Foreclosures: The Lie We Are Living

Most people, including homeowners, believe that the homeowners do owe the money and that the entities that are attempting to foreclose should win. That is why the free house myth is so pervasive.

The result is that foreclosures are being granted to entities that (a) do not exist or (b) have nothing to do with the loan, debt, note or mortgage or both. The benefits of foreclosure all run in favor of the megabanks and against the real parties in interest, the investors. These banks have managed to separate the debt from the paperwork in a highly effective way that can be, but usually isn’t, challenged on cross examination and well-founded objections.

The truth is that the homeowners do not owe any money to the people who are collecting or enforcing the loan. End of story. The rest is a lie.

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.

I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM. A few hundred dollars well spent is worth a lifetime of financial ruin.

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

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

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see tps-third-party-strangers-in-mortgage-cases/

One of my favorite lawyers is getting discouraged. He says that it is virtually impossible for a homeowner to successfully defend a foreclosure action especially if it involves a blank endorsement (bearer paper). Foreclosure defense is indeed an uphill battle but it is one in which the homeowner can — and should — prevail.

I don’t agree with the premise that homeowners will and should lose foreclosure cases. I think most of the foreclosures are built on an illusion created and fabricated by the megabanks. I think we would have won the cases we won even without the standing issue, with or without blank or special indorsements.

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The compounding error that keeps recurring is the difference between enforcement of the note and enforcement of the mortgage. You can enforce the note without owning the debt but you can’t enforce the mortgage without owning the debt. But in court they are conflated because few people draw the distinction.
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Possession of bearer paper (the note) raises a presumption that the debt was transferred. But that is a rebuttable presumption and proof at trial should be required as to the transfer (purchase) of the debt for value. But if the debt was actually transferred that would mean it was purchased for value. And if it was purchased for value then any transferee with half a brain would assert status of a holder in due course. They don’t assert HDC status because they didn’t pay value for the debt because the debt was never transferred and the fictitious delivery of the original note was intended to deceive the homeowner, his/her lawyer and the court.
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If a trust is involved, the existence of the trust should be pled and proven. Nobody is raising that issue even though it is a winner.
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It is an uphill battle and many judges will disregard the appropriate arguments because they don’t see or don’t want to see the consequences of their assumptions and bias.
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As a result we have a name being used as a DBA by multiple layers of conduits that don’t lead back to the actual owner of the debt. Homeowners did not create this problem nor should they suffer the consequences of bank chicanery. Banks did it because the big lie was extremely overwhelmingly and pornographically profitable. Banks have already made windfall profits on the loan whether the borrower pays or not. They then get an extra windfall by foreclosing because they can. At the same time the foreclosure sale raises yet another false presumption that everything that went before the sale was valid and authorized.
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This all happens under the cover of why should homeowners get a windfall free house? Most people don’t believe that the banks are getting a windfall for an investment that has been paid off multiple times. They believe the lie that the homeowner’s debt is still out there and belongs to someone who ultimately is connected to the entities that seek foreclosure or collection. It is a lie. Windfall results are more common than most people realize. It frequently happens that one litigant, because of a decision or the wording some legislation will get a windfall. In many cases the question is which party should get the windfall?
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The real question is who should get the windfall that has been created by the banks? Should it be the banks who have already profited in multiples of the loan amount or the homeowner whose signature and credit reputation was used as the foundation for the multiple sales of his loan? On a level playing field, the courts ought to tilt toward the homeowners who have mostly been lured into loans based upon wildly false appraisals on terms that they could not afford — and remember that under law the affordability of the loan is the responsibility of the lender, not the borrower.
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Finding excuses to rule in favor of a foreclosing party that usually doesn’t even exist much less own the debt, note and mortgage is simply the wrong way to go. This is not a matter of policy for the legislature although the legislatures could intervene. It is a matter of equity and foreclosures are in a court of equity not at law. The party who caused the mess and who brought the country to its knees should not be the party who is rewarded with a foreclosure to cover a nonexisting loss.
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If the investors were included I could see why both investors and homeowners would be considered victims and how the court could rule in favor of the investors. But the investors are decidedly NOT involved. They are unaffected by foreclosure of the loans because in reality they have only received a promise to pay from one of the megabanks doing business as “XYZ Trust”. They are completely uninformed about the debt or its enforcement and do not get the proceeds of a foreclosure sale.
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The underwriting is done by the megabank but the loan comes from investors who believe they are investing in a trust when in fact they are merely making a deposit with the underwriting investment bank.
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The whole reason why these banks were converted from investment banks to commercial banks over a weekend was not just to gain access to the Fed window to sell worthless mortgage bonds. It was because they had already been acting as though they were commercial banks by taking money from investors and merely starting an “account” for each of the investors wherein the only party who could draw money out of it was the “bank.”
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So after our experience in the courts, it is unfair to homeowners and unfair to us as the attorneys who made it happen, to say that it is impossible for homeowners to win foreclosure cases. Good cross examination, and trial practice including the use of well-founded objections still wins the day more often than not. 

How to Deal with the “Free House” Bias

If you are dealing with a bias held by most judges the only effective way of dealing with it is to meet the challenge head-on. If you dance around it it looks like you are trying to “get off on a technicality.”

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.

I provide advice and consent to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM. A few hundred dollars well spent is worth a lifetime of financial ruin.

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORMWITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

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

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A client asked me this morning about he “free house” bias and whether that will interfere with the decisions and ruling of the court. The answer is “of course it does.” And I again raise the issue that nobody wants to talk about — whether it is right or proper to voir dire the judge not just for bias, but for prejudgment decision before the case started. Here is the response I sent:

The answer to your “free house” question is this: You are correct in identifying that problem. We always start with presumption that the presiding judge will carry that bias with him/her into the courtroom.
However, as I have repeatedly found, once you pierce the foreclosure case, the credibility of the would-be foreclosing party declines to the point where the biased judge will ordinarily rule in favor of the homeowner — faced with inescapable legal defects in the position and assertions made by parties without standing.
But there are exceptions — judges who, in addition to having bias, have already ruled in their minds. For them the proceedings are a sham requirement and a test to see if the judge can APPEAR fair and impartial.
Countering the “free house” mindset first requires a demonstration that the homeowner is well aware that he can neither seek nor get a free house. That requires a presentation that concedes the fact that even if the note and mortgage were completely void, the debt remains and a judgment on that debt will result in a  judgment lien that could be foreclosed by the owner of that debt. That “concession” take the angst out of the “free house” conundrum for the judge and will often be an effective predicate to establishing the primary defense narrative.
So the question is not whether the homeowner will get a free house; it is whether this party seeking to foreclose title and take possession of this home has any right to do so. To say otherwise would be an invitation for anyone to fabricate documentation and foreclose, especially in cases where the homeowner concedes, relying upon false documentation of a false party. That scenario I have seen multiple times where the foreclosure is complete, the homeowner has moved out and basically forgotten about the house. The homeowner is later served with process or given notice that the house was foreclosed AGAIN by a different party.

Challenging the “Free House” Myth

Unless you are banker stealing homes through the fraudulent abuse of the foreclosure process there is no free house.

It is not rationale nor legal for anyone to tell a homeowner that because he or she cannot identify the source of funds for their “loan” the creditor MUST be in the chain of the party making the claim. It isn’t the fault of the homeowner that the paperwork was used to cover up fraud or negligence.

But every time a homeowner wins they do not necessarily get a free house nor exoneration from the debt that is owed to SOMEBODY even if they don’t know who it is.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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The bar remains high and we all know it. The court is not going to hand down a decision for the “borrower” unless there is something plainly wrong about it. In order to be plainly wrong, we need some narrative that puts the court back on its heels and to directly challenge the notions that a victory for Flaherty means that he gets a free house. The banks have stepped up their “free house” mythology in light of the Supreme Court decision in Florida.

The challenge here is to to present the case in a manner that makes the “free house” myth irrelevant and to do it in a compelling presentation. While the easiest way of doing that would be to allege simply that this is a fraudulent scheme, we can’t prove that without adequate responses to discovery. But the Courts are allowing the banks to skate through without responding to discovery even when the allegations clearly make the scheme an issue.

This is why the banks file motions to strike OR simply argue that the homeowner’s pleadings don’t state a case or defense.

So we are left with the consequences of the scheme. But that leaves fertile ground for many approaches. The focus should be on procedural aspects and away from “winning” the case on motions. The object is to win the pending motion on the grounds that due process demands it. The trick here is to find a way to ask the judge “What if all this is an illusion?” without asking it in those words. That is an uphill climb.

We cannot ignore the fact that the bench is biased in favor of the banks. Their presumption that the homeowner received a loan and should be required to pay it back or lose his home permeates everything. The greater hurdle is that their presumption comes from an era when those things were axiomatically true before Wall Street started with this scheme. And now everything is being subjected to claims of “securitization.” Even cell phone payments. “Securitization” has been institutionalized based upon a false foundation, but in theory there is nothing wrong with it.

The money trail remains the primary path toward victory for the homeowner. But it is true that there are certain aspects of the money trail that are none of your business when defending the homeowner. The fact that the banks defrauded investors and stole their money is compelling proof, once established, that the trusts were never funded and thus never purchased the loans. It also suggests but does not prove where the money came from for the “loan closing.” It came from a dark pool formed by the banks and consisting of the stolen money.

Knowing that, rather than proving that, is key to establishing the narrative. And now there are instances in which the “new” REMIC Trust actually does pay for the paper even though the Seller never owned the debt and the paper was based upon a fictitious transaction in which the Payee on the note never loaned any money — leading to the conclusion that the debt was never merged into the note; but this also leads to the conclusion that the risk shifts to the maker of the note when the note is purchased for value, in good faith and without knowledge of the borrower’s defenses. The new Purchaser” who really paid consideration (assuming they REALLY paid) could conceivably be a holder in due course. The focus then shifts to showing that there was no good faith and that there was complete knowledge of the borrower’s defenses on the part of the purchaser.

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Knowing that the parties making the claim have no legal basis for doing so and no monetary reason for doing so — because the source of funds were victims of fraud — allows the litigator to focus on the factual and legal consequences. But the art form required here is to do that without making it look like you are allowing the homeowner to slip away from the debt. Getting there means getting past preliminary motions and aggressively pursuing discovery (unless you think that the bank’s case is defective enough such that it would be better to wait until trial to defend).

Yale Law Review: “In Defense of “Free Houses”

MEGAN WACHSPRESS, JESSIE AGATSTEIN & CHRISTIAN MOTT published an article that takes dead aim at the “free house” controversy. In the Yale Law Review they come to the conclusion that (1) the house isn’t free to any homeowner even if they escape the mortgage and (2) the projected social cost of  market values are wrong. But probably the most stinging criticism of the judicial system is that judges are abandoning the rule of law for ad hoc rulings whose only purpose is to avoid a result the judge doesn’t like.

Unfortunately, the article does not fully address the issue of why the banks are failing to prove what is ordinarily a slam dunk case. The authors seem to assume that the debt is legitimate and that it is mainly a paperwork problem. I would add my usual comment: if the banks simply had continued with the standard procedures they would not have had any paperwork problems no matter how many times the loan was sold. The greater evil that is not addressed in case decisions and law review articles is that this was all part of fraudulent scheme and THAT is why the banks had to resort to more fraud (in documentation).

We should remember that banks basically drafted the statutes and are the source of all paperwork on consumer loans, especially mortgage loans. For hundreds of years they knew how to do it, knew how to keep it and rarely misplaced anything. It strains belief to think that suddenly the banks  forgot what took hundreds of years to develop. The more insidious reason is what is feared to be the nuclear option — that the mortgages, notes and loan contracts were all an illusion, even if the money was real.

In the end, for reasons other than those expressed on these pages, the authors come to the same conclusion that I did — the “free house” is going to the banks every time a foreclosure is granted.

Here are some quotes from their article that I think are self-explanatory.

When addressing faulty foreclosures, courts are afraid to bar future attempts to foreclose—that is, afraid of giving borrowers “free houses.” While courts rarely explain the reasoning behind this aversion, it seems to arise from a reflexive belief that such an outcome would be unjust. Courts are therefore quick to sidestep well-established principles of res judicata in favor of ad hoc measures meant to protect banks against the specter of “free houses.” [e.s.]

This Comment argues that this approach is misguided; courts should issue final judgments in favor of homeowners in cases where banks fail to prove the elements required for foreclosure. Furthermore, these judgments should have res judicata effect—thus giving homeowners “free houses.” This approach has several benefits: it is consistent with longstanding res judicata principles in other forms of civil litigation, it provides a necessary market-correcting incentive to promote greater responsibility among foreclosure litigators, and it alleviates the tremendous costs of successive foreclosure proceedings.

In a foreclosure suit, the bank must generally prove the following: (1) the homeowner has signed both the note (the underlying loan) and the mortgage assigning the house as collateral for that note; (2) the bank owns the note and mortgage; (3) the homeowner still owes a debt to the bank; (4) the homeowner is behind on that debt; and (5) the bank has accelerated that remaining debt in accordance with the terms of the note itself. When a bank fails to prove these elements, a judge is legally required to rule in favor of the homeowner.

Recently, courts have been inundated with suits where homeowners question the bank’s ability to prove the second element. Litigation over “proof- of-ownership” issues in foreclosures is a growing nationwide problem; sampling suggests a ten-fold increase between the periods immediately preceding and following the 2007 collapse of the housing market.

To demonstrate ownership without expending more resources than pooling and servicing agreements allotted, bank employees signed hundreds of thousands of affidavits asserting that they had seen and could attest to the contents of original documents demonstrating ownership of the underlying mortgage. Although such affidavits were a legally acceptable means of demonstrating such ownership, a significant number of them were actually fraudulent.

…ethical transgressions have affected hundreds of thousands of foreclosures.

Judge Schack, a trial judge sitting in the New York Supreme Court for Kings County, has repeatedly sanctioned law firms for bringing improper foreclosure suits when he has independently discovered the inadequacy of the plaintiffs’ evidence as to defendants’ indebtedness or plaintiffs’ ownership of the note. See, e.g., Argent Mortg. Co. v. Maitland, 958 N.Y.S.2d 306 (Sup. Ct. 2010); Wells Fargo Bank v. Hunte, 910 N.Y.S.2d 409 (Sup. Ct. 2010); NetBank v. Vaughn, 841 N.Y.S.2d 827 (Sup. Ct. 2007).

By focusing on the immediate consequence of a ruling for homeowners, the courts ignore perverse incentives created by allowing banks to continue to externalize the costs of their mistakes.

…one approach—that taken by the Florida and Maine Supreme Courts—is to bend the rules of res judicata to avoid a windfall for homeowners. This approach creates few benefits and significant economic problems. In this Part, we argue that further subsidizing banks’ poor litigation practices results in deadweight loss by contributing to negative public-health outcomes and by disincentivizing banks from improving their servicing and litigation techniques. We also explain how granting winning homeowners “free houses” will not negatively affect the mortgage market.

…broader social subsidization of irresponsible [bank] behavior.

…prolonged foreclosure proceedings create negative social externalities, depressing surrounding homes’ resale value, reducing local governments’ tax revenues, and increasing criminal activity.44 Foreclosures also appear to have significant effects on community members’ physical and mental health, and correlate with increased rates of depression, anxiety, suicide, cardiovascular disease, and emergency-care treatment.

…although judges have expressed concern about homeowner windfalls, the alternative creates a windfall for banks that cut corners in managing and prosecuting foreclosures. The risk and costs of losing foreclosures should already be internalized in the price of current mortgages. Empirical studies suggest that greater protection for mortgagors historically corresponds to slightly higher mortgage rates among lenders. These studies indicate that lenders adjust the price of mortgages based on what they anticipate the cost, and not just the likelihood, of foreclosures will be.

 

DEBT vs. Note: What is the difference?

 current trial court decisions are getting reversed because the courts are waking up to the reality of the rule of law. What they have been following is an off the books rule of “anything but a free house.”

the Courts may think they are saving the financial system, the economy and our society from disintegration, but in truth they are undermining all three.

A recent Yale Law Review article eviscerates the assumptions of a “free house” for the homeowners and destroys the myth that somehow that policy has saved the nation. Yale-In Defense of Free Houses 2016 03 23

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

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Like many other cases, current trial court decisions are getting reversed because the courts are waking up to the reality of the rule of law. What they have been following is an off the books rule of “anything but a free house.” A recent Yale Law Review Article eviscerates the assumptions of a free house for the homeowners and destroys the myth that somehow that policy has saved the nation.
The Trial Judges are making the assumption that there is an underlying debt and an underlying liability of the homeowner to make a payment to the parties in litigation even if the paperwork was found to be defective. Or worse, they are disregarding the rule of law altogether and ruling for the banks and servicers because of policy reasoning (a province exclusively reserved to the legislative branch of government and excluded from the judicial branch).

The key legal analysis goes back to basic contract law pounded into our heads in the first year of law school, to wit: the note is not the debt, it is evidence of the debt.” So if there is no debt and the homeowner challenges on that basis, the homeowner SHOULD win every time. The mistake made by pro se litigants and lawyers alike is that they cannot conceive of the notion of “there is no debt.” That’s because they don’t complete the sentence, to wit: There is no debt owed to the beneficiary or claimed beneficiary on the deed of trust (non judicial states) or there is no debt owed to the mortgagee or claimed mortgagee named in the mortgage.”

Basic contract law: an enforceable contract must contain three elements and a hidden fourth element. The three key elements without which there can be no enforcement are OFFER, ACCEPTANCE AND CONSIDERATION. The hidden fourth element is that contracts in violation of public policy are void.

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In nearly all cases where there are claims of securitization and most where no such claims are brought forward (but still exist) they are missing consideration (i.e., PAYMENT) from the origination and/or acquisition of the loan. The DEBT was never created in favor of the party receiving documents.
The documents, including the note refer to a transaction in which the originator loaned money to the homeowner. This is nearly always NOT true. And the contract, even if it existed, is part of a larger plot to defraud both the borrowers and the investors in which the originators, brokers, servicers, Master Servicers and Trusts are the fraudsters.
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These cases thus involve contracts to violate both laws and public policy — particularly those in which prior agreement is executed in which the parties to agree to create table funded loans as a pattern and practice — something which REG Z clearly says is PREDATORY PER SE.
Either predatory or predatory per se mean something or they don’t. But if they mean anything they set the bar such that parties who violate this provision cannot claim “clean hands.” And if the court of equity is being asked by the violators for the equitable remedy of foreclosure sale based upon, at best, dubious documentation (without proof of the debt or who owns the debt) then the availability of foreclosure should be barred.

Lawyers must meet this challenge head-on and stop pussy footing around. If the alleged loan was table funded, then there was never any completed loan contract. If the money came from a third party, then that third party has the right to the note and mortgage — if the note and mortgage are executed in favor of that third party or if the “originator” was in privity with the third party through contract. There is no other way.

BUT if the identified third party was just a conduit for a source of funds outside the circle of the originator and the party through whom the funds were sourced, then the homeowner owes the DEBT to someone else. What Wall Street banks did in its simplest form is to relieve the investors of money in such a way that the investors would see very little of it ever returned because the Wall Street banks had reached for and grabbed the holy grail of finance — selling financing for nonexistent entities and keeping the proceeds.

And the same logic then applies. If the FOURTH party was somehow in privity (contract) with the originator then the homeowner owes the debt to that fourth party. BUT unless the note and mortgage are properly delivered and executed in favor of the fourth party, neither the fourth party nor any agent or “servicer” for the fourth party can claim rights under the note and mortgage which should never have been released, delivered or recorded in the first place.

In short, without BOTH the money trial and the paper trail being synchronized there is no loan contract. And that means there is no valid note or mortgage which are then VOID ab initio. Can the real source of funds collect? Yes of course, but they do not own a claim that is secured by a mortgage or deed of trust. And they cannot use the note as direct evidence of the debt. This has always been the law. Ironically, nearly all “borrowers” would gladly execute notes and mortgages with the real investors that would be fully enforceable and would represent workouts that would protect both the investor and the borrower. But in order to do that, the banks and servicers in the false securitization industry must be benched and a new group of entities employed directly by investors must arise.

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As stated in the recent Yale Law Review article, document defects do not occur as a result of any action or fault of the alleged borrower and there is no reason not to apply the rule of law to any situation, much less one in which a party can lose their personal residence.

The theory of anything except a free house for the homeowner is full of holes that are amply challenged in the Yale Law Review article. As the authors point out, the trial judges may think they are saving the financial system, the economy and our society from disintegration, but in truth they are undermining all three.

See Yale-In Defense of Free Houses 2016 03 23

Banks Brace for Pain: Statute of Limitations on TILA Rescission and TILA Claims

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

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TILA remedies and requirements actually address the “free house” complaint head on: If banks misbehave in material and important ways (as defined by statute and not in the minds of a judge or lawyer) then yes, the homeowner should get a free house. That is what all three branches of the Federal government have said and no re-interpretation of TILA rescission or TILA remedies will be allowed since last week when the Supreme Court unanimously decided that TILA meant what it says. Any Judge or lawyer who thinks otherwise is in fairyland. The fact that a Judge doesn’t “like” the result of a “free house” (as the Judge perceives it) means nothing. The Judge is required to apply the law as decided by the United States Supreme Court.

Practically everyone is asking questions about whether the statute of limitations starts running from the date the documents were signed on the alleged loan or if it could start at a later time. The answer is a grey area, but as pointed out by James Macklin last night on the Neil Garfield show, there is a legal doctrine called equitable tolling that could suspend the start of the running of the statute of limitations for TILA rescission and TILA claims.

“The equitable tolling principles are to be read into every Federal Statute of Limitations unless Congress expressly provides to the contrary in clear and unambiguous language, see: Rotella v. Wood 528, 549, 560-61,120 S. Ct. 1075, 145 L. Ed. 2d 1047(2000). Since TILA does not evidence a contrary Congressional intent, it’s statute of limitations must be read to be subject to equitable tolling, particularly since the Act is to be construed liberally in favor of consumers.”

Basically the doctrine says that the statute starts to run, unless otherwise provided in the statute, when the claimant knew or should have known or most have known of the grounds for, in this case, TILA Rescission or TILA claims. The basis of that is obvious to anyone involved with these fake mortgages and fraudulent foreclosures for 8 years like I have. The very facts that give rise to TILA rescission and other TILA claims, are intentionally withheld by the parties at the fake closing where the borrower signs settlements documents, the note and the mortgage.

The strategy of the banks has been to wait out three years and then pursue foreclosure and when the borrower raises TILA defenses, the answer is that the statute of limitations has run. With the recent unanimous Supreme Court decision that effectively smacked thousands of lawyers and judges in the face for re-interpreting basic law and the specific and express provisions of TILA, this bank strategy should no longer work.

So now if you gave notice of rescission within three years of the date of the fake closing, your mortgage is null and void “by operation of law” and the “lender(s)” are required to give you (a) a satisfaction of mortgage for county records (b) a canceled original note (c) refund all the money you paid at closing for points, fees, costs etc. and (d) refund all the money you ever paid for interest and principal on the loan. Your debt becomes unsecured and there is no requirement for you to offer them any money at all in order to have the TILA rescission (“I hereby rescind my loan”) be effective. If you EVER sent such a notice within the three year period then your mortgage was void by operation of law at that time — unless the “lender(s)” filed a lawsuit (within 20 days of receipt of your notice of rescission) seeking declaratory relief saying your rescission was not based on any mistakes, errors, omissions or misbehavior on their part.

So all those hundreds of thousands of letters sent back to borrowers saying their letter of rescission was not effective were wrong. Dead wrong. And all those foreclosures that happened anyway were wrongful and void. And THAT means that what I said in 2008 is now true — that hundreds of thousands of homeowners who sent notices of rescission still own their homes even though on paper their homes were sold to third parties. The only thing that could interfere with that conclusion would be a state statute that existed at the time of the fraudulent sale  that said that you have 1 year or some other length of time to challenge the title.

So now that we know that nearly all the loans were table funded and therefore “predatory per se” (REG Z) the question becomes when did the three year statute of limitations begin to run.

There are two schools of thought on this. The first one is simple, as one caller on the Neil Garfield Show pointed out last night. If the disclosures were intentionally withheld, then even the three day rescission might still be available because the deal never actually closed and because the disclosures were fraudulent.

But in any event the statute would start to run as soon as the “borrower” found out that there were multiple people involved in his fake closing that were never disclosed — all of which undisclosed parties were involved in serving as conduits or aggregators and all of whom were paid an undisclosed amount of money arising out of the “closing.” So it is possible that even though your loan was the subject of a faked closing in 2005, you might still have a right to rescind and should send the notice of rescission since it forced the burden of proof onto the pretender lenders. This is especially important in nonjudicial states where the borrower must sue to prevent foreclosure and there is confusion over the alignment of parties.

Incidentally to drill in the point that this statute has teeth, the “lender” must pay the borrower all money paid including what was paid to third party vendors. The loss falls on the “lender” for misbehaving. If it didn’t bother the US Government (Congress, President and Supreme Court) when it passed TILA that the borrower would get a “free house” why should it bother anyone else?

MERS Assignments VOID

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

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see http://www.msfraud.org/law/lounge/mers-auroraslammed.pdf
While there are a number of cases that discuss the role of Mortgage Electronic Registration Systems (MERS), this tells the story in the shortest amount of time. MERS was only a nominee to track the off-record claims from multiple parties participating in what we call the securitization of loans. It now appears that the securitization in most cases never took place but the banks and their affiliates are foreclosing in the name of REMIC trusts anyway, relying on “presumptions” to “prove” that the Trust actually purchased and took possession of the alleged loan. In every case I know of  where the homeowner was allowed to probe deeply into the issues of whether the Trust actually received the loan, it has either been determined that the Trust didn’t own the loan, or the case was settled before the court could announce that ruling.

Decided in April of last year, this case slams Aurora, who was and remains one of the worst offenders in the category of fraudulent foreclosures. The Court decided that since the basis of the claim was an assignment from MERS who had no interest int he debt, note or mortgage, there were no “successors.” This logic is irrefutable. And as regular readers know from reading this blog I believe the same logic applies to any other party who has no interest in the debt, note or mortgage — like an unfunded “originator” whose name appears on not only the Mortgage, like MERS, but also on the note.

Judges have trouble with that analysis because in their minds they think the homeowner is trying to get a free house. Even if that were true, it doesn’t change the correct application of law. But the opposite is true. The homeowner is trying to stop the foreclosing party from getting a free house and the homeowner is trying  to find his creditor. I actually had a judge yesterday rule that the source of funds, ownership and balance was essentially irrelevant. Discovery on nearly all issues was blocked by his ruling, leaving the trial to be a very short affair since the defenses have been eliminated by that Judge by express ruling.

The attorney representing the bank basically argued that the case was simple and that anything that happened prior to the alleged default was also irrelevant. The Judge agreed. So when a trial judge makes such rulings, he or she is basically narrowing the issue down to when we were just starting out in 2007 in what I call the dark ages. The trial becomes mostly clerical in which the only relevant issues are whether the homeowner received a loan and whether the homeowner stopped paying. All other issues are treated as irrelevant defenses, including the behavior of the “servicer” whose authority cannot be questioned (because of the presumption raised by an apparently facially valid instrument of virtually ANY sort).

The moral of the story is persistence and appeal. I believe that such rulings are reversible potentially even as interlocutory appeals as to affirmative defenses and discovery. If anyone files a lawsuit they should be required to answer all potential questions about that that lawsuit in good faith. That is what discovery is for. The strategy of moving to strike affirmative defenses is meant to cut off discovery to the point where no defenses can be raised or proven. And cutting off discovery is what the foreclosers need to do or they will face sanctions, charges of fraud, perjury and worse when the real facts are revealed.

Now that you have won your “free “house, what happens next?

For further information please call 954-495-9867 or 520-405-1688. We provide litigation support in all 50 states.

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On an upbeat note, we are getting more and more communication from homeowners who have won their cases outright and not subject to confidentiality agreements. Fortunately these happy homeowners have realized that the fight is not yet over but that they are obviously in control of the narrative. A word of caution about the case cited in yesterday’s article where the Judge granted a “free house” to a homeowner. The New Jersey bankruptcy case is potentially persuasive but legal authority that the Judge in your case must obey.

Banks have gone to great lengths in framing the narrative on these mortgages and these foreclosures. Almost everywhere you hear the phrase “free house.” Of course nobody really knows what anyone means by that phrase. “free houses” are a myth, just like the trusts, the assignments and the “holders” of the note and mortgage. Preventing the mortgagee from enforcement does NOT give a free house to anyone, regardless of the circumstances. It is a rare circumstance that the buyer of the new house does not expend thousands of dollars or tens of thousands of dollars or even hundreds of thousands of dollars on the house that they think they now own.

I know thousands perhaps millions put a down payment into a house thinking that their payment was equity they would retrieve when the house was sold or refinanced. A typical case I have witnessed is a home purchased for $500,000 with $100,000 down payment —- 20% of the purchase price based upon appraisals that wildly speculative and untrue.

Then the house gets sold in a short sale for $300,000. If that homeowner had fought the bank and the bank was found not to be the owner of the mortgage or note or debt and the mortgage was found to be unenforceable or even void, did that homeowner get the house for free. $100k down, plus $50k in improvements, furnishings etc. The homeowner is out $150,000 no matter what happens and that is not free. There is no such thing as a free house and there never was. But mortgages and notes are sometimes ab initio (from the start), unenforceable or void and in today’s market most of them fall somewhere in that category.

And there is an area of confusion between property law, bankruptcy law and contract law. Which brings us to the case decided in New Jersey by a bankruptcy court judge. It is the case of Washington versus specialized loan servicing and the Bank of New York Mellon as trustee for the certificate holders of an allegedly asset-backed trust.

This case is far from a cure all that will fix all other foreclosures. I doubt the Judge had jurisdiction to declare the mortgage void. And therein lies a potential problem for the homeowner that won here. The homeowner might lose on appeal or still have a problem even if the bank’s appeal is turned down.

I will point out again that Bank of New York Mellon represents itself as trustee for the certificate holders and old minutes any representation for the trust itself. One might conclude that the trust does not exist and that the certificate holders who obviously are the investors are the real parties in interest as I have repeatedly stated for more than seven years.
And by the way, NJ does not have a homestead exemption, so the debt, which is real and if it can be computed after giving credit for all payments to the creditors from all sources, is still owed and the homestead can still be foreclosed based upon a money judgment. So a free house is just not the right term to describe any of this.

I don’t think the judge realized that the investors were being directly represented by Bank of New York Mellon and that the reference to the bank as a trustee was merely a self-serving statement by the bank in order to block any inquiry into the identity of the certificate holders who were the obvious real parties in interest. In the months and years to come the distinction which I am drawing here will become increasingly important in court rooms across the country.

The bankruptcy judge carefully analyzed the statute of limitations and concluded that there was no way that the loan could be enforced and that therefore the claim in bankruptcy was void. The judge that he didn’t like to give anyone a free house but that was what he had to do in this case in New Jersey.

The foreclosure case in the state court was dismissed for lack of prosecution without prejudice. The effect of that dismissal was one of the things that was in dispute that the bankruptcy judge decided. The bad news is that I am not so sure this decision will be upheld if it is appealed. But even if it is upheld I’m not so sure that the homeowner actually received the free house that the judge expressly said was being given to him by the judges decision. Bankruptcy Judges are known to have an inflated view of their jurisdictional authority. The District Court Judge above him in the same courthouse might have been able to declare the mortgage void, but I doubt if a bankruptcy judge has that authority. But the decision to prevent enforcement of the mortgage in the bankruptcy proceeding and the decision to cause the alleged creditor to be unsecured instead of secured (which is what I have been advocating for 7 years) is probably valid.

The judge decided that both the note and mortgage were unenforceable. He also decided that because they were unenforceable that Bank of New York Mellon did not have a secured claim for purposes of the bankruptcy proceeding. The judge went further than that by stating that the underlying lien is deemed void pursuant to 11 USC 506(a)(1) and (d). So for purposes of that bankruptcy proceeding court made a determination that Bank of New York Mellon did not have secured status. The Court also seemed to accept the agreement of both size that Bank of New York Mellon or a specialized loan servicing had the original note and mortgage.

The Question I have is the same question that Is being asked in many circles today. When all is said and done the mortgage still is present in the county records — it was recorded so it still exists in the county records of the County recorder in the jurisdiction in which the property is located. My question is whether in the absence of a court order stating that the mortgage is void or nullified, and in the absence of the recording of such an order at the county recorders office, will this homeowner be legally correct in assuming that the mortgage will not affect his title and that no payment will be required at the time the homeowner seeks to sell or refinance the property.

It may seem like splitting hairs and maybe It is. But I think there’s a difference between a lien that is in the county records and therefore encumbers the title answer the question of the enforceability of the lean. When you pull up the title chain by hand or by computer, the mortgage will be there. Would you buy that property without getting rid of that mortgage? Would you lend money on that property? In this case the Bankruptcy judge has decided for purposes of the bankruptcy proceeding that the secured status of Bank of New York Mellon did not exist.

I question whether that decision automatically means that the mortgage was in fact nullified or void unless the County recorder accepts the court order for recording and the recorded order is interpreted as nullification unemployed mortgage document. And THAT basically means you need to file a quiet title action, which bring you back to attacking the initial loan transaction ab initio (from the beginning). Unless you can say that the note and mortgage should never have been released from the closing table, much less recorded, I think there is a potential problem lurking in the shadows. The homeowner might be prevented from selling or refinancing the home without the AMGAR program or something like it.

Otherwise what it comes time to sell or refinance the property, the homeowner may find that he still must deal with either paying off somebody claiming to own the mortgage or the homeowner is required to file a quiet title action to resolve the question. Of course the longer the homeowner waits before taking any action to sell or refinance the property, more likely it is that the homeowner will in fact end up with the property unencumbered by the mortgage. My point is that I don’t think that question has been answered and I don’t think that the answer will be consistent across the country.

It is my opinion that nullification of the mortgage as a void instrument that never should’ve been released much less recorded is first required for the Court can consider of cause of action to quiet title in favor of the homeowner and specifically against the encumbrance filed in the county records as a mortgage. I would also Council caution on applying this bankruptcy case to other cases in the State judicial system even in New Jersey.

But I would also say that the distaste of people sitting on the bench for hey results that benefits the homeowner signals bias for which there is no proper foundation. There is no question that these loans, debts, notes, mortgages, assignments and transfers. collection modification and foreclosures are all clouded in obscure schemes created by the banks and not the borrowers. 50 million borrowers did not wake up one morning and meet in some stadium with the idea of defrauding the banks and the federal government and insurers, guarantors and investors. But a handful of Wall Street titans who had become accustomed to their power, did in fact arrogantly pursue a scheme that did defraud borrowers, investors, insurance companies and the U.S. government.

To say that nobody can file a foreclosure is not to say that the debt cannot be enforced. There are causes of action based solely on common law or the note. If a real creditor could step forward showing a real advance of funds, they would probably prevail in at least establishing that the debt is owed from the homeowner and possibly get a money judgment. In states that have little or no homestead exemption the lien can be recorded, attaches the chain of title for the house and can be foreclosed as a judgment lien. But of course that would require the party seeking to enforce the debt to show that they actually advanced the money as a creditor. And THAT is the problem for the banks. If they had that evidence there would be no argument over the enforceability of the alleged loan documents that I call worthless.

They would have produced it long ago if the notes and mortgages were valid documents. They didn’t, they can’t, and that is why Elizabeth Warren is absolutely right in demanding that the principal balance of the debt be corrected downward. And it is stink and no crime for a Judge to apply the law evenly and allow the chips to fall where they may. If that means nobody gets to enforce the mortgage it doesn’t mean the homeowner received a free house.

The debt is due, after all adjustments, and it could be enforced by other means — unless the truth is that the borrowers ARE off the hook because the original debt, upon which all other debts deals rely as their foundation, has already been paid off. Then the homeowner doesn’t owe the money on the original debt and if somebody wants to make a case against the homeowner for recovery of what they actually lost then let them bring that action. Otherwise too bad. If the original debt is paid off through any third party payment (i.e., if the certificate holders have received payment in full directly or indirectly on their investment), then there should be no possibility of a mortgage foreclosure because that is the only debt that is allegedly secured by a mortgage. Other parties who have been lurking in the shadows would have to come into the limelight and allege and prove their case including the allegation that they are losing money as a result of these complex and obscure transactions.

The banks started this and they should suffer the consequences. There is plenty of blame to go around. To have homeowners pay the full price for the bank’s misbehavior, for the servicer’s fraud, and the Wall Street bank’s greedy method of siphoning the life out of our economy is just plain wrong. Even if we want to treat the loan documents as real, the consequences should be spread around and not on banks who are reporting higher and higher profits from aggressive release of reserves that comes from money they stole from investors —- a fact that is now dawning upon securities analysts as they downgraded Wells Fargo and other banks.

4th DCA Florida: Trustee of Asset Pool Must Join or Ratify

 

“servicer may be considered a party in interest to commence legal action as long as the trustee joins or ratifies its action.”

ElstonLeetsdale LLC v CWCapital Asset Management LLC-1

This ought to be interesting. If Deutsch, or U.S. Bank, or Bank of New York, or any of the other “Trustees” join or ratify the action then they are asserting, under oath (if the lawyer for the homeowner knows what he or she is doing) that (1) the Asset pool is exists, (2) that the subject loan is in the asset pool (i.e., consideration paid by the Trust and assignment before cut-off date) and (3) that the trust was properly organized and (4) that the Trustee is authorized by [fill in blank here, if the lawyer of the homeowner knows what he or she is doing] to accept the assignment, join in the lawsuit and ratifies the representations and claims made on behalf of the REMIC trust and (5) signed by  a trust officer for the bank who says it is the trustee for the asset pool.

You might want to ask while you are on the subject, exactly why the Trustee wants to bind the beneficiaries of the trust to ownership of a worthless loan. This is a question raised by Judge Shack in New York 5 years ago. Nobody was listening. Now maybe some people are starting to see the wisdom of Shack’s question. If securitization was on the level, then the funding, assignment, assumption and payment would have all occurred as set forth under New York Law, the Internal Revenue Code, the provisions of the Pooling and servicing Agreement, which means underwriting according to industry standards and procuring insurance and credit default swap protection FOR THE INVESTORS, NOT THE BANKS WHO HAD NO MONEY IN THE DEAL.

So while you are on the subject, you might want to ask the trustee why they have made no claim against the insurance, credit default swaps and other payments received from co-obligors that were not disclosed to the borrower. In fact, you might want to ask whether the trustee views this as an account receivable, bond receivable or note receivable? If he or she doesn’t know, ask who would know — after all a trustee is like a receiver with special skills and experience in keeping the books for each trust and assuring customers there would be no commingling of funds. If the trustee doesn’t think the trust is owed any money other than the payments from the borrower, ask him or her, why not?

Once the trustee acknowledges that there were payments which should have been allocated to the bond receivable account or account receivable for the investors, then ask the big question, to wit: do your books and records show the same flow of money in and out of the trust as the figures used by the subservicer in declaring the default, and bringing the foreclosure action. Once you get by “I don’t know” the answer is going to be “NO” if you drill deep enough and keep asking the questions who knows, what do they know, how do they know it and is the party claiming to be the trustee really a trustee?

I ask you this: with each of these fine banking institutions maintaining separate corporations or divisions that provide trust services for even a few hundred thousand dollars, why wasn’t the same trust department used to provide trust services to the REMIC trust? Why is it managed by Reynaldo Reyes, VP, Asset management at Deutsch Bank? What fees were received by the trustee? What services did it perform?

Suddenly a new dawn is upon us. The banks knowing full well they were going to claim and get free houses started early and effectively in persuading the media, government and the public, including the borrowers themselves that to defend the foreclosure was immoral because the borrower was seeking a free house. The banks were smart enough to get out in front of that one, but it is coming back around to bite them. The homeowners are not seeking free homes, they are seeking reasonable deals based upon true facts instead of false representations, withholding of disclosures required by law and lies from the intermediaries who pretend to be the lenders or to act for the lenders when they do not.

Is there a free house? Yes, every time another Judge rubber stamps another foreclosure and allows a non-creditor to submit a “credit bid” (non-cash) and take title to a home they advanced no money to finance or purchase any loan.

 

Appraisal Fraud: Triaxx Inching Toward the Truth

Editor’s Comment: At the heart of the entire scam called securitization was the abandonment — in fact the avoidance of repayment of the loans. The idea was to make bigger and bigger loans without due any evidence of due diligence, so that the “lender” could claim plausible deniability and more importantly, make a claim for losses that were insured many times over. It was the perfect storm. Banks were using investor money to make bad loans on which the banks were raking in huge profits through multiple sales or insurance of the same loan portfolio. The only way the plan could fail was if the loans performed and the loan was in fact repaid.

For years, I have been pounding on the fact that the root of the method used was appraisal fraud, which as far as I can tell was present in nearly 100% of all loans subject to securitization, where loans were NOT bundled, and the securitization documents were ignored.

Now ICP Capital managing a vehicle called Triaxx, has countered the mountain of documents with real data sifted through algorithms on computers and they have come to the conclusion that loans were far outside the 80% LTV ratio that was presented to investors, that loans were never paid from the start (not even the first payment) and that probability of repayment was about zero on many loans. Soon, with some tweaking and investigation they will discover that repayment was never in the equation.

Thanks again to the learning curve of Gretchen Morgenson of the New York Times and her excellent investigations and articulation of her findings, we are all catching up with the BIG LIE. Banks made loans to lose money because they the money they were losing was the money of investors — pension funds etc. And at the same time they bet against the loans that were guaranteed to fail and put the money in their own pockets.

In classic PONZI scheme methodology, they used the continuing sales of false mortgage bonds to pay investors until the inevitable collapse.

Once this is established 2 things are inevitable — the investors will prove their case that they the mortgage bonds were fabricated and based upon lies, deceit and cheating.

And the other inevitable conclusion is that the money came from the investors and not from the named payee, lender or secured party on the notes and mortgages that were executed in the tens of millions during the mortgage meltdown decade.

But did the investor money come to the closing through the REMIC? The answer appears to be a big fat “NO” based upon a big fat LIE. And THAT is where the problem is that caused the banks and servicer to fabricate, forge, robo-sign, lie, cheat and steal in court the same way they did when they sold the investors and sold the borrowers on a deal doomed from inception.

Legally and practically all that means that the borrowers were equally defrauded by the false appraisals that are legally the representation of the “lender” not the borrower. But even more importantly it means that Wall Street cannot show that the money for funding or purchase of the loans ever actually came from the investment pools.

It turns out that the Wall Street was telling the truth when it denied the existence of the pools and the switched to a lie which we forced on them because it never occurred to us that they would blatantly cheat huge institutions that could do their own digging and litigating. 

The legal and accounting effect of all this is enormous. The Payees, Lenders and Secured Parties named in the closing were not the source of funding and therefore the documents that were signed must be construed as referring to a transaction that has never been completed because it was never funded.

The deception was complete when Wall Street investment bankers sent money down to closing agents without regard to any pool, REMIC, SPV or other specific collection of investors. The funding arrived from Wall Street a the same time as the papers were signed.

But in order to prevent allegations of false appraisals and predatory and deceptive lending from moving up the ladder, Wall Street made sure that there was NO CONNECTION between the PAYEE, LENDER or SECURED PARTY and either the investment bank or the so-called unfunded pool into which no assets were placed other than the occasional purchase or sale of a credit default swap.

FREE HOUSE?: As Arthur Meyer is fond of pointing out in his history of banking every 5 years, bankers always manage to step on a rake. The banks had severed the connection between the funding and the documents.

If the court follows the documents a windfall goes to someone in the alleged securitization documents WHO HAS ALREADY BEEN PAID.

If he follows the money, the loan is not secured by a perfected mortgage lien, which means that (1) the unsecured debt can be wiped out in its entirety by bankruptcy AND/or (2) with investors slow on the uptake, there might not be a creditor left to make a claim.

THE ULTIMATE AND RIGHT APPROACH TO PRINCIPAL REDUCTION: But as pointed out previously, there is a Tax liability that would put the federal, state and local budgets back in balance due from homeowners who got their “free house.” It would be a small fraction of the balance claimed on the original loan, but it would reflect the real valuation of the house, the real terms that should have applied, and a deduction for the predatory and deceptive lending practices employed.

BOA ET AL DEATHWATCH: The political third rail here is that 5-6 million homeowners might well have a right to return to their old homes with no mortgage — an event that would put our economy on steroids, end joblessness and crush the mega banks whose accounting and reporting to the SEC and shareholders has omitted the huge contingent liability to pay back the ill-gotten funds from reselling the same portfolio AS THEIR OWN  loans dozens of times.

Too Big to Fail may well be amended to “Too Fat to Jail”, a notion with historical traction even in our own society corrupted by money, influence peddling and lying politicians.

See Gretchen Morgenson’s Article at How to Find the Weeds in the Mortgage Pool

How to Find Weeds in a Mortgage Pool
By GRETCHEN MORGENSON, NY Times

IT sounds like the Domesday Book of the housing bust. In fact, it is a computerized compendium of millions of housing transactions — a decade’s worth from across the country — that could finally help us get to the bottom of troubled mortgage investments.

The system is an outgrowth of work done by a New York investment manager, Thomas Priore. In the boom years, his investment firm, ICP Capital, navigated the dangerous waters of collateralized debt obligations via an investment vehicle called Triaxx. Buyers of Triaxx C.D.O.’s did better than most, but Triaxx still incurred losses when the bottom fell out.

Now Triaxx’s database could help its managers and other investors identify bad mortgages and, perhaps, learn who snookered whom when questionable home loans were bundled into investments that later went bad.

Triaxx’s technology came to light only last month, in court documents filed in connection with the bankruptcy of Residential Capital. ResCap was the mortgage lending unit of GMAC, now known as Ally Financial. As an investor in mortgage securities, Triaxx gained access to a lot of information about loans that were pooled, including when those loans were made, where the properties are and how big the mortgage was, relative to the property’s value. After Triaxx fed such details into its system, dubious loans popped out.

Granted, Mr. Priore is no stranger to controversy. He and ICP spent two years defending themselves against a lawsuit by the Securities and Exchange Commission, which accused them of improperly generating “tens of millions of dollars in fees and undisclosed profits at the expense of clients and investors.” On Friday, ICP and Mr. Priore settled the matter. As is typical in such cases, they neither admitted nor denied the accusations. Mr. Priore paid $1.5 million. He declined to discuss the settlement.

But he did say that, looking ahead, he believed that Triaxx’s technology would help its investors recover money they deserved. Many other investors, unable or unwilling to dig through such data, have settled for pennies on the dollar.

“Our hope is that the technology will level the playing field for mortgage-backed investors and provide a superior method to manage residential mortgage risk in the future,” Mr. Priore said.

A step in that direction is Triaxx’s recent objection to a proposed settlement struck last May between ResCap and a group of large mortgage investors. Triaxx, which invested in mortgage loans originated by ResCap, criticized that settlement because it was based in part on estimated losses. Triaxx said the estimates had assumed that all the trusts that invested in ResCap paper were the same. Triaxx argued that a settlement based on estimated losses, rather than one based on an analysis of actual misrepresentations, unfairly rewards investors who bought ResCap’s riskier mortgages.

ResCap replied that it would be a herculean task to examine the loans in the trusts to determine the validity of each investor’s claims. But Triaxx noted that it took only seven weeks or so to do a forensic analysis of the roughly 20,000 loans held by the trusts in which it is an investor. Of its investments in loans with an original balance of $12.8 billion, Triaxx has identified approximately $2.17 billion with likely breaches. A lawyer for ResCap did not return a phone call on Friday seeking comment about problem loans.

John G. Moon, a lawyer at Miller & Wrubel who represents Mr. Priore’s firm, said: “Large institutions have been able to hide behind the expense of loan file review to evade responsibility for this very important national problem that we now have. Using years of data and cross-referencing it, Triaxx has figured out where the bad loans are.”

Triaxx, for example, said it had found loans that probably involved inflated appraisals. Those appraisals led to mortgages far exceeding the values of the underlying properties. As a result, investors who thought they were buying mortgages that didn’t exceed 80 percent of the properties’ value were instead buying highly risky loans that totaled well over 100 percent of the value.

Triaxx identifies these loans by analyzing 50 property sales in the same vicinity during the same period that the original mortgage was given. Then it compares the specific mortgage to 10 others that are most similar. The comparable transactions must involve the same type of property — a single-family home, for example — of roughly the same size. They must also be within a 5.5-mile radius. If the appraisal appears excessive, the system flags it.

Phony appraisals in its ResCap loans likely resulted in $1.29 billion in breaches, Triaxx told the court. Triaxx cited 50 possible cases; one involved a mortgage written in November 2006 on a home in Miami. It was a 1,036-square-foot single-family residence, and was appraised at $495,000. That appraisal supported a $396,000 mortgage, reflecting a relatively conservative 80 percent loan-to-value ratio.

But an analysis of 10 similar sales around that time suggested that the property was actually worth about $279,000. If that was indeed the case, that $396,000 mortgage represented a 142 percent loan-to-value ratio.

Perhaps the home had gold-plated bathroom fixtures and diamond-encrusted appliances. Probably not.

Triaxx’s system also points to loans on properties that were not owner-occupied, a breach of what investors were told would be in the pool when they bought it, Triaxx’s filing said. Such misrepresentations in loans underwritten by ResCap amounted to $352 million, Triaxx said.

The technology also kicks out mortgages on which borrowers failed to make even their first payments, loans that should never have wound up in the pools to begin with.

Although Triaxx is using its technology to try to recover losses, that system could also help investors looking to buy privately issued mortgage securities. After all, investors’ inability to analyze the loans in these pools during the mania led to enormous losses in the collapse. Now, deeply mistrustful of such securities, investors have pretty much abandoned the market.

Lenders and packagers of mortgage securities will undoubtedly fight the use of any technology like Triaxx’s to identify questionable loans. That battle will be interesting to watch. But investors should certainly welcome anything that brings transparency to this dysfunctional market.

Az Statute on Mortgage Fraud Not Enforced (except against homeowners)

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Editor’s Comment:

With a statute like this on the books in Arizona and elsewhere, it is difficult to see why the Chief Law Enforcement of each state, the Attorney General, has not brought claims and prosecutions against all those entities and people up and down the fraudulent securitization chain that brought us the mortgage meltdown, foreclosures of more than 5 million people, suicides, evictions and claims of profits based upon the fact that the free house went to the pretender lender.

Practically every act described in this statute was committed by the investment banks and all their affiliates and partners from the seller of the bogus mortgage bond (sold forward, which means that the loans did not yet exist) all the way down to the people at the closing table with the homeowner borrower.

I’d like to see a script from attorneys who confront the free house concept head on. The San Francisco study and other studies clearly show that many if not most foreclosures resulted in a “sale” of property without any cash offered by the buyer who submitted a credit bid when they had not established themselves as creditors nor had they established the amount due. And we now know that they failed to establish themselves as creditors because they neither loaned the money nor purchased the loan in any transaction in which they parted with money. So the consideration for the sale was not present or if you want to put it in legalese that would effect those states that allow review of the adequacy of consideration at the auction.

I’d like to see a lawyer go to court and say “Judge, you already know it would be wrong for my client to get a free house. I am here to agree with you and state further that whether you rule for the borrower or this pretender lender here, you are going to give a free house to somebody.

“Because this party initiated a foreclosure proceeding without being the creditor, without spending a dime on the loan or purchase of the loan, and without any right to represent the multitude of people and entities that should be paid on this loan. This pretender, this stranger to this transaction stands in the way of a mediated settlement or HAMP modification in which the borrower is more than happy to do a traditional workout based upon the economic realities.

“And they they maintain themselves as obstacles to mediation or modification because they have too much to hide about the origination of this loan.

“All I seek is that you recognize that we deny the loan on which this party is pursuing its claims, we deny the default and we deny the balance. That puts the matter at issue in which there are relevant and material facts that are in dispute.

“I say to you that as a Judge you are here to call balls and strikes and that your ruling can only be that with issues in dispute, the case must proceed.”

“The pretender should be required to state its claim with a complaint, attach the relevant documents and the homeowner should be able to respond to the complaint and confront the witnesses and documents being used. And that means the pretender here must be subject to the requirements of the rules of civil procedure that include discovery.

“Experience shows that there have been no trials on the evidence in all the foreclosures ever brought during this period and that the moment a judge rules on discovery in favor of the borrower, the pretender offers settlement. Why do you think that is?”

“If they had a good reason to foreclose and they had the authority to allege the required the elements of foreclosure and they had the proof to back it up they would and should be more than willing to put a stop to all these motions and petitions from borrowers. But they don’t allow any case to go to trial. They are winning on procedure because of the assumption that the legitimate debt is unpaid and that the borrower owes it to the party making the claim even if there never was transaction with the pretender in which the borrower was a party, directly or indirectly.”

“Neither the non-judicial powers of sale statutes nor the rules of civil procedure based upon constitutional requirements of due process can be used to thwart a claim that has merit or raises issues that have merit. You should not allow the statute and rules to be applied in a manner in which a stranger to the transaction who could not even plead a case in good faith would win a foreclosed house at auction without court review and a hearing on the merits.”

Residential mortgage fraud; classification; definitions in Arizona

Section 1. Title 13, chapter 23, Arizona Revised Statutes, is amended by adding section 13-2320, to read:
13-2320.

A. A PERSON COMMITS RESIDENTIAL MORTGAGE FRAUD IF, WITH THE INTENT TO DEFRAUD, THE PERSON DOES ANY OF THE FOLLOWING:

  1. KNOWINGLY MAKES ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
  2. KNOWINGLY USES OR FACILITATES THE USE OF ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
  3. RECEIVES ANY PROCEEDS OR OTHER MONIES IN CONNECTION WITH A RESIDENTIAL MORTGAGE LOAN THAT THE PERSON KNOWS RESULTED FROM A VIOLATION OF PARAGRAPH 1 OR 2 OF THIS SUBSECTION.
  4. FILES OR CAUSES TO BE FILED WITH THE OFFICE OF THE COUNTY RECORDER OF ANY COUNTY OF THIS STATE ANY RESIDENTIAL MORTGAGE LOAN DOCUMENT THAT THE PERSON KNOWS TO CONTAIN A DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION.

Those convicted of one count of mortgage fraud face punishment in accordance with a Class 4 felony.  Anyone convicted of engaging in a pattern of mortgage fraud could be convicted of a Class 2 felony


Everything Built on Myth Eventually Fails

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Editor’s Comment:

The good news is that the myth of Jamie Dimon’s infallaibility is at least called into question. Perhaps better news is that, as pointed out by Simon Johnson’s article below, the mega banks are not only Too Big to Fail, they are Too Big to Manage, which leads to the question, of why it has taken this long for Congress and the Obama administration to conclude that these Banks are Too Big to Regulate. So the answer, now introduced by Senator Brown, is to make the banks smaller and  put caps on them as to what they can and cannot do with their risk management.

But the real question that will come to fore is whether lawmakers in Dimon’s pocket will start feeling a bit squeamish about doing whatever Dimon asks. He is now becoming a political and financial liability. The $2.3 billion loss (and still counting) that has been reported seems to be traced to the improper trading in credit default swaps, an old enemy of ours from the mortgage battle that continues to rage throughout the land.  The problem is that the JPM people came to believe in their own myth which is sometimes referred to as sucking on your own exhaust. They obviously felt that their “risk management” was impregnable because in the end Jamie would save the day.

This time, Jamie can’t turn to investors to dump the loss on, thus drying up liquidity all over the world. This time he can’t go to government for a bailout, and this time the traction to bring the mega banks under control is getting larger. The last vote received only 33 votes from the Senate floor, indicating that Dimon and the wall Street lobby had control of 2/3 of the senate. So let ius bask in the possibility that this is the the beginning of the end for the mega banks, whose balance sheets, business practices and public announcements have all been based upon lies and half truths.

This time the regulators are being forced by public opinion to actually peak under the hood and see what is going on there. And what they will find is that the assets booked on the balance sheet of Dimon’s monolith are largely fictitious. This time the regulators must look at what assets were presented to the Federal Reserve window in exchange for interest free loans. The narrative is shifting from the “free house” myth to the reality of free money. And that will lead to the question of who is the creditor in each of the transactions in which a mortgage loan is said to exist.

Those mortgage loans are thought to exist because of a number of incorrect presumptions. One of them is that the obligation remains unpaid and is secured. Neither is true. Some loans might still have a balance due but even they have had their balances reduced by the receipt of insurance proceeds and the payoff from credit default swaps and other credit enhancements, not to speak of the taxpayer bailout.

This money was diverted from investor lenders who were entitled to that money because their contracts and the representations inducing them to purchase bogus mortgage bonds, stated that the investment was investment grade (Triple A) and because they thought they were insured several times over. It is true that the insurance was several layers thick and it is equally true that the insurance payoff covered most if not all the balances of all the mortgages that were funded between 1996 and the present. The investor lenders should have received at least enough of that money to make them whole — i.e., all principal and interest as promissed.

Instead the Banks did the unthinkable and that is what is about to come to light. They kept the money for themselves and then claimed the loss of investors on the toxic loans and tranches that were created in pools of money and mortgages — pools that in fact never came into existence, leaving the investors with a loose partnership with other investors, no manager, and no accounting. Every creditor is entitled to payment in full — ONCE, not multiple times unless they have separate contracts (bets) with parties other than the borrower. In this case, with the money received by the investment banks diverted from the investors, the creditors thought they had a loss when in fact they had a claim against deep pocket mega banks to receive their share of the proceeds of insurance, CDS payoffs and taxpayer bailouts.

What the banks were banking on was the stupidity of government regulators and the stupidity of the American public. But it wasn’t stupidity. it was ignorance of the intentional flipping of mortgage lending onto its head, resulting in loan portfolios whose main characteristic was that they would fail. And fail they did because the investment banks “declared” through the Master servicer that they had failed regardless of whether people were making payments on their mortgage loans or not. But the only parties with an actual receivable wherein they were expecting to be paid in real money were the investor lenders.

Had the investor lenders received the money that was taken by their agents, they would have been required to reduce the balances due from borrowers. Any other position would negate their claim to status as a REMIC. But the banks and servicers take the position that there exists an entitlement to get paid in full on the loan AND to take the house because the payment didn’t come from the borrower.

This reduction in the balance owed from borrowers would in and of itself have resulted in the equivalent of “principal reduction” which in many cases was to zero and quite possibly resulting in a claim against the participants in the securitization chain for all of the ill-gotten gains. remember that the Truth In Lending Law states unequivocally that the undisclosed profits and compensation of ANYONE involved in the origination of the loan must be paid, with interest to the borrower. Crazy you say? Is it any crazier than the banks getting $15 million for a $300,000 loan. Somebody needs to win here and I see no reason why it should be the megabanks who created, incited, encouraged and covered up outright fraud on investor lenders and homeowner borrowers.

Making Banks Small Enough And Simple Enough To Fail

By Simon Johnson

Almost exactly two years ago, at the height of the Senate debate on financial reform, a serious attempt was made to impose a binding size constraint on our largest banks. That effort – sometimes referred to as the Brown-Kaufman amendment – received the support of 33 senators and failed on the floor of the Senate. (Here is some of my Economix coverage from the time.)

On Wednesday, Senator Sherrod Brown, Democrat of Ohio, introduced the Safe, Accountable, Fair and Efficient Banking Act, or SAFE, which would force the largest four banks in the country to shrink. (Details of this proposal, similar in name to the original Brown-Kaufman plan, are in this briefing memo for a Senate banking subcommittee hearing on Wednesday, available through Politico; see also these press release materials).

His proposal, while not likely to immediately become law, is garnering support from across the political spectrum – and more support than essentially the same ideas received two years ago.  This week’s debacle at JP Morgan only strengthens the case for this kind of legislative action in the near future.

The proposition is simple: Too-big-to-fail banks should be made smaller, and preferably small enough to fail without causing global panic. This idea had been gathering momentum since the fall of 2008 and, while the Brown-Kaufman amendment originated on the Democratic side, support was beginning to appear across the aisle. But big banks and the Treasury Department both opposed it, parliamentary maneuvers ensured there was little real debate. (For a compelling account of how the financial lobby works, both in general and in this instance, look for an upcoming book by Jeff Connaughton, former chief of staff to former Senator Ted Kaufman of Delaware.)

The issue has not gone away. And while the financial sector has pushed back with some success against various components of the Dodd-Frank reform legislation, the idea of breaking up very large banks has gained momentum.

In particular, informed sentiment has shifted against continuing to allow very large banks to operate in their current highly leveraged form, with a great deal of debt and very little equity.  There is increasing recognition of the massive and unfair costs that these structures impose on the rest of the economy.  The implicit subsidies provided to “too big to fail” companies allow them to boost compensation over the cycle by hundreds of millions of dollars.  But the costs imposed on the rest of us are in the trillions of dollars.  This is a monstrously unfair and inefficient system – and sensible public figures are increasingly pointing this out (including Jamie Dimon, however inadvertently).

American Banker, a leading trade publication, recently posted a slide show, “Who Wants to Break Up the Big Banks?” Its gallery included people from across the political spectrum, with a great deal of financial sector and public policy experience, along with quotations that appear to support either Senator Brown’s approach or a similar shift in philosophy with regard to big banks in the United States. (The slide show is available only to subscribers.)

According to American Banker, we now have in the “break up the banks” corner (in order of appearance in that feature): Richard Fisher, president of the Federal Reserve Bank of Dallas; Sheila Bair, former chairman of the Federal Deposit Insurance Corporation; Tom Hoenig, a board member of the Federal Deposit Insurance Corporation and former president of the Federal Reserve Bank of Kansas City; Jon Huntsman, former Republican presidential candidate and former governor of Utah; Senator Brown; Mervyn King, governor of the Bank of England; Senator Bernie Sanders of Vermont; and Camden Fine, president of the Independent Community Bankers of America. (I am also on the American Banker list).

Anat Admati of Stanford and her colleagues have led the push for much higher capital requirements – emphasizing the particular dangers around allowing our largest banks to operate in their current highly leveraged fashion. This position has also been gaining support in the policy and media mainstream, most recently in the form of a powerful Bloomberg View editorial.

(You can follow her work and related discussion on this Web site; on twitter she is @anatadmati.)

Senator Brown’s legislation reflects also the idea that banks should fund themselves more with equity and less with debt. Professor Admati and I submitted a letter of support, together with 11 colleagues whose expertise spans almost all dimensions of how the financial sector really operates.

We particularly stress the appeal of having a binding “leverage ratio” for the largest banks. This would require them to have at least 10 percent equity relative to their total assets, using a simple measure of assets not adjusted for any of the complicated “risk weights” that banks can game.

We also agree with the SAFE Banking Act that to limit the risk and potential cost to taxpayers, caps on the size of an individual bank’s liabilities relative to the economy can also serve a useful role (and the same kind of rule should apply to non-bank financial institutions).

Under the proposed law, no bank-holding company could have more than $1.3 trillion in total liabilities (i.e., that would be the maximum size). This would affect our largest banks, which are $2 trillion or more in total size, but in no way undermine their global competitiveness. This is a moderate and entirely reasonable proposal.

No one is suggesting that making JPMorgan Chase, Bank of America, Citigroup and Wells Fargo smaller would be sufficient to ensure financial stability.

But this idea continues to gain traction, as a measure complementary to further strengthening and simplifying capital requirements and generally in support of other efforts to make it easier to handle the failure of financial institutions.

Watch for the SAFE Banking Act to gain further support over time.

BUYERS IN FLORIDA GETTING TITLE NIGHTMARE BARGAINS

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary SEE LIVINGLIES LITIGATION SUPPORT AT LUMINAQ.COM

EDITORIAL NOTE: Everyone seems to want to see real estate moving. Buying and selling of real estate gives a warm and fuzzy feeling to those involved in the marketplace. Buyers are sweeping up bargains, much like we saw in the late 1970’s. But what are they buying? And who is selling?

I’ll concede that ti would be a good thing to get commerce re-started — but not at the expense of creating a further nightmare down the road, which is what we are doing. Start with mortgages and notes that were defective and uncured, then move on to foreclosure proceedings that were fraudulent based upon fabricated, forged, unauthorized robo-signed documents, and then move to credit bids submitted to buy the property (where the bidder was not a creditor), and then finally a deed issued to an investor or regular buyer who has plenty of notice about the dubious title to the property, and for a little spice add title insurance policies that are defective and probably will be rescinded because of fraud, and you get people parting with money for a piece of paper that is as worthless as the original “securitized mortgages” and as empty as the “mortgage bonds” based upon invalid, unauthroized “pools of assets.”

There is at least the high probability that quiet title actions and fraudulent foreclosure actions, together with slander of title, identity theft, forgery and other actions will continue to climb in volume. Eventually the quiet title actions will become more commonplace than foreclosures because even the banks are going to be required to use them to clear title. In short, the PONZI scheme is continuing and the new ” buyers” are the ones at the bottom of the food chain, likely to lose a ton of money much like the homeowners and investors that  got duped into the original securitization scheme.

As a postscript, think about this: housing prices are continuing to  go down. Why? Well, there a lot of reasons, but they all boil down to this: title. There are a lot of people are offering the justification for this mess continuing by saying there must be certainty in the marketplace. That’s right. Nobody is going to trade or buy anything if they might lose it because the seller didn’t own it. The long and short of it is that until we give up the myth that this can be fixed any way other than application of black letter property law, there won’t be any certainty. The people who are espousing certainty mean that they they certainly want to steal title from homeowners even if the benefit is conferred on someone who never lent a dime on the transaction, never bought the receivable and is not not secured by an interest in the real property.

Politically, because of a lack of information, the majority of people think that the homeowners should not get a “free house.” What they don’t realize is that the banks who received the bailout money worth trillions of dollars (enough to cover the losses of investors) will therefore get a “free house.” Does anyone really think that is a better idea?

A Niche in the Wreckage of Florida Real Estate

By ANDREW MARTIN

NORTH PORT, Fla. — One recent morning, Shannon Moore raced through a musty pink house — three bedrooms, two baths — that was advertised as having “good bones” and “primed for renovation.” As in many recently foreclosed homes in Florida, the appliances and air-conditioner were missing from this one, either taken by the previous residents or stolen.

”It’s not as bad as I thought,” Ms. Moore said. “You could probably get this place fixed up for $8,000. You could get a refrigerator on Craigslist for $200.”

“$70,000?” she asks aloud, referring to the list price. “What the heck?” Ms. Moore, a real estate broker, has found a profitable niche in the wreckage of Florida’s real estate market, where a glut of vacant homes continues to depress prices. She scouts out deals for several groups of investors, including one that counts a professional poker player as a member and a group of Macedonians from Toronto.

Just a few years back, real estate investors were considered pariahs for fomenting a buying frenzy that drove home prices to stratospheric levels. This time around, housing experts say investors are desperately needed because there are so many vacant homes and homebuyers are having such trouble obtaining credit.

“If Florida is going to have a comeback anytime soon, investors are going to have to play a role,” said Rick Sharga, a senior vice president at RealtyTrac. “There are just too many properties for traditional home buyers to absorb.”

Of course, speculators have been picking through the rubble of America’s real estate collapse for several years now, and the housing industry remains deeply troubled across the country, suggesting that it would be far worse were it not for investors. Data released by the National Association of Realtors recently shows that investors represented 17 percent of all home sales in 2010 nationwide, the same as the previous year. But in recent months, investment activity has picked up, according to Walter Molony, an association spokesman, who attributed the increase to relatively cheap prices and the lack of available credit for homebuyers.

There is no shortage of deals in Florida. The Census Bureau recently reported that 17 percent of the homes in Florida were vacant. Even though the figure includes vacation homes that were unoccupied at the time of the survey, the underlying rate within the state reflects a sustained downturn.

The median house price in Florida, meanwhile, had dropped to $121,900 in February, from $257,800 in June 2006, a decline of 53 percent, according to Metrostudy, a housing research firm. Indeed, some houses and condominiums in Florida are selling for roughly the price of a practical family sedan, new or used.

For instance, a two-bedroom house in Port Charlotte, just south of North Port on the gulf coast of the state, recently sold for $8,000, and listings for $25,000 homes are not uncommon. Many experts expect prices to drop even further.

”Nationally we are expecting prices to stabilize by the end of this year,” said Celia Chen, senior director at Moody’s Analytics. “We don’t expect it to stabilize in Florida until sometime in 2012, and that’s a direct overhang of the excess inventory.”

Despite the risks, several investors expressed optimism about their chances of making money, if not a killing.

“A wise man told me that the best time to enter a business is during a recession,” said Peter Ide, a British builder who was transferred by his company to Florida to buy up homes, fix them up and resell them. “The potential here is phenomenal.”

Steve Barnhardt, a friend of Ms. Moore’s, said he began buying up houses to stay afloat until the market revived. On this morning, he was installing inexpensive carpet in a three-bedroom house that he purchased for $76,000 and had just sold for $103,000; he estimates his profit was $9,000 after paying $5,000 in back taxes and closing costs. (He says he could have made more if not for “low-life” neighbors.)

“The things I used to do are no longer out there,” said Mr. Barnhardt, who had previously made a comfortable living investing in commercial real estate and operating heavy equipment. “Right now, this is what is paying my property taxes and keeping me alive.”

Not everyone views real estate investors as that benign, or savvy. April Charney, a public aid lawyer who lives in nearby Venice, questioned why investors would fix up houses with so few eligible buyers. Besides, she said the new owners were likely to end up with a vacant home next door with squatters, mold or filthy pools.

“They are dreaming,” she said. “That’s just a pipe dream in North Port.”

As for investors, there is the occasional reminder that they are benefitting from the misfortunes of others. A few weeks ago, a painter found a letter addressed to “the next occupant of this fine home” in one of the houses Ms. Moore’s investors had purchased.

“This house was my dream but like life sometimes dreams don’t work out,” the letter read. “Now I’m just surrounded with boxes of memories and dashed intentions of what may have been. So do me a favor. Make your own good memories here.”

About 35 miles southeast of Sarasota, North Port was carved out of shrub land in the 1950s by the General Development Corporation, which sold the plots to buyers up north. It remained a relatively quiet community until the last decade, when developers erected one subdivision after the next.

North Port’s population doubled in less than four years, city officials say. There are now about 55,000 residents.

In those high-flying days of Florida real estate, Ms. Moore said she would buy up vacant shrub land and sell seven or eight lots on a good day, for $50,000 apiece, making as much as 40 percent in profits.

Those days are long gone, and North Port has fallen hard. Ms. Moore, a Florida native, is stuck with four plots that cost her $38,000 each (each is worth $5,000 or less) and a duplex she bought for $140,000 (it’s now worth $30,000, she says).

She is also $100,000 under water on her house and living on a street, Mistleto Lane, in which a third of the houses are vacant, including one just across the street.

Nonetheless, Ms. Moore reinvented herself as an intelligence agent of sorts, alerting her clients, for instance, to details like whether a house has undesirable neighbors, Chinese drywall or an unsavory past. (She steered her clients away from a three-bedroom house that appeared to be a steal, but was tied to a grisly rape and murder.)

One investor, a Florida businessman, exclusively buys duplexes. Ms. Moore’s Macedonian clients want three-bedroom, two-bathroom houses that cost about $100,000, which they buy and rent. Mr. Ide’s group, which includes a retired Maryland developer and the poker player, buys homes at foreclosure auctions, fixes them up and resells them.

Since investors can’t inspect the inside of a foreclosed house before auction, Mr. Ide’s group is particularly reliant on Ms. Moore’s local knowledge. If she isn’t familiar with a house, she drives by and often brings along two of her three daughters, who are home-schooled. (Her 13-year-old, Willow, has made as much as $400 a week on Craigslist, selling belongings left behind in vacant homes.)

During a recent auction, Ms. Moore sat in front of a computer screen in her office, with Mr. Ide’s partner, Jon Breen, the retired developer, on the speaker phone. Thirteen properties were being auctioned by the county this morning, though Mr. Breen focused his attention on a half dozen or so.

Ms. Moore pulled up comparable sales and back taxes, while Mr. Breen calculated his costs aloud.

“Barcelona has $8,367 in back taxes,” she says, referring to a house on Barcelona Avenue in Sarasota. “Remember the house next door had an odd color.”

“I think it’s a junky piece of property,” Mr. Breen said, before bidding $59,000.

Later, when the house sells for $64,001, she says, “Who is the dummy today? They are paying way too much.”

Mr. Breen ended up buying two houses in North Port, one for $111,001 and another for $77,002.

Later that day, when Ms. Moore met the investors to change the locks and inspect the houses, they were pleasantly surprised. Both houses were in relatively good condition and would require only some paint and minor repairs.

“This is about as good as it gets,” Mr. Ide said, as he inspected the $111,001 house, a four-bedroom where some water damage around the Jacuzzi was the only apparent problem. But it did get better.

A week later, after $4,500 was spent on new appliances and repairs, an offer was made on the house for $152,000.

Ms. Moore, meanwhile, has plowed her earnings into her own deals, recently purchasing a second duplex for $30,000 in cash. “I’m getting $650 a side in rent, a lot better than the stock market,” she said. “My plan is to buy up as much multifamily as I can while the market is down.”

Florida 6th District Strikes at Heart of Pretender Lenders

5 08 10 Florida mediationorder

The main message is that what we have here is a legal obligation in search of a creditor and that the opposition is trying to use the court as a vehicle to steal the house and run with it while the whole securitization mess is scrutinized.

I think this Order is far more significant than it might seem both statewide in Florida and nationally. This Order, as I read it, requires (1) verification of the Lender’s status and (2) the ACTUAL authority of a designated person in writing, as a decision-maker; in plain language it asks whether the note is actually legally payable to the (pretender) Lender that wishes to foreclose and whether they have an actual live person who has the authority to mediate, execute a satisfaction of mortgage and otherwise make any final decisions on the settlement of the matter. That eliminates virtually 100% of all pretender lenders, which in turn eliminates virtually 100% of all foreclosures.

This Order should be used as persuasive argument that an entire district has found the need to do this, which combined with the other Supreme Court and trial decisions we have reported here, should be persuasive enough to give the Judge pause about who is the REAL party trying to get a FREE HOUSE.

In the Motion Practice Workshop, an underlying theme is that you should not be arguing in the abstract or the nuances. In one hearing after another your objective is to get the Judge to agree to at least one thing that is OBVIOUS procedurally and gradually get to the next hearing and then the next, in a process of education that gives the Judge time to process and absorb the reality of the situation.

The main message is that what we have here is a legal obligation in search of a creditor and that the opposition is trying to use the court as a vehicle to steal the house and run with it while the whole securitization mess is scrutinized.

Tourre: The CDO’s I Create Are “Pure Intellectual Masturbation”

“a ‘thing’ which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price.”

Editor’s Note: Think about it. The foundation of the supply of money that was pressure pumped into our economic housing system resulted in inflation of home appraisals.

  • It was so large that everyone thought the “market” was going up, when in fact it was going nowhere.

  • Everyone knew it except the homeowners who were tricked into relying upon “lenders” who had no stake in the transaction except to close it and collect their fee.

  • Under intense pressure from Wall Street consisting of the carrot of higher fees and the whip of unemployment if they didn’t comply, nearly everyone in the real industry on up to the securities industry was corrupted by this scheme.

  • And it was all based upon creating a scheme that was so complex, nobody could understand it or assess the value of what they were buying.
  • So front and center, the rating agencies and appraisers, both performing the same task, both violating the most basic standards of their “professions” gave credence to this intellectual exercise that far from pleasurable, brought the worst pain to the American soil since the Great Depression.
  • The supreme Irony is that they still have us under their spell. We have good people pointing the finger at other good people raising hell about how nobody should get a free house, while the fight itself is allowing just that — a free house to anyone who walks away with title or proceeds from a foreclosure sale of property “secured” by a securitized loan.
  • I have yet to see a single foreclosure sale where the party foreclosing had one dime at risk in the loan.

Fabulous Fab Tourre: The CDO’s I Create Are “Pure Intellectual Masturbation”

Gregory White | Apr. 25, 2010, 1:49 PM | 2,242 | comment 33

fabrice toureFabrice “Fabulous Fab” Tourre has bitten his tongue again, after it was revealed in an e-mail that he likened the debt instruments he created to, “pure intellectual masturbation,” according to the Times of London.

Other e-mails also revealed his distrust for the index many of his derivatives products were based on, the ABX, comparing it to “Frankenstein“, who famously turned on his inventor.

He also said that his creation was “a ‘thing’ which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price.”

While the SEC’s release of a full e-mail between Fabrice Tourre and his girlfriend did much to make the man look more sincere, these latest revelations will heap pressure on the Goldman Sachs market-maker as his Senate hearing looms.

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