Miami Sues JPMorgan Over Discriminatory Lending Practices

As further corroboration of the articles on this site and an infinite number of mainstream and not-so-mainstream sites, the banks sold mortgage bonds to investors under the presumption that the risk of loss was nearly zero. If done properly, securitization works. It gives a greater opportunity to more people to get home loan and other kinds of credit financing. And we now know that the primary target of many campaigns was to get new “customers” to take a loan (even if the bank wouldn’t give them a bank account) and in a huge number of cases consisted of those people who were faced with language, education and cultural challenges. Any fool would know that if you are going to do business who are restricted by such challenges, things are not likely to turn out as planned. The City of Miami thinks there is something wrong with that plan. So do I.

It is easy to see why scam artists would target such people. They are easy to convince because the con man convinces them he or she is trustworthy. The “customer” comes to rely on the seller for information about whatever it is he or she is selling. In conventional terms it might be selling insurance on a weekly payment basis or selling an annuity for a large down payment made from the proceeds of life insurance. The insurance turns out not to be real or, in less pernicious cases, the insurance doesn’t cover nearly what was promised by the seller. In any event the Seller makes money because the customer gives money to him or her. The money goes into his or her pocket and they are able to live off their ill-gotten gains.

All this gets a whole lot less obvious when the “seller” is trying to “give” money to the customer and have the customer sign loan papers. Why would anyone give up the money knowing that the loan has a larger risk of failing because the customer is challenged in some ways that make it less likely they will have employment, less likely they will have savings and less likely that they will be able to pay the interest, much less the principal amount “loaned?” It sounds like a fool’s errand — lending money to people who are not likely to pay the money back. And yet, the banks did exactly that and employed tens of thousands (10,000 convicted felons in Florida alone) to sell such loans.

The key question is not whether the banks did it to make money. The answer is obvious. Of course they were making money — but how when they were getting agreements to pay the loan from people who would never pay it back — often because after the teaser period was over it was obvious on its face that nobody in their financial circumstance could pay more than their entire household income? The only rational answer is that the banks had no risk and that they made all their money on the front end AND when the loan failed by betting against the loans they were selling to unsuspecting investors. And the only way they could pull off that maneuver is to intervene in the lending process such that the investor and borrower never meet up. And the only way they could avoid disgorgement of their illegally obtained profits from “proprietary trading” and “fees” is to foreclose on as many mortgages as possible.

So when you take the entire program on its face, you can see that foreclosure was an integral part of their profit model because it cuts off the rights of borrowers, investors, insurers etc. from demanding disgorgement of illegally obtained compensation that was never disclosed at closing — an absolute requirement under the Truth in Lending Act. And they knew the day would come when everything would collapse and the proof of that is that they were betting on exactly that to happen.

And they knew that they would be destroying documents, “losing” documents etc such that they would be fabricating those documents with such advanced technology that the borrower never realized that he was being shown a document he had never seen before, much less signed. And finally, they knew they would be fined and censured. No matter — they simply used investor money again to pay fines and damages that were caused by the banks put are being paid by still unsuspecting investors. (except for people like Vincent Fiorillo bond manager at DoubleLine who has had enough of this game).

The Miami suit needs to result in discovery that digs deep into the books of JPMorgan to see just how much money was made on each of those bad loans (bad for both the investors and the borrowers) to see just how much money they made, how they made it and how much they made. The results will astonish most casual observers. The bottom line is that the banks made profits that were higher than anytime in history but they weren’t really “profits.” They were proceeds of theft.

It should all be disgorged and the communities that were decimated by the Bank should be restored. That is the RIGHT thing, especially when you learn that many of the “loans” were the result of hard sell, midnight visits signing piles of documents the customer had no way of understanding and no opportunity to read even if they could understand them. Add to that the refi’s were really homes that were paid off or  nearly paid off. If they had just been left alone, the same people would have actual positive net worth and would never have faced foreclosure.

JPMorgan sued by Miami over mortgage discrimination

  • At issue are alleged predatory lending practices in minority neighborhoods since at least 2004 which Miami blames for causing waves of foreclosures in the housing bust. After issuing high-cost loans to minorities, JPMorgan (JPM -0.3%), says the city, refused to refinance on the same eased terms extended to others.
  • The lawsuit follows a similar one launched a few weeks ago by Los Angeles.  Wells Fargo, Citi, and BofA face similar charges.
 Read more at Seeking Alpha:

http://seekingalpha.com/currents/post/1802293?source=ipadportfolioapp_email

Banks Keep Winning, But Borrowers Are Picking Up the Pace

What’s the Next Step? Consult with Neil Garfield

CHECK OUT OUR NOVEMBER SPECIAL

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).

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.

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

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