Corroboration of Basic Thread of Livinglies Blog: Banks are Claiming Assets That Really Belong to Investors
From complexity to simplicity: the banks diverted title to the loans from the investors to their puppets --- bankruptcy remote vehicles whose sole purpose was to act as though they were lenders or acquirers or aggregators of the loans. If the loans were properly securitized, the investors or the REMIC trust would show up in property records and there really wouldn't be any question about who owned the loans.
Similarly the banks controlled the issuance of the mortgage bonds. The investors advanced money to buy the bonds and the banks issued the bonds in "street name" which is to say that the banks issued the bonds in the name of the bank and then reported to the investor that the investor had successfully purchased the bond and issued monthly statements to that effect.
There is no dispute that the bonds are owned by the investors. But the banks diverted the money into their own pockets, failed to fund the REMIC trusts, insured the bonds with the banks declared as payee.
The Banks were also the payee on credit default swaps betting against the bonds. And the Banks were the seller and received the proceeds from sales of the bonds to the Federal Reserve --- with nearly all of the so-called delinquent loans now owned by the Federal Reserve except for one thing --- the Federal Reserve bought the bonds from the banks instead of paying the investors. So the balance sheets of the banks showing ownership of the bonds are wrong. They don't own the bonds, which means they don't have the required capital reported to regulators.
So the entire picture is wrong and this fact cannot have escaped regulators, law enforcement, the Federal Reserve. And the fact that it corrupts the legal effect of the notes and mortgages that were signed by homeowners in favor of bankruptcy remote vehicles or other third party intermediaries instead of the investors is just now being brought to the attention of the Courts by investors and homeowners as lawyers get more sophisticated and knowledgeable about securitization of debt.
Judges are getting exasperated by the stonewalling and scorched earth tactics of the allegedly "consumer friendly banks." And questions are arising in Courts across the country as to whether the banks are throwing their own lawyers under the bus with the intention of disclaiming the positions and tactics employed by bank foreclosure lawyers.
And THAT is why Judge young in Massachusetts required counsel to produce an original signed resolution signed by the president and Majority of board members of Wells Fargo Bank.
Now the investors are challenging the so-called settlements by the banks where the ownership of the loans was presumed but not correct in fact. They are attacking the settlements with the intention of reclaiming the proceeds of settlements and reclaiming ownership of the bonds.
All of this means that the Banks who are filing suit for foreclosure or starting non judicial foreclosure actions (first assigning themselves as trustees) don't have a dog in the race but they are getting the benefits of the Foreclosures and tossing the real losses over the fence at the investors by assigning non conforming loans in non conforming ways (directly violating the sole basis for assigning loans to REMIC trusts in the PSA).
With the investors claiming recovery from the banks for the money they received from investors, insurers, and other co-obligors on the bonds the primary question asked by this Blog is finally becoming front and center, the main issue in Courts who are hearing higher level issues: what is the real balance of the bond receivable in view of the money taken in by the banks as agents for the investor sand the investor vehicles (REMIC trusts).
Take a look at the profits reported by the banks which are out of this world and compare it with the losses being reported by the bond investors. Properly allocated, the receipts exceed the liability of the REMIC trusts that issued the bonds, which is to say the liability of the banks since the REMICs were their creatures and they failed to use the money as instructed.
And if the lenders have indeed established that the settlement proceeds and other payment proceeds from the banks should be allocated to investor losses then the balance due to the investors as lenders is reduced. As a consequence, the account receivable is posted as reduced by payment. The payments were under a strict waiver of subrogation or any right of contribution from the borrowers (homeowners).
Thus the account payable from the homeowner is correspondingly reduced, probably back down to levels that mark down the note payable to levels equivalent to the real value of the collateral or less instead of the inflated value pushed onto the homeowner in an inflated loan deal.
JPM | Tue, Oct 8
Mortgage investors urge Holder not to settle with JPM • In a letter to the Attorney General, the Association of Mortgage Investors ask him to consider the impacts any of legal settlements with banks over mortgages. Though not naming JPMorgan (JPM) by name, the group is clearly concerned with the rumored $11B settlement being talked about with the bank - only $7B of which would be in cash, and $4B in consumer relieft. • Last year's $25B settlement over "robo-signing" allowed banks to get credit for settling abuses by writing down loans - yet those loans are often held by third-party investors. There was also this year's $9.3B settlement which was similarly structured. "Parties sued by the government or third-parties should not be able to settle with assets that they do not own, namely other people's money," says the group's Chris Katopis.
PRACTICE NOTE: I was startled when counsel for a bank revealed his complete ignorance of securitization in a recent oral argument at the trial level. The attorney was "explaining" to the court that my argument was absurd. What difference, he asked, does it make how much the investors paid when they bought the stock of the originators? Yes that would be absurd. I was forced to use up my time for argument on clearing that up --- that the investors are the people who bought mortgage bonds and whose money was used to fund mortgages. The Judge understood that. The lawyer didn't know what I was talking about. Hopefully we don't have too many judges who are that confused about securitization or claims of securitization. But it does show that you should assume nothing and make sure you define your terms in short phrases like the buyers of mortgage bonds were the lenders and they are referred to in the industry as "the investor."