Monday, December 30, 2013

You are not alone

Thanks J :)

The mortgage monstrosity in short plain statements.

The mortgage monstrosity in short plain statements. Based upon my analysis of information in the public domain, there are two ways that anyone claim a loan was securitized --- carved up into pieces and then sold to multiple buyers or bundled with other loans. Either way --- carving or bundling is meant to decrease risk. If one loan goes bad it is only a small part of the entire portfolio of loans you bought so the perception of risk is reduced.
There are two types of transactions in which a loan enters the stream of claims of securitization --- origination and acquisition. Origination is what it sounds like --- money from the investors is used to fund the loan. Acquisition is a purchase of the loans with investor funds from someone who made the loan without the help or money of anyone else. Either way, it is the money of investors that is used and therefore they are the only ones paying value for the loan. Therefore they are the creditor.
There are two ways that the investors money can enter the system --- Purchasing mortgage bonds or direct funding. Either way there is an intermediary party aggregating or carving the loans up. And here is the problem, to wit:
The investor money was used for direct funding of the loan origination or direct funding of the purchase of the loan. But the loan documentation named some third party that didn't loan or purchase the loan. My analysis indicates that not only was there no agency agreement between the investors and the party NAMED as the originator or purchaser, but that this was an intentional act of deception. The broker dealers selling the bond were selling a security issued by a REMIC trust.
But instead of giving the trust the money, they kept it and tacked on fees. And instead of using the investors' money to make loans through a trust they converted a direct funding transaction in which the investors should have been named the lenders into an acquisition from a "third party" thus creating a "profit" for the broker dealer. The profit was the sale of the loan the investor already owned to a trust that was never funded. They took junk mortgages and sold them as platinum loans --- creating an entirely fictitious profit for the broker dealer and increasing the risk of loss to investors exponentially.
So the investor had his money split into two pieces --- neither of which was the purchase of the bond, which is why all those investors and agencies and law enforcement are accusing the broker dealer of fraud. One piece was used to fund the origination or purchase of the loan and the other piece was a pool of money that would be used for Servicer advances and extra trading profits on fictitious trades generated internally by the broker dealer. This process creates a lying mortgage securing a lying note. And that is why the investors are saying the paper is unenforceable.
The banks have done a good job of blaming the borrowers for the fraud. But it is clear that no borrower even understands this process now, much less as the designer of the scheme. The broker dealers racked up huge profits through theft of investor money that should have been used to fund the origination or acquisition of mortgage loans but was used instead to create a slush fund. The fact that SOME of the money was used for loans is not good enough because that changed the whole deal and created a loan transaction with the borrower in which the actual lender was left out and the designated lender was a party controlled by the broker dealer to create fictitious transactions or purchase insurance on loans the brokers didn't own.
In cases like this the law is clear. Victims of the fraud must receive as much restitution of their investment as possible. And the perpetrators of the fraud are not allowed to enforce any "contracts" (loans) that they created under false pretenses to both the lender and the borrower. It is called unclean hands. So unless the foreclosing party can show a money trail that leads to the doorstep of the foreclosing party they have nothing but dirt on their hands.
Does this create a free house for the borrower? In most cases the answer is no. Because the borrowers were putting down earnest money and equity in their homes to get these wondrous loans that were too good to be true based upon appraisals of pricing that were coerced.
The bottom line is that the perpetrators of false schemes may not be allowed to keep the benefit of the money they stole nor the benefit of contracts they created under false pretenses to both the lender and the borrower.


Upon analysis, research and reflection it appears as though the game could be over in the US Bank cases, the Bank of America cases, and any case in which the foreclosing party is identified as the Trustee. US Bank clearly has no right or even access to the foreclosure process. How do we know? Because US Bank says so on its own website. SEE
Here are some notable quotes from the US Bank websites which references materials to make their own assertions apply to all trustees over MBS trusts:
“Parties involved in a MBS transaction include the borrower, the originator, the servicer and the trustee, each with their own distinct roles, responsibilities and limitations.”
“ U.S. Bank as Trustee:
“As Trustee, U. S. Bank Global Trust Services performs the following responsibilities:
Holds an interest in the mortgage loans for the Benefit of investors
Maintains investors/securities holder records
Collects payments from the Servicer
Distributes payments to the investors/securities holder
Does not initiate, nor has any discretion or authority in the foreclosure process (e.s.)
Does not have responsibility for overseeing mortgage servicers (e.s.)
Does not mediate between the servicers and investors in securitization deals (e.s.)
Does not manage or maintain properties in foreclosure (e.s.)
Is not responsible for the approval of any loan modifications (e.s.)
“All trustees for MBS transactions, including US Bank have no advanced knowledge of when a mortgage loan has defaulted.
“ Trustees on MBS transactions, while named on the mortgage and on the legal foreclosure documents, are not involved in the foreclosure process.”
“ While trustees are listed on mortgages, and therefore in legal documents as well, as the owner of record, its interest is solely for the benefit of investors. The trustee does not have an economic or beneficial interest in the loans and has no authority to manage or otherwise take action on the loans which is reserved for the servicer.” (e.s.)
“Additional sources of information:
-- American Bankers Association White Paper, The Trustee’s Role in Asset-backed securities, dated November 9, 2010, "
-- The Trust Indenture Act of 1939
In several cases I am litigating, the servicer seems to be saying that they approve the foreclosure but do not want the turnover of rents. This brings up the question of whether the notice of default was sent by the Trustee, who according to the attached information would not even know if the default is being "called," in which case the notice would be fatally defective. The fatal defect would be that it is not a function of the Trustee if the PSA has the usual language. That function is exclusively reserved for the Servicer. Since the PSA probably has language in it that restricts the knowledge of the Trustee to virtually zero, and certainly restricts the knowledge of the Trustee as to all receipts and disbursements processed by the sub-Servicer, the broker dealer (investment bank), and the Master Servicer. Thus the Trustee of the MBS trust is the last party on whom one could depend for information about a default --- except that if "Servicer advances" (quotations used because the money is coming from the investment bank) then the Trustee would presumably know that from the creditor's point of view, there is no default.
But the complexity gets worse. If the action should have been brought by the servicer, but the creditor was really a funded trust who was legally represented by a properly authorized servicer, then the bid by the Trustee at the auction might have been valid. Hence the attack should be on the foreclosure process itself rather than the credit bid.
Not to worry. I don't think any of the Trusts were funded --- or to put it more precisely, I have found no evidence in the public domain that any of the MBS trusts were in fact funded the way it was set forth in the prospectus and pooling and servicing agreement. There does not appear to be any actual trust account over which the Trustee has control. Hence both the existence and capacity of the Trust and the Trustee are issues of fact that must be decided by the Court.
That leaves the MBS trusts with no money to originate or acquire mortgages. So who really owns the loans? This is why in Court on appeal, the attorneys agree that they don't know who owns the loans. But what they really mean, whether they realize it or not, is that they don't know if any of the loans are secured by a perfected mortgage. If none of the parties in their "chain" actually came up with money or value, then the lien is not perfected or valid. The mortgage would be subject to nullification of the instrument.
If the question was really who owns the loans, the answer is simple --- the investors who put up the money. We all know that. What they are dancing around is the real nub of the confrontation here:  Since we know who put up the money and therefore who owns the loan, was there any document or event that caused the loan as owned by the investors to be secured? The answer appears to be no, which is why the investment banks are all being sued every other day for FRAUD. First they diverted the investor money from the trust and then they diverted the title from the trust beneficiaries to one of their own entities. The actions of the investment banks constitutes, in my opinion, an intervening tortious or criminal act that frustrated the intent of both the borrowers (homeowners) and the lenders (investors).
So the real question is whether the Court can be used to reform the closing and create a loan agreement that is properly enforceable against lender and borrower. That appears to require the creation of an equitable mortgage, which is held in extremely low regard by courts across the country. And then you have questions like when does the mortgage begin and what happens to title with respect to intervening events?
The simple answer, as I said in 2007, is do some sort of amnesty and reframe the deals to reflect economic reality allowing everyone to bite a bullet and everyone to cover their losses but avoid, at this point another 6 million families being displaced. My experience with borrowers is that the overwhelming majority would sign a new mortgage document that is enforceable together with a new note that is enforceable and leaves all issues behind even though they know they could push the issue further. The borrower s are a lot more honest and straightforward than their banker counterparts. The deal should essentially be between the investors and the homeowners.
The question is whether the case is dismissed, possibly with prejudice, or if they can try to substitute the servicer as the Plaintiff in a style that would or might read "SPS, as servicer, on behalf of ????, Trustee for the asset backed trust" or "on behalf of the trust beneficiaries."
The further question is whether the complaint could be amended. But if the servicer didn't send the NOTICE OF DEFAULT, there is nothing to amend since on its face, the Notice of Default was sent by a party who not only was not authorized to start the process but who was expressly precluded from having any knowledge of the default.
This in turn leads to the further question of whether the verification was valid if signed on behalf of US Bank or any other party "as trustee" on the complaints to foreclose.
The smaller file tells the whole story we have been arguing and it should be attached. I would attach the smaller one page synopsis of quotations from their website. It leaves no room for interpretation --- trustees do not, and cannot initiate foreclosures or anything else relating to enforcement. They may not meddle in the foreclosure and they may not meddle or mediate in settlement or mediation. Here is the smaller file: US BANK ROLE OF TRUSTEE
As to Bank of America, the situation is even more dire ----
contains the Federal reserve Order approving the Bank of America - LaSalle merger. I can find no such order for the CitiMortgage-ABN Amro mortgage. It is also true that I can find no evidence that the BOA merger was completed whereas there is plenty of evidence that the Citi-ABN merger was in fact completed. This means that CitiMortgage became the parent company of LaSalle Bank.
While it is theoretically possible for an ACQUISITION of LaSalle to have taken place in which BOA acquired LaSalle Bank, no evidence exists that any such transaction exists between BofA and Citi. It is clear that Citi completed its deal in September of 2007 at around the same time that BOA was getting the approval order shown above on the federal reserve website.  But most curiously the Fed does not mention the Citi-ABN Amro deal. What we know for sure is that there was no MERGER between BofA and Citi.
In my opinion based upon review of this order from the Federal Reserve and other pronouncements from the FED, this order was either never officially issued in actuality or it never was used. In the absence of further contrary information which I have not been able to uncover, thus far, the irrefutable conclusion is that BOA never became the successor by merger to LASalle Bank. Therefore BOA was never the trustee for the asset backed REMIC trust. Therefore, the transaction to which US Bank refers granted US Bank nothing even if the position of trustee is determined to be a commodity --- an idea that would create havoc in the marketplace.
As for whether US Bank as trustee for MBS trusts has standing, the answer is no and they have absolutely no right, obligation or even access to the foreclosure or settlement process. In the same REMIC out in California, I am the expert witness on a case in which the same trust is represented by Chase as servicer. The case has not caught up with the fact that Chase has sold or transferred servicing rights to SPS (Select Portfolio Services) or at least that is what they say.
This being the case, several questions arise:
Since this information from the public domain is on the U.S. Bank website without any disclaimers, are we sure they authorized the foreclosure and the action for turnover of rents? Or are they going to say it was an error by the law firm? Who is actually the client of the opposing law firm --- the trust beneficiaries, the trust,, the trustee or US Bank who doesn't really appear to be the trustee?
The same question could be asked of Bank of America who says they are or were a trustee based upon a dubious series of announcements that seem to lack the same underlying transactions as all securitized loans that report a transaction has taken place (i.e.., on the note the contract is implied because the borrower agrees to repay a loan to a lender that never gave them the money).

Saturday, December 28, 2013

Get ready for your new landlords

You mean JP Morgan partnered up with Deutsche Bank who owns Blackstone. Ready for it??? Your new landlords with  be not the King of foreclosure anymore , but the next biggest fraud bank. This is pure bullshit! They are just passing these fraudulent notes back and forth , so you can never digg deep enough to find the truth. Now how about for once these two ponzi schemers tell the truth!

Blackstone Gets $252M Repo Financing

Blackstone Mortgage Trust Inc. has entered into a master repurchase agreement with JPMorgan Chase Bank which calls for advances up to 153 million pounds ($252 million) to purchase loans secured by English properties.
The agreement was disclosed on an 8-K filing obtained via
Advances are priced at Libor plus between 200 and 325 basis points depending on the attributes of the purchased assets. The maturity date is Dec. 20, 2016.
Blackstone is a commercial mortgage real estate investment trust headquartered in New York which purchases loans on properties located in the U.S and in Europe.


Blackstone has spent $7.5 billion on about 40,000 homes, the most of any firm after homes prices plunged as much as 35 percent from the 2006 peak. The New York-based firm has obtained $3.6 billion in credit lines from lenders led by Deutsche Bank. Christine Anderson, spokeswoman for New York-based Blackstone, declined to comment on the bond offering, which is also being arranged by Credit Suisse Group AG and JPMorgan Chase & Co. (JPM)
Renters in the U.S. occupy about 14 million single-family homes worth as much as $2.8 trillion, according to Goldman Sachs Group Inc. Demand for leased housing is increasing as fewer Americans are able to qualify for a mortgage after the financial crisis, which forced millions of homeowners into foreclosure.


Friday, December 27, 2013

I send this message to the GOP

Good question, any answers ?

They are not gonna get away with this

Not if we all pass this around the internet and let the truth come out, so please copy and paste and pass it forward to anyone and everyone.
It's our turn now.

Millions of tons of metal stored in "shadow warehouses"

  • The WSJ shines a light onto "shadow warehouses," a hidden system of facilities that store tens of millions of tons of aluminum, copper, nickel and zinc across the globe for banks, hedge funds and commodity merchants.
  • The warehouses operate outside the London Metal Exchange's system, are unregulated, and don't provide details of their holdings. As a result, it's unclear how much metal is held in the shadow system. This lack of visibility could cause major price swings.
  • The WSJ article follows allegations that warehousing companies have artificially boosted the price of metals, particularly aluminum.
  • Companies that operate metals warehouses include Goldman Sachs (GS), Glencore Xstrata (GLCNF) and JPMorgan (JPM), although the latter is looking to sell its commodities unit.
  • Relevant tickers include VALE, AA, AWC, KALU, MNSF, CENX, NOR, BHP, RIO, ACH.

Wednesday, December 25, 2013

Yes, I do find it unacceptable

It’s A Wonderful Life! — The Lesson Is the Banker Gets to Keep the Money He stole

by Neil Garfield
I never liked the Capra movie "It's a Wonderful Life," but I never remembered why. Dissapointment. So even though I like to watch my favorite movies more than once, I avoided watching this particular movie. It was just a knee jerk reaction for me. But my daughter and I watched tonight and I saw it through the eyes of a nearly 67 year old man instead of a 6-7 year old kid. And I ended up reliving my disappointment.
You see when I watched it as a child I believed the movie would end with the old miser banker being wheeled in at the end and giving back the money he stole. 60 years later, not remembering the movie very well, I still expected the end to be one of slight redemption when the old man is wheeled in and gives George Bailey back the money that George thought Uncle Billie had lost. Disappointed again, only this time I was also infuriated. The banker, knowing he had come into the money by pure accident when Billie left it in the newspaper he was teasing Mr. Potter about, kept the money when he discovered it in full view of his associates who of course said nothing because of their fear that the old miser would not only fire them but ruin them. He was too big to fail.
There is no reason for Mr. Potter to keep the money. It isn't his and he knows it. But he is corrupt and he is corrupting the system with his money from city politics to federal influence. So he keeps it and doesn't go to jail.
As a child I believed in redemption and in some ways the Capra movie delivers it when the town people rally around Bailey and he is better off even without the return of the money from Potter. But the idealist in me expected that Potter would have returned the money anyway because he wouldn't want to be thought of as a thief. But this doesn't bother him, just like the mortgage fraud we have going on now.
And tens of millions of people love this movie because of its uplifting message of good people appreciating the life and people they have. But am I the only one who was disappointed and infuriated that old Banker Potter got to keep the money he stole?
Yes you could argue that Potter didn't exactly steal it, but he knew it wasn't his and if morality was enforced, the angel Clarence would have made sure everyone knew the Banker had the money that was threatening to put the Building and Loan Association out of business and ruining the reputation (like credit rating) of the perfectly innocent George Bailey who is content to make $45 dollars per week managing the small Building and Loan association. Bailey's goal is to do the right things to maintain and build a community that maintains values of decency, morality and civility. His goal is to get by just like his shareholder-depositors. He has no interest in getting rich, which Potter offers him when George has a crisis of confidence.
Potter's goal is money and he doesn't care if he turns his community into a pile of crap as long as he makes money doing it. In fact he likes it when things crash so he can buy bargains and in the process ruin the life and dream of thousands of people. Sound familiar?
Not that the movie lacked morality and a good story about the way we see our lives. But Capra takes a definite shot at the banker by leaving him out of the glory at the end when the town people gather up far more money than needed to save George Bailey from bankruptcy and possibly jail. The bank examiner is in town to do his work. His first and only stop is to tally up the capital of George Bailey's tiny Building and Loan Association but skips the bank that Mr. Potter owns. And Frank Capra tells us why when Potter tells us that a congressman calling Potter is told to wait on the phone when Potter is distracted by his petty jealousy of Bailey.
The movie has a good moral at the end. If you live your life doing well by others, there is a pretty good chance they will do well by you. But in the end, the nasty miser is all about staying rich and gets richer because he gets money that belongs to another person and hides the fact. He gets to keep the $8,000 he stole from Bailey's Building and Loan Association. The money Potter steals in the movie is only $8,000 or about $280,000 in today's money --- easily enough for bank auditors to close down the business of Bailey's bank and is enough to add to the fortune of Potter. So the moral of the story is the opposite of the lesson --- being a good person is a good thing but the successful bad person will always het his way. I reject that lesson and encourage you to do the same.
The amount stolen this time by the likes of Mr. Potter is about $13 trillion, causing hundreds if billions of losses in pension funds alone and yet the government is concerned about the welfare of Mr. Potter instead of George Bailey. Tens of millions of families were displaced from their jobs and homes. I find that unacceptable, don't you?

Thursday, December 19, 2013

Well I warned you

 This is true. I paid off First Premier Bank CC in 2004, when owned by Washington Mutual. Recently I had letters arriving asking for settlements and people calling my family  telling them I could go to jail if I didn't pay. They updated it weekly on my credit report as well. I went to my VT AG who addressed this with them and guess what? They never responded .Chase and JP are selling these to recovery sites even if they were paid off.  

Chase and JP claim to own these and sell them and claim to own the notes and sell them and foreclose . Now , they are claiming they don't , and cry wolf cause they were caught and want to sue the FDIC.. ah NO ! You lied Chase and JP and its now time you face your karma! I warned you .



JP Morgan Sues FDIC for WAMU Cash Over Disputed Mortgage Bonds

by Neil Garfield
EDITOR'S NOTE: The dots are starting to get connected. Here JP Morgan who said they were the successor for everything that was WAMU turns out to be arguing that this didn't actually happen and that some money is still left in the WAMU "estate." The issue that is not raised is what else is in the WAMU estate? I content that there are numerous loans or claims to loans that were never transferred to anyone successfully and I think the FDIC and JPM both know that. Chase is trying to limit its exposure for bad bonds while at the same time claiming ownership or servicing rights for the underlying mortgages.
Which brings me to a central procedural point: if these cases are to be properly litigated such that the truth of the transaction(s) comes out, then it cannot be done on the rocket docket of foreclosures. It should be assigned to regular civil litigation or even better complex litigation because the issues cannot be addressed in the 5-10 minutes that are allowed on the rocket docket.
  • JPMorgan (JPM) has sued the Federal Deposit Insurance Corp. for a portion of the $2.7B remaining in the FDIC receivership that liquidated Washington Mutual following the sale of its branches and deposits to JPMorgan for $1.88B during the financial crisis in 2008.
  • The lawsuit is the latest development in the dispute between JPMorgan and the FDIC over who should assume Washington Mutual's legal liabilities, such as those related to the sale of problematic mortgage bonds.
  • Meanwhile, JPMorgan has been sued by the State of Mississippi for alleged misconduct while going after credit-card users for missed payments. The bank's sins include pursuing consumers for money they didn't owe, Mississippi said.
  • The state is the second to sue JPMorgan over the issue, the other being California, while 15 others are examining the matter. JPM is already in early settlement talks with 14 of them.

A must read

Your Lender is the Federal Reserve System

by Neil Garfield
It is difficult to state with certainty exactly how many ugly mortgage bonds have been purchased by the Federal Reserve. But if you put pencil to paper we can estimate the number. The published figures indicate there was a purchase of several hundred billion in these defective bonds when the financial collapse occurred. To be on the safe side we will use a figure of $300 billion. Since then the published articles indicate that the Fed has been purchasing bonds monthly. The amount of monthly purchases of the mortgage bonds appears to vary between $55 billion and $35 Billion. So if we use an average of $45 billion per month of mortgage bonds that have been purchased by the Federal Reserve. This has been going on for about 55 months. So the total monthly purchase of mortgage bonds is around $2,225 Billion or $2.225 Trillion. Hence the total purchases by the Fed could be reasonably estimated at $2.525 Trillion.
This means that the Federal Reserve owns a substantial bulk of the bonds issued during the mortgage meltdown. Questions abound. The Federal Reserve knows the bonds were defective in a number of respects. But they are purchasing those bonds for the express purpose of propping up the financial system and presumably getting those bonds out of circulation. The question is why did they purchase these bonds from the banks? The banks were merely the intermediaries that created the REMIC trusts that issued the bonds. So are the he trust beneficiaries receiving this money? Nothing in the public domain indicates that the investors were paid by the banks that received this money. Since it was a purchase the bonds still exist which means that the largest investor in many trusts is the Federal Reserve. Is the Fed getting Servicer advances?
But the largest question on my mind is why the Federal Reserve as an agency has not addressed the fundamental economic problem of economic inequality that was caused by a deeply flawed system of defrauding investors and borrowers into entering into loan deals that were (a) different from each other and (b) could never work because of the values used for the loan and property?
If you take the number of Foreclosures that have been rubber stamped through the system plus the bond purchases by the Federal Reserve and add them together, the amount of "help" received by the banks is around $3.5 Trillion. The amount of help given to homeowners is a tiny fraction of that amount. If the Federal Reserve wants economic growth, it should use its potential influence as the largest investor in the bonds to mandate settlements that make economic sense to both investors and to borrowers. This correction stops the financial aid to banks who are keeping the money. But it stimulates investment and incidence in the financial system and the capability of the middle class to spend and stimulate the economy.
The main obstacle to fair settlements is the fact that we are still going through intermediary banks who we know have committed widespread fraud and whose balance sheets and income statements are being artificially inflated by showing values and profits that should not have been allowed. No new law is required. When you defraud investors the normal result upon discovery is restitution to those investors. If the investors (including the federal Reserve) are satisfied and seek no further payment on the debt due to these lenders, then a pro rata reduction of the debt supposedly owed by homeowners is merely the corresponding bookkeeping entry. The federal Reserve has an obligation to use its influence to force these settlements avoiding further displacement and further erosion of middle class wealth.

Wednesday, December 18, 2013

Information you need to know

The deal offered to and accepted by the the real lenders (creditors/investors) who ended up being trust beneficiaries to an unfunded trust with no assets, was that there would be multiple co-obligors so there was practically no way on earth that the investor could lose money --- except of course in the case of fraud.
AND fraud is what happened because the co-obligors were part of a vast system in which the loans were not securitized, not collateralized and not enforceable by any of the parties who seek enforcement.
They ARE enforceable by investors but only under implied contract theory; and because the title to the loan was stolen by intermediaries the mortgage encumbrance to secure the debt is simply not there. But it is being treated as though the mortgage encumbrance was valid. Eventually you will start seeing decisions that nullify the mortgage, nullify the note as to enforcement or but use the note as partial evidence of part of the deal.
The contract that the investor relied upon when he made the loan, includes multiple parties, none of which were disclosed to the borrower and most of which received very liberal compensation that was also not disclosed to the investor or the borrower. Whether disclosure was required to the investors is not my concern. But disclosure to the borrowers is obviously required but was routinely and universally ignored.
Dan Edstrom has provided his list of parties. As a senior securitization analyst, this is pretty complete. The point here is that the party borrowing the money agreed to a different deal than the the one offered by the lender. Neither the lender nor the borrower truly understood that they were both getting screwed in much the same way. And as most of you know, the Banks will do ANYTHING to stop borrowers from meeting up with lenders to compare notes. The conclusion of that meeting would most likely end in jail time for thousands of people. Here is a list of the co-obligors, conduits, transactions in which intermediaries claim (or have, with or without knowing it) some interest in the "securitized" transactions (i.e., the loans):

master servicer
swap provider
cap provider
FDIC Repurchase Agreements
PMI provider
pool insurance provider
certificate guaranty insurance policy
each investor (subordinate, mezzanine, non-offered, etc.)
fraud insurance policy
bankruptcy insurance policy
originator (buy back agreements)
sponsor (buy back agreements)
depositor (buy back agreements)
reserve funds
TARP funds
corporate guaranty
Surety Bonds
Letters of credit
Blanket Fidelity Bond
Mortgage errors and omissions and professional liability insurance policy
Excess proceeds
Excess recoveries
Foreclosure Profits
Investment earnings

Are Servicer Advances Deductible Expenses for Homeowners?

by Neil Garfield
Many homeowners get tax statements from entities claiming the right to file them, with an EIN that is problematic. We are having trouble linking the EIN with the name of the entity that sends the tax statement. More importantly or perhaps of equal importance is the question raised by individual homeowners and investors who have purchased multiple residential units and operate them as a business, renting them out as landlords.
Despite my degree and experience in taxation, my knowledge is out of date on this subject. Nobody should take any action based upon this article without consulting a qualified tax professional. This article is for information purposes only. However, I pose the issue for those who do know, to comment on the following scenarios:
First in the homeowner who owns his single family residence but who has stopped paying the monthly amount demanded by the Servicer. In those cases where there are Servicer or similar advances, the creditor keeps getting paid the interest due under the bond agreement even though the Servicer is not receiving the interest allegedly due from the alleged borrower under the alleged note. The interesting issue here is whether the homeowner still owes the money to the creditor under the original note and mortgage agreement. As I have previously outlined in recent days the answer is no, the homeowner does not owe that money to the creditor claiming rights under the original borrower loan agreement. That would seem to be a gain. But the party who made such payments appears to have a new claim against the homeowner for contribution or unjust enrichment even though THAT claim is not secured. Thus, it is asserted, the payments were made on behalf of the homeowner in exchange for a claim to recoup the amounts advanced. Hence the conclusion that since the payments were made, the homeowner may deduct the Servicer advances from his income before paying taxes.
Second is the company or person that bought multiple properties and created a business out of them. The same logic applies. They didn't make payments to the Servicer but the payments of interest were obviously received by the trust beneficiaries like the scenario above. And like the homeowner they are subject to a claim to recoup the money advanced on their behalf producing a new debt, like the above, that is unsecured. That being the case, they ought to be able to deduct the Servicer advances as business expense deductions from the business (rental) income.
If the entities in the alleged securitization chain or cloud oppose this and want the deduction themselves, then they must pick up the other end of the stick --- I.e, that the payments they made as Servicer advances are not collectible from the borrower. Hence all such payments would reduce the original debt due the creditor and would not create a new debt due to the party who funded the Servicer advances. That party might be the Servicer as the name implies or it might be actually paid by the broker dealer who sold the mortgage bonds. Either way the creditor would appear to have received the interest income it was expecting under its deal, as presented by the broker dealer. Hence the trust beneficiary would be getting a statement from SOMEBODY stating that they had received the income for tax reporting purposes.
An interesting litigation question is whether the creditors did receive such statements from one of the securitization parties, and whether it can be discovered which party sent the statement and what EIN they used. An interesting tax and discovery question is whether one of the securitization parties took the deduction after paying the creditor and must now have that deduction disallowed --- especially if the Servicer advances were taken out of a pool of money supplied by the creditor, which is most probably the case. It seems unlikely that the Servicer would actually be making such advances in such large volumes (where would they get the money?) and it seems equally unlikely that any other party would be digging into their own pockets to make a payment for which they get a dubious claim against a defaulting homeowner.

Tuesday, December 17, 2013

US Bank.. well I called this one awhile back :(

US Bank is popping up all over the place as the Plaintiff in judicial actions and the initiator of foreclosures in non- judicial states. It is one of the leading parties in the shell game that is mistaken for securitization of loans. But on its own website it admits against the interests that it has advanced in courts across the country, that it has NO POWER TO FORECLOSE or to pursue any other remedies.
US Bank pops up as the foreclosing party as trustee for some supposedly securitized asset pool masquerading as a REMIC trust ( which we all know now was breached in virtually every way, which is why the IRS granted a one year amnesty for the trusts to get their acts together --- an action of dubious legality).
Both US Bank and the the Pooling and Servicing Agreement will usually state flat out that the servicer makes all decisions and takes all actions relating to the borrower and the borrower's payments. There are several reasons for this one of which is the obvious conflict that could occur if the the servicer and the trustee were both bringing foreclosure actions.
But the other reason, the hidden one, is that the banks want to keep the court's attention on the borrower's contract and keep it away from the lender's contract which is quite different than the borrower's contract. And THAT will invite inquiry as to how or even if the two contracts are related or connected such that the mortgage encumbrance gives rights to the trust beneficiaries such that the collection and foreclosure efforts will inure to the benefit of the trust beneficiaries in the REMIC trust.
So why is US Bank violating both the content and intent of the PSA and its own website? In my own law firm I have two entirely different foreclosure cases --- one in which US Bank is the foreclosing party and the other where the servicer started the foreclosure action. Both loans are claimed to be in the same trust although one is in California and the other is in Florida. Why would Chase bank as servicer started an action? Even worse, why did Chase bank start the action as though it was the creditor and claim that there was no securitization?
I am not sure about the answers to these questions but I have some conjectures.
In the Florida case, US Bank is bringing the case because the servicer can't --- it knows and its records show non-stop servicer advances to the trust beneficiaries of the REMIC trust that supposedly was funded and who purchased or originated the loans in the trust. In the California case, even though the servicer advances are still present it is non-judicial so it is easier for Chase to slip by without even pausing because unless the homeowner brings a legal action to stop the foreclosure sale it just happens. And then it is over. But Chase is treading on thin ice here which is why it is now transferring the servicing rights ---- and therefore the rights to litigate --- to SPS who did not make the servicer advances.
Both Chase and US Bank are going into bankruptcy courts in Chapter 11 proceedings and demanding adequate protection payments while the bankruptcy is proceeding, knowing and withholding the fact that the creditor is being paid every month and there is no default from the creditor's point of view. This would be important information for the debtor in possession and the his attorney and the Judge to know. But it is withheld in the hope that the borrower/debtor will never discover the truth --- and in most cases they don't, unless they get a loan level account report based upon a solid securitization report which is based upon a good title report.
Both US Bank and Chase are wiling to endure awards of sanctions for misleading the court as a cost of doing business because the volume of complaints about their illegal and fraudulent activities is nearly zero when compared with the total of all state court, federal court and bankruptcy actions. But now they are treading on even thinner ice --- they are seeking to get turnover of rents with people who own multiple properties. Their arrogance apparently overcame their judgment. The owners of multiple properties frequently have substantial resources to litigate against the US Bank and Chase and now SPS. The truth is coming out in those cases.
Other Banks who say they are trustees simply direct the borrower or other inquirers to the servicer. But where US Bank is involved it is seeking profit at the expense of the trust beneficiaries and the owners of the real property involved. It seems to me that US Bank has gotten too cute by half and is now exposed to multiple actions for fraud. And I question whether the current revelations about US Bank BUYING the position of trustee has any legal support. I don't think it does --- not in the PSA, not in the statutes nor under common law.

Chase Wamu Merger - Who really owns the loans?

Crowd Sourcing on the Chase-WAMU Merger and the Owner of the Loans

by Neil Garfield
LivingLies is crowd-sourcing this one. Send your transcripts, articles, letters to We want to know what you have about the Chase WAMU merger and what effect your information has on the ownership of loans that were originated or acquired by WAMU. Remember there were multiple parties involved in this ---
  1. Washington Mutual and subsidiaries, some of which still exist independently,
  2. the ex-OTS (office of thrift supervision),
  3. the FDIC receiver Richard Schoppe,
  4. the US Trustee in WAMU bankruptcy,
  5. Washington Mutual itself apart from the estate created and kept by the receiver and
  6. Washington Mutual itself apart from the estate created and kept by the U.S. Bankruptcy trustee, and of course
  7. Chase Bank whose merger document (on the FDIC website) with WAMU excludes loans and states that the consideration was zero for the merger.
Information about any of these and any cases in which the ownership of loans was at issue would be greatly appreciated. We will publish the list of resources as it grows.

Monday, December 16, 2013

You need to ask the right questions


by Neil Garfield
In thinking about how to present the issues in cases where the loans are part of a securitization process, whether successful or unsuccessful, I realized that one of the things that I failed to do was bring the attention of the court to the the cornerstone of the transaction --- the loan closing, rather than the the actual chronological first step which is the selling forward of empty mortgage bonds to investors. I realized that if I was sitting on the bench and the matter before me was the foreclosure of a mortgage that was facially correct and recorded in the county records, any argument that starts with securitization is going to seem like side-stepping the real issues. So I am working on going outside the chronological order of reality and starting with the middle point, which is the loan contract and loan closing.
Every contract must have an offer, acceptance and consideration. Every first year law student knows that. In the case of mortgage loans, the loan contract consists of
The problem is that the above scenario is not the usual scenario with 96% of all mortgages between 2001-2009. If I don't give you the money, there is no contract and even though you signed the note, I have no right to record the mortgage because I never loaned you the money. You were fooled by the fact that money appeared at the closing table just as I said. But the money wasn't my money and I didn't lend it to you. But you signed the note and mortgage to me. What I have just done is probably fraudulent and certainly a table funded loan in violation of the Federal Truth in Lending Act. When the Judge says "did you sign the note?", he is only asking half the required questions. The other half should be asked of the forecloser "did the payee on the note make the loan?" The answer in most cases is no, and in all cases as to the assignment of the loan, no value was paid by the assignee for the transfer to the assignee. The loan should either have been originated with the name of the actual source of funds on the note and mortgage or the assignment should have been recorded in the name of the trust when the loan was acquired. But then the wholesale rejection of common underwriting standards would have been exposed and most of the loans would never have been made.
The reason why Judges and lawyers are missing the mark in many cases is that the loan contract is not the one they are thinking about. In the great majority of loan contracts the actual source of funds is NOT the party who is named as Payee or mortgagee. The actual party who made the loan is either the group of Trust beneficiaries or the actual REMIC trust where the trust was funded. The loan contract is implied by law and undocumented. And the terms are not necessarily what was stated in the note and mortgage. The lenders agreed to a loan with different terms than the terms set forth in the note and mortgage.
The contract for loan that everyone has their eye on is written but never completed. The originator offers a loan provided that the borrower agrees to the terms presented and executes the loan closing papers. In plain language the originator is saying "I agree to loan you money provided you agree to the terms of repayment and you execute the loan closing documents." You agree and execute the loan closing documents but then the originator who made the offer does not make the loan. The result by any interpretation is that there is no enforceable contract. In fact, there is an implied duty to return the documents to the borrower marked canceled.
The originator has no documentation showing that it was acting as agent for the trust beneficiaries or the trust. Even if such documentation existed, it would have required that the originator act as agent for the Trust or the trust beneficiaries without disclosure to the borrower. Such a provision requiring non disclosure would violate Federal law (TILA) and would therefore be void.
But the money appears at the closing table anyway, unknown to the borrower, from the trust beneficiaries who thought their money would first be used to fund the REMIC trust where they would get certain tax benefits. The receipt of the money by the borrower creates an obligation to repay implied by law --- the assumption being that it wasn't a gift.
Thus when the Judge asks "Did you sign the note and mortgage" he or she is only asking half of the essential questions. The other half should be directed to the foreclosing party "did you make the loan"?
The forecloser would then be forced to explain why they should collect on a debt that was created outside of their cloud of parties and entities. This is why they don't allege they are the holder in due course because THAT would require them to prove they have the note and mortgage "for value" and that they didn't have actual knowledge of the borrowers claims and defenses. The borrower would only need to deny such an allegation thus forcing the burden of proof onto the forecloser --- a burden that no forecloser these days can meet unless it is a local bank loan.
Instead of alleging that the Forecloser is a holder in due course, they carefully allege that they are the holder with implied rights to enforce because the documents appear to be valid on their face. But a holder is subject to the defenses available in any breach of contract action including non-performance --- I.e. The denial that the originator ever made the loan. Then they stonewall discovery on questions about the wire transfer receipt that would reveal who made the loan. At trial the borrower should have objections and motions in limine after properly seeking to enforce discovery and getting no results except more objections.
If the homeowner raises the issue of payment of the loan from the originator they are properly challenging the existence of a valid contract, which was never formed because of the failure of performance by the originator. Most loans during the mortgage meltdown period fit this scenario.
The end result should be that the debt cannot be enforced by the foreclosing party because no entity in their "securitization" cloud ever performed the essential act required by the loan contract --- performing the act of delivering money as a loan to the homeowner. Hence no debt was created between THOSE parties.
Non stop servicer advances are payments to the creditors --- the trust beneficiaries (investors) --- of the trust whether or not the borrower is paying the required payments under the note.
This could also  be grounds for challenging the default saying that there was no default from the creditor's perspective because they continued to receive their expected payments. Or it could be grounds for saying they waived the default or that the default was cured while they were accepting the servicer advances. The creditor is only allowed to be paid once on your loan.
Assuming the court accepts that argument, you have established that there are not one, but two loan contracts --- the one that the lender saw, and the one that the borrower saw. That would mean there was by definition no meeting of the minds, which is a basic term used in contract law. If the money from investors actually funded the trust, then they could argue that there was nothing wrong with the two contracts because the borrower's loan contract was with the trust. But our retort would be that if the borrower's contract was with the trust, why were they not on the note?
These are Razor thin distinctions that must be carefully argued or presented by an expert. The goal would be to discredit the initial loan transaction such that the loan was not secured because the real contract was an implied contract at law rather than the written one you signed. If the written one is void, then the debt exists, but it is not secured by a mortgage, hence there could be no foreclosure.
Collection could only be by the trust in a judicial case brought against you that could be discharged in bankruptcy. I don't know how the homestead exemptions work in California bankruptcy court, so we would need to be careful about how this would be used. In any event, amounts received from insurance contracts and the like would be deducted along with offset for appraisal fraud --- but realize that appraisal fraud can only go so far. You must prove what the real value of the home was (not presume or guess at it) at the time of the  loan transaction, which could be the modification or refi which would be when the real value had already plummeted while the loan amount was higher. The difference between the appraised value and the real value could be the an element of consequential damages, and if you can prove malevolent intent you could ask for punitive damages.
While I have been writing about these things for years it is only now that some judges are beginning to loosen up to listen to the realities of securitization --- that it was a fraudulent scheme to deprive investors of their money and the promised secured enforceable loans. The investors all sued saying the loans were NOT enforceable even though they had supposedly been transferred into the trust. These are the lawsuits that the banks are settling every week or every other week for hundreds of millions or billions of dollars. The largest so far is Chase who just paid $13 Billion to settle claims of fraud, misrepresentation, and mismanagement of funds.

Thursday, December 12, 2013

I love Neil Garfield

 I love Neil Garfield! Why you ask? He is the only one who has stood up and told the truth. I have read many articles, but I alway look for his daily. Thank you Mr. Garfield for caring about so many of us ..


JP Morgan to Pay Another $2Billion for Madoff Conspiracy

by Neil Garfield
When the news of Madoff first made it into the media from which we think we get the information on what is happening in the world, I had two thoughts --- both related to my own experience on Wall Street. The first thing was that at $60 Billion it was impossible for all the big bankers (see Simon Johnson's Thirteen Bankers book --- a smart read) and traders to have been ignorant of what he was doing; the corollary to that is they said nothing, knowing that Madoff was saying he was the smartest trader in the world. None of the broker dealers had ever done a trade with him. So they new it was a PONZI Scheme. And he went to jail and other unpleasant things happened to his family.
The second thing that came to mind was the question of was why none of the big bankers were reporting him. Normally, the self policing code periodically cast a fraudster under the bus to achieve popularity with the public and regulators. Here, they were feeding a monster that was literally robbing widows and orphans over decades. And the reason why they were feeding Madoff's scheme with new suckers investing in Madoff's nonexistent investment trading portfolio --- and the reason it finally leaked out --- was that it was timed perfectly with the mortgage Ponzi scheme. It was the perfect distraction from what the Thirteen Bankers were doing. They threw him under the bus at precisely the time that their own peccadillo's were about to hit the fan (sorry to mix metaphors).
The Madoff scandal was called the largest financial fraud in the history of the world. But sitting right next to it was the largest white elephant ever conceived in the imagination of the public or even fiction writers. Madoff had taken $60 billion whilst the Bankers were making off with a minimum of $13 Trillion. Do the math. The Bankers sucked out of our economy a minimum of 10,000 times what Madoff had taken and they had retained a minimum of 2,000 times what Madoff had taken. If you like Math that equates by division to Madoff's "largest ever financial fraud" being 0.02% of what the bankers had taken also by fraud but using more sophisticated systems and layers of trail and entities so it made it more difficult to prosecute the banks than Madoff which was really very easy.
But the Wall Street bankers had another card up their sleeve. They had created a shadow banking system that was twenty times the total amount of fiat money issued by all countries of the world. They used these "nominal" values to scare the shit out of central bankers and finance ministers and convinced everyone that no matter how evil their motives and actions, they were too big to fail because if the government took them down, the entire financial system would collapse. That was a lie, and the recipients of that message suspected it was a lie but none of them knew enough to be sure. So they chickened out.
The result was that millions upon million of families lost all of their wealth or most of it, all of their credit reputation or most of it, and so far some 15 million people have been displaced, thrown out of good paying productive jobs and are forever taking the cost of this theft on their own backs and that of their generations to come.
On the ground level this translated as a double standard. While there is widespread acceptance of the fraudulent mortgages, notes, debts, bets, insurance and ratings, their is no acceptance of homeowners as the real victims who are paying most of the cost of this theft whether they are in foreclosure or not. In fact even if the citizens are renting or just looking for a job or trying to finance an education that will make them into marketable labor commodities they are paying through lower paying jobs, dependence upon unemployment benefits, Medicaid and other services that are costing all taxpayers trillions of dollars in what would otherwise by GDP.
And if that isn't enough the Federal Reserve is propping up these bankers with false balance sheets and false reserves with purchases of bonds that were never worth a penny because the asset pool never received funding and never owned a single loan. This is a cover up for more quantitative easing which is the printing of more money which in turn demeans the value of our currency and eventually will result in wholesale changes in world currency and cost of goods and services.
Some lawyer today at court said I know who you are--- you're the guy who hates banks. No. I have sat on the boards of banks and represented banks In Foreclosures both residential and commercial. I have filed hundreds of foreclosure actions for condominium, cooperative and homeowner associations. There are over 7,000 banks and credit unions in this country alone. I only dislike about 15 of them which means I like about 6,985 of these institutions who perform valuable services for a vibrant economy. I don't even dislike securitization. I just don't like when securitization documents are used to cover up a financial fraud. Is that wrong?