Nov
18
Just When You Thought You Heard It All, Freddie Mac Set to Securitize Previously Delinquent Mortgages
“The mortgages are listed as performing, but Freddie Mac said some are still distressed.” ~ Freddie Mac to securitize previously delinquent mortgages Freddie Mac plans to bundle pools of once-delinquent mortgages, calling the strategy “a new avenue for securitization.” The mortgages to be used as collateral are re-performing loans, current for the last 12 months. … Read more
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Sep
05
SEC Seeks Public Comment on Asset-Backed Issuers and Mortgage-Related Pools Under Investment Company Act
SEC Seeks Public Comment on Asset-Backed Issuers and Mortgage-Related Pools Under Investment Company Act FOR IMMEDIATE RELEASE 2011-176 Washington, D.C. – The Securities and Exchange Commission today voted unanimously to request public comment on the treatment of asset-backed issuers as well as real estate investment trusts (REITs) and other mortgage-related pools under the Investment Company … Read more
Nov
30
Who gets stuck fixing foreclosed homes when banks bail?
“Cape Coral - Big banks are taking over foreclosed homes but in some cases they’re not taking care of them like they’re required.
And you’re footing the bill.
“Board-ups is something that we’ve not traditionally done in the code enforcement realm,” said Mike VanDeutekom with Cape Coral Code Enforcement.
Boarding up pools isn’t exactly what VanDeutekom signed up for. A code enforcement officer for five-and-a-half years, he used to worry about housing construction violations.
Now he’s cleaning up the mess left behind by the foreclosure crisis.
“It’s the bank’s responsibility to maintain and register that property,” said VanDeutekom, who helped board up an abandoned pool at a foreclosed home Fox 4 brought to their attention.
When the bank fails to maintain foreclosed homes, the city steps in. In this case, Nationstar Mortgage failed to board up the pool and the city declared it an emergency.
Fixing foreclosed homes is something relatively new for code enforcement. And it’s taking away man power.”
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Aug
21
Securitization Searches: Devil and Details
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
04
Yes They ARE Willing to Lie
see this site www.conorix.com
A quick look at the above link shows game in full play.
- Mr Dinan, in an affidavit in Israel stated that UBS paid to the trust “to compensate the trust for it’s overpayment on the purchase on the UBS pool”. The Judges don’t want to hear about this complexity. The fact remains that the LEGAL documents stayed at the bottom of the securitization chain while the money and the receivables were traveling around at light speed at the top. Here is a direct statement of an “overpayment” which we have been talking about on these pages for years. The strategy of the pretender lenders has been to direct the attention (much like a magician does) on the borrower and whether the borrower made payments. The real question is whether any payments were due. If the real lender received real money and was satisfied that the obligation is terminated regardless of the source of the payment. Here we have an overpayment. Who is entitled to that overpayment? This seemingly innocuous statement also reveals and confirms that pools are being dissolved and paid off at the top of the securitization chain while at the bottom the pretender lenders are representing to the court that nothing has changed.
- The language in the pleading which is shown in the above site is obvious doublespeak that is intended to confuse the court and confuse homeowners and their attorneys. The reason they use it is that it works! If you want to win these cases you need to follow the rule: ASSUME NOTHING AND CHALLENGE EVERYTHING.
Filed under: foreclosure
Jul
23
Mortgage Securities It Holds Pose Sticky Problem for Fed
STICKIER THAN THEY THINK: These are not the only mortgage securities they hold and they all amount to ownership of the risk on every loan they purchased. The purchase of course was accomplished in one of many ways — direct and indirect.But when you come down to it, between the GSE’s (which are now departments of the Federal Government), TARP, and the outright purchase by the Fed, SOMEONE received 100 cents on the dollar for every loan, whether in default or otherwise.Add in insurance, credit default swaps and credit “enhancements” (i.e., commingling of money contrary to the explicit terms of the borrowers’ promissory notes) like over-collateralization and cross collateralization, it would be a fair statement to say that everyone of the mortgages CLAIMED to be in pools that were subject to various securitization instruments, have been paid in whole or in part.THAT IS WHAT I MEAN BY THIRD PARTY PAYMENTS. The legal issue is who got the money and why? The practical impact is that if those payments were related to individual mortgages, which indeed they must have been, then they were received into what should have been an escrow account and allocated to each loan.Now add the fact that very nearly NONE of the loans were in fact the subject of an actual assignment, recorded instrument, endorsement or delivery while they were performing and before the cutoff date in the securitization enabling documentation, and you really have an interesting conclusion: the loans never made it into the pool, which makes securitization a giant Ponzi scheme that paid investors long enough out of their own money to lend credibility to the scheme.But it is also true that borrowers made payments and where those went, and in what amounts is a clouded mystery because every lawsuit I know of that has asked for the accounting is stalled. So with nothing in the pools, nothing in the mortgage bonds, and the CDO’s based upon the mortgage bonds, and the credit default swaps referencing the mortgage bonds, and the synthetic CDOs consisting of CDS instruments referring to the mortgage bonds, they were all worthless from beginning to end. In short, the government bought nothing from bankers who had already made a ton of money, most of it parked off-shore.The real reason the government can’t sell these securities is that nobody will pay for them. Any due diligence down to the loan level will reveal that the loans were never subject to legally required execution, delivery and recording of transfer or assignment documents, together with indorsements etc. In some cases, this is correctable — at considerable legal expense. In most cases, they are not correctable. The bottom line is really simple: the obligation was created, the note was extinguished, and the security instrument became unenforceable, and separated from the note. The illusion that it is otherwise is what is keeping us in stagnation, preventing a solution.
July 22, 2010
Mortgage Securities It Holds Pose Sticky Problem for Fed
By BINYAMIN APPELBAUM
WASHINGTON — The Federal Reserve provided most of the money for new mortgages in the United States last year, effectively lending more than $1 trillion to American homeowners.
Now the legacy of that extraordinary intervention is hanging over the central bank as it faces growing demands for an encore to help revive the flagging economy.
While officials and economists generally regard the program as successful in supporting the housing market, it has left the Fed holding a vast pile of mortgage securities — basically i.o.u.’s from homeowners — that it does not want and cannot sell.
Holding the securities could cost the Fed a lot of money and hamper its ability to fight inflation, while selling the securities could drain needed money from the still-weak economy.
Fed officials have expressed confidence that they can finesse the dilemma by gradually selling the securities as the economy starts to recover. But they are not eager to expand the challenge they face by beginning a new round of asset-buying, one tool the Fed could use to try to stimulate growth.
“In my view, any judgment to expand the balance sheet further should be subject to strict scrutiny,” Kevin M. Warsh, a Fed governor, said in a speech last month in Atlanta. He warned that new purchases could undermine the Fed’s “most valuable asset”: its credibility.
Some Democrats want the Fed to pump more money into the economy to help reduce unemployment, one of the central bank’s basic responsibilities. In testimony before Congress this week, Chairman Ben S. Bernanke said that the Fed retained that option, but did not now plan to expand on the steps it had already taken.
In part, Bernanke and other Fed officials say they believe that new asset purchases would be less effective now that private investors have returned to the market.
The Fed became one of the world’s largest mortgage investors because no one else was interested. During the fall 2008 financial crisis, investors stopped buying the mortgage securities issued by the housing finance companies Fannie Mae and Freddie Mac. The two companies buy mortgages made by banks and other lenders, providing money for new rounds of lending, then package those loans into securities for sale to investors, replenishing their own coffers.
Two days before Thanksgiving 2008, the Fed announced that it would buy $500 billion in securities issued by the two companies. By the time the program wound down in March 2010, it had spent more than twice that amount. The central bank now owns mortgage securities with a face value of $1.1 trillion.
A wide range of economists say the Fed’s program — so big that purchases outstripped the issuance of new securities in some months — helped to preserve the availability of mortgage loans and helped to hold interest rates near record lows. Rates that exceeded 6 percent in late 2008 remain below 5 percent today.
But the Fed now must deal with the cleanup.
The central bank could hold the securities until the borrowers repaid or refinanced their loans. Brian P. Sack, an executive at the Federal Reserve Bank of New York, estimated in March that borrowers would repay $200 billion by the end of 2011. And in the meantime, the Fed is collecting regular interest payments.
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HOW IS THIS MONEY REACHING THE FED? WHO IS GETTING PAID FOR HANDLING IT?
WHY IS NOT THE FED’S INTEREST RECORDED IN THE PROPERTY RECORDS OF THE COUNTY IN WHICH THE PROPERTY IS LOCATED (ANSWER — BECAUSE THEY DON’T HOLD THE SECURITY, JUST THE RECEIVABLE, CALLED “SPLITTING NOTE FROM MORTGAGE”).
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IF THE FED OWNS THESE LOANS WHY DON’T THEY SHOW UP AS A PARTY IN FORECLOSURES?
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WHO IS THE TRUSTEE ON DEEDS OF TRUST?
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WHO ARE THE BENEFICIARIES?
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WHO ARE THE MORTGAGEES ON MORTGAGE DEEDS?
“We’ve been earning a fairly high income from our holdings and remitting that to the Treasury,” Mr. Bernanke told Congress on Wednesday.
But holding the securities could make it harder to control inflation as the economic recovery gains strength, said Vincent Reinhart, the former head of the Fed’s monetary policy division, now a resident scholar at the American Enterprise Institute.
The Fed bought the securities by pumping new money into the economy, stimulating growth. It could be difficult to reverse that effect without draining the money from the economy by selling the securities, Mr. Reinhart said.
“They created reserves, and those reserves ultimately can be inflationary,” Mr. Reinhart said. “The chief risk of keeping the balance sheet big and raising rates is that you might not be able to raise rates successfully” because the impact would be mitigated by the effect of the extra money still sloshing around the system.
Holding the securities also could cost the Fed a lot of money.
The Fed paid some of the highest prices on record for mortgage securities, basically accepting very low rates of interest on its investments. As the economy recovers and interest rates rise, the Fed will need to accept increasingly large discounts to make the securities attractive to other investors.
David Zervos, head of global fixed-income strategy at the investment bank Jefferies & Company, estimates that the value of the portfolio will drop almost $50 billion each time interest rates increase by one percentage point.
Selling the securities at a loss would reduce the Fed’s ability to transfer profits to the Treasury Department. Large enough losses could reduce the amount of capital held by the Fed, although it can always create more money.
But perhaps the greatest risk is that investors will begin to doubt the Fed’s willingness to raise interest rates, knowing that each increase will damage its own balance sheet.
“It compromises their integrity and their inflation-fighting mandate, because fighting inflation would be a direct detriment to their portfolio,” Mr. Zervos said.
The Fed could avoid these problems by selling the securities now, before interest rates start to rise. But doing so would reverse the benefits of the original program, draining money from the economy while it still is weak. It would also fly in the face of the demands for the Fed to do more for the economy.
A fire sale also could damage the banking industry by driving down the value of the comparable mortgage securities that banks hold in large quantities.
So far the Federal Open Market Committee, comprising the board of governors and a rotating selection of presidents from the regional reserve banks, has chosen to wait.
The approach favored by most of the committee, according to the minutes of its June meeting, is to start raising interest rates before beginning to sell the securities. By waiting “until the economic recovery was well established,” the minutes said, the Fed would limit the impact of the asset sales on the broader market.
Filed under: bubble, CASES, CDO, CORRUPTION, evidence, expert witness, Fannie MAe, foreclosure, foreclosure mill, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, STATUTES, trustee Tagged: BINYAMIN APPELBAUM, CDO, CDS, Federal reserve, loans, mortgage bonds, mortgage securities, SPLITTING NOTE FROM MORTGAGE 
Jul
22
Proposal to Place AIG Into Receivership Would Lead to Disclosure of Inner Workings
Editor’s Note: This proposal would reveal what really happened during the lead-up to the mortgage meltdown. The receiver would first take an objective inventory of what AIG (with taxpayer dollars) paid and track the actual transactions instead of REPORTS of the transactions.
It would reveal the theme for this week, which is that the loans were never securitized, which means that the “losses” attributed to failing mortgage bonds were fabricated losses, entitling the receiver to claw back the money given to the investment houses.
It would also result in clarification of title: who owns the property that has already been “sold” at auction pursuant to foreclosure and who is the legal owner of the loan. It should become apparent that only the originating lender really owns those loans as they are the only entity entity on record. By dismantling the illusion of securitization, it would also reveal that the investment banks did NOT sell the loans but only pretended to do so by clever manipulation of the wording in the prospectus.
And it would head off the worst title disaster in the nation’s history which so far has not been addressed — the inability of anyone to sell property (i.e.,m deliver clear title) that has been the subject property in what was an illegal table-funded loan that was later claimed to be part of fictitious pools whose “assets” were used to sell worthless bonds to investors in the form of mortgage “bonds” that were never actually issued.
A.I.G.: The First Test of Financial Reform?
July 21, 2010, 2:00 pm
<!– — Updated: 1:20 am –>
![[The Deal Professor by Steven M. Davidoff]](http://graphics8.nytimes.com/images/blogs/dealbook/deal_professor75x75.gif)
Do the sweeping financial regulations that just became law give the government another tool to deal with the American International Group? If so, what if anything should the Treasury Department do with its new power?
More specifically, now that the government has obtained the authority to place systemically important financial companies into receivership, should the government use this procedure with A.I.G.? After all, former Treasury Secretary Henry M. Paulson Jr. has said that if he had been able to use that process in fall 2008, he would have used it. If not then, why shouldn’t the government act now?
About The Deal Professor
Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the legal aspects of mergers, private equity and corporate governance. A former corporate lawyer at Shearman & Sterling, he is a professor at the University of Connecticut School of Law. He is the author of “Gods at War: Shotgun Takeovers, Government by Deal and the Private Equity Implosion,” which explores modern-day deals and deal-making.
The government appears to have this power with respect to A.I.G., although it would require some procedural hurdles and a determination that A.I.G. is technically insolvent.
First, A.I.G. would have to be put under the supervision of the Federal Reserve as a systemically important nonbank financial company. This can be done by a declaration of two-thirds of the members of the newly created Financial Stability Oversight Council upon their determination that A.I.G. could pose a threat the financial stability of the United States. Check. We have already found that to be true, to our regret.
A.I.G. would next have to be put into the resolution process. Because the largest subsidiary of A.I.G. is almost certainly an insurance company, the new financial regulations would require that two-thirds of the members of the Federal Reserve Board and the newly appointed director of the newly created Federal Insurance Office, in consultation with the Federal Deposit Insurance Corporation, agree to recommend this action to the Treasury secretary.
The Treasury secretary would then decide whether to put A.I.G. into receivership based on a seven-factor test that requires him to determine whether A.I.G. “is in default or in danger of default” on its obligations and “no viable private sector alternative is available.” Importantly, the definition of default here is quite wide and includes a situation in which “the assets of the financial company are, or are likely to be, less than its obligations to creditors and others” or A.I.G. has depleted all or substantially all of its capital.
Recent reports by the Government Accountability Office and the Congressional Oversight Panel have stressed that it is very unclear what exactly A.I.G. is worth, and it may be the case that A.I.G.’s assets are less than what the company owes the United States government for billions of dollars in bailouts. But this is a moving figure and the stock market currently assigns A.I.G.’s equity billions of dollars in value, mitigating against these assessments.
If A.I.G. were to be put into receivership, it would be unwound according to the process set forth in the bill. There is an expedited claims process and the government has the power to terminate all of A.I.G.’s derivatives contracts. (The holders would then be entitled to cash damages as creditors of the company.)
The assets of A.I.G. would first go to pay the United States government, then to wages up to $11,725 per employee and thereafter to pay senior and unsecured creditors, the senior executives and directors and finally A.I.G. shareholders.
If there is a shortfall of funds, the bill appears to provide authority for the government to recover any such shortfall through an assessment on the financial sector, although it is not entirely clear that this provision would apply to the government’s prior financial assistance since it was provided before A.I.G.’s entry into receivership.
The advantages of the resolution process is that it sets a clear path for ending A.I.G.’s plight. The company would be liquidated in an orderly manner and the United States government repaid from A.I.G.’s assets or, if the bill is interpreted that way, the financial sector.
In addition, this type of resolution would penalize those creditors of A.I.G. that remain from the time before the bailout. In particular, it would ensure that the government is paid ahead of the $43.9 billion in A.I.G. private debt that was estimated to be outstanding by the Congressional Oversight Panel in its recent report on A.I.G. It would also stop the bleeding at A.I.G.
Only last week, three Ohio state pension funds reached a $725 million settlement with A.I.G. related to prior allegations of securities fraud. Only $175 million was actually paid in cash by A.I.G. (the rest will depend on an unlikely-to-occur stock offering), but this is money that comes out of the ability of A.I.G. to repay the government for its bailout.
The disadvantages of this resolution process are at least threefold.
First, there is a problem that Prof. Jeff Gordon at Columbia Law School has highlighted with the entire resolution process. Placing a company into the resolution process may itself scare the entire market and throw the financial system into panic. This may be addressed in part by only putting the main part of A.I.G. and its subsidiary AIG Financial Products (the division that wrote the derivatives that destroyed A.I.G.) into receivership, leaving the main insurance companies out of the process. But still, this would be an undeniable blow to market confidence.
Second, a resolution process may not provide the greatest return to the United States without a financial assessment. In other words, putting A.I.G. into the receivership process may diminish its value and require yet further government support. In particular, if A.I.G. is put into the resolution process, it may render worthless the billions of dollars in equity currently attributable to A.I.G.’s common stock (although that may be in part attributable to market expectations that the government would willingly take a haircut on its debt) and cut off A.I.G.’s healthier subsidiaries from any access to private-sector capital markets.
The third disadvantage lies in the political ramifications. Does the Obama administration really want the headache of taking full control of A.I.G. and the charges of socialism that would come with it?
In the end, I admit that this is a bit of a thought experiment and that the government is unlikely to (or should) take these steps, because the process of dealing with the company appears to be working on an acceptable, if not optimal, level. But plotting an A.I.G. receivership also reflects some of the problems and advantages of the new resolution process.
At a minimum, the government should likely acknowledge reality and designate A.I.G. as a systemically significant nonbank financial company under the new financial regulations. But even here, I acknowledge that such a designation may make the market increasingly leery of A.I.G. and foreclose its ability to effectively recover.
Still, as the process with A.I.G. unfolds, this designation and resolution option is one that government regulators should keep in mind if the company’s financial situation significantly deteriorates. At least, it is an option that should be debated as to its merits and deficits. The government owes it to the taxpayers to keep all of its options open.
– Steven M. Davidoff
Filed under: foreclosure Tagged: A.I.G., financial reform, receivership, Steven M. Davidoff, University of Connecticut School of Law
Jul
14
Op-Ed: The Role of Appraisal Inflation in Loan Securitization
A misrepresentation is fraudulent if the maker (a) knows or believes that the matter is not as he represents it to be, (b) does not have the confidence in the accuracy of his representation that he states or implies, or (c) knows that he does not have the basis for his representation that he states or implies.
Inflated values were a solution to a lack of borrowers. Demand was so great for the pools that they had to find a way to expand the market, and trigger the defaults.
The appraisal is not undertaken to determine the value of the property so much as to satisfy the underwriter that the risk is acceptable.
From Stephen Bishop
Op-Ed: The Role of Appraisal Inflation in Loan Securitization
By George W. Mantor Print Article
RISMEDIA, July 13, 2010—Street level appraisers have been getting a lot of heat for their role in the rise and collapse of real estate values and most of it is unfair. Without exception, every appraiser I have ever met was professional, direct, and considered the facts when arriving at his or her opinion of value.
That isn’t to say that there aren’t dishonest appraisers. I’m certain that just like any occupation, the percentage of bad apples probably mirrors the population in general.
And, there is no question that there is pressure, both subtle and not so subtle, to hit the “right number.” Opportunities certainly exist for appraisers to profit from either inflating or deflating values. But, blaming them or suggesting that they were responsible for the crash, fails to acknowledge the parties who had the most to gain from inflating values—like Wall Street.
Much of the misunderstanding emanates from an inaccurate view of the residential appraisal and its role in financing. The appraisal is not undertaken to determine the value of the property so much as to satisfy the underwriter that the risk is acceptable.
People are often shocked to discover that the appraiser already knows the contract price. But, the appraiser’s purpose is simply to verify that on the day in question, comparable properties were selling for similar prices.
It is but one piece of the financial intermediaries’ efforts at controlling risk. If the ability to collect on credit default swaps was contingent on a certain percentage of loans failing within a particular pool, then controlling risk is vital.
The appraisal is also part of the documentation used to support the quality of loans in a securitized pool. The financial intermediary wants the investor to believe that the value of the security is sufficient to justify the risk.
Comparable properties or “comps” are the meat and potatoes of the vast majority of residential appraisals.
There are other types of appraisal methods employed by lenders depending on either the uniqueness or complexity of the property being offered as security. But, for most residential lending purposes, underwriters rely on the comparable property method.
Most of the housing stock of the last fifty years has been tract development, both vertical and horizontal, offering only a few variations among thousands of homes.
Large areas of homogeneous housing make valuing homes fairly simple. They are a commodity. If they are clustered together, one can quickly see what a buyer in that area has to choose from.
That’s it. No complex algorithms or cryptic equations, just the principle of substitution. And that can change overnight if certain events occur.
Anything that brings more homes to market than the natural pace of activity can absorb will drive down the prices that buyers will negotiate.
One of the remarkable things about the period from 2004 to 2007 was the buyer’s willingness to pay more and more, and doing so because they believed that the replacement cost, i.e. the price of new construction was rising dramatically.
It is no mystery why the states that had the greatest amount of large scale new home construction also had the fastest appreciation rate despite the fact that you would think that all that over-building would keep prices flat or drive them down—but, no.
But, Wall Street had even more to gain than builders. Inflated values were a solution to a lack of borrowers. Demand was so great for the pools that they had to find a way to expand the market, and trigger the defaults.
They keep getting away with saying they didn’t know this would happen, and I keep saying that every consequence of this financial debacle was not only known to them, it was planned for, lobbied for, implemented by them in contravention of so many laws and regulations that run the gamut from local, city, county, state and federal that it suggests that there is literally nothing they would not do to make a buck.
They absolutely knew the consequences and got rich from them.
Remember, risk analysis is what they do. They are researchers, social scientists, accountants and lawyers.
They analyze risk and, as part of their business model, they are always keenly aware of value trends. They knew that one of the factors that would influence defaults would be a steep drop in values that would prevent the refis they promised and contribute to defaults across all pools of loans.
You may wonder, what difference does it make if they knew or didn’t know the consequences? It’s an element of proving fraud.
A misrepresentation is fraudulent if the maker (a) knows or believes that the matter is not as he represents it to be, (b) does not have the confidence in the accuracy of his representation that he states or implies, or (c) knows that he does not have the basis for his representation that he states or implies.
We keep forgetting the tool in all of this was information. The financial intermediaries had it and they studied it, and their denials that they knew this would happen fail in the face of their own research.
I found an interesting piece of that research, a little 20 page document called innocuously enough, “Global Economic Paper No. 177.”
It is produced by none other than Goldman Sachs Research Staff and its subject is Home Prices and Credit Losses.
“Regarding mortgage credit performance, feeding the predictions from the home price sales model into the mortgage loss model…”
Did you get that? They actually have pricing and default models. They know exactly what a home is really worth and they don’t even need an appraiser.
They knew exactly what circumstances were contributing factors to default.
They knew that the inclusion of certain terms in mortgage loan documents would cause foreclosure rates, which historically ran around 1% annually, to skyrocket to over 10%. Currently, as of mid-July 2010, nearly 13% of home loans are in default.
As a result, about a quarter of American homeowners have negative equity in their homes. Had the values been real, they would have held.
They knew that there were not nearly enough borrowers to place into loan pools to satisfy the demand.
They knew that wages had stagnated and affordability was becoming prohibitive to further lending.
The key to it all—inflated appraisals.
George Mantor is a nationally respected authority on all areas of real estate and is frequently quoted in a wide range of publications. He is an oft invited guest of Fox Business Network and for many years, he was the host of “Keepin’ It Real…Real talk about the real thing, real estate” on KCEO radio.His articles have also recently appeared in Real Estate Finance, The Real Estate Professional, National Real Estate Investor, Broker Agent News, and Realty Times. His blog is http://www.realtown.com/gwmantor/blog.
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.
Filed under: bubble, CDO, foreclosure Tagged: disclosure, George W. Mantor, Lender Liability, predatory lending, securitization, trustee
May
24
Another Strategy to Own Your Loan: Allocation of Third Party Payments to Your Loan Account
I’m told by some industry insiders that you can buy a piece of our loan for pennies on the dollar, much the same as NPR did when they wanted to track the money and documents through the securitization structure. That’s a good goal because it will give you “inside information” on what the pretender lenders SAY happened to your loan.
But it doesn’t give you the real facts and events because the paperwork was prepared, executed and delivered long before the loans were originated. If a Judge thinks that you are nit-picking and that the issues you raise are issues between creditors, it is because he mistakenly presumes that the transaction started with the origination of the loan. In fact, the transaction commenced BEFORE the origination of the loan with the execution of the securitization documents, without which nobody would have any loans and nobody would have made any money.
By re-orienting the Judge to the point that the documentation for the origination of the loan was WITHIN THE CONTEXT, CONDITIONS AND PROVISIONS OF THE SECURITIZATION DOCUMENTS, you will (a) be telling the truth and (b) bringing the case closer to a result that are seeking — that without the pretender lender PROVING its case in a judicial proceeding, the election of non-judicial sale is unavailable.
One way to have the goods before your opposition has them is to buy, through a broker, a mortgage backed security that is based on a pool of assets and tranches, one of which is your own loan.
As an MBS owner you have every right to demand information about the rest of the owners and the status of the pool. One of the dirty little secrets is that a lot of pools have been closed out and dissolved which means that the party claiming to be the “trustee” for the SPV pool is claiming powers to represent an entity that no longer exists with investors who no longer are holders of MBS.
You can even ask whether any of the parties in the securitization chain or their agents, servants, employees, underwriters, affiliates ever received third party payments on “toxic” mortgages or mortgage backed securities or pools of assets in which a high percentage consists of loans that are non-performing, or on the representation that the receiver (usually the investment banking house or some subsidiary or affiliate).
As a holder of the mortgage backed securities you ask why the distribution reports did not include an allocation third party insurance, counterpart y or Federal money to your pool of assets and why the there was no allocation to individual loans in that pool. You can ask why they did not allocate those third party payments to the loans that were non-performing, which might include yours.
You can also ask whether such allocation to the pool and then to the individual loans in the pool and then to the nonperforming loans, has been applied to the obligation owed to the you as an investor. You should ask whether these third party payments are applied to the balance owed to you as an MBS owner, or whether it should be applied to payments that have been reduced or missed. And finally you should ask whether the third party payments would, if properly applied, make your payments, as an MBS owner, current or if they would still be behind. If behind, then how much behind and where did the rest of the money go? If ahead, then there is no longer any default to you as MBS owner.
Remember that the answer you are going to get (after stone-walling) is going to be a total of all such payments, since they never made any allocation. So your central question is how much did they get in third party payments and when. It is then up to you to decide on the proper with the help of an accountant familiar with generally accepted accounting principles.
You the take the report of your accountant, your expert, and your forensic analyst and attach it to a pleading in which you “intervene” as the “real creditor” and state that the loan (a) was never in default because the MBS holders got their money that was due including a profit and/or (b) that the default was not in the amount as represented and that you, as creditor, would like to work out an arrangements with the debtor (you) in which you will (a) disclose the identity of the other creditors (b) disclose the true balance of the obligation after the above allocation (c) remove the predatory aspects of the loan, including the loss from appraisal fraud and (d) arrive at a thirty year fixed payment starting thirty days after the second closing at market rates for top tier debtors on the newly disclosed principal balance reduced by all relevant factors.
It’s all about transparency, truth ,justice and the American way.
Filed under: bubble, CASES, CDO, CORRUPTION, expert witness, Fannie MAe, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, trustee, workshop Tagged: accountant, allocation to the pool, appraisal fraud, default, expert, forensic analyst, generally accepted accounting principles, individual loans in the pool, MBS holders, SECURITIZATION DOCUMENTS, third party payments, true balance of the obligation
May
05
The Importance of Discovery and Motion Practice
Practically all the questions I get relate to how to prove the case that the loan was securitized. This is the wrong question. While it is good to have as much information about the pool a loan MIGHT BE INCLUDED, that doesn’t really answer the real question.
The real question is what is the identity of the creditor(s). The secondary question is what is owed on my obligation — not how much did I pay the servicer.
It might seem like a subtle distinction but it runs to the heart of the burden of proof. You can do all the research in the world and come up with the exact pool name that lists your property in the assets as a secured loan supporting the mortgage backed security that was issued and sold for real money to real investors. But that will not tell you whether the loan was ever really accepted into the pool, whether it is still in the pool, or whether it is paid in whole or in part by third parties through various credit enhancement (insurance) contracts or federal bailout.
You must assume that everything is untrue. That includes the filings with the SEC. They may claim the loan is in the pool and even show an assignment. But as any first year law student will tell you there is no contract unless you have an offer AND an acceptance. If the terms of the pooling and service agreement say that the cutoff date is April 30 and the assignment is dated June 10, then by definition the loan is not in the pool unless there is some other documentation that overrides that very clear provision of the pooling and service agreement.
Even if it made it into the pool there are questions about the authenticity of the assignment, forgery and whether the pool structure was broken up (trust dissolved, or LLC dissolved) only to be broken up further into one or more new resecuritized pools. And even if that didn’t happen, someone related to this transaction most probably received payments from third parties. Were those allocated to your loan yet? Probably not. I haven’t heard about any borrower getting a letter with a new amortization schedule showing credits from insurance allocated to the principal originally due on the loan.
The pretender lenders want to direct the court’s attention to whether YOU paid your monthly payments, ignoring the fact that others have most likely made payments on your obligation. Remember every one of these isntruments derives its value from your loan. Therefore every payment on it needs to be credited to your loan whether the payment came from you or someone else. [You know all that talk about $20 billion from AIG going to Goldman Sachs? They are talking about YOUR LOAN!]
The error common to pro se litigants, lawyers and judges is that this is not a matter of proof from the borrower. The party sitting there at the other table in the courtroom with a file full of this information is the one who has it — and the burden of proof. Your case is all about the fact that the information was withheld and you want it now. That is called discovery. And it is in motion practice that you’ll either win the point or lose it. If you win the point about proceeding with discovery you have won the case.
You still need as much information as possible about the probability of securitization and the meaning it has in the context of the subject mortgage. But just because you don’t have it doesn’t mean the pretender lender has proved anything. What they have done, if they prevailed, is they blocked you from getting the information.
By rights you shouldn’t have to prove a thing about securitization where there is a foreclosure in process. By rights you should be able to demand proof they are the right people with the full accounting of all payments including receipts from insurance and credit default swaps. The confusion here emanating from Judges is that particularly in non-judicial states, since the borrower must bring the case to court in the first instance, the assumption is made that the borrower must prove a prima facie case that they don’t owe the money or that the foreclosing pretender lender is an impostor. That’s what you get when you convert a judicial issue into a non-judicial one on the basis of “judicial economy.”
In reality, the ONLY way that non-judicial statutes can be constitutionally applied is that if the borrower goes to the trouble of raising an objection by bringing the matter to court, the burden of proof MUST shift immediately to the pretender lender to show that in a judicial proceeding they can establish a prima facie case to enforce the obligation, the note and the mortgage (deed of trust). ANY OTHER INTERPRETATION WOULD UNCONSTITUTIONALLY DENY THE BORROWER THE RIGHT TO A HEARING ON THE MERITS WHEREIN THE PARTY SEEKING AFFIRMATIVE RELIEF (THAT IS THE FORECLOSING PARTY, NOT THE BORROWER) MUST PROVE THEIR CASE.
Filed under: CASES, CDO, CORRUPTION, Eviction, expert witness, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, interest rates, investment banking, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, trustee, workshop Tagged: AFFIRMATIVE RELIEF, amortization, assignment, assumption, authenticity of the assignment, BURDEN OF PROOF, credit default swaps, credit enhancement, cutoff date, DEED OF TRUST, discovery, full accounting of all payments, identity of the creditor, insurance, judicial economy, judicial proceeding, Mortgage, Motion Practice, non-judicial statutes, note, Obligation, offer AND an acceptance, owed on my obligation, payments from third parties, pooling and service agreement, prima facie case, pro se litigants, securitization, UNCONSTITUTIONAL
Apr
19
Discovery Issues Revealed: PRINCIPAL REDUCTION IS A RIGHT NOT A GIFT – CA Class Action V BOA on TARP funds
REGISTER NOW FOR DISCOVERY AND MOTION PRACTICE WORKSHOP MAY 23-24
PRINCIPAL REDUCTION IS A RIGHT NOT A GIFT. IF THE OBLIGATION HAS BEEN PAID BY THIRD PARTIES, THEN THE OBLIGATION HAS ALREADY BEEN REDUCED. THE ONLY FUNCTION REMAINING IS TO DO THE ACCOUNTING.
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There should be no doubt in your mind now that virtually none of the foreclosures processed, initiated or threatened so far have been anything other than wrong. The payments from third parties clearly reduced the principal due, might be allocable to payments that were due (thus eliminating even the delinquency status) and thus eviscerates the amount demanded by the notice of delinquency or notice of default.
Thus in addition to the fact that the wrong party is pursuing foreclosure, they are seeking to enforce an obligation that does not exist.”
Editor’s Note: This is what we cover in the upcoming workshop. Connect the dots. Recent events point out, perhaps better than I have so far, why you should press your demands for discovery. In particular identification of the creditor, the recipients of third party payments, and accounting for ALL financial transactions that refer to or are allocable to a specific pool in which your specific loan is claimed to have been pledged or transferred for sale to investors in pieces.
This lawsuit seeks to force BOA to allocate TARP funds to the pools that were referenced when TARP funds were paid. In turn, they want the money allocated to individual loans in those pools on a pro rata basis. It is simple. You can’t pick up one end of the stick without picking up the other end too.
The loans were packaged into pools that were then “processed” into multiple SPV pools, shares of which were sold to investors. Those shares “derived” their value from the loans. TARP paid 100 cents on the dollar for those shares. Thus the TARP payments were received based upon an allocation that “derived” its value from the loans. The only possible conclusion is to allocate the funds to the loans.
But that is only part of the story. TARP, TALF and other deals on a list that included insurance, and credit default swaps (synthetic derivatives) also made such payments. Those should also be allocated to the loans. Instead, BOA wants to keep the payments without applying the payments to the loans. In simple terms they their TARP and then still be able to keep eating, even though the “cake” has been paid off (consumed) by third party payments.
Now that the Goldman Sachs SEC lawsuit has been revealed, I can point out that there are other undisclosed fees, profits, and advances made that are being retained by the intermediaries in the securitization and servicing chains that should also be allocated to the loans, some of which are ALSO (as previously mentioned in recent articles posted here) subject to claims from the SEC on behalf of the investors who went “long” (i.e., who advanced money and bought these derivative shares) based upon outright lies, deception and an interstate and intercontinental scheme of fraud.
In plain language, the significance of this accounting is that if you get it, you will have proof beyond any doubt that the notice of default and notice of sale, the foreclosure suit and the demands from the servicer were all at best premature and more likely fraudulent in that they KNEW they had received payments that had paid all or part of the borrower’s obligation and which should have been allocated to the benefit of the homeowner.
There should be no doubt in your mind now that virtually none of the foreclosures processed, initiated or threatened so far have been anything other than wrong. The payments from third parties clearly reduced the principal due, might be allocable to payments that were due (thus eliminating even the delinquency status) and thus eviscerates the amount demanded by the notice of delinquency or notice of default.
Thus in addition to the fact that the wrong party is pursuing foreclosure, they are seeking to enforce an obligation that does not exist. This is a breach of the terms of the obligation as well as the pooling and service agreement.
INVESTORS TAKE NOTE: IF THE FUNDS HAD BEEN PROPERLY ALLOCATED THE LOANS WOULD STILL BE CLASSIFIED AS PERFORMING AND THE VALUE OF YOUR INVESTMENT WAS MUCH HIGHER THAN REPORTED BY THE INVESTMENT BANK. YOU TOOK A LOSS WHILE THE INVESTMENT BANK TOOK THE MONEY. THE FORECLOSURES THAT FURTHER REDUCED THE VALUE OF THE COLLATERAL WERE ILLUSORY SCHEMES CONCOCTED TO DEFLECT YOUR ATTENTION FROM THE FLOW OF FUNDS. THUS YOU TOO WERE SCREWED OVER MULTIPLE TIMES. JOINING WITH THE BORROWERS, YOU CAN RECOVER MORE OF YOUR INVESTMENT AND THEY CAN RECOVER THEIR EQUITY OR AT LEAST THE RIGHTS TO THEIR HOME.
On Thu, Apr 15, 2010 at 9:35 PM, sal danna <saldanna@gmail.com> wrote:
California homeowners file class action suit against Bank of America for withholding TARP funds
Thu, 2010-04-08 11:43 — NationalMortgag…
California homeowners have filed a class action lawsuit against Bank of America claiming the lending giant is intentionally withholding government funds intended to save homeowners from foreclosure, announced the firm of Hagens Berman Sobol Shapiro. The case, filed in United States District Court in Northern California, claims that Bank of America systematically slows or thwarts California homeowners’ access to Troubled Asset Relief Program (TARP) funds by ignoring homeowners’ requests to make reasonable mortgage adjustments or other alternative solutions that would prevent homes from being foreclosed.
“We intend to show that Bank of America is acting contrary to the intent and spirit of the TARP program, and is doing so out of financial self interest,” said Steve Berman, managing partner of Hagens Berman Sobol Shapiro.
Bank of America accepted $25 billion in government bailout money financed by taxpayer dollars earmarked to help struggling homeowners avoid foreclosure. One in eight mortgages in the United State is currently in foreclosure or default. Bank of America, like other TARP-funded financial institutions, is obligated to offer alternatives to foreclosure and permanently reduce mortgage payments for eligible borrowers struck by financial hardship but, according to the lawsuits, hasn’t lived up to its obligation.
According to the U.S. Treasury Department, Bank of America services more than one million mortgages that qualify for financial relief, but have granted only 12,761 of them permanent modification. Furthermore, California has one of the highest foreclosure rates in the nation for 2009 with 632,573 properties currently pending foreclosure, according to the California lawsuit.
“We contend that Bank of America has made an affirmative decision to slow the loan modification process for reasons that are solely in the bank’s financial interests,” Berman said.
The complaints note that part of Bank of America’s income is based on loans it services for other investors, fees that will drop as loan modifications are approved. The complaints also note that Bank of America would need to repurchase loans it services but has sold to other investors before it could make modifications, a cumbersome process. According to the TARP regulations, banks must gather information from the homeowner, and offer a revised three-month payment plan for the borrower. If the homeowner makes all three payments under the trial plan, and provides the necessary documentation, the lender must offer a permanent modification.
Named plaintiffs and California residents Suzanne and Greg Bayramian were forced to foreclose their home after several failed attempts to make new arrangements with Bank of America that would reduce their monthly loan payments. According to the California complaint, Bank of America deferred Bayramian’s mortgage payments for three months but failed to tell them that they would not qualify for a loan modification until 12 consecutive payments. Months later, Bank of America came back to the Bayramian family and said would arrange for a loan modification under the TARP home loan program but never followed through. The bank also refused to cooperate to a short-sale agreement saying they would go after Bayramian for the outstanding amount.
“Bank of America came up with every excuse to defer the Bayramian family from a home loan modification which forced them into foreclosure,” said Berman. “And we know from our investigation this isn’t an isolated incident.”
The lawsuits charge that Bank of America intentionally postpones homeowners’ requests to modify mortgages, depriving borrowers of federal bailout funds that could save them from foreclosure. The bank ends up reaping the financial benefits provided by taxpayer dollars financing TARP-funds and also collects higher fees and interest rates associated with stressed home loans.
For more information, visit www.hbsslaw.com.
Filed under: CDO, CORRUPTION, Eviction, expert witness, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, workshop Tagged: accounting, allocation of payments, and advances, Bank of America, CALIFORNIA, creditor, delinquency status, discovery, foreclosure suit, foreclosures, Goldman Sachs, Hagens Berman Sobol Shapiro, INVESTORS TAKE NOTE, Notice of Default, Notice of Sale, Obligation, payments, pool, principal reduction, profits, sale to investors, SEC, SPV pools, Steve Berman, TARP, TARP regulations, third party payments, undisclosed fees
Apr
10
Profits Surge as Declared Losses Vanish: Are the defaults real?
And THAT is why you are entitled to compel discovery, compel answers to your QWR, DVL and other requests. If the losses were not real, if the pools were marked down solely on the say-so of the financial institutions that created them, if the default rate was really much lower than the declared defaults, if AMBAC, AIG and others made payments on those pools, and if the investors, as the creditors in the loan transactions received payments directly or indirectly (through their agents) then some part of those payments were allocatable and should be allocated to your loan. Thus all loans in the pool should be credited pro rata with the amounts received from third party payments. Homeowner obligations declared in default would then be either premature or incorrectly stated in the amount due. Other loans that were not delinquent should have had the principal reduced — none of which was accounted for because the intermediary pretender lenders kept the money for themselves.
Editor’s Note: Ambac’s Profit Surge is the result of illusory losses that are now being recaptured. The “game” was to declare huge losses, take in taxpayer dollars and then gradually filter the money back into the company thus creating guaranteed earnings rising steadily and thus providing an increase in the price-earnings ratio. The investment houses are doing the same thing. They made trillions of dollars is cash profits, declared trillions in paper losses and scared the public and government into giving them money to prevent the collapse of the financial system.
Since trust and confidence in the system is the foundation, it didn’t matter whether they were telling the truth as long as most people believed the lie. The taxpayer bailout was necessary as a symbolic gesture to assure the world that there was always backing by the U.S. Federal government.
The question for these institutions is whether the defaults in home loans were declared prematurely (or falsely) or even caused by policies designed to give credence to the big lie and to provide them with yet another source of windfall profits by picking up homes that are sold in foreclosure at a fraction of the original loan amount. As stated in numerous articles before on this blog, the ONLY people who actually lost money are the investors who advanced the real money into a pool that was used to fund mortgage closings (and also used to fund absurd profits on fees, yield spread premiums etc.) and the homeowners who advanced their homes as collateral on loan products that were sold to them under false pretenses. Both the mortgage backed securities and the loans were sham financial transactions.
And THAT is why you are entitled to compel discovery, compel answers to your QWR, DVL and other requests. If the losses were not real, if the pools were marked down solely on the say-so of the financial institutions that created them, if the default rate was really much lower than the declared defaults, if AMBAC, AIG and others made payments on those pools, and if the investors, as the creditors in the loan transactions received payments directly or indirectly (through their agents) then some part of those payments were allocatable and should be allocated to your loan. Thus all loans in the pool should be credited pro rata with the amounts received from third party payments. Homeowner obligations declared in default would then be either premature or incorrectly stated in the amount due. Other loans that were not delinquent should have had the principal reduced — none of which was accounted for because the intermediary pretender lenders kept the money for themselves.
By Alistair Barr & John Spence, MarketWatch
SAN FRANCISCO (MarketWatch) — Ambac Financial Group Inc. shares surged 71% on heavy volume Friday, after the bond insurer said it swung to a fourth-quarter net profit.
Ambac (ABK 1.10, +0.46, +71.47%) said late Thursday that quarterly net income was $558.1 million, or $1.93 a share. That compares with a net loss of $2.34 billion or $8.14 a share in the same period a year earlier.
The improvement was mainly driven by a $472 million tax benefit, the company said, as well as by lower expenses from losses in its main financial-guarantee business.
Total net loss and loss expenses were $385.4 million in the fourth quarter of 2009, down from $916.4 million in the final quarter of 2008, Ambac reported.
Ambac, one of the world’s largest bond insurers, has been hit hard by losses from mortgage-related guarantees it sold during the housing-market boom of the last decade. When the real-estate market collapsed, Ambac was left paying big claims on those guarantees.
Last month, the regulator of Ambac’s main bond-insurance subsidiary, Wisconsin’s Office of the Commissioner of Insurance, seized a big chunk of its business to protect hundreds of billions of dollars in guarantees on municipal bonds. See Read about Ambac “amputation.”
Ambac also has been settling some of its obligations at large discounts, partly because counterparties worry that the bond insurer is too financially precarious to pay anywhere near 100 cents on the dollar on its guarantees.
//
“The transfer of structured finance obligations to the state regulator and the subsequent payment at a discounted rate is a de-facto default,” said Egan-Jones Ratings, a rating agency that’s paid by investors rather than issuers, on Friday. “However, credit quality of the remaining corpus is enhanced.”
Egan-Jones affirmed its rating on Ambac at BB+, but noted this rating only applies to the business units that aren’t seized by the Wisconsin regulator.
Shares of Ambac dropped after the seizure was announced, and recently traded near 50 cents. The company’s stock traded close to $100 before the financial crisis.
On Friday, the stock surged 71% to close at $1.10 as almost 200 million shares changed hands. The average weekly trading volume is 72 million shares, according to FactSet data.
Still, Jim Ryan, an equity analyst at Morningstar, said Ambac’s quarterly results weren’t as strong as suggested by the company’s reported net income of $1.93 a share.
“For all the favorable accounting benefits, the fact remains that Ambac has not written any new business in more than a year and continues to exist in runoff mode,” Ryan wrote in a note to investors on Friday.
When analyzing insurers in “runoff,” investors should try to work out whether there are enough reserves to settle claims on existing policies, Ryan explained.
Ambac’s qualified statutory capital fell almost 70% in 2009 while total claims paying resources dropped 20% for the year, he noted.
“With little improvement in the housing market (Ambac’s primary source of claims) and the potential for a double dip in housing prices on the horizon, which could contribute to the growing inventory of potential foreclosures, we think the future remains opaque, to say the least,” Ryan wrote.
Alistair Barr is a reporter for MarketWatch in San Francisco. John Spence is a reporter for MarketWatch in Boston.
Filed under: CDO, CORRUPTION, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: accounting, Alistair Barr, AMbac, default, HERS, illusory losses, John Spence, MarketWatch, mortgage backed securities, pretender lenders, price-earnings ratio, principal reduction, sham financial transactions, third party payments
Mar
31
RESECURITIZATION: ADDING MORE LAYERS FOR THE FORENSIC ANALYST, EXPERT, LAWYER AND LITIGANT
NEWS REPORTS HAVE BEEN SPORADICALLY REFERRING TO THE OLD DERIVATIVES BEING RE-PACKAGED AND SOLD AGAIN. This is called resecuritization. It takes the old pools, or what’s left of them, puts them together with other old pools, and creates a brand new Special Purpose vehicle that issues brand spanking new mortgage backed bonds.
The backing in this case is the old mortgage backed bond which in turn is evidence of the ownership or “beneficial ownership” of the underlying loans.
This produces the desired effect of making more money while at the same time leading litigators down blind alleys and the equally desirable effect of showing the Judge that you were full of crap. Of course if you do the proper discovery and explain with expert witness declarations or even testimony what is going on, then the Judge will either give you the go-ahead to pursue your line of inquiry or not, leading to an interesting appeal. Witness the following:
Fitch Rates J.P. Morgan Resecuritization Trust 2009-12
Business Wire, Nov 30, 2009
NEW YORK — Fitch Ratings has rated the J.P. Morgan Resecuritization Trust 2009-12. This transaction consists of nine non-crossed groups. Each group is a resecuritization of a residential mortgage backed securities certificate. Fitch is not rating Group 3, 6, and 9 certificates.
–Group 1 is a resecuritization of 55.26% interest in CHL 2007-9, Class A-6;
–Group 2 is a resecuritization of 6.97% interest in WFMBS 2006-AR12, Class II-A-1;
–Group 4 is a resecuritization of 11.08% interest in CHL 2005-29, Class A-1;
–Group 5 is a resecuritization of 12.55% interest in FHASI 2007-2, Class I-A-4;
–Group 7 is a resecuritization of 30.33% interest in WFMBS 2007-11, Class A-85;
–Group 8 is a resecuritization of 4.92% interest in WFMBS 2007-11, Class A-96.
As resecuritizations, the certificates will receive their cash flows from the underlying classes of certificates. The underlying certificates represent beneficial ownership interest in fixed-rate and adjustable-rate, conventional, first lien residential mortgage loans, substantially all of which have original terms to stated maturity of 30 years.
This transaction contains certain classes designated as Base Certificates and others as Exchangeable Certificates. Group 1 A-1 certificate is a Base Certificate and can be exchanged for certain combinations of A-3 through A-16. The A-1, A-2, A-3, A-4 and A-6 certificates in group 2, 7 and 8 are Base Certificates and can be exchanged for certain combinations of A-3 through A-19. The class A-3, A-4 and A-6 certificates in group 4 are Base Certificates and can be exchanged for class A-1. The class A-1 certificate in group 5 is a Base Certificate and can be exchanged for certain combinations of A-3 through A-8. Classes C-A-1 through C-A-8 can be exchanged for certain combinations of certificates from group 7 and group 8.
ResiLogic, the regression-based model used by Fitch, takes into account multiple risk factors which can broadly be placed into three categories in the following order of influence: seasoned loan risks, economic risks, and collateral risks. For seasoned loan risks, the delinquency status and volatility are the most important with regards to Frequency of Foreclosure (FOF), while change in home price index and loan age are the most important with regards to Loss Severity (LS). Economic risk is solely comprised of state and MSA level risk multipliers as well as a national multiplier. In the category of collateral risk, the credit score, credit sector, and combined loan-to-value (CLTV) ratio are the most heavily-weighted risk factors in calculating the FOF. Closing balance, loan-to-value (LTV) ratio and loan coupon are the most heavily-weighted risk factors in calculating Loss Severity. Due to concerns over recent pool performance and volatility, loss levels were adjusted higher than the ResiLogic model results for Group 5.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, HERS, Investor, Mortgage, securities fraud, Servicer Tagged: 2009-12, Business Wire, CHL 2007-9, Class A-6, CLTV, collateral risks, combined loan-to-value, delinquency status, discovery, Fitch ratings, FOF, Frequency of Foreclosure, HERS, J.P. Morgan Resecuritization Trust, Loss Severity, ResiLogic model, risk factor, Wells Fargo, WFMBS 2007-11
Aug
08
Loan Servicer Tactics… Foreclose don’t modify; lie, deceive, whatever it takes
As a citizen, please start asking tougher questions and demanding truthful answers of your elected officials. We MUST hold these men and women accountable to representing ‘we the people’ instead of their lobby pals.
Whatever you hear from the Administration or any of the large institutions via the drive-by media you can assume that it’s a lie or many shades of gray with dash or two of spin. Why? Well, of course, the truth is not going to get votes for politicians or more investors and account holders for any of these characters who operate in the shadows of financial institution corporate offices across America.
Let me give you a dose of truth serum in case you’re tempted to believe the drive by media reports on the foreclosures and the Making Home Affordable plan we’ve been told is going to rescue our economy and the housing market and the millions of families jobless and now facing foreclosure. You ready?
Here it is: the loan servicers don’t care about anything but money and the modus operandi is clear… foreclose as fast as possible on everyone in a mortgage hardship. Just modify enough loans to make everyone think we’re really on board with this. Make excuses for everything else. Lie to media about what’s really going on because mostly everyone believes what they hear anyway.
A deeper look into the numbers and statistics will leave you scratching your head though – and asking yourself the question, “but why?”
According to an article by Gretchen Morgenson from the New York Times, “Alan M. White, an assistant professor at the Valparaiso University law school in Indiana, analyzed data on 3.5 million subprime and alt-A mortgages in securitization pools overseen by Wells Fargo. The loans were written in 2005 through 2007; data on their performance is provided to the trusts’ investors. Mortgages handled by five of the nation’s largest loan servicing companies — Bank of America, Chase Home Finance and Litton Loan Servicing among them — are contained in the Wells Fargo data.
Mr. White found that mortgage modifications peaked in February and have declined in all but one month since. While servicers modified 23,749 loans in these trusts in February, they changed only 19,041 in May and 18,179 in June. This is exactly when servicers were supposed to be responding to the government’s loan modification urgings.
Foreclosures, meanwhile, keep rising. In June, 281,560 were in process, slightly above the 277,847 in May. Last January, there were about 242,000 foreclosures in the pipeline among the Wells Fargo trusts.”
Well, isn’t that interesting. You see, the numbers simply don’t lie. They tell the truth and expose the raw data of what is really happening. The report continues, “the most fascinating, and frightening, figures in the data detail how much money is lost when foreclosed homes are sold. In June, the data show almost 32,000 liquidation sales; the average loss on those was 64.7 percent of the original loan balance.”
Did you catch that? The AVERAGE loss on a house that a servicers takes to foreclosure sale is a whopping 64.7% of the original loan balance!!!! The average loan amount was $223,000. But in the liquidation sale, the property sold for $144,000 less, or a $79,000 sales price on average.
So any logical person goes, “why? Why would a servicer foreclose on the home instead of providing a loan modification for a homeowner who wants to pay but just needs a reduction in that payment?” I know I can’t be the only one who’s wondered that…
If you want to find the answer you just gotta follow the money… it’s that simple. And the answer does not shed any more favorable light on these servicers – who, by the way, are just subsidiaries of the main financial institutions. Example: Citimortgage is the servicer. They are owned by Citigroup. America’s Servicing Company is the servicer. They are owned by Wells Fargo.
So back to following the money. First, the pooling and servicing agreements governing these trusts, servicers and trustees usually contain “default servicing provisions” which provide the servicer which much higher fees when the loan goes into default. Then the servicer also gets all sorts of other fees reimbursed to them upon a liquidation sale such as BPO fees, inspection fees, legal fees, etc. These fees may get paid to the servicer right away but may not be reimbursed until the sale goes through. But, here’s the BIG reason…
Very often, if not most of the times, these servicers were paid in full for all these loans when they acted as the sponsor and sold the Notes (assets) to these trusts. The trust investors put up a lump sum amount to the servicer and the servicer agreed to collect the monies, manage the escrow accounts and in turn, made a guarantee of cash flow payments to the trust each month. The trust investors are most worried about one thing… their monthly payment on the cash flow. If they keep getting their monthly cash payment, do you think they’re going to be screaming bloody murder? Probably not. As long as the check keeps coming, I got no qualms. Stop the checks and I’m going to be gettin’ all in your business. Think about it… haven’t you noticed a peculiar lack of lawsuits being filed by MBS trust investors or the trusts themselves? One would think the federal courts would be littered with lawsuits by these trusts against all the institutions in the securitization chain for all sorts of allegations regarding the massive losses you’d think they’re realizing due to the defaults.
So, to keep the investors out of their “business” the servicer has to figure out a way to keep those cash flow payments going. Well, let’s say I’m servicing a pool of 1000 loans and the monthly cash flow on that pool is $1 million (or $1000 per loan average). But my default rate starts rising and now 10% of these loans are not paying. Well, that’s $100,000 per month less that I’m getting as the servicer. Shoot, how do I keep making the payment of $1 million per month if I’m only receiving $900,000?
Oh, I got it! If I can foreclose on a couple homes in default, take a 64.7% loss on it but I still get $79,000 in one lump sum from each home I liquidate, I can keep making that cash payment to the trust. All I need to do is liquidate about 1.2 homes per month on average, and, even though I take a huge loss on these homes, I can keep making that cash flow payment to the trust, keep my investors happy and better yet, keep them out of my business and away from asking all sorts of questions I really don’t want to answer. Note: this game can only carry on for so long. At some point the pied piper is going to pipe…
This my best stab at a simplified answer to “why” these servicers are ignoring the Making Home Affordable program and foreclosing as fast as they possibly can. Nothing else makes sense to me. If you have any other input, I’d love to hear about in the forum on this topic.
The kicker here is that these servicers don’t have legal standing to foreclose. They don’t own the Note in 80%+ of the cases – and that number is probably higher than 90% of the time. So they unlawfully seize a family’s home, sell it even though they don’t own it and in the process they also violate the servicing agreements they are governed by. These agreements mandate that the servicer act in a fiduciary manner with respect to the interests of the investors. I can tell you unequivocally that taking an average 64.7% loss on a trust asset is worse for the trust versus modifying the loan at a higher amount (still with principal reduction for the borrower) and recapturing the interest. There is NO WAY the current servicer model of foreclose and liquidate passes the NPV test for these trust assets – at least as far as I can see.
For reference and further context, here is the article written by Gretchen Morgenson at the New York Times.
So Many Foreclosures, So Little Logic
By GRETCHEN MORGENSON
LAST week, the stock market tumbled on news that housing foreclosures and delinquencies rose again in the first quarter. The Office of the Comptroller of the Currency said that among the 34 million loans it tracks, foreclosures in progress rose 22 percent, to 844,389. That figure was 73 percent higher than in the same period last year.
But the comptroller’s office also said that amid the gloom, there was promising data about loan modifications: they rose 55 percent in the quarter. That growth came on a very low base, of course, but the move encouraged John C. Dugan, head of the comptroller’s office.
“As the administration’s ‘Making Home Affordable’ program gains traction and helps offset the impact of this very difficult economic cycle,” he said in a statement, “we should continue to see progress in future reports.”
A glimpse of second-quarter mortgage data, however, indicates that the progress Mr. Dugan and his colleagues in Washington are hoping for may take longer to emerge — raising questions about whether policymakers and banks are moving quickly or intelligently enough on the foreclosure problem.
Foreclosures remain one of the great financial ills for the economy. The Bush administration largely overlooked foreclosures affecting average homeowners, focusing instead on propping up elite, troubled financial institutions with taxpayer funds. The Obama administration has said it wants to wrestle the foreclosure issue to the ground by encouraging mortgage loan modifications, but its efforts have gotten little traction.
Loan modifications occur when a lender agrees to change terms of a troubled borrower’s mortgage; the most common approach is to reduce the loan’s interest rate. Cutting the amount of principal owed — an option that could be of more help to a borrower — is rare because it means homeowners pay less money back to the bank over time.
Lenders and their representatives, however, don’t like to modify loans through interest rate cuts or principal reductions because, of course, it reduces the income they receive from borrowers. No surprise, then, that loan modifications have been a trickle amid the recent foreclosure flood.
Enter the government, with the program it announced in March to encourage modifications. It offers incentives to loan servicers to change mortgage terms, providing $1,000 for each loan they modify. The program focuses on making payments more affordable through lower interest rates, but delinquent amounts and late fees are typically tacked onto the mortgage balance. “Making Home Affordable” does not compel lenders to reduce mortgage balances.
Servicers signed on to the program in April. The program’s early months were not covered by the O.C.C.’s first-quarter report. But other figures on modifications conducted in April, May and June are available. And they show a decline in modifications, not an increase as the government hoped.
Alan M. White, an assistant professor at the Valparaiso University law school in Indiana, analyzed data on 3.5 million subprime and alt-A mortgages in securitization pools overseen by Wells Fargo. The loans were written in 2005 through 2007; data on their performance is provided to the trusts’ investors. Mortgages handled by five of the nation’s largest loan servicing companies — Bank of America, Chase Home Finance and Litton Loan Servicing among them — are contained in the Wells Fargo data.
Mr. White found that mortgage modifications peaked in February and have declined in all but one month since. While servicers modified 23,749 loans in these trusts in February, they changed only 19,041 in May and 18,179 in June. This is exactly when servicers were supposed to be responding to the government’s loan modification urgings.
Foreclosures, meanwhile, keep rising. In June, 281,560 were in process, slightly above the 277,847 in May. Last January, there were about 242,000 foreclosures in the pipeline among the Wells Fargo trusts.
“I was hoping we would see some impact in June of the government’s program,” Mr. White said. “Is ‘Home Affordable’ working? My short answer is no.”
To be sure, the government’s data differs from that which Mr. White analyzed, and its loan modification figures for the second quarter may look better as a result. The O.C.C. includes prime loans as well as subprime, for example, while the Wells Fargo data contains no prime loans.
Nevertheless, Mr. White has collected the figures since November 2008, and he said that in the months since, the performance of the 3.5 million mortgages that he analyzes tracked the O.C.C. data pretty closely.
THE Wells Fargo data is illuminating. It shows that in June, 58 percent of modifications cut the payments that the borrower has to pay, a slightly smaller percentage than in April or May. The average reduction in June was $173 a month.
But the most fascinating, and frightening, figures in the data detail how much money is lost when foreclosed homes are sold. In June, the data show almost 32,000 liquidation sales; the average loss on those was 64.7 percent of the original loan balance.
Here are the numbers: the average loan balance began at almost $223,000. But in the liquidation sale, the property sold for $144,000 less, on average. Perhaps no other single figure shows how wildly the mortgage mania pumped up home prices. It also bodes poorly for the quality of the mortgage-related assets lurking in banks’ books.
Loss severities, like foreclosures, are rising. In November, losses averaged 56.1 percent of the original loan balance; in February, 63.3 percent.
Given losses like these, Mr. White said he was perplexed that lenders and their representatives were resisting reducing principal when they modify loans. His data shows how rare it is for lenders to reduce principal. In June, for example, 3,135 loans — just 17.2 percent of the total modified — involved write-downs of principal, interest or fees. The total loss from these write-downs was just $45 million in June.
And yet, the losses incurred in foreclosure sales involving loans in the securitization trusts were a staggering $4.59 billion in June. “There is 100 times as much money lost in foreclosure sales as there was in writing down balances in modifications,” Mr. White said. “That is not rational economic behavior.”
If banks have written down the value of these loans to the 40 cents on the dollar that they are fetching on foreclosures — the only true value for these homes right now — then why don’t they bite the bullet and reduce the loan amount outstanding for the troubled borrowers? That type of modification would be far more likely to succeed than larding a borrower who is hopelessly underwater with yet more arrears.
“You can reduce payments with a lot of gimmicks similar to those built into subprime loans — temporary rate reductions that defer a lot of principal, balloon payments,” Mr. White said. “To me that leads to a situation where American homeowners are paying 50 to 60 percent of their incomes for mortgages which reset in 2011 and 2012. That is not solving the problem.”
Certainly not for borrowers, that is. And because many of these losses will ultimately be passed on to taxpayers, it’s not solving our problem, either.
White Paper | Credit Ratings Across Asset Classes: A=A? – Credit-rating companies routinely award higher rankings to debt issued by banks and corporations that pay them the most
By 4closureFraud | Bankruptcy, Foreclosure Fraud, News for the Patriot
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