NO TRUST ASSETS: In the eye of the storm

This is one more nail in the coffin of false securitization: the only assets attributed to apparent “Buyers” were those related to and including servicer advances. By severing the investors from their positions as creditors, the banks were able to create the illusion that they — or their “originators”, brokers, nominees, fronts and sham operators — were the owners of the debt. NONE of the “transfers” of the “loan documents” involved a purchase and sale of a loan. NONE of the original “loan documents” referred to an actual transaction between the homeowner and the originator. That is because at the base of the paper chain was an entity that served only as a conduit for the paperwork and which had nothing to do with the advance of money to or on behalf of any homeowner. The paper trail and the money trail diverged the moment the loan papers were executed.

Get a consult! 202-838-6345
https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

Hat tip to CC who wrote to me with the following:

In the eye of the storm

I also wanted to share with you the LinkedIn career history of a young “document specialist” who claims familiarity with executing and creating loan documents. (Document specialist Matt Byas maintains a profile on LinkedIn.) He worked his way up through such foreclosure/loan mod fraud luminaries as Saxon Mortgage (Dennis G. Stowe, COO, later acquired by Ocwen), Bank of America (where his job was “filing back several file folders containing loan information and processing them at various points along the line as well”), Homeward Residential, Inc. (later acquired by Ocwen, received $1.31B in TARP money, disbursed $280M) where his job included “creating allonges”), Residential Credit Solutions, Inc. (plaintiff in the successfully appealed judgement above, beneficiary of Geithner’s first, entirely bogus PPIP auction and another less well-known, similar sweetheart deal with Tim and Amtrust’s loans in 2010, which led to the $2M verdict for the Illinois widow in Hammer vs RCS, receiver of $43M in TARP money, $6.6M spent aiding borrowers, dissolved in 2016 by 2013 acquirer MTGE after non-stop quarterly losses from the point of acquisition onwards, and again featuring Dennis G. Stowe, CEO). His services were also utilized at a law firm that collapsed into a spectacular heap of revealed fraud, Butler & Hosch, P.A., and a loan servicer prone to deals so distant from comprehensibility that they had to issue this clarification to a press release in 2009:
No actual mortgage loans were part of the transaction. The acquired assets consisted principally of advances made on behalf of borrowers who are in arrears and of the Master Servicing Rights pursuant to which the loans are serviced. (e.s.) Mortgage servicing consists of collecting payments from homeowners, remitting them to appropriate parties and managing the default cycle. The transaction with Citi Residential Lending is similar to AHMSI’s earlier acquisitions from Option One and other sellers of servicing. In addition, while $1.5 billion has been described in a number of media reports as a “payment” in the transaction for the Master Servicing Rights, the vast portion of this amount is related to outstanding servicing advances.”
That loan servicer, American Home Mortgage Servicing, Inc. eventually changed its name to Homeward Residential, and the document specialist no longer names it as a separate entity on his LinkedIn profile.

Another Pennies on the Dollar Settlement

Editor’s Note: like the post before this one, it is astonishing how these settlements fall so far short of the actual damage that was created by the banks by their intentional illicit and criminal behavior.

This one “relates to conduct at Greenwich Capital, the R.B.S. unit that bundled mortgages into securities and sold them to investors. Nevada found that R.B.S. worked closely with Countrywide Financial and Option One, two of the most aggressive lenders during the boom.” They were categorized as sub-prime even if the borrower was not sub-prime. That way they loaned less of the investor money at a higher nominal rate, charged the borrower for additional underwriting risk when there was no underwriting at all, and kept the excess interest, the excess funding that should  have gone into standard loans properly underwritten according to industry standards.

The trap was teaser rates that borrowers could never decipher: “From 2004 through 2006, R.B.S. packaged $90 billion of these loans, many originated by Countrywide. The mortgages typically began with an artificially low interest rate that rose significantly after a year or two. Under the terms of these loans, borrowers could choose to pay only a fraction of what they owed monthly, resulting in a rising principle balance.”

And the media is all about how the housing problem is ending. That is nonsense. It is coming to a head, but the peak won’t be until perhaps 2014.

Bank Settles Over Loans in Nevada

By

The Royal Bank of Scotland agreed to pay $42.5 million late Tuesday in a settlement with the Nevada attorney general that ends an 18-month investigation into the deep ties between the bank and two mortgage lenders during the housing boom.

Most of the money paid by R.B.S. — $36 million — will be used to help distressed borrowers throughout Nevada. In addition, R.B.S. agreed to finance or purchase subprime loans in the future only if they comply with state laws and are not deceptive.

The settlement between the bank and Catherine Cortez Masto, Nevada’s attorney general, relates to conduct at Greenwich Capital, the R.B.S. unit that bundled mortgages into securities and sold them to investors. Nevada found that R.B.S. worked closely with Countrywide Financial and Option One, two of the most aggressive lenders during the boom.

Officials working with Ms. Masto say that they examined R.B.S.’s activities from 2004 to 2007. During those years, the bank provided funding for more than $100 billion of risky loans, many made by Countrywide and Option One. In 2005 and 2006, R.B.S. was the third-largest securitizer of subprime mortgages and adjustable-rate loans.

“I remain committed to enforcing Nevada’s laws against the players — including those on Wall Street — that contributed to and profited from reckless and deceptive mortgage lending in Nevada,” Ms. Masto said in a statement. “The payment from R.B.S. will alleviate some of the injury to the Silver State and its residents. The changes to its securitization process should help make sure that we do not go down this road again.”

In agreeing to the settlement, R.B.S. neither admitted nor denied the acusations.

During the investigation, Nevada officials examined more than one million pages of documents and interviewed former R.B.S. employees and borrowers. Ms. Masto’s office concluded that the bank had essentially created joint ventures with Countrywide and Option One and that its financing enabled those lenders to make reckless loans that were unlikely to be repaid.

The attorney general also examined whether R.B.S. reviewed the mortgages bought from Countrywide and concluded that the bank bundled and sold loans even after identifying them as problematic. Moreover, at Countrywide’s request, the bank limited the number of loans it reviewed, the attorney general’s office said.

Nevada has been hit hard by the foreclosure crisis. Some 60 percent of borrowers in the state have mortgages of greater value than the properties underlying them, according to Core Logic, a real estate data company.

Ms. Masto’s case comes after several others brought recently by state regulators against firms involved in mortgage securities. Earlier this month, the New York attorney general sued Bear Stearns over its conduct during the boom, and last week, the Massachusetts securities regulator sued Putnam Advisory, a unit of Putnam Investments, for misleading investors who bought a collateralized debt obligation it was managing. Officials at both firms rejected the allegations and said they would vigorously defend themselves in court.

Some securities lawyers say that it is easier for state officials to bring successful actions against banks for questionable activities than it is for federal investigators. That is mostly because of stringent requirements under federal securities laws.

“This strategy sidesteps the need to prove intent to defraud and to detail fraud allegations as is required for similar actions under the federal securities laws,” said Lewis D. Lowenfels, an authority in securities law in New York. According to the Nevada attorney general’s office, R.B.S. was among the larger bundlers of a risky type of loan known as a pay-option adjustable-rate mortgage. From 2004 through 2006, R.B.S. packaged $90 billion of these loans, many originated by Countrywide. The mortgages typically began with an artificially low interest rate that rose significantly after a year or two. Under the terms of these loans, borrowers could choose to pay only a fraction of what they owed monthly, resulting in a rising principle balance.

R.B.S. also worked hard to keep Countrywide generating loans for the bank’s securities, investigators said.

Ms. Masto’s office said that R.B.S.’s mortgage funding operation was widespread across Nevada, which is why most of the settlement will go to borrowers who have suffered harm.

How Did H & R Block Get into the Subprime Mortgage Business?

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Tax Preparer Slammed with $24 Million in Fines on Toxic Mortgages

Editor’s Comment:  You really have to think about some of these stories and what they mean. 

1. Where is the synergy in a merger between Option One and H&R Block? The answers that they were both performing services for fees and neither one was ever a banker, lender or even investor sourcing the funds that were used to lure borrowers into deals that were so convoluted that even Alan Greenspan admits he didn’t understand them.

2. The charge is that they didn’t reveal that they could not buy back all the bad mortgages — meaning they did buy back some of them. which ones? And were some of those mortgages foreclosed in the name of a stranger to the transaction? WORSE YET — how many satisfactions of mortgages were executed by Ocwen, which was not the creditor, never the lender, and never the successor to any creditor. Follow the money trail. The only trail that exists is the trail leading from the investor’s banks accounts into the escrow agent’s trust account with instructions to refund any excess to parties who were complete strangers to the transaction disclosed to the borrower. The intermediary account in which the investor money was deposited was used to pay pornographic fees and profits to the investment banker and close affiliates as “participants” in a scheme of ” securitization” that never took place.

3. Under what terms were the loans purchased? Was it the note, the mortgage or the obligation? There are differences between all three.

4. Since they didn’t have the money to buy back the loans it might be inferred that they never had that money. In other words, they appeared on the “closing papers” as lender when in fact they never had the money to loan and they merely had performed a fee for service — I.e., acting as though they were the lender when they were not.

5. Who was the lender? If the money came from investors, then we know how to identify the creditor. but if we assume that the loan might have been paid or purchased by Option One, then isn’t the lender’s obligation paid? let’s see those actual repurchase transactions.

6. If that isn’t right then Option One must be correctly identified as the lender on the note and mortgage even though they never loaned any money and may or may not have purchased the entire loan, just the receivable, the right to sell the property — but how does anyone purchase the right to submit a credit bid at the foreclosure auction when everyone knows they were not the creditor?

7. How could any of these entities have any loans on their books when they were never the source of funds and why are they being allowed to claim losses obviously fell on the investors who put up the money on toxic mortgages believing them to be triple A rated. 

8. Why would anyone underwrite a bad deal unless they knew they would not lose any money? These mortgages were bad mortgages that under normal circumstances would never have been  offered by any bank loaning its own money or the it’s depositors. 

9. The terms of the deal MUST have been that nobody except the investors loses money on this deal and the kickers is that the investors appear to have waived their right to foreclose. 

10. So the thieves who cooked up this deal get paid for creating it and then end up with the house because the befuddled borrower doesn’t realise that either the debts are paid (at least the one secured by the mortgage) or that the debt has been paid down under terms of the loan (see PSA et al) that were never disclosed to the borrower — contrary to TILA.

11. The Courts must understand that there is a difference between paying a debt and buying the debt. The Courts must require any “assignment” to be tested b discovery where the money trail can be examined. What they will discover is that there is no money trail and that the assignment was a sham.  

12. And if the origination documents show the wrong creditor and fail disclose the true fees and profits of all parties identified with the transaction, the documents — note, mortgage and settlement statements are fatally defective and cannot create a perfected lien without overturning centuries of common law, statutory law and regulations governing the banking and lending industries.

H&R Block Unit Pays $28.2M to Settle SEC Claims Regarding Sale of Subprime Mortgages

By Kansas City Business Journal

H&R Block Inc. subsidiary Option One Mortgage Corp. agreed to pay $28.2 million to settle Securities and Exchange Commission    charges that it had misled investors, federal officials announced Tuesday.

The SEC alleged that Option One promised to repurchase or replace residential mortgage-backed securities it sold in 2007 that breached representations and warranties. The subsidiary did not disclose that its financial situation had degraded such that it could not fulfill its repurchase promises.

Robert Khuzami, director of the SEC’s Division of Enforcement, said in a release that Option One’s subprime mortgage business was hit hard by the collapse of the housing market.

“The company nonetheless concealed from investors that its perilous finances created risk that it would not be able to fulfill its duties to repurchase or replace faulty mortgages in its (residential mortgage-backed securities) portfolios,” Khuzami said in the release.

The SEC said Option One was one of the nation’s largest subprime mortgage lenders, with originations of $40 billion in its 2006 fiscal year. When the housing market began to decline in 2006, the unit was faced with falling revenue and hundreds of millions of dollars’ worth of margin calls from creditors.

Parent company H&R Block (NYSE: HRB) provided financing for Option One to meet margin calls and repurchase obligations, but Block was not obligated to do so. Option One did not disclose this reliance to investors.

Option One, now Sand Canyon Corp., did not admit or deny the allegations. It agreed to pay disgorgement of $14.25 million, prejudgment interest of nearly $4 million and a penalty of $10 million.

Kansas City-based H&R Block reported that it still had $430.19 million of mortgage loans on its books from Option One as of Jan. 31. That’s down 16.2 percent from the same period the previous year.

GAME OVER? VEAL CASE VINDICATES EVERY POINT REPORTED ON LIVINGLIES

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NO MERIT TO FORECLOSURE ACTIONS, PAST PRESENT OR FUTURE UNLESS THE REAL CREDITOR IS PRESENT.

BURDEN OF PROOF SHIFTS TO PRETENDERS

57568003-IN-RE-VEAL-w

  1. “IN THIS CASE, ONE COMPONENT OF PRUDENTIAL STANDING IS PARTICULARLY APPLICABLE. IT IS THE DOCTRINE THAT A PLAINTIFF MUST ASSERT ITS OWN LEGAL RIGHTS AND MAY NOT ASSERT THE LEGAL RIGHTS OF OTHERS. SPRINT, 554 U.S. AT 589; WARTH, 422 AT 499; OREGON V LEGAL SERVS. CORP, 552 F. 3D 965, 971 (9TH CIR., 2009).

  2. “Civil Rule 17(a)(1) starts simply: “An action must be prosecuted in the name of the real party in interest… The modern function  of the rule… is simply to protect the defendant against a subsequent action by the party actually entitled to recover, and to insure generally that the Judgement will have its proper effect as res judicata.”

  3. “The party asserting it has standing bears the burden of proof to establish standing. Sumers v Earth Island Inst., 555 U.S. 488 (2009)

  4. “Real party in interest analysis requires a determination of the applicable substantive law, since it is that law which defines and specifies the wrong, those aggrieved, and the redress they may receive. 6A Federal practice and Procedure sec 1543 at 480-481

ILLUSION OF SECURITIZATION IS FALLING APART

COLLATERAL BENEFIT TO HOMEOWNER

RESULTING FROM DEFECTS IN PRETENDER LENDER CASE

IS NOT A REASON TO RULE AGAINST THE HOMEOWNER-BORROWER

In a decision filed June 10, 2011 — one year after oral argument — the BAP carefully analyzed the position of the borrower and the alleged creditor and came up with nothing to support the allegations that there was a creditor in the room. Standing being a jurisdictional issue wiped out AHMSI and Wells Fargo.

This one is for publication, which means it is controlling precedent for all bankruptcy Judges in the Ninth Circuit. In a nutshells, the claim of “holder” is not enough, even for a motion to lift stay where the burden is extremely light. Thanks to a growing number of bankruptcy lawyers who understand these issues and thanks to their skill in presenting it, Bankruptcy Judges are realizing two things (1) lifting the stay is misused by the movant by creating the appearance that the merits of the case have already been heard and decided and therefore are engraved in stone under the doctrine of collateral estoppel and the Rooker-Feldman doctrine and (2) nipping abuse of process in the bud is the proper way for the courts to handle the pretender lenders.

It is very clear that this represents a sea change in the judicial attitude toward the pretender lenders. The documents don’t add up. So if anyone wants to come in to a court alleging that they can foreclose on the property or collect on the debt, they need to have real evidence which means live witnesses testifying under oath that they have personal knowledge and can authenticate the documents and other evidence proffered by the pretenders. These people don’t exist.

The bottom line is that there is no claim, an objection to the proof of claim will obviously be upheld in view of this ruling, and the homeowner is going to get their home free and clear of any encumbrances or debts unless the real creditor shows up — which is unlikely since the investors are busy suing the investment banks that sold them the bogus mortgage bonds.

LAWYERS ARE SHARPENING UP THEIR PENCILS GETTING READY TO FILE MOTIONS FOR REHEARING AND RECONSIDERATION IN AND OUT OF BANKRUPTCY COURT.

QUOTES FROM THE CASE:

“We hold that that a party has standing to seek relief from stay if it has a property interest in, or is entitled to enforce or pursue remedies related thereto, teh secured obligation that forms the basis of its motion.”

“We hold that a party has standing to prosecute a proof of claim involving a negotiable promissory note secured by real property if, under applicable law, it is a “person entitled to enforce the note” as defined by the Uniform Commercial Code.”

“The Dorchuck letter is just that; a letter, and nothing more. Mr. Dorchuck does not declare that his statements are made under penalty of perjury, nor does the document bear any other traditional elements of admissible evidence.”

“No basis was laid for authenticating or otherwise admitting the Dorchuck letter into evidence at any of the hearings in this matter.”

“Wells Fargo presented no evidence as to who possessed the note and no evidence regarding any property interest it held in the Note.”

“the purported assignment from Option One to Wells Fargo does not contain language affecting the assignment of the note. While the Note is referred to, that reference serves only to identify the mortgage. Moreover, the record is devoid of any indorsement of the Note from Option One to Wells Fargo. As a consequence, even had the second assignment been considered as evidence, it would not have provided any proof of the transfer of the note to Wells Fargo. At most, it would have been proof that only the mortgage, and all associated rights arising from it, had been assigned.”

“given the carve out of the Note at the beginning… the relative pronouns “therein”, “thereto” and thereon” more naturally refer back to the obligations contained in the mortgage, such as the the obligation to insure the property, and not to an external obligation such as the Note…. Although the clauses might be sufficiently vague to permit parol evidence to clarify their intended meaning, no such evidence was offered or requested.”
“STANDING  is a threshold question in every federal case, determining the power of the court to entertain the suit.”

“Prudential standing ” ’embodies judicially self-imposed limits on the exercise of federal jurisdiction.'” Spring, 554 U.S. at 289 (quoting Elk Grove, 542 U.S. at 11); County of Kern F. 3d at 845.

“IN THIS CASE, ONE COMPONENT OF PRUDENTIAL STANDING IS PARTICULARLY APPLICABLE. IT IS THE DOCTRINE THAT A PLAINTIFF MUST ASSERT ITS OWN LEGAL RIGHTS AND MAY NOT ASSERT THE LEGAL RIGHTS OF OTHERS. SPRINT, 554 U.S. AT 589; WARTH, 422 AT 499; OREGON V LEGAL SERVS. CORP, 552 F. 3D 965, 971 (9TH CIR., 2009).

“Civil Rule 17(a)(1) starts simply: “An action must be prosecuted in the name of the real party in interest… The modern function  of the rule… is simply to protect the defendant against a subsequent action by the party actually entitled to recover, and to insure generally that the Judgement will have its proper effect as res judicata.”

“The party asserting it has standing bears the burden of proof to establish standing. Sumers v Earth Island Inst., 555 U.S. 488 (2009)

“Real party in interest analysis requires a determination of the applicable substantive law, since it is that law which defines and specifies the wrong, those aggrieved, and the redress they may receive. 6A Federal practice and Procedure sec 1543 at 480-481

American Home Mortgage Servicing Inc WAS PAINE WEBBER SUBSIDIARY

SUBMITTED BY BRIAN TRACY

Here’s a goodie for Florida (and probably the rest of the country.. I was looking around in the Florida corporate registry …and saw something really odd ( see http://www.sunbiz.org ) ,, My servicing entity from WF/Option One was originally “American Home Mortgage Servicing Inc” and it continues to be so … However the company went BK and Wylbur Ross’s “shadow” version took over servicing with a new company using the same name … I do not recall ever getting the required official notices….

here’s a cut-and-paste of the answer from my inquiry to the Florida dept. of corporations … if there is anything actionable of usable here let me know… I REALLY want to QT …. THANKS ..

Good Afternoon,

We apologize for the delay in our reply.

F93000002976 was a Maryland Corporation originally qualified in Florida on 06/28/1993 under the name PAINEWEBBER MORTGAGE FINANCE, INC. On 09/28/1993 the name was changed to COLUMBIA NATIONAL, INCORPORATED. On 07/21/2004 the name was changed to AMERICAN HOME MORTGAGE SERVICING, INC. On 04/21/2008 the name was changed to AHM SV, INC. On 09/25/2009 the corporate status in the State of Florida was revoked due to non-filing of the 2009 Annual Report.

The corporation used the name AMERICAN HOME MORTGAGE SERVICING, INC. from 07/21/2004 to 04/21/2008.

F07000006151 was a Delaware Corporation originally qualified in Florida on 12/17/2007 under the name AH MORTGAGE ACQUISITION CO., INC. On 06/04/2008 the name was changed to AMERICAN HOME MORTGAGE SERVICING, INC.

F07000006151 did not start using the name AMERICAN HOME MORTGAGE SERVICING, INC. until approximately 2 months after F93000002976 filed the amendment changing their name to AHM SV, INC.

When viewing the detail page online at http://www.sunziz.org just above the entity name you’ll find a link for “Name History”.

Lee Yarbrough

Internet Access Section

Florida Department of State

Division of Corporations

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REQUIRED READING

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JUST LOOKING AT THE TABLE OF CONTENT WILL TELL YOU WHAT YOU NEED TO KNOW

NATURE OF ACTION …………………………………………………………………………………………………….1
PARTIES ………………………………………………………………………………………………………………………..7
JURISDICTION AND VENUE ……………………………………………………………………………………….16
BACKGROUND ……………………………………………………………………………………………………………17
A.    THE MECHANICS OF MORTGAGE SECURITIZATION …………………………………….17
B.    SECURITIZATION OF MORTGAGE LOANS: THE TRADITIONAL MODEL ……..19
C.    THE SYSTEMIC VIOLATION OF UNDERWRITING AND APPRAISAL STANDARDS IN THE MORTGAGE SECURITIZATION INDUSTRY …………………..21
D.    DEFENDANTS WERE AN INTEGRATED VERTICAL OPERATION CONTROLLING EVERY ASPECT OF THE SECURITIZATION PROCESS…………..24
(1)    JPMorgan Defendants……………………………………………………………………..24 (2)

WaMu Defendants ………………………………………………………………………….26 (3)

Bear Stearns Defendants ………………………………………………………………….27
E.    DEFENDANTS’ OFFERING MATERIALS…………………………………………………………..29 (1)

The JPMorgan Offerings………………………………………………………………….29 (2)

The WaMu Offerings………………………………………………………………………30 (3)

The Long-Beach Offering………………………………………………………………..32 (4)

The Bear Stearns Offerings………………………………………………………………32
SUBSTANTIVE ALLEGATIONS …………………………………………………………………………………..34
I.    THE OFFERING MATERIALS CONTAINED UNTRUE STATEMENTS OF MATERIAL FACT AND OMISSIONS ABOUT THE MORTGAGE ORIGINATORS’ UNDERWRITING STANDARDS AND PRACTICES, AND MATERIAL CHARACTERISTICS OF THE MORTGAGE LOAN POOLS ……………..34
A.    Defendants’ Misrepresentations Regarding Underwriting Standards And Practices …………………………………………………………………………………………………..34
(1)    JPMorgan Defendants’ Misrepresentations Regarding Underwriting Standards And Practices………………………………………………35
i
(2)    WaMu Defendants’ Misrepresentations Regarding Underwriting Standards and Practices……………………………………………………………………35
(3)    Long Beach Defendants’ Misrepresentations Regarding Underwriting Standards and Practices……………………………………………….36
(4)    Bear Stearns Defendants’ Misrepresentations Regarding Underwriting Standards and Practices……………………………………………….39
B.    Defendants’ Misrepresentations Regarding Owner-Occupancy Statistics …………40
(1)    JPMorgan Defendants’ Misrepresentations Regarding Owner- Occupancy Statistics ……………………………………………………………………….40
(2)    WaMu Defendants’ Misrepresentations Regarding Owner Occupancy Statistics ……………………………………………………………………….41
(3)    Bear Stearns Defendants’ Misrepresentations Regarding Owner Occupancy Statistics ……………………………………………………………………….41
C.    Defendants’ Misrepresentations Regarding Loan-to-Value and Combined Loan-to-Value Ratios…………………………………………………………………………………42
(1)    JPMorgan Defendants’ Misrepresentations Regarding LTV and CLTV Ratios………………………………………………………………………………….42
(2)    WaMu Defendants’ Misrepresentations Regarding LTV and CLTV Ratios ……………………………………………………………………………………………42
(3)    Bear Stearns Defendants’ Misrepresentations Regarding LTV and CLTV Ratios………………………………………………………………………………….43
D.    Defendants’ Misrepresentations Regarding Debt-to-Income Ratios …………………44
(1)    JPMorgan Defendants’ Misrepresentations Regarding Debt-to- Income Ratios ………………………………………………………………………………..44
(2)    WaMu Defendants’ Misrepresentations Regarding Debt-to-Income Ratios ……………………………………………………………………………………………44
(3)    Bear Stearns Defendants’ Misrepresentations Regarding Debt-to- Income Ratios ………………………………………………………………………………..45
E.    Defendants’ Misrepresentations Regarding Credit Ratings……………………………..46
(1)    JPMorgan Defendants’ Misrepresentations Regarding Credit Ratings ………………………………………………………………………………………….46
(2)    WaMu Defendants’ Misrepresentations Regarding Credit Ratings………..47 ii
(3)    Long Beach Defendants’ Misrepresentations Regarding Credit Ratings ………………………………………………………………………………………….48
(4)    Bear Stearns Defendants’ Misrepresentations Regarding Credit Ratings ………………………………………………………………………………………….48
F.    Defendants’ Misrepresentations Regarding Credit Enhancements……………………49
(1)    JPMorgan Defendants’ Misrepresentations Regarding Credit Enhancements ………………………………………………………………………………..49
(2)    WaMu Defendants’ Misrepresentations Regarding Credit Enhancements ………………………………………………………………………………..50
(3)    Long Beach Defendants’ Misrepresentations Regarding Credit Enhancements ………………………………………………………………………………..50
(4)    Bear Stearns Defendants’ Misrepresentations Regarding Credit Enhancements ………………………………………………………………………………..51
G.    Defendants’ Misrepresentations Regarding Underwriting Exceptions………………51
(1)    JPMorgan Defendants’ Misrepresentations Regarding Underwriting Exceptions …………………………………………………………………51
(2)    WaMu Defendants’ Misrepresentations Regarding Underwriting Exceptions ……………………………………………………………………………………..52
(3)    Long Beach Defendants’ Misrepresentations Regarding Underwriting Exceptions …………………………………………………………………53
(4)    Bear Stearns Defendants’ Misrepresentations Regarding Underwriting Exceptions …………………………………………………………………53
H.    Defendants’ Misrepresentations Regarding Alternative Documentation Loans ……………………………………………………………………………………………………….53
(1)    JPMorgan Defendants’ Misrepresentations Regarding Alternative Documentation Loans ……………………………………………………………………..54
(2)    WaMu Defendants’ Misrepresentations Regarding Alternative Documentation Loans ……………………………………………………………………..54
(3)    Bear Stearns Defendants’ Misrepresentations Regarding Alternative Documentation Loans …………………………………………………….55
I.    Defendants’ Misrepresentations Regarding Full-Documentation Loans……………55
iii
J.    Defendants’ Misrepresentations Regarding Adverse Selection of Mortgage Loans ……………………………………………………………………………………………………….56
K.    Defendants’ Failure to Disclose the Negative Results of Due Diligence …………..57
II.    ALL OF DEFENDANTS’ REPRESENTATIONS WERE UNTRUE AND MISLEADING BECAUSE DEFENDANTS SYSTEMATICALLY IGNORED THEIR OWN UNDERWRITING GUIDELINES ……………………………………………………58
A.    Evidence Demonstrates Defendants’ Underwriting Abandonment: High Default Rates And Plummeting Credit Ratings ……………………………………………..59
B.    Statistical Evidence of Faulty Underwriting: Borrowers Did Not Actually Occupy The Mortgaged Properties As Represented……………………………………….62
(1)    The JPMorgan Offerings………………………………………………………………….64 (2)

The WaMu Offerings………………………………………………………………………64 (3)

The Bear Stearns Offerings………………………………………………………………65
C.    Statistical Evidence of Faulty Underwriting: The Loan-to-Value Ratios In The Offering Materials Were Inaccurate ………………………………………………………65
(1)    The JPMorgan Offerings………………………………………………………………….66 (2)    T

he WaMu Offerings………………………………………………………………………68 (3)

The Bear Stearns Offerings………………………………………………………………71
D.    Other Statistical Evidence Demonstrates That The Problems In Defendants’ Loans Were Tied To Underwriting Guideline Abandonment………..72
E.    Evidence Demonstrates That Credit Ratings Were A Garbage-In, Garbage-Out Process …………………………………………………………………………………75
F.    Evidence From Defendants’ Own Documents And Former Employees Demonstrates That The Representations In Defendants’ Offering Materials Were False ……………………………………………………………………………………………….76
(1)    The JPMorgan Offerings………………………………………………………………….76 (2)

The WaMu Offerings………………………………………………………………………80 (3)

The Long Beach Offerings……………………………………………………………….87 (4)

The Bear Stearns Offerings………………………………………………………………92
iv
G.    Evidence From Defendants’ Third-Party Due Diligence Firm Demonstrates That Defendants Were Originating Defective Loans………………….94
H.    Evidence Of Other Investigations Demonstrates The Falsity Of Defendants’ Representations ………………………………………………………………………97
(1)    The WaMu and Long Beach Offerings………………………………………………97
(2)    The Bear Stearns Offerings………………………………………………………………99
III.    DEFENDANTS’ REPRESENTATIONS CONCERNING UNAFFILIATED ORIGINATORS’ UNDERWRITING GUIDELINES WERE ALSO FALSE ……………102
A.    Countrywide ……………………………………………………………………………………………104
(1)    Defendants’ Misrepresentations Concerning Countrywide’s Underwriting Practices…………………………………………………………………..104
(2)    These Representations Were Untrue And Misleading………………………..105 B.

GreenPoint ……………………………………………………………………………………………..109
(1)    Defendants’ Misrepresentations Concerning GreenPoint’s Underwriting Practices…………………………………………………………………..109
(2)    These Representations Were Untrue And Misleading………………………..111 C.    PHH……………………………………………………………………………………………………….115
(1)    Defendants’ Misrepresentations Concerning PHH’s Underwriting Practices ………………………………………………………………………………………115
(2)    These Representations Were Untrue And Misleading………………………..116 D.

Option One……………………………………………………………………………………………..118
(1)    Defendants’ Misrepresentations Concerning Option One’s Underwriting Practices…………………………………………………………………..118
(2)    These Representations Were Untrue and Misleading:………………………..120 E.    Fremont ………………………………………………………………………………………………….122
(1)    Defendants’ Misrepresentations Concerning Fremont’s Underwriting Practices…………………………………………………………………..122
(2)    These Representations Were Untrue and Misleading…………………………124 IV.

THE DEFENDANTS KNEW THEIR REPRESENTATIONS WERE FALSE ………….126
v
A.    The Statistical Evidence Is Itself Persuasive Evidence Defendants Knew Or Recklessly Disregarded The Falsity Of Their Representations………………….126
B.    Evidence From Third Party Due Diligence Firms Demonstrates That Defendants Knew Defective Loans Were Being Securitized …………………………127
C.    Evidence Of Defendants’ Influence Over The Appraisal Process Demonstrates That Defendants Knew The Appraisals Were Falsely Inflated …………………………………………………………………………………………………..130
D.    Evidence Of Internal Documents And Former Employee Testimony Demonstrates That Defendants Knew Their Representations Were False ……….131
(1) (2) (3) (4)
JPMorgan Defendants Knew Their Representations Were False…………131 WaMu Defendants Knew Their Representations Were False ……………..133 Long Beach Defendants Knew Their Representations Were False………138 Bear Stearns Defendants Knew Their Representations Were False ……..140
V.    ALLSTATE’S DETRIMENTAL RELIANCE AND DAMAGES ……………………………144

VI.    TOLLING OF THE SECURITIES ACT OF 1933 CLAIMS …………………………………..146

FIRST CAUSE OF ACTION …………………………………………………………………………………………149

SECOND CAUSE OF ACTION …………………………………………………………………………………….150

THIRD CAUSE OF ACTION………………………………………………………………………………………..152

FOURTH CAUSE OF ACTION …………………………………………………………………………………….155

FIFTH CAUSE OF ACTION …………………………………………………………………………………………157

PRAYER FOR RELIEF ………………………………………………………………………………………………..157

JURY TRIAL DEMANDED………………………………………………………………………………………….158

Wells Fargo, Option One, American Home Mortgage Relationship

Wells Fargo Bank, N.A. appears in many ways including as servicer (America Servicing Company), Trustee (although it does not appear to be qualified as a “Trust Company”), as claimed beneficiary, as Payee on the note, as beneficiary under the title policy, as beneficiary under the property and liability insurance, and it may have in actuality acted as a mortgage broker without getting licensed as such.

In most securitized loan situations, Wells Fargo appears with the word “BANK” used, but it acted neither as a commercial nor investment bank in the deal. Sometimes it acted as a commercial bank meaning it processed a deposit and withdrawal, sometimes (rarely, perhaps 3-4% of the time) it did act as a lender, and sometimes it acted as a securities underwriter or co-underwriter of asset backed securities.

It might also be designated as “Depositor” which in most cases means that it performed no function, received no money, disbursed no money and neither received, stored, handled or transmitted any documentation despite third party documentation to the contrary.

In short, despite the sue of the word “BANK”, it was not acting as a bank in any sense of the word within the securitization chain. However, it is the use of the word “BANK” which connotes credibility to their role in the transaction despite the fact that they are not, and never were a creditor. The obligation arose when the funds were advanced for the benefit of the homeowner. But the pool from which those funds were advanced came from investors who purchased certificates of asset backed securities. Those investors are the creditors because they received a certificate containing three promises: (1) repayment of principal non-recourse based upon the payments by obligors under the terms of notes and mortgages in the pool (2) payment of interest under the same conditions and (3) the conveyance of a percentage ownership in the pool, which means that collectively 100% of the ivnestors own 100% of the the entire pool of loans. This means that the “Trust” does NOT own the pool nor the loans in the pool. It means that the “Trust” is merely an operating agreement through which the ivnestors may act collectively under certain conditions.  The evidence of the transaction is the note and the mortgage or deed of trust is incident to the transaction. But if you are following the money you look to the obligation. In most  transactions in which a residential loan was securitized, Wells Fargo did not work under the scope of its bank charter. However it goes to great lengths to pretend that it is acting under the scope of its bank charter when it pursues foreclosure.

Wells Fargo will often allege that it is the holder of the note. It frequently finesses the holder in due course confrontation by this allegation because of the presumption arising out of its allegation that it is the holder. In fact, the obligation of the homeowner is not ever due to Wells Fargo in a securitized residential note and mortgage or deed of trust. The allegation of “holder” is disingenuous at the least. Wells Fargo is not and never was the creditor although ti will claim, upon challenge, to be acting within the scope and course of its agency authority; however it will fight to the death to avoid producing the agency agreement by which it claims authority. remember to read the indenture or prospectus or pooling and service agreement all the way to the end because these documents are created to give an appearance of propriety but they do not actually support the authority claimed by Wells Fargo.

Wells Fargo often claims to be Trustee for Option One Mortgage Loan Trust 2007-6 Asset Backed Certificates, Series 2007-6, c/o American Home Mortgage, 4600 Regent Blvd., Suite 200, P.O. Box 631730, Irving, Texas 75063-1730. Both Option One and American Home Mortgage were usually fronts (sham) entities that were used to originate loans using predatory, fraudulent and otherwise illegal loan practices in violation of TILA, RICO and deceptive lending practices. ALL THREE ENTITIES — WELLS FARGO, OPTION ONE AND AMERICAN HOME MORTGAGE SHOULD BE CONSIDERED AS A SINGLE JOINT ENTERPRISE ABUSING THEIR BUSINESS LICENSES AND CHARTERS IN MOST CASES.

WELLS FARGO-OPTION ONE-AMERICAN HOME MORTGAGE IS OFTEN REPRESENTED BY LERNER, SAMPSON & ROTHFUSS, more specifically Susana E. Lykins. They list their address as P.O. Box 5480, Cincinnati, Oh 45201-5480, Telephone 513-241-3100, Fax 513-241-4094. Their actual street address is 120 East Fourth Street, Suite 800 Cincinnati, OH 45202. Documents purporting to be assignments within the securitization chain may in fact be executed by clerical staff or attorneys from that firm using that address. If you are curious, then pick out the name of the party who executed your suspicious document and ask to speak with them after you call the above number.

Ms. Lykins also shows possibly as attorney for JP Morgan Chase Bank, N.A. as well as Robert B. Blackwell, at 620-624 N. Main street, Lima, Ohio 45801, 419-228-2091, Fax 419-229-3786. He also claims an office at 2855 Elm Street, Lima, Ohio 45805

Kathy Smith swears she is “assistant secretary” for American Home Mortgage as servicing agent for Wells Fargo Bank. Yet Wells shows its own address as c/o American Home Mortgage. No regulatory filing for Wells Fargo acknowledges that address. Ms. Smith swears that Wells Fargo, Trustee is the holder of the note even though she professes not to work for them. Kathy Smith’s signature is notarized by Linda Bayless, Notary Public, State of Florida commission# DD615990, expiring November 19, 2010. This would indicate that despite the subject property being in Ohio, Kathy Smith, who presumably works in Texas, had her signature notarized in Florida or that the Florida Notary exceeded her license if she was in Texas or Ohio or wherever Kathy Smith was when she allegedly executed the instrument.

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