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EDITOR’S NOTE: The race is on — who is going to be the first attorney general to bring the major banks to their knees begging for amnesty instead of demanding it because they are too big to fail? Any politician with future ambitions had better not be cozy with Banks or even favor leniency. If there is a bailout, it had better be to John Q Public.

California attorney general’s office subpoenas Fannie, Freddie

Information is sought on the mortgage giants’ roles as landlords who own thousands of foreclosed properties in California. Also sought are details of their mortgage-servicing and home-repossession practices, a source says.

Kamala Harris 

California Atty. Gen. Kamala D. Harris has pushed for Fannie Mae and Freddie Mac to allow more principal reduction, which is the writing down of the loan balances of troubled borrowers. (Brian van der Brug, Los Angeles Times / November 30, 2010)
By Alejandro Lazo and Jim Puzzanghera, Los Angeles TimesNovember 16, 2011, 6:27 p.m.

Reporting from L.A. and Washington—

Investigators with the California attorney general’s office have subpoenaed information from mortgage titans Fannie Mae and Freddie Mac as part of a wide-ranging inquiry into lending and foreclosure practices in the state.

The subpoenas ask the government-controlled finance companies to answer a series of questions about their activities in California, including their roles as landlords who own thousands of foreclosed properties. The attorney general’s office is also seeking details of Fannie and Freddie’s mortgage-servicing and home-repossession practices, according to a person familiar with the matter.

In addition, investigators want to learn more about the companies’ purchases and sponsorship of securities holding “toxic mortgages” in the Golden State, said the person, who was not authorized to speak on the matter and requested anonymity.

Fannie and Freddie declined to comment on the investigation. Shum Preston, a spokesman for state Atty. Gen. Kamala D. Harris, also declined to comment.

Edward Mills, a financial policy analyst at FBR Capital Markets & Co., said Harris has been the most aggressive state attorney general in trying to assist those borrowers who are “underwater” on their mortgages, owing more on their properties than they are worth.

The move to open an investigation into Fannie and Freddie, Mills said, is a creative way to potentially force policy changes from the mortgage giants over the objections of their regulator, the Federal Housing Finance Agency in Washington, which is headed by Ed DeMarco.

“She’s felt that Ed DeMarco has not done enough to help homeowners and has undue influence over what changes are put in place at Fannie and Freddie,” Mills said. “If he’s not going to make those changes, she’s going to force those through the courts.”

The California investigation comes as DeMarco and the chief executives of the two companies faced bipartisan outrage this week over multimillion-dollar salaries and large bonuses at the housing finance giants, which still owe the government a combined $150 billion in the largest financial crisis bailout.

Harris this month pushed for Fannie and Freddie to allow more principal reduction, which is the writing down of the loan balances of troubled borrowers.

“If Mr. DeMarco is unwilling to support principal reduction for these home loans in crisis, he should step aside for someone who will,” Harris said.

DeMarco, in turn, said Wednesday during his congressional testimony that the agency has determined that reducing principal on loans owned by Fannie and Freddie is not “the least-cost approach for the taxpayer” to keep homeowners from foreclosure. In addition, those reductions are not authorized under the law that allowed the firms to be seized, DeMarco added.

“I do believe we are taking all due effort to provide assistance to homeowners, and I do not believe I’ve been authorized to use taxpayer money for a general program of principal forgiveness,” DeMarco told lawmakers.

According to the person familiar with California’s investigation, the central question posed by the California investigators is: To what extent did the two mortgage giants contribute to the foreclosure crisis in California?

Fannie and Freddie hold a vast number of loans in California. The major banks that are employed to act on their behalf — collecting payments from borrowers, foreclosing or evicting borrowers or striking deals with homeowners to modify their mortgages — must adhere to their guidelines.

Harris has made investigating the foreclosure crisis and mortgage meltdown a priority during her first year in office, creating a Mortgage Fraud Strike Force this year. More recently, she has stepped out of negotiations with the nation’s five largest banks, conducted on behalf of state attorneys general across the U.S., saying that the banks were asking for too much legal release in return for too little aid to California borrowers.

The subpoenas, issued Tuesday, deal only with Fannie’s and Freddie’s activities in California. But the investigation could lead other states to look into the firms’ operations, said Guy Cecala, publisher of Inside Mortgage Finance.

“If for some reason California would be successful in any of this, it certainly would encourage other states to go after them because every state has Fannie and Freddie mortgages,” Cecala said.

The two mortgage giants are responsible for about 40% of home loans in the U.S., according to Inside Mortgage Finance.

“I think that this is at least partially an attempt to penetrate that bubble which is hanging over half the market,” Cecala said. “The servicers, the big banks they are dealing with and negotiating with, have no control over the loans that are guaranteed and effectively owned by Fannie Mae and Freddie Mac; the major banks are just third-party contractors when it comes to those.”

State investigators will be looking at three broad areas of practices by Fannie and Freddie in California, according to the person familiar with the matter.

The first will be the two companies’ role as a landlord in the state, where the two own about 12,200 foreclosed properties. In the Los Angeles metro area alone, Fannie and Freddie hold about 2,000 foreclosed properties, and nearly 3,000 in the Inland Empire, according to data published by their regulator this summer.

The subpoenas ask the two companies to answer questions related to their role as the owners of these homes. Foreclosed properties that are neglected can result in blight and be a haven for criminals.

Fannie and Freddie are being asked to supply details about how the loans they own are serviced, how quickly they are foreclosed upon and what kind of relief is offered to homeowners, according to the person familiar with the matter. The questions seek to gain information about what servicers are doing and which are the worst performers.

The two companies own about 4 million loans in California amounting to about $793 billion in mortgages, according to Inside Mortgage Finance.

Investigators are also seeking to determine what role Fannie and Freddie played in selling or marketing mortgage-backed securities. The attorney general’s office has an ongoing probe into potential fraud committed in the so-called secondary market for mortgages that became popular during the boom and helped fuel the bubble in home prices. The office has subpoenaed Bank of America Corp. and Countrywide, as well as Citibank, in relation to this investigation, The Times has previously reported.

Fannie and Freddie have filed a lawsuit against 17 major banks, saying the companies were defrauded by those loans and securities. The attorney general wants to know whether what the two entities have uncovered in their own actions might assist her office.

Although the investigation might help California gain leverage in its efforts to help its homeowners, a direct legal battle seeking damages from the two entities would be difficult and potentially counterproductive, Cecala said, as they are being kept afloat by the federal government.

“They would hire the best attorneys, and you and I would pay for it as taxpayers,” he said. “You can’t really seek any damages out of them because it all comes out of Uncle Sam’s pocket.”

Although Fannie and Freddie may employ practices that run counter to the interest of borrowers as they seek to minimize costs and expedite foreclosures, California might have a more difficult time finding fault with the two companies’ actions as a landlord, Cecala said. The two companies set the “gold standard” in terms of servicing and disposing of distressed real estate, he said.

It also will be difficult to prove that any harm was done to investors, he said, as the loans they securitized are backed up by the government.




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Delaware sues MERS, claims mortgage deception

Posted on Stop Foreclosure Fraud

Posted on27 October 2011.

Delaware sues MERS, claims mortgage deceptionSome saw this coming in the last few weeks. Now all HELL is about to Break Loose.

This is one of the States I mentioned MERS has to watch…why? Because the “Co.” originated here & under Laws of Delaware…following? [see below].

Also look at the date this TM patent below was signed 3-4 years after MERS’ 1999 date via VP W. Hultman’s secretary Kathy McKnight [PDF link to depo pages 29-39].

New York…next!

Delaware Online-

Delaware joined what is becoming a growing legal battle against the mortgage industry today, charging in a Chancery Court suit that consumers facing foreclosure were purposely misled and deceived by the company that supposedly kept track of their loans’ ownership.

By operating a shadowy and frequently inaccurate private database that obscured the mortgages’ true owners, Merscorp made it difficult for hundreds of Delaware homeowners to fight foreclosure actions in court or negotiate new terms on their loans, the suit filed by the Attorney General’s Office said.


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EDITOR’S NOTE: California has approximately a 1/3 share of all foreclosures. So Harris’ decision to drop out of the talks is a huge blow to the mega banks who were banking (pardon the pun) on using it to get immunity from prosecution. The answer is no, you will be held accountable for what you did, just like anyone else. As I have stated before when the other AG’s dropped out of the talks (Arizona, Nevada et al), this growing trend is getting real traction as those in politics have discovered an important nuance in the minds of voters: they may have differing opinions on what should be done about foreclosures but they all hate these monolithic banks who are siphoning off the lifeblood of our society. And there is nothing like hate to drive voting.

This is a process, not an event. We are at the end of the 4th inning in a 9-inning game that may go into overtime. The effects of the mortgage mess created by the banks are being felt at the dinner table of just about every citizen in the country. The politics here is creating a huge paradox and irony — the largest source of campaign donations has turned into a pariah with whom association will be as deadly at the polls as organized crime.

The fact that so many attorneys general of so many states are putting distance between themselves and the banks means a lot. It means that the banks are in serious danger of indictment and conviction on criminal charges for fraud, forgery, perjury and potentially many other crimes.

IDENTITY THEFT: One crime that is being investigated, which I have long felt was a major element of the securitization scam for the “securitization that never happened” is the theft of identities. By signing onto what appeared to be mortgage documents, borrowers were in fact becoming issuers or pawns in the issuance of fraudulent securities to investors. Those with high credit scores were especially valued for the “cover” they provided in the upper tranches of the CDO’s that were “sold” to investors. An 800 credit score could be used to get a AAA  rating from the rating agencies who were themselves paid off to provide additional cover.

But it all comes down to the use of people’s identities as “borrowers” when in fact there was no “Lending” going on. What was going on was “pretend lending” that had all the outward manifestations of a loan but none of the substance. Yes money exchanged hands, but the real parties never met and never signed papers with each other. In my opinion, the proof of identity theft will put the borrowers in a superior position to that of the investors in suits against the investment bankers.

NO UNDERWRITING=NO LOAN: There was no underwriting committee, there was no underwriting, there was no review of the appraisal, there was no confirmation of the borrower’s income and there was no decision about the risk and viability of the so-called loan, because it wasn’t about that. The risk was already eliminated when they sold the bogus mortgage bonds to investors and thus saddled pension funds with the entire risk of loss on empty “mortgage backed pools.” So if the loan wasn’t paid, the players at ground level had no risk. Their only incentive was to get the signature of the borrower. That is what they were paid for — not to produce quality loans, but to produce signatures.

Little did we know, the more loans that defaulted, the more money the banks made — but they were able to mask the gains with apparent losses as an excuse to extract emergency money from the US Treasury using taxpayer dollars without accounting for the “loss” or what they did with the money. Meanwhile the gains were safely parked off shore in “off-balance sheet” transaction accounts.

The question that has not yet been asked, but will be asked as prosecutors and civil litigators drill down into these deals is who controls that off-shore money? My math is telling me that some $2.6 trillion was siphoned off (second level — hidden — yield spread premium) the investors money before the balance was used to fund “loans.”

When all is said and done, those loans will be seen for what they really were — part of the issuance of unregistered fraudulent securities. And you’ll see that the investors didn’t get any more paperwork than the borrowers did as to what was really going on. The banks want us to focus on the the paperwork when in fact it is the actual transactions involving money that we should be following. The paperwork is a ruse. It is faked.


California AG Harris Exits Multistate Talks
in News > Mortgage Servicing
by on Monday 03 October 2011
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The multistate attorneys general group working toward a foreclosure settlement with the nation’s biggest banks suffered a blow Friday, when California’s Kamala Harris announced her departure from negotiations.

Harris notified Iowa Attorney General Tom Miller and U.S. Associate Attorney General Thomas Perrelli of her decision in a letter that was obtained and published by the New York Times Friday. According to the letter, Harris is exiting the talks because she opposes the broad scope of the settlement terms under discussion.

“Last week, I went to Washington, D.C., in hopes of moving our discussions forward,” Harris wrote. “But it became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated.”

“[T]his not the deal California homeowners have been waiting for,” Harris adds one line later.

Harris, who earlier this year launched a mortgage fraud task force, says she will continue investigating mortgage practices – including banks’ bubble-era securitization activities – independent of the multistate group.

“I am committed to doing as thorough an investigation as is needed – and to taking the time that is necessary – to set the stage for achieving appropriate accountability for misconduct,” she wrote.

Harris also told Miller and Perrelli that she intends to advocate for legislation and regulations that increase transparency in the mortgage markets and “eliminate incentives to disregard borrowers’ rights in foreclosure.”

Harris’ departure is considered significant given the high number of distressed loans in California. In August, approximately one in every 226 housing units in the state had a foreclosure filing of some kind, according to RealtyTrac data.

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