Bank of America Found Guilty of Mortgage Fraud: Major Victory for U.S. Government – FRAUD STOPPERS Mortgage Fraud Audits Provide Solutions for Affected Homeowners
In a significant development, Bank of America has been found liable for mortgage fraud in a case that stems from the financial crisis. The verdict, which came after a four-week trial, marks a major win for the U.S. government and sheds light on the deceptive practices employed by the banking giant. While the verdict holds Bank of America accountable, it leaves many affected homeowners wondering about their rights and potential remedies. This is where FRAUD STOPPERS Mortgage Fraud Audits step in, offering a solution for those seeking justice and restitution.
The case revolves around Bank of America’s subsidiary, Countrywide, which was accused of originating defective mortgages and selling them to government-backed mortgage giants Fannie Mae and Freddie Mac. The government argued that Countrywide employed a program known as the “High Speed Swim Lane” or “Hustle,” where loan-quality checkpoints were eliminated, and employees were incentivized based on loan volume and speed. As a result, a staggering 43 percent of the loans sold to Fannie Mae and Freddie Mac were found to be materially defective.
The jury found Bank of America liable on one civil fraud charge and also held former Countrywide executive Rebecca Mairone liable on the one fraud charge she faced. The U.S. Justice Department aims to seek up to $848.2 million in penalties, reflecting the gross loss suffered by Fannie Mae and Freddie Mac due to the faulty loans. However, the final penalty will be determined by U.S. District Judge Jed Rakoff, with arguments scheduled for December 5.
While the verdict is undoubtedly a significant victory for the Justice Department, the question remains: What options are available for affected homeowners? This is where FRAUD STOPPERS Mortgage Fraud Audits play a crucial role. FRAUD STOPPERS is a leading organization specializing in uncovering mortgage fraud and assisting homeowners in navigating complex legal processes.
With their Bloomberg Securitization Audit, FRAUD STOPPERS conducts a comprehensive review of mortgage documents, looking for irregularities, discrepancies, and potential fraud. The audit examines the chain of ownership, loan transfers, securitization process, and other critical aspects to identify potential violations. If fraudulent activities or legal irregularities are discovered, FRAUD STOPPERS can provide homeowners with valuable evidence to support their claims and seek appropriate remedies.
One of the main challenges faced by homeowners in mortgage fraud cases is establishing a legitimate chain of ownership for their loans. The securitization process, where mortgages are bundled and sold as investment securities, often results in a lack of proper documentation and confusion regarding loan ownership. FRAUD STOPPERS’ expertise in securitization audits enables them to uncover potential flaws in the chain of ownership, providing homeowners with a strong basis to challenge foreclosure proceedings or negotiate loan modifications.
Moreover, FRAUD STOPPERS offers comprehensive legal assistance through their network of attorneys experienced in handling mortgage fraud cases. These attorneys specialize in consumer protection laws, foreclosure defense, and financial fraud, ensuring that homeowners have skilled advocates on their side. FRAUD STOPPERS understands the complexities involved in fighting against powerful financial institutions and aims to level the playing field for affected homeowners.
The Bank of America verdict serves as a reminder that homeowners should not bear the burden of deceptive practices by financial institutions. FRAUD STOPPERS empowers homeowners by equipping them with the tools, knowledge, and legal representation necessary to challenge fraudulent practices, seek restitution, and protect their homes.
If you believe you have been a victim of mortgage fraud or suspect irregularities in your loan documents, it is essential to consult with experts like FRAUD STOPPERS.
Their specialized audits can uncover crucial evidence and provide you with the means to fight for justice. Remember, you don’t have to face the legal complexities alone – FRAUD STOPPERS is here to help you navigate the path to recovery and hold responsible parties accountable.
In conclusion, the guilty verdict against Bank of America for mortgage fraud is a significant victory for the U.S. government, highlighting the consequences of deceptive practices during the financial crisis. For homeowners affected by such fraudulent activities, FRAUD STOPPERS offers a lifeline. Through their mortgage fraud audits and legal support, they provide homeowners with the means to challenge wrongful foreclosures, negotiate loan modifications, and seek justice. In the fight against mortgage fraud, FRAUD STOPPERS stands as a beacon of hope for those seeking to reclaim their homes and financial security.
Bank of America Found Guilty of Mortgage Fraud
By Reuters, 24 October 13
- Bank found liable on one civil fraud charge
- Verdict seen as a major win for the U.S. govt
- Former Countrywide exec found liable on one fraud charge
Bank of America Corp was found liable for fraud on Wednesday over defective mortgages sold by its Countrywide unit, a major win for the U.S. government in one of the few trials stemming from the financial crisis.
After a four-week trial, a federal jury in New York found the bank liable on one civil fraud charge. Countrywide originated shoddy home loans in a process called “Hustle” and sold them to government mortgage giants Fannie Mae and Freddie Mac, the government said.
The four men and six women on the jury also found former Countrywide executive Rebecca Mairone liable on the one fraud charge she faced.
The U.S. Justice Department has said it would seek up to $848.2 million, the gross loss it said Fannie and Freddie suffered on the loans. But it will be up to U.S. District Judge Jed Rakoff to decide on the penalty. Arguments on how the judge will assess penalties are set for Dec. 5.
Any penalty would add to the more than $40 billion Bank of America has spent on disputes stemming from the 2008 financial crisis.
“The jury’s decision concerned a single Countrywide program that lasted several months and ended before Bank of America’s acquisition of the company,” Bank of America spokesman Lawrence Grayson said. “We will evaluate our options for appeal.”
Marc Mukasey, a lawyer for Mairone, called his client a “woman of integrity, ethics and honesty,” adding they would fight on. “She never engaged in fraud, because there was no fraud,” he said.
Wednesday’s verdict was a major victory for the Justice Department, which has been criticized for failing to hold banks and executives accountable for their roles in the events leading up to the financial crisis.
The government continues to investigate banks for conduct related to the financial crisis. The verdict comes as the government is negotiating a $13 billion settlement with JPMorgan Chase & Co to resolve a number of probes and claims arising from its mortgage business, including the sale of mortgage bonds.
The lawsuit stemmed from a whistleblower case originally brought by Edward O’Donnell, a former Countrywide executive who stands to earn up to $1.6 million for his role.
The case centered on a program called the “High Speed Swim Lane” – also called “HSSL” or “Hustle” – that government lawyers said Countrywide started in 2007.
The Justice Department contended that fraud and other defects were rampant in HSSL loans because Countrywide eliminated loan-quality checkpoints and paid employees based on loan volume and speed.
The Justice Department said the process was overseen by Mairone, a former chief operating officer of Countrywide’s Full Spectrum Lending division. Mairone is now a managing director at JPMorgan.
Amy Bonitatibus, a JPMorgan spokeswoman, said, “We are reviewing the decision.”
About 43 percent of the loans sold to the mortgage giants were materially defective, the government said.
Bank of America bought Countrywide in July 2008. Two months later, the government took over Fannie and Freddie.
Bank of America and Mairone denied wrongdoing. Lawyers for the bank sought to show the jury that Countrywide had tried to ensure it was issuing quality loans and that no fraud occurred.
The lawsuit was the first financial crisis-related case against a bank by the Justice Department to go to trial under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).
The law, passed in the wake of the 1980s savings-and-loan scandals, covers fraud affecting federally insured financial institutions.
The Justice Department, and particularly lawyers in the office of U.S. Attorney Preet Bharara in the Southern District of New York, have sought to dust off the rarely used law and bring cases against banks accused of fraud.
Among its attractions, FIRREA provides a statute of limitations of 10 years and allows the government to bring civil cases for alleged criminal wrongdoing.
Virginia Gibson, a lawyer at the law firm Hogan Lovells, said the Bank of America verdict was a “big deal because it shows the scope of a tool the government has not used frequently since its inception.”
Gibson and other lawyers say any appeal by Bank of America would likely focus on a ruling made by the judge before the trial that endorsed a government position that it can bring a FIRREA case against a bank when the bank itself was the financial institution affected by the fraud.
The case was one of three lawsuits in New York where judges had endorsed that interpretation. Banks have generally argued that the interpretation is contrary to the intent of Congress, which they said is more focused on others committing fraud on banks.
Bank of America’s case was the first to go to trial, a rarity given that banks more typically choose to settle government claims instead of face a jury. But Bank of America had said that it “can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”
In a statement, Bharara said Bank of America “chose to defend Countrywide’s conduct with all its might and money, claiming there was no case here.”
“This office will never hesitate to go to trial to expose fraudulent corporate conduct and to hold companies accountable, particularly when it has caused such harm to the public,” Bharara said.
In late afternoon trading, Bank of America shares were down 27 cents at $14.25 on the New York Stock Exchange.
The case is U.S. ex rel. O’Donnell v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 12-01422.
WHY ALL THE ROBO SIGNING?
In Jamie Dimon’s annual letter to shareholders, he talks about JP Morgan’s part in all of that. Essentially it was “not our finest hour,” he said, but at least JPM wasn’t as bad as other banks (even their subprime mortgages performed better than theirs). Plus JPM got a ton of crappy mortgages from WaMu and Bear Stearns.
But then there’s what happened once all those mortgages started going to hell:
“…when delinquencies and foreclosures grew dramatically, we were ill-prepared operationally to deal with the extraordinary volume of troubled mortgages and upset borrowers. Our servicing operations left a lot to be desired: There were too many paperwork errors, including affidavits that were improperly signed because the signers did not have personal knowledge about what was in the affidavits but, instead, relied on the company’s processes. However, the information in the affidavits was largely accurate – i.e., the borrower, in fact, was in default, we did have the mortgage and so on.”
Not sure if a lot of Americans would be satisfied with the “however” bit.
UPDATE- FEB. 9, 2012-THE RIGHT QUESTION NOW IS “WHY NOT ROBO SIGN?-
“Let me help a few victims I created by ripping them off and illegally throwing them out of their homes by false court filings that I swore were true.” That’s what the so-called mortgage settlement talks are really all about: fraud, perjury and crimes. That’s what these banks did and that’s what they are trying to buy their way out of.
The settlement discussions are the same: eliminate all or almost all liability for the bank and, most importantly, all bank officers and employees in exchange for a loan forgiveness or modification program. Think about this: the banks engaged in a years’ long pattern and practice of what can only be described as fraudulent if not criminal conduct that would put anyone else in prison for years if not decades, yet banks get to buy off the cops with some money to help just a few of the victims they created.
Worst of all, there is no requirement in any of these talks that I’m aware of that require the banks to come clean, publicly release all the relevant documents and provide sufficient information on their conduct so that anyone can evaluate whether the sell-out, I mean, pay-off, oops, I mean, “settlement” is anywhere near adequate.
And they get to buy their way out of prosecution for chump-change. It’s reported that the settlement is going be $25 billion, with only $5 billion in cash and $20 billion in “loan forgiveness.” That’s nothing. There are more than 10 million homes under water where the amount they owe on their mortgages is more than the house is valued, i.e., could be sold for. $20 billion doesn’t make a dent in that: 1 million homes at $20,000 loan forgiveness is it. And, remember, $20 billion in loan forgiveness to the banks is not equal to $20 billion in cash. It is probably more like $10 billion, if that, due to accounting, prior write-downs and similar shenanigans.
There is also the risk of a tacit conspiracy here. The banks want to “put this behind them” (gee, who wouldn’t) and escape from real liability (criminal and civil) and the prosecutors (many of them politicians) and the administration want to claim victory. You will hear that the settlement was the largest, one of the largest or the greatest settlement in history that will help millions or billions or trillions of people who need help — you get the point: no hyperbole will be spared.
As if all that wasn’t bad enough, the most egregious aspect of all this may be the reporting: stories repeatedly use innocuous, but grossly misleading words that obscure what really happened here. For example, so-called “robo signing” is massive, systematic, fraudulent, criminal conduct. This is where banks themselves or their contractors sign legal documents to file in court swearing under oath that the facts are true and therefore support the legal application to take someone’s home away from them, i.e., foreclose.
Can you think of anything more despicable? Lying under oath to get someone thrown out of their home and onto the street. That’s what robo-signing means and what it obscures every time that word is used. Then, there’s always someone saying, basically, no harm, no foul because it’s just a “paper work” problem and these people are all delinquent and “deserve” to be thrown out on the street. Really? Since when does saying “trust us” while we lie to you under oath make illegal conduct acceptable?
And, the fraudulent if not criminal conduct occurred throughout the boom as well as the bust (when the robo-signing and other criminal conduct occurred). For example, there are unending examples of mortgage brokers changing income, job history and other material terms in mortgage applications without the person having any knowledge of it. Another example is putting large amounts of unqualified mortgages into packages that were securitized in violation of the required representations and warranties.
Anywhere else this would be called lying, cheating and stealing and it’s past time it gets called by the right name. And, everyone should insist on no settlements by anyone that includes the elimination of liability for a corporation or any of its officers or employees unless it also includes a requirement that all documents related to the conduct are all publicly disclosed on a central, searchable website. That won’t happen because they the conduct of the prosecutors and politicians in the sellout, err, settlement could be evaluated along with the conduct of the banks — see the problem here?
If they are getting any legal immunity, which is what they are demanding, then the American people deserve to at least know what laws they violated and how they did it so everyone knows what they are getting immunity for. That simply must be a price for forgiving what has been years of unconscionable fraudulent and almost certainly criminal conduct that has victimized tens of millions of American families, hollowed out neighborhood after neighborhood, and stuck millions more homeowners with underwater mortgages through no fault of their own.
UPDATE- FEB. 2, 2012-(Reuters) – The attorney general in Illinois on Thursday sued a mortgage document firm and said it filed “faulty” documents with local governments in a rush to process mortgages and foreclosures.
Nationwide Title Clearing Inc was a “key contributor” to the mortgage crisis by “undermining the integrity and accuracy of the mortgage servicing and foreclosure process,” Attorney General Lisa Madigan said in a statement.
The Palm Harbor, Florida-based firm prepares documents for mortgage servicers to use against borrowers who are in default or foreclosure.
A spokeswoman for Nationwide Title said the firm had not yet seen the lawsuit.
The lawsuit comes as Illinois and other states are close to signing an agreement with five top U.S. banks to resolve allegations of mortgage servicing and foreclosure abuses.
Those negotiations began more than one year ago, after reports emerged that workers had “robo-signed,” or signed without reading, thousands of pages of mortgage documents, which in some cases led to unlawful foreclosures.
That multistate settlement does not include contractors used by the banks in some of the questionable practices.
Nationwide Title works for eight of the 10 largest lenders and mortgage servicers, according to the lawsuit.
Its employees often signed documents as “vice president” of other companies, even though they were Nationwide Title workers, the lawsuit said.
Crystal Moore, for example, signed documents as a vice president of Citi Residential Lending Inc, even though she was an employee of National Title.
The employees sign a few thousand documents each day, and do not read and verify the documents they sign, according to the lawsuit.
The documents often include statements that the signatory has personal knowledge of the facts in the document, the lawsuit said.
The company is a “document production factory,” Madigan said in the lawsuit.
The lawsuit, filed in Cook County Circuit Court, accuses the firm of violating the Illinois Consumer Fraud and Deceptive Practices Act and the Uniform Deceptive Trade Practices Act.
Through the lawsuit Madigan asked the court to require the firm to review and fix documents it unlawfully created and recorded, and pay back revenue and profit it gained through the practices.
The suit also seeks civil penalties of up to $50,000 per violation.
Madigan has stepped up her state’s efforts to punish companies for what she views as their role in the 2007-2009 financial crisis.
She sued Standard & Poor’s last week, for example, and said it fueled the nation’s housing and financial crises by assigning inflated credit ratings to risky mortgage-backed securities.
Madigan also appeared with Attorney General Eric Holder and other top U.S. officials in Washington last week to announce a new federal-state working group that would investigate misconduct in the packaging and sale of home loans to investors.
The Wall Street Journal reports that the Obama administration is now engaged in heavy arm-twisting to get the 50 state attorneys general to agree to a settlement with five major banks in the “robo-signing” scandal. The scandal involves employees signing names not their own, under titles they did not really have, attesting to the veracity of documents they had not really reviewed. Investigation is revealing that it did not just happen occasionally but was an industry-wide practice, dating back to the late 1990s, and that it may have invalidated the titles to tens of thousands of homes.
The settlement would let Wall Street bankers off the hook for crimes that would land the rest of us in jail – fraud, forgery, securities violations and tax evasion – raising some interesting legal issues. But the question explored here is something else: Why were the banks doing it? The alleged justification – that they were so busy they cut corners – hardly seems credible given the extent of the practice.
The robosigning largely involved assignments of mortgage notes to trusts, representing the investors who put up the money for the note. Assignment is necessary to give the trust legal title to the note. But according to consumer attorneys April Charney and O. Max Gardner III, who have reviewed large numbers of these cases, the banks that signed the notes with the homeowners virtually never assigned them over to the trusts. Robosigning occurred long after the fact, and it was an industry-wide practice; so it must have served some industry purpose. But what?
Here is a working hypothesis, suggested by Martin Andelman: Securitized mortgages are the “pawns” used in the pawn shop known as the “repo market.” “Repos” are overnight sales and repurchases of collateral. Yale economist Gary Gorton explains that repos are the “deposit insurance” for the shadow banking system, which is now larger than the conventional banking system and is necessary for the conventional system to operate. The problem is that repos require “sales,” which means the mortgage notes have to remain free to be bought and sold. The mortgages are left unassigned to be used in the repo market – until they go into default, when they are robosigned over to the trusts for purposes of foreclosure.
The evolution of the shadow banking system:
Gorton observes that there is a massive and growing demand for banking by large institutional investors – pension funds, mutual funds, hedge funds, sovereign wealth funds – which have millions of dollars to park somewhere between investments. But FDIC insurance covers only up to $250,000. FDIC insurance was resisted in the 1930s by bankers and government officials and was pushed through by a populist movement: The people demanded it. What they got was only enough insurance to cover the deposits of individuals. Today, the large institutional investors want similar coverage. They want an investment that is secure, that provides them with a little interest, and that is liquid like a traditional deposit account, allowing quick withdrawal.
The shadow banking system evolved in response to this need, operating largely through the repo market. “Repos” are sales and repurchases of highly liquid collateral, typically Treasury debt or mortgage-backed securities – the securitized units into which American real estate has been ground up and packaged sausage-fashion. The collateral is bought by a “special purpose vehicle” (SPV), which acts as the shadow bank. The investors put their money in the SPV and keep the securities, which substitute for FDIC insurance in a traditional bank. (If the SPV fails to pay up, the investors can foreclose on the securities.) To satisfy the demand for liquidity, the repos are one-day or short-term deals, continually rolled over until the money is withdrawn.
This money is used by the banks for other lending, investing or speculating. Gorton writes: “This banking system (the ‘shadow’ or ‘parallel’ banking system) – repo based on securitization – is a genuine banking system, as large as the traditional, regulated banking system. It is of critical importance to the economy because it is the funding basis for the traditional banking system. Without it, traditional banks will not lend; and credit, which is essential for job creation, will not be created.”
Behind the curtain of MERS:
These shady practices were concealed behind an electronic smokescreen called MERS (an acronym for Mortgage Electronic Registration Systems, Inc.), which allowed houses to be shuffled around among multiple, rapidly changing owners while circumventing local recording laws. Title would be recorded in the name of MERS as a place holder for the investors, and MERS would foreclose on behalf of the investors. Payments would be received by the mortgage servicer, which was typically the bank that signed the mortgage with the homeowner. But the servicer was not actually the lender, which was the investment trust that put up the money.
This all worked well until courts started questioning whether MERS, which admitted that it was a mere conduit without title, had standing to foreclose. Courts have increasingly held that it does not.
On top of that, Fannie Mae sent out a memo telling mortgage servicers that in order to be reimbursed under HAMP, a government loan modification program designed to help at-risk homeowners meet their mortgage payments, the servicers would have to produce the paperwork showing that the loan had been assigned to the trust.
The hasty solution of the servicers was a rash of assignments back to the investment trusts by an army of “robosigners.” But besides the blatant forgeries entailed, this meant violating the terms of the trusts and state real estate law. The result has been to make a shambles of county title records. Delaware Attorney General Beau Biden, one of the holdouts from the robosigning settlement, says, “Since at least the 1600s, real property rights have been a cornerstone of our society. MERS has raised serious questions about who owns what in America.”
The banks not only have not met state law requirements but cannot meet them, if they are to comply with the tax laws for mortgage-backed securities.
Since 1986, mortgage-backed securities have been issued to investors in SPVs called REMICs (Real Estate Mortgage Investment Conduits). REMICs are designed as tax shelters; but to qualify for that status, they must be “static.” Mortgages can’t be transferred in and out once the closing date has occurred. The REMIC Pooling and Servicing Agreement typically states that any transfer after the closing date is invalid. Yet few, if any, properties in foreclosure seem to have been assigned to these REMICs before the closing date, in blatant disregard of legal requirements. The whole business is quite complicated, but the bottom line is that title has been clouded not only by MERS but because the trusts purporting to foreclose do not own the properties by the terms of their own documents. Most average homeowners have no idea what a REMIC is – actually most attorneys have no clue …. so, you know many of the Judges are completely in the dark. REMICs are a form of IRS tax shelter sold to investors as part of the mortgage-backed securities package (Real Estate Mortgage Investment Conduit (“REMIC”) pursuant to I.R.C. §§860A-G).
The documents that killed the REMICs may actually help save your home.
The largest key to REMICs is that they are required to be passive vehicles, meaning that mortgages cannot be transferred in and out of the trust once the closing date has occurred, unless the trust can meet very limited exceptions under the Internal Revenue Code. I.R.C. §860G. The 90 day requirement is imposed by the I.R.C. to ensure that the trust remains a static entity. However, since the mortgage-backed securities trust controlling documents, the Pooling & Servicing Agreement (PSA), requires that the trustee and servicer not do anything to jeopardize the tax-exempt status; PSAs generally state that any transfer after the closing date of the trust is invalid.
What does that mean to the average homeowner in foreclosure? Check the recordation office and look for the “Assignment of Mortgage” on your property – generally found just before the Notice of Foreclosure is filed with the State if your loan was securitized. Looking through hundreds of these beauties there have been few, if any, that were timely assigned to the trusts. How can you quickly tell if the Assignment of Mortgage has failed to make it timely to the trust?
The Assignment of Mortgage [below] shows a 2006 Trust – and a fraudulent assignment in 2009 – 3 years AFTER the Trust had CLOSED! Not only was it too late – but the Trust could not accept it pursuant to the REMIC of RFMSI 2006SA4 PSA and as further defined in the Oppenheim Law report. Assignments of Mortgage are public documents.
What was not known until very recently, in fact Delaware Attorney General Beau Biden brought it out in his case Delaware v. MERS, lenders generally failed to follow the PSA and properly assign the mortgage loans to the Trusts. In the transcripts that AG Biden cited from In re Kemp, 440 B.R. 624, 626 (Banker D.N.J. 2010) (No. 08-18700) (Aug. 11, 2009), an employee for Bank of America responsible for servicing the securitized Countrywide mortgage loans testified under oath that Countrywide did not have a practice of delivering original documents such as the note to the Trust and was not in the habit of endorsing notes at the bottom, but favored allonges that they made as they went along. She further testified that allonges are typically prepared in anticipation of foreclosure litigation, rather than at the time the mortgage loans are purportedly securitized. Both of these facts are contrary to the requirements of the PSA that the note be endorsed in blank and delivered to the trustee at the time of securitization. Thanks to foreclosure defense attorney, Bruce H. Levitt, of South Orange, NJ - Bankruptcy Chief Judge JUDITH H. WIZMUR totally got it! See her Opinion here.
The trust investors have been suing Countrywide and other Wall Street banks for inflated appraisals, systematically abandoning underwriting guidelines and over-rated bonds. The investors did not yet know that many of the mortgage loans failed to make it timely into the trusts and that the REMICs had been damaged. In fact, recently the IRS has taken notice and already initiated an investigation into the “active” activities of these trusts and the tax implications from them. Scot J. Paltrow, Exclusive: IRS Weighs tax penalties on mortgage securities, REUTERS, April 27, 2011.
Here’s a fine example of a (too) late Countrywide Assignment of Mortgage made in 2010 to a CWABS 2005-3 Trust. Did they just figure the courts were going to be oblivious?
This is FIVE (5) years too late! Oh yeah, the REMIC has or should have failed. And it appears there are thousands, if not millions of these gems filed all across America in every state property recordation office – you just have to look.
Law Professor Adam Levitin, Georgetown University, describes the conflict the following way: “The trustee will then typically convey the mortgage notes and security instruments to a “master document custodian” who manages the loan documentation, while the servicer handles the collection of loans. Increasingly, there are concerns that in many cases the loan documents have not been properly transferred to the trust, which raises issues about whether the trust has title to the loans and hence standing to bring foreclosure actions on defaulted loans. Because, among other reasons, of the real estate mortgage investment conduit (“REMIC”) tax trust of many private-label securitizations (“PLS”) . . . it would not be possible to transfer the mortgage loans (the note and the security instrument) to the trust after the REMIC’s closing date without losing REMIC status.”
Levitin further points out: “As trust documents are explicit in setting forth a method and date for the transfer of the mortgage loans to the trust and in insisting that no party involved in the trust take steps that would endanger the trust’s REMIC status, if the original transfers did not comply with the method and timing for transfer required by the trust documents, then such belated transfers to the trust would be void. In these cases, there is a set of far-reaching systemic implications from clouded title to the property and from litigation against trustees and securitization sponsors for either violating trust duties or violating representations and warranties about the sale and transfer of the mortgage loans to the trust.”
Without valid assignments, attorneys say that standing and jurisdiction issues rise to the top and may be asserted at any time – even first time on appeal. If the pretender lender did not have a standing to non-judicially foreclose because the assignment of mortgage is void, logically everything thereafter would be a nullity – that could open up a can of worms beyond the pretender lenders’/servicers’ repair.
These documents appear to have been fraudulent and as lawsuits assert – were intentionally prepared and executed to unlawfully confiscate the property from the homeowners. It appears it was easier to create the fraud and get paid by default insurance or credit default swaps than it was to modify they loans with the homeowners. Not only was there fraud on the homeowners, but also on the investors.
But could REMICs be why the investors don’t partner up with the borrowers? They were both duped. The borrowers unwittingly relied on the [inflated] appraisals and had no idea that the underwriting guidelines had been “systematically abandoned” – just like the investor claims. But there is one big difference…
If the investors include the borrowers, the fraudulent assignment of mortgages will surface and the REMIC fraud will float to the top like a dead body in a botched murder case…. and somebody will be stuck with paying the IRS – even if the investors win the case and get their investments back.
Could these fraudulent assignments save your home or undo the foreclosure? That’s a question to ask a competent foreclosure defense attorney and have him review your file.
Next, we need to follow the money… who actually got paid, how much and when??
From lending machines to borrowing machines:
The bankers have engaged in what amounts to a massive fraud, not necessarily because they started out with criminal intent, but because they have been required to in order to come up with the collateral – in this case real estate – to back their loans. It is the way our system is set up: The banks are not really creating credit and advancing it to us, counting on our future productivity to pay it off, the way they once did under the deceptive but functional façade of fractional reserve lending. Instead, they are vacuuming up our money and lending it back to us at higher rates.
The banks are not really creating credit and advancing it to us, counting on our future productivity to pay it off, the way they once did. Instead, they are vacuuming up our money and lending it back to us at higher rates.
In the shadow banking system, as in the old fractional reserve system, the collateral is being double-counted: It is owed to the borrowers and the depositors at the same time. This allows for expansion of the money supply, but the system is vulnerable to bank runs when the borrowers and the depositors demand their money at the same time.
“Instead of lending into the economy,” says British money reformer Ann Pettifor, “bankers are borrowing from the real economy.” She wrote in the Huffington Post in October 2010: “[T]he crazy facts are these: Bankers now borrow from their customers and from taxpayers. They are effectively draining funds from household bank accounts, small businesses, corporations, government treasuries and from e.g. the Federal Reserve. They do so by charging high rates of interest and fees; by demanding early repayment of loans; by illegally foreclosing on homeowners, and by appropriating and then speculating with trillions of dollars of taxpayer-backed resources.”
Unlike the conventional banking system, the shadow banking system is largely unregulated. It doesn’t have the backup of FDIC insurance to prevent bank runs, making it inherently prone to systemic failure. Gorton explains that it was a run on the shadow banking system that caused the credit collapse of September 2008. It happened before and it could happen again. The question is how to eliminate this risk.
Banco do Brasil, a public-owned bank that operates as a commercial venture, is Latin America’s biggest bank by assets. It is doing so well it is eying possible acquisition targets and opening branches in the United States.
As noted by The Business Insider: “Regulate shadow banking more tightly, and you probably have to also provide government backstops. Shudder. Try to shut the thing down or restrict it and you suck credit out of the system, credit which much of the non-financial ‘real’ economy uses and needs.”
Whatever the solution, a system that requires the slicing and dicing of mortgages behind an electronic smokescreen so they can be bought and sold as collateral for the pawn shop of the repo market is fraught with perils and is unsustainable.
A system that requires the slicing and dicing of mortgages behind an electronic smokescreen so they can be bought and sold as collateral for the pawn shop of the repo market is fraught with perils and is unsustainable.
Interestingly, countries with strong public sector banking systems largely escaped the 2008 credit crisis. These include the BRIC countries – Brazil, Russia, India and China – which contains 40 percent of the global population and is today’s fastest growing economies. They escaped because their public sector banks do not need to rely on repos and securitizations to back their loans. The banks are owned and operated by the ultimate guarantor – the government itself. Perhaps the public sector banking model deserves further study.
In case you’re interested in checking out the links provided in this article, you can find an online version of this article at www.FraudStoppers.org. Just click the “additional resources” tab on the homepage.
We just want to remind you that you can fight your foreclosure and save your house, if you decide to take action Fraud Stoppers can help.
We look forward to your victory.
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