NJ Court: Possession of note + mortgage assignment is prerequisite to foreclosure

Pretender lenders are going to cite this case as support for the idea that the note and mortgage can be separated and that either one can be the basis of a successful foreclosure. They will rely on the “exception” implied in the court decision wherein the owner of the note has an agency relationship with the servicer who is the foreclosing party.

In this case Freddie Mac clearly possessed the note, although there was no evidence cited that Freddie Mac had actually purchased it. That was presumed in this case. The purchase of the note was not an issue on appeal.

Freddie Mac had made it clear in public announcements that foreclosures should be in the name of servicers. So the possession of one part of the paperwork by the agent and the other by the principal are joined as a single unit.

This decision was correct in ruling against the homeowner, given the issues before it. The homeowner was attempting to make a technical distinction contrary to the facts and contrary to law. The issue brought on appeal was whether Freddie Mac was the only party with standing to foreclose. I would say that shouldn’t have been the issue. Both Freddie Mac and Capital One had standing depending upon who asserted it. Either one could have foreclosed.

Any party may foreclose in its own name or through an agent with authority to do so — if they otherwise plead and prove their status as holder in due course, or holder, or non-holder with rights to enforce. The issue on appeal was a non-starter.

Despite the article, there is no exception here. This New Jersey court simply followed the law.

see Court-says-note-and-mortgage-assignment-both-prerequisites-to-foreclosure-but-makes-an-exception/

see case decision: Peck adv Capital One

The difference between this case and most other cases is that in this case there appears to be a tacit admission that Freddie Mac, as possessor of the note, was a holder or non-holder with rights to enforce because they had purchased the note. It is assumed in this case that Freddie was the actual owner of the debt.

The key differences between this case and most other cases are as follows:

  1. The “principal” in this case has been identified and assumed to be the owner of the debt.
  2. The “agent” in this case, Capital One, is a servicer whose authority to act as agent was not contested.

What is missing is whether Freddie Mac actually purchased the debt or the note and whether Freddie Mac still owned anything at all. Purchase of the note does not mean purchase of the debt if the debt is owned by someone other than the seller of the note. It is well settled law that only the owner of the debt can foreclose. But even if a purchase transaction did in fact take place, the question remains as to whether the interest of Freddie Mac was sold back to some private label REMIC Trust or some other third party such as the seller who may have given warranties as tot he performance of loans.

But if the note was purchased in good faith and without knowledge of the borrower’s defenses, if any, then the purchaser of the note increases their status to holder in due course where there are no defenses even if the preceding origination or transfers had defects.

On the other hand, if the seller of the note did not own the note, then the purchase by Freddie would be nullity. This is also well settled law. A seller of an interest that is nonexistent or in which the seller has no interest, cannot create the interest by selling it. This is the basic problem with “originations” and most “transfers” by endorsement or assignment. In such circumstances the buyer would be a possessor without rights to enforce unless the owner of the debt was in privity with the buyer of the note. The buyer would have a potential claim against the seller, but not the maker of the note.

In such circumstances, the owner of the debt or the true owner of the note would be able to file a claim against the maker and the buyer of the note, explaining how the possession of the note was lost and pleading (and proving) ownership of the debt.

NOTE THAT THERE IS A DEEPER ISSUE PRESENT. But it probably won’t get you any traction despite the clear basis in law and fact. Freddie Mac may or may not have actually made a purchase of the subject loan. If they didn’t then asserting them as the owner of the note might be OK for pleading, but the case ought to fail at trial — if the homeowner denies that they are the owner of the note.  

If it paid in money, then to whom was payment sent? This is different than who claimed ownership of the note and mortgage. More often than not the money trail is NOT the same as the paper trail.

Note that many transactions occurred in which the “Mortgage Loan Schedule” was incomplete or nonexistent at the time of the purported sale. The identity of the seller in such purported transactions is also obscured by clever wording.

If they paid using RMBS certificates, then things get more interesting. Because the RMBS certificates were in all probability worthless. Hence there would a failure of consideration and Freddie Mac could not claim to be a purchaser for value. The vast majority of RMBS were sold under the false pretense that they were “backed” my residential mortgages. The issuer of the certificates is asserted to be a named trust. But if the trust never came into ownership of the alleged mortgage loans, then the RMBS certificates were backed by nothing at all.

Not to draw too fine a point here, it is still possible that Freddie could be considered a purchaser for value even if the RMBS certificates appeared to be worthless. That is because in the  shadow banking marketplace, such certificates and the synthetic derivatives deriving their purported value from the purported value of the certificates nevertheless take on a life of their own. Even if they have no fundamental value they may well have a trading value that far exceeds anything that is fundamental to the certificates (i.e.m, zero).

Same Old Story: Paper Trail vs, Money Trail (Freddie Mac)

Payment by third parties may not reduce the debt but it does increase the number of obligees (creditors). Hence in every one of these foreclosures, except for a minuscule portion, indispensable parties were left out and third parties were in reality getting the proceeds of liquidation from foreclosure sales.

The explanations of securitization contained on the websites of the government Sponsored Entities (GSE’s) clearly demonstrate what I have been writing for 11 years and reveal a pattern of illusion and deception.

The most important thing about a financial transaction is the money. In every document filed in support of the illusion of securitization, it steadfastly holds firm to discussion of paper instruments and not a word about the actual location of the money or the actual identity of the obligee of that money debt.

Each explanation avoids the issue of where the money goes and how it was “processed” (i.e., stolen, according to me and hundreds of other scholars.)

It underscores the fact that the obligee (“debt owner” or “holder in due course” is never present in any legal proceeding or actual transaction or transfer of of the debt. This leaves us with only one  conclusion. The debt never moved, which is to say that the obligee was always the same, albeit unaware of their status.

Knowing this will help you get traction in the courtroom but alleging it creates a burden of proof for you to prove something that you know is true but can only be confirmed with access to the books, records an accounts of the parties claiming such transactions ands transfers occurred.

GET A CONSULT

GO TO LENDINGLIES to order forms and services. Our forensic report is called “TERA“— “Title and Encumbrance Report and Analysis.” I personally review each of them for edits and comments before they are released.

Let us help you plan your answers, affirmative defenses, discovery requests and defense narrative:

954-451-1230 or 202-838-6345. Ask for a Consult. You will make things a lot easier on us and yourself if you fill out the registration form. It’s free without any obligation. No advertisements, no restrictions.

Purchase audio seminar now — Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense including 3.5 hours of lecture, questions and answers, plus course materials that include PowerPoint Presentations.

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

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For one such example see Freddie Mac Securitization Explanation

And the following diagram:

Freddie Mac Diagram of Securitization

What you won’t find anywhere in any diagram supposedly depicting securitization:

  1. Money going to an originator who then lends the money to the borrower.
  2. Money going to a named REMIC “Trust” for the purpose of purchasing loans or anything else.
  3. Money going to the alleged unnamed beneficiaries of a named REMIC “Trust.”
  4. Money going to the alleged unnamed investors who allegedly purchased “certificates” allegedly issued by or on behalf of a named REMIC “Trust.”
  5. Money going to the originator for sale of the debt, note and mortgage package.
  6. Money going to originator for endorsement of note to alleged transferee.
  7. Money going to originator for assignment of mortgage.
  8. Money going to the named foreclosing party upon liquidation of foreclosed property. 
  9. Money going to the homeowner as royalty for use of his/her/their identity forming the basis of value in issuance of derivatives, hedge products and contract, insurance products and synthetic derivatives.
  10. Money being credited to the obligee’s loan receivable account reducing the amount of indebtedness (yes, really). This is because the obligee has no idea where the money is coming from or why it is being paid. But one thing is sure — the obligee is receiving money in all circumstances.

Payment by third parties may not reduce the debt but it does increase the number of obligees (creditors). Hence in every one of these foreclosures, except for a minuscule portion, indispensable parties were left out and third parties were in reality getting the proceeds of liquidation from foreclosure sales.

Bank Fraud News: The reason why banks and servicers should receive no presumption of reliability

The following is but a short sampling supporting the argument that any document coming from the banks and servicers is suspect and unworthy of any legal presumption of authenticity or validity. Judges are looking into self-serving fabricated documentation and coming to the wrong conclusion about the facts.

Chase following bank playbook: screw the customer

“Chase provided no prior notice to its cardholders that their crypto ‘purchases’ would be treated as ‘cash advances’ on a going forward basis,” according to the suit.

Tucker claims he was hit with about $140 in fees and a “sky-high” interest rate of 26 percent without warning after Chase reclassified his purchases as cash advances, a violation of the Truth in Lending act.

Fannie Mae and Freddie Mac Stealth: Hiding the elephant in the living room

Its never been a secret that Freddie Mac’s business policy is to remain stealth in any chain of title if possible, and to rely on the servicers to keep its presence a secret in foreclosure proceedings. In fact, this PNC case which was overturned against PNC, involved the Defendant’s assertion that PNC was concealing Freddie Mac’s interest in the loan. Freddie Mac’s business policy appears to rely upon nothing more than handshakes with the originators and servicers. Here is some verbiage from a “Freddie Mac – Mortgage Participation Certificates” disclosure (See: Freddie Mac – Mortgage Participation Certificates):

Deutsch files lawsuit against private mailbox troller following the Deutsch playbook of foreclosure

“Defendants, and each of them initiated a malicious campaign to disrupt the chain of title to prevent Plaintiff from enforcing its contractual rights in the 2006 DOT by way of recording fraudulent documents to purportedly assign the rights under the 2006 DOT without the consent of Plaintiff, and otherwise thereafter fraudulently transfer all rights via a trustee deed upon sale, even though no trustee sale was ever conducted. All subsequently recorded or unrecorded transactions are therefore null, void, and of no effect.”

EDITOR COMMENT: So Deutsch is admitting that its practice of recording fraudulent documents are “null, void and of not effect.” In order to get to that point Deutsch is going to be required to prove standing — i.e., definitive proof that it paid for the debt, which it did not. Deutsch is on dangerous ground here and might deliver a bonus for homeowners. As for the defense, is it really a crime to steal a fraudulent deed of trust supported by fraudulent assignments and endorsements?

Barclays Bank settles for $2,000,000,000 for fraud on investors

Barclays’ offering documents “systematically and intentionally misrepresented key characteristics of the loans,” and more than half of the loans defaulted, federal officials said.

Additionally, the Department of Justice reached similar settlements with two Barclays’ employees involved with subprime residential mortgage-backed securities. They will pay $2 million collectively.

The agreements mark the latest in a string of U.S. settlements with major banks over sales of tainted mortgage securities from 2005 to 2007 that helped set the stage for the real estate crash that contributed to the financial crisis.

Deutsch Pays $7.2 Billion for Fraudulent securitizations

Confirming settlement details the bank disclosed in late December, federal investigators said Deutsche Bank will pay a $3.1 billion civil penalty and provide $4.1 billion in consumer relief to homeowners, borrowers, and communities that were harmed.

The federal penalty is the highest ever for a single entity involved in selling residential mortgage-backed securities that proved to be far more risky than Deutsche Bank led investors to believe. Nonetheless, the agreement represents relief of sorts for the bank and its shareholders, because federal investigators initially sought penalties twice as costly.

Credit Suisse‘s announcement said it would pay the Department of Justice a $2.48 billion civil monetary penalty. The bank will also provide $2.8 billion in consumer relief over five years as part of the deal, which is subject to negotiations over final documentation and approval by Credit Suisse’s board of directors. [Credit Suisse owns SPS Portfolio Servicing.]

Ocwen Settles with 10 States for Illegal Servicing

“The consent order provides that Ocwen will transition its servicing portfolio off of its current servicing platform to a platform better able to manage escrow accounts and establish a new complaint resolution process,” the Georgia Department of Banking and Finance said in a press release. “Ocwen shall hire a third-party firm to audit a statistically significant number of escrow accounts in high-risk areas of the portfolio to determine whether problems continue to exist around the management of escrow accounts and to identify the root cause of those problems.

“Ocwen has faced many legal and regulatory challenges in recent years. In December 2013 it reached a settlement over foreclosure and modification processes with the CFPB and state regulators. A year later, it made a separate agreement with New York regulators that removed company founder William Erbey as CEO.

Wells Fargo Whistleblower is Fired Among Others Who refused to Lie to Customers

In 2014, according to Mr. Tran, his boss ordered him to lie to customers who were facing foreclosure. When Mr. Tran refused, he said, he was fired. He worried that he wouldn’t be able to make his monthly mortgage payments and that he was about to become homeless.

Joining a cadre of former employees claiming they were mistreated for speaking out about problems at the bank, Mr. Tran sued. He argued in court filings that he had been fired in retaliation for blowing the whistle on misconduct at the giant San Francisco-based bank. Mr. Tran said he didn’t want his job back — he wanted Wells Fargo to admit that it had been wrong to fire him and wrong to mislead customers who were facing foreclosure.

 

 

 

Fannie and Freddie foreclose on almost 16,000 homes in May, almost 4 million since 2008

Fighting Off Foreclosures

http://www.dsnews.com/daily-dose/08-08-2017/fighting-off-foreclosures

Editor’s Note:  Fannie and Freddie have foreclosed on almost 4 million homes since the financial crisis of 2008.  The GSEs typically can’t prove they own the loan if it was securitized between 1999 and 2014.  Did you know that Fannie Mae and Freddie cannot accept a note that is not properly endorsed and assigned?  A note that is not properly endorsed or assigned is considered a ‘fail’.  See Document Custodian information here.

Avoid Foreclosure BHFannie Mae and Freddie Mac wrapped up 15,683 foreclosure prevention actions in May, according to the Federal Housing Finance Agency (FHFA) May Foreclosure Prevention Report. This brings the total number of foreclosure prevention actions to 3,914,668 since the inception of the conservatorships back in September 2008. More than half of the actions reported for May—or 10,769—were permanent loan modifications, compared with 11,328 in April. All told, since September 2008, the Enterprises have granted permanent loan mods to 2,076,345 distressed homeowners.

Along those same lines, the share of modifications with principal forbearance accounted for 25 percent of all permanent modifications in May, according to the report. Modifications with extend-term only leapt to 45 percent during the month thanks to ongoing positive headwinds in house prices. Additionally, a combined 1,489 short sales and deeds-in-lieu sealed in May. There were 10 percent more—or 1,650—in April.

As for the Enterprises mortgage performance metrics, the serious delinquency rate spiraled down further, plunging from 1.01 percent at the close of April to 0.98 percent at the end of May. Loans 30–59 days’ delinquent charted at 402,780 in April; they stood at 348,141 in May. Continuing their downward trajectory, 60-plus-days’ delinquent loans hit 1.3 percent in May, decreasing from April’s 1.34 percent.

In terms of Fannie and Freddie foreclosures, third-party and foreclosure sales jumped 9 percent, from 5,523 in April to 6,042 in May. Foreclosure starts tumbled 13 percent from 17,056 in April to 14,905 in May.

The top five reasons for delinquency in May included curtailment of income (21 percent), excessive obligations (22 percent), unemployment (7 percent), illness of principal mortgagor or family member (6 percent), and marital difficulties (3 percent).

The Fannie Freddie Document Treasure Trove

Editor’s Note: Former Secretary of Treasury Timothy Geitner was instrumental in greasing the runways for HAMP so the GSEs could steal homes.  But he also engineered the theft of GSE investor profits while proclaiming Fannie Mae and Freddie Mae to be on the verge of collapse.  Instead, the federal government, in an act of unconscionable bad faith, implemented net worth sweeps to steal money from investors.  These massive profits were also used to artificially prop up failing Obamacare.

The Libertarian Opinions expressed by Forbes Contributors are their own.

July 19, 2017 marked the release of the first set of much-awaited government documents that addressed the government knew and when, before the implementation of its net worth sweep on August 17, 2012, which gave the government all profits from the operation of those two Government Sponsored Entities (GSEs) Fannie Mae and Freddie Mac.  That deal was embodied in the Third Amendment to the original Senior Preferred Stock Purchase Agreements (SPSPAs) of September 2008.  Analytically, these documents are irrelevant: the case against the government is air tight without them. Practically, these documents should transform all phases of this complex litigation.  The best way to beat the government in litigation is to show its bad faith throughout.  It is important to see why both the propositions are true, and how they impact on the ongoing litigation.  I am offering this analysis, in my capacity as an advisor to institutional investors.

The Analytics.  A close look at the disclosed documents tell us nothing about the net worth sweep that is not apparent on the face of the published agreement that the Federal Housing Finance Authority (FHFA) and the Department of Treasury used to put the Net Worth Sweep (NWS) in place. These were expert lawyers and they meant what they said and said what they meant—namely, that the sole purpose of the deal was to make sure that all the future profits generated by Fannie and Freddie would end up in the pockets of the United States Treasury above and beyond the 10 percent dividend set in the original 2008 agreement.  It would have been, of course, imprudent for the two government agencies to announce their intention to collude publicly, so they engaged in a planned, but sham, transaction, that made it appear as if their joint action was the salvation of Fannie and Freddie.  The supposed benefit was that the enterprises were relieved of any obligation to pay money to Treasury when they did not have money to pay it.

Unfortunately, for the government, the enterprises and their private shareholders already had two airtight defenses against such an unhappy result.  First, if a company is insolvent it can’t pay any money to its shareholders as dividends or to its creditors anyhow.  So it is a simple sham to claim that consideration has been supplied by relieving parties of any obligation to pay amounts that could not pay in any event.  Second, as a legal matter, the SPSAs contained a so-called payment-in-kind clause, which allows Fannie and Freddie to not pay cash dividends so long as the deferred amounts accrue at a rate of 12 percent annually, two points higher than the 10 percent rate stipulated for cash dividends.

The ability to exercise this deferred option carries with it two unambiguous consequences. First, it meant that Treasury never had to make any further advances to the entities if it thought it imprudent to do so.  The GSE amounts due would just continue to accrue.  Accordingly, there could be no death spiral in which Treasury would have to make advances to prop up a worthless enterprise, and no exhaustion of Treasury’s financing commitments.  Second, this arrangement was not an open invitation for the conservators of the enterprises to squander money.  Any net distributions to the enterprises’ private shareholders, whether as dividends or distributions on liquidation, were subordinate to the government’s senior preferred stock.

It would therefore be unwise for any prudent trustee to incur higher rates of payment on the senior preferred if cash were available to make current cash dividends.  The initial deal had a built-in financial stability that worked well in all states of the world.  At no point in the documents did Treasury make reference to this decisive clause.

Similarly, the judicial treatment of the complete dividend arrangement on the motion to dismiss, no less, completely misunderstood these provisions.  That short cut is perfectly permissible if the opinions make an accurate assessment of the stated transaction.  But that was not to be had.  In the original 2014 trial court decision by judge Royce Lamberth in Perry Capital v. Lew, this additional shareholder option was perversely construed as a penalty for late payment, which therefore had to be ignored in deciding on the validity of the NWS.   Similarly, the clause was put to one side on the decision of the majority of the D.C. Circuit in Perry v. Mnuchin,  with the glib pronouncement that director of FHFA, as a fiduciary, did not have to avail himself of the one option that worked to the greatest advantage of his beneficiaries, but could instead fork over all that excess cash to the government knowing that it received nothing of value in return. Why this extreme statement? Because there is no state of the world in which the private shareholders were better off after the NWS than they were without it.  On the downside, the got no money either way.  On the upside, they got no money either, as all the cash above the standard 10 percent (or, if appropriate, 12 percent) dividend went to the government.  The government should have lost on the motion to dismiss.

The Documents.  The overall message from the published documents is in perfect sync with the basic structure of the underlying deal.  None of them are remotely privileged. The only damaging information that they contain is directly pertinent to the case, namely, on the state of mind of key government officials on the eve of the NWS. In order to best understand their impact, it is useful to examine the documents in reverse chronological order, starting with those that prepared just before the NWS was implemented.  The point is quite simple.  Whatever the earlier uncertainties, given the indications of the GSEs’ financial strength right before planned enactment, the government could have simply canceled the NWS without any public fanfare, knowing that the financial situation had stabilized.  By going forward with the NWS, the high government officials knew that the NWS was not a salvage operation to prevent the bailout from collapsing, but a calculated effort to strip all the profits from the GSEs in a no-risk transaction for the Treasury.

Thus, on the Monday, August 13, four days before the announcement of the NWS, an email from Jim Parrott to Brian Deese, takes the candid view that:

  • We are making sure that each of these entities pays the taxpayer back every dollar of profit they make, not just a 10% dividend. (emphasis in original)
  • The taxpayer will thus ultimately collect more money with the changes.
  • With the overall set of changes, we have removed any doubt about the long-term fate of these entities: they will NOT be allowed to return to profitable entities at the center of our housing finance system, but instead wound down and replaced with a system driven by private capital and lower risk to the taxpayer.

That of course is exactly what the NWS did.  The obvious reading of this document is that four days before the NWS all the relevant officials on the eve of the NWS knew that government stood to make profits in excess of the agreed 10 percent dividend rate, notwithstanding any earlier doubts Treasury and FHFA had several months prior about the expected financial performance of Fannie and Freddie.

Just before the NWS, these officials knew with certainty that there was no possibility of a death spiral in which the Treasury would constantly have to lend money to the GSEs in order to collect the required dividend from them. That result is confirmed by an earlier memo dated July 30, 2012, which announces the government’s intention to announce the changes on Friday, August 10 after the markets close.  (The actual launch date was a week later, still on a Friday in in August in order to avoid serious media attention.)  The memo’s stated rationale for the NWS was “GSEs will report very strong earnings on August 7, that will be in excess of the 10% dividend to be paid to Treasury.”  The relevant information had not changed from July 30 to the announcement of the NWS on August 17.

The next critical document was dated June 25, 2012 from Treasury official Mary Miller to Michael Stegman.  It relates that Ed DeMarco, the acting head of FHFA, had some doubts about how to proceed but no doubts about the increasing financial strength of Fannie and Freddie.  Its relevant portion reads:

  • Through weeks of negotiating terms of possible amendments to the PSPAs, he [DeMarco] never questioned the need to adjust the dividend schedule this year. Since the Secretary raised the possibility of a PR [principal reduction to benefit distressed homeowners] covenant, DeMarco no longer sees the urgency of amending the PSPAs this year.
  • He has raised two competing reasons for this new position: (1) the GSEs will be generating large revenues over the coming years, thereby enabling them to pay the 10% annual dividend well into the future even with the caps; and, (2) instituting a net worth sweep in place of the dividend will further extend the lives of the GSEs to such an extent that it would remove the urgency for Congress to act on long-term housing finance reform. He now sees the PSPA amendments as a backdoor way of keeping the GSEs alive-getting to an Option 3-type plan [calling for the separation of special purpose vehicles for good and bad assets] without the need for legislation.

For these purposes the most salient portion of the document is the acknowledgment of the large revenues that will be sufficient to cover the dividend payments in the future with the caps in place, which meant that Treasury understood that no additional advances would ever be needed.  The third option mentioned in the last paragraph refers to a position paper submitted to Secretary Timothy Geithner on December 12, 2011, or over eight months before the bailout took place. It contained a preliminary discussion of various policy options, the first of which called for restructuring “Treasury’s dividend payments from a fixed 10 percent annual rate to a variable payment based on available positive net worth (i.e. establish an income sweep). This will ensure that remaining PSPA funding capacity is not reduced in the future by draws to pay dividends.”  At the very least both Miller and Stegman knew that both Fannie and Freddie could turn profitable shortly, which came to pass to its knowledge when the NWS was put into effect in August, 2012.  This case is open and shut.

Commentaries on the released documents.  Most of the commentators who read the documents thought that they revealed that Treasury and FHFA had a full knowledge that the GSEs had turned the corner into positive territory when the NWS was adopted. Gretchen Morgenson’s article of July 23 was entitled “U.S. Foresaw a Better Return in Seizing Fannie and Freddie Profits.”  It was well understood”, she wrote “that decision to divert the profits knew that the change would most likely generate more revenue for the treasury.  She explicitly concluded that Treasury’s stated explanation, to protect the taxpayers from further losses, was contradicted by the documents which showed “as early as December 2011, high level treasury official knew that Fannie and Freddy would soon become profitable again.”

Her views were adopted wholesale by HousingWire, where once again the headline tells the whole story:  “Newly sealed documents reveal real reason for Fannie, Freddie Profit sweep:  Report:  Geithner knew in 2011 that GSEs would soon be profitable.”  Bloomberg News told the same story when it wrote “New Documents Give Hope to Fannie Shareholders seeking redress,” specifically pointing out that evidence undercut the key government claim that the NW was necessary to avert “a process known as a ‘circular draw’ or ‘death spiral.’”

The impact on litigation.  The last question is how these revelations will impact ongoing litigation.  The documents were released in connection with the Fairholme takings claim in the Federal Court of Claims.  The sound theory of that case is that government had confiscated shareholder property when it stripped them of their dividend rights, their liquidation preferences, and their voting rights—the three attributes that give shares their value. Similarly, Jerome Corsi at InfoWars stated: “New Docs Support Fannie Mae and Freddie mac Shareholders in Court: Apologist [John Carney] Ignores Evidence They Illegal Confiscated Fannie and Freddie Earnings.”

That claim is made out by an examination of the relevant documents. If these cases are treated as direct expropriation of funds, governed by the per se rule in Loretto v. Teleprompter  Manhattan CATV Corp.  the bad faith of the government should not matter.  But, if, as thus far has been the case, the NWS is evaluated under the more flexible doctrine of Penn Central Transportation Company v. City of New York this evidence fills any gap in the plaintiff’s case. Penn Central requires an explicit examination of the government reasons for imposing the sweep.

The Treasury’s bad faith of the government overrides any potential government justification for making these shareholders bear a disproportionate share of funding general government activities.  In the language of Penn Central, the NWS “has interfered with distinct investment-backed expectations,” without reference to any traditional police power concerns with health and safety.  As Justice Holmes quipped in Pennsylvania Coal v. Mahon “a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.”  The government has meet its financial needs from general revenues, not by picking the pocket of the private shareholders. The takings claim therefore should be solidified by the release of these documents.

The documents revealed in the takings litigation should also influence the treatment of the various breach of fiduciary and contract claims in Perry Capital v. Lew, and in Perry Capital v. Mnuchin.  Both the trial court in Lew and the D.C. Circuit on appeal in Mnuchin let the government win on summary judgment, without the benefit of any discovery at all.  A correct reading of these documents shows that they gave summary judgment for the wrong party, the government.  But now that Mnuchin is back to the District Court on remand, it should take those documents into account in making its decision on the validity of the plaintiff’s surviving contract claims.

The first time around, the Circuit Court badly mangled the proper tests for determining expectation damages. Its decision to divide outstanding shares into different subclasses destroys the underlying market, which can function only if all shares have identical attributes.  Hence it was a huge mistake to insist that shareholder claims be fractionated so that individual shareholder expectations somehow depend whether the shares were purchased before or after the NWS was into place.  The correct answer in all cases is that shareholder expectations are fixed at the time of initial issuance and purchase of these shares, such that any resales or other transfers of those shares do not affect the nature of the contract claims.

The D.C. Circuit’s revised opinion of July 17, 2017 backs off that categorical error.  Nonetheless it still goes astray because of its failure to affirmatively state as a matter of law the correct rule that treats all shares identically.   Instead its states the relevant inquiry on remand is “whether the Third Amendment violated the reasonable expectations of the parties.”  The government knew at the time of the NWS that it was claiming more than it was entitled to.  That fact should shape the reasonable expectations of the private parties who are entitled to think that the government will not consciously abuse its power by collusive transactions that were intended to strip the shareholders of all value in a sham transaction.

The NWS benefited the government, and only the government.  The District Court cannot decide this case in an informational vacuum, but must take this information into account in determining the reasonable shareholder expectations. The abuse of NWS is as relevant to the contract claims as it is to the takings claims.  Judge Lamberth should not ignore undisputed evidence, which points to the total viability of the contract claims that the D.C. Circuit has asked him to reevaluate on remand.

Richard A. Epstein is the Laurence A. Tisch professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School.

https://www.forbes.com/sites/richardepstein/2017/08/02/the-fannie-freddie-document-treasure-trove/2/#98228f850ea9

Refinancing mortgage? Maybe you don’t need that appraisal after all

Editor’s Note:  The Fed is doing everything in its power to maintain the real estate bubble in order to maintain demand- by lowering credit score requirements, offering lower down payments (1 to 3%), and now removing the lender’s responsibility for home valuations.  What could go wrong?

http://www.miamiherald.com/news/business/real-estate-news/article157002859.html

Read more here: http://www.miamiherald.com/news/business/real-estate-news/article157002859.html#storylink=cpy

New products could increase the number of investors shorting U.S. home loans

A sluggish mortgage-bond market could be jump-started by a new service that allows investors to short home loans.

Skeptics say the rise of derivatives on credit-risk transfer notes sold by Fannie Mae and Freddie Mac has echoes of the 2008 credit crisis, when the market plunged under the weight of collapsing subprime securities.

Fannie and Freddie – the biggest guarantors of U.S. home loans –  started transferring mortgage-default risk to bond funds and other investors in 2013 to help reduce risks to taxpayers according to Bloomberg. But the program has been generating more traction in recent months, after New York-based Vista Capital Advisors rolled out a pilot program that would eventually allow investors to bet on U.S. homeowner defaults.

Craig Phillips, a former BlackRock executive serving as head of financial markets advisory and client solutions for the Treasury Department, said credit-risk transfers will be core to U.S. housing policy.

The madness begins again with creative new derivatives and credit risk transfers that put the risk on the taxpayer.

Fannie, Freddie cut mortgage modification interest rate for first time in 2017

After four months of leaving the benchmark interest rate for standard mortgage modifications (not including HAMP mods) at an 18-month high, Fannie Mae and Freddie Mac recently announced that they are cutting the benchmark rate.

Back in January, Fannie and Freddie increased the standard mortgage modification benchmark rate from 3.875% to 4.25%. That level is the highest the benchmark rate has been since July 2015.

Now, Fannie and Freddie are cutting the benchmark rate slightly, but leaving it above 4%. The government-sponsored enterprises announced last week that they are cutting the benchmark rate to 4.125%.

The January hike marked the second straight month of an increase, after Fannie and Freddie dropped the benchmark rate throughout 2016, progressively decreasing it below 4%.

The increases also came after the GSEs dropped the standard mortgage modification benchmark interest rate to the lowest level ever, 3.5%, in August 2016.

Then, the GSEs increased the benchmark rate from 3.5% to 3.875% in December, before hiking it well above 4% in January.

And now, they’re cutting it back a bit.

The benchmark rate tracks with prevailing market rates, and the most recent data from Freddie Mac shows that interest rates have generally been the decline (with some slight modulation) over the last several months.

The standard modification program is “designed to help those borrowers who are ineligible for the Home Affordable Modification Program.”

According to the GSEs, the standard modification program is “designed to help those borrowers who are ineligible for the Home Affordable Modification Program.

Therefore, the new rate does not extend to HAMP borrowers.

The new 4.125% interest rate took effect on May 12, 2017.

CitiBank Whisteblower Richard Bowen: They’re Back! Fannie and Freddie Ride Again

By Richard Bowen

http://www.richardmbowen.com/theyre-back-fannie-and-freddie-ride-again/

It looks as if Fannie Mae and Freddie Mac have not learned from their previous enabling of banks leading to the financial crisis. In fact, it looks as if the two are still using the same business model; they are lowering even further their underwriting standards to allow loans to be underwritten, ignoring student, credit card and auto loans supposedly “paid by others.” Didn’t this kind of tactic fail before? 

Their creativity now extends to former college students who are so heavily burdened with student and other debt, so why not excuse the debt? Why not change the rules and allow mortgage lenders to ignore the debt that would prevent many students out of school to not be able to buy homes, cars, etc? Why not put them into more debt, not less and oh, by the way, maybe cripple the economy as they helped do before?!

Fannie Mae has just released new rules allowing millennial borrowers to exclude student loans, credit cards and auto loans that are “paid by someone else” when they are applying for a new mortgage. To further incent, taxpayer subsidized mortgage loans can also now be used to repay student debt.

According to Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae, ”We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution, …. These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.”

And, ironically, the person in charge of cleaning up these Wall Street rules is Craig S. Phillips, a former top executive on Morgan Stanley’s trading desk, who is now in charge to head up the effort to reform the Government-Sponsored Entities, Fannie Mae and Freddie Mac. At Morgan Stanley, Mr. Phillips headed a division that sold billions of dollars of toxic mortgages and mortgage-backed securities to Fannie, Freddie, and others.

Just this last April, Gretchen Morgenson of the New York Times wrote in an article that Mr. Phillips, then  leader of Morgan Stanley’s mortgage desk during the peak mortgage-mania years of 2004 and 2005, ran the operation that bundled loans and sold them to the two government-sponsored enterprises and many others. The loans blew up, the government sued Morgan Stanley and Mr. Phillips was a named defendant in the initial case — a case that resulted in the firm paying a $1.25 billion settlement. 

Discussing the financial crisis in December 2008 at the National Press Club, Phillips said he felt terrible about the level of government support of the financial system at that time, but government actions such as injecting capital were “critical because we can’t have systematic failure and a breakdown in all markets.” 

As I commented in a recent article, before the 2008 debacle the push was on to make housing affordable for everyone, and Congress gave directives to loosen the underwriting standards. And, although this was certainly one of the reasons Fannie and Freddie had such catastrophic losses, I strongly believe that the primary reason Fannie and Freddie had the huge losses was that they purchased many, many mortgages which did not even meet that lowered bar of creditworthiness. That is, they did not review the individual mortgages purchased but relied almost solely upon false certifications by the large bank sellers that the mortgages sold met the published standards. 

It was a perfect storm: a lack of controls, the implicit guarantee the government would stand by the loan, and the assumption that the institutions doing the lending wouldn’t go under and were providing true certifications. No one was checking. It was a circus! And still continues to be one!

The more mortgages were purchased, the more incentives went straight to Fannie and Freddie and their executives, until their collapse, when they were bailed out and placed into conservatorshipThen, in a move some have described as nationalizing the entities, the US Treasury started taking all of their profits, thus ensuring they would never be able to rebuild a capital base.

Our country is now faced with the dilemma of what to do with Fannie and Freddie. Should they be recapitalized and returned to private ownership, or should another path more favorable to the large banks be followed?

What to do with Fannie and Freddie is a huge decision now facing President Trump’s administration. Bad enough we’re encouraging – read enabling, those who may not be able to afford more debt to do so. Yet to appoint someone with Mr. Phillips’ less than clean hands to make this decision is a travesty.

H.R. 1694 Passes: Fannie and Freddie Open Records Act of 2017

Homeowners start preparing your Fannie and Freddie FOIA requests.  A brief window to submit your request may occur prior to the GSEs being privatized again.

Last week H.R. 1694  passed in the House of Representatives.

This bill will make Fannie Mae and Freddie Mac subject to the requirements of the Freedom of Information Act, which would make their records available to the public on request.

The Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) are government-sponsored enterprises (private corporations with federal charters that confer special privileges) that buy mortgages from lenders and either hold those mortgages in their portfolios or package the loans into mortgage-backed securities that may be sold.

To stabilize the housing market in the aftershock of the financial crisis, the Federal Housing Finance Agency (FHFA) used its authority in 2008 to place Fannie Mae and Freddie Mac into its conservatorship. In conservatorship, the government takes control of a failing financial institution with the goal of returning it to financial health and stockholder control. Well into their eighth year in conservatorship, they have operated under government control for longer than initially expected.

The Freedom of Information Act (FOIA; 5 U.S.C. §552) allows any person—individual or corporate, citizen or not—to request and obtain existing, identifiable, and unpublished agency records on any topic. Pursuant to FOIA, the public has presumptive access to agency records unless the material falls within any of FOIA’s nine categories of exception. Disputes over the release of records requested pursuant to FOIA can be appealed administratively, resolved through mediation, or heard in court.

Source: Republican Policy Committee

FannieGate: Obamacare Looting Scheme by diverting Fannie and Freddie Funds

Steve Mnuchin stated Monday on Fox News that President Obama engineered the “Net Worth Sweep” (NWS) in August 2012 to divert funds from the two Government Sponsored Entities (GSEs) to pay for Obamacare, after Congress refused to fund the low-income insurance subsidies critical to keep afloat the Affordable Care Act (ACA).

“There is a Twitter conversation going on, and it has been going on for some time, about how President Obama needed money for Obamacare and he took from Fannie and Freddie. Is that true?” Bartiromo asked Mnuchin.

“It is true,” Mnuchin replied.

“They [the Obama administration] used the profits of Fannie and Freddie to pay for other parts of the government while they kept taxpayers at risk,” Mnuchin answered.

An examination of the Treasury Department’s balance sheet for Fiscal Year 2013 documented how the Obama administration diverted billions of dollars into Obamacare that Treasury confiscated from Freddie and Fannie earnings.

On Aug. 17, 2012, the Obama administration amendment the Treasury Department’s Senior Preferred Stock Agreements with Fannie and Freddie that deprived private and institutional investors of their legally due dividend payments.

This enabled the Obama Treasury Department to confiscate billions of dollars in Fannie and Freddie earnings, in what is known as the “Net Worth Sweep,” or NWS.

The point is Congress never funded any taxpayer funds to pay the low-income insurance subsidies that are at the core of making the ACA work.

Section 1402 of the ACA – is written to provide federal subsidies to insurance companies for insurance purchased on state insurance exchanges to cover the difference between the capped maximum a low-income purchaser could be expected to pay and the amount the insurance cost.

Without funds provided by Congress to pay the low-income insurance subsidies under 1402, Obamacare would have collapsed immediately.

On May 12, 2016, U.S. District Judge Rosemary Collyer, in the case U.S. House of Representatives v. Burwell, ruled against Health and Human Services Secretary Sylvia Matthews Burwell.

Judge Collyer decided HHS Secretary Burwell had no constitutional authority to divert funds Congress appropriated to one section of the ACA to fund Obamacare subsidy payments to insurers under another section of the ACA, Section 1402 – the clause defining the insurer subsidies – when Congress specifically declined to appropriate any funds to Section 1402 for paying the insurance subsidy.

“Paying out Section 1402 reimbursements without an appropriation thus violates the Constitution,” Judge Collyer concluded.

“Congress authorized reduced cost sharing but did not appropriate monies for it, in the Fiscal Year 2014 budget or since,” she stressed.

The Obama administration appealed the District Court decision in U.S. House of Representatives v. Burwell to the U.S. Circuit Court of Appeals, deciding on its own authority that federal funds could continue to be diverted from other budgetary purposes to continue paying the insurance subsidies as long as the case was under appeal.

If the Trump administration wants to end Obamacare, all that is necessary is to drop the Circuit Court appeal in Burwell, and the result the District Court decision would become established law.

By dropping the appeal, the Trump administration would rule out any further diversion of federal funds to pay the ACA insurance subsidies, and Obama care would implode.

Mnuchin: GSEs Won’t Stay ‘As-is’ for Long

  http://www.themreport.com/daily-dose/05-01-2017/mnuchin-gses-wont-stay-long

Fannie Mae and Freddie Mac should prepare for change—and sooner rather than later. According to Steven Mnuchin, the Trump administration won’t keep the status quo for long.

Mnuchin discussed the GSEs and housing reform in general as part of an interview with reporter Maria Bartiromo on Fox Business’ “Mornings with Maria” on Monday. Though he didn’t go into too much detail, he did say that privatizing the two Enterprises wasn’t necessarily the plan.

“I haven’t said they’d be privatized,” Mnuchin said. “What I have said is I’m committed to housing reform. We’re committed to not leaving them as-is for the next four years.”

The main goal of reforming the system? Mnuchin said its to keep housing affordable without putting American taxpayers in harm’s way.

“We want to make sure that there is ample credit for housing,” Mnuchin told Bartiromo. “It’s a very, very important part of the economy, but we also want to make sure we don’t put the taxpayers at risk. And as you know, those two companies only exist because we have a giant line from the Treasury that supports them.”

Mnuchin also talked briefly about a recent bill introduced by Kevin McCarthy in the House that aims to eliminate Fannie and Freddie’s exemption from the Freedom of Information Act. This Act, according to Bartiromo, allowed the Obama administration to reallocate GSE funds toward other parts of the government—including the Affordable Care Act—without public knowledge.

“They used the profits of Fannie and Freddie for other parts of the government, while they kept taxpayers at risk,” Mnuchin said.

Bartiromo and Mnuchin also covered the recently proposed tax plan, which aims to lower taxes on middle-income earners and businesses. To see the full interview, visit FoxBusiness.com.

The Trump administration has been making waves in the housing and financial services industries as of late. Two weeks ago, President Trump issued two executive orders, calling for a review of “too big to fail” as well as oversight of these organizations.

Mnuchin also came out in support of the Financial CHOICE Act last week, which is proposed as an alternative to the controversial Dodd-Frank Act.

GSE Bill would allow Homeowners to submit FOIAs to Fannie and Freddie while under Federal Conservatorship

By K.K. MacKinstry/LendingLies

Anyone who is trying to find out information about the trust ownership of their loan, knows that if Fannie Mae or Freddie Mac are involved- your research hits a stone wall.  Homeowners who have a mortgage not secured by the GSEs are better able to determine what trust their loan was allegedly assigned to.  The GSEs who operate as quasi-governmental agencies are still private companies but have been able to evade public disclosures by claiming to not be federal entities.

Under current law, the Freedom of Information Act does not apply to Fannie Mae and Freddie Mac because, while they are under federal conservatorship, they are not federal agencies.

The days of the GSEs hiding behind an ambiguous status may come to an end.   H.R. 1694 was introduced by Rep. Jason Chaffetz R-UT last week.     Under the proposed  bill, the GSEs would be required to accept and process FOIA requests from the public and release information to satisfy those request for as long as they remain under federal conservatorship.  This would allow homeowners in litigation and foreclosure to have access to trust information and other loan information.  You can be assured that the GSEs and private investors will fight all attempts to bring transparency to these opaque entities.

On March 28, 2017, the House Committee on Oversight and Government Reform requested a cost estimate from the Congressional Budget Office. The CBO estimated the bill would increase spending for Fannie, Freddie and the Federal Housing Finance Agency by $10 million over the 2018 to 2027 period. Revenues, however, would not be affected.

All the net costs would be covered by Fannie and Freddie because FHFA would assess the fees on the two entities to cover its costs.  Both Fannie and Freddie are profitable operations and the government has fought to relinquish federal conservatorship.  However, it can be predicted that Fannie and Freddie will attempt to revert back to publicly held companies rather than hide the fact that a majority of the loans it guarantees were never properly delivered to the trusts.

The increase in administrative costs wasn’t the only increase the Congressional Budget Office discovered. The office estimates that administrative costs would increase by $40 million in 2018 in order to research and administer FOIA requests.

This bill would only apply to the GSEs while they are under federal conservatorship, and the administration could have solidified plans for GSE reform. The Mortgage Bankers Association recently released its GSE reform suggestions that analyze suggestions for the best option for reform.  Therefore, if this legislation is passed we highly suggest that readers immediately send FOIA requests immediately by certified mail to obtain the name of the trust that allegedly holds your mortgage.

Steve Mnuchin, has already stated that GSE reform is a priority of this administration.  The MBA’s “Task Force for a Future Secondary Mortgage Market,” was created by big lenders and insurers in the industry, to offer a specific vision of the end-state of the GSEs, as well as transition steps to a post-GSE system.  Predictably,  the White Paper benefits the banks at the expense of the homeowner.

The paper breaks down specific areas for reform. It includes:

  • Maintain the liquidity and stability of the primary and secondary mortgage markets through the establishment of a resilient and robust housing finance system, throughout the transition process to the end state.
  • Replace the implied government guarantee of Fannie Mae and Freddie Mac with an explicit guarantee at the mortgage-backed security (MBS) level only, supported by a federal insurance fund with “appropriately” priced premiums (whatever that means).
  • “Protect” taxpayers by putting more private capital at risk through expanded front- and back-end “credit enhancements” (requiring that the government and tax payer pay for the guarantee).

The chart below is a snapshot from the white paper and gives a quick view of keys factors in the MBA’s GSE reform plans, comparing how the GSEs operated before and after conservatorship.

The paper emphasizes the need for affordable-housing as a political requirement for bipartisan GSE reform.  But in reality, the paper emphasizes the ability of the big lenders to step in for the GSEs and monopolize the profits, while having the federal government act as a guarantor only.

History demonstrates that big banks don’t do anything altruistic for homeowners and the plan would require a mandatory housing fee charged against the guarantors.  Therefore, the banks would receive all of the financial benefits while saddling the government and homeowner with the risk and expense.  It sounds like the type of plan the big banks would attempt to push on to an unsuspecting public.

It is likely that e-lending and e-documents would become the new standard so that the big banks can attempt to electronically manipulate a decade of defective loan documents through this system.  This is disguised under the “preserve infrastructure” clause.  The government and big banks have proven they are unable to administer responsible housing policies without resorting to fraud or protecting homeowners.

Homeowners and borrowers should vehemently oppose using big lenders that securitize loans or use e-signature loan products that can easily be manipulated and fabricated.  Do yourself a favor and bypass the big banks.  Credit unions, local banks and lenders that offer portfolio loans are an excellent alternative to having your loan backed by Fannie Mae or Freddie Mac.

 

 

Gretchen Morgenson Strikes Again: A Revolving Door Helps Big Banks’ Quiet Campaign to Muscle Out Fannie and Freddie

The charge began under Michael D. Berman, who has served not only as chairman of the Mortgage Bankers Association, one of the industry’s most influential lobbying organizations, but also as a senior adviser to Shaun Donovan, who was the secretary of Housing and Urban Development from 2009 to 2014.

Conversely, Mr. Berman recruited David H. Stevens — who was one of the lead architects of the Obama administration’s proposal to phase out Fannie and Freddie — to the mortgage bankers group, where Mr. Stevens is now president and chief executive.

Many in Congress believe Fannie and Freddie contributed to the collapse of the housing bubble, and they still rest on a shaky financial foundation, largely because of actions taken by the Treasury and the companies’ regulator.

In and Out of the Revolving Door

Moving back and forth between private practice and public service, several people had central roles inside the Obama administration in developing a new housing finance policy that would phase out Fannie Mae and Freddie Mac, the huge government-backed mortgage firms. After leaving office, three of these former officials, now with connections to various large financial institutions, met several times with government officials to discuss issues related to Fannie and Freddie.

For all the problems associated with Fannie and Freddie, some housing experts say, allowing the nation’s largest banks to assume greater control of the mortgage market would most likely increase costs for borrowers. It would also reduce participation and competition from smaller lenders, and could imperil taxpayers because of the potential for even greater bailouts for financial institutions that Washington considers too important to be allowed to fail.

Elise J. Bean is among those who are troubled by the quiet advances Wall Street is making toward Fannie and Freddie’s turf. A former chief counsel for the Senate Permanent Subcommittee on Investigations, Ms. Bean oversaw a bipartisan investigation into the causes of the financial crisis, playing a central role in the committee’s four hearings and helping produce a revealing 650-page report.

“Fannie and Freddie have their flaws, but that doesn’t mean the answer is to hand over their business to the banks,” Ms. Bean said. “Their role in the mortgage market is too important to put under the thumb of banks with a history of toxic mortgages, structured finance abuse and consumer maltreatment.”

Behind the Bailout

Decades ago, Fannie Mae and Freddie Mac were created by the government to provide prospective home buyers with financing in both good times and bad. Fannie was born in 1938 during the Depression, when bank lending dried up. The company didn’t make mortgage loans outright; it bought them from other entities. Later, it pooled loans in securities that it sold to investors.

If credit was scarce, the thinking went, banks would be more inclined to lend knowing they could sell a loan to Fannie or to Freddie, a competitor company created in 1970. A bank could then turn around and make another loan, earning fees while keeping the housing finance wheels spinning.

In addition to benefiting borrowers, this system enabled small community lenders to sell their loans to Fannie and Freddie as easily as even the biggest guns in banking. This gave borrowers a choice of lenders, encouraging competition and keeping costs down.

Although government creations, Fannie and Freddie also had public shareholders. Fannie sold shares for the first time in 1968 and Freddie followed suit two decades later. As the nation’s economy grew and homeownership expanded, Fannie and Freddie became increasingly powerful and profitable institutions.

The unusual hybrid of shareholder-owned companies carrying the government’s imprimatur worked well for a long time. But the combination turned sour in the 1990s when Fannie executives began using the company’s lush profits to finance lobbying efforts that enhanced their stature and independence in Washington.

Throughout these years, Fannie and Freddie’s mounting profits, generated in part by their special ties to the government, which put them at a financial advantage, also drew resentment from the nation’s largest banks.

Fannie’s success wound up being a double-edged sword. Its enfeebled overseer, the Office of Federal Housing Enterprise Oversight, allowed its enormous operations to rest on the tiniest sliver of capital, increasing profits during the fat years. But when the financial crisis hit, expected loan losses at both Fannie and Freddie overwhelmed the small amount of capital the companies had on hand.

About a week before Lehman Brothers collapsed in September 2008, the government stepped in. It put Fannie and Freddie into conservatorship under the Federal Housing Finance Agency, a new and stronger regulator created that summer in the Housing and Economic Recovery Act. The companies ultimately drew about $187.5 billion from taxpayers in the bailout. They were put on a tight leash by their government minders and were viewed as political poison by Democrats and Republicans alike.

In an interview on CNBC on Sept. 8, 2008, Henry M. Paulson, the Treasury secretary, talked about the government’s rescue of Fannie and Freddie as a steppingstone to a new housing finance system. “Heaven help us and our nation if we don’t figure out what the right structure is going forward,” he said.

Devising Alternatives

Photo

Michael Berman, former chairman of the Mortgage Bankers Association, has also worked at Housing and Urban Development. He recruited another government official to succeed him at the mortgage bankers group. Credit Ryan Stone for The New York Times

The ink was barely dry on the Fannie and Freddie bailout when the Mortgage Bankers Association got busy. Mr. Berman, then vice chairman of the lobbying group and founder of CWCapital, a commercial real estate lender and management firm specializing in multifamily housing projects, was tapped to organize a campaign to privatize the nation’s broken home mortgage system.

With the housing market in collapse and Fannie and Freddie weakened and reviled, it was the perfect time to push the mortgage bankers’ plan to take over the companies’ business and divide their prized assets.

But with banks’ popularity plummeting after the financial crisis, their proposal had to be carefully framed as a way to protect taxpayers from future bailouts.

When President Obama entered office in 2009, taking Fannie Mae and Freddie Mac off government life support was far down his administration’s to-do list. But when officials began turning their attention to the matter in 2010, the industry-sponsored coalition was ready.

Its answer was to create new mortgage guarantors, backed by private capital, to take the place of Fannie and Freddie. These entities would issue mortgage securities with government guarantees, a report issued by the 22-member Council on Ensuring Mortgage Liquidity in late summer 2009 proposed.

The White Paper

“The centerpiece of federal support for the secondary mortgage market should be a new line of mortgage-backed securities.”

The language in the Mortgage Bankers Association’s white paper about the future of housing finance.

The council, overseen by Mr. Berman, was made up of mostly large banks and mortgage insurers. It also recommended that assets belonging to Fannie and Freddie “be used as a foundation” by the new entities.

Chief among these assets were the mortgage underwriting systems the government-sponsored enterprises had built to bundle loans into securities to be sold to investors.

“The M.B.A.’s position literally was: Get rid of Fannie and Freddie and create these new entities,” Mr. Berman said in a recent interview. “But there were extraordinary amounts of value in the enterprises to be reused in different ways in the new system.”

Photo

Michael Berman, then chairman of the Mortgage Bankers Association, testifying in March 2011 before the Senate Banking Committee on the future of the housing finance system. Credit Scott J. Ferrell/Congressional Quarterly, via Getty Images

At first, the industry’s views gained little traction. The economy was in tatters, and lawmakers were not yet ready to tackle the nation’s enormous and complex housing finance system.

Besides, Fannie and Freddie were providing virtually the only access American borrowers had to mortgages during this period. Yes, they were still drawing money from taxpayers, but at least the companies were financing loans as they always had, while big banks were withdrawing from the market.

Throughout 2009 and 2010, Mr. Berman and his colleagues pitched the mortgage bankers’ ideas, saying that their plan would prevent the need for future bailouts and keep the home loan spigot open.

To access the remaining article please go here.

Fannie, Freddie Plunge After Court Rules Hedge Funds Can’t Sue

Editor’s Note: Although the hedge funds and investors can’t claw back lost profits, perhaps they can sue on the rampant fraud committed by the GSEs.
http://www.zerohedge.com/news/2017-02-21/fannie-freddie-plunge-after-court-rules-hedge-funds-cant-sue
Moments ago, the stocks of the nationalized GSEs – Fannies and Freddie – tumbled by over 30%, after a federal appeals court upheld a ruling that barred hedge funds from suing to overturn the U.S. government’s 2012 decision to capture billions of dollars in the profits generated by the mortgage guarantors Fannie Mae and Freddie Mac after their bailout.According to Bloomberg, which first reported the ruling, some Fannie Mae and Freddie Mac investors still have a shot at money damages, based on when they acquired their shares and whether they did so before or after the Federal Housing Finance Agency was created and then imposed its control over Fannie Mae and Freddie Mac. They can pursue breach of contract claims, the appeals panel said in a split 2-1 decision Tuesday.

“It’s a little too early for me to announce what our response will be other than to say what these breach of contract claims were always the central claims in this case,” said Hamish Hume, a Washington-based attorney with Boies Schiller Flexner LLP, who represented some of the prevailing shareholders.

In place since January 2013, the controversial net worth sweep allowed the U.S. to recapture all of the $187 billion in taxpayer money it spent to stave off the companies’ collapse during the global fiscal crisis and as of 2016, at least $56 billion more. All of that without reducing Treasury’s liquidation stake in either firm.

As Bloomberg adds, the court, which included two judges selected by Republican presidents and one picked by a Democrat, heard arguments on April 15. It later allowed additional friend-of-the-court briefs to be filed by allies on each side, solicited still more submissions concerning a jurisdictional question and permitted the investors’ filing of evidence produced in sweep-related cases pending before other courts. Their ruling may yet be subject to U.S. Supreme Court review.

The U.S. Treasury Department press office did not immediately reply to an e-mailed request for comment. David Thompson, an attorney for the suing Fairholme Funds Inc. did not immediately respond to a voice-mail message seeking comment.

The appellate decision follows Fannie Mae’s Nov. 3 report in which it said it made a $3.2 billion profit in the third quarter of 2016, the company’s 19th straight quarterly profit. Those profits were more than the $1.96 billion earned in the same quarter a year earlier. The company had said it would send $3 billion to the Treasury in December, bringing its total payments to $154.4 billion.

 

Two days earlier, the smaller Freddie Mac said it made a $2.3 billion profit during the third quarter of this year and would send the same amount to the U.S.

 

Sweep terms let the companies retain an annually diminishing capital buffer that phases out in 2018, meaning any losses later sustained will require one or both to draw on taxpayer funds.

Meanwhile, some prominent hedge funds investors – most notably Bill Ackman and Richard Perry –  have been actively pushing the government to revert to the GSE status quo, as existed prior to the 2008 bailouts, convinced it would unlock substantial stakeholder value. Today, however, that won’t be the case.

Fannie and Freddie Launch Flex Modification Program: No Paperwork Required in Some Cases

By the Lending Lies Team

Fannie Mae and Freddie Mac have launched a new loan modification program for troubled mortgages known as “Flex Modification.”  The GSE’s have an issue with rising defaults and questionable paperwork and the Flex Modification allows them to modify the underlying defective “loan” and gloss over the false endorsements, assignments and chain of title issues.  Brilliant!

The new flexible loss mitigation tool is a combination of the impotent HAMP,  the Standard Modification, and the Streamlined Modification, and will replace the trio as early as March 2017.

Loan servicers are beginning to implement the Flex Modification at that time, but will be required to participate starting October 1st, 2017.

The Home Affordable Modification Program (HAMP) expired at the end of December.

How the Flex Modification Works

It is obvious that Fannie and Freddie are attempting to lure as many homeowners in or near default inot the Flex Modification program.  Unlike the original HAMP modifications that required burdensome amounts of paperwork (that was intentionally lost), the required borrower documentation needed to get a loan modification under this new program is surprisingly minimal.

A major problem with HAMP was the complicated paperwork and long, drawn out processes.  Not to mention that loan servicers who had little incentive to modify a loan when they could foreclose, typically threw the homeowner’s application into the trash.

HAMP has been revised to make it easier for borrowers to get relief, and it appears those lessons have been applied to the new Flex Modification, at least in theory.  However, the reality is that a servicer who illegally forecloses on a home receives a financial windfall, compared to a paltry fee for modifying.

Fannie and Freddie claim that the Flex Modification will aim to lower monthly housing payments to help at-risk, delinquent borrowers avoid foreclosure.

Those who are less than 90 days behind on their mortgage must submit a Borrower Response Package (BRP) in order to be evaluated for a Flex Modification, which will target a 20% monthly payment reduction and a 40% Housing Expense-to-Income (HTI) Ratio.  Why such aggressive measures when the previous HAMP program would rarely reduce principal or monthly payments?  The GSE’s have always been hostile to homeowners wishing to modify preferring to foreclose.  Less than 40% of all applicants were given loan modifications.

Freddie Mac noted that a “high percentage” of those at least 60 days delinquent would be eligible, and in some cases it could also be an option for those who are current on the mortgage or less than 60 days late.

However, that latter group would need to occupy their homes in order to get relief.

For those more than 90+ days delinquent, the program targets the same 20% payment reduction, but requires no “borrower documentation.”

Likely this program will be used to grease the runways, as Timothy Geitner of the Fed admitted back in 2008 when HAMP was devised.   It appears that the GSEs know they have MAJOR issues with the underlying loans they guarantee and they are resorting to issuing modifications to wipe the slate clean.  I predict that there is language in the agreement that states the homeowner will not sue their servicer or the GSE’s once the loan is modified.  The GSEs, Fed and OCC are not benevolent entities- they are cold, calculating bankers where profit is all that matters.

In other words, they realize you’re in imminent danger of foreclosure and that they have major legal liabilities so they’re going to make it easy for you to get assistance.   Without knowing more about the program I can already tell it doesn’t pass the sniff test.

Perhaps this program will actually provide relief by lowering monthly mortgage payments.  It is likely that borrowers will be incentivized to hit the 90 day plus delinquent status to take advantage of the easier modification option also.  Not that it matters because the entire program appears to be created to “fix” loans that are damaged beyond repair.

It is interesting that many loan servicers are exiting the market while the GSEs are attempting to paper over their fraudulent history.  There are unseen forces in the background that are influencing change.  It appears that servicers and faux lenders are running scared or do they know something we don’t?

In any case, the program will also allow for principal forbearance to an 80% mark-to-market loan-to-value ratio (MTMLTV), but this amount must not exceed 30% of the unpaid principal balance.

Some key changes from the Standard Modification include:

• Housing-to-income ratio for borrowers less than 90 days delinquent changed from less than/equal to 55% to 40%
• No amortization choice for borrowers with an MTMLTV ratio of less than 80%
• Must now forbear principal down to a 100% MTMLTV ratio rather than the prior 115%

Flex Modification Eligibility

– Mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac (GSEs do not own loans)
– Must be 60 or more days delinquent unless owner-occupied and in imminent default
– Must submit a Borrower Response Package (will the servicer actually process the package when they have more incentive to foreclose than modify?)
– Must have an eligible hardship
– Must verify income
– Must have been originated 12 months prior to evaluation date
– Must target a 20% principal and interest payment reduction and 40% front-end DTI
*If 90 days+ delinquent, a Borrower Response Package is not required, and servicer is not required to confirm a borrower’s hardship or income.

Ineligible for Flex Modification

– FHA, VA, and USDA loans
– Mortgages subject to recourse
– Mortgages secured by second homes or investment properties less than 60 days late
– Mortgages that have been modified three or more times previously
– Mortgages approved for a short sale or deed-in-lieu
– Mortgages under a different modification program
– Mortgages that don’t make it through the trial period or aren’t brought current

Why the Banks Fabricate and Forge Documents

We all know that the banks committed wholesale fraud on the government, on investors, on the the court system and on borrowers. They fabricated documents, forged them, altered them, and even paid off employees of Government agencies to do things that in normal circumstances would never be tolerated.

The question is why did the banks go so far off the rails doing what they have done for millennia — making loans and documenting them? The answer is that they lied about the origination and the alleged “transfers” of servicing rights, of trustee rights, and of course the rights of their self proclaimed entities to own or enforce the “closing documents.”

The answer is that they didn’t just fabricate the paper; they also fabricated the illusion of transactions that never took place in the real world. In the real world the history of transactions was much different than what is set forth in the PR releases, government filings and pleadings in court. Every lie became another opportunity for those “support” companies that fabricated notes, mortgages, assignments, signatures, payment schedules etc.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

Here is Bill Paatalo’s follow up article on the Visionet system for fabricating signatures and entire documents.

======================

Remember Harvey Keitel’s “fixer” character in Pulp Fiction?  “I’m Winston Wolf. I solve problems.” He is a no-nonsense, hard character who treats his subjects with no emotion, lives for work, and prescribes a solution to an issue that most would see as self-evident.

In my recent article involving the document reproduction mill “Visionet Systems, Inc.” (See: http://bpinvestigativeagency.com/automated-affidavit-verifications-and-lost-note-reproductions-for-bank-vendors-its-standard-business-practice/), I investigate an assignment produced by Visionet in which MERS, as nominee for defunct Greenpoint,  purports to transfer the mortgage directly to the “New Residential Mortgage Loan Trust 2015-1.”

During my investigation, I located Moody’s rating for this trust from June 2015 which announced, New Residential Mortgage Loan Trust 2015-1 (NRMLT 2015-1) is a securitization of seasoned performing residential mortgage loans which the seller, NRZ Sponsor V LLC, will purchase on the closing date, in connection with the termination of various securitization trusts.” (See: https://www.moodys.com/research/Moodys-assigns-provisional-ratings-to-New-Residential-Mortgage-Loan-Trust–PR_327931).

So, here we have an admission (I’ll start by calling it “admission number one”) that loans going into this trust were previously securitized in “various securitization trusts” even though there is no documentation of any previous securitization transactions per the Visionet assignment, the Note, nor the county records for this particular property.

Here are some additional admissions within Moody’s announcement:

“Third-party Review and Reps & Warranties

American Mortgage Consultants (AMC), conducted a compliance and data integrity review on a random sample of 367 loans from the pool. The regulatory compliance review consisted of a review of compliance with Section 32/HOEPA, Federal Truth in Lending Act/Regulation Z (TILA), the Real Estate Settlement Protection Act/Regulation X (TILA), and federal, state and local anti-predatory regulations. AMC ordered HDI values on all loans in the securitization in addition to an updated broker price opinions (BPOs) on 336 properties, from Clear Capital.

Upon the review of 367 loans, AMC found that 202 loans have exceptions. The majority of these exceptions were due to missing HUD and/or TIL documents, under disclosed finance charge, or missing right to cancel disclosures. 19 loans had missing original loan files. For the loans where the HUD documents, TIL documents and/or the original loan files are missing, AMC was unable to complete the testing. Although the TPR report indicated that the statute of limitations for many of these issues already passed, borrowers can still raise these legal claims in defense against foreclosure as a set off or recoupment and win damages that can reduce the amount of the foreclosure proceeds. In addition, some of these missing documents could prevent or materially delay activities such as foreclosure, loss mitigation and processing title claim under the related title insurance policy.

The seller, NRZ Sponsor V LLC, is providing a representation and warranty for mortgage files. In this R&W, and to the extent that the indenture trustee, the master servicer, the servicer, the depositor or the custodian has actual knowledge of a defective or missing mortgage loan document or a breach of a representation or warranty regarding the completeness of the mortgage file or the accuracy of the Mortgage Loan documents, and such missing document, defect or breach is preventing or materially delaying the (a) realization against the related mortgaged property through foreclosure or similar loss mitigation activity or (b) processing of any title claim under the related title insurance policy, the party with such actual knowledge will give written notice of such breach, defect or missing document, as applicable, to the seller, the indenture trustee, the depositor, the master servicer, the servicer and the custodian. Upon notification of a missing or defective mortgage loan file, the seller will have 120 days from the date it receives such notification to deliver such missing document or otherwise cure such defect or breach. If it is unable to do so, it will be obligated to replace or repurchase the mortgage loan. In our analysis we assumed that 10% of the projected default will have missing documents’ breaches that will not be remedied and result in higher than expected loss severity.”

Admission number two reveals that a compliance review exposed that nearly 55% of the loans being re-securitized had regulatory and compliance issues, including missing loan files. Moody’s seems to downplay these issues due to its belief that the statute of limitations for all this chicanery has likely run its course. But then we have admission number three – 10% of the projected default will have missing documents’ breaches that will not be remedied and result in higher than expected loss severity.”

“Will not be remedied?” Time to call in the “fixer.”

So, I looked to see who is behind “NRZ Sponsor V, LLC;” the entity providing the representations and warranties for the files. Lo and behold, it’s none other than “New Residential Investment Corp.” and its CEO/President – Michael Neirenberg. (See 10-Q: https://www.sec.gov/Archives/edgar/data/1556593/000155659315000011/nrz-2015630x10xq.htm#s262E0972E7E05C46ADEB9296D5C183F9).

From this Deadly Clear article,

(https://deadlyclear.wordpress.com/2013/08/05/where-are-bear-stearns-mortgage-executives-now/)

“Four of the executives, Thomas Marano, Jeffrey Verschleiser, Michael Nierenberg and Jeffrey Mayer, have been accused of making false statements in disclosures to federal regulators in a lawsuit brought by the Federal Housing Finance Agency, which oversees government-owned mortgage giants Fannie Mae and Freddie Mac.  They are among dozens of people and companies named in the lawsuit. [Click here for Complaint]

All four denied all the allegations in a 179-page response to the lawsuit.

The four “deny that the offering documents referenced contained material misstatements of fact or omissions of material facts,” according to the answer jointly filed by the Bear Stearns companies and the individual defendants from Bear.”

This is the guy who is going to vouch for the loan files? Yes, because his disclosures in the 10-Q state he is required to make these reps and warranties to appease his financing facilities, even though ultimately, the reps and warranties could be deemed inaccurate.

Per the 10-Q:

“Our borrowings collateralized by loans require that we make certain representations and warranties that, if determined to be inaccurate, could require us to repurchase loans or cover losses.

Our financing facilities require us to make certain representations and warranties regarding the loans that collateralize the borrowings. Although we perform due diligence on the loans that we acquire, certain representations and warranties that we make in respect of such loans may ultimately be determined to be inaccurate. In the event of a breach of a representation or warranty, we may be required to repurchase affected loans, make indemnification payments to certain indemnified parties or address any claims associated with such breach. Further, we may have limited or no recourse against the seller from whom we purchased the loans. Such recourse may be limited due to a variety of factors, including the absence of a representation or warranty from the seller corresponding to the representation provided by us or the contractual expiration thereof.”

Does anyone really believe that NRZ would repurchase these “hot potatoes” or cover losses on them? Time to call in the “fixer.”

So, here we have admission number five. NRZ will be making representations and warranties regarding loans it purchased from Sellers, who may not have had any documentation of the loans it was selling to NRZ.

This sounds like a “Fencing Operation.”

“A fence or receiver is an individual who knowingly buys stolen property for later resale, sometimes in a legitimate market. The fence thus acts as a middleman between thieves and the eventual buyers of stolen goods who may not be aware that the goods are stolen.”

So, where did NRZ buy this assigned loan, as well as all the others? Again, per the 10-Q:

“Representations and warranties made by us in our loan sale agreements may subject us to liability.

In March 2015, HLSS sold reperforming loans to an unrelated third party and transferred mortgages into a trust in exchange for cash. [THIRD-PARTY WHO? WHAT TRUST?] We may be liable to purchasers under the related sale agreement for any breaches of representations and warranties made by HLSS at the time the applicable loans are sold. Such representations and warranties may include, but are not limited to, issues such as the validity of the lien; the absence of delinquent taxes or other liens; the loans compliance with all local, state and federal laws and the delivery of all documents required to perfect title to the lien. If the purchaser is successful in asserting their claim for recourse, it could adversely affect the availability of financing under loan financing facilities or otherwise adversely impact our results of operations and liquidity. From time to time we sell residential mortgage loans pursuant to loan sale agreements. The risks describe in this paragraph relate to any such sale as well.”

Ah yes, HLSS and Bill Erbey. Need I say more?

(www.thedealnewsroom.tumblr.com/post/…/fortress-exploited-a-cayman-islands-loophole-)

“HLSS struck the deal under severe pressure from regulators, lenders, investors, and ratings agencies. A Dec. 19 settlement between Ocwen and the New York Department of Financial Services (NYDFS) had upset a delicate ecosystem of five interrelated companies including Ocwen, HLSS, Altisource Portfolio Solutions (ASPS), Altisource Residential (RESI) and Altisource Asset Management (AAMC) Bill Erbey, Chairman and de facto leader of all five companies, was forced to resign from those positions. The California Department of Business Oversight was threatening to suspend Ocwen’s license in that state. That put pressure on HLSS because its business and Ocwen’s were so closely interrelated.”

This is a cesspool. When it comes to chain of title, it all sounds like a line from SpongeBob Squarepants:

“I knew this guy, who knew this guy, who knew this guy, who knew this guy, who knew this guy, who knew this guy, who knew this guy, who knew this guy, who knew this guy’s COUSIN….”

One thing is crystal clear from all of this. The chain of title is so corrupted and fatally defective for these loans that it would be virtually impossible to legally prove ownership in a foreclosure action without first calling in a “fixer” such as Visionet Systems, Inc. to create the illusionary paper trail.

It is also crystal clear that at least 1 out of every 10 foreclosures being brought by the servicer for “New Residential Mortgage Loan Trust 2015-1” will contain counterfeit documents, to which there will be a servicer witness raising his/her right hand, and swearing that this trust owns the loan and holds the “Original Note.”

 

Bill Paatalo – Private Investigator – OR PSID#49411

Bill.bpia@gmail.com

 

Mnuchin as Treasury Secretary: Lackey for the TBTF Banks

Mnuchin was and remains “the guy between the guys.” Billed as the organizer of OneWest his role was to provide a layer between the founders and the rest of the world. His prospective appointment As Secretary of the US Treasury means that the TBTF banks would have a lackey to do what the banks wanted the US Treasury to do.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-
 *
It is reported that OneWest foreclosed on 40,000 homes. I have already described to you that Foreclosures sponsored or initiated by OneWest were very often done in the name of another entity. For example, Fannie Mae or Freddie Mac. Those are not counted in the number of homes foreclosed by OneWest. My experience is that the number of homes foreclosed where OneWest was the party “pulling the strings” (not entirely accurate since control was centralized far from OneWest) is at least equal to the number reported for foreclosure cases in which OneWest was the foreclosing party.
 *
The average “originated” principal amount of debt in which a homeowner received financial benefit from a direct receipt of funds or funds paid out on behalf of the homeowners to pay off an old “loan” or to pay the seller is reported as an average of $225,000.
The rest is arithmetic. If you multiply the number of foreclosures reported (40,000) times the principal amount of debt that a rose from the origination of transactions with homeowners on refi or prospective homeowners who were buying ($225,000) then you get a total of $9,000,000,000.
 *
If you look at the deal between the FDIC, the US Bankruptcy Trustee for IndyMac, and OneWest, you will not find $9 billion in consideration for the purchase of loans by OneWest from the IndyMac estate. Both the FDIC and the US Bankruptcy Trustee were under a duty to maximize the return to creditors. They did not receive $9 billion for sold loans because there were no loans to sell. OneWest principals merely put up or promised to commit around $1-$2 Billion in capital to qualify as a bank and to take over the service contracts and brick and mortar locations of IndyMac. This is nearly identical to the Chase-WAMU deal.
 *
But there is more: under a very lucrative loss sharing agreement with the FDIC, OneWest submitted claims to the FDIC to cover 80% of the alleged losses on nonperforming loans and then, after getting paid, proceeded to foreclose for the whole amount. 
 *
There is no evidence of any particular loan or pool of loans being sold to OneWest for any consideration that traveled from OneWest to either the FDIC as receiver or the US Bankruptcy trustee for the state of IndyMac. Yet OneWest followed the industry practice of stepping AS THOUGH they were the creditor, claiming they were the holder of negotiable paper because the real creditors — investors who advanced money as though they were buying real MBS (which were bogus securities issued by a nonexistent entity that never did any business) — were unaware of the status of their claim against the REMIC Trusts that were ostensibly purchasing loan portfolios but lacked the funding to do so because the Trusts never received the proceeds of sale of the MBS. 
 *
Second, OneWest did not actually have any business records. They are all  fabricated or outsourced (or both) to a subdivision of several different “servicing” entities that are directed by LPS/Blacknight. LPS is tasked with (1) selecting the Plaintiff or beneficiary of a foreclosure (2) collecting and creating records (3) fabrications and forgeries (and robosigning) of assignments, endorsements etc.
 *
Bottom Line: OneWest foreclosed on loans in which it was neither the owner nor the servicer. While it acquired servicing rights from IndyMac, the real servicers were selected by “Master Servicers” (underwriters/TBTF Banks) of the nonexistent trusts. So while IndyMac theoretically had servicing rights for the most part the actual job of servicing was done elsewhere, under the watchful eye of LPS. Thus when OneWest acquired the IndyMac servicing “business” it was in a actuality acquiring nothing.
 *
Thus approximately $9 billion in foreclosures, as reported in the media resulted in windfall profits to OneWest of a percentage of the liquidated properties, estimated total at around $6 billion, around two thirds of which $6 billion) was given to the “Master Servicers” as “recovery” of “servicer advances” (which neither came from the servicers nor were they advances as the payments were taken from dynamic dark pools consisting mostly of investor money), netting $2 Billion to OneWest plus “servicing fees” despite the fact that they performed very little or no servicing.
 *
The organizers of OneWest were billionaires that went into it on the premise and promise that they would make a few billion dollars, although they were never entirely clear on where the profits were coming from. OneWest was then sold after the windfall the profit projections slumped because there were practically no more alleged IndyMac originated “loans” to foreclose. The PR spin was that they were getting out because their temporary agreement to operate OneWest was expiring. But the real reason was that there was nothing left to plunder and the founders were getting increasingly uncomfortable about where the money was coming from. OneWest could have easily slipped into the roles occupied by Ocwen, SPS, Bayview et al etc and “acquired” more loans in Re-REMIC deals, but the founders wanted no part of it.
 *
Homeowners lost their homes on the premise that they thought they had a legitimate loan from a legitimate lender. But IndyMac was originating loans under pre-sale agreements that were effective BEFORE even the applications for loans were received. The Purchase and Assumption Agreement provided that the actual lender’s identity would be withheld from the borrower (a direct violation of TILA). The money for the funding of the alleged loan transactions came from the dark pools, the constituents of which were robbed of their right to the notes and mortgages. The irony is that the counterparty to IndyMac’s Purchase and Assumption Agreements were mere conduits and in many cases sham conduits.
 *
Mnuchin was and remains “the guy between the guys.” Billed as the organizer of OneWest his role was to provide a layer between the founders and the rest of the world. His prospective appointment As Secretary of the US Treasury means that the TBTF banks would have a lackey to do what the banks wanted the US Treasury to do. This greases the wheels of false securitization. The banks have never stopped in their “perfect” crime wave and are if anything speeding up with false and sometimes true claims of securitization of just about anything — including “servicer advances.” That adds insult to injury in that they are using their scheme of theft from investors and selling rights to participate in the scheme to investors. In the end, it is simply a scheme to use other people’s money and then step into their shoes without them knowing it.

Pinning Them Down on Musical Chairs

In the final analysis there is nothing about the business model that makes sense. Switching servicers and owners is simply not the norm of the industry except in relation to cases in foreclosure. It only makes sense if you assume that they are hiding the truth.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-
So I just responded to a homeowner who, with a little help from us, sent out a QWR and DVL and received a response that was quite revealing.  The homeowner was dealing with the usual chorus line of ever-changing servicers and alleged “lenders” (pretender lenders).
 *
After YEARS of denying that anyone other than BOA owned the loan they now admit that they are now asserting that Freddie Mac owns the loan, although, despite the QWR and DVL letters, they have never produced a single document that shows that.
 *
And after years of denying the involvement, Bayview makes the singular uncomfortable admission that LPS/Blacknight in Jacksonville maintains the system of records for Bayview (along with most everyone else in the “securitization” scheme). I say that means LPS is the servicer. If that opinion is right, then LPS is the servicer for virtually every loan made in the last 15 years. [Remember this is the company who published a menu of services that included the fabrication and forgery of documents]
 *
What they don’t say is that LPS (now known as Blacknight) maintained everything from the beginning because the loan didn’t legally exist nor was it ever purchased or acquired by anyone. The debt was and remains owing to institutional investors who don’t know they are owed money from the party who received their money. Neither the creditor nor the debtor know of each other’s identity or existence.
 *
So here are some of my responses to the array of documents sent to the homeowner leading one to the inevitable conclusion that they are intended merely to confuse and obfuscate.
  1. Freddie Mac is the owner. When did it become the owner?
  2. Did Freddie Mac approve the modification?
  3. Does Bayview have the right to commit to modification? ON behalf of whom did Bayview approve the modification? Who is bound by the modification agreement?
  4. Servicing changed from BAC—>BOA effective 7/11/11. BAC was the new name of Countrywide. So when did Countrywide get involved and how?
  5. When was servicing changed from BOA (the original pretender lender) to BAC or Countrywide?
  6. Servicing changed from BOA—>Bayview 8/1/15. It would be interesting to learn what other events may have prompted this change of servicer.
  7. What documents exist showing BOA right to service the loan?
  8. What documents exist showing Countrywide right to service the loan?
  9. What documents exist showing BAC right to service the loan?
  10. What documents exist showing Bayview right to service the loan.
  11. Request copies of servicing agreement.
  12. Who was the owner of the loan when the loan was first originated?
  13. Who was the owner of the loan when the servicing of the loan was transferred to Countrywide?
  14. Who was the owner of the loan when the servicing of the loan was transferred to BAC?
  15. Who was the owner of the loan when the servicing of the loan was transferred back to BOA?
  16. Who was the owner of the loan when the servicing of the loan was transferred to Bayview?
  17. Why was I not notified that Freddie Mac has become the owner of the loan? [Suggest letter to Freddie Mac asking if they are the owner and if they are aware there is a modification.]
  18. LPS/Blacknight: I am surprised they admitted it. So the question to them would be (a) are all records concerning my loan maintained by Blacknight and (b) is Blacknight actually my servicer? — Since Bayview says Blacknight has the records you could write to Blacknight and ask where your records are kept and who has access to them.
  19. The other question is if LPS/Blacknight maintains the system of records, what does Bayview do?
  20. 11/22/16 statement was prepared by Blacknight? where did they get information from? If there is a credit balance shouldn’t you get the money?
  21. If Freddie Mac is the owner then why did Bayview sign the acknowledgment as lender?
  22. If Bayview is the servicer why doesn’t the acknowledgment say that they are signing on behalf of FreddieMac, the owner?
  23. If Freddie Mac is the owner, why does the modification not state that and why does Bayview sign as and have you sign “in witness whereof, lender and Borrower have executed this agreement.”
  24. Since the modification has supposedly been completed, why hasn’t Freddie Mac or its authorized agent sent a correction to the credit bureaus — with the foreclosure dismissed?

Freddie Mac Selling Toxic Loans: Do they really own those loans?

The resulting case law is opening up Pandora’s box as the law of these foreclosure cases spills over into hundreds of other situations.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

see http://4closurefraud.org/2016/10/05/freddie-mac-sells-1-billion-of-seriously-delinquent-loans/

So I have two questions that should be sufficiently annoying to the banksters: (1) what makes Freddie think it owns the loans? and (2) if the loans are in default doesn’t that make the notes non-negotiable paper?

As to the first, my guess is that Freddie paid somebody something. What they used as currency was MBS issued by private label trusts. The MBS were worthless because they were issued by an unfunded paper trust. Freddie paid somebody using those bonds. But that somebody didn’t own the loans because the money had already been advanced by ANOTHER party (the investors) under a false deposit scheme with the investment/commercial banks.

*

So the debt was at all times owned by an unidentified and perhaps unidentifiable  group of investors/victims who to this day may not know that their money was hijacked to make toxic loans. That makes any sale or assignment to anyone void, including Freddie Mac. And whoever is getting paper executed by Freddie Mac is getting exactly what Freddie owns: NOTHING.

*

As to the second, if the loans in default are not negotiable paper, then the presumptions attendant to negotiable paper under Article 3 of the UCC do not apply. And if THAT is the case, the party in possession is not a holder, not a holder in due course and possibly not a possessor with rights to enforce. They would need to prove that they paid for the “loan” and they would need to show that there was a loan [not just from anyone. It must be an actual loan of money from the party identified as Payee on the note]. They would need to show that they not only bought the note but they also bought the debt.

As it turns out the note and the debt are owned by two different parties. The debt normally merges into the note so that when someone signs it they don’t have two liabilities. But what if the debt was owned by a third party at the time the maker signed the note? Assuming the maker did not know that a third party was involved, the maker is back in the position of two debts — the very problem that the merger rule was intended to prevent.

*

So far the courts have endeavored to deal with this tricky problem by pretending it does not exist. The resulting case law is opening up Pandora’s box as the law of these foreclosure cases spills over into hundreds of other situations.

 

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