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MORTGAGES WERE NOT SECURITIZED

“[Nevada Attorney General] Masto didn’t stop there. She also pulled out a bazooka. She accused BofA of failure to properly securitize mortgages, breaking the chain of title and nullifying their standing to foreclose. This is from the amended complaint:

Bank of America misrepresented, both in communications with Nevada consumers and in documents they recorded and filed, that they had authority to foreclose upon consumers’ homes as servicer for the trusts that held these mortgages. Defendants knew (and were on notice) that they had never properly transferred [text redacted] these mortgage to those trusts, failing to deliver properly endorsed or assigned mortgage notes as required by the relevant legal contracts and state law. Because the trusts never became holders of these mortgages, Defendants lacked authority to collect or foreclose on their behalf and never should have represented they could.”

Nevada AG Catherine Cortez Masto Destroys BofA in New Lawsuit

By: David Dayen Wednesday August 31, 2011 6:10 am

Nevada Attorney General Catherine Cortez Masto’s amended complaint in a lawsuit against Bank of America has so many interesting nuances, I think I need a new Internet to catalog them all. But let me start by saying that this complaint is a stick of dynamite to the foreclosure fraud settlement, exposing it as a useless whitewash that won’t deter banks from their criminal practices. Masto joins other skeptical AGs here in not acceding to such a dereliction of duty, and instead she lays out a thorough case of systematic fraud, in this case by Bank of America, at every step of the mortgage process.

First, the background. In October 2008, a group of twelve state Attorneys General, including Nevada, entered into a settlement with Bank of America over predatory lending at the mortgage lender Countrywide, which BofA had purchased in July. In the settlement, BofA promised to modify up to 400,000 mortgages nationwide, at a cost of up to $8.4 billion. This was to include principal reductions as well as refinancing, and all foreclosure operations on the affected loans would be suspended.

If any of this sounds familiar, that’s because it’s the same basic structure for the proposed settlement between all 50 AGs and leading banks over their fraudulent foreclosure operations. The question looming over the entire enterprise was whether the states could ensure vigorous enforcement. There’s a model with this Countrywide settlement in 2008 that we can look to. And apparently no AG but Catherine Cortez Masto has actually investigated whether or not BofA kept their promises. Turns out they haven’t. So Masto is seeking a pullout from the settlement, to pursue prosecution against the bank for multiple deceptive practices.

Allow me to highlight the deceptive practices in question. This is going to be a somewhat long excerpt because I want to add as much detail as possible:

In her filing, Ms. Masto contends that Bank of America raised interest rates on troubled borrowers when modifying their loans even though the bank had promised in the settlement to lower them. The bank also failed to provide loan modifications to qualified homeowners as required under the deal, improperly proceeded with foreclosures even as borrowers’ modification requests were pending and failed to meet the settlement’s 60-day requirement on granting new loan terms, instead allowing months and in some cases more than a year to go by with no resolution, the filing says […]

The complaint says the bank advised credit reporting agencies that consumers were in default when they were not, and contends that Bank of America employees deceived borrowers about why their requests to modify loans were denied. In addition, it says, the bank falsely claimed that the actual owners of loans had refused to allow changes to their mortgages, and it incorrectly claimed that borrowers had failed to make payments on trial loan modifications when in fact they had. Bank of America also misled borrowers, the Nevada attorney general’s filing noted, by offering loan modifications with one set of terms only to come back with a substantially different deal.

Among the more troubling findings in the Nevada complaint is the contention by several Bank of America employees that the company imposed strict limits on the amount of time they could spend on the phone assisting troubled borrowers seeking help with their loans.

One worker said in a deposition cited in the complaint that employees were punished if they spent more than seven minutes or 10 minutes with a customer. Even though these limits allowed almost no time for assistance, Bank of America employees who did not curtail their conversations were reprimanded, this employee said.

This is a portrait of a criminal enterprise, and to anyone who thinks the other mortgage servicers are somehow more chaste than Bank of America, I have some Bank of America stock to sell you.

But Masto didn’t stop there. She also pulled out a bazooka. She accused BofA of failure to properly securitize mortgages, breaking the chain of title and nullifying their standing to foreclose. This is from the amended complaint:

Bank of America misrepresented, both in communications with Nevada consumers and in documents they recorded and filed, that they had authority to foreclose upon consumers’ homes as servicer for the trusts that held these mortgages. Defendants knew (and were on notice) that they had never properly transferred [text redacted] these mortgage to those trusts, failing to deliver properly endorsed or assigned mortgage notes as required by the relevant legal contracts and state law. Because the trusts never became holders of these mortgages, Defendants lacked authority to collect or foreclose on their behalf and never should have represented they could.

We know that Countrywide didn’t convey the mortgage notes properly to the trust, their own officials testified to that in Countrywide v. Kemp (which is quoted in the complaint). Masto joins Eric Schneiderman in blowing the whistle on this corrupt securitization enterprise.

The entire complaint is here. Masto is seeking civil penalties of $5,000 per violation in the complaint, upping that to $12,000 when the violation affected a elderly or disabled person. She also wants restitution costs for wrongful foreclosures and the costs incurred by municipalities and homeowners from unnecessarily vacant foreclosed properties. Given that Nevada has so many foreclosures, the total liability could range higher than the original $8.4 billion settlement, and that’s just for Nevada alone.

So much else to say here. Masto’s lawsuit is as much about the current settlement talks as it is about the 2008 Countrywide settlement. She is saying, in no uncertain terms, that you simply cannot trust the banks to actually abide by settlement terms. As Masto says in the complaint, Bank of America’s “misconduct cut across virtually every aspect of the Defendant’s operations,” and they “materially and almost immediately violated the Consent Judgment” agreed upon in the settlement. At the time, Jerry Brown, then Attorney General of California, said that the settlement would “be closely monitored and enforced in the months ahead.” It clearly wasn’t. BofA didn’t wait for the ink to dry before violating the terms. And Masto has not only the accounts of borrowers to back this up, but also testimony from Bank of America employees.

Knowing this, seeing it fully documented in Nevada, how could there still be any negotiations on a settlement with the same people? The negotiation should be about whether there will be a public or private perp walk for BofA executives.

So why hasn’t any other state done the same basic investigation as Nevada, and sought to pull out of the Countrywide settlement? Arizona actually joined this lawsuit back in 2010, but that was when Democrat Terry Goddard was the AG. Republican Tom Horne became the AG after the 2010 elections, and he’s too busy literally trying to overturn the Voting Rights Act to worry about whether or not his constituents are being systematically ripped off by a bank, I guess. (Horne, by the way, is still on the executive committee of the foreclosure fraud settlement, I assume because he doesn’t want to do an investigation, and that’s the prerequisite, it seems.)

As for the others, let me tell you who one of the leaders on the Countrywide settlement was: a guy named Tom Miller, the Attorney General of Iowa and the leader of the 50-state settlement talks on foreclosure fraud. Here’s what he said at the time.

Miller said the Countrywide agreement’s program of loan modifications to prevent foreclosures is a win for all parties. “Foreclosure is the enemy. Most important, loan modifications can help homeowners avoid foreclosures and keep their homes. Avoiding foreclosures also helps the companies, helps communities and neighborhoods, and helps our overall economy by stabilizing the housing market,” he said.

“This is what we have been looking for. This agreement provides for the kind of systematic and streamlined loan modification program that is critical right now,” Miller said. “I strongly urge other servicers to undertake similar aggressive programs to prevent foreclosures.”

Do you think Tom Miller, who wants a foreclosure fraud settlement in the worst way, is going to bother to check to see if BofA managed to actually give Iowans the loan modifications they promised? Of course not. And he’s likely to bully all the other states in the Countrywide agreement to shut up about how that settlement was basically unenforced, because people would get the message that this new settlement would go the same way.

He must have got to all of them, but not Masto. And she has ruined his best wishes, not to mention the best wishes of Bank of America. They are denying any wrongdoing and still claiming that “the best way to get the housing market going again in every state is a global settlement that addresses these issues fairly, comprehensively and with finality.” Bullshit. The best way to restore the housing market, the rule of law, and faith in the American system is by rounding up criminal enterprises masquerading as banks.

And the investigation that would lead to that will surely happen now. Masto, Schneiderman and colleagues like Beau Biden, Martha Coakley and anyone else who actually takes their job description seriously will ensure that.

Richard Zombeck: Mass Register John O’Brien’s Presentation Draws Crowd of Recorders in Atlantic City

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“I am stunned and appalled by the fact that America’s biggest banks have played fast and loose with people’s biggest asset — their homes. This is disgusting, and this is criminal,” O’Brien said.

Mass Register John O’Brien’s Presentation Draws Crowd of Recorders in Atlantic City

07/ 5/11 05:06 PM ET

Registers, registrars and recorders from across the country gathered in Atlantic City on Tuesday for the Annual Conference of The International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT).

Several of those attending made the trip specifically to see Massachusetts Register John O’Brien’s presentation on his findings of massive fraud he and Marie McDonnell of McDonnell Property Analytics, uncovered at the Massachusetts Southern Essex County Registry of Deeds

According to O’Brien, McDonnell discovered that 75 percent of the assignments in the registry are fraudulent.

The audit examined assignments of mortgage recorded in the Essex Southern District Registry of Deeds issued to and from JPMorgan Chase Bank, Wells Fargo Bank, and Bank of America during 2010. In total, 565 assignments related to 473 unique mortgages were analyzed.

McDonnell’s Report includes the following key findings:

  • Only 16% of assignments of mortgage are valid
  • 75% of assignments of mortgage are invalid.
  • 9% of assignments of mortgage are questionable
  • 27% of the invalid assignments are fraudulent, 35% are “robo-signed” and 10% violate the Massachusetts Mortgage Fraud Statute.
  • The identity of financial institutions that are current owners of the mortgages could only be determined for 287 out of 473 (60%)
  • There are 683 missing assignments for the 287 traced mortgages, representing approximately180,000 in lost recording fees per 1,000 mortgages whose current ownership can be traced.

You can Download the PDF of the report at http://www.homepreservationnetwork.com/cat_view/132-press-releases-and-memos or request a copy at www.mcdonnellanalytics.com

“My registry is a crime scene as evidenced by this forensic examination,” O’Brien said. “This evidence has made it clear to me that the only way we can ever determine the total economic loss and the amount damage done to the taxpayers is by conducting a full forensic audit of all registry of deeds in Massachusetts. I suspect that at the end of the day we are going to find that the taxpayers have been bilked in this state alone of over 400 million dollars not including the accrued interest plus costs and penalties. ”

After the presentation O’Brien was inundated by nearly 150 recorders asking questions and wanting to conduct investigations of their own.

“I’m a hard person to please,” said Kevin Harvey, O’Brien’s first Assistant. “This was nothing short of extraordinary.”

Jeff Thigpen, the register of deeds for Guilford County, North Carolina is another early trail blazer in this effort. While he did not attend the conference, I spoke with him on Wednesday.

“What [O’Brien] is pointing out in a fundamental way is that the assignments are fraudulent and people need to look at the findings. It goes to the heart of where we are in all this, Thigpen said, “These institutions were once transparent and trusted, we now have a system that stacks the deck in favor of the financial services industry.”

The report, along with the overwhelming response to it, comes in the midst of settlement talks with banks by the 50 attorney’s general. A settlement that to many homeowner advocates is unacceptable and premature based on how little is actually known about the overall depth and impact of the fraud.

New York Attorney General Eric Schneiderman is expected to lead opposition to what he called a “quick, cheap settlement” of the 50-state investigation into foreclosure practices.

Schneiderman launched his own investigation in April and has found the problem is much deeper. He said he was “stunned” to find the multi-state probe so lacking that no documents or witness depositions had been obtained.

“We have no leverage,” Schneiderman said in an interview with the Democrat and Chronicle.

O’Brien’s report could represent the catalyst to gaining that leverage.

Earlier this month O’Brien vowed not to record fraudulent documents, so the banks started submitting replacement documents, including five from Bank of America, all with new signature and notaries. An obvious and sloppy whitewash of the documents O’Brien initially refused.

“These lenders chose not to sign my affidavit, but rather to submit completely new documents,” O’Brien said. “I believe the Bank’s actions speak louder than words and show their consciousness of guilt.”

O’Brien also told homeowners in his district to check the records at his website to see if their home mortgage documentation has been robo-signed. He’s facilitating consumer protection complaints through the Massachusetts AG. He has provided letters that homeowners can print out and send to their servicers, demanding their full chain of title pursuant to federal law.

In an article today in the Boston Herald Edward Bloom of the Massachusetts Real Estate Bar Association said it’s not clear that robo-signed documents are invalid — or that O’Brien can legally reject them.

“Mr. O’Brien is grinding the real estate business to a halt and he doesn’t have any right to do that,” Bloom said.

But according to Nantucket attorney Jamie Ranney, who points out in a 15 page memo citing Massachusetts law, O’Brien not only has every right to refuse fraudulent assignments, he has a duty to his constituents to do so.

It is without question that a Register of Deeds has an important and fiduciary relationship and responsibility — especially in the Commonwealth where his position is elected — to all of his constituents, as well as to the public at large, all of whom rely and who should be able to rely on the Register’s efforts, supervision, and oversight in assuring, maintaining and promoting the integrity, transparency, accuracy, and consistency of a County’s land records.The Register’s work and supervision of his registry most often revolves around tasks and responsibilities that are generally ministerial in nature. The Register is typically concerned with the daily task of recording of legal document(s) and/or instrument(s) affecting real property where such document(s) and/or instrument(s) are properly presented to the registry for recording on the public land records.

However, the Register’s fiduciary duty goes well beyond these usual ministerial acts in circumstances where the Register has actual knowledge or a subjective good-faith belief/basis for believing that document(s) and/or instrument(s) being presented for recording or registration in the registry for which he has responsibility are fraudulent or otherwise not executed or acknowledged under applicable law. In such cases the Register may lawfully refuse to record such document(s) and/or instrument(s).

O’Brien is calling on the Massachusetts Attorney General to look into his finding and many of the attendees at last weeks conference are planning to do the same.

In a press release Wednesday, O’Brien said:

Once again I am asking Attorney General Martha Coakley and the other state Attorney’s General to follow the lead of New York Attorney General Eric Schneiderman and stop any settlement talks with the banks. The results of this report are only for my registry, but I can assure you that this type of criminal fraud is rampant across the nation. This leaves me to question why anyone would consider settling with these banks until we know the full extent of the damage that they have caused to the homeowners chain of title across this country and the amount of money they have bilked the taxpayers for their failure to pay recording fees.

Fortunately, as Georgetown Law Professor Adam Levetin points out in a recent piece at Credit Slips Massachusetts AG Martha Coakley has no problem going after banks and mortgage servicers. In fact Levetin says, “These settlements have received very little notice in the press, but I think they provide a real template for future AG settlements and are worth examining.”

As with any settlement, one has to be a bit a skeptical when multi-billion dollar industries are willing to part with substantial chunks of change. And since the settlement with the AGs looks like it would release lenders from future claims and hinder law suits on the part of the individual states, O’ Brien’s and Thigpen’s efforts in raising the awareness of this to the other recorders across the country couldn’t come at a better time.

Much like the $8.5 billion settlement with investors Bank of America is willing to part with that doesn’t really settle anything, whatever amount they’re willing to pay the AGs doesn’t look like it’s going to come near what’s really owed to the counties, states, and certainly not to the American people.

“I am stunned and appalled by the fact that America’s biggest banks have played fast and loose with people’s biggest asset — their homes. This is disgusting, and this is criminal,” O’Brien said.

Join us at www.homepreservationnetwork.com – Homeowners, attorneys, advocates and foreclosure experts working together

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REGISTER OF DEEDS JEFF THIGPEN (NC) AND JOHN O’BRIEN (MA): REQUIRE ALL PAST AND PRESENT MERS ASSIGNMENTS TO BE FILED

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GETTING CLOSER TO THE TRUTH

EDITORIAL COMMENT: Every day we take a little more lipstick off the pig and discover, of all things, A PIG! This is a basic challenge to Wall Street that is so simple and so right that there is nothing to do but obey — but they won’t. If all the MERS transactions are recorded, it would not only recover billions in unpaid recording and registration fees, but trigger other tax liabilities on Federal, State and Local levels. The whole REMIC exemption is based upon the REMIC vehicle being closed within 90 days.

Oops! Nearly all REMIC (SPV, TRUST) vehicles are still open (i.e., empty) after many years. And Wall Street’s fees taken under the cover of the REMIC transactions and hidden from all, would be painfully obvious resulting not only in monumental income tax liability but liability for fraudulent sale of securities, appraisal fraud on the property, RICO and many other causes of action too numerous to mention (see Causes of Action on left side of this Blog).

But that is just a dream. There is no way they can record all 80 million MERS transactions because many of them don’t actually exist. In the end, the issue is simple — are we going to sacrifice a system of title recordation in place for centuries with an exemption (get out of  jail free) card for Wall Street and thus create commercial chaos for decades or centuries to come? Or are we going to let the chips fall where they will? If the chips fall naturally, some people will make money and some people will lose money. Some people will be satisfied and some people will be mad as hell. That’s what happens in a free market, isn’t it?

All we are offered is POLICY argument that says POLICY is more important than the law. That has never been true in theory. But now the only way out for Wall Street is to make it true in theory as well as in practice. Abandoning the separate but equal powers of the judiciary and thus removing one leg of the three legged stool the founders created when they launched the USA would be the single most important element in the destruction of the country as it is presently constituted — causing a secession battle and the same problems that Russia had when stopped being the Soviet Union.

Basically Wall Street is saying “we went to all this trouble and expense to cheat and deceive you and we ought to be able to keep it. Screw you if you think you are getting any of it back.” The government is nodding its head like a head on a spring in the back seat of the car. The people are saying we want governance not pie-splitting. How this will all end up is going to be interesting and profound. Unless we apply the rule of law suggested simply by applying the requirement of recording transactions in a public registry, we will have about as much confidence in the stability of U.S. commerce as there is in any of the third world countries.

Every PONZI scheme fails. All efforts by Wall Street and the government controlled by Wall Street have failed to find an alternative way around the rule of law that doesn’t strike at the heart of our constitutional system. All the people who lose money in a PONZI scheme wish the scheme had gone on just long enough for THEM to get their money back and someone else to lose THEIR money. That’s where we are, folks, and the time to end every PONZI scheme is immediately before another person gets hurt.

These foreclosures are virtually all based on factually false and fraudulent representations, documentation, and premises. Practically none of the “mortgages” are legal and if any one of them was singularly the subject of a quiet title action, the homeowner would win on the merits, based upon the facts. It is only because of the volume of transactions that legislators and bureaucrats are scurrying around looking for a novel way out of this scam, because they are getting “benefits” from Wall Street. The requirement of recording, will expose the truth: (1) that the only real parties to the transaction are not present in any existing documents and (2) that the existing documents describe transactions that never actually took place. They can’t record these documents because most states make it a criminal offense to record, execute, witness or notarize fraudulent documents.

FOR IMMEDIATE RELEASE:

Greensboro, NC

April 7, 2011

Contact:

Jeff Thigpen, Guilford County Register of Deeds

Ph. 336-451-5300

Ph. 336-641-3239

jthigpe@co.guilford.nc.us

REGISTER OF DEEDS JEFF THIGPEN (NC) AND JOHN O’BRIEN (MA) ASK 50 STATE ATTORNEY GENERAL FORECLOSURE WORK GROUP TO REQUIRE ALL PAST AND PRESENT MERS ASSIGNMENTS TO BE FILED!

JOHN L. O’BRIEN, JR.                                                                                                          JEFF L. THIGPEN
Register of Deeds                                                                                                                    Register of Deeds

Commonwealth of Massachucetts                                                                            Guilford County, North Carolina
Phone: 978-542-1704                                                                                                           Phone: 336-451-5300
Fax: 978-542-1706                                                                                                                  Fax: 336-641-5778
website:
www.salemdeeds.com website: www.guilforddeeds.com

April 6, 2011

The Honorable Tom Miller
Iowa Attorney General
1305 E. Walnut Street
Des Moines IA 50319

Dear Attorney General Miller,

We appreciate your leadership in the mortgage foreclosure working group, as part of a coordinated national effort by states, to review the practice of “robo-signing” within the mortgage servicing industry.   We understand this investigation is nearing conclusion, but we want to implore you to act on a very important issue to homeowners across the country.

As County Land Record Recorders in Massachusetts and North Carolina, we have been gravely concerned about the role of the Mortgage Electronic Registration Systems (MERS) in not only foreclosure proceedings, but as it undermines the legislative intent of our offices as stewards of land records.   MERS tracks more than 60 million mortgages across the United States and we believe it has assumed a role that has put constructive notice and the property rights system at risk.    We believe MERS undermines the historic purpose of land record recording offices and the “chain of title” that assures ownership rights in land records.

As a result, we are asking as part of your probe, that this task force and the National Association of Attorney Generals require that all past and present MERS assignments of deeds of trust/mortgages be filed in local recording offices throughout the United States immediately.  Assignments are required by statute to be filed in Massachusetts, however they are not currently required to be recorded in North Carolina.   We feel, that it is important that the Registers of Deeds should have representatives at the table before any settlement is discussed or agreed to as it relates to MERS failure to record assignments and pay the proper fees.

This action would serve three specific purposes.   First, the filing of all assignments would help recover the chain of title that determines property ownership rights that has been lost and clouded over during the past 13 years because of the scheme that MERS has set in place.  Second, transparency and confidence in ownership rights would be restored and this would prevent the infringement upon those rights by others.   Third, this action would support a return to sound fundamentals in our economy between the financial services industry and public recording offices.

MERS has defended their practices by saying that they were helping the registries of deeds by reducing the amount of paperwork that needed to be recorded. This claim is outrageous.  This is help we did not ask for, nor was it help that we needed.  It is very clear that the only ones that they were helping were themselves. Over the past 10-12 years, recording offices across the United States have upgraded their internal and external technology to meet the demands of lenders, title underwriters, title searchers and citizens.  In fact, in 1998 the Southern Essex District Registry of Deeds in Massachusetts became the first registry of deeds to provide both document images and indices available to the public, 24 hours a day, free of charge on the world-wide-web. In doing so, the Registry received a Computerworld Smithsonian Award which recognized the innovative use of technology to benefit society. In 2009, the Guilford County Register of Deeds was given a Local Government Federal Credit Union Productivity Award by the North Carolina Association of County Commissioners for their technological innovations.  Nationally, over 93% of the public land records are up to date and current, according to Ernest Publishing.

As of today, there are over 600 recording jurisdictions, covering 43% of the US population that have incorporated an eRecording model into their document recording operations.   We believe these jurisdictions cover nearly 80% of the volume of assignments that should be recorded.  The remaining areas could be covered quickly, with legislation requiring such action by state legislatures.

Quite frankly, we believe this can and should be done.  It’s the right thing to do.

In the coming weeks, we will be working with our national organizations, the National Association of County Recorders, Election Officials and Clerks (NACRC) and the International Association of Clerks, Recorders, Election Officials, and Treasurers (IACREOT) to take the same position.   We are also sending a copy of this letter to the National Conference on State Legislatures (NCSL) and the National Association of Counties (NACO).

Thank you for your immediate attention.

Sincerely,

Jeff L.Thigpen
Guilford County Register of Deeds, NC

John O’Brien
Southern Essex District Registry of Deeds, MA

###

SOURCE: Jeff Thigpen

LAW ENFORCEMENT’S UNCONDITIONAL SURRENDER TO WALL STREET

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NOTABLE QUOTES:

“ONE crucial reason the nation’s mortgage industry ran itself — and the entire nation — off the rails was its obsession with speed. Mortgages had to be approved chop-chop, loans pooled instantly. When it came to foreclosure, well, the quicker the better.”

“…no witnesses had been interviewed and that the coalition had sent out just one request for documents — and it has not yet been answered.”

“Treating holders of first and second liens alike is a boon to the banks, since so many second mortgages are owned by the nation’s largest institutions; many of the firsts are held by investors in mortgage-backed securities. The banks want the first mortgages to take the hit, leaving the seconds intact. Or at least for them both to share the pain equally.”

EDITOR’S COMMENT: Gretchen Morgenson has hit the nail on the head. Here we are AGAIN with SPEED being the driving force instead of asking and answering the appropriate questions. Why the rush? Probably because the more time that goes by, the more time there will be for some AG investigations to dig deeper and find out that the entire securitization scheme was a scam — an elaborate illusion that is causing our government, our economy and our relations with other nations to run on vapors.

The plain and obvious fact here is that the AG’s, as elected officials are more interested in pleasing their donors on Wall Street than the citizens they serve. With trillions of dollars in fake securitized loans, trillions of dollars in bailouts, trillions of dollars in unpaid taxes, fees, fines and probably $100 trillion in property or more subject to dubious title claims, the announcement of a $20 BILLION settlement is absurd. It is an unconditional surrender to Wall Street.

In the bizarre world we call American politics, the  victims — all the taxpayers, homeowners, and investors who were caught up in this PONZI scheme — are the ones paying the reparations. It’s all backwards. That’s like Jewish and other families whose property was seized and families  tortured and killed in World War II being required to pay Germany war reparations. Germany stepped up to its obligations not only because of unconditional surrender but because of a collective national guilt that they have been earning their way out of for over 60 years. What they did was bad and nobody in Germany would argue otherwise except a few extremist idiots.

But on Wall Street and the world media, there seems to be a gaslight approach to the worst financial fraud in history causing death, destruction and enslavement to generations of people all over the world. The job of an Attorney General is to enforce the law, not invent it and not to play politics on the basic rights of every citizen to be safe from predation and every taxpayer to be given the truth about the use of the their taxpayers and debts being created in the name of taxpayers who have not agreed to the deal. Nor should they.

Wall Street divided and created barriers between the real lenders (investors) and the real homeowners (also investors in securitization) and created the appearance of a deal that was good for Wall Street but that was neither good for nor acceptable to either the lenders or the homeowners. They did it by presenting different deals to each one without the other one knowing the disconnect between the deal they thought was on the table and the real deal with which Wall Street scammed the entire marketplace and world finance.

The proposed settlement, which is meant to to bar or persuade investors and homeowners to stop suing to recapture what was stolen from them, is an affront to the nation and the world. As Attorney Ashcroft said when the torturing was sanctioned by the Bush administration, “History will not treat us well for this.”

LLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL

A Swift Deal May Not Be a Sound One

By GRETCHEN MORGENSON

ONE crucial reason the nation’s mortgage industry ran itself — and the entire nation — off the rails was its obsession with speed. Mortgages had to be approved chop-chop, loans pooled instantly. When it came to foreclosure, well, the quicker the better.

So it is disturbing that the same need for speed is at work in the bank settlement being devised by state attorneys general relating to improper loan-servicing and foreclosure practices. When Tom Miller, the Iowa attorney general who leads the talks, announced initial terms of a deal on Monday, he said, “We’re going to move as fast as we can.”

While some might argue that a rapid approach will help borrowers, it is apt to benefit the banks far more. Hurrying to strike a deal means less time to devote to understanding how pernicious the foreclosure practices were at the nation’s largest institutions. How can you determine appropriate penalties for troubling practices when you haven’t conducted a full-fledged investigation?

Remember that the attorneys general who are participating in this settlement process have been a coalition only since October. Two people who have been briefed on the discussions, but who asked for anonymity because the deal was not final, told me last week that no witnesses had been interviewed and that the coalition had sent out just one request for documents — and it has not yet been answered.

And, yet, along comes a 27-page outline of remedies that the banks would have to abide by in their loan servicing and foreclosure businesses. Talk has also circulated that the banks would have to cough up $20 billion to close the deal, though there are no figures in the outline.

Mr. Miller declined to be interviewed about the proposal. But Geoff Greenwood, his spokesman, disputed the notion that the attorneys general have done no investigation. “We have dealt with this issue for some three and a half years on a day-to-day, front-line basis with consumers,” he said. “We know what the problems are, and we know what needs to change.”

Maybe so. But being able to produce reams of deposition testimony from bank employees and documents turned over under subpoena would give those negotiating for consumers and mortgage investors far more leverage than they’d have working with a series of talking points.

Recent lawsuits filed against Bank of America by Terry Goddard, then the Arizona attorney general, and Catherine Cortez Masto, Nevada’s attorney general, show the power that in-depth investigations provide. Both cases contend that the bank engaged in consumer fraud by failing to abide by loan modification provisions of a previous state settlement completed with Countrywide Financial in 2009. The bank has disputed the allegations, but the filings by these officials are chock-full of details gleaned from investigating more than 250 consumer complaints.

Mr. Miller’s list of remedies is helpful in showing just how dysfunctional and abusive the loan servicing business has become. Consider this proposed requirement: “Affidavits and sworn statements shall not contain information that is false or unsubstantiated.” And how’s this for revolutionary: “Loan servicers shall promptly accept and apply borrower payments.” (When they don’t, late fees magically appear.) And, get this: Loan servicers should also track the resolution of customer complaints.

You don’t say!

To be sure, there is substance to Mr. Miller’s proposal. A settlement would bar servicers from foreclosing on borrowers amid a loan modification, for example. And when a modification is denied, the servicer would have to explain why, and in detail.

But the terms severely disappoint in their treatment of second liens, a major sticking point in many loan modifications. The proposal would treat first and subsequent mortgages equally, turning upside down centuries-old law requiring creditors at the head of the line to be paid before i.o.u.’s signed later.

Treating holders of first and second liens alike is a boon to the banks, since so many second mortgages are owned by the nation’s largest institutions; many of the firsts are held by investors in mortgage-backed securities. The banks want the first mortgages to take the hit, leaving the seconds intact. Or at least for them both to share the pain equally.

To some degree, the document presented by Mr. Miller raises more questions than it answers. For example, what will state attorneys general have to give up regarding future lawsuits or enforcement actions against the banks if they sign on to the settlement? Typically, such deals contain releases barring participants from bringing new but related cases.

As they negotiate with Mr. Miller, you can bet the banks will push for aggressive releases. But because these institutions underwrote many toxic loans in the boom, barring attorneys general from bringing actions against them for lending improprieties is no way to hold dubious actors accountable.

One attorney general, Eric Schneiderman of New York, is concerned about such releases. According to a person briefed on the discussions, Mr. Schneiderman has told Mr. Miller that he will not participate in a deal that would preclude his office from pursuing claims against the banks relating to their mortgage origination, securitization and marketing practices. Mr. Schneiderman declined to comment.

IT is also unclear whether the settlement would prevent borrowers or investors from bringing their own lawsuits against loan servicers — a terrible result. And the list of terms has only the briefest mention of restitution for borrowers who have been hurt by questionable loan servicing.

These borrowers are legion. Reparations should not be limited only to those who were removed from homes improperly. Consider four who are suing the Money Store, a lender and loan servicer. Their two cases contend that the Money Store levied improper legal fees while borrowers were in foreclosure; one case has been dragging on for 10 years, the other for eight.

According to court filings, one couple paid $1,125 in legal fees and expenses associated with two bankruptcy motions that were never filed. They also paid $4,418 for legal work said to have been done by an outside firm (which lawyers for the Money Store have not proved it paid).

Another borrower paid $1,750 for legal fees that the Money Store could not show were paid to the firm that supposedly did the work. And yet another borrower paid $5,076 in fees and expenses that do not appear to have been submitted to the outside firm charged with the legal work, according to court filings.

“We picked four plaintiffs out of the hat here, and all four of them had situations where thousands of dollars in legal fees were passed on to them but where the evidence indicates the law firms were never paid,” said Paul Grobman, a New York lawyer for the borrowers. He wants to know if the servicer kept the fees.

The lead lawyer representing the Money Store declined to comment.

Shoddy loan servicing has clearly done significant damage to borrowers. If a state settlement morphs into yet another gift to the banks, let’s hope that at least some attorneys general will take a different path.

Can I Borrow Your Law License?

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

“In its S.E.C. filing, Prommis alerted potential investors that it could face challenges from bar associations, prosecutors or homeowners that its relationship with its law firms constituted the “unauthorized practice of law” or involved “impermissible fee sharing” arrangements.”

“The relationship between the Wall Street specialists and a law firm appears to work like this: A private equity firm, in a transaction worth tens of millions of dollars, buys a wide range of services used by the law firm, like its accounting, computer data, document processing and title search departments. Then, a subsidiary of that private equity firm or an entity it controls makes money by providing those services back to that law firm or other businesses for a fee.”

EDITOR’S COMMENT: It was a just a matter of time. Ask any of the anti-foreclosure mills how long and how much money it takes to build up an effective machine to counter the rush to foreclosure, and it doesn’t take a rocket scientist to realize that Stern, Bosco, Baum, Watson et al were getting their money from someplace, and that someplace HAD to be Wall Street. Wall Street effectively owns the foreclosure mills. Bar prosecutors in many states are taking a hard look at the referral of these cases for UPL (Unauthorized Practice of Law) and conspiracy. It’s a felony in most states and there are actual manuals published in many of these states that instruct prosecutors on how to prosecute UPL. It isn’t sexy, but it has a lot of teeth, as I have mentioned before, comparing to how they got Al Capone on income tax evasion.

So the owner of small law firm gets an offer he can’t refuse. We’ll buy out the guts of your firm whether it exists or not. We’ll put in the money to build it up with people, equipment, space, etc. We’ll lease it back to you at a guaranteed amount of money that will make you rich. Just sit back and do nothing. we’ll do the rest. Combined with the admission that the decision as to whether a homeowner would be declared in default was “outsourced” to a computer rather than a person, the pieces are falling together like a jig saw. That decision-making process was also used to “decide” which institution would foreclose — to prevent the obvious inquiries from more than one foreclosure on the same house initiated in the name of two or more supposedly separate and distinct entities. The purpose is to provide “plausible deniability” to the people involved and technical hair-slitting defenses to keep their licenses, keep the money they made, and maintain control of the biggest title fraud in the history of the world.

October 20, 2010

Foreclosures Profit Some Equity Firms

By BARRY MEIER

With a surge in lawsuits against law firms specializing in foreclosures, a case in Mississippi is casting light on another aspect of the mortgage mess — the connection between Wall Street private equity firms and those law firms, often known as foreclosure mills.

The lawsuit on behalf of homeowners claims that Great Hill Partners, a private equity firm, has benefited from what the lawsuit calls an illegal fee-splitting arrangement between Prommis Solutions and several of the busiest foreclosure law firms it controls. Great Hills is the biggest stakeholder in Prommis, a company that acts as a middleman between mortgage servicers and law firms.

A lawyer for Prommis rejected that claim, and officials of Great Hill Partners did not respond to inquiries. But a review of public filings, company news releases and other public statements shows that several private equity firms or entities they control have stakes in the business operations of some of the busiest foreclosure law firms in New York, California, Connecticut, Florida, Georgia and Texas.

Some of those law firms — like the offices of David J. Stern of Plantation, Fla., and Steven J. Baum of Amherst, N.Y. — are among those that are either under scrutiny by law enforcement officials or face actions by homeowners contending that they used inaccurate or fraudulent mortgage-related documents. Both lawyers have denied any wrongdoing, and neither has been charged with a crime.

The influence, if any, that private investors are having on the practices of the foreclosure mills is not clear. But the issue is likely to be examined in coming months in lawsuits like the one in Mississippi and as a nationwide task force of state attorneys general start their inquiry into the accuracy of mortgage documents.

To maximize investment returns, private equity firms often squeeze down costs in the operations they acquire. And some legal experts suggest that could be a factor in the quality of legal documents generated by foreclosure mills.

“The concern is that you are pushing production down to least-cost producer,” said Susan Carle, a professor at American University Washington College of Law.

Tom Miller, the Iowa attorney general who is heading up the task force investigating questionable document practices, said he was not aware that private equity firms had acquired some foreclosure-related operations. While there is no law against such purchases, Mr. Miller said the issue could prove significant because it expanded the possibilities of where and how the foreclosure system failed.

“If this is happening, this is something we are concerned about and would want to find out more about it,” Mr. Miller said in a telephone interview.

The investors involved in foreclosure mills include a publicly traded investment fund, Ares Capital, as well as other midsized and small buyout firms like Great Hill Partners.

The involvement of private equity firms in the legal industry is not new. But their involvement with foreclosure mills appears to have started about five years ago, just as the housing market was starting to collapse and the number of foreclosure procedures was beginning to boom.

The relationship between the Wall Street specialists and a law firm appears to work like this: A private equity firm, in a transaction worth tens of millions of dollars, buys a wide range of services used by the law firm, like its accounting, computer data, document processing and title search departments. Then, a subsidiary of that private equity firm or an entity it controls makes money by providing those services back to that law firm or other businesses for a fee.

For example, about three years ago, Tailwind Capital, a private equity firm in Manhattan, acquired many of the business-related operations of a law firm near Buffalo run by Mr. Baum, which does one of the highest volumes of foreclosures in New York State. Soon afterward, the fund bought similar operations from one of Connecticut’s biggest foreclosure law firms, Hunt Leibert Jacobson of Hartford.

Ares Capital, which financed the move, is also now a co-investor in those assets, which are held in a Tailwind unit called Pillar Processing, a public filing indicates.

Similarly, a private equity firm in San Francisco, FTV Capital spearheaded a $27 million investment in 2007 in an entity that buys law firm business operations and then uses them to provide services back to firms specializing in “foreclosure, bankruptcy and eviction,” according to a news release issued by the firm.

“We have been keenly focused on the mortgage-default services space,” the buyout fund stated in a 2007 news release. “The space is important to our strategic investors which represent six of the top 10 mortgage investors/servicers.”

In an e-mail, a spokeswoman for FTV Capital said that company officials were not available for comment.

Law firms receive a relatively low fee from companies that service home loans, say about $1,200 a case for handling a foreclosure-related proceeding. But those fees can translate into big profits for lawyers and their private equity partners when tens of thousands of foreclosures are involved. The law firms and the private equity firms have structured these deals with an eye toward avoiding legal statutes and ethical rules like those that bar fee-splitting between lawyers and nonlawyers.

But that relationship has been challenged in the Mississippi lawsuit against Prommis and Great Hill Partners.

Another company, Lender Processing Services, is also accused in the lawsuit of illegally splitting fees with foreclosure law firms; it also denies doing so.

The roots of Prommis, based in Atlanta, trace back to 2006 when the company acquired the back-office operations of McCalla Raymer, one of the country’s biggest foreclosure law firms. Great Hill Partners states on its Web site that it was interested in the acquisition because it reflected a way for it to profit from the housing downturn.

In subsequent years, Prommis expanded its operations nationwide by buying the back-office operations of other major foreclosure law firms, according to a recent Securities and Exchange Commission filing made by the company in connection with a planned initial stock offering.

According to that June filing, Prommis now generates revenue by providing services like document processing to the same law firms that handle nearly all of the foreclosures initiated by the loan servicers with whom Prommis works.

In a telephone interview, Prommis’s general counsel, Richard J. Volentine Jr., said that the company did not split fees with its affiliated law firms and that those fees were paid directly to those firms by the loan servicers.

In its S.E.C. filing, Prommis alerted potential investors that it could face challenges from bar associations, prosecutors or homeowners that its relationship with its law firms constituted the “unauthorized practice of law” or involved “impermissible fee sharing” arrangements.

Prommis also stated in that filing that any steps that slowed the pace of foreclosures, like government programs that helped homeowners renegotiate loans, would hurt its revenue.

Julie Creswell contributed reporting.

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