NEW LOAN CLOSINGS — BEWARE!!!— NonJudicial Deeds of Trust Slipped into New Mortgage Closings in Judicial States

For more information please call 520-405-1688 or 954-495-9867

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IF YOU ARE HAVING A CLOSING ON A REFI OR NEW LOAN BEWARE OF WHAT DOCUMENTS ARE BEING USED THAT WAIVE YOUR RIGHTS TO CONTEST WRONGFUL FORECLOSURES — GET A LAWYER!!!

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EDITOR’S NOTE: It is no secret that the Bank’s have a MUCH easier time foreclosing on property in states that have set up non-judicial foreclosure. Banks like Bank of America set up their own “Substitute Trustee” (“RECONTRUST”) — the first filing before the foreclosure commences. In this “Substitution of Trustee” Bank of America declares itself to be the new beneficiary or acting on behalf of the new beneficiary without any court or agency verification of that claim. So in essence BOA is naming itself as both the new beneficiary (mortgagee) and the “Trustee” which is the only protection that the homeowner (“Trustor”). This is a blatant violation of the intent of the the laws of any state allowing nonjudicial foreclosure.
The Trustee is supposed to serve as the objective intermediary between the borrower and the lender. Where a non-lender issues a self serving statement that it is the beneficiary and the the borrower contests the “Substitution of Trustee” the OLD trustee is, in my opinion, obligated to file an interpleader action stating that it has competing claims, it has no interest in the outcome and it wants attorneys fees and costs. That leaves the new “beneficiary” and the borrower to fight it out under the requirements of due process. An Immediate TRO (Temporary Restraining Order) should be issued against the “new” Trustee and the “new” beneficiary from taking any further action in foreclosure when the borrower denies that the substitution of trustee was a valid instrument (based in part on the fact that the “beneficiary” who appointed the “substitute trustee” is not the true beneficiary. This SHOULD require the Bank to prove up its case in the old style, but it is often misapplied in procedure putting the burden on the borrower to prove facts that only the bank has in its care, custody and control. And THAT is where very aggressive litigation to obtain discovery is so important.
If the purpose of the legislation was to allow a foreclosing party to succeed in foreclosure when it could not succeed in a judicial proceeding, then the provision would be struck down as an unconstitutional deprivation of due process and other civil rights. But the rationale of each of the majority states that have adopted this infrastructure was to create a clerical system for what had been a clerical function for decades — where most foreclosures were uncontested and the use of Judges, Clerks of the Court and other parts of the judicial system was basically a waste of time. And practically everyone agreed.
There are two developments to report on this. First the U.S. Supreme Court turned down an appeal from Bank of America who was using Recontrust in Utah foreclosures and was asserting that Texas law must be used to enforce Utah foreclosures because Texas was allegedly the headquarters of Recontrust. So what they were trying to do, and failed, was to apply the highly restrictive laws of Texas with a tiny window of opportunity to contest the foreclosure in the State of Utah that had laws that protected consumers far better than Texas. The Texas courts refused to apply that doctrine and the U.S. Supreme court refused to even hear it. see WATCH OUT! THE BANKS ARE STILL COMING!
But a more sinister version of the shell game is being played out in new closings across the country — borrowers are being given a “Deed of Trust” instead of a mortgage in judicial states in order to circumvent the laws of that state. By fiat the banks are creating a “contract” in which the borrower agrees that if the “beneficiary” tells the Trustee on the deed of trust that the borrower did not pay, the borrower has already agreed by contract to allow the forced sale of the property. See article below. As usual borrowers are told NOT to hire an attorney for closing because “he can’t change anything anyway.” Not true. And the Borrower’s ignorance of the difference between a mortgage and a deed of trust is once again being used against the homeowners in ways that are undetected until long after the statute of limitations has apparently run out on making a claim against the loan originator.
THIS IS A CLEAR VIOLATION OF STATE LAW IN MOST JUDICIAL STATES — WHICH THE BANKS ARE TRYING TO OVERTURN BY FORCING OR TRICKING BORROWERS INTO SIGNING “AGREEMENTS” TO ALLOW FORCED SALE WITHOUT THE BANK EVER PROVING THEIR CASE AS TO THE DEBT, OWNERSHIP AND BALANCE. Translation: “It’s OK to wrongfully foreclose on me.”
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Foreclosure News: Who Gets to Decide Whether a State is a Judicial Foreclosure State or a Non-Judicial Foreclosure State, Legislatures or the Mortgage Industry?

posted by Nathalie Martin
Apparently some mortgage lenders feel they can make this change unilaterally. Big changes are afoot in the process of granting a home mortgage, which could have a significant impact on a homeowner’s ability to fight foreclosure. In many states in the Unites States (including but not limited to Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin), a lender must go to court and give the borrower a certain amount of notice before foreclosing on his or her home. Now the mortgage industry is quickly and quietly trying to change this, hoping no one will notice. The goal seems to be to avoid those annoying court processes and go right for the home without foreclosure procedures. This change is being attempted by some lenders simply by asking borrowers to sign deeds of trust rather than mortgages from now on.
Not long ago, Karen Myers, the head of the Consumer Protection Division of the New Mexico Attorney General’s Office, started noticing that some consumers were being given deeds of trust to sign rather than mortgages when obtaining a home loan. She wondered why this was being done and also how this change would affect consumers’ rights in foreclosure. When she asked lenders how this change in the instrument being signed would affect a consumer’s legal rights, she was told that the practice of having consumers sign deeds of trust rather than mortgages would not affect consumers’ rights in foreclosure at all. Being skeptical, she and others in her division dug further into this newfound practice to see if it was widespread or just a rare occurrence in the world of mortgage lending. Sure enough, mortgages had all but disappeared, being replaced with a deed of trust.
As a general matter, depending on the law in a state, a deed of trust can be foreclosed without a court’s involvement or any oversight at all. More specifically, the differences between judicial and non-judicial foreclosures are explained here in the four page document generated by the Mortgage Bankers’ Association. It is not totally clear whether this change will affect the legal rights of borrowers in all judicial foreclosure states, but AGs around the country should start looking into this question. Lenders here in New Mexico insist that this change in practice will not affect substantive rights but if not, why the change? The legal framework is vague and described briefly here.
Eleven lenders in New Mexico have been notified by the AG’s Office to stop marketing products as mortgages when, in fact, they are deeds of trust, according to Meyers and fellow Assistant Attorney General David Kramer. As a letter to lenders says: “It is apparent … that the wholesale use of deeds of trusts in lieu of mortgage instruments to secure home loans is intended to modify and abrogate the protections afforded a homeowner by the judicial foreclosure process and the [New Mexico] Home Loan Protection Act.”

MBS TRUSTEES UNDER INVESTIGATION

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“ROYALTY” FEES FOR USE OF THEIR NAME UNDER SCRUTINY

EDITOR’S COMMENT: Investors are starting to get restless as they see what is left of their “equity” in the MBS deals they advanced money to buy, dwindling to zero. They are onto the game and the pension fund and other fund managers responsible for the purchase had best start acting to protect their pensioners or they will find themselves in the same position as the so-called trustees of what are now emerging as non-existent trusts for pools of money that have nothing but the investor money in them as assets and no loans.

Let’s first get our terms straight so you know who the players are and what they do. Start at the beginning:

  1. Working people get a pension benefit that vests to them after a certain number of years of employment. Sometimes they contribute to the fund themselves, and sometimes it is entirely funded by their employer. 
  2. Those contributions are then aggregated into a fund which often is an entity unto itself — like  a corporation, LLC, Trust etc. organized and existing under the laws of the state where the pension fund is located.
  3. A fund manager is hired to invest those funds to assure that the balances keep up with inflation and so forth. Usually there are restrictions as to what kind of investments the fund manager is allowed to buy for the fund, whose purpose is to give the pensioners, the monthly payment they are expecting when they retire. 
  4. The hired fund manager could be an individual or a company. If it is a company then some person who works at the company is appointed to take care of that fund and perhaps some others.
  5. Usually when the media speaks of “investors” they mean the pension funds or other types of funds under management that constitute qualified investors because they are professionally managed by people of financial sophistication and they have a lot more money than the average Joe so they can check things out pretty carefully. When you have $1 billion under management, it doesn’t take much to spend $50,000 checking out a potential investment. 
  6. So “investors” are basically conduits through which the money funding pensions and the money paying pension benefits are processed, managed and invested. The real people who are affected by the performance of the fund manager are those people who worked for their pension benefits.
  7. The fund manager is usually paid for performance and hired and fired on the same basis. If the fund balances are properly maintained and the investments are all AAA and were checked out by the fund manager, they avoid most of the tricks and scams that Wall Street is always generating.
  8. So the fund manager, in order to preserve his employment, compensation and bonuses (everything on Wall Street is about bonuses) has a vested interest in managing the information that reaches the media and members of the fund. If there is a Board of Directors or other overseeing body they should be checking under the hood as well to make sure that the fund manager is investing according to the rules and make sure that the fund manager is not embezzling funds.
  9. Thus fund managers who invested heavily into MBS Mortgage Bonds or other MBS products that carved up and pooled debts arising from student loans, credit cards etc, all with AAA ratings from the rating agencies, are now sitting on some liabilities that they don’t want to report because if they do, then they will probably lose their bonus, job or other compensation.
  10. Enter the MBS Trustee seen often as Deutsch Bank, as Trustee for series abcnde-2005a. As Reynaldo Reyes has stated in taped interviews, the function of Deutsch Bank is to do nothing. Only the servicer calls the shots, along with instructions from other entities created by the investment banks in order to put layers between them and the acts that caused all this mess. See organized crime structure as the model for what Wall Street did. 
  11. The fund managers for the pension funds (investors) are actually representing real people who are expecting their pension benefits. So now some of them are looking to the MBS Trustee to ACT like a Trustee and ACT like they care what happens to the investors (pension funds) and all the pensioners depending upon that fund. But the same disdain and contempt that has been shown to homeowners in foreclosure is being displayed against the pensioners. They are the “little people” who in the culture of Wall Street “don’t count.”
  12. Many fund managers were duped by several attributes of these bogus MBS Bonds. The AAA ratings were a big factor as was the presence of the largest banks in the world acting as “Trustees.” The Trustees’ deal with Wall Street was to get paid a fee so their name could be used in foreclosures and other transactions. That is why the actual Trust Departments of the same banks serving as MBS Trustees don’t have anything to do with the MBS Trusts. Besides the fact that the Trusts probably don’t exist at all, the deal was that the MBS Trustee would be completely insulated from all the actual workings of the securitization chain.
  13. Recent case decisions are pointing  the way toward holding the MBS Trustees liable for their inaction. That is what Biden And Schneiderman are looking into as well, to see if laws were broken with those deals. Of course laws were broken. The MBS Trustee was advertised as a Trustee with fiduciary duties. Neither the Trust nor the duties actually existed, and even if they did the MBS Trustee had no intention of doing anything because that wasn’t the deal. [You might want to look at both the original Trustee on Deed of Trust and the “substitute Trustee” for additional potential liability — to borrowers.]

At the end of the day, everybody knows everything. I first heard that on Wall Street of all places but they keep forgetting their own little axioms. The MBS Trustees like Deutsch, US BANK, etc. have long been known to be doing absolutely nothing. The purpose of using their name was to provide window dressing: a big name like HSBC is more likely to be taken seriously than some unknown title agent, which is why in the non-judicial states that ALWAYS have a substitution of trustee. The other reason is that the original trustee would insist on performing the due diligence that the statutes require and oops, they are not going foreclose on property at the instruction of someone who is out of the chain of title.

Biden of Delaware and Schneiderman of New York, both Attorney generals in the center of the securitization playground, are now looking at one of the weakest links in the Great Securitization Scam — i.e., the claim that securitization happened when it didn’t. The fact is that the parties took the money as though the securitization documents were followed but they didn’t have the the loans, transfer documents, mortgage documents, or for that matter even a conforming mortgage that was an actual lien on anyone’s property.

Pauley’s BofA MBS ruling is boon to New York, Delaware AGs

10/25/2011 COMMENTS (0)

In 1998, 400 investors in a trust that distributed revenue from a communications satellite got word that their securitization trustee had settled a $41-million suit against the satellite’s fuel supplier. The trustee, IBJ Schroeder, filed a New York State Article 77 proceeding to obtain a judge’s endorsement of the $8.5 million settlement. Some of the investors protested the deal, arguing that the trustee didn’t have the power to settle the case without consulting them. In 2000, a New York appeals court ruled that, in fact, IBJ Schroeder did have that power, under both New York law and the contract governing the satellite revenue trust. The lower court ultimately ruled in the Article 77 case that even if investors considered the settlement amount too low, Schroeder hadn’t acted unreasonably or imprudently in striking the deal.

If you’re wondering why I’m telling you about an 11-year old ruling involving a defunct communications satellite, it’s because the IBJ Schroeder opinion is sure to be invoked by Bank of New York Mellon, the trustee of those Countrywide mortgage-backed securities, as well as the 22 Countrywide MBS investors represented by Gibbs & Bruns as they appeal last week’s decision by U.S. District Judge William Pauley III of Manhattan federal court. In holding that the federal courts have jurisdiction over Bank of America’s proposed $8.5 billion settlement, Pauley took issue with BNY Mellon’s use of an Article 77 proceeding to get the deal approved. The judge wrote that Article 77 is usually employed to resolve garden-variety trust administration issues; BNY Mellon and Gibbs & Bruns will use the IBJ Schroeder ruling to argue at the U.S. Court of Appeals for the Second Circuit that, contrary to Pauley’s assertion, there’s precedent for using Article 77 exactly as they did in the BofA MBS case.

But even as the Second Circuit decides whether to take up the issue of the rights and responsibilities of securitization trustees, state attorneys general are likely to pounce upon some of the language in Pauley’s 21-page ruling. I warned that there might be unintended consequences for indentured trustees when the judge asked for briefing on the BNY Mellon’s duties. After Pauley’s ruling, that warning is now a red alert. New York attorney general Eric Schneiderman and his faithful follower, Joseph Biden III of Delaware, have both announced that they’re investigating MBS securitization trustees. Schneiderman showed he’s serious by filing state-law fraud claims against BNY Mellon along with his petition to intervene in the BofA Article 77 proceeding. In his complaint against BNY, Schneiderman argued that once an investment goes south, as many of the MBS trusts have, the indentured trustee has a fiduciary duty to trust beneficiaries under New York common law.

BNY Mellon’s lawyers, on the other hand, argued in a brief to Pauley that an indentured trustee does not have a fiduciary duty to beneficiaries. The investment contract, BNY Mellon said, governs the trustee’s responsibilities. Standard securitization contracts, known as pooling and servicing agreements, say the indentured trustee serves a ministerial function, mostly making revenue distributions to investors. BNY Mellon told the judge that its only responsibilities, aside from those specified in pooling and servicing agreements, are common law duties to avoid conflicts of interest and to exercise due care.

The judge, however, took a broader view of the source of the trustee’s responsibilities — and that’s good news for regulators who are trying to find routes to liability for securitization trustees. Pauley considered the question in the context of determining whether the proposed BofA settlement falls into an exception to federal court jurisdiction in the Class Action Fairness Act. But his reasoning, of course, can be cited in other contexts.

Pauley cited Judge Learned Hand — who sat on the same court a century ago — to conclude that indentured trustees can’t evade a duty of loyalty to beneficiaries just because their responsibilities are defined by a contract. BNY Mellon had asserted its only duty to act in good faith came from the Countrywide pooling and servicing agreements. Pauley said it comes instead from state common law. As New York and Delaware regulators consider causes of action against securitization trustees, they’re going to have stronger claims if they can argue that trustees breached their state-law duties to investors. Similarly, trustee defenses are weakened if they can’t argue that their responsibilities were strictly defined by pooling and servicing agreements.

The New York and Delaware AGs are in an awkward limbo right now in the BofA MBS litigation. When Grais & Ellsworth removed the case to federal court, their intervention petitions were pending before Judge Barbara Kapnick in New York State Supreme Court. (BNY Mellon and Gibbs & Bruns, you may recall, filed fiery briefs opposing the N.Y. AG’s intervention.) The AGs stayed out of the federal court case while Pauley decided whether to remand it. But now they’re likely to renew their intervention petitions before the federal court judge, who has already raised a lot of the same questions as the AGs about the fairness of a binding settlement that was reached without consulting most of the investors it will affect. (The New York AG’s Martin Act counterclaim against BNY Mellon, in case you’re wondering, can technically proceed in federal court as well.) As I’ve said before, it’s too soon to say for sure that the proposed settlement will stay with Pauley. But if it does, invigorated attorneys general are the last thing BofA, BNY Mellon, and the Gibbs & Bruns group need.

(Reporting by Alison Frankel)

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TDSF.com website oddly down?

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AUCTIONS AND BIDDING ARE AUTOMATED

BY TRUSTEE SURROGATE

Cochrane:

OPPPSSSS – TDSF.com website oddly down? offline ? Hmmmmm. Interesting coincidence

ian – w ‘anyone’ can file a notice of default – blank form on TD Services website:

‘Foreclosure’s Notice of Default’ Foreclosure request screen oddly enough just opens to anyone?

https : // www . tdsf . com / rqsnod . htm

TD Services dba TD Escrow Services,

TD is a partner in a number of networks and a PREMIER provider for several industry providers including MERS.

Look at cover pages provided in Discovery for “TD ”

any DISCOVERY DOCUMENTS look for ‘TD’
All dirty deeds done by the non-judicial state ‘TRUSTEES’ and Sub-stitutue ‘TRUSTEES’ and judicial states robo-firms.

You are about to launch T.D. Service Company’s on-line request to prepare a notice of default.

To initiate a foreclosure proceeding, please complete the request form on the following page. You must then forward copies of the applicable documents (as selected on the form) to our office. If you have any questions please contact our office at (800) 843-0260 and ask for a foreclosure specialist.

By clicking the button below you agree to the following:
I accept sole responsibility for the information provided to T.D. Service Company via this on-line form for the purpose of preparing foreclosure documents. I understand that this web application is proprietary to T.D. Service Company and is used solely for the purpose of initiating foreclosure proceedings. I have also read and understood T.D. Service Company’s privacy policy regarding on-line transactions.

Chart of Document Services Outsource Work Flow, click on image, and save document using internet browser, file, save, TD_Doc_Outsource.jpg
Paste URL and view documents http://www.tdsf.com/graphics/Outsource_flow.jpg

Web-based Lookups, Electronic Reporting screen can be saved as a document “WEB-STAR” Lien Release Search. Click on the image and browser select ‘File’ save as TD_WEBSTAR_Lien_Release.jpg

You’ll find in related documents and discovery, ‘Service#’ and ‘Loan#’ and Borrower Name, State, Payoff Date, Property Address. The Nancy Drew investigators will be looking at the screen image integration

Data inside ‘input screens’ are saved inside databases and those databases used to create checks, wire transfers, falsified DOT’s, DOS,’s, Assignments, Liens, Allonges, Notes, etc

TD preferred provider of MERS, a transaction partner with LPS, and can accept data for many of TD services INCLUDING LIEN RELEASE, ASSIGNMENT, FORECLOSURE, AND MANY OTHER TRANSACTIONS.

TD ‘can send’ data ‘back to TD clients in wide variety of formats including:
XML, hard-copy, txt, csv (spreadsheet default format to import and export data, and others.
SECURE ‘FTP’
web services,
many othe rmethods.
Reports & Billing on-line applications.
On-line applications can interface (integrate) with customers’ in-house systems.

TD partner IBM Business Recocvery Services (BRS).
TD provides hot site aound nation mirror equipment duplicate TD’s operating environment and config.
TD Data Security, as required by HUD, TD fully complaint with Gramm-Leach-Bliley Act (Financial Moderenzation Act) regarding ‘privacy’ of sensitive data. Consumers don’t realize when they sign credit application on-line or on paper, all bank-affiliates and non-bank affiliates globally have access to their data.

Bruce Gauger, TD’s CIO responsible for TD’s

‘Trustee sale information’
‘lien releases’
‘reconveyance lookup’
‘assignment’
‘document research inquiryt’
‘dedicated FTP’
‘other’

TD owners and benefactors constanting develop applications for their commercial clients who engage in commerce in private licensed communication channels or publically licensed communications channels.

Publishing and posting of Legal Notices, Conducting trustee Sales, Senior Lien bidding

TAC Trustee Assistance Corporation, a subsidiary of TD Service Financial Corp, weblink changed, Cached google not working, text only

Publishing and posting of Legal Notices, Conducting trustee Sales, Senior Lien bidding.

Established in 1985, Trustee’s Assistance Corporation (“TAC”) is a subsidiary of TD Service Financial Corporation. Its primary focus is providing publishing, posting, conducting trustee sales and related support services to the industry.

TAC is headquartered in Santa Ana, California with a branch office in Phoenix, Arizona. TAC offers a broad range of services in the states of Arizona, California, Nevada, Oregon and Washington including:

Automated Trustee Sale Hot Line:
(714) 480-5690 (24 hours) Web-based Trustee Sale Lookup

Publishing and posting of legal notices.
Conducting trustee sales.
Senior lien bidding.
Connectivity to customer’s servicing systems, electronic transfer of publication data to newspapers.
Messenger service for pickup and delivery of documents.
Property inspections.
Trustee sale/auction information free on web and by telephone (714) 480-5690.

For more information, contact Renee M. Patrick (714) 480-5550

This is Google’s cache of http://www.tdsf.com/tac.htm. It is a snapshot of the page as it appeared on Aug 8, 2011 18:36:42 GMT. The current page could have changed in the meantime. Learn more

Full versionThese search terms are highlighted: td services

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.

by LOUISE STORY

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

ID THEFT: Example of one person’s response

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

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

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

Moral Hazard in Non-Judicial Sale: Trustee commits violations of FDCPA and other statutes!

From Eaine B

Editor’s Note: I have long advocated sending letters, objections to sale and complaints against “trustees” named (or substituted) on deeds of trust who initiate foreclosure proceedings. Indeed, it is highly probable that because of statutes attempting to protect the trustee from liability, the trustee is at best usually named only as a nominal party in a lawsuit challenging the legality of the non-judicial sale, demanding the identity and contact information of the creditor and getting a full accounting from the real creditor.

I would argue that this reader’s comment is more on target than they even know. Because that is the point — knowledge. If the “trustee” knowingly proceeds when it KNOWS there is a question of title, a question of who is the creditor, and knows that this loan was sold to third parties that have not been disclosed to the Trustor nor the Trustee, then the trustee is more than a nominal party, to wit: they are a co-venturer in a  fraudulent scheme.

Typically non-judicial action commences under a “substitute trustee”.  One would ask why it was necessary to call in a “substitute trustee” from the bullpen, when the current one is just fine. The only possible answer is that the old trustee either doesn’t want any part of this, or won’t do it without following industry standards to confirm ownership etc. It would seem fairly obvious that if the existing trustee is still in business and continues to qualify as a trustee, the only rational reason to change trustees is because the actors wish to do business with people who won’t ask questions.

Often the “substitution of trustee” is backdated, undated or dated after the notice of sale, notice of default etc., so there is a simple procedural angle to set back the sale if you are actually reading the documents, and getting a title report.

More substantively, the “substitute trustee” is granted that position by a party who in all probability does not have the power to grant it — but that requires a forensic analysis, title report, and probably a lawsuit to establish. For example, if some person unknown to MERS assumes the title of “assistant Vice president of Mortgage Electronic Registration Systems” and signs the substitution of trustee or any other document, they probably lack the power to do so, or they lack the documentation showing they have the power to do so.

This actually runs to the core of moral hazard in non-judicial states. Anyone who knows you have missed payments, could file a “substitution of Trustee” document in the county records, send you a notice of default, notice of sale and sell your property to the highest bidder — all BEFORE your real servicer (who we know is only a pretender lender) even knows about it. It is a scam waiting to happen. The scammer then takes the money and runs. Meanwhile you have most likely given up and left the house so it is now abandoned. This scenario can only happen in non-judicial states, where the statute authorizing a non-judicial foreclosure sale ASSUMES that the right party is doing the right thing under proper authority.

When mortgages were simple, and securitization was only an idea, the opportunity for abuse in non-judicial states was present but generally controllable because your true lender had control of the loan, they knew when you were delinquent, and they would be in touch with you, during which time it might come out that you had already received a notice of sale from a “substitute trustee.”

In the world of securitization where the potential real parties in interest are almost infinite in number, where the credit report is used rather than the title report, and where various layers of companies are used to create plausible deniability, insulation from liability and the ability to move things around “off-balance sheet” or “off record” at the county recorder’s office, the potential for abuse is practically infinite. And true to form, my experience is that virtually every foreclosure in a non-judicial state contains at least the taint of this abuse and often facially shows the failure to use proper documentation.

Comment submitted by Eaine B—–

Trustee commits violations of Fair Debt Collections Practice Act!
A good cause of action against Northwest Trustee Services Inc, Routh Crabtree Olsen PS is that I have found they sell your private information to the public. Go to http://www.usa-foreclosoure.com and find your foreclosure….then buy for $39.00 a copy of the title report that is supposed to be private between the trustee and the beneficiary. Any public person can order your report online. This is mail and interstate violations. Make a complaint to the Bar association, and the FTC and your state Attorney General.
Call the title company on the top of the form and ask them. Then perhaps you can file a suit against Routh Crabtree Olsen and Northwest Trustee Services Inc for violations of 15 USC 1692 Fair Debt Collection Practices Act violation. It’s triple damages. Most likely they will have sent you a letter from Routh Crabtree Olsen. One I got even quotes the 15 USC 1692. So obviously THEY know about it. The owner of Routh, Crabtree and Olsen is Stephen Routh and Lance Olsen. Routh has various companies in AK, MT, AZ, CA etc. Just look at the list on the various web sites. http://www.usa-foreclosure.com has the same address as Routh Crabtree Olsen and Northwest Trustee Services and as Routh in AK.
Also, the process serving company that they use is owned by them.

Verifying that the ‘Substitute Trustee’ is indeed a TRUST

BTW, I ask about verifying that the ‘Substitute Trustee’ is indeed a TRUST since I saw a post that made a point that any named ‘TRUSTEE’ must really be a TRUST.

Quality Loan Servicing was nominated by Litton Loan Service’s employee (via MERS) as the Substitute Trustee in place of ReconTrust.

I may have a case where BofA was in too many of the ‘roles’. The servicing was transferred on the very day the modified payments were to start per a signed and notarized mortgage modification agreement. The transfer was an attempt to justify the ‘mod’ not ‘happening’. RESPA does not agree with that. They ignored me. They never contacted me about any reason the mod was not occurring. I had been assured it was ‘my mod’. The BofA employees have stated that ‘all AG Mods’ were canceled. Well, they think that is the word. Actually the correct term is ‘BREACHED’.

So now I have some funny-looking documents being filed and what appears to be a bogus attempt to foreclose. Who knows who really has the note. Litton has filed documents saying that the ‘investor’ is CWABS with BoNY-MELLON as the trustee. Strangely BofA claims to be the beneficiary in more-recently filed documents in my court case. If BofA is ACTING for the investor, what the hell is Litton doing? The beneficiary LITTON should be ‘working for’ would seem to be the CWABS trustee. Certainly, I question whether BofA would have bought the mortgage back from the pooling (CWABS) once it was in litigation without advising the court at least. I do not understand how I can have BofA make the claim that they ARE the ’successor beneficiary’ when CWABS was otherwise identified as the ‘investor’.

Also, how would they deal with the original ‘Lender’ being a fictitious business name and the only beneficiary named is MERS as ‘nominal beneficiary’? Will I have more fictitious assignments to be looking for?

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