Unrhetorical Questions — Money, Lies and Accounting Records: Gander and Goose

Why are our courts routinely accepting allegations and documents from foreclosing banks that they would summarily throw out if the same allegations and documents came from borrowers?

 How can possession of an ALLONGE construed as ownership

of the debt without any other evidence being presented?

Why is the standard definition of “Allonge” ignored?

IF THE COURT IS USING THE TERMS OF “ALLONGE”, “ASSIGNMENT”AND “ENDORSEMENT” INTERCHANGEABLY, WHY DOES ALL THE LITERATURE ON LEGAL DEFINITION AND ELEMENTS SAY OTHERWISE? ARE WE MAKING A NEW UCC?

WHY ARE COURTS ALLOWING ENDORSEMENTS (SHOULD BE SPELLED “INDORSEMENT”) IN BLANK TO TRANSFER THE LOAN WHEN THE BASIS OF THE PROPONENT’S AUTHORITY TO FORECLOSE IS A DOCUMENT THAT FORBIDS ACCEPTANCE OF  ENDORSEMENTS IN BLANK?

 I recently received a question from an old friend of mine who was a solicitor in Canada and who is frustrated with our court system that continues to assume the validity of loans that have already been thoroughly discredited. He has attempted on numerous occasions to get information through a qualified written request or a debt validation letter and has attempted to verify the authority of any party to whom he would address a request for modification of his loan in Florida. While chatting with him online I realized that this information might be of some value to attorneys and borrowers. The principal point of this article is the old expression “what is good for the goose is good for the gander.” For those of you who are unfamiliar with the old expression it means that there should be equality of treatment, all other things being equal. In mortgage litigation is apparent that when an allegation is made or a proffer is made through counsel rather than the introduction of evidence, the courts continue to function from both a misconception and  misapplication of the Rules of Court and the rules of evidence.

 When the case involves one institution against another, the same arguments that are summarily  rejected when they are advanced by a borrower are given considerable traction because the argument was advanced by a financial institution or financial player that identifies itself as a financial institution. In fact, a review of most cases reveals a much heavier burden on the party defending against the loss of their homestead than the party seeking to take it —  which is a complete reversal of the way our justice system is supposed to work.  The burden of proof in both judicial and nonjudicial states is constitutionally required to be on the party seeking affirmative relief and not on the party defending against it.

In the nonjudicial states, in my opinion, the courts are violating this basic constitutional requirement on a regular basis under circumstances where the party announcing a right to enforce a dubious deed of trust, collection on a dubious note, and therefore having the right to sell the property without judicial intervention despite the inability of the foreclosing entity to produce any evidence that it owns the debt, note, mortgage rights,  or even demonstrate a financial interest in the outcome of the foreclosure sale; to make matters worse the courts are allowing trustees on deeds of trust to be appointed or substituted even though they have a direct or indirect financial relationship with the alleged lender.

These trustees are accepting “credit bids” without any due diligence as to whether or not the party making the offer of the credit bid at auction is in fact the creditor who may submit such a credit bid according to the statutes governing involuntary auctions within that state.  In nonjudicial states the burden is put on the borrower to “make a case” and thus obtain a temporary restraining order preventing the sale of the property. This is absurd. These statutes governing nonjudicial sales were created at a time when the lender was easily identified, the borrower was easily identified, the chain of title was easily demonstrated, and the chain of money was also easily demonstrated. Today in the world of falsely securitized loans, the courts have maintain a ministerial attitude despite the fact that 96% of all loans are subject to competing claims by false creditors. The borrower is forced to defend against allegations that were never made but are presumed in a court of law. If anything is a violation of the due process requirements of the United States Constitution and the Constitution of most of the individual states of the union, this must be it.

 In the judicial states,  the problem is even more egregious because the same presumptions and assumptions are being used against borrowers as in the nonjudicial states. Thus in addition to being an unconstitutional application of an otherwise valid law, the judicial states are violating their own rules of civil procedure mandated by the Supreme Court of each such state (or to be more specific where the highest court is not called the Supreme Court, we could say the highest court in the state).  This is why I have strongly suggested for years that an action in mandamus be brought directly to the highest court in each state alleging that the laws and rules, as applied, violate constitutional standards and any natural sense of fairness.

 Here is the question posed by my Canadian friend:

(1)  The documents are phony documents (copies) produced by Ben Ezra Katz. It will cost me several thousand dollars to have a document expert evaluate the documents and then testify if they find them to be copies. At the beginning of this case, The Plaintiff’s attorney (Ben Ezra Katz associate) told the court (I do have a transcript) that they has found the ORIGINAL documents (note, mortgage, etc.) and that they had couriered the ORIGINAL documents to the clerk of Court. They did a Notice of Filing which on its’ face states ORIGINAL documents. I can not afford a document expert, however the AG in S. Florida has an open investigation into this case. Would I be out of line in requesting that they include this case per-se as part of their investigation and accordingly make a determination as to if or if not the subject documents which are on file with the clerk of court are originals or copies ??
(2)  The only nexus that Wells Fargo produces to establish themselves as a real party in interest is a hand filled out allonge (copy attached). Please note that the signer only signs as “assistant secretary” without further specifics. On the basis of what they provide it is virtually impossible to depose this person to determine if she actually did or did not sign this document, and if so what is her authority to do so.  I want to launch some sort of discovery that seeks to discover what else the Plaintiff has which would support the alleged allonge. Things such as any contracts, copies of any consideration, what was the consideration, who authorized the transaction, etc.  Do you have any suggestions in this regard. I bounced this off my attorney and I am not sure that we are on the same page. He wants to go to trial and have the proven phony documents as the main thrust. I agree with that, however I also would feel far better if we were able to cut them off at the knees as to standing such as the alleged allonge is part of the phony documents, and there are no documents that the Plaintiff can produce to support not only its’ authenticity, but its’ legitimate legal function. I do not like to have all of my eggs in one basket.

 And here is my response:

 You are most probably correct in your assessment of the situation. If they lied to the court and filed phony documents you should file motion for contempt. You should also file a motion for involuntary dismissal based on the fact that they have had plenty of time to either come up with the original documents or alleged facts to establish lost documents. The affidavit that must accompany the allegation of lost documents must be very specific as to the content of the documents and the path of the documents and it must the identify the person or records from which the allegations of fact are drawn. They must be able to state with certainty when they last had the original documents if they ever did have the original documents. If they didn’t ever have the original documents then an affidavit from them is meaningless. They have to establish the last party had physical custody of the original documents and establish the reason why they are missing. If they can’t do those things then their foreclosure should be dismissed. The more vague they are in explaining what happened to the original documentation the more likely it is that somebody else has the original documentation and may sue you again for recovery. So whatever it is that they allege should result in your motion to strike and motion to dismiss with prejudice. As far as the attorney general’s office you are correct that they ought to cooperate with you fully but probably incorrect in your assumption that they will do so.

I think you should make a point about the allonge being filled out by hand as being an obviously late in the game maneuver. You can also make a point about the “assistant Sec.” since that is not a real position in a corporation. Something as valuable as a note would be reviewed by a real official of the Corporation who would be able to answer questions as to how the note came into the possession of the bank (through interrogatories or requests for admission) and  what was paid and to whom for the possession and rights to the note, when that occurred and where the records are that show the payment and how Wells Fargo actually came into possession of the note or the rights to collect on the note. As you are probably aware the predecessor that is alleged to have originated the note or alleged to have had possession of the note must account for whether they provided the consideration for the note and what they did with it after the closing. If they say they provided consideration than they should have records showing a payment to the closing agent and if they received consideration from Wells Fargo they should have those records as well.

But the likelihood is that neither Option One nor Wells Fargo ever funded this mortgage which means that the note and mortgage lack consideration and neither one of them has any right to collect or foreclose.   In fact, since they are taking the position that the loan was not securitized and therefore that no securitization documents are relevant,  neither of them can take the position that they are representing the real party in interest as an authorized agent for the real lender.  And the reason you are seeing lawsuits especially by Wells Fargo in which it names itself as the foreclosing party is that the bank knows that Iit ignored and routinely violated essential and material provisions of the securitization documents including the prospectus and pooling and servicing agreement upon which investors relied when they gave money to an investment banker.

In that case, since you seek to modify the loan transaction and determine whether or not it is now or is potentially subject to  a valid mortgage, you should seek to enforce a request for information concerning the exact path of the money that was used to fund the mortgage. And you should request any documentation or records showing any guarantee, payment, right to payment, or anything else that would establish a loan to you where actual money exchanged hands between the declared lender and yourself. The likelihood is that the money was in a co-mingled account somewhere —  possibly Wells Fargo —  which came from investors whose names should have been on the closing and the closing documents.  Those investors are the actual creditors. Or at least they were the actual creditors at the time that the loan money showed up at the alleged “loan closing.” Since then, hundreds of settlements and lawsuits were resolved based upon the bank tacitly acknowledging that it took the money and used it for different purposes than those disclosed in the prospectus and pooling and servicing agreement. These settlements avoid the embarrassing proof problems of any institution since they not only ignored the securitization documents, more importantly, they chose to ignore all of the basic industry standards for the underwriting of a real estate loan because the parties who appeared to be underwriting the loan and funding the loan had absolutely no risk of loss and only had the incentive to close deals in exchange for sharing pornographic amounts of money that were identified as proprietary trading profits or fees.

And the reason why this is so important is that the mortgage lien could never be perfected in the absence of the legitimate creditor who had advanced actual money to the borrower or on behalf of the borrower. This basic truth undermines the industry and government claims about the $13 trillion in loans that still are alleged to exist (despite multiple payments from third parties in multiple resales, insurance contracts and contracts for credit default swaps). The abundant evidence in the public domain as well as the specific factual evidence in each case negates any allegation of ultimate facts upon which relief could be granted, to wit: the money came from third-party investors who are the only real creditors. The fact that the money went through intermediaries is no more important or relevant than the fact that you are a depository bank is intended to honor checks drawn on your account provided you have the funds available. The inescapable conclusion is that the investors were tricked into making unsecured loans to homeowners and that the entire foreclosure scandal that has consumed our nation for years is based on completely false premises.

Your attorney could pose the question to the court in a way that would make it difficult for the court to rule against you. If the lender had agreed to make a loan provided you put up the property being financed PLUS additional collateral in the form of ownership of a valid mortgage on another piece of property,  would the court accept a handwritten allonge from you as the only evidence of ownership or the right to enforce the other mortgage? I think it is clear that neither the banks nor the court would accept the hand written instrument as sufficient evidence of ownership and right to collect payment if you presented the same instruments that they are presenting to the court.

PRACTICE HINT: In fact, you could ask the bank for their policy in connection with accepting its mortgages on other property as collateral for a business loan or for a loan on existing property or the closing on a new piece of property being acquired by the borrower. You could drill down on that policy by asking for the identification of the individual or committee that would decide whether or not a handwritten allonge would be sufficient or would satisfy them that they had  adequate collateral in the form of a mortgage on the first property and the pledge of a mortgage on a second piece of property.

The answer is self-evident. No bank or other lending institution or lending entity would loan money on the basis of a dubious self-serving allonge.  There would be no deal. If you sued them for not making the loan after the bank issued a letter of commitment (which by the way you should ask for both in relation to your own case and in relation to the template used by the bank in connection with the issuance of a letter of commitment), the bank would clearly prevail on the basis that you provided insufficient documentation to establish the additional collateral (your interest in the mortgage on another piece of property).

The bank’s position that it would not loan money on such a flimsy assertion of additional collateral would be both correct from the point of view of banking practice and sustained by any court has lacking sufficient documentation to establish ownership and the right to enforce. Your question to the court should be “if justice is blind, what difference does it make which side is using an unsupportable position?”

HSBC Hit with Foreclosure Suit; FHA’s $115 Billion Loss Scenario; Return of the Synthetic CDO?
http://www.americanbanker.com/bankthink/hsbc-hit-with-foreclosure-suit-fhas-115-billion-dollar-loss-scenario-1059622-1.html
Massachusetts foreclosures decline 79% as local laws stall the process
http://www.housingwire.com/news/2013/06/05/massachusetts-foreclosures-decline-79-local-laws-stall-process
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Money from thin air? If the bank does not create currency or money then where does the money come from? Answer investor deposits into what they thought was an account for a REMIC trust. And if the money came from investors then the banks were intermediaries whether they took money on deposit, or they were the underwriter and seller of mortgage bonds issued from non existent entities, backed by non existent loans. And any money received by the banks should have been for benefit of the investors or the REMIC trust if the DID deposit the money into a trust or fiduciary account.Dan Kervick: Do Banks Create Money from Thin Air?
http://www.nakedcapitalism.com/2013/06/dan-kervick-do-banks-create-money-from-thin-air.html

Eric Holder Doctrine: Decriminalize Big Crimes

see also Guest Post: Why The Government Is Desperately Trying To Inflate A New Housing Bubble
http://www.zerohedge.com/news/2013-03-25/guest-post-why-government-desperately-trying-inflate-new-housing-bubble

The problem with the theory that criminal prosecution of the banks could have a negative effect on the world economies is that the banks have already had their effect on the world economy. Along with their own well-deserved hit to their reputations they took the U.S. reputation and probably the whole Eurozone with them.

Refusing to prosecute is like saying we should not prosecute organized crime — or even the same crimes committed by smaller institutions — because someone might get killed or jailed or swindled out of more money than they already lost.
Our rating has dropped by all accounts in all the rating services — a consequence of not getting our house in order and not controlling institutions whose importance is obviously parallel to that of a water or electric utility. And people are still losing wealth and homes, thus undermining any prospect of a true economic recovery.
Eric Holder’s logic is simply not sustainable and the people of Maryland are doing the best they can to keep criminal banks out of their state. We should all do that, and do what the State of New York came close to doing — revoking the license of criminal banks to ply their snake oil financial products within their state. Now that does something to protect the public and puts everyone on notice that doing business with criminal mega-banks is risky business no matter what the smiling bank representative tells you.
The biggest flaw in Holder’s so-called logic about the banks being too big to jail is that an important part of justice has been thwarted. In fraud cases the victim receives some restitution from a receiver appointed after the culprit’s assets are seized. That can’t happen as long as we avoid criminal prosecution. And until there is criminal prosecution judges will continue to think that borrowers are deadbeats instead of victims.
Investors is the fake mortgage backed bonds issued by empty REMIC trusts that were never funded and thus never entered into a transaction in which they acquired loans deserve restitution. Clawing back the money held in the Cayman’s, Cyprus and other places can never happen as long as criminal prosecution is avoided.
The trust we earned from world central bankers,investors and borrowers has been destroyed and that is what is causing economic problems all over the world. Nobody knows where to put their money or even what currency will ultimately survive. This uncertainty is undermining our claim to moral superiority across the board in matters of state as well as commercial activity. We have opened the door to allowing Chinese firms to take the lead, like Alibaba which has quietly become larger than Amazon and EBay combined and is on track to become the world’s first trillion dollar company.
If we truly want to survive and prosper we can show the world that we know how to do the right thing rather than become an accessory during and after the fact of a continuing crime that ranks as the greatest fraud in human history. When investors get a check from a court-appointed receiver in a criminal case, when we see bankers go to jail, and when the amount demanded from borrowers is reduced by payments to the banksters, THEN confidence will be restored along with wealth, investment and employment.
We are pursuing a going out of business strategy. By holding back on the basis of the Holder Doctrine we are confirming that we lost our moral high ground. Someone will fill that void and don’t think for a minute that the Chinese are not acutely aware of their opportunity.
Remember when we made fun of Japanese products as cheap unreliable imports? They fixed that, didn’t they. The Chinese are now spreading out creating new standards of morality in the marketplace such as not releasing money to an online seller until the buyer is satisfied.

It won’t be long before Chinese currency and currencies pegged to Chinese currency become the standard medium of value replacing western currencies, unless we change and start running a country that controls and disciplines its players domestically and on the world stage.

Money-laundering firm should get no welcome in Maryland
http://www.baltimoresun.com/news/opinion/oped/bs-ed-hsbc-20130325,0,1565911.story

Where is all that money the banks took? Hiding in Plain Sight

You’ll probably never get to this point in litigation but if you do, you’ll be glad you read this. Obviously there is a lot of talk about where all the money went. Right off the top the banks took some 20%+ off of the money that investors gave them to invest in mortgages. That is $2.6 trillion alone off of the $13 trillion in “mortgages” that were mostly defective or fabricated. Then add their profit from insurance and credit default swaps which might amount to on a nominal basis several times the original $13 trillion invested and we get an idea of how much money is being withheld from world economies including the United States.

The answer is that they are hiding it in plain sight and in conjunction with legitimate investments from many other investors and entities. They are putting it in the stock market, mostly, causing it to rise without reason, and to a lesser extent they are putting it into bonds. If someday someone traces the first dollar in from investors all the way through the convoluted fabricated system of what the banks called securitization and the rest of us know was a PONZI scheme, you’ll find it right in front of you listed in the Wall Street Journal.

And if you Google it, you’ll see that BofA’s security analysts agree that the Dow Jones Average and other equity indexes are not reflecting true economic activity. They didn’t get the memo to shut up and sit down. That is what happens when you are too big to fail — you are also too big to manage, too big to jail and too big to regulate. The complicity of regulators, auditing firms and others in this mess has yet to be determined but it seems likely that there will be suits and prosecutions against the auditing firms for taking management’s word for the data rather than testing it the way any first course in auditing 101 would teach future CPA’s. I do know, because I taught auditing classes when I was getting my MBA.

Where is the money that the bankers siphoned out of our economy? Hiding in plain sight in the equity markets. With societies in chaos and economies in tailspins around the world, somehow the equity indexes are reaching record highs and profits are being recorded that are clearly not conforming to economic activity that in some countries is at a virtual standstill or even declining.

Yet the equity markets supposedly are a measure of future earnings which magically appear, justifying the increase in stock prices. If I stole a few trillion dollars and I needed a place to hide it, I would invest it relentlessly in the equity markets and to a lesser degree into debt instruments.

The increase in the DJIA represents trillions in wealth increase — or it represents a deposit of ill-gotten wealth generated by the Wall Street banks and their co-venturers. With GDP so fragile around the world my conclusion is that economic activity around the world is not reflecting any support for the increase in expectations and increase in stock prices.

The banks cornered the market on money and had to decide where they were going to hide ill-gotten profits that most people don’t understand, know about or care about. The obvious answer was, when they were holding trillions of dollars, where the dollar was in possible jeopardy, was to put the money in equities on a slowly increasing relentless purchase of stocks and bonds.

Stocks are measured in numbers of shares rather than strictly dollar denominated accounts. This allows the holders of equities to sell in any marketplace converting the investment into any currency of their choice, potentially avoiding the negative impact of a sudden devaluation of the type that made George Soros so rich.

Undoubtedly this logic has not escaped other legitimate investors and investment managers. Thus the bull market effects produced by the underlying floor of bankers’ purchases of equities is hidden under an increase in legitimate buying. It is a perfect plan as long as receivers are not appointed over the mega banks and dollars are traced to their origin and destination.

If things seem upside down when you turn on the news, now you know why. It is still hard for people to wrap their head around this proposition. All anecdotal evidence which is now so extensive that it almost qualifies as a scientific survey, points to at least 2/3 of all mortgages being fatally defective as perfected liens, unreported compensation on loans (that the banks say were charged against investors) is present in nearly all loans of every kind where a claim of securitization is present, and bank profits and capital have continued to rise even though as intermediaries, they should be making less money because there is less economic activity in a recession or stagnant economy.

That money in the mega banks is our money — taxpayers, shareholders of insurance companies, shareholders of guarantors and co-obligors, investors who advanced the money the homeowners who put up their homes as collateral on non-existent or defective transactions in which the loan and property were intentionally inflated in value. The extra money in those deals were funneled into off shore accounts and transactions that were never taxed by agreement with the jurisdiction in which the the transactions were cited as taking place even though it all happened in the good old USA. I have seen the document where Bermuda accepted the jurisdiction over the transaction and agreed not to tax it.

Although this is my opinion for general information purposes, I feel comfortable sharing it with the public  because I have enough facts from current events and enough experience from my own past experience on Wall Street to be confident that the above rendition is true. Once again I remind readers that the legal consequence of these practices might vary from state to state and even between judges in the same district. Federal and State courts are likely to treat these presentations differently as well.

And just because you are right, doesn’t mean you can prove it or win. So it is imperative that you consult with an attorney who knows all the facts of your case, is familiar with securitization and is licensed in the jurisdiction in which your property or domicile is located.

Premarkets: Dow defies gravity, S&P nears record
http://money.cnn.com/2013/03/15/investing/premarkets/

Senate “Whale” Report Reveals JP Morgan as a Lying, Scheming Rogue Trader (Quelle Surprise!)
http://www.nakedcapitalism.com/2013/03/senate-whale-report-reveals-jp-morgan-as-a-lying-scheming-rogue-trader-quelle-surprise.html

Goldman partner Barg moves to New York from Asia in new role
http://www.reuters.com/article/2013/03/15/us-goldman-barg-idUSBRE92E0CS20130315

Big Banks Headed For Break-Up

“What policy makers are starting to realize is that the absence of prosecutions and regulatory action against these banks has produced a profound loss of confidence not only in the financial markets but in the leader of the financial markets (the United States) to control itself and its own participants in finance. It’s not just fair to enforce existing laws and regulations against the banks who so flagrantly violated them and nearly destroyed all the economies of the world, it’s the only practical thing to do.” — Neil F Garfield, livinglies.me
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The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Comment: There is an old expression that says “At the end of the day, everybody knows everything.” The question of course is how long is the “day.” In this case the day for the bank appears to be about 10-12 years. The foibles of their masters, the conduct of their policies, and the arrogance of their behavior has led them into the position where the once unthinkable break-up of the bank oligopoly and their control, over our government is coming to a close.

The titans of Wall Street have thus far avoided criminal prosecution because of the misguided assumption — promulgated by Wall Street itself — that such prosecutions would destroy the economic systems all over the world (remember when Detroit arrogance reached its peak with “what’s good for GM is good for the country?”). But the Dallas Fed are joining the ranks of of once lone voices like Simon Johnson stating that Too Big to Fail is not a sustainable model and that it distorts the markets, the marketplace and our society.

It is virtually certain now that the mega banks are going to literally be cut down to size and that some form of Glass-Steagel will be revived. As that day nears, the images and facts pouring out onto the public and the danger to the American taxpayer facing deficits caused by the banks in part because they siphoned out the life-blood of liquidity from the American marketplace will overwhelm the last vestiges of resistance and the same lobbyists who were the king makers will be the kiss of death for re-election of any public official.

As they are cut down, the accounting and auditing will start and it will take years to complete. What will emerge is a pattern of theft, deceit, fraud, forgery, perjury and other crimes that are most easily seen in the residential foreclosures that now appear to be mostly illusions that have caused nightmare scenarios for millions of Americans and people in other countries. Those illusions though are still with us and they are still taken as real by many in all branches of government. The thought that the borrower should never have been foreclosed and that the amount demanded of them was wrong is not accepted yet. But it will be because of arithmetic.

Investment banks sold worthless bonds issued by empty creatures that existed only on paper without any assets, money or value of any kind. The banks then funded mortgages of increasingly obvious toxicity to people who might have been able to afford a normal mortgage or who couldn’t afford a mortgage at all but were assured by the banks that the deal was solid. Both investors and homeowners were taken to the cleaners. Neither of them has been addressed in any bailout or restitution.

It is the bailout or restitution to the investors and homeowners that is the key to rejuvenating our economy. Trust in the system and wealth in the middle class is the only historical reference point for a successful society. All the rest crumbled. As the banks are taken apart, the privilege of using “off-balance sheet” transactions will be revealed as a free pass to steal money from investors. The banks took the money from investors and used a large part of it to gamble. Then they covered their tracks with lies about the quality of loans whose nominal rates of interest were skyrocketing through previous laws against usury.

For those who worry about the deficit while at the same time remain loyal to their largest banking contributors, they are standing with one foot upon the other. They can’t move and eventually they will fall. The American public may not be filled with PhD economists, but they know theft when it is revealed and they know what should happen to the thief and the compatriots of the thief.

For the moment we are still rocketing along the path of assuming the home loans, student loans, credit cards, auto loans, furniture loans et al were valid loans wherein the lenders had a risk of loss and actually suffered a loss resulting from the non payment by the borrower. As the information spreads about what really happened with all consumer debt, housing included, the people will understand that their debts were paid off by the investment banks, the insurance, companies and the counterparties on hedge products like credit default swaps.

A creditor is entitled to be repaid the money loaned. But if they have been repaid, the fact that the borrower didn’t pay it does not create a fact pattern under which the current law allows the creditor to seek additional payment from the borrower when their receivable account is zero. Yet it is possible that the parties who paid off the debt might be entitled to contribution from the borrower — if they didn’t waive that right when they entered into the insurance or hedge contract with the investment banks. Even so, the mortgage lien would be eviscerated. And the debt open to discussion because the insurers and counterparties did in fact agree not to pursue any remedies against the borrowers. It’s all part of the cover-up so the transactions look like civil matters instead of criminal matters.

Thus far, we have allowed windfall after windfall to the banks who never had any risk of loss and who received federal bailouts, insurance, and proceeds of credit default swaps and multiple sales of the same loan — all without crediting the investors who advanced all the money that was used in the mortgage maelstrom.

The practical significance of this is simple: the money given to the banks went into a black hole and may never be seen again. The money given BACK to (restitution) investors will result in fixing at least partly the imbalance caused by the bank theft. It will also decrease the loss suffered by the lenders in the loans marked as home loans, auto loans, student loans etc. This in turn reduces the amount owed by the borrower. Their is no “reduction” of principal there is merely a “deduction” or “correction” to reflect payments received by the investors or their agents.

The practical significance of this is that money, wealth and income will be  channeled back to the those who are in the middle class or who belong there but for the trickery of the banks and the economy starts to hum a little better than before.

It all starts with abandoning the Too Big To Fail hypothesis. What policy makers are starting to realize is that the absence of prosecutions and regulatory action against these banks has produced a profound loss of confidence not only in the financial markets but in the leader of the financial markets to control itself and its own participants in finance. It’s not just fair to enforce existing laws and regulations against the banks who so flagrantly violated them and nearly destroyed all the economies of the world, it’s the only practical thing to do.

Big Banks Have a Big Problem
http://economix.blogs.nytimes.com/2013/03/14/big-banks-have-a-big-problem/

We The Taxpayers Are On The Hook For Mortgages, Student Loans, Banks
http://lonelyconservative.com/2013/03/we-the-taxpayers-are-on-the-hook-for-mortgages-student-loans-banks/

Documentary Co-Produced by Broker Exposes Foreclosure Devastation, Housing System Flaws, in Low-Income Hispanic Neighborhood of Phoenix
http://rismedia.com/2013-03-13/documentary-co-produced-by-broker-exposes-foreclosure-devastation-housing-system-flaws-in-low-income-hispanic-neighborhood-of-phoenix/

Housing advocates accuse Wells Fargo of damaging communities through foreclosures
http://www.scpr.org/blogs/economy/2013/03/13/12908/housing-advocates-accuse-well-fargo-damaging-commu/

 

Banks Controlled Independent Reviews

“TARP was supposed to cover losses from defaulting loans. But then it was switched to make direct capital infusions into the mega banks. Why the switch? Because everyone realized very early on that the banks had no losses from defaulting loans. It was the investors who made the loans and would take those losses. But even though the government recognized this fact, it did so in secret allowing the confusing notion of bank losses to permeate the judicial cases. All they had to do to stop foreclosures was to tell the truth and Judges would have correctly assumed that the Banks were mere intermediaries. PRACTICE HINT: Is Champerty and maintenance a cause of action for damages, a defense to a lawsuit or both?” — Neil F Garfield, livinglies.me

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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).

If you are having trouble believing that the recession, the mortgages, the foreclosures, the auctions, and the health of the banks are all a big lie click here for Matt Taibbi’s Article in Rolling Stone

Editor’s Comment: The so-called independent reviews were neither independent nor reviewed. They were processed. Which is to say they went in one end and came out the other. The so-called reviews relied completely on the banks themselves to review their own criminality in the foreclosure process that was only one step in a multifaceted plan to take down the wealth of America and concentrate in the hands of people who could claim it as their own.

The reviews were not independent because all the information offered was the information that the banks wanted to reveal and half of that was completely fictitious. The lack of an administrative hearing process made it impossible for the independent review conclusions to be challenged. Talk about stacking the deck.

A random survey of foreclosures would show that the forecloser was a complete stranger to the transaction, never invested a penny in the origination or purchase of the loan, and never accounted properly for its actions to the actual lender/investors. How do we know this with certainty? Because real independent reviews like the ones conducted in counties all over the country came to exactly that conclusion after reviewing foreclosures that were “completed.”

There is no ambiguity except whether the credit bid and ensuing deed upon foreclosure is void or voidable. I maintain it is void and not voidable. Voidable means that the victim must do something to replace the job of the county recorder. Voidable means that the transaction stands and the deed is valid even though we know it is a wild deed with no place for it in the chain of title. Voidable means that in a later refi or sale if some title lawyer is actually doing his work the way it was done since the dawn of title records, he or she is going to discover the wild deed and declare the title to be clouded defective or fatally defective. And that would be because of all the documents submitted by a series of entities that had no function except layering over the festering corruption of title created in the first place.

Actual findings that somehow leaked through the controlled review process were suppressed. It all comes down to the same thing in administrative action, law enforcement action, executive action and legislative action: homeowners are deadbeats who don’t count or can be managed through the miracle of telling big lies through the media. The conclusion reached in virtually all cases was the same: while the forgeries, fabrications and perjury were bad things and the ensuing theft of the homes was allowed to proceed anyway, the net result is that these people borrowed the money, defaulted on the payments and lost the house they were supposed to lose anyway.

It is a compelling argument if it was true. In fact, the posturing and lying of the banks enhanced the lender/investor losses and stopped the homeowners from connecting up with real lenders to settle the loans and then go after the banks together for lying to everyone about appraisals, underwriting, and loan quality.

As I see it, the only way this is going to wind up is that those people who fight back with Deny and Discover will be rewarded for their efforts if they persist. But on the whole, most people will not fight back leaving the Banks with windfall several times over. Government won’t help them. If the Banks lose every case that is contested it will be less than the amount they would reserve for loan losses if their loans were real.

We all know that the Banks were using investor money 96% of the time, and yet we allowed them to get insurance, credit default swaps, and federal bailouts on investments they never made. We allow them to pretend that they own what the investors own, thus corrupting their balance sheets with fictitious assets. We allowed them to book fictitious sales of bogus mortgage bonds to investors using the investors own money to create the infrastructure that was never used to sell, assign or securitize the loans. The Bankers who control the banks also control all the profits from these false “proprietary trades”, book them as they wish partly to keep the value of the stock higher and higher, and then keep the rest in off balance sheet off-shore transactions spread around the world.

In an economy that is still driven 70% by consumer spending these policies are arrogant and stupid. The investors who were the real lenders should be paid. The balance on the books owed to those investors should be reduced. And the process of separating the false tier 2 premiums on proprietary trades and the REAL balance owed by borrowers should proceed. This can only happen, given current circumstances by denial of all elements of the cause of action for foreclosure, and pressing on through discovery against the Master Servicer, subservicer (who did they pay? how long did they day after the declaration of default?), the Trustee of the REMIC trust (where are the trust accounts?), the aggregators and other parties that were engaged in the PONZI scheme that was covered over by a false infrastructure of assignments and securitization which never took place.

Our economy is projected to grow at a mere 2% this year if we are lucky, because the banks are holding all the fuel for the engine. If we were to apply simple precepts of law on fraud and contracts, the amount clawed back to investors and homeowners would end the crisis for the economy and yes, possibly threaten the existence of the large banks, but greatly enhance the prospects for the 7,000 other banks in the U.S. alone. But that of course would only happen if we were doing things right.

OCC Foreclosure Reviewer: “Independent” Reviews Were Controlled by Banks, Which Suppressed Any Findings of Harm to Foreclosed Homeowners
http://www.nakedcapitalism.com/2013/01/occ-foreclosure-file-reviewer-independent-reviews-were-controlled-by-banks-which-suppressed-any-findings-of-harm-to-foreclosed-homeowner.html

Securitization and the Future of Finance

The Future of Securitization
By ETHAN PENNER
July 10, 2008; Page A15

The deconstruction of the financial services industry this past year has been something to behold. Unfortunately, the responses have been shortsighted, the equivalent of putting a band-aid on a gunshot wound. The blunt fact is that we’re in the midst of a major structural shift in the financial world: Yesterday’s business model has been invalidated.

Securitization as it has been practiced will not be the dominant means of financing it has been for the past decade and a half. And it has been truly dominant – moving from $1 trillion to $12 trillion in annual new issuance, capturing a significant share of all new loans including residential mortgages, commercial real estate and corporate loans, even auto and college tuition loans. Yet securitization will continue to play an important role – if adapted appropriately.

Securitization involves transferring a loan or pool of loans into a trust and then having that trust issue securities, or bonds, that are rated by the large rating agencies and purchased in the institutional bond market. Effectively, through what I will call “risk transference” securitization, whereby the originator retains no ongoing interest in the loan, the bond market becomes the at-risk lender. Implicit in that arrangement, especially at the high volume levels of past years, is the nearly complete delegation of credit underwriting by the ultimate lenders, the bond buyers, to others, mostly the credit rating agencies, and to a lesser extent the banks that originated, repackaged and sold the loans to these bond buyers.

It’s easy to see the model’s appeal over portfolio lending, where the banker held an originated loan to maturity. This limited the potential gross return on equity (ROE) that the loan could generate to something in the mid to high-teens. And from this seemingly unappetizing return, one must still deduct overhead expenses. Further, the bank remained on the hook for any losses during the life of the loan.

In the risk transference securitization model, the potential of significantly enhanced ROE was breathtaking. The originating bank became an intermediary, or a manufacturer of loans. A loan originated and resold within six months for a 2% profit could – when combining the yield spread in the six-month warehouse period with the gain on sale – double the bank’s ROE, while also permanently removing the credit risk associated with that loan from the bank’s balance sheet. Thus large banks shifted from purely portfolio lending to a mix of portfolio lending and risk transference securitization.

The most profound change occurred in the investment banks. Their balance sheets ballooned more than 100-fold as they morphed, from entities engaged primarily in the business of advising corporate America and facilitating access to the capital markets, into gigantic originators and intermediaries of all forms of credit assets. Without the huge fixed costs associated with deposit-gathering that the banks have – and the benefit of nearly double the leverage ratios of their more tightly regulated competitors – risk transference securitization generated staggering gross ROEs that, in the good times, ranged between 50%-100%.

That business model is now being dismantled, and the search is on for a new vision. Financial players need to explain to investors, whose capital they may desperately need to survive this painful transition period that, even in the best case, the ROE upside will be significantly less. Investment banks need to construct a vision justifying their huge balance sheets.

And yet the truth is that securitization, with a simple tweak, is actually something that can and will surely continue to play an important role in finance. This mechanism brings two main attributes to the table that are worth preserving.

First, it is the only method available to the asset originator to finance his position in a loan without incurring a mismatch risk between the terms of his assets and the terms of his liabilities. In the old portfolio-lending model, the bank would make a loan that may have a five- or 10-year fixed-rate term with all sorts of prepayment provisions that could shorten the term, and then finance that asset with deposits or other liabilities that didn’t match the term or the duration characteristics of the loans themselves.

This model created the sort of systemic risk that has caused most of the serious financial dislocations of the past, including the collapse of the Savings & Loans in the 1980s all the way to the collapse of the SIVs in 2007 and Bear Stearns in 2008.

The second significant benefit of securitization is the transparency that it brings to bear on the system. While this is painful in bad times, as the mistakes of the market are more immediately and broadly known, only the most cynical among us would argue that better information is not hugely beneficial to the market at large.

Were a portfolio lending model crafted in which the lender – instead of relying upon shorter term deposits or other liabilities whose terms are uncorrelated to the assets that they are intended to finance – financed his loan inventory through the securitization process, the duration mismatch risk would be solved. The lender would create distinct pools of loans, all of which it would retain on its balance sheet and hold appropriate equity capital against, and then have the trust issue only the lowest risk and most highly rated securities.

Further, in this construct the bond market will not be taking on the full ownership of the loan. Instead it will be providing lower risk leverage to the originator, who will retain ownership. Thus, the bond market will be relying less on the rating agencies and more on the lender’s acumen, and the alignment of interest that results from the originator’s ongoing ownership of the loan. These securities would have payment and maturity characteristics that exactly mirrored those of the underlying loans they were financing, and it would be this perfect match that would serve to remove the heretofore systemic duration mismatch risk that has resulted in numerous bailouts.

I believe the next step for finance in the Western world is to create a system that marries the discipline of portfolio lending with the asset-liability management and transparency benefits of securitization. As in the portfolio-lending model, the originator will be left to hold the loan. The bond-buying community will provide financing to the originating lender by purchasing the securitized debt that is backed by the loans originated.

Equity markets will provide the capital to own assets and will thus discriminate as to which origination franchises deserve the licenses to participate in the business of finance going forward. It will be those franchises that have demonstrated credit underwriting expertise in the areas in which they are extending credit, and clean and understandable balance sheets with commitments to transparent reporting, that will likely dominate in the next cycle.

Mortgage Meltdown: Congress Makes the Right Moves!

Today we have a bill pending that stops the meltdown. It is a courageous and creative step that protects all parties. It requires YOUR input, so pass this along to as many other people as you can. This is much more than a step in the right direction. It would be nice to see support from the presidential contenders as well.

Write your congressmen and women and get this thing passed. The Senate and House are standing on the line between mayhem and an orderly society and have taken the right steps. The rest is up to you.

It isn’t perfect, but the bill would do more to stem the tide of foreclosures, evictions and declining home prices than anything else on the table. It will protect your home equity, it will stabilize the economy, and it will give the U.S. dollar just the shot of confidence it needs to slow the rising threat of hyper-inflation.

Call and write your congressman/woman, call and write your senators, flood them with emails.

This is not about the morality of or ideology of whether it was more the fault of one group over another. This is about the practicality of holding our society together. Nothing is more important to the your lifestyle than this bill no matter who you are.

May 2, 2008

Mortgage Aid Plan Advances in House

WASHINGTON — The House Financial Services Committee pushed forward on Thursday with an aggressive effort to help troubled homeowners, approving legislation that would make up to $300 billion in federally insured loans available to refinance the mortgages of borrowers in danger of foreclosure.

With passage of the House bill virtually assured, debate over how best to address the downturn in housing shifts back to the Senate, where Democrats drafting a similar plan are struggling to overcome the reservations, if not outright opposition, of a more robust Republican minority.

President Bush has called on Congress to pass very specific legislation to update the operations of the Federal Housing Administration, to tighten regulation of the government-sponsored financiers Fannie Mae and Freddie Mac and to let state and local housing authorities use tax-exempt bonds to refinance bad loans. But he opposes the more expansive legislation pursued by Democrats.

The Financial Services Committee approved the bill 46 to 21, with 10 Republicans joining the Democrats in favor of it.

Representative Barney Frank, Democrat of Massachusetts and the chief author of the housing legislation, said Thursday that he hoped President Bush would sign the bill if it reached the White House as part of a wider package and it contained the legislation that Mr. Bush had demanded.

The Democrats’ legislation seeks to help homeowners by requiring lenders to reduce the principal balances for borrowers at risk of default. The bad loans, typically with high adjustable rates, would be refinanced into more affordable 30-year fixed-rate loans insured by the F.H.A.

The new loans would be limited to no more than 90 percent of a property’s value, based on an updated appraisal. The government would retain a stake in any future sale of the property, worth 3 percent of the initial loan balance or 50 percent of net profit from a sale, whichever is greater.

Borrowers would have to demonstrate the ability to repay the new loan, and if they default, they will forfeit the property. Democrats say the plan could help as many as 1.5 million homeowners.

The Bush administration calls that goal unrealistic and says achieving it would require loosening underwriting rules that would put taxpayer money at too much risk. But the administration’s own effort to help troubled borrowers, called F.H.A. Secure, has so far aided only about 2,000 homeowners who were clearly behind in repaying their loans.

In an interview, Mr. Frank said that Republicans, including the president, understood that the government-sponsored lenders were playing an increasingly vital role in the stability of the economy and that they were now anxious to tighten regulation.

“Don’t underestimate the importance” of changes affecting Fannie Mae and Freddie Mac, he said.

As for the Senate, Mr. Frank said: “I am not going to guess.”

Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, had been hoping to complete work next Tuesday on a bill that would incorporate the broad expansion of federally insured loans sought by Democrats with a Senate version of the legislation sought by the Bush administration. But aides said a committee vote would be delayed to at least Thursday or perhaps the following week.

In a statement on Thursday, Mr. Dodd said he hoped to reach a deal, even as some Senate Republicans said they remained uncertain.

“Our top priority right now should be helping people keep their homes,” Mr. Dodd said, praising the House committee’s vote. “This is another step in the right direction.”

He added: “I am committed to working on bipartisan legislation with my colleagues in the Senate banking committee to reduce foreclosures and restore liquidity to the mortgage market.”

A spokesman for Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, declined to comment.

Republican support for the Democrats’ plan has waned in recent days. Senator Mel Martinez, Republican of Florida and a member of the banking committee, who had previously advocated aggressive government action to stem foreclosures, this week said that he supported the more measured response favored by President Bush. Florida is one of the states hit hardest by foreclosures.

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