Tonight — Silent Roles of Fannie Mae and Freddie Mac — Hiding Behind the Obtuse

How to Withhold Vital Information from Homeowners

Thursdays LIVE! Click in to the The Neil Garfield Show

Or call in at (347) 850-1260, 6pm Eastern Thursdays

Charles Marshall, Attorney and Bill Paatalo, licensed investigator discuss the moral hazard created by the Government Sponsored Entities (GSEs) banks, the courts and the regulators in allowing “presumptions” to be used even when the actual facts are different from the presumed facts.

Fannie and Freddie have long been a mystery wrapped in an enigma.

Before false claims of securitization, before fabrication and forgery of documents, the GSEs had fairly clear role in the origination, servicing and enforcement of mortgages. Now they are used as cover to hide lack of ownership where the banks and servicers make the homeowner travel and endless loop leading nowhere.

Now, as to any specific loan, we don’t know which of the following applies:

  1.  GSE is the guarantor of the loan (basically like a third party insurer with government backing)
  2. GSE is Master Trustee of a REMIC Trust in which there is a named Trustee who has the same powers, rights and obligations as the Master Trustee — i.e., no powers to actively administer the active affairs of the trust because there is no business or assets in the trust.
  3. GSE is or was a purchaser for cash.
  4. GSE is or was a purchaser using MBS issued by a named trust that either exists or doesn’t exist.
  5. GSE, using Trust A MBS paid Trust A for loans owned by the Trust or for loans not owned by the trust.
  6. GSE was a seller of the subject debt, note or mortgage.
  7. GSE claimed ownership when it didn’t own the subject debt, note or mortgage.
  8. GSE showed subject loan on its website but had no interest in the subject debt, note or mortgage (or foreclosure).
  9. Third parties claimed that GSE owned the subject debt, note and/or mortgage and it was true.
  10. Third parties claimed that GSE owned the subject debt, note and/or mortgage and it was false.

Fannie and Freddie Unloading Bogus “Mortgage” Bonds

Standard Operating Procedure: Create more bogus paper on top of piles of old bogus paper and you contribute to the illusion that any of it is real. The “business model” still leaves out the basic fallacy: that most loans were never actually securitized into the trusts that are claiming them. Hence the at the base of this pyramid, is an MBS issued by an entity without any assets in cash, property or loans.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see http://blogs.barrons.com/incomeinvesting/2014/06/30/government-support-for-gse-mortgage-transfer-securities-unrealistic-fitch/

The actual goal here is to spread the risk so wide that the impact is reduced when it is finally conceded that the original MBS had no value and every successor synthetic derivative is just as worthless as the one before it.

At ground level, this creates a dichotomy. First the act of a Government Sponsored Entity (GSE) engaging in a “re-REMIC” transfer adds to the illusion that the issuing trust ever acquired the loan in the first place. But second, it corroborates the finding by me, Adam Levitin and others who know and have studied the situation: the foreclosure based upon claims from alleged REMIC Trusts are false claims.

If the original MBS had real value because it was issued by a real REMIC Trust, the process described as “re-REMIC” would not be necessary. Hedge products would be sufficient to cover the changing risk from alleged defaults on loans that were legitimately made by originators. The fact is that the “loans” did not produce loan contracts because one party was owed the debt while another party was named on the bogus note.

And THAT corroborates the experience of millions of homeowners who attempted to learn about the fictitious financial transaction in which “successors” to the “originator” paid nothing for the “transfer” of the loan because it could not be sold by the preceding party who had no ownership.

New York Judge Orders Release of Hidden Documents

This is just the beginning of what I have been predicting for 10 years. When the public finds out that the government itself is addicted to the false scheme of securitization — and that this has led to abandonment of policies and rules of law that have continued to depress the U.S. economy — the “movements” of Sanders and Trump will look like garden parties.

The mortgage loan schedules, assignments, and endorsements are all pure fabrication, illusion smoke and mirrors. This is why 10 years ago the banks were denying the existence of the trusts. They created a void between the investors and their money on the one hand and the homeowners and their homes on the other. They stepped into the void acting as principals when they were in fact rogue intermediaries.

“In the discovery battle in these suits, the government’s pleas for secrecy were so extreme that it asked for, and received, “attorneys’ eyes only” status for the documents in question. This meant that not even the plaintiffs were entitled to see the raw papers. This designation is usually reserved for cases involving national security or proprietary business secrets.”

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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see http://www.rollingstone.com/politics/news/why-is-the-obama-administration-trying-to-keep-11-000-documents-sealed-20160418?utm_source=email
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Matt Taibbi is one of the few journalists in existence who has actually taken the time to gain some real understanding of the financial crisis that was revealed in 2008-2009. I would only add that this is like the tobacco litigation where the states became addicted to revenue from the tobacco companies in order to pay their “fines.”
 *
There are many reasons why the Bush and Obama administrations moved to “save” the TBTF banks at the expense of the rule of law and on the back of homeowners who were lured into unworkable debt masquerading as mortgage debt.
 *
And the outcome of this leadership by example is that the mortgages are treated as valid encumbrances, the mortgage bonds are treated as viable assets on the balance sheets of banks, and the one source that could save the economy — consumers — is being cutoff from any form of relief.
 *
This is like the Fortune 500 companies who have decided that their stock is their product, and the higher their stock price the better they are doing — even if it means that they artificially inflating their stock price by purchasing the stock at high levels with company funds. It’s like oil companies who continue to value the oil in the ground as though they were going to suck it all out and make a profit when we all know that oil is largely going to be left intact and not subject to sale or use. The bubble is here and this decision by a federal judge forces the hand of the Obama administration to lift the veil of secrecy on the pact between the TBTF banks and the U.S. government.
 *
THE SIMPLE TRUTH: The “Trusts” were nothing but names on paper. And the paper allegedly issued by the “Trusts” was as worthless as the Trusts themselves. The investors advanced money under the belief that it would mean their money was going through a “pass-through” entity to be managed by the Trust; but the money never went to the trusts and the trusts never acquired any assets from any source, leaving the trusts at best “inchoate” and at worst nonexistent depending upon the state.
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The mortgage loan schedules, assignments, and endorsements are all pure fabrication, illusion smoke and mirrors. This is why 10 years ago the banks were denying the existence of the trusts.
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They created a void between the investors and their money on the one hand and the homeowners and their homes on the other. They stepped into the void acting as principals when they were in fact rogue intermediaries.
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And to cover their tracks they funded loans with money they stole from investors, thus stealing the money and the debt, while at the same time defrauding the borrower and the courts with false claims of ownership leading to the pinnacle of their scheme — a forced sale of property that in fact they had no interest in, based upon a loan that they never funded or acquired. Getting to that auction is the first legal document in the whole fabricated illegal chain of documentation — and it gives them the right to use that foreclosure sale as proof that everything that went before the sale was true and valid. It wasn’t.
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GET A CONSULT
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Problems with Lehman and Aurora

Lehman had nothing to do with the loan even at the beginning when the loan was funded, it acted as a conduit for investor funds that were being misappropriated, the loan was “sold” or “transferred” to a REMIC Trust, and the assets of Lehman were put into a bankruptcy estate as a matter of law.

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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I keep receiving the same question from multiple sources about the loans “originated” by Lehman, MERS involvement, and Aurora. Here is my short answer:
 *

Yes it means that technically the mortgage and note went in two different directions. BUT in nearly all courts of law the Judge overlooks this problem despite clear law to the contrary in Florida Statutes adopting the UCC.

The stamped endorsement at closing indicates that the loan was pre-sold to Lehman in an Assignment and Assumption Agreement (AAA)— which is basically a contract that violates public policy. It violates public policy because it withholds the name of the lender — a basic disclosure contained in the Truth in Lending Act in order to make certain that the borrower knows with whom he is expected to do business.

 *
Choice of lender is one of the fundamental requirements of TILA. For the past 20 years virtually everyone in the “lending chain” violated this basic principal of public policy and law. That includes originators, MERS, mortgage brokers, closing agents (to the extent they were actually aware of the switch), Trusts, Trustees, Master Servicers (were in most cases the underwriter of the nonexistent “Trust”) et al.
 *
The AAA also requires withholding the name of the conduit (Lehman). This means it was a table funded loan on steroids. That is ruled as a matter of law to be “predatory per se” by Reg Z.  It allows Lehman, as a conduit, to immediately receive “ownership” of the note and mortgage (or its designated nominee/agent MERS).
 *

Lehman was using funds from investors to fund the loan — a direct violation of (a) what they told investors, who thought their money was going into a trust for management and (b) what they told the court, was that they were the lender. In other words the funding of the loan is the point in time when Lehman converted (stole) the funds of the investors.

Knowing Lehman practices at the time, it is virtually certain that the loan was immediately subject to CLAIMS of securitization. The hidden problem is that the claims from the REMIC Trust were not true. The trust having never been funded, never purchased the loan.

*

The second hidden problem is that the Lehman bankruptcy would have put the loan into the bankruptcy estate. So regardless of whether the loan was already “sold” into the secondary market for securitization or “transferred” to a REMIC trust or it was in fact owned by Lehman after the bankruptcy, there can be no valid document or instrument executed by Lehman after that time (either the date of “closing” or the date of bankruptcy, 2008).

*

The reason is simple — Lehman had nothing to do with the loan even at the beginning when the loan was funded, it acted as a conduit for investor funds that were being misappropriated, the loan was “sold” or “transferred” to a REMIC Trust, and the assets of Lehman were put into a bankruptcy estate as a matter of law.

*

The problems are further compounded by the fact that the “servicer” (Aurora) now claims alternatively that it is either the owner or servicer of the loan or both. Aurora was basically a controlled entity of Lehman.

It is impossible to fund a trust that claims the loan because that “reporting” process was controlled by Lehman and then Aurora.

*

So they could say whatever they wanted to MERS and to the world. At one time there probably was a trust named as owner of the loan but that data has long since been erased unless it can be recovered from the MERS archives.

*

Now we have an emerging further complicating issue. Fannie claims it owns the loan, also a claim that is untrue like all the other claims. Fannie is not a lender. Fannie acts a guarantor or Master trustee of REMIC Trusts. It generally uses the mortgage bonds issued by the REMIC trust to “purchase” the loans. But those bonds were worthless because the Trust never received the proceeds of sale of the mortgage bonds to investors. Thus it had no ability to purchase loan because it had no money, business or other assets.

But in 2008-2009 the government funded the cash purchase of the loans by Fannie and Freddie while the Federal Reserve outright paid cash for the mortgage bonds, which they purchased from the banks.

The problem with that scenario is that the banks did not own the loans and did not own the bonds. Yet the banks were the “sellers.” So my conclusion is that the emergence of Fannie is just one more layer of confusion being added to an already convoluted scheme and the Judge will be looking for a way to “simplify” it thus raising the danger that the Judge will ignore the parts of the chain that are clearly broken.

Bottom Line: it was the investors funds that were used to fund loans — but only part of the investors funds went to loans. The rest went into the pocket of the underwriter (investment bank) as was recorded either as fees or “trading profits” from a trading desk that was performing nonexistent sales to nonexistent trusts of nonexistent loan contracts.

The essential legal problem is this: the investors involuntarily made loans without representation at closing. Hence no loan contract was ever formed to protect them. The parties in between were all acting as though the loan contract existed and reflected the intent of both the borrower and the “lender” investors.

The solution is for investors to fire the intermediaries and create their own and then approach the borrowers who in most cases would be happy to execute a real mortgage and note. This would fix the amount of damages to be recovered from the investment bankers. And it would stop the hemorrhaging of value from what should be (but isn’t) a secured asset. And of course it would end the foreclosure nightmare where those intermediaries are stealing both the debt and the property of others with whom thye have no contract.

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MERS 2.0: CSP Another MERS for Securitization of Debt

For More information please call 954-495-9867 or 520-405-1688

This article is not a substitute for a legal opinion on your case obtained from an attorney licensed in the jurisdiction in which your property or transaction is located. Get a lawyer.

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see GMAC Exec Appointed CEO of CSS

see Common Securitization Platform

see Common Securitization Platform — Freddie First

We all know that Mortgage Electronic Registration Systems (MERS) has been pretty thoroughly discredited although there are still many judges whose attitude is “so what”, and the foreclosure goes forward anyway. MERS does not meet the statutory requirements to be a beneficiary under a deed of trust nor a mortgagee under a mortgage deed. It is a naked nominee, wearing none of the clothes required to be a lender, holder of the note or owner of the mortgage. And it even says so on its website, disclaiming any interest in any loan, debt, note or mortgage. It has been used extensively (an estimated 80 millions loans have been registered in the MERS system). Its purpose was to hide—-

(1) the real lender,  making virtually every loan a table  funded loan and therefore predatory per se (something which people have still not caught onto — until the Supreme Court says AGAIN, predatory per se means that it is against public policy, negating the right to obtain equitable relief [foreclosure]

(2) the real transactions of real money in the origination of loans and the acquisition of loan documents

(3) the real players in the lending process

(4) the real players in the collection process

(5) the real players in the foreclosure process

(6) theft from the investors

(7) theft from the borrowers

(8) fraud on the courts

Many knowledgeable judges, county recorders, legal analysts and title agents around the country have all come to the same conclusion: the use of MERS forever corrupted the public records systems for recording title and interests in real property. And yet those defective encumbrances remain in the public records as though MERS was real and the facts from the MERS platform were true. Clearing the title problems and compensating victims of foreclosure fraud enabled by MERS remains among the great challenges to all branches of government.

The problem for the banks is that if they fess up to the truth, the banks, their stockholders and anyone who relies upon them (i.e., the Federal government) will see their benefits go up in smoke. So they have been quietly seeking a way to cover the whole thing up and sweep it under the rug. Statutory changes were discarded because that would amount to admitting that something was wrong. So they hit upon the idea of institutionalizing the whole concept all over again — which will lead to yet another and bigger catastrophe than the one called the “Great Recession.”

It was obvious that if any of the largest banks were involved, alarm bells would have gone off all over the place. So they are using Fannie and Freddie, with a GMAC exec at the helm to start a “Common Securitization Platform” (CSP) that will not only enhance the illusion that prior fake securitizations were real, but also provide a quasi-governmental entity whose “business records” will seem more real than even the property records of any given county. It is a blatant usurpation of state powers with no more viability or validity than MERS. This is MERS 2.0. They will probably treat it as an administrative function of a quasi governmental agency entitled to the presumption of truth. Sounds like MERS, looks like MERS, smells like MERS, Walks like MERS …. must be a duck. [I said in 2008 in a 6 day marathon deposition of me as expert witness that they might just as well have put the name “Donald Duck” on the note and mortgage — since they were already using fictional characters.]

Bottom Line: They are institutionalizing prior acts of fraud against the taxpayers, the government (Federal, state and city), investors and borrowers and clearing the way for it continue unabated. The reason is clear: our political leaders from all political spectrums don’t have a clue about the real world of finance and they are scared to death by threats from bankers that if they go down, they will take the country down with them.

Where is Teddy Roosevelt (“Trust buster”) when you really need him?

CA Appelate Decision: Damage Claims Against OneWest Goes to Jury, Summary Judgment reversed

For further information please call 954-495-9867 or 520-405-1688

Sue Rose is my new administrative assistant. Danielle and Geordan do not work for livinglies or the Garfield firm. If you have placed an order which is unfulfilled please call the above numbers.

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see CA Appeals OrderReversesMSJ

This case allows the jury to hear claims against OneWest for fraud, negligent misrepresentation, concealment, promissory estoppel, negligence, wrongful foreclosure, and violation of CA Business and Professional Code.

Here is an example of the obvious: a Judge takes no risk in denying a motion for summary judgment. It is only when the Judge grants summary judgment that there is a risk of reversal. With the current judicial climate changing in favor of borrowers, [including findings that the mortgage was absolutely void (invalid, non-perfected) where a sham nominee like MERS was used], Judges should take note that they are better off getting in front of the new trend and allow borrowers’ claims to be heard in a fair manner, observing the requirements of due process.

If the Banks collapse because they created 100 million invalid mortgages, that is not a problem for the Judge. And, as I have said many times here, there are 7,000 banks and credit unions that can take up whatever falls out of the mega banks as a result of investors and regulators realizing that the mortgages are void, the assets on bank balance sheets don’t exist or are far overvalued, and the liability section of the bank balance sheet is far understated as a result of damage claims like the one featured in this article.

As noted earlier on these pages, the threshold legal question has been reversed. The question now is what difference does it make if the borrower is in default if the foreclosing party had no right to foreclose?  The previous question that I heard hundreds of times from the Judges themselves was incorrect from the beginning. Their question was what difference does it make if the loan was securitized, as long as the borrower is in default? And that is where the dissenting justice in this case also got it wrong. He is still assuming that these loan transactions were in fact consummated as reflected in the alleged loan documents. The underlying assumption of the dissenting judge is obvious: that the loan contracts were fundamentally valid and whatever defects existed could be corrected before or even during foreclosure. NOT TRUE!

Here in this case is an example of how judges are now perceiving the entire loan transaction instead of just the claim of a default. And the result is that this California appellate court decided to let the case go to trial and allow a jury to hear the claims against OneWest, whose behavior was predatory from the start of when they acquired IndyMac business in 2008-2009.

The appellate court reversed the trial judge who had granted Summary Judgment for OneWest — a little plaything organized over a weekend by some of the richest people in the country. On a net basis they paid nothing and made a ton of money off of loss sharing and guarantee payments from the FDIC and and the GSE’s respectively. They also foreclosed on thousands of homes in cases where they had no interest in the loan and no right to foreclose, collect or do anything else with respect to the loan.

The hidden issue here is whether the Judge, having been reversed, will now allow the homeowner’s attorney to probe deep into the dealings of OneWest during discovery. I suspect that the trial judge will allow more liberal discovery after being reversed. And if that happens you might not never hear about this case again — as it joins the tens of thousands of cases that have been settled under seal of confidentiality. Essentially the strategy of the banks is that if they lose, they can always pay off the homeowner to keep the case from being publicized.

Modification Minefields as Foreclosures Resume Upward Volume

For further information please call 954-495-9867 or 520-405-1688

Listen to Neil Garfield Show on Thursday February 26, 2015 at 6pm EDT., and each Thursday

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

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

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

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

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

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

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

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

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

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

Insurers Pay Pretender Lenders and Then Pursue Homeowner for the “Loss”

For further information please call 954-495-9867 or 520-405-1688

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see http://features.necir.org/pmi Insurers pay “losses” on mortgages and then pursue borrowers for recovery of payment

A big area of confusion in the foreclosure cases is the impact of insurance claims and payments with respect to insured mortgages and insured mortgage bonds. So let’s start with the fact that there are many types of insurance contracts that affect the balance to be proven in a foreclosure case. The simplest rule to follow which has been stated in a number of cases, is that if the party seeking foreclosure has already received payments ON THAT LOAN then the balance should be correspondingly reduced. But that reduction is between the pretender lender and the borrower. That doesn’t mean that whoever paid the money to the pretender lender can’t pursue the homeowner for the amount paid. But it does affect the foreclosure because the insurance or third party payment (FDIC loss sharing, for example or Fannie or Freddie buyout or guarantee) affects the claimed liability of the borrower.

If you ask the banks about these payments you get stonewalled. And depending upon the timing of the payment it might invalidate the claim of a default, a notice of default and notice of sale. It could also negate the right to foreclose — again depending upon the timing of the payment.

There have been only 2,000 cases in which the insurers have paid the pretender lender and then fled a lawsuit against the homeowner/borrower. They are claiming they paid for a loss incurred by the pretender lender and that the borrower was essentially unjustly enriched and also claiming subrogation (whatever rights the pretender lender had against the borrower goes to the party making the payment to the pretender lender). The problem here of course is that while only 2,000 cases have been field against borrowers by insurers, there are hundreds of thousands of payments received by the pretender lenders.

And the fact that the insurer paid does NOT mean (but will often be presumed anyway) that the loss was actually incurred by the pretender lender. It is one thing to mistakenly apply presumptions under the UCC in which the pretender lender gets to foreclose. It is quite another when the insurer is making a claim that it paid a loss on your mortgage. They must prove the loss. And that means they not only must prove that they paid the claim, but that the claim was real.

For that reason, I am suggesting to foreclosure defense lawyers that they include, in discovery, the insurers and other third parties who appear to have some connection to the subject loan. This might present an opportunity to determine whether any real loss was present and could open the door to argue the reality: that the foreclosing parties neither owned nor had any risk of loss on the subject loans and that they did not represent any owner or other party entitled to enforce.

The take away here is that in a huge number of cases there are or were third party payments that reduced the alleged loss of the creditor or alleged creditor AND depending upon when those payments were made if might have the effect of rendering a notice of default void or even a foreclosure judgment where the redemption rights of the homeowner were affected by an incorrect statement of the loss. In actions for deficiency, the insurers are essentially cherry picking cases in which they think the borrower can pay the alleged loss. It also might represent an overpayment. For example if the third party payment was on a GSE guaranteed loan, did the pretender lender submit claims for both the insurance payment AND the guarantee payment? Under the terms of the note, the borrower might well be entitled to disgorgement of the overpayment, especially if it totals more than the claimed balance due on the alleged loan.

Insurance on the mortgage bonds is the same but more complicated and harder to present in court. The mortgage bond derives its value from the loan. That is why it is called a derivative. In nearly all cases the payment received by the banks (supposedly on behalf of the investors) is received long before a default on any specific loans and there is NO SUBROGATION. The insurers cannot step into the shoes of the pretender lender under those contracts. The “loss” is a claimed reduction in value called a “credit event” that is declared by the Master Servicer in sole discretion. The payment might be all or less than all of the par value of the mortgage bond.

Whatever the amount, it reduces the alleged loss as between the homeowner and any party making a claim for foreclosure based upon an alleged loss incurred from their default. This is true because the balance due to the investors under the mortgage bond has been covered already by the “credit event” which includes many things other than default on any specific loans, so the payment might include a claimed loss from default on a specific group of loans and other factors. In any event, the investors’ books if they were available would show a lower balance due than what any servicer would show. And that would mean that the default notice might be incorrect especially in terms of the reinstatement amount in the paragraph 22 letter.

And because these insurance contracts provide for no subrogation (no claims can be brought by insurer against the homeowner) the reduction in the balance is a reduction of the balance due from the borrower; and THAT is because if the borrower paid the full amount due on the claims of the pretender lender there would be a windfall or “free ride” to the pretender lender (adding insult to injury).

Comments Welcome

Fannie and Freddie Don’t Own Your Loan

The problem with the site whose link appears below is that it is not authoritative. But we can treat it as though it was authoritative. The principal point is that even where Fannie and Freddie have “purchased” a loan it was for the express purpose of resale into the secondary market the trusts. In most cases Fannie and Freddie served as master trustees, which means that the usual trustee arrangement applied to the underlying trusts in what they call the “secondary market.”
If they followed the usual plan, the banks committed fraud — they took the money but never gave it to the trust. And they issued bonds to themselves as street name nominee for investors (but in actuality as though they had themselves funded the trust) , with which the loans were passed on to Fannie or Freddie and then they”purchased” the loans (without consideration) but the bonds were worthless because the trust that issued them never got any money to do ANY deal.
In short Fannie and Freddie are nominees or conduits with no real interest in the loans  EVER. The fact that they are almost ALWAYS guarantors in situations where the loan was processed by them (there are many instances in which Frannie and Freddie closing forms are used but the loan was never sent to Freddie or Fannie),

So in one case for example the statement that Fannie was the investor from the start is only an indication that Fannie was a conduit for investment dollars collected from the secondary market as a result of sale or resale of the loans, of the bonds or both. There is no scenario under which Fannie and Freddie remain the “investor.”

http://www.mortgageloan.com/mortgage-loan-modification/who-owns-my-mortgage

Is the loan look-up site the real thing? Sort of.
Yes it is legitimate and the client should have already given their social security number or at least the last 4 digits. But remember just because it is listed on the website of Fannie or Freddie does not actually mean that they own the loan. It only means that they have guaranteed the loan or the mortgage bond that was issued  by a trust whose trust beneficiaries advanced money for the origination or acquisition of the loan.
There are circumstances under which Fannie and Freddie buy loans using cash or mortgage bonds for which they are the master trustee of a trust. But they don’t ever keep them. So the listing on the site is not dispositive of exactly what the status of the loan is, the ownership of the loan or the loan balance. In fact it doesn’t even establish the loan existence. A witness from Fannie or Freddie should be interviewed as to the status of this particular loan and whether or not the agency is acting as the master trustee, guarantor or some combination of the two. The other possibility is that they actually own it by virtue of an actual purchase some of which transactions did occur between 2008 and 2009.

Foreclosures on Nonexistent Mortgages

I have frequently commented that one of the first things I learned on Wall Street was the maxim that the more complicated the “product” the more the buyer is forced to rely on the seller for information. Michael Lewis, in his new book, focuses on high frequency trading — a term that is not understood by most people, even if they work on Wall Street. The way it works is that the computers are able to sort out buy or sell orders, aggregate them and very accurately predict an uptick or down-tick in a stock or bond.

Then the same investment bank that is taking your order to buy or sell submits its own order ahead of yours. They are virtually guaranteed a profit, at your expense, although the impact on individual investors is small. Aggregating those profits amounts to a private tax on large and small investors amounting to billions of dollars, according to Lewis and I agree.

As Lewis points out, the trader knows nothing about what happens after they place an order. And it is the complexity of technology and practices that makes Wall Street behavior so opaque — clouded in a veil of secrecy that is virtually impenetrable to even the regulators. That opacity first showed up decades ago as Wall Street started promoting increasing complex investments. Eventually they evolved to collateralized debt obligations (CDO’s) and those evolved into what became known as the mortgage crisis.

in the case of mortgage CDO’s, once again the investors knew nothing about what happened after they placed their order and paid for it. Once again, the Wall Street firms were one step ahead of them, claiming ownership of (1) the money that investors paid, (2) the mortgage bonds the investors thought they were buying and (3) the loans the investors thought were being financed through REMIC trusts that issued the mortgage bonds.

Like high frequency trading, the investor receives a report that is devoid of any of the details of what the investment bank actually did with their money, when they bought or originated a mortgage, through what entity,  for how much and what terms. The blending of millions of mortgages enabled the investment banks to create reports that looked good but completely hid the vulnerability of the investors, who were continuing to buy mortgage bonds based upon those reports.

The truth is that in most cases the investment banks took the investors money and didn’t follow any of the rules set forth in the CDO documents — but used those documents when it suited them to make even more money, creating the illusion that loans had been securitized when in fact the securitization vehicle (REMIC Trust) had been completely ignored.

There were several scenarios under which property and homeowners were made vulnerable to foreclosure even if they had no mortgage on their property. A recent story about an elderly couple coming “home” to find their door padlocked, possessions removed and then the devastating news that their home had been sold at foreclosure auction is an example of the extreme risk of this system to ALL homeowners, whether they have or had a mortgage or not. This particular couple had paid off their mortgage 15 years ago. The bank who foreclosed on the nonexistent mortgage and the recovery company that invaded their home said it was a mistake. Their will be a confidential settlement where once again the veil of secrecy will be raised.

That type of “mistake” was a once in a million possibility before Wall Street directly entered the mortgage loan business. So why have we read so many stories about foreclosures where there was no mortgage, or was no default, or where the mortgage loan was with someone other than the party who foreclosed?

The answer lies in how these properties enter the system. When a bank sells its portfolio of loans into the system of aggregation of loans, they might accidentally or intentionally include loans for which they had already received full payment. Maybe they issued a satisfaction maybe they didn’t. It might also include loans where life insurance or PMI paid off the loan.

Or, as is frequently the case, the “loan” was sold after the homeowner was merely investigating the possibility of a mortgage or reverse mortgage. As soon as they made application, since approval was certain, the “originator” entered the data into a platform maintained by the aggregator, like Countrywide, where it was included in some “securitization package.

If the loan closed then it was frequently sold again with the new dates and data, so it would like like a different loan. Then the investment banks, posing as the lenders, obtained insurance, TARP, guarantee proceeds and other payments from “co-obligors” on each version of the loan that was sold, thus essentially creating the equivalent of new sales on loans that were guaranteed to be foreclosed either because there was no mortgage or because the terms were impossible for the borrower to satisfy.

The LPS roulette wheel in Jacksonville is the hub where it is decided WHO will be the foreclosing party and for HOW MUCH they will claim is owed, without any allowance for the multiple sales, proceeds of insurance, FDIC loss sharing, actual ownership of the loans or anything else. Despite numerous studies by those in charge of property records and academic studies, the beat goes on, foreclosing by entities who are “strangers to the transaction” (San Francisco study), on documents that were intentionally destroyed (Catherine Ann Porter study at University of Iowa), against homeowners who had no idea what was going on, using the money of investors who had no idea what was going on, and all based upon a triple tiered documentary system where the contractual meeting of the minds could never occur.

The first tier was the Prospectus and Pooling and Servicing Agreement that was used to obtain money from investors under false pretenses.

The second tier consisted of a whole subset of agreements, contracts, insurance, guarantees all payable to the investment banks instead of the investors.

And the third tier was the “closing documents” in which the borrower, contrary to Federal (TILA), state and common law was as clueless as the investors as to what was really happening, the compensation to intermediaries and the claims of ownership that would later be revealed despite the borrower’s receipt of “disclosure” of the identity of his lender and the terms of compensation by all people associated with the origination of the loan.

The beauty of this plan for Wall Street is that nobody from any of the tiers could make direct claims to the benefits of any of the contracts. It has also enabled then to foreclose more than once on the same home in the name of different creditors, making double claims for guarantee from Fannie Mae, Freddie Mac, FDIC loss sharing, insurance and credit default swaps.

The ugly side of the plan is still veiled, for the most part in secrecy. even when the homeowner gets close in court, there is a confidential settlement, sometimes for millions of dollars to keep the lawyer and the homeowner from disclosing the terms or the reasons why millions of dollars was paid to a homeowner to keep his mouth shut on a loan that was only $200,000 at origination.

This is exactly why I tell people that most of the time their case will be settled either in discovery where a Judge agrees you are entitled to peak behind the curtain, or at trial where it becomes apparent that the witness who is “familiar” with the corporate records really knows nothing and ahs nothing about the the real history of the loan transaction.

New Bank Strategy: There was no securitization — IRS AMNESTY FOR REMICs

Reported figures on the financial statements of the “13 banks” that Simon Johnson talks about, make it clear that around 96% of all loans originated between 1999 and 2009 are subject to claims of securitization because that is what the investment banks told the investors who advanced money for the purchase of what turned out to bogus mortgage bonds. So the odds are that no matter what the appearance is, the loan went through the hands of an investment banker who sold “bonds” to investors in order to originate or acquire mortgages. This includes Fannie, Freddie, Ginny, and VA.

The problem the investment banks have is that they never funded the trusts and never lived up to the bargain — they gave title to the loan to someone other than the investors and then they insured their false claims of ownership with AIG, AMBAC, using credit default swaps and even guarantees from government or quasi government agencies. Besides writing extensively in prior posts, I have now heard that the IRS has granted AMNESTY on the REMIC trusts because none of them actually performed as required by law. So we can assume that the money from the lender-investors went through the investment banks acting as conduits instead of through the trusts acting as Real Estate Mortgage Investment Conduits.

This leads to some odd results. If you foreclose in the name of the servicer, then the authority of the servicer is derived from the PSA. But if the trust was not used, then the PSA is irrelevant. If you foreclose in the name of the trustee, using a fabricated, robo-signed, forged assignment backdated or non dated as is the endorsement, you get dangerously close to exposing the fact that the investment banks took a chunk out of the money the investors gave them and booked it as trading profit. One of the big problems here is basic contract law — the lenders and the borrowers were not presented with and therefore could not have agreed to the same terms. Obviously the borrower was agreeing to pay the actual amount of the loan and was not agreeing to pay the overage taken by the investment bank. The lender was not agreeing to let the investment bank short change the investment and increase the risk in order to make up the difference with loans paying higher rates of interest.

When we started this whole process 7 years ago, the narrative from the foreclosing entities and their lawyers was that there was no securitization. Their case was based upon them being the holder of the note. Toward that end they then tried lawsuits and non-judicial foreclosures using MERS, the servicer, the originator, and even foreclosure servicer entities. They encountered problem because none of those entities had an interest in the loan, and there was no consideration for the transfer of the loan. Since they were filing in their own name and not in a representative capacity there were effectively defrauding the actual creditor and having themselves designated as the creditor who could buy the property at foreclosure auction without money using a “credit bid.”

Then we saw the banks change strategy and start filing by “Trustee” for the beneficiaries of an asset backed (securitized) trust. But there they had a problem because the Pooling and Servicing Agreement only gives the servicer the right to enforce, foreclose, or collect for the “investor” which is the trust or the beneficiaries of the asset-backed trust. And now we see that the trust was in fact never used which is why the investment banks were sued by nearly everyone for fraud. They diverted the money and the ownership of the loans to their own use before “returning” it to the investors after defaults.

Now we are seeing a return to the original strategy coupled with a denial that the loan was securitized. One such case I am litigating CURRENTLY shows CitiMortgage as the Plaintiff in a judicial foreclosure action in Florida. The odd thing is that my client went to the trouble of printing out the docket periodically as the case progressed before I got involved. The first Docket printed out showed CPCA Trust 1 as the Plaintiff clearly indicating that securitization was involved. Then about a year later, the client printed out the docket again and this time it showed ABN AMRO as trustee for CPCA Trust-1. Now the docket simply shows CitiMortgage which opposing counsel says is right. We are checking the Court file now, but the idea advanced by opposing counsel that this was a clerical error does not seem likely in view of that the fact that it happened twice in the same file and we never saw anything like it before — but maybe some of you out there have seen this, and could write to us at neilfgarfield@hotmail.com.

Our title and securitization research shows that ACCESS Mortgage was the originator but that it assigned the loan to First National which then merged with CitiCorp., whom opposing counsel says owns the loan. The argument is that CitiMortgage has the status of holder and therefore is not suing in a representative capacity despite the admission that CitiMortgage doesn’t have a nickel in the deal, and that there has been no financial transaction underlying the paperwork purportedly transferring the loan.

Our research identifies Access as a securitization player, whose loan bundles were probably underwritten by CitiCorp’s investment banking subsidiary. The same holds true for First National and CPCA Trust-1 and ABN AMRO. Further we show that ABN AMRO acquired LaSalle Bank in a reverse merger, as I have previously mentioned in other posts. Citi has reported in sworn documents with the SEC that it merged with ABN AMRO. So the docket entries would be corroborated as to ABN AMRO being the trustee for CPCA Trust 1. But Citi says ABN AMRO has nothing to do with the subject loan. And the fight now is what will be allowed in discovery. CitiMortgage says that their answer of “NO” to questions about securitization should end the inquiry. I obviously take the position that in discovery, I should be able to inquire about the circumstances under which CitiMortgage makes its claim as holder besides the fact that they physically possess the note, if indeed they do.

Some of this might be revealed when the actual court file is reviewed and when the clerk’s office is asked why the docket entries were different from the current lawsuit. Was there an initial filing, summons or complaint or cover sheet identifying CPCA Trust 1? What caused the clerk to change it to ABN AMRO? How did it get changed to CitiMortgage?

Those VA Loans and Ginny Mae Loans Were ALso Securitized

Probably the most misunderstood aspect of the securitization process is that the banks are able to claim there was no securitization when in fact there was. This is especially true in GSE’s like Fannie, Freddie, Ginny and the VA. When you are researching loans you hit a brick wall when you get to the GSE. And there are terms thrown around like smoke and mirrors that this was or this is a Fannie loan and that therefore the loan was not securitized. This is wrong.

None of the GSE’s are lenders. They don’t loan money to anyone. So if the allegation is made that this was a Fannie or Freddie or VA loan from the start, then the originator was not the lender and neither was Fannie or Freddie or any other GSE. These are strictly guarantee agencies who don’t part with a nickle until the loan is foreclosed and the home is sold. THEN they guarantee up a certain amount and pay it out, drawing from the US Treasury as necessary.

All the loans that were considered GSE loans from the start constitute an admission that the loan was securitized or subjected to claims of securitization. Fannie and Freddie for example have a Master Trustee agreement in which they do nothing but they serve as the Master Trustee for asset-backed pools that have a regular trustee (who also does nothing). These pools are REMIC trusts.

As you can see from the attached files,if you will read them carefully, you will see that the custom and practice of the GSE was, if it guaranteed the loan, to serve as either the conduit or the Master trustee for an asset backed pool where the trust beneficiaries funded the origination or acquisition of the loan. This is a factor that did not get adequately covered in Shack’s excellent opinion recently in New York where he chastised Chase and others for playing with the ownership of the loan to suit the need for foreclosure instead of presenting facts that would protect the people who are actually taking a loss.

see Pooled_Loans_and_Securitizations_032309 and VA-FinancialPolicyVolumeVIChapter06

 

Fannie and Freddie Demand $6 Billion for Sale of “Faulty Mortgage Bonds”

You read the news on one settlement after another, it sounds like the pound of flesh is being exacted from the culprits again and again. This time the FHFA, as owner of Fannie and Freddie, is going for a settlement with Bank of America for sale of “faulty mortgage bonds.” And most people sit back and think that justice is being done. It isn’t. $6 Billion is window dressing on a liability that is at least 100 times that amount. And stock analysts take comfort that the legal problems for the banks has basically been discounted already. It hasn’t.

For practitioners who defend mortgage foreclosures, you must dig a little deeper. The term “faulty mortgage bonds” is a euphemism. Look at the complaints there filed. When they are filed by agencies it means that after investigation they have arrived at the conclusion that something was. very wrong with the sale of mortgage bonds. That is an administrative finding that concluded there was at least probable cause for finding that the mortgage bonds were defective and potentially were criminal.

So what does “defective” or “faulty” mean? Neither the media nor the press releases from the agencies or the banks tell us what was wrong with the bonds. But if you look at the complaints of the agencies, they tell you what they mean. If you look at the investor lawsuits you see that they are alleging that the notes and mortgages were “unenforceable.” Both the agencies and the investors filed complaints alleging that the mortgage bonds were a farce, sham or in other words, a PONZI Scheme.

Why is that important to foreclosure defense? Digging deeper you will find what I have been reporting on this blog. The investors money was not used to fund the REMIC trusts. The unfunded trusts never had the money to buy or fund the origination of bonds. The notes and mortgages were never sold to the Trusts even though “assignments” were executed and shown in court. The assignments themselves were either backdated or violated the 90 day cutoff that under applicable law (the laws of the State of New York) are VOID and not voidable.

What to do? File Freedom of Information Act requests for the findings, allegations and names of investigators for the agency that were involved in the agency action. Take their deposition. Get documents. Find put what mortgages were looked at and which bond series were involved. Get a list of the mortgages and the bonds that were examined. Get the findings on each mortgage and each mortgage bond. Use the the investor allegations as lender admissions admissions in court — that the notes and mortgages are unenforceable.

There is a disconnect between what is going on at the top of the sham securitization chain and what went on in sham mortgage originations and sham sales of loans. They never happened in the real world, no matter how much paper you throw at it.

And that just doesn’t apply to mortgages in default — it applies to all mortgages, which is why all the mortgages that currently exist, and most of the deeds that show ownership of the property have clouded and probably “defective” and “faulty” titles. It’s clear logic that the government and the banks are seeking to avoid, to wit: that if the way in which the money was raised to fund the loans or purchase the loans were defective, then it follows that there are defects in the chain of title and the money trail that were obviously not disclosed, as per the requirements of TILA and Reg Z.

And when you keep digging in discovery you will find out that your client has some clear remedies to collect the profits and compensation paid to undisclosed recipients arising out of the closing of the “loan.” These are offsets to the amount claimed as due. If the loan was not funded by the Trust, then the false paper trail used by the banks in foreclosure is subject to successful attack. If the loans were in fact funded directly by the trust complying with the REMIC provisions of the Internal Revenue Code, then the payee on the note and the mortgagee on the mortgage would be the trust — or if the loan was actually purchased, the Trust would have issued money to the seller (something that never happened).

And lastly, for now, let us look at the capital structure of these banks. A substantial portion of their capital derives from assets in the form of mortgage bonds. This is the most blatant lie of all of them. No underwriter buys the securities issued by the company seeking financing through an offering to investors. It is an oxymoron. The whole purpose of the underwriter was to create securities that would be appealing to investors. The securities are only issued when you have a buyer for them, and then the investor is the owner of the security — in this case mortgage bonds.

The bonds are not issued to the investment bank as an asset of the investment bank. But they ARE issued to the investment bank in “street name.” That is merely to facilitate trading and delivery of certificates which in most cases in the mortgage bond market don’t exist. The issuance in street name does not mean the banks own the mortgage bonds any more than when you a stock and the title is issued in street name mean that you have loaned or gifted the investment to the investment bank.

If you follow the logic of the investment bank then the deposits of money by depository customers could be claimed as assets — without the required entry in the liabilities section of the balance sheet because every dollar on deposit is a liability to pay those monies on demand, which is why checking accounts are referred to as demand deposits.

Hence the “asset” has been entered on the investment bank balance sheet without the corresponding liability on the other side of their balance sheet. And THAT remains that under cover of Federal Reserve purchase of these bonds from the banks, who don’t own the bonds, the value of the bonds is 100 cents on the dollar and the owner is the bank — a living lies fundamental. When the illusion collapses, the banks are coming down with it. You can only go so far lying to the public and the investment community. Eventually the reality is these banks are underfunded, under capitalized and still being propped up by quantitative easing disguised as the purchase of mortgage bonds at the rate of $85 Billion per month.

We need to be preparing for the collapse of the illusion and get the other financial institutions — 7,000 community and regional banks and credit unions — ready to take on the changes caused by the absence of the so-called major banks who are really fictitious entities without a foundation related to economic reality. The backbone is already available — electronic funds transfer is as available to the smallest bank as it is to the largest. It is an outright lie that we need the TBTF banks. They have failed and cannot recover because of the enormity of the lies they told the world. It’s over.

CBO: principal reduction best for economy

Three cheers for Chris Hayes on MSNBC. In his new show, ALL IN, last night he reported and editorialized on the mistakes of giving banks relief and “screwing” homeowners since 2008. On his show he had Elliot Spitzer who took the administration to task for not doing something before this time. And to top it off DeMarco, the head of the former government sponsored entities (GSE), who has single-handedly blocked principal reduction is being removed and his replacement is an ardent consumer advocate currently a Representative from North Carolina. Things are changing.

The Congressional Budget Office is accepted as a non-partisan agency which has torpedoed both Democratic and Republican proposals on the economy. Upon request from Congress, the CBO studied the mortgage and foreclosure market and concluded that principal reduction should be the keystone of policy for Fannie and Freddie because it is a win-win that will return money to the taxpayers, spur the economy with an fiscal stimulus with a program that costs nothing, increasing GDP and employment. The CBO unequivocably recommended immediate implementation of large-scale reductions in mortgage principal.

The momentum is growing for the reduction of household debt just as this blog, numerous economists and financial experts have been virtually demanding. Iceland has proved the point. We have there a live experiment. Iceland has adopted a policy of continual reduction of household debt. The result was a healthier economy growing at a higher pace than any other country hit by the world- wide recession because consumer wealth, confidence and earnings increased allowing for consumption of goods and services that are in sharp decline in the U.S. and Europe. And the banks in Iceland are healthier and better regulated than at any time before the crash.

It is clearly a win- win situation for all stake holders. All this is providing fuel for the policy of principal reduction in household debt, including mortgages, forcing the banks to eat the difference. Of course Iceland also jailed the bankers who created the conditions that caused the Iceland economy to crash n 2008. Now you wouldn’t know it ever happened — but only if live in Iceland. Policy experts here and the CBO that measures past, present and future effects of economic policies are now moving away from the disastrous European experiment in reduced spending (“austerity”) which kicked the Euro economy when it was already down.

This means that homeowners will fight even harder to stay alive while the new policies go into effect and the right thing is done for consumers and homeowners in particular, that will provide trillions in fiscal stimulus for the economy with little negative impact on the banks who were using other people’s money to fund the mortgages, suffered no loss in mortgage defaults and only reported losses on bogus mortgage bonds backed by mortgage loans, which in turn were guaranteed by Fannie and Freddie 90% of the time. Those GSE entities under a single Federal Agency now guarantee or own more than 90% of all U.S. mortgages.

The remaining correction in describing the mortgages that were supposedly filed on record is that the mortgages were for the most part unenforceable, as is consistently alleged by investor lawsuits against investment banks that created and sold the bogus mortgage bonds AND that the “reduction” is really CORRECTION to adjust for fraudulent appraisals on which homeowners, the government and investors relied.

For the first time the reception of homeowners has changed from deadbeat to the ultimate resource to restore economic growth and who were screwed worse than anyone in the criminal enterprise that Wall Street called “securitization.” There was no securitization. Wall Street banks put the money in their own pockets instead of funding the so-called asset pools, “trusts” and other special purpose vehicles that the investors belied was receiving their money. The paperwork is all a sham from origination, where the “lender” never loaned a penny through assignments that conveyed nothing and were completely unsupported by value or consideration.

CONGRATULATIONS TO THE SOLDIERS IN THIS WAR AGAINST OPPRESSION OF THE AVERAGE CITIZEN.

Prosecutors Getting Tough? Small Banks ONLY!!

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with 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, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Comment and Analysis: Abacus Bank has only $272 million in deposits. In rank, it is near the very bottom of the ladder. And apparently justifiably, federal prosecutors have seen fit to prosecute the bank for fraud. The quandary here is why the prosecutors are putting their muscle behind just the low-hanging fruit and why they are settling with the mega banks for the same acts — without threat of prosecution. If we could offer $17 trillion in various forms of “relief” for the banks, they certainly could pony up $1 billion and investigate the truth behind the securitization claims. The only conclusion I can reach is that the administration, so far, doesn’t want proof of the truth.

One of the things that Yves gets right here is that when Fannie and Freddie get involved, it isn’t the end of the line and it certainly does not mean that the loan was not “securitized” using the same fake documents at origination and the same fake mortgage bonds, albeit guaranteed by Fannie and Freddie who serve as “Master Trustee” of the investment pools that presumably “bought the loans with actual money. Like their cousins in the non government guaranteed loans, the money largely comes from fat accounts where the investors’ money was commingled beyond recognition and the investment bank who created and sold the bogus mortgage bonds was the “buyer” on paper so that they could bet against the same loans and bonds they were selling to investors.

Yves still refers to the scheme as reckless as though a judgment was made without knowing the consequences of the banks’ actions. Nothing could be further from the truth. This wasn’t reckless.

It was intentional because that was where the big money came from. The scheme was to take as much as possible from money advanced by pension funds and keep it, while giving the illusion of a securitization scheme for funding mortgages and reducing risk.

The mega banks even bet on their success and the investors’ loss, the borrowers’ loss and the loss shouldered by taxpayers, increasing their leverage positions up  to 42 times (Bear Stearns). As we all know, the risk was magnified not reduced and the only experts that really knew were in the departments where collateralized debt obligations were packaged on paper, sold to investors and never transferred to any trust, REMIC of SPV.

With Abacus, the punch line is that their default rate was 1/10th that of the national average indicating that contrary to the practices of the mega banks, some underwriting was involved and some verification and oversight was employed.

What is avoided is that $13 trillion in loans were originated using the false securitization scheme in which the borrower was kept in the dark about who his lender was, and where upon inquiry the borrower was told that the identity of the lender was confidential and private, nearly all of which loans were classic cases of fraud in the execution, fraud in the inducement, breach of contract, slander of title, and recording false documents in the county records. The perpetrators of these schemes are settling for fractions of a penny on the dollar with full agreement that their conduct will not be reviewed.

So here is the question: If Abacus is guilty of fraud and caused minimal damage to the economy or the borrowers, isn’t the bar set higher for the mega banks. Why are they allowed to slip through without getting the same treatment as a bank whose deposits equal less than 1/10 of 1% of the size of the megabanks who caused mayhem here and around the world?

Quelle Surprise! Prosecutors Get Tough on Mortgage Fraud….At an Itty Bitty Bank
http://www.nakedcapitalism.com/2013/02/quelle-surprise-prosecutors-get-tough-on-mortgage-fraud-at-an-itty-bitty-bank.html

Deutsch and Goldman Lose Bid to Dismiss FHFA Lawsuit for Fraud

What’s the Next Step? Consult with 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).

CHECK OUT OUR NOVEMBER SPECIAL

Administrative Process May Provide a Lift to Borrowers

Editor’s Comment: Following on the heals of a similar ruling against JPMorgan Chase, Judge Denise Cote, denied the motion to dismiss the lawsuit of the Federal Housing Finance Agency that overseas Fannie and Freddie.

Simply put the agency is charging the investment banks with intentionally misrepresenting the underwriting standards that were in use during the mortgage meltdown. To put it more simply, the fraud we know that occurred at ground zero (the “closing” table) is being traced up the line to the banks that were pulling the strings and causing the fraud.

The allegations of course are insufficient in and of themselves to use as proof of anything. They are unproven allegations in a civil court suit in Federal Court in Manhattan. BUT there is an interesting argument to be made here that should not be ignored. I did a lot of work in administrative law when I was practicing full-time.

The procedure that any agency follows in filing such a lawsuit is something that should be pointed out when you are making arguments about fraud in the origination or assignments of loans.

In order for an agency to file suit, there must be a “finding” that the facts alleged in the complaint are true. In order for that to happen there must be an investigation and it must be brought before a committee or board for a finding of probable cause.

Normally the finding of probable cause would result in an administrative action brought before a hearing officer that would result in either acquittal of the offending suspect (respondent) or fines, penalties or even revocation of their right to do business with the agency or under the auspices of the agency.

Here the action is brought in civil court which must mean that the findings were strong enough to go beyond probable cause to establish in the findings of the agency that these violations did occur beyond a reasonable doubt. Hence, it could be argued, given the structure and process of administrative actions, that the investment banks have already been found by administrative agencies to be fraudulent.

Then you go to the facts alleged and see what those facts were (see article on JPMorgan denial of dismissal for copy of the complaint). Where there are similarities, you can allege the same thing and apply it to the origination of the loan and the so-called assignments and claims of securitization. AND you can say that there has already been an administrative finding that the fraud occurred, which is persuasive authority at a minimum.

In these cases the investment banks are accused of intentionally lying about the underwriting standards used in origination of the loans — something we have been saying here for  years.

That means it was no mistake that they failed to put the name of the real payee on the note and mortgage and it was no mistake that they failed to reference the REMIC or the pooling and servicing agreement which set the terms of repayment, sometimes in direct contradiction to the terms expressed in the note that they induced the borrower to sign. The information was intentionally withheld from the borrower and promptly used with Fannie and Freddie knowing ti was false, as to verifications of value, income viability etc. (see previous post).

In essence the FHFA is saying the same thing that the investors are saying, which is the same thing that the borrowers are saying — these origination documents are worthless scraps of paper replete with deficiencies, lies and misrepresentations, unsupported by consideration and unenforceable.

The defense of the investment banks is that they HAVE been enforcing the notes and mortgages (Deeds of trust). They are saying that since the courts have let most of the cases go to foreclosure, the documents must be valid and enforceable. If improper underwriting standards had been used, or more properly stated, if underwriting standards were ignored, then the borrower would have had a right to rescission, which the courts have largely rejected. It is circular reasoning but it works, for the most part when it is a single homeowner against a big bank.

But when it is institution against institution its not so easy to pull the wool over the judge’s eyes. AND unlike the borrowers, the FHFA is not plagued with guilt over whether they were stupid to begin with and therefore deserve the punishment of taking the largest loss of their lives.

The answer to that is that the banks were only able to “enforce” as a result of the ignorance of the judges, lawyers and borrowers as to the truth behind the facts of each loan origination, assignment etc.

By Jonathan Stempel, Reuters

A U.S. judge rejected bids by Goldman Sachs Group Inc (GS.N) and Deutsche Bank AG (DBKGn.DE) to dismiss a federal regulator’s lawsuits accusing them of misleading Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) into buying billions of dollars of risky mortgage debt.

In separate decisions on Monday, U.S. District Judge Denise Cote in Manhattan said the Federal Housing Finance Agency may pursue fraud claims over some of the banks’ representations in offering materials regarding mortgage underwriting standards.

The FHFA had sued over certificates that Fannie Mae and Freddie Mac, known as government-sponsored enterprises, had bought between September 2005 and October 2007.

Goldman underwrote about $11.1 billion of the certificates, and Deutsche Bank roughly $14.2 billion, the regulator has said.

Michael DuVally, a Goldman spokesman, declined to comment, as did Deutsche Bank spokeswoman Renee Calabro. Trials in both cases are scheduled to begin in September 2014.

Last year, the FHFA filed 18 lawsuits against banks and finance companies over mortgage losses suffered by Fannie Mae and Freddie Mac on roughly $200 billion of securities.

Cote handles 16 of the lawsuits, and previously refused to dismiss its cases against Bank of America Corp’s (BAC.N) Merrill Lynch unit, JPMorgan Chase & Co (JPM.N) and UBS AG (UBSN.VX).

In her Deutsche Bank ruling, the judge said that while the offering materials said representations were “preliminary” and “subject to change,” their use suggested that the German bank “fully intended the GSEs to rely on” them.

Meanwhile, Cote rejected what she called Goldman’s “legally dubious” claim not to be liable over prospectus supplements it did not write, saying “it is difficult to square with the fact that the bank’s name is prominently displayed on each.”

She dismissed some claims over representations concerning owner-occupied homes and loan values.

The FHFA became the conservator of Fannie Mae and Freddie Mac after federal regulators seized the mortgage financiers on September 7, 2008.

In May, Deutsche Bank agreed to pay $202.3 million in a separate federal probe, in which its MortgageIT unit admitted it had lied to the U.S. government over whether its loans were eligible for federal mortgage insurance.

Cote said it is too soon to decide liability over MortgageIT activity that predated its 2007 takeover by Deutsche Bank.

The cases are Federal Housing Finance Agency v. Deutsche Bank AG et al, U.S. District Court, Southern District of New York, No. 11-06192; and Federal Housing Finance Agency v. Goldman Sachs & Co et al in the same court, No. 11-06198.

(Reporting By Jonathan Stempel in New York; Editing by John Wallace, Tim Dobbyn and M.D. Golan)

Federal Reserve Money Laundering For Dirty Banks

Since the Fed can create unlimited money, why not pay off every mortgage in the land? That’s only $9.7 trillion, and if the Fed wanted to unleash an orgy of spending, that would certainly do it. Trillions in losses would be filled with “free money,” since the Fed would pay the full value of all mortgages. —- Charles Hugh Smith, Of Two Minds

It is really up to each of us to demand, require and force an accounting for the money that has been taken out of the system and stolen from creditors and borrowers BEFORE we allow another foreclosure. — Neil F Garfield, www.livinglies.me

Editor’s Note: The article below by Charles Hugh Smith from Of Two Minds, strikes with great clarity at the heart of the nonsense we are calling “foreclosure”, and which is corrupting title for decades, taking the confidence in the U.S. economy and the U.S. dollar down with it.

This is the first article I have received that actually addressed the issue that the mortgages, especially the worst ones, were paid off in full. They were paid in full because the supposed mortgage bonds that included shares of the mortgage loans were sold to the Federal Reserve 100 cents on the dollar. Now either those mortgage bonds were real or they were not real. There is nothing in between. What we know for a fact is that the entire financial industry is treating them as real.

The ownership of the bonds was transferred from the trusts, therefore, to the Federal Reserve. While there is little documentation we can see that reveals this, there is no other logical way for the Federal reserve to even claim that it was “buying” the mortgage bonds and the loans.

Either each trust became a trust solely for the Federal Reserve, or the Federal Reserve, bought the bonds directly from the investors.  But since everyone is treating the trusts as valid REMIC entities that do not exist for tax or other business purposes, then the trust did not own the bonds, and only the investors owned the bonds. But they were not paid. The Banks were paid and still allowed to foreclose — but for who?

If the banks took payments on behalf of the REMICs, then they owe a distribution to the investors whose losses, contrary to the reports from the banks become fully cured. That means the creditor on on the mortgage bond has been paid off in whole or in part. That in turn means, since a creditor can only be paid once on a debt, that the amount that SHOULD have been credited to the investors  SHOULD have reduced the receivable. The reduction in the receivable to the creditor should correspondingly reduce the payable due from the borrower. Thus no “principal reduction” should be required because the loan is already PAID.

Why then, is anyone allowing foreclosure of the mortgage loans except in the name of the Federal Reserve? This article explains it. For the full article go to Smith Article on Rule of Law

From the Smith Article:
In a nation in which rule of law existed in more than name, here’s what should have happened:

1. The scam known as MERS, the mortgage industry’s placeholder of fictitious mortgage notes, would be summarily shut down.

2. All mortgages in all instruments and portfolios, and all derivatives based on mortgages, would be instantly marked-to-market.

3. All losses would be declared immediately, and any institution that was deemed insolvent would be shuttered and its assets auctioned off in an orderly fashion.

4. Regardless of the cost to owners of mortgages, every deed, lien and note would be painstakingly delineated or reconstructed on every mortgage in the U.S., and the deed and note properly filed in each county as per U.S. law.

That none of this has happened is proof-positive that the rule of law no longer exists in America. The term is phony, a travesty of a mockery of a sham, nothing but pure propaganda. Anyone claiming otherwise: get the above done. If you can’t or won’t, then the rule of law is merely a useful illusion of a rapacious, corrupt, extractive, predatory neofeudal Status Quo.

The essence of money-laundering is that fraudulent or illegally derived assets and income are recycled into legitimate enterprises. That is the entire Federal Reserve project in a nutshell. Dodgy mortgages, phantom claims and phantom assets, are recycled via Fed purchase and “retired” to its opaque balance sheet. In exchange, the Fed gives cash to the owners of the phantom assets, cash which is fundamentally a claim on the future earnings and productivity of American citizens.

Some might argue that the global drug mafia are the largest money-launderers in the world, and this might be correct. But $1.1 trillion is seriously monumental laundering, and now the Fed will be laundering another $480 billion a year in perpetuity, until it has laundered the entire portfolio of phantom mortgages and claims.

The rule of law is dead in the U.S. It “cost too much” to the financial sector that rules the State, the Central Bank and thus the nation. Once the Fed has laundered all the phantom assets into cash assets and driven wages down another notch, then the process of transforming a nation of owners into a nation of serfs can be completed.

Here’s the Fed’s policy in plain English: Debt-serfdom is good because it enriches the banks. All hail debt-serfdom, our goal and our god!

In case you missed this:

The Royal Scam (August 9, 2009):

Once all the assets in the country had been discounted, the insiders then repatriated their money and bought their neighbor’s fortunes for pennies on the dollar, finding cheap, hungry, competitive labor, ready to compete with even 3rd world wages. The prudent, hard-working, and savers (the wrong people) were wiped out, and the money was transferred to the speculators and insiders (the right people). Massive capital like land and factories can not be expatriated, but are always worth their USE value and did not fall as much, or even rose afterwards as with falling debt ratios and low wages these working assets became competitive again. It’s not so much a “collapse” as a redistribution, from the middle class and the working to the capital class and the connected. …And the genius is, they could blame it all on foreigners, “incompetent” leaders, and careless, debt-happy citizens themselves.

But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. Frederic Bastiat, 1850

BULK SALES OF MORTGAGE LOANS: WHAT ARE THEY BUYING?

Wall Street is gearing up to buy properties en masse from Fannie, Freddie and other holders (including the Federal Reserve. The question for these investors is what are they buying and what are they doing?

I think these sales represent an attempt to create a filler for an empty hole in the title chain. we already know that strangers to the transaction were submitting credit bids at rigged auctions of these properties. The auctions were based upon declarations of default and instructions from a “beneficiary” that popped up out of nowhere. The borrowers frequently contested the sale with a simple denial that they ever did business with the forecloser and that the chain of “assignments” were fabricated, forged, robo-signed, surrogate signed and executed by unauthroized people on behalf of unauthroized entities.

The reason the banks and servicers resorted to such illegal tactics was that they understood full well that the origination documents were fatally defective and they were papering over the defects that continually recited the validity of the preceding documents. That is putting lipstick on a pig. It is still a pig.

While apparently complex, the transaction in a mortgage loan is quite simple — money is loaned, a note is made payable to the lender and a separate agreement collateralizes the loan as guarantee for faithful performance of repayment in accordance with the terms of the note. An examination of the money trail shows that this procedure was not followed and that the practices followed and which have become institutionalized industry standards lead to grave moral hazard, fabrication, forgery and fraud. The entire matter can be easily resolved if the forecloser is required to produce original documentation and appropriate witnesses to lay the foundation of the introduction of documents starting with the funding of the loan through the present, including all receipts and disbursements relating to the loan.

Since the receipts and disbursements clearly involve third parties whose existence was not contemplated or known at the time of origination of the loan, it would probably be wise to appoint an independent receiver with subpoena powers to obtain full records from the subservicer, Master Servicer, trustee, other co-obligors or co-venturers including the investment bank that sold mortgage bonds and investors with the sole restriction that it relate to the accounting and correspondence, agreements and other media relating to the subject loan and the subject pool claiming to own the loan.

Starting from that point, (knowing all receipts and disbursements, sources and recipients, the rest is relatively uncomplicated. Either the documents follow the money trail or they don’t. If they do, then the foreclosure should proceed. If they don’t then there are discretionary decisions of the court as well as mandatory applications of law that are required to determine whether or not the discrepancies are material.

The chain of documents relied upon by the foreclosing party is neither supported by consideration nor do the origination documents recite the terms of the transaction authorized by the lender. Hence there was no meeting of the minds. At a minimum, the recorded lien is a wild deed or should otherwise be subject to invalidation or removal from county records, and the note should be excluded as evidence of the obligation. The actual obligation runs through a different chain the terms of which were never documented between the lenders and the borrower. Hence at common law, it is a demand loan, unsecured.

But the sale from a GSE or other entity creates yet another layer of paper giving the appearance that the origination documented were valid, even though the evidence strongly points in the opposite direction. The purchase of such loans or properties would thus lead to the inevitable wrongful foreclosure suits in which the property is sought to be returned to its rightful owner, and/or compensatory and punitive damages including damages for emotional distress in California.

So my answer is that these buyers did not buy property or loans. They bought themselves into lawsuits that they will lose once discovery is opened up on the underlying transactions, all of which were faked. Is the government colluding with these “buyers” to fix an fixable title problem?

Why DeMarco Won’t Allow Principal Corrections Despite Instructions

Housing Regulator Defies White House

Obama’s Next Move Unknown

Editor’s Comment and Analysis: It’s unanimous! Except for DeMarco, the housing regulator who won’t let Fannie and Freddie cooperate with principal reductions. Why not?

“The Federal Housing Finance Agency’s own analysis has shown that principal reduction could help up to 500,000 homeowners and save taxpayers as much as $1 billion, Geithner wrote to DeMarco. It could save Fannie Mae and Freddie Mac, the government-controlled mortgage giants that DeMarco is preventing from offering principal reduction, up to $3.6 billion, he said.”

The reason is that Fannie and Freddie are actually creatures of Wall Street. And under the now debunked too big to fail theory, a reduction of principal is bad. Mind you this reduction is only a correction to reflect two things: (1) the appraisals were fraudulently inflated just like the rating companies did with the bogus mortgage bonds and (2)  PAYMENTS received but which are going into the bottom line of the mega banks instead of repaying the lenders.

The reason why the Banks are fighting this tooth and nail are many. But the trigger that they fear is that when the loans are written down, more than $150 trillion in fake “cash equivalent” instruments will disappear and they would need to correct their balance sheets and profit and loss statements to reflect the fact that this whole securitization thing was a sham.

This is the last gasp of Wall Street using a regulator who for reasons of personal ideology or personal finance (or both) can still be manipulated into avoiding the one correction that would bring the entire housing market back, return equity to homeowners (or at least give them a  fighting chance to get to equity in their homes) and stop the drag on the economy.

So it all comes down to this. Who is more important — the banks or the people of this country. Even if you are ideologically opposed to reductions or corrections you must realize that this plan results in a decrease in taxpayer losses. Why would you want anything else when the alternative costs more, leads to bigger government, and will lead the economy to the next recession/depression?

DeMarco’s ideological response is that the correction would lead to a “moral hazard” leading to other people who stop paying their mortgages. They should stop paying but they won’t — because deep down inside homeowners want to do the right thing. And even though I think they are wrong, they believe that the right thing is to pay their debt — even if someone has already paid it through bailout, Fed purchases, insurance, credit default swaps etc.

DeMarco’s response was clearly scripted by Wall Street who are the titans of “moral hazard.” They took booming economies and reduced them to rubble. The bottleneck is at the Banks and the answer is that DeMarco can and will be fired, the Banks will be taken down into sizes that enable regulators to control them, and the economy will eventually recover.

Ed DeMarco, Top Housing Official, Defies White House; Geithner Fires Back

Demarco

In a move that brings two federal agencies as close to warfare as possible within the confines of bureaucratic memos, the Treasury Department called out housing regulator Edward DeMarco on Tuesday for his continued refusal to offer a key piece of housing assistance to underwater borrowers struggling to save their homes from foreclosure.

The Federal Housing Finance Agency’s own analysis has shown that principal reduction could help up to 500,000 homeowners and save taxpayers as much as $1 billion, Geithner wrote to DeMarco. It could save Fannie Mae and Freddie Mac, the government-controlled mortgage giants that DeMarco is preventing from offering principal reduction, up to $3.6 billion, he said.

The response was timed to coincide with DeMarco’s latest letter to Congress, in which he reaffirmed his opposition to principal reduction, a form of loan forgiveness championed by many housing advocates and economists. DeMarco wrote that his agency’s analysis found that the taxpayer benefit of writing down the mortgage values of some loans “would not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers.”

This is not the first time DeMarco has irked the Obama administration. As the acting director of the federal overseer of Fannie and Freddie, DeMarco has broad powers to set policy at the companies. The Obama administration — especially Treasury — leaned hard on DeMarco to agree to allow the five banks that signed on to the national mortgage settlement in March to write down the roughly 50 percent of all loans they service that are owned or backed by Fannie and Freddie.

DeMarco said no. He has also resisted entreaties to allow borrowers who obtain a loan modification through the Home Affordable Modification Program, or HAMP, which Treasury administers, to allow loan forgiveness as part of the modification in some circumstances. It is the analysis of whether principal reduction offered through this program would help or hurt taxpayers that is the center of the dispute between Geither and DeMarco.

In the letter sent Tuesday to Congress, DeMarco said that projected benefit to taxpayers is $500 million in the best case, and that most of this aid would go to homeowners who haven’t made a mortgage payment in more than a year.

“Experience dictates that the likelihood of successfully modifying and reinstating these loans is small so that the anticipated benefit is likely to be much less than $500 million,” he said.

The housing regulator also restated his position that allowing some homeowners off the hook for some of what they owe would pose “a moral hazard.”

“This could give borrowers who are current on their mortgages a message that the government endorses forgiving a portion of mortgage debt if hardship can be demonstrated, creating a very broad incentive for underwater borrowers to seek ways to become eligible.”

He also repeated his argument that steps Fannie Mae and Freddie Mac are already taking, such as reducing the interest rate on loans and offering to postpone, or “forbear,” mortgage payments, will help struggling borrowers without posing the moral and financial hazards that come with reducing the value of a loan.

Geithner struck back at that analysis, claiming that DeMarco omitted key details in order to stick to his guns on principal reduction. Even if the longer-delinquent loans that DeMarco referenced are not a part of a program, there are still 300,000 borrowers who could participate in a loan forgiveness program at zero cost to taxpayers, Treasury said.

“[A]s we have discussed many times, the use of targeted principal reduction by [Fannie and Freddie] would provide much needed help to a significant number of troubled homeowners, help repair the nation’s housing market and result in a net benefit to taxpayers,” Geithner wrote.

The Federal Housing Finance Agency has overseen the mortgage giants since they were bailed out in 2008, part of the early fallout from the mortgage crisis. Since then, taxpayers have spent roughly $188 billion to prop up the companies, according to the regulator.

Elijah Cummings (D-Md.), one of DeMarco’s fiercest Congressional critics, said in an email that he believes the regulator is behaving recklessly.

“It is incomprehensible that Mr. DeMarco would reject the chance to save up to a billion dollars in taxpayer funds while helping nearly half a million homeowners stay in their homes,” Cummings said. “He should immediately withdraw this reckless and misguided letter and start following the law Congress passed.”

DeMarco’s continued refusal to allow the two mortgage giants to offer loan write-downs has prompted a growing chorus of critics to call for his resignation, or for Obama to fire him.

“If Mr. DeMarco will not change his mind, we need to change his job — and today we’re once again calling on President Obama to fire him,” said Natalie Foster, the chief executive officer of Rebuild the Dream, an advocacy group.

A White House spokesman referred a query to the Treasury Department.

see entire article at War at the White House Over Principal Reduction

The Documents Fannie and Freddie Never Received

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Editor’s Comment:

Go to the link below which will take you to the article posted on StopForeclosureFraud where  you will see a list of documents (just like the Pooling and Servicing Agreements that everyone ignored) that should have been received by Freddie, Fannie, Ginnie, FHA et al.  Since we now know that the securitization chain of documents was nonexistent until the dealers were called upon to fabricate them for cases in litigation, we know that the absolute minimum requirements for Fannie and Freddie approval were absent. 

This means, contrary to the assertions of 99% of the securitization “auditors”, and contrary to the appearance of a loan on a Fannie or Freddie website, that the loan was never delivered to those agencies nor any of the documents required.  Just as the REMICs never received the loans, Freddie never received the loans.  And since Freddie never received the loans it became the master trustee of “trusts” that never received the loans and were therefore empty.

All this means is that we have to go back to the first day of the alleged transaction.  Investor lenders, operating through dealers, (investment banks) were advancing money for the “purchase” of residential mortgage loans.   The money was advanced to the closing agent who paid off the party claiming to be the prior mortgagee, giving the balance to the seller of the property or to the borrower (if the transaction was supposedly a refinance).  The nightmare for the banks is that if we go back to that first day the parties named as “lender”, “beneficiary”, “mortgagee” are the only parties of record with an apparent recorded interest in the property.  Their problem is that contrary to conventional foreclosure practice, those entities (many of which do not exist anymore) never funded nor even handled the money as a conduit for the loan.  Thus the note and mortgage are fatally defective and cannot be enforced. 

This would mean that the loan never made it into any pool.  That would mean that all of the deals made by the dealers (investment banks) based on the existence of that loan would fall apart leaving them with an enormous liability since they had sold the same deal dozens of times.  And that is the sole reason why the bailout, insurance, credit default swaps, guarantees and other credit enhancements were so large.  The banks used their ability to control the people with their hands on the levers of power within our government to pay for the malfeasance of the banks that have wrecked our economy and our society.

As Iceland has already proven and Europe is in the process of proving, the only answer is to take the stolen money back from the banks, put it back into the private sector, and put it back into government budgets. 

Freddie Mac Designated Counsel/Trustee For Foreclosures and Bankruptcies 2012

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