Why Zombie Houses? Local government budget deficits

The appearance of zombie homes and the destruction of hundreds of thousands of them thus destroying entire neighborhoods and subdivisions illustrates a fundamental truth about the foreclosure tidal wave that hit in 2007-2008: the banks didn’t care about the property, they just wanted the record to reflect a foreclosure sale. This alone represents probative evidence that the banks, pretending to act as intermediaries, were actually players in an illegal scheme wherein they were working against both investors and borrowers.

Local governments have been missing the mark in nearly every case. Instead of challenging the lenders as having committed multiple violations of state, county and municipal law including initiating false foreclosures forcing the burden of loss onto the restricted budget of local governments, they are following in the footsteps of pretender lenders and foreclosing on their tax liens, from which they gain nothing in most cases. Were they confront the banks with reality, their budget problems could be cured.


Zombie homes occur when “banks” foreclose and then walk away from the property as unsalable or too expense to maintain and insure. The entry of a Foreclosure Judgment or a certificate of sale is actually the first “legal” document in a long chain of nonexistent events. The foreclosure raises the presumption that all that previously transpired was real even when the courts and the borrowers and their attorneys were presuming facts that were simply untrue. In cases where securitization claimed it is fair to say that none of them were real and the foreclosure was initiated based upon fraudulent representations.

For a true lender or creditor the worst possible thing for them is to end up with nothing. That is exactly what happens in the current marketplace. Investors are left in a position of having an empty unenforceable promise to pay from the nonexistent trust that would be empty even if it did exist. Investors think their investment is secured but it isn’t. They have received a promise to pay from the nonexistent trust that is secured by nothing.

And the ability of the trust to pay them never existed because none of the money went through the trust. The entire plan of giving the investors a secured investment was a ruse. And that is why I have said that investors would do far better firing and terminating all relationships and illusions and forming their own servicing entities who would act in the best interests of the investors with respect to the “underlying loans” that the intermediary banks are claiming as their own.

Since the trusts were never used it is fair to say that the trust instruments are irrelevant and that volunteer payments by third parties were neither from a servicer nor were they advances. Without foreclosures the execution of workout agreements would preserve home ownership preserve neighborhoods, maintain the tax base, and most importantly preserve the value of the loan as an asset.

Before the late 1990’s the custom and practice of the industry was to do a workout, if at all possible rather than foreclose. This was true in commercial and residential lending. In commercial loans the business borrower could force the workout in Chapter 11 but homeowners rarely can get any traction in bankruptcy court.

Now, even faced with a cash payoff conditioned on revealing the creditor(s) the servicers relentlessly pursue foreclosure because that is what they are instructed to do by the TBTF banks. No servicer would “lose” the paperwork on a modification 10 times if they were really interested in working things out. Many attorneys representing the servicer and the alleged trust have actually argued that they have no obligation to take the money and that they would rather have the foreclosure.

The fundamental issue is that having committed dozens of illegal acts with respect to each alleged loan neither the servicer nor the broker dealers have the slightest interest in preserving the property or the loan. To the contrary, it is only when the house is foreclosed that the Master Servicer gets to “recover” something called “servicer advances” that neither come from the servicer nor are they an advance since they are paid from the investor’s capital.

The bigger issue is that a foreclosure sale frequently closes the door on attacks from the dozens of traders , investors, hedge funds and insurance companies who remain ambivalent about coming out and saying point blank that they were defrauded, and that there was no underlying loan for the loan documents that were executed.

The actual debt was left hanging without the knowledge of investors or borrowers. The banks created that situation and then grabbed the debts as if they were owned by the banks who held RMBS in street name as nominee for the investors. To all the world it looked like the banks owned the first layer of derivatives, whose value was intended to be derived from “underlying loans.” In truth, the debt relationship arose between the borrower and the capital sunk into a slush fund of investor capital. The source of funds were the investors. The note could only have been legally executed in favor of the investors or an authorized existing entity. That entity could have been the named trust, but it wasn’t.

Look for any indication of any kind that any transaction was ever completed using the name of the trust as a principal. You won’t find it. So in addition to Zombie houses, we have zombie investors, and zombie borrowers.

Eerie Photos Explore Homes Abandoned in the Housing Crisis


Five years ago, as a journalism student at Florida International University, Nicole Taylor-Lang began thinking of ways to flesh out her photography portfolio. She didn’t have to look far: Only a block from her Greenacres home in Palm Beach County, she found the first subject of what would become a years-long passion project.

It was a white and beige house with boarded-up windows and a chimney shooting out of one corner. The yard was overgrown with weeds, and it looked like no one had lived there in several years.

“It had a very Little House on the Prairie feel,” Taylor-Lang says. “That house I call my baby. All of a sudden, it just started intriguing me, [these] abandoned properties.”

Since then, Taylor-Lang has traveled South Florida photographing empty homes and businesses to document the aftermath of the housing crisis, which continues to scar the landscape nearly eight years after it began. Some of the homes Taylor-Lang explores are spotless inside, as if they haven’t been touched in years. Others are marked with graffiti or damage to the interior, signs she’s not the only one to have trespassed there.

The objects inside the homes hint at the lives of the people who once occupied them: a single broom propped in a corner, a Barbie train car sitting atop a pile of junk, a stack of National Geographic issues from the 1980s.

“There’s kind of something unsettling about it,” Taylor-Lang says. “I try to picture the family that was living there.”

Recent figures paint an unclear picture of how the market has recovered after the housing bubble burst in 2007. While a new U.S. Census report says the number of new homes sold in July was the highest since October 2007, a report from the National Association of Realtors says sales of existing homes are on the decline.

South Florida trails only the Detroit area when it comes to abandoned properties. RealtyTrac  recently identified more than 54,000 in the tri-county area, of which about 650 are so-called zombie foreclosures. It’s a phenomenon Taylor-Lang has seen firsthand.

“It’s difficult to think of what they once were,” she says. “The housing market seems to be doing better, but it’s sad to see how easily these buildings are forgotten.”

Now living in New York, Taylor-Lang has been focusing her lens on homes that have yet to be repaired after experiencing significant damage in Hurricane Sandy.

“It’s something I’m drawn to wherever I go — the decay,” she says. “I think about these places that were probably nice homes, and now they look like this.”

Zombie Properties: Banks Don’t Want the Money, Don’t Want the Property: They Just Want Foreclosure Sale and Deed

The borrowers are for the most part willing to straighten this mess out if approached with fair terms that reinstate their credit and reinstate or create loans that are free from the myriad of defects in the falsely claimed securitization chains. The intermediate banks don’t want that because they would be facing liability for trillions of dollars they collected through fraud, deceit and identity theft. So if things keep going the way they are going, the ultimate effect is indeed going to be that the “free house” is going to switch from the intermediate banks who have no just or legal claim to the property to the homeowner whose signature was used in ways he never agreed and would never have agreed. — Neil F Garfield, livinglies.me

With 6.6 foreclosures and an equal amount to come, given 2.5 residents per household, more than 33 million people will be displaced— paying the price for the misbehavior of the bank and having been used as innocent, ignorant pawns in a PONZI scheme that has nearly perfected the technique of PONZI schemes. — Neil F Garfield, livinglies.me

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Zombie Properties got their name from being in a state of limbo. Broadly characterized, they include first homes abandoned my misinformed homeowners who believed their home was subject to a legitimate foreclosure. Second they include properties subject to foreclosures but where the bank has put off getting the final judgment or put off the sale. And third they include properties in which the foreclosure sale has occurred but the property was abandoned by the Banks.

Not surprisingly many schemes have evolved in which the renting of these properties has been accomplished by strangers to the transaction. Knowing that the property is temporarily or permanently abandoned, people are offering “deals” to renters, collecting rents on property they don’t own. In other cases the neighborhoods have become so blighted that nobody would move in there if you gave the house to them. So Detroit, Cleveland and other cities are bull dozing tens of  thousands of homes creating farm land and park land where businesses and residential housing had been.

It seems obvious now that the Banks want that foreclosure sale and that is the end of the story. They don’t want the money (we are trying to give them the money in several cases (1000 cents on the dollar) and they are resisting, they don’t want the house (we are actually deeding the house to them without prejudice and without an agreement to avoid a deficiency judgment), They don’t want reinstatement, they don’t want redemption, and they don’t want any modification or mediation except just enough to give the public relations impression that they are trying to work things out. In most modifications, even where the modification is approved and the homeowner complied with all terms including the payments, the Bank goes ahead and forecloses anyway.

In a real mortgage situation, Banks will do almost anything to avoid foreclosure. If you review the literature on foreclosures prior to 2007 it is all based upon workouts in commercial and residential real estate. In fact “workouts” are an area of concentration for most law firms that engage in mortgage litigation whether they are on the lender side or the borrower’s side. Now now. The Bank wants the foreclosure sale and the borrower, investor who put up the funds and insurers who “covered” a “loss” and the counterparts who were covering announced losses, let them be damned.

Why do we have a pandemic of zombies and foreclosures when so many homeowners are actually eager to sign new document that would clear up the title problems caused by MERS, improper disclosure at closing as to who the lender was, claims of fraud, predatory lending deceptive lending etc.?

In the law we say look to the result to determine the intention. There is no doubt that the policies and procedures pursued by the banks, on loans they never owned based upon mortgage bonds that were issued by unfunded trusts, MINIMIZES the eventual monetary recovery and justifies the payment of insurance, payment of hedge contracts (CDS), and the reports to investors that there investment was lost because of foreclosures and expenses of foreclosure, leaving the Banks with the money and frequently the house too because they brought the foreclosure as a servicer without stating they were acting for a principal that had advanced the actual money for the loan.

Since the Banks are evading payment in full, evading receipt of the deed to the home, and evading workouts and modifications, the intent is clear no matter how logical the other alternatives appear to the advantage of all concerned. The intent is to get a foreclosure sale and deed on foreclosure which in most states starts a short statute of limitations ticking in which the deed on foreclosure cannot be challenged.

Of course there are possible remedies involving fraud on the court or the borrower that MIGHT change that but the foreclosure sale basically closes the book on the matter. What does this do for the banks? It ends the possibility of having to account for and pay back money received from investors, insurers, CDS counterparties, guarantors (Fannie and Freddie) and the Federal Reserve who has been buying the worthless mortgage bonds (that supposedly represent a claim of ownership over the loans) at the rate of $85 Billion per month apparently for years.

By getting a deed from a foreclosure sale, they put another layer of deniability between them, the Banks, and the parties from whom they took money on the announced failure of the loans, the bonds or the asset pools. The essential defect of the loans, that the payee and named mortgagee never loaned a dime to the borrower (unknown to the borrower) destroys the claim that the note and mortgage lien were ever perfected. This defect results in a finding of no valid mortgage, nullification of the instrument, and thus no security for the lending party — something that obviously smart Wall Street lawyers knew about but thought they could finesse — and they were right.

By having the information at hand in a title and securitization analysis, getting it explained in an Expert declaration from a credible source, and consulting with those who actually understand what happened here, the lawyer can feel confident that he is pleading and can prove that the entire transaction was a sham. Ask any professor of law who knows bills, notes, negotiable instruments, etc. If there was o underlying transaction in which value was exchanged both ways, no enforceable rights arise. There simply isn’t a transaction at all, and all the paperwork in the world isn’t going to fix that without getting a signature from the borrower — which most borrowers are willing to do if they get a fair modification based upon real values, instead of the artificially inflated values that were used for the loans.

The fact remains that virtually all loans were paid off in their entirety whether they ever went into “default” (which could not exist because the loan no longer existed), or whether they are performing loans in which hapless homeowners are paying monthly payments to a bank who does not own the loan, on a loan that either no longer exists or which has been paid down by actual payment from parties who waived subrogation, waived contribution and waived any right of action against the homeowner. If the account receivable is paid off, the banks’ claim for recovery one more time (after being paid several times over 100 cents on the dollar) in the form of a foreclosure is nothing more than looking for an official governmental action that cuts off the players who advanced the money on the same loan assets repeatedly.

Looking again to the result to determine the intent, it cannot be argued that the Banks pretended to issue mortgage bonds issued from a REMIC trust that was never funded and then did whatever they wanted to do with the trillions of dollars deposited with those investment bank for purchase of the bonds. The investors weren’t buying bonds. They were buying problems. They were, contrary to agreement with the investment bank, directly lending money to homeowners without a note or mortgage.

The actual closing procedure was a sham. The closing agent applied the money received from investors through one of the investment banks or an affiliate of the investment bank as though it was a loan from the named payee on the note and the named mortgagee on the mortgage or the named beneficiary on the deed of trust.

Thus the title, to which the investors were expecting and entitled was diverted from the investors to puppet companies who were already under contract to do what they were told — as in the Assignment and Assumption Agreement executed between the loan “originator” and the “aggregator” neither of whom advanced a dime, nor did they need to do so — the money from the investors being at hand in a commingled account at the investment bank who never followed through giving money or loans to the Trustee of the New York “Trust” thus creating a legal entity that had neither money nor assets.

The illusion is ONLY completed with an apparently legal “foreclosure sale” which creates a presumption of validity on the 6.6 million foreclosures completed thus far, and the additional latest estimate of 7 million more foreclosures). By fabricating foreclosure documents after the “trades” had been completed (i.e., the banks had received payment for the bonds and loans several times over that they never reported to the investors – but which still must be accounted for as payment to the investor because the investment banks were at all times acting as the agents of the investors).

Confused? Here is the easy way of looking at it. The Banks stole the identity of the investors and the REMIC trust by issuing the bonds into street name” but showing on end of month statements to the investors that they owned the bonds and loans. After selling the loans several times or receiving mitigating payments that were intended to reduce the loss, the loans were worthless to the Banks and now represented a liability to give all that money back because the underlying loans were fraudulent and defective and the trading profits declared by the banks was really the proceeds of theft. All the participants squeeze the last ounce of fees and profit from this PONZI scheme which was completely reliant on the continued purchase of the bogus mortgage bonds. When it was all over, they pitched the loan over the fence and said the Trust owned it but there had never been a transaction between the trust and anyone else in which the trust paid for and was delivered the loan according to the terms of the Prospectus and the Polling and Servicing Agreement.

Want it shown differently? The Banks stole the identity of the borrowers and traded on it knowing they would do anything possible to make the loan go into default and thus collect, in addition to the original money advanced by investors, insurance and other funds that paid off the loan several times over. Some enterprising Class Action lawyer who really knows what they are doing can lay claim to the vast pool of money that emerged from this scheme with the real parties in interest — the investor lenders and the homeowner borrowers taking the loss. The payment extinguishes the loan and the over payment collected by the banks is due back to the homeowner unless the investors intervene and assert claims to the pool of money that ultimately was held by firms that were at best only intermediaries and at worst (and usually) complete strangers tot he transactions with investors and complete strangers to transactions with the borrowers.

The borrowers are for the most part willing to straighten this mess out if approached with fair terms that reinstate their credit and reinstate or create loans that are free from the myriad of defects in the falsely claimed securitization chains. The intermediate banks don’t want that because they would be facing liability for trillions of dollars they collected through fraud, deceit and identity theft. So if things keep going the way they are going, the ultimate effect is indeed going to be that the “free house” is going to switch from the intermediate banks who have no just or legal claim to the property to the homeowner whose signature was used in ways he never agreed and would never have agreed.

When owners walk, ‘zombie’ homes become nuisance

Zombie properties run rampant across Florida

Jacksonville-Based EverBank to Pay $43.3 Million for Foreclosure Crimes

Southwest Florida riddled with underwater homeowners

The Cautious Approach to Buying Foreclosures



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