Wells Fargo Bank, N.A. Accused of Control Fraud through Stumpf and Other Corporate Insiders

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Republished by permission. Dan Edstrom is the senior forensic analyst of Livinglies.
By Daniel Edstrom
DTC Systems, Inc.

October 19, 2016

The purpose of Sarbanes-Oxley legislation is to put in place financial controls in order to not only reduce fraud, but to identify risks so that the controls can be expanded or new controls put in place. Large companies such as Wells Fargo Bank have compliance departments and ethics lines where questionable conduct (unlawful or not) can be reported “safely” in order for the company to take action to stop and/or remediate the questionable conduct. This is done so that a business operates safely and soundly, and is the perfect source for implementing new controls, enhancing existing controls, testing the effectiveness of the controls, or at least disclosing material deficiencies that can be identified and corrected at a later date.

Risk Management would entail identifying the risk, and then prioritizing, such that the highest priority risks can be mitigated first.  Assuming that early on this conduct was identified, the risk could have been low, leaving it to be addressed at a future date. Its fair to say now that it appears this conduct was effectively suppressed from any risk management.

Based on current reporting, it would appear that the compliance and ethics lines were used against those who reported questionable conduct. This is the exact opposite of the purpose for which Sarbanes-Oxley legislation was imposed, and if true, represents the creation of non-reported internal controls that do the exact opposite of what the legislation imposes. The exact opposite because the controls are put in place to reduce fraud, and require that senior officers such as the CEO and CFO, provide an oath that they have established appropriate internal controls, and then certify that they “have evaluated the effectiveness of the company’s internal controls”. Presumably they would need to disclose information related to material deficiencies.

It is fairly obvious (now) that they had no controls to inhibit, detect or report these issues even though they presumably had actual knowledge of the conduct (or reports of the actual knowledge, which if investigated appropriately would have led to actual knowledge of the conduct).  This, if true, would seemingly mean that when these officers gave their oath, they were knowingly concealing material information that should have been disclosed (no internal controls to detect this activity, fraud, false accounting, and no controls put in place to make sure if this conduct was reported, that it would be appropriately investigated, etc.). They seemingly also knew that their controls were defective, insufficient, and that there were material exceptions that they were knowingly withholding from disclosure. And even worse, it appears they may have implemented “secret” controls, policies and procedures to specifically target and retaliate against those who actually did make an effort to report this “questionable” conduct (i.e. opening accounts for their customers without the customers request in order to receive bonuses, and then, presumably, closing these accounts). But these “secret” controls were not disclosed at all, nor mentioned as a material exception.

But who was the target of the fraud? The customer? No, although they were a victim. This was all targeted at the stockholders in order to falsely inflate their stock value through false and fabricated financial transactions that simulated the “flow” of money in order to give the appearance that money was moving and that fees were being generated.

According to Wikipedia from this URL: https://en.wikipedia.org/wiki/Money_laundering

According to the United States Treasury Department:

Money laundering is the process of making illegally-gained proceeds (i.e. “dirty money”) appear legal (i.e. “clean”). Typically, it involves three steps: placement, layering and integration. First, the illegitimate funds are furtively introduced into the legitimate financial system. Then, the money is moved around to create confusion, sometimes by wiring or transferring through numerous accounts. Finally, it is integrated into the financial system through additional transactions until the “dirty money” appears “clean.”[10]

This could have started out as bad acts by one or more employees opening these accounts to get paid extra money. Or it could have started out designed from the top as a complete scheme and artifice to defraud. But either way is now irrelevant. Once it was happening and once known at the highest levels, it became a standard and practice. If it wasn’t a control fraud early on, it became one when ethics and compliance officers, managers or employees failed to act (or worse, retaliated or allowed others to retaliate). The final nail in the coffin came when senior officers decided retaliation was appropriate instead of enhancing their internal controls, disclosure controls and reporting. Once they knew or should have known of the conduct, it became their business processes, whether they controlled it directly or not. Closing your eyes so as not to learn the truth is an affirmative act.

How does Sarbanes-Oxley work?  Here is a small sampling on Section 302: Disclosure Controls from Wikipedia, available at this URL: https://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act

Sarbanes–Oxley Section 302: Disclosure controls[edit]

Under Sarbanes–Oxley, two separate sections came into effect—one civil and the other criminal. 15 U.S.C. § 7241 (Section 302) (civil provision); 18 U.S.C. § 1350 (Section 906) (criminal provision).

Section 302 of the Act mandates a set of internal procedures designed to ensure accurate financial disclosure. The signing officers must certify that they are “responsible for establishing and maintaining internal controls” and “have designed such internal controls to ensure that material information relating to the companyand its consolidated subsidiaries is made known to such officers by others within those entities, particularly during the period in which the periodic reports are being prepared.” 15 U.S.C. § 7241(a)(4). The officers must “have evaluated the effectiveness of the company‘s internal controls as of a date within 90 days prior to the report” and “have presented in the report their conclusions about the effectiveness of their internal controls based on their evaluation as of that date.” Id..

The SEC interpreted the intention of Sec. 302 in Final Rule 33–8124. In it, the SEC defines the new term “disclosure controls and procedures,” which are distinct from “internal controls overfinancial reporting.”[30] Under both Section 302 and Section 404, Congress directed the SEC to promulgate regulations enforcing these provisions.[31]

External auditors are required to issue an opinion on whether effective internal control over financial reporting was maintained in all material respects by management. This is in addition to the financial statement opinion regarding the accuracy of the financial statements. The requirement to issue a third opinion regarding management’s assessment was removed in 2007.

A Lord & Benoit Report: Bridging the Sarbanes-Oxley Disclosure Control Gap was filed with the SEC Subcommittee n internal controls which reported that those companies with ineffective internal controls, the expected rate of full and accurate disclosure under Section 302 will range between 8 and 15 percent. A full 9 out of every 10 companies with ineffective Section 404 controls self reported effective 302 controls in the same period end that an adverse Section 404 was reported, 90% in accurate without a Section 404 audit.http://www.section404.org/UserFiles/File/Lord_Benoit_Report_1_Bridging_the_Disclosure_Control_Gap.pdf

Quite a Stew: Wells Fargo Pressure Cooker for Sales and Fabricated Documents

Wells Fargo Investigated by 4 Agencies for Manual on Fabricating Foreclosure Documents

Wells Fargo is under investigation for a lot of things these days, just as we find in Bank of America and other major “institutions.” The bottom line is that they haven’t been acting very institutional and their culture is one that has led to fraud, identity theft and outright fabrication of accounts and documents.

There can be little doubt about it. Documents that a real bank acting like a bank would have in its possession appear to be completely absent in most if not all loans that are “performing” (i.e., the homeowner is paying, even if the party they are paying isn’t the right and even if the loan has already been paid off). But as soon as the file becomes subject to foreclosure proceedings, documents miraculously appear showing endorsements, allonges, powers of attorney and assignments. According to a report from The Real Deal (New York Real Estate News), these are frequently referred to as “ta-da endorsements” a reference from magic acts where rabbits are pulled from the hat.

Such endorsements and other fabricated documents have been taken at face value by many judges across the country, despite vigorous protests from homeowners who were complaining about everything from “they didn’t have the documents before, so where did they get them?” to luring homeowners into false modifications that were designed to trap homeowners into foreclosure.

After 7 years of my reporting on the fact that the documents do not exist, including a report from Katherine Anne Porter at what was then the University of Iowa that the documents were intentionally destroyed and “lost” it has finally dawned on regulators and law enforcement that something is wrong. They could have done the same thing that I did. I had inquiries from hundreds (back then, now thousands) of homeowners looking for help.

So the first thing I did was I  sent qualified written requests to the parties who were claiming to be the “lenders.” After sending out hundreds of these the conclusion was inescapable. Any loan where the homeowner was continuing to make their payments have no documentation. Any loan where the homeowner was in the process of foreclosure had documentation of appear piece by piece as it seemed to be needed in court. This pattern of fabrication of documents was pandemic by 2007 and 2008. They were making this stuff up as they went along.

It has taken seven years for mainstream media and regulators to ask the next obvious question, to wit: why would the participants in an industry based on trust and highly complex legal instruments created by them fall into patterns of conduct in which nobody trusted them and where the legal instruments were lost, destroyed and then fabricated? In my seminars I phrased the question differently. The question I posed is that if you had a $10 bill in your hand, why would you stick it in a shredder? The promissory note and the other documents from the alleged loan closings were the equivalent of cash, according to all legal and common sense standards. Why would you destroy it?

As I said in 2008 and continue saying in 2014, the only reason you would destroy the $10 bill is that you had told somebody you were holding something other than a $10 bill. Perhaps you told them it was a $100 bill. Now they want to see it. Better to “lose” the original bill then admit that you were lying in the first place. One is simple negligence (losing it) and the other is criminal fraud (lying about it). The banking industry practically invented all of the procedures and legal papers associated with virtually every type of loan. The processing of loans has been the backbone of the banking industry for hundreds of years. Did they forget how to do it?

The answers to these questions are both inconvenient and grotesque. I know from my past experience on Wall Street that bankers did not deserve the trust that everyone seemed to repose in them. But this conduct went far beyond anything I ever saw on Wall Street. The answer is simply that the bankers traded trust for money. They defrauded the investors, most of whom were stable managed funds guarding the pensions of millions of people. Then they defrauded homeowners creating a pressure cooker of sales culture in which banking evolved simply into marketing and sales. Risk analysis and risk control were lost in the chaos.

The very purpose for which banks came into existence was to have a place of safety in which you could deposit your money with the knowledge that it would still be there when you came back. Investors were lured into a scheme in which they thought their money was being used to fund trusts; those trusts issued mortgage bonds that in most cases were never certificated. In most cases the trust received no money, no assets and no income. The fund managers who were the investors  never had a chance.

The money from the investors was instead kept by the broker-dealers who then traded with it like drunken sailors. They pumped up real estate PRICES  far above real estate VALUES, based on any reasonable appraisal standards. The crash would come, and they knew it. So after lying to the investor lenders and lying to the homeowner borrowers they lied to the insurers, guarantors, co-obligors and counterparties to credit default swaps that had evolved from intelligent hedge products to high flying overly complicated contracts that spelled out “heads I win, tails you lose.”

In order to do all of that they needed to claim the loans and the bonds as though they were owned by the broker-dealers when in fact the broker-dealers were merely the investment banks that had taken the money from investors and instead of using it in the way that the investors were told, they created the illusion (by lying) of the scheme that was called securitization when in fact it was basically common fraud, identity theft of both the lenders and borrowers, in a Ponzi scheme. When Marc Dreier was convicted of similar behavior the amount was only $400 million but it was the larger scheme of its kind ever recorded.

When Bernard Madoff was convicted of similar behavior the amount was only $60 billion, but the general consensus was that this was the largest fraud in history and would maintain that status for generations. But when the Madoff scandal was revealed it was obvious that members of the banking industry had to be involved; what was not so obvious is that the banking industry itself had already committed a combination of identity theft, fraud and corruption that was probably 300 times the size of the Madoff scandal.

The assumption that these are just loans that were to be enforced just like any other loans is naïve. The lending process described in the paperwork at the closings of these loans was a complete lie. The actual lender did not know the closing had occurred, never received the note and mortgage, nor any other instrument that protected the investor lenders. The borrower did not know the actual lender existed. Closing agent was at best negligent and at worst part of the scheme. Closing agent applied money from the investors to the closing of the “loan” and gave the paperwork that should’ve gone to the investors to third parties who didn’t have a dime invested in the deal. Later the investment banks would claim that they were suffering losses, but it was a lie, this time to the taxpayers and the government.

The reason the investment banks need to fabricate documentation is simply because their scheme required multiple sales of the same loan to multiple parties. They had to wait until they couldn’t wait any longer in order to pick a plaintiff to file a foreclosure lawsuit or pick a beneficiary who would appear out of nowhere to start the nonjudicial sale of property in which they were a complete stranger to the transaction.

The reason that homeowners should win in any reasonable challenge to a foreclosure action is that neither the forecloser nor the balance has been correctly stated. In many cases the balance “owed” by the borrower is negative! Yes that means that money is owed back to the borrower even know they stopped making payments. This is so counter intuitive that it is virtually impossible for most people to wrap their brains around this concept and that is exactly what Wall Street banks have been counting on and using against us for years.

LA Times Report on Wells Fargo Sales Culture

Why do we need to force the banks to accept more money in modification?

Selecting a forensic analyst or a lawyer to represent you in a mortgage dispute. You need to look at their credentials rather than listen to their sales pitch. And you need people who really believe that you can and SHOULD win. For our services and products call our customers service numbers at 520-405-1688 on the West Coast, and 954-495-9867. Or visit www.livingliesstore.com. Don’t waste your money if the people lack the credentials and experience and commitment to make things work out the way you want it. Everyone promises the world. We promise expertise and guidance on how to use it in court.

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It seems obvious. And if you are a lawyer practicing in real estate, you have probably attending CLE seminars about mortgage lending requirements and what to do when the borrower is in default or claimed to be in default. The answer is always a “workout” wherever possible. And the reason is that you get more from a workout than the proceeds from a foreclosure and all the financial requirements of ownership like maintenance, taxes, insurance and the expenses of selling, repairs etc. It really is that simple.

But Banks don’t want workouts or modifications. They only want to use the illusory promise of modification to get the borrower in so deep he sees no way out when the application is eventually denied. Why are so many trial modifications now in court because the bank denied the permanent modification after the trial modification as approved and the borrower met all the requirements including payments? why are the banks pursuing a strategy where they are guaranteed far less money than ramping up the “workout” programs. Maybe because if they did, they would be admitting that the loan was defective in the first place, the appraisal was inflated, the viability of the loan was zero, and the borrower had been tricked.

So why do the Banks need to be forced to take more money and less responsibility for the property? It seems obvious that they would want a workout rather than a foreclosure because it will end up with more money in their pockets and the whole mortgage mess behind them with a nice clean note and mortgage.

The answer can only be that the Banks oppose such efforts because the rational strategy of a true lender won’t end up with more money in THEIR pockets. And THAT can only be true if they are working off some different business model than a lender. It means by definition in a rational world, as Greenspan likes to say, that they could not possibly be the lender or working for the lender.

It can only be true if they are protecting the fees they are earning on nonperforming loans and justifying their stubborn resistance to modification and principal reduction by showing that the foreclosure was the only way out even though it wasn’t. The destruction of tens of thousands of homes in various cities shows that the net value of the foreclosure was zero even while the homeowners were applying for modifications that, if approved, would have not only saved individual homes, but entire neighborhoods.

The other reason of course is that the banks don’t own the loans and they did receive multiple payments on the loans from multiple sources. A foreclosure hides these payments.

So the practice hint is to be persistent and insistent on following the money trail. What the San Francisco study revealed as well as other similar studies and are own study here at livinglies is that the courts are rubber stamping foreclosures that are in favor of complete strangers tot he transaction. They don’t have a dime in the deal. But they are being given judicial nod that they are the creditor even though they are clearly not the creditor. This false creditor now has authority to claim the status of creditor and to buy property worth millions of dollars with a non-monetary credit bid in the amount of their claim, thus “out bidding” any conceivable competition and guaranteeing their ownership of the property, or allowing someone else to outbid them and taking the money from the sale even though everything they had done up to that point was false.

So you have these people and companies in a cloud of false claims of securitization selling the loan multiple times through insurance and other gimmicks making a ton of money assuming the identity of the investors and assuming ownership over the borrower’s identity and trading on that all for the purpose of ill-gotten gains. It is fraud, identity theft, RICO and Ponzi Schemes all rolled into the fog that comprises the false claims of securitization.

PRACTICE HINT: Test each transaction claimed to see if money exchanged hands and if so between what parties. You will find that the money transactions — that is the reality of what was going on bears no resemblance to the paper trail. The paper trail is meant to lead you down the rabbit hole. First establish what is in the paper trail, then establish what transactions actually occurred and then compare the two and show that the paper trail is a trail of lies.

THE KEY TO THIS MESS IS TO REPLACE OR SUBSTITUTE THE CURRENT SYSTEMS OF SERVICERS WITH AN ENTIRELY DIFFERENT SYSTEM OF SERVICING AND A DIFFERENT SET OF SERVICERS TO REPLACE THOSE WHO ARE BLOCKING THE DIALOGUE BETWEEN LENDERS AND BORROWERS.

Mortgage borrowers get more foreclosure protection from Mass. bank regulators
http://www.bizjournals.com/boston/news/2013/10/17/mortgage-borrowers-get-more.html

The Very Worst Thing About Foreclosures Today Is Watching Consumers That You Know Could be Helped Standing in Court Without An Attorney
http://ireport.cnn.com/docs/DOC-1050081/

 

Identity Theft: The Nuclear Option

The purpose of this article is to support the prior conclusions expressed in my articles and appearances that in addition to being a Ponzi scheme, a necessary component of the illusion of a securitization plan was identity theft in which the identity of a person or entity is used for fraudulent purposes. The latest round of lawsuits and investigations center in on allegations by the Department of Justice and the Securities and Exchange Commission that the sale of mortgage bonds was fraudulent. We agree, and for more reasons than those reported to be in those lawsuits. Under Federal and State law identity theft occurs when the information is obtained for use in a fraudulent scheme, just as alleged by the department of justice.

I remind the reader that I have repeatedly made the statement that the money from the investor was diverted and misapplied just as the money from the insurance, credit default swaps, taxpayer and federal reserve was misapplied. Research below indicates that such behavior can be and in this case I would argue is criminal conduct with a right of private action for damages.  Thus I would argue that embezzlement and related crimes apply to the securitization scam.

There are many ways in which the damages to the homeowner can be recouped. this article suggests that one of them is through allegations of identity theft. The thief is the bank that set up the false securitization scheme. The victim is the homeowner who gave their name, SSN and other identifying characteristics so that the thief could use it in a variety of ways for trading and profit without the knowledge or consent of the victim. The information was obtained by falsely representing the nature of the transaction in which the alleged loan was closed. The damages are the value of the home, and any other out of pocket expenses or consequential damages to credit reputation etc. plus punitive, treble or exemplary damages.  The defendants are all of the people who knew or should have known or must known the details of the fraudulent scheme.

The interesting legal question that is not answered in the research document below is whether identity theft can be used defensively as part of affirmative defenses or whether it must be used offensively in a counterclaim or separate lawsuit. I would argue that it can be used defensively and that as such the statute of limitations would never apply. The purpose of the transaction was to obtain the homeowners personal financial information in a manner that was not disclosed to the homeowner at the time the information was obtained nor was it disclosed at the time of the alleged loan “closing”, and then the financial information was used for the purpose of selling fraudulent mortgage bonds to investors who now concede that they have no right of action against the homeowner.

The banks will  attack this defense on the same basis as the head of any other organized crime syndicate, to wit: that they had no idea that crimes were being committed in the securitization chain. This claim will not hold much water when it is disclosed that securitization chain is described in documents but was never used and that the banks directly control the movement of money and the fabrication of documents to give a false impression of the movement of money and transacting business.

If the United States Department of Justice wishes to press criminal charges it might find an easy path in identity theft.

I wish to acknowledge that the research presented below was done entirely by a legal intern from the law school at Florida State University. While the initial instructions came from me she performed the research without direct guidance required from me. While I don’t think I am permitted to use her name I would like to say for purposes of disclosure, I am thankful for the work that she performed in producing the information and commentary contained below.

Table of Contents

 

QUESTION 1: What is the definition of ID theft?2

 

a. ON THE STATE LEVEL2

 

b. ON THE FEDERAL LEVEL4

 

§ 1028A. Aggravated identity theft4

 

§ 656. Theft, embezzlement, or misapplication by bank officer or employee4

 

18 U.S.C.A. § 1028(a)(7)5

 

§ 6823. Criminal penalty5

 

§ 6821. Privacy protection for customer information of financial institutions5

 

QUESTION 2:  What can you sue for and/or what damages are you entitled to?7

 

DOCUMENT A8

 

DOCUMENT B13

 

772.11. Civil remedy for theft or exploitation13

 

DOCUMENT C14

 

812.012. Definitions14

 

812.014. Theft15

 

812.019. Dealing in stolen property15

 

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

QUESTION 1: What is the definition of ID theft?

 

 

 

a. ON THE STATE LEVEL

 

 

Identity theft is covered by FL Stat. §817.02 and §817.568.  §817.02 states that “Whoever falsely personates or represents another, and in such assumed character receives any property intended to be delivered to the party so personated, with intent to convert the same to his or her own use, shall be punished as if he or she had been convicted of larceny.”

 

 

 

§817.568 defines the “Criminal Use of Personal Identification Information.”  I will summarize, but at the end I will include the full text of the statute (see “Document A”).  In the summary below, any irrelevant sections have been omitted, and the particularly important paragraphs have been put in bold font. §817.568 does also specify that the definition of “person” can be found in FL Stat. §1.01(3), which says that, “The word ‘person’ includes individuals, children, firms, associations, joint adventures, partnerships, estates, trusts, business trusts, syndicates, fiduciaries, corporations, and all other groups or combinations.”  Which would reasonably include a bank.  With that in mind, here is the summary:

 

 

 

Subsection (1)(f) says that “personal identification information” is any name or number used to identify a specific individual.  This includes names, postal/email addresses, phone number, SS number, bank account number, credit/debit card number, unique electronic ID number, and “other number or information that can be used to access a person’s financial resources”, among other things.

 

 

 

 Subsection (2)(a-c) specifies the felonies that a person can be charged with if they commit “fraudulent use of personal identification information” by “willfully and without authorization fraudulently uses, or possesses with intent to fraudulently use, personal identification information concerning an individual without first obtaining that individual’s consent”.  Depending on the amount of the injury/fraud, and the number of individuals’ personal ID info that is fraudulently used, a person can be charged with first, second, or third degree felony. 

 

 

 

Subsection (4) says that if you use personal ID info without consent for the purposes of harassing that individual, then they’ve committed the offense of “harassment by use of personal identification information.”

 

 

Subsection (5) says that if the offense was “facilitated or furthered by the use of a public record…the offense is reclassified to the next higher degree.”

 

 

Subsection (9) describes the penalties and definitions for creating, using, or possessing with intent to fraudulently use, counterfeit or fictitious personal identification information.

 

 

Subsection (10) says that “Any person who commits an offense described in this section and for the purpose of obtaining or using personal identification information misrepresents himself or herself to be…an employee or representative of a bank, credit card company, credit counseling company, or credit reporting agency; or any person who wrongfully represents that he or she is seeking to assist the victim with a problem with the victim’s credit history shall have the offense reclassified.”  It then goes on to reclassify the offenses in subsections (a) through (d).

 

 

Subsection (13) describes the restitution the court may order.  It specifies that, “In addition to the victim’s out-of-pocket costs, restitution may include payment of any other costs, including attorney’s fees incurred by the victim in clearing the victim’s credit history or credit rating, or any costs incurred in connection with any civil or administrative proceeding to satisfy any debt, lien, or other obligation of the victim arising as the result of the actions of the defendant.”  The court may also issue orders necessary to correct the public record if need be.

 

 

 

Subsection (14) specifies who may bring the action to the court (any state attorney or the statewide prosecutor).

 

 

Subsections (15) and (16) describe the requirements for jurisdiction and venue.

 

 

 

Subsection (17) describes the statute of limitations. (3 years after offense occurred for subsections (2), (6), & (7).  1 year after discovery of offense by aggrieved party/person who has a legal duty to represent the aggrieved party IF the prosecution is commenced within 5 years after the violation occurred)

 

 

 

 

 


 

 

b. ON THE FEDERAL LEVEL

 

 

18 U.S.C.A. §1028A would probably be the most applicable.  The section on aggravated identity theft is in normal font, and the sections it references are indented and italicized. Andininand willweight of the dealgot a goalshouldI know I just can’t get a matter the house I think he’s out and mixing I know is onin better

 

§ 1028A. Aggravated identity theft

 

 

 

(a) Offenses.

 

(1) In general.–Whoever, during and in relation to any felony violation enumerated in subsection (c), knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 2 years.

 

 

(c) Definition.–For purposes of this section, the term “felony violation enumerated in subsection (c)” means any offense that is a felony violation of–

 

(1) …section 656 (relating to theft, embezzlement, or misapplication by bank officer or employee)…;

 

§ 656. Theft, embezzlement, or misapplication by bank officer or employee

 

Whoever, being an officer, director, agent or employee of, or connected in any capacity with any Federal Reserve bank, member bank, depository institution holding company, national bank, insured bank, branch or agency of a foreign bank, or organization operating under section 25 or section 25(a) of the Federal Reserve Act, or a receiver of a national bank, insured bank, branch, agency, or organization or any agent or employee of the receiver, or a Federal Reserve Agent, or an agent or employee of a Federal Reserve Agent or of the Board of Governors of the Federal Reserve System, embezzles, abstracts, purloins or willfully misapplies any of the moneys, funds or credits of such bank, branch, agency, or organization or holding company or any moneys, funds, assets or securities intrusted to the custody or care of such bank, branch, agency, or organization, or holding company or to the custody or care of any such agent, officer, director, employee or receiver, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both; but if the amount embezzled, abstracted, purloined or misapplied does not exceed $1,000, he shall be fined under this title or imprisoned not more than one year, or both.

 

 

 

As used in this section, the term “national bank” is synonymous with “national banking association”; “member bank” means and includes any national bank, state bank, or bank and trust company which has become a member of one of the Federal Reserve banks; “insured bank” includes any bank, banking association, trust company, savings bank, or other banking institution, the deposits of which are insured by the Federal Deposit Insurance Corporation; and the term “branch or agency of a foreign bank” means a branch or agency described in section 20(9) of this title. For purposes of this section, the term “depository institution holding company” has the meaning given such term in section 3 of the Federal Deposit Insurance Act.

 

18 U.S.C.A. § 656 (West)

 

 

 

(4) any provision contained in this chapter (relating to fraud and false statements), other than this section or section 1028(a)(7);

 

18 U.S.C.A. § 1028(a)(7)

 

“…knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, or in connection with, any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law…”

 

18 U.S.C.A. § 1028 (West)

 

 

 

(8) section 523 of the Gramm-Leach-Bliley Act (15 U.S.C. 6823) (relating to obtaining customer information by false pretenses);

 

§ 6823. Criminal penalty

 

(a) In general

 

Whoever knowingly and intentionally violates, or knowingly and intentionally attempts to violate, section 6821 of this title shall be fined in accordance with Title 18 or imprisoned for not more than 5 years, or both.

 

15 U.S.C.A. § 6823 (West)

 

 

 

§ 6821. Privacy protection for customer information of financial institutions

 

 (a) Prohibition on obtaining customer information by false pretenses

 

It shall be a violation of this subchapter for any person to obtain or attempt to obtain, or cause to be disclosed or attempt to cause to be disclosed to any person, customer information of a financial institution relating to another person–

 

(1) by making a false, fictitious, or fraudulent statement or representation to an officer, employee, or agent of a financial institution;

 

(2) by making a false, fictitious, or fraudulent statement or representation to a customer of a financial institution; or

 

(3) by providing any document to an officer, employee, or agent of a financial institution, knowing that the document is forged, counterfeit, lost, or stolen, was fraudulently obtained, or contains a false, fictitious, or fraudulent statement or representation.

 

(b) Prohibition on solicitation of a person to obtain customer information from financial institution under false pretenses

 

It shall be a violation of this subchapter to request a person to obtain customer information of a financial institution, knowing that the person will obtain, or attempt to obtain, the information from the institution in any manner described in subsection (a) of this section.

 

15 U.S.C.A. § 6821 (West)

 

 

 

18 U.S.C.A. § 1028A (West)

 

 

 

 

 

 

 

 


 

 

QUESTION 2:  What can you sue for and/or what damages are you entitled to?

 

 

Under Florida law, §817.568(13)(a-b) specifies the restitution an aggrieved party is allowed to recover.  It states,

 

(a) In sentencing a defendant convicted of an offense under this section, the court may order that the defendant make restitution under s. 775.089 to any victim of the offense. In addition to the victim’s out-of-pocket costs, restitution may include payment of any other costs, including attorney’s fees incurred by the victim in clearing the victim’s credit history or credit rating, or any costs incurred in connection with any civil or administrative proceeding to satisfy any debt, lien, or other obligation of the victim arising as the result of the actions of the defendant.

 

(b) The sentencing court may issue such orders as are necessary to correct any public record that contains false information given in violation of this section.

 

 

The statute does not specify that you can sue the convicted defendant and recover the benefits they received from stealing your identity. 

 

 

Most the cases I am finding about recovering damages from a bank because of identity theft result from the bank losing the personal information or somehow making it accessible (often through a bank employee), and then the bank being sued under the doctrines of agency/respondeat superior.  Because they were the custodian of the information and they didn’t employ reasonable standards to safeguard the personal information, they are then the proximate cause of the plaintiff’s suffering and liable for damages.  Which is probably not quite the right situation here.

 

 

HOWEVER, I did find a (what I believe to be) legitimate way to recover damages from the banks.  Florida law allows for recovery of damages. If you read FL Stat. Ann. §772.11, “Civil Remedy for Theft or Exploitation” (see “Document B”), it states that, if you can prove a violation of §§812.012-812.037, you can recover treble damages as well as reasonable attorney’s fees and court costs.  You cannot recover punitive damages.  It also lays out special procedures you must follow before you may file an action for damages.  The sections that I believe are actually applicable are §§812.012 (“Definitions”), 812.014 (“Theft”), and 812.019 (“Dealing in Stolen Property”).  The best way for you to understand what I’m talking about would be to read the relevant sections (see “Document C”).  Essentially, my thought process is that if you can show the bank obtained the property by fraud in order to temporarily or permanently benefit from the property, or that the bank coordinated the theft of the property where the value of the property exceeds $3,000, you’ll have them for theft under 812.014.  Which would then allow you to recover damages under §772.11.  OR, if you show that the bank “initiates, organizes, plans, finances, directs, manages, or supervises the theft of property” and “traffics in such stolen property” AKA they “buy, receive, possess, obtain control of, or use property with the intent to sell, transfer, distribute, dispense, or otherwise dispose of such property”, then you would again be able to recover damages.  Just to be clear, “‘property’ means anything of value”, examples being “real property” as well as “tangible or intangible personal property, including…interests and claims”. 

 

DOCUMENT A

 

 

 

817.568. Criminal use of personal identification information

 

(1) As used in this section, the term:

 

(a) “Access device” means any card, plate, code, account number, electronic serial number, mobile identification number, personal identification number, or other telecommunications service, equipment, or instrument identifier, or other means of account access that can be used, alone or in conjunction with another access device, to obtain money, goods, services, or any other thing of value, or that can be used to initiate a transfer of funds, other than a transfer originated solely by paper instrument.

 

(b) “Authorization” means empowerment, permission, or competence to act.

 

(c) “Harass” means to engage in conduct directed at a specific person that is intended to cause substantial emotional distress to such person and serves no legitimate purpose. “Harass” does not mean to use personal identification information for accepted commercial purposes. The term does not include constitutionally protected conduct such as organized protests or the use of personal identification information for accepted commercial purposes.

 

(d) “Individual” means a single human being and does not mean a firm, association of individuals, corporation, partnership, joint venture, sole proprietorship, or any other entity.

 

(e) “Person” means a “person” as defined in s. 1.01(3).

 

(f) “Personal identification information” means any name or number that may be used, alone or in conjunction with any other information, to identify a specific individual, including any:

 

1. Name, postal or electronic mail address, telephone number, social security number, date of birth, mother’s maiden name, official state-issued or United States-issued driver’s license or identification number, alien registration number, government passport number, employer or taxpayer identification number, Medicaid or food assistance account number, bank account number, credit or debit card number, or personal identification number or code assigned to the holder of a debit card by the issuer to permit authorized electronic use of such card;

 

2. Unique biometric data, such as fingerprint, voice print, retina or iris image, or other unique physical representation;

 

3. Unique electronic identification number, address, or routing code;

 

4. Medical records;

 

5. Telecommunication identifying information or access device; or

 

6. Other number or information that can be used to access a person’s financial resources.

 

(g) “Counterfeit or fictitious personal identification information” means any counterfeit, fictitious, or fabricated information in the similitude of the data outlined in paragraph (f) that, although not truthful or accurate, would in context lead a reasonably prudent person to credit its truthfulness and accuracy.

 

 

 

(2)(a) Any person who willfully and without authorization fraudulently uses, or possesses with intent to fraudulently use, personal identification information concerning an individual without first obtaining that individual’s consent, commits the offense of fraudulent use of personal identification information, which is a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

 

(b) Any person who willfully and without authorization fraudulently uses personal identification information concerning an individual without first obtaining that individual’s consent commits a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084, if the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of the injury or fraud perpetrated is $5,000 or more or if the person fraudulently uses the personal identification information of 10 or more individuals, but fewer than 20 individuals, without their consent. Notwithstanding any other provision of law, the court shall sentence any person convicted of committing the offense described in this paragraph to a mandatory minimum sentence of 3 years’ imprisonment.

 

(c) Any person who willfully and without authorization fraudulently uses personal identification information concerning an individual without first obtaining that individual’s consent commits a felony of the first degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084, if the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of the injury or fraud perpetrated is $50,000 or more or if the person fraudulently uses the personal identification information of 20 or more individuals, but fewer than 30 individuals, without their consent. Notwithstanding any other provision of law, the court shall sentence any person convicted of committing the offense described in this paragraph to a mandatory minimum sentence of 5 years’ imprisonment. If the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of the injury or fraud perpetrated is $100,000 or more, or if the person fraudulently uses the personal identification information of 30 or more individuals without their consent, notwithstanding any other provision of law, the court shall sentence any person convicted of committing the offense described in this paragraph to a mandatory minimum sentence of 10 years’ imprisonment.

 

 

 

(3) Neither paragraph (2)(b) nor paragraph (2)(c) prevents a court from imposing a greater sentence of incarceration as authorized by law. If the minimum mandatory terms of imprisonment imposed under paragraph (2)(b) or paragraph (2)(c) exceed the maximum sentences authorized under s. 775.082, s. 775.084, or the Criminal Punishment Code under chapter 921, the mandatory minimum sentence must be imposed. If the mandatory minimum terms of imprisonment under paragraph (2)(b) or paragraph (2)(c) are less than the sentence that could be imposed under s. 775.082, s. 775.084, or the Criminal Punishment Code under chapter 921, the sentence imposed by the court must include the mandatory minimum term of imprisonment as required by paragraph (2)(b) or paragraph (2)(c).

 

 

 

(4) Any person who willfully and without authorization possesses, uses, or attempts to use personal identification information concerning an individual without first obtaining that individual’s consent, and who does so for the purpose of harassing that individual, commits the offense of harassment by use of personal identification information, which is a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083.

 

 

 

(5) If an offense prohibited under this section was facilitated or furthered by the use of a public record, as defined in s. 119.011, the offense is reclassified to the next higher degree as follows:

 

(a) A misdemeanor of the first degree is reclassified as a felony of the third degree.

 

(b) A felony of the third degree is reclassified as a felony of the second degree.

 

(c) A felony of the second degree is reclassified as a felony of the first degree.

 

For purposes of sentencing under chapter 921 and incentive gain-time eligibility under chapter 944, a felony offense that is reclassified under this subsection is ranked one level above the ranking under s. 921.0022 of the felony offense committed, and a misdemeanor offense that is reclassified under this subsection is ranked in level 2 of the offense severity ranking chart in s. 921.0022.

 

 

 

(6) Any person who willfully and without authorization fraudulently uses personal identification information concerning an individual who is less than 18 years of age without first obtaining the consent of that individual or of his or her legal guardian commits a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

 

 

 

(7) Any person who is in the relationship of parent or legal guardian, or who otherwise exercises custodial authority over an individual who is less than 18 years of age, who willfully and fraudulently uses personal identification information of that individual commits a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

 

 

 

(8)(a) Any person who willfully and fraudulently uses, or possesses with intent to fraudulently use, personal identification information concerning a deceased individual commits the offense of fraudulent use or possession with intent to use personal identification information of a deceased individual, a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

 

(b) Any person who willfully and fraudulently uses personal identification information concerning a deceased individual commits a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084, if the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of injury or fraud perpetrated is $5,000 or more, or if the person fraudulently uses the personal identification information of 10 or more but fewer than 20 deceased individuals. Notwithstanding any other provision of law, the court shall sentence any person convicted of committing the offense described in this paragraph to a mandatory minimum sentence of 3 years’ imprisonment.

 

(c) Any person who willfully and fraudulently uses personal identification information concerning a deceased individual commits the offense of aggravated fraudulent use of the personal identification information of multiple deceased individuals, a felony of the first degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084, if the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of injury or fraud perpetrated is $50,000 or more, or if the person fraudulently uses the personal identification information of 20 or more but fewer than 30 deceased individuals. Notwithstanding any other provision of law, the court shall sentence any person convicted of the offense described in this paragraph to a minimum mandatory sentence of 5 years’ imprisonment. If the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of the injury or fraud perpetrated is $100,000 or more, or if the person fraudulently uses the personal identification information of 30 or more deceased individuals, notwithstanding any other provision of law, the court shall sentence any person convicted of an offense described in this paragraph to a mandatory minimum sentence of 10 years’ imprisonment.

 

 

 

(9) Any person who willfully and fraudulently creates or uses, or possesses with intent to fraudulently use, counterfeit or fictitious personal identification information concerning a fictitious individual, or concerning a real individual without first obtaining that real individual’s consent, with intent to use such counterfeit or fictitious personal identification information for the purpose of committing or facilitating the commission of a fraud on another person, commits the offense of fraudulent creation or use, or possession with intent to fraudulently use, counterfeit or fictitious personal identification information, a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

 

 

 

(10) Any person who commits an offense described in this section and for the purpose of obtaining or using personal identification information misrepresents himself or herself to be a law enforcement officer; an employee or representative of a bank, credit card company, credit counseling company, or credit reporting agency; or any person who wrongfully represents that he or she is seeking to assist the victim with a problem with the victim’s credit history shall have the offense reclassified as follows:

 

(a) In the case of a misdemeanor, the offense is reclassified as a felony of the third degree.

 

(b) In the case of a felony of the third degree, the offense is reclassified as a felony of the second degree.

 

(c) In the case of a felony of the second degree, the offense is reclassified as a felony of the first degree.

 

(d) In the case of a felony of the first degree or a felony of the first degree punishable by a term of imprisonment not exceeding life, the offense is reclassified as a life felony.

 

For purposes of sentencing under chapter 921, a felony offense that is reclassified under this subsection is ranked one level above the ranking under s. 921.0022 or s. 921.0023 of the felony offense committed, and a misdemeanor offense that is reclassified under this subsection is ranked in level 2 of the offense severity ranking chart.

 

 

 

(11) The prosecutor may move the sentencing court to reduce or suspend the sentence of any person who is convicted of a violation of this section and who provides substantial assistance in the identification, arrest, or conviction of any of that person’s accomplices, accessories, coconspirators, or principals or of any other person engaged in fraudulent possession or use of personal identification information. The arresting agency shall be given an opportunity to be heard in aggravation or mitigation in reference to any such motion. Upon good cause shown, the motion may be filed and heard in camera. The judge hearing the motion may reduce or suspend the sentence if the judge finds that the defendant rendered such substantial assistance.

 

 

 

(12) This section does not prohibit any lawfully authorized investigative, protective, or intelligence activity of a law enforcement agency of this state or any of its political subdivisions, of any other state or its political subdivisions, or of the Federal Government or its political subdivisions.

 

 

 

(13)

 

(a) In sentencing a defendant convicted of an offense under this section, the court may order that the defendant make restitution under s. 775.089 to any victim of the offense. In addition to the victim’s out-of-pocket costs, restitution may include payment of any other costs, including attorney’s fees incurred by the victim in clearing the victim’s credit history or credit rating, or any costs incurred in connection with any civil or administrative proceeding to satisfy any debt, lien, or other obligation of the victim arising as the result of the actions of the defendant.

 

(b) The sentencing court may issue such orders as are necessary to correct any public record that contains false information given in violation of this section.

 

 

 

(14) Prosecutions for violations of this section may be brought on behalf of the state by any state attorney or by the statewide prosecutor.

 

 

 

(15) The Legislature finds that, in the absence of evidence to the contrary, the location where a victim gives or fails to give consent to the use of personal identification information is the county where the victim generally resides.

 

 

 

(16) Notwithstanding any other provision of law, venue for the prosecution and trial of violations of this section may be commenced and maintained in any county in which an element of the offense occurred, including the county where the victim generally resides.

 

 

 

(17) A prosecution of an offense prohibited under subsection (2), subsection (6), or subsection (7) must be commenced within 3 years after the offense occurred. However, a prosecution may be commenced within 1 year after discovery of the offense by an aggrieved party, or by a person who has a legal duty to represent the aggrieved party and who is not a party to the offense, if such prosecution is commenced within 5 years after the violation occurred.

 

 

 

Fla. Stat. Ann. § 817.568 (West)


 

DOCUMENT B

 

 

772.11. Civil remedy for theft or exploitation

 

 

 

(1) Any person who proves by clear and convincing evidence that he or she has been injured in any fashion by reason of any violation of ss. 812.012-812.037…has a cause of action for threefold the actual damages sustained and, in any such action, is entitled to minimum damages in the amount of $200, and reasonable attorney’s fees and court costs in the trial and appellate courts. Before filing an action for damages under this section, the person claiming injury must make a written demand for $200 or the treble damage amount of the person liable for damages under this section. If the person to whom a written demand is made complies with such demand within 30 days after receipt of the demand, that person shall be given a written release from further civil liability for the specific act of theft or exploitation by the person making the written demand. Any person who has a cause of action under this section may recover the damages allowed under this section from the parents or legal guardian of any unemancipated minor who lives with his or her parents or legal guardian and who is liable for damages under this section. Punitive damages may not be awarded under this section. The defendant is entitled to recover reasonable attorney’s fees and court costs in the trial and appellate courts upon a finding that the claimant raised a claim that was without substantial fact or legal support.  In awarding attorney’s fees and costs under this section, the court may not consider the ability of the opposing party to pay such fees and costs. This section does not limit any right to recover attorney’s fees or costs provided under any other law.

 

 

 

Fla. Stat. Ann. § 772.11 (West)


 

DOCUMENT C

 

 

 

812.012. Definitions

 

 

 

As used in ss. 812.012-812.037:

 

 

(3) “Obtains or uses” means any manner of:

 

(a) Taking or exercising control over property.

 

(b) Making any unauthorized use, disposition, or transfer of property.

 

(c) Obtaining property by fraud, willful misrepresentation of a future act, or false promise.

 

(d)1. Conduct previously known as stealing; larceny; purloining; abstracting; embezzlement; misapplication; misappropriation; conversion; or obtaining money or property by false pretenses, fraud, or deception; or

 

2. Other conduct similar in nature.

 

(4) “Property” means anything of value, and includes:

 

(a) Real property, including things growing on, affixed to, and found in land.

 

(b) Tangible or intangible personal property, including rights, privileges, interests, and claims.

 

(c) Services.

 

(5) “Property of another” means property in which a person has an interest upon which another person is not privileged to infringe without consent, whether or not the other person also has an interest in the property.

 

 

(7) “Stolen property” means property that has been the subject of any criminally wrongful taking.

 

(8) “Traffic” means:

 

(a) To sell, transfer, distribute, dispense, or otherwise dispose of property.

 

(b) To buy, receive, possess, obtain control of, or use property with the intent to sell, transfer, distribute, dispense, or otherwise dispose of such property.

 

(9) “Enterprise” means any individual, sole proprietorship, partnership, corporation, business trust, union chartered under the laws of this state, or other legal entity, or any unchartered union, association, or group of individuals associated in fact although not a legal entity.

 

(10) “Value” means value determined according to any of the following:

 

(a)1. Value means the market value of the property at the time and place of the offense or, if such cannot be satisfactorily ascertained, the cost of replacement of the property within a reasonable time after the offense.

 

2. The value of a written instrument that does not have a readily ascertainable market value, in the case of an instrument such as a check, draft, or promissory note, is the amount due or collectible or is, in the case of any other instrument which creates, releases, discharges, or otherwise affects any valuable legal right, privilege, or obligation, the greatest amount of economic loss that the owner of the instrument might reasonably suffer by virtue of the loss of the instrument.

 

 

(c) Amounts of value of separate properties involved in thefts committed pursuant to one scheme or course of conduct, whether the thefts are from the same person or from several persons, may be aggregated in determining the grade of the offense.

 

 

 

Fla. Stat. Ann. § 812.012 (West)

 

 

 

 

 

812.014. Theft

 

 

 

(1) A person commits theft if he or she knowingly obtains or uses, or endeavors to obtain or to use, the property of another with intent to, either temporarily or permanently:

 

(a) Deprive the other person of a right to the property or a benefit from the property.

 

(b) Appropriate the property to his or her own use or to the use of any person not entitled to the use of the property.

 

(2) (a) 1. If the property stolen is valued at $100,000 or more…

 

 

(b) 1. If the property stolen is valued at $20,000 or more, but less than $100,000;

 

 

(6) A person who individually, or in concert with one or more other persons, coordinates the activities of one or more persons in committing theft … where the stolen property has a value in excess of $3,000 commits a felony of the second degree…

 

 

 

Fla. Stat. Ann. § 812.014 (West)

 

 

 

 

812.019. Dealing in stolen property

 

 

(1) Any person who traffics in, or endeavors to traffic in, property that he or she knows or should know was stolen shall be guilty of a felony of the second degree…

 

(2) Any person who initiates, organizes, plans, finances, directs, manages, or supervises the theft of property and traffics in such stolen property shall be guilty of a felony of the first degree…

 

 

Fla. Stat. Ann. § 812.019 (West)

 

 

 

 

 

IDENTITY THEFT: THE HEART OF THE SECURITIZATION SCAM

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COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE

YOUR SIGNATURE WAS WORTH $TRILLIONS — MAYBE IT STILL IS!

There ought to be a law against that! Oops, there is a law, in fact many of them. The thief gets your credit card information etc. buys a TV and you get the bill. Nobody would argue that the thief should go to jail. Sometimes the thief simply sells your information to others who will use it to obtain something for value and lay the bill at your doorstep. Nobody would argue that both the thief and the buyer of your identity should go to jail. What happens if the thief is a Bank?

In securitization of debt that is exactly what happens. It’s not that securitization of debt is a bad thing. What was bad was the way the banks handled it. They took your signature and without your knowledge or consent used it to obtain credit, money and undisclosed profits and loss mitigation money (insurance) to reduce the balance owed to the investor creditors. What they didn’t do was tell you they received that money, nor did they tell you that the investor creditor had been paid down on the balance due. They kept the money — which they were able to get because of your signature on some loan agreement that was either a credit card, student loan, auto loan, mortgage loan, or some other debt.

Sometimes the investor creditor actually received the money and sometimes they didn’t. But in all cases either they received the money or their agent received the money and if the investor didn’t get it, that is a matter between them and their agents. If you pay the bill, you are paying the same obligation twice — but because of the asymmetry of information, you only know about one payment — the one you made.

Lending laws vary from state to state but the underlying theme is that borrowers are customers just like any product and as such they have a right to choose with whom they do business. They also have a right to know the details of the deal — what the fees are and what compensation is being received by the various players that participated in advancing credit to you. So for example, if you knew that the fees and profits from your signature was going to produce large amounts of money to the participants in one deal offered to you, you could shop around and see if there is someone who doesn’t work that way and by eliminating some of the middlemen and hedge products, your rate or other terms might be more favorable.

Now the industry has laid the bill at your doorstep, no matter what type of loan you have. They have received money they have not disclosed and they haven’t done the accounting: how much of the money they received should have been credited against the amount owed to the investor creditor and how much of that reduction in the amount owed to the creditor should be allocated to your loan? We don’t know because the Banks are not talking. The reason is that they have concealed this money under the label of trading profits when in fact it is just plain theft. You are being told to pay a bill that has already been paid. The investor also might be deprived of money that has been paid toward the obligation owed to the investor creditor.

In the mortgage industry, where these issues have received the most attention, it has been obvious that the Banks were playing fast and loose with the money and the documentation. The trail of money and the trail documents are two different paths each having little similarity — when they should obviously be identical. Those paths lead to different places with one “creditor” showing up as the holder of the paper and the other real creditor merely holding a right to an obligation that has been obscured by the middlemen.

The interesting thing about all this is that the paperwork does matter and so does the law. Title to real property can only be “clear” if the title registry shows an unbroken chain and there are no facts known that would lead anyone to believe otherwise. It is now apparent, thanks to MERS and other diversions of paperwork, that title to the property, the documents and the money obligation are all different and cannot be corrected without some new instrument(s).

That’s where you come into the picture. In order to straighten out the problem, the investors must be  given credit and money for what was received on behalf of the loan they made to a “Trust” or other special purpose vehicle. And if the creditors want a claim that is enforceable by reference to a document, then they need your signature — again, this time with feeling —- i.e., after full disclosure of what they did and negotiating with you for the value of your signature instead of merely stealing it for their own purposes. This is the reason that BOA is experimenting with the cash for keys program where they pay as much as $20,000. What they are really purchasing is not just your keys, but your signature so now they can claim that what they said is at least now true even if it wasn’t true when they said it.

What is the value of your signature? I would argue that you could use several possible indices. If you have already been foreclosed and evicted then perhaps the value is at least the value of the house at the time of the new transaction. Perhaps the value would be computed based upon participation in those “trading profits” in which they pocketed money belonging to the investor and which should have been credited to your loan account. Or possibly the value is tied to the total value of your claims and counterclaims whether filed or not — for slander of title, predatory lending, deceptive lending, quiet title etc. Whatever the value might be it must be worth a fair amount of money if BOA is offering up to $20,000.

This isn’t theoretical. At my suggestion American Homeowners Cooperative is going to launch a service where borrowers (past and present) can offer their signatures for sale on current or previous loans. Hedge fund managers see this as a way of betting against the validity of mortgages and betting against the validity of the paper being used to enforce the obligation. We’ll find out soon enough whether the buyers of these signatures will pay enough for the borrowers to sign yet another group of documents that assigns and releases their claims and either clears title or starts a new claim without any of the dirty laundry that is currently attached to securitized debt. Stay tuned. This should be interesting.

Allocation of Third Party Payments and Loans to Specific Loan Accounts

TURNING A DEFENSE INTO AN AFFIRMATIVE DEFENSE FOR SET OFF AND A CLAIM OR COUNTERCLAIM FOR DAMAGES AND ATTORNEY FEES

So the question is how would you allocate third party payments and what difference will that make to a Judge hearing the case.

ASSUMPTION: XYZ Investment Banking Holding company has received a total of $50 billion in third party payments from insurance, counterparties, credit enhancements (moving money from one tranche to another within the SPV “Trust”), and federal assistance or bailout. Each one of these is subject to separate analysis, but for simplicity we will treat them all the same.

  • The money received was for “toxic assets” meaning bad mortgages or pools that were written down in value because of the presence of bad loans in the pools. Whether those loans really made it into the pool when the “assignment” was years after the cutoff date in the PSA and was for a non-performing loan which is specifically excluded in the PSA is yet another issue that requires separate analysis.
  • Out of the many SPV entities created and sold to investors, 50 were in the status of default or write-down, triggering the insurance, bailouts etc.
  • Arithmetically, assuming $1 billion goes to each pool under the assumption they were all the same size (not true in reality, so you would be required to make a calculation to arrive at the prorata share of each pool which involve several factors and is subject to a whole separate analysis that will be ignored for purposes of this example).
  • Out of each pool, 50% of the loans were in some stage of negative credit event. Thus we have $1 billion to allocate to 50% of the loans.
  • For purposes of this example, the assumption is that each loan was the same size and that there are 4000 loans each with a nominal principal balance of $350,000 claimed.
  • For purposes of this loan each borrower stopped making payments under identical terms 6 months before the receipt of the third party payments.
  • If we ignore the payments then each loan would be entitled to a credit of $250,000 and the investors in each pool would receive a pro rated share of the $1 billion, which amounts to $250,000 per loan.
  • If we don’t ignore the payments and assume that the payments under the note would have been $2,000 per month principal and interest only, then $12,000 wood first be allocated to the past due payments and the default, in relation to the creditors (investors) would be cured. This would be in accordance with the note provisions that first allocate receipts to the payments due.
  • Then fees and costs would be paid off, which we will assume are $13,000, as per the terms of the note.
  • Thus the $250,000 allocation would be reduced by $25,000 before application to principal. That leaves $225,000 allocated to principal.
  • Reducing the principal by $225,000 leaves a balance due on the obligation of $125,000 ($350,000-$225,000).
  • Reducing the balance for the appraisal fraud at origination: (1) appraisal for this example was $370,000 (2) real fair market value was $250,000 (3) borrower made down payment of $20,000 (4) total damages for appraisal fraud = $120,000.
  • After reduction for appraisal fraud the balance on the obligation in our example here is $5,000.
  • Under TILA the failure to disclose the hidden fees and hidden parties and resulting effect on the APR, would mean that the borrower is entitled to either rescission or return of all payments made including the costs of closing and points on the loan, plus attorney fees and possibly treble damages which would mean that someone owes the borrower money, the obligation has been extinguished, the note is evidence of an obligation that has been paid in full, and the mortgage secured is incident to a note securing a non-existent obligation. Either way, under rescission or allocation, the borrower owes nothing.
  • The net result for the creditor is that they get or should get $250,000 cash plus a claim for damages against numerous parties for ratings fraud, appraisal fraud and securities fraud.
  • The net result for the intermediaries who stole all the money including the third party payments is that they get the shaft including possible criminal liability.

A very similar allocation procedure would be appropriate for the top quality performing loans under the theory of identity theft. Without using these high FICO credit-worthy people’s identity and loan score they would not have had the golden cover to the heap of dog poop stinking underneath.

ID THEFT: Example of one person’s response

Editors’ Note: In response to my post on ID THEFT I received a number of comments and ideas. Here is one example of how someone stuck to the message and forced the issue using ID theft as a defensive tactic as well as preparing for an offensive response.

Are you reading my mind?
Out of the blue in Oct. Got a letter with my mortgage company letterhead stating “welcome to new mortgage company”. Said they changed their name. Separate letter said on Nov 6. stop making payments to them by their name and Nov. 7 start making payments to them by new name.
I know about contracts so I attempted to not contract with new name. It’s been a disaster.

1. No assignment 5 months out, in the Official Real Estate Records.
2. Real Trustee still holds title. I contacted him, but he only represents the beneficiary ‘who has the note and an interest secured in the home”.
3. Checked all three credit reports, 5 months out. Two show old name one show new name all have the same info. I disputed new name in the credit report that had it – stating I didn’t know them.
4. I disputed old name in another credit report since they are no longer exist to force identification of who is updating that report. Got copies of all.
4. Checked SEC filings. Investors bought the first name corporation in 2008. Then on Nov. 6, 2009 they merged the bank into their business. That explains why they said to stop paying one name.
5. Foreclosures under old name on file in Deed of Trust has been without assignment or transfer filings. Using Substitute Trustee. Three problems. Original Trustee still holds title. I already wrote him and know this. Deed of Trust on file has no provision for Substituting the Trustee. By virtue of the ‘merger’ they should have the original documents.
6. Spent 5 months asking them to validate their claim. They send a copy of the Certified copy of my Deed of Trust on file in the public (that does not name them), and a copy of a Certified copy of the Promissory note (that does not name them). Two problems They can’t attach to the Deed of Trust without assignment..name change or not…their name is ‘not’ the named Lender nor beneficiary in the Deed of Trust. And the Promissory Note was made out to a specific entity. You can’t possibly assume that I have to know that when you sell it, they can come up and say ‘pay me’ when the promissory note is supposed to be held by the person you promised to pay. If they sell it, that’s a different agreement between them and the other buyer, but I can’t be forced into their third party agreement as long as I agree to pay you..you stay right there and let me pay you..but don’t force me to pay someone I did not ‘promise to pay’.
7. They’ve hired a law firm (setting up for a substitute trustee situation). I contacted the firm. (not pro bono, not pro se, no attorney..just me and told them I don’t recognize the other company and I have asked them to validate and they respond with stronger demand for money.) Maybe that’s why I got the ‘copies’ I did get from the mortgage company that does not support their claim.
8. Informed the attorney of their violation of FDCPA by forwarding information to another party and by not disclosing the amount attempted to collect is in dispute.
9. I wouldn’t trust an attorney at this time. The United States is in Bankruptcy, China filed a lien for 45 Million dollars in December 2009.
10. Have a copy of a Substitute Trustee sale by this company. They never released the lien on the debtor they foreclosed on after the sale. If they had the papers they could have released the lien.
11. Once you admit there is a contract you can’t use Statue of Frauds which helps me because I have refused to contract and have refused to pay and requested validation of their claim of a debt owed to them.
Thinking seriously about filing SEC complaint and sending the ‘Communications, Notice and Order’ to the named person listed in their SEC filing and a copy of that to the law firm listed with the words “With a copy to” – in their SEC filing
My identity has been stolen by the company. When I establish an account with one firm, that does not give a right to another firm to step up and say I have the account, change the name, change the terms of your initial agreement and start paying me now because I have a ‘new name’. How can you have an account demanding payment when there is no agreement and you are really a new entity, not just a new name?
I’m learning about Statute of Frauds. It would also appear that Deceptive Trade Practices can be proven in this mess. A company who has no contract attaches to your credit report as if you’ve established business agreement with them? They have no definition in your Deed of Trust, yet they can get an attorney to represent their interest in your document and start nonjudicial foreclosure proceedings. If they have the papers it takes to change the name on the credit report, they should have the papers it takes to file an assignment/transfer and change the name on the Deed of Trust.
I’ve not paid them any money, but I have filed FTC and Attorney General complaints. Not sure if I have to pay the 5 months in arrears as Threat, Duress, and Coercion to get some action done by these public resources I’m using to filing the compliant.

Identity Theft as a Cause of Action

From Beth Findsen, Attorney in Scottsdale, AZ, she comments that ID Theft may just be the heart of the matter in seeking damages. The logic is simple: they used every borrower’s signature for selling a pool of loans that included OTHER borrowers and a huge undisclosed profit was generated by using the borrower’s signature. Without that signature there would have been no deal. This is especially true if the person was one of the top tier tranche borrowers with 800 FICO scores etc. Without them making the pool look pretty there would have been no sale. Those people were neither compensated nor informed of the use of their very personal information.

The elements are pretty clear. Use of a person’s ID without their consent. Loss to another person. This is another connection between the interests of the borrower and interests of investors.

The essence of securitization of loans has been the unauthorized use of the borrower’s ID to create a collection of loans that were sold as more valuable than any single loan would have been priced, based upon the presence of multiple parties who had no idea that their name and identifying information was being passed around the world like a “whiskey bottle at a frat party” as reported by MSNBC.

Privacy is a commodity. It is constitutionally and statutorily protected. It can be waived or it can be bought, if the person is willing to sell it or waive it. But it cannot be taken by a “lender” (pretender or otherwise) to use for their own profit. That profit belongs to the person or persons whose identity and privacy have been violated — along with punitive damages if it can be applied.

Quoted from Beth:

is it “consent” if it’s based upon a fraudulent misrepresentation or failure to disclose?

in AZ

13-2008. Taking identity of another person or entity; knowingly accepting identity of another person; classification
A. A person commits taking the identity of another person or entity if the person knowingly takes, purchases, manufactures, records, possesses or uses any personal identifying information or entity identifying information of another person or entity, including a real or fictitious person or entity, without the consent of that other person or entity, with the intent to obtain or use the other person’s or entity’s identity for any unlawful purpose or to cause loss to a person or entity whether or not the person or entity actually suffers any economic loss as a result of the offense, or with the intent to obtain or continue employment.

Garfield Continuum White Paper Explains Economics of Securitization of Residential Mortgages

SEE The Economics and Incentives of Yield Spread Premiums and Credit Default Swaps

March 23, 2010: Editor’s Note: The YSP/CDS paper is intentionally oversimplified in order to demonstrate the underlying economics of securitization as it was employed in the last decade.

To be clear, there are several things I was required to do in order to simplify the financial structure for presentation that would be understandable. Even so, it takes careful study and putting pencil to paper in order to “get it.”

In any reasonable analysis the securitization scheme was designed to cheat investors and borrowers in their respective positions as creditors and debtors. The method used was deceit, producing (a) an asymmetry of information and (b) a trust relationship wherein the trust was abused by the sellers of the financial instruments being promoted.

So before I get any more comments about it, here are some clarifying comments about my method.

1. The effects of amortization. The future values of the interest paid are overstated in the example and the premiums or commissions are over-stated in real dollars, but correct as they are expressed in percentages.

2. The effects of present values: As stated in the report, the future value of interest paid and the future value of principal received are both over-statements as they would be expressed in dollars today. Accordingly, the premium, commission or profit is correspondingly higher in the example than it would be in real life.

3. The effects of isolating a single loan versus the reality of a pool of loans. The examples used are not meant to convey the impression that any single loan was securitized by itself. Thus the example of the investment and the loan are hypothetical wherein an average jumbo loan is isolated from the pool from one of the lower tranches and an average bond is isolated from a pool of investors, and the isolated the loan is allocated to in part to only one of the many investors who in real life, would actually own it.

The following is the conclusion extracted directly from the white paper:

Based upon the foregoing facts and circumstances, it is apparent that the securitization of mortgages over the last decade has been conducted on false premises, false representations, resulting in intentional and inevitable negative outcomes for the debtors and creditors in virtually every transaction. The clear provisions for damages and other remedies provided under the Truth in Lending Act and Real Estate Settlement Procedures Act are sufficient to make most homeowners whole if they are applied. Since the level 2 yield spread premium (resulting from the difference in money advanced by the creditor (investor) and the money funded for mortgages) also give rise to claim from investors, it will be up to the courts how to apportion the the actual money damages. Examination of most loans that were securitized indicates that they are more than offset by undisclosed profits, kickbacks, fees, premiums, and rebates. The balance of “damages” due under applicable federal lending and securities laws will require judicial intervention to determine apportionment between debtors and creditors.

Identity Theft, Mers and Other Issues: Great Post from James

James

Henderson, Nevada
Editor’s Comment: At the heart of the entire mortgage meltdown is identity theft by the banks and investment banks. They take your identity, merge it with the identities of thousands of other people and sell it to investors under false pretenses leaving you holding the bag not knowing who to pay or if you still owe anything after the insurance, bailouts and cross collateralization.)

Who owns your house???
Forecasting the future of any market whether it’s real estate or the stock market requires good financial analysis and a little bit of luck. Not if you are on the MERS Bandwagon, the real estate market changes every the day…. Even the Past..

The Mortgage Electronic Registration System, asset backed securities and trustee deed foreclosures are the name of this game. First In………First Out………….! In Clark County Nevada, (Las Vegas) and Maricopa, Arizona, an average of five thousand documents are recorded every day. The two municipalities even brag about the ‘State of the Art’ of their recording technologies. Online, Anytime.. In Maricopa County you can view the Unofficial Documents to any public recording on line. If you want the official document, you will have to order it and they will mail it to you. Chances are, it’s not going to be the same document you viewed on line. Remember, it’s the unofficial recordings as opposed to the Official Recording. Good, but not as good as Clark County Public Recorders Office. They will record any document as long as the paperwork is filled out per their instructions. Public beware since they record documents back in the time as well. Recordings are posted back in time superseding or outright replacing what really happened. Once the transaction posts, its official. Hindsight is 20/20 and in Clark County, Nevada and Maricopa County, Arizona, the past is never really history since it could change tomorrow. Confused?? So was I until I researched the fraud that has perpetrated my life. Only after hiring professionals whom I paid to uncover and identify these fraudsters, did I realize how big this criminal network really is. The professionals came in and covered up the past fraud and set me up for another round of financial loss. Don’t think it affects you, check it out for yourself. You can find out by checking your assets online @ www.knowx.com. Your lender’s trustee has probably already foreclosed once on you at least once without your knowledge.

WHO OWNS YOUR HOUSE????
The scenario reflects my personal experience with Wells Fargo Bank over the last several years. After banking with them for over 16 years, I realized that I was a victim of identity theft, which was controlled and perpetrated by the bank.

On my search for my stolen identity, I discovered a ‘ring of fraud’ involving several reputable companies who I discover all are under the umbrella of Wells Fargo Bank. If the bank owns the mortgage company (Wells Fargo Home Mortgage) and is also the trustee for the loan (American Securities Company of Nevada) and the title companies (pick one), and the insurance company, the only thing they need to make a deal is the consumer. They issue one loan to the consumer and one to themselves. One is recorded in the county the property is located with the lender as the beneficiary; one is recorded with MERS with MERS as the beneficiary. Since the consumer only pays on the loan he signed up for, the second loan eventually goes into default because of non-payment, which activates the foreclosure process by the trustee. These non-judicial foreclosures are kept in-house and are only known about by the insiders (the MERS network). This includes the lenders, real estate brokers, lawyers and title companies and other criminals, all of whom are breaking the law. Three months later the non-judicial foreclosure takes place without public knowing about it. The trustee for the lender adds the outstanding debt on the second bogus loan to the bid price for the property. Since the bid is now 80% +(typical value of second loan) of the original appraisal, the lender is able to clear the first and second loan off their books and now owns the property. The owner never knows what has happened but technically, the real first loan and bogus second loan is cleared by right of the non-judicial foreclosure, the lender now owns the property free and clear and the owner becomes a renter. If someone other than the lender buys the foreclosure, they are issued a Substitution of Trustee and a Deed of Reconveyance from MERS (Mortgage Electronic Recording System). The payment for the foreclosure (generally the amount of the borrowers loan balance at the time) is the price of admission into the loan pool of funds. Instead of getting to take ownership of the foreclosure property, they now have an investor number and an investor loan number which puts them in the real estate investment trust and secures there position in line to collect. It’s a pyramid. First in………First Out……….There is always the title policy that is often time collected on by the group as well since most of the title policies issued pay the lender for the property because of unmarketable title either because of easements, restrictions or other title flaws that are placed on the property using DMS Order Management Software. The title company can pick a start date and a plant date to insert negative history on the property that never really happened but clouding the title so they can collect once the home has closed. These encumbrances are added to the property history after the preliminary title report is issued but before the property closes escrow. The public doesn’t know about any of this or else it would be anarchy. To add injury to insult, the government ends up paying for the fraud as well through RESPA, HUD claims and through a Federal Reserve bank account held by Wells Fargo unbeknownst to the Federal Government. The RESPA and HUD claims are made possible by keeping the limit of the transactions below the HUD insured thresholds. The Federal Reserve account is an retired payroll withholding account Wells Fargo was supposed to close when Bank of America took over payroll (EFTPS) withholding electronic transfers for the government in the early 90’s.

This country will not survive if the very people paid to properly transact and control the home buying process are double dipping. This is not an isolated case. It is happening everywhere. The only way to stop it is to make these institutions and their employees responsible for their actions. Because of the very nature of the fraud, the people in the network are not rookies. Most of them are educated professionals holding well paying, respectable jobs and position in their communities. Unfortunately, our local, state and federal government is infected with people that help facilitate the transactions of these fraudulent activities as well. The war is not in IRAQ. It is here in the United States. Where do you think the money goes? Hidden originally in a trust account that is not audited and then electronically transferred OFFSHORE. Out of the reach of our government. All tax-free. Money Laundering at the Speed of the Internet.

The situation is much like anything terrible that is this big. Eventually the truth will come out. How many years did it take for the Catholics to even admit there might be some truth to the sexual misconduct of the clergy? How many people had to lose their life savings in their retirement plans did it take for the public to find out about the accounting improprieties that Big Financial Houses were committing? How many people will have to die fighting a war half way around the world when the real war is right here in this country? It is time for the truth to be told and the cross collaterization of United States real estate to STOP. The future of our democracy is at stake. The alternative is nothing less than true Anarchy.

MERS
Mortgage Electronic Registration System
The Myth Exposed

The first time I heard the term “MERS” was in April 2003. Not one person I have asked since knows what it is even though a few people acknowledge hearing the term before. “MERS” is short for Mortgage Electronic Registration System. It has quickly become the single most threatening thing to Homeland Security along with the 9th Circuit Courts in the United States. Why? Simple, both MERS and the 9th Circuit Courts are being manipulated and used to commit fraud. Unfortunately, the uninformed public will be left to bear the burden if the insanity doesn’t end soon. In the case of MERS, when JQ public borrows money to buy a home, the lender takes a second loan for the exact same amount as well. Since the lender is generally a bank, as long as they can balance the collateral against their outstanding loan obligations, they take as much as they want. Effectively, doubling the consumer debt by 100% for each real estate transaction made in the United States today. The purchase contracts are written up on VPN contracts (Virtual Private Network) agreements, which look like a normal escrow form with VPN on the bottom left hand corner of each page. What the hell am I taking about? MERS………… Lets start at the beginning.

*Excerpt from CTA Federal Legislative and Regulatory Committee White Paper written by James E. Cornwall, Chairman (in italics)

In 1993, a ‘Whole Loan Book Entry White Paper’ was published jointly by the Mortgage Bankers Association of America, Fannie Mae, Freddie Mac, and Ginnie Mae. The paper outlined a concept for a national registry system for tracking mortgage loans. The original concept is now a reality and is known as MERS (Mortgage Electronic Registration System).

CTA’s involvement in MERS began in 1994 when they began monitoring various news releases concerning the subject of electronic loan registration. In November 1995, CTA hosted a MERS meeting, which was attended by approximately twenty-five of our members and featured Dr. Leilani Allen of Tenex Consulting, representing MERS.

WHAT IS MERS?

MERS is an industry-owned electronic registry and clearinghouse that revolutionizes the way the mortgage market works by eliminating paper, and cutting the cost of the mortgage process. A loan registered with MERS will receive a permanent 18-digit mortgage identification number (MIN) as early as loan application. The MIN will be a loan’s identifier throughout the life of the loan, even if ownership or servicing rights are transferred. Currently, a lender records the mortgage or deed of trust with the County Recorder and this step will remain the same. In addition, an assignment will be recorded with the County Recorder reflecting MERS as the mortgagee of record. The MERS database will reflect the name of the actual owner of the loan.

TECHNOLOGY PARTNER

In April 1996, MERS selected EDS of Plano, Texas as its official information technology partner to develop the systems needed to make MERS work. MERS also held its inaugural meeting of the MERS Advisory Council in April 1996. The Council is made up of representatives from the broader real estate finance industry that is not directly engaged in originating, funding or servicing mortgage loan. (CTA is a member of the Advisory Council)

MERS TODAY

On April 28th, MERS production software was delivered to its first users, Norwest Mortgage, Inc. and Allied Group Mortgage Company. Both companies were the first companies to register mortgages electronically with MERS, Paul Mullings, Chief Executive Officer of MERS, said ‘MERS represents the culmination of a dream that those of us in the mortgage industry have long had, and that is to transform our business through the cooperative application of advanced business process and technologies. Many have been skeptical about our chances of bringing the entire industry together to create something that would be beneficial to all parties involved.
To date, more than 130 entities, including mortgage companies, data processing companies and trustees have signed on to become part or MERS. Several CTA members, including First American Title Company, Stewart Title Company, Cal-Western Reconveyance Corporation and T.D. Service Financial Corporation are listed as MERS members.

I’m not sure if this “White Paper” is accurate or not. I found it on the Internet during my research of MERS. Assuming it is accurate, than why hasn’t anyone heard about MERS? According to their website, MERS recently celebrated its 20 million recording. Twenty million real estate loans recorded and no one’s ever heard of it. I will tell you what it is. It’s white-collar crime. It is greed orchestrated through the use of technology unregulated and gone wild. It’s E-commerce controlled by imposters of our Federal and Local Governments in Cyber World. Every day of the business week, five thousand plus recordings are recorded with the County Recorder of Clark County, Nevada. This is the average per day, 5,000 recordings. That’s 25,000 per week, 100,000 per month, 1,300,000 per year. How is that possible? Its only possible if 50% of the recordings are fraudulent, and they are. Clark County is the center of the e-recording world where fraudulent transactions are recorded to offset the transactions taking place in Cyber Space. MERS is a major factor in these recordings. Still, no one knows what MERS is. Or do they? The only people that know about MERS are the insiders using it for ill-gotten gain. It is nothing more than a database of mortgage loans that are kept track of nationally in one place and are still recorded in the County where the property exists.

*According to the “MERS Quality Assurance Procedures Manual, Version 2.0 November 17, 2003: (in italics)

Legal title to the mortgage lien or the lien of other security agreements must be vested in the Mortgage Electronic Registration Systems, Inc.; a Delaware stock corporation with its principal offices at 1595 Spring Hill Road, Suite 310, Vienna, VA 22182.

The loans are vested in MERS recorded in the MERS database but not on the recordings in the County where the property exists. MERS is supposed to be the beneficiary on the note and not the lender. In my case, MERS is not listed anywhere on the title or note but apparently are listed as beneficiary on the MERS database for my properties. This double recording creates the opportunity for fraud. By changing the beneficiary on the MERS recording, they are essentially creating another record for the same loan. This enables them to issue two loans, one for the borrower and one for the lender. The second loan is collaterized by the same property as the first loan. Since the beneficiary is listed as the lender on the recordings made in the local County where the property exists, the borrower sees the lender or trustee listed as the beneficiary and has no reason to question the recording. At the same time, the mortgage is recorded on MERS with MERS as the beneficiary essentially creating two recordings for the same property. The MERS recording is used to keep up with the cross-collaterization that has just happened. Another place to track the double recordings is at www.knowx.com This is owned by Choice Point in Atlanta, GA. Know X is a national public records database open to the public. It is a fee based search engine and is used extensively by law firms and credit managers in the United States. The MERS recording comes up as a (trustee deed forclosure) on record with knowx if you have a loan that is recorded with MERS and with the county recorder. Essentially, it keeps track of the fraud. If you have a loan listed on knowx.com with (trustee deed forclosure) beside it, the property has been double-mortgaged. The second loan, which the consumer doesn’t know about, is a mirror loan. It will be exactly the same amount, issued the same date, etc. etc. as the originating transaction. This is done so that if there is a cross up and the consumer somehow gets a statement or invoice for the second loan, it appears to be information concerning the first loan. If the second loan is the same amount, same interest rate, issued the same day, then the amortization schedule will be exactly the same. This makes the second loan basically undetectable.

*Excerpts from MERS Commercial quality Assurance Procedures Manual Version 2.0 November 17, 2003
Obligations and Reliances:

Section 6.1: RELATIONSHIP OF BORROWER, MERS AND LENDER.
The relationship between Borrower and Lender is solely that of debtor and creditor. The relationship between Borrower and MERS is solely that of mortgagor and mortgagee. Neither the Lender nor MERS has any fiduciary or other special relationship with Borrower, and no term or condition of any of the Note, this Security Instrument and the Other Security Documents shall be construed so as to deem the relationship between Borrower and MERS to be other than that of debtor and creditor, and the relationship between Borrower and MERS to be other than that of mortgagor and mortgagee. The grants, assignments and transfers to MERS made in Article I are for the benefit of the Lender and its successors and assigns. Borrower understands and agrees that MERS holds only legal title to the interests granted, assigned and transferred by Borrower in the his Mortgage and Security Agreement, but if necessary to comply with law or custom, MERS (for the benefit of the Lender and its successors and assigns) has the right to exercise any or all of those interests, including without limitation, the right to foreclose and sell the Property, and take any action required of Lender, including without limitation, a release, discharge or reconveyance of this Mortgage and Security Agreement.
In the event of a sale, by foreclosure, power of sale, or otherwise, Lender, or MERS on behalf of Lender, may bid for and acquire the Property and, in lieu of paying c ash therefore, may make settlement for the purchase price by crediting against the Obligations the amount of the bid made therefore, after deducting therefore the expenses of the sale, the cost of any enforcement proceeding hereunder and any other sums which Lender, or MERS on behalf of Lender, is authorized to deduct under the terms thereof, to the extent necessary to satisfy such bid. Notwithstanding the provisions of this Section 11.1 to the contrary, if any Event of Default as described in the clause (i) or (ii) of Subsection 10.1 (g) shall occur, the entire unpaid Debt shall be automatically due and payable, without any further notice, demand or other action by Lender, or MERS on behalf of the Lender.

Section 11.2 Application of Proceeds:

The purchase money, proceeds and avails of any disposition of the Property, or any par thereof, or any other sums collected by Lender, or MERS on behalf of Lender, pursuant to the Note, this Security Instrument or the Other Security Documents, may be applied by Lender to the payment of the Debt in such priority and proportions as Lender in its discretion shall deem proper. Upon any foreclosure sale or sales of all or any portion of the Property under the empower of sale herein granted (if any), Lender, or MERS on behalf of Lender, may bid for and purchase the property and shall be entitled to apply all or any part of the Debt as a credit to the purchase price.
This must be illegal. If a borrower defaults on his mortgage, the property goes into foreclosure and a non-judicial foreclosure sale takes place. This sale is supposed to be open to the public. The sale price is determined by high bid and once the bid is accepted, all encumbrances on the property including liens, mortgages, etc. are all wiped clean and clear title is presented to the highest bidder. If the Lender or agent of the lender is allowed to bid on the property and add the outstanding debt owed by the borrower as a credit to the purchase price, the lender is going to be the highest bidder every time. Basically, none of the money bid for the property goes towards satisfying the borrowers debt with the lender since the outstanding debt owed is factored in the bid by the lender. This effectively eliminates most or all-potential bidders from outbidding the lender since the lender is using the debt owed as part of the bid price. This must be illegal. Any vehicle such as this that makes foreclosure a more lucrative situation for the lender than actually servicing the loan as originally intended promotes fraud by design.

Problems:

· EDS was given the contract in April 1996, to create the software used for MERS. According to my research, (Exhibit ) All but 3 EDS companies located @ 5400 Legacy Drive, Plano Texas are foreign entities. I would be surprised if the Federal Government through Fannie Mae or Freddie Mac would award the software development contract to a non-US foreign entity. Where is official government endorsement of the MERS system? Nowhere to be found!

· MERS is an industry owned entity.

What Industry? The Real Estate industry? If there is no clear ownership defined and the industry as a whole owns the system, who is responsible for the monitoring the system for accuracy and possible fraudulent recordings? The only way a national registry database makes since is if the federal government is in control of MERS and to my knowledge, they are not.

Who Owns MERS?

The main reason stated as the benefit of MERS is that the recordings will be cheaper. If the property still records in the County where the property is located, and another recording is required in the MERS database as well, how could it save anybody any money? There are now two recordings required instead of one. How can two recordings cost less than only one?
·
I don’t believe that Fannie Mae or Freddie Mac or any other real government agency approved or endorsed MERS and agreed to include government subsidized loans in this registry. I believe the Fannie Mae referred to in the MERS documents is an imposter. “In the name of” Fannie Mae is whom these people are, not the Fannie Mae which is a division of Housing and Urban Development, an agency of the United States Government Where’s the proof?

Why is www.knowx.com listing thousands of trustee deed forclosures on properties where no foreclosures have take place? These foreclosures are not recorded in the county records where the property is located. Show me proof of these foreclosures and identify the new owners of these properties.

Twenty Million loans recorded to date with MERS and no one knows who they are. Who is MERS and why can’t anybody answer that question? Does MERS own our properties?

MERS Quality Assurance Procedures Manual contains language and instructions for handling mortgages that is against State and Federal Consumer Protection laws.

MERS is part of the Enron debacle. It represents the awards taken through the bankruptcies as unsecured debt. It represents recorded documents that generate the instruments to steal with. Essentially, they are borrowing from the past, debt registered owing in the future, collect the Money today.

Many major financial houses including Wells Fargo are included on the MERS memberships list (See Attached)

MERS is the master database tracking recordings that are offset for stolen loan funds.

MERS is recorded on loan documents that have VPN in the bottom left corner.

VPN stands for Virtual Private Network

MERS members are all committing fraud if they record the lender as the beneficiary on the county recorders office and MERS as the beneficiary on the MERS recording

IT IS TIME TO STOP THE CROSS COLLATERIZATION OF OUR MOST PRECIOUS COMMODITY
AMERICA’S REAL ESTATE

James
Henderson, Nevada
U.S.A.

Foreclosure Defense and Offense: USURY

It is a central point of the discussion on securitization that usury lies at the heart of every claim. Unfortunately many states have eliminated usury laws but still maintain maximum interest laws, which can be used to state that the loan violates the state law on the maximum interest that can be charged.

While the limits vary widely from 5% to 45%, the basic calculation is the same and produces the same results, to wit:
the real APR was not disclosed,
the interest charged was greater than state law permitted,
the intentionally inflated appraisal lifted the APR far above any disclosed or permissible limits on interest when amortized over the known and likely life of the loan and
no exemptions apply for “financial institutions” or other “licensed” (e.g. pawnbroker lending organizations because the real source of the loan in a table-funded loan was not only lacking a bank charter or lending license, they were most probably not registered to do business in the state.
The pattern of cheating the state out of the revenues for registration and evading the taxes and revenues to the state by not recording the alleged “assignments” of the loans despite state law to the contrary, demonstrates that the fraudulent scheme of tricking borrowers into signing papers they would not have signed if they were aware of the true facts so that their identities could be stolen and used to sell unregulated and fraudulent securities, but that the state was also a victim of this fraud.

As you will see below, there are approximately 29 states (**) in which usury can be alleged and another 5 (*) states where consumer protections exist by statute that can be alleged and argued in connection with mortgages and deeds of trust that ended up costing the homeowner his home and all his net worth, a fact that was well-known to the “experts” and “fiduciaries” that engineered the loan closing. Thus if it was obvious to everyone other than the borrower that at the first reset there was no ability to pay, THAT is the known and expected life of the loan and the costs, including the inflated appraisal are thus amortized over 6-24 months rather than 30 years. In most cases this will result in a cost of the loan far in excess of anything permitted by law.

The argument that a national charter or other protection will shield the loan transaction from this attack is completely specious. The protected entity acted not as a lender but merely rented its charter or license for the purpose of providing unregulated, unauthorized and illegal cover for an entity that lacked any authority to be in the  home loan business.

Many state’s laws provide that you cannot lend money at an interest rate in excess of a certain statutory maximum. This is a “usury limit.” Unless Otherwise Stated, The Rates Are Simple, Not Compound Interest. Further We Are Stating The **Present** Limits, the ones applicable at the time that this research was completed. Many states have had lower limits in the past. Further, in most states a late charge or other fee exacted from someone who owes another money is also counted as interest.

“But my car loan is higher than that”; “But I’m paying way more than that on my credit cards.” That’s right! Banks have separate rules. In fact, due to high inflation, in 1980, the federal government passed a special law which allowed national banks (the ones that have the word “national” or the term “N.A.” in their name, and savings banks that are
federally chartered) to ignore state usury limits and pegged the rate of interest at a certain number of points above the federal reserve discount rate. In addition, specially chartered organizations like small loan companies and installment plan sellers (like car financing companies) have their own rules.

The usury limit which is stated as the general usury limit is the rate that can be charged by one person or corporation to another, in other words, if you lend your next door neighbor $ 100.00, the rate stated is the limit. To charge more you must get a banking, pawnbroking, or whatever license. This also means that special kinds of loans, like
those from pawnbrokers or small loan companies are not stated.

In some states we also have a “legal rate.” In such states, as a general rule, if you have a contractual obligation that provides simply for interest without a specific term, or “interest at the highest legal rate” then the “legal rate” what applies.

In other instances we have stated a “judgment rate.” That’s the rate that final judgments bear. In states without a usury limit, there still may be a federally imposed limit because at certain astronomical rates of interest “loan sharking” will be inferred by the federal government.

Usury Is A Complicated Area Of Law. Transactions that a person would not consider to be affected by usury often are, for example, repurchase agreements, or sales with an option to repurchase are often found to be loans. A word of caution. Before trying to lend someone money or “invest” with a guaranteed return, see an attorney to make sure that you don’t run afoul of the usury laws. In state’s that specify one limit for consumers and one limit for non-consumers, you cannot avoid the usury limit by creating a sham business deal. In a supplement that is now being prepared and will be available soon, we will review the penalties for usury in each state and point out special circumstances in each state.

**ALABAMA, the legal rate of interest is 6%; the general usury limit is 8%. The judgment rate is 12%.
**ALASKA, the legal rate of interest is 10.5%; the general usury limit is more than 5% above the Federal Reserve interest rate on the day the loan was made.
*ARIZONA, the legal rate of interest is 10%.
**ARKANSAS, the legal rate of interest is 6%; for non-consumers the usury limit is 5% above the Federal Reserve’s interest rate; for consumers the general usury limit is 17%. Judgments bear interest at the rate of 10% per annum, or the lawful agreed upon rate, whichever is greater.
**CALIFORNIA, the legal rate of interest is 10% for consumers; the general usury limit for non-consumers is more than 5% greater than the Federal Reserve Bank of San Francisco’s rate.
**COLORADO, the legal rate of interest is 8%; the general usury limit is 45%. The maximum rates to consumers is 12% per annum.
**CONNECTICUT, the legal rate of interest is 8%; the general usury rate is 12%. In civil suits where interest is allowed, it is allowed at 10%.
DELAWARE, the legal rate of interest is 5% over the Federal Reserve rate.
**DISTRICT OF COLUMBIA, the legal rate of interest is 6%; the general usury limit is in excess of 24%.
**FLORIDA, the legal rate of interest is 12%; the general usury limit is 18%. On loans above $ 500,000 the maximum rate is 25%.
**GEORGIA, the legal rate of interest is 7%; On loans below $ 3,000 the usury limit is 16%. On loans above $ 3,000, the limit appears to be 5% per month. As to loans below $ 250,000 the interest rate must be specified in simple interest and in writing.
**HAWAII, the legal rate of interest is 10%. The usury limit for consumer transactions is 12%.
IDAHO, the legal rate of interest is 12%. Judgments bear interest at the rate of 5% above the U.S. Treasury Securities rate.
**ILLINOIS, the legal rate of interest is 5%. The general usury limit is 9%. The judgment rate is 9%.
INDIANA, the legal rate of interest is 10%. Presently there is no usury limit; however, legislation is pending to establish limits. The judgment rate is also 10%.
*IOWA, the legal rate of interest is 10%. In general consumer transactions are governed at a maximum rate of 12%.
KANSAS, the legal rate of interest is 10%; the general usury limit is 15%. Judgments bear interest at 4% above the federal discount rate. On consumer transactions, the maximum rate of interest for the first $ 1,000 is 18%, above $ 1,000, 14.45%.
KENTUCKY, the legal rate of interest is 8%; the general usury limit is more than 4% greater than the Federal Reserve rate or 19%, whichever is less. On loans above $ 15,000 there is no limit. Judgments bear interest at the rate of 12% compounded yearly, or at such rate as is set by the Court.
**LOUISIANA, the legal rate of interest is one point over the average prime rate, not to exceed 14% nor be less than 7%. Usury limit for individuals is 12%, there is no limit for corporations. (As warned, you cannot evade the limit by forming a corporation when the loan is actually to an individual.)
MAINE, the legal rate of interest is 6%. Judgments below $ 30,000 bear 15%, otherwise they bear interest at the 52 week average discount rate for T-Bills, plus 4%.
**MARYLAND, the legal rate of interest is 6%; the general usury limit is 24%. There are many nuances and exceptions to this law. Judgments bear interest at the rate of 10%.
**MASSACHUSETTS, the legal rate of interest is 6%; the general usury rate is 20%. Judgments bear interest at either 12% or 18% depending on whether the court finds that a defense was frivolous.
**MICHIGAN, the legal rate of interest is 5%; the general usury limit is 7%. Judgments bear interest at the rate of 1% above the five year T-note rate.
**MINNESOTA, the legal rate of interest is 6%. The judgment rate is the “secondary market yield” for one year T-Bills. Usury limit is 8%.
**MISSISSIPPI, the legal rate of interest is 9%; the general usury limit is more than 10%, or more than 5% above the federal reserve rate. There is no usury limit on commercial loans above $ 5,000. The judgment rate is 9% or a rate legally agreed upon in the underlying obligation.
*MISSOURI, the legal and judgment rate of interest is 9%. Corporations do not have a usury defense. (Remember that a corporation set up for the purpose of loaning money to an individual will violate the usury laws.)
**MONTANA, the legal rate of interest is 10%; the general usury limit is above 6% greater than New York City banks’ prime rate. Judgments bear interest at the rate of 10% per annum.
**NEBRASKA, the legal rate of interest is 6%; the general usury limit is 16%. Accounts bear interest at the rate of 12%. Judgments bear interest at the rate of 1% above a bond yield equivalent to T-bill auction price.
NEVADA, the legal rate of interest is 12%; there is no usury limit.
NEW HAMPSHIRE, the legal rate of interest is 10%; there is no general usury rate.
**NEW JERSEY, the legal rate of interest is 6%; the general usury limit is 30% for individuals, 50% for corporations. There are a number of exceptions to this law.
NEW MEXICO, the legal rate of interest is 15%. Judgment rate is fixed by the Court.
**NEW YORK, the legal rate of interest is 9%; the general usury limit is 16%.
**NORTH CAROLINA, the legal interest rate and the general usury limit is 8%. However, there is a provision for a variable rate, which is 16% or the T-Bill rate for non-competitive T-Bills. Above $ 25,000 there is no express limit. However, the law providing for 8% is still on the books- be careful and see a lawyer!
**NORTH DAKOTA, the legal rate of interest is 6%; the general usury limit is 5 1/2% above the six-month treasury bill interest rate. The judgment rate is the contract rate or 12%, whichever is less. A late payment charge of 1 3/4% per month may be charged to commercial accounts that are overdue provided that the charge is revealed prior to the account being opened and that the terms were less than thirty days, that is, that the account terms were net 30 or less.
**OKLAHOMA, the legal rate of interest is 6%. Consumer loans may not exceed 10% unless the person is licensed to make consumer loans. Maximum rate on non-consumer loans is 45%. The judgment rate is the T-Bill rate plus 4%.
OREGON, the legal rate is 9%, the judgment rate is 9% or the contract rate, if lawful, whichever is higher. The general usury rate for loans below $ 50,000 is 12% or 5% above the discount rate for commercial paper.
**PENNSYLVANIA, the legal rate of interest is 6%, and this is the general usury limit for loans below $ 50,000, except for: loans with a lien on non-residential real estate; loans to corporations; loans that have no collateral above $ 35,000. Judgments bear interest at the legal rate. It is criminal usury to charge more than 25%.
PUERTO RICO, the legal rate of interest is 6%; all other rates are set by the Finance Board of Office of Commissioner of Financial Institutions. Judgments bear interest at the same rate as the underlying debt.
**RHODE ISLAND, the legal rate of interest and judgment rate is 12%. The general usury limit is 21% or the interest rate charged for T- Bills plus 9%.
*SOUTH CAROLINA, the legal rate of interest is 8.75%, and judgments bear interest at the rate of 14%. Subject to federal criminal laws against loan sharking there is no general usury limit for non- consumer transactions. The South Carolina Consumer Protection code provides regulations for maximum rates of interest for consumer transactions. Please consult with counsel for the latest rates.
SOUTH DAKOTA, the legal rate of interest is 15%, judgments bear interest at the rate of 12%. There is no other usury limit. There are certain limitations on consumer loans below $ 5,000.00.
**TENNESSEE, the legal rate and judgment rate of interest is 10%. The general usury limit is 24%, or four points above the average prime loan rate, WHICHEVER IS LESS.
*TEXAS, the legal rate of interest is 6%. Interest does not begin until 30 days after an account was due. The judgment rate of interest is 18% or the rate in the contract, whichever is less. There are a number of specific ceilings for different types of loans, please see counsel for information.
UTAH, the legal rate of interest is 10%. Judgments bear interest at the rate of 12%, or a lawfully agreed upon rate. There are floating rates prescribed for consumer transactions. Please see counsel for information.
**VERMONT, the legal rate of interest and judgment rate of interest is 12%. On retail installment contracts the maximum rate is 18% on the first $ 500, 15% above $ 500. The general usury limit is 12%.
*VIRGINIA, the legal rate of interest is 8%. Judgments bear interest at the rate of 8%, or the lawful contract rate. Corporations and business loans do not have a usury limit, and loans over $ 5,000 for “business” or “investment” purposes are also exempt from usury laws. Consumer loans are regulated and have multiple rates.
WASHINGTON, the legal rate is 12%. The general usury limit is 12%, or four points above the average T-Bill rate for the past 26 weeks, whichever is greater. (The maximum rate is announced by the State Treasurer.) Judgments bear interest at the rate of 12% or the lawful contract rate, whichever is higher.
**WEST VIRGINIA, the legal rate of interest is 6%. The maximum “contractual” rate is 8%; Commissioner of Banking issues rates for real estate loans, and, may establish maximum general usury limit based on market rates.
WISCONSIN, the legal rate of interest is 5%. There are a myriad of rates for different type of loans. There is no general usury limit for corporations. Note that a loan to an individual, even if a corporation is formed, will violate the law. The judgment rate of interest is 12%, except for mortgage foreclosures, where the rate will be the lawful contract rate.
WYOMING, the legal rate and judgment rate of interest is 10%. If a contract provides for a lesser rate, the judgment rate is the lesser of 10% and the contract rate.

Foreclosure Offense and Defense: Identity Theft Catching ON

It seems that my Texas readers have done some research of their own regarding my recent posting about using identity theft and mortgage fraud as a solid claim with teeth to go after individuals and corporations who tricked you into the mortgage terms that nobody could pay or will pay.

Hi Neil:
After reading your front page, I thought you would be interested in the following. I hope to run it in my case if I can ever locate competent counsel here in Texas:
Texas Penal Code Sec. 32.32: FALSE STATEMENT TO OBTAIN PROPERTY

(b): A person commits an offense if he intentionally or knowingly

makes a materially false or misleading written statement

to obtain property or credit for himself or another.

(c)(7): An offense under this section is: a felony of the first degree if the

value of the property or the amount of credit is $200,000 or more.

Sec. 32.46: SECURING EXECUTION OF DOCUMENT BY DECEPTION:

(a) A person commits an offense if, with intent to defraud or

harm any person, he, by deception:

(1) causes another to sign or execute any document affecting

property or service or the pecuniary interest of any person

(b) An offense under Subsection (a)(1) is a:

(7) felony of the first degree if the value of the property, service,

or pecuniary interest is $200,000 or more. (Id.)

Jack Wright

Foreclosure Offense and Defense: Identity Theft Might be the Keystone

Based upon the submission from Sal, it would appear that the identity theft statutes apply in every element. It might behoove you to go down to the police station and file a complaint for ID theft, in addition to including it in your defensive pleadings and counterclaim against the party foreclosing or attempting to foreclose your property:

1. Any person who willfully obtains personal identifying information of another person and attempts to obtain credit, goods, services, or medical services without consent shall be guilty of a wobbler misdemeanor/felony. [In most cases, the mortgage broker, appraiser and “lender” obtained your personal information under false pretenses for the purpose of obtaining credit (the mortgage loan, and the proceeds of sale from investors in mortgage backed securities which are now universally recognized as worthless because the representations attendant to their sale were untrue.]

2. The 2002 amendment also expanded liability beyond ”willfully obtaining” the personal identifying information of another person to include as a misdemeanor offense the transfer or retention of that information with ”the intent to defraud.” [This is easier than it sounds. The “lender” received 102.5% of the principal amount due on the loan from a third party on a loan that all participants knew included inflated appraisals and failed tangible benefit test and affordability.

  • At most, this paper was worth 40%.
  • No arm’s length buyer would have paid 102.5% unless the buyer already knew the loan was already pledged and sold to a pool under a pooling and service agreement, and where the risk and liability was passed on under an assignment and assumption agreement.
  • Under those circumstances the buyer received a total of 105% for paper that was worth, at most 40%.
  • Then the paper was sold to investors under false pretenses wherein the actual payment from the borrower was disguised (by “reserves and other means) and the actual fair market value of the security was artificially inflated (i.e., they lied).
  • The inflated real estate appraisal was matched by an inflated securities appraisal from one of the rating agencies (Moody’s, Fitch, S&P etc.).
  • The investment was further “overcollateralized” by under capitalized entities with other worthless paper, insurance from entities that didn’t have the money to pay, and credit default swaps from companies that also didn’t have the money to pay.
  • The victims of this fraud include the “borrower” who was actually the issuer of a security without his knowledge or consent, and the investor who was purchasing something that did not resemble what was described.
  • Had either the borrower or the investor known the truth, the transactions would not have occurred. All the participants in between made lots of money with each movement along each link of the securitization chain.
  • In no case was the borrower aware of the true nature of his transaction, the use to which his signature would be put, or the outcome of the borrower’s investment. In virtually all cases, the object was the procurement of personal identifying information that was used by each of the participants at each link in the securitization to pay themselves unearned, undisclosed fees, contrary to law.

One of the things I like about this strategy is that it neatly ties the entire transaction into a single transaction from the borrower through the investor. Now with all of the bailouts occurring, ALL of the participants in the securitization chain are getting paid in full, which means the note is satisfied. If the note is paid, the mortgage cannot be enforced.

From Sal in Comments:

Part I WHITE COLLAR CRIMES AND OFFENSES

Chapter 1 Complex Theft Offenses

1.900 IDENTITY THEFT

In 1997, the California Legislature added Penal Code section 530.5 to create the explicit offense of ”identity theft,” and expanded the statute in 1998 and again in 2002. Any person who willfully obtains personal identifying information of another person and attempts to obtain credit, goods, services, or medical services without consent shall be guilty of a wobbler misdemeanor/felony. The statute includes common identification indicia in its list of ”personal identifying information,” i.e., name, address, telephone number, driver’s license number, social security number, place of employment, employee ID number, mother’s maiden name, bank and credit account numbers. The statute was amended in 2002 to expand identification indicia further to include, among other things, checking account numbers, passport numbers, date of birth, credit card number, biometric data (including fingerprint, facial scan identifiers, voice print, retina or iris image, or other unique physical representation), and personal identification numbers or passwords. (Pen. Code,  530.5(b).) The 2002 amendment also expanded liability beyond ”willfully obtaining” the personal identifying information of another person to include as a misdemeanor offense the transfer or retention of that information with ”the intent to defraud.” (Pen. Code  530.5(d).)

In 2001, the law was amended to eliminate the ”without consent” element (AB245 (Wyland)). Hence, as of 2002, the use of such information ”for an unlawful purpose” constituted a violation. A person could therefore consent to the taking of some personal information for a consented purpose–and its expropriation for another (unlawful) purpose would be a violation.

Also in 2001, the Legislature enacted SB125 (Alpert) to allow victims of identity theft to file a police report and obtain information from financial institutions and credit card companies about false identification in their name–overcoming Right to Financial Privacy Act impediments.

<b>It looks like that elimination of “without consent” might just make this an actionable offense in my opinion.

Link to FTC Affidavit for ID Theft

If the police are reluctant to take your report, ask to file a “Miscellaneous Incidents” report, or try another jurisdiction, like your state police.

You also can check with your state Attorney General’s office to find out if state law requires the police to take reports for identity theft.

Foreclosure Offense: Identity Theft by “lenders” and Investment Banks

According to the stats, it appears as though there are around 400 lawyers using the blog as a resource. Most of them use the material without posting any comments or results. So now I want you guys to return the favor. I had a thought that I’d like some feedback on.

The typical case of identity theft involves getting the personal information and signature (electronic or actual) and using it for your own personal gain in ways that the victim is unaware without the victim’s consent. If you get me to sign something and give you my address and social security number, you can pretty much do anything as me even though it isn’t me. You can apply for credit, issue securities as officer of a corporation, start bank accounts, make deals and profit handily until the cops come knocking on your door. Of course if you can show the cops that you had my permission to act in my name, then the crime goes away. But then the jail door slams shut anyway when it is shown that you obtained my signature under false pretenses.

So here we have a mortgage broker and a “lender” getting every scrap of personal information about borrowers and getting their signatures on papers that nobody reads or understands. They pass on these signed papers along with third party agreements that the borrower knows nothing about. Some of the agreements (assignment and assumption, pooling and service, collateralization, credit default swaps, insurance, hierarchical guarantees of tranches) actually change the way the payments are allocated to and from this particular loan account — contrary to the terms of the note signed by the borrower.

And they end up selling the borrower’s name and signature to an investor under false pretenses as to the value of the property and the income and assets of the borrower, all of which contains the signature of the borrower, but none of which is true. In fact most of the falsification was done either without the knowledge of the borrower or at the insistence of the “lender”.

And of course as we have seen the “lender” is only a “pretender lender” who was hired to play the part, and whose charter or license was rented by a non-bank, unregulated lender/investor. Seems like a classic con game to me.

OK, the question is, why isn’t this identity theft and why don’t the criminal and civil penalties apply?

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