Keep Your House: Understanding the lies about the FDIC.
by Neil Garfield
A mistake is not the less so, and will never grow into a truth, because we have believed it a long time, though perhaps it be the harder to part with; and an error is not the less dangerous, nor the less contrary to truth, because it is cried up and had in veneration by any party.”—Locke, in King’s Life of him, second edition. Vol. I. p. 188, 192.
I receive lots of inquiries about foreclosures where the FDIC is involved somewhere in the chain of events. Here is the first point: except in very rare instances, the FDIC is never involved in the title chain.
If you see a document that says otherwise it is fabricated, forged, backdated, and robosigned by either electronic means, mechanical means or by human hands that belong to the person who has no idea what or why they’re signing. They only know that they’re authorized to ign but they don’t realize they were never authorized to sign that document. They were appointed as “authorized signors,” but the instructions to sign particular documents do not come from anyone who ahs legal right to issue such instructions.
When laypeople start to use legal jargon they get themselves confused. And even some lawyers get confused by the mirage that appears without any foundation in fact or law. Securitization of loans presumes that there were loans and that the loans were sold in parts to investors.
If the loans were not sold in parts to investors them there is no securitization by definition. Yes, it IS that simple. There is no sale unless there is a purchase and sale as prescribed by law.
The fact the payment occurred does not mean the payment can be described only by one party even though the other party would not describe it in the same way. All contract law requires a meeting of the minds. There is no contract to enforce if there was no meeting of the minds. The remedy is not enforcement in such circumstances.
The remedy is common la wor statutory rescission or reformation. In securitization claims, there is no meeting of the minds. The homeowner wants a loan and does not get a lender. Sometimes the homeowner gets a lender initially but then the “successor” does not accept any designation as a lender or actual successor to the party who originated the loan. It is all very confusing but you need to pay attention or you will lose your house to someone who is enjoying pure profit by forcing the sale of your biggest investment.
The investment bank controlling the deal does not appear anywhere in the disclosed chain of events nor in the title chain. The originator is operating strictly for a fee and has no risk of loss for a badly underwritten loan. The homeowner is simply not getting what he/she wanted nor does the homeowner get anything that complies with the disclosure requirements under the Federal Truth in Lending Act.
So questions come in about failed financial institutions and then how the FDIC handles notes and mortgages. Here is the simple answer: they don’t. Any document that stays otherwise is a lie.
FDIC does not obtain the note. It has no custodial facility for receiving or storing promissory notes. It can get temporary control over the notes if, and only if, it becomes the receiver of a failed financial institution that owns promissory notes.
While it was customarily true before securitization that each financial institution had its own portfolio of promissory notes, things have changed. In most cases — but not all — nearly all promissory notes generated by the financial institution were “sold” into the secondary market.
This means that the bank or credit union received payment and delivered the promissory note to someone who probably destroyed it. The bank also issued an assignment of the mortgage if there was one.
This looks like a sale of the underlying obligation, legal debt, note, and mortgage. It serves as the foundation for the illusion created by Wall Street banks that loans were being securitized. It is a trick learned from magicians. By distracting the attention of the viewer to one thing, the other thing is not noticed.
On the investment banking side of that transaction, despite all claims to tech contrary, the investment banks wanted nothing to do with lending or loans. And they proved that by extinguishing the underlying obligation and the legal debt on any accounting record on which entries were made to reflect financial transactions. There simply is no loan account receivable and the debit from cash to fund the purchase simply does not appear.
Instead, there is an offshore, off-balance sheet transaction in which the investment bank borrows money from, for example, Credit Suisse to JPM Securities, which gets repaid when JPM sells certificates to investors. The domestic transaction can be a debit to cash, for example, on the books of Washington Mutual, but most often WAMU was only acting as an aggregator of data leaving the “book entries” to be reconciled by their feeders like Long Beach Mortgage.
When JPM in our example, sold certificates to investors it was NOT selling any ownership interest in the underlying obligation, legal debt, note or mortgage. It was selling a JPM promise to make periodic payments. But it used the name of a trust so that the JPM name would not show up on record.
So when the sale of new certificates failed in 2008, most of WAMU’s business failed. So it went into receivership and bankruptcy and you can see for yourself if you get to the schedules that were field, that it was not claiming any of the “securitized” loans as assets. So neither the receiver nor the U.S. Trustee in bankruptcy obtained any control or ownership over any obligation, debt, note or mortgage.
In that example, the FDIC had no reason to ask for or receive possession or control over any notes. But that did not stop JPM Chase from claiming that its purchase of the WAMU estate for Zero consideration was a purchase of the nearly $1 trillion in transactions originated with homeowners for which WAMU was either the aggregator or originator.
If such a sale had taken place it would have been recited somewhere. No such claim was made at the time that the agreement was signed with the FDIC on September 25, 2008. NO assignment of mortgage was executed by WAMU, the U.S. Bankruptcy, trustee or the FDIC as receiver over the WAMU estate. No endorsement of note occurred either because the notes were long gone.
If you look at other examples like Indymac, the matter becomes even more convoluted and from a policy standpoint nearly insane. The FDIC took control over the IndyMac failed estate just like WAMU. This time, instead of Chase, a new company was literally formed over a weekend with some midnight signings and notarizations of documents. (Don’t ask me how I know that). Extremely wealthy investors including Michael Dell were asked to put up money without actually paying it to start OneWest.
Mnuchin was really a bag man or tool of the investment bank that put this one together. He was the guy everyone blamed for what happened but he really had no control over what happened.
So in the OneWest-IndyMac example, the FDIC became the receiver of the IndyMac estate which did not include any loans originated with homeowners or any other transactions originated with homeowners. Those had already been “sold” off into the secondary market to buyers that had no intention of recording them as assets as described above.
The reason that Sheila Bair flew into a rage, as chairman of the FDIC, while initially rejecting the proposed deal, and the reason why she was fired, was that the deal was the worst example of public-private corruption imaginable. I liked Obama but like Bush before him, he just didn’t get what was going on and was taking advice from the thieves who were plundering the U.S. economy.
The FDIC became the vehicle for funding OneWest by covering 80% of the “losses” that did not exist on IndyMac’s balance sheet. So if IndyMac originated a transaction in which an investment bank paid a homeowner some money, the transaction looked like IndyMac had loaned the money — for about 1 millisecond. The truth was that IndyMac was only acting for a fee and had no control over the transaction or the money trail after the “closing.” This is the same as WAMU and countless others.
If homeowners refused or failed to make scheduled payments, neither IndyMac nor the FDIC could possibly suffer a loss because there was no loan account to post the loss against. Thus the “acquisition” by OneWest could NOT produce anything different, just like the Chase-WAMU example.
Here again, the FDIC does not receive possession, control, or the right to enforce the legal debt or note issued by the homeowner because it did not legally come into possession or control of the underlying obligation, legal debt, note, or mortgage of any homeowner.
So it came as quite a surprise when the FDIC, under intense pressure from Obama administration, agreed to pay 80% of the losses on loans as claimed by OneWest. As soon as lawyers filed suit on behalf of OneWest, even though OneWest did not own any aspect of the loan or transaction, it made a claim for a nonexistent loss that the FDIC paid 80 cents on the dollar for the claim without verifying if there was any loss.
Mnuchin became the “foreclosure king” for a while because he had a cash machine, as President of OneWest, based on zero actual investment, in which 80% of all loans slated for foreclosure would be paid to OneWest AND One West would also get the property. Only in America.
OneWest is now CIT. The point of all this is that like all other securitization claims, it is based upon a false premise and then layered over with lies. So here is what you might do about it, after consultation with a licensed attorney:
1. Do not accept any assumption or allegation as being true. This is different from normal foreclosures before securitization where most of the allegations and assertions were true.
2. Send and keep sending QWR and DVL to all potential parties discovered behind the “Curtain.” Tell them you think they are controlling the situation even though they own nothing and that the designated claimant has no interest in the claim and will not receive a penny because they never receive a penny from any payment from any homeowner, any service, or the proceeds from any forced sale of property.
3. Send complaints to CFPB and your State AG consumer division.
4. File suits that attack all the parties who are interested in the success of your foreclosure — not just the unauthorized ones who are being presented as having a claim by attorneys who have no contact or connection — in most instances — with the named claimant, plaintiff or beneficiary.
5. If you are in judicial state file affirmative defenses that might otherwise be barred by the statute of limitations if brought as claims. Most claims brought as affirmative defenses are limited as to the amount that can be awarded (the limit is whatever was claimed against the homeowner) but are not barred by SOL. Go as far back as the origination of the transaction as a sham transaction. Those claims live!
6. Regardless of which jurisdiction is involved conduct vigorous discovery and enforcement. This is where you force the issue and force either a settlement or sometimes the other side simply goes dark and walks away. See my various articles on the details of discovery, motions to enforce, notions for monetary sanctions, motions for evidentiary sanctions and motions in limine. Don’t let up. Be relentless.
Don’t litigate to get things not the record. Litigate to win. FDIC does not obtain the note. It has no custodial facility for receiving or storing promissory notes. It can get temporary control over the notes if, and only if, it becomes the receiver of a failed financial institution that owns promissory notes.