Foreclosures: The Lie We Are Living

Posted on October 30, 2018 by Neil Garfield

Most people, including homeowners, believe that the homeowners do owe the money and that the entities that are attempting to foreclose should win. That is why the free house myth is so pervasive.

The result is that foreclosures are being granted to entities that (a) do not exist or (b) have nothing to do with the loan, debt, note or mortgage or both. The benefits of foreclosure all run in favor of the megabanks and against the real parties in interest, the investors. These banks have managed to separate the debt from the paperwork in a highly effective way that can be, but usually isn’t, challenged on cross examination and well-founded objections.

The truth is that the homeowners do not owe any money to the people who are collecting or enforcing the loan. End of story. The rest is a lie.

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.

I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM. A few hundred dollars well spent is worth a lifetime of financial ruin.

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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see tps-third-party-strangers-in-mortgage-cases/

One of my favorite lawyers is getting discouraged. He says that it is virtually impossible for a homeowner to successfully defend a foreclosure action especially if it involves a blank endorsement (bearer paper). Foreclosure defense is indeed an uphill battle but it is one in which the homeowner can — and should — prevail.

I don’t agree with the premise that homeowners will and should lose foreclosure cases. I think most of the foreclosures are built on an illusion created and fabricated by the megabanks. I think we would have won the cases we won even without the standing issue, with or without blank or special indorsements.

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The compounding error that keeps recurring is the difference between enforcement of the note and enforcement of the mortgage. You can enforce the note without owning the debt but you can’t enforce the mortgage without owning the debt. But in court they are conflated because few people draw the distinction.
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Possession of bearer paper (the note) raises a presumption that the debt was transferred. But that is a rebuttable presumption and proof at trial should be required as to the transfer (purchase) of the debt for value. But if the debt was actually transferred that would mean it was purchased for value. And if it was purchased for value then any transferee with half a brain would assert status of a holder in due course. They don’t assert HDC status because they didn’t pay value for the debt because the debt was never transferred and the fictitious delivery of the original note was intended to deceive the homeowner, his/her lawyer and the court.
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If a trust is involved, the existence of the trust should be pled and proven. Nobody is raising that issue even though it is a winner.
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It is an uphill battle and many judges will disregard the appropriate arguments because they don’t see or don’t want to see the consequences of their assumptions and bias.
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As a result we have a name being used as a DBA by multiple layers of conduits that don’t lead back to the actual owner of the debt. Homeowners did not create this problem nor should they suffer the consequences of bank chicanery. Banks did it because the big lie was extremely overwhelmingly and pornographically profitable. Banks have already made windfall profits on the loan whether the borrower pays or not. They then get an extra windfall by foreclosing because they can. At the same time the foreclosure sale raises yet another false presumption that everything that went before the sale was valid and authorized.
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This all happens under the cover of why should homeowners get a windfall free house? Most people don’t believe that the banks are getting a windfall for an investment that has been paid off multiple times. They believe the lie that the homeowner’s debt is still out there and belongs to someone who ultimately is connected to the entities that seek foreclosure or collection. It is a lie. Windfall results are more common than most people realize. It frequently happens that one litigant, because of a decision or the wording some legislation will get a windfall. In many cases the question is which party should get the windfall?
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The real question is who should get the windfall that has been created by the banks? Should it be the banks who have already profited in multiples of the loan amount or the homeowner whose signature and credit reputation was used as the foundation for the multiple sales of his loan? On a level playing field, the courts ought to tilt toward the homeowners who have mostly been lured into loans based upon wildly false appraisals on terms that they could not afford — and remember that under law the affordability of the loan is the responsibility of the lender, not the borrower.
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Finding excuses to rule in favor of a foreclosing party that usually doesn’t even exist much less own the debt, note and mortgage is simply the wrong way to go. This is not a matter of policy for the legislature although the legislatures could intervene. It is a matter of equity and foreclosures are in a court of equity not at law. The party who caused the mess and who brought the country to its knees should not be the party who is rewarded with a foreclosure to cover a nonexisting loss.
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If the investors were included I could see why both investors and homeowners would be considered victims and how the court could rule in favor of the investors. But the investors are decidedly NOT involved. They are unaffected by foreclosure of the loans because in reality they have only received a promise to pay from one of the megabanks doing business as “XYZ Trust”. They are completely uninformed about the debt or its enforcement and do not get the proceeds of a foreclosure sale.
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The underwriting is done by the megabank but the loan comes from investors who believe they are investing in a trust when in fact they are merely making a deposit with the underwriting investment bank.
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The whole reason why these banks were converted from investment banks to commercial banks over a weekend was not just to gain access to the Fed window to sell worthless mortgage bonds. It was because they had already been acting as though they were commercial banks by taking money from investors and merely starting an “account” for each of the investors wherein the only party who could draw money out of it was the “bank.”
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So after our experience in the courts, it is unfair to homeowners and unfair to us as the attorneys who made it happen, to say that it is impossible for homeowners to win foreclosure cases. Good cross examination, and trial practice including the use of well-founded objections still wins the day more often than not. 

Filed under: foreclosure | Tagged: , , , , , , | 9 Comments »

Ireland Joining Iceland for Mortgage Principal Corrections

Posted on October 9, 2012 by Neil Garfield

Editor’s Note: It’s not final but it looks like Ireland is going to do pretty much the same thing that Iceland did, except this one is based upon the heart of the crisis — housing and bad mortgages, falsely presented to lenders and borrowers alike. The answer? Reduction in the balance due on mortgages that were falsely presented in the first place.

It is the obvious answer. Homeowners and lenders were BOTH fooled into believing that normal underwriting practices were at work. The originators even charged more for no-doc loans because they were taking a higher risk than the usual requirements of tax returns, confirmation of employment and income, and verification of the value of the property and the ability of the borrower to repay the loan.

The banks took the money from investors, promising to deposit those funds into a “trust” account for funding mortgages or acquiring mortgages within the prescribed period of time (90 days). The banks didn’t deposit the funds in any such account and instead commingled all the investor money to intentionally obscure the theft and the nature of the Ponzi scheme they were running.

The homeowner is said to be at fault for borrowing more money than they could afford to repay, but the bank sales machine expanded the offering of mortgages from 4-5 different types to over 450 different types of loans, along with assurances that the bank had reviewed the loan, and was satisfied that the loan could be repaid and that was because of rising prices in real estate fueled mostly by a flood of money and the boom in new house building where builders were only too happy to raise their prices as much as 20% per month, for appraisers to “use” in comparing property values. The truth is that the appraisers were under threat of either coming in with an appraisal at least over $20,000 more than the contract price, or they would never work again.

Yet somehow in the mind of policy makers and bankers (and the courts)  it was cheating when they gave those appraisals (indirectly) to investors but stupid on the part of borrowers who accepted the approvals. So the borrowers, who were cheated out of the deal they they were getting are stuck and the investors who are cheated out of the deal they thought they were getting, are getting settlements.

As Iceland has shown, the issue isn’t blame anymore. It is survival. And as Iceland as shown, the issue is whether the economy can be re-started and become robust once again. The answer is yes, as long as we turn a deaf ear to the bankers whose information and data is used by policy makers.

6 Years I ago I proposed that the answer to this problem was amnesty for everyone, with everyone taking a share of the loss. That still seems like a good idea. Iceland is putting bankers in jail and maybe that is where they belong. But I am more concerned with the health of our society, not the revenge against individual bankers.

Ireland Plans Bold Measures to Lift Housing

By PETER EAVIS, NY Times

DUBLIN – With its economy still reeling from the housing crash, Ireland is making a bold move to help tens of thousands of struggling homeowners.

The Irish government expects to pass a law this year that could encourage banks to substantially cut the amount that borrowers owe on their mortgages, a step that no major country has been willing to take on a broad scale.

The initiative, which would lower a borrower’s monthly payment, could prevent a tide of foreclosures, an uncertainty that has been hanging over the Irish housing market for years. If it works, the plan could provide a road map for other troubled countries.

Without the proposed law, Laura Crowley, a nurse who lives in a village 30 miles west of Dublin, figures she will lose her home. In 2007, Ms. Crowley and her husband bought a small home for the equivalent of $420,000. But they can no longer afford the $1,400 monthly payment. Her husband, a construction worker, is earning far less and her take-home pay has been cut by the country’s new austerity measures, which include new taxes. “This bill is the only light at the end of the tunnel for us,” she said.

Most countries that have suffered housing busts, including the United States, have made limited use of so-called mortgage write-downs, the process of forgiving a portion of the principal on the loan. The worry has been that some borrowers who can afford their mortgages will stop making payments to take advantage of a bailout. Banks have also been reluctant since they could face unexpected losses.

Ireland is different from the United States and most countries. During the financial crisis, Ireland bailed out the banks, and the government still has large ownership stakes in some of the biggest mortgage lenders. So taxpayers are already responsible for mortgage losses. In other countries, the burden of principal forgiveness would largely fall on privately owned banks.

But the debate is the same: whether to push lenders to take losses now, in hopes that things will get better faster, or wait for the housing market to heal on its own, which could cloud the economy for years to come.

Countries suffering from a housing hangover will most likely be watching Ireland closely to see how the law works. Spain, swamped with mortgage defaults, introduced a measure in March that allows for debt forgiveness, though under strict conditions.

In many ways, Ireland has to try something audacious. House prices are still 50 percent below their peak, compared with 30 percent in the United States. And more than half of Irish mortgages are underwater, meaning the house is worth less than the outstanding debt. While some of those borrowers can afford to keep making payments, more than a quarter of mortgage debt on first homes, roughly $39 billion, is in default or has been modified by lenders.

The housing market is now in a state of limbo as the government and the banks have made little effort to clean up the mortgage mess.

Unlike in the United States, Irish banks have foreclosed on very few borrowers. While Ireland’s leaders have considered it socially unacceptable for banks to seize large numbers of homes, they also feared the fiscal cost of foreclosures.

This approach creates doubt about the true level of bad mortgages at Irish banks. And borrowers, unsure of whether they will keep their homes, remain in a state of financial paralysis.

The new law aims to end this stalemate by overhauling Ireland’s consumer debt and bankruptcy laws.

While banks aren’t required to reduce the mortgage debt, the legislation gives them a powerful incentive to write down mortgages for troubled borrowers. Under the new rules, it will be less onerous to declare bankruptcy, making it easier for people to walk away from their homes altogether. As the threat rises, banks are more likely to reduce homeowners’ debt, rather than risk losing the monthly income and getting stuck with the property.

“For the banks, where there are losses, they have to be recognized,” said Alan Shatter, Ireland’s justice minister, who has sponsored the new law, called the Personal Insolvency Bill. “This legislation gives homeowners hope for their future.”

The legislation is intended, in part, to reach homeowners who are on the verge of running into trouble, as Geraldine Daly is.

A health care worker, Ms. Daly bought a home in 2009 in Belmayne, a new development in northern Dublin. Until last month, Ms. Daly said, she has been making her $1,200 payment. Then she fell behind after some unexpected expenses, including a car repair.

Ms. Daly estimates that her finances would become manageable if her monthly mortgage payments were cut to around $900. “Right now, I am a slave to this dog box.”

Critics contend the law could have unintended consequences.

One fear is that banks won’t have the money to absorb the potential losses on the mortgages. A big mystery is the level of defaults on so-called buy-to-let mortgages, loans that many Irish people took out to buy second homes to rent. In theory, the insolvency bill allows for write-offs on this type of mortgage, and analysts expect defaults on such loans to be higher than on first homes. Ireland’s central bank is expected to release the data soon.

To qualify, borrowers will have to prove that they are in a precarious financial position and cannot afford to pay. Analysts are concerned that the bill may actually be too restrictive and homeowners will continue to default. “There are so many layers that borrowers have to go through to get a write-down,” said Paul Joyce, senior policy researcher at Free Legal Advice Centers, a legal rights group that has supported moves to make Irish bankruptcy law more lenient. For instance, borrowers will most likely have to pay a big fee upfront to the person who handles their case.

John Chubb, a former construction worker who lives on a quiet cul-de-sac on the outskirts of Dublin, isn’t too worried about the process right now. He just wants to save his home.

Since having an operation for colon cancer in 2004, Mr. Chubb has lived primarily on government disability payments, and the bank has allowed him to pay only mortgage interest. But the lender is in the process of deciding whether to foreclose.

“I am expecting the word any day now,” he said. “I don’t know if I will be out on the front path before the bill passes.”

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , | 8 Comments »

CFPB Safe Harbor Rule Would Allow Homeowners to Fight Bad Mortgages

Posted on September 21, 2012 by Neil Garfield

Editor’s Comment: The practice of disregarding normal loan underwriting standards creates a claim that homeowners were tricked into loans that they could never repay. The Consumer Financial Protection Bureau, built by Elizabeth Warren under Obama’s direction is about to pass a rule that addresses that very issue. The new Rule would allow homeowners contesting foreclosure to introduce evidence challenging whether the “lender” correctly determined a borrower’s ability to repay the loan.

The details of the test for the “safe harbor” provision that is being contested are not yet known. The objective is to separate those who are using general knowledge of bad practices in the industry from those who were actually hurt by those practices. It would provide the presiding judge with a simple, clear test to determine whether the evidence submitted (not merely allegations — so the burden is still on the homeowner) are sufficient to determine that the “lender” wrote a loan that it knew or should have known could not be repaid.

The game being indirectly addressed here is that the participants in the fake securitization scheme intentionally wrote bad loans and then were successful at entering into contracts that paid insurance, credit default swap and federal bailout proceeds to the participants in the scheme even though they neither made the loan nor did the forecloser actually buy the loan (no money exchanged hands).

Those who do not meet the test would have “frivolous” claims dismissed summarily by the Judge. But they would have other grounds to sue the “lender” or the party making false claims of default and foreclosure. Those who do meet the test, would defeat the foreclosure leaving the loan in a state of limbo.

The net legal effect of the rule could be that the mortgage is void and the note is no longer considered evidence of the entire transaction — because the risk of loss on the homeowner shifts to the lender, at least in part. This would clear the path for principal reduction and new loans that would correct the corruption of title in the county title records.

The rule is coming at the behest of the Federal Reserve, which has is own problems on how to account for the trillions they have advanced for “bad” mortgages or worthless bogus mortgage bonds.

The question remains whether the purchase of these bonds conveys some right of action to collect money that the investors advanced, and who would receive that money. It also leaves open the question of whether a mortgage bond purportedly owned by the Federal reserve or even sold by the the Federal Reserve changes the players with standing to bring lawsuits or other foreclosure proceedings.

This rule, when it is finally written and passed, won’t solve all the problems but it could have a cascading effect of restoring at least some homeowners to at least a better financial condition than the one in which they find themselves.

The issue that would be interesting to see litigated is whether the homeowners who meet the test now have a claim to recover part or all of the money they paid on the mortgage thus far or if they are given an additional credit for the overage they paid — another way of reducing principal.

The bottom line is that there is recognition at all levels of government agencies —Federal and State — that there are problems with the origination of the loans and not just with the robo-signed assignments, allonges endorsements and fake powers of attorney. This recognition is going to be felt throughout the regulatory and judicial system and will redirect the attention of Judges to the reality that Wall Street banks wanted bad loans so they could make millions on each bad loan through multiple sales of the same loans using insurance, credit default swaps, TARP and other schemes to cover it all up.

http://www.housingwire.com by John Prior

Consumer Financial Protection Bureau Director Richard Cordray told a House committee Thursday that mortgage lenders would still not be safe if the bureau elects to grant a safe harbor provision to the upcoming Qualified Mortgage rule.

“The safe harbor versus rebuttable presumption is a mirage,” Cordray said. “Even safe harbor isn’t safe. You can always be sued for whether you meet the criteria or not to get into the safe harbor. It’s a bit of a marketing concept there. The more important point is are we drawing bright lines? If someone were to say to me safe harbor or anything else, I would go with a safe harbor. But I don’t think safe harbor is truly safe. And I think it oversimplifies the issue.”

Rep. Michael Grimm, R-N.Y. then right away pressed Cordray on which he would choose: a safe harbor or rebuttable presumption. The director was forced to remind him the rule was still under development and would be finalized in January.

“I have not taken a position. I have discussed the issue,” Cordray said.

Mortgage industry lobbyists have been pressing the bureau since it overtook QM rulemaking responsibility from the Federal Reserve last year to install “clear, bright lines” and a legal safe harbor that protects lenders from future homeowner suits during foreclosure.

A rebuttable presumption provision allows homeowners to introduce evidence in court challenging whether the lender correctly determined a borrower’s ability to repay the loan before it was written. But a safe harbor allows a simple test for a judge to find if the mortgage met the QM rule, and frivolous suits could be dismissed early.

The Mortgage Bankers Association even showed the CFPB that attorney fees go up to an average $84,000 for a summary judgment from $26,000 if it’s dismissed. The risk of this increased cost would be passed on to borrowers, they claim.

Some consumer advocacy groups previously said such suits are rare, and a safe harbor could clear lenders from risks down the road rule makers cannot anticipate now.

Cordray repeatedly said in the hearing Thursday that his goal on QM and upcoming rules for the mortgage market is to protect consumers but not cut off access to credit. Forcing courts to define areas left gray by regulators is not something he would permit.

“As a former attorney general in Ohio, gray areas of the law are not appreciated,” Cordray said. “They’re difficult for people trying to comply. If we write rules that are murky, they’ll end up getting resolved in courts and it will take years and be very expensive. We are making real efforts to draw very bright lines.”

jprior@housingwire.com

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , | 58 Comments »

ALLSTATE FILES SUIT LAYING OUT ALL THE ALLEGATIONS YOU NEED

Posted on February 24, 2011 by Neil Garfield

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

REQUIRED READING

2.24.2011 Chase -Allstate-Complaint

JUST LOOKING AT THE TABLE OF CONTENT WILL TELL YOU WHAT YOU NEED TO KNOW

NATURE OF ACTION …………………………………………………………………………………………………….1
PARTIES ………………………………………………………………………………………………………………………..7
JURISDICTION AND VENUE ……………………………………………………………………………………….16
BACKGROUND ……………………………………………………………………………………………………………17
A.    THE MECHANICS OF MORTGAGE SECURITIZATION …………………………………….17
B.    SECURITIZATION OF MORTGAGE LOANS: THE TRADITIONAL MODEL ……..19
C.    THE SYSTEMIC VIOLATION OF UNDERWRITING AND APPRAISAL STANDARDS IN THE MORTGAGE SECURITIZATION INDUSTRY …………………..21
D.    DEFENDANTS WERE AN INTEGRATED VERTICAL OPERATION CONTROLLING EVERY ASPECT OF THE SECURITIZATION PROCESS…………..24
(1)    JPMorgan Defendants……………………………………………………………………..24 (2)

WaMu Defendants ………………………………………………………………………….26 (3)

Bear Stearns Defendants ………………………………………………………………….27
E.    DEFENDANTS’ OFFERING MATERIALS…………………………………………………………..29 (1)

The JPMorgan Offerings………………………………………………………………….29 (2)

The WaMu Offerings………………………………………………………………………30 (3)

The Long-Beach Offering………………………………………………………………..32 (4)

The Bear Stearns Offerings………………………………………………………………32
SUBSTANTIVE ALLEGATIONS …………………………………………………………………………………..34
I.    THE OFFERING MATERIALS CONTAINED UNTRUE STATEMENTS OF MATERIAL FACT AND OMISSIONS ABOUT THE MORTGAGE ORIGINATORS’ UNDERWRITING STANDARDS AND PRACTICES, AND MATERIAL CHARACTERISTICS OF THE MORTGAGE LOAN POOLS ……………..34
A.    Defendants’ Misrepresentations Regarding Underwriting Standards And Practices …………………………………………………………………………………………………..34
(1)    JPMorgan Defendants’ Misrepresentations Regarding Underwriting Standards And Practices………………………………………………35
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(2)    WaMu Defendants’ Misrepresentations Regarding Underwriting Standards and Practices……………………………………………………………………35
(3)    Long Beach Defendants’ Misrepresentations Regarding Underwriting Standards and Practices……………………………………………….36
(4)    Bear Stearns Defendants’ Misrepresentations Regarding Underwriting Standards and Practices……………………………………………….39
B.    Defendants’ Misrepresentations Regarding Owner-Occupancy Statistics …………40
(1)    JPMorgan Defendants’ Misrepresentations Regarding Owner- Occupancy Statistics ……………………………………………………………………….40
(2)    WaMu Defendants’ Misrepresentations Regarding Owner Occupancy Statistics ……………………………………………………………………….41
(3)    Bear Stearns Defendants’ Misrepresentations Regarding Owner Occupancy Statistics ……………………………………………………………………….41
C.    Defendants’ Misrepresentations Regarding Loan-to-Value and Combined Loan-to-Value Ratios…………………………………………………………………………………42
(1)    JPMorgan Defendants’ Misrepresentations Regarding LTV and CLTV Ratios………………………………………………………………………………….42
(2)    WaMu Defendants’ Misrepresentations Regarding LTV and CLTV Ratios ……………………………………………………………………………………………42
(3)    Bear Stearns Defendants’ Misrepresentations Regarding LTV and CLTV Ratios………………………………………………………………………………….43
D.    Defendants’ Misrepresentations Regarding Debt-to-Income Ratios …………………44
(1)    JPMorgan Defendants’ Misrepresentations Regarding Debt-to- Income Ratios ………………………………………………………………………………..44
(2)    WaMu Defendants’ Misrepresentations Regarding Debt-to-Income Ratios ……………………………………………………………………………………………44
(3)    Bear Stearns Defendants’ Misrepresentations Regarding Debt-to- Income Ratios ………………………………………………………………………………..45
E.    Defendants’ Misrepresentations Regarding Credit Ratings……………………………..46
(1)    JPMorgan Defendants’ Misrepresentations Regarding Credit Ratings ………………………………………………………………………………………….46
(2)    WaMu Defendants’ Misrepresentations Regarding Credit Ratings………..47 ii
(3)    Long Beach Defendants’ Misrepresentations Regarding Credit Ratings ………………………………………………………………………………………….48
(4)    Bear Stearns Defendants’ Misrepresentations Regarding Credit Ratings ………………………………………………………………………………………….48
F.    Defendants’ Misrepresentations Regarding Credit Enhancements……………………49
(1)    JPMorgan Defendants’ Misrepresentations Regarding Credit Enhancements ………………………………………………………………………………..49
(2)    WaMu Defendants’ Misrepresentations Regarding Credit Enhancements ………………………………………………………………………………..50
(3)    Long Beach Defendants’ Misrepresentations Regarding Credit Enhancements ………………………………………………………………………………..50
(4)    Bear Stearns Defendants’ Misrepresentations Regarding Credit Enhancements ………………………………………………………………………………..51
G.    Defendants’ Misrepresentations Regarding Underwriting Exceptions………………51
(1)    JPMorgan Defendants’ Misrepresentations Regarding Underwriting Exceptions …………………………………………………………………51
(2)    WaMu Defendants’ Misrepresentations Regarding Underwriting Exceptions ……………………………………………………………………………………..52
(3)    Long Beach Defendants’ Misrepresentations Regarding Underwriting Exceptions …………………………………………………………………53
(4)    Bear Stearns Defendants’ Misrepresentations Regarding Underwriting Exceptions …………………………………………………………………53
H.    Defendants’ Misrepresentations Regarding Alternative Documentation Loans ……………………………………………………………………………………………………….53
(1)    JPMorgan Defendants’ Misrepresentations Regarding Alternative Documentation Loans ……………………………………………………………………..54
(2)    WaMu Defendants’ Misrepresentations Regarding Alternative Documentation Loans ……………………………………………………………………..54
(3)    Bear Stearns Defendants’ Misrepresentations Regarding Alternative Documentation Loans …………………………………………………….55
I.    Defendants’ Misrepresentations Regarding Full-Documentation Loans……………55
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J.    Defendants’ Misrepresentations Regarding Adverse Selection of Mortgage Loans ……………………………………………………………………………………………………….56
K.    Defendants’ Failure to Disclose the Negative Results of Due Diligence …………..57
II.    ALL OF DEFENDANTS’ REPRESENTATIONS WERE UNTRUE AND MISLEADING BECAUSE DEFENDANTS SYSTEMATICALLY IGNORED THEIR OWN UNDERWRITING GUIDELINES ……………………………………………………58
A.    Evidence Demonstrates Defendants’ Underwriting Abandonment: High Default Rates And Plummeting Credit Ratings ……………………………………………..59
B.    Statistical Evidence of Faulty Underwriting: Borrowers Did Not Actually Occupy The Mortgaged Properties As Represented……………………………………….62
(1)    The JPMorgan Offerings………………………………………………………………….64 (2)

The WaMu Offerings………………………………………………………………………64 (3)

The Bear Stearns Offerings………………………………………………………………65
C.    Statistical Evidence of Faulty Underwriting: The Loan-to-Value Ratios In The Offering Materials Were Inaccurate ………………………………………………………65
(1)    The JPMorgan Offerings………………………………………………………………….66 (2)    T

he WaMu Offerings………………………………………………………………………68 (3)

The Bear Stearns Offerings………………………………………………………………71
D.    Other Statistical Evidence Demonstrates That The Problems In Defendants’ Loans Were Tied To Underwriting Guideline Abandonment………..72
E.    Evidence Demonstrates That Credit Ratings Were A Garbage-In, Garbage-Out Process …………………………………………………………………………………75
F.    Evidence From Defendants’ Own Documents And Former Employees Demonstrates That The Representations In Defendants’ Offering Materials Were False ……………………………………………………………………………………………….76
(1)    The JPMorgan Offerings………………………………………………………………….76 (2)

The WaMu Offerings………………………………………………………………………80 (3)

The Long Beach Offerings……………………………………………………………….87 (4)

The Bear Stearns Offerings………………………………………………………………92
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G.    Evidence From Defendants’ Third-Party Due Diligence Firm Demonstrates That Defendants Were Originating Defective Loans………………….94
H.    Evidence Of Other Investigations Demonstrates The Falsity Of Defendants’ Representations ………………………………………………………………………97
(1)    The WaMu and Long Beach Offerings………………………………………………97
(2)    The Bear Stearns Offerings………………………………………………………………99
III.    DEFENDANTS’ REPRESENTATIONS CONCERNING UNAFFILIATED ORIGINATORS’ UNDERWRITING GUIDELINES WERE ALSO FALSE ……………102
A.    Countrywide ……………………………………………………………………………………………104
(1)    Defendants’ Misrepresentations Concerning Countrywide’s Underwriting Practices…………………………………………………………………..104
(2)    These Representations Were Untrue And Misleading………………………..105 B.

GreenPoint ……………………………………………………………………………………………..109
(1)    Defendants’ Misrepresentations Concerning GreenPoint’s Underwriting Practices…………………………………………………………………..109
(2)    These Representations Were Untrue And Misleading………………………..111 C.    PHH……………………………………………………………………………………………………….115
(1)    Defendants’ Misrepresentations Concerning PHH’s Underwriting Practices ………………………………………………………………………………………115
(2)    These Representations Were Untrue And Misleading………………………..116 D.

Option One……………………………………………………………………………………………..118
(1)    Defendants’ Misrepresentations Concerning Option One’s Underwriting Practices…………………………………………………………………..118
(2)    These Representations Were Untrue and Misleading:………………………..120 E.    Fremont ………………………………………………………………………………………………….122
(1)    Defendants’ Misrepresentations Concerning Fremont’s Underwriting Practices…………………………………………………………………..122
(2)    These Representations Were Untrue and Misleading…………………………124 IV.

THE DEFENDANTS KNEW THEIR REPRESENTATIONS WERE FALSE ………….126
v
A.    The Statistical Evidence Is Itself Persuasive Evidence Defendants Knew Or Recklessly Disregarded The Falsity Of Their Representations………………….126
B.    Evidence From Third Party Due Diligence Firms Demonstrates That Defendants Knew Defective Loans Were Being Securitized …………………………127
C.    Evidence Of Defendants’ Influence Over The Appraisal Process Demonstrates That Defendants Knew The Appraisals Were Falsely Inflated …………………………………………………………………………………………………..130
D.    Evidence Of Internal Documents And Former Employee Testimony Demonstrates That Defendants Knew Their Representations Were False ……….131
(1) (2) (3) (4)
JPMorgan Defendants Knew Their Representations Were False…………131 WaMu Defendants Knew Their Representations Were False ……………..133 Long Beach Defendants Knew Their Representations Were False………138 Bear Stearns Defendants Knew Their Representations Were False ……..140
V.    ALLSTATE’S DETRIMENTAL RELIANCE AND DAMAGES ……………………………144

VI.    TOLLING OF THE SECURITIES ACT OF 1933 CLAIMS …………………………………..146

FIRST CAUSE OF ACTION …………………………………………………………………………………………149

SECOND CAUSE OF ACTION …………………………………………………………………………………….150

THIRD CAUSE OF ACTION………………………………………………………………………………………..152

FOURTH CAUSE OF ACTION …………………………………………………………………………………….155

FIFTH CAUSE OF ACTION …………………………………………………………………………………………157

PRAYER FOR RELIEF ………………………………………………………………………………………………..157

JURY TRIAL DEMANDED………………………………………………………………………………………….158

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , , , | 73 Comments »

Bank of America to Pay $108 Million in Countrywide Case

Posted on June 8, 2010 by Neil Garfield

GET LOAN SPECIFIC RECORDS PROPERTY SEARCH AND SECURITIZATION SUMMARY

FTC v Countrywide Home Loans Incand BAC Home Loans ServicingConsent Judgment Order 20100607

Editor’s Comment: This “tip of the iceberg”  is important for a number of reasons. You should be alerted to the fact that this was an industry-wide practice. The fees tacked on illegally during delinquency or foreclosure make the notice of default, notice of sale, foreclosure all predicated upon fatally defective information. It also shows one of the many ways the investors in MBS are being routinely ripped off, penny by penny, so that there “investment” is reduced to zero.
There also were many “feeder” loan originators that were really fronts for Countrywide. I think Quicken Loans for example was one of them. Quicken is very difficult to trace down on securitization information although we have some info on it. In this context, what is important, is that Quicken, like other feeder originators was following the template and methods of procedure given to them by CW.Of course Countrywide was a feeder to many securities underwriters including Merrill Lynch which is also now Bank of America.

Sometimes they got a little creative on their own. Quicken for example adds an appraisal fee to a SECOND APPRAISAL COMPANY which just happens to be owned by them. Besides the probability of a TILA violation, this specifically makes the named lender at closing responsible for the bad appraisal. It’s not a matter for legal argument. It is factual. So if you bought a house for $650,000, the appraisal which you relied upon was $670,000 and the house was really worth under $500,000 they could be liable for not only fraudulent appraisal but also for the “benefit of the bargain” in contract.

Among the excessive fees that were charged were the points and interest rates charged for “no-doc” loans. The premise is that they had a greater risk for a no-doc loan but that they were still using underwriting procedures that conformed to industry standards. In fact, the loans were being automatically set up for approval in accordance with the requirements of the underwriter of Mortgage Backed Securities which had already been sold to investors. So there was no underwriting process and they would have approved the same loan with a full doc loan (the contents of which would have been ignored). Thus thee extra points and higher interest rate paid were exorbitant because you were being charged for something that didn’t exist, to wit: underwriting.
June 7, 2010

Bank of America to Pay $108 Million in Countrywide Case

By THE ASSOCIATED PRESS

WASHINGTON (AP) — Bank of America will pay $108 million to settle federal charges that Countrywide Financial Corporation, which it acquired nearly two years ago, collected outsized fees from about 200,000 borrowers facing foreclosure.

The Federal Trade Commission announced the settlement Monday and said the money would be used to reimburse borrowers.

Bank of America purchased Countrywide in July 2008. FTC officials emphasized the actions in the case took place before the acquisition.

The bank said it agreed to the settlement “to avoid the expense and distraction associated with litigating the case,” which also resolves litigation by bankruptcy trustees. “The settlement allows us to put all of these matters behind us,” the company said.

Countrywide hit the borrowers who were behind on their mortgages with fees of several thousand dollars at times, the agency said. The fees were for services like property inspections and landscaping.

Countrywide created subsidiaries to hire vendors, which marked up the price for such services, the agency said. The company “earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue,” the agency said in a news release.

The agency also alleged that Countrywide made false claims to borrowers in bankruptcy about the amount owed or the size of their loans and failed to tell those borrowers about fees or other charges.

Filed under: CASES, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, trustee, workshop | Tagged: , , , , , , , , , , , , , , , , , , , , | 15 Comments »

Sample Interrogatories

Posted on March 11, 2010 by Neil Garfield

SUPERIOR COURT OF NEW JERSEY

CHANCERY DIVISION – ESSEX VICINAGE

——————————————————————X                Civil Action

Deutsche Bank National Trust Company, As Trustee Of

Argent Securities, Inc. Asset Backed Pass Through Certificates, Series 2004-PW1

Docket Number: XXX

REQUEST FOR

INTERROGATORIES

Plaintiff(s),

vs.

XXX; John Doe,

Husband Of XXX                                                                            XXX Avenue

Rosedale, NY 11422

Defendant(s)/Pro Se ——————————————————————X

REQUEST FOR DISCOVERY: INTERROGATORIES

i). Defendant, XXX, serves these interrogatories on Deutsche Bank National Trust Company, as authorized by Case Management Order dated September 30, 2009, and by the Federal Rule of Civil Procedure 33. Deutsche Bank National Trust Company must serve an answer to each interrogatory separately and fully, in writing and under oath within 30 days after service to: XXX, XXX Ave., Rosedale, NY 11422.

INSTRUCTIONS

ii). These requests for interrogatories are directed toward all information known or available to Deutsche Bank National Trust Company – not its lawyer, Ralph F. Casale, Esq. – including information contained in the records and documents in Deutsche Bank National Trust Company’s custody or control or available to Deutsche Bank National Trust Company upon reasonable inquiry.

iii). Each request for interrogatory is to be deemed a continuing one. If, after serving an answer, you obtain or become aware of any further information pertaining to that request, you are requested to serve a supplemental answer setting forth such information.

iv). As to every request for interrogatory which an authorized officer of Deutsche Bank National Trust Company fails to answer in whole or in part, the subject matter of that request will be deemed confessed and stipulated as fact to the Court.

v). Kindly attach additional sheets as required identifying the Interrogatory being answered.  You have a continuing obligation to update the information in these Interrogatories as you acquire new information. If no such update is provided in a reasonable period of time that you acquired such information, it may be excluded at trial or hearing.

DEFINITIONS

vi). “You” and “your” include Deutsche Bank National Trust Company and any and all persons acting for or in concert with Deutsche Bank National Trust Company.

vii). “Document” is synonymous in meaning and equal in scope to the usage of this term in Federal Rule of Civil Procedure 34(a) and includes computer records in any format. A draft or non-identical copy is a separate document within the meaning of this term. The term “document” also includes any “tangible things” as that term is used in Rule 34(a).

viii). Parties. The term “plaintiff” or “defendant”, as well as a party’s full or abbreviated name or a pronoun referring to a party, means the party and, where applicable, (his/her/its) agents, representatives, officers, directors, employees, partners, corporate parent, subsidiaries, or affiliates.

ix). Identify (person). When referring to a person, “identify” means to give, to the extent known, the person’s full name, present or last known address, telephone number, and when referring to a natural person, the present or last known place of employment. Once a person has been identified in compliance with this paragraph, only the name of that person needs to be listed in response to later discovery requesting the identification of that person.

x). Identify (document). When referring to a document, “identify” means to give, to the extent known, the following information: (a) the type of document; (b) the general subject matter of the document; (c) the date of the document; (d) the authors, address, and recipients of the document; (e) the location of the document; (f) the identity of the person who has custody of the document; and (g) whether the document has been destroyed, and if so, (i) the date of its destruction, (ii) the reason for its destruction, and (iii) the identity of the person who destroyed it.

xi). Relating. The term “relating” means concerning, referring, describing, evidencing, or constituting, directly or indirectly.

xii). Any. The term “any” should be understood in either its most or its least inclusive sense as necessary to bring within the scope of the discovery request all reasons that might otherwise be construed to be outside of its scope.

REQUEST FOR INTERROGATORIES

1. Please identify each person who answer these interrogatories and each person (attach pages if necessary) who assisted, including attorneys, accountants, employees of third party entities, or any other person consulted, however briefly, on the content of any answer to these interrogatories.

ANSWER:

2. For each of the above persons please state whether they have personal knowledge regarding the subject loan transaction.

ANSWER:

3. Please state the date of the first contact between Deutsche Bank National Trust Company and the borrower in the subject loan transaction, the name, address and telephone number of the person(s) in your company who was/were involved in that contact.

ANSWER:

4. Please identify every potential party to this lawsuit.

ANSWER:

5. Please identify the person(s) involved in the underwriting of the subject loan. “Underwriting” refers to any person who made representations, evaluations or appraisals of value of the home, value of the security instruments, and ability of the borrower to pay.

ANSWER:

6. Please identify any person(s) who had any contact with any third party regarding the securitization, sale, transfer, assignment, hypothecation or any document or agreement, oral, written or otherwise, that would effect the funding, closing, or the receipt of money from a third party in a transaction that referred to the subject loan.

ANSWER:

7. Please identify any person(s) known or believed by anyone at Deutsche Bank National Trust Company who had received physical possession of the note and allonges, the mortgage, or any document (including but not limited to assignment, endorsement, allonges, Pooling and Servicing Agreement, Assignment and Assumption Agreement, Trust Agreement,  letters or email or faxes of transmittals  including attachments) that refers to or incorporates terms regarding the securitization, sale, transfer, assignment, hypothecation or any document or agreement, oral, written or otherwise, that would effect the funding, or the receipt of money from a third party in a transaction, and whether such money was allocated to principal, interest or other obligation related to the subject loan.

ANSWER:

8. Please identify all persons known or believed by anyone in Deutsche Bank National Trust Company or any affiliate to have participated in the securitization of the subject loan including but not limited to mortgage aggregators, mortgage brokers, financial institutions, Structured Investment Vehicles, Special Purpose Vehicles, Trustees, Managers of derivative securities, managers of the company that issued an Asset-backed security, Underwriters, Rating Agency, Credit Enhancement Provider.

ANSWER:

9. Please identify the person(s) or entities that are entitled, directly or indirectly to the stream of revenue from the borrower in the subject loan.

ANSWER:

10 Please identify the person(s) in custody of any document that identifies the loan servicer(s) in the subject loan transaction.

ANSWER:

11. Please identify any person(s) in custody of any document which refers to any instruction or authority to enforce the note or mortgage in the subject loan transaction.

ANSWER:

12. Other than people identified above, identify any and all persons who have or had personal knowledge of the subject loan transaction, underwriting of the subject loan transaction, securitization, sale, transfer, assignment or hypothecation of the subject loan transaction, or the decision to enforce the note or mortgage in the subject loan transaction.

ANSWER:

13. Please state address, phone number, and employment history for the past 3 years of Tamara Price, Vice President, Argent Mortgage Company, LLC, “designated as the Assignor” of the mortgage loan to Deutsche Bank National Trust Company (Assignment of Mortgage recorded in Essex County Register’s Office on June 25, 2008).

ANSWER:

14. Please state the date on which Argent Mortgage Company, LLC (originator) sold the mortgage loan to Ameriquest Mortgage Company (Seller and Master Servicer).

ANSWER:

15. Please state the date on which Ameriquest Mortgage Company (Seller and Master Servicer) sold the mortgage loan to Argent Securities, Inc. (Depositor).

ANSWER:

16. Did Argent Mortgage Company, LLC (originator) or previous servicers of this account receive any compensation, fee, commission, payment, rebate or other financial considerations from Ameriquest Mortgage Company (Seller and Master Servicer) or any affiliate or from the trust funds, for handling, processing, originating or administering this loan?

ANSWER:

17. If yes, please describe and itemize each and every form of compensation, fee, commission, payment, rebate or other financial consideration paid to Argent Mortgage Company, LLC, the originator or previous servicers of this account by Ameriquest or any affiliate, or from the trust fund.

ANSWER:

18. Please identify any party, person or entity known or suspected by Deutsche Bank National Trust Company or any of your officers, employees, independent contractors or other agents, or servants of your company who might possess or claim rights under the subject loan or mortgage and/or note.

ANSWER:

19. Please identify the custodian of the records that would show all entries regarding the flow of funds for the subject loan transaction prior to and after closing of the loan. (Flow of funds, means any record of money received, any record of money paid out and any bookkeeping or accounting entry, general ledger and accounting treatment of the subject loan transaction at your company or any affiliate including but not limited to whether the subject loan transaction was ever entered into any category on the balance sheet at any time or times, whether any reserve for default was ever entered on the balance sheet, and whether any entry, report or calculation was made regarding the effect of this loan transaction on the capital reserve requirements of your company or any affiliate.)

ANSWER:

20. Please identify the auditor and/or accountant of your financial statements or tax returns.

ANSWER:

21. Please identify any attorney with whom you consulted or who rendered an opinion regarding the subject loan transaction or any pattern of securitization that may have effected the subject loan transaction directly or indirectly.

ANSWER:

22. Please identify any person who served as an officer or director with Deutsche Bank National Company or Argent Mortgage Company LLC commencing with 6 months prior to closing of the subject loan transaction through the present. (This interrogatory is limited only to those people who had knowledge, responsibility, or otherwise made or received reports regarding information that included the subject loan transaction, and/or the process by which solicitation, underwriting and closing of residential mortgage loans, or the securitization, sale, transfer or assignment or hypothecation of residential mortgage loans to third parties.)

ANSWER:

23. Did any investor/certificate holder approve or authorize foreclosure proceedings on XXX’s property?

ANSWER:

24. Please identify the person(s) involved or having knowledge of any insurance policy or product, plan or instrument describing over-collateralization, cross-collateralization or guarantee or other instrument hedging the risk of default as to any person or entity acting as an issuer of any securities or certificates. (Such instrument(s) relate to the composition of a pool, tranche or other aggregation of assets that was created, included or referred to the subject loan and the pool or aggregation was transmitted, transferred, assigned, pledged or hypothecated to any entity or buyer. A person who “transmitted, transferred, assigned, pledged or hypothecated” refers to any person who suggested, approved, received or accepted the composition of the pool or aggregation made or confirmed representations, evaluations or appraisals of value of the home, value of the security instruments, ability of the borrower to pay.)

ANSWER:

25. Please identify the person(s) involved or having knowledge of any credit default swap or other instrument hedging the risk of default as to any person or entity acting as an issuer of any securities or certificates. (Such instrument(s) relate to the composition of a pool, tranche or other aggregation of assets that was created, included or referred to the subject loan.)

ANSWER:

Submitted by:  XXX

XXX  Ave

Rosedale, NY 11422

CERTIFICATE OF SERVICE

I, I, XXX certify that on this 29th day of the month of October, 2009.

1. A true copy of the 10-page Request for Interrogatories was served on The New Superior Court of New Jersey, Chancery Division – Essex Vincinage, at 212 Wasington Street, Eighth Floor, Newark, New Jersey.

2. A copy of the foregoing was mailed on October 28, 2009 to

Dated: Queens New York

This _________ day of ___________ 2009    XXX

XXX Ave

Rosedale, NY 11422

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , , , , , , , , , , , , , | 12 Comments »

Monster From Below, Not from Above — Appraisal Fraud

Posted on February 15, 2010 by Neil Garfield
Editor’s Comment: Again, myth prevails.
The monster that gobbled our home equity and the value of our pension funds came from the waters beneath the market not from some economic disaster or sudden migration of population to Australia. The “loss of value” was nothing of the sort. Prices were going up during a decade when median income was going down. Prices at best should have been level. This disaster is from a lack of support on the fundamentals of economics — the houses were never worth what the money that appeared on appraisals.
Most pundits, reporters and “experts” talk about the decline in housing prices as the result of some mysterious downward market pressure — like a lack of demand. Demand for housing is no lower or higher than it ever was.
The truth is that there never was any increased demand for housing to support the huge price jumps over the last decade. THAT was caused by an increase of what economists call liquidity and the rest of us now know as phoney money pumped in by Wall Street who paid appraisers to render a report that conformed to contracts instead of market conditions.
Those contracts went through not because of public demand or population increases or even migration. They came from the fact that Wall Street paid or created “lenders” to pretend they were “underwriting” loans and assessing risk the way banks normally perform their duties as lenders. But since they had no money at risk, these “lenders” as straw men in a complex securitization chain, dropped their underwriting function altogether and merely pretended to “qualify” borrowers and approve contracts to purchase or refinance.
February 15, 2010

U.S. Housing Aid Winds Down, and Cities Worry

ELKHART, Ind. — Over the next six months, the federal government plans to wind down many of its emergency programs for housing. Then it will become clear if the market can function on its own.

People here are pretty sure the answer will be no.

President Obama has traveled twice to this beleaguered manufacturing city to spotlight the government’s economic stimulus program. The employment picture here has indeed begun to improve over the last nine months.

But Elkhart also symbolizes the failure of federal efforts to turn around the housing slump at the heart of the economic crisis. Housing in this community has become almost entirely dependent on a string of federal support programs, which are nonetheless failing to prevent a fall in prices and a rise in mortgage delinquencies.

More than one in 10 mortgage holders in Elkhart is seriously behind on payments. The median sales price has plunged to the level of a decade ago. Many homeowners owe more than their home is worth, freezing them in place for years. Foreclosures recently hit a record.

To the extent that the real estate market is functioning at all, people here say, it is doing so only because of the emergency programs, which have pushed down interest rates on mortgages and offered buyers a substantial tax credit.

Equally important is an expanded mortgage insurance program run by the Federal Housing Administration, which encourages private lenders to accept borrowers with small down payments. The government takes the risk of default.

A few years ago, only one in 10 buyers in Elkhart used the housing agency program. Now about half do. Across the country, the agency has greatly expanded its reach so that it now insures six million mortgages.

“There has been all kinds of help for housing. I’m not unappreciative,” said Barb Swartley, president of the Elkhart County Board of Realtors. “But you can’t turn real estate into a government-sponsored operation forever.”

Many in Washington agree. With worries about the deficit intensifying, the government is eager to start withdrawing some of its support programs.

The first step could happen as early as next month, when the Federal Reserve has said it will end its trillion-dollar program to buy up mortgage securities. That program has driven mortgage interest rates to lows not seen since the 1950s.

Yet it is uncertain whether the government can really pull back without sending housing markets into another tailspin. “A rise in rates would kill us all by itself,” Ms. Swartley said.

The Obama administration has offered few ideas about reforming the housing market. Proposals for the future of Fannie Mae and Freddie Mac, the mortgage holding companies taken over by the government at the height of the crisis, were supposed to be introduced with the president’s budget this month. They were not.

The government programs, however crucial, are distorting the market. The tax credit produced sales last fall, but some lenders here say it has troubling implications.

“People are buying to get that tax credit, to get some reserve money. They’re saying, ‘If something happens, I will have a little bit of money to fall back on,’ ” said Denny Davis of Horizon Bank in Elkhart. “That’s not healthy.”

The programs favor first-time buyers, who have the fewest resources to bring to a deal. Heather Stevens, a 23-year-old nurse here, is closing on a three-bedroom house this week. Since her loan was insured by the Federal Housing Administration, she had to put down only 3.5 percent of the $74,900 purchase price.

“It was a breeze to get approved,” she said.

The sellers are covering her closing costs, which agents say is often the case here. That meant Ms. Stevens had to come up with only the $2,600 down payment, which still took all her savings.

But the best part is the $7,500 tax credit. She will use that to remodel the kitchen. “If it wasn’t for the credit, we would have waited to buy,” said Ms. Stevens, who is getting married this year.

Buying houses with no money down was a feature of the latter stages of the housing bubble. It gave prices a final push into the stratosphere. But buyers with no equity were the first to abandon their properties as the market turned south.

With housing prices stagnant, bolstering the market by again letting people buy with hardly any money down is viewed in some quarters as a bad bet.

Neil Barofsky, the special inspector general for the government’s Troubled Asset Relief Program, wrote in his most recent report to Congress that “the federal government’s concerted efforts to support” housing prices “risk reinflating” the bubble.

He noted one difference from the last bubble: taxpayers, rather than banks, are now directly at risk in these new mortgages.

In Elkhart, the worries are less about the risks of doing too much and more about the perils of doing too little. If the Federal Reserve really ends its $1.25 trillion program of buying mortgage-backed securities, economists say, mortgage rates could rise as much as one percentage point. In recent weeks, rates on 30-year fixed mortgages have drifted below 5 percent.

The tax credit requires home buyers to make a deal by April 30, the middle of the prime spring selling season.

For now, the F.H.A. is modestly tightening the requirements on some of its programs, trying to strike a balance between stabilizing the market with qualified buyers and overwhelming it with unqualified borrowers.

John Katalinich, chief lending officer at the Inova Federal Credit Union in Elkhart, says there is danger in letting buyers get into properties with so little at stake, but those risks are minimal compared to the alternative.

“If the government were not to continue the same level of support, it would be very detrimental, like cutting the legs off a wobbling child and expecting it to run a marathon,” he said. “It’s very possible we’ll still be at this level of need five years from now.”

Elkhart, in the northeast corner of Indiana, became a symbol of distressed Middle America after Mr. Obama chose it as the place to introduce his stimulus plan last February. The region is a hub of recreational vehicle manufacturing, one of the first industries to falter in the recession. In less than a year, the unemployment rate tripled, peaking at 18.9 percent last March.

Mr. Obama returned in August to promote the effectiveness of the stimulus program and of government grants for the manufacture of battery-powered electric vehicles. Several companies have announced they are hiring. Unemployment in December was down to 14.8 percent.

No such improvement is visible with housing. In the last 18 months, the F.H.A increased its loans in Elkhart by 40 percent even as its defaults rose 174 percent.

As these troubled loans become foreclosures, the government takes over the property and tries to sell it. On Saturday, Gina Martin, an administrative assistant, examined a three-bedroom government house for sale southeast of Elkhart.

In late 2003, the house sold for $115,000, but in these depressed times the government was willing to let it go for $75,000.

Ms. Martin’s agent, Dean Slabach, thought the government would eventually have to take a much lower bid, substantially increasing its loss. Most of the F.H.A. properties on the market in Elkhart carry notations like “significant price reduction” and “all reasonable offers considered.”

“They’ll end up selling this for $60,000 or less,” Mr. Slabach said.

But Ms. Martin, a 47-year-old renter who has approval for an F.H.A. loan, said she was not tempted at any price.

“We’ll see what else is out there,” she said.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , | 3 Comments »

Foreclosure Defense: How They Did it

Posted on October 29, 2008 by Neil Garfield

One new answer we are getting when we ask for the identity of the real holder in due course of the note is “that information is confidential. You are not entitled to that.” Of course this is ridiculous — if you signed a note and it has been “assigned” to some third party, you have a right to know where to send your payments and to whom. There is no confidential status under any law or theory, legally, morally or ethically. And you have the right to know if the holder in due course is getting paid if there is a mortgage servicer involved. And if there is a mortgage servicer, you have a right to know whether they are indeed authorized to make collections — authorized by the real holder of the note, whoever that might be.

Lawsuits in Texas and other states indicate that the distribution reports to investors are vague at best and outright fabrications in other cases.

All of this brings us back to how they did it. How did they sell a $300,000 mortgage for $1 million and get away with it? And what happened to all that money? ANSWER: They sold the same mortgage over and over again. That is called fraud. They put the loan documents in pools that were described in tables that were impossible to decipher. See dsvrn.6m.d.htm .

They were able to do this and make it “work” because they wanted and pressured the lenders to give them the worst loans possible carrying the highest interest rates possible with the most onerous terms for prepayment etc. that were possible to insert. That is because these loans were made with a note bearing an interest rate of 16% or more but they were put into pools of assets that contained a few real loans, thus bringing the average STATED return on investment to perhaps 6-8%. This was a fictitious return because none of the 16% loans were paying anything other than zero or teaser rates.

Even though the pool contained numerous loans on homes that were appraised at 50% over market, and terms wherein the “borrower” was paying nothing to nearly nothing on the loan for the first few months or years, the loan went into the pool as a “performing loan” (because nothing was expected from the borrower) and sold as though the 16% income ($48,000 on a $300,000 note) was being paid. An unsuspecting investor would put up perhaps $750,000 to buy certificates for the $48,000 in income, especially if it was insured and carried a AAA rating. There is a $450,000 profit on a $300,000 loan — available to the investment banker only if the the loan was toxic waste (Z tranche) classified as such because there was no chance whatsoever that it could ever be repaid.

But wait there is more. If you assign the $48,000 fictitious income into multiple parts (say $8 parts of $6,000), you could assign the same note to eight different pools. In other words they were selling the same note multiple times. If you and I did that we have free room and board courtesy of the state or federal government in a prison of their choosing. But on this scale, despite the clear presence of two sets of victims that were coerced, deceived, cheated and misled (borrowers and investors) the bailout went to the thieves instead of the victims.

What this means to foreclosure defense is that your defense goes far beyond the “where’s the note” strategy. It goes to whether the note has been paid in full and whether there are multiple parties (investors) who are equity holders in the note and perhaps even the mortgage, all of whom have at least an arguable right to collection — totaling perhaps 300%-500% of your loan amount. It means that your payments probably went into the wrong pockets. It means that even if you made no payments, they probably paid the investor anyway out of reserves, overcollateralization, cross collateralization or one of several insurance products.

The reason the note is gone in most cases (destroyed in 40% of all cases) and lost in most other cases is that the terms of the note do not match up with the description that went up line in the securitization process. That leads to only two possible conclusions:

Either the note was separated from the mortgage making the secured obligation into an unsecured obligation thus voiding the power to foreclose OR the “assignments” were invalid because they were undated or otherwise defective leaving the mortgage and note intact — but PAID in full. Either there are assignees out there who have rights to the note obligation or there are not assignees with any rights.

If there are assignees with rights, you need to know who they are, how they got the loan, and whether they are proper holders and if they are still holders in due course and if the seller of your mortgage sold the same deal to other assignees.  And if so whether your payments or someone else’s payments were properly or improperly allocated to your account — not at the mortgage servicer level but much higher up at the level of the Trustee for asset backed securities series AAAA2007. You find that in the distribution reports. And if it isn’t there you find it through discovery asking for explanations of exactly where the payments went, who got them and why, along with proof of deposits and how they wer entered on the books of the receiving party.

If there are not assignees with rights, then the case is simple it is defended by one word: PAYMENT. They were paid in full by a third party, plus an undisclosed fee (TILA violation) for “borrowing” the lender’s license in a “table funded loan” where the agent (mortgage aggregator) of the investment banker, directed by the CDO Manager (Collateralized debt obligation manager) reached around the apparent lender and placed the money on the table to fund your loan. The apparent lender’s name was put on the note and mortgage. Why? Because they wanted to qualify for all the exemptions that apply to banks and lending institutions even though those institutions were not making the loans.

The apparent lender was paid a fee for 2.5% for pretending to underwrite the loan, perform due diligence, confirm the appraisal, confirm the viability of the transaction, confirm the affordability and benefits etc. The lender did no such thing. Brown’s lawsuit brought by the Attorney general of California, shows that the people doing the underwriting were under quotas that amounted to approving 70-80 loans PER DAY. 10,000 convicted felons were recruited in Florida to become LICENSED mortgage brokers. A virtual army of people were given scripts and amrching orders to get those loans signed no matter what they had to offer or what lie they had to tell.

THIS MEANS THAT EVEN YOUR PRIME MORTGAGE FIXED RATE 30 YEAR AMORTIZATION WITH ESCROW FOR TAXES AND INSURANCE WAS SOLD IN THE SAME WAY BECAUSE IT WAS SOLD AS PART OF A POOL WITH THESE FRAUDULENT ASSETS. ALL THE REMEDIES AND STRATEGIES PROPOSED HERE IN THIS BLOG APPLY TO YOU WHETHER YOU ARE IN TROUBLE ON YOUR MORTGAGE OR NOT.

Bottom Line: Go Get Them. They don’t have the goods and can’t produce them because if they do produce them it may be an admission of criminal fraud.

Check with local counsel before taking any action or deciding on any course of action in your particular case. This is general information only.

Filed under: CDO, currency, Eviction, foreclosure, GTC | Honor, Mortgage | Tagged: , , , , | 15 Comments »

Foreclosure Offense and Defense: DISCOVERY OF Insurance Policies and Applications Reveal ALL

Posted on June 10, 2008 by Neil Garfield

The simple mortgage on a home had been broken into many pieces (tranches — See Special Purpose Vehicle (SPV)) each having characteristics of entities unto themselves. The term “borrower” was severed from the the obligation to pay. The term “lender” was severed from the risk of loss and the right to payment from the borrower. The term “investor” was severed from the actual ownership of any asset, except one deriving its value from conditions existing between a myriad of third parties, but which nonetheless carried with it a right to receive payments from many different entities and people, the “borrower” being just one of many.

 

In the Mortgage Meltdown context, the challenge is to prove the point that this was a fraudulent scheme, a Ponzi arrangement that was a financial pandemic. You get that information through discovery, but unless you know what you are looking for, you will merely come up with volumes of paper that do not, in and of themselves reveal all the points you need to make — but they WILL lead to the discovery of admissible evidence (the gold standard of what is permitted in discovery) if you understand the scheme.

The nucleus of the scheme is the virtually unregulated creation of the Special Purpose Vehicle (SPV), which is a corporation formed by the investment banker to “own” certain rights to the loans and mortgages and perhaps other assets that were packaged for insertion into the SPV. The SPV issues securities and those securities are sold to investors with fake ratings and “assurances” and insurance that is falsely procured, but where the insurers or assurers were under common law, state law and/or federal law, required to perform their own due diligence, which they did not (in the mortgage meltdown). The proceeds of the sale of ABSs (CDO/CMO) go into the SPV.

The directors and officers of the SPV entity order the disbursement of those proceeds. (see INSURANCE in GARFIELD’s GLOSSARY).

The recipients are a large undisclosed pack of feeding sharks all claiming plausible deniability as to inflated appraisals of the residential dwelling, the borrower’s ability and willingness to pay, the underwriting standards applied (suspended because the lender was selling the risk rather than assuming it), and the inflated appraisal of the ABS (CDO/CMO) for all the same reasons — direct financial incentives, coercion (give us the appraisal we want or we will never do business with you against and neither will anyone else) or even direct threats of challenges to professional licenses.

In order to get this information, you must find the name of the SPV, which is probably disclosed in filings with the SEC along with the auditor’s opinion letter (see INSURANCE in GARFIELD’s GLOSSARY). You might get lucky and find it just by asking. Then demand production of the articles of incorporation and the minutes, agreements, signed and correspondence between the SPV and third parties and between officers and directors of the SPV. The entire plan will be laid out for you as to that SPV and it might reveal, when you look at the actual insurance contracts, cross collateralization or guarantees between SPV’s. Those cross agreements could be as simple as direct guarantees but will more likely take the form of hedge products like credit default swaps (You by mine and I’ll by yours — by express agreement, tacit agreement or collusion). 

You will most likely find that once you perform a thorough analysis of the break-up (“Spreading”) of the risk of loss, the actual cash income stream, the ownership of the note, the ownership of the security instrument (mortgage) and the ownership and source of payment for insurance and other contracts, that all roads converge on a single premise: this was a deal between the borrowers (collectively as co-borrowers) and the investors (collectively as co-investors). Everyone else was a middle man pretending to be NOT part of the transaction while they were collecting most of the proceeds, leaving the investor and the borrower hanging.

And there is no better place to start than with the insurance underwriting process — getting copies of applications, investigations, analysis, correspondence etc. Combined with the filings with the SEC you are likely to find virtual admissions of the entire premise and theme of this entire blog. I WOULD APPRECIATE YOU SENDING ME THE RESULTS OF YOUR ENDEAVORS.

INSURANCE — DEFINED

A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual,company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policycreates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest. IN FORECLOSURE OFFENSE AND DEFENSE, YOU WILL FIND ERRORS AND OMISSIONS POLICIES COVERING THE OFFICERS AND DIRECTORS OF THE INVESTMENT BANKING FIRM, THE SPV THAT ISSUED THE ASBs, THE RATING AGENCY FOR THE ASB (CMO/CDO), THE LENDER, THE MORTGAGE BROKER, THE REAL ESTATE AGENT, ETC. YOU WILL FIND MALPRACTICE INSURANCE FOR THE AUDITORS OF THE SAME ENTITIES WHICH RESULTED IN FALSE REPRESENTATIONS CONCERNING THE FINANCIAL CONDITION OF THE ENTITY. YOU WILL FIND LOSS COVERAGE FOR DELINQUENCY, DEFAULT OR NON-PAYMENT THAT MAY INURE TO THE BENEFIT OF THE BORROWER. By joining the borrower and the investor as victims in the fraudulent Ponzi scheme creating money supply with smoke and mirrors, it may be argued that the insurance premiums were paid by and equitably owned by the borrower and/or the investor. 

Filed under: bubble, CDO, CORRUPTION, EMS, Eviction, foreclosure, GTC | Honor, inflation, Investor, Mortgage, politics, securities fraud | Tagged: , , , , , , , , , | 1 Comment »

Foreclosures Go Hyper, Up 65%

Posted on May 14, 2008 by Neil Garfield

Anyone reading this site will not find it surprising that the number of foreclosures is rising by unprecedented numbers at unprecedented rates. At the same time, the FBI is getting involved claiming mortgage fraud is on the rise at well.

Let’s tell it like it is: Until this scam was perpetrated by Wall Street on the American Public, the cases where people overstated their income or the value fo the house was manipulated were rarely far out of range of reality. It is only now that the major fraud of inflating stated fair market value by 40% or more that the FBI and lenders are looking for ways they can deflect attention to the cases where the borrowers actual numbers don’t match up to the original loan documentation.

Lenders should be careful what they wish for however. And the FBI is only doing a small part of its job, if it does not investigate the “fraud” of both lender and borrower. In most cases, the fraud case against the lender is more complex but far more egregious than anything the borrower did, all of which was well known to the lender,the mortgage broker and everyone else at the closing who didn’t care about anything except getting the borrower’s signature on those papers. 

Nobody cared and the borrower was clueless as to what was really happening. The lender was “underwriting” the loan knowing they had no risk. The mortgage broker knew he had steered the borrower into the loan that would give him the greatest commission and fees — the yield spread premium payments jumped geometrically during this period. The real estate brokers wanted the closing over because the higher the price, the greater their commission, and they wanted “closure” before the inevitable happened — a correction to real fair market values. The appraiser knew that he had to come in a little higher than the contract amount or he wouldn’t be hired again. And so on.

Foreclosure filings continued to climb in April
Actions rise 65 percent over the same month the year before
The Associated Press
updated 4:43 a.m. MT, Wed., May. 14, 2008

LOS ANGELES – More U.S. homeowners fell behind on mortgage payments last month, driving the number of homes facing foreclosure up 65 percent versus the same month last year and contributing to a deepening slide in home values, a research company said Tuesday.

Nationwide, 243,353 homes received at least one foreclosure-related filing in April, up 65 percent from 147,708 in the same month last year and up 4 percent since March, RealtyTrac Inc. said.

Nevada, Arizona, California and Florida were among the hardest hit states, with metropolitan areas in California and Florida accounting for nine of the top 10 areas with the highest rate of foreclosure, the company said.

Irvine, Calif.-based RealtyTrac monitors default notices, auction sale notices and bank repossessions.

One in every 519 U.S. households received a foreclosure filing in April. Foreclosure filings increased from a year earlier in all but eight states.

The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with fewer options to avoid foreclosure. Many can’t find buyers or owe more than their home is worth and can’t get refinanced into an affordable loan.

Efforts by government and the mortgage industry to stem the tide of foreclosures aren’t keeping up with the rising number of troubled homeowners.

The April data show nearly half of the properties received an initial notice of default, suggesting many homes were new entrants to the foreclosure process.

“We’re still sitting at roughly the same percentage of loans handled in any way successfully as we were a year ago, and the volume (of foreclosure filings) still keeps going up,” said Rick Sharga, RealtyTrac’s vice president of marketing. “It’s apparent that what they’ve tried so far isn’t working.”

The U.S. House passed a bill last week that would offer government insurance on $300 billion in new mortgages to refinance loans for an estimated half-million borrowers facing foreclosure, particularly those who now owe more than their houses are worth because of declining values.

House lawmakers also passed a bill that would send $15 billion to states to buy and fix foreclosed homes.

Still, should the homeowner aid package clear the Senate, it faces a potential hurdle in the White House, which has threatened to veto the plan, arguing it’s too risky and amounts to a lender bailout.

Even if a legislative compromise is reached, it could come too late for homeowners with adjustable-rate mortgages scheduled to reset to higher rates this month and the next.

More than 1 million home foreclosures are forecast for 2008.

“It doesn’t look like the volume is going to slow down any time soon,” Sharga said.

More than 54,500 properties were repossessed by lenders nationwide in April. In all, about 2 percent of U.S. households were in some stage of foreclosure during the month, RealtyTrac said.

Still, as foreclosed properties pile up, they add to the inventory of homes on the market and can drag down home prices. The impact is felt mostly in regions where foreclosures are concentrated, such as Southern California, the Las Vegas area, South Florida and parts of Arizona.

Nevada posted the worst foreclosure rate in the nation, with one in every 146 households receiving a foreclosure-related notice last month, nearly four times the national rate.

The number of properties with a filing jumped 95 percent versus April last year but declined 5 percent from March.

California had the most properties facing foreclosure at 64,683, an increase of 112 percent from April 2007. The number of properties declined less than 1 percent from March.

The state posted the second-highest foreclosure rate in the country, with one in every 204 households receiving a foreclosure-related notice.

California metro areas accounted for six of the 10 U.S. metropolitan areas with the highest foreclosure rates, led by Merced, with one in every 66 households receiving a foreclosure notice.

Arizona had the third-highest foreclosure rate, with one in every 224 households reporting a foreclosure filing in April. A total of 11,620 homes reported at least one filing, up nearly 181 percent from a year earlier and up 26 percent from the previous month.

 

Like Las Vegas and inland regions in California, areas of Arizona saw a sharp run-up in speculator-driven home prices and new home construction during the housing boom.

Florida had 35,264 homes reporting at least one foreclosure filing last month, a 146 percent jump from a year earlier and a 17 percent hike from March. That translates into a foreclosure rate of one in every 242 households, the fourth-highest in the nation.

The other states among the 10 with the highest foreclosure rates in April were Colorado, Maryland, Georgia, Ohio, Michigan and Massachusetts.

Filed under: bubble, CDO, CORRUPTION, currency, education, Eviction, foreclosure, GTC | Honor, interest rates, Investor, Mortgage | Tagged: , , , , , | 1 Comment »

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