Martin Act Threatens Banks Securitization Scheme
Originally reported by Neil Garfield
While most people didn’t notice, all of Wall Street took notice when the New York Governor signed into law a bill that extends the right of the state attorney general to investigate financial crimes and bring actions for equitable relief and damages.
Investment bankers may not be going to jail but they are about to be taken to the cleaners for creating illegal securitization schemes that were directly intended to violate basic laws and doctrines that have existed for centuries. And this time the appetite is there to prosecute such claims.
PLAIN FACTS: The issuance of “certificates” aka “bonds” from a named “trust” was deceitful and based upon false claims, representations and assertions in the documents themselves in connection with REMIC Trusts and other special purpose vehicles. Both the certificates and the origination of loans took place in a scheme where concealment of the true nature of the transactions was the primary strategy. It is still happening.
- The first purpose of the scheme was to lend money without any significant risk of loss regardless of whether the loan performed or not.
- The second purpose of the scheme was to make money from the sale and trading of non-securities contracts that on average produced revenue of 12 times the amount of each loan.
- The debt was obliterated by the sale of variant attributes of each debt on several different levels resulting in the divestment of the investbank of all risk of loss without transferring title to the debt to anyone.
- Disclosure requirements were ignored as to both investors and borrowers
- The loan transaction was distorted beyond recognition in which normal market forces between lender and borrower simply were not operating — and only the parties involved in securitization knew about it
- Then for purposes of enforcement, the players created false documentation making it appear that the debt still existed.
- Investors reasonably and erroneously believed that the loans were subject to normal underwriting standards, which they were not.
- Borrowers reasonably and erroneously believed that the loans were subject to normal underwriting standards, which they were not.
- Neither investors nor borrowers ever advised or given access or information that the investment banks and affiliated players were creating revenue of 12 times the amount of the investment of securities and 12 times the amount of each loan.
Existing law is sufficient to address a scheme that was illegal starting with its conception. While securitization is not illegal, the employment of a securitization scheme for an illegal purpose is illegal per se.
Remedies include rescission for both investors and borrowers — or compensation to waive rescission.
What will emerge from all this is that the laws need to be changed to cover such securitisation schemes because as it stands now the debt is eliminated and enforceable under the requirements of both statutory and common law. That is not just an opinion, it is a fact. That fact is subject to equitable remedies worked out by the attorney general, the courts and the prospective defendants.
But that fact also means that changes in the regulations and laws governing taxes (for so-called “REMIC), securities (for so called “mortgage backed” instruments), loans under TILA and deceptive lending practices must be put into play so that the intent behind all of those laws can still be accomplished, to wit: that both investors and borrowers know and understand exactly what is happening to their money, their names, their signatures, and their reputation and how much the investment bank is profiting from the transaction.
This is already intended by the law. But without regulations specifically targeting the practice of creating false documents and making false representations in the sale of allegedly mortgage-backed securities or the sale or enforcement of complex loan products to borrowers, the policies for enforcement will remain woefully inadequate.
If you have a MERS securitized mortgage loan take action right now and get a trial ready Bloomberg Securitization Audit and Robo-Signing Report so you have the facts and evidence you need to profit from the banks illegal securitization scheme. Call FRAUD STOPPERS right now or visit our store using the link at the top of this page.