Criminal and Civil Actions Against Chase and BofA Creep Forward

By Neil Garfield esq.

The Department of Justice and the Securities and Exchange Commission are proceeding from the wrong presumption. They are starting with public policy and politics instead of enforcement of the law to maintain the fabric of our society. It results in the rule of man rather than the rule of law. And it is tearing us apart even if government refuses to talk about and mainstream medium refuses to report on it despite the constant drum beat of new lawsuits and new settlements of bank wrongdoing.

Hardly a day goes by without some settlement being announced with respect to the sale of fraudulent securities to investors. Now we have announcements that Bank of America and Chase are being investigated and sued for civil and criminal behavior with respect to the sale of mortgage bonds to investors.

They have framed their complaints in such a way that it is presumed that proper procedure was followed in the origination and assignment of loans while at the same time they are alleging that proper procedure was not followed in the origination and assignment of loans. The difference is only whether they are saying the victims are the investors or they are ignoring the fact that the victims include the homeowners. It is like a scene from Gulliver's Travels where the incredibly ridiculous is taken as true. Investors should be restored but homeowners may be cheated and bear most of the burden of the bank's misbehavior because it is convenient to do so.

Once again we have agency determination of wrongdoing and still we have a judicial system that is more concerned with validating the illegal mortgages and validating illegal foreclosure judgments and validating illegal foreclosure auctions and validating deeds issued from illegal foreclosure auctions and validating evictions of homeowners who legally should be declared the owner of the home free and clear of any encumbrance and frankly free and clear of any debt which by now has been paid multiple times by third parties who have no interest in pursuing the homeowners for payment.

This is going to be decided on a case-by-case basis in the judicial system and only successful where the attorney for the homeowner is extremely aggressive on discovery. Otherwise, the public policy and mainstream media will control the narrative on each case such that despite fatally defective fabricated documents with false signatures were used in the origination and assignment of the mortgage loan.

Attorneys have to be creative in explaining how the fraudulent sale of securities to investors is tied to the fraudulent sale of a loan product to homeowners. But you can start with the single transaction doctrine in which it can be stated with considerable certainty that had the investors known what was going on in the origination and transfer of loans they never would have advanced a penny. And the borrowers would never have signed the documents if they knew that an inflated appraisal was used in making the loan unreasonable and very expensive once the true value of the property was reflected in the marketplace. Borrowers would also have never signed documents if they knew that the  undisclosed intermediaries were making a mystery profit that amounted to far more than the amount of the alleged principal due on the mortgage. They would not have signed the documents if they knew that their identities were being stolen and traded.

In other words, if federal law had been followed requiring the disclosure of all compensation and all parties to the loan transaction, none of the transactions would have occurred. The federal law is the federal truth in lending act and the federal real estate settlement and procedures act. Qualified written requests and debt validation letters are treated as jokes in the industry and irrelevant in court.

The banks are rolling in money while the rest of the economy struggles. How is that possible? Answer: they are taking the money owed to investors and which would erase the debt and they are keeping it thus maintaining the illusion that the loan to the homeowner has not been paid.

The banks have succeeded in driving home a false assertion, to wit: that the homeowners are seeking a windfall profit by receiving the house free and clear of any encumbrance and being released from any debt. What they are really doing is covering up their own windfall caused by stiffing investors, insurers, credit default swap counterparties, homeowners, taxpayers and the Federal Reserve. It might SEEM wrong to let the homeowners off the hook but only if their debt remains unpaid. But under the rule of law that is exactly what happens when the debt has been paid. Homeowner did not create this. Wall Street created this complex series of transactions that were conjured up to cover up a Ponzi scheme in which depository institutions created the illusion of ownership of the securities and cash deposited with them in good faith by investors.

At some point the prosecution in the cases that are now pending and that will be pending in the near future will come face-to-face with the conflict of the rule of law versus the rule of man. The conventional wisdom is that public policy should prevail even if it means taking someone's home illegally. The logic is that if the mortgages were declared invalid and the debts have been paid, a large shift in wealth would occur from the banking sector to the middle class and even parts of the poverty sector.  We already have enough information in the public domain to know that most of the foreclosures are illegal and the parties that have been thrown out of their homes have a cause of action in damages or to recover the home ---  a fact well known to agencies and their investigators but not known to the families because the agency has stepped in to protect the bank and refused to notify the families that were affected by the illegal behavior.

It may be true that the mortgages and the alleged transfers of the mortgages were all an illusion that there is no value to most of the mortgage bonds and therefore there are no assets that have been purchased by the Federal Reserve in those bond purchases because there was noting to put in the asset pool (trust) and they never bothered to event try to put it in the pool until challenged in litigation.  This has created the ridiculous situation where an illegal transaction of no value and no valid documentation supports it is nonetheless treated as valid simply because nobody has challenged it. And when they reach the line in the sand where it means declaring the mortgages and foreclosures to be fraudulent and invalid, void and unenforceable, past, present and future, then they will settle for pennies on the dollar ---- again.

The #Obama administration is simply running on the wrong track. Restoring the rule of law will restore the ability of the middle class to fuel a dynamic economy. Any negative impact on a mega-bank that is broken up into pieces is not a price to pay ---  it is an additional perk to bring the banking industry down to size where it can be regulated and where they can be stopped from using the money of depositors and investors as though it was their own.

WHY JOIN ORIGINATOR AND THE PARTY WHO PARTICIPATED IN THE ILLEGAL TABLE FUNDED LOAN

From  livinglies. I just admire this man so much .

Amongst the cases I review and manage, the question was raised by one of the homeowners as to why I insisted on holding both the originator and subsequent intermediaries in the alleged securitization chain and/or table-funded loan where both the party alleging having (1) the capacity to sue see SEC Corroborates Livinglies Position on Third Party Payment While Texas BKR Judge Disallows Assignments After Cut-Off Date, (2) the standing to sue and/or the authority to initiate foreclosures and (3) financial injury where they allege sale or assignment of the note. The reason is simple from a tactical and legal point of view. I wish to close out their options to keep moving the goal posts.
Here is the answer I wrote to the customer, whose property is located in a judicial state. This particular person is being pro-active — always a wise choice — in that he has been making his payments, was told to to stop making payments if he wanted a modification which he did initially and then changed his mind and reinstated, and remains convinced he was the victim of various forms of fraud and crimes including false Appraisals of the supposedly fair market value of the property at the time of the loan closing or the alleged loan closing. His goal is not a free house. His goal is to pursue any rights you might have for modification or settlement of his claims with respect to the illusion of a loan closing and the office of a closing agent. As any reader of this blog knows, it is my opinion that any such loan closing was in fact an illusion and that all the parties participating in that illusion were paid actors pretending to be something they were not —  less creating plausible deniability for any of the improper actions of the intermediaries at the “loan closing.”

There is a reason why I insist on continuing the joinder of those two defendants. Embrace wants to be dismissed out with prejudice because it says that sold the loan to Wells. I want to say that they didn’t sell the loan to Wells.  If I prevail on that point then Wells Fargo is out as a plaintiff in any foreclosure they might file, and potentially out as a servicer since they might not be able to show any authority.  If that is the case then they owe you an accounting for all of the money they collected from you and a statement of what they did with the money that they collected from you. You might well have a cause of action against Wells Fargo for taking money under false pretenses.

 If I don’t Prevail on that point and somehow they are able to show that Wells Fargo paid for the loan and owns the loan by virtue of that payment, then Embrace is still a proper party in the action because they are the owner of record of a mortgage based on a note that was never funded by Embrace.  The issue here is whether or not the mortgage was transferred with the debt and that issue is tied closely with the issue of securitization, which both of them deny. I believe that I will be able to show that the loan is subject to claims of securitization on behalf of a loan pool that may never have existed or which might not exist now.  and if I am able to show that the loan pool was never funded and therefore could never have paid for the loan then the apparent authority of both defendants is eviscerated.

  Either way, I don’t want to let either of them out of the litigation quite yet.  If we prevail on the question of whether or not there was an actual sale and the sale was authorized (see my blog article from yesterday) then Embrace is the only party left on record in the recording office. At that point I would drill down on them to see whether or not they can show that they fulfill their part of the bargain with you, to wit: that you sign a note and they give you adequate disclosure under the law and they fund a loan to you. It is my position that they did not give adequate disclosure and that they did not fund a loan to you even if the loan was not securitized. The best they can say is that this was a table funded loan which is according to Reg Z of the Federal Reserve a predatory loan  per se if it was part of a pattern of conduct.

 Given the statistics and information we have about both defendants it is my opinion that the chances are 96% that the loan was allegedly sold into the secondary market where it is the subject of a potential claim from an asset pool. The problem I wish to reveal here is that the entire chain of ownership collapses on itself. The other problem that I want to addressed is who actually received the money that you pay every month and what did they do with it (who did they pay).  the strategy here is to show that regardless of whether or not a claim of securitization exists, there were co-obligors (Wells Fargo),  insurance payments and proceeds of credit default swaps and multiple resales all of which should be applied against the amount owed to the real creditor, whoever that might be, thus reducing the loan receivable.

 If I can tie the loan receivable to one which derives its value from the alleged loan made to you, even if the originator paid for it, then there is a strong argument for agency and allocation of receipts under which the payment of monthly payments and the receipt of insurance proceeds and the proceeds from other obligors (including but not limited to counterparties on credit default swaps) were received and kept, like in the Credit Suisse case. 

From that point forward it is a simple accounting task to allocate third-party receipts of insurance and hedge money to the benefit of the investors whether they received it or not. The auditing standards under the rules of the financial accounting standards Board would require a further analysis and allocation of the money received —  specifically the reduction of the loan receivable or bond receivable held by the investors (directly if the REMIC trust was ignored or indirectly if the agents for the trust purchased insurance and hedge products, the proceeds of which should have been credited to the investors.

 If the investors are the real creditors than the amount that they are entitled to have repaid to them does not exceed the amount they advanced. It practically goes without saying that if the money advanced from investors was based on their reasonable belief that they were acquiring title to the loans funded by the money advanced by the investors, they should recover part or all of their investment to the extent that the other players (see the SEC order against Credit Suisse) paid for insurance and hedge products using the money of the investors and kept the proceeds for themselves —-  thus explaining rising reports of profits in the banks who are supposedly merely intermediaries in the conduct of commerce which was in sharp decline.

 In the end, under a series of unjust enrichment and other common-law actions, as well as the requirements of statute and the terms of the promissory note executed by the borrower, all money received in that manner should reduce the principal balance due from the borrower because the creditor has already been paid either directly or indirectly through its agents who were either authorized or possessed of apparent authority.

In fact , the great likelihood is that the banks received substantial overpayments amounting to multiples of the original principal amount of the loan.  According to both law and the terms of the proposed agreement between the borrower and the apparent lender, subject to the terms of the documents themselves as well as state and federal law, the borrower is entitled to recover all such undisclosed payments and receipts which are defined under the truth in lending act as “compensation.”
 Thus while the creditors not entitled to any more recovery than the amount advanced under an alleged loan, the borrower is entitled to full recovery of all money paid in connection with or related to the loan received by the borrower, regardless of the original source of the loan and any agreements between the intermediaries in the alleged securitization chain that do not have the signature of the borrower on them. The reason is public policy. While securitization was not considered in the original passage of laws  it was the overreaching by banks to the disadvantage of consumers and borrowers that was sought to be discouraged by penalties that would be so great as to prevent the practice altogether.

 Usually it is money that is taken under false pretenses and the illusion of securitization claims is no exception. But in the case of the borrower it is the signature of the borrower that was obtained under the false pretenses that  the party obtaining the borrower’s signature. The consideration was the money advanced by an unrelated party tot he transaction (investor) who thought their money was first going through a REMIC trust that would give them certain tax advantages.