Foreclosure Offense: Write A Letter Even if You are Not (Yet) in Trouble

It is my opinion that the victims of the enormous fraud includes even those who are not yet delinquent in their mortgages or even those who will never be delinquent. In any event, the following applies to those in trouble, not yet in trouble or who want to make trouble.

  • The players in the fraud knowingly entered into a scheme that would result in a generalized increase in “fair market value” for targeted geographical areas. This increase was artificially inflated to support a program creating excitement and sizzle amongst prospective home buyers and prospective investors in asset backed securities. It was only apparent if a very sophisticated economist appraised the fundamentals in view of the larger geographical areas and over a larger period of history that the spike emerges as artificial.
  • The loss to the more than 15 million people directly affected can be measured by the difference between the appraised value at time of the loan closing(s) and the actual value which is now apparent for anyone to see. Generally speaking the difference is around 25%-40% in the targeted geographical areas.
  • Add this loss as a cost of the loan and you get a startling result: not only is the good faith estimate and other disclosure documents wrong on the “APR”, the actual APR moves into usury territory, entitling the victim (in many states) to extinguish the note in its entirety, remove the security instrument (mortgage), collect treble damages and attorneys fees and costs. The parties involved might even be liable for criminal prosecution.

Based upon the figures we think are reliable there are at least 2 million more foreclosures that willl be filed, in addition to the 1.3 million that are in progress right now. Then we have another 12 million homes that are either upside down (more loan than equity) or very close to it. If you include the cost of a realtor and other expenses in selling the figure might be closer to 15 million homes.

There are of course many reasons for this but the principal reason is fraud: all the players in the securitization chain, a sub-part of which is the sale of real estate, knew for sure that the security (asset backed security) sold to investors was overrated and over-priced and knew that the security (residence) sold to home-buyers was overrated and over-priced. Neither the loan documents, the “prospectus” offered investors, nor any rating or appraisal or lending practice followed normal underwriting standards.

Thus the “fair market value” was artificially inflated on both ends of the spectrum — to investors and homebuyers. This created an orgy of feeding on fees, profits, etc. So using this theory, we are recommending that you write a letter right now to whomever you direct your payments to, to the originating loan company, the mortgage broker, and the bank the handled the transactions for the title/escrow agent, instructing them to forward the letter to their errors and omissions carrier.

The letter, in my opinion, should state that you are aware that some documents exist regarding the loan(s) which have not yet been disclosed to you and you would like to see them. These documents are dated before, during and immediately following the closing and relate to the funding source, transfer of certain rights or obligations under the note and mortgage you executed, and payments of fees to the mortgage originator, the mortgage broker and appraiser that were not disclosed at the time of closing.

This letter should also state that it has become apparent that the appraised value was vastly over-stated, that the “lender” stated on the loan was not the the actual ultimate funding source, and that neither the lender nor the mortgage broker were acting in accordance with their fiduciary duty to represent and protect you from predatory practices. Instead, it appears that they themselves not only did not protect you but actually participated in such practices and deceived you as to the value of the property, which dropped in the real world within a few days, weeks or months after the closing.

You should ask for the documents used that were “off balance sheet” for the named lender, the amounts paid to the “lender” and the mortgage broker and any other third parties, and the names of the auditors and attorneys for the lender, the mortgage broker, the title agent, and the appraiser.

You should also state that you need these documents because it appears as though you are paying parties who have no interest in the mortgage or note, and who do not have a relationship with anyone who does have such an interest. This places you in the untenable position of making payments and facing potential liability to a third party, to whom the note and mortgage may have been rightfully assigned, even though not re corded in the property records.

Lastly, you should state that you reserve the right to demand attorney fees and auditors fees if the facts are as you have recited them as well as all rights under all applicable rules, regulations and laws of the City, County, State or Federal Government.

Foreclosure Offense and Defense: DISCOVERY OF Insurance Policies and Applications Reveal ALL

The simple mortgage on a home had been broken into many pieces (tranches — See Special Purpose Vehicle (SPV)) each having characteristics of entities unto themselves. The term “borrower” was severed from the the obligation to pay. The term “lender” was severed from the risk of loss and the right to payment from the borrower. The term “investor” was severed from the actual ownership of any asset, except one deriving its value from conditions existing between a myriad of third parties, but which nonetheless carried with it a right to receive payments from many different entities and people, the “borrower” being just one of many.


In the Mortgage Meltdown context, the challenge is to prove the point that this was a fraudulent scheme, a Ponzi arrangement that was a financial pandemic. You get that information through discovery, but unless you know what you are looking for, you will merely come up with volumes of paper that do not, in and of themselves reveal all the points you need to make — but they WILL lead to the discovery of admissible evidence (the gold standard of what is permitted in discovery) if you understand the scheme.

The nucleus of the scheme is the virtually unregulated creation of the Special Purpose Vehicle (SPV), which is a corporation formed by the investment banker to “own” certain rights to the loans and mortgages and perhaps other assets that were packaged for insertion into the SPV. The SPV issues securities and those securities are sold to investors with fake ratings and “assurances” and insurance that is falsely procured, but where the insurers or assurers were under common law, state law and/or federal law, required to perform their own due diligence, which they did not (in the mortgage meltdown). The proceeds of the sale of ABSs (CDO/CMO) go into the SPV.

The directors and officers of the SPV entity order the disbursement of those proceeds. (see INSURANCE in GARFIELD’s GLOSSARY).

The recipients are a large undisclosed pack of feeding sharks all claiming plausible deniability as to inflated appraisals of the residential dwelling, the borrower’s ability and willingness to pay, the underwriting standards applied (suspended because the lender was selling the risk rather than assuming it), and the inflated appraisal of the ABS (CDO/CMO) for all the same reasons — direct financial incentives, coercion (give us the appraisal we want or we will never do business with you against and neither will anyone else) or even direct threats of challenges to professional licenses.

In order to get this information, you must find the name of the SPV, which is probably disclosed in filings with the SEC along with the auditor’s opinion letter (see INSURANCE in GARFIELD’s GLOSSARY). You might get lucky and find it just by asking. Then demand production of the articles of incorporation and the minutes, agreements, signed and correspondence between the SPV and third parties and between officers and directors of the SPV. The entire plan will be laid out for you as to that SPV and it might reveal, when you look at the actual insurance contracts, cross collateralization or guarantees between SPV’s. Those cross agreements could be as simple as direct guarantees but will more likely take the form of hedge products like credit default swaps (You by mine and I’ll by yours — by express agreement, tacit agreement or collusion). 

You will most likely find that once you perform a thorough analysis of the break-up (“Spreading”) of the risk of loss, the actual cash income stream, the ownership of the note, the ownership of the security instrument (mortgage) and the ownership and source of payment for insurance and other contracts, that all roads converge on a single premise: this was a deal between the borrowers (collectively as co-borrowers) and the investors (collectively as co-investors). Everyone else was a middle man pretending to be NOT part of the transaction while they were collecting most of the proceeds, leaving the investor and the borrower hanging.

And there is no better place to start than with the insurance underwriting process — getting copies of applications, investigations, analysis, correspondence etc. Combined with the filings with the SEC you are likely to find virtual admissions of the entire premise and theme of this entire blog. I WOULD APPRECIATE YOU SENDING ME THE RESULTS OF YOUR ENDEAVORS.


promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual,company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policycreates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest. IN FORECLOSURE OFFENSE AND DEFENSE, YOU WILL FIND ERRORS AND OMISSIONS POLICIES COVERING THE OFFICERS AND DIRECTORS OF THE INVESTMENT BANKING FIRM, THE SPV THAT ISSUED THE ASBs, THE RATING AGENCY FOR THE ASB (CMO/CDO), THE LENDER, THE MORTGAGE BROKER, THE REAL ESTATE AGENT, ETC. YOU WILL FIND MALPRACTICE INSURANCE FOR THE AUDITORS OF THE SAME ENTITIES WHICH RESULTED IN FALSE REPRESENTATIONS CONCERNING THE FINANCIAL CONDITION OF THE ENTITY. YOU WILL FIND LOSS COVERAGE FOR DELINQUENCY, DEFAULT OR NON-PAYMENT THAT MAY INURE TO THE BENEFIT OF THE BORROWER. By joining the borrower and the investor as victims in the fraudulent Ponzi scheme creating money supply with smoke and mirrors, it may be argued that the insurance premiums were paid by and equitably owned by the borrower and/or the investor. 

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