Libor vs Mortgage Scandals: Amount of Money Appears to be the Only Difference

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It appears as though LIBOR is being thrown under the bus as a distraction from the much larger mortgage securitization scam. Both cases relied upon trust that was breached, money that was invented, figures that were fabricated, lying, cheating and inside trading to the detriment of the institutions that participated in one form or another. In both cases the ultimate victims on both sides of the transactions is the consumer.

Yet with LIBOR “suits are mounting,” (Wall Street Journal) investigations proliferating and a handy group of scapegoats far from the top of the scam may well be prosecuted.

The only difference seems to be that the size of the LIBOR scandal in terms of consequences to the institutions and consumers appears to be far less than the monumental scam foisted upon taxpayers all over the industrialized world, especially in the U.S.

To be certain the manipulation of the LIBOR rates was clearly an intentional act, but so was the insertion of the bankers naked nominees when residential loans were originated. In most cases, securitization was different in the commercial setting because it was more likely that more questions would be asked by higher priced, more sophisticated lawyers for the borrower.

The manipulation of LIBOR rates resulted in the wrong calculation of adjustable rate mortgages all over the world, making the notices of default, demand for payment and perhaps even the sales illegal. That is more in the nature of legal argument. The insertion of nominees controlled by the investment banks as payees, nominees, trustees, beneficiaries and mortgagees in lieu of the institutions that were actually providing the money and hiding the compensation that TILA requires to be disclosed, the steady practice of table funded loans which are deemed “predatory per se” under regulation Z, allowed intermediaries to pretend to be the lenders, the owners of the loans so they could trade with impunity. If they lost money, they threw the loss over the fence at the taxpayers and investment funds that bought bogus mortgage bonds. If they made money, they kept it.

The only difference is that the the amount of money involved in the non-existent securitization scheme that was so well “documented” was that it resulted in siphoning out the life blood of multiple nations and sending the world into a recession not seen in most of your lifetimes. AND the policy makers in Washington either were or are in bed with the perpetrators on this scheme, whereas the LIBOR scandal is being couched in terms where the traders were conspiring but the banks were unaware of their transgressions.

Let’s face it, if suddenly you have a trading department that is reporting profits geometrically and even exponentially higher than any other time in history, as CEO you would want to know why. Those trading profits did exactly that in both LIBOR and the mortgage securitization myth. One must ask why thousands of advertisements costing billions of dollars were on TV, radio, newspapers and magazines for loans at 5%. Put pencil to paper. If normal underwriting standards were used, and normal fees were applied to intermediaries who made the loan possible, there would be no room in the budget for such extravagance, much less the pornographic profits and bonuses reported on Wall Street. Why were armies of salesmen, including 10,000 convicted felons in Florida alone pushed into the market place as mortgage brokers or mortgage originators?

The intentional reporting of the wrong rates has an effect on all loans, past, present and future, but it requires yet more education of an already overloaded judiciary. So throwing a few traders under the bus and calling it a day is pretty much what is going to happen.

As it turns out though, the Banks have painted themselves into a corner on the securitization scam. What they securitized was paper, not money. The monetary transactions were left untouched by the documents, leaving the people who loaned the money through the scam vehicle known as a REMIC trust with no security for a bad loan.

Hence neither the documentation of an on-existent transaction between the parties named on the instrument, nor the manipulation of terms that were presented in one set to the investor-lenders and an entirely different set of terms presented to the borrower created valid contracts, much less perfected liens. But that didn’t matter to the intermediaries who were supposed to be acting as intermediaries — in the same way a check clears the bank — with no claim to the subject matter of the transaction.

They too manipulated rates by creating second tier yield spread premiums, and thus created spreads upon which they could withdraw money, pay for insurance, credit default swaps and other bets that the bad loans they wanted and received would fail, leaving the market in free-fall.

Predicting the market to to fall is like pushing a person off a cliff. You pretty much know that once the balance is lost the person is doomed. Doctoring up the applications with false income and false property appraisals did exactly that. It was a bet on a sure thing. Wall Street could rest comfortably in the knowledge that housing would ultimately fall to normal levels simply because there was nobody who could or would pay the premium they invested on the mortgage scam.

Now Wall Street is creating entities that will buy up “distressed”properties — a product of their own wrongdoing, using the money of the same people who owned the homes that were foreclosed — i.e., their pension and 401k retirement money. So they used your own money to fund a bad loan to you that they knew they could foreclose, and in between the time they originated the loan documents and the time of foreclosure they engaged in trading on your mortgage even though they had no part in funding or purchasing the loan.

My question to you is where is your outrage? When are you going to fight the bank control of Washington, the bank manipulation of judiciary by fabricating false, forged documentation that “looks right?” You can do it by voting against hose  most closely tied to the Wall Street community, by fighting with the party claiming to be your mortgage lender/servicer, or both. If you don’t you are handing the Country over to the banks and leaving it to your children and grandchildren to suffer the consequences.

A NEW FACE in Government Activism in Securitization Scam

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Editor’s Comment:

Anyone who wants the job of being the county recorder takes a risk of being blamed for all the warts and defects that come out after they take office. So when somebody runs for public office without prior real estate experience like a Nurse, you know that community activism is on the rise and we all know why. The shell game and run-around that the banks and servicers are playing can only work so long.

The facts remain that the county recorders across the country fully understand that title is corrupted but they are mostly elected officials, a member of  a major political party and thus follow orders when told to do the Texas 2-step when it comes to removing illegal documents from the recording system or requiring proof of the authenticity of the documents and declarations in the documents.

We need many more people to run for office where it counts — the county level, get rid of the hacks who refuse to sue the banks for screwing up title, refuse to collect fees that are owed and would help the county budget, and refuse to hold those who submitted false filings accountable. THAT is where the banks have little influence. That is where they are weak politically. The lower the political office the less influence the bank has in preventing actions that would embarrass the mega banks.

Eventually the truth will all come out. It is seeping in through all the windows and doors. The logjam will break and we’ll know everything. And what we are going to find is that most mortgages were recorded without any transaction commenced between the the parties recited on the documents. We’ll find that the record is devoid of any real documentation between the real lenders (who might be impossible to determine with certainty because of commingling of funds in escrow accounts that ignored the existence of the REMICs). All that means is that the mortgages were fraudulently filed and therefore the foreclosures are invalid. There lies the path to salvation to our economy. Instead of the big boys getting a handout, the little people who were scrunched into the dirt by the boots of Wall Street titans are going to get a break.

Support with your money , effort and contacts and networking every candidate on the local level who runs for office on the platform of rejecting these illegal documents and throwing out the deeds of foreclosure based upon illegal mortgages and illegal, fabricated, forged and unauthorized documents.

Foreclosure Fraud Combatant Eyes Clerk of Court Role in Florida

By Jon Prior

Florida has been ground zero for foreclosure fraud, but even with multibillion-dollar settlements and federal consent orders, the state’s financial services industry may face new scrutiny from a community activist who’s taken a critical look at the industry and its practices.

Lisa Epstein, who’s running for clerk of court in Palm Beach County, was once an oncology nurse. For most of her career she saw her patients strike deals with their banks when they ran into debt problems, particularly with mortgage payments, once they became ill.

But when the housing crisis struck and foreclosures mounted, that changed. Banks and mortgage servicers overloaded with delinquent loans struggled with the paperwork and the complexity of linking struggling borrowers with decision-makers. To speed up the foreclosure process, reams of documentation was mishandled, signed improperly and filed at county courthouses.

In 2007, Epstein noticed her patients were no longer being helped. They were being rushed through the foreclosure system.

“That was my first hint that there was something very different,” Epstein said during a HousingWire interview.

So began her advocacy work in Florida fighting against banks and third-party firms handling the foreclosure process. In June, she was placed on the ballot for clerk of court of Palm Beach County, the third largest clerk office in the state.

If elected in August, she will be in charge of many things, including managing an overloaded docket, acting as treasurer and chief financial officer of the county’s funds, and most importantly, serving as the keeper of public record.

Her major focus will be on what she claims is a broken system, surrounding the cloudy chain of title flaws filed with the counties to this day. If state funding allows, she said she will perform wide-scale audits of the entire county database and develop reforms — even if that means shutting down the process entirely.

“I don’t know if it is fixable,” Epstein said. “But these are not truly legal instruments that convey proper property ownership. Conducting any sort of real estate transaction or sorting who really owns the loans in many cases will become an enormous legal burden because of the morass of documentation fraud.”

The Florida system remains a nightmare after the collapse of the Law Offices of David J. Stern in March 2011. Several other firms came under investigation and some settled claims before being shut down. The $25 billion foreclosure settlement involving 49 states (Oklahoma didn’t participate) includes language that will hold servicers accountable for any third-party firms that handle any aspect of a foreclosure filing.

Consent orders with the Office of the Comptroller and the Federal Reserve will also force servicers to monitor these firms, specifically Mortgage Electronic Registration Systems and Lender Processing Services ($23.87 1.23%).

New foreclosure filings in Palm Beach County increased in May by 3.6% from the previous month as servicers are looking to restart the process. The 1,356 new filings was 61% above levels seen in the year-ago period.

Both Epstein and incumbent Sharon Bock, who’s held the office since 2003 and is running for re-election, are concerned with keeping up because of pending budget cuts.

“We expect that our foreclosure division is one that will be heavily affected by these budget cuts,” Bock said in a statement accompanying the numbers last week. “My fear is if the trend of increased filings continues as it has in recent months, we will not have the ability to keep up with the volume. We will do our best, but it will be a challenge.”

Mortgage servicers have stated they’ve ended past robo-signing practices and are installing new policies to reduce risk in the system. Few, if any, borrowers, they claim, were foreclosed on improperly because of past flawed practices.

But the financial industry is watching this election closely. Should Epstein prevail, her appetite for audits and new investigations could wipe out any restart to an already backlogged foreclosure process.

Some county record keepers in other states already launched investigations of their own, some founded on faulty claims, but some may have real consequences. A report in one Massachusetts county claimed 75% of mortgage assignments were invalid. Another in San Francisco attempted to show similar results through an audit but shrivels under scrutiny through California case law.

The treasurer for the clerk of courts in two Michigan counties filed lawsuits against Fannie Mae and Freddie Mac to get fees levied during the recording of foreclosure property transfers. The GSEs used a government tax status to escape the fees, an exemption now being challenged.

Epstein said she would be on board with taking all of these actions and suggested the federal government go even further with a wide-scale probe. For this, Epstein is running into a lot of pushback. Her race against Bock has become one of the most heated in the local Florida elections.

“We have to solve a fraudulent process that is hurting our property value taxes, hurting our ability to do a short sale, hurting our ability to work with lenders,” she said. “It’s hurting the faith that there would be some protection. It’s damaging our court systems and yet our court systems are allowing this go on and on.”

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