. This can often be accomplished in a less adversarial action in Chapter 11.

Verification of income and/or viability of loan for the life of the loan. This has a huge impact on the GFE (Good faith estimate) especially in adjustable rate mortgages (ARMs) and negative amortization mortgage loans (teaser rates). Plainly stated the question is whether the borrower would qualify for the loan based upon current income for when the loan resets. If the answer is no, which it usually is, then the life of the loan is a fabricated figure. Instead of it being a 30 year loan, the loan becomes much shorter reduced to the moment of reset of the payments, and all the costs and points charged for the loan must be amortized over the REAL LIFE of the loan. In such cases the “lender” is required to return all the interest, principal and other payments and other compensation received from all parties, possibly with treble damages and attorney fees. It’s pretty easy to prove as well. Most people think they can’t use this provision because of misstatements on the application. The obligation to verify the statements on the application is on the underwriter not the customer. And the law was written that way to cover just such a situation as this. If you paid 3 points to close and it was added to your loan or you paid in cash those points would substantially raise your effective APR or even stated interest rate if the loan life was reduced to two years. In many cases it would rise the level of usury, where state law provides for that.

Vendor management: This is where even before Dodd-Frank you could catch them in the basket of allegations. The true management of the vendors lay not with the originator but with the investment banker who was selling mortgage bonds. This alone verified that the party on the note and named on the mortgage was an originator (strawman) and not an underwriter. And the accounting that everyone asks for should include a demand for an accounting from the investment banker and its affiliates who acted as Master Servicer, Trustee of a “pool,” etc.

Compliance programs and audits: Nonexistent in originators and the presence of such procedures and employees is not proof that they were part of the process. Discovery will reveal that they were taken out of the loop on loans that were later claimed to be subject to claims of securitization.

Effective Communication Systems and Controls: The only communication used was email or uploading of flat files to a server operated or controlled by the investment banker, containing bare bones facts about he loan, absent copies of any of the loan closing documents. This is how the investment bankers were able to claim ownership of the loans for purposes of foreclosure, bailouts, insurance, and credit default swaps when the real loss was incurred by the investors and the homeowners.

Document Management: I need not elaborate, after the robo-signing, surrogate-signing, fabrication and forgeries that are well documented and even institutionalized as custom and practice in the industry. The documents were lost, destroyed, altered, fabricated and re-fabricated, forged in vain attempts to make them conform to the transaction that is alleged in foreclosures, but which never occurred. The borrowers and their lawyers are often fooled by this trick. They know the money was received, so their assumption was that the originator gave them the loan. This was not the case, In nearly all cases the loan was table funded — i.e., funded by an undisclosed principal access to whom was prohibited and withheld by the servicer, the originator and everyone else. AND remember that under Dodd-Frank the time limits for response to a RESPA 6 (QWR) inquiry have been reduced to 5 days and 30 days from 20 days and 60 days respectively.

Submission of periodic information to appropriate regulatory agencies that regulate Banks or lenders: If the originator did not report to a regulatory agency, then it wasn’t a lender. If it did report to regulatory agencies the question is whether they ever included in any of their reports information about your loan. In most cases, the information about your loan was either omitted or falsified.

Compliance with anti-fraud provisions on Federal and State levels: This characteristic would be laughable if wasn’t for the horrible toll taken upon millions of homeowners and tens of millions of people who suffered unemployment, reduced employment and loss of their retirement funds.

In house audits to assess exposure for financial loss through litigation, fraud, theft, loss business and wasted capital from failed strategic initiatives: The simple answer is that such audits were and remain virtually non-existent. Even the so-called foreclosure review process is breaking all the rules. But it wouldn’t hurt to ask, in discovery, for a copy of the plan of the audit and the results. The fact is that most banks involved in the PONZI scheme that was called “Securitization” are still not reporting accurately, still reporting non-existing or overvalued assets and still not reporting liabilities in litigation that are even close to reality.

See the rest of the OCC Paper:

TILA Appendix Worksheets 11-13-12

TILA worksheets -2 — 11-13-12

Tenant Protection OCC 11-13-12

RESPA and Worksheets 11-13-12

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: Deny and Discover, GFE, good faith estimate, OCC White Paper, RESPA, Tenant Protection, TILA, TILA Summary, truth in lending | 18 Comments »

Incredible “Hustle”: JPM Moves Exec Who Defrauded Fannie and Freddie to Defrauding Borrowers Again

Posted on November 12, 2012 by Neil Garfield