How the loan was sold multiple times.



It is like any hedge contract. The buyer of the hedge contract is the investment bank, sometimes working through sham conduits. It is saying it wishes to ensure stability of its “portfolio.” It provides triple agency rating and “insurance” from AIG for instance while at the same time buying insurance from  AIG based on the premise that hedge funds are selling hedge contracts. It looks like a safe bet as long as you don’t peek under the hood where you see that the debt, note and mortgage were split at inception and the enforcement of the debt, note and mortgage is at best a long shot if all the facts are revealed.

The hedge funds and insurance companies make money because they are receiving fees from the investment bank for assuming the risk. It’s income pure and simple. The risk is seen as nonexistent. But in fact a small move in the value of the certificates whose value is entirely derived from the investment bank’s promise to pay certificate holders is a discretionary promise controlled exclusively by the vinestment bank. So Goldman can reduce payments and cause the certificates to decrease in value thus triggering the insurance and hedge contracts. Goldman can also, in its sole discretion declare that the value has reached the trigger point. And the counterparties expressly disclaim subrogation or any claims to the certificates, debts, notes or mortgages.
In many cases the initial hedge contract was created for the highest tier of the tranches containing AAA rated mortgages. But the tier 1 tranche had received fees for issuing a hedge contract on the lowest tranche. The certificates were based upon the value of the tranche including the hedge contracts which investors thought were exclusively to protect the Tier 1 tranche but in fact contained a commitment to absorb losses for the Z tranche that contained 15% mortgages. So the modest but lucrative fees paid to hedge funds to assume the risk for stabilizing the Tier 1 tranche was in fact a guarantee of the entire Z tranche.
When Z tranche failed as everyone knew it would, it took down the tier 1 tranche and through similar devices the entire issuance of that “trust” was reduced to rubble with investment bank getting the full amount of the investment (by certificate investors) paid to the investment bank (not the certificate investors) in mortgages that had (a) not failed and (b) did not have nearly the effect on perceived loss of value that was reported.
Hence the investment bank sold, using the trust name as a fictitious name for the investment bank, to the investors who bought certificates whose value was perceived as derived from “underlying mortgages” and then sold again the same mortgages under guise of hedge fund and insurance contracts. In fact the value of the certificates was entirely derived from the value of the promise made by the  viestment bank with no right, title or interest to the indexed fictitious portfolio of debts, notes and mortgages arising out of the origination of or acquisition of residential mortgage loans.
When the credit market collapsed (nobody was willing to trade in derivatives) Goldman and others had insurance contracts pending with AIG et al. The bailout was used to fund AIG so that GOldman could receive $150 Billion on losses never incurred by Goldman and which were never attributed to anyone who might be construed as having purchased the debt. Goldman was not lobbying to recover losses made from risky investments. Goldman was lobbying and did so successfully in protecting a windfall expectancy from hedge contracts and insurance procured through false pretenses. Losses on the loans had nothing to do with it.
Goldman and Citi were successful at manipulating the story. TARP and FED and US Treasury and FDIC bailouts were at first predicated on losses caused by defaults on mortgages. But that is only part of the story. Mortgage Defaults actually were not a major cause of any collapse except in a few instances that Goldman PR seized on to make it appear that was what was happening marketwide. Most mortgage debt and all risk of loss had been sold multiple times. There simple was no owner of any debt in which the claimed “holder” had an pecuniary interest. Hence today we have no creditor — a proposition that virtually everyone finds unacceptable.
So TARP evolved from Troubled mortgages to troubled Certificates. And when the promise was revealed to come not from homeowners but form the investment banks, TARP evolved again into a generic ill-defined “troubled asset ” classification that meant anything the banks decided. The stuff that simply could not be reconciled was put into the maiden lane entities and then later recycled out as new securitizations as though there was nothing wrong with the inherently defective and illegal nature of lending, servicing, selling and profiting from the sale of loan products that were guaranteed to fail in many instances and whose failure was central to the bank business model in which they would profit from the failure.
What I am saying is that the infrastructure for all of that was established before the loans were made. That infrastructure and the expectancy of windfall revenues and profits from the origination or acquisition of loans was absolutely essential (condition precedent) to granting loans, whether they were viable or not. The funding of the loan was essential to getting the borrower’s name, signature and reputation as well as their house as collateral. Without that all the tranches, insurance contracts, hedge products and more advanced derivative products were never have been written, much less sold. This process did not, as was advertised, diversify risk. It concentrated it on borrowers, government and investors in that order.
Note that the banks are left out of that equation because they were intermediaries as it relates to risk and they were principals as it relates to profits. It is my contention that this was an implied contract in which the homeowners should be compensated for their essential part and focal point, but for which the rest of the scheme, undisclosed to borrowers, could not have occurred.
Consulting with insiders the average gross revenue from the loan of $1 was between $10 and $20 dollars. So for an average loan of $250,000 the gross revenue was in excess of $2, 500,000 and frequently topped $5,000,000. The average was $8,000,000. Royalties and license fees usually run from as low as 1.5% to an average of 6% and are applied to gross revenues. The implied contract that included the borrower and the investment bank thus computes as $480,000 plus statutory interest which at this point would average around 9% per year for an average of $43,200 per year for an average of 10 years or $432,000. Hence the value of the claim by each borrower is on average $900,000 for each $250,000 loan.
In addition there exists a further claim for recovery of all undisclosed compensation as outlined above amounting to several times the above estimate. this presents an unparalleled profitable opportunities to good litigators. Pro se litigators are not invited. The theory is simple and if presented correctly will almost definitely survive a motion to dismiss and could be the subject of mass joinder, class action and even Qui Tam relief.
While a DC group is forming I would be willing to help in the creation and development of a new group whose sole focus was on this theory.

Banks Brace for Pain: Statute of Limitations on TILA Rescission and TILA Claims

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


TILA remedies and requirements actually address the “free house” complaint head on: If banks misbehave in material and important ways (as defined by statute and not in the minds of a judge or lawyer) then yes, the homeowner should get a free house. That is what all three branches of the Federal government have said and no re-interpretation of TILA rescission or TILA remedies will be allowed since last week when the Supreme Court unanimously decided that TILA meant what it says. Any Judge or lawyer who thinks otherwise is in fairyland. The fact that a Judge doesn’t “like” the result of a “free house” (as the Judge perceives it) means nothing. The Judge is required to apply the law as decided by the United States Supreme Court.

Practically everyone is asking questions about whether the statute of limitations starts running from the date the documents were signed on the alleged loan or if it could start at a later time. The answer is a grey area, but as pointed out by James Macklin last night on the Neil Garfield show, there is a legal doctrine called equitable tolling that could suspend the start of the running of the statute of limitations for TILA rescission and TILA claims.

“The equitable tolling principles are to be read into every Federal Statute of Limitations unless Congress expressly provides to the contrary in clear and unambiguous language, see: Rotella v. Wood 528, 549, 560-61,120 S. Ct. 1075, 145 L. Ed. 2d 1047(2000). Since TILA does not evidence a contrary Congressional intent, it’s statute of limitations must be read to be subject to equitable tolling, particularly since the Act is to be construed liberally in favor of consumers.”

Basically the doctrine says that the statute starts to run, unless otherwise provided in the statute, when the claimant knew or should have known or most have known of the grounds for, in this case, TILA Rescission or TILA claims. The basis of that is obvious to anyone involved with these fake mortgages and fraudulent foreclosures for 8 years like I have. The very facts that give rise to TILA rescission and other TILA claims, are intentionally withheld by the parties at the fake closing where the borrower signs settlements documents, the note and the mortgage.

The strategy of the banks has been to wait out three years and then pursue foreclosure and when the borrower raises TILA defenses, the answer is that the statute of limitations has run. With the recent unanimous Supreme Court decision that effectively smacked thousands of lawyers and judges in the face for re-interpreting basic law and the specific and express provisions of TILA, this bank strategy should no longer work.

So now if you gave notice of rescission within three years of the date of the fake closing, your mortgage is null and void “by operation of law” and the “lender(s)” are required to give you (a) a satisfaction of mortgage for county records (b) a canceled original note (c) refund all the money you paid at closing for points, fees, costs etc. and (d) refund all the money you ever paid for interest and principal on the loan. Your debt becomes unsecured and there is no requirement for you to offer them any money at all in order to have the TILA rescission (“I hereby rescind my loan”) be effective. If you EVER sent such a notice within the three year period then your mortgage was void by operation of law at that time — unless the “lender(s)” filed a lawsuit (within 20 days of receipt of your notice of rescission) seeking declaratory relief saying your rescission was not based on any mistakes, errors, omissions or misbehavior on their part.

So all those hundreds of thousands of letters sent back to borrowers saying their letter of rescission was not effective were wrong. Dead wrong. And all those foreclosures that happened anyway were wrongful and void. And THAT means that what I said in 2008 is now true — that hundreds of thousands of homeowners who sent notices of rescission still own their homes even though on paper their homes were sold to third parties. The only thing that could interfere with that conclusion would be a state statute that existed at the time of the fraudulent sale  that said that you have 1 year or some other length of time to challenge the title.

So now that we know that nearly all the loans were table funded and therefore “predatory per se” (REG Z) the question becomes when did the three year statute of limitations begin to run.

There are two schools of thought on this. The first one is simple, as one caller on the Neil Garfield Show pointed out last night. If the disclosures were intentionally withheld, then even the three day rescission might still be available because the deal never actually closed and because the disclosures were fraudulent.

But in any event the statute would start to run as soon as the “borrower” found out that there were multiple people involved in his fake closing that were never disclosed — all of which undisclosed parties were involved in serving as conduits or aggregators and all of whom were paid an undisclosed amount of money arising out of the “closing.” So it is possible that even though your loan was the subject of a faked closing in 2005, you might still have a right to rescind and should send the notice of rescission since it forced the burden of proof onto the pretender lenders. This is especially important in nonjudicial states where the borrower must sue to prevent foreclosure and there is confusion over the alignment of parties.

Incidentally to drill in the point that this statute has teeth, the “lender” must pay the borrower all money paid including what was paid to third party vendors. The loss falls on the “lender” for misbehaving. If it didn’t bother the US Government (Congress, President and Supreme Court) when it passed TILA that the borrower would get a “free house” why should it bother anyone else?

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