War on the Home Front | Mortgage Loan Investigations | Securitization Audits

Aug

I had occasion to respond to an inquiry and after reading it i thought this might help a few people on a number of levels. So here it is:

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August 20, 2010 by Neil F Garfield

HI there!. I received an inquiry that was forwarded to me about your “title review.” Since this has gone through several different people, I wanted to contact you directly. You placed your $149 deposit for a securitization search, review, report, copies of relevant documents and strategic commentary. You were one of the first people to help us get started in launching a search tool for homeowners and their lawyers and we thank you for your support.

My guess is that somewhere in your junk mail folder you received further introductions and since we don’t sell things here to people who are not interested we didn’t follow-up. The $149 you paid was the down payment on the securitization search. We presumed that we could do that without a title search but we were wrong. So we gave our customers two options: Either fill out the GTC Registration form which is a lot of work, or order the loan specific title search, review, report, copies of relevant documents and strategic commentary.

Despite the money we advanced for some very expensive subscriptions that only banks have (normally) costing thousands of dollars per month, and despite our own developing database, we discovered that the pretender lenders had been playing with the loan descriptions. What that means is that there we found that there were “alleged: pools that might or might not have been actually formed, but which were referred to in securitization documents as though they had been created. Close examination frequently reveals that the “Trust” or whatever was often never actually created even though investors received evidence of the issuance of a bond that they had “purchased” that entitled them to the receivables from the loans in one particular pool. It was a shell game/ponzi scheme.

THAT was only part of the problem. The rest was that there were multiple pools in which loans answering the same general description were claimed to be in one or more tranches of the pool. And in most cases NONE of the descriptions precisely matches the actual loan description we were looking for. So we ended up scratching various parts of our anatomy, realizing that the game was on and that we were not dealing with a series of individual events, but rather, on on-going process in which the parts were always moving and the pretender lenders kept their options open at all times because they were constantly “repackaging” loans into new “pools”, CDOs, special purpose vehicles, synthetic CDOs, cred it default swaps sales (the equivalent of buying the loan) etc..

And THAT was only part of the problem: we then discovered that there was literally NO PAPER trail on virtually ANY loan. That means you have a “Trustee” claiming to represent investors who own asset backed bonds which in turn supposedly own the loans, but the loans were never transferred in the first place. So legally, in the public records, the only lender was the one who appeared at your loan closing as the lender, and who also appeared as the Payee on your promissory note. Most of those companies are out of business. None of them, including MERS claim to have any interest in the obligation, note or mortgage. But that has not stopped the pretender lender from fabricating with low-tech solutions the “original”documents. So we are left with an empty security document, a note payable to nobody because the original lender was being funded by a third party, and an obligation hanging like a dangling modifier, if you remember your high school English. It’s an obligation with no where to go because the real party on the other end keeps changing. The only party entitled to enforce anything against you is someone who can honestly say that they advanced money that was used or accepted by you as a benefit and that they have not received the money back.

The services we subscribed to and which told us we can find anything in a snap if we pay all this money over-stated their capability, in part because they were not actually automated and in part because they depended upon the voluntary reporting of the underwriters. So we had the issue of getting all the precise details of each transaction.

That means that without charge you can fill out this form: —> GTC Registration Form For Seach Services
Or purchase this service — > CLICK THIS LINK TO DO LOAN SPECIFIC TITLE RECORDS SEARCH, ANALYSIS AND COMMENTARY

THEN AFTER YOU HAVE DONE THAT YOU CAN COMPLETE THE SECURITIZATION SEARCH BY PURCHASING THIS SERVICE WHICH IS EXCLUSIVE TO EARLY PEOPLE WHO SUPPORTED THIS EFFORT: —>COMPLETION OF SPECIAL OFFER SUBSCRIPTION FOR SECURITIZATION SEARCH (YOUR $149) IS TREATED AS A THREE MONTH SUBSCRIPTION MEMBERSHIP.

Hopefully this clears things up for you. I know it is complicated, but we didn’t make it that way — Wall Street did.

Regards,
Neil

Filed under: foreclosure

Aug

Strategies Compared by Nilson

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

121751 CommentStrategies+Compared+by+Nilson2010-08-21+08%3A53%3A17LH

August 20, 2010 by Barry Nilson:

Sometimes when trying to understand an issue, I make a chart of comparing different angles, or in this case, I’ve captured/summarized the essence of what I think are 3 litigation methods, and 1 administrative method. I don’t know if April Charney or Matt Weidner’s method can be summarized succinctly or not. I’m sure there are more methods. If either of you come across one, please add it to this list. I love comparing and contrasting views from all sides. I’m sure they could probably be further broken down into Judicial and Non-judicial states. Barne’s method below for example is specifically for non-judicial states.

The common thread I find always is that the Servicers/Trusts can not, or more importantly, will not comply with discovery and accounting. Given that all of these things are indeed moving targets and confusing, I kind of like Krieger’s or the UCC aggressive and offense method focusing on the claim to the house and putting the servicer/trustee on the defensive.

I’ve ordered the full securitization work up on one of my houses from Neil Garfield, but I wonder if chasing all the PSA and location of note is a goose chase. In the end, the enemy’s behavior is always the same. I suppose if you can catch them red-handed that may be effective and I suppose knowing the enemy’s rule book is always good. Maybe the strength here is their willingness to let the house go out of fear of exposure to a felony, or huge taxable event on the mortgage pool by clever discovery of their accounting fraud. I can’t stand Maher Soliman’s cryptic explanations, but his warnings about violations of FASB 140 and accounting threats have been confirmed by UsedKarGuy and I think are part of what you (Alina) are getting at.

But most of all I really like Krieger’s pragmatic posts and focus on simplicity. ANONYMOUS has always been my favorite but now Krieger is with ANONYMOUS in second place, as far as Livinglies.

Methods:

1) The Jeff Barnes, TRO – Preliminary Injunction – litigation method:

From Jeff’s Post on FDN:

As those of you who follow this website are aware, the “nonjudicial” foreclosure states require the borrower to institute litigation in court to challenge a Trustee’s (foreclosure) sale and request both a temporary restraining order cancelling a pending sale, and for a preliminary injunction prohibiting any further attempts at foreclosure pending the duration of the borrower’s litigation challenging the foreclosure attempt.

2) The Dave Krieger, – begin with Quiet Title Method:

from a post of Krieger’s on Livinglies:

“to file suit for quiet title and get the action to the point where you get to have discovery utilized through an evidentiary hearing [as Neil has suggested]. It would be at that point (if BOA won’t give you this stuff via a QWR and DVL) then an attorney that knows this stuff can advise you of your options. I don’t recommend doing this stuff pro se/pro per. I’m working a case now against them that is purposefully becoming convoluted in an attempt to thwart discovery. They DO NOT want you finding this stuff out. Quiet title action in this case is in state court. Don’t let them remove it to federal; and they will try under diversity jurisdiction using all the same arguments as they do with everyone else and then motion for a 12(b)(6) dismissal. “

3) The Max Gardner Bankruptcy Litigation Model (BLM):

from Max’s BLM model website:

“Every bankruptcy client has, literally, hundreds of claims that a he can pursue via the FDCPA, state UDAP and TILA statutes, before the case is even filed. After filing, many servicers violate the automatic stay, file improper proof of claims and are outside the statute of limitations, among many other problems. After the bankruptcy is discharged, serious violations occur when servicers start sending bills to the debtor for thousands of dollars of fees they secretly accrued during the bankruptcy case that weren’t ever noticed out or approved by the bankruptcy court …”

“Max’s base filing fees represent less than 10% of his firm’s revenue. The other 90% is earned through litigating claims for his clients. They are so shocked by their great bankruptcy results, they enthusiastically become Max’s best marketing tool and his main source for new clients”

4) The administrative, non-judicial method with perfecting a UCC claim:

Start with “Notice of Conditional Acceptance upon proof of claim” when served with the notice of default or foreclosure sale. This notice binds, or accepts the servicers ”offer” into a private contract without changing the terms or creating a counter proposal. This is now a private contract outside the court room. The single condition, “proof of claim” can be expanded into a long laundry list demand for discovery, in affidavit form, under penalty of perjury. The debtor has a right to a legal accounting of his/her bill. Demanding that accounting is his/her right under UCC. Send out QWRs and other such stuff (all will be tossed by servicer) builds more ammunition for the potential future litigation

Then file UCC-1 Financing Statement, with 3 follups according to the timeline allowed by UCC to “Perfect the Claim”. All of this is done with certified mail and notaries to everyone and everybody.

As further ammunition, file a Mechanics Lien, and a Lis Pendens on the property.

Some rogue Trustees will attempt to foreclose over a Lis Pendens. I guess that is a big no-no, and when the owner or tenant gets served with an eviction notice, that’s pretty good ammunition to go after the trustee. (I don’t understand this part yet).

Eventually this goes to quiet title, or in one case I’ve seen, the full Reconveyance was given. This part is what I don’t know. I do know it delays the thing for a very very long time.

Filed under: foreclosure

Aug

62 MILLION HOMES ARE LEGALLY FORECLOSURE -PROOF

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

121292 Comments2010-08-20+17%3A09%3A54LH

EDITOR’S NOTE: YES IT MEANS WHAT IT SAYS — WHICH IS WHAT I HAVE BEEN SAYING FOR THREE YEARS. BUT JUST BECAUSE SOME JUDGES REALIZE THAT THIS IS THE ONLY CORRECT LEGAL INTERPRETATION DOESN’T MEAN ALL OF THEM WILL ABIDE BY THAT. QUITE THE REVERSE. MOST JUDGES REFUSE TO ACCEPT AND CAN’T WRAP THEIR BRAINS AROUND THE FACT THAT THE FINANCIAL INDUSTRY THAT SET THE LEGAL STANDARDS FOR PERFECTING A SECURITY INTEREST IN RESIDENTIAL HOME MORTGAGES COULD HAVE SCREWED UP LIKE THIS.

THE ANSWER OF COURSE IS THAT THEY DIDN’T — WALL STREET DID IT. I KNOW FOR A FACT AND HAVE SEEN THE INTERNAL MEMORANDUM WRITTEN IN 2003-2006 THAT LAWYERS WHO WERE PREPARING THE SECURITIZATION DOCUMENTS KNEW AND INFORMED THEIR CLIENTS THAT THIS COULD NOT WORK.

THIS DOES NOT MEAN YOU GET A FREE HOUSE. BUT IT DOES MEAN THAT AT THE MOMENT ANY HOUSE IN WHICH MERS WAS INVOLVED DOES NOT HAVE A PERFECTED SECURITY INTEREST AS AN ENCUMBRANCE. AND THAT MEANS THAT ANY FORECLOSURE BASED UPON DOCUMENTS OR PRESUMPTIONS REGARDING MERS ARE VOID. AND THAT MEANS THAT IF YOU FALL INTO THIS CLASS OF PEOPLE — AND MOST PEOPLE DO — IT IS POSSIBLE AND EVEN PROBABLE THAT YOU COULD BE AWARDED QUIET TITLE ON A HOME THAT WAS FORECLOSED AND SOLD EVEN YEARS AGO.

BUT BEWARE: JUST BECAUSE THEY SCREWED UP THE PAPERWORK AND THEY DON’T HAVE THE REMEDY OF FORECLOSURE IMMEDIATELY AVAILABLE DOESN’T MEAN THAT NOBODY LENT YOU MONEY NOR DOES IT MEAN THAT YOU DON’T OWE ANY MONEY NOR DOES IT MEAN THAT THEY COULD NOT CREATE AN EQUITABLE LIEN ON YOUR PROPERTY THAT COULD AMOUNT TO A MORTGAGE THAT COULD BE FORECLOSED. BUT THAT IS STRICTLY A JUDICIAL PROCESS EVEN IN SO-CALLED NON-JUDICIAL STATES.

WE ARE NOW CLOSING IN ON THE REALITY. THE INEVITABLE OUTCOME IS PRINCIPAL REDUCTION WHETHER THE BANKS LIKE IT OR NOT. EVEN IF THEIR LIEN WAS PERFECTED AND ENFORCEABLE THEY STILL CANNOT GET ANY MORE MONEY THAN THE HOUSE IS WORTH. WITHOUT THE ENCUMBRANCE, THEY ARE FORCED TO NEGOTIATE A WHOLE NEW PATH WITH ONLY THE PARTIES THAT ARE NOW LEFT HOLDING THE BAG ON THE LOSS ASSOCIATED WITH THE ORIGINAL LOAN ON YOUR PROPERTY, AFTER ADJUSTMENTS FOR PAYMENTS RECEIVED BUT NOT RECORDED OR ALLOCATED.

IN ORDER TO HOLD THEIR FEET TO THE FIRE, YOU HAVE TO KNOW THE ORIGINAL SECURITIZATION SCHEME AND INSIST ON PROOF OF WHAT HAPPENED AFTER THE INITIAL SECURITIZATION PLAN WAS PUT IN PLACE. REMEMBER THAT THIS IS NOT A FIXED EVENT. THIS IS SINGLE TRANSACTION BETWEEN THE BORROWER AND AN ONGOING PROCESSION OF SUCCESSORS EACH OF WHOM HAS QUESTIONABLE RIGHTS TO THE NOTE, MORTGAGE OR EVEN THE OBLIGATION SINCE THEY WERE ONLY ASSIGNED A RECEIVABLE FROM A PARTY WHO WAS NEITHER THE BORROWER NOR THE ORIGINATING LENDER.

A Homeowners’ Rebellion: Could 62 Million Homes be Foreclosure-Proof?

Ellen Brown
Web of Debt
August 20, 2010

Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles—and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.




Victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”—an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff’s legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

California Precedent

The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E–11. The court held that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:

Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.

In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court). (For more on these earlier cases, see here, here and here.) The court concluded:

Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.

The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:

This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee’s Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.

While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.

What Could This Mean for Homeowners?

Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS’ technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.

An August 2010 article in Mother Jones titled “Fannie and Freddie’s Foreclosure Barons” exposes a widespread practice of “foreclosure mills” in backdating assignments after foreclosures have been filed. Not only is this perjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.

In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders’ case in 2004. Five years later, she says, some of the homeowners she’s helped are still in their homes. According to a Huffington Post article titled “‘Produce the Note’ Movement Helps Stall Foreclosures”:

Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action ‘quiets’ all other claims). Charney says she’s helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.

Criminal Charges?

A d v e r t i s e m e n t

Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used “the artifice of MERS to sabotage the judicial process to the detriment of borrowers;” that “to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;” that the scheme depended on “the MERS artifice and the ability to generate any necessary ‘assignment’ which flowed from it;” and that “by engaging in a pattern of racketeering activity, specifically ‘mail or wire fraud,’ the Defendants . . . participated in a criminal enterprise affecting interstate commerce.”

Local governments deprived of filing fees may also be getting into the act, at least through representatives suing on their behalf. Qui tam actions allow for a private party or “whistle blower” to bring suit on behalf of the government for a past or present fraud on it. In State of California ex rel. Barrett R. Bates, filed May 10, 2010, the plaintiff qui tam sued on behalf of a long list of local governments in California against MERS and a number of lenders, including Bank of America, JPMorgan Chase and Wells Fargo, for “wrongfully bypass[ing] the counties’ recording requirements; divest[ing] the borrowers of the right to know who owned the promissory note . . .; and record[ing] false documents to initiate and pursue non-judicial foreclosures, and to otherwise decrease or avoid payment of fees to the Counties and the Cities where the real estate is located.” The complaint notes that “MERS claims to have ‘saved’ at least $2.4 billion dollars in recording costs,” meaning it has helped avoid billions of dollars in fees otherwise accruing to local governments. The plaintiff sues for treble damages for all recording fees not paid during the past ten years, and for civil penalties of between $5,000 and $10,000 for each unpaid or underpaid recording fee and each false document recorded during that period, potentially a hefty sum. Similar suits have been filed by the same plaintiff qui tam in Nevada and Tennessee.

By Their Own Sword: MERS’ Role in the Financial Crisis

MERS is, according to its website, “an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.” Or as Karl Denninger puts it, “MERS’ own website claims that it exists for the purpose of circumventing assignments and documenting ownership!”

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MERS was developed in the early 1990s by a number of financial entities, including Bank of America, Countrywide, Fannie Mae, and Freddie Mac, allegedly to allow consumers to pay less for mortgage loans. That did not actually happen, but what MERS did allow was the securitization and shuffling around of mortgages behind a veil of anonymity. The result was not only to cheat local governments out of their recording fees but to defeat the purpose of the recording laws, which was to guarantee purchasers clean title. Worse, MERS facilitated an explosion of predatory lending in which lenders could not be held to account because they could not be identified, either by the preyed-upon borrowers or by the investors seduced into buying bundles of worthless mortgages. As alleged in a Nevada class action called Lopez vs. Executive Trustee Services, et al.:

Before MERS, it would not have been possible for mortgages with no market value . . . to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder’s office where documents reflecting any ownership interest in real property are kept….

After MERS, . . . the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible …. The servicer was interested in only one thing – making a profit from the foreclosure of the borrower’s residence – so that the entire predatory cycle of fraudulent origination, resale, and securitization of yet another predatory loan could occur again. This is the legacy of MERS, and the entire scheme was predicated upon the fraudulent designation of MERS as the ‘beneficiary’ under millions of deeds of trust in Nevada and other states.

Axing the Bankers’ Money Tree

If courts overwhelmed with foreclosures decide to take up the cause, the result could be millions of struggling homeowners with the banks off their backs, and millions of homes no longer on the books of some too-big-to-fail banks. Without those assets, the banks could again be looking at bankruptcy. As was pointed out in a San Francisco Chronicle article by attorney Sean Olender following the October 2007 Boyko [pdf] decision:

The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

. . . The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail . . . .

Nationalization of these giant banks might be the next logical step—a step that some commentators said should have been taken in the first place. When the banking system of Sweden collapsed following a housing bubble in the 1990s, nationalization of the banks worked out very well for that country.

The Swedish banks were largely privatized again when they got back on their feet, but it might be a good idea to keep some banks as publicly-owned entities, on the model of the Commonwealth Bank of Australia. For most of the 20th century it served as a “people’s bank,” making low interest loans to consumers and businesses through branches all over the country.

With the strengthened position of Wall Street following the 2008 bailout and the tepid 2010 banking reform bill, the U.S. is far from nationalizing its mega-banks now. But a committed homeowner movement to tear off the predatory mask called MERS could yet turn the tide. While courts are not likely to let 62 million homeowners off scot free, the defect in title created by MERS could give them significant new leverage at the bargaining table.

Filed under: foreclosure

Aug

LivingLies UPDATED Plan of Engagement: What to Do

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

4832Leave a Comment2010-08-20+10%3A58%3A38LH

UPDATE: This is THE OUTLINE of a plan that is current in its evolution but by no means complete or the last word. It replaces the entry I made in February of this year. The assumption here is that even without taking mortgage foreclosure cases into consideration, the percentage of cases that actually go to trial is between 5%-15% depending upon how you categorize “cases.” On the other hand, if you are not prepared for trial and counting on settlement, your opposition will generally know it and have the upper hand in negotiating a settlement. They are going to play for keeps. You should too. Don’t assume that the note in front of you is the actual original. Close inspection often reveals it is a color copy.

And for heaven sake don’t stand there with your mouth hanging open when someone says you are looking for a free house. You are looking for justice. You had your purse snatched in this transaction, you know there is an obligation, but you also know that they didn’t perfect the security interest (not your fault) and they received multiple payments from multiple parties on these securitized loans. You want a FULL accounting of all such transactions to determine what balance is due after insurance payments, who is subrogated or substituted on claims, and an opportunity to negotiate a settlement or modification with someone who actually has advanced money on THIS transaction and can show it to be so.

WORD OF CAUTION: IF YOU ARE ALREADY IN PROCESS, YOU ARE REQUIRED TO ACT WITHIN THE TIMES SET FORTH BY STATE LAW, FEDERAL LAW, OR THE LAWS OF CIVIL PROCEDURE. FAILURE TO DO SO LEAVES YOU IN AN UPHILL BATTLE TO REVERSE ACTIONS ALREADY TAKEN. ON THE OTHER HAND ACTIONS ALREADY TAKEN “FIX” THE POSITION OF YOUR OPPOSITION, SINCE THEY CAN NO LONGER ASSERT CHANGES IN CREDITOR, LENDER OR TRUSTEE. THUS IT MIGHT BE EASIER, ACCORDING TO SOME SUCCESSFUL LITIGATORS OUT THERE, TO WAIT UNTIL THE SALE HAS OCCURRED AND THEN ATTACK IT AS A FRAUDULENT SALE, THAN TO TRY TO STOP IT WITH A TEMPORARY RESTRAINING ORDER ETC.

CONSIDER BANKRUPTCY, ESPECIALLY CHAPTER 13, WHERE THERE ARE MORE REMEDIES THAN YOU MIGHT THINK IF YOU FILL OUT YOUR SCHEDULES PROPERLY. WE ARE SEEING BETTER RESULTS IN SOME BANKRUPTCY COURTS THAN FEDERAL OR STATE CIVIL COURT PROCEEDINGS.

Get your act together, stop fighting amongst the members of your household and make a decision as to what you want to do — fight or flight?

GET SOME HELP NO MATTER WHAT YOU DECIDE. GET THE LOAN SPECIFIC TITLE SEARCH, GET A SECURITIZATION SEARCH, AND GET A LAWYER LICENSED IN THE COUNTY WHERE YOUR PROPERTY IS LOCATED AND MAKE SURE HE/SHE IS NOT STUCK ON THE PROPOSITION THAT YOU SHOULD LOSE.

If you choose flight, then by all means try the short-sale or jingle mail strategies that have been discussed on this blog. Do not try to make money on the short-sale, since nobody is going to give it to you. You can make a few dollars by riding out the time in foreclosure without making payments (and hopefully saving the money you would have paid) and by negotiating as high a price (a few thousand dollars) as you can in a deal known as “cash for keys.” Even for this, you should employ the services of a local licensed attorney — at least for consultation. There are several short-sale options that have evolved. Google Edge Simonson or Prime financial. I’ve been working on a short-sale-leaseback option that seems to be picking up steam.

STRATEGIC DEFAULTS RISING: More and more people of all walks of life including those that have some considerable wealth, are walking away from these properties that were the subject of transactions in which the presumed value of the property was preposterous. This is an option that scare the hair off the pretender lenders because it pouts the power in your hands. They in turn are trying to scare the public with threats of deficiency judgments etc and collections. It is doubtful that many or indeed any deficiency judgments would be awarded, even if they were allowed. But in many cases, particularly in non-judicial states, deficiency judgments are NOT allowed. A version of the strategic default that many people like is to stay as long as possible without paying and then walk. If you are smart about it, you raise your own capital by socking away the payments you would have made.

If the decision is fight — then the second decision to make is to answer the question “fight for what?” If you want to buy time, there are many strategies that can be employed, which basically are the same strategies as those used if you are fighting for real. And you might be surprised by the result. Some people get a year or two or even more without payments. You are going to take a FICO hit anyway so why not put some cash in your pocket while you hold back payments.

AVOID crazy deals where you give your property or share your property with a stranger. If you persist in engaging such people at least call references and make sure the references are real. Ask questions about their situation and how they feel it worked out to them. Get as much detail as possible.

AVOID mortgage modification firms. If you persist in engaging such people at least call references and make sure the references are real. Ask questions about their situation and how they feel it worked out to them. Get as much detail as possible. My opinion is that if they don’t pursue an aggressive litigation strategy the statistical probability of you accomplishing anything by going to them is near zero.

In all cases, if at all possible:

(a) Get all your information together along with a short executive summary of your “journal” (even if you create the journal now). That means all closing documents, any information you have on title, recording in the county recorder’s office, the names of all parties who were “at” closing (that means not just the actual people who were there, but he names of companies that were represented or mentioned at closing). Also, include in the file any notices of default(NOD) or notice of Trustee sale (NOTS) or summons from a court.

(b) Get a MORTGAGE ANALYSIS of the loan transaction itself. THIS INVOLVES THREE PARTS — (1) LOAN SPECIFIC TITLE SEARCH AND CHAIN OF TITLE, EXAMINATION OF THE DOCUMENTS, SIGNATURES, AND DATES OF DOCUMENTS PURPORTING TO BE REAL, (2) SECURITIZATION SEARCH THAT CHASES THE MONEY TRAIL AND WILL PROBABLY LEAD YOU TO SOME IMPORTANT ISSUES LIKE THE VERY EXISTENCE OF THE “TRUST” ASSERTING IT HAS THE RIGHT TO FORECLOSE AS WELL AS MONETARY ISSUES SUCH AS APPLICATION OR ALLOCATION OF PAYMENTS RECEIVED BY THE INVESTOR WHO ADVANCED THE FUNDS FOR THE LOAN AND (3) COMMENTARY AND ANALYSIS THAT IS USABLE BY AN ATTORNEY IN COURT SUCH THAT HE/SHE CAN ARGUE THAT THERE ARE QUESTIONS OF FACT ENTITLING YOU TO PURSUE DISCOVERY. IF YOU WIN THAT POINT YOU ARE ON YOUR WAY TO A SUCCESSFUL CONCLUSION. BUT NOBODY IS GOING TO MAKE IT EASY FOR YOU.

(c) Who is your creditor? The TILA Audit alone does nothing without taking further steps. The Trustee’s “Take-down” report should be demanded in non-judicial states and if the house is in foreclosure, your written objection should be sent to the Trustee.

(d) If someone tells you they are “pretty sure” or can “definitely” stop your foreclosure or promises a favorable outcome, and asks for money up front, then run like hell. This is a scam. IF THEY TELL YOU THEY WILL DO WHAT THEY CAN, AND THEY GIVE YOU SOME EXAMPLES OF WHAT THEY WILL BE DOING FOR YOU THEN LISTEN AND GET REFERENCES.

(e) Only a Court order stops foreclosure or a Trustee Sale. No letter of any form or substance will stop it unless the other side is intimidated into stopping the action, which sometimes happens when they know their paperwork is “out of order.”

(f) Get a Forensic Mortgage Analysis Report OR AN EXPERT DECLARATION that summarizes in a few pages the potential issues that you should be investigating AND WHICH LENDS SUPPORT TOY OUR DENIAL OF THE DEFAULT, DENIAL OF THE RIGHT OF THE OPPOSING PARTY TO CLAIM A DEFAULT, DENIAL OF THE RIGHT OF THE OPPOSING PARTY TO FORECLOSE.

(g) Get an Expert Declaration that uses the forensic report and the expert opinions of specific experts (like appraisers, title analysts) and which identifies the probable chain of securitization and the money trail. You’ll be surprised when you find out there were two yield spread premiums not disclosed to you and that they can total as much or more than the “loan” itself. GET EXPERT OPINION ON PROBABLE DAMAGES INCLUDING RETURN OF UNDISCLOSED FEES, INTEREST, ETC. (SEE LAWYER’S WORKBOOK FROM GARFIELD CONTINUUM).

(h) Send the Forensic Report and expert declaration to the known parties, with an instruction to forward it to all other parties known to them in the securitization chain. Include a Qualified Written Request(QWR) AND a Debt Validation Letter(DVL) (which is really a debt verification letter). Don’t be surprised if your pretender lenders will come back and tell you your QWR is defective or improper in some way, but that’s OK, you have followed statutory procedure and they didn’t. With the help of an attorney and with consultation with your experts decide on what resolution you will demand — damages, rescission, etc.

(i) Don’t believe a word about modification. Practically none of them go through. They are leading you into default so they can collect more service fees, and get money out of you that you think is stopping the foreclosure.

(j) Don’t believe a word that any pretender lender or representative says or represents, even if they are a lawyer, particularly verbal communications that they refuse to confirm in writing. Challenge everything.

(k) Don’t accept any document as authentic. Many documents are being fabricated or forged, including affidavits. This is why you need a lawyer and an expert and a Forensic mortgage analysis — to determine what documents and parties are suspect and what you should be asking for in discovery and in the QWR and DVL.

(l) YOUR FIRST STRATEGY IS TO RAISE NOT PROVE ISSUES OF FACT. BY PRODUCING A FORENSIC REPORT AND EXPERT DECLARATION, NEITHER YOU NOR YOUR LAWYER NEEDS TO ACQUIRE EXPERTISE IN SECURITIZED LOANS. YOU ONLY NEED TO RAISE THE ISSUE OF FACT BY SHOWING THE COURT THAT YOU HAVE EXPERTS WHO SAY THE PRETENDER LENDERS/TRUSTEES ETC. ARE NOT CREDITORS AND NOT AUTHORIZED AGENTS WORKING FOR THE CREDITORS. THEY SAY THEY ARE IN FACT THE CREDITORS OR HAVE SOME AUTHORITY GRANTED BY AN ALLEGED CREDITOR. IT IS NOT FOR THE COURT TO ACCEPT ONE VIEW OR THE OTHER, BUT RATHER TO ALLOW DISCOVERY AND AN EVIDENTIARY HEARING ON THE ISSUE OF STANDING (SEE MANY RECENT CASES REPORTED SINCE FEBRUARY ON THIS BLOG).

(m) Be very aggressive on discovery. They will argue that even if they are not the creditor and even if they refuse to disclose the identity of the creditor, they are still entitled to disclose because they are the holder of the note and/or mortgage. Your argument will probably be that they still have a duty to disclose the identity of the creditor and the source of the their authority to represent the creditor, along with proof that the creditor has received notice of these proceedings.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: debt validation, expert declaration, forensic analysis, qualified written request, TILA audit, trustee

Aug

NEW YORK CLASS ACTION FILED AGAINST BANKS AND THEIR FORECLOSURE MILL ATTORNEYS

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

12135Leave a Comment2010-08-20+08%3A42%3A02LH

NEW YORK CLASS ACTION FILED AGAINST BANKS AND THEIR FORECLOSURE MILL ATTORNEYS

Today, August 20, 2010, 24 minutes ago | Foreclosureblues

Class action suit filed in New York against “foreclosure mill” attorneys and banks
Fri, 2010-08-20 10:19 — NationalMortgag…
New York-based attorney Susan Chana Lask has filed a federal class action complaint on behalf of tens of thousands of New York State homeowners who lost their homes to an alleged foreclosure fraud orchestrated for years by a New York “foreclosure mill” attorney and major mortgage companies. The case is filed in the US District Court, Eastern District of New York, entitled “Connie Campbell against Steven Baum, MERSCORP Inc., et al.”, Case #10CV3800. It alleges violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), Real Estate Settlement Procedures Act (RESPA) and the Fair Debt Collection Practices Act, and that homeowners paid inflated foreclosure and other fees fictionalized by Baum who profited from the scheme since 2005.

The action seeks to return tens of thousands of foreclosed homes to their owners or the values thereof and hundreds of millions in punitive damages against Baum, MERSCORP and HSBC.

Attorney Susan Chana Lask discovered the alleged foreclosure scheme after her client lost her $1.7 million Brooklyn Caroll Gardens Brownstone home to a $190,000 mortgage foreclosure filed by attorney Steven Baum for HSBC. The foreclosure court filings were false as filed in HSBC v. Concepcion Campbell, et al, New York Supreme Court, Kings County, Index #20393/07. Steven Baum’s foreclosure complaint he filed was for HSBC against Campbell. It admits the loan was never assigned to HSBC, yet he sued for HSBC. A later Satisfaction of Mortgage was not filed for HSBC, but for a company named MERS, admitting HSBC never owned the loan and the foreclosure complaint should have never been filed in the first place.

Also, in the original foreclosure case of HSBC, they file documents by an alleged officer of MERS named Rebecca A. Cosgrove by a notary in Erie County. But MERS is located in Virginia and Erie County is in Buffalo, N.Y. where Baum’s office is based. It is suspect that Cosgrove is not even an officer of MERS, no less that she flew to Buffalo, N.Y. for the day just to sign a document before a notary. In fact, other courts recently discovered these same false notaries and “officer” claims in other cases involving Baum and MERS.

“Mr. Baum is an attorney who knows better, yet his foreclosure filings for parties who have no standing to sue confuse the courts and homeowners while he and his banking clients profit tremendously by throwing people on the streets after their bad loans sold by the very same banks become unaffordable to innocent people,” said Lask.

The aforementioned false foreclosure filings potentially hit tens of thousands of New Yorkers who were foreclosed upon.

“Courts have rules and laws are made to be followed. Corporate America needs to follow the rules and be accountable just like the rest of us, else we’re all victims to one big Bernie Madoff scam,” said Lask.

Courts blast Baum for his sloppy filings claimed to be deliberate to hasten foreclosures on unwitting homeowners and courts. On July 29, New York County Supreme court Judge Alice Schlessinger summed up a MERS foreclosure as “I am unable to say with any confidence that this was an honest transaction.”

The Manhattan U.S. Trustees office started an investigation of Baum months ago.

Filed under: foreclosure

Aug

South Florida Attorneys Addition

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

12068Leave a CommentSouth+Florida+Attorneys+Addition2010-08-19+09%3A52%3A45LH

Posted by Ann

Editor’s Note: These go up either because someone else posts them or I run across the work of a lawyer that I liked. No guarantees, no magic bullets.

2010/08/18 at 7:34 pm

Florida – Before hiring a lawyer, check his credential at the Florida Bar website member seach:
http://www.floridabar.org/names.nsf/mesearch?openform.

Go to the Court House and ask the Court Clerk to give you some cases handled by the lawyer. Ask the lawyer to show you some of his winning cases. Question him about Trustee, assignments, affirmative defenses, Pooling Service Agreement (PSA), April Charney, Mortgage securization etc.

Some excellent Florida Foreclosure Defense Lawyers :
Miami/Broward – Dillon Graham Esq.
Broward – Carol Asbury Esq.,
Palm Beach – Thomas Ice Esq.
North Florida – Chip Parker, Matt Weidner, Wasylik Esq.

Can’t afford a lawyer ? Read http://www.foreclosureprose.com

Filed under: foreclosure

Aug

Debating Yield Spread Premiums: RU Talking to ME?

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

12067Leave a Comment2010-08-19+08%3A43%3A31LH

From Gregg Christoff, who apparently doesn’t like what I have to say and thinks I don’t know what I’m talking about —-

Ok, no offense but this Garfield has no clue what he is talking about in this article. Let me tell you how YSP actually work. Typically banks send mortgage originators (lender) rates every day. The lender then chooses which rate he is going to offer the client. Frankly the higher the rate above the raw rate the higher the yield spread premium. (Which translates to higher commission paid to the lender.) Obviously, the lender cannot offer the raw rate to the client because no profit will be reckonized unless the lender can charge for numerous fees. Normally, charging additional fees is challenging due to the competitive nature of mortgage lending. Therefore, most lenders make thier income from YSP.

When it comes to charging YSP frankly it depends on how much time is spent preparing the loan. If it is a quick and easy loan a minimum YSP can be “charged”. Therefore the loan rate should be close to the raw rate for that loan product. On the other hand, some loans can take months even up to a year to close. So obviously the YSP has to be higher to offset the time and overhead needed to prepare that loan.

The bottom line is no one can stay in business without collecting some type of profitibility. Do you know of any business that can survive without any income?

Like any business, there are always ones that act responsible and with integrity and those that don’t. There are a number of cases where people abused the mortgage industry as it was originally intended. These people have created a black eye for the industry.

But to say that YSP is used to lie to clients claimed by Garfield is utterly ridiculous. If it wasn’t for YSP, how was a mortgage company to stay in business?? Answer that Garfield………..[OK see below]

ANSWER: NO OFFENSE TAKEN, BUT I ALWAYS KNOW WHEN SOMEONE SAYS “NO OFFENSE” WHAT THEY REALLY MEAN IS THAT THEY DON’T WANT TO HEAR AN ANSWER THAT MAKES THEM LOOK FOOLISH.

YIELD: The rate received by the lender on a loan adjusted for the effects of amortization, points and other factors. That is why the APR is different than the nominal rate quoted to the borrower. The actual yield is considered to be the percentage return that goes to the lender, taking into consideration the amount of money the lender advanced and measured against the amount of money the lender actually receives on an annual basis.
If there was ONE YIELD there would be no YIELD SPREAD. And if there was no YIELD SPREAD there would be no YIELD SPREAD PREMIUM.
A Yield SPREAD arises when there are two different possible yields for the same loan. One is better for the borrower and one is better for the lender.
If the spread favors the lender, then a PREMIUM is paid to the one responsible for creating it — i.e., the mortgage broker or mortgage originator.
YIELD SPREAD PREMIUMS for 2001-2008 ran 3-4 times higher than the figures you quote. In some cases, they were much higher than that because all the premiums and commissions were raised to keep mouths shut who knew that the appraisal would never stand the test of time — even one day worth of time.
While it is possible that an argument could have been made for the old yield spread premium of 1-1/2%, it still amounted to a commission that paid for asymmetric information — i.e., the lender/broker knew more than the borrower or the borrower would not have paid it.
In order to “earn” a yield spread premium, the broker or originator must convince the borrower to accept a loan which gives the lender a higher yield than the borrower could otherwise pay. If the borrower takes the bait (you come to the table with less money, you reduce the the monthly payments at first anyway, etc.) then the yield spread occurs and the premium is paid.
In order to convince the the borrower to take the loan terms that give the lender a higher yield, the broker must downplay the negative aspects of making the switch and play up the apparent advantages of the terms that give more to the lender.
To seal the deal, the broker pretends to be acting in the best interests of the borrower when in fact he is acting in the best interests of himself and the “lender.”
Pretending means the broker is lying to the customer about who to trust. And the substance of the lie is that the loan that gives the higher yield to the lender is better for the borrower. This lie can only be accomplished in complex transactions like real estate purchases with one or more loans. Otherwise the borrower would see right through it.
Thus I stand by my rendition of yield spread premiums and assert that you are counting the pits in the orange while someone is driving off with the grove — with your help.

Filed under: foreclosure

Aug

Securitization Search: Why You Need the PSA

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

12001Leave a Comment2010-08-18+11%3A50%3A20LH

Quoted from April Charney — I’m not sure of the source. She is right on every point.PSA= Pooling and Servicing Agreement

EDITOR’S NOTE: Glad to see that April is doing what the rest of us are doing — going deeper and deeper. There are two things you need — the loan specific title search with analysis and the securitization search, report and analysis. One tracks the chain of title the other tracks the chain of money. You must track both in order to avoid the “proffers” and bogus representations of opposing counsel. The only thing I would add is that the Prospectus, Assignment and Assumption Agreement, Distribution reports and “re-stated” agreements tell a long tale as well.

The search for the securitization documents is not as simple as you might think. The claim of some “Trustee” for a “pool” is never backed up by documents showing the full chain of title of the loan, because the receivables were assigned, not the loan. More than one pool can often be found claiming “ownership” of a loan that meets MOST of the characteristics of your loan, but not all of them. It is these inconsistencies that enable you to chip away at the credibility of the pretender lenders.

COMBO TITLE and SECURITIZATION Search, Report, Documents and Comprehensive Analysis

You must realize that while the original PSA is a good starting point, it isn’t the ending point. That is because of the the dissolution of hundreds if not thousands of these special purpose vehicles which was easy because they were never officially formed in the first place. You must realize that the point of fact is that there is a “claim” that the loan is in a “pool” which may or may not have ever existed, but that the the documentary trail shows it was never really assigned tot he pool. So the money trail leads us to those people who have an actual interest in the loan — only after you can make the point that ALL transactions by or relating to the “pool” must be accounted for and allocated to individual loans.

My opinion, is that the the money people, if they can be found, have an interest that can imposed by equity and not by law. Everyone else is simply out to line their own pockets without ever having invested a dime in the loan transaction.

FROM APRIL CHARNEY—–

“You have to get the PSA and the mortgage loan purchase agreement and the hearsay bogus electronic list of loans before the court. You have to educate your judge about the lack of credibility or effect of the lifeless list of loans as the Uniform Electronic Transactions Act specifically exempts Residential Mortgage-Backed Securities from its application. Also, you have to get your judge to understand that the plaintiff has given up the power to accept the transfer of a note in default and under the conditions presented to the court (out of time, no delivery receipts, etc). Without the PSA you cannot do this.

Additionally the PSA becomes rich when you look at § 1-302 (b) which says that the obligations of good faith, diligence, reasonableness and care prescribed by the code may not be disclaimed by agreement, but may be enhanced or modified by an agreement which determine the standards by which the performance of the obligations of good faith, diligence reasonableness and care are to be measured. These agreed to standards of good faith, etc. are enforceable under the UCC if the standards are “not manifestly unreasonable.”

The PSA also has impact on when or what acts have to occur under the UCC because § 1-302 (c) allows parties to vary the “effect of other provisions” of the UCC by agreement.

Through the PSA, it is clear that the plaintiff cannot take an interest of any kind in the loan by way of an “A to D” assignment of a mortgage and certainly cannot take an interest in the note in this fashion.

Without the PSA and the limitations set up in it “by agreement of the parties”, there is no avoiding the mortgage following the note and where the UCC gives over the power to enforce the note, so goes the power to foreclose on the mortgage.

So, arguing that the Trustee could only sue on the note and not foreclose is not correct analysis without the PSA. Likewise, you will not defeat the equitable interest “effective as of” assignment arguments without the PSA and the layering of the laws that control these securities (true sales required) and REMIC (no defaulted or nonconforming loans and must be timely bankruptcy remote transfers) and NY trust law and UCC law (as to no ultra vires acts allowed by trustee and no unaffixed allonges, etc.).

The PSA is part of the admissible evidence that the court MUST have under the exacting provisions of the summary judgment rule if the court is to accept any plaintiff affidavit or assignment.

If you have been successful in your cases thus far without the PSA, then you have far to go with your litigation model. It is not just you that has “the more considerable task of proving that New York law applies to this trust and that the PSA does not allow the plaintiff to be a “nonholder in possession with the rights of a holder.””

Filed under: bubble, CORRUPTION, evidence, foreclosure, foreclosure mill, GTC | Honor, investment banking, Investor, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES, trustee Tagged: SEC report, SEC search, securitization search, title report, title search

Aug

Devil in the Details

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11999Leave a CommentDevil+in+the+Details2010-08-18+11%3A03%3A44LH

Submitted by Attorney

William H. Pincus
bpincus@whpincuslaw.com

2010/08/17 at 1:43 pm

I just received a Notice of Filing Assignment of Mortgage From MERS in Virginia to BAC in Texas and signed by — you guessed it — Caryn A. Graham in Florida. It was notarized by Shavonia L. Turner before her notary privileges were revoked. And it is dated Nov. 9, 2009.
However, I also have an Assignment signed by Ms. Graham in Florida between the same companies for the same property, assigning the same legal documents but this one was notarized by Evelyn Saillant (? – name is hard to read) and witnessed by 2 different witnesses than the other assigment. And its dated Oct. 28, 2009. How many times did they need to assign the same mortgage and note!?

Filed under: foreclosure

Aug

FED BANS YIELD SPREAD PREMIUMS

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11948Leave a CommentFED+BANS+YIELD+SPREAD+PREMIUMS2010-08-17+16%3A19%3A31LH

A YIELD SPREAD PREMIUM IS A FEE PAID TO A BROKER FOR CREATING A FRAUDULENT PROFIT BY LYING TO THE CUSTOMER WHO BUYS A FINANCIAL PRODUCT. This particular lie would be about the rate on the loan.

One would think this was already illegal and one would be right. Not only is it specified in the Truth in Lending Act and other state and federal laws governing deceptive lending practices, it is also covered by RICO and common law actions for fraud. YSP fees and other forms of undisclosed compensation, of which there were many, are all illegal. These fees are illegal and are all due back to the borrower, along with attorney fees, interest, and potential treble damages. And states and federal government agencies that collect revenue should be interested in all this undeclared income “earned” tax-free.

Up until the era of securitization, YSP fees were limited to those situations addressed by this “new” FED ban — where a mortgage broker convinced a borrower to take a higher interest rate in exchange for some perceived advantage that was in fact disadvantageous to the customer — like coming to the table with less money in exchange for a virtual guarantee of foreclosure down the road. But what this ban does not address directly is the the “tier 2″ YSP, in which the second broker was the investment bank. Nor does it take a shot at the trillions in YSP fees ripped out of our economy up until now, which the taxpayers have guaranteed thanks to the TARP, US Treasury and Federal Reserve programs in the fall of 2008. In a hot election year, government and Wall Street guessed correctly that nobody would realize what hit them until long after the deed was done.

While the first YSP was abhorrent, paying brokers thousands of dollars for each bad loan, the second one, also undisclosed, paid investment bankers a profit that sometimes exceeded the loan itself. In the first instance the lie was that this loan is better for you because your initial payment is less, your down payment is less or whatever. In the first instance the lie was first to the prospective borrower, and second to the investor who was advancing money under the supposition that the money would be used to fund loans that had the usual risk of non-payment — which is to say that the odds were in their favor that on balance they would get the return they were looking for, get their principal back and minimize the small balance of defaults with proceeds of foreclosures.

The first lie was predicated on an even bigger lie to both the borrower and the lender (investor): that the property was worth more than the loan, so it was covered by a security interest that would minimize or eliminate the risk of an actual loss. This lie was compounded by the lie that housing prices never go down and they had the appraisals and ratings form official rating agencies to prove that these were transactions whose value was the highest grade available in the marketplace.

The compounded lie was used to convince borrowers that the fact that they knew they could not afford the loan payments when the loan reset to its real terms was “offset” by the “fact” that the broker “guaranteed” the house would later be refinanced at a higher value in which the payment would again be reduced and the borrower would actually receive extra cash. This passive return on an investment meets the definition of the sale of a security, qualifies as a fraudulent unregistered securities transaction, and should land some people in jail. So far, though, the bulk of public opinion continues to blame the victim. The fact that in a transparent transaction where the real facts were disclosed most borrowers would never have signed and no investor would have advanced money is still mysteriously being ignored by policy makers and the courts. Yet it is as plain as day.

This brings us to the second BIG LIE which was that the loan met underwriting standards for the industry, was verified in all the appropriate ways, and the money advanced by the investors was being used to fund loans, not illicit profits. All the lies overlap. The worse the loan the higher the “yield spread premium” to the broker and the higher the yield premium to the investment banker. If the lender (investor) and the borrower knew that the actual amount funded by the lender was $450,000 but the loan was only $300,000, how many people do you think would have allowed or completed that transaction. If they knew that a $150,000 yield spread premium was kept by the investment banker on a $300,000 loan, how many readers think that NOBODY would have asked “hey! Where is the other $150,000?” How many readers think that ANYONE would say that 50% of the loan amount is a reasonable fee for the investment banker to keep?

Although they make it sound complicated the method was conventional and simple: keep the borrower and lender far away from each other so that neither one actual knew the true facts of the transaction. In other words, your standard con game.

This is why the securitization searches are SO important in confronting your adversary in a mortgage dispute. The title search is important, but the securitization search is what really traces the money. And NOBODY in the financial industry wants you to be able to trace the money because if you do, then investors and borrowers who are suing in greater and greater numbers are going to know where the money went, who got it, and they are going to want it back because it was procured by outright lies.

NOTE: The tier 2 YSP runs counter-intuitive to most people so they keep putting it aside. But it lies at the heart of the mortgage crisis. So I’ll explain it AGAIN here. I’ll use a brand new example taken from the above. It is oversimplified to make the point, but it makes the double point that every financial transaction should be allocated to every loan where it is appropriate to do so, which is why your action for ACCOUNTING and DISCOVERY is so important.

Teachers Pension Fund of Arizona is limited to AAA rated investments, which means the equivalent of U.S. Treasury obligations. They seek the highest possible return without going outside the lines of the primary restriction: NO RISK. They understand that in a market where AAA returns are running at 4% they are not going to get 8% without substantially increasing their risk, which is not allowed. The fund managers basically have the job of making sure that investments stay within guidelines, and that liquidity is maintained to pay the benefits to retired Arizona teachers. The fund managers generally rely upon the rating agencies (Moody’s, Standard and Poor’s, Fitch etc.) but they also “peek under the hood” now and then to make sure everything is OK. Generally they rely upon 2 or 3 investment brokerage houses that have world wide reputations to “protect” and whose objective is to keep the pension fund as a long-term client. It’s been like this for decades, so the hum drum of daily activity lulls everyone into a semi-comatose state.

So when Merrill Lynch tells them they have this “innovative financial product” that “everyone” is buying and that has the AAA rating but provides a higher return of say 5% AND is further insured by AIG and/or AMBAC, the fund managers, wanting to look pretty to management of the fund, buy some of these exotic creatures. In our case we will say for example that the fund invested $450,000 in exchange for a promised return on investment of 5%.

Thus our pension fund managers have partied with $450,000 and they are expecting 5% interest (RISK-FREE) which is, in dollars, $22,500 per year. And they expect the investment bank to pick up a few basis points as their fee on this no-brainer risk free investment transaction.

The investment bank goes to its mortgage aggregator, let’s say Countrywide (now Bank of America/BAC), and says give me a $300,000 loan on which the borrower has agreed to pay $22,500 in interest. CW does a quick calculation and arrives at the obvious result: Merrill Lynch is asking them for a $300,000 mortgage loan whose stated rate of interest is 7.5%. Just to check their math they multiply $300,000 times the 7.5% rate and sure enough, it is $22,500 annual interest.

CW goes to its loan originator, and asks for a $300,000 loan with a nominal rate of 9%, with a teaser payment of only 1%, because they want to make sure there is plenty of money to pay the yield spread premium to the mortgage broker, and to collect service fees, transaction fees etc.

The loan originator goes to the prospective borrower who qualifies for a 5 1/2% loan fixed rate for 30 years and can easily pay that. But that is not what Merrill Lynch, CW, or the loan originator want in order to earn their ridiculous fees.

The loan originator assigns a “loan specialist” who has received been certified as a mortgage analyst after a total of 7 seconds of training on his way up the elevator to the 13th floor where his cubicle is filled with prospective deals. His conviction for mail fraud, wire fraud, and prison sentence is behind him now because this new company doesn’t care about his past.

The loan specialist is given a script to convince the borrower against paying 20% down payment, and to take a loan that allows them to pay only 1% interest only for two years. At $250 per month payment, the savings per month is enormous and the loan specialist further entices them with the fact that this is a bona fide transaction backed up by Quicken Loans or some other originator who has done the math and they have figured out that this works best for the customer. Not only that, home prices are forecasted to continue rising by 20% per month, so in a year they will able to refinance and take out an extra $100,000 with even Lower payments.

If the borrower takes the bait, everyone gets what they want except the borrower who is in for some nasty surprises down the road when the payments rise substantially above anything the borrower can pay. This loan is identified as being in the junior tranches of a securitized pool, but subject to a credit default swap which was sold by the senior tranche thus contains toxic waste loans without anyone being the wiser. [This "sale" initially shows MORE INCOME in the senior tranche but creates an enormous liability --- the equivalent of having purchased the worst of the toxic waste loans. Thus the senior tranche "safe" asset was converted into a horrendous liability that was as guaranteed to fail as the lowest tranches. The trick on the secondary transaction was that the investment banking firm had the proceeds of the credit default swaps payable to themselves instead of the investors, by labeling the transaction as a proprietary trade instead of a fiduciary transaction].

If the borrower doesn’t take the bait, then the loan is done at 5 1/2% and is identified as being in the senior tranches of a securitized pool by virtue of a spreadsheet without any assignment, indorsement or delivery of or recording of actual documents.

So to summarize, on a $300,000 loan, the investment bank made $150,000 which was used to fund the outsized and illegal yield spread premiums to the mortgage brokers, who were incentivized to make the worst loans possible because the investment bank’s spread increases exponentially every time they get a bad loan. The Arizona Pension Fund is not wise to the fact that only $300,000 of their money was actually invested in a mortgage. Nor do they know the quality of the mortgage is virtually ‘guaranteed to fail” much less AAA.

Once the loan fails, the Pension Fund does not in theory ask any questions about what happened to all the money — except now, many investors ARE asking that that question and I encourage readers to keep track of those cases, since the discovery responses and pleadings will be very revealing regarding your own actions as borrowers to recover damages, interest, attorney fees etc for TILA, RICO and other violations.

——————————————

August 16, 2010

Fed Adopts Rules Meant to Protect Home Buyer

By DAVID STREITFELD

The Federal Reserve on Monday moved to end a controversial lending practice that had helped propel the housing boom to unsustainable heights and then accelerated its collapse.

The Fed announced that it was adopting new rules banning yield spread premiums, which allowed mortgage brokers and lenders to gain additional profit from loans by charging borrowers higher-than-market interest rates.

Reaction to the change was muted. For one thing, the recent package of financial reforms passed by Congress this summer already addressed the issue. And some thought a ban should have been imposed long ago, at a time when it could have directly affected loan quality.

Michael D. Calhoun, president of the Center for Responsible Lending, described the action as “a real milestone,” but he said that he had been trying to convince regulators for at least 15 years that yield spread premiums were no more than illegal kickbacks.

Many borrowers had little idea of what a yield spread premium was, even when it was costing them money.

Traditionally, mortgage brokers were paid directly by the home buyer. The rise of the premium allowed the brokers to be compensated by the lender as well. Lenders in effect started paying bonuses to brokers who brought them high-interest loans that were naturally coveted by mortgage investors.

From there, critics said, it was a short step for some brokers to put unsuspecting buyers into these loans and tell them it was the best deal they could get. Subprime lenders in particular often used yield spread premiums.

“People didn’t just happen to end up in risky loans,” Mr. Calhoun said. “Mortgage brokers and other people on the frontlines were getting two to three times as much money to push buyers into those loans than they were into 30-year fixed-rate loans. So what do you think happened?”

Brokers argued that it was frequently in the interest of the borrower, especially a low-income buyer, to pay a higher rate in exchange for bringing less cash to closing.

Attempts at reform achieved little, and during the housing boom the yield spread premiums became ever more prevalent. In many cases, groups like the Center for Responsible Lending found, borrowers never realized they were paying both higher fees and a higher rate.

While the new rules prohibit payments to a lender or broker based on the loan’s interest rate, they do allow for compensation based on a fixed percentage of the loan amount.

To avoid steering the buyer into a loan that is offering less favorable terms, the rules now say that the borrower must be provided with competing options, including the lowest qualifying interest rate, the lowest points and origination fees, and the lowest qualifying rate without risky features like prepayment penalties.

The National Association of Mortgage Brokers, which had long argued that efforts to reform the premium unfairly singled out its members, pronounced itself satisfied with the new rules.

The Fed rules “put everybody on the same footing,” including brokers and banks, said Roy DeLoach, executive vice president for the brokers’ association.

The rules take effect in April. Similar, and in some ways broader, rules in the financial reform bill will take effect later.

Filed under: bubble, CDO, CORRUPTION, Eviction, evidence, expert witness, Fannie MAe, foreclosure, foreclosure mill, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES, trustee Tagged: David Streitfeld, fraud, RICO, TILA, yield spread premium, YSP

Aug

Securitization and Title Commentaries Are Current! No further delay!!

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11468Leave a Comment2010-08-16+15%3A44%3A48LH

AND THEY ARE GOING OUT STEADILY. CHECK YOUR “JUNK” EMAIL FOLDERS. Kudos to Dan Edstrom who streamlined the process for the commentaries. The process turned out to be far more complex than we realized when we started. THANKS FOR STICKING WITH US AND SUPPORTING THIS EFFORT!!

CLICK HERE –> if-you-subscribed-to-the-special-offer-at-149

Filed under: foreclosure

Aug

Maine Supreme Court Invalidates MERS Standing

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11881Leave a Comment2010-08-16+15%3A31%3A16LH

MAINE SUPREME JUDICIAL COURT Reporter of Decisions

MERS v Saunders Law Court decision[1]

Decision: Docket: Argued: Decided:
Panel:
2010 ME 79 Cum-09-640 June 15, 2010 August 12, 2010
SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR, JJ.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. v. JON E. SAUNDERS et al.

The good news is that we have yet another state Supreme Court invalidating the legal standing of MERS. But there are many other lessons to be learned from this decision. The main lesson for litigants without legal representation is that the sophistication of legal and procedural arguments has reached a point beyond the capabilities of virtually any layman.

In this case MERS filed a foreclosure action against Saunders. In a late attempt to avoid a decision that would clearly undermine MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, Deutsche Bank National Trust Company attempted to correct the record by substituting itself in the motion for summary judgment after the trial court had already granted the motion for summary judgment in favor of MERS. It is the intricacies of legal procedure that must be observed here.

The court agreed that MERS did not have a stake in the proceedings and therefore had no standing. The court also agreed that a substitution of parties could not be used to cure a jurisdictional defect of lack of standing and was therefore an improper. (The importance of this part of the decision can only be apparent to seasoned litigators. Nearly all foreclosure cases involve late filings of papers intended to cure a jurisdictional defect or other defect).

Finally, and equally as important, the court concluded that “there are genuine issues of material fact.”

This Court made the assumption that the real party in interest was the bank but that the bank was not entitled to summary judgment as a matter of law because they were genuine issues of material fact. The assumption that the bank was a real party in interest is troublesome. It does not appear that there was any evidence in the record to support that assumption.

Before the bank had become a party to the action, it filed a motion to reconsider or amend the order denying the previous motion for summary judgment. The court noted that the bank filed an undated two-page allonge indicating that the originating lender transferred the note to the bank and also filed an assignment indicating that MERS had transferred any rights it had in the note or mortgage to the Bank.

The court also noted that the transfers occurred during the course of litigation. Of course we all know by now that MERS doesn’t have any interest or right in any note or mortgage.

The court stated “a party’s personal stake in the litigation is evidenced by a particularized injury to the party’s property, pecuniary or personal rights.” This wording is congruent with the wording of many other decisions in state and federal courts

The court specifically rejected the argument that a nominee could for any purposes be considered the mortgagee of record and therefore the party with a right to initiate foreclosure proceedings. MERS only right was the right to record the mortgage. The fact that the security instrument identified it as “the mortgagee of record does not change or expand that right.”

An interesting discussion on page 11 of the decision makes a distinction between judicial and nonjudicial states. “These cases are inapposite because nonjudicial foreclosures do not invoke the jurisdiction of the courts. Nonjudicial foreclosures proceed wholly outside of the judiciary, typically utilizing local law enforcement to affect a mortgage or and gain possession of the mortgaged property.”

The interesting procedural point was a finding by the court that Deutschbank, as a non-party had no standing to file any motion in the current proceeding. The implications of this reasoning are very interesting. Because the nominee had no jurisdictional standing, it had no right to bring the foreclosure in the first instance. Because the bank was not a party to the action filed by the nominee, it had no right to bring any motions in the foreclosure initiated by the nominee.

I think this last point is very important from both a tactical and legal perspective. The pretender lenders are using any pretense available in order to initiate a foreclosure and a judicial or nonjudicial state. Only after they are challenged do they attempt to correct obvious deficiencies and defects in the title chain relating to the original obligation between the borrower and the originating lender. Their strategy is clearly to finesse the basic requirements of due process, substantive law and the Rules of Civil Procedure. Arguing this position successfully obviously will take considerable knowledge, memorandums of law, and the ability to argue the point succinctly.

The court obviously recognized this strategy. “After substitution, the bank should have filed its own independent motion for summary judgment with a statement of material facts and supporting affidavits. The Saunders would then have had the opportunity to respond to the new motion and appropriately defend the foreclosure action against the real party in interest.”

On page 19 the court corroborates our arguments regarding evidence citing other cases in Maine. At a minimum a party attempting to foreclose a mortgage must provide proof of the existence of a mortgage and its claim on the real estate supported by evidence of a quality that could be admissible at trial. These facts must be included in the mortgage holder’s statement of facts.

In my opinion this position supports both arguments made on these pages regarding judicial and nonjudicial foreclosures, sales and evictions. None of them are valid and all of them are void unless supported by evidence of the truth of the chain of title. And non-judicial states that require minimal proffers by counsel instead of proof are committing legal error and applying nonjudicial statutes in a manner that is inconsistent with the due process requirements of the United States Constitution.

Filed under: bubble, CASES, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, GTC | Honor, HERS, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES, trustee Tagged: 2010 ME 79, Maine Supreme Judicial Court

Aug

Maine Supreme Court Invalidates MERS Standing

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11882Leave a Comment2010-08-16+15%3A31%3A16LH

MAINE SUPREME JUDICIAL COURT Reporter of Decisions

MERS v Saunders Law Court decision[1]

The good news is that we have yet another state Supreme Court invalidating the legal standing of MERS. But there are many other lessons to be learned from this decision. The main lesson for litigants without legal representation is that the sophistication of legal and procedural arguments has reached a point beyond the capabilities of virtually any layman.

In this case MERS filed a foreclosure action against Saunders. In a late attempt to avoid a decision that would clearly undermine MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, Deutsche Bank National Trust Company attempted to correct the record by substituting itself in the motion for summary judgment after the trial court had already granted the motion for summary judgment in favor of MERS. It is the intricacies of legal procedure that must be observed here.

The court agreed that MERS did not have a stake in the proceedings and therefore had no standing. The court also agreed that a substitution of parties could not be used to cure a jurisdictional defect of lack of standing and was therefore an improper. (The importance of this part of the decision can only be apparent to seasoned litigators. Nearly all foreclosure cases involve late filings of papers intended to cure a jurisdictional defect or other defect).

Finally, and equally as important, the court concluded that “there are genuine issues of material fact.”

This Court made the assumption that the real party in interest was the bank but that the bank was not entitled to summary judgment as a matter of law because they were genuine issues of material fact. The assumption that the bank was a real party in interest is troublesome. It does not appear that there was any evidence in the record to support that assumption.

Before the bank had become a party to the action, it filed a motion to reconsider or amend the order denying the previous motion for summary judgment. The court noted that the bank filed an undated two-page allonge indicating that the originating lender transferred the note to the bank and also filed an assignment indicating that MERS had transferred any rights it had in the note or mortgage to the Bank.

The court also noted that the transfers occurred during the course of litigation. Of course we all know by now that MERS doesn’t have any interest or right in any note or mortgage.

The court stated “a party’s personal stake in the litigation is evidenced by a particularized injury to the party’s property, pecuniary or personal rights.” This wording is congruent with the wording of many other decisions in state and federal courts

The court specifically rejected the argument that a nominee could for any purposes be considered the mortgagee of record and therefore the party with a right to initiate foreclosure proceedings. MERS only right was the right to record the mortgage. The fact that the security instrument identified it as “the mortgagee of record does not change or expand that right.”

An interesting discussion on page 11 of the decision makes a distinction between judicial and nonjudicial states. “These cases are inapposite because nonjudicial foreclosures do not invoke the jurisdiction of the courts. Nonjudicial foreclosures proceed wholly outside of the judiciary, typically utilizing local law enforcement to affect a mortgage or and gain possession of the mortgaged property.”

The interesting procedural point was a finding by the court that Deutschbank, as a non-party had no standing to file any motion in the current proceeding. The implications of this reasoning are very interesting. Because the nominee had no jurisdictional standing, it had no right to bring the foreclosure in the first instance. Because the bank was not a party to the action filed by the nominee, it had no right to bring any motions in the foreclosure initiated by the nominee.

I think this last point is very important from both a tactical and legal perspective. The pretender lenders are using any pretense available in order to initiate a foreclosure and a judicial or nonjudicial state. Only after they are challenged do they attempt to correct obvious deficiencies and defects in the title chain relating to the original obligation between the borrower and the originating lender. Their strategy is clearly to finesse the basic requirements of due process, substantive law and the Rules of Civil Procedure. Arguing this position successfully obviously will take considerable knowledge, memorandums of law, and the ability to argue the point succinctly.

The court obviously recognized this strategy. “After substitution, the bank should have filed its own independent motion for summary judgment with a statement of material facts and supporting affidavits. The Saunders would then have had the opportunity to respond to the new motion and appropriately defend the foreclosure action against the real party in interest.”

On page 19 the court corroborates our arguments regarding evidence citing other cases in Maine. At a minimum a party attempting to foreclose a mortgage must provide proof of the existence of a mortgage and its claim on the real estate supported by evidence of a quality that could be admissible at trial. These facts must be included in the mortgage holder’s statement of facts.

In my opinion this position supports both arguments made on these pages regarding judicial and nonjudicial foreclosures, sales and evictions. None of them are valid and all of them are void unless supported by evidence of the truth of the chain of title. And non-judicial states that require minimal proffers by counsel instead of proof are committing legal error and applying nonjudicial statutes in a manner that is inconsistent with the due process requirements of the United States Constitution.

Aug

Countrywide settlement pays fraction to investors – Shell Game Continues

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11873Leave a Comment2010-08-16+10%3A14%3A37LH

EDITOR’S NOTE: The shell game continues. While the media picks up stories about “settlements” giving rise to the presumption that Countrywide Home Loans and Bank of America and the rest of the securitization players committed various violations of statutes, duties, rules and regulations, the main point gets lost. Where is this money going and WHY? What is the tacit or express admission in paying that money and what effect does it have on the average homeowner sitting with a loan whose obligation is being paid in these settlements?

Think about it. If Bank of America, which now owns Countrywide, is paying “fractions” to investors who purchased mortgage bonds then who is it that owns the underlying mortgages and loans? Did Bank of America pay the investors do it under a reservation of rights (subrogation) to enforce the underlying loans? If not, then why are they foreclosing? All evidence is to the contrary. There is no subrogation under these purchases, insurance, credit default swaps or any other contract — not that I ever saw and not that my sources in the industry tell me was ever even contemplated much less executed. The same holds true for all those bonds the Federal Reserve is holding.

If Bank of America is paying “fractions” to investors who purchased mortgage bonds, why was it a fraction? Is it because the value of the bond was much lower than the price paid by the investor? Is it just a convenient settlement? Or is it because the investors have also received funds from other sources?

This is what I am referring to when I address “factual constipation.” How are these payments being allocated? Did the owners of the bonds actually have any definable interest in the underlying mortgage loans? If they did, why are these payments not being allocated to the obligations or payments due under those underlying mortgage loans? If they didn’t, why did they get paid anything? How will we ever know without getting a full accounting from all the parties that claim some stake or ownership interest or receivable interest in me is underlying mortgage loans?

It is black letter law as well as common law dating back centuries that nobody can collect the same debt more than once. If they do collect more than once there is a clear right of action by the borrower to collect the excess payment through a lawsuit for unjust enrichment, breach of contract and other causes of action. Here we have an intentional act designed to collect the same debt multiple times. In my opinion this does not merely indicate the presence of an action for fraud, it clearly shows an interstate pattern of racketeering that at one time in our history had the Department of Justice and the FBI busy putting people in jail.

Only in America where the news has turned into an entertainment blitz used by those with the most power and the most money to get their message across, even if it is a total lie. Somehow many if not most people have the impression that the borrowers and the securitized mortgages executed between 2001 and 2009 are not entitled to the relief that any other debtor is entitled to receive––that is the obligation has been reduced for any reason, the borrowers should get credit and if any party receives money in excess of the net amount due after credits, the creditor becomes the debtor owing money to the former borrower.

The bullet point that is being used to distort the perception of our citizens and policymakers is that these borrowers should not get a “free house.” Without getting a full accounting from all parties that advanced funds to and from the original investors who purchased mortgage bonds or collateralized debt obligations and related hedge products, there is no way of knowing the amount of the credit which is due to the borrower. Yes, it is possible that the amount received by the various intermediaries in the securitization chain exceeded the original obligation due from the borrower.

In that case, the borrower owes nothing to the originating lender or the successors to that lender. But if there is still a class of investor or institution that can prove a loss resulting from the nonpayment of the obligation by the borrower (as opposed to non-payment from other parties in the securitization chain) then the law allows that party to recover the loss from those that caused it. That probably includes the borrower, which means that we are not seeking a free house, we are seeking a truthful accounting.

BUT the fact that this obligation theoretically exists does not mean and never did mean under any legal decision in existence that the obligation should be paid to anybody who claims it. By all substantive and procedural law, the obligation is payable to one who proves the obligation and to one who proves it is owed to them and nobody else.

Yet in the view of many judges the challenge by the borrower is viewed as a delay tactic or an attempt to use technical deficiencies to a gain a free house on a lawn that the borrower sought but could not pay. No doubt this is true in some cases. But in nearly all the cases, armies of salespeople using names like “loan expert” pounded on doors and rang the phones of people who had no thought of borrowing money on homes, in many cases, that were debt-free and had been in the family for generations. Now many of those homes are bank owned property.

The simple question that needs to be posed to anyone who looks at the borrower as anything other than a victim is which is more likely? Did the owners of 20 million homes enter into a conspiracy to defraud the financial system, half society and our taxpayers? Did these people have the sophistication, education, knowledge, experience or training to pull off such a caper? Or is it more likely that the Wall Street titans stepped over the line and instead of increasing liquidity for the benefit of consumers and small businesses, used their position to deplete the resources of unsuspecting citizens, pension funds, financial institutions and governmental units from the top federal levels down to the smallest local geographical areas?

Countrywide settlement pays fraction to investors

By ALAN ZIBEL (AP) – Aug 3, 2010

WASHINGTON — Former shareholders of fallen mortgage giant Countrywide Financial Corp. are in line to recoup a fraction of their investments now that a Los Angeles judge has approved a settlement worth more than $600 million settlement.

The payoff doesn’t come close to compensating for the money lost by investors. But it could prompt more lenders to settle legal disputes at the center of the housing bust.

Bank of America, which bought Countrywide two years ago, agreed to pay $600 million to end a class-action case filed against the company. KPMG, Countrywide’s accounting firm, will pay $24 million.

Several New York pension funds who served as lead plaintiffs alleged that Countrywide hid how risky its business had become during the housing market’s boom years. Calabasas, Calif.-based Countrywide was once the nation’s largest mortgage lender.

The agreement stands to return about 40 cents per share of Countrywide’s common stock, before legal fees and expenses. Consider that the stock peaked at $45 a share in February 2007, before the financial crisis. So an investor who held 100 shares could bank on receiving $40 for an investment that was once worth $4,500.

Shareholders did receive 0.1822 shares of Bank of America’s stock for each share of Countrywide they owned when Bank of America acquired Countrywide. That worked out to about one share for every 5.5 shares of Countrywide stock. Shares of Bank of America closed at $14.34 on Tuesday. So that same 100 shares of Countrywide would be worth about $261 today in Bank of America stock.

Add the $40 from the settlement and those shares are now worth little more than $300.

Lawyers for the pension funds are requesting $56 million, or 4 cents per share, for fees and other costs.

Investors “will be compensated for a significant portion of the legal damages that they suffered as a result of what we believe was a violation of the securities laws,” said Joel Bernstein, a lawyer for the pension funds. “They won’t be compensated for every penny of that.”

Bank of America has been trying to put Countrywide’s legal problems behind it. In June, the Charlotte, N.C.-based company agreed to pay $108 million to settle the Federal Trade Commission’s charges that Countrywide collected outsized fees from about 200,000 borrowers facing foreclosure.

It reached a settlement Monday primarily to keep legal fees from escalating, a bank spokeswoman said.

“Countrywide denies all allegations of wrongdoing and any liability under the federal securities laws,” said Shirley Norton, a spokeswoman for Bank of America. “We agreed to the settlement to avoid the additional expense and uncertainty associated with continued litigation.”

Plaintiffs attorneys have pursed lawsuits against numerous lenders and investment banks in the wake of the housing market’s devastating downturn, and the Countrywide settlement could encourage even more such cases, said Paul Hodgson, a senior research associate at The Corporate Library, an independent corporate governance research firm.

“There are a lot of suits out there waiting to get launched,” Hodgson said. “I think this is the opening of the floodgates.”

Former Countrywide CEO Angelo Mozilo, former President David Sambol, former CFO Eric Sieracki and former board members were named in the litigation but are not contributing to the settlement.

But it does not end their legal problems. More than a year ago the Securities and Exchange Commission brought civil fraud charges against Mozilo and the two other former executives. Mozilo, the most high-profile individual to face charges from the government in the aftermath of the financial crisis, has denied any wrongdoing.

For Countrywide, “This is only a chapter and not the end of the book,” said John Coffee, a securities law professor at Columbia University.

Filed under: bubble, CASES, CDO, CORRUPTION, education, evidence, expert witness, foreclosure, foreclosure mill, foreign relations, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Servicer, trustee Tagged: ALAN ZIBEL, AP, Bank of America, countrywide, Joel Bernstein, KPMG, New York pension funds

Aug

POLITICS IN THE FALL: REPR BRAD MILLER

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11852Leave a Comment2010-08-15+14%3A46%3A19LH

EDITOR’S NOTE: I don’t know Brad Miller bradmiller.house.gov but I’m sending him a donation. Gretchen Morgenson says he’s worth getting to know and I am going to do just that.

He’s running for re-election in North Carolina, and except for a scant few other members of Congress, he is one of the few that has actually studied the issues confronting 20 million homes and the resulting impact on the economy. What really distinguishes him is that he has something that virtually nobody else in politics has — an idea. It’s hard to imagine someone in politics who actually wants to do something rather than just say something. It’s even harder to imagine that there is someone already in Congress that “gets it” and is taking on the tyrannical control of the big banks in Washington, D.C.. Yet there he is.

If we as a group support Brad Miller, give him the money he needs to campaign properly, and if we can ferret out some other people like him, things might actually change — not just in Washington, but at our dinner tables. Like Alan Grayson www.congressmanwithguts.com in Florida, one man, getting national attention can change the dialogue, change the national perception of an issue being twisted by vested interests and help create at least a first step toward resolution that is fair, equitable and realistic.

This article identifies only one of many conflicts of interests that the large servicers have. This one is about keeping you paying the second mortgage and deluding you into letting the first mortgage slip into default. There is a reason for this behavior — a self-serving reason that runs counter to the interests of the homeowner, the investors who advanced money for the loans, the taxpayers, and everyone else who is affected by unemployment and stagnation in our national economy). The reason is that the servicers are out for themselves and the “trustees are letting them do it because all they care about is getting their monthly fee.

Elimination or strict regulation of the servicing infrastructure would eliminate or mitigate the foreclosure epidemic. Brad Miller has identified that fact with clarity. As a member of congress he is representing you wherever you are and whatever your political affiliation. If you are sick of the bank bailouts, sick of the factual constipation caused by the banks and all those elected and appointed officials who are paid to do the bidding of the banks, then start voting like it.

Personally I have little in common with the tea party movement that consists mostly of people who voted for Bush and the republicans who created and enhanced this mess to unimaginable proportions — and then handed it over to the democrats with a smirk. But I have one thing in common with them — if the candidate is not very convincing that they intend to actually DO something rather than TALK about it, then the “candidate” is not running for office they are marketing for a lucrative job. Fire them, regardless of party affiliation unless they really convince you they know what they are talking about and can articulate specific proposals to fix the problems we face.

August 14, 2010

In This Play, One Role Is Enough

By GRETCHEN MORGENSON

MEET Brad Miller, a Democratic representative from North Carolina who was elected to Congress in 2002, talks straight and understands how big banks can put consumers at peril.

He is worth getting to know, not only because of his deep concern about the foreclosure epidemic, but also because he has made a compelling recommendation to level an exceedingly tilted playing field in mortgage finance.

Depending upon your perspective, Mr. Miller is either the right man in the right place on Capitol Hill — if you’re a consumer — or a threat to the status quo.

A lawyer who worked on consumer protection issues in North Carolina, Mr. Miller is not new to battling banks. In March 2009, along with Representative William D. Delahunt, a Democrat from Massachusetts, he proposed the creation of an independent consumer agency; it became a part of the recent financial overhaul. This past March, Mr. Miller introduced a bill that would eliminate one of the most pernicious conflicts of interest in banking today: the dueling roles played by the big mortgage servicers.

These companies — the biggest are Bank of America, JPMorgan Chase, Wells Fargo and Citibank — operate as the back office for the mortgage lending industry. In good times, their tasks are fairly simple: they take in monthly mortgage payments and distribute them to whoever owns the loans. In many cases, large institutions like pension funds or mutual funds own the mortgages, and servicers are obligated to act in their interests at all times.

When borrowers are defaulting in droves, as they are now, loan servicing becomes much more complex and laborious. Servicers must chase delinquent borrowers for payments and otherwise manage these uneasy relationships, possibly into foreclosure.

So where does the conflict of interest lie? Often, the same bank that services a primary mortgage owned by another institution also owns a second mortgage or home equity line of credit on the same property. When that borrower has trouble meeting both payments, the servicer has an interest in making sure that amounts owed on the second lien, which it owns, continue to be paid even if the first loan, which it has no interest in, slides into delinquency. About two-thirds of primary mortgages are serviced by banks who do not own them but hold the accompanying seconds.

This conflict is a crucial reason that the government’s loan modification program has been so woefully ineffective. The Treasury Department never forced the second-lien holders who service troubled primary mortgages to reduce the amount they are owed by borrowers, even though such a move would give them a better shot at keeping their homes.

Of course, the big banks that hold these second liens have little interest in letting borrowers write them off entirely, or in part, because the institutions would have to absorb huge losses on them. As long as the borrower is eking out payments on the second liens, the banks that own them can pretend that they are performing and keep recording them at high values on their books.

The top four banks hold approximately $450 billion in second liens that are supposed to take a backseat to the investors who hold the primary mortgages. But because of the front-seat role big banks play as servicers, they are in a position to put their interests first.

“Unless we can make servicers modify mortgages through bankruptcy or eminent domain, the servicers are not going to reduce principle,” Mr. Miller, 57, said in a recent interview. “Their stance does seem largely driven by accounting concerns — they are trying to maintain the fiction that the mortgages are worth the value they are carrying them at on their books.”

Enter Mr. Miller’s bill, the Mortgage Servicing Conflict of Interest Elimination Act. It bars servicers of first loans they do not own from holding any other mortgages on the same property.

Mr. Miller’s bill has not gained much attention since it was introduced in March. But it ought to, because the Dodd-Frank financial overhaul law is utterly silent on servicer conflicts.

The bill would give these institutions a reasonable amount of time to divest either their servicing businesses or their interests in home mortgages, Mr. Miller said. A likely outcome is that the four biggest banks would spin off their mortgage servicing operations. This would not only resolve the conflict between loan servicers and investors, but it would also result in smaller, less complex banks, he said. That is surely a major benefit.

Another is that Mr. Miller’s law, if enacted, would break up the logjam now thwarting mortgage modifications. “We must reinvent our mortgage finance system,” he said. “This is a huge part of our economy, and we cannot have a healthy recovery with the housing sector as sick as it is.”

A member of the House Financial Services Committee, Mr. Miller concedes that he did not see the financial crisis coming. But he said that several years ago he became aware that increasingly poisonous mortgages were being peddled to consumers.

“These mortgages were not designed to increase homeownership; they were designed to trap people in debt and strip the equity in their home as home prices appreciated,” Mr. Miller said. “For the financial industry, that increasing wealth from middle-class homeowners was an attractive target; if they could trap families in a cycle of borrowing every three years or so, then a lot of increased wealth in their homes would end up in the financial sector rather than with those families.”

Mr. Miller recognizes that his is an uphill climb because the big banks have many friends in high places across Washington. “Americans have come away from this persuaded that everything has been done to help the banks and not to help them,” he said. “And in a democracy, that’s a real problem.”

Still, he said he has recently noted a slight shift in the balance of power. “I’ve seen the banks going from losing no fights to losing a few fights,” he said. “What I’ve found is the more fights we pick, the more success we have.”

Here’s to more fights, then. Many more.

Filed under: bubble, CDO, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Pleading, Servicer, STATUTES, trustee Tagged: BRAD MILLER, GRETCHEN MORGENSON, MILLER, POLITICS

Aug

Fixing the Principal Deficit Problem

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11814Leave a CommentFixing+the+Principal+Deficit+Problem2010-08-14+14%3A21%3A29LH

I’m not sure I deserve credit for this entry from Richard Widmark, but it has a great deal of merit. It should be expanded and I’ll publish it. His is a bare outline with not much to show the reasoning behind it. Yet I see glimmers of a solution if anyone would listen.

The presenting issue is that none of the homes are worth the paper that was written and signed. We all know that. But we also know that prices vary from place to place. And we know the appraisal fraud was worse in some places than in others. So without establishing another federal agency to go through each closing, how do you fix this? Richard sees a possible way. He gives me credit but I’m not sure why.

Summarizing what I see in Richard’s comment you start with each homeowner using a “stated value” of their home that they come up with. The program could be further refined by use of appraisers, but his point is well taken — if the homeowners can be kept honest we instantly have a correction to reality pricing and that is the only correct starting point for this nonsense.

The offset for the homeowner is that if they state the value too low, then the government or anyone else could come in and buy it. The homeowner is out. The more they want to keep the home, the higher the value they place on the home. In theory this makes sense and while neo-cons would be quick to point out moral hazard, I would be just as quick to point out that any moral hazard would be a drop in the bucket compared to what Wall Street did with these “values.”

A new obligation, note and mortgage is created at the real fair market value of the property. I would argue that the best stimulus for the economy is to use 80% loan to value since the prices are still going down anyway. The creation of a feeling of equity, even if it wasn’t all that solid would do more to prop up the confidence in the economy and confidence in a government that is dealing with reality.

The new loan would be funded. The proceeds would go to anyone who could prove they actually lost money on this deal starting with the purchase of mortgage bonds and ending with the new loan and the new valuation. I would argue that the investors should be required to use their “credit standing” if they can prove it, to hold a portion of the new loan rather than receiving funding from it. The funding would come from conventional lending, especially if you use 80% loan to value and conventional underwriting standards. I would argue that it is in the best interest of the country to make some accommodation (perhaps a lease) to those homeowners who cannot afford to own the property even if the terms are drastically turned in their favor.

Government guarantee programs, as opposed to actual funding will cause actual liquidity in the housing market and allow these deals to go forward and the regular purchase and sale of homes to go forward using a higher degree of certainty about prices. The actual out-of-pocket government cost would be minimal.

But here is the rub. If we don’t adopt the approach used in Germany which was to create and maintain jobs at all costs, then there won’t be anyone to pay rent, mortgage payments or anything else. Housing prices have long been known to vary directly with median income, which in this country has been going down for over thirty years. The drop in median income was “offset” with credit, but we all know how that turned out. So the only way we are going to see our country survive as anything more than a banana republic is by raising median income through jobs programs, new business stimulus, small business loan liquidity and housing liquidity.

The neo-cons can scream all they want about how this is against American principles of self-reliance and small government. This is NOT an ideological question. It is a practical one — do we want recovery or do we want ruin?

FROM RICHARD WIDMARK (ANY RELATION TO THE ACTOR?)

I propose the Neil Garfield bottoms-up and top-down split mortgage options program.

Each underwater home owner is given the right to fix a fair value on his home.

The US Government will guarantee a mortgage on that homeowners own value with the full faith and credit of the US Government: I propose 5-year T-Bond rates for that underlying mortgage.

And then the US Government will give a lesser guarantee on a 2nd mortgage to fill the difference.

The rub: the US Government may condemn the property at will and on 60-days notice at the the price set by the homeowner. And third parties may force than condemnation procedure as well.

And in that fashion – homeowners will be very honest about their homes value.

Homeowners may adjust their value upwards if prices rise – as they will under this propgram.

Filed under: foreclosure

Aug

Mortgage bond holders taking collective action

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11781Leave a Comment2010-08-13+14%3A43%3A30LH

SHELL GAME CONTINUES. WHO HAS THE BOND? WHO HAS THE RECEIVABLE? WHO HAS THE SECURITY INTEREST? WHO IS GETTING PAID? WHERE ARE THE MONTHLY PAYMENTS GOING? FANNIE MAE AND FREDDIE MAC ARE BIG PLAYERS, AS IS THE FEDERAL RESERVE. ARE THEY THE ONES REALLY FORECLOSING UNDER COVER OF SECURITIZATION?

EDITOR’S NOTE: Another entry under the category of “I told you so.” Sooner or later the investors were going to figure out that they had real claims against the investment bankers and other intermediary entities in the illusion of the securitization chain, together with the servicers and other players at the loan closing. Not long ago investors would not talk with each other. Now they are banding together. Things change. This development will lead to further unraveling of the factual constipation that those players arrogantly thought they keep a lid on. The inevitable and only logical outcome here is the entry of real facts portraying the reality of these transactions.

The current reality is very simple: the investors were tricked, the borrowers were tricked, and the intermediaries took all the money. The ONLY way this can be fixed from a National perspective is to bring the borrowers and the investors together, realizing that they both have the same interests — recovery from their financial ruin. Investors need to bring certainty to what is left of their “investments.” They need to know the value of their investments and how best to recover that value. Without that they can’t bring a specific action for damages. Without that they can’t fire the intermediaries and get an honest deal launched with borrowers on property that just isn’t worth what was advertised.

There is no way to avoid principal reduction in some form because it is already there. The value is down to where it should have been at the beginning and it isn’t going up. Investors, sellers,, buyers and borrowers need to accept this fact and government, including the judiciary, need to realize that this wasn’t normal market movement, this was cornering the market and manipulating it. The investors will prove that in their own lawsuits.

A direct approach from investors to borrowers will eliminate the ridiculous fees being sucked out of what is left of these deals, and allow the investors to recoup far more than what they are being offered. Most homeowners would be willing to accept a principal reduction that splits the loss fairly between the investors and borrowers if they were able to get fair terms.

The difference is night and day. What would have been zero recovery for the investor could be as much as $100,000 or more in a genuine modified or new mortgage. And with cooperation between borrower and investors the security interest, which is in my opinion completely invalid and unenforceable, could be perfected, title cleared and the marketplace renewed with confidence in contract , property laws and the rights of consumers and investors. Community banks could fund the new mortgages giving the investors an immediate exist or the investors could hold the paper through REAL special purpose vehicles that were REALLY created and REALLY existing.

Mortgage bond holders get legal edge; buybacks seen

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Fla 5th DCA Invalidates Enforcement for Non-Payment of Taxes on Note

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11777Leave a Comment2010-08-13+11%3A23%3A44LH

NOTE TO BOB HAGER: TOLD YOU SO

727 So.2d 302 (1999)
Michael M. SOMMA, Appellant/Cross-Appellee,
v.
METRA ELECTRONICS CORP., etc., Appellee/Cross-Appellant.
No. 98-1774.
District Court of Appeal of Florida, Fifth District.
February 12, 1999.
Eric W. Ludwig of Eric W. Ludwig, P.A., Altamonte Springs, for Appellant/Cross-Appellee.
Melissa Clark Daley of Melissa Clark Daley, P.A., Tampa, for Appellee/Cross-Appellant.
ANTOON, J.
The dispositive issue raised in this action to enforce a promissory note is whether the trial court was required to dismiss the action once it was established at trial that the plaintiff had failed to pay the taxes due on the note. We conclude that the trial court should have dismissed the action because a promissory note is not enforceable in any Florida court until the requisite tax due on the note is paid. See § 201.08, Fla.Stat. (1997). Accordingly, we reverse the final judgment entered below.
In January 1997, Metra Electronics Corporation (Metra) executed a $1,893,750 promissory note in favor of Michael Somma. The note was executed in accordance with the terms of a settlement agreement reached by the parties relating to an earlier dispute. The terms of the note required Metra to pay Mr. Somma $18,750 per month for a period of ten years. The payments were to be made by the 21st day of each month and the note did not include a grace period for late payment. An acceleration clause was included in the note providing that Mr.Somma could demand the entire amount due if Metra failed to make a monthly payment.
Pursuant to the parties’ agreement, Metra arranged to deposit its monthly payments into Mr.Somma’s Prudential investment account. Metra made an initial deposit of $348,000 with Sun Trust Bank and instructed Sun Trust to forward the monthly note payments to Mr. Somma’sPrudential account.
The payments were made by Sun Trust in accordance with the terms of the promissory note until June 1997 when the funds contained in Metra’s Sun Trust account fell below $18,750. Since the balance in the account was not sufficient to pay the amount 303*303 due, Sun Trust did not forward the June payment to Mr. Somma’s Prudential account. Sun Trust did not notifyMetra of the deficiency until early July. Upon notice, Metra instructed Sun Trust to forward the remaining account balance of $12,554.94 to Mr. Somma’s Prudential account. This payment was made on July 2. On July 3, Metra issued a check in the amount of $6,131.55 payable to Mr. Somma’s Prudential account. Notwithstanding the payment of these sums, $63.51 remained due on the June installment payment. Mr. Somma promptly declared the note to be in default and filed this suit seeking to accelerate the balance due on the promissory note.
The case proceeded to non-jury trial. During his case-in-chief, Mr. Somma offered the promissory note into evidence. The note did not have documentary tax stamps affixed, and Mr.Somma did not offer any evidence that the taxes due on the note had been paid. Metra moved for involuntary dismissal of the lawsuit, arguing that the trial court lacked authority to enforce the note because the taxes due on the note had not been paid. To support this argument,Metra cited to section 201.08 of the Florida Statutes which provides in relevant part:
201.08 Tax on promissory or nonnegotiable notes, written obligations to pay money, or assignments of wages or other compensation; exception.—
(1)
* * * * * *
The mortgage, trust deed, or other instrument shall not be enforceable in any court of this state as to any such advance unless and until the tax due thereon upon each advance that may have been made thereunder has been paid.
§ 201.08(1), Fla.Stat. (1997) (emphasis added). The trial court reserved ruling on the motion and the trial proceeded.
At the close of trial the court, in an effort to reach an equitable result, denied Metra’s motion to dismiss but entered final judgment in Metra’s favor concluding that: 1) Prudential was Mr.Somma’s agent and was authorized to accept the late and deficient payments from Metra and Sun Trust; 2) the deficiency in the June payment was de minimis and Metra had substantially performed its obligations pursuant to the terms of the note; 3) Mr. Somma’s failure to pay the taxes due on the note did not deprive the court of authority to enforce the note; and 4) Metrahad waived any objection to Mr. Somma’s failure to pay taxes by failing to raise the issue sooner. Both parties have appealed the final judgment.
Mr. Somma contends that the trial court erred in applying the equitable doctrine of substantial performance and in determining that Prudential was his agent and not merely a depository. On cross appeal Metra argues that the trial court erred in failing to dismiss the action due to Mr.Somma’s failure to obtain the requisite documentary tax stamps. Although the arguments raised by Mr. Somma have piqued our interest, we only need to determine the issue raised on cross appeal because that determination is dispositive.
Other courts have addressed procedural issues arising from the fact that at trial the plaintiff failed to establish that the requisite taxes had been paid on instruments which they were seeking to enforce. For example, in Owens v. Blitch, 443 So.2d 140 (Fla. 2d DCA 1983), the trial court refused to admit a promissory note into evidence because the documentary tax stamps on the note had been belatedly purchased. On appeal, the second district reversed this ruling, holding that “[n]othing in Florida law would deny enforceability of promissory notes merely because documentary stamps have been belatedly affixed.” Id. at 141.
Similarly, in Klein v. Royale Group, Ltd., 578 So.2d 394 (Fla. 3rd DCA 1991), the plaintiff sued the defendant for failure to pay a promissory note. After the plaintiff rested his case, the defendant moved to dismiss the action on grounds that the plaintiff had failed to pay the necessary tax on the promissory note. The court scheduled a hearing on the motion; however, before the hearing commenced the plaintiff paid the tax due and affixed the documentary stamps to the note. Nevertheless, the trial court dismissed the action without prejudice. On appeal, the third district reversed, holding that “there is nothing in the statute or the case decisions 304*304 that deny enforceability merely because the required documentary stamps have been belatedly purchased and affixed.” Id. at 395.
In Silber v. Cn’R Industries of Jacksonville, Inc., 526 So.2d 974 (Fla. 1st DCA 1988), the plaintiff sought recovery on a promissory note. At trial, after the close of the plaintiffs case, the trial court allowed the plaintiff to reopen its case, remove the note from evidence, and affix the requisite documentary tax stamps in order “to correct [the] legal impediment to enforcement of the note”. Id. at 977. On appeal, the defendants argued that the trial court erred in so ruling and should have instead granted their motion to dismiss the action without prejudice to refiling after payment of the tax due. The first district found the trial court’s ruling “troublesome” primarily because the court had permitted the plaintiff “to reopen its case, change the evidence to alter the existing facts, and then adduce proof of the new facts as altered by using the evidence of such changes.” 526 So.2d at 978 (emphasis in original). By so ruling, the trial court not only allowed the plaintiff to prevail on the substantive claim but also subjected the defendant to the payment of prevailing party attorney’s fees. Such fees would not have been incurred had the court dismissed the action. In reviewing the matter, the first district refused to dismiss the action since all of the issues “were fully and fairly tried free of error”. 526 So.2d at 979. However, the court vacated the prevailing party attorney’s fee award and remanded the matter to the trial court with instructions to either allow the plaintiff the option of waiving the fees incurred prior to the purchase of the stamps, or having the case dismissed without prejudice.
The facts of the instant case are distinctively different from those in the cases cited above. Evidently, this action has proceeded through trial and appeal even though the promissory note is statutorily unenforceable. Inexplicably, once Metra pointed out that the documentary tax had not been paid, Mr. Somma did not request permission from the trial court to purchase and affix the required stamps. In fact, neither the instant record nor the appellate briefs suggest that Mr.Somma has yet purchased the requisite documentary tax stamps.
Section 201.08(1), Florida Statute (1997), clearly states that in an action to enforce a promissory note the plaintiff must establish, as a condition precedent to pursuing the action, that the taxes due on the note have been paid. The prohibition against actions to enforce promissory notes until the required documentary taxes have been paid applies to “any court” including ours. The obvious purpose of this statute is to ensure payment of statutorily mandated taxes. “This statutory provision is concerned primarily with enforcement of the taxing statutes and collecting monies due the state for documentary stamps on designated instruments.” Silber, 526 So.2d at 977. To this end, section 201.08(1) constitutes an injunction prohibiting courts from enforcing rights created by instruments upon which required taxes have not been paid. Accordingly, since no evidence was submitted at trial to prove that Mr. Sommahad paid the taxes due on the note, this lawsuit should have been dismissed.
Mr. Somma argues that his failure to pay the documentary tax constitutes an affirmative defense, not a limitation upon the court’s authority to adjudicate the lawsuit. He argues further that, like all other affirmative defenses, the defense relating to the failure to pay documentary taxes is waived if not timely raised. See Fla.R.Civ.P. 1.140. Applying this argument, he submits that Metra waived its right to assert the defense of his failure to pay the taxes due on the note by waiting to raise the issue until trial. We disagree.
Unlike an affirmative defense, section 201.08 was not enacted for the protection of any particular class of defendants, nor was it enacted to preserve the integrity of the judicial proceedings. Therefore, a defendant’s failure to plead a plaintiff’s noncompliance with section 201.08 does not waive the state’s right to receive payment of the requisite taxes nor does such noncompliance excuse the court from complying with the prohibition contained in the statute. We note that the record before us does not disclose that Metra had knowledge of Mr.Somma’s failure 305*305 to pay the documentary tax prior to the note being offered into evidence. Perhaps this lack of knowledge explains the lateness of the objection. In any event, since the failure to pay taxes due on a note does not constitute an affirmative defense, defendants are not required to undertake pre-trial discovery in order to determine whether the plaintiff has complied with the terms of the statute.
In summary, promissory notes for which documentary taxes have not been paid are, as a matter of law, unenforceable by any Florida court. In an action to enforce such a note, once the court discovers that the documentary taxes have not been paid, the court must dismiss the action without prejudice, or upon proper motion abate the action for a time sufficient to enable the plaintiff to purchase documentary stamps and affix them to the note. See Kotzen v. Levine,678 F.2d 140 (11th Cir.1982). Accordingly, we reverse the final judgment entered below and remand this matter to the trial court for proceedings consistent with this opinion.
REVERSED and REMANDED.
GRIFFIN, C.J., and THOMPSON, J., concur.

Filed under: foreclosure

Aug

HELOC LOANS WORTHLESS

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

117382 CommentsHELOC+LOANS+WORTHLESS2010-08-12+16%3A41%3A37LH

12debt.html?_r=1&ref=business

EDITOR’S NOTE: It is ironic how reality eventually catches up with illusion. While we have been pounding on the issue of principal reduction as the only realistic way out of the recession, and while the financial industry has been busy convincing people that principal reduction is somehow immoral, the contraction of home prices back to reality is having its own consequences.

In the article below the art and necessity of strategic default is revealed as mainstream in the current housing market. In the case of home equity loans or home equity lines of credit the bloating of appraisals at the time of the transactions has blown up in the face of the financial industry. Many of those home equity loans were in reality part of the initial transaction without which the buyer would have been unable to purchase the home. The transaction would have been valid if the appraisal had been valid. It wasn’t.

A simple analysis of basic fundamental figures published monthly over the last 120 years easily demonstrates that the appraised values that were unverified by the alleged “lender” as part of a nonexistent “underwriting process” could not sustain the test of time or circumstance.

In point of fact most new homeowners quickly found out within weeks or months of the initial transaction that their property was worth far less than the representations made to them at the time of closing. The true value was so far below the so-called appraised value that it didn’t cover the home equity part of the transaction even at the time that the transaction was closed.

The reaction of homeowners to the disappearance of the illusion of wealth has been entirely predictable. For the present the number of home equity loans which are going unpaid is soaring both in numbers and percentages, regardless of the borrower’s ability to pay. Any party that wishes to assert itself as the “owner” of the loan is stuck in the position of holding a predatory loan subject to numerous defenses that is completely unsecured by any equity in the home. According to this article there is at least one debt collector that won’t pay more than $500 per loan regardless of the principal amount due.

The rising number of strategic defaults on primary loans is also rising, also predictable and also inevitable. This is the obvious reaction of a marketplace seeking equilibrium and dependable valuations. Until policy makers accept the reality that the wealth of our economy is largely buried under the illusion of debt that is neither secure nor perfected arising from transactions that were illegal, predatory and fraudulent, there is no way out.

Restoring consumers to the position they were in before they were defrauded is the only way to restore confidence in our society that has permitted the privatization of the issuance of money. Financial reform without providing an easy path to restoration of wealth in the middle-class is meaningless.

August 11, 2010

Debts Rise, and Go Unpaid, as Bust Erodes Home Equity

By DAVID STREITFELD

PHOENIX — During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back.

The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.

Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.

The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.

“When houses were doubling in value, mom and pop making $80,000 a year were taking out $300,000 home equity loans for new cars and boats,” said Christopher A. Combs, a real estate lawyer here, where the problem is especially pronounced. “Their chances are pretty good of walking away and not having the bank collect.”

Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter.

Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar. “People got 90 cents for free,” Mr. Combs said. “It rewards immorality, to some extent.”

Utah Loan Servicing is a debt collector that buys home equity loans from lenders. Clark Terry, the chief executive, says he does not pay more than $500 for a loan, regardless of how big it is.

“Anything over $15,000 to $20,000 is not collectible,” Mr. Terry said. “Americans seem to believe that anything they can get away with is O.K.”

But the borrowers argue that they are simply rebuilding their ravaged lives. Many also say that the banks were predatory, or at least indiscriminate, in making loans, and nevertheless were bailed out by the federal government. Finally, they point to their trump card: they say will declare bankruptcy if a settlement is not on favorable terms.

“I am not going to be a slave to the bank,” said Shawn Schlegel, a real estate agent who is in default on a $94,873 home equity loan. His lender obtained a court order garnishing his wages, but that was 18 months ago. Mr. Schlegel, 38, has not heard from the lender since. “The case is sitting stagnant,” he said. “Maybe it will just go away.”

Mr. Schlegel’s tale is similar to many others who got caught up in the boom: He came to Arizona in 2003 and quickly accumulated three houses and some land. Each deal financed the next. “I was taught in real estate that you use your leverage to grow. I never dreamed the properties would go from $265,000 to $65,000.”

Apparently neither did one of his lenders, the Desert Schools Federal Credit Union, which gave him a home equity loan secured by, the contract states, the “security interest in your dwelling or other real property.”

Desert Schools, the largest credit union in Arizona, increased its allowance for loan losses of all types by 926 percent in the last two years. It declined to comment.

The amount of bad home equity loan business during the boom is incalculable and in retrospect inexplicable, housing experts say. Most of the debt is still on the books of the lenders, which include Bank of America, Citigroup and JPMorgan Chase.

“No one had ever seen a national real estate bubble,” said Keith Leggett, a senior economist with the American Bankers Association. “We would love to change history so more conservative underwriting practices were put in place.”

The delinquency rate on home equity loans was 4.12 percent in the first quarter, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping. Borrowers who default can expect damage to their creditworthiness and in some cases tax consequences.

Nevertheless, Mr. Leggett said, “more than a sliver” of the debt will never be repaid.

Eric Hairston plans to be among this group. During the boom, he bought as an investment a three-apartment property in Hoboken, N.J. At the peak, when the building was worth as much as $1.5 million, he took out a $190,000 home equity loan.

Mr. Hairston, who worked in the technology department of the investment bank Lehman Brothers, invested in a Northern California pizza catering company. When real estate cratered, Mr. Hairston went into default.

The building was sold this spring for $750,000. Only a small slice went to the home equity lender, which reserved the right to come after Mr. Hairston for the rest of what it was owed.

Mr. Hairston, who now works for the pizza company, has not heard again from his lender.

Since the lender made a bad loan, Mr. Hairston argues, a 10 percent settlement would be reasonable. “It’s not the homeowner’s fault that the value of the collateral drops,” he said.

Marc McCain, a Phoenix lawyer, has been retained by about 300 new clients in the last year, many of whom were planning to walk away from properties they could afford but wanted to be rid of — strategic defaulters. On top of their unpaid mortgage obligations, they had home equity loans of $50,000 to $150,000.

Fewer than 5 percent of these clients said they would continue paying their home equity loan no matter what. Ten percent intend to negotiate a short sale on their house, where the holders of the primary mortgage and the home equity loan agree to accept less than what they are owed. In such deals primary mortgage holders get paid first.

The other 85 percent said they would default and worry about the debt only if and when they were forced to, Mr. McCain said.

“People want to have some green pastures in front of them,” said Mr. McCain, who recently negotiated a couple’s $75,000 home equity debt into a $3,500 settlement. “It’s come to the point where morality is no longer an issue.”

Darin Bolton, a software engineer, defaulted on the loans for his house in a Chicago suburb last year because “we felt we were just tossing our money into a hole.” This spring, he moved into a rental a few blocks away.

“I’m kind of banking on there being too many of us for the lenders to pursue,” he said. “There is strength in numbers.”

John Collins Rudolf contributed reporting.

Filed under: bubble, CDO, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, GTC | Honor, HERS, investment banking, Investor, Mortgage, Motions, Pleading, securities fraud, trustee Tagged: appraisals, David Streitfeld, fraud, home equity, Mortgage, predatory

Aug

Foreclosure Poetry

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11742Leave a CommentForeclosure+Poetry2010-08-12+15%3A47%3A06LH

From Down River Eye

In Idaho, you lucked up and got to sock it to them good.
Pays to be on your toes when it comes time to fight in court.
I say Yes! We should all stop paying them, join the class action and prepare to fight.
Safety in numbers, united we stand, divided they pick us off one by one.
They are banking on (no pun intended) the majority to keep right on paying or struggling to pay no matter what.
Put the fear of being labeled a deadbeat failure on them, scare them with threats of ruined credit for life.
Make the majority believe they have no choice, no alternative but the streets if they don’t comply. Intimidate them into submission. Shame them into keeping quiet about what is happening to them.
For the rest of us who try to fight back, they’ll bog us down in court, drain our resources in filings and stress us out with constant battles.
Calls at work, at night and all day demanding payments, lie about what to do to get a modification and threaten us if we try to complain.
There are too few lawyers to help and they know we must do much of this ourselves.
It should be illegal for a deal as important as buying a house be allowed with the buyer so ignorant of all the legal ramifications of a mortgage contract.
It’s totally one-sided and geared to benefit the lender and screw the borrower.
I was one of the first to lose to an illegal foreclosure, didn’t know a thing except that my papers weren’t even signed by a judge, they played so many tricks, withheld the summons until after the trial was over, wasn’t notified of a sheriff’s sale, papers unsigned, lies on top of lies, GMAC refused to answer the phone or put you on hold forever.
Since then I have learned a lot, I even trained for a brief time as a mortgage broker. That is what opened my eyes to what was really going on.
The very intent from the beginning is for the lender to sell you a mortgage you will eventually default on! They will repeatedly refinance you into bankruptcy. They will do whatever it takes to get your house after taking all your money.
This was taught to us from the first day of training.
It’s all about the money, every time you refinance, that new note is sold for more than full value. Every time.
They never reveal they are going to bundle the mortgage, never tell you about how they set you up with a servicer who has no authority to do anything but take your money, or that you are now paying for a mortgage they already sold and got paid for. You will never know unless you start checking.
It was a scam from the start and the borrower never had a fair chance of getting out of the trap.
You pay all the fees, deposits, appraisals, over and over again. You pay the note that gets higher and higher, you pay the taxes and all the other costs to a lender who doesn’t even own the loan anymore.
Now they are training their lawyers how to fight us in court, how to get around producing the note, what to do when fraud is charged, when to just pay up and when to push to the limit.

This is like living in the Twilight Zone, it’s all so unreal and incredible. How did so many get so deep that it crashed the whole economy?

One thing I have learned from all this is that you can’t win if the other side is making up the rules and making you play by those rules.

Filed under: foreclosure

Aug

TESTIMONIALS ON OUR SECURITIZATION COMMENTARY

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11700Leave a Comment2010-08-11+19%3A29%3A20LH

Great job! Thank you so much for this commentary. It will be an excellent tool for us at the preliminary hearing on August 27, 2010. An evidentiary hearing may be coming in the immediate future. Deutsche Bank introduced a fake “original note” during an eleventh hour deposition of one Cynthia Stevens. She had verified all the Original Documents used to foreclosure on our property.
When pressed for an answer by my attorney, Dan McGookey, she had to admit that she never saw the “original note” until a few minutes before her deposition. When my wife Terry and I were deposed, we asked to see the “original note and mortgage”. We were told that they were coming in the mail.
During our depositions, my wife and I hammered Deutsche Bank about the mortgage being a securities transaction and the opposing attorney – one Rose Marie L. Fiore of McGlinchey Stafford – became so angry that she threatened us both with contempt as she did not like our answers. Our attorney said that he wanted to call the judge if she did not stop badgering us. Both of our depositions were stopped at one point and we were told to leave the conference room. We sat in a small lunch room about five doors down from the arguing attorneys. They were screaming at each other so loud that we could hear every word.
We knew then that it was “a good day at the office” for us. We shall keep you posted as Deutsche Bank has to explain to the court why they are refusing to answer any of our discovery.

Filed under: foreclosure

Aug

NON-DISCLOSURE DETAILS FROM THE OTHER SIDE

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11656Leave a Comment2010-08-11+08%3A00%3A50LH

ONE MORE QUESTION TO ASK IN DISCOVERY: WHAT ENTITIES WERE CREATED OR EMPLOYED IN THE TRADING OF MORTGAGE BONDS, CDO’S, SYNTHETIC CDO’S OR TOTAL RETURN SWAPS (NEW TERM)?

EDITOR’S COMMENT: LOUISE STORY, in her article in the New York Times continues to dig deeper into the games played by Wall Street firms. You’ll remember that the executives of the major Wall Street firms were spouting off the message that the risks and consequences were unknown to them. They didn’t know anything was wrong. Maybe they were stupid or distracted. And maybe they were just plain lying. The risks to these fine gentlemen and their companies are now enormous. If the veil of non-disclosure (opaque, in Wall Street jargon) continues to be eroded, they move closer and closer to root changes in Wall Street and both criminal and civil liability. It also leads inevitably to the conclusion that the loans and the bonds were bogus.

Yes it is true that money exchanged hands — but not in any of the ways that most people imagine and not in any way that was disclosed as required by TILA, state law, Securities Laws and other applicable statutes, rules and regulations. They continue to pursue foreclosure principally for the purpose of distracting everyone from the truth — that the transactions were wrong in every conceivable way and they knew it.

If there was nothing wrong with these innovative financial products why were they “off-balance sheet.” If there isn’t any problem with them now, then why can’t they produce an accounting, like any other situation, and say “this person borrowed money and didn’t pay it back. We will lose money if they don’t — here is the proof.” If everything was proper and appropriate, then why are we seeing revealed new entities and new layers of deception as Ms. Story and other reporters dig deeper and deeper?

The answer is simple: they were hiding the truth in circular transactions that were partially off balance sheet and partially on. I wonder how many borrowers would be charged with fraud for doing that? Now, thanks to Louise Story, we have some new names to research — Pyxis, Steers, Parcs, and unnamed “customer trades. They all amount to the same thing.

The bonds and the loans claimed to be attached to the bonds were being bought and sold in and out of the investment banking firm that created them. If they produce the real accounting the depth and scope of their fraud will become obvious to everyone, including the Judges that say we won’t give a borrower a free house. What these Judges are doing is ignoring the reality that they are giving a free house and a free ride to companies with no interest in the transaction. And they are directly contributing to a title mess that will take decades to untangle.

August 9, 2010

Merrill’s Risk Disclosure Dodges Are Unearthed

By LOUISE STORY

It was named after a faint constellation in the southern sky: Pyxis, the Mariner’s Compass. But it helped to steer the mighty Merrill Lynch toward disaster.

Barely visible to any but a few inside Merrill, Pyxis was created at the height of the mortgage mania as a sink for subprime securities. Intended for one purpose and operated off the books, this entity and others like it at Merrill helped the bank obscure the outsize risks it was taking.

The Pyxis story is about who knew what and when on Wall Street — and who did not. Publicly, banks vastly underestimated their exposure to the dangerous mortgage investments they were creating. Privately, trading executives often knew far more about the perils than they let on.

Only after the housing bubble began to deflate did Merrill and other banks begin to clearly divulge the many billions of dollars of troubled securities that were linked to them, often through opaque vehicles like Pyxis.

In the third quarter of 2007, for instance, Merrill reported that its potential exposure to certain subprime investments was $15.2 billion. Three months later, it said that exposure was actually $46 billion.

At the time, Merrill said it had initially excluded the difference because it thought it had protected itself with various hedges.

But many of those hedges later failed, and Merrill, the brokerage giant that brought Wall Street to Main Street, soon collapsed into the arms of Bank of America.

“It’s like the parable of the blind man and the elephant: you had some people feeling the trunk and some the legs, and there was nobody putting it all together,” Gary Witt, a former managing director at Moody’s Investors Service who now teaches at Temple University, said of the situation at Merrill and other banks.

Wall Street has come a long way since the dark days of 2008, when the near collapse of American finance heralded the end of flush times for many people. But even now, two years on, regulators are still trying to piece together how so much went so wrong on Wall Street.

The Securities and Exchange Commission is investigating whether banks adequately disclosed their financial risks during the boom and subsequent bust. The question has taken on new urgency now that Citigroup has agreed to pay $75 million to settle S.E.C. claims that it misled investors about its exposure to collateralized debt obligations, or C.D.O.’s.

As Merrill did with vehicles like Pyxis, Citigroup shifted much of the risks associated with its C.D.O.’s off its books, only to have those risks boomerang. Jessica Oppenheim, a spokeswoman for Bank of America, declined to comment.

Such financial tactics, and the S.E.C.’s inquiry into banks’ disclosures, raise thorny questions for policy makers. The investigation throws an uncomfortable spotlight on the vast network of hedge funds and “special purpose vehicles” that financial companies still use to finance their operations and the investments they create.

The recent overhaul of financial regulation did little to address this shadow banking system. Nor does it address whether banking executives should be required to disclose more about the risks their banks take.

Most Wall Street firms disclosed little about their mortgage holdings before the crisis, in part because many executives thought the investments were safe. But in some cases, executives failed to grasp the potential dangers partly because the risks were obscured, even to them, via off-balance-sheet programs.

Executives’ decisions about what to disclose may have been clouded by hopes that the market would recover, analysts said.

“There was probably some misplaced optimism that it would work out,” said John McDonald, a banking analyst with Sanford C. Bernstein & Company. “But in a time of high uncertainty, maybe the disclosure burden should be pushed towards greater disclosure.”

The Pyxis episode begins in 2006, when the overheated and overleveraged housing market was beginning its painful decline.

During the bubble years, many Wall Street banks built a lucrative business packaging home mortgages into bonds and other investments. But few players were bigger than Merrill Lynch, which became a leader in creating C.D.O.’s

Initially, Merrill often relied on credit insurance from the American International Group to make certain parts of its C.D.O.’s attractive to investors. But when A.I.G. stopped writing those policies in early 2006 because of concerns over the housing market, Merrill ended up holding on to more of those pieces itself.

So that summer, Merrill Lynch created a group of three traders to reduce its exposure to the fast-sinking mortgage market. According to three former employees with direct knowledge of this group, the traders first tried sell the vestigial C.D.O. investments. If that did not work, they tried to find a foreign bank to finance their own purchase of the C.D.O.’s. If that failed, they turned to Pyxis or similar programs, called Steers and Parcs, as well as to custom trades.

These programs generally issued short-term I.O.U.’s to investors and then used that money to buy various assets, including the leftover C.D.O. pieces.

But there was a catch. In forming Pyxis and the other programs, Merrill guaranteed the notes they issued by agreeing to take back any securities put in the programs that turned out to be of poor quality. In other words, these vehicles were essentially buying pieces of C.D.O.’s from Merrill using the proceeds of notes guaranteed by Merrill and leaving Merrill on the hook for any losses.

To further complicate the matter, Merrill traders sometimes used the cash inside new C.D.O.’s to buy the Pyxis notes, meaning that the C.D.O.’s were investing in Pyxis, even as Pyxis was investing in C.D.O.’s.

“It was circular, yes, but it was all ultimately tied to Merrill,” said a former Merrill employee, who asked to remain anonymous so as not to jeopardize ongoing business with Merrill.

To provide the guarantee that made all of this work, Merrill entered into a derivatives contract known as a total return swap, obliging it to cover any losses at Pyxis. Citigroup used similar arrangements that the S.E.C. now says should have been disclosed to shareholders in the summer of 2007.

One difficulty for the S.E.C. and other investigators is determining exactly when banks should have disclosed more about their mortgage holdings. Banks are required to disclose only what they expect their exposure to be. If they believe they are fully hedged, they can even report that they have no exposure at all. Being wrong is no crime.

Moreover, banks can lump all sorts of trades together in their financial statements and are not required to disclose the full face value of many derivatives, including the type of guarantees that Merrill used.

“Should they have told us all of their subprime mortgage exposure?” said Jeffery Harte, an analyst with Sandler O’Neill. “Nobody knew that was going to be such a huge problem. The next step is they would be giving us their entire trading book.”

Still, Mr. Harte and other analysts said they were surprised in 2007 by Merrill’s escalating exposure and its initial decision not to disclose the full extent of its mortgage holdings. Greater disclosure about Merrill’s mortgage holdings and programs like Pyxis might have raised red flags to senior executives and shareholders, who could have demanded that Merrill stop producing the risky securities that later brought the firm down.

Former Merrill employees said it would have been virtually impossible for Merrill to continue to carry out so many C.D.O. deals in 2006 without the likes of Pyxis. Those lucrative deals helped fatten profits in the short term — and hence the annual bonuses paid to its employees. In 2006, even as the seeds of its undoing were being planted, Merrill Lynch paid out more than $5 billion in bonuses.

It was not until the autumn of 2007 that Pyxis and its brethren set off alarm bells outside Merrill. C.D.O. specialists at Moody’s pieced together the role of Pyxis and warned Moody’s analysts who rated Merrill’s debt. Merrill soon preannounced a quarterly loss, and Moody’s downgraded the firm’s credit rating. By late 2007, Merrill had added pages of detailed disclosures to its earnings releases.

It was too late. The risks inside Merrill, virtually invisible a year earlier, had already mortally wounded one of Wall Street’s proudest names.

Filed under: bubble, CASES, CDO, CORRUPTION, evidence, expert witness, foreclosure, foreclosure mill, foreign relations, GTC | Honor, HERS, inflation, investment banking, Investor, Mortgage, Motions, Pleading, trustee Tagged: Custom trades, HERS, Louise Story, Ny Times, Parcs, TOTAL RETURN SWAPS

Aug

FLA State probes whether three law firms falsified foreclosure documents

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11624Leave a Comment2010-08-10+17%3A45%3A09LH

Editor’s Note: The REAL BOTTOM LINE POINT is not some technicality wherein the paperwork wasn’t done right, which frankly is reason enough to deny the foreclosure, it is that this “technical” deficiency is “derived” from the fact that there is no note or mortgage or deed of trust that can be enforced. There might not even be any obligation at all if the creditor received payment in full.

LAWYERS TAKE NOTE: Go back to the law books. There are essential differences between the obligation that arises as a matter of law, the note that is offered as proof of the obligation, and the mortgage or deed of trust which is incident to the note.

Don’t dispute the obligation. It DID arise by operation of law. And by operation of law it may still exist, be partially extinguished or entirely extinguished. The documents signed at closing were only PART of the deal in a securitized residential loan. The borrower signs a note and the lender (investor) gets a bond (or evidence of a bond). [THE NOTE AND BOND HAVE DIFFERENT TERMS AND PARTIES BUT THE BOND REFERS TO SECURITIZATION DOCUMENTS THAT IN TURN DESCRIBE LOANS OF WHICH THE BORROWER'S LOAN IS ONE CLAIMED TO BE IN A POOL FORMING THE SOURCE OF REVENUE].

WITHOUT REAL DOCUMENTS SIGNED BY REAL PEOPLE WITH REAL AUTHORITY WITH REAL EFFECTIVE DATES, THE CHAIN IS BROKEN.

The borrower signs the note to a party whom the investor never heard of nor could the investor have uncovered the payee on the note because the information was withheld. The investor receives a bond which is an assignment of all right, title and interest to the receivables, but the security instrument is left where it always was — with the mortgage originator (the only one in county records with an interest). The lender (investor) doesn’t know the borrower and the borrower doesn’t know the lender, while each of them receives different terms and [promises from different parties.

But by operation of law, the originator’s interest is extinguished the moment it arises because it is in most cases a table funded loan in which the originator acted as a broker not a lender, and performed no underwriting tasks. So the legal obligation is extinguished at the same time that the legal obligation arises.

BUT that is not the end of the story.

The equitable powers of the court come into play to prevent unjust enrichment. So the next time a Judge says he doesn’t want the borrower to get a house for free, your answer should be you don’t want anyone to get the house for free. And if the Court wishes to exercise its equitable powers to allocate any equity in the home, after due consideration for the obligations of the borrowers and many others who promised to pay the bond holder then the party seeking affirmative relief must make a short plain statement of ultimate facts upon which relief could be granted and then prove their case.

What these law firms and fabrication mills are doing is fabricating and forging documents to create the illusion that those complexities don’t exist — a conclusion that every Judge would like to reach.

Ultimately, the die is cast — the Courts are required to consider the complexity and force the real party in interest, the party with standing to say they lost money on the deal and to show exactly how they did lose money — not merely point to the borrower’s non-payment.

The non-payment by borrower ONLY comes into play if the payment is due and the “creditor” can prove their standing and prove the obligation, complete with an accounting from beginning to end. The fact that the note SAYS the payment is due does not make the payment due — not if the payment was made or the obligation has been changed or satisfied.The note is evidence that must be proffered though the rules of evidence with authentication from competent witnesses or admission from the borrower. Don’t be so quick to admit that they have the note. Even if it is right in front of you, close examination may well reveal that it came off a color printer that morning.

The reason the die is cast is that ultimately this comes down to property law. The breaks in the chain of title render every title in whichever a securitized loan was involved susceptible to being identified as unmarketable or defective title. This threatens the entire marketplace. It is this issue that these firms and the large banks are continuing to finesse with their freshly color-printed “original” documents, indorsements, assignments and powers of attorney.

NEWS RELEASE

For Immediate Release

August 10, 2010

Contact: Sandi Copes

Phone: 850.245.0150

Sandi.Copes@myfloridalegal.com

FLORIDA LAW FIRMS SUBPOENAED OVER FORECLOSURE FILING PRACTICES
——————————————————————

TALLAHASSEE, FL – Attorney General Bill McCollum today announced his office has launched three new investigations into allegations of unfair and deceptive actions by Florida law firms handling foreclosure cases.

The Attorney General’s Economic Crimes Division is investigating whether improper documentation may have been created and filed with Florida courts to speed up foreclosure processes, potentially without the knowledge or consent of the homeowners involved.

The new investigations name The Law Offices of Marshall C. Watson, P.A.; Shapiro & Fishman, LLP; and the Law Offices of David J. Stern, P.A. The law firms were hired by loan servicers to begin foreclosure proceedings when consumers were in arrears on their mortgages.

Because many mortgages have been bought and sold by different institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing. On numerous occasions, allegedly fabricated documents have been presented to the courts in foreclosure actions to obtain final judgments against homeowners.

Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper actions of the law firms under investigation.

The Attorney General’s Office is also investigating whether the law firms have created affiliated companies outside the United States where the allegedly false documents are being prepared and then submitted to the law firms for use.

Subpoenas have been served on each of the law firms listed above, and the investigations are ongoing.

For an official, downloadable photograph, please visit http://www.myfloridalegal.com/picture.html. Also, follow the Attorney General’s Office on Twitter! http://www.twitter.com/myfloridalegal

By KIMBERLY MILLER

Palm Beach Post Staff Writer

Posted: 11:48 a.m. Tuesday, Aug. 10, 2010

The Florida Attorney General’s office announced this morning investigations into the state’s three largest foreclosure law firms for allegations of unfair and deceptive actions.

The firms, sometimes called “foreclosure mills,” are the Fort Lauderdale Law Offices of Marshall C. Watson, Tampa-based Shapiro & Fishman, and the Law Offices of David J. Stern, based in Plantation.

Last month, a lawsuit seeking class action status was filed by a Fort Lauderdale attorney against Stern claiming the firm generated fraudulent mortgage assignments when pursuing foreclosures.

An assignment is held by the entity that has the right to receive mortgage payments.

Stern’s practice, which the lawsuit claims filed up to 7,000 foreclosure cases in Florida every month last year, also is alleged in the suit to have pursued foreclosures for lenders that didn’t own the debt on the homes.

Miami attorney Jeffrey Tew is representing Stern. Last week, he said Stern and his company have done nothing wrong.

“This foreclosure crisis was not created by David Stern, but it is so huge and a lot of people are in very bad shape, so some of the finger-pointing goes to him,” Tew said.

Tew called portions of the lawsuit that claim Stern conspired to confuse ownership of homes “fantastical.”

A press release from Attorney General Bill McCollum’s office says because many mortgages have been bought and sold by financial institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing.

“On numerous occasions, allegedly fabricated documents have been presented to the courts in foreclosure actions to obtain final judgments against homeowners,” the press release states. “Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper actions of the law firms under investigation.”

Filed under: CASES, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, GTC | Honor, HERS, Investor, Mortgage, Motions, Pleading, trustee

Aug

Florida Law Firms Subpoenaed Over Foreclosure Filing Practices

By LH | Corporate Greed & Corruption, Featured, Foreclosure Rights, Housing & Economic Research

11600Leave a Comment2010-08-10+16%3A02%3A36LH

Even though this is 18 months late, it’s a positive sign that the Florida Attorney General is finally getting it, or, more likely just making a political move to try and win some votes for November. Of course, this “investigation” will last well past November so voters will have to consider whether this is just political feint or if the stalwart AG McCollum actually posesses the balls to actually put someone in jail for all the fraud that’s been committed to date using the Florida judciary as pawns in the chess game called Wall Street and Banking. Mr. McCollum, ball’s in your court… pun intended. – mdn

Attorney General Bill McCollum News Release

August 10, 2010
Media Contact: Sandi Copes
Phone: (850) 245-0150

Florida Law Firms Subpoenaed Over Foreclosure Filing Practices

TALLAHASSEE, FL – Attorney General Bill McCollum today announced his office has launched three new investigations into allegations of unfair and deceptive actions by Florida law firms handling foreclosure cases. The Attorney General’s Economic Crimes Division is investigating whether improper documentation may have been created and filed with Florida courts to speed up foreclosure processes, potentially without the knowledge or consent of the homeowners involved. – (gee ya think?)

The new investigations name The Law Offices of Marshall C. Watson, P.A.; Shapiro & Fishman, LLP; and the Law Offices of David J. Stern, P.A. The law firms were hired by loan servicers to begin foreclosure proceedings when consumers were in arrears on their mortgages.

Because many mortgages have been bought and sold by different institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing. On numerous occasions, allegedly fabricated documents have been presented to the courts in foreclosure actions to obtain final judgments against homeowners. Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper actions of the law firms under investigation.

The Attorney General’s Office is also investigating whether the law firms have created affiliated companies outside the United States where the allegedly false documents are being prepared and then submitted to the law firms for use.

Subpoenas have been served on each of the law firms listed above, and the investigations are ongoing.

Aug

WSJ: GOLDMAN CONTINUES TO PROFIT FROM DERIVATIVES

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11573Leave a Comment2010-08-10+11%3A29%3A55LH

Editor’s Note: It’s important to remember that “derivatives” “derive” their value from something other than the paper it is written on. One must wonder how the real stuff is going down in value (mortgage bonds, mortgage loans and “real” collateralized debt obligations) while the fake stuff is producing profits. This is what I mean by the grand illusion. If we don’t address it, we can’t fix it.

GOLDMAN DERIVATIVES MADE UP 25% TO 35% OF 2009 REVENUES

By LIZ RAPPAPORT

Goldman Sachs Group Inc. told the Financial Crisis Inquiry Commission that 25% to 35% of its revenue comes from derivatives-based businesses, according to a person familiar with the situation.

The figures are part of Goldman’s response to a request by the panel to disclose information about its derivatives holdings and operations. Derivatives have been blamed for exacerbating the credit crisis, and Goldman has faced scrutiny from the FCIC for its derivative contracts with American International Group Inc., the insurer bailed out by the U.S. government.

A memo sent to the panel Thursday night by the New York company included an analysis of derivatives-based revenue at Goldman from 2006 through 2009, said the person familiar with the matter. Based on the percentages provided by Goldman, such businesses generated $11.3 billion to $15.9 billion of the company’s $45.17 billion in net revenue for 2009.

An FCIC spokesman wouldn’t immediately confirm that the panel has received the information from Goldman or any other firm. “We’ve asked for the same information from several banks,” the spokesman said. “They have all indicated they are working hard to provide that information to us. If we need additional information, we will ask for it.” The 10-person commission is required by Dec. 15 to issue a report on the causes of the financial crisis.

Goldman’s analysis reflects all derivatives products, ranging from credit to equity to interest rates, traded on and off exchanges, said the person familiar with the situation.

Goldman said it doesn’t conduct its businesses in a way that delineates revenue from derivatives transactions or other types of trading, this person said.

For example, Goldman cited credit-trading desks that are separated by industry group, adding that traders are indifferent to whether they are selling clients a bond or a credit derivative. As a result, separating the revenue among the two product lines is useless, Goldman told the FCIC. The firm also said its technology systems firm-wide don’t single out derivatives transactions.

The analysis was based on a “best guess” of the main type of trading on each Goldman trading desk at the firm, said the person familiar with the matter. The numbers vary widely, with the company’s fixed-income unit getting much more of its revenue from derivatives than investment banking, where no revenue is tied to derivatives.

Write to Liz Rappaport at liz.rappaport@wsj.com

Filed under: foreclosure

Aug

Foreclosure Attorney Referral Posting — South Florida and Orlando Corridor

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11097Leave a Comment2010-08-10+03%3A20%3A19LH

Remember, no guarantees, no magic bullets.

Jon. B. Lindeman, Esq.

Advocate Law Groups of Florida, P.A. (not to be mistaken with other firms with very similar names)

305-398-4910

This guy I know fairly well. I like his work and his style. He’s a good litigator and serves both the Spanish speaking and English populations in South Florida, as well as maintaining an office in Orlando. Coming from a military family, and with eight years in the Navy himself, he is well-disciplined, prepares before he does anything, fights for the goal and is constantly learning and developing new strategies, facts, and theory. He argues with force and control. You are going to hear a lot from this guy. He has an expanding well trained staff and runs a good business model. Fees are reasonable. He is turning the word “foreclosure mill” into something the pretender lenders are coming to fear. He likes winning. By way of full disclosure, I should mention that my daughter works for him. I like her too.

Filed under: foreclosure

Aug

Foreclosures on NBC Evening News.

By LH | General

11610Leave a CommentForeclosures+on+NBC+Evening+News.2010-08-10+01%3A04%3A52LH

Tonight’s episode of NBC Evening News reports on one of the largest yet bailouts….the bailout of Fannie Mae and Freddie Mac.

NBC news reports that more than half of the mortgages in the US are owned or underwritten by the federal government…now consider that in the context of the foreclosure crisis.

Why should the obscene conduct being committed by the foreclosure mills be allowed to continue when the client on whose behalf such conduct is being committed is the victim of the conduct….the US Taxpayer.

Here is the NBC Story.

Visit msnbc.com for breaking news, world news, and news about the economy

Tweet this! Share and Enjoy:

Scridb filter

Aug

GROUP POLITICAL ACTION URGED BY BLOG READERS

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11563Leave a Comment2010-08-10+00%3A12%3A05LH

WOW! I guess I hit a nerve. Here is an example of the many comments received. Worth the read not only because it validates what we know, but proposes action.

CAUTION: I agree that freedom of assembly and free speech is probably going to have more effect than any traditional approach. But we are close to a tinderbox here with millions of people out of work, underemployed, and simply dropped out that could lead to a chaos that none of us should want or allow. The anger and frustration is growing. Power in the people is reserved to those who maintain the higher moral ground. Scaring people with violence or threats will isolate you even if it gets you some press coverage.

So my advice is don’t break any laws, and if you are given a direct instruction from law enforcement, obey the command unless you are prepared to be arrested or detained. If so, go peacefully. Take no action against law enforcement officers. They are not the cause of the problem and you will alienate people who might otherwise sympathize with your views.

2010/08/09 at 6:05 am FROM DAVID

Essentially, this is what will happen in court. The foreclosure mills justify their conscience because they are simply doing what they are paid to do. Pro-se litigants have a personal hook in the deal – the foreclosure mills have nothing but easy money.

We started filing our lawsuit long before we stopped paying the mortgage. In fact, it was “after” we sent the demand letter with complaint attached to the builder and original lender when they filed to foreclose.

We were left in a no-win situation because of what the BANK – BUILDER – APPRAISER – County Code Official – conspired and did. We cannot fix, correct, or sell our house because of their actions. It has cost us everything which is exactly the position the foreclosure mills want their prey to be in. Unfortunately, they filed false affidavits and committed fraud on the court. The judge dismissed the case without prejudice which means they will be back.

My outrage and infuriation is that they ALL know it. The alleged original lender knew they pre-sold our loan so their liability was already limited at best. We paid the full mortgage for 8-months before moving into the house. That alone is a violation of the PSA. The house violates the zoning & building codes – another violation. IMHO – I do believe the mortgage loan – Instrument is VOID & Nullified because at NO-TIME was it EVER a legitimate legal Instrument. It is still isn’t…

The idiocy of attempting to work this out legally – respectfully is futile because they have NO INTENTION of working anything out. Their intentions are clear – pound us into poverty – take the property – sue us for whatever else defiency or whatever and leave us for dead…

Yet, at no-time did we participate with their lies & deception.

I specifically gave Patrick countless proof that CW deliberately sold mortgages to consumers that did NOT know what they were getting. Yet, he believes these people are accepting their due-responsibility. How can they accept responsibility for something they have no-idea was done – worse it was done TO THEM and NOT the lender. That is hypocrisy on Patrick’s part. Yet, he will conveniently drop back to the courts continued mis-handling of these cases and proclaim victory.

I agree with Frankielee – the fact of the matter is everyone should stop paying their loans and drive the lenders into bankruptcy. It would not take every loan – maybe 4-6 months and these lending institutions would collapse. Sadly, that will not happen because these lenders control the media which portrays every borrower in trouble as a deadbeat. Strangely, when I think back to a few weeks before settlement – I kept asking – don’t they need a U&O Permit – what about the lien waivers – invoices – how could they get a final inspection and appraisal to settle on a house that was NOT completed..? I was told it was all taken-care-of… hmm?

I know of folks who were never late paying their mortgage and they were foreclosed. As for us – we simply attempted to sue the original lender so we could fix the house, correct the zoning – illegal U&O – lack of inspections – etc and just sell the damn place. The made it very clear – they will stomp us into submission – take the house – wash the title through the foreclosure process – pay for the illegalities using the special hazard insurance (Ins fraud) and auction for pretty penny pocketing the entire deal as another cash-cow for them.

…and somehow the guilt manipulators want me to feel as though it was my-fault…

All I know anymore is this driving me insane – I wake up several times per night with them on my mind and none of it is good. Gee maybe I can sue them for punitive damages for driving me crazy but do I have to [suggestion omitted) to do it…? It certainly appears that way…

Filed under: foreclosure

Aug

FACTUAL CONSTIPATION: THE URGE TO NOT DISCLOSE

By LH | Foreclosure Blog News, Homeowner Resources, Weidner

11543Leave a Comment2010-08-09+11%3A57%3A18LH

EDITOR’S NOTE: FACTUAL CONSTIPATION is our current state of reality. It is the universal strategy across the board from Wall Street, the pretender lenders, servicers, and all other intermediaries in the gross illusion known as “securitization” of debt. We can’t get the information in court from Judges who can’t or won’t allow the inquiry, we can’t get the information using federal statutes (TILA, RESPA, UDCPA) that were specifically written with teeth to allow us to find out the identity of the creditor and to get a full accounting of all debits and credits related to our obligation, and we can’t examine the skeletons in the closets of Wall Street investment banking firms, the rating agencies, the counterparties in credit enhancements, or the insurers.

We are left with naked “assurances” from the same sources that created awesome illusions of wealth in the minds of the people they were robbing. No proof required. And if the “creditors” found a way to get paid AND take the house, that’s OK too. And if the actual creditors did not get paid, but their agents collected insurance and other proceeds amounting to multiples of what the investors actually received — that is a matter for the creditors to work out. Obligation extinguished? No problem, enforce it anyway!! Receivables from obligation assigned to multiple sources of cash WITHOUT the mortgage? No problem, foreclose anyway in the name of some party who never had a dime in the deal.

You say you’re a trust but you have no trust documents or any evidence of your existence? No problem! You say the loan was securitized into a pool where the documents show co-obligors added to the obligation. No Problem! Forget those insurance policies whose premiums were paid from proceeds of the investor lending money to the borrower. Why should that count for anything? So what if it is in the note that the borrower signed! So what if it isn’t in the bond that the investor received! So what if all the documents you have were freshly printed fabricated and forged the morning of the hearing in court? This is big business. The little guy doesn’t get to win, no matter what the law says and no matter what was done to him. And if that undermines our country’s strength and national security, so much the better for those who would take over lock, stock and barrel.

Just how close do we have to get to the legal nightmare of unmarketable title for most residential and commercial property in the United States before we start addressing reality? The Judicial branch of government, the last bastion of protection of the constitution and our whole body of laws has failed miserably in the basic requirements of law, procedure, fairness and equity. A handful of Judges have clearly stated that upon closer scrutiny of the documents submitted to support foreclosure, they don’t hold up to even basic elements of proof or evidence. Some State Supreme Courts have issued opinions on the same thing. Sanctions have been issued against major names like Wells Fargo and Bank of America for misrepresenting themselves as the creditor. Settlements for hundreds of millions of dollars are being paid to investors who advanced the funds for the loans to borrowers. Where is the allocation of that money to reduce the obligation? If they received the money, why is it still owed?

WHAT IS SO DIFFICULT ABOUT THIS? EITHER WE HAVE A CLEARLY DEFINED BORROWER, OBLIGATION, CREDITOR, AND BALANCE DUE OR WE DO NOT. IF NOT, THE BURDEN IS ON THE PARTY SEEKING FORECLOSURE TO CORRECT IT. IF YES, THE FORECLOSURE PROCEEDS. WE ALL KNOW THIS — WHY ARE WE NOT FOLLOWING LAW THAT IS ESTABLISHED FOR CENTURIES?

The fact remains that our government not only regulates these entities and has huge powers of subpoena and other investigation tools, but is now a significant shareholder, if not the major shareholder of most of these entities. The current plans to disengage the US government from ownership in these entities under the guise of giving back to the taxpayers their money, merely enlists the government as a co-conspirator in withholding essential information from both claimants and policy makers.

AIG and the rating agencies lie at the root of the mortgage bond and mortgage security ripoff that brought down the economy of the nation, the states, the cities, counties and even neighborhoods. And it was the fraud and nondisclosure at the top that enabled and encouraged the fraud and nondisclosure at the bottom––where unsuspecting borrowers who were totally ignorant of the complexities of Wall Street “innovations” signed documents that in most cases did not represent the deal that was offered to them, nor even a transaction that could ever have been completed. The misinformation leading to the ridiculous valuations of mortgage-backed securities was identical to and part of the plan of misinformation and ridiculous valuations of the underlying property values.

Unless and until the reality of the situation is fully disclosed and we are relieved of the mental and factual constipation that is being perpetuated by the courts and by government policy, we cannot effectuate a remedy to an economic nightmare that continues everyday. Our economy can be fixed, but not by participating in a cover-up plan. Here is the truth: all the money is sitting on Wall Street, which continues to report high profits, Grant high bonuses, and incredibly comes up with hundreds of billions of dollars to “repay” the American taxpayers out of money stolen from those same taxpayers.

Here is the remedy: restore the American taxpayer and the American homeowner to the positions they were in before the fraud. This means a transfer of wealth back to those who have been reduced to poverty or simply untenable financial condition. It means reducing the clout of Wall Street from being 40% of our GDP back to 16% of our GDP where it belongs. The other 24% was mere illusion covering up the fact that we were in fact producing no goods or services of value.

This restoration is not a gift anymore than returning the purse to a woman from a thief that snatched it. Anything less, will leave us with a perpetual state of unemployment, under employment, lack of innovation and lack of prospects. Anything less will leave us falling further and further behind the other countries of the world and further behind the American dream. The question is whether we allow a twisted ideology and bad politics to award the thief with the purse or decide that we a nation of laws where we punish the thief and return the purse.

August 6, 2010
A.I.G. in Talks to Pay U.S. Debt, Chief Says
By MICHAEL J. de la MERCED

The American International Group has begun talks with the federal government over how to finish repaying its $130 billion taxpayer-financed bailout, its chief executive said on Friday.

Separately, he said, the company was making progress toward a potential sale of its consumer finance unit, one of several divisions it planned to shed as part of its turnaround.

“We’ll make sure taxpayers get paid back in full, and they will,” the executive, Robert H. Benmosche, said in an interview on Friday, as the company reported financial results that seemed to signal progress toward the repayment goal. “They’ll get paid back at a profit.”

The company reported a $2.7 billion loss for its second quarter, but the loss stemmed from a $3.3 billion charge related to the sale of a major international unit to MetLife. Excluding the charge, A.I.G. reported $1.3 billion in profit and $2.2 billion in operating income. Both figures showed improvement over the same time last year.

Mr. Benmosche, approaching his first anniversary as A.I.G.’s chief, has embarked on an aggressive campaign to sell off businesses, making the company much smaller than it was at the height of the financial crisis, when it faced possible collapse.

Along the way, Mr. Benmosche has clashed with some of the company’s overseers, including Harvey Golub, who stepped down as A.I.G.’s chairman last month. The company replaced Mr. Golub with Robert S. Miller, a turnaround expert with whom Mr. Benmosche said he worked well.

A.I.G. has begun holding talks with the Federal Reserve about ways to pay down its credit line, which had $20.5 billion outstanding as of June 30, plus an additional $6 billion in accrued interest and fees.

Already, the company is moving forward with the sale of two units: the American Life Insurance Company, an overseas insurance business, and Nan Shan, a Taiwanese life insurance company. It is also on track to sell American International Assurance, its Asia life insurance business, in an initial public stock offering.

A.I.G. is also accepting bids for its consumer lending unit, American General Financial Services, and hopes to announce a sale sometime this month, Mr. Benmosche said.

The stakes of the turnaround strategy are high: only after shedding its reputation as a ward of the state can A.I.G. again flourish as a company, Mr. Benmosche said. So long as questions remain about its dependence on government borrowings, the insurer could be hard-pressed to tap the stock and credit markets for fresh capital, he said.

Once the debt is paid off, Mr. Benmosche said, the company can hold serious negotiations with the Treasury Department about the government’s shedding of its nearly 80 percent stake in A.I.G. One option is to convert the government’s preferred shares into common stock that can be sold off over time, as is happening with Citigroup. Mr. Benmosche did not give a timeline for any possible sale.

“What’s important is that we have to get it right,” he said. “We have to make sure that we’re not leaving a lot on the table.”

Meanwhile, A.I.G. has made big strides in the businesses it is keeping, Mr. Benmosche said. Investment income in both its general and domestic life insurance operations is up, and while revenue from premiums written has fallen, that was in part because A.I.G. refused to cut its prices too far.

“A year ago, analysts were talking about a potentially enormous erosion of our business,” he said. “We have in fact been very successful in retaining business.”

Mr. Benmosche said that earlier this year, he visited 50 of A.I.G.’s biggest customers, and described the feedback as positive. So long as the company continued to make progress in paying back the government, customers indicated that they would most likely stay put, he said.

Another major A.I.G. business, the aircraft leasing company International Lease Finance Corporation, plans to raise up to $4 billion from the debt markets to help pay off a lifeline extended by the Fed. It also recently named a new management team led by Henri Courpron, a former Airbus executive.

The company is continuing to wind down A.I.G. Financial Products, the unit whose deteriorating credit-default swap business was at the center of the 2008 financial crisis. A.I.G. said on Friday that the unit had reduced the notional amount of its supersenior credit-default swap portfolio by 51 percent from Dec. 31, 2009 to June 30, to $89.5 billion.

Filed under: foreclosure Tagged: AIG, Benmosche, MetLife, RESPA, TILA, UDCPA

Aug

The Economic Realities of our Judicial Branch

By LH | General

11612Leave a Comment2010-08-09+11%3A56%3A25LH

When our forefathers conceived of this once great nation, a key principle was the necessity for each of the three branches to be separate and insulated from one another. Great pains were taken especially to insulate the judicial branch from the other three branches. (Writing “the other three branches” was a typo in the original draft, but I left it in…a slip perhaps…maybe the other branch is the heretofore hidden kleptocracry that has recently become so powerful in this country.)

The foreclosure crisis features center stage the most dramatic assault on the fundamental principle of separation of powers witnessed during this generation. The legislature in this state in particular has made it very clear to our elected circuit court judges…

YOU JUDGES MUST CLEAR THIS FORECLOSURE DOCKET

Legislators are not concerned with pesky details like the law, the Uniform Commercial Code and they’re certainly not concerned with details like Rules of Civil Procedure and the Evidence Code. They don’t care about practical economic realities like what will be done with foreclosed homes in a state with 25% unemployment. They don’t care that they Yankee Fat Cats and foreign investors sucked billions of dollars of equity from this state. They don’t care that all this foreclosing sucks more money out of this state and concentrates that wealth in Yankee Fat Cats and foreign investors. What the legislature does care about is the well funded banking and mortgage industries that contribute to their campaigns…

THOSE INTERESTS ARE DEMANDING AN END TO FORECLOSURE DEFENSE AND JUDGES ARE BENDING TO THOSE INTERESTS.

The blended political and economic realities that have infected our courtrooms plays out every day in courtrooms all across this state. The most visible expression of this infection is the utilization of senior judges presiding over the foreclosure rocket dockets but other examples abound. It can be seen every time a circuit court judge overlooks, even for a second and even when a foreclosure case is not defended, any of the rules of evidence, case law, statutory law or rules of procedure that should govern every foreclosure case. This unprecedented pressure on our judicial branch represents a fundamental breakdown in our core governing principles. The meltdown on Wall Street shows the consequences of ignoring rules and fundamental principles….

I shudder to think what will be the long term consequences of ignoring rules and principles in our courtrooms.

The article from today’s St. Petersburg Times illustrates just how intertwined our legislature has become with our judicial branch. This article just scratches the surface and illustrates part of the larger economic and policy debate that has infected our courtrooms. And while this article details legislative control over funding for buildings, consider that the legislature funds judicial salaries, court budgets and judicial pensions. With that in mind,

Is there any doubt that judicial decisions in the foreclosure courtroom are being impacted by economic considerations?

I recognize that it’s a bit naive to believe that our judges will stand up to these pressures and economic realities, but I’m confident that there are far too many good and intelligent judges out there who do see this foreclosure catastrophe for what it is and who share my concerns.

THE REAL QUESTION IS WHETHER OUR JUDGES WILL SHOW THE COURAGE NECESSARY TO STAND UP AND FIGHT FOR THE HEART AND SOUL OF OUR COURTS.

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Quoted from April Charney — I’m not sure of the source. She is right on every point.PSA= Pooling and Servicing Agreement

A YIELD SPREAD PREMIUM IS A FEE PAID TO A BROKER FOR CREATING A FRAUDULENT PROFIT BY LYING TO THE CUSTOMER WHO BUYS A FINANCIAL PRODUCT. This particular lie would be about the rate on the loan.

Fed Adopts Rules Meant to Protect Home Buyer

By DAVID STREITFELD

In This Play, One Role Is Enough

By GRETCHEN MORGENSON

SHELL GAME CONTINUES. WHO HAS THE BOND? WHO HAS THE RECEIVABLE? WHO HAS THE SECURITY INTEREST? WHO IS GETTING PAID? WHERE ARE THE MONTHLY PAYMENTS GOING? FANNIE MAE AND FREDDIE MAC ARE BIG PLAYERS, AS IS THE FEDERAL RESERVE. ARE THEY THE ONES REALLY FORECLOSING UNDER COVER OF SECURITIZATION?

Mortgage bond holders get legal edge; buybacks seen

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Debts Rise, and Go Unpaid, as Bust Erodes Home Equity

By DAVID STREITFELD

Merrill’s Risk Disclosure Dodges Are Unearthed

By LOUISE STORY

LAWYERS TAKE NOTE: Go back to the law books. There are essential differences between the obligation that arises as a matter of law, the note that is offered as proof of the obligation, and the mortgage or deed of trust which is incident to the note.

WITHOUT REAL DOCUMENTS SIGNED BY REAL PEOPLE WITH REAL AUTHORITY WITH REAL EFFECTIVE DATES, THE CHAIN IS BROKEN.

BUT that is not the end of the story.

What these law firms and fabrication mills are doing is fabricating and forging documents to create the illusion that those complexities don’t exist — a conclusion that every Judge would like to reach.

Ultimately, the die is cast — the Courts are required to consider the complexity and force the real party in interest, the party with standing to say they lost money on the deal and to show exactly how they did lose money — not merely point to the borrower’s non-payment.

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