Summit County Ohio Prosecutor Using the F Word Against Freddie

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Editor’s Comment:  

By now the law suits by counties against Wall Street mortgage madness to collect fees, fines, taxes, interest and assessments are becoming so commonplace, that we ALMOST are reluctant to report them. But we still will report especially when there is something noteworthy about counties and cities striking back at Wall Street. 

Back in 2007 when I started the blog and most people saw me not so much as a lone voice of truth in the wilderness as the loan popper on the fringe of legal “theories” I used the word FRAUD often but maybe not often enough. Now the very respectable count and city attorneys suing the giant Wall Street creations like Fannie and Freddie (who claim to be government agencies when it suits them, and private corporations when it suits them) are using the F word more than I did. FRAUD is not easily alleged or proven. Fraud requires intent to deceive and a host of other elements before it becomes actionable even in a civil court where it must be proven far beyond more likely than not (clear and convincing evidence standard). Yet here it is bandied about like apples at a supermarket. 

What is different is that the word fraud is being used against a lot of banks and financial entities that defy description like Fannie, Freddie and Ginny. And the people using F word are government lawyers and prosecutors in law enforcement. And the F word is being used across not just the country but the world. All that means right now, is that normally reticent lawyers are feeling bolder about their allegations and about their ability to prove those allegations. 

But remember you saw it here first, years ago. The mortgage meltdown was no mistake. It was intentional with complete knowledge as to the horrendous consequences the countries of the world and their states and provinces would suffer. And with the kind of indifference to humanity that was present when slave trading was allowed. And it was done for money and the PEOPLE who did it made more money than any person has a right to make on Wall Street, sucking the wealth out of the country to the detriment of their own companies (with 50% of profits attributed as bonuses over and above the ridiculously high salaries already paid) and the shareholders who are supposed to be the ones who get most of the profits — not employees even if they are officers.

The PEOPLE on Wall Street who used their companies as tools to gain personal wealth for themselves, the world be damned, they always made money. They always do make money when the Markets go up and when they go down, because they make it when money moves, so they made a lot of money look like it was moving many times. They called it leveraging and selling forward. I called it FRAUD and now I am somewhat encouraged that more and more people are seeing these actions not as excess but as fraud.

Summit County Ohio Prosecutor Files Fraud Lawsuit Against Freddie Mac for Failure to Pay Transfer Taxes and Fees

Mortgage corporation failed to pay taxes and fees to Summit County for six years

AKRON, OHIO – Summit County Prosecuting Attorney Sherri Bevan Walsh today filed a complaint in Summit County Court of Common Pleas against Federal Home Loan Mortgage Corporation, widely known as “Freddie Mac,” on behalf of Russell M. Pry, executive of Summit County, and Kristen M. Scalise, fiscal officer of Summit County. The complaint requests that Freddie Mac be ordered to pay restitution to Summit County for neglecting to pay fees and taxes over a six-year period.

From 2002 through December 31, 2008, Freddie Mac failed to pay the fees or transfer taxes on more than 3,500 real estate transactions. Freddie Mac claimed to be exempt from those payments because it is a government entity.

Summit County contends that Freddie Mac was fraudulent in this claim, as Freddie Mac is not a government entity, but rather it is a federally-chartered private corporation. Furthermore, the fees and transfer taxes on real estate transactions are an excise tax, not a direct tax. Government entities are not exempt from excise taxes.

“Freddie Mac’s failure to pay fees and transfer taxes on these properties amounts to nothing less than fraud,” said Prosecutor Walsh. “That fraud came at significant expense to Summit County taxpayers, and I fully expect that the Court will order Freddie Mac to repay the money it owes to the citizens of Summit County.”

Summit County is asking the Court to find that Freddie Mac committed fraud when it claimed to be exempt from real estate transfer fees and transfer taxes. The County is seeking repayment of all unpaid fees and transfer taxes plus interest and penalties.

Full complaint below…

www.4closureFraud.org

STATE OF OHIO COUNTY OF SUMMIT v FEDERAL HOME LOAN MORTGAGE CORPORATION

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Pot Calls Kettle Black: Deutsch V BOA

See DEUTSCHEBANKv BANKOFAMERICA

This is an action for (1) damages for breach of contract resulting from BOA’s
failure to secure and safeguard over $1.25 billion worth of cash and mortgage loans that it was contractually obligated to secure on behalf of DB and (2) contractual indemnity for the losses caused by BOA’s negligent performance of its duties to DB.

Ocala was established for the sole purpose of providing funding for mortgage
loans originated by Taylor, Bean & Whitaker Mortgage Corp. (“TBW”). Mortgages purchased by Ocala were required to conform to the requirements of, and were intended to be sold to, the Federal Home Loan Mortgage Corporation (“Freddie Mac”), a government-sponsored entity that is implicitly backed by the full faith and credit of the United States government.

WET AND DRY MORTGAGES

One vital mechanism protecting DB against risk was the requirement that DB’s investment be at all times over-collateralized by a combination of cash and “dry” mortgages purchased by Ocala. “Dry” mortgages are mortgages that have been reviewed by the lender and are actually in the lender’s possession at the time the mortgage loan is acquired by the lender. By contrast, “wet” funding of mortgages is riskier from the lender’s perspective because financing is provided to a borrower before the mortgage note has been received and reviewed by the lender (i.e., when the ink on the mortgage note is still “wet”). The lender providing wet funding for TBW was Colonial Bank (“Colonial”). In making its investment in Ocala on June 30, 2008, DB insisted that its investment be used only for dry mortgages.

DB trusted that BOA, one of the nation’s largest and most well-known financial institutions, would perform the gatekeeper function reasonably and responsibly. DB’s confidence was echoed by Moody’s Investors Service, which, in assigning Ocala an investment grade rating, emphasized the importance of BOA’s role and stated that risk to DB and other noteholders was “mitigated by the resources, capability and credit strength of BOA as the trustee, collateral agent, depositary and custodian to provide critical program support services, including: certifying the borrowing base and checking the delinquency triggers before the issuance of Ocala’s ABCP; checking in the loan files and creating a collateral transmittal report; and managing the orderly wind-down of the program.” Moody’s ABCP Market Review (July 13, 2009). see Asset Backed Commercial Paper Review

As it turned out, the faith of DB and other investors was misplaced. In myriad ways, BOA failed to carry out its various duties designed to protect DB’s investment, and these failures substantially damaged Ocala and DB’s investment.


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