Fannie and Freddie Ignore Homeowners in Detroit

If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.


The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.


In the upside down world of the foreclosure of mortgages that are neither in default nor owned by the parties initiating foreclosure, and where applications for modification are submitted that clearly exceed federal standards for approval (and are denied)  and should come as no surprise that the government sponsored entities, Fannie and Freddie, canceled their appearance at a Metro Detroit foreclosure hearing which they had scheduled.

These are essentially federal agencies. Their first duty is to serve the country and its citizens. But they canceled their appearance because of pending litigation against them. Here was an opportunity for them to understand the impact of foreclosure on families, businesses, investors and the government. Here was an opportunity for them to utilize information provided to them by people on the ground to fashion remedies that are appropriate and legal.

This is all part of state and federal government policy to sweep the mortgage tragedies under the rug. Despite the fact that we know that most of the foreclosures that have already been deemed completed were in fact illegal, we have had millions of “auction sales” in which strangers to the transaction were awarded title to the house without ever having made a single payment of any amount of money to originate or acquire the loan that was allegedly in default but which was fatally defective and certainly not in default  despite the illusions created by Wall Street banks.

I am leading the charge on this one. It is my intention to file suit against the Wall Street banks who have accepted monthly payments, short sale payments, and full payments on loans that were subject to claims of securitization. In fact, my law firm is offering to represent homeowners who lost or sold their homes on a contingency fee, as long as only economic damages are sought. It is my goal to show payments to the sub servicer or anyone else in the false securitization chain should never have been made and were never due. It is my opinion that these payments are owed back to the homeowner in all events, together with interest, costs of the court action, and attorney fees where those are provided by statute or contract.  Each case will be evaluated as to viability utilizing this strategy.

If Bank of America or any other bank responds to an estoppel letter for payoff or short sale without knowing or showing that they have paid for the origination or acquisition of the loan, then they have no business providing the estoppel information or approving or denying a request for a short sale. Their acceptance of the money at closing and their execution of a satisfaction of mortgage or release and reconveyance is a sham. In the absence of any other creditor demanding payment and showing that they are in fact a true creditor (having paid actual money for the origination or acquisition of the loan), proceeds of all such closings should, in my opinion, go to the homeowner. If the bank got the money, it is my opinion that the bank should be sued for recovery of the entire proceeds of the closing.

Each of those closings described above represents a gift to the banks and a horror show for the homeowner and many attorneys for homeowners. The spin machine for the banks has created the illusion that homeowners are seeking a free home when in fact it is the banks that are seeking and getting free money and free homes. In auction sales where the banks are submitting a credit bid, they do not qualify as a creditor who can submit a credit bid. But the credit bid is accepted anyway and the bank gets the house for free despite the fact that the bank has no status as a creditor or even the authorized representative of a creditor.

Fannie and Freddie are colluding with the banks and the federal reserve  to maintain the illusion that the notes and mortgages are in proper form, were properly executed, and contain true representations concerning the real parties in interest. Many theories have been advanced as to why the Federal Reserve and other agencies are colluding with the banks. I think the reason is because many layers of policies are based upon the false assumption that the origination of the loans complied with existing laws, rules and regulations. The federal reserve and other federal agencies would look pretty stupid if they had paid or advanced trillions of dollars for worthless notes and mortgages and worthless mortgage bonds.

It is highly probable that the reason why the real lenders (investors) have not pursued loss mitigation with homeowners directly is that they know the note and mortgage is unenforceable and they have said so in their lawsuits against the investment banks that sold them the bogus mortgage bonds. What they don’t fully appreciate is the fact that most homeowners would willingly give them a valid mortgage and note based upon the reality of the current market. But the intermediaries (servicers) are doing everything possible to prevent modification or successful mediation of claims; which of course results from those intermediaries falsely claiming to be owners of loans that were funded by investors and falsely claiming losses on those loans that were paid by insurance and credit defaults swaps. Those intermediaries are the leading Wall Street banks in this mortgage mess. As long as we include them in the process of resolving the mortgage meltdown, the problems will be compounded rather than cured.

Fed Pours Huge Sums Into Foreign Bank Coffers

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Foreclosure Victims Protesting Wall Street Impunity Outside DOJ Arrested, Tasered

Foreclosure Fraud Failures Come To A Head In Justice Dept. Protest

Bank of America Zombie Foreclosure Protest (VIDEO)

This is what it looks like when foreclosure fighters demand Wall Street criminals be prosecuted

Chasing The Shadow Of Money

Seminars Corroborate Title Problems and HAMP LItigation

It might seem to many that the industry is blind to title problems caused by false claims of securitization or even real claims based upon securitization. It might also seem that there is nothing about which you can litigate when it comes to HAMP and HARP modifications. The big seminar promoters are offering a gaggle of of short and long seminars on these subjects, indicating that they recognize that litigation and title snarls are getting traction across the country and they admit that the future litigation will include clearing title and litigating over HAMP modifications.

The principal problem that homeowners and their lawyers are missing is that the duty to consider the modification does not require the the acceptance of a homeowner for modification. Some servicers are getting more lenient than others, including, from what I hear, Ocwen. But the litigation that is being filed and which the pretender lenders are losing is on the precise question of whether the actual creditor was given notice of the offer of modification and whether the servicer did anything to apply any formula to the the almost inevitable denial of modification.

What we have started doing at my firm is (a) supplying the required material, return receipt requested, together with (b) a specific offer of modification on which an expert (real estate broker, mortgage broker or other professional in the real estate industry) gives an opinion that is worded something like the auditors do when they complete an audit, to wit:

“Based upon industry standards and conditions, the enclosed offer of modification reflects actual current conditions in the relevant real estate market and provides the creditor with two benefits that are not present in the event of foreclosure. The first is that the question of the perfection of the mortgage lien and enforcement of the lien is completely resolved, thus clearing title and the second, is that the net proceeds from the enclosed proposal for modification results in a far higher benefit to the actual creditor than the proceeds from foreclosure, which is a fraction of the offer. There is no known criteria in the industry under which this proposal would be rejected under normal circumstances unless the parties rejecting the modification had some risk of loss unrelated to the loan itself.”

When the denial comes back, you have a basis for alleging that they are lying to the court, that the modification was never considered, that inappropriate criteria was used to guarantee denial and that the creditor was never notified. The anecdotal reports I am receiving strongly suggests that this strategy is getting a lot of traction and is resulting in very favorable settlements within hours after the Judge enters an order requiring the servicer and pretender lender to show cause why they should not be ordered to provide a evidence of the “consideration” and the reasons why the proposal or request was denied.

The National Business Institute is offering three seminars that will be the subject of the member teleconferences (become a member of this blog now to get into the discussion: Become a member, for discounts, online teleconferences etc.). I strongly recommend that these short seminars be attended and that you even order the recordings as well.

Go to (livinglies is not paid for this endorsement directly or indirectly). I would suggest ordering the following seminars:

  1. HAMP litigation: breach of contract and related claims, June 21, 2013 2 p.m. to 3:30 p.m.

  2. Resolving complex commercial title defects June 11 2013 11:00 a.m. to 12:30 p.m.

  3. Handling short sales and deed in lieu of foreclosure 2 p.m. to 3:30 p.m. July 11 2013

  4. The Role of MERS in Mortgage Origination and Foreclosure June 3 2013 1PM-2:30PM

Short-Sale Alert: Shifting the Title Problem to the Borrower

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Comment: In reviewing some documents for a proposed short-sale it appears to me that the reason why the banks are willing to do it is hidden in the legalese contained in the multiple forms that the borrower is asked to sign.

It is important that you have an attorney licensed in the jurisdiction in which the property is located review those short-sale papers before you sign them, thinking your problems are over.

The first big problem that I see is that it appears to be common practice for the borrower to warrant title and lack of encumbrances that others might assert claims. This is a warranty that properly should be made by the servicer, the trust and the trustee on the deed of trust (where applicable) since the information necessary to make such an assertion or acknowledgment or warranty is solely within the care, custody and control of the pretender lenders.

The fact is that the satisfaction of mortgage or release and reconveyance may be executed by a party lacking the authority to do so, just as the wrongful foreclosures are based upon robo-signed fabricated documents. If the Seller in a short-sale makes such a warranty and a claim arises later that the title is corrupted it is the Seller who made the warranty to the new buyer and the title company, and both the buyer and the title company could sue the Seller who thought they were putting an end to the foreclosure nightmare.

The fact is that depending upon the actual money trail and the the documentary trail that preceded the short-sale, there are many parties who could assert a claim, although it appears unlikely they will do so.

If the asset pool (trust or REMIC) actually acquired the loan legally then it should say so and join in the release and reconveyance or satisfaction of mortgage. Which brings me to the second point of concern: when the package is delivered to the Seller in a short-sale, it typically does NOT include the forms that will be used to release the mortgage, waive the deficiency etc. It is entirely possible that a trusting Seller in a short-sale might themselves tied in knots because the satisfaction or reconveyance contains statements, warranties and assertions that are not true and potentially binding the Seller for all responsibilities on title and even deficiencies.

If the onus of potential title problems is not being covered by the title company and disclaimed by the parties executing the release or satisfaction, then the Seller is stuck with a problem he didn’t have before: corruption of title caused by the fake scheme of securitization is transferred to the Seller’s doorstep. It is even possible that you might be inadvertently signing up for a deficiency judgment when in a foreclosure (particularly in non-judicial states) the deficiency is ordinarily waived. This can force the Seller into a bankruptcy they were seeking to avoid. Be Careful!

Living Lies Opens Clearinghouse For Investors and Homeowners to Get Together


A division of General Transfer Corporation

“Workouts With Honor”

Call 520 405-1688 or write to GTC|Honors provides analytical reports, negotiation with the title insurer to eliminate exclusions for off-record transactions, and potential homeowners looking for deals in which they can either enter into a short-sale, or sale lease back with option to buy. Except in rare instances. GTC|Honors works with local licensed attorney and local licensed real estate brokers only. We do not accept applications from brokers but have no objection and even advise the investor and the homeowner to engage the services of a real estate broker and licensed attorney. GTC|Honors does not guarantee title or a successful result but does provide screening of both investors and homeowners.

Investors must have some knowledge of U.S real estate transactions, their own counsel, and proof of funds. Bank and customer references are required.

Homeowners: Must have an actual provable income from which they could pay rent or a modified mortgage. Personal , bank and financial references are required. DO NOT provide a history of your case unless you believe there is a single salient point that distinguishes your case from others.

Standard business model includes purchase at auction, purchase out of bankruptcy state, short-sale, lease back, option to repurchase at discount and an equity “kicker” for the investor in the event of sale or refinancing.


GTC|Honors Business Plan for Residential Housing Investments

GTC operates www. the largest website on the internet providing resources, articles, forms and active analytical assistance to those seeking to challenge those banks and servicing relying upon false, fabricated, forged documentation. Counties around the country have verified what Katherine Ann Porter discovered in 2007 in her ground breaking study — that the promissory notes executed by homeowners were a hoax, and that no less than 40% of them had been destroyed or “lost.” More recent studies show that the number is even higher, probably at 60%. The reason for the destruction and loss was that in between the delivery of a loan to an investor-lender purchasing a “mortgage bond” and the time of funding tot he borrower, the banks inserted themselves as the owner of the loan in order to justify the purchase of insurance, credit default swaps and other hedge products. They used investor money to make these purchases.

The author of the blog, Neil F Garfield is 65, started his career on Wall Street as a security analyst, then manager of securities and bond research, and then director of mergers and acquisitions at boutique brokerage houses in the early 1960’s and 1970’s. He then went on to become a successful attorney in the trial room and in the boardroom where deals were made. In South Florida he traded in residential and commercial properties.

After 6 years of interviews, analysis and surveys, as well as direct involvement with thousands of foreclosure cases, he has arrived at the conclusion that  the original obligation at the time of funding was composed of two parties — the investor-lender and the homeowner. Wire transfer instructions corroborated his conclusion and since then he has tested his conclusion by demanding the evidence of the money trail in loans that were subject to the claims of securitization. GTC now provides paid services to investors and homeowners alike as well as some community banks who have been approached with applications for refinancing but are worried about clear title.

96% of homeowners leave without a fight, some of those declaring bankruptcy. The others fight actively in state and federal courts including bankruptcy. The typical business model being followed by investors in the area is to buy the property for fair market value. The forecloser usually resists at first, because the banks have credit default swaps and insurance payable if the property is sold in foreclosure. The investors make an offer in short-sale or to buy the property out of the bankruptcy estate. They rent the property with an option to buy the property back over a term of 5-10 years. The rent depends upon market conditions and the LTV ratio. Investors typically seek a total ROI of 25%-50%.

Example, pending case now: XX was the owner of two unencumbered properties. She was induced to finance them to invest in a Ponzi scheme, for which US Bank was the conduit for funds transfer. The application recited her income including the projected income that would begin in 12 months. The income of course never arrived and the properties were set for foreclosure.

One property located in Payson Arizona was thought to include 4 parcels, including parcel #4 which contains a 2500 square foot log cabin with two floors plus a partially finished basement, appliances etc. The cabin has electricity but not access to water. Lot #5, also owned by XX has the water, pump and plumbing, and septic fields.

Chevy Chase Bank applied for a lift stay order in bankruptcy reciting their ownership of the loan. Judge entered an order confirming the ownership of Chevy Chase and lifting the stay. U.S> Bank then foreclosed without relief from Stay, eventually saying that the actual source of funds was a “trust” for which they were the “trustee” “relating to” the certificates. The foreclosure was set for auction and the auctioneer accepted a credit bid from U.S. Bank. XX is still in litigation with US Bank over their ownership of the loan. It was discovered that the only property foreclosed was Lot #4, after which discovery XX filed a motion to add the other three lots to her bankruptcy estate in the interest of full disclosure.

The U.S. Trustee has suggested a settlement purchase price of $80,000, half of which would go to US Bank if they can prove they own the loan receivable. We already know they do not. So the eventual sale price might be as low as $40,000.

The property was originally appraised at nearly $500,000 without Lot #5. XX has the ability to challenge US Bank’s right to intervene in the sale proposed by the Bankruptcy trustee, if she can show that she has the actual deal ready by which the trustee could be paid. The property is worth, according to local realtors (lots 4 and 5 only) approximately $250,000-$300,000 in a distressed market, containing over 2 acres of prime land overlooking valleys and mountain views.

She has an income now of approximately $500 per week without working, because of money due to her, is enrolling in nursing school, is 56 years of age, in excellent health and comes with glowing recommendations. She has prior experience as a massage therapist and a personal trainer. Her expected income should be in excess of $1000 per week.

She is looking for an “angel” to buy the house, allow her to perform maintenance and repair ( a brand new water pump was somehow destroyed by the realtor), pay rent starting 60 days after closing at the rate of $700 per month, plus an option to buy the property at $115,000 plus an equity kicker on refinancing or sale of the home at 25% of net proceeds. She is open to any reasonable offer.

I am her friend as well as her adviser, which is why I moved her case to the front of the list. Your offer to buy should be submitted to the Trustee with the usual demand for clear title which cannot be given without further order of the court since the Judge already recited another bank owned the loan other than U.S. Bank. The court and the trustee just want to get rid of this case. The auction “Credit bid” submitted by US Bank without a loan receivable or the note was $91,000.

She currently lives on a second structure on Lot #5 consisting one room, electricity for limited access to water. Lot #5 contains all ingress and egress to Lot #4 as well.

I have dozens of such properties in which homeowners are looking to walk away with some dignity or who would like to stay and rent. Most would like to stay and rent.

I am am an attorney and the author of the above mentioned blog with approximately 7.3 million visitors. My fee includes $7,500 from the investor for judicial and non-judicial methods of clearing title, providing title and securitization analysis and negotiating with the title company to include a guarantee of title including any off-record transactions. This feature is absent from most title policies and many investors are already finding out they are stuck in properties with clouded titles. I have attorneys that will provide services locally in Arizona, California, Nevada, Florida, Alabama, Tennessee Oregon, and other states.

If you have any further questions please call as indicated above

Neil F Garfield

P.S.  Our experience, while limited, confirms what we have already discovered in court, that when the Judge commands the forecloser to open up its books and records to prove the loan receivable they either fail to appear at any further court hearings or make offers of 70%-90% discounts off the original loan. It is still necessary to obtain a court order declaring the identities of the stakeholders and the status of their holding in the property in a final order that can be certified and recorded in the county records.

The reason why the foreclosers are moving in the direction of allowing short-sales it is that it no longer a bank with no interest in the property signing the deed, it is the actual homeowner. But that still leaves the problem of prior loans that were subject to claims of securitization. By following the procedures that we provide, the investor can be reasonably assured of getting clear title and a very thankful tenant.

Homeowners Settlements, Shortsales and Modifications Opportunities Arise for Investors

Whether it is in Bankruptcy Court, Federal Civil, or State Civil, the trend is obvious — more and more cases are being settled, modified or otherwise resolved outside the courtroom. In some cases, the settlement is relatively easy, with the pretender lender agreeing to sharp principal reductions and long term paybacks at low fixed rates. The homeowner need only be wary of getting an Order from a Judge through a new or existing lawsuit that quiets title and a new title policy that not exclude risks associated with securitization, assignment or sale into the secondary market. If you need help with this call our customer service line and we will find someone to help settle the matter or help your attorney. 520-405-1688.
But in other cases, especially in bankruptcy court, we have a growing list of homeowners who seek “hard money” sources that will enable them to buy the house out of the bankruptcy estate at deep discounts. In some cases these are loans and in others it is an outright purchase by the investor with an option granted to the homeowner to purchase from the investor. In the meanwhile the homeowner rents from the hard money source on a triple net lease, meaning that the homeowner takes care of everything from utilities to repairs and maintenance. That reduces the monthly rent for the homeowner but it also eliminates any landlord liability.

As an example, we have someone who is in bankruptcy court with 2 1/2 acres, two completed structures on the block and the ability to buy the property out of the estate for 20% of the original finance appraised value. She needs a hard money source who will lend or buy. The specs on the deal make it about as risk free as one could get. And the return make it about as high a return as anyone could even imagine. So if there are investors out there who are looking for deals, look no further. Just call our customer service line (520-405-1688) and ask for a telephone appointment with me and I’ll put you in touch with the right people.

BUYING PROPERTIES: Pitfalls and Remedies

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This Topic Will be Discussed Thoroughly

at 7/26 Seminar in Chandler, Az


We had an expression when I was on Wall Street that in an up market everyone thinks they are a genius. The apparently oversold properties being sold in short-sales and REO sales by the banks are subject to serious pitfalls that won’t surface until the buyer seeks to sell or refinance the property.

  1. All evidence, despite the spinning of Wall Street, realtors and others whose vested interest in seeing sales, is that property sales will both slow down and property prices are still 15% over the real value of those properties when measured against the benchmark that every economist uses: median income and overhanging inventory.
  2. The corruption of title that is becoming increasingly evident, especially with the Oregon decision two days ago, is completely evident. Practically every property sold has the potential of a lawsuit brought by either the “former” (still legally the owner) homeowner, prior lien holders etc.
  3. No deed from a stranger to the chain of title, even if there is an intervening deed on foreclosure, is safe from attack. We have numerous reports of junior landholders re-establishing their rights and homeowners regaining the title, possession and use of the property.
  4. Virtually no title policy being issued today covers claims arising out of claims of securitization or assignments off record.
  5. The answer is to take steps as part of your purchase to as sure that title is not now and won’t be considered clouded later and to obtain through negotiation a policy of title insurance that does not exclude such claims and names MERS and other third parties that are excluded by current title policies.

Realtors Complaining About Lack of Financing on REO Resales

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Truth triumphs in the Marketplace:                                         Buyers and bankers have no confidence that prices are not going lower, and Title Corruption Taints the Deals

Editor’s Comment:

Realtors are on the wrong side of this issue. THEY should have led the way to correcting the problems and defects in the foundation of the housing market — pricing and title. Instead they put blinders on and pushed through whatever sales they could — REO sales, short sales, anything to make a buck. Now it is coming back and hitting them on the back of the head.

Sales are slowing because financing is getting harder and the message is out. The values of the homes are lower than the prices and the title chain is often corrupted leaving a prospective buyer or lender in a position of accepting a risk that didn’t exist before securitization. This isn’t the fault of realtors so don’t go blaming them for creating the securitization PONZI scheme. But they are at fault for not looking for a way to fix it. After all, it is THEIR industry.

Financing Needed to Boost REO Sales

by Carla Hill

Buyer, sellers, and real estate professionals alike are finding that today’s market is still experiencing a glut of distressed properties.

These properties hit the market each day in the form of REOs. This steady influx of properties is in addtion to the high number of short sales seen across the nation.

According to the National Association of Realtors (NAR) there are certain steps that lenders and the government need to take in order for this oversupply to reduce and for the market to return to a more normal balance.

The current market sees around one third of all sales coming from distressed properties. These housing units carry a smaller price tag than the competition, but a steeper price in terms of the value of the overall market. Distressed properties sell at steep discounts, sometimes at almost half of what a non-distressed property is listed. This causes the overall market value of a neighborhood or community to drop, ending up with more and more sellers finding themselves upside down in their loans.

NAR President Ron Phipps has said that a lack of mortgage financing is hurting REO sales and the entire housing market. They report that “the lack of private capital in the mortgage market, unduly tight underwriting standards, and increasing fees have discouraged many potential home buyers from applying for mortgages. NAR believes ensuring mortgage availability for qualified home buyers and investors will help absorb the excess REO inventory.”

“We believe the government has an opportunity to minimize the impact of distressed properties on local markets by expanding financing opportunities, bolstering loan modifications and short sales efforts, and enhancing the efficient disposition of REO properties. This will help stabilize home prices and neighborhoods and help support the broader economic recovery.”

NAR has also said in a letter to the U.S. Department of Housing and Urban Development, the Federal Housing Finance Agency, and the U.S. Department of the Treasury that steps must be taken in order to stop the steady stream of new REO properties that is currently hitting the market. Homeowners need help to either stay in their homes or to make short sales before their home is put into foreclosure, something that helps their credit scores and the market.

“Loan modifications keep families in their home and reduce defaults, while short sales keep homes occupied, helping stabilize neighborhoods and home values,” Phipps said. “Expanding resources and ensuring the use of already allocated funds for pre-foreclosure efforts is the best opportunity to reduce taxpayer costs and creates more positive outcomes for homeowners and their communities.”

As the election year heats up we expect to hear more about what candidates propose to do about the continued struggle the housing market faces as well as how to keep American homeowners in their homes





Banks Pushing Homeowners Over Foreclosure Cliff

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Editor’s Comment:

Whether it is force-placed insurance or any other device available, banks and servicers are pushing homeowners, luring homeowners and tricking homeowners into foreclosures. It is the only way they can put distance between them and the collosal corruption of title, the fact that strangers are foreclosing on homes, and claims of predatory, deceptive and fraudulent lending practices.

Most of those five million homes belong back in the hands of the people who lost them in fake foreclosures. And that day is coming.

Foreclosures are good but short- sales are better as those in the real estate Market will tell you. Either way it has someone other than the bank or servicer signing the deed to the ” buyer” and eventually it will all come tumbling down. But what Banks and servicers are betting is that the more chaotic and confused the situation the less likely the blame will fall on them.

Watch out Mr. Banker, you haven’t seen our plan to hold you accountable. You might think you have control of the narrative but that is going to change because the real power is held by the people. Go read the constitution — especially the 9th Amendment.

Look Who’s Pushing Homeowners Off the Foreclosure Cliff

By the Editors

One of the more confounding aspects of the U.S. housing crisis has been the reluctance of lenders to do more to assist troubled borrowers. After all, when homes go into foreclosure, banks lose money.

Now it turns out some lenders haven’t merely been unhelpful; their actions have pushed some borrowers over the foreclosure cliff. Lenders have been imposing exorbitant insurance policies on homeowners whose regular coverage lapses or is deemed insufficient. The policies, standard homeowner’s insurance or extra coverage for wind damage, say, for Florida residents, typically cost five to 10 times what owners were previously paying, tipping many into foreclosure.

The situation has caught the attention of state regulators and the Consumer Financial Protection Bureau, which is considering rules to help homeowners avoid unwarranted “force- placed insurance.” The U.S. ought to go further and limit commissions, fine any company that knowingly overcharges a homeowner and require banks to seek competitive bids for force- placed insurance policies. Because insurance is not regulated at the federal level, states also need to play a stronger role in bringing down rates.

All mortgages require homeowners to maintain insurance on their property. Most mortgages also allow the lender to purchase insurance for the home and “force-place” it if a policy lapses or is deemed insufficient. These standard provisions are meant to protect the lender’s collateral — the property — if a calamity occurs.

High-Priced Policies

Here’s how it generally works: Banks and their mortgage servicers strike arrangements — often exclusive — with insurance companies in which the banks agree to buy high-priced policies on behalf of homeowners whose coverage has lapsed. The bank advances the premium to the insurer, and the insurer pays the bank a commission, which is priced into the premium. (Insurers say the commissions compensate banks for expenses like “advancing premiums, billing and collections.”) The homeowner is then billed for the premium, commissions and all.

It’s a lucrative business. Premiums on force-placed insurance exceeded $5.5 billion in 2010, according to the Center for Economic Justice, a group that advocates on behalf of low- income consumers. An investigation by Benjamin Lawsky, who heads New York State’s Department of Financial Services, has found nearly 15 percent of the premiums flow back to the banks.

It doesn’t end there. Lenders often get an additional cut of the profits by reinsuring the force-placed policy through the bank’s insurance subsidiary. That puts the lender in the conflicted position of requiring insurance to protect its collateral but with a financial incentive to never pay out a claim.

Both New York and California regulators have found the loss ratio on these policies — the percentage of premiums paid on claims — to be significantly lower than what insurers told the state they expected to pay out, suggesting that premiums are too high. For instance, most insurers estimate a loss ratio of 55 percent, meaning they’ll have to pay out about 55 cents on the dollar. But actual loss ratios have averaged about 20 percent over the last six years.

It’s worth noting that force-placed policies often provide less protection than cheaper policies available on the open market, a fact often not clearly disclosed. The policies generally protect the lender’s financial interest, not the homeowner’s. If a fire wipes out a house, most force-placed policies would pay only to repair the structure and nothing else.

Lack of Clarity

Homeowners can obviously avoid force-placed insurance by keeping their coverage current. Banks are required to remove the insurance as soon as a homeowner offers proof of other coverage. But the system, as the New York state investigation and countless lawsuits have demonstrated, is defined by a woeful lack of clarity, so much so that Fannie Mae has issued a directive to loan servicers to lower insurance costs and speed up removal times. And it said it would no longer reimburse commissions. The recent settlement with five financial firms over foreclosure abuses also requires banks to limit excessive coverage and ensure policies are purchased “for a commercially reasonable price.”

That’s not enough. Tougher standards should be applied uniformly, regardless of the loan source. Freddie Mac should follow Fannie Mae’s lead and require competitive pricing on the loans it backs. The consumer bureau should require mortgage servicers to reinstate a homeowner’s previous policy whenever possible, or to obtain competitive bids when not.

The bureau should also prevent loan servicers from accepting commissions or, at the very least, prohibit commissions from inflating the premium. It should require servicers to better communicate to borrowers that their policy has lapsed, explain clearly what force-placed insurance will cost and extend a grace period to secure new coverage. Finally, states should follow the example of California, which recently told force-placed insurers to submit lower rates that reflect actual loss ratios.

Many homeowners who experience coverage gaps have severe financial problems that lead them to stop paying their insurance bills. They are already at great risk of foreclosure. Banks and insurers shouldn’t be allowed to add to the likelihood of default by artificially inflating the cost of insurance.



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EDITOR’S NOTE: Hoak’s article only points out three varieties of scam but there are many more. The long and short of it is that homeowners do need help in gathering information and using it effectively with the assistance of a licensed attorney. But they are not getting the help they need in most instances and they are not getting effective counsel. Here are three categories of scams:

The first is foreclosure rescue. Anyone telling you that the foreclosure will stop if you pay them money is lying to you, pure and simple. The only thing that will stop a foreclosure is a Judge’s order. The automatic stay in bankruptcy is the order of the court. So unless if you have sought and obtained a signed order from a Judge or filed for bankruptcy relief, there is no stopping the foreclosure. Period. Most of these people take your money and run. Some fo them are lawyers who will tell you they are working on it but are doing nothing and won’t return  phone calls once they have your money.

The second uses a short-sale as a vehicle for fraud. There are many varieties of this. Some demand fees up front to get it done, some interpose themselves as middlemen, not submitting the bid they should submit, the list is endless. The worst case scenario is that  you get foreclosed and don’t even know it. You move out thinking the sale went through when in fact nothing happened.

The third one she mentions ought to be the first. It is the false payoff. This hurts everyone. Mostly used in “refis” it  often happens in sales. The writer could have written a full investigative article about this. These “payoffs” send money to someone who has no interest in the deal, no right to receive the money and no authority to release the old mortgage. OR the title or closing agent simply keeps the money from the new deal and doesn’t pay anyone. They get away with it because nobody knows who the creditor is anyway. The homeowner in a refi starts paying the new mortgage source but the old mortgage is still on there going into “default.



Fraudsters will always finds ways to scam lenders and homeowners. And in recent years, they’ve shifted their tactics to profit from the market’s downturn.

Today, there’s less identity fraud and misrepresentation of income or employment to obtain a mortgage, mainly because of stricter validation criteria, says David Johnson, vice president of fraud and consortium solutions for CoreLogic, a provider of financial, property and consumer information. But other types of fraud are replacing those scams.

MERS and Fannie Mae sue Short Sale Seller and Buyer


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Licensed Real Estate Agent

Camarillo, CA

July 04, 2011

OMG! Just when you think you’ve seen it all, along comes a new horror story that makes the thought of doing short sales even more disgusting than before!!

Because of our intense hatred of all banks (BofA and Chase head the top of the list) we decided to stop doing short sales, and most conventional real estate transaction last summer and have been buying and flipping properties instead!

The last short sale we did was one we were referred to in October of 2009 (no good deed goes unpunished!!). The client (Tom) had recently lost his job due to downsizing and, to make matters worse, his mother had been diagnosed with a life threatening disease. There was no way we could turn this opportunity down to assist him so we took the listing on his one bedroom condo in southern California. He had purchase it in 2007 for $224K and we figured the current value was about $125K. We put it on the market and got an offer for $130K within a couple of weeks! Tom moved out of state to assist his mother in her remaining days on earth and we were happy to have an offer. After 5 months of negotiating with BofA (loan servicer) with 2 different negotiators, we finally got approval for a sale price of $123k!! (First negotiator said it was worth $180K!!!- Surprise)!

We closed the deal in April, 2010 and both the Seller and Buyer were ecstatic! All was right with the world!

Fast forward to July 2011! Last week, we received a document from our Seller that he had received. Are you sitting down? It was a LAW SUIT on behalf of MERS and Fannie Mae (Plaintiffs) against the Seller and Buyer (Defendants) and a possible 23 other defendants, (Does) who are at this point unnamed!

The Law Suit maintains that: ————“The Substitution of Trustee and Full Reconveyance on the County records which purports to reconvey MERS’s interest in the property is a mistake and was not properly prepared or recorded by ReconTrust. An actual controversy has arisen and now exists between Plaintiffs and Defendants concerning their respective rights and duties in that Plaintiffs contend that the Substitution of Trustee and Full Reconveyance is a mistake and, therefore, of no force or effect which should be stricken from the public records and that Fannie Mae’s Deed of Trust is valid and enforceable.!”

WTF!!!! I thought that the movie Too Big To Fail was unbelievable but this is ABSOLUTELY INCREDIBLE!!! Here is MERS (those bastards who were identified on 60 minutes as putting phony signatures on thousands of mortgage documents) maintaining that Recon Trust (not a party to the suit) MADE A FRIGGIN MISTAKE? They did not properly prepare or record the reconveyance of the loan!!!

To top it off, the scum sucking lawyers (and I apologize to any scum out there that may be offended by the comparison) have filed a LIS PENDENS on the property such that the new buyer could not sell the property if she wanted to!!!!!

This lawsuit FAILS to mention that monetary consideration of $123K was ACCEPTED by BofA for the purchase of the property!!

I have to stop because my blood pressure is getting dangerously high!!!!

Has anyone EVER seen this before!!! I suspect that Fannie and MERS are probably putting these lawsuits out en masse in the hope that- WHAT- they get the property BACK so they can sell it now for $89K?


Why Short-Sales Are Being Rejected

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Foreclosure Mills Get Rich With Fraudulent Foreclosures

EDITOR’S NOTE: In my opinion, for the reasons stated below, the policy of rejecting short-sales and proceeding with foreclosures creates a greater loss for the bank’s earnings statement, a decrease in the actual capital structure, and therefore constitutes shareholder fraud and stock manipulation. Management is intentionally incurring losses, using the accounting rules to make their financial reports look better than the true condition of the company. Their incentive is their compensation and their ability to gradually sell off their stockholdings before the truth becomes widely known. First they defrauded the MBS investors, then they defrauded the homeowners, then the taxpayers and now their shareholders.

“After this, I’ll never buy again,” Ms. Sweetland says. “This is not the American dream. This is not my American dream.”

“In half a dozen more cases examined by The New York Times, Bank of America rejected short sale offers, foreclosed and auctioned off houses at lower prices.
“The aversion to short sales also leads banks to take many months to process applications, and some lenders set unrealistically high sales prices — known as broker price opinions — and hire workers who say they are poorly trained. [EDITOR’S COMMENT: WHY WOULD YOU USE BROKERS WHEN THERE ARE TENS OF THOUSANDS OF APPRAISERS AVAILABLE? ANSWER: BECAUSE YOU LIKE THE ANSWER FROM THE BROKERS AND DON’T LIKE THE ANSWER YOU WOULD GET FROM APPRAISERS]

EDITOR’S NOTE: It all seems so counter-intuitive, doesn’t it? Banks, if they were really acting like banks, would want and be required to mitigate their losses. So why take an $18,000 loss when you could have taken a $6,000 loss? And why is this the rule rather than the exception? The answer lies in the accounting rules. The banks are carrying illusory assets that they don’t actually own at a value that cannot withstand the reality of fair market value.

Let’s pretend that the original mortgages were valid. We’ll pretend that the note was correct in that it described and disclosed the creditor who advanced the money for the loan. We’ll pretend that the mortgage or deed of trust secured the note with an encumbrance on the home. (None of these things are true, but we’ll go along with the illusion for the moment). Now let’s also pretend that the proper assignments and endorsements were properly executed and delivered. (Also not true). And finally we’ll pretend that the the proper documents were properly recorded, so that the lender of record is the one who actually loaned the money. (Also not true). THEN we have to pretend that the mortgage loans that were, according to the securitization documents, assigned to a valid trust (REMIC, SPV). AND we are required to make a giant leap of faith and say that even though the trusts received the assignments, the servicers were allowed to record the loans as their own assets, even though they never loaned any money.

Okay, all of that is a stretch beyond the breaking point, but let’s assume it is true for the moment. Under that scenario, Bank of America through BAC and others like it would  have the authority to execute documents. If they had a situation in which someone was selling the house and they were coming to the table with the money required to pay off the mortgage, BOA would have the right, power and obligation to execute a satisfaction of mortgage. You could even force them to, if they refused. If they had a situation in which someone didn’t have the extra money to come to the table and pay-off the entire loan, they would have the power to accept the lesser amount (a short-sale) and execute a satisfaction of mortgage (or reconveyance in non-judicial states). So if a foreclosure would cost them more than the short-sale, they would obviously accept the short-sale, right? Wrong.

Even accepting the ridiculously flawed scenario described above, BOA would avoid short-sales like the plague. The reason is that they are carrying the “assets” on their books at full value — the principal due according to the note (even though, if there is an asset it actually belongs to someone else). So if the principal due is $200,000 and they accept a short-sale at $100,000, they are required by the accounting rules to take the loss on their books. That means taking $100,000 off their balance sheet and taking a “one-time” write-off on their income statement of $100,000. Investors and shareholders might forgive one or two like that, but if it became a regular thing, then the whole “one-time write-off” thing might get a little tiresome — i.e., not credible.

But if they foreclose and the property is sold to their own REO at $75,000, even though they have increased their loss from $100,000 to $125,000, their books are unchanged. There is not write-down of assets and there is no loss to report in income. So the choice is whether they take a loss of $100,000 on a  short-sale or not report any loss at all. For those of you who are not schooled in the world of equities and the stock market, that $100,000 loss may well translate into a $1 million loss in the value of their stock. That is because stocks trade at a price-earnings ratio. If investors use the $100,000 loss and compute it into earnings, and the stock is trading at 10 times earnings, then the short-sale decreased their stock value by $1 million whereas the foreclosure has no effect.

Now go back and take away all of the false presumptions and you can see the scope of the problem that BOA and others face. If reality is introduced into the picture, a substantial bulk of their entire capital structure is literally absent. Dig a little deeper and you’ll see that the “trading profits” are not real either. Whereas 7,000 banks report the their assets and income in accordance with reality, the mega banks are allowed to report based upon a grotesque hallucination. Something, I suppose arrogance, keeps the leaders of these supposedly large institutions in a bubble of belief that this won’t burst. When in all of human history has the bubble evolved into a permanent structure? I don’t know of any.

October 24, 2010

Short Sales Resisted as Foreclosures Are Revived


PHOENIX — Bank of America and GMAC are firing up their formidable foreclosure machines again today, after a brief pause.

But hard-pressed homeowners like Lydia Sweetland are asking why lenders often balk at a less disruptive solution: short sales, which allow owners to sell deeply devalued homes for less than what remains on their mortgage.

Ms. Sweetland, 47, tried such a sale this summer out of desperation. She had lost her high-paying job and drained her once-flush retirement savings, and her bank, GMAC, wouldn’t modify her mortgage. After seven months of being unable to pay her mortgage, she decided that a short sale would give her more time to move out of her Phoenix home and damage her credit rating less than a foreclosure.

She owes $206,000 and found a buyer who would pay $200,000. Last Friday, GMAC rejected that offer and said it would foreclose in seven days, even though, according to Ms. Sweetland’s broker, the bank estimates it will make $19,000 less on a foreclosure than on a short sale.

“I guess I could salute and say, ‘O.K., I’m walking, here’s the keys,’ ” says Ms. Sweetland, as she sits in a plastic Adirondack chair on her patio. “But I need a little time, and I don’t want to just leave the house vacant. I loved this neighborhood.”

GMAC declined to be interviewed about Ms. Sweetland’s case.

The halt in most foreclosures the last few weeks gave a hint of hope to homeowners like Ms. Sweetland, who found breathing room to pursue alternatives. Consumer advocates took the view that this might pressure banks to offer mortgage modifications on better terms and perhaps drive interest in short sales, which are rising sharply in many corners of the nation.

But some major lenders took a quick inventory of their foreclosure practices and insisted their processes were sound. They now seem intent on resuming foreclosures. And that could have a profound effect on many homeowners.

In Arizona, thousands of homeowners have turned to short sales to avoid foreclosures, and many end up running a daunting procedural gantlet. Several of the largest lenders have set up complicated and balky application systems.

Concerns about fraud are one of the reasons lenders are so careful about short sales. Sometimes well-off homeowners want to portray their finances as dire and cut their losses on a property. In other instances, distressed homeowners try to make a short sale to a relative, who would then sell it back to them (a practice that is illegal). A recent industry report estimates that short sale fraud occurs in at least 2 percent of sales and costs banks about $300 million annually.

Short sales are also hindered when homeowners fail to forward the proper papers, have tax liens or cannot find a buyer.

Because of such concerns, homeowners often are instructed that they must be delinquent and they must apply for a modification first, even if chances of approval are slim. The aversion to short sales also leads banks to take many months to process applications, and some lenders set unrealistically high sales prices — known as broker price opinions — and hire workers who say they are poorly trained. [EDITOR’S COMMENT: WHY WOULD YOU USE BROKERS WHEN THERE ARE TENS OF THOUSANDS OF APPRAISERS AVAILABLE? ANSWER: BECAUSE YOU LIKE THE ANSWER FROM THE BROKERS AND DON’T LIKE THE ANSWER YOU WOULD GET FROM APPRAISERS]

As a result, quite a few homeowners seeking short sales — banks will not provide precise numbers — topple into foreclosure, sometimes, critics say, for reasons that are hard to understand. Ms. Sweetland and her broker say they are confounded by her foreclosure, because in Arizona’s depressed real estate market, foreclosed homes often sit vacant for many months before banks are able to resell them.

“Banks are historically reluctant to do short sales, fearing that somehow the homeowner is getting an advantage on them,” said Diane E. Thompson, of counsel to the National Consumer Law Center. “There’s this irrational belief that if you foreclose and hold on to the property for six months, somehow prices will rebound.”

Homeowners, advocates and realty agents offer particularly pointed criticism of Bank of America, the nation’s largest servicer of mortgages, and a recipient of billions of dollars in federal bailout aid. Its holdings account for 31 percent of the pending foreclosures in Maricopa County, which includes Phoenix and Scottsdale, according to an analysis for The Arizona Republic.

The bank instructs real estate agents to use its computer program to evaluate short sales. But in three cases observed by The New York Times in collaboration with two real estate agents, the bank’s system repeatedly asked for and lost the same information and generated inaccurate responses.

In half a dozen more cases examined by The New York Times, Bank of America rejected short sale offers, foreclosed and auctioned off houses at lower prices.

“When I hear that a client’s mortgage is held by Bank of America, I just sigh. Our chances of getting an approval for them just went from 90 percent to 50-50,” said Benjamin Toma, who has a family-run real estate agency in Phoenix.

Bank of America officials also declined interview requests. A Bank of America spokeswoman said in an e-mail that the bank had processed 61,000 short sales nationwide this year; she declined to provide numbers for Arizona or to discuss criticisms of the company’s processing.

Fannie Mae, the mortgage finance company with federal backing, gives cash incentives to encourage servicers, who are affiliated with banks and who oversee great bundles of delinquent mortgages, to approve short sales.

But less obvious financial incentives can push toward a foreclosure rather than a short sale. Servicers can reap high fees from foreclosures. And lenders can try to collect on private mortgage insurance.

Some advocates and real estate agents also point to an April 2009 regulatory change in an obscure federal accounting law. The change, in effect, allowed banks to foreclose on a home without having to write down a loss until that home was sold. By contrast, if a bank agrees to a short sale, it must mark the loss immediately.

Short sales, to be sure, are no free ride for homeowners. They take a hit to their credit ratings, although for three to five years rather than seven after a foreclosure. An owner seeking a short sale must satisfy a laundry list of conditions, including making a detailed disclosure of income, tax and credit liens. And owners must prove that they have no connection to the buyer.

Still, bank decision-making, at least from a homeowner’s perspective, often appears arbitrary. That is certainly the view of Nicholas Yannuzzi, who after 30 years in Arizona still talks with a Philadelphia rasp. Mr. Yannuzzi has owned five houses over time, without any financial problems. When his wife was diagnosed with bone cancer, he put 20 percent down and bought a ranch house in North Scottsdale so that she would not have to climb stairs.

In the last few years, his wife died, he lost his job and he used his retirement fund to pay his mortgage for five months. His bank, Wells Fargo, denied his mortgage modification request and then his request for a short sale.

The bank officer told him that Fannie Mae, which held the mortgage, would not take a discount. At the end of last week, he was waiting to be locked out of his home.

“I’m a proud man. I’ve worked since I was 20 years old,” he said. “But I’ve run out of my 79 weeks of unemployment, so that’s it.”

He shrugged. “I try to keep in the frame of mind that a lot of people have it worse than me.”

Back in Phoenix, Ms. Sweetland’s real estate agent, Sherry Rampy, appeared to receive good news last week. GMAC re-examined her client’s application and suggested it might be approved.

But the bank attached a condition: Ms. Sweetland must come up with $2,000 in closing costs or pay $100 a month for 50 months to the bank. Ms. Sweetland, however, is flat broke.

A late afternoon desert sun angles across her Pasadena neighborhood.

“After this, I’ll never buy again,” Ms. Sweetland says. “This is not the American dream. This is not my American dream.”

Talk About a Guy Who Gets It – “Anonymous?”

As some of you knew or probably have guessed, livinglies is a lightening rod for information. We have posts like the one below on the comments and emails sent with details that are neither for attribution or publication. In addition, several people in sensitive government positions use livinglies as a method of getting the real information out. Take a close look at this comment posted from “Anonymous” a frequent contributor. While succinctly stated his points are pearls.

Yeah – searching Maiden Lane is good. But, it will only tell you what “toxic” tranches the government took off the books of the banks that held them. These are the tranches that were NOT paid by the swap protection.

My point is that if the upper tranches were paid via swap protection, then the bottom tranches – held by the government (Maiden Lane) are simply worthless tranches. This is because the pass-through tranche structure has been paid and is no longer existent.

Lower tranches are only paid current payout – if – and only if – the upper tranches have been paid. But, this payment must be current. If a swap payout has occurred, the upper tranches are NO LONGER current. They are done – there is nothing left for for the subordinate tranches to receive. Purchasing worthless toxic assets, by the government, was only a ploy to aid the financial institutions that held worthless “toxic” assets – that are no longer part of the originated “waterfall” structure payout. Worthless assets from a dissolved and dismantled Trust.

You must remember, the REMICs were set up for current pass through of receivables ONLY. Nothing more. Foreclosures cannot be assigned to REMICs with knowledge of default.

My anger is – the government knows this – and what the heck are they doing? They claim to be promoting modifications – and at the same time – are the investor in the toxic securities that are dead. Thus, ironically, the government is the one denying a loan modification and/or principal reduction – and, forcing foreclosure – despite their own law – including the 2009 TILA Amendment and .Federal Reserve Interim Opinion.

But, listen to Mr. Ben Bernanke – he wants short sales. This is their goal. And, for anyone who knows of someone purchasing a new home – ask them their terms – ask them the size of their mortgage, ask them their down payment. These people are going to be in trouble. All is simply a transfer of wealth of from you – to them (new home buyers). I cannot figure out how this ever came to be – except politics in the worst possible way.

Ratings Arbitrage a/k/a Fraud

Investment banks bundled mortgage loans into securities and then often rebundled those securities one or two more times. Those securities were given high ratings and sold to investors, who have since lost billions of dollars on them.

Editor’s Note: The significance of this report cannot be overstated. Not only did the investment bankers LOOK for and CREATE loans guaranteed to fail, which they did, they sold them in increasingly complex packages more than once. So for example if the yield spread profit or premium was $100,000 on a given loan, that wasn’t enough for the investment bankers. Without loaning or investing any additional money they sold the same loans, or at least parts of those loans, to additional investors one, two three times or more. In the additional sales, there was no cost so whatever they received was entirely profit. I would call that a yield spread profit or premium, and certainly undisclosed. If the principal of the loan was $300,000 and they resold it three times, then the investment bank received $900,000 from those additional sales, in addition to the initial $100,000 yield spread profit on sale of the loan to the “trust” or special purpose vehicle.

So the investment bank kept $1 million dollars in fees, profits or compensation on a $300,000 loan. Anyone who has seen “The Producers” knows that if this “show” succeeds, i.e., if most of the loans perform as scheduled and borrowers are making their payments, then the investment bank has a problem — receiving a total of $1.3 million on a $300,000 loan. But if the loans fails, then nobody asks for an accounting. As long as it is in foreclosure, no accounting is required except for when the property is sold (see other blog posts on bid rigging at the courthouse steps documented by Charles Koppa).

If they modify the loan or approve the short sale then an accounting is required. That is a bad thing for the investment bank. But if they don’t modify any loans and don’t approve any short-sales, then questions are going to be asked which will be difficult to answer.

You make plans and then life happens, my wife says. All these brilliant schemes were fraudulent and probably criminal. All such schemes eventually get the spotlight on them. Now, with criminal investigations ongoing in a dozen states and the federal government, the accounting and the questions are coming anyway—despite the efforts of the titans of the universe to avoid that result.

All those Judges that sarcastically threw homeowners out of court questioning the veracity of accusations against pretender lenders, can get out the salt and pepper as they eat their words.

“Why are they not in jail if they did these things” asked practically everyone on both sides of the issue. The answer is simply that criminal investigations do not take place overnight, they move slowly and if the prosecutor has any intention of winning a conviction he must have sufficient evidence to prove criminal acts beyond a reasonable doubt.

But remember the threshold for most civil litigation is merely a preponderance of the evidence, which means if you think there is more than a 50-50  probability the party did something, the prima facie case is satisfied and damages or injunction are stated in a final judgment. Some causes of action, like fraud, frequently require clear and convincing evidence, which is more than 50-50 and less than beyond a reaonsable doubt.

From the NY Times: ————————

The New York attorney general has started an investigation of eight banks to determine whether they provided misleading information to rating agencies in order to inflate the grades of certain mortgage securities, according to two people with knowledge of the investigation.


Andrew Cuomo, the attorney general of New York, sent subpoenas to eight Wall Street banks late Wednesday.

The investigation parallels federal inquiries into the business practices of a broad range of financial companies in the years before the collapse of the housing market.

Where those investigations have focused on interactions between the banks and their clients who bought mortgage securities, this one expands the scope of scrutiny to the interplay between banks and the agencies that rate their securities.

The agencies themselves have been widely criticized for overstating the quality of many mortgage securities that ended up losing money once the housing market collapsed. The inquiry by the attorney general of New York, Andrew M. Cuomo, suggests that he thinks the agencies may have been duped by one or more of the targets of his investigation.

Those targets are Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Crédit Agricole and Merrill Lynch, which is now owned by Bank of America.

The companies that rated the mortgage deals are Standard & Poor’s, Fitch Ratings and Moody’s Investors Service. Investors used their ratings to decide whether to buy mortgage securities.

Mr. Cuomo’s investigation follows an article in The New York Times that described some of the techniques bankers used to get more positive evaluations from the rating agencies.

Mr. Cuomo is also interested in the revolving door of employees of the rating agencies who were hired by bank mortgage desks to help create mortgage deals that got better ratings than they deserved, said the people with knowledge of the investigation, who were not authorized to discuss it publicly.

Contacted after subpoenas were issued by Mr. Cuomo’s office late Wednesday night notifying the banks of his investigation, spokespeople for Morgan Stanley, Credit Suisse and Deutsche Bank declined to comment. Other banks did not immediately respond to requests for comment.

In response to questions for the Times article in April, a Goldman Sachs spokesman, Samuel Robinson, said: “Any suggestion that Goldman Sachs improperly influenced rating agencies is without foundation. We relied on the independence of the ratings agencies’ processes and the ratings they assigned.”

Goldman, which is already under investigation by federal prosecutors, has been defending itself against civil fraud accusations made in a complaint last month by the Securities and Exchange Commission. The deal at the heart of that complaint — called Abacus 2007-AC1 — was devised in part by a former Fitch Ratings employee named Shin Yukawa, whom Goldman recruited in 2005.

At the height of the mortgage boom, companies like Goldman offered million-dollar pay packages to workers like Mr. Yukawa who had been working at much lower pay at the rating agencies, according to several former workers at the agencies.

Around the same time that Mr. Yukawa left Fitch, three other analysts in his unit also joined financial companies like Deutsche Bank.

In some cases, once these workers were at the banks, they had dealings with their former colleagues at the agencies. In the fall of 2007, when banks were hard-pressed to get mortgage deals done, the Fitch analyst on a Goldman deal was a friend of Mr. Yukawa, according to two people with knowledge of the situation.

Mr. Yukawa did not respond to requests for comment.

Wall Street played a crucial role in the mortgage market’s path to collapse. Investment banks bundled mortgage loans into securities and then often rebundled those securities one or two more times. Those securities were given high ratings and sold to investors, who have since lost billions of dollars on them.

Banks were put on notice last summer that investigators of all sorts were looking into their mortgage operations, when requests for information were sent out to all of the big Wall Street firms. The topics of interest included the way mortgage securities were created, marketed and rated and some banks’ own trading against the mortgage market.

The S.E.C.’s civil case against Goldman is the most prominent action so far. But other actions could be taken by the Justice Department, the F.B.I. or the Financial Crisis Inquiry Commission — all of which are looking into the financial crisis. Criminal cases carry a higher burden of proof than civil cases. Under a New York state law, Mr. Cuomo can bring a criminal or civil case.

His office scrutinized the rating agencies back in 2008, just as the financial crisis was beginning. In a settlement, the agencies agreed to demand more information on mortgage bonds from banks.

Mr. Cuomo was also concerned about the agencies’ fee arrangements, which allowed banks to shop their deals among the agencies for the best rating. To end that inquiry, the agencies agreed to change their models so they would be paid for any work they did for banks, even if those banks did not select them to rate a given deal.

Mr. Cuomo’s current focus is on information the investment banks provided to the rating agencies and whether the bankers knew the ratings were overly positive, the people who know of the investigation said.

A Senate subcommittee found last month that Wall Street workers had been intimately involved in the rating process. In one series of e-mail messages the committee released, for instance, a Goldman worker tried to persuade Standard & Poor’s to allow Goldman to handle a deal in a way that the analyst found questionable.

The S.& P. employee, Chris Meyer, expressed his frustration in an e-mail message to a colleague in which he wrote, “I can’t tell you how upset I have been in reviewing these trades.”

“They’ve done something like 15 of these trades, all without a hitch. You can understand why they’d be upset,” Mr. Meyer added, “to have me come along and say they will need to make fundamental adjustments to the program.”

At Goldman, there was even a phrase for the way bankers put together mortgage securities. The practice was known as “ratings arbitrage,” according to former workers. The idea was to find ways to put the very worst bonds into a deal for a given rating. The cheaper the bonds, the greater the profit to the bank.

The rating agencies may have facilitated the banks’ actions by publishing their rating models on their corporate Web sites. The agencies argued that being open about their models offered transparency to investors.

But several former agency workers said the practice put too much power in the bankers’ hands. “The models were posted for bankers who develop C.D.O.’s to be able to reverse engineer C.D.O.’s to a certain rating,” one former rating agency employee said in an interview, referring to collateralized debt obligations.

A central concern of investors in these securities was the diversification of the deals’ loans. If a C.D.O. was based on mostly similar bonds — like those holding mortgages from one region — investors would view it as riskier than an instrument made up of more diversified assets. Mr. Cuomo’s office plans to investigate whether the bankers accurately portrayed the diversification of the mortgage loans to the rating agencies.

Gretchen Morgenson contributed reporting

Home Sales Stall: Millions of Homes in Real Inventory

Editor’s Comment: Any lawyer who does not think that issues relating to foreclosure will not dominate his or her practice of law is in a state of denial and delusion. The 16% drop in new home-sale contracts (see article below) means a similar or worse drop in sales over the next 30-60 days.

As we have said repeatedly along with the major newspapers, there is no relief in sight without principal reduction on mortgages. It’s not a matter of ideology or even law. It is a matter of pure practicality. The choice is between a total loss and a partial loss.

More and more articles and reports are emerging that clearly show that millions of homes are going to be abandoned and suddenly added to the foreclosure lists simply because the owners choose to take the FICO credit score hit and rent a comparable house for a fraction of the payments demanded under their crazy inflated mortgages.  Really, why continue to pay on a $500,000 note for a property that is worth $300,000? Why? hope you will break even in 5-10 years? Just not a good business decision.

In the anti-deficiency states like Arizona the “lenders” (who incidentally don’t qualify as creditors) can only take the house. In the states that permit pursuit of the deficiency judgment, it is a waste of time and money because nearly everyone is basically cleaned out — no cash, no savings and no available credit. So there is no point in continuing this farce any further. The homes are not worth what is owed and never will be worth that amount even after the market “recovers”.

Now add to the equation that the parties being ordered into mediation, modification or attempting short sales or settlements are mismatched: one of these things is not like the other. On the one side you have people who really own a home and on the other you have people who don’t even know who the creditor is much less possess the authority to approve a short sale or settlement or issue a satisfaction of mortgage.

There is no way out except through principal reduction or letting the entire housing market collapse into chaos. The real crisis is coming over the next few months. The “Great Recession” was just the appetizer and although there is time to avoid the full impact of what was done on Wall Street, it seems unlikely that anyone in office is willing to “call it” like the doctor announcing the time of death.
January 6, 2010

Slowing Pace of Home Sales Raises Fears of New Retreat

The number of houses placed under contract fell sharply in November in the first drop in nearly a year, figures released Tuesday show. It was the clearest sign yet that predictions of another downturn in real estate may become a reality.

The National Association of Realtors said that its index of pending home sales plunged to 96 from a revised level of 114.3 in October. Analysts had predicted a drop, but nothing like that.

“We thought it would drop 2 percent,” said Jennifer Lee of BMO Capital Markets. “When you see 16 percent, the first thing you say is, what the heck happened here?”

Since the majority of pending sales become final in six weeks to two months, the index is considered a reliable indicator of where the market is headed. The index is calculated by comparing the number of pending sales with the level of 2001, when the index was formulated.

The data indicates that the weakest parts of the country are the Northeast and Midwest, both of which fell 26 percent in November from the previous month after adjusting for seasonal variations. The South dropped 15 percent, while the West was off 3 percent.

Ms. Lee called the drop from October to November “unnerving” but said that the index remained well above the level of a year ago. In November 2008, when the financial crisis was at its peak and buying a home required a faith in the future that many did not feel, the index was 83.1.

As the overall economy improves and the employment situation grows a little less dire, the question becomes whether real estate can muddle through — or if it will need a new round of government support to ward off another damaging downturn.

There are plenty of reasons for worry. The Obama administration’s effort to compel lenders and servicers to modify loans has not been a success. Many of these owners will eventually lose their homes to foreclosure.

Meanwhile, a quarter of homeowners with mortgages owe more than their houses are worth. If prices start dropping again, some will be induced to walk away, further undermining the market.

“I wouldn’t rule out more stimulus, especially in an election year,” said Ivy Zelman, an analyst.

Last year’s stimulus efforts, however expensive and divisive, calmed a market where prices had plummeted by a third. Even now, the government’s efforts to push down interest rates and entice buyers with a tax credit appear to be having an effect, keeping a weak market from getting weaker.

Walter Martin and Paloma Munoz, artists in Dingmans Ferry, Pa., are a stimulus success story. They are paying $360,000 for a new home 10 miles away without even having an offer for their current home.

“The new home has enough space for us both to have studios,” Ms. Munoz said. “The price is amazing, we are getting a mortgage at a 5.125 rate, and we qualify for a $6,500 credit.”

It is a leap of faith, she acknowledged, but an eminently sensible one. “When houses were expensive, everyone wanted to buy, and now that they’re cheap everyone is scared,” she said.

Buyers like Ms. Munoz and Mr. Martin are outnumbered, however, by people who think the market still has room to fall. While some of these may indeed be scared, others simply see a virtue in patience.

“With two growing boys, we are busting out of our small house,” said Stephen Sencer, deputy general counsel at Emory University in Atlanta. “But I’m still waiting for sellers to capitulate.” His agent is telling Mr. Sencer that may happen in the spring.

Starting from a low of 80.4 last January, pending sales rose for nine consecutive months in 2009. The index proved a harbinger of both completed sales, which began climbing in April, and prices, which started rising over the summer.

As the Nov. 30 expiration of the tax credit drew near, would-be buyers hastened to secure deals. Sales in November roared at a 6.54 million annual pace, the highest since February 2007.

At the last minute, Congress extended and broadened the credit. The urgency immediately dissipated. “We were really, really pushing hard, and I think everyone just wore out,” said Steve Havig, president of Lakes Area Realty of Minneapolis.

Buyers now have until April 30 to qualify for the credit. Many analysts say the effect this time around will be mild.

“It could turn out the second credit has such a small impact it doesn’t show up in the data,” said Patrick Newport of IHS Global Insight.

Nevertheless, he predicts the downturn this time will be gentler. “The economy is improving, and that is what the market needs to get back on a sustainable path,” Mr. Newport said.

Long before the tax credit ends, another stimulus effort is due to disappear. The Federal Reserve has bought more than a trillion dollars of mortgage-backed securities in a successful effort to push down mortgage rates. The Fed is scheduled to wind down the program by March 31.

Rates are already moving higher, exceeding 5 percent in some lender surveys. Perhaps as a result, mortgage applications to buy homes in late December were a third lower than during the corresponding period in 2008, the Mortgage Bankers Association said.

The Fed’s Open Market Committee left itself leeway in its December meeting to start buying again, saying it “will continue to evaluate the timing and overall amounts of its purchases of securities.”

Rising rates could hamper Mr. Martin and Ms. Munoz’s search for a buyer for their old house.

“It’s been on the market for almost three months,” she said. “We have had very few viewings.”





The Emperor is still strutting around as though he was fully clothed in the best silk, color and design. Wall Street is still the darling of government and a whole lot of other people, even if it was a little bad these past few years. We’ve been through the part where the swindler’s came to town, where the government officials ashamed of their apparent blindness and ignorance raved about the new derivative innovations, and the parade of foreclosures based upon invisible clothes. But we have not arrived at the part in the story where the little child yells out that the old fool has no clothes on. And we still don’t hear everyone laughing at wall Street and sending them home to lick their own wounds instead of inflicting it on everyone else.

The swindlers are still in town selling invisible clothes to everyone gullible enough to buy nothing and call it something. We are running on vapor since 1983 when derivatives were zero. Now we have credit derivatives with a nominal value of somewhere over $500 Trillion — that is ten times the total money in circulation from government origins. That’s “nominal value” because they don’t exist and they have no value. There is no substance to them to the extent that they are based on secured debt and possibly all other debt. There is no mortgage, there is no note, although there might be an obligation. But if there is an obligation it probably has been extinguished by either set off for predatory “lending” (actually illegal sale of unregistered securities fraudulently masquerading as loan products) or extinguished by payment directly or indirectly from Uncle Sam, more investors or others. In this fairy tale (national nightmare), the swindler’s take over the government instead of sneaking out of town with their hoard of ill-gotten gains.

Think about it. If virtually ALL of the securitized residential mortgages that were originated for the last 10 years are in some sort of trouble, how much brain power does it take to conclude that there was something wrong with them to begin with?

If virtually ALL of the mortgage backed securities that were created and sold in the last 10 years went into default, how much brain power does it take to conclude that there was something wrong with them to begin with?

So if virtually all the transactions originating the source money and all the transactions that were funded from the source money went bad, how much brain power does it take to conclude that there was no substance to the transaction and that the whole thing was a fantasy from Wall Street, who are now strutting around with their pockets bulging with the all the money everyone else (investors and “borrowers”) lost?

I’ve been as gentle as I could, giving everyone a chance to catch up but we are now on the precipice of a cliff far deeper than anything we have seen before including one year ago. And nobody on the side lines is really getting it. We continue our march toward the edge of the cliff, push the ones in front off, in the hope or belief that we won’t ever get there. So here it is, my opinion to be sure, but anyone who has been following my writings since April, 2007 knows that I called the stock market crash, the credit freeze and the collapse of the world economies and why. So it’s not like I don’t have a track record. I wasn’t the only one and people with far more credibility than me spotted the same things and continue to scream bloody murder, “the emperor has no clothes!” See comments by Roubini, Krugman, Volcker et al.

  1. Geithner and Summers have to go. They are the emperor’s closest confidants who don’t want to look stupid even if it destroys the entire country. The current emperor is still on a learning curve so we have to cut him some slack. The prior ones, well….read on.
  2. The recession is real but most of it could be reversed by simply admitting the obvious: those derivatives have no value, the mortgages are mostly invalid, the notes are mostly invalid, and the obligations are mostly extinguished by the swindlers’ own chicanery with Federal bailouts and Credit Default Swaps, which were the cloth of the Emperor’s invisible clothes.
  3. The need for the AIG bailout can be argued. But nobody can argue that the people who benefited from it are the same people who got us into this mess. They took a system that was working and turned it into a system that couldn’t work. They turned mortgage lending on its head: mortgages that were likely to perform were valuable only as cover for most of the illegal activities underneath. The real incentive was to create mortgage pools that would fail and where they could collect on credit default swaps worth as much as 30 times the original nominal value. Vapor on Vapor.
  4. That means they have every motivation to make certain you go into default and no motivation whatsoever to modify, settle, allow short-sale or do anything for the benefit of a homeowner who wants to settle the matter honorably. You can’t do that when you are dealing with dishonorable people with motives that amount to acts of domestic terrorism. There is no talking to them because if they can get you to default on that $300,000 loan they probably are going to get paid $9,000,000 just on your default. How do you like them apples? Check it out. It is true.
  5. Any obligation — whether it is a loan for refinancing a house, buying a house, student loan, auto loan etc. that have the attributes discussed in this blog — does NOT have any security or note that can be enforced and all of them can be extinguished in bankruptcy — probably even including the nondischargeable student loans. (More on that another time).
  6. Therefore, much of the recession, all of the foreclosures and much of the lost wealth that is “missing” is legally, morally and ethically and in actuality and reality, a fantasy. Some 20 million homeowners or more with these residential mortgages securitized through a money laundering scheme are sitting on wealth they have been convinced they don’t have. But they do. Those houses are free and clear — legally, morally and ethically.
  7. All the homes in the MERS database are probably free from any encumbrance legally, ethically and morally. Trillions of dollars of wealth that is claimed as “lost” is still possessed by people who don’t know they have it and the game is on to make sure that if they ever figure it out it will be too late.
  8. Imagine the purchasing power in our consumer economy if the mortgage obligations and other obligations simply vanished. What would happen to the recession? What would happen to unemployment? What would happen to tax revenues without ever raising the rate of taxation? It would all self correct. And speaking of taxes, how about all those trillions of dollars in “fees” and “profits” that were sequestered off shore, never reported and thus never taxed? what would happen to the national and state deficits?
  9. All this is happening because the wrong people are controlling the conversation and most people are listening because the “experts” because they are so smart “must know better.” Consider me the child who yelled “But the Emperor has no clothes.” A million experts with long resumes, PhD’s and persuasive catch words can’t change the fact that the money laundering scheme of the last 10 years was clothed in “Apparent” legality but in substance was simply fraud perpetrated by people who were not any smarter or better than the common swindler. They did, however, have one ace in the hole — the Emperors were in on it. Maybe we have a chance with the current administration, maybe not.
  10. Unless we do something about this, we will suffer the indignity of decline into third world status as the wealthy few squeeze the life out of the rest of the country. Is this too extreme for you? Go to the International Money Fund website or the World Bank website or any other website or book that addresses basic economics. You won’t find anything different there. Just words, like these, with a little more polish and a little more academic tone, with the same message.

1 in 10: U.S. Mortgage Delinquencies Reach a Record High — Going UP?

Editor’s Note: While the media, Wall Street and government sources try to placate us, there are inescapable truths right now and inescapable consequences right around the corner. Other than people who own their home outright or who are relatively close to that point, nearly every homeowner in America has several problems: (1) title is clouded if they refinanced or purchased a home in the last 10 years unless their loan product was local and thus not securitized and (2) they are hopelessly lost in debt that was fabricated by the sellers of Wall Street loan products because whether they know it or not, their home is worth less right now than what they owe, especially after you take into consideration the costs of sale (brokerage commissions etc.) and costs of closing.

The future is even more bleak as prices continue to fall under pressure from an increasing number of homes in inventory. If we stopped building now it would probably take close to 10 years to sell all the houses that are actually in the pipeline. Many of them are not counted right now as “inventory” but they are there nonetheless. Prices will fall under even more pressure as an increasing number of people, their real income decreasing for the last 30 years, simply pick up sticks and leave the keys on the counter. They can rent or even own a home for far less than the payments being demanded on their existing home. In many cases it is a simple calculation of whether to take a “hit” on their FICO score or try to pay hundreds of thousands of dollars they might never recover. As stated, they can’t pay it anyway because median income is dropping. In other words inventory will increase just from voluntary abandonments. Just staying in the house a few months during the process of foreclosure and eviction can put some money back on the table for the homeowner who is already strapped whether payments are being made or not.

Housing prices are tied to median income more than anything else. Unemployment, underemployment, and decreasing wages —actual dollars as well as relative purchasing power is lowering REAL median income every month. Those FOR SALE signs and the prices being asked are not real. Sure some buyers might bite, but most are going to wait until there is some indication that we have hit bottom. So prices will come under increasing pressure from lower median income and an absence of buyers. Using Schiller’s inflation adjusted index, it is obvious when we are still 15%-25% from the bottom using today’s “asking” prices as the baseline.

So that house that the seller thinks is “worth” $300,000 because they bought it for $450,000 is actually only going to fetch perhaps $250,000, less expenses. In all probability the Seller does not have the resources to make up the difference between the actual net selling price or proceeds and the alleged amount due (ignoring the fact that the amount due has probably been paid several times over to the investors who advanced the money that went mostly into the pockets of the Wall Street masters of the universe and partly into the funding of the loan). The only options are short-sale with permission from an entity that does not have any authority to approve it, loan modification with principal reduction with the same authority problem, attack the pretender lenders using the tools provided here, or walk from the house and forget about the whole thing. It doesn’t take a rocket scientist to figure out what many people will elect out of those choices.
November 20, 2009

U.S. Mortgage Delinquencies Reach a Record High

The number of people at least one month behind on their house payments rose to a record in the third quarter, the Mortgage Bankers Association said Thursday.

Nearly 10 in 100 homeowners are delinquent, according to the association’s data, up from about seven out of 100 in the third quarter of 2008.

These numbers do not include those who are actually in foreclosure, a figure that also rose sharply. The combined percentage of those in foreclosure as well as delinquent is 14.41 percent, or about one in seven of mortgage holders.

“Despite the recession ending in mid-summer, the decline in mortgage performance continues. Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in G.D.P.,” Jay Brinkmann, the association’s chief economist, said in a statement.

The data indicates that borrowers in trouble are no longer just those who took out subprime loans. High-quality prime fixed-rate mortgages now represent the largest share of new foreclosures.

The survey is based on a sample of more than 44 million mortgage loans serviced by mortgage companies, commercial banks, thrifts, credit unions and others. The association’s records date back to 1972.

Mortgage Short Sales and Modifications: Make certain you get a new title insurance policy without exceptions for the securitization process or you could be facing the same situation with a different party — the one who REALLY owns your note and mortgage

So the only way you can protect yourself in a short sale or modification is to either deal with the real parties in interest, or to get indemnification from the party offering to accept the short sale or modification AND a new title policy that does not state exceptions to the securitization process. In order to be sure that the insurance company does not disclaim coverage because the application for title insurance lacked full disclosure, you need to make certain that you have disclosed in writing to the title agent what he/she already knows — that it is possible that others might have an interest in the property or the mortgage.

Nearly everyone is missing an essential and basic element of property law — you can’t sell, transfer, alter or modmify title that you don’t own. The deed is an interest in real property. The mortgage is an interest in real property. Interests in real property MUST be recorded to be valid, but the converse is not true. Just because you have an interest recorded in real property does not mean you own it.

Take for example the old deal where you pay a certain amount of money every month and THEN get title. The sellers thought they were cleverly avoiding the cost of foreclosure. But the courts have uniformly held that an agreement for deed is the same as a deed with a mortgage. So even though the Seller is the title owner of record, he istreated as though he is only a lender with a mortgage and the buyer is treated as though he is the owner of record. Thus he is rquired to file a foreclosure action on property he already has “legal” title to.

The securitization of mortgages created a very similar situation. The “lender” on the Trust deed or mortgage has already been paid by the undisclosed mortgage aggregator upstream in the securitization process, plus a 2.5% fee, plus the points and fees at closing. From the “lender’s prospective, the “lender” has no asset and therefore no right to enforce the mrotgage even if the borrower misses the first payment. It is for this reason that the “lender” does not report this as a loan outstanding, it doesn’t require the lender to provide a reserve against defaults or delinquencies, nor does the “loan” count in the “lender’s” reporting to the government regulatory agencies.

Through the process of securitization the note, and sometimes the mortgage is moved upstream, but in no case are all of the “movements” recorded in the local property records because of many reasons, not the least of which is avoiding the stamps and taxes that would apply to each recordation.

Thus the REAL owner (holder in due course) of your note is the one who actually MIGHT have the power to enforce the note and foreclose on the rpoperty, but one thing is certain — the “lender” at closing has no right to proceed. To prove your point you need only ask the “lender” where the money is going to go if they foreclose on the property, and sell it to a third party. The answer will surprise you.

So the only way you can protect yourself in a short sale or modification is to either deal with the real parties in interest, or to get indemnification from the party offering to accept the short sale or modification AND a new title policy that does not state exceptions to the securitization process. In order to be sure that the insurance company does not disclaim coverage because the application for title insurance lacked full disclosure, you need to make certain that you have disclosed in writing to the title agent what he/she already knows — that it is possible that others might have an interest in the property or the mortgage.

If the agent refuses to issue the poplicy without the exception for securitization you have an independent third party witness who will make your case. Otherwise someone needs to either proceed in “friendly suit” in foreclosure to finish the deal, giving published notice to all people who might have an interest and forcing the lender to perform due diligence in reaching those people, or filing a quiet title. In most cases this will lead to you simply getting the title free and clear if they cannot satisfy these requirements.

One of the interesting scenarios here is that if you have a title agent who refuses a clear policy it might be the same agent who did the closing knowing that the securitization process was in play but failed to appreciate the effect and failed to disclose this knowlegde to the borrower — thus depriving the borrower of knowing the real lender and therefore the real party in interest to whom a rescission letter could be sent. This, it could be argued, extends the three-day rescission rights indefinitely. And the three-day rescission remedy is much stronger that the 3 year rescission.

Foreclosure Strategy: Beware those Short Sales — they might be the beginning rather than the end of legal problems.

The government’s role in this mess has been abdicated to people running agendas that are based on narrow self-interest. One could argue that if the Federal Reserve window was swung open for investment banks to borrow at Fed Funds rates using worthless securities based upon assets (residential real estate), that the same window should be open to the homeowners. But that is not necessary either.

Other than private loan situations and a few other rare exceptions, nearly 100% of all loans “secured” by residential real property were securitized, which means that these loans, false from in their inception, went on a journey to never never land where securities, also false from inception, were sold to investors to fund the transaction. Both sides were based upon fraud involving intentional representations of facts known to be false and upon which the victims at both ends relied most notably the false appraisal of the real estate value and the false appraisal of the ABS or CMO sold to an investor.

If authority is claimed but not real, then the nominal “lender” can execute a satisfaction of mortgage, an agreement to forgo deficiency, and allow the short payment — all to zero effect because the nominal “lender” lacked any right to execute any of those documents. Thus the lender, the “borrower” etc. could have their legal position virtually unchanged by the transaction, but the new buyer has a very substantial change of position, as does the new buyer’s lender both of whom might be taking title or recording a mortgage(s) subject to a mortgage that has not actually been been satisfied. This will produce trouble for title companies and closings.It might also produce claims of fraud against the nominal “lender” by new plaintiffs— the new buyer of the property and the new mortgage lender.

The same logic would also require the conclusion that a “lender” or other buyer who takes title to a residence at a foreclosure sale has received nothing in the way of marketable title and even if the argument is made that the mortgage and note were not extinguished, the “lender” takes title subject to claims of multiple third parties

Either the title company will state an exception in the title policy which basically will mean that the buyer is not insured if a third party enters the picture later, or that the new lender for the new buyer, doesn’t have a mortgage at all because the new mortgage lender did not get the signature of the new buyer.

IN THE BEGINNING (when the first buyer/”borrower” bought the property): We have a buyer, a seller (or developer), and a nominal mortgage lender. The “selling forward” (presale of the loan to a third party before closing) by the nominal “lender” negated the validity of the loan closing but not the real estate closing. So the buyer received good title to the property (all other things being equal) and the seller got paid. Since there was no valid mortgage transaction, rescission becomes unnecessary. However fact patterns may vary, as do state laws, so that rescission is probably a good idea as an alternative position to take.

The funding by an undisclosed third party means that the party posing as the lender at the loan closing was by definition part of a deceptive scheme. The statutes help us with that because of the disclosure requirements coming from Federal and state laws. Failure to disclose the real lender is in itself a fatal defect in teh transaction. Hence the New York Judge who ordered that the mortgage be removed from the county records, leaving the homeowner with title, free and clear of the mortgage encumbrance. Going further, he also invalidated all transfers of any interest in the mortgage because the mortgage and note had never really existed.

But even if the mortgage had come into existence, and even if the theory that this was in reality part of an elaborate scheme to trick people into creating negotiable instruments and to trick other people into buying them as “asset backed securities” the loan was paid in full and the mortgage satisfied or extinguished contemporaneously with the original loan transaction. Whether the third party paid the nominal “lender” before or after closing, the note had been paid in full. In order to “purchase” a negotiable instrument and security instrument (mortgage) involving real estate, the transaction would need to be recorded. This is arguably true even in the “notice” states (what’s left of them).

Thus the payment of money by the third party to the nominal lender can only be interpreted as payment (satisfaction) of the note. This is why the allegation that the payments are in default from the “borrower” should be denied. No payments are required, under the terms of the note itself, if the note has been prepaid — whether the prepayment was from the borrower, his mother, or a mortgage aggregator. The affirmative defense of payment obviously is supported by the same logic.

And the filing of a claim to quiet title by the homeowners serving the nominal lander as a defendant/respondent, and John Does 1-100 as people or entities who might claim an interest in the note, will most likely be successful. The “lender” must disclaim any interest in the note. The servicer of the mortgage must admit (and it should be alleged) that they have been receiving payments from the “borrower”, instructions from “lender” and making payments to some third party, none of which should have been demanded, accepted or processed.

The failure to deliver the note or the failure to be able to account for the note in a situation where the intention of a series of parties in a chain of transactions was to transfer the rights or interests in the original “loan” transaction ALWAYS indicates the potential for a third party claim against any one of the parties in the chain at a later time despite adjudication of rights between any two or three of them.


Here is an article from one of our contributors

Welcome to Wall Street’s Masquerade Ball (every American was invited)

Securities Disguised as Residential Mortgages – and Why Short-Sales Don’t Work among Other Things

Let’s back into this so you can really understand why the reality of what has happened to nearly every American and every homeowner is so bad, the cause of most of our economic problems right now, and yes, most-likely fraudulent.

You lose your job, your job is outsourced to China, you are in a car accident, substantially injured, life happens,etc. All of a sudden, you can’t pay your monthly mortgage payment, along with other debts. You call the financial institution that you send your mortgage payments to. Oh, by the way, this institution is different than who actually lent you the money at closing – and this “servicer” of the loan has maybe changed twice or more since you closed on the loan.

So, you can’t make your payment. The “servicer” now starts calling you almost daily “harrassing” you to “pay up or else.” You indulge them in your perfectly legitimate and understandable situation and, yes, it falls on deaf ears. They tell you something like, “Miss, if you are having a hardship, we will mail you out a hardship package, please fill it out completely and include all the items requested and send back to us. We will see what we can do for you.

So you do just that, you spend about 3 hours of your precious time, diligently filling everything out and collecting all those “necessary” documents. You send it in. Hear nothing back for like 6 weeks. So you call, wait on hold for 40 minutes and finally get someone who barely speaks English… But it sure as hell is frustrating trying to communicate with someone who obviously doesn’t speak your language, not to mention that, in the back of your head, you wonder “how safe it is to be revealing your social security number and all sorts of sensitive, personal information to someone you’re sure is somewhere halfway around the globe and 10 hours ahead/behind us in time. Anyway, sorry for the rant again… back to the real story.

So, you finally get someone on the line and ask them if they received your fax of all the documents you most diligently put together and faxed to them at their request. You faxed everything in 6 weeks ago and haven’t heard a thing! The person politely tells you that for some reason, they have no record of receiving anything from you and “are you sure that you sent it to the right number?” – Now you’re head turns about 3 shades of red as your carotid artery starts to bulge and you consider popping a Nitro pill to stave off a sure-fire myocardial infarction. But that’s beside the point.

Anyway, back to the real story. So, you send it again, wait another 3 weeks, call again and, “MIRACLE!” They got it, thank God, now we can at least get a solution to our current challenges…right.  The foreigner on the other end politely tells you that it will be a few weeks before the “committee” can review it and come up with a decision on your “situation.” (You feel like telling them to go stick it but refrain since “good, polite Americans” don’t do that sort of thing). Son of a gun… I just went off on a quick rant again. Sorry.

Anyway, back to the real story. So, 4 weeks go by and you hear nothing. You think, “What the heck?” Does this company have their heads so far up their rear ends that they can’t even return a call and respond to my really dire “situation?” Then you remember that you were talking to some person who didn’t really care and by now, they might have taken your Social Security Number, borrowed another $100,000 (on your credit) to go shopping at their country’s version of Best Buy and they’re probably watching the CNN “Mortgage Meltdown” coverage on some 100 inch Big Screen Plasma on a brand new leather couch with a Universal Remote Control that even God would be jealous of. Shoot. Sorry for the rant right there.

Anyway, back to the real story… So, you call again, wait another 25 min. on hold and finally get someone on the line. You explain the whole nightmare and they tell you that “yes, we did receive your package and yes, it did come back from the committee, and “could you please wait for a supervisor?” – and yes, the wait on hold charade starts again… but I know, you can’t relate.

Anyway… supervisor comes on the phone like 10 minutes later and tells you that “unfortunately, there’s nothing we can do for you at this time. But if you’d like, you can go to our website and get the “I can’t make a friggin payment because I’m really out of a job” hardship form, fill it out and fax it in, we’ll see what we can do for you.”

Another rant and rave. Sorry. But really folks, this is the madness that everyday, hard-working AMERICANS are going through with their mortgage loans and the crazy lender/servicers can barely answer the phones much less speak intelligibly with a real solution or option!!!!

So, here’s the real story and WHY all those forms, short-sale efforts and all that work to modify your loan won’t do a bit of good. The company you’re calling is just the SERVICER! They don’t own your mortgage OR your note. They have no substantial right to do anything with the note/debt. The mortgage is still recorded in the name of the FIRST mortgage company that gave you the money at closing AND the note (the real evidence of the debt) was sold BEFORE you ever made a payment INTO a Securitization Trust which then SOLD that POOL of NOTES as a Security to 100’s or 1000’s of Investors ALL OVER THE COTTON-PICKIN’ WORLD.


Want a little context to what I’m saying? Read below for some good ol’ fashioned 3rd party verification. Then, call me and we’ll try to help you a bit. I speak Indian, Chinese and Pig Latin by the way – just in case it’s needed to help you out on your loan.JK.

Foreclosure Defense and Mortgage Meltdown: Credit Crisis Leaves Financial Markets in extremely Volatile Position

People ask me, will they really settle? Of course the question is from borrowers and they are asking if they can actually do something about the millions of foreclosures, default cases and upside down equity cases totaling more than 10 million homes in the U.S. alone. The answer is yes, especially now — because the financial institutions are doing everything they can to make it LOOK like it is business as usual. But the markets are far more fragile than they are letting on. So in order to avoid a plethora of lawsuits in which the truth comes out on the front pages of every newspaper, they are seeking various settlement opportunities with the victims of these mortgages and notes. 

Be sure, in your settlement to make sure you have no deficiency judgment exposure and make doubly sure that whoever you re dealing with proves beyond any doubt that they actually have title to the mortgage and note. I have been personally apprised of large situations where the “lender” “bought back” the loan. I was the messenger bearing bad tidings:  



Fed might accept foreign collateral: Kohn

Should broker-dealers have regular access to funds, or only in crises?

WASHINGTON (MarketWatch) — The Federal Reserve is actively considering creation of a lending facility that would accept “very safe” foreign collateral from “sound” global banks in case of a widespread liquidity crisis, Fed Vice Chairman Donald Kohn said Thursday.
A new global discount window is “under active study,” Kohn said. “It is possible that over time, major central banks could perhaps agree to accept a common pool of very safe collateral, facilitating the liquidity management of global banks,” he said, stipulating that such loans only be made to sound institutions.
Kohn’s suggestion came in prepared remarks wrapping up a special conference in New York on liquidity in money markets that was sponsored by the New York Fed and the Columbia Business School. Read his prepared remarks
“Market functioning remains far from normal,” Kohn said, pointing in particular to large spreads between overnight bank rates such as Libor and other short-term rates. Such large spreads indicate that markets still are in shock.
Kohn argued that the Fed and other central banks had prevented a global run on Bear Stearns and possibly other major financial institutions in March, but the emphasis of his talk was on what lessons central banks and the financial system should take from the liquidity crisis that spread like topsy from subprime mortgages to asset-backed securities to the collapse of one of the world’s biggest investment banks. See latest story on Bear Stearns
“One of the things we have learned over recent months is that broker-dealers, like banks, are subject to destructive runs when markets aren’t functioning well,” Kohn said.
The biggest question is: What to do about the broker-dealers and investment banks that, since the run on Bear Stearns, have now been given unprecedented access to the Fed’s lending facilities? Should that access be continued on a permanent basis? Or should it be provided only in emergencies?
Kohn had no simple answer to that question: “Unquestionably, regulation needs to respond to what we have learned,” he said. “Whether broader regulatory changes for broker-dealers are necessary is a difficult question that deserves further study.”
Permanent access to the Fed’s balance sheet at attractive rates would distort markets without well-designed and well-executed supervision. On the other hand, everyone in the markets knows that the Fed will step in with funds in an emergency, so in some sense the markets have been irredeemably distorted already.
Kohn suggested that the term auction facility, which was created in December and expanded in early May, should be retained on a permanent basis after the crisis is over. The TAF allows banks to bid to borrow funds from the Fed’s discount window for 28 days.
“The Fed’s auction facilities have been an important innovation that we should not lose,” he said. “They have been successful at reducing the stigma that can impede borrowing at the discount window in a crisis environment and might be very useful in dealing with future episodes of illiquidity in money markets.” End of Story
Rex Nutting is Washington bureau chief of MarketWatch.

Mortgage Meltdown: Strategies for Defense and Settlement: Short Sales


Mortgage Meltdown: Strategies for Defense and Settlement: Short Sales


Borrowers, whether they are in foreclosure or not, are advised to write letters to their lenders claiming violations of law and their closing documents. The various causes of action and the advice to get an “audit” done of your loan have been detailed here for several months and are available by scrolling, search, or find commands. 


I would add to the list a demand and potentially an offer for pre-approval of a short-sale based again on the lender’s participation to defraud you by collaborating in a plan wherein it abrogated its fiduciary responsibilities to you, actually acted against your interests and in so doing mislead you into thinking that the Fair market value of your home, your financial condition, or both were sufficient to justify the loan and loan terms.

Keep in mind that short-sales are coming into increasing favor with regulators even while the lenders and investors in CMOs/CDOs are balking. The dam will break in your favor.

A short sale is simply a sale of property that would carry a price less than the amount owed on the property. It is used mostly in cases where there was little or no down-payment, or where negative amortization was employed that resulted in a higher mortgage balance than the borrower started with.

However it can be used in other setting as well. The problem has been that real estate brokers now won’t touch short sales and neither will most buyers because of the ornate and and frustrating “approval” process from the lender, who has its own problem: the lenders have in nearly all cases, sold off the obligation to investment banks or in turn re-marketed them to government purchasers, pension funds etc., under the guise of AAA ratings that were procured by forming personal relationships with the people working for rating agencies and by providing financial incentives to the rating agencies coupled with economic duress of losing a “client” if the rating agency did not bend.


Thus the lender is frequently without leverage to or even authority to offer approval or permission regardless of its own assessment, because the true owner of the obligation is either not returning calls or is actually unknown to the lender. It is the fact that the true owner is unknown that is enabling borrowers to (a) challenge standing in foreclosures thus dismissing the foreclosure or stopping the judicial sale of the property and (b) sometimes getting the house for nothing. 


It is suggested that you demand pre-approval for a short sale that amounts to the cumulative total of the following list — and keep in mind that by combining this with allegations of TILA violations and the other claims we have suggested on, you are threatening them with TOTAL loss of the loan and investment so you are more likely to get their attention:


  1. Your down payment
  2. Additional money you spent on the house as a result of taking ownership or re-financing
  3. Points paid on the loan
  4. All interest paid on the loan
  5. The loss in fair market value measured by the the appraised value at the top, minus the current value on sale, after a 6% real estate commission and various other seller expenses.


  • You bought a house for $630,000 and you made a down payment of $130,000. (Fill in your own figures to figure this out for yourself). 
  • The house was appraised at $650,000. 
  • You took a loan for $500,000, paying 
  • $15,000 in points and thus far you have paid 
  • $35,000 in interest. 
  • You also made improvements to the house that you can’t take with you of another $25,000. 
  • If you sell the house now you can’t get more than $480,000, which after commissions and other costs will net $450,000 (loss of $200,000 from “benefit of the bargain”). 
  • In your letter or pleading defending or foreclosure or challenging the lender without foreclosure pending, you will ask for pre-approval for a short sale discounting their loan to you to $95,000. 
  • This will enable you to sell the house for a net of $450,000 if you choose to, give the lender $95,000, who will give the investing pool the $95,000 less servicing fees with a “sorry Charlie” letter. 
  • You will net $355,000 on the deal, which pretty much makes you whole after the entire sorry affair.


The lender will do one of three things: They MUST answer you within 20 days under Truth in Lending laws. They will deny your request and offer you something else assuming you cite specific violations of the  truth in lending laws and make the allegations we have recommended here. They will agree to your proposal. Or they will negotiate with you. If they start negotiating, realize that you hit a nerve and you are sitting in the driver’s seat. You might be very pleasantly surprised by the outcome. 


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