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

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

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

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

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

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

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

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

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

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

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

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

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

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

By

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

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

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

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

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

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

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

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

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

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

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

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

Szymoniak: Honesty Pays $46.5 Million in Whistleblower Suit

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Editor’s Comment and Analysis:  

It was and remains a big lie — the securitization the loans, the origination of the loans, the assignments, alleges and endorsements. $46.5 million sounds like a lot and these whistleblowers will get a “windfall” as a result of it. But it is a drop in the bucket and we need to fill the bucket. And our bucket list should include taking down the big banks, removing money from politics, and getting back to government by the people and for the people.

Schiller, the scholar who has been leading the way in economic analysis of the housing market, has offered an audacious plan that is the last possible way for government intervention to save the economy, which is heavily dependent upon consumer spending, particularly in the housing market. Eminent domain has long been sustain as the right of government to take private property and convert it to public use. Whether it is a highway, downtown redevelopment or other reasons, eminent domain has been played by the banks and developers as a way to get land they need, at a price that could not be achieved using the power of the government behind them. 

While seemingly unusual and audacious, Schiller’s proposition has many precedents in history and should be considered as the last great hope after the 50 attorney generals agreed in the 50 state settlement that now prevents them from further investigation and prosecution against the banks. Schiller’s, the originator of the case-Schiller index showing that median income and income disparity is harmful to the economy and deadly to the housing market, proposes that we use the power of eminent domain to seize the remaining mortgages, and perhaps the property that has already been foreclosed, and remake the deals so that they make sense. Translating that means that the homeowners will get the deal that they should have received when they bought o refinanced their house. And it capitalizes on the inconvenient truth that it was the banks who created risks that neither the investors nor the homeowners signed up for.

By paying the value of the remaining mortgages — more than 30% are reported still under water and when carefully analyzed the figure is closer to 60%, the banks get no more and no less than they should, the investors still get their money — 100 cents on the dollar if they insist on payback from the banks in addition to the money from the new mortgages on the old property, and the homeowner is back in charge of his own home paying principal, interest, costs, fees and insurance and taxes that are fair market value indicators. It is better than the proceeds of foreclosures, so the banks now must argue that they have a right to take less money in order to get the foreclosure.

The banks want the foreclosure because they lied. And with the foreclosure it adds to the illusion that they funded or paid for loans in which they do not have a nickel invested. The fact that the balance sheets of the mega banks are going to take a giant hit is only an admission that the assets they are reporting are either not worth anything or are worth far less than the value shown on their public financial statements. They are still lying about that to investors, the SEC and other regulatory agencies.

So whistleblowers must pave the way and show the lies, show the inequality, show the inflated appraisals that could not stand the test of time and force government to act as it should. The chief law enforcement of the country and the chief law enforcement of each state owes his/her citizens at least that much and more. They must find ways to clear up the corruption of title records that are irretrievably lost. 

And the lawyers who keep turning down these cases because they are too complex or too weak should take a close look at these whistleblower  cases. The settlement, as always, comes before the trial because the fact remains that the banks are o the hook for  their bets on the mortgages and not the mortgages themselves. Lawyers need to show a little guts and seek some glory and wealth from these cases, while at the same time doing their country a service.

We are turning the corner and the banks are starting to lose. Keep up the fight and your effort will probably go well-rewarded.

Whistleblowers win $46.5 million in foreclosure settlement

By James O’Toole

NEW YORK (CNNMoney) — Getting served with foreclosure papers made Lynn Szymoniak rich.

While she couldn’t have known it at the time, that day in 2008 led to her uncovering widespread fraud on the part of some of the country’s biggest banks, and ultimately taking home $18 million as a result of her lawsuits against them. Szymoniak is one of six Americans who won big in the national foreclosure settlement, finalized earlier this year, as a result of whistleblower suits. In total, they collected $46.5 million, according to the Justice Department.

In the settlement, the nation’s five largest mortgage lenders –Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial — agreed to pay $5 billion in fines and committed to roughly $20 billion more in refinancing and mortgage modifications for borrowers.

A judge signed off on the agreement in April, and in May — Szymoniak received her cut.

“I recognize that mine’s a very, very happy ending,” she said. “I know there are plenty of people who have tried as hard as I have and won’t see these kinds of results.”

Related: 30% of borrowers underwater

Whistleblower suits stem from the False Claims Act, which allows private citizens to file lawsuits on behalf of the U.S. when they have knowledge that the government is being defrauded. These citizens are then entitled to collect a portion of any penalties assessed in their case.

The act was originally passed in 1863, during a time when government officials were concerned that suppliers to the Union Army during the Civil War could be defrauding them.

In 1986, Congress modified the law to make it easier for whistleblowers to bring cases and giving them a larger share of any penalties collected. Whistleblowers can now take home between 15% and 30% of the sums collected in their cases. In the cases addressed in the foreclosure settlement, the whistleblowers revealed that banks were gaming federal housing programs by failing to comply with their terms or submitting fraudulent documents.

In Szymoniak’s case alone, the government collected $95 million based on her allegations that the banks had been using false documents to prove ownership of defaulted mortgages for which they were submitting insurance claims to the Federal Housing Administration.

The FHA is a self-funded government agency that offers insurance on qualifying mortgages to encourage home ownership. In the event of a default on an FHA-insured mortgage, the FHA pays out a claim to the lender.

Szymoniak’s case was only partially resolved by the foreclosure settlement, and she could be in line for an even larger payout when all is said and done.

As an attorney specializing in white-collar crime, the 63-year-old Floridian was well-placed to spot an apparent forgery on one of the documents in her foreclosure case, one she saw repeated in dozens of others she examined later.

“At this point, the banks are incredibly powerful in this country, but you just have to get up every morning and do what you can,” she said.

The other five whistleblowers in the settlement came from the industry side, putting their careers at risk by flagging the banks’ questionable practices.

Kyle Lagow, who won $14.6 million in the settlement, worked as a home appraiser in Texas for LandSafe, a subsidiary of Countrywide Financial. He accused the company in a lawsuit of deliberately inflating home appraisals in order to collect higher claims from the FHA, and said he was fired after making complaints internally.

Gregory Mackler, who won $1 million, worked for a company subcontracted by Bank of America to assist homeowners pursuing modifications through the government’s Home Affordable Modification Program, or HAMP. Under HAMP, the government offers banks incentive payments to support modifications.

Mackler said Bank of America violated its agreement with the government by deliberately preventing qualified borrowers from securing HAMP modifications, steering them toward foreclosure or more costly modifications from which it could make more money. He, too, claims to have been fired after complaining internally.

There’s also Victor Bibby and Brian Donnelly, executives from a Georgia mortgage services firm who accused the banks of overcharging veterans whose mortgages were guaranteed by the Department of Veterans Affairs, thereby increasing their default risk. Bibby and Donnelly won $11.7 million in the settlement; their attorneys did not respond to requests for comment.

Shayne Stevenson, an attorney who represented both Lagow and Mackler, said the two weren’t aware of possible rewards when they first brought their evidence to his firm.

“The reality of it is that most of the time, whistleblowers don’t even know about the False Claims Act — they don’t know they can make money,” Stevenson said. Both his clients, Stevenson added, “just wanted the government to know about this fraud, so they deserve every penny that they got.”

A Bank of America spokesman declined to comment on individual cases, but said the national settlement was “part of our ongoing strategy to put these issues, particularly these legacy issues with Countrywide, behind us.” BofA acquired mortgage lender Countrywide in 2008, thereby incurring the firm’s legal liabilities.

The other banks involved either declined to comment or did not respond to requests for comment.

Related: Foreclosures spike 9%

While the whistleblowers in the settlement scored big paydays in the end, the road wasn’t easy. Stevenson said his clients “were pushed to the brink” after raising their concerns, struggling to find work and beset by financial problems.

“They were facing evictions, foreclosure, running away from bills, trying to deal with creditors that were coming after them,” Stevenson said. “This went on and on and on, and this is part and parcel of what happens to whistleblowers.”

For Robert Harris, a former assistant vice president in JPMorgan’s Chase Prime division, the experience was similar.

Harris accused the bank of failing to assist borrowers seeking HAMP modifications and knowingly submitting false claims for government insurance based on wrongful foreclosures. He was stymied when he tried to complain internally, and says he was fired for speaking out.

While Harris ended up with a $1.2 million payout in the settlement, the father of five says he’s been blacklisted within the industry and exhausted by the ordeal.

“It completely turned my life upside down,” he said. “I’m trying to raise my kids, recover from a divorce, recover from the loss of my career — it just comes to down to surviving and putting this to an end.”

“I guarantee the other whistleblowers, too, have sacrificed a lot,” he added. “But to be able to sit back and sleep at night is worth it.”


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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

Documents That Must Be Received By Counsel/Trustee Within 2 Business Days of Referral

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FHA Loan Sales Good News and Bad News

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Editor’s Comment:

With the Federal reserve and FHA and soon other agencies selling off their loans it is true that the homeowners will be getting calls inviting them to accept new mortgages at much lower rates and principal owed. But the reason is that the Banks have figured out is that if you can just get a signature from the homeowner who is getting screwed in foreclosure, the Bank’s potential liability for all their illegal activities is greatly diminished.

 

And the fact that the signature of the homeowner does absolutely nothing to clear up title in most cases. The payoff on the old loan was inevitably to a party picked at random from the list of participants in the securitization chains that were created on paper and then totally ignored. When the homeowner gouges to sell or refi his home in a few years, we will have another crisis on our hands because the title won’t be clear by any conventional standards of title analysis.

 

So this “opportunity” is much like the settlements that suddenly appear when the Master Servicer (not the sub-servicer with whom the borrower has transacted business) is ordered to open up its books. The fact is that they used Master Servicer or investment banking escrow accounts where the money from all investors was intermingled in a superFund account where the Wall Street banks kept the money on a tight leash and once again, as they do every 20-30 years or so, totally screw up the paperwork. The difference is that this time the paperwork was screwed up not only between themselves but with the consumers and government agencies.

 

This time, internal sources are telling me independently of one another, that the securitization chain was and is a paper tiger.  There never was  and is not currently anyting in the pools or trusts. In fact, the only thing on paper going into the trusts are bad loans already declared in default and they are going in years after the cutoff date allowed by law and the terms of the pooling and servicing agreement and prospectus. Pension funds are getting a shorter end of the stick than the homeowners, if that is possible. They bought and advanced funds for good loans and all they are getting in return are bad loans that never did conform to the restrictions in the PSA.

 

It isn’t just a technical matter that there was no acceptance of the offer of the assignment. That is a given. who would want a loan that was already declared in default unless they had some other way of satisfying the loan balance in some other way through a co-obligor — like a sub-servicer whose sole action to recover from the homeowner is through a cause of action called “contribution.” That obligation is clearly NOT secured. That action arises out of a contract between the lender and the sub-servicer. There is no contract, note or mortgage between the sub-servicer and the borrower.

 

The question remains in these sales is “what are they really selling.” What is it that the agency “acquired?” What warranties are they giving on the sale of the loans? From whom did they acquire the loans and what due diligence was performed besides taking the bank’s word for it that they owned the loan? Here is the truth: with the REMICs totally disregarded by CDO managers and all the money being in a co-mingled Superfund account it is virtually impossible to determine the indentity of the the “partners” in the loan from the SuperFund because it is impossible to determine the relative amounts of money advanced by pension funds and other investors at the moment the funding took place. What we DO know is that the the loans were sold forward but the loans that were sold forward were based upon paperwork that recited transactions that didn’t exist and never did and never would (thus making the forward sale a civil or criminal fraud). We do know that the claims of ownership from the banks and servicers were at best claims of conveience without substance. So what did the agencies buy and why did they not do their due diligence? Why are we doing the investigation that the FHA and Federal Reserve shold be doing? Why is the burden on the homeowner to discover facts that are readily available to the agencies and law enforcement? When will homeowners stop getting screwed?

 

If none of the elements of a perfected mortgage lien are present, why are we pretending they are there? If removing the illegal mortgage lien and leaving the parties to fight it out or settle the amounts due would revive the economy, why are we not doing that?

 

Why are we substituting new rules of evidence and civil procedure that are created by each judge for the long-standing laws, rules and procedures developed over hundreds of years of common law? How long will we let banks run the system?


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Arizona Supreme Court Hogan Case Holds that Note is Not required to Start Foreclosure

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the trustee owes the trustor a fiduciary duty, and may be held liable for conducting a trustee’s sale when the trustor is not in default. See Patton v. First Fed. Sav. & Loan Ass’n of Phoenix, 118 Ariz. 473, 476, 578 P.2d 152, 155 (1978).” Hogan Court

Editor’s Comment: Here is another example of lawyers arguing out of a lack of understanding of the securitization process and trying to compress an elephant into a rabbit hole. They lost, unsurprisingly.

If you loaned money to someone, you want the money repaid. You DON’T want to be told that because you don’t have the note you can never enforce the loan repayment. You CAN start enforcement and you must prove why you don’t have the note in a credible way so that the court has footprints leading right up to the point that you don’t have the note. But the point is that you can start without the note. 

The Supreme Court apparently understood this very well and they didn’t address the real issue because nobody brought it up. The issue before them was whether someone without the note could initiate the foreclosure process. Nobody mentioned whether the same party could submit a credit bid at the auction which is what I have been pounding upon for months on end now.

Apparently, right or wrong, the feeling of the courts is that there is a very light burden on the right to initiate a foreclosure whether it is judicial or non-judicial. It is very close to the burden of the party moving to lift stay in a bankruptcy procedure. Practically any colorable right gives the party enough to get the stay — because the theory goes — whether it is a lift stay or starting the ball rolling on a foreclosure there is plenty the borrower can do to  oppose the enforcement procedure. I don’t agree with either standard or burden of proof in the case of securitized mortgages but it is about time we got real about what gets traction in the courtroom and what doesn’t.

In the Hogan case the Court makes a pretty big deal out of the fact that Hogan didn’t allege that WAMU and Deutsch were not entitled to enforce the note. From the court’s perspective, they were saying to the AG and the borrowers, “look, you are admitting the debt and admitting this is the creditor, what do you want from us, a free pass?”

This is why you need real people with real knowledge and real reports that back up and give credibility to deny the debt, deny the default, deny that WAMU and/or Deutsch are creditors, plead payment and force WAMU and Deutsch to come forward with pleadings and proof. Instead WAMU and Deutsch skated by AGAIN because nobody followed the money. They followed the document trail which led them down that rabbit hole I was referencing above.

In order to deny everything without be frivolous, you need to have concrete reasons why you think the debt does not exist, the debt does not exist between the borrower and these pretender lenders, the debt was paid in full, and deny that the loan was NOT secured (i.e. that the mortgage lien was NOT perfected when filed).

For anyone to do that without feeling foolish you must UNDERSTAND how the securitization model AS PRACTICED turned the entire lending model on its head. Then everything makes sense, which is why I wrote the second volume which you can get by pressing the appropriate links shown above. But it isn’t just the book that will get you there. You need to give rise to material, relevant issues of fact that are in dispute. For that you need a credible report from a credible expert with real credentials and real experience and training.

I follow the money. In fact the new book has a section called “Show Me the Money”. To “believe” is taken from an ancient  language that means “to be willing”. I want you to believe that the debt that the “enforcers” doesn’t exist and never did. I want you to believe that the declarations contained in the note, mortgage (deed of trust), substitution of trustee etc. are all lies. But you can’t believe that unless you are willing to consider the the idea it might be true. That I might be right.

At every “Securitized” closing table there were two deals taking place — one perfectly real and the other perfectly unreal, fake and totally obfuscated. The deal everyone is litigating is the second one,  starting with the documents at closing and moving up the chain of securitization. Do you really think that some court is going to declare that everyone gets a free house because some i wasn’t dotted or t crossed on the back of the wrong piece of paper when you admit the debt, the default and the amount due?

It is the first deal that is real because THAT is the one with the money exchanging hands. The declarations contained in the note, mortgage and other documents all refer to money exchanging hands between the named payee and secured party on one side and the borrower on the other. The deal in those documents never happened. The REAL DEAL was that money from investor lenders was poured down a pipe through which the loans were funded. The parties at the closing table with the borrower had nothing to do with funding; acquiring, transferring the receivable, the obligation, note or the mortgage or deed of trust.

Every time you chase them down the rabbit hole of the document trail you miss the point. The REAL DEAL had no documents and couldn’t possibly be secured. And if you read the wording from the Hogan decision below you can see how even they would have considered the matter differently if the simple allegation been made that the borrower denied that WAMU and Deutsch had any right to enforce the note either as principals or as agents. They were not the creditor. But Hogan and its ilk are not over — yet.

There is still a matter to be determined as to whether the party who initiated the foreclosure is in fact a creditor under the statute and can therefore submit a credit bid in lieu of cash. THAT is where the rubber meets the road — where the cash is supposed to exchange hands. And THAT is where nearly all the foreclosures across the country fail. The failure of consideration means the sale did not take place. If the borrower was there or someone for him was there and bid a token amount of money it could be argued in many states that the other bid being ineligible as a credit bid, the only winning bidder is the one who offered cash.

————————————————————

Hogan argues that a deed of trust, like a mortgage, “may be enforced only by, or in behalf of, a person who is entitled to enforce the obligation the mortgage secures.” Restatement (Third) of Prop.: Mortgages § 5.4(c) (1997); see Hill v. Favour, 52 Ariz. 561, 568-69, 84 P.2d 575, 578 (1938).

-6-
We agree. (e.s.) But Hogan has not alleged that WaMu and Deutsche Bank are not entitled to enforce the underlying note; rather, he alleges that they have the burden of demonstrating their rights before a non-judicial foreclosure may proceed. Nothing in the non-judicial foreclosure statutes, however, imposes such an obligation. See Mansour v. Cal-Western Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009) (citing A.R.S. § 33-807 and observing that “Arizona’s [non-]judicial foreclosure statutes . . . do not require presentation of the original note before commencing foreclosure proceedings”); In re Weisband, 427 B.R. 13, 22 (Bankr. D. Ariz. 2010) (stating that non-judicial foreclosures may be conducted under Arizona’s deed of trust statutes without presentation of the original note).

———————AND SPEAKING OF  DEUTSCH BANK: READ THIS AS GRIST FOR THE ABOVE ANALYSIS——-

Disavowal by-DEUTSCHE-BANK-NATIONAL-TRUST-COMPANY-AS-TRUSTEE-NOTICE-TO-CERTIFICATE-HOLDERSForeclosure-Practice-Notice-10-25[1]

Pandemic Lying Admission: Deutsch Bank Up and Down the Fake Securitization Chain

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Editor’s Comment:

One problem with securitization in practice even under the academic model is the effect on potential enforcement of the obligation, even assuming that the “lender” is properly identified in the closing documents with the buyer of the loan product and the closing papers of the buyer of the mortgage bonds (and we’ll assume that the mortgage bonds are real and valid, as well as having been issued by a fully funded REMIC in which loans were properly assigned and transferred —- an assumption, as we have seen that is not true in the real world). Take this quote from the glossary at the back of this book and which in turn was taken from established authoritative sources used by bankers, securities firms and accountants:

cross guarantees and credit default swaps, synthetic collateralized asset obligations and other exotic equity and debt instruments, each of which promises the holder an incomplete interest in the original security instrument and the revenue flow starting with the alleged borrower and ending with various parties who receive said revenue, including but not limited to parties who are obligated to make payments for shortfalls of revenues.

Real Property Lawyers spot the problem immediately.

First question is when do these cross guarantees, CDS, Insurance, and other exotic instruments arise. If they are in existence at the time of the closing with the borrower homeowner then the note and mortgage are not properly drafted as to terms of repayment nor identity of the lender/creditor. This renders the note either unenforceable or requiring the admission of parole evidence in any action to either enforce against the borrower or enforce the cross obligations of the new cross creditors who supposedly are receiving not just rights to the receivable but to the actual note and the actual mortgage.

Hence even a truthful statement that the “Trustee” beings this foreclosure on behalf of the “trust” as creditor (assuming a Trust existed by law and that the Trustee, and beneficiaries and terms were clear) would be insufficient if any of these “credit enhancements” and other synthetic or exotic vehicles were in place. The Trustee on the Deed of Sale would be required to get an accounting from each of the entities that are parties or counterparties whose interest is effected by the foreclosure and who would be entitled to part of the receivable generated either by the foreclosure itself or the payment by counterparties who “bet wrong” on the mortgage pool.

The second question is whether some or any or all of these instruments came into existence or were actualized by a required transaction AFTER the closing with the homeowner borrower. It would seem that while the original note and mortgage (or Deed of Trust) might not be affected directly by these instruments, the enforcement mechanism would still be subject to the same issues as raised above when they were fully actualized and in existence at the time of the closing with the homeowner borrower.

Deutsch Bank was a central player in most of the securitized mortgages in a variety of ways including the exotic instruments referred to above. If there was any doubt about whether there existed pandemic lying and cheating, it was removed when the U.S. Attorney Civil Frauds Unit obtained admissions and a judgment for Deutsch to pay over $200 million resulting from intentional misrepresentations contained in various documents used with numerous entities and people up and down the fictitious securitization chain. Similar claims are brought against Citi (which settled so far for $215 million in February, 2012) Flagstar Bank FSB (which settled so far for $133 million in February 2012, and Allied Home Mortgage Corp, which is still pending. Even the most casual reader can see that the entire securitization model was distorted by fraud from one end (the investor lender) to the other (the homeowner borrower) and back again (the parties and counterparties in insurance, bailouts, credit default swaps, cross guarantees that violated the terms of every promissory note etc.

Manhattan U.S. Attorney Recovers $202.3 Million From Deutsche Bank And Mortgageit In Civil Fraud Case Alleging Reckless Mortgage Lending Practices And False Certifications To HUD

FOR IMMEDIATE RELEASE                  Thursday May 10, 2012

Preet Bharara, the United States Attorney for the Southern District of New York, Stuart F. Delery, the Acting Assistant Attorney General for the Civil Division of the U.S. Department of Justice, Helen Kanovsky, General Counsel of the U.S. Department of Housing and Urban Development (“HUD”), and David A. Montoya, Inspector General of HUD, announced today that the United States has settled a civil fraud lawsuit against DEUTSCHE BANK AG, DB STRUCTURED PRODUCTS, INC., DEUTSCHE BANK SECURITIES, INC. (collectively “DEUTSCHE BANK” or the “DEUTSCHE BANK defendants”) and MORTGAGEIT, INC. (“MORTGAGEIT”). The Government’s lawsuit, filed May 3, 2011, sought damages and civil penalties under the False Claims Act for repeated false certifications to HUD in connection with the residential mortgage origination practices of MORTGAGEIT, a wholly-owned subsidiary of DEUTSCHE BANK AG since 2007. The suit alleges approximately a decade of misconduct in connection with MORTGAGEIT’s participation in the Federal Housing Administration’s (“FHA’s”) Direct Endorsement Lender Program (“DEL program”), which delegates authority to participating private lenders to endorse mortgages for FHA insurance. Among other things, the suit accused the defendants of having submitted false certifications to HUD, including false certifications that MORTGAGEIT was originating mortgages in compliance with HUD rules when in fact it was not. In the settlement announced today, MORTGAGEIT and DEUTSCHE BANK admitted, acknowledged, and accepted responsibility for certain conduct alleged in the Complaint, including that, contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations. MORTGAGEIT also admitted that it submitted certifications to HUD stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; that FHA insured certain loans endorsed by MORTGAGEIT that were not eligible for FHA mortgage insurance; and that HUD consequently incurred losses when some of those MORTGAGEIT loans defaulted. The defendants also agreed to pay $202.3 million to the United States to resolve the Government’s claims for damages and penalties under the False Claims Act. The settlement was approved today by United States District Judge Lewis Kaplan.

Manhattan U.S. Attorney Preet Bharara stated: “MORTGAGEIT and DEUTSCHE BANK treated FHA insurance as free Government money to backstop lending practices that did not follow the rules. Participation in the Direct Endorsement Lender program comes with requirements that are not mere technicalities to be circumvented through subterfuge as these defendants did repeatedly over the course of a decade. Their failure to meet these requirements caused substantial losses to the Government – losses that could have and should have been avoided. In addition to their admissions of responsibility, Deutsche Bank and MortgageIT have agreed to pay damages in an amount that will significantly compensate HUD for the losses it incurred as a result of the defendants’ actions.”

Acting Assistant Attorney General Stuart F. Delery stated: “This is an important settlement for the United States, both in terms of obtaining substantial reimbursement for the FHA insurance fund for wrongfully incurred claims, and in obtaining the defendants’ acceptance of their role in the losses they caused to the taxpayers.”

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www.justice.gov/usao/nys/pressreleases/may12/deutschebankmortgageitsettlement.html                  1/45/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

HUD General Counsel Helen Kanovsky stated: “This case demonstrates that HUD has the ability to identify fraud patterns and work with our partners at the Department of Justice and U.S. Attorney’s Offices to pursue appropriate remedies. HUD would like to commend the work of the United States Attorney for the Southern District of New York in achieving this settlement, which is a substantial recovery for the FHA mortgage insurance fund. We look forward to continuing our joint efforts with the Department of Justice and the SDNY to combat mortgage fraud. The mortgage industry should take notice that we will not sit silently by if we detect abuses in our programs.”

HUD Inspector General David A. Montoya stated: “We expect every Direct Endorsement Lender to adhere to the highest level of integrity and accountability. When the combined efforts and attention of the Department of Justice, HUD, and HUD OIG are focused upon those who fail to exercise such integrity in connection with HUD programs, the end result will be both unpleasant and costly to the offending party.”

The following allegations are based on the Complaint and Amended Complaint (the “Complaint”) filed in Manhattan federal court by the Government in this case:

Between 1999 and 2009, MORTGAGEIT was a participant in the DEL program, a federal program administered by the FHA. As a Direct Endorsement Lender, MORTGAGEIT had the authority to originate, underwrite, and endorse mortgages for FHA insurance. If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD for the costs associated with the defaulted loan, which HUD must then pay. Under the DEL program, neither the FHA nor HUD reviews a loan before it is endorsed for FHA insurance. Direct Endorsement Lenders are therefore required to follow program rules designed to ensure that they are properly underwriting and endorsing mortgages for FHA insurance and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting. These requirements include maintaining a quality control program, pursuant to which the lender must fully review all loans that go into default within the first six payments, known as “early payment defaults.” Early payment defaults may be signs of problems in the underwriting process, and by reviewing early payment defaults, Direct Endorsement Lenders are able to monitor those problems, correct them, and report them to HUD. MORTGAGEIT failed to comply with these basic requirements.

As the Complaint further alleges, MORTGAGEIT was also required to execute certifications for every mortgage loan that it endorsed for FHA insurance. Since 1999, MORTGAGEIT has endorsed more than 39,000 mortgages for FHA insurance, and FHA paid insurance claims on more than 3,200 mortgages, totaling more than $368 million, for mortgages endorsed for FHA insurance by MORTGAGEIT, including more than $58 million resulting from loans that defaulted after DEUTSCHE BANK AG acquired MORTGAGEIT in 2007.

As alleged in the Complaint, a portion of those losses was caused by the false statements that the defendants made to HUD to obtain FHA insurance on individual loans. Although MORTGAGEIT had certified that each of these loans was eligible for FHA insurance, it repeatedly submitted certifications that were knowingly or recklessly false. MORTGAGEIT failed to perform basic due diligence and repeatedly endorsed mortgage loans that were not eligible for FHA insurance.

The Complaint also alleges that MORTGAGEIT separately certified to HUD, on an annual basis, that it was in compliance with the rules governing its eligibility in the DEL program, including that it conduct a full review of all early payment defaults, as early payment defaults are indicators of mortgage fraud. Contrary to its certifications to HUD, MORTGAGEIT failed to implement a compliant quality control program, and failed to review all early payment defaults as required. In addition, the Complaint alleges that, after DEUTSCHE BANK acquired MORTGAGEIT in January 2007, DEUTSCHE BANK managed the quality control functions of the Direct Endorsement Lender business, and had its employees sign and submit MORTGAGEIT’s Direct Endorsement Lender annual certifications to HUD. Furthermore, by the end of 2007, MORTGAGEIT was not reviewing any early payment defaults on closed FHA-insured loans. Between 1999 and 2009, the FHA paid more than $92 million in FHA insurance claims for loans that defaulted within the first six payments.

***

Pursuant to the settlement, MORTGAGEIT and the DEUTSCHE BANK defendants will pay the United States $202.3 million within 30 days of the settlement.

As part of the settlement, the defendants admitted, acknowledged, and accepted responsibility for certain misconduct. Specifically,

MORTGAGEIT admitted, acknowledged, and accepted responsibility for the following:

www.justice.gov/usao/nys/pressreleases/may12/deutschebankmortgageitsettlement.html                  2/4

5/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

MORTGAGEIT failed to conform fully to HUD-FHA rules requiring Direct Endorsement Lenders to maintain a compliant quality control program;

MORTGAGEIT failed to conduct a full review of all early payment defaults on loans endorsed for FHA insurance;

Contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations;

MORTGAGEIT endorsed for FHA mortgage insurance certain loans that did not meet all underwriting requirements contained in HUD’s handbooks and mortgagee letters, and therefore were not eligible for FHA mortgage insurance under the DEL program; and;

MORTGAGEIT submitted to HUD-FHA certifications stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; FHA insured certain loans endorsed by MORTGAGEIT that were not eligible for FHA mortgage insurance; and HUD consequently incurred losses when some of those MORTGAGEIT loans defaulted.

The DEUTSCHE BANK defendants admitted, acknowledged, and accepted responsibility for the fact that after MORTGAGEIT became a wholly-owned, indirect subsidiary of DB Structured Products, Inc and Deutsche Bank AG in January 2007:

The DEUTSCHE BANK defendants were in a position to know that the operations of MORTGAGEIT did not conform fully to all of HUD-FHA’s regulations, policies, and handbooks;

One or more of the annual certifications was signed by an individual who was also an officer of certain of the DEUTSCHE BANK defendants; and;

Contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations.

***

The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating financial fraud, including mortgage fraud.

To date, the Office’s Civil Frauds Unit has brought four civil fraud lawsuits against major lenders under the False Claims Act alleging reckless residential mortgage lending.

Three of the four cases have settled, and today’s settlement represents the third, and largest, settlement. On February 15, 2012, the Government settled its civil fraud lawsuit against CITIMORTGAGE, INC. for $158.3 million. On February 24, 2012, the Government settled its civil fraud suit against FLAGSTAR BANK, F.S.B. for $132.8 million. The Government’s lawsuit against ALLIED HOME MORTGAGE CORP. and two of its officers remains pending. With today’s settlement, the Government has achieved settlements totaling $493.4 million in the last three months. In each settlement, the defendants have admitted and accepted responsibility for certain conduct alleged in the Government’s Complaint.

The Office’s Civil Frauds Unit is handling all three cases as part of its continuing investigation of reckless lending practices.

The Civil Frauds Unit works in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Mr. Bharara thanked HUD and HUD-OIG for their extraordinary assistance in this case. He also expressed his appreciation for the support of the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C.

www.justice.gov/usao/nys/pressreleases/may12/deutschebankmortgageitsettlement.html                  3/4

5/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

Assistant U.S. Attorneys Lara K. Eshkenazi, Pierre G. Armand, and Christopher B. Harwood are in charge of the case.

Monster From Below, Not from Above — Appraisal Fraud

Editor’s Comment: Again, myth prevails.
The monster that gobbled our home equity and the value of our pension funds came from the waters beneath the market not from some economic disaster or sudden migration of population to Australia. The “loss of value” was nothing of the sort. Prices were going up during a decade when median income was going down. Prices at best should have been level. This disaster is from a lack of support on the fundamentals of economics — the houses were never worth what the money that appeared on appraisals.
Most pundits, reporters and “experts” talk about the decline in housing prices as the result of some mysterious downward market pressure — like a lack of demand. Demand for housing is no lower or higher than it ever was.
The truth is that there never was any increased demand for housing to support the huge price jumps over the last decade. THAT was caused by an increase of what economists call liquidity and the rest of us now know as phoney money pumped in by Wall Street who paid appraisers to render a report that conformed to contracts instead of market conditions.
Those contracts went through not because of public demand or population increases or even migration. They came from the fact that Wall Street paid or created “lenders” to pretend they were “underwriting” loans and assessing risk the way banks normally perform their duties as lenders. But since they had no money at risk, these “lenders” as straw men in a complex securitization chain, dropped their underwriting function altogether and merely pretended to “qualify” borrowers and approve contracts to purchase or refinance.
February 15, 2010

U.S. Housing Aid Winds Down, and Cities Worry

ELKHART, Ind. — Over the next six months, the federal government plans to wind down many of its emergency programs for housing. Then it will become clear if the market can function on its own.

People here are pretty sure the answer will be no.

President Obama has traveled twice to this beleaguered manufacturing city to spotlight the government’s economic stimulus program. The employment picture here has indeed begun to improve over the last nine months.

But Elkhart also symbolizes the failure of federal efforts to turn around the housing slump at the heart of the economic crisis. Housing in this community has become almost entirely dependent on a string of federal support programs, which are nonetheless failing to prevent a fall in prices and a rise in mortgage delinquencies.

More than one in 10 mortgage holders in Elkhart is seriously behind on payments. The median sales price has plunged to the level of a decade ago. Many homeowners owe more than their home is worth, freezing them in place for years. Foreclosures recently hit a record.

To the extent that the real estate market is functioning at all, people here say, it is doing so only because of the emergency programs, which have pushed down interest rates on mortgages and offered buyers a substantial tax credit.

Equally important is an expanded mortgage insurance program run by the Federal Housing Administration, which encourages private lenders to accept borrowers with small down payments. The government takes the risk of default.

A few years ago, only one in 10 buyers in Elkhart used the housing agency program. Now about half do. Across the country, the agency has greatly expanded its reach so that it now insures six million mortgages.

“There has been all kinds of help for housing. I’m not unappreciative,” said Barb Swartley, president of the Elkhart County Board of Realtors. “But you can’t turn real estate into a government-sponsored operation forever.”

Many in Washington agree. With worries about the deficit intensifying, the government is eager to start withdrawing some of its support programs.

The first step could happen as early as next month, when the Federal Reserve has said it will end its trillion-dollar program to buy up mortgage securities. That program has driven mortgage interest rates to lows not seen since the 1950s.

Yet it is uncertain whether the government can really pull back without sending housing markets into another tailspin. “A rise in rates would kill us all by itself,” Ms. Swartley said.

The Obama administration has offered few ideas about reforming the housing market. Proposals for the future of Fannie Mae and Freddie Mac, the mortgage holding companies taken over by the government at the height of the crisis, were supposed to be introduced with the president’s budget this month. They were not.

The government programs, however crucial, are distorting the market. The tax credit produced sales last fall, but some lenders here say it has troubling implications.

“People are buying to get that tax credit, to get some reserve money. They’re saying, ‘If something happens, I will have a little bit of money to fall back on,’ ” said Denny Davis of Horizon Bank in Elkhart. “That’s not healthy.”

The programs favor first-time buyers, who have the fewest resources to bring to a deal. Heather Stevens, a 23-year-old nurse here, is closing on a three-bedroom house this week. Since her loan was insured by the Federal Housing Administration, she had to put down only 3.5 percent of the $74,900 purchase price.

“It was a breeze to get approved,” she said.

The sellers are covering her closing costs, which agents say is often the case here. That meant Ms. Stevens had to come up with only the $2,600 down payment, which still took all her savings.

But the best part is the $7,500 tax credit. She will use that to remodel the kitchen. “If it wasn’t for the credit, we would have waited to buy,” said Ms. Stevens, who is getting married this year.

Buying houses with no money down was a feature of the latter stages of the housing bubble. It gave prices a final push into the stratosphere. But buyers with no equity were the first to abandon their properties as the market turned south.

With housing prices stagnant, bolstering the market by again letting people buy with hardly any money down is viewed in some quarters as a bad bet.

Neil Barofsky, the special inspector general for the government’s Troubled Asset Relief Program, wrote in his most recent report to Congress that “the federal government’s concerted efforts to support” housing prices “risk reinflating” the bubble.

He noted one difference from the last bubble: taxpayers, rather than banks, are now directly at risk in these new mortgages.

In Elkhart, the worries are less about the risks of doing too much and more about the perils of doing too little. If the Federal Reserve really ends its $1.25 trillion program of buying mortgage-backed securities, economists say, mortgage rates could rise as much as one percentage point. In recent weeks, rates on 30-year fixed mortgages have drifted below 5 percent.

The tax credit requires home buyers to make a deal by April 30, the middle of the prime spring selling season.

For now, the F.H.A. is modestly tightening the requirements on some of its programs, trying to strike a balance between stabilizing the market with qualified buyers and overwhelming it with unqualified borrowers.

John Katalinich, chief lending officer at the Inova Federal Credit Union in Elkhart, says there is danger in letting buyers get into properties with so little at stake, but those risks are minimal compared to the alternative.

“If the government were not to continue the same level of support, it would be very detrimental, like cutting the legs off a wobbling child and expecting it to run a marathon,” he said. “It’s very possible we’ll still be at this level of need five years from now.”

Elkhart, in the northeast corner of Indiana, became a symbol of distressed Middle America after Mr. Obama chose it as the place to introduce his stimulus plan last February. The region is a hub of recreational vehicle manufacturing, one of the first industries to falter in the recession. In less than a year, the unemployment rate tripled, peaking at 18.9 percent last March.

Mr. Obama returned in August to promote the effectiveness of the stimulus program and of government grants for the manufacture of battery-powered electric vehicles. Several companies have announced they are hiring. Unemployment in December was down to 14.8 percent.

No such improvement is visible with housing. In the last 18 months, the F.H.A increased its loans in Elkhart by 40 percent even as its defaults rose 174 percent.

As these troubled loans become foreclosures, the government takes over the property and tries to sell it. On Saturday, Gina Martin, an administrative assistant, examined a three-bedroom government house for sale southeast of Elkhart.

In late 2003, the house sold for $115,000, but in these depressed times the government was willing to let it go for $75,000.

Ms. Martin’s agent, Dean Slabach, thought the government would eventually have to take a much lower bid, substantially increasing its loss. Most of the F.H.A. properties on the market in Elkhart carry notations like “significant price reduction” and “all reasonable offers considered.”

“They’ll end up selling this for $60,000 or less,” Mr. Slabach said.

But Ms. Martin, a 47-year-old renter who has approval for an F.H.A. loan, said she was not tempted at any price.

“We’ll see what else is out there,” she said.

Whitley Case 607 F Supp 2d 885 Denial of Motion to Dismiss

Whitley 3rd amended Complaint

Whitley order on mtd Taylor Bean

Thanks everyone for sending me the full text OF THE OPINION.  VERY IMPORTANT CASE. Appraisal fraud, negligence, fiduciary duty, traced up to Taylor Bean. The reasoning in the opinion is at treatise-level. This Illinois Case and the cases it cites opens the door for traveling upstream in the securitization chain to recover all undsiclosed, hidden profits. It also contains some cautionary findings about alleging fraud against a group of defendants, about tolling, and other pertinent topics.

WHITLEY v. TAYLOR BEAN & WHITACKER MORTGAGE CORP. (N.D.Ill. 4-20-2009)
No. 08 C 3114.
April 20, 2009

Ida Mae Whitley (“Mrs. Whitley”), Clyde Whitley (“Mr. Whitley”), and their adult daughter Kenna Whitley (“Kenna”) (collectively “Plaintiffs”) bring this action against Taylor, Bean & Whitacker Mortgage Corp. (“TB & W”), Advance Lending Group, Corp. (“Advance Lending”), Blue Horizon Real Estate Corp. (“Blue Horizon”), Oswald Ochoa (“Ochoa”), John Frey Ospina (“Ospina”), Anita Logan (“Logan”) and Favian Cardenas (“Cardenas”) (collectively “Defendants”) alleging violations of the Credit Repair Organizations Act, 15 U.S.C. § 1679b (“CROA”), the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, et seq (“RESPA”), the Fair Housing Act, 42 U.S.C. § 3605 (“FHA”), the Equal Credit Opportunity Act, 15 U.S.C. § 1691 (“ECOA”), and the Civil Rights Act, 42 U.S.C. § 1981, along with various state law violations. (R. 19, Am. Compl.) Currently before the Court are four motions to dismiss filed by Logan (R. 35), TB & W (R. 38), Advance Lending, Ochoa, and Ospina (“Advance Lending Defendants”) (R. 42), and Blue Horizon and Cardenas (R. 46). For the reasons stated below, the motions to dismiss are denied in part and granted in part.

Foreclosure Defense: New York State Homeowners get SOME Help

It is a step in the right direction

June 19, 2008

Court Offers Homeowners Help Avoiding Foreclosure

Homeowners in New York who face foreclosures would be offered help by the courts to save their homes or at least make the overall process easier under a new program announced on Wednesday by the state’s chief judge.

The program calls for the creation of a new section of the court charged with helping borrowers and lenders reach speedy settlements. Homeowners would be notified almost immediately that they face a foreclosure proceeding; they would receive a list of legal and foreclosure counselors who can help them; and they would be invited to court for a settlement conference.

Parts of the program would be voluntary. The court would encourage, but not require, a settlement conference, and lenders would still be able to foreclose.

The chief judge, Judith S. Kaye, however, said that she hoped that getting the courts involved in the process early would allow them to be more than the final arbiters who order people removed from their homes.

“New Yorkers are losing their homes in record numbers,” Judge Kaye said on Wednesday during a news conference in Lower Manhattan. “Some neighborhoods are being ravaged by foreclosures. Can we be part of an influence for the good?”

A pilot version of the program is scheduled to start in Queens this summer.

According to court data, foreclosure filings across the state have increased by 150 percent since January 2005, Judge Kaye said. In Queens, she said, that figure is 223 percent. She said an additional increase of 40 percent was expected by the end of 2008.

United States Senator Charles E. Schumer said Judge Kaye’s plan was “just what the doctor ordered.”

He said more than half of the people facing foreclosure who received adequate professional counseling could save their homes.

“There are some who can’t afford to stay in their homes,” Mr. Schumer said. “There are many who can easily afford to stay in their home and were just given a terrible deal. A refinancing by a counselor can work.”

Congress is considering legislation that would refinance mortgages with federally insured loans. The legislation would authorize the Federal Housing Administration to insure an additional $300 billion in mortgages. Only homeowners whose primary residences were in danger of foreclosure could apply, and their lenders would first have to voluntarily reduce the principal balance of the original loan so that the new loan was more affordable.

Sponsors hope to send the bill, which has been approved by the House and is awaiting Senate action, to President Bush before the July 4 break.

Congress has already appropriated $180 million toward nonprofit foreclosure counselors, and another $180 million is proposed in a pending bill.

In Albany, there are different proposals before the Legislature. Under a plan favored by Gov. David A. Paterson, lenders would have to take steps to ensure that the people they lend money to have the ability to pay, and banks foreclosing on a house would have to give the homeowner 60 days notice before they begin foreclosure proceedings. A plan that passed the Assembly last month would go a step further by declaring a one-year moratorium on home foreclosures throughout the state.

Under the current state statute, lenders have 120 days to notify a borrower that they have filed for a foreclosure proceeding, which is usually done at the county clerk’s office. The lender then has an unspecified amount of time to file a request for the court’s assistance. That starts a series of motions and hearings that could take up to 18 months, said Ann T. Pfau, the chief administrative judge.

But under the court’s plan, the lender would be required to send the borrower a notification of complaint as soon as the foreclosure papers are filed with the county clerk. And once the lender asks for judicial help, the court will send the homeowner a letter with referrals to legal advisors and mortgage counselors who can help them for free, Judge Pfau said.

Mike Thompson, a mortgage counselor and the executive director of Iowa Mediation Service, said organizing conferences between borrowers and lenders could be complicated for several reasons. For one, the people who service loans for lenders can be anywhere in the country, which would make an in-person conference difficult. Also, borrowers are often reluctant to be upfront with pertinent information needed for negotiations, such as pay stubs and account information.

But the mere attempt to get the parties to sit down and talk before going through the full legal proceedings could represent a positive step, Mr. Thompson said.

“They’re setting up a new time frame,” he said. “What deadlines do in negotiations is it makes people be more realistic.”

David M. Herszenhorn and Jeremy W. Peters contributed reporting.

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