PTSD: A Breakdown of Securitization in the Real World

By using the methods of magicians who distract the viewer from what is really happening the banks have managed to hoodwink even the victims and their lawyers into thinking that collection and foreclosure on “securitized” loans are real and proper. Nobody actually stops to ask whether the named claimant is actually going to receive the benefit of the remedy (foreclosure) they are seeking.

When you break it down you can see that in many cases the investment banks, posing as Master Servicers are the parties getting the monetary proceeds of sale of foreclosed property. None of the parties in the chain have lost any money but each of them is participating in a scheme to foreclose on the property for fun and profit.

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It is worth distinguishing between four sets of investors which I will call P, T, S and D.

The P group of investors were Pension funds and other stable managed funds. They purchased the first round of derivative contracts sometimes known as asset backed securities or mortgage backed securities. Managers of hedge funds that performed due diligence quickly saw that that the investment was backed only by the good faith and credit of the issuing investment bank and not by collateral, debts or mortgages or even notes from borrowers. Other fund managers, for reasons of their own, chose to overlook the process of due diligence and relied upon the appearance of high ratings from Moody’s, Standard and Poor’s and Fitch combined with the appearance of insurance on the investment. The P group were part of the reason that the Federal reserve and the US Treasury department decided to prop up what was obviously a wrongful and fraudulent scheme. Pulling the plug, in the view of the top regulators, would have destroyed the investment portfolio of many if not most stable managed funds.

The T group of investors were traders. Traders provide market liquidity which is so highly prized and necessary for a capitalist economy to maintain prosperity. The T group, consisting of hedge funds and others with an appetitive for risk purchased derivatives on derivatives, including credit default swaps that were disguised sales of loan portfolios that once sold, no longer existed. Yet the same portfolio was sold multiple time turning a hefty profit but resulted in a huge liability when the loans soured during the process of securitization of the paper (not the debt). The market froze when the loans soured; nobody would buy more certificates. The Ponzi scheme was over. Another example that Lehman pioneered was “minibonds” which were not bonds and they were not small. These were resales of the credit default swaps aggregated into a false portfolio. The traders in this group included the major investment banks. As an example, Goldman Sachs purchased insurance on portfolios of certificates (MBS) that it did not own but under contract law the contract was perfectly legal, even if it was simply a bet. When the market froze and AIG could not pay off the bet, Hank Paulson, former CEO of Goldman Sachs literally begged George W Bush to bail out AIG and “save the banks.” What was saved was Goldman’s profit on the insurance contract in which it reaped tens of billions of dollars in payments for nonexistent losses that could have been attributed to people who actually had money at risk in loans to borrowers, except that no such person existed.

The S group of investors were scavengers who were well connected with the world of finance or part of the world of finance. It was the S group that created OneWest over a weekend, and later members of the S group would be fictitious buyers of “re-securitized” interests in prior loans that were subject to false claims of securitization of the paper. This was an effort to correct obvious irregularities that were thought to expose a vulnerability of the investment banks.

The D group of investors are dummies who purchased securitization certificates entitling them to income indexed on recovery of servicer advances and other dubious claims. The interesting thing about this is that the Master Servicer does appear to have a claim for money that is labeled as a “servicer advance,” even if there was no advance or the servicer did not advance any funds. The claim is contingent upon there being a foreclosure and eventual sale of the property to a third party. Money paid to investors from a fund of investor money to satisfy the promise to pay contained in the “certificate” or “MBS” or “Mortgage Bond,” is labeled, at the discretion of the Master Servicer as a Servicer Advance even though the servicer did not advance any money.

This is important because the timing of foreclosures is often based entirely on when the “Servicer Advances” are equal to or exceed the equity in the property. Hence the only actual recipient of money from the foreclosure is not the P investors, not any investors and not the trust or purported trustee but rather the Master Servicer. In short, the Master servicer is leveraging an unsecured claim and riding on the back of an apparently secured claim in which the named claimant will receive no benefits from the remedy demanded in court or in a non-judicial foreclosure.

NOTE that securitization took place in four parts and in three different directions:

  1. The debt to the T group of investors.
  2. The notes to the T and S group of traders
  3. The mortgage (without the debt) to a nominee — usually a fictitious trust serving as the fictitious name of the investment bank (Lehman in this case).
  4. Securitization of spillover money that guaranteed receipt of money that was probably never due or payable.

Note that the P group of investors is not included because they do not ever collect money from borrowers and their certificates grant no right, title or interest in the debt, note or mortgage. When you read references to “securitization fail” (see Adam Levitin) this is part of what the writers are talking about. The securitization that everyone is talking about never happened. The P investors are not owners or beneficiaries entitled to income, interest or principal from loans to borrowers. They are entitled to an income stream as loans the investment bank chooses to pay it. Bailouts or even borrower payoffs are not credited to the the P group nor any trust. Their income remains the same regardless of whether the borrower is paying or not.

Lehman to Pay $2.4 Billion out of Bankrupt Estate

“Lehman’s own documents show it was aware of the widespread problems and deteriorating performance of the loans it had securitized,” with half the loans at one point containing material misrepresentations, the trustees said in a court filing.

Editor’s Note: The difference is money — investors have it and borrower’s don’t. So while investors are successfully litigating fraud and deceit, the borrowers can’t afford to litigate the same issues. The idea that Lehman was somehow honest with borrowers and not with investors is preposterous.

Lehman recently closed out a $2 billion dispute with Citigroup Inc. over derivatives, and similar litigation over derivatives with Credit Suisse Group AG is the last major remaining contest.

Around 14 large institutional holders, including Goldman Sachs Asset Management LP and BlackRock Financial Management, broke ranks with hedge funds and accepted a settlement last year valuing claims around $2.4 billion. Chapman noted that these “sophisticated players” held around 24 percent of the RMBS.

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See Lehman Brothers Knew 1/2 the loans were misrepresented to both borrowers and investors

The trustees representing RMBS holders are Deutsche Bank National Trust Co., Law Debenture Trust Co. of New York, U.S. Bank National Association and Wilmington Trust Co., according to court papers.

A group of hedge funds, including Whitebox Advisors LLC, Deer Park Road Management Co. and Tilden Park Capital Management LP, was formed in 2016, and expanded in May 2017 to include Prophet Capital Management LP, Tricadia Capital Management LLC, BlueMountain Capital Management LLC and others, according to court records.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan.)

Practice note: Dig into the pleadings and exhibits in these cases and you will find a treasure trove of information that supports your contention at trial that the documents are unreliable and therefore the proof of the matters asserted must be proven with facts, not assumptions. You will probably uncover inconsistent allegations from Deutsch, Credit Suisse et al. They are most likely saying one thing in court with borrowers and another in court with investors.

An important note here is that these actions are based upon the presumptive finding of the US Bankruptcy trustee as to Lehman misrepresentations.

 

 

Matt Levine: Mortgage Math and Sympathetic Sales

Please refer to Bloomberg news for article about the Goldman Sachs/Fannie Mae non-performing loan purchases at:

https://www.bloomberg.com/view/articles/2017-03-20/mortgage-math-and-sympathetic-sales

 

Why would Goldman Sachs buy Delinquent and Defective Mortgages?

By the Lending Lies Staff

Just last year Goldman Sachs entered into settlements with state and federal governments over the sale of toxic mortgage backed securities to investors while subsequently shorting the very same securities they were selling.  Goldman would agree to provide $1.8 billion in debt relief to delinquent borrowers.  However, since Goldman (and likely no other identifiable party) doesn’t owns the debt, Goldman cuts its losses by repackaging the toxic debt, assigning it an AAA rating and selling it to unsuspecting investors and pension funds for a fee, thus off-loading any liability.  Goldman knows the feds won’t do anything to stop its crimes spree- so why not sell mortgage backed securities you know are toxic?

Goldman has once again successfully masterminded a new strategy to satisfy the $1.8 billion settlement without having to fund a dollar of that outstanding obligation, and while also profiting on this RICO scheme.

Goldman’s plan includes buying up billions of dollars of non-performing and defective loans at massive discounts.  Goldman just announced they were purchasing 4.5 billion dollars in non-performing loans from Fannie Mae.  It would be interesting to research if Fannie Mae discloses that these loans have material defects that cannot be remedied.

Goldman then contacts the homeowners and negotiates loan modifications by incentivizing the homeowner to participate by reducing their principle balance.  Most desperate and unsuspecting homeowners have no idea that Goldman is acting as a debt collector and there is no underlying party that owns the debt or has a right to modify the mortgage contract in the first place.  Once the modification is signed, in theory, a “new” loan is issued that rectifies all past endorsement, assignment and trust issues, while whitewashing all prior fraud.

The homeowner is now making payments on a new loan that is less than Goldman’s initial discount on the original purchase.  Goldman than credits the principle forgiveness against its $1.8 billion dollar mortgage relief obligation while making money!  Goldman is able to skirt the punishment and the fine costs them nothing because the debt was acquired at an even larger discount.

Finally, the true ingenuity of this plan emerges.  Once the loan is modified and performing, the loans can be repackaged and resold as Triple-A paper once again to unsuspecting buyers.

The Wall Street Journal reports that the debt scavengers at Goldman Sachs are the largest buyer of Fannie Mae’s non-performing loans, having purchased $5.7 billion worth of unpaid loans over the past several months.  Goldman Sachs should have been barred from ever participating in mortgage backed securities transactions after its last criminal enterprise.

Over the past year-and-a-half, Goldman Sachs has become the largest buyer of severely delinquent home loans from Fannie Mae. In fact, Goldman has acquired nearly two-thirds of $9.6 billion in loans the agency has auctioned off, representing unpaid loan balances in excess of $5.7 billion, according to the Wall Street Journal’s review of government records.

In all, Goldman has spent roughly $4.5 billion on some 26,000 Fannie-owned loans, according to government records. It has also been buying mortgages, from private sellers and Freddie Mac.  Apparently while everyone is unloading zombie mortgage loans, Goldman Sachs is buying as much toxic sludge that is available.

According to the government-sponsored enterprise, the portfolio was split into four pools of loans and auctioned off.

The winning bidder of the smallest of the four pools is Igloo Series II Trust (Balbec Capital). That pool contained 1,465 loans that carry an aggregate unpaid principal balance of $246,748,844.

The pool has an average loan size of $168,429; a weighted average note rate of 4.51%; a weighted average delinquency of 29 months; and a weighted average broker’s price opinion loan-to-value ratio of 78.75%.

The remaining $1.43 billion in unpaid principal balance went to MTGLQ Investors, a “significant subsidiary” of Goldman Sachs.

MTGLQ Investors is now a fixture among the NPL sales from both Fannie Mae and Freddie Mac.

Last year, MTGLQ Investors bought billion-dollar pools of NPLs from Fannie and Freddie in several different sales.

In this latest sale, MTGLQ Investors bought the remaining three pools of NPLs.

The first pool contained 3,062 loans that carry an aggregate unpaid principal balance of $496,205,215.

Goldman has an excellent business plan.  By renegotiating and repackaging worthless mortgage loans it can polish high-risk loans into grade-A paper.  The pension funds take on all of the risk if the homeowners default, and Goldman will have kicked the can down the road to the newest suckers in the scheme.

On Tuesday Goldman won the majority of defective loans at Fannie Mae’s latest auction, its largest to date. The bank bought about 8,000 loans with unpaid balances of $1.4 billion.

Goldman has paid between 50 and 90 cents on the dollar for the loans, according to Fannie Mae, however, some (if not all) of these loans are likely not worth a dime until fraudulently modified.

Meanwhile, because Goldman is getting credit toward fulfilling the terms of its settlement, it can afford to pay more for the delinquent loans than other competing bidders, which essentially means they’ve not only created but they have cornered an entire market.

 

David Dayen: Behind Closed Doors, Hillary Clinton Sympathized With Goldman Sachs Over Financial Reform

https://theintercept.com/2016/10/11/behind-closed-doors-hillary-clinton-sympathized-with-goldman-sachs-over-financial-reform/

Excerpts of Hillary Clinton’s previously secret speeches to big banks and trade groups in 2013 and 2014 show her exalting the work of her hosts, hardly a surprise when these groups paid her up to $225,000 an hour to chat them up.

Far from chiding Goldman Sachs for obstructing Democratic proposals for financial reform, Clinton appeared to sympathize with the giant investment bank. At a Goldman Sachs Alternative Investments Symposium in October 2013, Clinton almost apologized for the Dodd-Frank reform bill, explaining that it had to pass “for political reasons,” because “if you were an elected member of Congress and people in your constituency were losing jobs and shutting businesses and everybody in the press is saying it’s all the fault of Wall Street, you can’t sit idly by and do nothing.”

Clinton added, “And I think the jury is still out on that because it was very difficult to sort of sort through it all.”

Clinton praised Deutsche Bank in a 2014 speech for “the work that the Bank has done in New York City on affordable housing.”

While Deutsche Bank has given to anti-homelessness campaigns in the past, it was also cited in a New York State Senate report in January for refusing to maintain foreclosed properties in New York City neighborhoods and costing those communities millions in unpaid fines. Deutsche is also about to face a multi-billion-dollar penalty from the Justice Department for defrauding investors with low-quality mortgage securities, leading to the housing meltdown.

Those excerpts were among many listed in an 80-page document prepared by the Clinton campaign, listing potentially damaging quotes from the Democratic nominee’s paid but at that point still secret speeches. The report landed in campaign chairman John Podesta’s email, which was hacked, and then posted by WikiLeaks last week.

In a November 2013 speech to the National Association of Realtors (NAR), Clinton pronounced herself proud to work with the trade group as a U.S. senator to “look for ways to help families facing foreclosure with concrete steps.”

NAR represents real estate agents, who had no authority to assist distressed homeowners. An April 2007 document lists NAR’s priorities in foreclosure mitigation, and they were able to get an amendment exempting mortgage debt forgiveness from being treated as earned income. But the rest amount to “urging” and “supporting” efforts to help homeowners that never happened.

Clinton has historically been far less critical of the revolving door between Wall Street and Washington than many other Democrats, and as secretary of state allowed two of her top aides — Tom Nides and Robert Hormats — to receive big payouts from their big-bank employers before entering public service.

“Thank you for lending me Tom Nides for the past two years,” Clinton said to a crowd at Morgan Stanley on April 18, 2013. As The Intercept reported in July 2015, Nides moved from chief operating officer at Morgan Stanley into Clinton’s State Department, and when Clinton left Foggy Bottom, Nides went right back to Morgan Stanley as a vice chairman.

Clinton joked about the “culture shock” for Nides, working a government job. “You should have seen his face when he learned there were no stock options at the State Department. But he soon not only settled in very nicely, he became positively enthusiastic when I told him we did have our own plane.” Clinton also gushed about Hormats, who joined her at State after a career at Goldman Sachs, in a 2014 speech at JPMorgan Chase………………..for the remaining article please visit https://theintercept.com/2016/10/11/behind-closed-doors-hillary-clinton-sympathized-with-goldman-sachs-over-financial-reform/

 

Download Hillary Clinton’s Paid Speech Flags: https://www.documentcloud.org/documents/3130829-HRC-Paid-Speeches-Flags.html

Goldman Sachs Fined $5 Billion for Violations Dating Back to 2008

…should anyone who owns a home that is subject to claims of securitization of their mortgage be at risk of losing their property?

…the government should stop the arrogant policy of letting most of the burden fall onto middle class property owners.

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So we have another “settlement” with one of the major players in the greatest economic crime in human history. But the cover-up of the actual transgressions  emanating from corruption on Wall Street continues. Government investigators should have had a press conference in which they clearly stated the nature of the violations — all of them. People deserve to hear the truth; and the government should stop the arrogant policy of letting most of the burden fall onto the middle class property owners.

The defects in government intervention give rise the illusion that these settlements only have effect on the investors and other financial institutions who were defrauded. Both the charges and the settlements seem far away from the ground level loans and foreclosures. But that is only because of deals in which the government’s continued complicity in “protecting the banking system — a policy that has rewarded trillion dollar banks and given them unfair advantage over the 7,000 other banks and credit unions.

Government now knows the truth about what Wall Street did. But they are restricting their comments in the fear that maybe notes and mortgages would be obviously void, making the MBS bonds worthless causing some world-wide panic and even aggression against the United States for allowing these enormous crimes to occur and continue.

For example, if the government investigators actually said that the REMIC Trusts were never funded, then the cases pending in which the REMIC Trust is named as the initiator of the foreclosure would dissolve into nothing. There would be no Plaintiff in judicial states and there would be no beneficiary in non-judicial states. Thus the filing of a substitution of trustee on a deed of trust would be void. It would raise jurisdictional issues in addition to the absence of any foundation for the assertion of the right to foreclose.

If government investigators identified patterns of conduct in the fabrication, forgery and utterance of false instruments, recording false instruments, then presumptions of validity might not apply to documents presented in court as evidence. Instead of the note being all the evidence needed from a “holder”, the actual underlying transactions would need to be proven by parties seeking foreclosure. If those transactions don’t actually exist, then it follows that the note, mortgage and claim are worthless.

And a borrower could point to the finding by administrative agencies and law enforcement agencies that these practices constitute customary and usual practices in the industry — a statement that would go a long way to convincing a judge that he or she should not assume or presume anything without proof of payment (consideration) in the origination of the loan with whoever ended up as Payee on the note. The same analysis would apply for the alleged acquisition of the “loan.”

If the party on the note or the party claiming they acquired the loan was NOT a party to an actual transaction in which they made the loan or paid to acquire it, then the note is evidence of a transaction that does not exist. Instead government is continuing to cover-up the fact that a policy decision has been made in which borrowers can fend for themselves against perpetrators of financial violence.

The view from the bench still presumes that they would not have a case to decide if there wasn’t a valid loan transaction and a valid acquisition of the loan. They see defects in documentation as splitting hairs. And to make matters worse I have personally seen judges strike virtually all discovery requests that address the issue of whether real transactions took place. And I have seen lawyers retreat over the one issue that would mean success or failure for their client. The task of defending illegal foreclosures would be far easier if the consensus view from the bench was that all the loans are suspect and need to be proven as to ownership, balance and authority.

These issues are almost impossible to prove at trial because the parties with the actual information and proof are not even at the trial. But they can be reached in discovery where on a motion to compel answers and a hearing on the objections from the “bank” or “servicer” the homeowner presses his demand for data and documents that show the actual existence or nonexistence of these transactions.

It would seem that the U.S. Department of Justice is coming out of the shadows on this. They are looking back to 10 years ago when the violations were at their most extreme. We may yet see criminal prosecutions. But putting people in jail does not address the essential issue, to wit: should anyone who owns a home that is subject to claims of securitization of their mortgage be at risk of losing their property?

 

Oops — Goldman Sachs Lets the Cat Out of the Bag — Naked Trades on Thin Air

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see http://www.bloomberg.com/news/articles/2015-11-09/u-s-probes-treasuries-niche-that-some-investors-claim-is-rigged

Traders at global banks colluded to artificially inflate the price of instruments that allow them to sell U.S. debt before they own it, and then bought the debt at auctions for an artificially suppressed price, unfairly profiting at investors’ expense, according to several lawsuits filed against the banks beginning in July. The banks haven’t responded to those allegations in court.

“Vapor Money” is what the banks are saying about the defenses to foreclosure actions. As usual they are accusing us of doing what they are doing. Their argument is that if we can’t prove the chain of money, then we are dealing in hypothetical or theory; obviously a fool’s errand by their accounts. What difference does it make where the money came from on a loan as long as the money landed on the closing table? The first answer is how is a court to know one way or the other without the facts? And how is the Court to get the facts unless it permits the use of discovery to get the information from the only place it can be retrieved — the players in the securitization fail market.

I have been writing for years about the lack of any entity that could be legally identified as a creditor and therefore that the foreclosures were wrongful, illegal and are the root cause of our stumbling economy. Through the use of “naked” trades in which the appearance of a (nonexistent) trade is created the banks have created a “currency” market that is some twenty times the size of the actual fiat currency from all the countries in the world. Goldman just tried to sneak in a “disclosure” on the currency markets and they have effectively admitted that they are creating those trades out of thin air.They are attempting to sneak into the regulatory process to preserve the “shadow banking system” and exercising powers that only the Federal government should be exercising.

Doesn’t make any difference? Ask the treasury department whose unissued debt instruments are being used to create the appearance of profits for the banks; the existence of these vapor instruments traded on the anticipated issuance of US Treasury instruments is not only improper and illegal but actually effects the value of the instruments themselves when they are issued and sold. Does it matter where the money comes from and from whom the money is taken? Yes.

And that is exactly what happened with most of the “mortgage loans” during the mortgage meltdown era which is now ramping up again with such idiotic things as new securitizations of nonperforming loans. Think about that.

Just as a trade on an unissued treasury bill is a trade on nothing, so too is the trading before a “Loan” is issued. All those trades are based upon illusion, smoke and mirrors. The commercial paper market is supposed to take care of things like that. So too are the ratings and the insurance agencies. And the legal system is also supposed to be the legal bastion to combat over-reaching by the banks who have virtually unchecked powers to create anything they want — including “loans” they design for failure, bet on the failure and then sell the loans multiple times. So yes it does matter where the money came from and under what pretenses the money was secured.

Legally it is important because of basic contract law — offer, acceptance and consideration BOTH WAYS in a two party contract. Otherwise it is not a contract that can be enforced. It might be a contract, but it cannot be enforced — a distinction that nearly all judges miss. If the signature on the contract was procured by false pretenses then it isn’t even a contract. And since public policy requires disclosures of who is the actual creditor giving the “loan”,  the writing of the name of an originator who is merely a paid servant of unknown principals creates neither a contract nor any other type of enforceable agreement or instrument. Enforcement is patently against the public policy contained in the law of the land — the Federal Truth in Lending Act.

State laws concerning property and recording also prohibit such actions. If the transaction relied upon by the person requesting recording is nonexistent (they didn’t give the loan) then the instrument should not have been released from the closing table, much less recorded. So there is no valid recorded instrument upon which one could seek foreclosure. And the reason is simple: the entire reason for the recording statutes is provide certainty in the real estate market. If the truth is that we don’t know who the lender is then we cannot be sure, without litigation, who to pay when we wish to satisfy such a loan nor can we be certain of who has the right to collect payments or enforce the loan. Judges who are so set on not giving homeowners a “free house” are sacrificing the entire marketplace to accomplish their sense of morality.

And speaking of the “closing table” it is just plain wrong to say that the loan contract, even if it was real, was consummated the moment the “borrower” signed the papers. The funding is not received by the closing agent until hours, days, weeks, or even months after the alleged closing. So there is no “closing table.” It is now custom and practice in the industry to allow for post-closing underwriting, which is to say that there is no closing, according to the banks, until they fund the loan; So the money DOES  matter to the banks when it comes to the creation of the loan contract. Why wouldn’t it mean anything when they seek to terminate the loan contract through foreclosure?

The vapor is not in our theories of foreclosure defense. The vapor is in the pre-closing trading that eventually produces money that goes to pay the borrower, a former “lender”, a seller etc. At some point in the food processor that chews up the paper (lost notes etc) and title chains and money chains before “closing” and before “foreclosure” money ends up on the table. All of it was done, as with the rigged treasury debt market, BEFORE the investor gave its investment money to the selling brokers, and BEFORE the borrower signed, sometimes BEFORE the borrower actually signs the loan application and WITHOUT disclosures that would have sent the bankers to jail. —

Imagine a disclosure like this: “Borrower acknowledges that the party described on the note as ‘Lender’ is not the lender. The actual party whose money is being used to fund the transaction is unknown and shall never be known.”

Or imagine a disclosure like this: “Investor acknowledges that he is purchasing the certificates of an entity that does not exist, where the proceeds will not be paid to that entity. The underwriter and related entities will use such proceeds as they see fit within their sole discretion and shall not report nor respond to requests for reports on the use of proceeds.”

QUESTION TO THE SEC: If the certificates were not mortgage backed, why do they qualify for deregulation for REMICs? Why have you not investigated the fact that the Trusts received no money, assets, business, payments, or even a bank account?

JP Morgan Corners Gold Market — where did they get the money?

Zerohedge.com notes that JP Morgan has cornered the market in gold derivatives. They ask how the CFTC, who supposedly regulates the commodities markets could have let this happen. I ask some deeper questions. If JPM has cornered the market on those derivatives, is this a reflection that they, perhaps in combination with others, have cornered the market on actual gold reserves? Zerohedge.com leaves this question open.

I suggest that this position in derivatives (private contracts that circumvent the actual futures market) is merely a reflection of a much larger position — the actual ownership or right to own gold reserves that could total more than a trillion dollars in gold. And the further question is that if JPM has actually purchased gold or rights to own gold, where did the money come from? And the same question could be asked about other commodities like tin, aluminum and copper where Chase and Goldman Sachs have already been fined for manipulating market prices.

This is the first news corroborating what I have previously reported — that trillions of dollars have been diverted from investors and stolen from homeowners by the major banks, parked off shore, and then laundered through investments in natural resources including precious metals. This diversion occurred as an integral part of the mortgage madness and meltdown. It was intentional and knowing behavior — not bad judgment. It was bad because of what happened to anyone who wasn’t an insider bank (see Thirteen Bankers by Simon Johnson). But to attribute stupidity to a group of bankers who now have more money, property and investments than anyone else in the world is pure folly. What Is stupid about pursuing a strategy that brings a geometric increase in wealth and power? This was no accident.

And the answer is yes, all of this is relevant to foreclosure litigation. The question is directed at the source of funds for JP Morgan, Chase, Goldman Sachs and the other main players on Wall Street. And the answer is that they stole it. In the complicated world of Wall Street finance, the people at the Department of Justice and the SEC and other regulatory agencies, there are scant resources to investigate this threat to the entire financial system, the economy in each of the world marketplaces, and thus to national security for the U.S. And other nations.

It would be naive in the context of current litigation over mortgages and Foreclosures to expect any judge to allow pleading, discovery or trial on evidence that traces these investments backward from gold derivatives to the origination or acquisition of mortgages. Perhaps one of the regulators who read this blog might make some inquiries but there is little hope that they will connect the dots. But it is helpful to know that there is plenty of corroboration for the position that the REMIC Trusts could not have originated or acquired mortgages because they were never funded with the money given to the broker dealers who sold “mortgage bonds” issued by those Trusts with no chance of repayment because the money was never used to fund the trusts.

The unfunded trusts could not originate or acquire the loans because they never had the money. In fact, they never had a trust account. Thus in a case where the Plaintiff is US Bank as trustee is not only wrong because the PSA and their own website says that trustees don’t initiate Foreclosures — that is reserved to the servicers who appear to have the actual powers of a trustee. The real argument is that the trust was never a party to the loan because the trust was never party to a transaction in which any loan was acquired or originated.

Investors and governmental agencies have sued the broker dealers accusing them of fraud (not bad judgment) and mismanagement of money — all of which lawsuits are being settled almost as quickly as they are filed. The issue is not just bad loans and underwriting of bad loans. That would be breach of contract and could not be subject to claims of fraud. The fraud is that the investment banks took the money from investors and then used it for their own purposes. The first step was skimming a large percentage of the investor funds from the top, in addition to fake underwriting fees on the fake issuance of mortgage bonds from an unfunded trust.

And here is where the first step in mortgage transactions and foreclosure litigation reveals itself — compensation that was never disclosed closed to the borrower in violation of he the Truth in lending Act. While most judges consider the 3 year statute of limitations to run absolutely, it will eventually be recognized by the courts that the statute doesn’t start to run until discovery of the undisclosed compensation by an undisclosed party who was a principal player in permeating the loan. This will be a fight but eventually success will visit someone like Barbara Forde in Scottsdale or in one of the cases my firm handles directly or where we provide litigation support.

The reason it is relevant is that by tracing the funds, it can be determined that the actual “lender” was a group of investors who thought they were buying mortgage bonds and who did not know their money had been diverted into the pockets of the broker dealers, and then used to create fictitious transactions that the banks falsely reported as trading profits. In order to do this the broker dealers had to create the illusion of mortgage loans that were industry standard loans and they had to divert the apparent ownership of those loans from the investors through fraudulent paper trails based on the appearance of transactions that in fact never happened. In truth, contrary to their duties under the prospectus and pooling and servicing agreement, the broker dealers created a false “proprietary” trade in which the investment bank was the actual trader on both sides of the transaction.

They booked some of these “trades” as profits from proprietary trading, but the truth is that this was a yield spread premium that falls squarely within the definition of a yield spread premium — for which the investment bank is liable to be named as a party to the closing of the loan with borrowers. As such, the pleading and proof would be directed at the fact that the investment bank was hiding their identity or even their existence along with the fact that their compensation consisted of a yield spread premium that sometimes was greater than the principal amount of the loan. Under federal law under these facts (if proven) and the pleading would establish that the investment bank should be a party to the claim, affirmative defenses or counterclaim of borrowers for “refund” of the undisclosed compensation, treble damages, interest and attorney fees. I might add that common law doctrines that are not vulnerable to defenses of the statute of limitations under TILA or RESPA, could be used to the same effect. See the Steinberger decision.

Lawyers take note. Instead of getting lost in the weeds of the sufficiency of documentation, you could be pursuing a claim that is likely to more than offset the entire loan. I make this suggestion to attorneys and not to pro se litigants who will probably never have the ability to litigate this issue. My firm offers litigation support to those law firms who have competent litigators who can appear in court and argue this position after our research, drafting and scripting of litigation strategies. Once taught and practiced, those firms should no longer require us to provide support except perhaps for our expert witnesses (including myself). For more information on litigation support services offered to attorneys call 850-765-1236 or write to neilfgarfield@hotmail.com.

I conclude with this: it is unlikely that any judge would seriously entertain discharging liability or stop enforcement of a mortgage merely because of a defect in the documentation. These defects should be used — but only as corroboration for a more serious argument. That the attempted enforcement of the documentation is a cover-up of a fraud against the investors and the borrower; this requires artful litigating to show the judge that your client has a legitimate claim that offsets the alleged debt to the investors who are seeking damage awards not from the borrowers but from the investment bankers. As long as the Judge believes that the right lender and the right borrower are in his court, the judge is not likely to make rulings that would create additional uncertainties in a market that is already unstable.

I have always maintained that a pincer action by investor lenders and homeowner borrowers would bring home the point. The real culprits have been left out of foreclosure litigation. Tying investment banks to the loan closing would enable the homeowner to show that the intermediaries are in fact inserting themselves as parties in interest — to the detriment of the real parties. The investors are bringing their claims against the broker dealers. Now it is time for the borrowers to do their part. This could lead to global settlements in which borrowers and investors are able to mitigate (or even eliminate) their losses.

Wall Street banks shifting “profits” from mortgage bonds into natural resources

Wall Street banks know all about leveraging. They need to bring back the huge quantity of money they stole from the U.S. economy that they have secreted around the world (without paying a dime in taxes). The strategy they adopted was to bring the money from the shadow banking sector into the real banking world by “investing” in natural resources. The reason for the choice is obvious — high demand for the raw materials, high liquidity in the marketplace for both the products and the futures and related contracts for “trading profits” (like the “trading profits they created with investor money in the mortgage bond market before any loans were made), and an opportunity for virtually unlimited “leverage” where they could control prices and bet against the very same investments they were selling to their customers.

The leverage comes from a primary investment in the warehousing and transport of raw materials and secondarily taking positions in the ownership of natural resources. This allows them to manipulate the cost of raw materials — like copper and aluminum (see articles below), manipulate the politics in our country so that infrastructure repairs and rebuilding is out off until there is a tragedy of a large collapsing bridge killing thousands, and manipulate the bidding process for natural resources (like the Iraq and Afghanistan wars) so that there is a level of panic that causes the nation to send ten times the price of rebuilding now. The natural resources market is basically the only game they can play because it is the only marketplace that is large enough to absorb trillions of dollars stolen from Americans and people all over the world in the securitization scam.

Just as securitization was an illusion, making the base investment (mortgage loans) non existent at the same moment they were created or acquired, so will be the exotic investment vehicles now being prepared for both institutional and ordinary investors that will cover the multiple sales of the same bundle of commodities. Here we go again! Another boom and bust.

Tue, Aug 13

CFTC subpoenas metal warehouse companies • The Commodity Futures Trading Commission has reportedly subpoenaed Goldman Sachs (GS), JPMorgan (JPM), Glencore Xstrata (GLCNF.PK) and their subsidiaries for documents relating to warehouses they operate for aluminum and other metals. • The agency has requested information dating back to January 2010; it also wants documents relevant to the companies’ relationships with the London Metals Exchange. • The CFTC’s investigation follows allegations that the activities of warehousing companies have artificially boosted the price of metals, particularly aluminum. • Earlier speculation said the CFTC had sent subpoenas to an unnamed metals warehousing firm.

Full Story: http://seekingalpha.com/currents/post/1216972?source=ipadportfolioapp

Federal Reserve Continues Welfare Payments to Banks

If the bond buying program had been directed at direct assistance to investors and homeowners, the crisis would already be over and GDP would be rising by at least 3.5%, unemployment at 5% or less, and the deficit would be eliminated on an annual basis and vastly reduced long term. Debt would cease to be a problem which means that Banks would lose their position of complete dominance.

As Iceland shows all day and all month and all year, even the banks would be prospering and litigation would be virtually eliminated with respect to the validity and enforcement of mortgages and assignments. The cleanup would become the cure. The corruption of title is not problem in several countries because the county recorders wouldn’t accept the garbage that the banks were filing here. We have toxic title and the illusion of a healthy economy. Others do not have toxic title and are dealing with reality, warts and all.

Fed Announces Continued Bond Purchases, Mortgage Rates Fall
http://realtytimes.com/rtpages/20130626_bondpurchases.htm

It’s Official: Bank of America Has the Worst Reputation in the Banking Industry
http://www.fool.com/investing/general/2013/06/25/its-official-bank-of-america-has-the-worst-reputat.aspx

17 Signs That Most Americans Will Be Wiped Out By The Coming Economic Collapse
http://www.zerohedge.com/node/475692

Meet the Nation’s Toughest New Foreclosure Protection Law
http://www.theatlanticcities.com/housing/2013/06/meet-nations-toughest-new-foreclosure-protection-law/5952/

BUYING A HOUSE, BUYER BEWARE! Foreclosure documentation issues trap investors, creating litigation risk
http://www.housingwire.com/fastnews/2013/06/21/foreclosure-documentation-issues-trap-investors-creating-litigation-risk

Bank Of America Allegedly Gave Cash Bonuses To Workers Pushing Homeowners Into Foreclosure
http://www.businessinsider.com/bofa-sued-over-foreclosure-practices-2013-6

WHY WOULD A BANK BE SO ANXIOUS TO FORECLOSE IF IT WAS GOING TO ABANDON THE PROPERTY? Nearly 3 in 10 Oregon homes in foreclosure vacant
http://www.oregonlive.com/front-porch/index.ssf/2013/06/28_of_oregon_homes_in_foreclos.html

Foreclosures Are Still a Concern
http://online.wsj.com/article/SB10001424127887324520904578553660440428142.html

Florida puts a limit on deficiency Judgments but what happens when the real creditor shows up? Banks Go after Homeowners Years after Foreclosure
http://www.allgov.com/news/top-stories/banks-go-after-homeowners-years-after-foreclosure-130623?news=850369

Conflict for the big accounting firms? They did the audits and certified the balance sheets of both the investment banking companies and the ratings companies. A bad report card would put them at risk: Another Conflicted Foreclosure Review: PricewaterhouseCoopers and Ally/ResCap
http://www.forbes.com/sites/francinemckenna/2013/06/25/another-conflicted-foreclosure-review-pricewaterhousecoopers-and-allyrescap/

Regulatory Looting, Promontory-Style: Botched Foreclosure Reviews Alone Generate More than Double Goldman’s Revenues per Employee
http://www.nakedcapitalism.com/2013/06/regulatory-looting-promontory-style-botched-foreclosure-reviews-alone-generate-more-than-double-goldmans-revenues-per-employees.html

Promontory Financial Group Paid More Than $900 Million for Independent Foreclosure Review
http://4closurefraud.org/2013/06/24/promontory-financial-group-paid-more-than-900-million-for-independent-foreclosure-review/

 

Fear of Unraveling the Truth: Is the Fed Running Interference for the Banks

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Comment and Analysis: AIG correctly decided not to try to bite the hand that saved it when it refused the demand of Hank Greenberg to join in his lawsuit against the government. Greenberg, some will recall, was forced out of AIG in a scandal in 2005.

Now AIG is attempting to open the door to suing banks besides the suit it already filed against Bank of America for selling them worthless trash instead of high rated bonds that were safe and verified. But the Fed created Maiden Lane II stands in the way even though it has already wound down its affairs.

The argument is that AIG transferred its litigation right to Maiden Lane. So the question is whether that was standard procedure and did the maiden Lane entities get such a transfer of litigation rights on ALL the debts that were  “contributed” to the Maiden Lane entities. While this particular suit has more to do with life insurance than mortgages, it has far reaching implications.

The questions raised by all these “transfers” is who transferred what to whom, when and what did the Maiden Lane entities actually get in terms of legal title to something. If they did get legal title to either the bogus mortgage bonds or the loans themselves, then why are there foreclosures in the name of other entities?

And if these entities were given the opportunity to dump the bad bonds or loans onto the Fed and be bailed out 100 cents on the dollar, then why is there any balance in any loan receivable account relating to the origination of ANY loan involved in the Fed transfers?

The can of worms covered over by the Maiden Lane transactions is deep and ugly. Similar transactions occurred all over Wall Street as some parties received 100 cents while others were left out in the cold — especially investors who put up the money to originate the financial transactions in the first place.

As a practice hint, I would say that you should inquire as to whether the subject loan is claimed to be part of an alleged investment pool that issued mortgage-backed bonds and which delivered ownership in indivisible shares in the underlying mortgages.

If yes, then you should inquire as to whether any or all of the bonds were the subject of a transfer to any of the Maiden Lane entities or some other party. This would jive with what I am told is the fact that more than 50% of the REMIC trusts have long since ceased existence in any way, manner, shape or form.

Then you should inquire as to whether the subject loan was included in said transfer and if so, the how? Assignment, indorsement, etc. And you should inquire about the amount of money received for the transfer, how and when it was paid and production of copies of said payment.

The point here is that the parties who are initiating the foreclosures are (a) complete strangers to the transaction having neither funded nor purchased the receivable or loan and (b) that even if they were at some point owners of the loan, they transferred it out for payment which mitigates the loss and the balance due on the loan receivable account. If Maiden Lane II is winding down as reported, where did the loans go from there? The answer from inside Wall Street was they were “re-securitized” into new trusts, all private label away from the sight of investors, borrowers and regulators.

In the end, the result I am after here is that the loan was paid down in whole or in part and the complexity of the way the banks were bailed out is not a license to receive yet another windfall. The parties who paid have a right of contribution and perhaps a right to foreclose the mortgages.

But without the identity of the current real creditor, compliance with HAMP and other programs is impossible because you need the injured party at the table.

A party who once held the receivable but was paid should not be receiving a second payment or a free house through foreclosure just because they have presented part of the deal. Discovery should include ALL of the deal, which is why the Master Servicer should be the target of your investigations including the parent investment banking firm.

Goldman and other banks are reporting record profits resulting not from lending but from trading activity, which is the way I have said from the beginning that they would repatriate the money they stole is increments so that the value of their stock would appear to be worth more and more.

But think about it. What other managed fund is getting such bountiful results? Answer: NONE. That indicates to me that the proprietary trading is a ruse in which the banks are claiming profits derived from trading with funds obtained illegally and parked off shore. By controlling the transactions end to end, they can simply set the amount of profits they want to report and continue on for a long time considering estimates of anywhere from $3-$10 trillion that has been siphoned out of the world economy and for which there has been no accounting or accountability.

These are funds that SHOULD be credited to investors and the loan receivable accounts of borrowers.

A.I.G. Seeks Approval to File More Bank Suits

By

Since the summer of 2011, the insurance giant American International Group has been battling Bank of America over claims that the bank packaged and sold it defective mortgages that dealt A.I.G. billions of dollars in losses.

Now A.I.G. wants to be able to sue other banks that sold it mortgage-backed securities that plunged in value during the financial crisis. It has not said which banks, but possibilities include Deutsche Bank, Goldman Sachs and JPMorgan Chase.

But to sue, A.I.G. first must win a court fight with an entity controlled by the Federal Reserve Bank of New York, which the insurer says is blocking its efforts to pursue the banks that caused it financial harm.

The dispute illustrates the web of financial instruments that A.I.G. and the federal government became tangled in as the insurer nearly collapsed in 2008 and required a vast taxpayer bailout. It also shows the complexity of apportioning blame, five years after the financial crisis, and making wrongdoers pay for their share of the harm.

According to a lawsuit filed Friday, A.I.G. is seeking a declaration from a New York state judge that it has the right to pursue “billions of dollars of fraud and other tort claims that exist against numerous financial institutions,” even though Fed officials have said A.I.G. gave up that right.

“If I were the general counsel of A.I.G., I would seek this kind of declaratory judgment,” said Henry T. C. Hu, a former regulator who is now a professor at the University of Texas School of Law. “I don’t know whether I’d win, but it’s certainly worth trying.”

Much of A.I.G.’s rescue was needed because it didn’t have money in 2008 to cover guarantees that it sold banks in case the complex securities in their portfolios defaulted. But the latest dispute centers on a less familiar part of the bailout — the part in which reserves were removed from A.I.G.’s life insurance units and replaced with what turned out to be troubled mortgage securities.

The securitized housing loans lost value so fast when the bubble burst that some of A.I.G.’s life insurers risked being shut down by state insurance regulators. The Fed stepped in instead, and A.I.G.’s current lawsuit centers on the relationship that formed between the insurer and its rescuer as a result.

The Fed paid about $44 billion to extricate A.I.G.’s life insurance units from soured trades, and set up a special entity, Maiden Lane II, to buy the plunging mortgage securities for $20.8 billion. Those securities had an original face value of $39.3 billion.

Maiden Lane II is the sole defendant in A.I.G.’s lawsuit. The complaint says that at the moment Maiden Lane II bought the securities, it locked the insurance units into an $18 billion loss — the difference between the securities’ face value and their price in late 2008, arguably the bottom of the market. A.I.G. attributes a large chunk of its losses to the mortgage securities that it bought from Bank of America. It sued the bank for $10 billion in August 2011.

But one of Bank of America’s defenses is that A.I.G. lacks standing, having given its litigation rights to Maiden Lane II.

Last month, for instance, two senior Fed officials submitted declarations saying they believed that as part of the sale of assets to Maiden Lane II, A.I.G. had agreed not to go after any of the banks.

That prompted A.I.G. to file its suit, arguing that when it sold the tainted assets to Maiden Lane II, it did yield some litigation rights, but not the ones giving it the right to bring fraud complaints against the banks that put the securities together.

A.I.G. said those banks had misled its life insurance and money management businesses regarding the quality of the securities, and “obtained artificially high credit ratings” so the securities would pass the life insurers’ investment rules.

A.I.G.’s lawsuit is separate from one that until late last week it considered joining, which argued that the New York Fed acted unconstitutionally during the bailout, harming the insurer’s shareholders.

That lawsuit was filed in 2011 by Maurice R. Greenberg, a former chief executive of A.I.G. and a major shareholder. Mr. Greenberg had hoped the company would join the lawsuit, but the possibility that A.I.G. would sue its rescuer drew sharp criticism and A.I.G.’s board decided against it.

The new suit isn’t seeking financial compensation from the Fed.

The New York Fed, which has sole control of Maiden Lane II, declined to discuss the matter and has not yet responded to the complaint. A hearing on the arguments in the Bank of America case is scheduled for Jan. 29 in U.S. District Court for the Central District of California.

A.I.G. did not name other banks it would take action against, but it bought mortgage-backed securities from banks that included Deutsche Bank, Goldman Sachs and Bear Stearns, which was acquired during the financial crisis by JPMorgan. Much of the securities were sold to A.I.G. by Lehman Brothers, which collapsed in September 2008.

A.I.G. watchers are intrigued by the newest chapter of the story.

“A.I.G. has a credible claim that they’re pursuing aggressively,” said Michael J. Aguirre, a San Diego lawyer who is representing a California couple who argue the Fed was bilked when it bailed out A.I.G. “The question now is how aggressive the Fed is going to be on pushing back.”

“Is the government going to say, ‘We’re not pursuing these claims, but we’re not going to let anybody else pursue them either — we’re just going to let the banks walk away with fraud profits?’ ” he added.

Although it received relatively little scrutiny, the life insurance part of A.I.G.’s bailout was costlier than the better-known part involving A.I.G.’s Financial Products unit, which sold the notorious guarantees, known as credit-default swaps.

In 2011, A.I.G. tried to buy back the entire pool of mortgage securities from Maiden Lane II, but its offer, about $15 billion, was rejected.

Subsequently other bidders acquired all the assets, and last February the New York Fed announced it had made a $2.8 billion profit on its roughly $20 billion investment in the rescue entity. Terms of the bailout called for it to give one-sixth of any profit to A.I.G.

Maiden Lane II no longer holds any of the mortgage securities and is winding down its affairs.

FDIC ($677.4 Billion) Charges Banks With Fraud, Illegal Underwriting Practices

Has Obama Awakened?

Appraisal Fraud Alleged by this Blog

is found to be Centerpiece of this Action

Editor’s Note: The FDIC claims it studied a rough sampling of the securitized loans and alleges more than 60% of the loans packed into each deal contain material untrue or misleading statements.

In a resounding acceptance of the principles enunciated first on this blog, the FDIC, being the best regulator to file the charges, has moved against the big banks and servicers in the false scheme of securitization resulting in trillions in losses to the government, investors and homeowners.

Central to the allegations are that “defendants made untrue statements or omitted important information about such material facts as the loan-to-value ratios of the mortgage loans, the extent to which appraisals of the properties that secured the loans were performed in compliance with professional appraisal standards, the number of borrowers who did not live in the houses that secured their loans (that is, the number of properties that were not primary residences), and the extent to which the entities that made the loans disregarded their own standards in doing so.”

The allegations are so serious that it is unlikely that there will be any slap on the wrist coming out of this. The result of this lawsuit will have a profound impact on the housing market, the financial community and best of all, homeowners who have been using these allegations as defenses for years. It is apparent that the false premises upon which the bogus mortgage bonds were sold, combined with the complete avoidance of the supposed securitization scheme that was “in place,” has prompted this huge lawsuit. It is the tip of an iceberg where the administration is finally bringing the war to the door of the banks and will most likely lead to criminal charges as the cases progress.

 

The Federal Deposit Insurance Corp. filed three lawsuits against big banks, alleging the lenders misrepresented the quality of securitized loans sold to the now defunct Texas firm, Guaranty Bank.

The FDIC took Austin, Texas-based Guaranty Bank into receivership back in Aug. 2009.

This week, the regulator filed multiple lawsuits in Austin, Texas, suggesting Guaranty suffered major losses from toxic RMBS loans sold and packaged by mega banks and other financial institutions.

Defendants named in the multibillion-dollar lawsuits includeCountrywideJPMorgan Chase ($38.04 0%)Ally Financial,Deutsche Bank Securities ($34.07 0%)Bank of America ($8.190%) and Goldman Sachs ($105.32 0%) among others.

FDIC, on behalf of Guaranty, claims the banks misrepresented loan-to-value ratios, underwriting criteria and appraisal amounts when selling, packaging and underwriting home loans that became collateral for mortgage securities sold to Guaranty.

Specifically, the FDIC alleges the financial firms violated federal and Texas securities laws by failing to fully disclose or truthfully represent the quality of mortgages backing the security certificates.

In the first case, the FDIC accuses Countrywide Securities, Bank of America, Deutsche Bank and Goldman Sachs of playing a role in the packaging, selling or securitization of mortgages sold off to Guaranty Bank for $1.5 billion. The suit says Guaranty Bank acquired 8 certificates in the transaction.

The FDIC claims it studied a rough sampling of the securitized loans and alleges more than 60% of the loans packed into each deal contain material untrue or misleading statements.

The FDIC is suing for an undetermined amount that is no less than $559.7 million in damages.

The bank regulator also sued Ally Securities, Goldman Sachs, Deutsche Bank Securities and JPMorgan Securities among others. In that suit, the regulator claims, the firms were involved in the packaging, underwriting and sale of eight RMBS certificates valued at $1.8 billion.

The FDIC alleged in court records that the “defendants made untrue statements or omitted important information about such material facts as the loan-to-value ratios of the mortgage loans, the extent to which appraisals of the properties that secured the loans were performed in compliance with professional appraisal standards, the number of borrowers who did not live in the houses that secured their loans (that is, the number of properties that were not primary residences), and the extent to which the entities that made the loans disregarded their own standards in doing so.”

In that complaint, the FDIC is asking for at least $900.6 million in damages.

The regulator also sued JPMorgan Securities, Merrill Lynch, RBS Securities and WaMu Asset Acceptance Corp., making similar claims about 20 RMBS certificates that Guaranty paid $2.1 billion to acquire. The FDIC is requesting at least $677.4 billion in damages.

Pension Fund Bangs Goldman for $26.6 Million

Editor’s Note: The allegation was that the Pension Fund was misled into buying securities backed by risky mortgages from the now defunct New Century Financial.

The importance of this is that it corroborates what we have been saying all along. The pension funds were required by law to invest in “stable” funds which means in Wall Street parlance — investments that have very little risk. Goldman came to them with what appeared to be Triple A rated inured investments with a higher return than what the pension fund could get elsewhere from similar investments. The proposal was an outright lie and Goldman knew it. The only thing that the Pension Fund missed was an opportunity to get punitive damages. It is possible that the pension fund managers had a relationship with Goldman that might have raised questions about whether the fraud could be proved.

But there is no doubt who funded those loans — the Pension Fund. So there is no doubt that whoever was named on the promissory note and mortgage was a naked nominee at best and probably just a regular bad country lie. And there is also no doubt that the terms and quality of the loan were DIFFERENT from the terms and quality proposed to the borrower. Thus we have a mismatch: the terms and names of the principals in the transaction were changed to allow Goldman to trade the loans and resell them as “temporary” owner of the loans while the Pension Fund was left high and dry on the actual lender.

No mortgage broker originator has been punished or sued for giving those bad loans to to Goldman, because Goldman knew the loans were bad and in fact counted on it: they were betting the loans would fail. But just for good measure they included language in the tranche terms that made it certain that they, as Master Servicer, could pull the rug out from the Pension Fund by simply declaring that the level of defaults resulted in a write-down or wipe-out of the investment. Then Goldman made a claim on AIG et al, for proceeds of insurance and credit default swaps payable to Goldman instead of the Pension Fund.

So there was no meeting of the minds, in lawyer speak, between the borrower (homeowner) and the lender (Pension Fund). The note was void because the party identified as the lender was not the lender at all. And it was void because it recited different terms than what the lender thought would be in the loans. Therefore, the mortgage lien was never perfected because it was securing the faithful performance of a note, under which no performance was required — the borrower did not intend to pay a party from whom he had received no loan.

The borrower had intended to pay the real lender, not the party named on the note and mortgage who had neither funded nor purchased the loan. The lender had intended to own a piece of high quality loans that together constituted a stable fund. They were both fooled.

Now here is the kicker: since there was no meeting of the minds, common law takes over. The terms of the loan have yet to be resolved. One thing is fairly sure at this point, which is that the obligation to the lender has not been secured.

goldman-to-pay-26-6-mln-in-mortgage-debt-class-action

Screw the Pooch!!??

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Editor’s Comment:

Do some research, think about what you know and what you need to know. Come to my seminar or any seminar on securitization and you will understand the significance. Naked short-selling is the same as selling forward. In both cases you sell to an “investor” something where you have no asset and no money to back it up. You take the money from the investor and use it pretty much any way you like and account for it as “trading profits.” Then you take what is left and you create the illusion of transactions when in fact the documents refer to a virtual transaction in which the parties were different than those described on the closing documents and the terms of repayment of the loan are different than the terms disclosed to either the  investor or the borrower.

This sort of thing is unfathomable to most people, except those who spent a lot of time on Wall Street or doing Wall Street-type things, which is an adequate description of my background. If you sold a car to someone when you didn’t have the car or the money to buy it and then you took the money and put part of it in your pocket as your fee and then went out and bought a junker, you might be charged with civil or criminal fraud. Don’t you think? But on Wall Street these behaviors are permitted in the name of increasing liquidity.

What a country!

Joe Floren Screws the Pooch

by Patrick Byrne

The first time I heard Joe Floren speak I was standing behind him in an elevator in his law firm’s San Francisco office tower  as another lawyer informed him that the subpoena Joe Floren had served the previous day on a colleague of mine had reached her in the hospital, after a difficult delivery of her first child, while she was breastfeeding for the first time.

“Really? That’s beautiful. I love it!” He replied with glee.

Joseph E. Floren, Esq., is a lawyer at Morgan Lewis, the white shoe law firm defending Goldman Sachs against Overstock’s prime broker litigation, and tonight I celebrate the mistake Joe Floren made yesterday.  In filing Goldman’s response to Overstock’s motion to vacate the trial court judge’s decision to stay his own decision to unseal various documents related to this litigation (in more straightforward English: the trial court judge decided to unseal some documents while also deciding to delay acting on his decision, but we objected to this delay, and Goldman responded to our objections), Joe Floren screwed the pooch. He filed something containing an attachment he forgot to redact. That attachment is a previous filing of Overstock’s, a filing which contains but a sample of the shenanigans at Goldman and Merrill that has turned up over the course of five years and millions of pages of discovery, but which filing we had redacted when we made it (as good litigants do).

Fortunately for the cause of all that is good and right about America, Joe Floren’s goof came to the attention of a diligent 1st amendment attorney in California named Karl Olson, who represents the Economist, Bloomberg, the New York Times and Wener Publications (owners of Rolling Stone magazine) in their efforts to obtain the documents.  Karl Olson provided Joe Floren’s sloppy filing to his clients. Tonight these stories appeared:

Rolling Stone: Accidentally Released – and Incredibly Embarrassing – Documents Show How Goldman et al Engaged in ‘Naked Short Selling’

Bloomberg: Goldman, Merrill E-Mails Show Naked Shorting, Filing Says

Economist: An enlightening mistake

Really, Joe Floren?  That’s beautiful.  I love it.

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How the Goldman Vampire Squid Just Captured Europe

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Editor’s Comment:

Guest Writer:  Ellen Brown

Ellen is an attorney and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com.  She is also chairman of the Public Banking Institute.

How the Goldman Vampire Squid Just Captured Europe

By Ellen Brown, Truthout | News Analysis

The Goldman Sachs coup that failed in America has nearly succeeded in Europe – a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers.

In September 2008, Henry Paulson, former CEO of Goldman Sachs, managed to extort a $700 billion bank bailout from Congress. But to pull it off, he had to fall on his knees and threaten the collapse of the entire global financial system and the imposition of martial law; and the bailout was a one-time affair. Paulson’s plea for a permanent bailout fund – the Troubled Asset Relief Program or TARP – was opposed by Congress and ultimately rejected.

By December 2011, European Central Bank President Mario Draghi, former vice president of Goldman Sachs Europe, was able to approve a 500 billion euro bailout for European banks without asking anyone’s permission. And in January 2012, a permanent rescue funding program called the European Stability Mechanism (ESM) was passed in the dead of night with barely even a mention in the press. The ESM imposes an open-ended debt on EU member governments, putting taxpayers on the hook for whatever the ESM’s eurocrat overseers demand.

The bankers’ coup has triumphed in Europe seemingly without a fight. The ESM is cheered by euro zone governments, their creditors and “the market” alike, because it means investors will keep buying sovereign debt. All is sacrificed to the demands of the creditors, because where else can the money be had to float the crippling debts of the euro zone governments?

There is another alternative to debt slavery to the banks. But first, a closer look at the nefarious underbelly of the ESM and Goldman’s silent takeover of the ECB….

The Dark Side of the ESM

The ESM is a permanent rescue facility slated to replace the temporary European Financial Stability Facility and European Financial Stabilization Mechanism as soon as member states representing 90 percent of the capital commitments have ratified it, something that is expected to happen in July 2012. A December 2011 YouTube video titled “The shocking truth of the pending EU collapse!” originally posted in German, gives such a revealing look at the ESM that it is worth quoting here at length. It states:

The EU is planning a new treaty called the European Stability Mechanism, or ESM: a treaty of debt…. The authorized capital stock shall be 700 billion euros. Question: why 700 billion?… [Probable answer: it simply mimicked the $700 billion the US Congress bought into in 2008.][Article 9]: “,,, ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them … within seven days of receipt of such demand.” … If the ESM needs money, we have seven days to pay…. But what does “irrevocably and unconditionally” mean? What if we have a new parliament, one that does not want to transfer money to the ESM?…

[Article 10]: “The Board of Governors may decide to change the authorized capital and amend Article 8 … accordingly.” Question: … 700 billion is just the beginning? The ESM can stock up the fund as much as it wants to, any time it wants to? And we would then be required under Article 9 to irrevocably and unconditionally pay up?

[Article 27, lines 2-3]: “The ESM, its property, funding and assets … shall enjoy immunity from every form of judicial process…. ” Question: So the ESM program can sue us, but we can’t challenge it in court?

[Article 27, line 4]: “The property, funding and assets of the ESM shall … be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.” Question: … [T]his means that neither our governments, nor our legislatures, nor any of our democratic laws have any effect on the ESM organization? That’s a pretty powerful treaty!

[Article 30]: “Governors, alternate Governors, Directors, alternate Directors, the Managing Director and staff members shall be immune from legal process with respect to acts performed by them … and shall enjoy inviolability in respect of their official papers and documents.” Question: So anyone involved in the ESM is off the hook? They can’t be held accountable for anything? … The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply? Governments cannot take action against it? Europe’s national budgets in the hands of one single unelected intergovernmental organization? Is that the future of Europe? Is that the new EU – a Europe devoid of sovereign democracies?

The Goldman Squid Captures the ECB

Last November, without fanfare and barely noticed in the press, former Goldman executive Mario Draghi replaced Jean-Claude Trichet as head of the ECB. Draghi wasted no time doing for the banks what the ECB has refused to do for its member governments – lavish money on them at very cheap rates. French blogger Simon Thorpe reports:

On the 21st of December, the ECB “lent” 489 billion euros to European Banks at the extremely generous rate of just 1% over 3 years. I say “lent,” but in reality, they just ran the printing presses. The ECB doesn’t have the money to lend. It’s Quantitative Easing again.The money was gobbled up virtually instantaneously by a total of 523 banks. It’s complete madness. The ECB hopes that the banks will do something useful with it – like lending the money to the Greeks, who are currently paying 18% to the bond markets to get money. But there are absolutely no strings attached. If the banks decide to pay bonuses with the money, that’s fine. Or they might just shift all the money to tax havens.

At 18 percent interest, debt doublesin just four years. It is this onerous interest burden – not the debt itself – that is crippling Greece and other debtor nations. Thorpe proposes the obvious solution:

Why not lend the money to the Greek government directly? Or to the Portuguese government, currently having to borrow money at 11.9%? Or the Hungarian government, currently paying 8.53%. Or the Irish government, currently paying 8.51%? Or the Italian government, who are having to pay 7.06%?

The stock objection to that alternative is that Article 123 of the Lisbon Treaty prevents the ECB from lending to governments. But Thorpe reasons:

My understanding is that Article 123 is there to prevent elected governments from abusing Central Banks by ordering them to print money to finance excessive spending. That, we are told, is why the ECB has to be independent from governments. OK. But what we have now is a million times worse. The ECB is now completely in the hands of the banking sector. “We want half a billion of really cheap money!!” they say. OK, no problem. Mario is here to fix that. And no need to consult anyone. By the time the ECB makes the announcement, the money has already disappeared.

At least if the ECB was working under the supervision of elected governments, we would have some influence when we elect those governments. But the bunch that now has their grubby hands on the instruments of power are now totally out of control.

Goldman Sachs and the financial technocrats have taken over the European ship. Democracy has gone out the window, all in the name of keeping the central bank independent from the “abuses” of government. Yet, the government is the people – or it should be. A democratically elected government represents the people. Europeans are being hoodwinked into relinquishing their cherished democracy to a rogue band of financial pirates, and the rest of the world is not far behind.

Rather than ratifying the draconian ESM treaty, Europeans would be better advised to reverse Article 123 of the Lisbon treaty. Then, the ECB could issue credit directly to its member governments. Alternatively, euro zone governments could re-establish their economic sovereignty by reviving their publicly owned central banks and using them to issue the credit of the nation for the benefit of the nation, effectively interest free. This is not a new idea, but has been used historically to very good effect, e.g. in Australia through the Commonwealth Bank of Australia and in Canada through the Bank of Canada.

Today, the issuance of money and credit has become the private right of vampire rentiers, who are using it to squeeze the lifeblood out of economies. This right needs to be returned to sovereign governments. Credit should be a public utility, dispensed and managed for the benefit of the people.

To add your signature to a letter to parliamentarians blocking ratification of the ESM, click here.

TBTF Banks Bigger than Ever — How is that possible in a recession?

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Editor’s Comment: 

The pernicious effect of the banks and the difficulty of regulating them across transnational and state borders has led to a growing nightmare that history will repeat itself sooner than later.

This is to rocket science — it is recognition. We have median income still declining in what is still by most measures a recession that is about to get worse. Yet the largest banks are reporting record profits. What that means is that Wall Street is making more money “trading paper” than the rest of the country is making doing actual commerce — i.,e. the making and selling of goods of services.

This is another inversion of common sense. But it is explainable. 4 years ago I predicted that as the recession depressed the earnings of most companies the banks would nonetheless show increased profits. The reason was simply that using Bermuda, Bahamas, Cayman Islands the banks siphoned off most of the credit market liquidity through the tier 2 yield spread premium. The tier 2 YSP was really the money the banks made by selling crappy loans as good loans from aggregators to the investors — and then failed to document any part of the real transactions where money exchanged hands. In some case the YSP “trading profit” exceed the amount of the loan.

So now they are able to feed those “trading profits” back into their system a little at a time reporting ever increasing profits while the the real world goes to hell. So tell, me, what is it going to take to get you to to go to the streets, write the letters and demand that justice be done and allow, for the first time, investors and borrowers to get together and reach settlements in lieu of foreclosures? Don’t you see that whether you are rich or poor, renting or owning, that all of this is going to bring down your wealth and buying power. The Federal Reserve has already tripled the U.S. Currency money supply giving all the benefit to the TBTF banks. It seems to me that as group the American citizens are far more too big to fail than any industry or company.

Evil prospers when good people do nothing. 

Big Five Banks larger than before crisis, bailout

WASHINGTON —

Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the credit crisis.

Five banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve.

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did during the 2008 crunch.

“Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis.

That specter is eroding faith in Obama’s pledge that taxpayer-funded bailouts are a thing of the past. It also is exposing him to criticism from Federal Reserve officials, Republicans and Occupy Wall Street supporters, who see the concentration of bank power as a threat to economic stability.

As weaker firms collapsed or were acquired, a handful of financial giants emerged from the crisis and have thrived. Since then, JPMorgan, Goldman Sachs and Wells Fargo have continued to swell, if less dramatically, thanks to internal growth and acquisitions from European banks shedding assets amid the euro crisis.

The industry’s evolution defies the president’s January 2010 call to “prevent the further consolidation of our financial system.” Embracing new limits on banks’ trading operations, Obama said then that taxpayers wouldn’t be well “served by a financial system that comprises just a few massive firms.”

Simon Johnson, a former chief economist of the International Monetary Fund, blames a “lack of leadership at Treasury and the White House” for the failure to fulfill that promise. “It’d be safer to break them up,” he said.

The Obama administration rejects the criticism, citing new safeguards to head off further turmoil in the banking system. Treasury Secretary Timothy Geithner says the U.S. “financial system is significantly stronger than it was before the crisis.” He credits a flurry of new regulations, including tougher capital and liquidity requirements that limit risk-taking by the biggest banks, authority to take over failing big institutions, and prohibitions on the largest banks acquiring competitors.

The government’s financial system rescue, beginning with the 2008 Troubled Asset Relief Program, angered millions of taxpayers and helped give rise to the tea-party movement. Banks and bailouts remain unpopular: By a margin of 52 to 39 percent, respondents in a February Pew Research Center poll called the bailouts “wrong” and 68 percent said banks have a mostly negative effect on the country.

The banks say they have increased their capital backstops in response to regulators’ demands, making them better able to ride out unexpected turbulence. JPMorgan, whose chief executive officer, Jamie Dimon, this month acknowledged public “hostility” toward bankers, boasts of a “fortress balance sheet.” Bank of America, which was about 50 percent larger at the end of 2011 than five years earlier, says it has boosted capital and liquidity while increasing to 29 months the amount of time the bank could operate without external funding.

“We’re a much stronger company than we were heading into the crisis,” said Jerry Dubrowski, a Bank of America spokesman. The bank, based in Charlotte, says it plans to shrink by year-end to $1.75 trillion in risk-weighted assets, a measure regulators use to calculate how much capital individual banks must hold.

Still, the banking industry has become increasingly concentrated since the 1980s. Today’s 6,291 commercial banks are less than half the number that existed in 1984, according to the Federal Deposit Insurance Corp. The trend intensified during the crisis as JPMorgan acquired Bear Stearns and Washington Mutual; Bank of America bought Merrill Lynch; and Wells Fargo took over Wachovia in deals encouraged by the government.

“One of the bad outcomes, the adverse outcomes of the crisis, was the mergers that were of necessity undertaken when large banks were at-risk,” said Donald Kohn, vice chairman of the Federal Reserve from 2006-2010. “Some of the biggest banks got a lot bigger, and the market got more concentrated.”

In recent weeks, at least four current Fed presidents — Esther George of Kansas City, Charles Plosser of Philadelphia, Jeffrey Lacker of Richmond and Richard Fisher of Dallas — have voiced similar worries about the risk of a renewed crisis.

The annual report of the Federal Reserve Bank of Dallas was devoted to an essay by Harvey Rosenblum, head of the bank’s research department, “Why We Must End Too Big to Fail — Now.”

A 40-year Fed veteran, Rosenblum wrote in the report released last month: “TBTF institutions were at the center of the financial crisis and the sluggish recovery that followed. If allowed to remain unchecked, these entities will continue posing a clear and present danger to the U.S. economy.”

The alarms come almost two years after Obama signed into law the Dodd-Frank financial-regulation act. The law required the largest banks to draft contingency plans or “living wills” detailing how they would be unwound in a crisis. It also created a financial-stability council headed by the Treasury secretary, charged with monitoring the system for excessive risk-taking.

The new protections represent an effort to avoid a repeat of the crisis and subsequent recession in which almost 9 million workers lost their jobs and the U.S. government committed $245 billion to save the financial system from collapse.

The goal of policy makers is to ensure that if one of the largest financial institutions fails in the next crisis, shareholders and creditors will pay the tab, not taxpayers.

“Two or three years from now, Goldman Sachs should be like MF Global,” said Dennis Kelleher, president of the nonprofit group Better Markets, who doubts the government would allow a company such as Goldman to repeat MF Global’s Oct. 31 collapse.

Dodd-Frank, the most comprehensive rewriting of financial regulation since the 1930s, subjected the largest banks to higher capital requirements and closer scrutiny. The law also barred federal officials from providing specific types of assistance that were used to prevent such firms from failing in 2008. Instead, the Fed will work with the FDIC to put major banks and other large institutions through the equivalent of bankruptcy.

“If a large financial institution should ever fail, this reform gives us the ability to wind it down without endangering the broader economy,” Obama said before signing the act on July 21, 2010. “And there will be new rules to make clear that no firm is somehow protected because it is too big to fail.”

Officials at the Treasury Department, the Fed and other agencies have spent the past two years drafting detailed regulations to make that vision a reality.

Yet the big banks stayed big or, in some cases, grew larger. JPMorgan, which held $2 trillion in total assets when Dodd-Frank was signed, reached $2.3 trillion by the end of 2011, according to Federal Reserve data.

For Lacker, the banks’ living wills are the key to placing the financial system on sounder footing. Done right, they may require institutions to restructure to make their orderly resolution during a crisis easier to accomplish, he said.

Neil Barofsky, Treasury’s former special inspector general for the Troubled Asset Relief Program, calls the idea of winding down institutions with more than $2 trillion in assets “completely unrealistic.”

It’s likely that more than one bank would face potential failure during any crisis, he said, which would further complicate efforts to gracefully collapse a giant bank. “We’ve made almost no progress on ending too big to fail,” he said.

SEC ISSUES WELLS NOTICES TO MAJOR BANKS

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Sifting Through 25 Million Pages of Documents

EDITOR’S COMMENT: Attorneys for homeowners should watch these investor suits carefully. Contained within them are allegations and discovery relating to the enforceability of the mortgage liens as well as the failure to properly underwrite the loans.

The fact that the SEC is going after the banks on these issues is a good thing, but not unless it is referred for criminal prosecution. If our securities markets are subject to outright criminal fraud and we don’t do anything about the criminal aspect, we are sending the wrong signal out to the rest of the world which already views our mortgage debacle as a virtual attack on the sovereignty of dozens of countries.

If we want to see our credit markets revive and our economy, we will need to make investors feel certain that the regulatory environment and law enforcement are working together to bring criminal masterminds to justice. Anything short of that will result in a slow but rising attrition to anywhere but the U.S. credit markets.

Feb 8 (Reuters) – U.S. securities regulators plan to warn several major banks that they may sue them over the sale of bonds linked to sub-prime mortgages that ignited the financial crisis in 2008, the Wall Street Journal said, citing people familiar with the matter.

The U.S. Securities and Exchange Commission (SEC) is looking at whether the banks misrepresented the poor quality of loan pools they bundled and sold to investors, the people told the Journal.

It was not clear which firms will receive the formal SEC enforcement warnings, known as “Wells notices”, the paper said.

Banks whose activities are being examined in the civil investigation include Ally Financial Inc, Bank of America Corp , Citigroup, Deutsche Bank and Goldman Sachs, the Journal said.

Ally Financial spokeswoman Gina Proia told Reuters that she could comment on the Journal report.

Representatives of the banks and SEC declined to comment, the Journal said.

None of the other parties could immediately be reached for comment by Reuters outside regular U.S. business hours.

Speaking at a news conference in January, SEC enforcement director Robert Khuzami said his agency already reviewed 25 million pages of documents on mortgage-related investigations.

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, sued 17 large banks last September over losses on about $200 billion of subprime bonds and said the underlying mortgages did not meet investors’ criteria.

Consumer Gloom: Could it be Housing?

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“That has led a growing number of economists to argue that the collapse of housing prices, a defining feature of this downturn, is also a critical and underappreciated impediment to recovery. Americans have lost a vast amount of wealth, and they have lost faith in housing as an investment. They lack money, and they lack the confidence that they will have more money tomorrow.”

EDITOR’S NOTE: I wonder if it could be housing. Is it possible the consumers have lost faith in the system and their prospects, having lost all their wealth and being mired in debt in an economy dragged down by the collapse of the financial system (except for a few companies)? It’s a difficult question — but only if you have had your eyes and ears closed and blocked to hearing the cries of the people of our once great nation. Bank of America, once great for being the largest bank, is now number two and probably on its way to dying off altogether. Why so gloomy?

For four years I have been writing about the depression — economic and psychological and how they relate — caused by the the crisis caused by Banks stealing the wealth out of the belly of the nation. In a scheme to issue securities to unwary investors, they involuntarily enlisted homeowners to sign and accept financial products that were doomed from the start. This isn’t like driving a new car off the lot and losing value because now it is a used car. This is like driving off a cliff.

HERE IS WHAT HAPPENED: The banks sold investors on the idea of buying “mortgage bonds.” But there actually were few real bonds. The Banks sold them and the world on the idea of pooling mortgage assets into trusts. There were no trusts. And the pools never had anything in them. AFTER they had the money, the Banks organized aggregators who supposedly were collecting mortgages, loans, notes and obligation from originators that were created or enlisted by the aggregators offering higher compensation than anything the world has ever seen.

Then the Banks ordered the aggregators to arrange the loans” which were not owned, into pools that did not exist. The Banks arranged for the aggregators to sell the pools to the Banks and then the Banks sold them to the special purpose vehicles into which the investors had invested their money.The Banks made a “proprietary trading profit” by diverting money that should have been used to fund mortgages into their own pockets. On average the Banks skimmed between 15% and 25% of the money given to them by investors. The rest was a cover-up of forged, fabricated, robo-signed, surrogate signed, fraudulent documents.

The investors were expecting 5% return but the loans were for rates as high as 18%, which meant that the dollar income from the loans exceeded the dollar return expected by the investors (on paper, because the loans did not conform to industry standard underwriting standards). So the amount funded as loans was far less than the amount that the investors advanced. The difference between the amount advanced by investors and the amount loaned out was called a proprietary trading profit for the Bank, which has now vanished because nobody except the Banks wants this system anymore. That’s why Goldman Sachs no longer reports high “proprietary” trading profits. It isn’t regulation that is depressing Bank earnings it is the fact that the market won’t tolerate theft anymore.

There was no profit. They merely didn’t loan out the amount that investors gave them to fund mortgages. They kept the rest and called it profit. Under the Truth in Lending Act, this would be an undisclosed yield spread premium — that puts the Bank squarely in the sites of investors who didn’t get what was promised and borrowers who didn’t get the disclosure that was required. What investor and what borrower would have signed onto a deal where the intermediaries were making in fees as much as the loan itself? These Banks are doomed and so are their shareholders and management who thought they could away with calling theft of investor money by another name — “proprietary trading profits.”

The effect on investors was devastating while the effect on banks was bountiful with bonuses, supercharged earnings, and the esteem of the world as they posted ever higher values on their balance sheets and income statements. The effect on borrowers was also devastating as they had been steered into loans that were guaranteed to fail, and that MUST fail, in order for the Banks to cover up the theft from investors. The money received from insurance and bailouts and such was taken by the Banks who never had any loss in the first instance because it was investor money that was used to fund the loans.

The ultimate result is that everyone who had anything invested in real property was demolished by the scheme of the banks. The scheme was covered up as a lending program but in fact it was a scam to cover up the theft from investors and the theft of money that was received to cover the investors’ advance. So the borrowers are portrayed as owing money on obligations that have been paid several times over and they not only have no money to pay it, they also have no prospects of getting out from under this mess. The mess includes millions of vacant homes and of course millions of homeless people. The effect also includes millions of closed businesses whose customers have no money to buy anything.

HERE IS WHAT WE CAN DO ABOUT IT: Apply existing standards of generally accepted accounting principles to the Banks and have them cough up the truth, disgorge the illicit profit, apply them to the investor accounts, and thus reduce the obligations, pro rata of borrowers for the money that was paid to cover the losses. Then we will have a basis for settling all the foreclosures, and the wealth of the pensioners and homeowners alike will be restored.

Investors and borrowers will be smarter and less gloomy if they know that their government demanded the truth and acted on it. Their rage will increase exponentially if their government insists on going to the Banks for projections and status reports. Politicians beware! The people now understand what was done to them, their neighbors and their nation — and they are not just gloomy, they are angry.

Gloom Grips Consumers, and It May Be Home Prices

By

ORLANDO, Fla. — Ernest Markey lost his stone-cutting business in 2009. He then sold his home for half a million dollars less than its value at the peak of the housing bubble and moved with his wife, Marie, to a smaller home in a less affluent suburb. They gave up two new cars and bought one. Used.

The Markeys have since patched together a semblance of their old life, opening a new stone-cutting shop. But they do not expect that they will ever recover financially from the loss of equity in their old home.

“For two years I kept thinking that things would get better,” Mr. Markey, 51, said as he stood in his empty store on a recent weekday. “Now I think the future doesn’t look so good.”

The United States has a confidence problem: a nation long defined by irrational exuberance has turned gloomy about tomorrow. Consumers are holding back, businesses are suffering and the economy is barely growing.

There are good reasons for gloom — incomes have declined, many people cannot find jobs, few trust the government to make things better — but as Federal Reserve chairman, Ben S. Bernanke, noted earlier this year, those problems are not sufficient to explain the depth of the funk.

That has led a growing number of economists to argue that the collapse of housing prices, a defining feature of this downturn, is also a critical and underappreciated impediment to recovery. Americans have lost a vast amount of wealth, and they have lost faith in housing as an investment. They lack money, and they lack the confidence that they will have more money tomorrow.

Many say they believe that the bust has permanently changed their financial trajectory.

“People don’t expect their home to regain value, and that’s really led to a change in consumer attitudes about the economy that we’ve just never seen before,” said Richard Curtin, a professor of economics at the University of Michigan who directs its Survey of Consumers. The latest data from the survey, released Friday by Thomson Reuters, shows that expectations for economic growth have fallen to the lowest level since May 1980.

In Orlando, a city that trades in upbeat fantasies, the housing crash has been particularly painful. The total value of area homes has fallen below the total mortgage debt on those homes, according to the real estate analytics firm CoreLogic. In the parlance of the real estate world, Orlando is underwater, a distinction matched by Las Vegas.

“I don’t know that it’s going to get better. We just have to get used to it,” said Sherry DeWeese, whose home in Ocoee, a northwestern suburb of Orlando, is worth less than she paid for it 13 years ago — and about a third of its value at the peak of the market. “It was nothing to buy whatever we wanted. Now we just think about what we really need.”

Economists have only recently devoted serious study to how a decline in housing prices affects consumer spending, not least because this is the first decline in the average price of an American home since the Great Depression. A 2007 review of existing research by the Congressional Budget Office reported that people reduce spending by $20 to $70 a year for every $1,000 decline in the value of their home.

This “wealth effect” is significantly larger for changes in home equity than in the value of other investments, such as stocks, apparently because people regard changes in housing prices as more likely to endure.

A recent paper by Karl E. Case, an economics professor at Wellesley College, and two co-authors estimated the decline in home prices from 2005 to 2009 caused consumer spending to be $240 billion lower in 2010 than it otherwise would have been. That figure is equal to about 1.7 percent of annual economic activity, enough to be the difference between the mediocre recent growth and healthy growth. And it does not include all the other effects of the housing crash, including the low level of new home construction, that are also weighing on the economy.

Roy Pugsley, who owns a pool supply store in Winter Garden, another suburb here, said that he made 2,500 fewer sales during the first eight months of 2011 compared with the same period in 2007. That translates to one less person walking through the doors to buy chemicals or toys or spare parts in each hour that the store is open.

Mr. Pugsley said business actually increased in the early days of the recession; customers had told him they were spending more time at home. But now people buy only what they need for maintenance. “People realized that it wasn’t going to get any better, and they stopped spending on their pools, too,” he said.

At Milcarsky’s Appliance Center in the adjacent town of Longwood, business now comes from people remodeling their own homes rather than builders, and customers are picking cheaper models, said Doug Morey, a sales manager.

“People who might have bought that” — he taps a stove with chunky burners, designed to look like it belongs in a restaurant kitchen — “are double-thinking it. Everyone has had to cut back.”

That means Milcarsky’s has cut back too. The company, which employed 26 people three years ago, now has about a dozen workers, and they are making less in salary and commissions.

“I might like to think that I’m middle class, but I’m not. I’m not anymore,” said Rae-Anne Crotty, a customer service manager at the store. She now shops for groceries at discount stores, she said, and buys gifts for her children at Christmas but not on their birthdays.

It remains the prevailing view of economic policy makers that economic activity will eventually return to the same trajectory as before the recession. Mr. Bernanke and others have said that they see no evidence of any permanent change in the economy. Previous bouts of economic pessimism, as in the early 1980s and early 1990s, went away once growth picked up.

But many people in the Orlando area do not share this confidence, at least not when it comes to their own prospects. Instead, like the Markeys, they are settling into lives of less prosperity.

The couple moved to Orlando 12 years ago from central Massachusetts in search of opportunities. The business Mr. Markey created, Stone Giant, grew to include two factories and 60 employees, and it installed granite countertops in up to 15 new kitchens every day.

His new company, Winter Park Granite, now installs two kitchens on the average day. He has eight employees but cannot afford health insurance for them or himself. The family income last year was less than a third of the $175,000 that he and his wife made in 2007, their last good year.

And he sees little room for growth. He has stopped spending money on advertising.

“We’re never going to get that big again,” he said. “I was someone employing people and taking people to the good life. Now I’m just trying to survive.”

INVESTORS SHOULD SEEK HELP FROM BORROWERS

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GOLDMAN SACHS WINS DISMISSAL OF INVESTOR CASE

EDITOR’S COMMENT: Here Goldman Sachs wins a case it surely should have lost. And the reason is the same thing that the borrowers are encountering. The middlemen (investment bankers and all their affiliates) are keeping vital information from the investors that would allow them to plead and prove their case. By keeping the borrowers and investors apart, the investment banks are succeeding at obscuring the truth and getting away with outright theft. The prejudice against the lowly borrower is keeping the investors from entertaining that their interests may be similar and virtually identical on many issues.

By combining forces investors and borrowers could effect a pincer action in which the investment banks had no where to hide. And this is the place for them to come together to do it. Just by comparing notes from both sides, they would each gain additional knowledge and proof of the reality behind the securitization scam. Like, for example, the fact that part of the money they advanced for mortgage bonds was never used for mortgage funding and was instead taken as fees and profits.

And for those high-priced lawyers who have missed the point, here it is: only the investor and the borrower can come into court with the WHOLE transaction and the documents to prove it. The investor received a bond and the borrower signed a note. Unless you connect those two different documents (each being “evidence” of the obligation), you don’t have a case against anyone. And without the homeowners there to affirm the transaction, all you have is some vague equitable right for restitution against people who defrauded you or people who could help you but are not being invited to the party.

It’s so obvious that it makes my head spin. If the real parties in interest — both ends of the spectrum that were defrauded — were to combine forces, the real facts would come out, and real solutions would emerge. Most homeowners would be glad to achieve a settlement or modification in which the investors recovered part of their money. Many channels would come into the market on those homes that are permanently abandoned if they knew that they were not in danger of losing title. And investors would (a) be able to account for the loss in actual dollars and cents (and sense) and (b) recover part of their loss from the homeowner sector and the rest from the the investment banks who are responsible for this mess.

How can investors not see that all the foreclosures are an exercise in defrauding investors? The property is being taken, for the most part lock stock and barrel by intermediaries who have no investment in the loan. This is happening because the investors have abandoned their claims for restitution and are seeking it solely from investment banks. granted, the investment banks should pay the lion’s share of the loss. But investors beware! You are not going to get past the goal line without homeowner help!

With the real parties in interest in the same courtroom, the servicers and the investment banks can be eliminated from the equation since they are using their powers (mostly fictional) to bar settlements that would be far more beneficial to investors than foreclosure. The train is pulling out of the station without you, investors, and at the end of the day someone is going to get a free house at YOUR expense — either borrowers, when the evidence starts being applied, or the servicers and other pretender lenders who serve in that capacity courtesy of your inaction!

Sept. 28 (Bloomberg) — Goldman Sachs Group Inc. won dismissal of a lawsuit brought by Landesbank Baden-Wuerttemberg over losses on $37 million in collateralized debt obligations.

U.S. District Judge William Pauley III in Manhattan ruled today that the bank didn’t sufficiently back up its claims against Goldman Sachs, which underwrote Davis Square, a CDO collateralized by residential mortgage-backed securities in 2006, and against Los Angeles-based TCW Asset Management Co., which manages collateral for asset-backed securities.

Goldman Sachs, based in New York, and TCW sold the Davis Square securities to institutional investors, marketing it as a $2 billion “High Grade Structured Product CDO” backed by investment-grade mortgage-backed securities, Pauley said in his opinion today. LBBW bought two notes totaling $37 million.

Pauley said about 79 percent of the mortgages underlying Davis Square were below prime and at an increased risk of default. He ruled that LBBW failed to allege specific facts to support its claims for fraud and unjust enrichment. He also said the bank was a sophisticated investor that accepted the risks of its investment.

LBBW, based in Stuttgart, Germany, sued in October 2010. The bank claimed that Goldman knew many of the mortgages didn’t conform to the requirements for inclusion in the CDO and that they were riskier than indicated in the Davis Square offering circular. The bank claimed Goldman Sachs also concealed the true risk of the mortgages from rating agencies, which gave Davis Square a triple-A rating.

A voice-mail message seeking comment on the ruling from LBBW’s press services department wasn’t immediately returned after regular business hours in Germany.

The case is Landesbank Baden-Wuerttemberg v. Goldman Sachs, 10-7549, U.S. District Court, Southern District of New York (Manhattan.)

–With assistance from Edvard Pettersson in Los Angeles and Patricia Hurtado in New York. Editors: Peter Blumberg, Michael Hytha

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

FRAUD: The Significance of the Game Changing FHFA Lawsuits

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FHFA ACCUSES BANKS OF FRAUD: THEY KNEW THEY WERE LYING

“FHFA has refrained from sugar coating the banks’ alleged conduct as mere inadvertence, negligence, or recklessness, as many plaintiffs have done thus far.  Instead, it has come right out and accused certain banks of out-and-out fraud.  In particular, FHFA has levied fraud claims against Countrywide (and BofA as successor-in-interest), Deutsche Bank, J.P. Morgan (including EMC, WaMu and Long Beach), Goldman Sachs, Merrill Lynch (including First Franklin as sponsor), and Morgan Stanley (including Credit Suisse as co-lead underwriter).  Besides showing that FHFA means business, these claims demonstrate that the agency has carefully reviewed the evidence before it and only wielded the sword of fraud against those banks that it felt actually were aware of their misrepresentations.”

It is no stretch to say that Friday, September 2 was the most significant day for mortgage crisis litigation since the onset of the crisis in 2007.  That Friday, the Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac, sued almost all of the world’s largest banks in 17 separate lawsuits, covering mortgage backed securities with original principal balances of roughly $200 billion.  Unless you’ve been hiking in the Andes over the last two weeks, you have probably heard about these suits in the mainstream media.  But here at the Subprime Shakeout, I like to dig a bit deeper.  The following is my take on the most interesting aspects of these voluminous complaints (all available here) from a mortgage litigation perspective.

Throwing the Book at U.S. Banks

The first thing that jumps out to me is the tenacity and aggressiveness with which FHFA presents its cases.  In my last post (Number 1 development), I noted that FHFA had just sued UBS over $4.5 billion in MBS.  While I noted that this signaled a shift in Washington’s “too-big-to-fail” attitude towards banks, my biggest question was whether the agency would show the same tenacity in going after major U.S. banks.  Well, it’s safe to say the agency has shown the same tenacity and then some.

FHFA has refrained from sugar coating the banks’ alleged conduct as mere inadvertence, negligence, or recklessness, as many plaintiffs have done thus far.  Instead, it has come right out and accused certain banks of out-and-out fraud.  In particular, FHFA has levied fraud claims against Countrywide (and BofA as successor-in-interest), Deutsche Bank, J.P. Morgan (including EMC, WaMu and Long Beach), Goldman Sachs, Merrill Lynch (including First Franklin as sponsor), and Morgan Stanley (including Credit Suisse as co-lead underwriter).  Besides showing that FHFA means business, these claims demonstrate that the agency has carefully reviewed the evidence before it and only wielded the sword of fraud against those banks that it felt actually were aware of their misrepresentations.

Further, FHFA has essentially used every bit of evidence at its disposal to paint an exhaustive picture of reckless lending and misleading conduct by the banks.  To support its claims, FHFA has drawn from such diverse sources as its own loan reviews, investigations by the SEC, congressional testimony, and the evidence presented in other lawsuits (including the bond insurer suits that were also brought by Quinn Emanuel).  Finally, where appropriate, FHFA has included successor-in-interest claims against banks such as Bank of America (as successor to Countrywide but, interestingly, not to Merrill Lynch) and J.P. Morgan (as successor to Bear Stearns and WaMu), which acquired potential liability based on its acquisition of other lenders or issuers and which have tried and may in the future try to avoid accepting those liabilities.    In short, FHFA has thrown the book at many of the nation’s largest banks.

FHFA has also taken the virtually unprecedented step of issuing a second press release after the filing of its lawsuits, in which it responds to the “media coverage” the suits have garnered.  In particular, FHFA seeks to dispel the notion that the sophistication of the investor has any bearing on the outcome of securities law claims – something that spokespersons for defendant banks have frequently argued in public statements about MBS lawsuits.  I tend to agree that this factor is not something that courts should or will take into account under the express language of the securities laws.

The agency’s press release also responds to suggestions that these suits will destabilize banks and disrupt economic recovery.  To this, FHFA responds, “the long-term stability and resilience of the nation’s financial system depends on investors being able to trust that the securities sold in this country adhere to applicable laws. We cannot overlook compliance with such requirements during periods of economic difficulty as they form the foundation for our nation’s financial system.”  Amen.

This response to the destabilization argument mirrors statements made by Rep. Brad Miller (D-N.C.), both in a letter urging these suits before they were filed and in a conference call praising the suits after their filing.  In particular, Miller has said that failing to pursue these claims would be “tantamount to another bailout” and akin to an “indirect subsidy” to the banking industry.  I agree with these statements – of paramount importance in restarting the U.S. housing market is restoring investor confidence, and this means respecting contract rights and the rule of law.   If investors are stuck with a bill for which they did not bargain, they will be reluctant to invest in U.S. housing securities in the future, increasing the costs of homeownership for prospective homeowners and/or taxpayers.

You can find my recent analysis of Rep. Miller’s initial letter to FHFA here under Challenge No. 3.  The letter, which was sent in response to the proposed BofA/BoNY settlement of Countrywide put-back claims, appears to have had some influence.

Are Securities Claims the New Put-Backs?

The second thing that jumps out to me about these suits is that FHFA has entirely eschewed put-backs, or contractual claims, in favor of securities law, blue sky law, and tort claims.  This continues a trend that began with the FHLB lawsuits and continued through the recent filing by AIG of its $10 billion lawsuit against BofA/Countrywide of plaintiffs focusing on securities law claims when available.  Why are plaintiffs such as FHFA increasingly turning to securities law claims when put-backs would seem to benefit from more concrete evidence of liability?

One reason may be the procedural hurdles that investors face when pursuing rep and warranty put-backs or repurchases.  In general, they must have 25% of the voting rights for each deal on which they want to take action.  If they don’t have those rights on their own, they must band together with other bondholders to reach critical mass.  They must then petition the Trustee to take action.  If the Trustee refuses to help, the investor may then present repurchase demands on individual loans to the originator or issuer, but must provide that party with sufficient time to cure the defect or repurchase each loan before taking action.  Only if the investor overcomes these steps and the breaching party fails to cure or repurchase will the investor finally have standing to sue.

All of those steps notwithstanding, I have long argued that put-back claims are strong and valuable because once you overcome the initial procedural hurdles, it is a fairly straightforward task to prove whether an individual loan met or breached the proper underwriting guidelines and representations.  Recent statistical sampling rulings have also provided investors with a shortcut to establishing liability – instead of having to go loan-by-loan to prove that each challenged loan breached reps and warranties, investors may now use a statistically significant sample to establish the breach rate in an entire pool.

So, what led FHFA to abandon the put-back route in favor of filing securities law claims?  For one, the agency may not have 25% of the voting rights in all or even a majority of the deals in which it holds an interest.  And due to the unique status of the agency as conservator and the complex politics surrounding these lawsuits, it may not have wanted to band together with private investors to pursue its claims.

Another reason may be that the FHFA has had trouble obtaining loan files, as has been the case for many investors.  These files are usually necessary before even starting down the procedural path outlined above, and servicers have thus far been reluctant to turn these files over to investors.  But this is even less likely to be the limiting factor for FHFA.  With subpoena power that extends above and beyond that of the ordinary investor, the government agency may go directly to the servicers and demand these critical documents.  This they’ve already done, having sent 64 subpoenas to various market participants over a year ago.  While it’s not clear how much cooperation FHFA has received in this regard, the numerous references in its complaints to loan level reviews suggest that the agency has obtained a large number of loan files.  In fact, FHFA has stated that these lawsuits were the product of the subpoenas, so they must have uncovered a fair amount of valuable information.

Thus, the most likely reason for this shift in strategy is the advantage offered by the federal securities laws in terms of the available remedies.  With the put-back remedy, monetary damages are not available.  Instead, most Pooling and Servicing Agreements (PSAs) stipulate that the sole remedy for an incurable breach of reps and warranties is the repurchase or substitution of that defective loan.  Thus, any money shelled out by offending banks would flow into the Trust waterfall, to be divided amongst the bondholders based on seniority, rather than directly into the coffers of FHFA (and taxpayers).  Further, a plaintiff can only receive this remedy on the portion of loans it proves to be defective.  Thus, it cannot recover its losses on defaulted loans for which no defect can be shown.

In contrast, the securities law remedy provides the opportunity for a much broader recovery – and one that goes exclusively to the plaintiff (thus removing any potential freerider problems).  Should FHFA be able to prove that there was a material misrepresentation in a particular oral statement, offering document, or registration statement issued in connection with a Trust, it may be able to recover all of its losses on securities from that Trust.  Since a misrepresentation as to one Trust was likely repeated as to all of an issuers’ MBS offerings, that one misrepresentation can entitle FHFA to recover all of its losses on all certificates issued by that particular issuer.

The defendant may, however, reduce those damages by the amount of any loss that it can prove was caused by some factor other than its misrepresentation, but the burden of proof for this loss causation defense is on the defendant.  It is much more difficult for the defendant to prove that a loss was caused by some factor apart from its misrepresentation than to argue that the plaintiff hasn’t adequately proved causation, as it can with most tort claims.

Finally, any recovery is paid directly to the bondholder and not into the credit waterfall, meaning that it is not shared with other investors and not impacted by the class of certificate held by that bondholder.  This aspect alone makes these claims far more attractive for the party funding the litigation.  Though FHFA has not said exactly how much of the $200 billion in original principal balance of these notes it is seeking in its suits, one broker-dealer’s analysis has reached a best case scenario for FHFA of $60 billion flowing directly into its pockets.

There are other reasons, of course, that FHFA may have chosen this strategy.  Though the remedy appears to be the most important factor, securities law claims are also attractive because they may not require the plaintiff to present an in-depth review of loan-level information.  Such evidence would certainly bolster FHFA’s claims of misrepresentations with respect to loan-level representations in the offering materials (for example, as to LTV, owner occupancy or underwriting guidelines), but other claims may not require such proof.  For example, FHFA may be able to make out its claim that the ratings provided in the prospectus were misrepresented simply by showing that the issuer provided rating agencies with false data or did not provide rating agencies with its due diligence reports showing problems with the loans.  One state law judge has already bought this argument in an early securities law suit by the FHLB of Pittsburgh.  Being able to make out these claims without loan-level data reduces the plaintiff’s burden significantly.

Finally, keep in mind that simply because FHFA did not allege put-back claims does not foreclose it from doing so down the road.  Much as Ambac amended its complaint to include fraud claims against JP Morgan and EMC, FHFA could amend its claims later to include causes of action for contractual breach.  FHFA’s initial complaints were apparently filed at this time to ensure that they fell within the shorter statute of limitations for securities law and tort claims.  Contractual claims tend to have a longer statute of limitations and can be brought down the road without fear of them being time-barred (see interesting Subprime Shakeout guest post on statute of limitations concerns.

Predictions

Since everyone is eager to hear how all this will play out, I will leave you with a few predictions.  First, as I’ve predicted in the past, the involvement of the U.S. Government in mortgage litigation will certainly embolden other private litigants to file suit, both by providing political cover and by providing plaintiffs with a roadmap to recovery.  It also may spark shareholder suits based on the drop in stock prices suffered by many of these banks after statements in the media downplaying their mortgage exposure.

Second, as to these particular suits, many of the defendants likely will seek to escape the harsh glare of the litigation spotlight by settling quickly, especially if they have relatively little at stake (the one exception may be GE, which has stated that it will vigorously oppose the suit, though this may be little more than posturing).  The FHFA, in turn, is likely also eager to get some of these suits settled quickly, both so that it can show that the suits have merit with benchmark settlements and also so that it does not have to fight legal battles on 18 fronts simultaneously.  It will likely be willing to offer defendants a substantial discount against potential damages if they come to the table in short order.

Meanwhile, the banks with larger liability and a more precarious capital situation will be forced to fight these suits and hope to win some early battles to reduce the cost of settlement.  Due to the plaintiff-friendly nature of these claims, I doubt many will succeed in winning motions to dismiss that dispose entirely of any case, but they may obtain favorable evidentiary rulings or dismissals on successor-in-interest claims.  Still, they may not be able to settle quickly because the price tag, even with a substantial discount, will be too high.

On the other hand, trial on these cases would be a publicity nightmare for the big banks, not to mention putting them at risk a massive financial wallop from the jury (fraud claims carry with them the potential for punitive damages).  Thus, these cases will likely end up settling at some point down the road.  Whether that’s one year or four years from now is hard to say, but from what I’ve seen in mortgage litigation, I’d err on the side of assuming a longer time horizon for the largest banks with the most at stake.

Article taken from The Subprime Shakeout – www.subprimeshakeout.com
URL to article: the-government-giveth-and-it-taketh-away-the-significance-of-the-game-changing-fhfa-lawsuits.html

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